Transcripts For CNBC Squawk Box 20131007

Clean debt limit increase. Under no circumstances . I told the president theres no way were going to pass one. The votes are not in the house and the president is risking default by not having a conversation with us. By moodys ceo says the chance of a u. S. Default is extremely unlikely. That reflects our thinking that it is extremely unlikely that the government treasury is not going to continue to pay on the treasury securities. Hopefully it is unlikely that we dont go past october 17th and fail to raise the debt ceiling, but even if that does happen, then we think the u. S. Treasury is still going to pay on its treasury securities, prioritize those payments. Still, the dollar is trading near an eight month low today amid debt default fears. Take a look at whats been happening. You can see that the dollar is down against the euro at 1. 3572. The dollar is at 96. 96. Well talk more about that with john harwood. First, andrew has a roundup of the mornings top stories. Andrew, welcome back. Thank you, becky. Japan airlines is buying its first ever jets for airbus. The deal is for 31 planes with the value of 9. 5 million. Joe, i dont own one of those. Thats a blow for boeing. The ceo of airbus talking to our colleagues with cnbc asia earlier today. Not only do we succeed to introduce 50, but its probably the biggest order ever here in japan. We are very pleased with that. Its the biggest order this year of 50s. 31 aircraft. In other corporate news, becky, we have a little bit of hope this morning. Blackberry is reportedly in talks with cisco, sap. You may not have to get rid of it quickly. They have interest from possible strategic buyers. Any deal would be an alternative to the preliminary going private agreement with the shareholder fairfax. Jana takes large stake in outer wall. They intend to explore possible options. I didnt know that was the people that ran that. Ive tried that. Really . When have you tried red box . You do it when youre on vacation. Not very good at working it. Like ive tried to return it i returned it for the first time this summer. Did you press return . I had to ask somebody for help because i didnt know what i was doing. Im going to get you a netflix subscription. If youre on vacation you cant do that at the beach. Were you getting no emails. You cant send out an email saying youre not getting any emails. I thought i wasnt receiving them because i thought my mailbox was full. You can still send them out but you cant get them in. I think it was a blackberry shutdown. Matts didnt work. You were still in chicago. We had a little bit of an incident. Did you go to rush street . Have you heard of rush street . I do know of rush street. I did not. Did you stay friday night in no. No. No. Thursday night . You came back friday . Yes. Are you willing to take a polygraph . Excuse me. You came back thursday. Right. Did you go to dinner at scoozy . Nothing . Nothing. Zero, zilch. Im wrong. I tagged im wrong. I ascribed more happeningness to you. Joe likes to live vicariously. I do. You do nothing. Sorry. I can do nothing. I do that. Before we get back to the broader markets. A few analysts calls. Ibm to equal weight at barclays. 190 from 215. Warren made 10 billion during the crisis. This ibm thing, thats about where he bought it . Did you see that . That was a 40 return. He ma i had a lot of money. When everybody else is afraid. He noted, i think hes right actually, that had you bought the s p when he was making those same 159 to 185. The same place. 159 to 185 is where he bought in. 65 million shares. You had to have the stomach to do it. And the money. And the money. But the total dollar volume. Everyone is losing their heads around you you need to keep cool. Apple was upgraded to buy from hold at jeffries. The firm says that after talking with suppliers it believes apples Gross Margins will be better than it had expected and the target was increased from 600 to 425. Qualcomm was downgraded. The target is 75. Even though it was downgraded it was upgraded. Theyre increasing trereal ogy. Lets get a check on the markets this morning because the markets are starting to set up. Pay a little attention to whats happening in washington. After shrugging things off after the first week of the shutdown. The dow futures are indicated down by 123 points below fair value. S p futures are off by 14. 5 points and the s p is down. Oil prices down by 1. 16. This is probably questions about what happens to the economy after a week or longer of a Government Shutdown. Some estimates pointing out a half a percentage point and then well see beyond that what would happen. This is where you start to get into some kind of messy territory. Were not talking about a quick shutdown at this point. The yield on the ten year note is at 2. 63 . Dollar is weaker. As we pointed out you can see that its down across the board. Gold prices this morning, right now are up just slightly, by about 2. 60. 1,360 an ounce. Global markets reports. Ross westgate is standing by. Overseas we did start to see some minor selloffs in reaction to whats been happening here in the United States. Yes. I see a lot of red arrows. Yeah, hi, becky. A little bit more twitchy. I wouldnt describe it as selling. Decliners outpaced by subscribers. 8 to 1 at the moment. Its no real heavy selling seeping through. Weve seen it down 1 thereabouts on average. Ftse is down. 8 . It was up four points on friday. Weve seen percentage falls for the german and french markets. There we go. We just dipped. Ftse down. 2 . It was outperforming again today because the Coalition Government didnt collapse. Mr. Letta survived and Silvio Berlusconi has been asked to leave. Chemicals, technology down 1. 3 . Utilities are up this morning. The bias is very much to the down side as well with these stocks. As far as bond markets, yields are contained. Where we were at the end of last year. Gilts yields 2. 7 . Itali italians a little bit lower. Spanish yields slightly higher. We havent moved the same way. Currencies are in the up trends of the year ranges. Dollar dax havent gone any lower. You mentioned a couple of stocks there earlier. One of the standouts was airbus turning the tables on boeing with its first ever big owing in japan. 318350 jet. Boeing trying to get a deal with jet. Thats where we stand in europe. Thank you. Ross westgate. Thank you very much. Were going to move the conversation to washington where john harwood is hanging out. We have a lot to talk about. We brought the rise above. I did miss that. Its always there. John, maybe im getting too cynical. I think its possible we go over the debt ceiling despite everybody thinking we wont. What do you think . I doubt it. I think John Boehners more responsible than that. I dont think hell do that when push comes to shove. Whats your sense of action over the weekend, zero . None. None. The president and the democrats are simply waiting for republicans to move off of a position which john boehner never wanted to be in but hes gotten himself stuck in because of the strategy that he didnt want to pursue but did pursue because he was forced to. Now theyre waiting for them get off them. John, heres the question. Joe said it to me before we came on the show. Why cant the president pick up the phone . If the president were to pick up the phone . What would happen . Thats part of the whole question inside the white house is if you pick up the phone, what happens on the other side of the phone . Keep in mind the president , as he told me in our interview last week, has said he will have negotiations with republicans after they reopen the government and raise the debt limit. So he will have negotiations. So start just sort of a little bit beforehand. Last time remember who it was its not start em a little bit. Last time it was biden. Biden had to come in and save the day. Is that going to happen. Being the king, the president can be benevolent. We know hes in charge. Hes in charge of everything. No, he obviously is not in charge of everything because our economy is at risk of getting blown up. Hes in charge of the democratic party. Not harry reid and becky made this point last week. He could say, john, lets just cool the entire lets just cool all of this down and lets what is it that you guys eventually want in these budget deals . He knows what they theoretically want. What they theoretically want are entitlement cuts right. That they will not propose, that the president would propose without any tax increases which is a possible that the American People oppose who just reelected the president. What the republicans are saying right now is, mr. President , heres the deal. We want you to in return for reopening the government and not causing a debt default, we want you to immediately enter negotiations which we ourselves have not been willing to have all year until right now and in those negotiations. Hold on a second. No. In those negotiations make immediate concessions up front to a position which is not popular. Youre going to tell me again that im wrong because i dont just tow the line to the democratic position here. Its not towing the line. There are two sides to this though and im just trying to figure out no. Okay. There arent two sides but i wish somehow you could get to a joe, the republicans im dead wrong. I saw all of news. Jump to shark. I know the republicans are wrong. Im finding a way to get to the one thing that changed my mind, i did not realize that john boehner and harry reid had had negotiations and discussions where john boehner said if you pass a bill at the levels were looking at, 70 billion below what the senate had looked at, that would be enough to get through. That didnt work. The Second Time Around was, look, theres a problem with obama care. I have to have a vote for joe, are you paying attention to what becky is saying . Boehner acknowledged over the weekend im trying to go somewhere from here. Okay. For whatever reason were at this point now, i think the president is you know, in the past i think hes the guy thats got to do it at this point. Can we keep our eye on the prize and the debt ceiling issue . You heard what babe ner said yesterday on meet the press. Are there the votes to pass a clean cr . Yes. Yes. There are . Both sides can claim that there arent. You dont know how someone is going to vote hold it a second. Beckys point is an important one. The speaker acknowledged to George Stephanopoulos yesterday that reid has accepted that boehner himself now rejects. This is absolute lunacy. I thought it was the president s fault back in 2011. He cut a deal with john boehner and went back to nancy pelosi. The goalposts moved. I think the boehner moved that. John wont concede that. I dont think you can get john to concede anything. Thats not true, either, john . Which . That becky said that obama was the one that moved it when he met with pelosi and the democrats on the friday. Back in 2011. And then he came back and wanted another 5 or 600, i dont know, billion in revenue. I dont understand im sorry john boehner in those negotiations in 2011 never, ever, ever conceded the need for new revenue. He said revenue with dynamic scoring, growth. He never conceded new taxes which was the critical demand. Were not getting anywhere, john. Youre absolutely as intractable as the democrats. Then were back to square one. Then we just well, i ran into a major republican strategist whos done multiple president ial campaigns for the republicans and his point was, yes, we realize that were trapped in an untenable position but obama needs to give us something. Make the call. Face saving thing. Something for our pride. Its not going to kill him. I dont understand what you get when you make the phone call. Joe what. I dont know if the president is right on this point, but what his point is is that if i just having been pressed with an unreasonable position reward that unreasonable position by giving something, anything, simply to give something, anything, im going to make sure that future president s have to deal with the same kind of ridiculous situation. You know past president s have dealt with it, too. No. No. No. This is a situation no president has ever dealt with a situation like this. Okay. I think this is not that dissimilar. We have never, ever had, ever, a congress that was willing to take it right to the edge of default. Have they dragged their feet . Yes. We dont want to raise the debt limit. Obama did it. Nobody took it up to the brink in 2011. The president will still be blamed if that happens. Thats what the republicans have i think in the back of their mind, that the guy in charge if the buck does stop there eventually. That should give them some leverage. The preds will be hurt. Theres no question. Thats what i mean. He will be hurt. Its like pet two lent children to see who can hold out longer. John, we have to run. Whats the day . What day does the actual vote for the debt ceiling get squared away . We have a week . Id say october 16th at 11 55 zblaum wow. I want it before then. Me too. I think we go over. I say we go over for a day or two. Ill bet you, andrew. Well do it. Whats your what . Dinner . Where do you want to go . Ill bet you if i win im getting you two tickets to the next bengals home game and you have to go even if its in december. Youve got a deal. Bengals beat i will come up with our side of what we can offer. Do you see what the bengals did yesterday . Thats the key, andrew. You have to go to the game. I can be there. Can i be there . They lost. They beat the patriots. You have no idea. I know. The bengals won. It was a huge win. They beat the patriots for the first time. Im just showing you because even bradys 52 game record of throwing a touchdown pass was broken. You know who has the record though, im sure . Who does have the record . Drew brees. The bengals won 133 and brady did not throw a touchdown. The patriots well, they dont have any receivers. Andrew yes, sir. Im picking a game in mid december. Mid december. Okay. Im i actually hope i will go to a bengals game. You might see some home runs. Maybe someone will hit a grand slam. Yesterday in the denver dallas game, you know what i wanted more than anything, john . What . Suddenly the idea of watching a punt and see if they could get it off and see if someone could catch it and like run it. Was there ever i mean, it was just down the field, down the field, down the field. Did they ever stop was there ever a three and out . Barely, right . It gets old. Too much scoring. I want somewhere between 5050. 