Saving Medicare: Free Market Reforms Are Better than Bureaucratic Rationing

This recent video from my friend Dan Mitchell explains how a "premium-support" plan would solve Medicare's fiscal crisis and improve the overall healthcare system. This voucher-based system also would protect seniors from bureaucratic rationing.

Eric Cantor’s 5% Growth Strategy

House Majority Leader Eric Cantor turned the policy temperature down on austerity this week by rolling out a strong economic-growth agenda. Headlined by a 25 percent top tax rate for individuals and business, the Cantor package includes regulatory relief, free trade, and patent protection for entrepreneurs. It’s job creation and the economy, stupid.

Sounds Reaganesque? Well, Eric Cantor has a lot of Reagan blood in him. Back in 1980, while Cantor was still in high school, his father was the Virginia state treasurer of the Ronald Reagan presidential campaign. So the apple never falls far from the tree.

In fact, it looks like Cantor is restoring the supply-side incentive model of economic growth. Forget tax-the-rich class warfare. Throw out wild-eyed government-spending stimulus and dollar-depreciating Fed money-pumping. Make it pay more after tax to work, produce, and invest. Go for a growth spurt, something the economy badly needs. And — my thought — crown such a growth strategy with a stable King Dollar re-linked to gold.

When I interviewed Cantor this week, he made it clear that faster economic growth was crucial to holding down spending, deficits, and debt. As scored by the CBO, every 1 percent of faster growth lowers the budget gap by nearly $3 trillion from lower spending and higher revenues. “Grow the economy,” Cantor said. “It will help us manage-down the deficit and it will help get people back to work.”

This is not to say that spending cuts and structural entitlement reforms aren’t necessary. They are. But it is to argue that lately the GOP has forgotten the growth component that is so essential to spending restraint and deficit reduction.

The GOP should say: In return for substantial federal-spending cuts, we’re gonna more than make it up to you with large tax cuts. You will win. Big government will lose.

I suggested to Cantor that the GOP adopt a 5 percent national growth target, which President John F. Kennedy had when he launched his across-the-board tax cuts in the early 1960s. “That is a fantastic goal,” he told me.

Cantor’s growth plan is very timely as the U.S. economy is once again sputtering. In what is already one of the weakest post-recession recoveries in the postwar era, first-quarter GDP came in at a tepid 1.8 percent. Many economists believe the second quarter will be no better.

And consider this: Between 1947 and 2000, average real economic growth registered 3.4 percent yearly — an excellent prosperity baseline. Yet over the past ten years — amidst boom-bust Fed policy, a collapsing dollar, and soaring gold — the stock market on balance hasn’t moved as the economy has averaged only 1.7 percent annually. Because of the ongoing slump, actual real GDP growth from the early 2000s through the first quarter of 2011 has dropped nearly 17 percent below the long-run historical trend. That translates to a massive output gap of $2.7 trillion.

In order to close that gap in five years the economy would have to grow 7.3 percent annually (roughly Reagan’s two-year recovery rate in 1983-84). To close the gap in ten years, the economy would have to grow near 5.3 percent annually.

Alright, so why not establish a national economic growth target of over 5 percent? That might wipe out the current spirit of economic pessimism and decline.

A 5 percent growth target might give some hope to the roughly 15 million unemployed. Or the 12 to 15 million homeowners who can’t meet their mortgages, are in foreclosure, or have upside-down property values. Or the disappointed investors who haven’t made any real cash in ten years. Or the families who are suffering from rising gas and food prices.

A 5 percent growth target might wipe out the sense that we can’t seem to right the economic ship.

For all these reasons, according to the polls, jobs and the economy are the number one political issue today. Entitlements are going to have to be fixed. But that day of reckoning is nearly 20 years away. Right now folks want work and income to pay the bills.

The brilliance of Mr. Cantor’s effort is his attempt to move the GOP back to the economic-growth high ground. It is our most urgent priority.

On CNBC's Kudlow Report Tonight

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THE MARKETS
-Ron Kruszewski, Stifel Nicolaus CEO
-Michael Farr, Farr, Miller & Washington president
-Don Luskin, Trend Macro CIO, "I Am John Galt" author

IS PIMCO'S BILL GROSS WRONG ON TREASURIES?
-John Lonski, chief economist at Moody's Capital Markets
-Carl Riccadonna, senior US economist at Deutsche Bank

KUDLOW TRIBUTE TO CNBC'S MARK HAINES

GOP PRESIDENTIAL POLL SHOCKER
One-on-one with Republican presidential candidate Herman Cain.

WHERE IS THE WASHINGTON GROWTH PLAN?
One-on-one with Congressman Eric Cantor (R-VA)

EINHORN COMES OUT AGAINST MICROSOFT'S STEVE BALLMER
Businessweek's Jon Fine reports.

My Pal, Mark Haines

For years I worked with Mark Haines on Squawk Box, usually Friday mornings as a guest or guest host. We go back a long way. He called me Lawrence of America. The nickname stuck. I loved it.

Like every one I was stunned to hear the unspeakably bad news this morning. Nick Dunn called me. I was in a Washington, DC hotel room. A lonely place to get some very bad news.

Mark’s untimely passing hits me close. We are about the same age and of course it gets you to thinking. We had a long history. On Squawk and elsewhere we talked and talked, argued, debated, agreed and disagreed. I preferred it when we agreed, mostly because he was such a formidable opponent when we were on opposite sides.

Mark had a very keen intellect. He had that penetrating lawyer-like skill of cutting right to the chase in dissecting an argument. But you know what? Down though the years I loved it and I loved him.

As a novice learning to become a broadcaster I studied Mark’s formidable skills -- his insightful and penetrating questions -- his ability to hone in and really nail some one. He taught me a lot, and I am still learning.

A bunch of months ago he came by my desk in the newsroom one afternoon to chat. I hadn’t seen him in a while. It must have been around Christmas actually because we were talking about the Washington debate over extending tax cuts and stopping a humongously unnecessary spending bill.

