Welcome to the kudlow report. Im larry kudlow. Its 7 00 p. M. Eastern and 4 00 pacific. We begin tonight with the gm recall crisis thats threatening to blow up into one of the most expensive lawsuits in the history of the auto industry. Our own phil lebeau joins us now from chicago with the latest. Good evening, phil. Hey, larry. Pressure is reallyla starting t mount on not only General Motors but also regulators in washington to do something more about whatshi happened with regard to this gm recall crisis. The latest comes from a filing out of texas. An attorney down in texas has filed a motion with the u. S. District court asking the court to have General Motors issue a recall ireport. He says the cars should not be driven because they could potentially hit a bump. Y they say they can be driven as long as theres nothing weighing down the key. These cars could be thrown into thent troublesome position if t car hits a bump. And that according to the attorney is what is the potential problem with people still driving these cars. Pr if theyre telling their customers, if you hit a bump in the i road, this could happen, even if you follow the instruction on the keychain, you know, theres not anyone i know that would put a Family Member in it at all. A meanwhile in washington, a senate bill has been introduced that i would make it necessary r early were with aing reports that come from automakers from the National TrafficHighway Safety administration to make it public. That would force them toe repo deaths. There would be Information Available about awo potential problem. And finally, connecticut senator Richard Blumenthal wants compensation to be set up for victims who have been involved in this recall crisis. A fund is what hes proposing that would be set up, larry, that would take care of not only those who are owners of recalled vehicles since gm came out of bankruptcy, but also before bankruptcy. Nd hes calling on the department of justice to c set that fund. Itth will be interesting whethe or not the department i of juste says yes, theres some grounds here to do that. Because as we allat know, wheth or not general, motors should py for the liability of incidents before bankruptcy is a huge question. And whos going to decide that question . Ho i think ultimately its going to have to be a judge somewhere because as you know, Bankruptcy Law is pretty clear here. In civil cases, companies that go through bankruptcy, as General Motors did, are not responsible for incidents that happened before the company went through bankruptcy. And thats what a lot of lawyers are saying. Wait, listen. This is not fair because youve got some deaths, many accidents that happened in these vehicles before gm went through bankruptcy. Thats Bankruptcy Law. In criminal cases, General Motors, which is under a criminal investigation by the department of justice, would be liable for the actions of its employees before bankruptcy as well as after bankruptcy. So its pretty clear on the criminal side which the doj is investigating. Its on the civil side, larry, that a lot of people are looking at this and saying wait a second. Gm is getting off the hook, not having to pay for these claims. Look, im no expert on this, but just reading about it, phil, listening to your reports, some of these ignition switch problems can be traced back to 2003 models . Right. The bailout was, what, 2009 . Do i have that right . Right. How they worm out of that, something that occurred six years before the new gm emerged . Well, a lot of people are asking that question. Theyre saying, look. Did they know about this when they went through the bankruptcy process with the federal government . And if they did know about this, why didnt they disclose this . Thats a gray area at this point. Now, General Motors so far hasnt said much, which is understand building given the fact that theyre under a criminal investigation. But i suspect, larry, that as we have the criminal investigation unfold with the doj as well as the congressional hearings that well have next week with Ceo Mary Barra as well as the national highway traffic association. Keep in mind, when you look at toyota which is the most relevant case that people are pointing to, it took four years before the doj finally said heres the deal. 1. 2 billion fine for toyota which was just levied, you know, last week. And in terms of just final one in terms of the same process, would this conceivably be larger than the toyota story no matter how many years it takes to work out . Yes. It could. When you look at the scale and the scope of the problem and you compare it with toyota, theres no doubt that it could be as large for General Motors as it was for toyota. Now, whether or not that happens over the next several months and years remains to be seen. But 1. 2 billion, thats the benchmark thats out there, and i wouldnt be surprised if, when its all said and done, General Motors faces a fine of at least that much, potentially even more. Many thanks. Phil lebeau updating us on the gm story. Thank you, phil. You bet. Now, the gm bailout is always going to be a part of president obamas legacy. What about his Overall Record in history . Thats something i asked Texas Governor rick perry. Heres what he said. I think the president is missing an opportunity. Open up the xl pipeline, send the message to federal lands to be opened up to allow for the expiration, safely, thoughtfully, creating massive amounts of jobs. This president actually could have a good legacy when he leaves in two years. All right. You can see my full interview with governor rick perry in just a few moments. Were going to talk about energy, obamacare and what he would do to respond