Transcripts For CNBC Squawk Box 20131014

Im not going to vote for any plan that will get a majority of republicans in the house. As a result take a look at the futures this morning. You will see that there are some red arrows once again. Dow futures down by 93 points below fair value. The s p futures down by 10 points. Andrew, ill send it over to you. The bond market today not open because of columbus day which may have a little bit of an impact in terms of the odd dynamic between the stock market and what people think is going on. Also reaction this morning to the situation in washington. Imf chief Christine Lagarde shes now warning of, quote, massive destruction to the Global Economy if the u. S. Debt ceiling is not lifted. Deutsche bank ceo says it would be, quote, a very rapidly spreading fatal disease. I havent heard it put in those terms in a very long time. Jpmorgan boss jamie dimon warned banks are spending money. Quote, we need global growth. We are on the verge of getting it. Please, lets not shoot ourselves in the foot. On a similar note, former treasury secretary Larry Summers pending an op ed in the Financial Times he argues a small rise in the Economic Growth would entirely eliminate the budget gap. If even half the energy that had been devoted over the past five years to budget deals were devoted instead to growth strategies, we could enjoy sounder government finances for restoration of the power of the american people. Joe, i think thats a message that republicans and democrats have to learn. To hear Larry Summers say that and if he can get some of his democratic friends on board, it could help a lot of things. He lives. He lives. Were going to try to get him back on the show. Kind of like hes coming out. Debutante. He was not around and now he is. What was the store bring before that that you said, andrew . We had jamie dimon, we had jamie dimon. Jamie needs some growth. Needs to make a little money for the bills, the legal bills, right, from last week. Definitely needs growth. We all do. I dont know what larrys growth is. Instead of arguing about a budget should have been doing proactive things to create growth or no, hes back on infrastructure. Hes back on what is the role. Some of it is how do you reduce some of the regs and things like that. A lot of it is what else can we be doing on the infrastructure side. It solves all the problems as you like to say. Youre borrowing money from china to do the infrastructure stuff. I bet republicans would take spending for cutting entitlements. Its monday, walking dead. This other stuff, i feel like its out of my hands now. Ive tried. You know what, i feel ive tried. Do something. Just get it done. Mcconnell. Two steps forward, one step back with this. Now were back to looking at sequestration level. I know. Obama. Just i feel like its out of my hands, andrew. You feel like youre going to washington on thursday. I think youre going to washington on thursday. Tomorrow is the day im worried about. Today im not so worried. I dont think you should be worrying. You think they have it organized so theres nothing to worry about . No. I think its going to happen. Im tired of the back and forth. I think it will happen so late on wednesday well already be in washington. Thats my prediction. Go down there. Anyway jill, why dont we take the last whats the last flight out . Yeah, im not tlieflying. I like the train. Get buffalo chilly. Chili. You try new seafood items on a train. Say what . You have a muscle crab risotto. Okay, bring it. Chinas official news agency is calling for the creation of a deamericanized world. Im not sure what that means. It sounds scary. The destinies should not be left in the hands of what it calls a hypocritical nation with a dysfunctional government. They have the taliban. Yeah, their right. Lets throw them together, china, russia, the taliban. The news agency doesnt want the dollar used as the International Reserve currency. Even though theyve pegged the dollar for how many years. Kick us while were down. Well remember this. Check the markets. The futures are down. We made up 400 on thursday and friday. Thats because there was hope. Yeah. Theres always hope. 15 2,237 is where the dow wa. We came rolling back up. If i were mr. Gold, and im talking about bouillon, id be showing signs of life. Well look at that. Energy, that makes sense. You figure that might go down. The dollar, maybe were not quite as nice as the best house in the neighborhood with whats happening. Its only what month is it . Is it october . Im thinking of europe in the summer. Would he have time to get back below 130 and maybe below 120. This should be moving. Lets go. The world is i mean, this has never happened before and no ones rushing to the quality of gold. Thats weird. If were going to default, i think gold would be reacting a little bit more positively than 12,076. Were getting near the multiyear low. Time for the Global Markets report. Ross westgate is standing by in london. I guess youve got some stuff over there, but i think about saturday and what i saw with college, i think about all of the nl and al championship games. I think about tom brady yesterday watching what happened and all of the other bengals. I feel sorry for you. You dont have all of that. What went on in the u. K. Over the weekend worth talking about in toermgs of sports . Can you name one thing . I hope you get a football team. World cup qualification games, joe. World cup qualifiers. That was it . Yeah. Its the last are you open to saying thats something worth if you like that, sure. In brazil this is whats coming to brazil next year. Could you get nfl games if you wanted to over there . Is there a way to do it . Yes, you can watch them. Yeah. But you i think there was you know what, ill bet you you saw more football than andrew . Probably true. It is probably true. I spent the weekend at a Pumpkin Patch. Oh, yeah . Thats nice. Thats nice. I did. We went on ponies and did all sorts of things like that. Not sports but, you know, were working on it. Where is that . 31st and lex . Where is the Pumpkin Patch had to leave the island. What . We had to leave the island. What . Yeah. We rented a car. A zip car . We left the island. A zip car . It was a real car. A real car. It was an suv. To largo. I drove. No way. I drove and we went out and we spent the day out there. In what state . In los angeles. We got corn and we got pumpkins and we did ponies and we ran on camels and llamas. Did your kids love it . They did. But we have business to attend to. Youre now set for five years or so seeing all the greenery. Sorry, ross. Ross is like, do do do, i come here, wait, finally get introed. Anyway, sorry. No, thats okay. Im pleased andrew got out of the city for the weekend. Thats good news. Despite where futures are trading right now, which you were just pointing out, joe, european he can witt its havent done very well. Were pretty evenly paced around decliners. Little more relaxed. Global investors, no one thinks the u. S. Is going to default. There schbt huge pressure. You can see its up 600. Absolutely flat. Ftse has been flat this morning. It was up a little bit on friday. Up half a percent. The cac up. 10. Now were not too concerned. There are other issues were looking at. Basic resourgss are up. Thats despite chinese data is down to a 17 month low. Its contracting. Basic resources would normally fall on that number. The good news is that there are imports and theyre dogs fairly well. Technology down a little bit. Auto is very much in focus off 1 4 percent. Here in europe, down to the two stocks. Peugeot, the french car maker, they are talking about a 3 billion hike. A chinese partner will have to come in. They may take between 20 and 30 . Down a quarter percent and bmw talked about chinese sales up 20 for the last nine month period. Theyre talking about another Record Number of sales. Pretty contained session. Now back to you. Sorry about the interrepresentation of ponies over the weekend. No, youre riding llamas . I wasnt riding the llamas. Camels. Camels. I dont think you can ride can you ride a llama . You can ride a camel. You can try. Probably can try. I dont know if youll get bucked off. Camels definitely spit. There was a lot of spitting and bucking going on in washington. John harwood joins us to give us a little bit of an update over what happened or rather what didnt happen over the weekend, john. Well, what didnt happen was the deal got purt in place to resolve the debt ceiling and reopen the government. I think were getting closer. You have knnenknow negotiations Mitch Mcconnell and harry reid. The longer it goes on at current levels the more democrats feel like they cant alleviate parts of the sequester. Already the republicans want a short debt limit extension. Democrats want a longer one. I do think that mcconnell and reed are likely to work that out. If they do, then you could get a deal through the senate that the house would have little choice but to accept and i think thats a strategy that even house leaders are counting on, too. Something comes over from the senate. The speaker puts it on the floor and it ends up passing whether or not conservatives within the House Republican caucus object to it. John, whats the timing at this point . I think the were looking early today for some sort of agreement from reid and mcconnell. If that happens, the senate can put it on the floor relatively quickly. The target date since you know since youve scheduled your show to come down here is thursday. Theres still time for both things to happen, that is Senate Consideration of passage and house consideration and passage by thursday, but if they dont get an agreement today, thats in jeopardy. Theres some talk, john, that if the senate doesnt get a deal going today, boehner plans to put up a new proposal tomorrow. What would that look like . A shortterm debt limit extension, perhaps a Government Spending bill as well to reopen the government, but something very short term and i think look, the senate has no deal and boehner passes that, that has a good chance of becoming the outlook as well. I sense the commitment shared by leadership in both parties that will likely be controlling that we are avenue not going to breach the debt ceiling on thursday. If you wanted to handicap it, you would put the odds that we dont go over . I think the odds that we go over, that we breach the debt ceiling are pretty low. I think that, you know, one in five . No. Stop worrying. I like that. Except that one in five shot comes true and we do breech it, the consequences are pretty grave. So i think im packing my bags. I love you but im not packing my bags. What do you mean . Im not coming down on thursday. Ill be down that weekend. Youre not coming . Note thursda thursday. Hes betting well get a deal before wednesday . Oh, okay. Is that what you think, well get a deal before wednesday late on it will go down to the wire . I think it will go down to the wire. Wednesday midnight. Lets put it this way, i dont think it will be done before 6 00 p. M. On wednesday. Wow. Guys, in looking at what happened in bringing the sequestration levels back into it, the democrats are going to push the advantage at this point. Is this just talk a who he had of it or making a point that, by the way, we had agreed to go ahead with the sequestration talks. Yeah, i do think theres a human danger that at the end of this process the democrats pushed their leverage too far the hubris having beaten back the republican demand which they considered way out of bounds, they pressed too far. There is a common desire. Remember, the House Republican proposal to the president was also about alleviating sequestration cuts in long term entitlement changes. What theyre doing in trying to press their advantage is to make sure that the debt and deficit negotiations that follow this agreement dont foreclose them getting anything because if republicans rule out revenue and if you also rule out alleviation of the sequester, all there is are additional entitlement cuts. Assuming you get a deal, is there a Lasting Impact for either party or does it matter or is this just the messy game that is washington . Theres lasting damage to the democratic party. Theyre pushing it too far. Even if the deal gets done . Yes. But i think the intensity of the damage sort of fades over time. This is a preexisting condition, if you will, for the Republican Party that hurt them in 2012 that is getting burned in now. Also of kind of in the middle of people that are still you know, they havent decided whether they want what we talked about last week. You saw the one poll came out about who wanted a clean cr and it was like 60 said, no, id like to cut. The times big piece yesterday was maybe the republicans chances of taking the senate have been diminished. It wasnt about losing the house, it was still even with the idea that they could retake the senate in 2015. It was a front page piece that said maybe the chances of doing that are at the margin. Well see. I agree with you. It is at the margin. Memories fade. Peoples attention moves on quickly. Republicans need to deal with the perception that they are a party thats speaking to a small number of people and not the broad swath of the american public. That will get solved when they get a nominee and Chris Christie redefines the party. There are people that would make the case that governing by polls isnt the way to go anyway. If you have ideas about whats right and you dont damn the torpedos, its not about poll, then it stands for something instead of sticking your finger up every five minutes in the air to see which way the wind is blowing. I know what your saying. Its true but its about the realistic exercise of the power that you want that the voters have given you. Im with you. Theres a lot of important things happening in terms of the national league, the american league. Did you watch the end of that game last night . The roiblgs and no. No, it was too late. Oh, my god. 65 i saw, the red sox pulled it out. That was a game for the