99 points were scored in that game. Joe, i want to go back to one other thing . No. Come on. Im trying to it will be quick. Heres what i think will happen. I think that the president may not pick up the phone but, remember, harry reid is involved in this situation, too. He may pick up the phone and i think what is what you will get what potentially could be a way out is an agreement on a negotiating process which would take place which would be agreed on and the president would acquiesce. Theyre going to go back to where they were 2011. Super committee. You saw reid is now talking about running again. Were not sure whether hes serious because hes got the problem of being a lame duck. He has all of these personal issues right now for being, you know, so intractable. Im going to laugh if the biden meister, if he comes in and saves the day again, im going to laugh, if he comes riding in there. I think its going to be the gang of 8. The gang of 8 . I look forward to the bengals game. Coming up, why americans are hoarding more cash, plus how a 9yearold managed to make it past airport security, get to this, to fly to las vegas alone without a ticket. First as we head to a break lets check on the national forecast. The weather channels alex wallace. Good morning to you, guys. A wet morning. Wet start to things. Parts of the carolinas getting into virginia. Downpours heading into roanoke. Showers entering the interior northeast. All thanks to a cold front that will march its way in and help bring us rain for the i95 corridor. Well see storms fire up particularly later today. Thunderstorm activity and some of those storms could pack a bit of a punch. Areas shaded in red from east to North Carolina has the risk of damaging winds and hail. The main risks but you cant completely rule out isolated tornadoes. Active weather. Keep the rest of the weather situation across the northeast. Thats your National Weather forecast. More squawk box coming up next. So she could take her dream to the next level. So we talked about her options. Her valuable assets were staying. And selling her car wouldnt fly. We helped sydney manage her debt and prioritize her goals, so she could really turn up the volume on her dreams today. And tomorrow. So lets see what we can do about that. Remodel. Motorcycle. [ female announcer ] some questions take more than a bank. They take a banker. Make a my financial priorities appointment today. Because when people talk, great things happen. Make a my financial priorities appointment today. Pcentury link provides reliable yit Services Like multilayered Security Solution to keep your Information Safe secure. Century link. Your link with whats next. Welcome back, everybody. Right now its time for the executive edge. This is our segment on giving Business Leaders a leg up. Twitter quickly becoming a part of lots of industries. Today nielsen sl introducing twitter tv ratings. This was announced last year. The goal is to measure the activity and reach of twitter conversations about shows. Ahead of its ipo they have forged partnerships with Television Content owners like cbs, mtv and the nfl. Twitters amplify program will let them send video feeds to people interested in their programming. Does it tell you whos watching . To me the only thing it does is suggest maybe how engaged certain viewers are. Thats about it. Half the time, by the way, can you send out a tweet, even you, becky, and i wont see it unless i go back to scroll. If youre watching the at moment it gets sent. Directionally it may suggest an engagement factor but i dont think it suggests a tweet thing. Weve measured twitter stuff about shows we have on. It doesnt seem to correlate. The ratings, you mean . Its such a blunt instrument. Youre reverse engineering. I have an idea. Nielsen, i think, is a blunt instrument right now for ratings. Right. No out of home measurement. Fix that. No. If you want to know what people are watching, ask comcast. If google knows every predilection i have for the slightest thing, and if the nsa knows exactly, why cant you ask why cant from a set top box, how about saying what people are watching . And its privacy concerns. Thats a privacy issue right now. My question is if comcast or time warner cable, verizon, whomever ask them what you have to check a box. Is it okay if we maybe theyll offer you 3 bucks or 5 bucks a minute. You know down to the minute. To go backwards from twitter. For a discount, a monthly discount. The privacy concerns were a really big thing brought up in the past. We seem to be giving everything you saw the numbers. On google, on your phones. 230,000 tweets and youre talking about trying to measure 5, 6, 8 million viewers. How do you extrapolate. What would you want back in return for your priecvacy . You see what im watching. Check the box. Thats what we should do. Thats the end of it. Problem solved. Guys, lets talk about the next story. A 9yearold boy made it past tsa officials and airline gate official alzheimers to board a flight alone to make it from minneapolis. He was screened at security. Security camera tapes showed the child then managed to board a delta flight undetected. Welcome to security theater. Thats basically all it is. I want to know this kid. Did he want to go to vegas . Nine, yeah, im going to vegas. Sneaks on a plane. I want to invest in this guy. Enterprising child. He did a dry run the day before. Why vegas . Sounded like an exciting place. Go where the money is. At nine years old . You dont want to fly to iowa city. I bet he had a harder time playing at the black jack tables. Didnt quite make it there. He said his parents were in the back of the plane. One of the flight attendants got suspicious and noticed his name was not on the manifest. An internet entrepreneur. Well have him as a guest as a disrupter. Lets talk about disruptions. Families are still hunkered down hoarding cash. An analysis of households in the worlds ten biggest economies show that families continue to spend very cautiously. Theyve pulled hundreds of billions of dollars out of stocks. For the first time a big drop since post world war ii. Theyve poured money into savings and bonds that offers tiny interest payments. Yeah. Deleveraging. We talk about it all the time. We seman any if he is stations about it in the stock market. Thats the hangover from the financial crisis. It only means things can be better, right . Were a long way from the speculation. Do you know who has the speculation . Who. The fed. The fed are fully engaged. Deep into 2014 theyre saying that for tapering. Yeah. Theyre prichbting a new 100 bill. If youre talking about cutting 1 2 off gdp growth every day of the week. This is day seven. Call me. Call me. When we come back, john paulsens bet on greece, but first a new dance world record. The most massive dance took place in croatia. To join guinness records the organization needed 250 dancers, 274 participated. We can dance if we want to we can leave your friends behind because if friends dont dance and if they dont dance, well, theyre no friends of mine lets dance with mary jane. One more time to get the fame if you have the audacity to believe in straight talk, not doubletalk. If you have the nerve to believe that in a puzzling financial world, clarity is king. [ man ] if you believe nothing beats a sitdown for knowing where you stand. [ male announcer ] join the nearly 7 million investors who think like you do face time and think time make a difference. Join us. [ male announcer ] for 90 years, its how edward jones has made sense of investing. Transit fares as in the 37 billion transit fares we help collect each year. No . Oh, right. Youre thinking of the 1. 6 million daily Customer Care interactions xerox handles. Or the 900 Million Health insurance claims we process. So, its no surprise to you that companies depend on todays xerox for services that simplify how work gets done. Which is. Pretty much what weve always stood for. With xerox, youre ready for real business. Good morning and welcome back to squawk box here on cnbc. Im joe kerner along with becky quick and andrew sorkin. S p was down. It was the second down week in a row. It wasnt anything out of the ordinary. Well see this week, this would put us below 15,000 again on the open most likely. Now that we have taper or qe forever, deep into 2014, if anything positive happens looking like this will get done before the 17th, i think people would just, you know, cant we all just get along . Lets talk. Cant we just talk, andrew . We do it every morning. Come on over. Come on over to the white house. Lets talk. Doesnt boehner smoke . Maybe the president can bum a cigarette. He doesnt smoke anymore. They can use nicotine patches together. We have a couple headlines to get you through. Fair home capitol is opening up its nine month Old Hedge Fund to institutional investors. The fund was launched in january. Its grown to 140 million largely through investments by berkowitz and his employees. He hopes the fund grows to 1 billion in assets. The Financial Times hoping that john paulson invest into greeces struggling banking sector. Expecting it to turn a corner its said to have prompted big banks to lobby the government to consider speeding up the reprivatization of the sector. Joe . Joining, Beth Ann Bovino and from chicago, low greene, drw trading strategist. Lou, what happened to the dollar . I think its a combination of a possible debt default. I dont believe that. I think its now that qe has pushed were going well into 2014. I think thats whats hrting the dollar. Theres going to be no taper. I think the dollar probably the response is more i think tied to the debt ceiling. Theres so much uncertainty thats happening. Then you cant tie the fact that, well, with the debt ceiling, with the bickering among politicians in dc, when are we going to see any kind of compromise on the shutdown. That means the tapering will go through into the 2013. You mean qe will go through . Lou, what do you think . Well, i think its similar to that. The idea of the qe going through 2014 i think, you know, at some point it was going to go in through 2014. Maybe not at 85 billion, 70, 75 gradually diminishing. A couple more years. Dont start until the end of the year. I dont think you can see a lot of difference between the value of the dollar now, the yen or the euro in particular, where the dollar was at the beginning of this episode versus the emerging markets. Where are the spreads then on you see it in the debt market too, then, wouldnt you . Are you seeing anything that indicates that people are taking a default risk seriously, lou . Where that will show up is in the stock market. Its one of those deals just like in 2011. In 2011 the market was just a couple of percent from the high even though weve been talking for about the debt ceiling and the possibility of default for months. Its just such a remote possibility. Its such a stupid thing. Even so , the treasury can finda way to pay everything as they go along. The closer you get to it. Then its snowballing itself. If you havent done anything going into it, all of a sudden there is a calamity of some kind, then youre kind of an idiot. Its so unlikely how do you hedge the apocalypse. When you get to the edge you have to do something. What is your bet with harwood . Bengals. Bengals. Your bet is debt ceiling. We go over. We go over. Youre not saying we default on any debt . Not necessarily. But you think theres a possibility that we default on debt . Well, i think theres 4 million payments that get made literally every day. The chances that you actually default on one or two payments if you go over if you believe the treasury is right, but i do believe we go over. Only on treasuries . No, across the board. In 59 seconds we will be into the next day. Okay. My sense is even on that day the market will go down but everybody believes see, heres my issue. My issue is everybody believes that everybody in washington is so rational even though theyre not. As a result the market pressure the republicans you mean . No. No. Both sides. Both sides. Everybody believe theyre rational enough not to get it together they ultimately will. Its what warren buffet said on thursday. See, i dont feel like going to washington on the 17th. Right. Yes. We were talking about doing the show on the 17th. Thats why im asking people to talk. Please. I would say on the 17th, whether the debt ceiling happens or not, i would say thats likely going to happen. We have the shutdown and that saves the treasury money. The department of defense is bringing back over 300,000 employees that they say they can very well bring back all of the civilian employees. Maybe the 18th. What is, beth ann, the actual impact on the economy from the Government Shutdown. Is it half a percentage each week . Im looking at a little less, 30 bases points. The first week probably didnt have much of an impact. Youre looking at people that had planned to visit d. C. To go to the monuments. They couldnt go. Everything is closed. But the longer it goes, the more its going to hurt. If youre saying something closer to the 95, 96 shutdown, a little less than a month, youre looking at 1. 2 growth taking off of the fourth quarter. Thats pretty significant. Where do you see that . Well, irs. No tax refunds go out to the people who need it. All those people on furlough, well, theyre not getting checks and eventually that will hit their spending. For some people, they might not be able to pay bills. You have loans not available. Finally for economists like me and the fed, you dont have any data to analyze whats going on in the world. Lou, just listening to that, i would 2014 is going to be tough to switch around anyway because of the redistricting. Thats going to be hard. The president s going to see that this is going to hurt the economy most likely. Eventually thats going to be his legacy. It seems like its in his best interests to we already are sure, the country were absolutely sure this is the republicans fault. I think you could look magnanimous to say, all right, you little spoiled children, im going to rise above, you know, what youre doing and, you know, instead of just taking the ball and going home. Im going to actually try to do something. Wouldnt you do that if it was in your best interests . I think its in the best interests of everyone in washington. Dont you know how people think in chicago. Do you know them . Can you talk to them . Ill see what i can do. Ill give him a call. Maybe ill see him at the diner. Thats the whole point. Its obviously in everyones best interests to solve the Government Shutdown and make sure theres no perception that the government will default on its debt. Its such an irrational thing that it should go that far to do it. Thats why i think the market hangs around with the negative bias until you sort of have to say, i have to hedge a little bit. That kind of snow balls. Remember, back in 2011 even though we got this all solved, the s p was down 18 in two weeks. Maybe i should start, you know, getting on the biden thing. Keep talking about get joe involved. There you go. Leno said since all nonessential employees are furloughed, he may not be might show up. Might show up for free. See, i think he is essential. I think hes the opposite of nonessential. There are a million workers asked to work without pay so maybe hes one of them. Could be. Come on, joe. Might be you. Might be you. The president or the vice president. Lou, thank you. Up next, we are going to talk about initial public threat. How the Government Shutdown could disrupt the ipo market. At the top of the market well welcome alan kruger in his First Television interview since leaving the administration. The futures at this point are under pressure. This morning dow futures down by 125 points. S p futures off by almost 15 points. Squawk box will be right back. Points. 