He said “Kudlow, what do you think here?” I said “Mark, buddy, kill the spending, keep the tax cuts.”

And he broke out laughing and said “You know what, I agree with you!” I said “Oh my gosh.” It was a classic Mark Haines moment.

During Squawk Box breaks we’d go off the set to talk about sports, politics, that morning’s show. I learned he was a great family man because that’s what he talked about constatntly. I think Mark Haines had great values. And I think down through all those years he taught me an awful lot about stuff, all kinds of good stuff.

As I flew home today from Washington back to New York, I thought non-stop about my pal, Mark Haines and all the episodes and conversations and our ups and downs as two opinionated guys.

I want to get this blog out because emotionally I need to get it out and say what I’m saying. I don’t think it’s really adequate, but it is what’s rattling around in my head.

Like I said, he was a remarkable man. He passed way too soon. Already I miss him enormously. To his family, my sincerest condolences and my prayers. To Mark, may you rest in peace.

An Interview with Kansas City Fed President Thomas Hoenig

I had the wonderful opportunity yesterday to sit down with Kansas City Fed President Thomas Hoenig. He’s a straight-shooting, hard-money, free market central banker—an unusual combination. Hoenig is also a man of integrity who dissents from the FOMC so clearly in his disagreement with ultra-easy money. Incidentally, he believes that Too-Big-To-Fail and “Bailout Nation” are moving America away from free market capitalism.

On CNBC's Kudlow Report Tonight

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THE MARKETS
- Stephanie Link, Director of Research for The Street.com
- Jim LaCamp, Macroportfolio Advisors Sr. VP, Portfolio Manager

BOOMING HEALTHCARE INSURANCE STOCKS
- CNBC’s Brian Shactman reports.

IS LLOYD BLANKFEIN BEING INVESTIGATED FOR PERJURY?
- CNBC’s John Carney
- Tom Curran, Partner Peckar & Abramson, P.C.
- William Cohan, "Money and Power: How Goldman Sachs Came To Rule The World" Author

GENE SIMMONS ON U.S. ECONOMY/OBAMA/DEBT & CONGRESS
- NBC’s Jane Wells reports.

MIDDLE EAST IN CRISIS…THE OBAMA/NETANYAHU MEETING
-NBC’s Steve Handelsman reports.

- Jim Glassman, Executive Director; The George W. Bush Institute; U.S. Under Secretary of State (2008-2009)
- Larry Korb, Ctr for American Progress Sr Fellow; Fmr. Asst. Defense Secy during Reagan Admin; Council on Foreign Relations member

IMF IN CRISIS: STRAUSS-KAHN OUT OF JAIL
- CNBC’s Mary Thompson joins us from Rikers Island.

DSK'S PAY PACKAGE UPDATE
- CNBC’s Eamon Javers reports.

WHY DO LEADERS GET CAUGHT UP IN SEX SCANDALS?
- Kellyanne Conway, The Polling Company President & CEO
- Mark Simone, WABC Radio Talk Show Host
- Gloria Allred, Woman's Rights Attorney

One-on-One with Senator Tom Coburn

Yesterday I spoke with the terribly smart, tough, fiscal conservative Sen. Tom Coburn (R-OK) about why he walked out of the "Gang of Six" bipartisan budget talks. In short, what he told me was that the "Gang of Six" budget-cutting package was simply too small. It was not up to the needs of a brewing financial crisis. He highlighted Medicare, but he also called for a pro-growth tax reform package, plus a regulatory rollback to promote economic growth.

KUDLOW: All right, so let me ask you the obvious question. Why specifically did you walk out of the Gang of Six bipartisan budget talks in the Senate?

Sen. COBURN: Well, specifically, I didn't think we were making the progress in the areas that we needed to make the progress, and I had a frank conversation with Dick Durbin, and he thought we were at impasse, I agreed that we were in impasse, and his words to me is, `We've been at impasse for a couple of weeks.' And so what I've done is take a sabbatical, and I'm going to produce a document that's going to show you how we can get out of the trouble, and then we'll let everything else be compared to that. My staff and I have the capability of doing that. And we'll just see. And I'm not abandoning it completely, but whatever we come up with has to solve the very real problems. And it can't be light, it's got to recognize that entitlements are a significant portion of our problem, and if you don't really address those, you haven't fixed the problem.

KUDLOW: So let me ask you, you're using the word sabbatical. What would it take to get you back in? Is it an issue of Medicare? Are there other entitlements? Are there tax issues? What would get you to go back into the talks? Because, potentially, that was a very powerful group.

Sen. COBURN: Well, I--first of all, I don't want to debate that through the media, and I'll be talking with those guys intermittently from time to time. What has to happen is we have to have a viable solution to our problems, and if I think that's achievable I'll be the first one back there. But it's not fair to them. Each one of these individuals worked in great faith. But look, realistically we cannot solve our problems unless we generate growth in this country, and the only way we're going to do that is back off on a lot of regulations, create a tax structure that's going to cause investment to happen, and get dynamic returns that actually increase the revenues coming to the federal government. We can't do it all by eliminating large sections and duplicate spending and waste. We can do a large portion of it, but there has to be some revenue component to that, and anybody that says that's not the case, I think they're just wrong and they're not thinking about the long-term health of our country.

KUDLOW: What's the revenue component? I mean, is it tax earmarks or tax expenditures? Would that be accompanied by lower tax rates? Tell me about the revenue part.

Sen. COBURN: Absolutely. You know, the idea would be as you start eliminating a lot of the tax credits that cause people to invest not in the best performance for capital, but in the best tax policy and lower rates, effectively, so that we have a lower rate and a more vibrant economy that people will go out and say, `Hey, this rate's really low, I think I'll put the risk of that because if I make the million bucks on it, the rate's only this.' So changing behavior. But it--with that has to come some regulation reform because one of the things I find all throughout Oklahoma and the places I travel is this government is killing the people's desire to put a risk in terms of capital into new business propositions because the regulations are so heavy and onerous and don't make any sense.