ages. Did you see the patriots as well yesterday . Yes. Great stuff. Yes. I also saw the redskins get whipped by the cowboys. That was not good. Yeah, i know. I know. Thats why im mad at these guys. Its like i need to focus on some of this other stuff. You know bengals in overtime. That was something, too. Theyve beaten the packers and the patriots which i would never have predicted. Anyway, were getting yelled at. John howard in washington. Thank you, sir. Lady in red. He can say thank you back if you want. We need to thank him. We do need to thank him. Every monday morning felling us wh telling us every weekend what did happen. We have Erskine Bowles joining us. Hes going to bring his rise above. Bob corker will tell us whats going on. Then we have mark bertoloni. Who . Bertolini. As long as you get mark right. Dont worry about it. How twitter is getting a great deem from the banks. Being really cheap, arent they . Theyre allowed. You know what, you have power. You have power. Anyway, its the lowest in the year for the fees. First off, heres what we were talking about, some of the stuff. Sports news in the sunday night game. The cowboys beat the redskins 3116. What an ending in the patrio patriots saints game. He heaved it 17 yard touchdown pass to kenbrell tompkins. Five seconds left from the 17 yard line for new england to beat the previous unbeaten saints. Big night for boston sports as well. David ortiz hit a game tying grand slam in the eighth inning and then watch this. A walkoff single in the bottom of the ninth which gave the redskins the red sox a 65 bins win over the tigers. Now its 11. The dodgers have to get it going. The tigers will host game three. Now the forecast. Hey, guys. The storm system moving here in the plains. This is a big weather maker. This is going to open the door to a lot of very cold air across the country over the next few days into next weekend be. For today looking at severe storms in places like nebraska in through kansas. Rain out ahead of that in places like minneapolis. The rain tomorrow tracks into the biggest cities like chicago, indianapolis. We could see maybe severe storms here tomorrow. Pretty wet and unsettled. By wednesday the storm system reaches the east coast. More gloomy skies there in new york city, boston, d. C. Going to be getting more rain as well. As i mentioned though, more cold weather ahead. In fact, 10 to 20 degrees below average. Those temperatures spilling out across the u. S. By the end of the week. More squawk box when we come back. Welcome back. Its time now for the executive edge. Focus on giving Business Leaders a leg up. Twitter is said to be getting favorable terms from the banks to go public. Theyre going to collect fees of 3. 25 of the money raised. That would be the lowest amount paid on a u. S. Ipo. Twitter is finalizing a 1 billion credit line. It can use it to help their finances grow. Theyre squeezing firms on both ends, the banks on both ends. You know, its funny. Traditionally there is an argument made that its an au antitruant antitrust issue. Pandora paid 7 . However, what we didnt note there dsh. They paid 1 . Absolute dollars, more than twitter. Facebook squeezed the banks and got a huge loan. Thats right. The idea theres collusion at 7 . Theres been a long debate as to why is there no competition going on in this market. Its because this is like a this is a reputation enhancer. Thats why people are willing to give very little. Facebook, they say you get what you pay for, 1 . Well, because the question is do the banks make it up . I dont know this. Is it made up on the debt side . Is that why grub ber has the best auction . That was one of the reasons the fees have been there. You take money out of an atm at 7 . No way. No way. I did 3 . You did 3 . Thats yesterday. Thats crazy. Were you in vegas . No, i had to take out 400 to get it at 1 . Thats what i did. I feel better. They should have bought me dinner. Vegas, 7 . Ill make it back. Theyre a dibted. Theyll pay anything. 3. 25 still sounds like a lot to me. It does in the stock business. It does. Everything else has been squeezed much lower than that. People used to pay a Mutual Fund Front end load 8 . Those were the days when the brokers had big clients. Another story. The Home Builders are trying to lure buyers. Sales in some markets have been hurt by rising prices and by higher Mortgage Rates. The upgrades that you can get at this point, free appliances, blinds, premium flooring, closing costs, covering some of the downpayment on paying to reduce the buyers Mortgage Interest Rate for a year or two. We thought youd have to get past the point where you needed give aways, but theyre back with full force. Is that ep hansing or masking a larger problem in the indus y industry . Are we not appreciating whats going into this . I think for a while that had gone away. That was a great sign that the home buyers had the upper hand. This is what happens when you raise the Mortgage Rates 4. 5 . Its still an incredibly low mortgage rate. When youre talking of rising 30 or 40 like you said earlier, three steps forward, three steps back. Were at that 58 number in terms of they can get a great job, lose the current job. Were not rocking and rolling in the employment picture. Until we get going, you cant imagine the pre2007 type of activity that we had. Right. Even with rates this low, thats whats a little disconcerting. Thats why the fed is still here. Full bore. Do you think theyre going up . I dont know. I dont know. It wouldnt surprise me. 85 is such awho picked 85 . Why not do a hundy and leave it there . Oh, boy. Well have to ask them how they came up with 85 billion. Round it up. Potentially. In the meantime, lets talk about the chinese smart maker, ute. They sponsor the Houston Rockets hoping they can boost their brand in the United States. The company could be a security threat. Ztes ceo says theyve long been looking to build a connection with the u. S. Public. Theyre sponsoring a game between the rockets and indiana pacers. You can get a good deal at the new york giants. Do they need a little help . Need a sponsor. You can get it cheaper than the yeah. Im not that bothered by that. Are you bothered by that . Would you own one of these phones . Would you are would be rird everything you say do you know how hard it is for me to get to where i am now . Is it on the iphone . From the blackberry . Yeah, white. Something i have been doing. Talking. Using siri . Yes. I did a six sentence email and i had to change one thing. Way to go. Im impressed, joe. You dont have to use the fingers. You can do it. Think if it really works. Thats true. I wouldnt have to worry about not being able to drive. Thats what i mean. Okay. Im there. Im there. Think about it. Own the iphone. I think ill have one before christmas. You think android is what youre thinking. No, i think iphone. He is. Zpl im already thinking i want to test it. Battery life is longer. I want to see. I want everything on one thing. Its a better phone. You can have the mac phone, ipad. I want one thing. Im done because i cant run multiple systems and transfer files and Everything Else. Im going to do one system, thats that. Did you take shots of the Pumpkin Patch . I do. During the break ill show you. When we come back, still no deal on the debt ceiling or the Government Shutdown in washington. As a result you can see that the futures are giving up some ground this morning. Right now the dow futures are down. Were going to talk about the list from the markets in the days ahead right after this. Plus, Richard Branson firing back at critics. He says that he is not a tax exile. Well have that forstory when squawk box comes back. Woman everyone in the nicu all the nurses wanted to watch him when he was there 118 days. Everything that you thought was important to you changes in light of having a child that needs you every moment. I wouldnt trade him for the world. 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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 this morning. We have headlines for you. This one is for Ross Westgate if hes still watching. Richard branson is denying being in tax exile in the u. K. In an article in the u. K. s guardian he said he moved his Main Residence to his private caribbean island seven years ago for what he says are Health Reasons. Branson has made nekr island the island he bought in the 1970s his tax base. I dont understand. Do you pay taxes to yourself if you own the island . Reason to buy the island. As a result he have can only spend between 46 or 183 days in the u. K. Income is not taxed in the British Virgin islands. He plans to spend his remaining years on nekr for the sake of hess Health Rather than to protect his bank balance. Comments . Questions . What do you say about that . Im saying you are in a unique position to tell us about that place. Are you not going to cop to having been to i have been to nekr. I know you have. Are you going to sit there and say nekr island, like ive never heard of it. Whats it like . Its amazing. Out of control. Im sorry. If you are able to its one of the coolest places youll ever go. Theres a main house which had a fire a couple of years back. I remember that. Maybe only a year or two ago. Maybe five or ten other bedrooms. I think they charge if you want to rent the island, you can. It used to be about 200, 350,000 a week and people bring you didnt pay that . I did not pay that. I went there on a reporting trip. Oh, yeah. Thats why now you can at least you can report reporting trip. Its pretty crazy. It is a pretty crazy place. The ratio of staff to people has to be maybe one to one if not more. If you want be to learn to kite surf, i took a lesson. I understand what hes done. I think its fair to say that im doing this for Health Reasons. If thats the case, if youre just doing it for Health Reasons and not to evade taxes, pay your taxes in the u. K. I dont know. He says its so much more comfortable to live there. I can understand. Youre saying, do it. I did this so i dont have to pay taxes. Richard branson, hes always next to union jack. He sort of wraps himself in the whole u. K. Thing. For all of his businesses, virgin businesses. Right. He is almost an icon of london, of the whole country. That would be the first guy that but that on that side of the aisle. Say you did it because the taxes are too high. You need to work and find ways to keep that money here or keep it there. Theres a reason to do that. This would not be a lear jet. This would be a boeing business jet liberal probably. He had a very nice plane, that i do remember. Duh he owns an island. You couldnt land on an island. You had to land on the island next door and take a boat. Look at the value added youre bringing. You were just sitting over there. I was sitting there. We asked you for comments about the story. That was an amazing it was a weekend. You didnt know i knew, did you . It was about Climate Change and green. You remember everything. You have a steel trap of a brain. It was a Climate Change weekend back when ill give you some names that were there. Elon musk was there. Tesla was just there. Everybody thought he lost his mind. It seemed like a crazy idea. Larry page showed up with his main girlfriend. I dont think he was married at the time. No. He went surfing. Then the thing i will never forget is we went to an island next door. It was called mosquito island. Thats crazy. Tony blair was on this boat. We were all going across. This is all our friends on this little boat going to mosquito island. We get there and theres music playing and literally girls in bikinis. The whole thing was crazy. I would never forget Richard Branson going there and saying normally theyd be naked but the Prime Minister is here. Really. The travel brochures, i dont think thats a good mosquito island. Thats a place where, hey, lets go to mosquito island. Mosquitos everywhere. Its like this. Mosquito island. They have one in the video so they named it that. Mosquito. Just listen. Your life. I could sit here and, i mean as you know, youre quite a story teller. Its really good. The markets ending the week. Whos out there . Paul allens boat was docked on the side and tvs supposed to land on the boat. The markets are ending the week where they grew more optimistic. Futures are trading lower this morning. Theres limb progress starting a weekend in the nations capital. You have to figure out what youre not going to do to figure out what you can do. I think you would say that there was progress even though its not done. Jeff is joining us. And aaron is joining us, chief economist at ihs will tell us what we can expect in terms of economic numbers overall. Jeff, any pullback . Did you buy on weakness . Are you hopeful this gets worked out and you can stay long . I was actually in washington, d. C. Ive been on the road for the past couple of weeks. I was in d. C. During the shooting, as a matter of fact, close to the studios. I agree with john, what your guy in d. C. Said earlier in the show. I think youll see a lastminute deal this week. Thats the way it works. You saw the same thing happen with the fiscal cliff. I think a deal gets worked out this week. If you get a hit today, tomorrow into wednesday its a by. And you figure something will happen by then. Whats the maximum longterm effect you see if we do finally get something done this week . Well, i think the big hit, assuming they get something done this week, the big hit for the fourth quarter, we could see growth below 1 . Already a lot of damage has been done. We saw that in the unemployment claims numbers. They spiked up. A lot of that was because of glitches in california. 