but i think we get to turn the stable today. we get to ask the questions today so that gives us a little bit of something to -- >> are you going to stonewall or do the -- >> i'm going to do this. oops. >> speak into the microphone. we can't hear you. >> this is as close as we'll probably going to being elected officials. >> well, in your case -- >> i'm surprised i could get in here. who am i, jude law? i'm surprised i could get in here, in fact. >> getting through security this morning, the guard didn't automatically seem to recognize me and joe, but we are already through the x-ray and the guard says, when is becky quick showing up? >> and then he said, don't you know who i am? which was -- you see, i've banned that from my vocabulary. >> they never do. anyway, we're here at a time

when the markets have been -- what a date was yesterday where the s&p and the nasdaq, why it is these milestones tend to happen in tandem.gx >> these are very different gx indices. at the same time, you've got it moving above 2,000, above 9,200x for the dow, above 1,000 for the s&p. these are the highest closing values in the dow and s&p since november. >> was it the time or news or which one was it? >> news woom had the balloon last week saying that the recession is over. not saying that the recession would be an easy one. >> just getting us that close is uncomfortable. >> investors are turning their backs on a lot of the safe havens. the dollar hitting its lowest levels of the year yesterday,  though it's gaining a bit in some early trading. this morning, there is a look at the greenback versus the pound, which is now i believe at a seven-month high versus the

dollar. treasury prices dropped sharply during the session yesterday. there is a look at treasuries yielding about 3.6%. all that, you can see why oil is above $70. >> higher equities, higher oil. >> it wasn't just oil. it was natural gas, copper, gasoline, platinum. >> that doesn't make sense that equities keep going up. i guess it's a reflection of the economy, not something that's it's going to do to the economy down the road at this point. when do you start worrying about the dollar? when does this become not orderly? we're at 1.44 now, lowest on the year. i don't know. i don't know when it becomes negative. >> lowest since september 29th.

>> men time, check out equity futures for this morning. we're going to have some data out today, consupgz and spending, pending home sales at 10:00 a.m. we've got cvs and dr horton reporting before the bell and tonight, kraft and electronic arts but for the meantime, we are negative by about 50 points or so. european markets, down a little bit. the ftse is off about 32. take a look at what asian stocks have done. i think they've put together 13 straight wins, at least on the nikkei, adding another 22 overnight. >> this story i read with great interest this morning. treasury secretary tim geithner, issuing, i think it says, a stern warning to regulators using more than one sxla active during a meeting friday. geithner told the group to end

the battle and back the approximated's reform plan. the wall street journal reports that geithner -- wow, i can't read that. vented frus ragzs about the slow progress and told regulators words, enough is enough and demanding that they stop publicly airing concerns over the potential loss of authority and what i liked about the story was that it was xepletive choice words. >> they didn't say what they were. >> it was a closed door meeting and he's getting animated about the slow pace of what's happening. >> and he works with rahm emanuel and he's trying flying into this the whole time. >> and there was an expectation

that you would see criticism and some pushback but i think they've said at this point, shut up. >> they're worried at this point given some of the bonuses that we could be -- the risky behavior could be back and the bonus structure, which sort of maybe lends itself to that risky behavior has been done. >> what's happened to compensation over the past two months? >> have we lost the momentum in the -- when the was fresh in everyone's minds? >> exactly. today, daniel turullo will be testifying in a room not too far from there one. in prepared testimony, he outlines the central bank's plan to strengthen the investigations of the bank's lending practices and financial health with experts. tarullo plans to tell the fed will explain companies that own finance arms, they should be able to keep them without the government overseeing their

nonbank operations. >> dealing with korchb flikts of interest and police in companies rescued by the government. last month, the agency decided to file suit against regents subsidiary. but in this case, s.e.c. officials realize that not filing suit would have helped protect the government's $3.5 billion investment in the firm. regulators increasingly face egg situations where policing investors can harm taxpayer/owners and in some cases penalties could be paid with t.a.r.p. funds. in an interview with the washington post, the director of the s.e.c.'s division says t.a.r.p. status is unlikely to determine the outcome of a case, but officials do acknowledge they are thinking about the effects about a lot of these news policies. this prompter is really, really far away. >> you know, we pride ourselves on not reading the prompter, anyway.