KUDLOW: You're being just a little vague, Senator, which is not like you down through the years.

Sen. COBURN: Well, I...

KUDLOW: Is it--is it Medicare that you want? It had been reported that you were unhappy with the volume of reduction in Medicare spending. Would that get you back in?

Sen. COBURN: Larry, we cannot fix the problems in front of us--let me say it this way. There should not be any confusion on the part of American citizens. Medicare will not be what it is today in five years. It is a physical impossibility for it to be that. We cannot do it. So for us to continue to lie to the American people and say Medicare isn't going to have to change and Social Security isn't going to have to change and Medicaid isn't--that's untruthful. And it delays the time at which we make the critical decisions. So I don't want to negotiate with those guys. It's not fair to them. There's--entitlement spending is the big problem, and we have to address it to a greater extent than they were willing to do it at this time. And if they're not willing to do it, I don't see how we solve the problems.

KUDLOW: I interviewed Nancy Pelosi a few days ago, and she said everything is on the table in these budget talks. Now, she's a House member, obviously, not a senator, but I wanted to ask you is Paul Ryan's Medicare reform plan, his so-called voucher plan, is that on the table?

Sen. COBURN: Well, it should be. The fact is, is, you know, either a means testing or--you know, our problem in health care isn't that we don't have a Medicare program, the problem is health care costs too much, and the reason it costs too much is 1 in $3 that we spend on it doesn't help anybody. And we think we can bureaucratically address that rather than let market forces address that. And so anything that goes away from market forces is going to end up costing health care more, anything that goes towards it's going to cost it less. And that's what Paul--why Paul Ryan's plan is so good. Paul's Ryan plan puts it back in your control and makes sure those that need the most help from the federal government in terms of their health care in their older years are going to get it. And those that need the least are going to get less. And also uses market forces to help allocate those resources and diminish overutilization of the health care dollar.

KUDLOW: So it's been reported that Senator Conrad, who is one of your group, wants to raise the top marginal tax rate significantly. Was that also a deal breaker for you?

Sen. COBURN: No, it was never even brought up in our...

KUDLOW: All right, so let you ask me generally, step back for a minute. You've got these two talks. You've got budget talks and you've got the debt ceiling talks. If we don't get a strong 2012 budget out 10 years, or, alternatively, and/or if we don't get a debt ceiling deal that has serious budget reductions and budget caps and reforms, I just want to ask you, is this country going into a financial crisis? We’re going to be downgraded again by S&P and the other rating agencies? Is all--are we staring a crisis right here in the summer months?

Sen. COBURN: As Erskine Bowles says, this is the most predictable crisis this country's ever faced. As a matter of fact, I think you could make the case right now in a lawsuit against Moody's and S&P for why they haven't already downgraded us, looking at the financial situation. I know that's going to make Geithner go nuts, but the fact is look at the realistic. You have politics being played ahead of the good best interests of the country. I mean, this shouldn't be a Democrat/Republican thing. It--our problems are urgent, they're immediate and they're severe, and lack of action's going to make the difficulty in solving them even greater.

KUDLOW: All right. You were very critical--last one--in your Washington Post op-ed piece. You were very critical of the Senate Democratic leadership. Let me just ask you, in your judgment, are they serious about getting a budget deal and a debt ceiling deal?

Sen. COBURN: Well, I can't answer that. What I know is that they're not serious about having the problem debated on the floor of the US Senate. I mean, when we can't even get a vote to get rid of 3 to $5 billion worth of ethanol subsidies that the people wanting the subsidies don't want--in other words, they've sent us a letter, `Please quit sending us this $5 billion a year,' and we can't even get a vote on that on the Senate floor? Tell me whether they're serious about solving our problem. That's the--actually now, if it were to happen today, it'd be about 4 billion we would save this year. That's 4 billion we wouldn't be borrowing, and that's not even on the floor? And that's a bipartisan bill that we probably have 67, 68 votes for? Tell me, are they more interested in protecting people from having to make tough votes, or are they more interested in what's in the long-term best interests of the country?

KUDLOW: What's your answer to that, Senator?

Sen. COBURN: Well, I think that the lack of action speaks to the answer.

KUDLOW: All right, we're going to leave it there. Senator Tom Coburn of Oklahoma, not exactly out of the budget talks, but not in them, either. Thank you, sir. We appreciate it.

Fix the IMF

As the IMF gets ready to choose a successor to Dominique Strauss-Kahn, who resigned following his arrest on charges that he sexually assaulted and raped a hotel housekeeper, it would be a good thing to step back for a moment and ask: What should the IMF do?

More specifically, can the IMF possibly morph itself into a worldwide force for economic growth instead of Bailout Nation?

Yes, it’s a powerful global economic agency. It’s also one with a very checkered past. Usually opting for austerity policies, such as currency devaluation and tax increases, the IMF has bungled a lot of rescue missions down through the years.

There was Turkey, Mexico, and the Asian Tigers. More recently, there was the Greece bailout plan, which has not succeeded. Neither have the Portugal and Ireland plans. Though the EU’s involvement in these European states has been larger than the IMF’s, the IMF was supposed to be the tough cop for budget cuts that have not materialized. The necessary debt restructuring also hasn’t occurred.

Socialist Strauss-Kahn restored IMF prestige with his political-economic activism. But he didn’t restore prosperity to the southern-tier European countries.

So, to some extent, the IMF has become Bailout Nation Europe. (I note that the U.S. owns about 20 percent of the IMF, and Bailout Nation is very unpopular among the Tea Partiers and independent voters.)

According to news reports, it is widely expected that French finance minster Christine Lagarde will get the IMF’s newly vacated top post, although there’s some talk of Jean-Claude Trichet, the able central banker.

The point is, however, will the IMF ever adopt a true economic-growth model for the basket-case countries it is trying to fix?