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Serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. Common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. Ask your doctor about the only underarm low t treatment, axiron. Welcome back, everyone. Amid the shutdown and default fears u. S. Equity futures have been selling off. The dow futures are down below 125 points below value. In our headlines the Supreme Court begins the fall session. Despite the Government Shutdown. The Court Announced that it will operate normally, at least through the end of this week. There are more than two dozen cases on the fall docket including the equal protection clause, age discrimination and campaign finance. The Government Shutdown now a week old with not much progress on capitol hill. If the shutdown drags on, big question, could it start to impact the ipo market. Joining us to discuss this and a lot more, michael furdick. Hes the ceo of reputation. Com. This was an angle i had not thought of, michael. Given where we are now, i assume the s. E. C. , theyre not really working or are they working . The s. E. C. Is working. They have a couple more weeks of funding. The federal shutdown will have a big impact on the ipo game. Bankers who are very connected to the issue. It looks like November Ipos will not be affected but december could. Twitter is in okay shape . Twitter is fine. The pipeline is full. Its fat and full. We have had 150 ipos year to date. Were on record to have a dominant year. If you want a very, very, very powerful lever to screw up the Wealth Creation of the economy, defunding the s. E. C. Is a good one. Theyre still funded . Yes. Theyre running out of cash now. The word i have is theyre running out of cash in the next 10 or 15 days. If you were to try to register for an ipo . We do not know. They have not made clear what their alternative plans are to the people im talk to go. I want to get to one other issue with you since is important, you are reputation. Com. You help people build reputations on time. Yes. The state ag two weeks ago in new york yes, this is important. Went after 19 Different Companies for trying to change embellishing. Trying to change their reputation on line. Writing fake reviews. Fake reviews. To up the ante of their restaurant. Look better. I thought if i hired a reputation. Com or if i tried to make myself look better online. That was okay. It is okay but its not okay to write fake reviews. Im glad youre asking about this. Ive been public. You cant ask for fake reviews and you cant create fake reviews. You cant hire someone to get fake reviews. My company, reputation. Com, only invites your customers to give you real reviews. If i called you and said, look, theres this horrible thing out there on the internet about me. Yeah. There are some unfortunately. Yes. I said i need you to completely undeserved in your case. Thank you. I said, you need to help me fix this. Yes. I would say yes. I assume you might build some nice glowing profiles of me and some other things . You dont have to do all the embellishment. You dont have to do all of that fansy pants stuff. Tell the truth and make sure you know how to tell the truth on the internet so it shows up nice and high. How do you do that . First of all, a lot of observation how Search Engines i thought they did it on the most clicked on things. That would have been true a solid 15 years ago. Its no longer true. Theres a lot of input. I often get this question from famous people. One blogger has a bone in his dr craw how do i solve that . New york ag did crack down on fake review peddlers. Thats healthy. Restaurant guys will say the guys who are writing nasty reviews about me are my competitors. Often that is true. Whether its true or not, you cant ask all your waiters to write a good one for you. The big problem is not for restaurants . Restaurants, night life, hogs pi talt, you get a lot of reviews. Reviews. Its for almost every other kind of company in the country. So theres outsized impact. Weve got to run. One more question. One more. When you press like or not like, sometimes you can move these things up or down. Yeah. If i said to you move up or down these reviews, would that be considered illegal by the a. G. . I dont know. Would you do it . No, i dont think thats something wed get ask to do. There are people who ask you to create fake reviews, but we wont. Thank you for this on the issues of the ipos and managing your reputation online. Thank you. A call to rise above. A former council of economics adviser chairman alan krueger says not raising the debt ceiling could trigger a sharknado event on the financial sector. And john podesta and andy card, do they think lawmakers can rise above the business . Tion . Hooking up the country helping business run build were investing big to keep our country in the lead. Load we keep moving to deliver what you need. And that means growth, lots of cargo going all around the globe. Cars and parts, fuel and steel, peas and rice, hey thats nice Norfolk Southern whats your function . Helping this big country move ahead as one Norfolk Southern hows that function . The ocean gets warmer. The peruvian anchovy harvest suffers. It raises the price of fishmeal, cattle feed and beef. Bny mellon turns insights like these into powerful investment strategies. For a university endowment. It funds a marine biologist. Who studies the peruvian anchovy. Invested in the world. Bny mellon. With my united mileageplus explorer card. 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Get up to 140 in mailin rebates when you buy four select tires with the Ford Service Credit card. Whered you get that sweater vest . Your ford dealer. Welcome back to squawk box. Sandra bullock, George Clooney, opening with 55. 6 million in north america and ticket sales. And sonys cloudy with a chance of meatballs ii dropped to second place with did you tell us . I liked it. My son loved it. Yeah, he did. I want a review. The scariest thing is and astronauts have conceded this. You know, if you get separated and you start going that way and theres no one there to come out and retrieve you, you keep going and going. You cant swim back. Just go to the theater . Yeah. Whats really neat, if one thing happens, its neat to see all of the action cause and effect. The way that if youre going you know, ill give away parts of the movie. Dont tell me. Dont do it. You are going to see it. Its entertaining. Yeah. Its entertaining. Okay. And worth the studio experience . Because ive read that you should we saw it in 3d. And it is beautiful. Looking at because the earth is in the background. The one thing that was a little weird was theres other space stations around and theyre like, you know how big space is, think about how big kansas is. Yeah, you might run into another one. Well, lets go over to the russian space, its right over here. Spoiler, spoiler. But everythings like a football field away. When we come back. The Government Shutdown heads into a second week, no end in sight, and Global Markets are starting to take notice. Europe opening in the red and the dow futures at this point more than 120 points below fair value. Well have this continuing story when squawk box comes right back. Capital to make it happen . Without the thinking that makes it real . Whats a vision without the expertise to execute it. And the financing to make it grow . Whatever your goal, it can change more than your business. It can change the future. Thats why, at barclays, our ambition is to always realize yours. Could the unthinkable really happen . Alan krueger, comparing the debt ceiling debacle to sharknado. His First Television interview since leaving the white house is just ahead. Shining the spotlight on sector transports. Find out if its time to pump the brakes of put your foot on the gas from planes to trains to trucks. The names you should be watching. Be sure and tell them large marge sent ya. Will a deal get done in washington . I told my members the other day, there may be a back room somewhere, but theres nobody in it. Top lawmakers and Administration Officials hit the air waves this weekend. There are no winners here. Every day the government is shut down, it does real harm to the American People. A wrapup of what you need to know as we try to rise above washington politics, the second hour of squawk box begins right now. Good morning, everybody. Welcome back to squawk box on cnbc. The futures this morning sinking as the Government Shutdown enters its seventh day. Dow futures down by 125 points. In our headlines this morning, in agreement in sight to end the Government Shutdown nor to raise the debt limit with a deadline that is rapidly approaching. House republicans say they are eager to negotiate with president obama. The nations credit is at risk because of the administrations refusal to sit down and have a conversation. Theyre saying its a risk because of your refusal to pass a clean debt limit. We are not going to pass a clean debt limit increase. I told the president , theres no way were going to pass when the votes are not in the house to pass a clean debt limit and the president is risking default by not having the conversation with us. A big blow for boeing, buys 31 airbus a350 jets. They will replace 747s being retired from the carriers fleet. And walmart and radioshack are cutting prices for apples new iphone 5c to less than 50. They had previously discounted the less expensive of the two offerings. Walmarts promotion lasts through friday and radioshacks will end on november 2nd. Reading that. Is that true . I do believe thats true. Im going to go back and find it. The debt ceiling . Right. Hello. Switched over to. Hello. They switched over to budget. Theyre talking budget now. There may have been some blowback from theres still. One, they want this, two, they want this, and three ted cruz, but i dont thats why i said we might go over. You said we will go over. We will go over. We had the european debt crisis. We had some other predictions. This is going to be another. Sorkin predictions. I think something starts happening today. I dont think theyre going to like the market today. I hope youre right. And by the way, i want to be wrong. No, you dont. I do. It would be better for the country if i was wrong. Some men like to watch the world burn. Did you see batman . Batman. Did years ago, yes. From the sniping tweets to the war of words on the sunday talk show, the gridlock in washington isnt showing any signs of breaking. Joining us now, alan krueger. And proor of economics and Public Affairs at princeton university. You want to apply . I know some people that some day im trying to find an Ivy League School with fair and balanced education. Is princeton the one . Theres no Better School in the world than princeton university. When is the first break . 7 20. This is your First Television interview since leaving. Thats right. Yeah. In person, youre no worse for wear from working in the white house. Maybe because you refreshed yourself after leaving two months ago. Its a grind, isnt it . I have the glow that the president said that, you know, the alumni have who worked in the white house. Because theyre no longer there. No long, oh, god, why did i say yes . Also head of equity portfolio strategy. I still think its in everyones best interest to let the other side off the hook to some extent if they can. Sooner or later thats going to happen. And this reminds me of wrestling, almost. And it reminds me of the wrestling that, you know, where we know its not real sometimes. Are you expecting us to go up to the 17th . I think its going up to the wire. Thats what weve seen in the past. I think its unfortunate that were here. I think the reason were here because Speaker Boehner went to plan b in december. Walked away, that put us on this path and, i think as, you know, the administration said, theyre not averse to reaching a grand bargain. They shouldnt have the negotiations under the threat of default. If everybody, its a lose lose if the economy ends up weaker. It wasnt great anyway. We already saw little slowdown at 150 or 160. So why at this point, you know, i dont see any electioneering going on. Hes not going to lose anything if he makes that call and lets these guys, you know, not completely lose face. Yeah, the president , i think has done a lot of difficult things. Offered a lot of things that are difficult for democratic president to do in terms of entitlement reform. Hes offered it. Hes offered it. Still up on the website. If you go take a look. Why not call up and say, look, this is what this is still on the table if we do this deal, if you give me, you know, the increase, well talk about immediately. Well talk about cpl, entitlement reform. Why not make that call to make sure theres the possibility of progress. He has been having discussions with various groups reaching out. But no country should operate under the threat of default where youre facing extortion from one fraction of the party. Thats the way the system is set up. Its possible to do that. It hasnt been played that way in the past. Its irresponsible. To lesser degrees. Nothing to this extreme. Okay. But people, you know, they do what theyre going to do. What were the markets like . Im arguing for the market side. Yeah. I dont think that the trigger to the deal will be the markets this go around. Yes, were weak this morning. But our broad position on this is the situation is significantly different than 2011 and as much as when you looked at the fact that european credit markets were under an extreme amount of pressure. And the u. S. Budget deficit was as big as greeces. And you thought if the country at the core of the Global Financial system can get drawn into this, its a scary pop sigs. Were nothing like that right now. Well have a 3. 