15,000 was because of layoffs in nonfederal workers affected by the federal shutdown. So already its having an effect. So i would say big hit in the fourth quarter. And if its all done, then the First Quarter and Second Quarter we could see a bounce back. A bounce back above where we would have been normally or yes. Back to our crappy 2 level . No, more than normal in the sense that there are two things happening. One is theres some expenditures happening, spending, cars, that will come back. There are some well never see again. Spending by federal workers on restaurants, for example . How much of that that well never see again . Well get back if its below 1, people would go, wow. Thats bad. If you get are we getting half of it back . Well probably get half of it back would be rough guess well get half of it back. 2. 5. We could use that. Jeff, Everything Else notwithstanding, do you expect 2014 to be the year where we break out of this longterm trend of sort of just above stall speed . I think youre going to accelerate. I think the economy is stronger than the superficial figures show. A lot of people got burned with credit cards and theyre transacting in cash which is not readily captured. I think thats what the stock market is pointing towards. I defended you last week. We had this i. I. Stuff. Its all the big banks around the i. E. They get all the analysts but theyre never at the top of the stock picking surveys. Raymond james is usually there. Some of the more localized firms. I want to let you know that i pointed that out. Thank you vemp. Whats your year end target for the s p. I dont have targets, joe. If you go back and look at what the best and brightest they were saying in the end of 2008, they were so far off the mark. I think we will be higher at year end than we are now and i think well be higher at the end of 2014 than we will be at the end of this year. I think the chances were in a secular bull market are high. That will be if we knew that for sure, that would be something because wed be above 1700 at the end of this year and then above wherever that is at the end of this year. Youre not looking for 20 next year but maybe somewhere up around 1800 on the s p . I think youre looking for 12 Earnings Growth year over year between this year and next year and it wouldnt surprise me to see the market track that as well because multiples, they might stay where they are. Naerman, what is janet yellen going to do, do you think . Well, i think shes been sort of pigeonholed as being a dove. Im not quite convinced that she is but, okay. I think she is probably going to continue what bernanke has been doing. What weve got with yellen was continuity. Thats a good thing in this environment. We have a huge amount of uncertainty about fiscal policy. I would say shell probably follow in the footsteps of bernanke. Big debate about when are they going to start tapering. The earliest ill do it is december. Even then depending on what the economy is doing they may wait. Theyll wait until next year. Continuity i guess is what weve got. Youre not convinced shes a dove . No. Remember, she i see the boston background. Shes from berkley. Maybe youre from cambridge. Shes she if you see something walking going quack, quack, quack, it has paddles, a big yellow bill, do you say that might be i dont know, that could be a dog . Remember, shes been pushing this 2 inflation target pretty hard. Youre scaring me. Youre scaring me. Youre not sure she was a dove. I dont know what would cause you quack, quack, quack, quack. Thats the consensus. The consensus is probably wrong on this one. Okay. Interesting. What if her first act is to what if its going to 65 . All right. Concession. Thank you. Thanks, jeff and naerman. I think hes on the other side of it, of the charles river. On the cambridge side or the m. I. T. Side . Cambridge. Cambridge and m. I. T. And harvard are on the same side . Oh, are they . Yeah. All right. When we come back we have your morning squawk planner. The Business Plans for the day. At the top of the hour, former citigroup chairman, dick parsons. Squawk box will be right back. 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. Its time for your squawk box planner. I can play vanna white here. It is columbus day, that means the bond market is closed. The day marks Christopher Columbus discovery of the americas back in 1492. President ial proclamation calls on americans to observe the day with ceremonies and activities and stars and stripes be displayed on all public buildings. And i want to know why we keep the bond market closed and stock market stays open. Look for that news at about 8 00 eastern time. Hopefully well bring that for you on squawk. And it is, of course, day 14 of the Government Shutdown and you should head over to cnbc. Com to vote for top ways to punish congress for the shutdown. Little way to express your frustration if you have any. And thats your squawk planner today. Anyway, coming up, weve got former citigroup chairman dick parsons going to join us. Plus Erskine Bowles is going to bring his call to rise above squawk box. Stay tuned for that and a lot more. 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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. Coming up, u. S. Equity futures under pressure after fridays big rally. Really, thursday was the big one. But we continue then on friday. We will welcome former citigroup chairman dick parsons when squawk box comes right back. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Good morning, everybody. Welcome back to squawk box here on cnbc. Im becky quick. And the futures this morning are under some pressure. This is coming as it is clear theres no deal, at least not now in washington. Dow futures down by about 82 points, s p futures down by close to 9 1 2. In our headlines this morning, as we mentioned, still no agreement to ending the Government Shutdown. Now in the 14th day. Also, no agreement on raising the nations debt ceiling. That optimism that fueled the stock rally on friday faded over the weekend. With democrats and republicans still apart on key issues. Democratic senator dick durbin told nbcs meet the press that reaching a deal to raise the debt limit is crucial. If in four days we default on our debt for the first time in our history, it is going to have a dramatic, negative impact. This may be heresy, but i think Simpson Bowles got it right, put everything on the table. In the next hour, well have one of those men that got it right. Erskine bowles starting at 8 00 eastern time. And the company is using that to its financial advantage. According to the wall street journal, twitter has been able to put bank fees for the initial public offers to 3. 25 . Thats the lowest for a listed ipo in over a year and close to arranging a credit line for the bankers as well. And netflix is in talks for services through set top boxes. Those negotiations, though, are said to be preliminary with no agreement expected any time soon. Lawmakers on each side of the aisle pointing fingers at each other for failing to reach a compromise on the debt ceiling battle over the weekend. Here now barry and our guest host for the next two hours Richard Parsons who is a Senior Adviser of providence equity. Former chairman of city group and all kinds of like an iconic figure. Great to have you here. Youre iconic sort of. In my own way. Well, weve made you iconic. Predated coming on squawk box, but youre there now, barry. If you were to just start i was wondering how you were going to get its not easy. If you were just to give me the how youve been viewing this for the past three weeks, lets say. How would you summarize your feelings . Probably like most americans, its sad. Theres no good story to tell. Theres nothing that you can say, at least out of this will come x, y or z. This is just a case of massive dysfunctional lack of leadership. I think thats what most americans think. We just said, i dont know, on our website, were allowing you to complain, get mad at congress and punish congress. Do you think okay, fine. Congress has its policy. Do we think we should get mad at the Obama Administration, the white house . Theres blame on both sides. Yeah, this is like anything else that you encounter in human interactions. Its never all one guys fault, right . Its never all one guys fault. Everyone is contributing this. And in my judgment, its its a function of lack of leadership and and narrow focused as opposed to broad gauged focus. People wondering, what, how do i keep my job . What does my district want as opposed whats good for the country . It doesnt help, though, when theres this much animosity between the two sides. No. Because even in the past where you have seen totally different opinions about what we should be doing, big government, small government, more spending, less spending, all of that. But it did seem to be some collegiality. And that, these guys theres a lot of republicans that dont want to give anything to the president. And the president is so, you know, you can almost see his revulsion to even dealing with a lot of people on the other side of the aisle. Its bad, really bad. I think its bad. And i dont profess to have insight into how it got so bad or why it got so bad. But theres no trust. Obama care didnt help. Well iraq didnt help. I mean, it goes back years. I think theres a new breed of politician. I think a lot of the highly conservative element thats come in i was reflecting theyre actually antidemocratic. Not antidemocrat. Its the will of the people, the will of the majority. Its no longer relevant. Its only its relevant what i want and what my constituents want. And so were going to hold out and were not going to yeah. The latest guy says bankruptcy of shutting down, going on the debt ceiling is not as bad as the bankrupt country. Right. And thats what theyre thinking. But i saw a poll this weekend on meet the press, talking about how the middle of the country is 51 . If you add up the far right and far left together, you still get less than the majority. Thats true. Thats true. But theyre the ones a lot of People Holding Public Office actually dont believe when you strip it down that the majority should determine. Well, they may reflect the views in their district. Maybe its a problem with the district. But i go back to the redistricting and gerrymand gerrymandering. Its weve set up a system that allows the polar opposites weve always had this system. Wouldnt you think that after you have a huge financial crisis, it would create this polarization. Its an extreme in terms of the Macro Economic outlook and situation. And so, look, roosevelt was a polarizing figure to be sure. And theres, you know, people still litigating that fight as to whether he did the right things, or not. I suspect the country will come back to the middle. I take a more sanguine view of all of this. The fact of the matter is, we manage to get the budget deficit above 10 of gdp to below 4 . The Government Spending has dropped, so weve gotten back to about the sixyear average in terms of spending. And if out of this deal, we get some trading of discretionary cuts for entitlement cuts, theyll be small, they wont solve our longterm debt problem, but if they cross the rubicon, you have to view that as encouraging, we know thats the longterm driver of the debt. We may have some good come out of all this despite, you know, all the acrimony. You think it was going to get done otherwise. You think you needed this blunt instrument. I think it was always likely to be highly contentious given the magnitude of the depth of the recession and increase in unemployment. There were always going to be divergent views on how you do it. I was studying economics in the early 80s. The debate was heated. And in that case, reagan and kempf and that crew won that fight. Now weve weve had the same fight 30 years later and it was always going to be a contentious battle. Theres a book called that. We keep fighting that over and over again. When did i mean, the great books on economics. We thought we settled this in the 30s, didnt we with hayek. We thought we settled it. The difference, though, i think, and i was a part of the earlier fights. We didnt get close to the edge that weve gotten close to this time in terms of Government Shutdowns. And looking at a potential default on our indebtedness. Which, you mentioned a minute ago, joe. Someone said well, id rather have us, you know, default, run up against the debt ceiling and default on the payment of our debts rather than go bankrupt, you know, and have the our liabilities ultimately exceed our assets. Its been a long time since i practiced law, but my recollection is either one of those is bankruptcy. Bankruptcy is either our liabilities exceed your assets or you cant pay your debts when they fall due. Thats what were looking at. So its kind of a question, do we want to be a dead beat or be broke . Either one is not so good. But, you know, if we did get 3 or 4 growth again, i bet you we wouldnt be as mad at each other either. Thats true. Thats true. And look at the unemployment picture and its just its 80 of the country thinks were headed in the wrong direction. So, robert, its the nobel memorial prize in economic science, its a nobel prize. Its added in 1968 as a memorial to nobel. Lars peter hanson and Robert Shiller. Americans winning for their empirical analysis of asset prices. I was looking really quick to see what hes written. The last thing i saw him write was from october of 2007. Interpretation in terms of changing popular economic policies. He loves animal spirits and i think hes he probably wouldve won if he wasnt on squawk box as much as he is. He probably still wouldve. This did not hurt. Is there a campaigning that goes on behind the scenes . Hes a market master. Do you have surrogates behind the scenes working . Nothing just happens. Nothing just happens. Hes is one of our market masters. He is one of our market masters. The nbc team working behind the scenes for this. Cnbc teams. Were not part of the squawk box team. Squawk box. Were not part of nbc news, andrew. You know that, right . Were owned by nbc universal. Friends at comcast. I understand. I understand. Never mind. Anyway, barry, thank you. Richard will be sticking around for the rest of the show. Symphony. Yeah. We work closely together with them. We love them. Whats going to happen in markets . Well, we sure. We thought wed have a 4 correction like we had in 