For example, why not East-European-style flat-tax reform to go along with the necessary social-welfare entitlement reduction? Greece and Portugal could do as well as Poland and Slovakia. And outside the eurozone, the IMF could seek currency stabilization rather than currency depreciation.

People forget, by the way, that the original IMF created in 1945 was a currency-stability fund. It was set up for the postwar era to help Germany, Japan, and many others keep their currencies lined up with the dollar, which in turn was linked to gold at $35 an ounce. But when the Bretton Woods arrangement collapsed in the early 1970s under Richard Nixon, the IMF was forced to look for a new job. And so it got into the bailout business, with policy prescriptions that frequently made the patient worse, not better.

I remember a great article years ago by David Malpass: “A Radical Idea: The IMF Should Promote Growth.” Today, a whole bunch of us like Lew Lehrman, Steve Forbes, and myself would prefer the IMF work toward a return to a gold-based world currency system.

Like many, I believe successful newly emerging economies like China, India, and Brazil should play a larger role in IMF governance and decision-making. But I think the biggest issue is what will the Fund do with all its resources and influence to promote world economic growth?

There’s news that the highly respected Economic Cycle Research Institute is now predicting a downturn in global industrial growth. Of course, the financial near-bankruptcy of the U.S., without any serious budget-cutting deals, may well contribute to that downturn this summer. So I am less worried about who runs the Fund and more concerned about whether it will be a force for economic growth.

Judging by past decades, I’m not holding my breath.

The late Jude Wanniski used to joke that if you want to find the next breakout of social and political unrest, all you need to do is get hold of the IMF travel schedule. I hope that will change. But I doubt it.

On CNBC's Kudlow Report Tonight

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LINKEDIN IPO TOPS $100 -- BUBBLE TROUBLE?
- Brett Arends, Wall Street Journal Columnist
- Vikram Mansharamani, Hedge Fund Manager; "BOOMBUSTOLOGY "author"
- Quentin Hardy, Forbes Executive Editor
- CNBC’s Jon Fortt

MARKETS
- Brian Kelly, Capital & Fast Money Contributor President
- Richard Soultanian, NUS Consulting Group President

IMF CHIEF MAKES BAIL
- CNBC’s Mary Thompson reports.

BATTLE ROYALE FOR TOP IMF JOB
- CNBC’s Eamon Javers reports.

BATTLE TO RUN THE IMF -- WHO SHOULD BE THE HEAD?
- David Malpass, Encima Global President, Fmr. Bear Stearns Chief Economist
- Robert Reich, Fmr. Labor Secretary; "Aftershock: The Next Economy and America's Future" author; CNBC Contributor; Univ. of CA., Berkeley, Prof.

GANG OF SIX...AND THEN THERE WERE NONE; WHY IS THE SENATE STALLING ON THE DEBT DEBATE?
- Sen. Tom Coburn, (R) OK joins us.

OBAMA'S MIDEAST SPEECH
- NBC’s Steve Handlesman reports.

IMPACT OF OBAMA'S MIDEAST SPEECH: DID OBAMA TURN HIS BACK ON ISRAEL?
- Dan Senor, Sr. Fellow for Middle East Studies; Council on Foreign Relations
- Col. Jack Jacobs; U.S. Army (Ret.); NBC Military Analyst

On CNBC's Kudlow Report Tonight

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MARKETS: THE BULL CASE VS. THE BEAR
- Lincoln Ellis, Linn Group (CME) Managing Director
- Matt Shapiro, MWS Capital President
- Don Luskin, Trend Macro Chief Investment Officer

FED MINUTES OUT TODAY … WHAT NEXT FOR THE BERNANKE FED?
- Lee Hoskins, Former Cleveland Federal Reserve President
- Dean Baker, Co-director of the Center for Economic and Policy Research (CEPR)

SCHWARZENEGGER BABY BOMBSHELL: INVESTIGATION INTO WHETHER ANY GOVT OR CAMPAIGN RESOURCES USED TO COVERUP
- Stephanie Stanton reports from California.

AROUND THE WORLD...OBAMA’S MIDEAST BLUEPRINT...BRITAIN PULLING OUT OF AFGANISTAN, SHOULDN'T WE?... SANCTIONS ON SYRIA
- Bing West, fmr. Marine; fmr Asst Secy of Defense in Reagan Admin; "No True Glory: A Frontline Account of the Battle for Falluja" Author
- Gen. Barry McCaffrey, NBC Military Analyst; U.S. Army (Ret.); McCaffrey Associates Pres.

IS THE IRS GETTING POLITICAL?
- Phil Kerpen, Americans for Prosperity Vice President of Policy

FIELD OF POSSIBLE GOP PRESIDENTIAL SHRINKS
- CNBC chief Washington correspondent John Harwood reports.

- Larry Sabato, Director, University of Virginia Center for Politics
- Michael Smerconish, WPHT Radio Talk Show Host

An Air of Willingness

This debt ceiling deal is going to be a tough slog.

But I want to quote House Republican Majority Leader Eric Cantor, who told me on "The Call" Tuesday, "there's an air of willingness” in the debt talks with Vice President Biden.

And as you know from my interview with House Democratic Leader Nancy Pelosi, she is shifting to the center and told me that everything should be on the table to reduce the federal deficit. Those are her words and she said several times.

She also said that Speaker John Boehner's plan that every dollar increase in the debt ceiling must be accompanied by a dollar reduction in spending is "interesting”. She didn't trash it and that's important.

It's up to the Democrats now to follow through and put some spending and entitlement reforms on the table.

By the way, Ms. Pelosi joins Republicans in favor of pro-growth tax reforms, especially business tax reforms to lower the rates and broaden the base. This is positive.

I have no idea how this whole story is going to turn out. But I am reporting to you that there is some optimistic movement in the right direction by both sides.

We're going to go down to the wire.

But the possibility of lower spending and tax reform is pro-growth and could conceivably be a positive tonic for stocks this summer if a debt deal gets done.

