Strategies and former White House Press secretary and Gerald Bernstein former economic adviser to Vice President joe biden. Gentlemen, thank you for being here with us and getting this special day of coverage kicked off for us. Rising early and rising above. Exactly. Lets talk about this. Jared, it seems like things have gotten quieter. Do you think thats the case . Is that a good sign . I think its probably a pretty good sign. If you look at this mornings papers, you see a number of articles suggesting that theres a bit more compromise in the air. My concern is that tomorrows papers may say the opposite. So interestingly, theres been some pretty leak free discussions going on, which i actually think is a good thing. Theyre obviously big, outstanding questions. You mentioned the tax rate issue. One question i keep coming up against is the president and john boehner are now supposedly having good, substantive discussions. Can boehner bring the troops along . If he agrees with the president , can he get enough Tea Party Republicans behind him to sale the deal . Because that wasnt the case back in 2011. And, tony, i have to say, both sides seem to have really with all the rhetoric weve had leading up to today, it seems to me that both sides have rallied up their bases and i have questions about whether either of them can deliver. Yeah. I think it makes it really difficult. Jared is right, you know, you talk about each element of what an agreement might be. Some of them are really big water fall kinds of issues, right . And the rate issue is a water fall kind of issue. You dont meet in the middle. You have to go over and everybody go off the water fall together. Wait a second. Is there a proposal that could be met which would say were going to raise income tax rates, but were not going to go back to 39. 6 . Maybe 37 . It is possible, but still it is movement on marginal tax rates, which fundamentally republicans disagree with. They dont believe they should move on marginal tax rates. That makes it very, very difficult. That makes it a water fall issue, a philosophical movement for republicans. Now, is there a price that can be put together that to convince republicans that that is a price worth paying . Its possible. You know, they gave a price on revenues, but not on the question of rates. We havent seen any specifics on what that would be. They would want to see movement on longterm entitlement programs. No one has seen a plan on long ter. And thats the thing that boehners office is discussing. Exactly. And theres two points there off of tonys observations. First of all, it is possible that you go over the cliff, rates reset, 396. Then they come back a point or two and everybody declares victory. Now, i get that that is sillily because whats the point of going over the cliff if you can work it out a few days later . Why not not go over the cliff . But the tax rates reset. But then they come down and everybody declares victory. This is how washington operates and this is such a crazy thing that Grover Norquist can say i look, i actually think this is all crazy, right . Its all crazy to do tax policy this way. Tax policy is really big. My preference would be that we actually go back into the clinton tax rate. Its a much better place to do tax reform. You mean for everybody. Right. We have frightened everybody that its, you know, a scary place to be in the clinton tax rates now. Its not the tax policy i would prefer for the country, but it is a much better base for going and doing retax reform and doing it in regular order, right . And its a tax structure that did the economy very well as well as the fiscal budget which, of course, is in temperature plus. I read this morning in the paper something about negotiators are finally getting serious or Something Like that. Its the central 11. Why not get serious last september . I think it was david reubenstein maybe who said something about i think were going to have a deal sooner rather than later and its not going to be too close to the new year. Its later. It is later. How does this play out now . Also, ive talked to some senators who said, yeah, they are expected to be here. Maybe they go home for Christmas Eve and christmas but then theyre back home and its back in session. So this will be cutting down to the wire, maybe down to the very end . I was surprised that david reebenstein said that. Negotiations always come down to the wire. Especially if a side has to give in on a principled position, it has to be the last thing thats given. Are both sides going to have to give on a principled position or does the president have the upper hand because of the elections . I think both sides are going to have to give in. Is there an issue where you agree with one and you kick the can down the road . If they agree to anything on tax revenue or rates, thats immediate, day one revenue collecting, right . But all we have on spending cuts and especially the entitlement programs are promises to achieve something on the spending side sometime down the road. Right. I had something something that senator warner had throne out the idea that Social Security should be delinked from all this. And senator warner is a fine man and i think a lot of people trust him, but i think theres a sense that, wait a second, we dont want to decouple this. We dont want to split the two. I think he has a point in the following sense. These social insurance programs, the entitlement programs, medicare and Social Security, these are very big, very important programs to people. And the idea that youre jam negotiations on these programs doesnt make a lot of sense. Yeah, but we knew this was coming. So i agree with that. So i think that the changes we should be making over the past actually, it may may changes, would be a better top line. Were going to agree to make this amount of savings. For example, democrats dont like this and i dont think its a good idea, but the change cpi or the increased in eligibility age, it means testing. These are framework