Tonights american greed criminal burned, he was unstoppable until the feds caught him in the act. All new tonight, ill be watching, hope you will be too. Magnum hunter disappointing 10k delay. Give me a break. Dont come on the show if you cant file the stuff. Salesforce, i think its real. Theres always a bull market somewhere, i promise to try to find it for you here on mad money. Im jim cramer, see you tomorrow. Good evening, im larry kudlow, this is the kudlow report. You know my view, even modest spending cuts and limited government are good for growth. Its a free market, private sector tax cut. Thats what i think. Despite all the false fear mongering by the administration with their budget cuts, thats going to come gradually, youll see. Nonessential accounts will go first, theres a tenyear window for full completion. And the stock market, by the way, has reacted well to all of this and also, did you know that while the government may take out 85 billion in Spending Authority, the Federal Reserve puts in 85 billion every single month. So, folks, please d panic tomorrow morning. The kudlow report starts right now. First up, yeah, we know the sequester is going to happen tomorrow, we know the worst threats and warnings from the Obama Administration are empty scare tactics. They do not stand up to factchecking. For instance, listen to education secretary arne duncan. They sort of act like theres some sort of magical thing that i could do or superintendent or principal could do. Kids are going to get hurt. Thats just reality. Yeah, right. But first he said 40,000 teachers would be laid off. Then it was 17,000 teachers, but even this statements got four pinnoccios. So far, not a single teacher is in line to lose his or her job. And theres eric holder also making scare mongering positions about violent criminals going free. The reality is, there is going to be harm, there is going to be pain and the American People will be less safe. Thats a fundamental reality that people have got to get their heads around. Well, i beg your pardon, there is not one bit of evidence that has to be true. In fact, all of these scare tactics and melodrama and predictions are not working for obama. You know what, even the media is beginning to turn against him. Theres been a shrug in reaction to Janet Napolitano releasing illegal immigrant detainees for no reason, and she may have broken the law in doing so. Transportation secretary ray lahood, hes not much getting the reaction to threatening laying off air controllers. Thats even though his own budget and his workforce are greater today than they were a few years ago. Air traffic was heavier, we did fine. All right. Just my take. I think this is all just nutty stuff. But joining me now, our guest panelist for the evening, democratic strategist Jimmy Williams and cnbc contributor sarah fagan. Sarah, whats your take on this scare mongering . From political standpoint, is obama losing his creds here . He runs a risk of losing his credibility on this. And day after day, we see Administration Officials going out and scaring the American People as you pointed out. Yet, the numbers dont comport. Were talking about a percent. This year, 2 overall of the budget. You ask American Families how much what percentage theyve had a cut from their budget, its a lot greater than 2 over the last couple of years. Every darn business in america has had to make cuts like that. Every business. Large, small or otherwise. Heck, jpmorgan laid off 17,000 workers and no ones happy about that. Not jpmorgan, obviously not the families, no ones happy. But sometimes youve got to do what youve got to do. Our government never does it. Now it is and obama wont let it happen. Listen, youre not going to get an argument from this democrat. I completely think the sequester is fabulous. Lets do it. You do . Republicans voted for it, president signed it into law. John boehner said ive got 98 of what i wanted. Im pretty sure it wasnt the sequester. If thats the case, lets all sit down in this bed weve made up and lie down in it. Lets not forget they hash this out in 2011. They went through what cuts to do and what cuts not to do. It wasnt like this has been sprung on anybody in this process. Absolutely this is an interesting point. Im going to call it your wing, youre kind of a probusiness democrat. Very probusiness, yes. Why is it that your wing of the party isnt stepping up . Why is it youve got these guys in the cabinet, for example. Take arne duncan. Yes. Hes a smart guy, decent education. Yes. Not bad. Why is he caving into this thing . Why would ray lahood say what hes saying . His own Inspector General told them there were 100 zombie air towers that shouldve been taken down years ago and theyre Still Standing and in some cases still staffed out. And we do not need that money. Wheres a ray lahood . Whats wrong with him . These cabinet secretaries are doing what theyre supposed to be doing, which is go out and be mouthpieces for the administration. When george bush was president , your former boss, our former president when they ran around scaring the living hell out of the country out of this terrorist attack and this terrorist attack and if we dont fund up and do the department of Homeland Security et cetera, et cetera and scaring voting for tax cuts, the whole world was going to fall down. I think theres plenty of blame and plenty of politics to be put out there on this. I dont blame these secretaries for doing what theyre doing. My problem with this is this, they voted all these members voted for it. The president signed it into law, august 2011. It was his idea. Yes, and boehner loved it. So why is everyone running around acting like the sky is falling . I dont get it. Business is fabulous. Heres a thing thats interesting to me, republicans are almost shellshocked because of the debates and the fiscal cliff and the election that you