>> you know, i have two different -- i have byfocals over here. i can't see far out of this one. >> and we don't have paper scripts. >> no. but i do have this machine. but i can't read the machine, either. so this is almost comical. but you know what? i feel more senatorial like this. i may need to yo this. but i get the slightest cloud in the one where i can't see and i'm going to make things up. there could be some good quotes today, inadvertent. the treasury department plans to borrow less than expected in the next quarter. it plans to borrow about $406 billion for the quarter, $109 billion less than it originally estimated. the treasury is forecasting that the government will borrow $1.39 trillion. that's right, trillion with a "t," this year through the end

of september and i double-checked ta to make sure i wasn't making that number up. >> the numbers are important. >> 2 billion. i thought i saw trillion. are you sure inspect. >> sure. >> would $ trillion be enough, do you think? >> that would jump start the auto industry. meantime, former president bill clinton making a surprise visit to north korea overnight trying to win the release of those two jailed u.s. journalists. clinton's trip could mark the country's return to die lomg with the united states about nuclear weapons. a north korea news agency reports the country's chief negotiator was among those greeting mr. clinton. we hope that situation resolves itself soon for the sake of those journalists. >> we have much more to talk

about this morning from washington. meantime, let's check on the cme, see what's happening with the markets after we saw this huge rally continue yesterday. right now standing by tcme is kevin ferry. kevin, warning what's been happening with the markets, every day we say this has to be the end. is that the same thing people are saying on the floor? >> good morning. you've gone to the center of power and gone into complete disarray, i can tell. >> yes. >> so the -- there's certainly enough of that rolling around, becky, that things have kept going. but let's see what happened. i think what you guys were talking about is the main theme down here earlier, and that is that everything went up. and we talked about that in july when i was out there. what they call the correlation coefficient, meaning that it's virtually one. the dollar goes down, the commodities go up. no matter what you were doing, it was running. i think august will be the great differentiation. and so as people start to pick

and choose, i don't think the fed can stand by and watch everything get pumped up this aggressively. >> well, to the great differentiation, what can the fed possibly do to step in and change the entire scenario? >> a very difficult task, but i think that's it. what you're seeing is that you can't have this much support for the credit markets and the financial system and not have it spill out all over the place. so i think that that is positive. obviously, we were coming from a very terrible situation to something that's much more soundly fund based. but now comes the tough decisions, what's going to be supported and what's not. then you'll see how much underpinning to this rally. like joe was saying, how far can you push the dollar down before there's consequences? >> but kevin, you talk about the fed having to act before bernanke or geithner or summers

have indicated they think they're going to have to. >> i think they have to lay the groundwork, becky. they've talked about what they might do. now they to talk about what they're doing getting on the pa path to doing it. i think what needs to happen is the rate structures need to be raised within but not necessarily the availability of credit restricted. that's a delicate situation, something that we haven't seen them accomplish before. but right now and as you saw yesterday, it's off to the races. let's see how the rebalancing take place. i think that's going to be a high volume timt 0.some of the rules that were being applied over the past few months, they're probably going to break down in august. >> you know, this week is probably the last week that the house will be in session. how closely is the floor watching what's happening, not only with the health care department, but with this potential sxang of the cash nor

clukers program? ? i think they'll both be important to one getting done and one not. i think the market has been more in tune with the delay in the big programming, the inability to get things much more done quickly has helped the market. so as you can see, the administration to trying to push from the top down. so, you know, it's been a heck of a run and it's global. last night, the australian central bank finally said that they were going to move away from an easing bias. so if that's where the leadership comes from, watch. these central banks are hooked up positively all in the same direction, also. >> kevin, thank you very much. we'll talk to you again real soon.

>> okay. >> meantime, joining us in our special squawk session this morning, john harwood joins us here. good morning to you, john. >> morning. hey, carl, what i want to know is how are you guys going to handle the green peace or anti-protesters or are you going to realize it's just the cameramen and the protesters? >> have you ever been up here before? >> i have, actually. not in this room, but when we interview max back yutsus and chuck grassley a few weeks ago, we did it in the hearing room. >> what strikes you now about how the health care debate has progressed or not? >> how nothing has gotten done in the finance committee? that would be what struck me the most. those two guys sat down, they want to get something done. they're friend. they see the world in similar ways and max bachus said to me, as sure as we're sitting here, within ten days or so we're

going to lay down a bipartisan bill. that was about ten weeks ago. it's tough to do. democrats want to take it one way, republicans want to take it the other. i'm glad you have 6% of the senate to try to work something out today. >> have you checked that number? was your math right? >> it's 5% of the democrats since they have 06 and about 7% -- >> oh, you went above that. >> we have another senator who is coming on earlier, so that's 7%, make it. >> john, this is a complex issue, obviously. it can be boiled down, really, simply, i think, to either a public plan or a co-op. and you've got democrats pushing the co-op plan, but the members that are further left aren't having any of it. i think the republicans would go for the co-op plan, but that's not going to do it. will they go to reconciliation? >> you think, it's feel to me,