9 budget deficit. This year were on our way to two. So the thing that will push, i think, the parties over the edge are the polls. And a recognition like in 95 and 96 that no one is winning this. Clinton went down ten points, president obamas approval has been going down sharply. And thatll push him to the table and theyll wind up the republicans cant get any worse in terms of the polls, i dont think. Thats why i think this is eventually going to have to be the president s move. Last week they said, we dont mind the Government Shutdown because were winning. That was one of the quotes. What does that mean either . Winning . Thats right. You can poll various polls. In 95 and 96, the republicans had taken the house for the First Time Since 1948, lost two seats and picked up three in the senate. While the general narrative is that they lost the 95 96 fight, they didnt really lose it. Tell me what happens in the market for real if it goes over even a day. Warren buffett made this comment on thursdays program that suggested that ultimately well get to the right resolution but we might go over a day or two and seemed more sanguine i would have imagined about it. Heres another related point. Unlike the budget control act which had a significant negative impact on the economy. Unlike the atra, i cant call it by its name because it raised taxes even though its called taxpayer relief. The deal were likely to get out of this will not contain 150 basis points of fiscal drag and the markets been accustomed of going to the wire and getting a deal. I think youd absolutely is that as a result, though, is there going to be a perverse nonincentive for washington to act because the markets are going to sit here . Eventually theyll get rational about it. Were not going to freak out completely. Theres always going to be a buyer on the other side waiting. Youre not going to have that Pressure Point where theyre going to go, we have to do this right this second. Expecting the s p to go down something more than 5 , for example, is a bad bet. Its unlikely. Again, i think the trigger to get them to come to the table is the recognition that nobodys winning. If nobodys winning, if the polls are going south, looks like no clear victor, thats the seeds of compromise. Not because the market imploeds. Just dont think that the markets are going to do that this time. If you look at the Government Shutdown, weve been trying to figure out how big of an impact is on the economy. What happens if we extend to the 17th . Well the shutdown is harming the economy. Its not tragedy for the economy, but not something the economy needs at this point, certainly. The best estimates are that each week shaves gdp growth by. 2 percentage point. Weve seen estimates as high as. 5 . Well,. 3 last week, thats ridiculous. 2 is a reasonable estimate if you look at the past shutdown. The one that went three weeks. If theyre not paid retroactively, its a lot more than. 2 per week. The pentagon is going to bring back more workers, thats moderate it a bit. But the longer this goes on, the worst it is for the economy and, of course, the uncertainty created by the wrangling over the debt ceiling is a much bigger issue, i think for the is this the type of thing we keep waiting for the u. S. Economy to really break out and hit new growth levels. Does this derail that . Slows it down, pushes it back, theres no question. Thats what we saw in 2011 with the fight over the debt ceiling. I think it pushes back the point from 2 growth to 3 growth. You know the president well. What would force him to pick up the phone . Ive just been watching the president s statements very closely. He views this as extortion and i think it is extortion. This is just a sixweek cr. If he were to give into their demands, to their blackmail, i think at this point, again, in six weeks and i think hes thinking more importantly about future president s. He doesnt want to leave his successors in the position to be blackmailed. You have to if youre going to compromise and im listening to the statements too, obviously i dont know the man but he said in that on that first day, the sequesters still hurting. Okay. Theres something the democrats want, the president wants. The democratic budget was 70 billion above the budget. Give on that a little bit. We know the longterm debt problem is entitlements not the near term discretion spending anyway. And give republicans something on the other side and get a deal. Wrap it up for a year and move on. Do that this week. Well, i always thought it would take a week, at least, joe, until we got evidence in the polls things werent going that way and they would start to move. Tuesday, wednesday. All right. What i think is missing is the internal dynamic within the House Republicans because they seem to be quite fractured. Its awfully hard to decipher the strategy. Joe couldnt figure out exactly people said boehner if he wanted to, he could do it now. If there was a way where he could save face a little bit, hes got the votes probably for a clean theyre saying hes saying he doesnt. Well, he knows the dynamic within the party better than anyone. Right. The fact he hasnt put up the clean cr, he must be worried well, might be worried about the speakership too. Anyway, theyll be with us for the rest of the show. Weve got andy card and john podesta. Were coming right back in a moment. This week, squawk box is rising above the debt. Equity Group Investments chairman sam zell is our guest host. On wednesday, bp capital founder Boone Pickens talks energy. And on friday, we wrap up the week with former ge chairman and ceo jack welsh. The biggest names in business are here. And its only on squawk box. Lets check the futures, show you where the markets indicated to open down. About 124 points on the dow to open where it is here. Last week, Union Pacific warning that profits would fall below examination. Right now, well shine a sector spotlight on the transports as we head towards earnings season. Christian, is Union Pacific the exception here . Well, i think what we saw at Union Pacific was a little bit of a change of mix of traffic in declining coal and grain which are highrevenue, highmargin businesses for them. I think the rest of the businesses were doing okay. The preannouncement was negative, but only missed by about 3 . Youve seen volume up over every part of this sector. Thats right. If you look over the Third Quarter, it was somewhat constructive. July up about 80 basis points, and it accelerated to about 2. 5 growth in august. And then september was the strongest of the three months it was a better trend through the quarter. We look at the transports as some indicator of where the economys headed. Overall you would say the economy was doing well, at least, based on what weve seen up until this point . Sure, seems like were getting a little bit better. September was sort of weak last year, but the pace of the economy seemed as good as its been over the last six or nine months. This Government Shutdown, will that have impact in the transports in the immediate future . I think for the most part, businesses continuing to operate in the freight segment of the economy. We dont see a huge impact coming up in the next couple of weeks or so. Around the ports, you could have issues with customs, otherwise, but for the time being, i think were okay. This is beyond, this is the trucks, the railroads, shipping, on every part of the sector . I think if you look around the pace of volume flows for the Third Quarter have been generally with everyone getting a little bit better throughout the quarter. Your two favorite picks are Union Pacific despite the earnings warning and fedex . Yeah, Union Pacific continues to be our favorite pick in the railroad space. Still exists there and were getting double digit earnings growth. Fedex is interesting because one of the few transport names not at an alltime stock price high, you have fairly depressed margins in the express segment and a self help story underway if you get a little bit of tail wind from the economy helping out. Trucking company, ch robinson, you are a little concerned there . Yeah, so ch robinson is unique. A bit of a truck brokerage company. They work a margin between the sellers of capacity and the buyers of capacity we think the truck market has gotten tighter because of issues that went into place on july 1st. Its a very kpestive market right now, may see margin pressure in the Third Quarter. Okay. Well, this volume dynamic to me is really interesting because core retail sales were fairly soft. That correlates with holiday sales. Theres lots of concerns about that. But if you look at things like asian exports. China in particular, exports to the u. S. Averaged 1. 8 analyzed in the first half. But the last two months, theyve averaged 5 1 2. Looks like this activitys starting to pick up. What you describe sounds like, yeah, there is actually this pickup in volume that implies, you know, maybe final demand is not as bad as you would think. At some point here, the effects of the tax hikes start to dissipate and you would expect consumer demand to start to lift a bit. Sort of wondering if were looking at the leading edge of that in some of the activity numbers or its an inventory restock. Well, i think its a little bit of both. Weve been running at extraordinarily low inventories for an extended period of time in the u. S. Weve been really running at very kind of depressed levels from an inventory perspective because i think of a weak outlook in general by customers. And we should start to see so if we see any end market demand, which i think is what were starting to see on the margins, youre going to get that pickup in freight volumes and agree with your point about the china exports. We watch some of the container trade data, and that has been getting better. We have, you know, typical seasonality would suggest you do a little bit more volume in late third and fourth quarters going into the holiday season. But on a yearoveryear basis, things are looking good. I would agree with your point. Thanks a lot for coming in today. Thanks for having me. Coming up, what you need to know for the week ahead and day seven for the Government Shutdown. Theyre both waiting for the other side to yield in a showdown thats supposed to be about spending. But derailed by disagreements over obama care. Two former white house chiefs of staff are going to join us. Theyll be right here, squawk box coming right back. Time now for todays aflac trivia question. When did the word millionaire first appear in literature . The answer when cnbcs squawk box continues. Ready to run your lines . Okay, who helps you focus on your recovery . Yo, yo, yo. Aflac. Wow. 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Lease the 2014 gx 460 for 499 a month for 27 months. See your lexus dealer. For 499 a month for 27 months. Customer erin swenson ordebut they didnt fit. Line customers not happy, im not happy. Sales go down, im not happy. Merch comes back, im not happy. Use ups. They make returns easy. Unhappy customer becomes happy customer. Then, repeat customer. Easy returns, im happy. Repeat customers, im happy. Sales go up, im happy. I ordered another pair. Im happy. both im happy. Im happy. Happy. Happy. Happy. Happy. Happy happy. I love logistics. Now the answer to todays aflac trivia question. When did the name millionaire appear in literature . The answer, 1826, in the novel vivian gray. Aflac. Again, the futures this morning if youre just waking up are under pressure. Dow futures down by about 125 points as we head into day seven of the Government Shutdown. In the meantime, the average price for a gallon of gasoline in the United States continues to fall according to the latest lundberg survey. Just over 3. 38 a gallon. Thats down about 45 cents from a year ago and down nearly 14 cents over the last two week. That is the biggest twoweek drop since last november. And if you look at oil prices this morning, youd see another drop. Oil trading around 102 this morning. Coming up next, a check on gold and the dollar this morning as we get ready for another week of trading and then well be welcoming john podesta. Squawk box coming right back. So i c an reach ally bank 24 7, but there are no branches . 24 7. Im sorry, im just really reluctant to try new things. Really . Whats wrong with trying new things . Look mommys new vacuum cat screech you feel that in your muscles . I do. Drink water. Its a long story. Well, not having branches lets us give you great rates and service. Id like that. A new way to bank. A better way to save. Ally bank. Your money needs an ally. Welcome back to squawk box this morning. Even as the Government Shutdown continues, the pentagon recalling most of the 350,000 civilian workers who had been sent home according to chuck hagel. The newly signed bill to pay the military will also allow most furloughed workers to also return. Also, apples tax practices now theyve received a clean bill of health from the sec. All things reporting that a fourmonth review found nothing wrong with the way apple handles the overseas cash and tax policies. And youll recall mr. Tim cook went to washington to talk about that a couple of months ago. Blackberry may be selling pieces of itself. Pieces, lets put a point on that. Reiters reporting that the company has been in talk with cisco, google and s. A. P. About selling various units. So i dont know what happens, becky, actually, the more i think about it. Im curious of what it means for blackberry. I know alans got one too. We shall see. The debt drama continues to weigh on both gold and the dollar. Joining us right now to talk about talk about currencies is the global head of currency strategy. Frank holmes is the ceo of u. S. Global investors. And mark, the dollar today in particular has been quite a bit weaker on this. Joe asked the question earlier because qe is going to be extended into late 2014. I dont know how far qe will be extended. I think the dollar is mixed today. Weve seen it trade euro, sterling, dollar strong against the dollar block currencies. People reduce their short dollar exposures hoping, anticipating something would happen over the weekend. Nothing happened over the weekend. And the dollar has resumed, has traded heavily again against the major currency. Some kind of safe haven bid for the japanese yen and swiss franc. I think from the sentiment point of view, rather, most people, i think, im not thinking the u. S. Government will default when push comes to shove. How the politicians get out of this one not clear yet. If we head to the brink, october 17th, which is the date treasury has laid out as the point of no return, then what happens to the dollar . Whats a fair price versus the euro lets say . If were sitting on october 17th with no deal . Well, i think in general, the dollar the euro heads up higher, maybe as high as 137, we stopped last week at 1. 