see some of these more moderate republicans afraid to stand up for spending cuts. You saw one go down to newport news with obama. Ive got to get out of here. Im going to say to that point, what else is new. Republicans have done better on this than i thought. Now, lets switch gears, same topic. What will the sequester do to the economy . Okay. Its coming, no question about that, it begins tomorrow. What will it do to the economy . Here now two ace cnbc contributors, Jared Bernstein and jimmy p. Theres so much leeway and flexibility. I dont care what the president is willing to accept. You have these budget accounts and you have subaccounts and you can change the funding you can reallocate the priorities, you can affect the timing. In other words, jimmy, why cant people say this is going to be Done Gradually over a longer period of time which is, in fact, the truth . Why do we have to have the scare among eri mongering. It is the truth. Theres a lot of discretion, you can cut sort of the administrative budgets first and then work your way to the operations budget. I think this is a great opportunity for democrats to show, guess what, they can run government, run it lean, show they could actually run something before they decide to try to run 20 of the American Economy. This is a nice proof of concept that democratic governance can be efficient. Here, go run the government for the Discretionary Spending for less money and have the country not fall apart. A wonderful challenge. All right, jared, think of this. You all spend about 1 trillion in Government Spending stimulus back in 2009. That didnt work. Now you want to take out now the whole congress, i believe, wants to take out as jimmy said 44 billion in cash outlays. Lets try that. Lets try Something Different for a change. Nows the moment. Theres so much i have to cover. Let me try to be quick here. First of all, 44 billion is the decline in fiscal year 2013. Over the calendar year, the estimate is that and this is from the cbo and Macroeconomic Advisers nonpartisan shops is that this will shave. 5 off gdp growth this year. Now, you know that gdp for the Fourth Quarter was flat, but if you look at the yearoveryear numbers, which are more accurate, i think. Gdp is growing at about 1. 5 . Now, do you think that is an economy that can afford. 5 drag . I dont. Look, i agree this is not cataclysmic, the skys not going to fall, its not going to be nearly as happy dappy as you say. That model is basically the same model that said the stimulus was going to give us 4 growth and 5 unemployment. The stimulus it was wrong on the upside you want to have a stimulus argument . Do you want to have a stimulus debate . I dont. Im sure you dont. Jared, its sara its been well established that the stimulus boosted gdp growth by a couple of percent and saved a few million i do not think that help me out here, jimmy. A great debate. Sara has a question. Hey, jared. Nice to see you. Help me understand something. Sure. The budget is going to be 15 billion more. Even with the sequester, yet how is it now that our border is going to be unpatrolled and tens of thousands of people are not going to have child care, help me out with that. Sure, it mean, i think some of that has been exaggerated. Somehow its gone from cuts to like agencies shutting down. Thats not going to happen. But, you know there are things that happen right away. Right away because they have to cut these checks, right away 4 Million People will get a cut in their unemployment checks. Thats baked in the cake. Starting about midapril, youre going to see furloughs, furloughs at the faa, tsa, among meat inspectors and thats going to slow down production. We dont have to have meat inspectors, those are decisions that the agencies can make. They have a lot of latitude. But if youre telling me ive got to get in there. Youre telling me furloughs, aisle telling you, jared, that the government is vastly overstaffed, okay. And furloughs are the beginning of a downsizing of the civilian part of the federal government, and that includes the civilian part of the Defense Department which is long overdue jimmy pethokoukis. Nobody wants to lose anything in the federal government which numbers have expanded so much thats not true. Its time we take a look at this because every business, small or large in this country has had to adjust to a little bit of austerity. For the first time im asking jimmy. Efficiencies. Jimmy. Not just spending more money, but efficiencies. Lets see if they can do it. Jimmy, i have a question for you, we now have 4. 1 years of an Obama Administration, we had eight years of george bush. During the eight years of george bush, can you name a single spending bill that george bush vetoed . You know what . I cant okay. During the four years that any president vetoed. Well, i can. Except for reagan. Reagan vetoed a lot of bills also grew the size of government. Shrunk the size of government lets talk about i just want to be clear thats not the issue right now. No jimmy can the u. S. Economy afford these minor spending cuts Going Forward without tanking the economy . Put it all in perspective. Without tanking the economy. I want some perspective here. I want to make sure that everybodys clear about the world that we live in. All right, Larry George Bush did not veto with all due respect two points. George bush by the way, George Bush Shouldve done Something Like this. Yes, he shouldve, but he didnt. And no one cried foul for eight years. Criticize let me make two points i want to challenge your numbers. Not the 44 billion or the 60 billion for the year, i want to say to you in either case, ill use the full 85 billion which is the budget Spending Authority. You are talking about. 25 of gross domestic product. Thats all it is. Youre talking about probably less than 2 of the 3. 