though, that i don't think -- i think he wants to get at least a small number of republicans. but there's a reason bachus and gasly haven't come out with a deal and it's because both sides are hardening. to be perfectly honest with you, i don't think why democrats would draw the line. if they have a deal to get everybody in the system that has insurance market reform and they can regulate insurance companies in a way that produces it, i don't think why they won't take that deal. but they're not admitting that it is, but is it? is that why they won't accept the cost? >> i think that's the key point. i think there's a split among democrats. some democrats are for the public option because they think it's the trojan horse. other people are for it because of the reason obama mentioned,

keeping the insurance companies honest. i think that's a problem for the democrats because if that is your goal, it is a fact that single payer cannot pass this congress and it's a political nonstarter at this point. and so the more that -- if that becomes revealed as your true ambition, that's toxic. >> orhalf gave an interview on the hill where he said balkus, would, if he could, be to give a no plan. does that mean a public option is going to happen, bottom line? >> i wouldn't lay money on that right now. >> really? >> i think there is a strong desire on the part of the white house to have at least some republican buyin. maybe three, four, five republican senators. and if that is the price that you have to pay, surrendering the public option, i don't think that they're prepared to rule that out.

i mean, we'll see what happens and you have pressure from the left and credit dodd and others say, don't assume those of us on the left are going to swallow anything, but we'll see. >> did you see what peg by noonan wrote over the weekend, why noting and push it into a position where you go, we'll come to some sort of an agreement and then open up medicare to anybody under 60. has that been seriously talked about and did you discussed? >> they're talking about variants of that, not with medicare, but with medicaid, widening the circle of eligibility as a way to get a lot of the people in who are not yesterday recovered, going from 150% of pofrts. so yes, that is in the family of ideas on the table. >> you saw the rules that -- and

i each learn what a birdbath is in looking into this. if it's not about keeping costs low, a lot of the things that you would want to put in the health care bill won't pass even through reconciliation unless you do that separate plan aerchbdz that if you did reconciliation in the fist place a lot of people aren't going to go for -- it seems like a very tough row to hoe. >> there's no question it's tough. if you don't have republicans, there are a lot of cob servive democrats who then get nervous and don't want to be out there on their own without political cover. so just because you have 60 votes doesn't mean you get 60 votes. if you do it with a bare majority of democrats, everybody that votes for it knows they're on the hook for that plan.

most people think that for a huge change in social policy, you want to have some buyin by two parties to have a stable basis for preserving what we're doing. >> every big democrat initiative had some bipartisan twice. kwa do this stuff alone. you had ralt of literal republicans. but nevertheless, you want to have a stable basis. the democrat president signs that bill from a republican congress and barack obama wants something like that. but look, he's discovering how tough it is to get such a huge change done in this. >> and you saw the specter/sedalius meeting. she had her talking points all ready to go. >> you know, it's hard to know what is -- you have the activists in both parties who

know that they want to be loaded for bear at all these town halls. >> we might get it. i think we're going to try and run it later. >> yeah. so i mean, whether or not this is something -- i mean, people on the left who show up at these things have talking points. if it's actually staffers as we saw during that recount, that's a -- >> it's amazing the number of people who are so fired up about this. if guy who drove me from the chain saying -- >> selecting the ads, right? >> this is -- all the way back to truman they've tried to do this. in the public, it's not just lobbying money. >> i agree with that. >> but on both sides. >> i've got no argument with

that. look, and i think the public is conflicted because there are things that they like about the current system and there are things they don't like about it. and it is so big and it reaches into so many parts of our lives that how you -- how you change something and sustain an argument that says, yes, there are flaws in what i'm trying to do, but it's better than what we've got right now. that is tough. >> it's fun being with you, john. >> welcome to the town. joe, does it feel like a toxic waste dump down here? >> i get an odd feeling. >> i thought you would be wearing a mask or something. >> it is. but i start itching. right when i get in the city limits, it's -- >> the virus is going to stay with us. >> oh, god, i'm going to turn into you. >> if you are just waking up and you haven't figured it out this morning, squawk goes to walk.

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sidewalk is in session all morning. coming up next, we'll take off the gloves as party strategists square off. the hot button political issues that matter the most to your money when we come back. he ran off with his secretary! she's 23 years old! - oh, come on. - enough! you get half. and you get half. ( chirp ) team three, boathouse? ( chirp ) oh yeah. his and hers.