365. I think people dont want to be caught too short the dollar when this news hits. I think itll be very cautious trading. But, again, i think the important thing is many people are looking past this. Many people do not think the u. S. Will default. Okay. If you get past default and still looking at qe, lets say qe does push late into 2014 before theres a taper, then what . Is there a point where the market starts to push back . Well, im not so sure the qe has been a key driver to the dollar. Weaker through the summer as European Economic news improved. And thats the focus. Talking about hedge funds buying greek banks. Weve seen other reports about leveraged players buying distressed debt in europe, u. S. Money markets increasing holdings of european paper. I think there has been a move into europe which is keeping the euro well supported. Frank, gold prices have risen as weve gotten into this kind of mess that were sitting in right now with washington. What happens if there is a resolution in the deal and the whole world looks brighter . What happens to gold prices at that point . Shortterm, we are in a bias sentiment going over 35 years of data. So i think its important to follow whats taking place in asia because the biggest physical demand for gold you see in the Shanghai Commodity Exchange is deliveries are taking place there. Month in and month out. And i think even in india, indias demand for gold, even with all the barriers to entry are rising with government policies, still very strong. Although, frank, we were looking at a longer term chart watching gold go from 1,800 to 1,300. Is this a bear market for gold overall if you look at it . Well, it clearly appears to be that. But if you go back in the 70s, the corrections were of similar magnitude. I think whats important is that the monetary stimulus is going to continue, qe3, qe4 will continue. Shortterm what gold is saying theres a deflation. And gold is usually whenever theres type of physical factors in the marketplace is deflationary and governments will do everything to stimulate economic activity. But coming back, its so important for investors to buy gold, 5 to 10 waiting ask rebalance. Dont run out there and buy it to make a big score. 10 seems high, 5 , that i can get my head around, but 10 seems a bit high, frank, no . No. 5 gold stocks, weve shown for the past three years, five years, ten years, outperforms the s p 500. Okay. Mark, frank, gentlemen, thank you both for joining us this morning. Coming up next, getting negotiations started. What will it take . Maybe our buttons. I say thank you, andrew. Thank you for listening. Former white house chiefs of staff john podesta. As we head to break. Heres treasury secretary jack lew on meet the press yesterday. I know the leaders of Congress Republican and democrats, i dont believe any of them want to default. Theyre going to need to look at how do they let a majority in Congress Work their will. Clients are always learning more to make their money do more. ann to help me plan my next move, i take scottrades free, inbranch seminars. Plus, their live webinars. I use daily market commentary to improve my strategy. And my local scottrade Office Guides my learning every step of the way. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. 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If you have any sudden decrease or loss in hearing or vision, or if you have any allergic reactions such as rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. Ask your doctor about cialis for daily use and a 30tablet free trial. Lets check the futures, weve done about 125, now were down 117. As we wait. We wait for the thaw. Waiting for the thaw. One of these days, i think. I cant believe Nothing Happened over the weekend. I was looking through one of the papers. Maybe it was the Washington Post that had losers and not so losers. And, you know, theres no winners. Reid was in that not that big of a loser and couple of other not that big and then the big losers were the its more about who is going to be the loser in 2014 and 2016. Its hard to the senate may be interesting, but the house, you got these guys coming from places where its like 90 of either party is whos voting after redistricting. Well, we have a with a view on all of this. Squawk box is trying to rise above the debt ceiling looking for ways to solve the gridlock in washington, joining us right now is john podesta. Former white house chief of staff to president bill clinton. In studio, alan krueger, former chairman of president obamas council of economic advisers also professor of economics and Public Affairs. Princeton university. Im going to go to you, john, because we heard from the other guys so far. Were not going to try to what is the olive branch that needs to be extended. Is there something me can say . Well, andrew, i think that hes already indicated that hes willing to negotiate over the budget, but not with a gun to his head on the Government Shutdown and the debt limit. We saw a reversal of position, i think, over the weekend by Speaker Boehner when he said at the beginning of the weekend he would not let the government default. And then on sunday he was kind of threatening do you think he realized he lost all negotiating position by saying i want default and then he realized, im now out of ammo . You know, i have no idea. I think its a combination of ideology and his being pushed by the far right combined by a little bit of a sense they dont have a negotiating position. Theyre not sure what they want. They painted themselves in the corner, not sure how to get out of it. Seems to me there are sort of two possibilities now. One is that you can push this off for 60 days or, you know, six weeks and try to create a negotiating process under which they extend the debt limit for some period of time or suspend the debt limit. And they put the Government Back to work and then try to negotiate a budget framework. But i dont think obama care can be on the table in that context. The alternative to that is were going to go right up to october 17th, the markets go crazy. And i think at that point its anybodys guess but i think my worry is the markets dont go crazy because they think were going to get there. You think were misreading what boehner said over the weekend . No, i dont think that he saying that we wouldnt put the country in default is saying the same thing as we dont want to shut down the government. Thats a standard talking point that both will say. These werent comments. He was making private conversations, privately assuring republicans who were worried about i understand. But its just the same point. Theyre not no ones going to give up the negotiating position. And i think that was totally taken out of context. Theres going to be umt matly the ultimately there has to be a deal you think boehners comment that he was that he said were not going to negotiate on that. Thats what he said. Play the clip again. You dont think he was talking about the debt ceiling . No, what i said was when everyone jumped all over it and he said, oh, were not going to let the nation go into default. That didnt mean he was just going to say, okay, well, im going to pass a clean debt ceiling hike. Thats a standard talking point. We dont want the country to go into default. You cant say, okay, ill give you that and move on. It was always going to be a negotiation around both issues. The problem, of course is that boehners original position was he wasnt going to shut the government down. They can get themselves to a point where they actually threaten default or put the country in default and thatll have Global Implications and, you know, it will, i think, really depress growth, not just in the United States but across the globe for a fairly long time. I think we really need to move forward with some ability to move past that october 17th deadline. And then try to negotiate the budget. Assuming that everybodys playing chicken and assuming that the republicans dont come to play and there is a hostage situation, is there something for the president to give . Well, i think hes prepared to kind of negotiate with them. What he wants, i think, is relief from the sequester. I think he wants realistic levels of spending on the discretionary side. And i think hes been he showed that in his budget earlier this spring. I think hes willing to negotiate over that. I think when you get to obama care, i think theres precious little to give. Maybe they can talk about this medical device tax or something small, but i dont think hes got a lot theres a deal there. I just heard it. I just heard it and you would make it. And, of course, we know youre with clinton, but theres a deal there. I just heard it. Well, id like to see a threeyear deal to get out of this for the remainder of the Obama Presidency and maybe the republicans can say well, when ted cruz gets elected president , well repeal obama care. At least get a framework in place for three years to stop this nuttiness. Lets do that. Do the sequester and do a little bit with the entitlements and everybodys happy. Thats possible. Maybe thats what it finally looks like. I think you could put it together. John, why do you think that the republicans would accept that . Thats what the president offered in the fiscal cliff negotiations. He saw this coming down the road. Because now theyre backed into a corner, right . They should have looked down the map then. My reading is they want trench warfare. From their view, thats the best hand they have. They didnt want to go to guns. They just want to keep us in this morass on the budget. I dont think thats where boehner wanted to go. I think thats where he got to, alan, i think youre right about that. Seems to me we were headed toward some kind of resolution along the lines i was talking about some time this summer. And did this detour off into obama care. You know, New York Times reported that was a long planned things by the Koch Brothers and ted cruz took the bait, boehner took the bait and there we are. Getting back to the debt ceiling. Youre right about the economic concerns it would raise. What i didnt realize is if treasuries, the yield increases by one percentage point, you are looking at the cost of borrowing by increasing by about 120 billion a year for what we already have. I didnt realize that was in there too. Logically, you sit down and look at these numbers, do you think theres any way to push past october 17th . Both sides have to know whats at risk. The combination of ideology and incompetence, i think risks that now. Think about what would happen in advance of that if the european regulators asked to stress test against their exposure to u. S. Default. And begin to raise the Capital Requirements in the european banks. It would be disasterorous. We seem to be as unable to control our politics as they were. Wow. Treasuries would rally. Would rally. Would rally in the event we go off the debt ceiling. And get pushed down . The risky parts of the capital structure will sell off. Stock market will sell off, but the treasury market will rally. Ill take the other side of that bet. Part of the curve will steepen. Longterm securities will underperform. But the belly of the curve will rally. Its what it did in 94, 95, what it did in 11. Europe was much weaker then. No, i i think if the markets think that we may default on our obligations, youll see a credit freeze. Its not going to happen. Its not going to happen . This is almost seems like it should happen. It should happen for a real reason. It shouldnt happen for this reason. If you look, maybe europe is getting better. Were still the cream of the crop. The ability to pay back anything we lend. Were so close to just owning people in the rest of the world, they look at their own, you know, governments and its like theyve got 12 different coalitions banding together, they look over i think its surprising things run so smoothly most of the time. I think the rest of the world will look at this and realize were not perfect but were still the best there is. Best and the broader point is the fiscal accounts have approved so much and were not in a sovereign global crisis. The chinese are not going to let it rise sharply, japanese are not going to let the yen rise sharply. All sorts of buyers. We have a deal, meaning the two of us. And ill get you a button rise above, but i think you could see. The president is the president. Boehner, hes not the president. The president can afford to give up to look magnanimous here and say for the good of everyone, im going to, all right, fine, you guys. You know, youre spoiled little brats, im going to come in here and do what president s do and negotiate. You know, and stuck in a corner and just holding out to the end. You think thats a way to go. I think he can negotiate, but i think he cant do there are two things that are kind of off the table. One is hes not going to give up obama care. Fine. Ill give you that. Thats his signature thing. You got that. And the other thing, i think in the longterm this stuff about worrying about future president s having thats crap. I think thats real, joe. Come on. What hes got to do is get to a place where he can negotiate legitimately over the budget. Its nice hes worried about what Chris Christies going to have to face, john. Chris christie or jeb bush . I dont know. Seriously, joe, when you sit in the oval office, you worry about these structural changes in the power of the presidency and what it means for the country and how were going to be able to govern going forward. We have a more polarized country, not just a more polarized congress. I think hes serious about saying youve got to have a structure well, i think hed like to leave office under 6 unemployment and none of this is helping us get there. I get that. I think we have more polarized districts. But thats another topic. Thank you, guys, youre sticking around for the rest of the show. Call bill and have him make the call. Someones got to make the call. The president is rising above. Hes looking at the future of the country. Doesnt feel like were rising above, feels like were stuck in the morass, in the mud. Speaker boehner went to plan b and that put us here. You can have the entire country agree its the republicans fault if you want, but that doesnt get us where were going unless, you know, someone rises above. I think the republicans have to work out their own internal debate. Find out what it is theyre asking. Democrats usually love diversity. Nice diversity in the republican party. I think diversity is fine. And as long as i read someone said that. Who said that . Carl rove made that comment. Oh, he did . Oh, my talking points, yeah. Here it is. Thanks. You made that comment. In my head i was saying, oh, he read the carl rove talking points. I knew i had them here. When we come back, the Government Shutdown heads into its second week with no end in sight and the Global Markets are taking notice. The nikkei dropping by more than a percent overnight. The dow futures have been down by about 120 points. You can see right now down by about 111. Off the worst levels but still triple digit losses at this point. Squawk box will be back with more of the story after this quick break. [ man ] on december 17, 1903, the Wright Brothers became the first in flight. [ goodall ] i think the most amazing thing is how like us these chimpanzees are. [ laughing ] [ woman ] can you hear me . And you hear your voice . Oh, its exciting [ man ] touchdown confirmed. Were safe on mars. [ cheers and applause ] hi. [ baby fussing ] peace of mind is important when so we provide it services you bucan rely on. ] with centurylink as your trusted it partner, youll experience reliable uptime for the network and services you depend on. Multilayered Security Solutions keep your Information Safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. Here are some stocks to watch this morning. That i missed. When the cats away. The cats away. Boeing, you can imagine, is lower on news that youve probably seen. Japan airlines made its first ever purchase from air bus, purchasing 31 a350s. Total 9. 