95, 96 because there wasnt a risk of a big fiscal drag coming out of any deal that gets done. And so we always thought it was going to be sort of a minor reaction. I think the reactions done. The other effect it does create enough fog weve pushed tapering into next year. This clears up in the next day or two the futures look like theyre down about 90 points this morning. If we dont get a deal done tomorrow. Theyre pushing their advantage saying they have questions about the sequestration. Thats why we dont have a budget in the first place. They had agreed to that. Now that the house said no thanks to that, the senate is kind of standing tough saying forget it, were not going to agree to what we agreed to. They never agreed to that. Harry reid said they had a back room deal, he and boehner agreed to that. He told them if he couldnt get that, he would bring the house. Well, look, if you have a couple of days of fighting and it lingers and the market sells off, you should buy that selloff. There will ultimately be a deal. And the point here is this is not going to be like 2011 where you have huge spending cuts coming out of it. Weve done the bulk of that work. Were not going to have a big tax hike coming out of that. Weve done that work. So what you might wind up with is actually stimulative in the sense you change trade shortterm spending cuts for longterm entitlement cuts and youve got the fed on hold now. The outcome of this is likely favorable for the markets not unfavorable. In terms of how to come up with some sort of agreement, do you expect we will see more tax increases in order to get entitlements brought down . In the longer term. Not in the next few days. In the longer term, yes, i do. Okay. It has always struck me as odd that almost anybody who has any common sense would know. When youre running the way this countrys running, were borrowing way too much, spending more than we can afford to spend. The answer has to be in two buckets. And youll hear this from Erskine Bowles when he comes on, one, weve got to cut our expenditures and, two, raise our revenues. I think Bowles Simpson got it about right. I think there will be some revenue increases in the form of tax increases but those tax increases may be simply eliminating loopholes, subsidies, doing things, increasing as the president has proposed the level of participation, Social Security, changing the inflation and those kinds of things. Therell be revenue side to any ultimate resolution, i believe. Got it. Stick around. A lot more to come. Hes going to join us to discuss fixed income, the fed and whats going on in washington. Squawk box returns right after this. Tomorrow on squawk box, omegas chairman and ceo peter fisher, and sandy cutler is helping rise above the debt ceiling. All leading up to our exclusive interview with david teper. Business leaders and the worlds best investors come to one show, squawk box. Starting at 6 00 a. M. Eastern only on cnbc. Millions of people are estimated to have visited Health Insurance exchange websites during the first week of enrollment, but many had trouble signing up. An a. P. Poll of 1,200 adults found that 7 tried to sign up for insurance on the exchanges, when applied to the general population, that could be as many as 20 Million People. 3 out of 4 respondents had trouble signing up, 1 in 10 successfully bought insurance. The Obama Administration is expected to release enrollment statistics at the end of the month. Our guest host is dick parsons. One of the things weve looked at is the health care rollout. It hasnt gotten a lot of attention because of the Government Shutdown and debt ceiling debates. How would you rate this to this point . This rollout . Well, the rollout per se is obviously troubled. Lots of glitches. That was inevitable given the complexity of the tax at hand. And i think thats thats thats the challenge the administrations going to have. Fundamentally, most americans, i think, believe that there shouldnt be 40, 45 Million People in this country without Health Insurance, without access to quality. But how do you provide it . How do you do it in a way that ultimately becomes seamless . How do you create a system that will rival, you know, Social Security system, rival medicare and do it in a hurry without hitting some blips. Is it inevitable because the government was doing it . Because google didnt do it . If google or facebook had done this, would we be in the same place . The answer is if time warner well, thats a different question. Thats a different question still. Its a complicated piece of business. You know, i watched lets take your first choice google. I watched them grow up and make mistakes and stumble. They did it over time. This is going to take some time to get right. Its going to be a lot more expensive than i think people had anticipated or at least some people had anticipated. Expensive from the cost of technology or because the whole process isnt going to work exactly. The rule of unintended consequences has to bite on something this large, this complicated. But theyll get it right over time. One of those problems, dick, is that youre talking about something, health cares already 18 of the gdp. Yeah. And obviously we had a massive problem that you had 45 Million People who didnt have health care insurance. But this bill doesnt necessarily tackle some of the cost curve issues. There were two problems with health care. Were looking at trying to fix one, we havent tried to figure out how to fix the other. Thats because the others very tough. I dont know if you saw the piece in the times on sunday about how difficult it was. Not only how difficult this was but the cost of drugs and generic drugs and prescription drugs and all that sort of stuff. And the comparisons to what those cost in other countries. Right. A fraction. I mean, like 1 10 of what they cost in this country. Were going to have to tackle that. Fundamentally our Health Care System costs twice as much as any of our other developed country competitors. Do we do that by putting price controls, blunt price controls across the board . Or do we no im not a price control person. I think that. Thats how they do it over there. I think with drugs, i mean and get no innovation and we develop all their drugs and they cap their prices and, you know were going to have to figure out ways and i think this was the thrust of part of the obama care piece to get market competition, to get more competition going in the Health Care Markets effectively to pull prices down. Because joes right in part, not complete, but in part. If i were going to when you say to get lets let the government control all of the health care so that Market Forces start working. Does that make sense to you . Does that not sound like a conflict in terms . Well, i think, you know, whats the role of government . Right. The role of government is to make sure that markets function effectively. And the other side of what youre saying, joe, is lets get the government out of it and let competitive forces. There are free market ways that it could have been done, i think. Theres free market ways that you could youre talking about that article yesterday about the drugs. The market is not going to fix that problem. No, but the individual mandate is huge. You cant without making with generics, its all about how long you give exclusivity, what is it worth to spend 1 billion. How long should you be able to sell that without competition. Those are all things you need to figure it out. You can buy those drugs because theres price caps over there. Correct. They arent innovating anymore. Right. But assuming their price caps remain because those arent going to change, what do you do here to actually lower the price and continue the innovation . I dont know if globalization, weve got all these arbitrage. I dont know how you do it at this point. I can tell you its alive and well, innovation in this country in terms of Drug Development and because one of the reasons its so expensive here because were ziziziz i subsidizing the rest of the world. Im not sure the companies would say its well. Theres so much regulation. Thats true. We use a lot of basic research in this country for the government and make that basic Research Available for people to then build on. Sort of like creating an open system if you want to use a technology analogy. However, we dont do that anymore. So these companies now have to go all the way back into the basic research. The nih and nsf. The universities are still even there. Thats right. Thats primarily where it happens. But the level of u. S. Expenditures in terms of total u. S. Expenditures which goes to basic research. Its like infrastructure if you will that goes to creating a platform of which other people can innovate has been cut dramatically because, again, i think shortsighted. Discretionary stuff, weve already done what we can do. If we can do something on the entitlement side, you can bring it back to the discretionary side. I agree with that. That means that people that are rational and have the interest of the country, longterm interest of the country in focus have to sit down and work their way through this. Were going to slip into a break. Thank you, dick. Coming up, seattle and kansas city vie for the honor of having the loudest fans. The details after the break. And black rocks peter fisher is going to join us when we return. Time now for todays aflac trivia question. When was the debt ceiling created . 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. [ under his breath ] that was horrible. Pays you cash when youre sick or hurt . [ japanese accent ] aflac. Love it. [ under his breath ] hate it. Helps you focus on getting back to normal . [ as a Southern Belle ] aflac. [ as a cowboy ] aflac. [ sassily ] aflac. Uh huh. [ under his breath ] i am so fired. Youre on in 5, duck. [ male announcer ] when youre sick or hurt, aflac pays you cash. Find out more at aflac. Com. [ male announcer ] when youre sick or hurt, aflac pays you cash. 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. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. When was the debt ceiling created . The answer in 1917. You need to rise above the debt ceiling. Did you know it was 1917 . It was a while. I thought the case made last week was interesting. Theres no debt ceiling. Really . Its going up. I dont even know why we talk about it. Its weird we even have it. Its going up. Hank paulson its going up. Its never going down. Going to keep going and going and going. For years Arrowhead Stadium the home of the Kansas City Chiefs is known as one of the loudest places to play in the nfl and yesterday it officially became the loudest place. The screaming fans in kansas city reached an ear splitting 137. 5 decibels in their game against the rivals. Thats a new alltime high, beats an old record set by these other maniacs out in seattle. Last month, 136. 7, roughly about the same volume as if you were standing next to a jet engine. Are you kidding me . The fans in k. C. Have good reason to be so cheerful. Under andy reid theyre 60. They are. Only three remaining undefeated teams, they only won denver . Denver, k. C. , i dont know the third. Did new orleans win . No. New orleans got beat in the last 20 seconds by i have to look that up. By brady. Did seattle lose . They lost, didnt they . I think so. I know giants are 06. Theyre the opposite of undefeated. While we figure out the third, were going to welcome black rocks peter fisher when we come back. Plus, much more from dick parsons, former citigroup chairman and then the top of the next hour, Erskine Bowles will join us. The cochair of the fix the Debt Campaign. Sits on the boards of Companies Like facebook, morgan stanley, norfolk southern. In a world thats changing faster than ever, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Welcome back to squawk box. In the headlines. We have sort of a headline to tweak from right before the break which is that theres now only two undefeated teams left, denver and kansas city. Three teams with the perfect record. Four teams with the perfect record. Two of them are wins. Were only giants are 06. If it wasnt for if it wasnt for were trying to figure out how we messed it up. If they hadnt played the last 20 seconds of the saints patriots game, thered be three. Its just a mistake about the timing. Timing is everything. Timing. Talking about timing, it is columbus day which means the government would be shutdown even if it wasnt already shutdown. The stock market is open, but the bond market is not. Were going to talk to peter fisher about why thats the case. No economic reports on the schedule. And a few Earnings Report of note, as well. Another victim of the Government Shutdown, holders of winning lottery tickets in the district of columbia. The d. C. Lottery issued a statement saying no Winning Tickets would be paid out until further notice but also said Winning Tickets would be honored once the shutdown is over. I wonder if theres any big Winning Tickets out there. Also the thriller gravity which i saw over the weekend remains atop the weekend box office. Easily beat captain phillips, starring tom hanks, which earned 26 million in ticket sales. I saw it in imax 3d with the glasses and it was pretty cool. Apparently both movies are equally accurate. In terms of the level of accuracy that you can see in both. Captain phillips is based on a true story. Gravity is except the people there say it is no way representative of what happened. Havent you read . The astronomer from the Natural History museum had a lot of problems. You should see how much debris is flying by at the speed of light and theyre somehow dodging. One little speck if dont ruin it for and the Chinese Space station is a couple hundred yards from the one. Lets just go over to that space station. Do you know how big the spaces anymore dont tell me anymore, i want to see it. Its neat special effects. Wearing the 3d glasses. Shes talking about her daughter that she stop. Or when clooney im going to ruin walking dead for you