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"but i don't even live near the water." what you don't know about flood insurance may shock you. including the fact that a preferred risk policy starts as low as $119 a year. for an agent, call the number on your screen. this is a special presentation of "squawk box," live from capitol hill, health care, cash for clunkers, economic stimulus, the political issues that matter most to your money. "squawk box" is in session.

a special hearing begins right now. >> all right. we are back. the prompter is closer. good morning. i'm joe kernen. this is much better with becky quick and carl quintanilla. we're live from the hearing room. i'm sitting on a phone book. it's a little bit hard. >> it's a ream of paper. >> but my recent problems have abated and i'm fine. we've traveled down the nation's corridor to discover more appearses on the economy. joining us now today, nancy-ann deparle, morris reid and susan molinari. >> i like this senator's name,

jeanne shaheen. she's going to talk about expanding the cash for clunkers program. did the music just die? >> you talked so long that the album -- >> we've got in the 9:00. i'm going to keep going. then at 8:00, we've got an opportunity to sit down with kent conrad, jeff bingaman and jack reed. you guys promised me that if i came along with you on the next one of these things that everything would be all -- >> i never promised you that. >> you didn't? >> no. although this may be the last time we get out out after -- >> what did i ask you, is my car up there? >> before we get to the political news of the day, let's

get a quick check on markets this morning after this incredible run where the s&p is now above 1,000. futures are a lot lower, i think by about 50 points so so. developly the pause refreshes? >> it means mb back to 80. >> golding putting up a good file. we are whack in the low 90s. >> 70/72. the ten-year note, who wants treasuries these days? anybody who is willing to take a 3-6 yield. know mentioned the dollar is at its lowest level of the year and you asked the question whether or not this is intming disorderly or not. >> so orderly within and that's

what they always is say. a lot of people are reading the tea leaves that the administration at times isn't quite as strident about the dorm -- >> well, kevin ferry told us this is beginning to get to the point where he thinks you'll have to see the fed to start to lay things out, give us a little bit more so that you don't continue to see this round of the dollar. >> someone was saying pb if you think you can just turn this off, no way. >> we're in watching. >> but so far, he's performed well. we'll see whether he can clean them up, stop them up? the senate, preparing to adjourn

for summer recess this friday, so the clock is ticking, tension is riding over several hot button topics. joining us now, morris reid, managing director of bgr group and a former new york republican congress winter storm susan moracelli. >> joe, you look good. >> thank you. i'm off prompter again and we can just talk. i don't know where though start. cash for clunkers, obviously, maybe not quite as joerch arching as health care, so let's start with that, morris. we were talking about why -- it's the public option, that's the flash point. housing point to work itself out when it's all said anden do. do we have one or not having one? >> we've got to work it out.

this idea actually worked. if you saw in the paper today, this is the highest level in year for auto sales. all the dealers, all the employ pleaeeses everything gout up to the stable and get a great solution. would you accept the coopen as an economist? >> no with, no. if i was the white house, i would attach myself to someone that is not as partisan. i know the blue dogs did a big victory for those guys. but i'm hearing a rumor that they stopped showing up for some of the caucus meeting. if i'm this white house, i would find a dpie like mark balkus, hitch my wagon there and i would tell the president not to get on

vacation in august and go everywhere and trying to figure it out? >> look, you know, whether the republicans do or not, the problem will be therein the bfktd party. the house had three different xhps, passed three different and i agree with you, but the public option, the dilemma for the democrat party and for american health care, frankly, is some of the democrats say, no public option, i'm not voting for you. others say the more conservative, the tougher races next year say if public option is included, i'm not voting for it. so yop how the two sides come together at this pint and i

think if they do come together, it has to be in the senate, not at the house at the moment. >> morris, are you one saying if that's the way it's going to go, it has to go that way? >> as my colleague, see san knows, how difficult sts. you have to be more vautful, more dlit ral, as well. i think that he will slow the american people that he is serious stackeling these rishs. so if i were the president, i would show the americans wouldn't the meetings. >> there are some that say the more the president talks about it, the lower the levels go.

it's been ten points in a month after all the press conferences and toul town halls. does he help his case when he goes on the road is in the? >> yeah. he needs to go back to campaign styled. he was a very disciplined candidate. he needs to get out there and touch the people. sit around the same and have decisions to the american people. >> first of all, you have to know what program it is you're talking about. we know we know thing you're talking about is how much is it going to cost and how are we going to far for it. i think americans like no other time in other recent history are more kerpts about spending and the escalation of the deficit. so i think that you have to have some of those answers before you can venture back out there and continue that conversation with the american people.