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MARKETS
- Todd Schoenberger, Managing Director LandColt Trading
- Mike Ozanian, Forbes Executive Editor
- Keith McCullough, Founder & CEO of Hedgeye Risk Management


IS MOHAMMAD EL-ERIAN RIGHT? IS FINANCIAL REPRESSION COMING TO AMERICA?
- Mark Perry, University of Michigan-Flint economics & finance professor; AEI Visiting Scholar; "Carpe Diem" Blogger
- Matthew Slaughter, Tuck School of Biz, Dartmouth Assoc. Dean ; Natl. Bureau of Economic Research; Council of Economic Advisors Member ('05-'07) - Dartmouth Camera

IMF SCANDAL: KAHN IN THE CAN
-NBC’s Jonathan Dienst reports.

AHMADINEJAD TO HEAD OPEC?
- Helima Croft, Barclays Capital Geopolitical Strategist
- Ken Timmerman, Newsmax.com Contributing Editor
- John Kilduff, CNBC Contributor; Again Capital Founding Partner

WASHINGTON TO WALL STREET…IS PAUL RYAN WILLING TO DEFAULT? AND CAN A DEAL BE MADE TO FIX MEDICARE & SOCIAL SECURITY? WHAT'S THE BEST WAY TO DO IT?

- James Freeman, Wall Street Journal Assistant Editor Editorial Page
- Keith Boykin, Former Clinton White House Aide; Editor of The Daily Voice online news site; CNBC contributor
- Kevin Williamson, National Review Deputy Managing Editor

One-on-One with Nancy Pelosi

Earlier today, I had the pleasure of interviewing Nancy Pelosi, the former Speaker and current House Democratic leader. We’ve had several interviews down through the years. And while we’ve disagreed on a number of topics, I do have enormous personal respect for her. She’s a very strong lady with a subtle sense of humor. Always good copy. And while she still wants to tax oil companies, she did have some interesting thoughts regarding pro-growth tax reform and spending and entitlement cuts. Of course, trust but verify. But I thoroughly enjoyed this interview.

Click here to read the full interview.

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MARKETS: BIG CRACKUP COMING?
- Joe Kernen, Squawk Box Host; "Your Teacher Said What?!: Defending Our Kids from the Liberal Assault on Capitalism"
- Dan Fitzpatrick, StockMarketMentor.com, President & CEO
- David Dietze, Point View Financial Services; President and Chief Investment Strategist

INFLATION NATION: IS EL-ERIAN RIGHT? INFLATION IS REAL, NOT TRANSITORY?
- John Rutledge, CNBC Contributor; Fmr. Reagan Economic Advisor
- Peter Cohan, President of Peter Cohan & Associates; Prof of Business Strategy at Babson School of Business; Author of "Capital Rising"

The Great Flood 2011
MISSISSIPPI RIVER FLOOD REACHING CRITICAL WEEKEND
- CNBC’s Brian Sullivan reports from Baton Rouge.

MEDICARE & SOCIAL SECURITY OUTLOOK WORSENS: WHAT SHOULD BE DONE ABOUT IT TO FIX HEALTHCARE & ENTITLEMENTS?
- Matt Miller, Washington Post Online Columnist; Public Radio's "Left, Right and Center" Host
- Betsy McCaughey, Hudson Institute Health Policy Expert; Fmr. NY Lieutenant Governor (1995-1999)

TEACHING THE VALUE OF CAPITALISM: WHY IS AMERICAN CULTURE SO HOSTILE TO FREE MARKETS?
- Joe Kernen, Squawk Box Host; "Your Teacher Said What?!: Defending Our Kids from the Liberal Assault on Capitalism" co-author
- Blake Kernen, "Your Teacher Said What?!: Defending Our Kids from the Liberal Assault on Capitalism" co-author

IS DEBT CEILING REALLY AN URGENT PROBLEM?
- Deroy Murdock, Scripps Howard News Service Syndicated Columnist; Media fellow with Hoover Institution at Stanford University
- Jimmy Pethokoukis, Money & Politics Columnist; Reuters Breakingviews; Reuters Money & Politics Columnist; CNBC Contributor
- Mark Walsh, "Left Jab" Host (Sirius show); Genius Rocket CEO; Fmr. Sr. Vice President at America Online; Fmr. Vertical Net CEO; Fmr. DNC Advisor

Bernanke’s Quantitative Neutrality

There’s a lot of turmoil in commodity and stock markets. Last week they both got slammed. On Monday and Tuesday they rallied back. And today they got slammed again.

The heart of this story is commodities, especially gold, silver, and oil. And the dollar.

And the heart of that story is a significant shift coming in monetary policy. Quantitative easing is going to end next month when quantitative neutrality begins. It’s a significant change by the Fed. And on a de facto basis, it represents a relative tightening.

Traders and investors are fighting like cats and dogs over the meaning of the Fed’s policy. They shouldn’t be. The handwriting is on the wall. And Bernanke’s less-accommodative stance -- what I call quantitative neutrality -- is bullish for the dollar, bearish for commodities, and is leading to a stock market sector rotation of the major groups, away from energy and raw materials and toward more defensive plays like health care, utilities, and consumer staples.

Now, strong profits provide a good backdrop for the change in Fed policy and the rotation shift in the stock market. Profits will cushion whatever stock corrections are out there.

And, let’s face it, with a zero interest-rate target and a negative real fed funds rate, the Fed will still be highly accommodative.

But my point is, going from quantitative easing to quantitative neutrality is a less-accommodative Fed. I think it puts a floor under the dollar and a ceiling over most commodities. And this change from the Fed is the main source of the volatility that we are witnessing.

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TURMOIL IN THE MARKET
- CNBC’s Brian Shactman reports.

- Lincoln Ellis, Linn Group managing director
- Lee Munson, Portfolio Chief Investment Officer
- Bob Froehlich, The Hartford, Sr. Managing Director
- Michael Farr, Farr, Miller & Washington president

COMMODITY CORRECTION...AGAIN!
- CNBC’s Sharon Epperson reports.