5 billion. Other apple news, reports the sec has ended an investigation into apples overseas cash and tax practices without taking any action. Theres a shock. Considering they probably have the best analysis, accountants they can buy. Im sure they were operating under the laws we havent changed yet. What do they do . Like the double Irish Whiskey turn around backwards flip . What is it called . Yeah, where they put the subsidiary but did you see when the cfo was there, who pays the most taxes of any company in the United States . Apple. Exactly. You dont want to kill the goose. Iphone 5c has seen discounting. Walmart and radioshack the latest to cut prices. You didnt do this . I did not. Any comments . Yeah, theres very little Revenue Growth and theyve done what they can do to make the numbers work. 20 years of Revenue Growth. But thats the whole market. Goldman downgraded toll brothers, by the way. Okay. Its called a double irish with a dutch sandwich. Former Economic Council advisers chairman, thats you, by the way, and phil lebeaus going to take a spin in a cadillac hopes to be the next big thing in selfdriving cars. Squawk box returns after this. Its as simple as this. At bny mellon, our business is investments. Managing them, moving them, making them work. We oversee 20 of the worlds financial assets. And that gives us scale and insight no one else has. Investment management combined with investment servicing. Bringing the power of investments to peoples lives. Invested in the world. Bny mellon. First day of my life by bright eyes youre not just looking for a house. Youre looking for a place for your life to happen. Congress failing to rise above partisan politics and negotiate a solution to the shutdown and the debt ceiling. Why cant we all just get along . Well talk to congressmen from both sides of the aisle. Plus, several key Economic Data points this week could be casualties of the shutdown. Were going to tell you what not to expect in the week ahead. And gm super cruise cadillac is one step closer to driving itself. Phil lebeau will take it for a spin as the third hour of squawk box begins right now. Welcome back to squawk box here on cnbc first in business worldwide. Im joe kernan along with our guest host alan krueger, former chairman of the white house economic advisers. And head of u. S. Equity portfolio strategy at barclays. The futures have been down about 125, ive seen them down about 115, maybe close to 130. 118 right now. Overseas in europe, theyre nervous about whats happening here, as well. But kind of wait and see, nothing down more than full percentage point. And there was mixed trading overnight in asia too. The shanghai was up more th than. 6 . The pentagon ordering more than 300,000 employees back to work today. Another week in developments, the house voted to pay all furloughed employees retroactively once the government reopens. Theres still no signs of compromise on a bill to fund and reopen the government. And the debt ceiling deadline does loom. Next week, the u. S. Runs out of credit to pay its bills. Treasury secretary jack lew making the sunday talk show rounds. If we cross the line, were going to a place weve never gone before. Its dangerous. The argument from House Speaker john boehner on the other side. The nations credit is at risk. Because of the administrations refusal to sit down and have a conversation. There have been some reports. We are not going to pass a clean debt limit increase. I told the president , therest no way were going to pass when the votes are not in the house to pass a clean debt limit. And the president is risking default by not having a conversation with us. But moodys ceo tells cnbc that the chance of u. S. Default extremely unlikely. Hopefully, its unlikely that we dont go past october 17th and fail to raise the debt ceiling. Even if that does happen, we think the u. S. Treasury is still going to pay on its treasury securities, prioritize those payments. Still, we should note that the dollars trading at an eight month low. People buying all the banks in greece, as well. Thats true, but we could go to i think we should make a trip to europe right now. You see thats 1. 35 euro. You like paris, italy, come on. Thats the opposite. You want to be its going up. Going up. A lot lower than we were when you went on vacation last year. Where was it then . 1. 40 i thought. No, 1. 35s my level. 1. 40 is the level of the last couple of years. Thats a breaking point where the ecb gets a bit nervous. Im going to go down go down and stay with clooney and who else . Next door neighbor. Who is that . Clooney and somebody i saw over i may go down to cabo, ive been invited, i dont know the man, but nice place. Well work on that invitation. In the meantime, also corporate news. Ill look up who else. Japan airlines randy gerber. Maybe you and dan loeb can go down together. Is he a friends . No, thats the point. You dont remember when George Clooney came out against dan loeb . Oh, yeah, yeah. The airbus deal for planes for 9 billion replacing 777s. It is, of course, a blow to boeing, which had been the airlines supplier for decades. The shutdown is heading into week two and the debt ceiling deadline is quickly approaching. Here now to talk about the economic repercussions of the gridlock in washington is the former chief economist at omb. And professor of Public Policy of the Kennedy School of government. Also larry myer who is former fed governor and cofounder of Macro Economic advisers. Larry, why dont we start with you. We heard from the ceo of moodys who does not think well actually go over the debt ceiling. What do you think . Well, i dont know the answer to that. Im not a political guru. I would say we assume were not going to go over the limit. Obviously as we get closer and closer, the danger is rising. In your model, what happens in week two of a Government Shutdown . How much has been lost to this point . And if we go up to october 17th, what does that do to the economy . Well, this is a massive cut in Government Spending with really huge impacts for the economy. Now, i dont want to get into a couple of quarters, but if it lasts a longer period of time, we could have a worst recession in post war period. And day by day balanced Budget Amendment which is basically what this is could lead to the Unemployment Rate getting to 15 . Larry, what do you think would happen in the Financial Market . Thats a tougher question, because the distinction is, can the government prioritize . Can it pay the interest on the debt and cut all other spending to meet the requirement they dont borrow. In that case, the impact on the Financial Markets would be more muted, but the fact theres a huge recession coming would have a big impact nevertheless on equities and risk assets. I think its different if you defaulted on the debt. Its hard to come up with a number of what the impact is on the dollar. It would be ugly. And i would presume if treasury could prioritize, ive seen no evidence they actually can, but, you know, if you go with moodys presumption they would prioritize, i suspect thered be legal challenges to that from all the contractors who werent getting paid . Thered be doubt in the Financial Markets which would make it not too different from them not prioritizing. I agree there are legal issues and there are technology issues. So i think a point of departure would be they cannot do it. Hey, jeff, let me ask you. The department of defense at this point is bringing back over 300,000 furloughed workers today. The house voted unanimously to go ahead and retroactively pay all of the Government Employees who arent getting paid. I just wonder, whats the point of a shutdown . Seems like you lose productivity at that point. Absolutely. The shutdown makes no sense at all. And as larry said, you know, in one circumstance we cause financial panic and the other circumstance we suck demand out of the economy and go toward a recession. So either way, this is not good news. And whats clear is we need to have both the end of the shutdown and passing an extension of the debt limit and then have a sensible conversation about how to build on the progress weve made and bringing down the deficit in terms of what future steps need to be taken. I understand that argument. And thats the president s argument hes put out we will talk after we get through these situations. But i understand the republicans thinking they have no leverage. Is there a way for both sides to get a Little Something out of this . Well, i dont think thats right. The president put on the table earlier this year a package that included cuts and tax expenditures as well as reductions in spending on medicare and medicaid and said lets talk about how to make further progress beyond the progress weve made in bringing down the deficit. And at the time, boehner said he had no interest in talking with the president on making further progress. This was right after this was right after revenue taxes had been raised. Correct me if im l wrong on this, but i think this was right at the beginning of the year after taxes had been raised significantly and the republicans didnt want to come back and say, okay, now in order to get entitlement cuts, we have to agree to raise taxes again. Weve done a lot of cuts to Discretionary Spending and couple pieces of legislation. We did major cuts. Getting through the sequester, by not having an agreement thats how you got some of those cuts. But earlier it was part of the budget talk. Even earlier, there was significant progress made that has been a big part of why the deficit came down. Weve had measures on the revenue side and spending side to date. And its going to take each going forward. And what needs to happen is not any more changes to rates, its closing tax expenditures which really in many cases are just another type of Government Spending that we can cut if we get rid of the tax expenditures. Ill admit, it makes your head spin if you try to figure out whose fault it is. Last time it was so and sos fault. Theres a lot of bad blood on both sides. Is there a way you can actually reach some sort of a grand agreement on both sides . If obama cares off the table, thats not going to be a negotiating part, do you get there by saying, yes, we will address entitlements and also take a look at higher revenue. Sure. If you restructured. Theres all this concern about too many cuts to spending. Lets restructure the spending cuts. The uk cut spending but 80 entitlements, 20 near term Discretionary Spending. Weve done almost entirely Discretionary Spending, lets swap some of that. Lets do the cpi in exchange for rolling back sequestration cuts. Creates stimulus. I dont believe its all that stimulative. But nonetheless, new keynesians might, but thats the grounds for an agreement. And thats what has to be done. Can that be reached in the next week . I dont think it can be in the next week. I would say the president kept his offer out there on the sb entitlement reforms. Theres so much difference in opinion in terms of what our problems are and how to solve them. And my hope would be that Congress Just does no harm. They could do very severe harm with the debt ceiling. Right. So larry myer made a great point earlier which is if you think about Financial Markets as discounting future economic activity, the reason that the equity market reacts so negatively to these scenarios is because if there is fiscal drag that results as a consequence, that means the growth sensitive parts of the market should correct. The treasury markets the opposite. So unless you really think were not going to pay our debt for an extended period of time, treasuries rally, yields go down, but stocks sell off. Thats the reaction in 94, 95 and thats the reaction in 11. If thats the case, why have rates on shortterm gone up for those maturing in october . Youve got a very small steepening curve. But the belly of the curve have all rallied substantially through this. Thats the forwardlooking part of the curve. Yeah, youve got dislocations within the equity market. Shortterm volatility moves because if you have to make markets on onemonth options, its a scary proposition through an event like this. But the longer term volatilities havent moved at all. We were ready for 10 and got that forecast of a 2. 