>> susan, we had a president for eight years that didn't want to have a conversation with the american people. barack obama s can do more listening than talking and i think he can find a solution. >> and maybe that part of it is true, but i would say maybe he was wrong and the dmgs were wrong when they were trying to rush through proposals by the august 7th deadline which i think the president was endorsing as a drop dead date in mid-july. so i do think this is a conversation the american people have to have with their legislators. i'm glad everybody moved slowly and they were going to give it more time so people could hear what the proposals were that were out there, analyze what's going on. >> morris, was ate mistake

asking congress to come up with a solution? >> i think, yes, when you're a president, you don't want to put your fate too much in the hands of congress because, you know, congress is a partisan body. so you don't needily know where the winds are going to blow on any given day. the other mistake, membership, is where it is too late to adjustment. if they would have said, listen, we want to try to get this done, we have to get it done, but not necessarily paints themselves in a box on a certain date. >> if it's so important, morris, that you would do it through reconciliation. take 0.7% of the economy and you guys decide hour to do and it that's final way, you don't want to do it that way, do you i keep going back to don't go on

vacation, mr. approximated. i don't know if they're up early. >> he would say, listen, you don't know pt to force down anyone's throat. this is a situation where we all need to come one a solution. i wish susan was still in congress. we might be able to get something done because these sa sensible person. >> let's end on that. that's sweet. >> thank you. >> thanks, susan. thanks for joining us. >> if you have any questions, go ahead and e-mail us, o squawk@cnbc.com. one guy wrote in and said, you're appropriate that you're sitting to my left.

>> and you're kind of flipped. it they happened depends recess. still ahead, joining us all morning, congressional leaders, white house officials and industry experts. g#)%)%)%)%)%)%.

this is "squawk box," live from the u.s. senate hearing room. mr. chairman, i yield the balance of my time to becky quick. >> coming up this morning, read all about it. we've got the morning papers

washington style. that is straight ahead. and later, six senators, three republicans, three democrats, one squawk session. they question witnesses every day. now we're turning the tables and asking the tough questions. the issue at hand? america's health care crisis. the witness list. senators alexander, bigaman, conrad, reid, hitchinson. charmss quick, quintny ya and kernen will open the session. so i've come to this ring to see who's faster... on the internet. i'll be using the 3g at&t laptopconnect card. he won't. so i can browse the web faster, email business plans faster. all on the go. i'm bill kurtis and i'm faster than floyd mayweather. (announcer) switch to the nation's fastest 3g network and get the at&t laptopconnect card for free.

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reporting live from the senate, here again, joe kernen. >> all right. welcome back. this is -- the lighting's bad. i'm not doing this because i feel like a senator. the lighting's bad. >> you look good. the glasses help a lot. >> we call this segment "the chairs." i'm going to talk to you something light and generate a little mail because bike riders are really adamant that it's their road, too. i see them hogging the road, not going fast, it's hard to pass. i have to get in the other lane to pass. it irritates me sometimes -- >> i don't mind sharing the road. >> you have to share. there are more and more laws --

states that will pass laws to provide a three-foot buffer. my favorite is a colorado law not only requires motorists to give riders a three-foot berth it's also illegal to throw things at riders. >> it's legal now? >> it's legal now. until now police could only cite the motorist if you hit the rider. >> as long as you have poor aim it's okay? >> one bicycle rider said, it can't always be the fastest, heaviest vehicle wins. >> i'm okay with sharing the road. my problem is when these guys don't obey the traffic laws. when they fly through red lights -- >> not everyone supports the laws. this sheriff in colorado says, basically it's impossible to enforce the laws with these bicyclists and they cop an attitude -- >> that's the problem. i don't mind sharing the road but you better follow --

>> and it's also that, i'm green, leave me alone. i'm doing my part. i got no carbon footprint, my friend, so back off! this is my road. >> i don't mind bicyclists long they follow the laws. >> when i'm driving the denali past them -- >> yao so angry this morning. >> i'm angry because i don't have a cough switch. where you press a button normally with your mike and nothing that you -- >> goes out over the air. >> goes out inadvertently. >> if only you had a cough switch in real life. >> i know. i know. i do today because -- i don't want to pull a geithner. >> this one? >> yes. >> be very, very careful here. >> it's his birthday today. ♪ happy birthday mr. president >> that's going to be on youtube. >> we're here, talking about the president's birthday. i figured it would only be appropriate to look into the horoscopes. i have "the washington post" horoscope. this is is for if your birthday is today. listen up.