- Jack Bouroudjian, CEO of Index Futures Group
- Richard Ross, Auerbach Grayson Global Technical Strategist

POLITICS OF GAS PRICES
- CNBC’s Eamon Javers reports from Washington.

GALLEON CHIEF RAJ RAJARATNAM CONVICTED ON ALL CHARGES
- CNBC’s Bertha Coombs reports.

- Tom Curran, Peckar & Abramson
- Joe DiGenova, Former U.S. Attorney

SCHUMER WANTS SALES TRANSACTION TAX ON COMPUTERIZED FAST-TRADING
- Jimmy Pethokoukis, Reuters

POSTAL SERVICE REPORTS BILLIONS IN LOSSES
- Jim Miller, Fmr. Reagan OMB Dir; Husch Blackwell Sanders Capital Analysis Group Chairman; US Postal Service Bd. of Govenors Member

WHAT SHOULD BE DONE WITH THE UNDOCUMENTED WORKERS? HOW TO REFORM IMMIGRATION SYSTEM?
- Tamar Jacoby, Immigration Works USA CEO
- J.D. Hayworth, Fmr. Congressman (R) Arizona; Fmr. Candidate for US Senate, Former KFYI Talk Show Host

On CNBC's Kudlow Report Tonight

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MARKETS
- Kimberly Foss, Empyrion Wealth Management CEO/Founder
- Keith McCullough, Founder & CEO of Hedgeye Risk Management
- Matt Shapiro, MWS Capital President

DEMS PLOT TO GET $21B FROM BIG OIL … WILL TAXING OIL MEAN LESS OIL & HIGHER PRICES?
- Rep. Javier Becerra (D-CA)
- Rep. Kevin Brady (R-TX)

FLOODS, REFINERIES & GAS PRICES
- John Kilduff, partner at Again Capital reports.

RED CHINA RISING: ARE THEY RIPPING US OFF ON TRADE? ARE THEY ABOUT TO OVERTAKE OUR ECONOMY? DO THEY THREATEN US MILITARILY?
- Peter Navarro, "Seeds of Destruction" Author; "The Coming China Wars" Author; University Of California - Irvine Business Professor
- Gordon Chang, "Nuclear Showdown" Author; "The Coming Collapse of China" Author
- David Goldman, Former Head of Fixed Income Research at Bank of America

NEW DHS ADVISORY & NEW CELL PHONE TERROR ALERT SYSTEM TO LAUNCH IN NYC
- NBC’s Jonathan Dienst reports.

FREE MARKET MATTERS
IS GOVERNMENT STEPPING IN THE WAY OF FREE MARKETS?
- Bernard Whitman, Whitman Insight Strategies; Democratic Pollster & Strategist
- James Freeman, ,Wall Street Journal Editorial Page Asst. Editor
- Sam Seder, Political Commentator; Host, "The Majority Report"

Boehner Lays Down the Debt-Ceiling Gauntlet

House Republican Speaker John Boehner will give an important policy speech on the debt ceiling tonight at the Economics Club of New York. This is probably the key paragraph (taken from an advanced look at the speech): “So, let me be as clear as I can be. Without significant spending cuts and reforms to reduce our debt, there will be no debt-limit increase. And the cuts should be greater than the accompanying increase in debt authority the president has given. We should be talking about cuts of trillions, not just billions.”

In plain English, Mr. Boehner is making this suggestion: Let’s say there’s a $2 trillion debt-limit increase proposed by the administration. In that case, there would have to be $2 trillion-plus in spending cuts in order to get Republican support. This is tough stuff.

By the way, the speaker argues that only tax hikes are off the table in the debt-ceiling discussion. He also insists that any debt deal must “reform the budget process.” However, the speaker does not specify budget-process reform.

That’s where there’s gonna be a big debate between an administration that wants deficit targets and many Republicans who want spending caps as a share of GDP. The former could still allow for tax hikes in the form of eliminating deductions, credits, and other so-called tax expenditures. It would seem that Boehner rules this out, but he does not explicitly say so. A spending cap, however, whether as a share of GDP or as a targeted level of some sort, would rule out any tax increases at all.

The White House believes that eliminating tax expenditures is a spending cut through the tax code. But unless this is accompanied by tax-rate reductions, it’s an anti-growth tax hike.

In terms of the overall budget going beyond the debt ceiling, Boehner talks about pro-growth tax reform and overhauling the code. He even quotes President John F. Kennedy in 1962. Speaking before the Economics Club of New York, JFK talked about the need to lower tax rates in order to generate more revenues to balance the budget.

Kennedy believed in the supply-side incentive model, and Boehner does too. But tax reform will not be part of the debt-ceiling discussion.

Finally, Boehner does state that “allowing America to default would be irresponsible. . . . But it would be more irresponsible to raise the debt ceiling without simultaneously taking dramatic steps to reduce spending and reform the budget process.”

So Speaker Boehner lays down the gauntlet. You want to raise the debt ceiling? Then we need an equal amount of spending cuts to go along with the higher borrowing authority. It looks like a good start. But of course, the Joe Biden talks will go on. We’ll see what happens next.

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MARKETS ... WILD RIDE WITH COMMODITIES ... GOLD, SILVER, OIL AND THE DOLLAR
- Jim Rogers, Rogers Holdings Chairman
- Scott Nations, Nations Shares Chief Investment Officer; Options Action Contributor
- Richard Soultanian, NUS Consulting Group President

DEMS WANT TO OFFSET DEFICITS BY TAXING OIL: WOULDN'T TAXING OIL JUST DRIVE PRICES HIGHER?
- John Hofmeister, Citizens for Affordable Energy Founder & CEO; Fmr. Pres. & CEO of U.S. Operations, Shell Oil

TRANSPORTATION TERROR FEARS
- NBC’s Jonathan Dienst reports.