issues. I dont like any of that. But the agreement on the commitment to include something on those types of reforms. Yeah. I think that that kind of thing would move the negotiations forward. On a policy basis, neither the changed cpi nor the increased eligibility age make much sense to me. But you are willing to say even though this doesnt make sense to me, im not going to get everything i want . Marginal cash rates dont make sense. But you guys are willing to say yes, we will do that at this point . I am. I know tony is. If youre going to compromise, put yourself on the table. Gentlemen, we want to thank you very much for kicking off this special day of coverage with us. Its great talking to both of you. As we mentioned, our special Critical Mission is all day long. Coming up next hour, we will be sitting down with jeff henserling of texas. Right now, lets bring in our coworkers, joe kernen and Andrew Ross Sorkin. Thank you. Good to see you. Good to see you, too. It wag something to see when we well, im not going to go into it. But we hugged it out. A big bro man. The only thing is, you werent here, which made it bittersweet. Well have her back tomorrow. We will. Well see you tomorrow. We hope you had a good trip down on the amtrak. I did. Hopefully you had the bison chili. No. There was no bison chili this time. It was steak or a shrimp pasta or really . Yeah. Ive had the shrimp pasta. I had the salad. I wont eat bison anywhere but on the amtrak. Sound policy. Well have more from becky and jim cramer will join her in d. C. For now, lets get up on the mornings top stories. The fed is hold ago twoday meeting in washington and a News Conference by bernanke is set for tomorrow afternoon. Operation twist expires at the end of this month. The central bank is expected to maintain its purchase of bonds with longer maturities. And well talk more about expectations for what were going to hear tomorrow, in the next hour, when Steve Liesman will join us with results of our fed survey. An oh beck minister, important events. Opec ministers are in vienna. Why vienna, by the way . I dont know why they originally set it there, but it seems like as good a place as any. Have you been . I have not been. I dont think ive ever been to vienna. I always wondered about that. I mean, its better than meeting in, i dont know, skokie, right . Theyre expected to retain its 28 million barrel a day output target. But the real drama is likely to be about leadership, the worlds leading Oil Exporters are expected to argue about who should be opecs next secretary general and we have candidates from iran, iraq and saudi ara a arabia. Theyre all competing to replace the current leader, as you can see there. Abdallah salem el badri, hes 72 years old and hes been there for years. I dont know where ive been for five years, but did you know i apologize in advance. I didnt. You could have said you did and weve been best friends, in fact. Hes completely changed the entire operation. Anyway, did a great job. In Global Market news this morning, stocks in asia, closed mixed today. Investors waiting to see what comes out of the fiscal cliff negotiations and in europe, a choppy start to the trading day. Investors are waiting for the results of greeces Bond Buyback Program occurs. Joe has some of the big Corporate News and this one is actually a Global Corporate story. Hsbc. Were talking about paying 1. 9 billion in the money lawnering lapses. A brirchb lender admitting to a breakdown of controls, in a statement announcing a deferred payment. Yesterday Standard Chartered agreed to pay 27 million agreeing that it violates sanctions against iran and two other international companies. If youre an International Bank and you prael without getting into this kind of trouble . No. Can you actually operate without Money Laundering . Im just saying, if youre going to be in business in all these types of markets, isnt this going to happen . Arent there sxwier countries that would be probably that it would stead if you dont want any business tale. Was there a fascination in this country about whether you want to indict the whole institution or what happens systemically. Is this your sequel . I was on the phone last night. One of the two publishers that are left. We have other news on wall street this morning, Morgan Stanley said to be considering asking the fed to hold permission to hold a share buyback. The wall street journal reporting that the official request could come in early january when the bank is due to hand over iback tests as part of its buybacks. The company has no purchase requested to give to you. For four years after that, 182 billion buyback. The government offering more than 230 million in shares. The price represents a 2. 6 discount. Aig closed yesterday. It will raise 7. 6 billion. In a statement, treasurys former chief reinstruct during officers jim millstien says no tax player should be pleased with the government had to rescue this company, but all taxpayers should be pleased with todays anounlsment ending the largest of the industry bailouts. But the way, that profit now looking to be about 15. 