vitality increases this year. you will spiff up your image, impress loved ones and attract new friends. shockingly good if news comes in september. in the near year you will shift your perspective on work and suddenly make much, much more money in less time.g capricorn and scorpio adore you. >> me and my wife. >> interesting. >> what's in september? >> maybe that's when they come back -- >> go-20. >> when congress comes back.h maybe they'll pass the bills -- >> health care -- >> i'm worried about making more money. you're not supposed to do that, right? >> right. >> guys in jersey recently had a couple of back-to-back good months -- >> they knew a guy. >> yeah. >> the one from the new york post. fact and fiction are not always opposites and what happens in the next 12 months tells you something you invented could become a reality in your life.

believe your dreams can come true and most likely it will. >> health care. >> health care. >> that's what i wondered. >> cap and trade. >> car check. >> taxes on millions. he's got -- financial regulations. where do we start? >> the journal has a good piece on sodium silicate, the stuff using to kill the clunkers, pour it in the engine, the engine heats it up, solidifies the material to the engine is inoperable. the specialty chemical companies that make this stuff normally sell 150 gallons a year. 5,000 gallons are on order. they're working 16-hour shifts trying to fill demand for this stuff. >> it's not just the auto companies, it's the chemical companies. >> that's stimulus right there. >> engines. >> how do you say it? >> engines. >> engine. >> engine? >> yes. >> you say engine. >> and i say insurance. >> insurance. >> yes. >> some senators call it insurance. >> i call it that. when we come back, we'll

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"squawk box" is now in session. joe, becky and carl travel to our nation's capital to speak to some of the biggest names affecting business, the economy and public policy. cash for clunkers, health care reform and the president's plans to right the economy hit the gavel as the second hour of "squawk box" live from washington begins now.h

good morning, everybody.h welcome back to "squawk box" h right here on cnbc.h i'm becky quick along with carl quintanilla and joe kernen. we're live in our nation's capital this morning. we are coming to you from the senate energy and national resources committee hearing room. we've taken over this room. but we've got a great show already this morning. much more to come. check out this morning's lineup. in about 40 minutes or so we'll be speaking with nancy de par row, the directwhite house offi health reform. she's leading the charge on most of the health care reform issues taking place. also a perfect set up for our "squawk" summit coming up at :00 a.m. eastern time. we have senators in the house, six of them. we'll be speaking with kay bailey hutchinson, senators kent conrad, jeff bingeaman, judd h

greg. this the first time a live show has been broadcast from a senate hearing room -- >> other than the actual hearings themselves. >> other than the hearings themselves. a live program with 6% of the senate joining us. >> incredible. >> and you feel -- i remember when you went to davos you came back a socialist. do you remember? >> the davos syndrome. >> patty hearst syndrome, you got there and came back -- >> it was good. >> i look around, this is the seat of government here. there are so many buildings and they're all filled with big, government people. government can be a force for good. >> really? >> well, when you're here, you feel that -- >> protected? >> you can feel almost like idealistic about what's possible with a benevolent, smart government. >> because they're keeping order, right? >> i'm uncomfortable with the ceilings, and i'm just wondering, once you get ost past

the beltway circle, you're back to normal, aren't you? >> as you get on the train today -- >> yeah. as soon as i get out of the h station.h but for now, looking around -- h mean, look at these ceilings. >> i know. can you get a wide shot on them? >> you come in the train station, and the pomp and circumstance -- >> wide avenues, huge buildings. it is a beautiful place. there's a sense of energy. >> yeah. so when you go back home are you going to get in a bathe tub full of money or something? how are you going to offset this? >> take a big bubble bath and just soak. looking at harwood, i could be john. i've got the gray hair and i could end up like that if i were down here. last time i came down, i felt the same way. surreal feeling. >> a powerful town. >> very powerful town. i miss new jersey. that's saying something. >> we're going to have fun this hour and next hour. we have 10% of the senate. meantime, some top stories -- >> i think we have 11%.