1. You have discount in the shortterm, thats what shows up in shortterm index. The longer term securities that discount the economic outcomes of this are not reacting. Thank you both for joining us today. And alan and barry will be sticking with us. Coming up, the Government Shutdown means no Economic Data from the Labor Department or census bureaus. Steve liesman will join us next with more on the data casualties. And well talk to congressmen from both sides of the aisle about the negotiations or lack thereof. And then google isnt the only Company Working on a selfdriving car. Phil lebeaus going to join us from michigan. Going to take him for a ride. Were going to come back with a lot more. We asked people, if you could get paid to do something you really love, what would you do . [ woman ] id be a writer. [ man ] id be a baker. [ woman ] i wanna be a pie maker. [ man ] i wanna be a pilot. [ woman ] id be an architect. What if i told you someone could pay you and what if that person were you . When you think about it, isnt that what retirement should be, paying ourselves to do what we love . Okay. Weve got Steve Liesman at the desk. We do have red arrows as the Government Shutdown continues. New questions are on us here. S p 500 off about 13 points. And the nasdaq off about 22 1 2 points. Today was scheduled to be a light day for Economic Data. The Government Shutdown is here. Right now, joining us to talk all about this, mr. Liesman can help us through, trying to figure out. What happens if there was a decline in government activity due to the shutdown but there wasnt any data to prove it . If a tree falls lets take a look, folks, what we get, dont get. And some of the things. Because we dont get some stuff we dont Pay Attention to that we wouldnt normally Pay Attention to. Today well get consumer credit. That comes out. Tomorrow, were going to pay a little more attention to the nfib. Were not as youll see later, getting retail trade from the government. International trade, that does not happen. Johnson, redbook weekly and the imf World Economic report will come out. Lets move on now to wednesday. Mortgage market index, thats the association that provides that data. Fomc minutes . Yes. How can the fomc minutes come out . The Federal Reserve is a whats the word they use . No, no, no, its a nonappropriated entity. Is that how they call it . Thats correct. Theyre funded by fees. Nonappropriated theyre still funded. They do what they want. They sent you the notes every time. I have sources. We had the employment number. You gave us that on friday. I did get you the employment number. What was it . 158. Plus or minus 50. Plus or minus. My 95 confidence level was zero. You can take that any way you like. Lets move on and look at the rest of the week. On thursday, we will get claims. Krueger, can you tell us why we get claims. I dont know why we get claims, there was some thing greenspan did in 96. I think because its a mandatory program. No import prices and no federal budget report. What does that mean . Johnson redbook monthly. Well talk about that in a second. Thats the best proxy for retail sales. Moving on to friday, no retail sales, no home sale price report. Consumer sentiment, well get, no business inventories report. And then well have a lot of fed speakers speaking about the uncertainty, i expect. Look at that, on thursday, we get a trifecta, bullard, williams and tarullo. Well see what they have to say about the shutdown. A lot of talk there. A lot of talk over the weekend from economists saying, you know what, i thought december was the best possible time for tapering and now theyre saying that the risk is january 2014 is when they might do it at best. Can i ask a question, if thats true, what happens to the idea if its finished up . Thats an excellent question. Do they then extend it . You think about what happens to the slope. Going very fast. It would have to be much sharper decline. They said that. They said they were going to be done by the end of 2015. Can we look very quickly at the impact of the debt ceiling breach if we get there . Government spending in that case, its a Budget Amendment. Somebody said that, spending cut by 1 of every 3. 32 decline or down 108 billion. I dont know how you do that, but the question becomes, alan, is there a way is there was a secret plan inside treasury . Becky asked this question. Yeah, is there what case of emergency, break the glass. Double secret plan. I would take the single secret. Theres no plan that is sufficient for the kind of calamity that we would face. That is sufficient. But there is a plan, right . Well, look, its incumbent on government to make contingency plans. Theres no plan thats conceivably possible to cope with breaching the debt ceiling. Do you have any sense to what this does to the president s plan to pick a new chairman . Im observing that from the outside. I think that the fights that were seeing in congress are not helpful for any nominee. Its going to slow down nominations, thats not good for the country, not good for the economy. Do you think this would be a reason for bernanke to stay on a little longer . No, cant get inside the head of ben bernanke. I think hes done a fabulous job. I think he certainly earned the opportunity to leave if he would like to leave. But i know he also cares deeply about our country and about doing whats best for the economy. What happens if theres not a nominee whos been confirmed by january when hes supposed to leave . Does he traditionally stay . He can stay on. He would stay on potentially, wow. Poor bernanke. I gave the president of the United States my advice about his selection for the fed and thats the only person im giving my advice to. I can tell you that all the candidates whose names youve seen in the paper are standing economists. Were not asking you to give us advice on it what did you tell the president . This may be my first interview but i did learn a few things over the years. You didnt really say you wouldnt tell us, so now you did. Now its official. You really wont tell us. The line from and this is from i hear from senators, i hear from different people, not raising the debt limit does not imply default. Well honor all notes and interest. Theres no such thing as a debt limit because it is always raised. So that is why we are at 17 trillion. Joe, ive read almost every paper you can read on this. There are people in high places. The only thing ive been able to find is a footnote in a Congressional Research Service Report that says there was something of a priority planned that the treasury wont give the congressional there might be a double secret plan. Heres the problem, all right. The treasury argues it has no Legal Authority or legal basis to pay one thing or another. Everybody says, oh, well, just pay the interest on the debt. Okay. But you think about it, joe, theres no difference in an appropriation law in the priority of for a national park, the debt ceiling or the nuclear missile. Theres no theyre all equal law. So i think what happens here, and maybe alan has an idea on this. If we reach the debt ceiling, jack lew will have to break some law. Theres a prioritization of constitutionality and hell have to make certain choices. And its not strictly true. But he may have to choose to pay the interest on the debt or to pay retirees Social Security. I mean, its you know. Right. He could have to close the justice department, the fbi and the courts. You have to get to november 1st or 2nd . Yeah, the timing has to do with when certain payments are due. Or they can go daytoday and make no choices. Meaning debt payments could come late if he just pays what bills are due when its due. The Computer System as i understand it is not rigged to do that. [ laughter ] [ female announcer ] each one of us is our own boss. And no matter where you are in life, ask your financial professional how lincoln financial can help you take charge of your future. Can help you take charge of your future. Theyre the days to take care of business. When possibilities become reality. With centurylink as your trusted partner, our visionary Cloud Infrastructure and Global Broadband network free you to focus on what matters. With Custom Communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. Every day of the week. Centurylink® your link to whats next. Welcome back to squawk box, everyone. The Warner Brothers adventure film gravity soared to the top of the weekend box office. The movie that stars Sandra Bullock and George Clooney took in 55. 5 million in northern american ticket sales. Last weeks number one was sonys cloudy with a chance of meatballs 2. That was number two at 20. 5 million. When we come back, the Government Shutdown continues with no hint of compromise in washington ahead of that october 17th debt ceiling deadline. Up next, well talk to congressmen from both sides of the aisle about the sticking points that are preventing a resolution to the problem. I love having a free checked bag with my united mileageplus explorer card. Ive saved 75 in checked bag fees. [ delavane ] priority boarding is really important to us. You can just get on the plane and relax. [ julian ] having a card that doesnt charge you foreign transaction fees saves me a ton of money. [ delavane ] we can go to any country and spend money the way we would in the u. S. When i spend money on this card, i can see brazil in my future. [ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. Welcome back to squawk box. Lets take a look at some stocks to watch in todays trading. Alcoa has been cut to equal weight from overweight. Also, take a look at blackberry, its shares are on the rise according to reiters, blackberry is now in talks to sell parts of itself to google, s. A. P. And cisco. That would be an alternative to the buyout of the whole company by fairfax financial. Also, cooper tire shares, theyre taking a hit. This Company Already struck a buyout agreement with apollo tires. Now apollo says its been hit with unexpected costs related to the merger and it believes a price reduction is appropriate. As they try to recut that deal. Well see what happens to that stock. Still no end in sight due to the Government Shutdown and the debt ceiling. A deadline is creeping closer and closer. Can congress find a resolution to rise above the partisan bickering . Joining us now to talk about this, congressman adam schiff, democrat from california. Start with you, congressman barton. Just because i think we got maybe you can tell us whether obama care now, can we put that aside and do some budget deal . Would that be enough to maybe not a clean cr, but something where boehner and even, you know, some of the over guys would be satisfied. Is obama care off the table now . I dont think obama care is off the table. Its the largest entitlement expansion. We do have the debt ceiling that according to the president is coming up in mid october. Republicans in the house can multitask, i would assume the democrats can too. We can handle them simultaneously or handle them independently. Are you saying you would actually take us over the debt ceiling and say forget it if obama care isnt on the negotiation block . Im not saying that at all. But what i am saying is this debate over the Affordable Care act is not just another debate. Its a fundamental change in the way americans receive their medical care. We cant get anywhere with it. Well, maybe you and i ought to have a cup of coffee and see if we can work it out. Do you want to say right now one way or the other whether youre willing to let it go. No, no, the debt ceiling in my mind is a bigger issue than obama care. I want a real debt ceiling with real reforms and entitlement and a way to get the budget balance in the next five years. Youre willing to play with that . Im not sure what you mean by willing to play with it. What im suggesting is that come september 17th, youre prepared to go over if you dont get what you want on entitlements some of these other issues . I dont know what go over means. Im not going to vote for a a socalled clean debt ceiling where we give the president a blank check. I will not vote for that. Well, thats assuming that the president s not going to debate on this, youve got a problem, right . I think the president made it clear hes not going to be extorted on this type of thing and itll pass probably without the congressmans vote. It wont pass. I wanted to ask the congressman how his staff have been weathering the shutdown. Have they been furloughed . How have they put up with not getting paid . My personal staff. Your personal staff, other staff in congress, federal workers. Well, each congressman is an independent agent. So each of them decide which stay and which are furloughed. In my case, i have one person in each of my offices in texas and the rest are at home and up here i think i have three people plus two interns that are voluntary anyway. And those not getting paid, how are they handling the situation . Well, they seem to be in good spirits. They cant do work from home. And they dont have their blackberries or their computers but they can call in and check on various issues that theyre tracking. And i think they understand this is a serious situation and for the shortterm some sacrifices have to be made. Congressman, at this point, i guess we all are thinking about that comment that i dont know, it was an anonymous source that said we dont care how long this takes, were winning. Thats not the right attitude for democrats or even the president , right . Thats a stupid attitude. That is not defensible at all. Were all losers in this Government Shutdown, the American People, the economy, its been an unmitigated and manmade disaster. And if we go over the next cliff and allow default on our debt obligations, itll be an even bigger disaster. Theres no winners here. But i do disagree with the president if hes going to negotiate either the kind of my way or we shut it down, burn the house down this time over the debt ceiling or over the shutdown were incurring right now, hes going to invite this kind of extortion every time theres a deadline. The Affordable Care act was upheld by the Supreme Court. We had an election, president ial election over it. The other side lost. Its time to let it go. Give it a chance to succeed, give it a chance to be improved. Its more than fair to ask the president to negotiate improvements but not with the threat of shutting down the government or defaulting on our debt. Its no way to do business and cant be allowed to proceed that way. Not only for this president but future president s. Well, then, youre not willing. So were where we are. You saw boehner, saw what was said. So you say the president shouldnt do anything at this point. Well, i think, look, theres a way forward here and the republicans seem to be in search of a prize of some kind. Theyve moved some, others have moved away from obama care to more budgetary decisions, i think theres a facesaving way out of this. Is there anyone other than the president that could that could make the move to get this done . And president s in the past, i mean, president thats what they do. Ill make a deal with the president and the democrats. Lets make obama care voluntary for a year. If its as good as the democrats say it is, the American People will accept it and if its as bad as the republicans like me say it is, theyll reject it and we can come back in a year of course what needs to be fixed. Make it voluntary and let the People Choose. That doesnt work at all because if you why doesnt