next week when you dont stay up late enough. And you thought you were here to talk about and Robert Shiller. Won the prize for their in the what society is this . The economic society. Its like some subgroup. Their empirical analysis of asset prices, peter fisher passed over again. Not going to happen. Research began in the 60s credited with spurring the krags of index funds and hansons work dealt with the risk and return there. And shiller, best known to cnbc viewers for the monthly case shiller home price report. Won the award for his work on the relationship between stock prices and dividends. Wrote a book called irrational exuberance too. And hes big on animal spirits. Which we are in terms of how that affects investor sentiment. And hes a squawk market master. He had that honor beforehand. Before no, you dont think the Nobel Committee took that into consideration . Maybe they did. Maybe they did. But youre kind of snickering over there. Arent you . All right. Were going to give you a chance to all those guys deserve the nobel prize. Lets bring in peter fisher, senior director at the black rock institute. He is also a senior fellow for the center of business and government at dartmouth. Its a pleasure having you here today, as were looking at the Government Shutdown extended into these final days as were about to hit the debt ceiling, people are wondering what the bond Market Reaction is going to be. Weve heard that fidelity is selling off shortterm bonds. Have you seen other issues that really show the bond market is feeling any stress at this point . I think its a curve flater in flattener. People that run money funds, people are likely to want to cash in their Money Market Fund in event we have a default, which i dont think well have. Therefore theyve got to stay liquid. Theyve got to sell the shortterm bills even if there are other investors happy to gobble them up. Has black rock been a net seller . I understand my colleagues in the money Fund Business have sold out of the very short dated bills. Its just you have to do that. Those funds have to stay liquid. At the long end, hasnt backed up much. Im afraid if we had the horrible outcome which wont expect of the government not paying its bills, it would be bad for growth and that means the long end would come down. Thats interesting, though. You said the big problem is the government not paying its bills. So on thursday morning, if we wake up and theres not an agreement at that point, is that the day that the market really reacts harshly . Or is it later when we miss a massive payment . I think its closer to the end of the month when you are looking at big payments. The payments im told on the 21st or 22nd. Next tuesday. I ran domestic finance in the treasury. This is an art not a science. Its such a massive flow of payments thats got to go through the system that the Financial Management service is running and the bureau of fiscal affairs. I think what we see going on in washington right now is the usual shenanigans. Once a bill has to pass. It creates dysfunction. In your judgment, what happens if we dont get past the 17th . If a bill doesnt pass . Well, if a bill doesnt pass the 17th and the treasury is then stuck, the disruption to the economy is going to be massive. The economy looked like it was doing well. One of my favoriindicators is household income, jumping up from five years of anemic readings. So right now we couldve seen the economy picking up speed and i really think itll be a hit to confidence. Theres also an irony. What if congress did the right thing and said, look, were going to sit down and talk about serious tax and budget issues. Whats going to happen to business fixed investment . I think a lot of corporate planners will say, well, theres a serious tax reform on the table. You were saying earlier maybe well have tradeoffs of loopholes. Theyll slow down investment. Although, a lot of those things would potentially be things youre looking at several years down the road. Some way of reaching a deal might be to raise some of the yes, but thats spending up right now from sequestration levels and longer term. But Business Leaders, Corporate Leaders have shown theyd rather be buying back shares and making tough investment choices. Give them another excuse to delay that another six months. Listen. I think people buying back shares because they know at least they think they know what theyre buying. Most businesses still on the growth agenda, right. To be a Public Company in this country, in these markets, growth has to be at the top of the agenda. And if they had confidence they knew what the contours of the landscape were, they would start investing again. But buying back shares is is a conservative and kind of default way to go when you have excess cash, which a lot of companies now have. And youve got to do something with it. That just may be not very good for picking up speed here in the economy. No might be the right thing. I agree with you. The economys doing better than most people estimate and the Government Shutdown obviously is a hit to that. And a default would be everyone says massive disruption in the economy. Nobody spells out what that looks like. I think you almost cant. Have you done anything in advance of this . Is there any preparations youve made . Any models youve created . Any sort of instruction manuals youve told your people, look, if this happens, this is what we do . Well, im not running the fixed income group anymore. Ive got colleagues doing that. But as we did in august 2011, we talk to our clients, try to make sure their guidelines reflect how they want us to respond to them. You dont want something someone wrote down on a guideline five, ten years ago to guide whats going to happen. Weve got to rally. Its unthinkable. Yeah, but if youre running a business, you have to have contingency jpmorgan and fidelity sold down all the shortterm stuff, right . And i imagine is everybody doing that . Everyone with shortterm funds, youve got to be prudent to do that. Theres a much bigger problem were all facing here in the fixed income markets coming from the intersection and the fed. The fed. So the fed is clearly with less insight into the economy now without the data and with the shutdown going on and the risk of default going to be stretching out the taper. When will they start tapering further and further out . But the longer they delay that and theyve said this in speeches, the more likely it is when the time comes theyll have to let rates rise faster. However far off in the future that is. Now, my way of thinking, thats like someone telling you, dont worry, im holding this beach ball under water and im going to let go of it later than you think. But when i let go of it, its going to be harder to come bring it up to the surface slowly. Theyre really telling us theres future volatility in our future. Theyre telling us manana. Its inflating as youre theyre going to say, were going to let go of it later than you think. Its going to be harder to hold down. That sounds like a big market delocation. We thought maybe we had seen it when Interest Rates spiked a couple of months ago. When the fed didnt start tapering, are you telling me were going back to big market dislocations . Qe has been volatility suppressing with all of their bond buying. And its going to come back to haunt. I think theres a much simpler way to think about what the fed learned in the last six months. They were telling us a year, two years ago, not to worry, qe would have a stock, not a flow effect. They buy these bonds, hoard a little risk. It wouldnt have a flow efgt. Effect. What did they learn this summer . They learned it had a big flow effect. Just talking about taking away the flow effect moved markets. So now, theyve got to realize the flow effect is much bigger than they thought on markets therefore the exits going to have to be more gradual. You think they realized that sitting around the table . Thats what the whole summer was about. They didnt like the tightening and financial conditions when they told us they were going to start to taper. What youre saying, though, theyre not going to be able to manage. Its going to be hard. Its going to be hard for them. What does that mean to an investor sitting at home listening . What do you do . I think you have to worry about volatility and be ready for it. Weve lived in a world of very low volatility the last few years. Thats what all the qe and Forward Guidance has done. I think the trick is, were also living in a low nominal growth world. Even though the u. S. Is doing better, the imf is revising down its forecast. I dont think were about to jump to very rapid growth and very high rates. I think were going to have a little volatility in our future in 2014, what it feels like to me. It doesnt yet, i dont see the evidence of a really rapid growth rate for the u. S. Or the world. So i would tell the investor, get ready for a little volatility, but dont do anything drastic. Maybe dont keep a lot of stuff on margin. Yes, i would not do that. Peter, thank you very much for joining us. Thank you for having me. Coming up next, more from dick parsons and the country is on a path to bankruptcy and says holding out on the debt ceiling is the only hope the country has to stop the spending in d. C. Hell join us in a couple of minutes. Still to come, fix the Debt Campaign cochair Erskine Bowles. Plus, Mark Bertolini. Its a growing trend in business do more with less with less energy. Hp is helping ups do just that. Soon, the worlds most intelligent servers, designed by hp, will give ups over twice the performance, using forty percent less energy. Multiply that across over a thousand locations, and theyll provide the same benefit to the environment as over 60,000 trees. Thats a trend we can all get behind. Welcome back, everybody. As we enter this 14th day of the Government Shutdown. You can see that the futures are under a little bit of pressure. No agreement in sight yet. And as a result, the dow futures down by about 94 points. S p off by 10 1 2. Up next, alabama republican congressman mo brooks on the ongoing debt ceiling battle on why hes holding out against a higher debt ceiling. And at the top of the hour, Erskine Bowles will join us and Mark Bertolini with his perspective on whats going on in washington. 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 ] maestro of project management. Baron of the buildout. You need a permit. To be this awesome. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. aaron purrrfect. vo meeeow, business pro. Meeeow. Go national. Go like a pro. The Treasury Department warning the government wont be able to pay its bill after wednesday. Taking over negotiations with majority leader harry reid and Mitch Mcconnell speaking by phone yesterday. But the two failed so far to agree to deal. Something perhaps in the works. Mo brooks, congressman from alabama, congressman, do you expect a deal before the 17th . I dont know. A lot will depend on whether we can get a package, a proposal from the other side of the aisle that is financially responsible. One that both opens up the government under spending terms our country can afford, raises the debt ceiling, again under spending terms our country can afford and also takes into account the need to minimize bankruptcy resulting from five consecutive years of deficits that average over 1 trillion per year. What does that mean . Does that mean going ahead with the sequestration levels that youd be okay with that . Well, im open to any kind of suggestions on how best to walk this narrow path. It both opens the government, raises the debt ceiling and adequately minimizes the risk on an american insolvency and bankruptcy. To date, there have been zero proposals from the other side of the aisle that does that. And that puts us in a quandary on the republican side. We can open up the government at the spending levels that the other side wants, raise the debt ceiling, but all that does is kick the problem down the road where we are weaker and less able to address it because the Additional Debt burden we have taken on. Do you want more discretionary cuts . Is it all about entitlements with you, congressman . Im flexible on where the cuts can be. Certainly, there is no part of the federal spending that is immune from efficiency, from spending cuts. Personally, i prefer the give away programs, the welfare programs, the foreign aid, things of that nature that are less productive than the fbi which is Law Enforcement or the military which is national security. Were going to have to do a tough job of prioritizing. As long as we raise the debt ceiling, we kick the can down the road. Eventually well have to address this issue. If we dont, then were going to have an insolvency and bankruptcy. And the longer we wait, the more difficult its going to be because the weaker our country will be because of the increasing debt load. Congressman, dick parsons is here, we had a conversation earlier in the hour where you suggested there were certain factions of the Republican Party. I think thats what you were referring to that you thought were being antidemocratic, not just antidemocrat. When you think congressman, when you think about the polarization of both your party and the country, do you think theres a part of your party thats antidemocratic . No, i dont. Not at all. I think were pro american. We recognize the seriousness of the Financial Issues that weve been in. Heck, the president s own comptroller general sent us in writing a letter this year to the white house and the United States congress saying we were financially on a quote, unquote, unsustainable path. We need to heed these warnings. This is very serious for our country. We could slip down the road of grease where the Unemployment Rate is 20 . Congressman, we we understand that we need to deal with some of this stuff for sure. But the financial calamity that could come from if we actually did default. And im not talking about if we just go over the 17th and we, i dont know wait a few days and some people think theres a way of prioritizing. But the default itself and the financial near term financial calamity that could cause. It wouldnt be worth bringing that on just to get our longterm entitlement house in order or to make some kind of a point, right . Well, to make a point, no, but to get our financial house in order, absolutely. A bankruptcy is far worse than not raising the debt ceiling as bad as not raising the debt ceiling may be. Thats way off. Bankruptcy is years off, right . You would take a near term meltdown of the Global Financial system to make the point about the longterm entitlement issues . Im not talking about making a point. Im talking about trying to fix a problem before its too late. Lets say the other side will not allow you to solve all our entitlement issues in the next three days. Well, then were in a world of hurt if they continue to be as financially irresponsible as they have been with the solvency of a nation that has taken two centuries to build. I guess the question i have is, you know, youre defining insolvency as being unable to sort of having our liabilities exceed our assets. Its been a while since i practiced law, but usually insolvency was also failure to pay your obligations when they come due. Either of those constitutes bankruptcy. And im trying to understand the differentiation youre making. Fine. If youre talking about a default and the Financial Markets were really talking about the ability to pay our creditors. We have roughly 2. 