>> that's right. it is seven. >> all right. >> some top stories. toyota motor reports third straight quarterly loss but said annual loss would be smaller than earlier forecast. ubs posted a big loss as wealthy clients continue to take their cash elsewhere. and tim geithner issuing a stern warning to regulators saying enough is enough. geithner telling the group to end turf battles and back the president's plan for regulatory reform. joseph? >> time for a check on what's going on in the markets this morning. it's been really surprising to everyone. it began in, i guess, early july, but we continue to head higher. big day yesterday. a little bit of a pull back indicated today. matt is at the cme and i saw on one of our shows yesterday morning, matt, it said, is the correct -- is it time for the correction? we were right in the middle of

this unexpected rally where everybody's looking for a correction. is it time for a correction? >> well, i mean, that's the $64,000 question. people have been calling on that for a daily basis for some time now. markets overbought but markets can stay overbought for an extremely long time. a couple things we're looking at, now that we've reached that ten-handle on the s&p, a little pull back wouldn't surprise me. i think we've got the msc world index trading at the highest level since 2003. the market now is fair value at best. i think what we're seeing is just euphoria right now. we see improvement in manufacturing data, a lot of the other data coming out. everybody just trying to jump on the bull band wagon at this point. i think we'll see a pull back in the near future, an area of 3% to 5%. i think investor, the risk appetite has returned in a major way. we've seen outflow coming out of the yen, the u.s. dollar trading at the lowest level since

september. we see that money going into equities, commodities such as crude oil. crude oil is a great example, right now 70-plus dollar a barrel crude isn't justified by the fundamentals. i think we will see things simmer down a little bit. >> why would money coming out of the dollar go into equities. that doesn't seem like it makes any sense, especially any foreign buyer, he's losing with weakness in the dollar. >> i think just in general we've seen these levels -- the dollar is coming down quite a bit as investor fear goes down. people worldwide look to the dollar as a flight to safety type instrument. we're just seeing that, unwound in a major way. we're seeing that and the yen trading lower. people moving money into riskier assets right now. >> well, it could all change on friday, i guess. but the numbers have been pretty consistently better than people thought, i think. you think we could get an upside or a downside surprise? what's more likely on friday? >> i think probably an upside

surprise at this point. i think that, you know, the number comes in line. i think the market rallies. if it comes in better, the market rallies. i think at this point it's going to take a fair amount of damage to really dent the momentum this market has had. although, you know, 275,000, 300,000 jobs is not a good number, it it certainly appears the momentum in job losses is certainly declining in a major way. you know, perhaps first half of 2010 we'll start adding jobs again and see that unemployment rate start to tick lower. >> and the commodities trade. we should be early cycle, not late cycle. there's a lot of things that are hard to understand in what's been happening recently, matt. i guess a lot might be rebounds from oversold conditions, but it's hard to make sense of everything. >> well, i think part of it is a rebound from extremely oversold conditions. we've gone from one end of the spectrum to the other. we've gone from, you know, the

depths of potential doom to this -- you know, this sugar high, this euphoric state we're in now. look at what crude oil has done in the last two weeks. look at what copper has done. i mean, these commodities have just been skyrocketing. people trying to get in early based on this rebound. you know, although we may be getting through the worst and the worst may be over, you know, growth is going to be slow at best. so perhaps some of these big moves higher are a bit premature at this point. >> okay, matt. thank you. we'll see you later. >> all right. if you have any comments or questions about anything you've seen this morning on "squawk," go ahead and e-mail at squawk@cnbc.com. if you've got questions for the senators who are coming up later, we'd love to hear that, too. we've been watching the futures this morning after this major market rally has been continuing. right now you are talking about those dow futures well below fair value. down by 52 points this morning. we'll keep an eye on what happens through the course of the morning. still to come on "squawk box," will the cash for clunkers

program hit a speed bump? the senator from new hampshire, gene shaheen is our special guest. health care in the crosshairs, six senators join us. keep it right here. "squawk" is in session. time now for today's aflac trivia question. in what year did the u.s. senate convene for the very first time? oof! i hope he has that insurance. aflac! you really need it these days. how come? well if you're hurt and can't work it pays you cash... yeah to help with everyday bills like gas, the mortgage... ...and groceries. it's like insurance for daily living. so...what's it called? uhhhhh aflaaac!!!! oh yeah! that's it!

aflac. we've got you under our wing. a-a-a-aflaaac!

now the answer to today's aflac trivia question. in what year did the u.s. senate convene for the very first time? the answer, 1789. they met at new york city's federal hall. >> welcome back to the special session of "squawk box," "squawk" in session in the senate this week where focus is really turning to things like cash for clunkers and the health care bill. in the markets they're already looking ahead to friday's job report. how will we know when the job market is about to turn? our senior economic reporter steve liesman is back at headquarters with the answer to that question. what should we be watching? >> this comes out of our

