Citizens of new zealand. In auckland, this is where theyre celebrating new years. The light just went down. All you hobbits out there, we wish you a very happy new year. Its coming our way a little later. There go the fireworks. Yeah, it is officially new years eve. 18 hours ahead of us. Happy 2013 to those folks just a few hours away from us. Good morning, everybody. Im becky quick along with Andrew Ross Sorkin. Joe kernen is joining us from washington, d. C. This morning along with john harwood. Joe, i know you have a huge lineup there. And i know you were up a little late last night, too, right . Yes, becky, very late. You and andrew, i hope you guys are ready for the heavy lifting. Can i ask you a question . Are they over the cliff in new zealand, do you know . Yeah, i guess thats it. The sequester would have gone into effect. No, thats probably only affecting us here, but that shows you how close it is. We are i guess something could happen at 11 00. Well see, beck. Andrew, good to see you, as well. Good to see you. Weve switched. Ive got the jacket on, youve got the jacket off. How does that Capital Building look . It looks great behind you. You look very statesman like, absolutely. You have your rise above pin on for this final day. He looks like a senator. You do have a senatorial look. Im going to retire to the rise above when we Start Talking about the debt ceiling. We may need a whole new branding campaign. Anyway, john harwood is here. Its coming down to lawmakers to try to rise above. Were going do discuss many different angles. Coming up in the next few minutes, Shelly Capito and greg meeks of new york. In the next hour, tom cole, tom price and Chris Van Hollen. Then at 8 00 a. M. Eastern, senator ron johnson and bob corker. President obama issued a warning on meet the press. On midnight, december 31st, if congress doesnt act, then everybodys taxes go up. And for the average family, that could mean a loss of 2,000 in income. For the entire economy, that means consumers have a lot less money to make purchases, which means businesses are going to have a lot less customers, which means that theyre less likely to hire and the whole economy could slow down at a time when the economy is starting to pick up. But after it was all said and done, leaders on the senate floor couldnt get anything done, at least not yet. Theres no single issue that remains an impossible Sticking Point. The Sticking Point appears to be a willingness and interest or frankly the courage to close the deal. I want everyone to know, im willing to get this done, but i need a dance partner. This morning, weve been trying to come up with some counteroffice to my friends proposal. We havent been able to do that. Ive had a number of conversations with the president and at this stage, were not able to make the counteroffer. Thats joe biden, i believe. The house will meet at 9 00 a. M. For legislative business. I heard one rally as i was leaving and that was bring in rg3. Im ready to bring in one other rookie. If you need an adoptive team, i suggest the redskins. Those two rookies, unbelievable. I didnt stay up to watch the whole game. I did, in fact. Exiting the stadium, wow, there i think these fans started tailgating at, like, 8 00 in the morning and i think they were tailgating, as they say, all day long. Joe, youre bringing tears to my eyes. Talking about rg3. Oh, yeah. It was great. It was great. And i guess thats what it is. I hear people talking about john wheaton and comfortable in that fancy box you were in . I was very comfortable in that fancy box i was in. I was comfortable. Do you want me to show you how comfortable i was . What have you got . Right here, baby. Redskins pajama pants. I was watching the game in these. John, thank you for not wearing those in today. I thought about wearing them on the bottom of the suit. If i was a better fan, i would do that. Oh, my god, theres a pouch in back. Though, its not. Im sorry. Your jammies. Anyway, you guys can handle a lot of the heavy lifting today, please, after about a you look good, joe. You dont look worse for the wear. How late did it go . I think we were like after 12 00. 12 30. You were tweeting me after 12 00. Why was he up . Oh, i know why you were at. I assume you continued the tailgating after that, then. No. But i definitely got behind some of the other i mean, i was not quite up to snuff with some of the other fans as we were exiting. Those guys had been at it a little longer than you have . Jae. You definitely dont want to say, hey, watch it, buddy. Go redskins, right, and get out of the way . Right. Its more dangerous to go to a game in philly. Is it, really . Yeah. They throw batteries and becky, im sorry about rutgers again. We didnt get to talk about that. Three straight disappointments. Theres always next year. Are you ready for the big ready for notre dame. We have notre dame coming up, too. Something else to look forward to. Do you guys see any lawmakers . Are you for notre dame over the tide . Yeah. Sorry, beck. Did you guys see any lawmaker else at the game last night . Any senators or congressmen . Sflo no current ones. I was looking around for that. Would it really matter . No, its just bad optics. If youre sitting there sitting on your hands you should sit on your hands in your office, right . All right. Were going to continue talking about all this. As we said, we are about to go over the fiscal cliff. If a deal is not reached to avoid the fiscal cli by january 2nd, automatic domestic and military spending cuts will kick in and the pentagon will be forced to cut 9 million in spending. If lawmakers cant avoid the fiscal cliff, they may be able to avoid a different cliff, the dairy cliff. House and Senate Members appear likely to extend farm legislation for a year, a deal that would keep milk prices skyrocketing in january. We were worried about 6 gallon of milk. It could keep a decades old subsidy from coming back to life. The usda would be forced to buy milk at prices well above what farmers were getting now if the subsidy was revived. It could double the price of moib to 6. 12 a gallon. Markets have been reacting to each move on capitol hill, but obviously, things at this point are looking like the dow would open down by about 7. 