RED CHINA RISING… U.S./CHINA TALKS…DOES CHINA HAVE UNFAIR TRADING PRACTICES…IS CHINA RIPPING US OFF? WHAT'S THE U.S. GOING TO DO ABOUT IT?
- Zach Karabell, CNBC's Fast Money Contributor; River Twice Research President
- Jonathan Tasini, President Economic Future Group; Fmr. Labor Research Association Executive Director

CEO WAGES UP 11% -- ISN'T IT ABOUT TIME BUSINESS & CEO'S GET REWARDED FOR BEING THE BACKBONE OF THE ECONOMY?
- Howard Dean, Fmr. Vermont Governor & Presidential Candidate; CNBC Contributor
- Jimmy Pethokoukis, Reuters Breakingviews: Money & Politics Columnist; CNBC Contributor

FLOOD REPORT
- NBC’s Jay Gray reports.

BOEHNER SPEAKS AT THE ECONOMIC CLUB OF NY - DISSING THE DEBT CEILING
- Robert Reich, Fmr. Labor Secretary; "Aftershock: The Next Economy and America's Future" author; CNBC Contributor; Univ. of CA., Berkeley Prof.
- Steve Moore, Senior Economics Writer for WSJ Editorial Board

Where’s the Beef, GOP?

Are we headed for more political business as usual, where Republicans give up too much and get too little back in the debt-ceiling fight? Friday’s papers are loaded with stories on the GOP giving up Paul Ryan’s Medicare-reform package. It’s being called “political reality.”

But let me ask this: Will they also give up any attempt to slow Medicare spending in the next couple of years, at least a down-payment on the budget deficit?

And I don’t see much talk anymore about tax reform as part of the new package. But the economy still needs an incentive jolt, which could be supplied at least by dropping the business tax rate.

Conservative Canadian Prime Minister Stephen Harper is moving to a 15 percent corporate tax rate. We’re still at 35 percent. Canada’s open for business. Are we?

Friday’s jobs report was better than expected, with a 244,000 increase in nonfarm payrolls, even though the small-business household survey fell 190,000, edging up the unemployment rate from 8.8 to 9.0 percent.

The Obama recovery has produced about two million new jobs. But compare that to the Reagan recovery that produced five million new jobs in its first two years. The current economic cycle is growing at less than 3 percent. Reagan’s first two years saw more than 7 percent growth annually.

If today’s Republican party vacates the pro-growth position of flat-tax reform and clear spending reductions, it will lose the high political ground. The Obama administration wants deficit targets in the debt-ceiling bill. But that allows for tax increases. Will the GOP man up for a clear spending cap at 20 percent of GDP, with across-the-board budget-cutting penalties? Will they get any spending reductions at all? Will the deficit and debt outlooks in the next couple of years be lower?

For all the talk about the bond market going nuts over the failure to increase the debt limit, 10-year Treasury rates have been falling, not rising. At this writing they’re 3.14 percent, down from 4 percent last year. So if the bond market isn’t panicking, why should Republicans?

At Thursday night’s GOP debate in South Carolina, only Herman Cain had a real pro-growth message with his national sales-tax/fair-tax approach. But discussion of economic growth and unemployment was minimal. Gov. Tim Pawlenty, who has been meeting with supply-side leaders, failed to articulate a single supply-side tax-cut idea. And there was no talk of spending caps or spending cuts.

What’s up with the national GOP? What’s up with the congressional GOP?

Where’s the beef on economic growth and jobs?

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MARKETS
- Jim LaCamp, Macroportfolio Advisors Sr. VP, Portfolio Manager
- Jim Iuorio, Options Action Contributor; Director, TJM Institutional Services
- Larry Glazer, Managing Partner Mayflower Advisors

GREECE PULLING OUT OF EUROZONE?
- CNBC's Simon Hobbs reports.

IS THE ECONOMY IN BETTER SHAPE THAN WE THINK?
- Denny Stringl, Fmr. Verizon CEO
- Robert Johnson, Fmr. Continental Airlines Chairman & CEO; CNBC Contributor

FREE MARKET FRIDAY
WHY WAS MEDICARE TAKEN OFF THE TABLE? WASN'T THIS WHY THE REPUBLICANS WERE ELECTED? AND WHY AREN'T THEY TACKLING TAX REFORM?

- Fred Grandy, News Talk 630 WMALRadio Talk Show Host; Former Congressman
- Sam Seder, Political Commentator; Host, "The Majority Report"
- Mark Simone, WABC Radio Talk Show Host

EMERGING GOP STAR? CONSENSUS SAYS HE WON THE GOP DEBATE LAST NIGHT
- Herman Cain, GOP presidential hopeful and former Kansas City Fed Head and Godfather Pizza Chairman/CEO

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COMMODITIES CRASH: GOLD DOWN ALMOST $50, SILVER; OIL CLOSES BELOW $100
- CNBC’s Sharon Epperson reports.

- Lincoln Ellis, Linn Group (CME) managing director
- Matt Shapiro, MWS Capital President

MARKET PERSPECTIVE
- Stephen Weiss, Author, "The Billion Dollar Mistake;" Fast Money Contributor
- Bill Baldwin, Forbes Editor
- Don Luskin, CNBC Contributor; Trend Macro Chief Investment Officer

OBAMA VISITS GROUND ZERO
- CNBC’s John Harwood will join us.

DEBT THREAT: BIDEN'S BUDGET MEETING
- CNBC’s Eamon Javers reports from Washington.

OIL CLOSES BELOW $100 - WHERE ARE OIL & GAS PRICES GOING?
- John Kilduff, CNBC Contributor; Again Capital LLC Partner
- John Hofmeister, Citizens for Affordable Energy Founder & CEO; Fmr. President & CEO of U.S. Operations, Shell Oil
- Stephen Schork, ‘The Schork Report’ Editor

RUST BELT STATES LEAD ECONOMIC RECOVERY...PLUS OHIO BUDGET & UNION FIGHT
- Gov. John Kasich (R-OH) will join us.

DOUBLE DIP IN HOUSING PRICES?
- CNBC’s Diana Olick reports.