5 trillion in revenue according to the gao. Roughly 250 billion a year. We have have the revenue you believe jack lew is lying to you . The gao says the president has discretion to pay our creditors if he wants to. Do you think jack lew is lying to the 17th date, not as the date we default, but getting close. He uses it in a more expansive way than im using it. Congressman, we appreciate you coming on this morning. Coming up, a man who knows a thing or two about u. S. Debt and possible solution, Erskine Bowles is our special against when we return. Tire event . Your ford dealer. Who has 11 major brands to choose from . Your ford dealer. Whos offering a rebate . Your ford dealer. 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And processing 421 billion dollars in accounts payables each year. Helping thousands of companies simplify how work gets done. Hows that for an encore . With xerox, youre ready for real business. Here we are, me and you on the road and we know that it goes on and on [ female announcer ] youre the boss of your life. In charge of making memories and keeping promises. Ask your financial professional how lincoln financial can help you take charge of your future. Oh, oh, all the way oh, oh this hour on squawk box, a triple play. Well kick things off with Erskine Bowles. These politicians are playing games, jerking our country around from crisis to crisis. And then senator bob corker on the odds of getting a deal this week before the debt ceiling deadline. And aetnas ceo going to join us onset to talk about the challenges of obama care and finding a solution to the debt crisis. The third hour of squawk box starts right now. Welcome back to squawk box here on cnbc. Our guest host this morning, dick parsons, Senior Adviser. First of all, andrew has more morning headlines. Its columbus day. Theres not a lot of headlines. It is columbus day which means the government will be shut down even if it wasnt already shut down. The stock market was open. On the flip side, the bond market is not. Fading over the weekend with democrats and republicans still apart on key issues. Well talk more about those negotiations with Erskine Bowles in a moment. We are down about 100 on the dow, s p would open about 11 points and nasdaq about 17 points, as well. And you can see whats going on in asia. Things closing there actually up. The hang seng up over 1 and the nikkei up almost 1. 5 on the day. And you take a look at whats happening in europe. Its a little bit of a mixed picture. Ill call that marginal across the board. We should also note that three americans have been awarded the nobel prize for economics. Eugene, peter hanson, and Robert Shiller have won the award for their empirical analysis of asset prices. Robert shiller is a name familiar to many cnbc viewers, including those here on squawk. One of the names behind the monthly case shiller home price report. And also squawk box market master. Thats the real prize. Theres no evidence that itll help. I think that put him over the top. Began in the 1960s and is credited with spurring the creation of index funds. And hansons work dealt with the relationship of risk levels to returns. I dont see how won nobel prize for genius. Thats changed a lot of things. And they do pretty well. Its good for average investors. Youre not paying the fees you were paying for Money Managers that may or may not do as well as the markets. An index fund. I like index funds. I think its a great invention. Our guest host this morning is dick parsons and weve been talking all morning long about whats happening in washington. How we reach some sort of a solution. Have you youre a businessman. Youre somebody who negotiates. Youre somebody who knows how both sides have to walk away with something. Whats a winning solution you could possibly see at the end of the day . If i could answer that question, becky. You know, id be in washington right now. Its very difficult because the fundamentals to any successful negotiation seem to have evaporated. Theres no appreciation this is kind of like world war i. Everybodys in their trench. And, you know, they move one trench to another, they move up 3 feet and back 3 feet, up 3 feet and back 3 feet. Nobody gets out of their trench. There seems to be a breakdown of trust. And most importantly, in a very fundamental way, weve lost sight of the interest of the country as opposed to our adherence to our ideological point of view. Joe just said something i agree with completely to wrap up to the last session. He says you dont burn the house down to save the house. Right. Right. And thats kind of the path that were on. Now, i think well get off that path. I think that something will happen in the next several days that will avoid a complete, you know one of these days were going to fall off the edge because weve lost the fear of falling off the edge. And were going to burn the house down in an effort to save the house. Theres been a lot of people buy a house and tear it down and put up a new house. Thats because they can afford to. Right. We cant. Thats very true. But that is something that, man, it happens. You see that a lot. You do see that a lot. I guess if we were still looking for a grand bargain, thats something that Erskine Bowles and alan simpson have been preaching for for a while. If we were still looking for a grand bargain, could that be the Silver Lining that comes out of all of this . Well, not in the shortterm. It could be if there is going to be a Silver Lining. That cant happen in the shortterm. There isnt enough trust and will to get it done right now. The president appointed that panel. He did not like the findings of that panel. And theres been no interest in pursuing. Theres a lot of stuff we dont like here. Theres one of the reasons i dont think it happens in the shortterm. Its about trust and the idea that the president hasnt invested in the other side. And theres a trust issue. Two people who didnt know each other before that situation, i dont believe you can tell me if im wrong on that there was probably zero trust and somehow magically you gave him a big old bear hug and did something in a short space of time. Is that true . Well shoulder grab. But it wasnt magic, right . It wasnt magic. I had a problem, he had a problem, we had to solve the problem. And we focused on, you know, how do we get ourselves out of where we are as opposed to, you know, im right, youre right, lets fight. And so you work on that. You work on that. You go, you visit, you talk, you try and understand where hes coming from. You try and meet people half way. Thats two rational actors. In fact, joining us right now is the cochair of the campaign to fix the debt. Erskine bowles. He and alan simpson are launching a National Ad Campaign calling for lawmakers to fix the debt. Erskine, were looking at some of that video right now on this campaign thats launching. You see where we were last week, whats happened over the weekend. Hopes are the senate will step in and reach an agreement. Do you think thats a likely path . I think its going to be tough, becky. All i can tell you is i walk through every single airport. People yell at me, you know, for god sakes, stop the madness in washington. Get these people talking. Solve the problem. They want real action. They dont care about the inside up there. They want to see the government opened again, they want to see us pay our bills. They think the talk of default is nuts and it really is. And they want these guys to get in a room and start negotiating. Just like we did with gingrich back in 1996, 95, when we got the Government Back open again. And both of us made compromises. And thats what they want to see. They want to see some logic brought back to washington. Weve talked about the logical plan with you before. Weve talked about it with dick parsons here today. Yeah. And every time weve been on the verge of having some sort of a deal that would attack some of the longterm problems and maybe invest in today to try to help with the economy right now, every time we get close to that, you end up with a situation where basically the can gets kicked down the road. None of it is for the best interest of where the nations headed. Why is this time different . Or is it . Well, because were right up against default, which is as you know as everybody has said today, everybody globally has said would be globally catastrophic. So hopefully we can get time line set up and an agreement that people will get in the room and talk about three or four things. Theyve got to talk about reforming the tax code so america can be globally competitive. Secondly, theyve got to talk about reforming these entitlement programs, particularly bending the Health Care Cost curves so Health Care Costs dont grow faster than the gdp on a per capita basis. And thirdly, weve got to make Social Security sustainably solvent so its there for the people who need it. We made a promise on Social Security, weve got to be able to commit on it. Lastly, youve been talking about this sequester, theres an easy solution to the sequester. Theres a reason why even the republicans in the house have found out they cant pass the appropriation bill because the sequester levels are too low. The sequester was stupid. Its across the board cuts and discretionary items. Lets make some real substitutes of cuts in other mandatory program where theres broad agreement. That will help us in the longterm and also give us the funds we need to invest in research, education, and infrastructure and also make sure our military has real readiness. How do we do that, erskine . How do we do that in the current climate of washington . Is that is that just a wish list . Or do you see a way that can actually happen . Oh, its not a wish list. I hate to tell you how many people come up to me when im in washington. Im Walking Around and, of course, ive got my button on here which i believe rise above. Theyve got on their congressional buttons and come up to al and me and say save us from ourselves. Get in there and get some negotiations started. If we can get some people in a room and build up some trust and put the ultra politics aside, the Economic Solutions are easy. Its the way we did it in can these players do it . Is it too far gone in terms of the trust . I think its never too far gone. Look, we did it when they were trying to impeach clinton. It was pretty partisan back then i felt. But i spent months and months locked up in Conference Rooms with gingrich and lott and we worked it out. Should ome people say theren to everybodys head and the markets are fearful that the Global Economy is fearful. Theres all sorts of issues. Or done with things are calmer. Is this the only shot. We talked about it joe, what was your phrase . Well, we were going to try to extract yeah, we need to do it. It needs to be done by thursday, right . Its the one way or another by hook or crook. Yeah. My best bet is thursdays a soft date, i think itll have adverse effects on the market if we dont go by thursday. But heres the deal, joe. I would open the government, id pay our bills and set up a tight time frame to negotiate this deal. Thats what i thought we decided. Let the people understand. Thats what we decided to do last week. And that got yeah. Youre okay, mr. President , youre not negotiating, fine. All youre doing is were going to write this now and were going to make a plan to have a plan. Lets raise it and do exactly what youre seeing. Raise the government, lets start negotiating. Whatever you want to call it, were like little spoiled brats on both sides of the aisle. If you look at this and i say theyre like children except they dont have any manners. Its unbelievable, childish, the way theyre operating. You cant use the word negotiate. Okay, well talk. Does talk constitute i thought it was i still think thats all you need to do. Raise the near term, but try to do something for some of the entitlement stuff and not just talk about that in five, ten years. How much do you joe, weve made promises, weve made promises we cant deliver on. And thats what we have to admit. Whether its on medicare, medicaid, Social Security, even dick durbin, you cant get any more liberal than dick durbin, said that yesterday. If he says it weve got to make changes. How much do you worry, though, that the plan for another plan creates a whole new level of uncertainty between now and christmas or thanksgiving and just from an immediate Economic Impact we feel that . I am worried about it bouncing from crisis to crisis and not a good thing. Because of a Christmas Shopping center, id probably make this negotiating period longer than i would otherwise and longer than i think is necessary so we dont disrupt the Christmas Shopping. People who want to close the government again or threaten default again, theyve got that option in january if they want to do that. Lets get busy, get people in the room. I think if we get people in a room, i think that will help restore confidence and give people hope. The president said he was not going to negotiate. The republicans have said they are not going to open theyre not open to the idea of new revenue. Is that wrong . I feel like they gave the revenue back in january. Look, they gave a little bit of revenue. 