2 billion and people did not expect that we would ever make money on in deal. I dont know if that makes the deal any better. I dont know if all of the anger and frustration that people have had, that people say, okay, we had a profit and were okay with it. Are you okay with it . Im okay with it, yeah. I feel better. I know you havent seen this movie, but mr. Smith on goes to washington. He said for so long where were you looking at on the screen . I was just reading it. I dont know. You guys of lost me on that last one. Aig said et wasnt that interested . Aig, yeah, what are you going to do . Its good to be back. See you. Lets check on the markets. The one story i thought was interesting today and not only sort of a commentary of what with do for a living, but how hard it is to be a stockbroker right now. You go over the things that people are concerned with when they talk to their Financial Adviser and the list is endless. And one client, this is right at the beginning of the article, he just drew a picture. He said, this is what i feel like being in the stock market right now. And that is, you know, after two really big spot selloffs and then a financial crisis. People are still not over this. Theyre not desensitized from the worry of there could be a significant break at any time. Do you want them to be is he sensitized . Yeah. And then it climbs another wall of worry. Desensitized means not being so worried that they dont go into the market at all. People, the individual investor because of whatever. Not trusting markets, High Frequency trading, the financial crisis, very, very difficult. Very weary. And were seeing it in the action in the markets. Were seeing it in the interest in the stock markets and everything else. Anyway, markets ended up 14 points yesterday. Theyre indicated up about, what did it say, about 20 points . Were up 20, but fair value is down 20. So were actually looking for an opening up of about 49 points. Coming up, why netflix could end up doomed with its success with children. But next, the unmanned bshuttle this afternoon. The unmanned mini shuttle will spend months in eithers orbit before returning to land on the Kennedy Space centers runway. But forecasters are now predicting a 70 chance of not launching today due to expected lightning, thick clouds and bad weather. We might be having this conversation again tomorrow. Announcer tomorrow, squawk box exclusive coverage of the New York Times conference. Investing, the economy and the looming fiscal cliff. Jpmorgan chairman ceo jamie dimon. Carlyle group cofounder David Rubenstein and a lot more. And it all starts tomorrow at 6 00 a. M. Eastern on squawk box. [ male announcer ] how can power consumption in china, impact wool exports from new zealand, textile production in spain, and the use of medical technology in the u. S. . At t. Rowe price, we understand the connections of a complex, global economy. Its just one reason over 75 of our mutual funds beat their 10year lipper average. T. Rowe price. Invest with confidence. Request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing. Welcome back to squawk. Happy monday. Today in the wall street journal suggesting netflix could end up doomed with its success with children. Netflix just for kids get more popular. Companies like viacom get accurate. Companies provide netflix with most of its content in a kids focused section. The journal says at some point the suppliers will probably want to charge netflix more or they might even stop selling to netflix. Thats been a huge problem for them when it comes to contend more broadly. Time for the Global Markets report. Kelly evans standing by in london. You rise above over there, kelly. Is it vienna, bernanke . What is most what do you think is most important to you . It has to be what its whats happening in washington, isnt it . No. I say its up there, top thee, but also on the top three is whats happening with italian politics. Of course, mario monti saying he was going to resign as italys prime minister. That paves the way for flesh elections to be called in the beginning of next year. Yesterday, we saw the negative reaction. Sylvia berlusconi wants to make his return on the political scene. Today, we saw a bounce back. If you can see see bind me, the bank stocks in italy rerebound, but its only in the range of. 5 to 1 of these names which were down in some cases nearly 10 yesterday. If you take a quick look at european bourses, if thats possible, down near the ftse mib, this is the one selling off somewhere in the range of 3. 5 yesterday. Today its adding about. 8 . In spain, showing a nice rebound. Same attitude listing peripheral debt. We can take a look there. Italy and spain seeing prices rise, yields falling to 4. 75 and 5. 75 respectively. Is investor attention returning to spain . Here is the thing. Italy is the third biggest Government Debt market in the world. Its the third biggest economy in the eurozone. Whatever happens with its political situation could put neighboring pressure on spain. The main thing to keep an eye on here is whether spain comes back into the markets cross hairs. We saw today an auction go up reasonably well. Were looking for the country still needing to raise significant amounts of money into the new year. And in a final reminder of the ten ewe yigz situation, greece had to extend the time frame of its own buyback of debt to the end of today. For the most part, despite these gyrations and despite berlusconi accusing monti of bad policy, markets are shruggedel it off after serious losses yesterday. The way its clear for attention to be focused, i will say, on the fiscal cliff in the u. S. Today. Yeah. Italy is important. Its a big economy. We dont you know, compared to whats going on over here i missed mario monti on vacation. You missed him on vacation . No, i missed oh, you missed the story. It was huge. When i was there a year ago, i asked what do those posters say . And it was a picture of him in a beach chair. It said send monti to the beach. It doesnt take long to get how long is the average government in italy . I dont know. Is kelly evans still with us . Shes gone. Thats about as long as a her report is about as long as the average government. But they have a figure. Lets head to eric fisher on todays weather forecast. Maybe he has the answer. Eric. Unfortunately not, guys. I know the weather changes quickly, and thats my business here. I dont deal with the Italian Government too much. But what were watching for today too much in items of changes, its colder outside. As soon as you walk out the door, you notice a big change in that cold front. This time yesterday in cincinnati, 17 degrees colder. 30 degrees colder in jackson. Still showers around boston and new york city. Theyll be out of the way fairly quickly. Our main story is florida. Miami, naples, picking up showers and thunderstorms. A half dozen tornados across the so