BULL/BEAR HOUSING DEBATE
- Brett Arends, Columnist The Wall Street Journal
- Stephen Meister, Meister Seelig & Fein

Are We Done in Afghanistan?

In the aftermath of the killing of Osama bin Laden, I found myself agreeing with Charles Krauthammer that this was a global game-changer for American greatness. It was a gutsy and courageous decision by President Obama, brilliantly executed by the Navy SEALs and all the intelligence and support behind them.

As Krauthammer put it, after the tough slogs in Iraq and Afghanistan, this amounts to the restoration of unquestioned U.S. military dominance. America has not slipped, nor has our military reach and power.

But now I want to ask a more difficult question. With the killing of Osama, is the Afghan mission complete? The original post-9/11 goal was to kill bin Laden and wipe out al-Qaeda. Now that we’ve killed bin Laden and dismantled so much of al-Qaeda, do we really need to trudge through an even longer war in Afghanistan?

Al-Zawahiri is in Pakistan. Perhaps the SEALs can dismantle him. Al-Awlaki is in Yemen, and perhaps al-Qaeda can be dismantled there. But regarding the broader war in Afghanistan, I was taken by a quote from Congressman Peter King on National Review Online. He said, “The enemy is now more of a threat from within than it is from overseas.”

I am no military or foreign-policy expert. But I do know the cost of supporting a corrupt regime like Hamid Karzai’s in terms of blood and treasure. The cost is steep. I speak here as a hawk, not a dove.

In dollar terms, the cost of the Afghan war is roughly $450 billion today, and according to CBO projections it is scheduled to rise by perhaps another $500 billion.

Meanwhile, the Congressional Research Service reports that we have doubled our average troop strength in Afghanistan from 44,000 to 84,000 as part of the surge. Troop strength there is expected to average 102,000 in FY2011. A slight 4,000 troop decline is projected for FY2012, but the longer-term commitment continues to the end of 2014.

Thus far, nearly 1,600 U.S. troops have been killed in action in Afghanistan. To me this is the most tragic part. Of course, I wholeheartedly support our troops. But is this blood really necessary? Are the projected future costs really necessary?

Again, I ask myself: All this to support Karzai? Isn’t this the sort of nation-building that the late William F. Buckley Jr. opposed? Are American national-security interests really tied up in Afghanistan? Is now not the time to contemplate a much more rapid troop withdrawal from Afghanistan?

I am willing to concede that the U.S. needs to fight the expected Taliban spring surge. But after that, is it worth it to stay any longer? And does our mission really include wiping out the Taliban in Afghanistan, a seemingly impossible task?

Going forward, what exactly is our real mission in Afghanistan? That’s the basis of my concern. Are we as Americans and conservatives really convinced that the continued mission is worth the lost blood and treasure? Is now not the time to leave?

What exactly are we doing in Afghanistan? And how do we get out of it?

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MARKETS
- David Tice, Portofilio Manager, The Prudent Bear Fund
- Michael Cuggino, Permanent Portfolio Funds President & Portfolio Manager
- Todd Schoenberger, LandColt Trading Managing Director

WHY IS EVERYONE SO GLOOMY ON THE ECONOMY?
- Brian Wesbury, First Trust Advisors Chief Economist
- David Goldman, Former head of Fixed Income Research at Bank of America

BIN LADEN KILLED; LATEST NEWS FROM THE WHITE HOUSE
- CNBC chief Washington correspondent John Harwood reports.

THE COST OF WAR...WITH BIN LADEN DEAD, IS IT TIME TO GET OUT OF AFGHANISTAN?

- Gen. Wesley Clark, U.S. Army (Ret.); NATO Supreme Allied Commander Europe (1997 - 2000)
- Rep. Jason Chaffetz, (R) Utah; House Budget Committee
- David Rittgers, Fmr. Special Forces officer (did 3 tours in Afghanistan)

HAS JETER LOST HIS MOJO? OVER THE HILL AT 36? IS HE WORTH THE $51 MILLION?
- CNBC’s Darren Rovell reports.

DEBT CEILING PREVIEW: DAY BEFORE BIDEN'S DEFICIT REDUCTION MEETING, CANTOR, KYL CHALLENGE WHITE HOUSE
- Keith Boykin, Former Clinton White House Aide; Editor of The Daily Voice online news site; CNBC contributor
- Steve Moore, Senior Economics Writer for WSJ Editorial Board; "Return to Prosperity" co-author

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THE MARKETS
- Jeff Kleintop, LPL Financial Chief Market Strategist
- Stephanie Link, TheStreet Director of Research and VP of Strategy
- Keith McCullough, Hedgeye Risk Management CEO & CNBC Contributor

SILVER DOWN 10%, BELOW $42, AHEAD OF CME MARGIN INCREASE; GOLD; DOLLAR
- CNBC's Sharon Epperson reports.

BUY OR SELL SILVER & GOLD & COMMODITIES INDEX?
- Mike Seery, President Seeryfutures.com
- Lee Munson, Portfolio Chief Investment Officer

STRATEGIC ISSUES FOLLOWING BIN LADEN DEATH

- Roger Cressey, NBC News Terrorism Analyst,Terrorism Expert
- Chad Sweet, Co-Founder of The Chertoff Group; Fmr. Chief of Staff, Dept. of Homeland Security (2007-2009); Fmr. CIA Directorate of Operations (1990-1993)
- Larry Korb, Center for American Progress Senior Fellow; Fmr. Asst. Defense Secretary during Reagan Administration

OSAMA STORY DETAILS & THE PRESIDENT'S POLITICAL CAPITAL MOVING FORWARD
-CNBC chief Washington correspondent John Harwood reports from the White House.

NATIONAL UNITY MOMENT TO GET THE COUNTRY'S WORK DONE?

- Robert Reich, Fmr. Labor Secretary; "Aftershock" author; CNBC Contributor; Univ. of CA., Berkeley, Prof. of Public Policy - Berkeley, CA
- Kay Bailey Hutchison, (R) Texas