600 billion, 700 billion, weve got about 2 trillion worth of cuts. What we need to finish this process off is another 2 trillion of real cuts, not these phony cuts they were talking about this last weekend. But real cuts, things that make sense, have much bigger legs in the out years than they do in the early years. But real cuts and then have a small amount of revenue that comes from reforming the tax code. If you look at those tax expenditures, those exemptions, loopholes, deductions, credits, things i like. Look, there are about 1. 3 trillion a year. Over ten years, that adds up to around 15 trillion. Theyre only talking about using 400 billion of that. Thats not much. Erskine, you know if i could get 2 trillion worth of cuts to go with that. Simpson bowles. And i guess the question is, if we dont do something different. In other wordsious weve been down the road of putting wise men in a room and having them try and develop a plan to sort of rationally get us out of this. And it hasnt worked. What needs to change now for to begin to put this country back on the right road . Actually, im not reliving Simpson Bowles. What im saying is you could go whole hog and really solve this problem and the future of a country will be very, very bright. And im not saying, look, were going to fall off the end of the world. You can do a smaller deal. Come together and do it in steps. There are lots of ways to do it but you have to get in the room to get it started. I just want to make sure i have our numbers right. You said we need about 2 trillion in cuts in terms of spending cuts and about 1. 3 trillion in additional revenue for closing loopholes . You only need about 400 billion to 500 billion in revenue and 2 trillion in spending cuts. When you talk numbers, we listen, i want to make sure we got those right. Erskine, thank you so much for joining us and well be watching that campaign on television. We appreciate it. Thanks so much. I appreciate it. Index funds, were shutting down a molecule that causes skin cancer. Different category. Coming up yeah, ones a real nobel prize. Key debt negotiations moving to the senate after talks broke down in the house over the weekend. Senator bob corker is next with more on what to expect from the government this week. And later, aetna ceo mark im not. Bertolini. announcer at scottrade, our clients trade and invest exactly how they want. With scottrades online banking, i get one view of my bank and brokerage accounts with one login. To easily move my money when i need to. Plus, when i call my local scottrade office, i can talk to someone who knows how i trade. Because i dont trade like everybody. I trade like me. Im with scottrade. announcer scottradeproud to be ranked best overall client experience. 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. Negotiations in the house of representatives broke down on saturday. Talks in the senate may be the best hope for a debt deal to end the Government Shutdown. Joining us now bob corker, member of the banking committee. I dont know when you get to tune into us, but we talked to john harwood earlier. He still gets the feeling talking to the various players that the senate, mcconnell and reid, somethings forthcoming, maybe even today. Do you have any input we dont know about . Whats the latest . I think thats very possible. Ive had some good conversations early this morning. It is between mitch and harry. And i think people want to see that come to fruition. You know, lets face it. Republicans have overreached on the Health Care Bill and i think thats widely acknowledged. Over the last 48 hours, democrats feeling a little jumpy, if you will, overreached on wanting to actual bust or break the budget control act, which also is set a law. I think were back to a place, joe, where we hopefully will resolve this in the senate. And the wild card is what happens if we do something here when it goes over the house. Weve got a major expectations game that needs to be managed here. And hopefully, hopefully we will do that. It seems to me if you did something half decent in the senate and then, you know, you give it over to boehner, hed let the whole house vote at that point. Hes held off enough saying im not going to turn my back on the far right on this. At this point, if it was anything that, you know, got the government running, kept us, you know, pushed it off into january. I dont know, do it for till january. Thats not that long. Yeah. And i think hed let that come to a vote, dont you . You know, joe, the problem and i heard the last segment. You know, we keep putting off these episodes. And i do think on the other hand the moment, sort of the twitching hour is going to be when the next level of sequester kicks in on january 15th. Thats a Pressure Point that, you know, democrats dont want to see happen. They obviously were trying to overcome that over the last 48 hours. But i think that is a point at which maximum pressure on Discretionary Spending is in place and maybe its that point in time when we have the opportunity to do some of the things that erskine was talking about. And that is to substitute some longer term mandatory spending reforms in place of those. So, you know, again, i hate to see us kick the can down the road again. I do think that, look, were in a place where were certainly, as youve mentioned earlier, were not going to solve the biggest issues over the next three days. If a framework can be put in place, if we can do something for a period of time that gets us to that place, maybe we finally do those things that we all know need to happen and have been working on for so long. If you say its almost like there seem to be universal truths. And that means weve overpromised. We need to get our entitlements some day under control. We also know we dont want to default on our debt. If you go far enough left, there are people that say, no, we dont. What weve promised already is already a promise. We need to pay up on that by raising and then youve got guys on the right that say, hey, if we default, whats the big deal . Thats the problem. What you just said, its so obvious. It is, yeah. We need to do these things. You figure adults could come together and do this. You know, joe, believe it or not, i took a little bit of an issue with the last segment. And erskine is one of my one of my heroes, i really enjoy working with him. But, you know, there are candidly a lot of adults here. There have been some movements, you know, in a wrong direction. Weve ended up in this canyon that candidly i predicted months ago. There are people that want to solve these problems, and joe, what weve got to do and weve got to start in the senate doing this, weve got a deal between the 35yard lines. Weve got to get those folks not on the fringes on either side and solve this problem. What may come out of the senate is one of those between the 35yard line solutions. When it goes to the house, it is a wild card and ive been clairvoyant on the outcomes and im still again, its such an expectations difference when youve moved from totally defunding the central element of the president s agenda as your goal to now just doing some things that put us in a place to solve these problems over the long haul. Thats a major expectations change we need to manage over the next several days. But the first step is to move something in a bipartisan way out of the senate. Thats something that needs to happen soon. Go ahead, yeah. You have been clairvoyant. So tell us whats going to happen next couple of days. Well, i said as ive said, this ones a little more difficult to pretty. Because, again, the expectations have been at such a level. So, look, i do think theres a good chance that we will get back on the right page in the right paragraph today in the senate. And i think we have an opportunity to move something ahead on a broader, bipartisan basis. The question is, how is that dealt with in the house of representatives which has been off on a total, not only a different page, almost a different book, if you will over the last several months. So, again, managing those expectations, understanding the realities that all of you know. I was with a large group of finance ministers on saturday night and i do understand the impacts of all of this right now, even, before weve even brushed up against the 17th. Go ahead. Senator, you claimed the middle ground of your party. So im curious, when you have conversations with people like ted cruz, how do those conversations go . What do you say to him . So ive been very blunt and direct from day one. And when i first heard the notion of this idea come up several months ago, i almost came up out of my chair at a lunch meeting. And, you know, its a very direct conversation. I dont want to get into and, look, for what its worth, i think that, you know, our Republican Caucus when you say i represent the middle, i think people are now very, very unified towards focusing on the things we should have been focusing on on day one, which is spending. And the kinds of things we know, you know we have to deal with. You know, i think this chapter, this sort of chapter that weve been through leading us into a boxed canyon is over, okay. And now, again, i think were all back where we should have been in the first place. And what i regret about this most is a lot of time has gone by where we could have done those things that erskine was talking about had we focused on this in the first place. Okay. Senator, thank you. Thank you very much. Coming up, Mark Bertolini. 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. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Welcome back to squawk box, the launch of the exchanges has been marred by heavy web traffic. Joining us now to talk about the Health Care Law and the debt showdown in washington, aetna ceo Mark Bertolini. He is the head i dont know, youre not the head of it, but youre on it, the fix the Debt Campaign. Right, i was one of the initial people. Lets talk about obama care for a second. Sure. You guys worked on the rollout of this, or at least behind the scenes of some of the beta stuff. Did you know it was going to be this bad . We were pretty nervous as we got further along. We helped them build blueprints on how to put the system together. And as they started missing deadlines, we were convinced it was going to be difficult did you tell them, dont do this, move it . We started to help them prioritize how to move ahead with the project. And, you know, they had their perspective on when they wanted to start. So we did our very best to help them get started on time. Dick said in the last hour this was bound to happen when you have big projects like this, stuff happens. How long will it take to fix all the kinks . Well, that is a big question. When you implement a project of this size, the first thing is unit testing then application testing and then integrated testing and then scaleability testing and user testing. That plan is usually a lot longer than some of the Application Development itself. Thats happening on the fly. None of that was done beforehand . All of it has been on the fly. We didnt get probably a month before the system went. Well, you dont know what scaleability issues you have until you get all the functionality working and everybody starts hitting the system. So youve actually got to get the functionality up. You dont know how many files youre going to hit or how many people will hit them. I guess what happens january 1st. If people are having troubles now, maybe they go through a few weeks of tough time. Is everybody going to sign up by january 1 . No, enrollment still open until march 31st. But i think the bigger issue is will enough people sign up to make it work . I want to talk about the economics of fixing just the Technology Behind it. Then the larger economics. Are there some people that dont come back and try again . They needed a lot of people to give it a shot because so many young people have to pay for so many sick and older people. Will people say, ill pay the fine. I think the Attention Span of the younger generation, if it doesnt work the first time, its going to be tough to get them back the second time. As a result, website technology, we are actually testing it with the types of users we want to use it. Its not like we have as long as this takes to get it right. We well. I think its the law of the land, number one. Number two, public exchanges are going to be here to stay. We need to make them work somehow. How do we get there from here . Well, penalties may go up. Penalties could force the issue. The question i would have is six months between now and march 31st. Thats not a long time when it comes to doing all the testing and prototyping and evaluation and scaleability of a system this large. Is that enough time . I dont know. Were in a place now where theres so much wrong you just dont know whats broken until you get a lot more of it fixed. I think we have to plow through it. Its nothing you ever like to repeat. Its a career ending event in a lot of cases. He worried if its delayed a year. Once you get people in entitlement, you never get them out. He p wanted to get it started, right . If the program blows up because the people dont sign up, then the programs not going to move ahead either all that well. So they delayed it a year . I would have if i would have been in their seat. But im not in charge