How would you react to an E2 who "smart mouths" you in formation?

I would make him do drills and make his life a living hell and he would learn to respect commanding officer.

Report it to the Chief Petty Officer on Duty at the time.

There is a job to be done, you are training for the job, the training is tough because the job is tough, the training is making you tough, so you can preform the job.
Sometimes people don't like doing what needs to be done, but it has to be done.

I would do it in the same manner as it was shown to me back in the 70s. Take him out to the wood-line and show him the error of his ways

The drill instructors build on what the parents instill. Today we have a softer weaker generation. The threat of NJP takes away the tools we need as leaders. Thrash his assistant until he can't get up. Break his mind until he's nothing. Build him back up tough. In the mean time he's on every shot detail you can throw his way. To bad we can't beat people any more. It's the corps. We are not supposed to be soft. Mouths like that get people killed in combat.

i would remind him of what he should have learned in boot camp about lawful and direct orders explain to him clearly how the army works , no matter how insufficient a task might seem the directive to carry out an order must be followed,because the Army works as a team ,,the lives of others and the mission ,may rely upon him to understand and follow orders.and also to carry out those orders to the best of his ability., Ask him again if he clearly understands this. If he does, reassign the task to him Establish immediate remedial punishment for his insubordination " besides the task set forth, and if that works fine, you do not have to carry this matter out any further,

The fix is simple. Document on formal counseling and assigned corrective training which fits the inappropriate behavior until default workable attitude is obtained. If not, continue further counseling and forward to chain for chapter process out on failure to adapt because defective soldiers drain the purpose of the mission and valuable time from the nco which keeps them away from training a squad or platoon for war.

Request 50 push ups

I would then tell him he has now just volunteered to do that task every day until he understands to a where he went wrong talking back to a senior NCO or until he transfer out of your unit. Too bad we can't just take him out back and give him some one on one training like in the old days.

My Father was a Gunnery Sergeant in the United States Marine Corps. I would do as my Father done me and slap the shit out of him before he finished his sentence.