it work . Well, ill tell you why it doesnt work. It doesnt work because if you let People Choose to have insurance or not but you require the Insurance Companies cover those with preexisting conditions, then people will only opt into insurance when they get sick and, of course, that wont work at all. The whole point is all i know all my friends on the democratic side have been saying how great it is. Congressman which congressman . The one from texas. The question i have for you is this. Becky said in the last hour, were talking about if you go over the debt ceiling what the cost is, and the cost could be 120 billion annually. Thats if the Interest Rate goes up, although barry said in the past times are you willing to risk that . And it sounds like you might be . Well, we have in my Household Budget some bills that have to be paid and some bills that only paid partially. I think paying interest on the debt has to be paid i think paying Social Security payments have to be paid. I dont think paying the secretary of energys travel expanses have to be paid 100 cents on the dollar. Weve got more than enough cash flow, more than enough cash flow to pay interest on the public debt when it comes due and the House Republicans have passed a prioritization bill. This talk about default by the u. S. Treasury is nonsense. The president can be smart or the president can be stupid. And i would assume as smart as president obama is when push comes to shove, hell be smart. So we are not going to default on the public debt. But that doesnt mean that we have to pay every bill the day it comes in you think jack lew is lying when he says he cant prioritize . Im not going to say anybody is lying. Im saying hes playing politics when he says that. Congressman, just to come back to Affordable Care for a minute. I get the negative selection bias point youre trying to make. What if you took the penalty for the individual mandate and said nobody making less than 100,000 has to pay it for the first year in exchange for a restructuring sequestration cuts. In essence, youve created a pseudo fiscal stimulus plan where youre not cutting spending in exchange for just the low end person doesnt have to pay that fine for a year to match up with the employer mandate. Do you think thats a nonstarter, as well . I think its a nonstarter because many will tell you the penalties are too low as they are. People make an economic decision, theyre better off just paying the penalty and then if they get ill, they can opt in. I think economists would reject that argument and say it makes the program even less workable. But the point id like to make is the president has said all along and i think democrats in congress feel the same way, this is not going to be a perfect process, not a perfect reform. Its going to need improvements and tweaks as we go along and were more than willing to entertain those. There ought to be some way to resolve this by saying, lets establish a process. Were not about to guarantee the other side theyre going to win those votes because, frankly, they havent been winning them and you cant simply use the lever of a shutdown or the lever of a default and, frankly i think its irresponsible to take us over that cliff and say, well, well see how it works out on the other side. Yeah, well sit down at the table and negotiate a process where we can get votes on these things and then the congress will do its will. That may be one way out of this impasse. But to take the gamble to roll the dice and say, well, the secretary can prioritize when he says he cant or that the International Markets are going to view this as anything other than the most severe dysfunction and depreciate u. S. Debt, i think, is a terrible risk to take. All right, gentlemen. We got somewhere, i think, sort of. We appreciate it. Thanks for your time today. Thank you. When we come back, gm getting one step closer to a selfdriving car. Phil lebeaus going to bring us the story from michigan right after this quick break. She loves a lot of the same things you do. Its what you love about her. But your erectile dysfunction that could be a question of blood flow. Cialis tadalafil for daily use helps you be Ready Anytime the moments right. You can be more confident in your ability to be ready. And the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. Tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. Do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. Do not drink alcohol in excess with cialis. 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Gm taking the next step to a selfdriving car. Phil lebeau joins us now from michigan with more. Good morning to you, phil. You are in the car and it is youre going to drive it without driving it . I am, andrew, behind the wheel, behind the wheel. Im going to show you in a little bit how gms new supercruise control works out on the test track. Let me give you a peek about what this is all about. This is a technology that General Motors is putting into vehicles that will be fully implemented, they believe, before the end of this decade. The idea here is it controls braking, steering, lane assistance under certain conditions. And as time goes on, they expect it to become more complex and more oriented to assisting the driver. Are we close to seeing the day of people getting in the backseat and not having a driver . No, were a long ways from that happening. The drivers still going to need to Pay Attention. The level of technology isnt going to all of a sudden just take a quantum leap overnight where you can simply sit in the backseat of the car and let it take you to work. That might happen some day. What were doing now is building on technologies that we have available and taking them to the next level. As you take a look at shares of General Motors, keep in mind gm is not alone in this race for semiautonomous vehicles. Heres how it works with super cruise control. Once im in the lane, the right spot, the screen will tell me ill get green and then i leave go, there you go, guys. The car is controlling itself. Im not doing anything here. How fast . Staying in the lain, staying at speed. How fast are not using your knees . Let me see your knees. You want to see my knees . Phil, how fast are you going . 52. Were going to get it back up here. We were testing a few minutes ago at 60. Well do that. What would be your worry. You take your hands off and i know youre supposed to Pay Attention. But because you dont have to keep your hands on it and your child is sitting in the back and you probably think yourself i can probably look away for a minute. Does it alert you, or do something or you have to be there . It will alert you. In fact, weve had the car alert us a couple of times that we need to pick up our speed or that we were departing from the lane. This is a case where ive decided i want to speed up, get back up here to 55 or 60. Your question gets to the point of how much control will you have with autonomous drive vehicles . They still want you to have your hands on the wheels. They do not want you having a conversation with someone in the seat next to you. You should be paying attention. If your hands dont have to be on the wheel if you take your hands off the wheel oh, i hope we didnt lose phil. Thats because hes driving. Hes breaking up because hes driving. You only have to hope that the computers inside dont have the same glitches we just did on the air. But, look, i think thats phils point is the right one. You cant turn around and talk. But my anxiety is if the indication is you dont have to hold on to the wheel, by default, your brain thinks that it could be available to start doing other things and thats when things get a little, you know, you know me being anxious. Yeah. I dont use cruise control. You dont really drive. No, you already have a driver. You have a driver but you dont drive your car. Youre in a better position. For a guy that drives from new york city into new jersey every day, you know you keep your hands on the wheel otherwise 18 wheelers are hitting you. Yeah, that is true. But you have issues now. Jeeves didnt show today. How did you get here . Taxi. Taxi has some personal problems. Wow. Yeah. All right. So youre on the market for i think jeeves i dont know, jeeves might be unavailable. All right. All right. When we come back, you can start off your week right. Jim cramer will join us right after this with the stocks to watch ahead of the opening bell. Tomorrow on squawk box, guest host sam zell. Nobody wants to make commitments beyond tomorrow. The outspoken investor will weigh in on the Government Shutdown. The debt ceiling deadline and a lot more. Dont miss squawk box starting tomorrow at 6 00 a. M. Eastern. [ bagpipes and drums playing over ] [ music transitions to rock ] make it happen with the allnew fidelity active trader pro. Its one more innovative reason serious investors are choosing fidelity. Get 200 free trades when you open an account. Bny mellon combines Investment Management investment giving us unique insights which help us attract the industrys brightest minds who create powerful strategies for a countrys investments which are used to build new schools to build more bright minds. Invested in the world. Bny mellon. Welcome back to squawk box. The future is down by triple digits. Dow down by 105 below fair value. Day seven of the Government Shutdown. Lets get to the new york stock exchange. Jim cramer joins us. I am not going to ask you to figure out whats happening with the debt ceiling, washington and, debt shutdown. I figure all of us are going to put this on hold. Lets look at stocks. Boeing has been under pressure after Japan Airlines has said it is going to be buying planes for the very first time from airbus. How big of a problem is this . Boeing is hard to get a plane from. The cue is so long. I dont know if it is in the numbers. I dont think it is in the numbers that they would lose japan air. It was a big deal in the sense that this is a company. Boeing has had 60 years worth of ties to the japanese. I am surprised about it. I would like to think that there is that if the numbers arent coming down, boeing is an actual buy into this area i think that is going to be the case ibm was actually downgraded. Im very worried about ibms quarter. I havent heard anything good about ibm. Most importantly is the down grade is structural. They are saying this company is going to be hurt by the cloud. The other companies that have been hurt, it has been meaningful. This is a company that may be on the wrong side of the trade for some large transformation we all see. Jim, this is barry knapp. They just downgraded emc a couple of weeks ago. This is whats so hard about investing in tech. You can have a view of the group but the trends evolve so much. Things move away from the cloud. How crazy is it that vm is actually a cloud play and emc opens the biggest stake in vm. You would be tempted to go long vm and short emc. It is complicated, because the cloud is taking so much mine share everywhere. Jim, im feeling the rise above. I have the idea of how to turn this. Im serious, from a negative into a positive. Im serious. We get these guys. The president called. We deal with the sequester. Discretionary is not the issue. We give some stuff on the sequester. We do a little bit on entitlements, get the dialogue started on cost of living. We come together and do these things. The market likes it. We get together a little bit better. Obama care isnt part of the equation. It is sequester and entitlement. We come up with something. That will be fabulous. Entitlements are the issue. I dont know whether the republicans would agree. I dont know that they would. They might but he would look if he did it, it wouldnt be a sign of weakness if you were to call and say, all right, lets go ahead and talk about this. How about saying, listen, im not negotiating over the next year but i am in the back here. Kind of like what greenspan did with Social Security. In the back years, im perfectly willing to negotiate. Over the next year, im not. Lets get the dialogue started. We cant go any further apart. Joe, i think you are dead right. I want that pin and i twar proudly. I will now too, because i got the solutions. When you heard from joe barton you could call him and he is not the guy. A lot of those guys. You had an interview that made me think they already have a plan for when we default, which is that we selectively play. This is very different. We had other interviews earlier where you could see the deal. The deal was, we could have a role and get that deal. There is a deal to be done. There has to be. I agree. Jim, real quick. You got name checked today in that david carr column. What do you think about the fact that carl icahn, each of his tweets is worth about 5 billion. I dont know. I like the whole idea that he has been sending out these tweets, each worth about 6 billion of market moves. Maybe thats the power of twitter. Lets not forget that the judges show was mentioned, jud judge wapner. Twitters going to come north of billions. We know what happens when something is in excess of what a lot of people think it should be coming up, our guest hosts have been alan kruger and barry knapp. Our only republican. He has had a hard day but he has held his own. Lets get back to our guest host. Alan kruger and barry knapp. Whats the last word . I would love to see a grand bargain. I think to get there, the republicans need to get away from ideas like repealing the Affordable Care act and prioritization and start to kofrn. They need to solve their internal problems. Dissension is fine. Having disagreement and a range of views is fine. They need to have a leader who is strong and can reach a bargain. You want to take the other side of that . No. I would just add that the fiscal accounts are in a much better position. The markets are not going to overreact to this. They have become accustom to thinking there is a deal out there. They deal will not have a huge amount of fiscal drag. The markets are right not to overreact to this. Thank you guys for being here this week. The first time you have been on tv. I was happy to join you early this morning. That does it for us today. Make sure you join us tomorrow. Right now, time for squawk on the street. Good morning. Welcome to squawk box or actually squawk on the street. Im david faber with jim cramer live from the new york stock exchange. This week begins with jiters over the continuing Government Shutdowned athe march toward the debt ceiling deadline. Lets take a look at the futures. You can see we are geared for what is going to be a fairly significant lower open. As for the tenyear yield, which can be very important, as we know, still coming in a