to Vladimir Putin in the ukraine. Speaking of president obama, he held a key News Conference in the netherlands today on the ukraine situation. And cnbcs own john harwood joins us now with the details. Good evening says, john. Reporter good evening. The president s been in europe trying to rally International Support to counter russias seizure of the crimea from ukraine. Now, the president rejected charges at that News Conference that he had misread Vladimir Putins intention, saying he cares about actions, not intentions. He also rejected the charge which has circulated in recent days that his 2012 opponent, mitt romney, had been right to say that russia was the number one geopolitical foe of the United States. Heres the president. Americas got a whole lot of challenges. Russia is a Regional Power that is threatening some of its immediate neighbors, not out of strength, but out of weakness. They dont pose the Number One NationalSecurity Threat to the United States. I continue to be much more concerned when it comes to our security with the prospect of a Nuclear Weapon going off in manhattan. Now, as for the somewhat broader sanctions or the somewhat limited sanctions that he has imposed so far, the president said those could be expanded to broader sectoral sanctions on energy, on Financial Institutions if russia goes further into the ukraine. Many of his partners are not eager to go there. But the United States senate and the house of representatives are moving to give the president additional flexible, larry, because theres progress on a bipartisan bill that would have aid to ukraine, a billion dollars in loan guarantees, and new sanctions and flexibility for additional sanctions for the president , should passed by the end of this week, larry. John, i was surprised actually, two things surprised me on this. Number one, his reference to a nuclear bomb going off in manhattan. All right, is he talking about terrorism . Is he saying terrorism is the number one threat, not russia . Yes. And i will say, in fairness to mitt romney, his response was a little off point to what romney said. Romney said geopolitical foe. Thats not the same thing as an individual threat. Nevertheless, the president has faced a lot of people coming out and saying hey, mitt romney was right, and he was determined to back that down and not acknowledge any sort of flipflop in his position. Ill leave it there. John harwood, thanks very much. We appreciate it. A lot of Economic Data coming into the market today. But the real question for me remains, why are we still experiencing such a substandard recovery . Two of the kudlow reports alltime best experts set to tackle that question. For now, dont forget free market capitalism is the best path to prosperity. The kudlow report will be right back. Stay with us, please. Larry, youve been one of the very best shows on television. I consider being interviewed by you a privilege. Your interviews have always been very insightful and very good. Free market capitalism is the path to prosperity. Larry kudlow, thank you for those great words. Youre a true american patriot. Youve really demonstrated to the american audience for nine years that the thing that defines us from all others is our free market. Larry, the adventure continues. What youre doing next is going to be fantastic. Listen, youve been fantastic in my life. At thanksgiving, we thank the good lord, we thank larry kudlow, and not always in that order. Best of luck. [ male announcer ] how can power consumption in china, impact wool exports from new zealand, textile production in spain, and the use of medical technology in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 75 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. With investment information, risks, fees and expenses so our business can be on at ts network for 175 a month . Yup. All 5 of you for 175. Our clients need a lot of attention. Theres unlimited talk and text. Were working deals all day. You get 10 gigabytes of data to share. What about expansion potential . Add a line, anytime, for 15 a month. Low dues, great terms. Lets close new at t mobile share value plans our best value plans ever for business. Lots of Economic Data came out today. Consumer confidence on the upside. Caseschiller home prices very strong. Although new home sales declined. But ive asked it on this show many times before, and im going to ask it again. Why is this such a substandard recovery, and in particular, is it because team obama has consciously fought true free market supply side policies . Here now, old friends of the show, dean baker, center for Economic Policy and research, codirector and dougie holzekin. I hope you can see this chart because what weve got today, weve got the highest Consumer Service number in the postrecession period, all right . So thats good. But its nowheres near what we got back in 2007. And as you can see, the king of the hill, the top for Consumer Confidence goes all the way back to year 2000. Now, we are so far from that right now. You could call year 2000 clinton, thats fine. You can call 2007 bush, thats fine. You can call 2014 obama. Thats fine. The point im making is, weve had a steady drop in Consumer Confidence. It isnt even a cyclical drop, doug. And that troubles me. Why are we having so many problems with Consumer Confidence . Larry, before i answer that question, let me voice join those who congratulate you on a great run, and thank you for your steadfast adherence to free market capitalism as a way to prosperity. Thank you. I really do appreciate it. Thank you. I think what youre seeing is exactly that. Were seeing a mismatch between the problems people recognize on the ground