5 points. The dow is off 67 points and the nasdaq is down 14. 75 points. All the surprised given the late hour that even if something doesnt happen today, it happens in two or three days. Right. So if you were looking for a Market Reaction because a lot of the market iraqis weve heard has said, if highways the case, near not getting it base odd what theyre going to see this morning. Based on where we were on friday after the market closed, the dow at that point was actually up yeartodate by about 5. 9 . Russell 2,000 did very well. It was up by better than 12 . Well continue to watch this closely today. The one group that you might see interested in seeing a drop in some of these nebs today would be any fun manager who is interested in trying to make sure his fund beats the market performance. If you see a big dip today, its good news for those people. I see a lot of people who say if there is a drop, they think theyll be jumping in to pick up the pieces. Im not sure how far things could end up falling. And its not just today, its beyond that. Take a look at oil. Right now, oil down by about 25 cents. 90. 55. And the tenyear notoriety now is yielding 1. 711 . The dollar has been hanging in there, too. The dollar is up against the euro and the yen today. Right now, the euro is at 131. 93. And gold prices, go the gold has at this point gone up about 8. 90, 1,664. 80 an ounce. By the way, we have jim oneill coming up in just a moment. We also have pimcos mow hammel elerian. Steve sedgwick is standing by in london right now. How are things standing by there . Its a very quiet session as we saw last week on the u. S. And the european incidentsies. Despite the fact that the vix in the United States and the vstocks and the various volatility measures on this side of the atlantic remain elevated. Despite that, were not seeing a lot of oscillation on the back of, as you said, the fiscal cliff and concerns that we may fall off. Does that mean that people are getting complacent . They think even though we might not get a deal in the next 24 hours, we will get a deal fairly imminently. In the meantime, though, this is what weve got in terms of the major european indices. That will open and the germans will come to that in a few minutes time it has been up yeartodate around about 6 and that makes the ftse 100 a real lagger compared with some of its european peers. A laggard, as well, compared to the cac 40. We have no fiscal cliff deal as of yet and it is up 1 . That means the cac 40, the french equity market, the blue chips there are up over 15 yeartodate. And a lot of markets are being shut today, including the dax, it pales to insignificant compared to this. The dax when it closed on friday closed out a 29 increase yeartodate. A stunning performance from those german blue chips, especially when you consider the fact that we are in and out of recession in europe, we have a real malaise in front of a lot of sectors such as the carmakeres and that hasnt stopped the likes of vw, the likes of porsche, the likes of bmw having a very strong 2012. Thats despite the fact that gms opel said it will cut capacity by 20 in 2013. So we are seeing at the moment a real complacency regarding the fiscal cliff, but its low volumes here as we enter the last hour or so of trading. Back to you. We also have some news to bring you, broken last night. I expect john harwood talked about it on the special that we did last night. Secretary of state Hillary Clinton is in a New York Hospital this morning being treated from a blood clt clot resulting from a concussion you suffered earlier this month. She had been expected to return to work this week. Coming up, deal or no deal . Were going to look beyond the fiscal cliff and what it will mean for the markets. We have jim oneill. Hes going to join us to talk about whether he is bullish for the start of 2013 and how much the fiscal cliff is playing into his outlook. Welcome back to squawk box this morning. Take a look at futures for the day, the s p is up a little over 7 points as we await to see what happens with the fiscal cliff. It is the last trading day of the year. How will the global marketses react to our domestic drama . Calling in right now on the squawk news line is jim oneill. Its great to be speaking with you this morning. I know we made it through the mayan apocalypse, but will we make it three through the fiscal cliff, as well . Gosh, i dont know. I keep exchanging my mind about this every day in the past week. What is quite encouraging in a way is that other markets around the world, other important mark particular are trading so much of their own issues that the disappointment in the u. S. Has not affected them at all. And while europe has given a bit back, its barely noticeable. The markets, at least for now, are treeding this as pretty much a domestic affair or as is the case throughout the u. S. , an assumption that something will happen later today that will allow it to but, you know, it comes against the background that there is a rotation of stock market leadership shifting away from the u. S. The u. S. , the s p led the worlds market rally in 2012. But as we come to the end of the year, even without the fiscal cliff, theres evidence that the markets are taking over leadership. That would be my guess for the early part of 2013. Almost irrespective of what goes on with the fiscal cliff. You know, jim, i was watching our futures this morning. Right now, it looks like the dow would open down about 65 or 70 points. Thats the good news, that the market would shrug this off that there will be a deal reached either later today or in the next few days. Weve been expecting all along that it would take a big reaction in the markets to get any serious action in washington. If theyre not seeing that, that may make it less likely for them to reach any sort of a grand deal. In fact, a grand deal at this point is probably off the table. What does that mean for the next three to six months for the u. S. Markets . Yeah. Waiting to come on the show, i was looking at a chart of the various u. S. Markets going back since before the election. And which have sort of gone through some phases. In a way, the markets have sort of factored in from