6 trillion budget. So therefore, im going to argue, jared, that you and your numbers are mistaken. Just as the stimulus spending didnt workoost the economy, these small reductions will not work to damage the economy. Thats what the stock markets been telling us, and i believe youre going to see the economic numbers, theyre not going to be great, but were not going to dip down below 2 . First of all, your no, it isnt. Whatever that means. Gdp what does that mean . Screwed up. It means famished. Gdp is about 16 trillion. Thats correct. So 1 is 160 billion, half of that is about 80, so 85 is. 5 of gdp. Thats what i said and if you use 44 billion, its. 25 . Thats my point. We are talking about a tiny amount of money. Okay. A tiny amount of money here. I dont think, i dont thi think i dont think that. 5 of gdp is a cataclysm. I agree with you, but i dont think its something that a 1. 6 gdp growth economy can take. The budget deficit has come down by half. I dont see how president obama is a killer spender. Spending has gone up. 6 between 2009 and 2012. Larry, what you want to see and what i want to see are vertical cuts in the budget, not these horizontal across the board ones. Ill take it any way i can get it. Jimmy p. , i want you to finish this off. Whats your final take on the growth story . Whats the economy going to look like in the next six to nine months . As this thing phases in, and i want to emphasize this, its going to phase in gradually. Its going to phase in gradually. Whats the economic meaning . Listen, im more concerned about the 60 billion in tax increases, including raising investment taxes by 60 . Im far more worried about that than these minor cuts and Discretionary Spending. And if the economy does weaken, trust me, the white house, theyll forget about the tax hikes and only blame of course. And i want to add one thing, by if way, even while 85 billion in Spending Authority will be lowered, the Federal Reserve puts in 85 billion of new money every single month. Theyre very different pots. Yeah. You know what the difference is . The feds Monetary Policy is more powerful than the governments spending policy. Ill leave it with that. Jim pethokoukis and Jared Bernstein. Now, as you know, ive been stock market bullish on the sequester. Its free Market Economics and you know what . I final lip fouly found a profe investor who agrees with me. Ive got to tell you, i really liked Michelle Obamas wall street journal oped today that favors businesses who are improving our health. Thats right. Michelle nailed it and im going to talk about it later on in the show. And folks, have you seen this video . This is not some ordinary air traveler having a tantrum, weve got the whole story later in the program. Check this out. Whoa. Whoa. Look at this. This guy is one teed off guy. Dont forget free market capitalism is the best path to prosperity. That includes limited government. And were going to be fine. Ill be back im kudlow. [ male announcer ] to hold a patent that has changed the modern world. Would define you as an innovator. To hold more than one patent of this caliber. Would define you as a true leader. To hold over 80,000. Well that would make you. The creators of the 2013 mercedesbenz eclass. Quite possibly the most advanced luxury sedan ever. See your authorized mercedesbenz dealer for exceptional offers through mercedesbenz financial services. A talking car. But ill tell you what impresses me. A talking train. This ge locomotive can tell you exactly where it is, what its carrying, while using less fuel. Delivering whatever the world needs, when it needs it. After all, whats the point of talking if you dont have something important to say . But i am your rmarket data. If you dont have something important to say . I know what youre looking for. Im not chained to your desk anymore. Im faster and smarter now. And so much less expensive. I am your market data. And if i do say so myself, i have never looked better. Superderivatives introduces dgx. Data done differently. Not today, no alltime high on wall street today, but markets still in rally mode and my next guest says the sequester cuts are fueling the rally or at least part of the story. Lets hear this. Stock trader and financial radio host ross kaminski wrote it in the american spectator. Welcome back. Hey, thanks. I love this, but i want you to explain yourself. How is it the sequester, the big bad evil sequester thats going to lay off hundreds of thousands of people as Jared Bernstein told us and destroy the economy. How is this helping the stock market . You know, i think what it is, it comes down to the big picture about, as you well know, larry, the first time there was a decent improvement in the Unemployment Rate came in 2010 right off republicans took control of the house of representatives. They couldnt get any good profree market legislation through the senator the white house, but at least they could stop the worst of what obama was injecting into our economies kind of economic poison. So its not so much that i think the sequester is a huge positive, but its just so much better than anything else that obama and the democrats would replace it with. Well, the point that i i think thats whats going on. The point i made night after night after night on this show regarding the sequester is modest spending reductions, okay, limited government are good for the economy. They lower the government share of gdp, i think thats a big plus, i think it frees up resources in the private sector. And i guess, ross, my question is, doesnt the stock market see that . Doesnt it understand that . Were actually moving the ball in the right direction. It absolutely does. But on the other hand, i think they also realize that this is very small compared to the kind of cuts that you and i would implement if we were in charge. This is nothing. And the actual spending if you had a middle class family that was spending 3,500 a month, this is asking th