and the kinds of policies that are being put out there to solve them. Whats being put out is old thinking. Its topdown, born in washington, one size fits all, stimulus, health care, and thats not how economies grow. And people know that they need to have an open economy. They know theyre interconnected. They know its about the future and starting things up. And were not seeing startups. Were not seeing the confidence that we can look past this problem over the horizon to success. And thats whats going on with the confidence numbers. I mean, dean, it troubles me that theres so much pessimism. Now, confidence is rising in a cyclical basis. But again, its so far from that 2000 peak, one wonders if well ever get back. I have to think some of this has to do with the very mediocre job performance, and thats true during the bush years just as its been true during the obama recovery years. Why that is, i dont know. But i dont think weve really recovered in the job market. Is that part of the problem . Well, theres actually a more simple explanation, but let me also extend my good wishes. Ill miss you, larry. Youre starting to convince me about free market capitalism. I dont know what ill do now. Anyhow, good luck in your future endeavors. Getting back to the issue, you look at 2000, you want to call that clinton, 2007, call that bush. I call them bubble. We had a stock bubble in 2007. People were really happy. We had a huge housing bubble back in 2007. People were really happy. But that wasnt the real world. If we actually look at what people are doing, if we look at how much theyre spending, consumptions at a near record high as a share of gdp. So regardless of what people tell, you know, the surveyors, theyre actually spending money. The reason why we arent back to, you know, the peaks that we were in 2000 and 2007 is we dont have a bubble which to my mind is a good thing. We need to replace that with Something Else. My explanation, id have larger budget deficits. You dont like that. Id say get the trade deficit down. If it was close to balanced, wed be back at pretty much full employment. No real mysteries here in my book. Doug, no, i dont want more i dont want more government spending. I would like to abolish the Corporate Income tax altogether. I this i that wounk that would d wages. We had ed lazere on. He talked about something that was on the front page of idb today. People are being hired 180,000 a month, thats historically rather lower for a recovery, but hours worked are falling. And somehow i hear, dean, on the bubble story, but i dont know. I dont think consumers can anticipate bubbles any better than policymakers. I mean, something, doug, theres something going on here, and im not sure what it is except we dont have a lot of happy campers in the economy. The weather. I want to agree with dean. I understand the timing there, but remember, what also came with the bubbles was the innovation. You know, it was a dotcom bubble. New things started up. There was a path to the future that wasnt stuck in the policies of the past. The same was true in 2007. People thought they could see the future. Thats what they want to see again. Were not going to get that unless we get serious and have some fresh thinking about what can get out of the way and let people start up some new companies. Thats where the jobs typically come from. Build a little dynamism into the labor market. And when that happens, then were going to see the employers extend hours. Were going to see the employers raise wages. And that has been the missing ingredient in this recovery. Yeah, there havent been jobs, and thats been a problem for a decade. But for those with who have had jobs, we havent seen real wages rising. The hours havent been there. The wages havent been there, and we need to get back to that. Dean, you probably wont agree, but i also think consumers are as conscious about regulatory problems. They know that companies are worried. Obamacare is a deterrent to hiring. Maybe they love the minimum wage maybe theyre actually spending. Im not looking at what theyre saying. Theyre actually spending at very high rates. We have no reason to expect them to spend any more than theyre doing. The savings rate the only time the savings rate has been lower was at the peak of the bubble in 2000, at the peek of the peak of the bubble in 2005, 2006 and 2007. People were spending based on fictitious wealth. The same with the housing bubble. Again, you can look at the data. Its very clear on this. All right. Doug, ill give you the last word. On Consumer Spending, i mean, yeah, dean is right, theyre spending, but growth of Consumer Spending is 2. 5 on average. The growth of the economy. Right. I mean, wheres the 4 to 5 gdp growth . Wheres the 4 to 5 Consumer Spending . Wheres the 10 to 15 longterm Business Investment spending . Thats where thats what im looking for. I think thats exactly right. Because what weve got is an economy muddling along at 2 to 2. 5 . The wage growths been slow enough that yeah, theyre spending wages but theres no real growth there. You need the spike in business durables, in investment. Those are characterized by confidence that looks like 2007, confidence that looks like 2000, not like the confidence we have right now. We had some of it in the 80s, a lot in the 90s. I dont disagree about the bubbles, but somehow i dont think the bubbles explain everything, but i dont know. Well revisit it. Both of you, god bless. Now, folks, the markets had a pretty good day. They bounced back after a bad friday and monday. Will we really see any direction until First Quarter profit reports come in next month . Remember, profits, the mothers milk of the stock market. W