the first immediate period following the election a big deal to resolve the situation in the u. S. Is not going to happen. The lying fiscal challenges in the u. S. Are not going to be resolved anytime soon. That would be a big surprise and, obviously, if it was one that appeared that didnt damage the economy, that would be enough. But i think most people are resigned to democracy and maybe this is a broader issue about western democracy. Unless the markets do put governments under pressure, its not easy to come up with such tough positions and i suspect that is going to be the case. It will be a recurring theme through the year, i suspect. And thats what i was going to suggest, this idea that were going to come up with cliff after cliff after cliff, that maybe were into a whole year of cliff diving, your expectation, lets say we get through the cliff with a baby deal. Weve had still a number of economists come on this set and talk about how we could still be maybe not in a recession, but continue to see a slowdown. Well, the other way ive been trying to think about the past 24 hours, you look at the private sector, there are two sources of great encouragement for the u. S. Economy, it seems to me. One is the domestic housing story. And the second is, of course, the remarkable thing going on with energy based around shale, gas and oil. If these two sources of strength persist, you know, is the disappointment about the cliff enough to negate those two things . I suspect the answer is probably not. What it might mean is the difference between an economy thats going in the 2 vicinity of one that could, if a credible deal unleached from the korcht sector and beyond, one that could get back to what most people were if not normal, think of the old one in the 3 vicinity. Jim, to the extent a client were to call you today and say, look, the market is dounl a little bit and who knows if it will be later today. Do us this is a buying opportunity, then . Well, you know, because i look at, obviously, things in such a global context, in any case, because the u. S. Market has rallied so much from 2009, and as you guys, i hope, recall, ive been in the bull camp ever since, measures of valuation in particular socalled capital adjusted p e ratio tight model which is a very conservative approach. The u. S. Market isnt cheap any more. I dont think the u. S. Market itself is going to be the sense of Global ActionGoing Forward and particularly whats going on policywise in japan and the whole trade. Fascinating to see china hit a few weeks post leadership changes, first time this year the markets had more than 10 rally there. And the signs of europes issues being if not resolved, certainly more minimized in terms of stress. So i think were going tothz a lot clearer signs of powerful rallies coming from the rest of the world in 2013 which will make it somewhat different than 2012 and to some extent the previous two years, as well. Joe is down in washington wauchg all of this first hand and i know he has a question for you, as well, jim. Feeling all the Different Things coming in. That must be a real challenge for you being down in d. C. How did you get that straw . Yeah, it is. I can take it for about 24 hours. I am feeling a lot of whats happening. And in the last 2 1 2 years or so, the poisoned atmosphere down here just to try and do anything is becoming really apparent. We put the sequester because it was so hard to try and do anything last time to force us, now were not really inclined to do it again. My question, even if we do get a deal, a lot of the extra tax money we get is probably going to help off set the sequester. Is there a day of reckoning, jim, and i read krugman today who, you know, now hes mad at Howard Schultz because he wants to, i dont know, do something with the deficit near term. Can we go another five years without having some kind of reckoning in the bond market or somewhere else . You know, the European Crisis has been quite instructive for my mind in this. But the reality is democracies dont really take tough decisions until theyre put under enormous pressure from some external factor, in this case, the stock market. I find myself and i still think it today that oddly in the events of europe come out of the germans next door with something much more clear about a nurch path of the eurozone, and so people did start to believe the euro is a true global reserve currency to compete with the u. S. , that might be the point where the u. S. Starts to come under sear use pressure from the markets. Of course wrb to some degree, the past well, longer, going back to august of last year, the u. S. Had this strange benefit that this persisting European Crisis is around and sort of Global Investors cant deal with two huge clem mas at the same time. But i think that would seem to me the period where things become more specifically risky for the u. S. And it may well be that until the bond Market Forces the pressure, where is the incentive for politicians to take tough decisions . Jim, if thats the case, weve been watching the euro and its been hard to understand why its been so strong against the dollar. What do you think happens to the dollar if we get a year down the road or further and it looks like europes problems arent as big as they are today . Then what happens . You know, i think the dollar outlook is looking is quite mixed. Because theres various forces going on all over the world. It does seem to me that the draghi moments earlier this year, i thought within minutes of seeing it and i believe since that that was a major changing point, at least in terms of investors, instead of selling the bad news, as you know, the buy on the bad news dips in the euro area because the europeans and the german ves supported the ecb, despite the controversy. Basically, theyre going to do whatever is necessary to keep this thing in existence. And i think out the margin, it is already making investors around the world, including some very conservative and large ones i know, think that europe is now a better place to invest than the u. S. And i suspect that picture could slowly build more and more, which might seem odd to some of your viewers and listeners, but that would be my suspicion as