and they couldnt politically republicans were telling them to so they definitely couldnt. And the politics got in the way of a Good Business decision. This is going to be 2017, 2016 i think the bigger issue for folks to think about is private exchanges have kicked off as a result of the private sector innovating against the law. And as these private exchanges move ahead and good experiences in a lot of cases, well be launching a number of them. Well be in 15 this year alone. Youll start to attract people to a different kind of marketplace. What will that do to the public exchanges over time . And how will that work . We had toby crossgrove in the last month, and he said theyve announced a big cutting plan. Others are doing the same thing. Should we look at that as a good thing or a bad thing . I think its a good thing. I think we need to redo the capacity of the system. And the only way that will happen is through economic events. When we see big headlines i thought the Cleveland Clinic was one of the examples. If its affecting them too. And theyre to the point where they have to have massive layoffs. This is going to be a messy and difficult time. I think were going to have to let it shake out. If we were to do it rationally and stand back and say how do we fix the capacity of the system and how would we plan to move ahead . Thats what we had in the 70s with Health Systems planners and we got rid of them because they got in the way of economic progress. I think well have a messy situation and therell be a lot of casualties as a result in the system. When we see headlines in the next year or two, i imagine we will see lots of them. Different health plans are cutting back, different hospitals. We should say this is what it takes to shrink the system and we want the system to be shrunk. There was an article in the new york times, article yesterday about generics and the cost of generics at broad and cost of generics here. Those type of headlines ultimately, good, bad . We have to rebuild the system. From the ground up. Unfortunately, weve got a system in play. How much capacity do you take out . Some say 30 of what we spend every year is waste. Do you believe that . Yes. So if you think about that 2. 7 trillion well spend in the last year on health care, 30 of thats 810. We have two things going on. Were shrinking the system so we dont have as large of debt, the bad news is, those people dont have jobs either and either have to be retrained to do something else. What happens to them . Heres how i would approach the system if we were to fix it. Let me relate this back to the debt discussion. Both parties are right in what theyre trying to accomplish. The democrats believe we need to create entitlement programs and spend to help those less fortunate and damaged by this current economy. Thats true. The republicans saying were spending too much money, thats going to affect our economy. Thats true. If you put the two thoughts together, the only way you do this is to fix entitlements. Make them work better. If you were to take medicare, which by law and structure and charter does not allow the government to get in between the patient and the physician and structure programs that change the system that affects care. If we were to go at the system and say lets change the revenue model, lets put a budget in place, lets do it with the private sector, medicare becomes a blocking fullback going through the line. The health plans follow behind and we restructure the revenue model in the business over the next 18 to 24 months. Huge change. The second is that 5 of the medicare population drives 43 of the 550 billion we spent on health care. Those were largely unmanaged. Half of them below 65 and if we get them into better programs, managing them more tightly, passively enrolling them in programs that get the care right, if we have an impact there, cut 20 of that, youve got 110 billion a year that go back to the system. Those are two places i would start. And the third is the Affordable Care act needs to be touched. Congress runs medicare, by the way, i should note by virtue of the law. If we fix the Affordable Care act with a few changes, those programs could begin to restructure health care entitlements. Where have you been the last year . Spending his time overseas. Real quick, this issue, i dont know if its on the table anymore about medical devices and the tax on medical devices. What should happen there . I think if youre going to fix the Affordable Care act, you get more flexibility, get rid of the Health Insurance taxes, the medical device taxes, everybodys paying taxes on their premiums. Its all being passed through to the customer. If we fix, again, the underlying entitlement, 810 billion a year, you could pay for the Affordable Care act and reduce the debt by almost 35 if we actually got those two parameters without raising taxes at all. Let me ask you this, things are the way they are for a reason always. So youre suggesting that up to 30 of the total health care spend is an efficiency and lack of focus in terms of how we manage programs. Who are the constituencies that keep that in place . Its the interest in the Health Care System today so you need to change the revenue model. You need to say this is the budget. This is what were going to spend on health care. And if we go after the sickest in the United States and make them make a program thats better for them and we change the revenue model so youre rewarded by putting people into the lowest cost venue of the lowest cost providers that are effective for them, we start to change the cost structure of the industry and thats where the reemployment begins. Were going to need people in the homes working with people and technology to help them stay home and stay healthier. Okay. Thank you for coming in. Thanks, good to be here. Coming up, much more from our guest host, dick parsons. Netflix shares trading higher on rumors of a new partnership. That story after the break. N a. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Welcome back to squawk box, everyone. Were going to keep an eye on shares of netflix today. Making Online Video Service available as an app onset top boxes. The tv providers reportedly includes cnbc parent comcast and sudden link communications. Netflix recently announced a similar deal with virgin media. We have much more coming today from our guest host. Dick parsons, stick around, squawk box will be right back. vo you are a business pro. Maestro of project management. Baron of the buildout. You need a permit. To be this awesome. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. aaron purrrfect. vo meeeow, business pro. Meeeow. Go national. Go like a pro. 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 this morning. Were going to have more now from our guest host. Dick parsons, also the former ceo and chairman of time warner. And the conversation we were just having around the table right now its hard to produce this show because you just did a story over there. It was a story becky was talking about over there. Which i liked because i dont want to hate netflix. You said why cant comcast have then we can all just get along and share the revenue. I wish netflix had never been invented so comcast had all the stuff they had on xfinity and i wouldnt need netflix. The question, why didnt it happen . Because first of all, netflix is not new. Its been around for a long time and evolved into the space. Ive got to go to my play station to well, its all about the economics. Ultimately if netflix has both the market clout and the economics, theyll get on the set top box. Well be fenemies at that point, right . You wont be frenemies. Friends . Youll be friends. That market cap, it should have been on comcast. You think it should have been on comcast . Yeah. But theres an argument that thats what i said during the break, they started well, you need to say it again. They have great mountains and good skiing . No, they were an upstart. Nobody thought of them as a competitive threat. Now people think of them as a competitive threat. To a certain extent, thats true. The big guys all have deep suspicion about the other big guys and a new Service Comes along when netflix first started, they werent a threat to any of the big guys and now that theyre larger, the issue is, you know, how do we expect friends and thats all about the economics. Youre right, when netflix first started, they had off window times. They got to movies, but six months down the road. They werent a threat to hbo, they werent a threat to the pay services, to the big Cable Companies. And then as they got stronger, they sort of closed all of those distances. And now, you need to contend with it. And who has the bargaining upper hand here . I would like to hit one where i go to on demand. Id like to see netflix in there and go like that. Everybody always underestimates the Cable Companies. Theyre the incumbent, theyve got the inhome presence, theyve got the clout. Netflix, we ought to be able to get a deal. What happens to a company you spun off, Time Warner Cable . Its grown you think it gets bought out . I dont think so. Its twice the size. Do you think it it gets bought out by anybody . No. We always kind of figured wed end up in a place with two major telcos and two major Cable Companies. There are now two major telcos. I think the two major Cable Companies. Time warner and comcast. And everyone else gets merged into those . Ultimately. Thats my view. And the folks in washington allow that to happen . I think so. I think so. Its a lot of other things that to happen . I think so. There are a lot of other things going on . Folks in washington have problems right now. Thats not imminent. Thats not today. I think thats where it is going. These are scale businesses. You need to have a certain amount of scale and a certain amount of competition. There is room in the market for two big telecoms and two big Cable Companies time ink, the spinoff of the magazine, would you invest in the publicly traded version of time inc . I would. I think. People always told me that eventually the same thing is going to happen to the movie business, magazine business, tv business. I dont believe that. I think that publishing, the value ad is twofold. One is the distribution value ad which has been disrupted by the internet and digital technology. The other is editorial value. You cant dingitize what she does. That editorial aspect or compontent is not represent cli kabul. You still think you can charge a premium . Yes. Another quick break. Thats a good answer for becky, and those that apply a little bit of a trade in print. More from dick parsons. Gulf oil is posting record production numbers. We have more on that story when we return. Tomorrow on squawk box, lee on cooperman will join us for an hour and then an exclusive interview with hedge fund guru, david, tepper. You cant afford to miss squawk box tomorrow at 6 00 a. M. Eastern. Welcome back to squawk box. Take a look at the futures right now. We are pointing to a red open. Dow, off about five points, the s p, 10 points. We have headlines for you. The increase in north American Oil Production expected to chip away at opexs market share. The iae estimates that saudi, kuwait and the uae and qatar set production records in the last three months. In september, it accounted for 18 of global demand, a level matched only twice since the 1980s. The Sandra Bullock George Clooney thriller, gravity remained atop the movie board. The new drama starring tom hanks was topped by it. You can choose your own seat online. Our guest host, former citigroup chairman, dick parsons. Were going to give him the last word when squawk box returns. O way were going to let them die. Like they helped millions of others. By listening. Planning. Working one on one. Thats what Ameriprise Financial does. Thats what they can do with you. Thats how ameriprise puts more within reach. [ male announcer ] the parking lot helps by letting us know whos coming. The carts keep everyone on the right track. The power tools introduce themselves. All the bits and bulbs keep themselves stocked. And the doors even handle the checkout so we can work on that thing thats stuck in the thing. [ female announcer ] today, cisco is connecting the internet of everything. So everyone goes home happy. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Back with dick parsons. Jamie dimon, great bank ceo, a witch hunt or overrated . If you were chairman of jpmorgan, would you be wondering about whether you need to replace him at this point . No, i wouldnt. Jamie is terrific, a gooden ma. I dont think he is overrated. I just think that the banks are in the penalty box. They have been for the last four or five years. Bank . Banks. Dont you think they are being singled out a little bit here . They are at the moment. Citi was for a while when i was there. Fortunately, for us but not for j. P. , the puck moved. Right now you didnt say anything bad about the white house. You have to play these things like they lay. He acquired it is not so much j. P. And franchise. He acquired bear stearns and those things have kind of blown up in terms of the problems he has right now. Jamie is terrific and they are lucky to have him. There you go. A lot of questions about that. He just settled it. Well, weve had a lot of people settle it and it stays unsettled. Now that there is a 23 billion price tag for the piggy bank out there. Dick, thank you so much for joining us today. It was fun. That does it for us today. Make sure you join us tomorrow. Right now, it is time for squawk on the street. Good monday morning. Welcome to squawk on the street. Im Carl Quintanilla with david faber and kelly evans and the new york stock exchange. Cramer is off today. We are in day 14 of the Government Shutdown. Futures are down. What appeared to be promising talks heading into the weekend. The debt limit expires on thursday. The bond markets are closed for the columbus day holiday. Europe is giving up some ground. Our road map begins with the risk of the u. S