discussion yesterday. i took to the data machines and called up a bunch of economists and tried to figure it out. economists saying no magic indicator will tell us when the market is about to turn, especially in this deep jobs recession. one of the economic debates is whether it will be a jobless recovery, which will be the third in a row, or could there be a sharp hiring turn-around after both the '91 and 2001 recessions ended the job recession took much longer to return. growth was positive for a year after the recession ended in '90 before any single positive quarter of job growth. it took a year and a half in 2000. the breakdown on the close relationship between economic growth and job growth has wells fargo adjusting for the cost of labor, subtracting labor cost from gdp to see the marginal cost of hiring workers goes up or down. he says this predicts better job growth. he suggests job growth could rebound quickly when gdp returns. another economist says all recessions are different so the

leading indicator for job growth could be different this time. he points to the huge rice in part-time workers for economic reasons. he says it's doubtful employers would hire any new workers until they made use of their part-time workers. this indicator is leveling off. here's a bunch of other indicators that economists look at. jobless claims, they have been on the positive side. hours worked, that still seems to be declining. that's going to have to turn around before any full time work. temp work is on the decline. gdp looks like it will be ticking up. if we can establish the relationship between economic growth and job growth maybe we'll see positive payroll numbers. put them all together, one economist says no new job growth any time soon. they hope there's a turn around later this year or early next year. you guys look absolutely great there. if joe could ask me a question looking down the long end of his

nose, something like, maybe we should subpoena those tapes, something along those lines? >> secretary steve liesman -- >> have you ever been -- there you go. >> did you fly in on a private jet? >> on a private jet? no. >> have you ever issued a credit card? have you tried to raise rates recently? this is not working. >> hit it once and leave it on. >> oh, okay, i got it. >> take your glasses off in the middle of the question. >> that's what chuck does, chuck schumer, right? >> take the glasses off. >> he's high up, too, isn't he? >> i speak the english language, that's how i know! or mccarthy, have you ever been or do you -- have you ever been a member of the communist party, joe? >> i see you're working on your material for leen's lodge again, steve. >> take your glasses off, joe,

in the question. >> steve, thank you very much. we'll be back in house with you tomorrow. we'll talk a whole lot more about what to think, what we're expecting with the jobs number coming down the pike. the cash for clunkers program has been running on fumes. the cash is nearly depleted and that has a lot of people wondering what's going to be happening to that program. joining us from the committee that calls this very hearing room home is democratic senator jean shaheen, from new hampshire. thank you for joining us. >> i'm delighted to be here. i hope we'll get more funding for that cash for clunkers program because it's working terrificicly. >> what do you think the odds are, though? this rests swir entirely in the senate's hand. you have a lot of things to get covered before the senate goes on recess at the end of the week. it looks like there have been a few senators who have been coming over. what's your best guess? >> well, you know, i think this is a program that's done exactly what the economists said we needed to do. it's been temporary. it's targeted. it's helping middle class

families save money. it's increasing fuel efficiency from our automobile fleet. 80% of the cars that have been turned in have been trucks and 60% of the repurchases have been cars. so it's doing what we want it to do. and i think -- i hope this is going to persuade other senators that this is the kind of program we should keep working. >> senators on the republican side, some have been pushing back and saying, we've already bailed out the auto companies. why do they need a second bailout? >> in new hampshire we have 22,000 jobs related to the auto industry. i want to keep those jobs in new hampshire. i want to keep those auto dealers working. i want to help families in new hampshire with the cost of buying gasoline. this program does all of that. the average family is going to save between $700 and $1,000 when they get one of these -- when they turn in their old clunker and get a new car. >> the white house administration officials have said that the devil's going to be in the details as to whether or not this makes it through the senate. yesterday we spoke with senator

corker who said he'd be in favor of extending the additional $2 billion if it came from the existing $787 billion in the stimulus plan. how do you feel about this? do you care if it comes from the $787 billion or you just want this extended no matter what? >> i think it's important we pay for it. obviously, i support the energy loan guarantee fund the house took the money out of. i'm on the environmental and natural resources committee, and i think it's important we move to a new energy economy. that's part of what this program does. it's helping us, you know, about a third of our energy is in transportation. and this is helping to move that transportation sector to be more efficient. i think this is an important program that's working and we should continue it. >> what do you say to critics who say, it's easy to give government money to americans. i mean, people will -- they'll vote for that every time and that there really is no, where is the line? do you give them cash for -- we

made jokes yesterday about giving them cash for their own golf clubs or cash for clothes they don't want anymore. >> eight-track tapes. >> yeah. things that are of no longer use to them. >> but we're talking about a significant segment of our economy here with the auto industry. we're talking about helping to maintain those jobs in the auto industry. i don't think we want a future in america that doesn't have a strong automobile industry. and we want a future that's going to help us transition to a new energy economy. this program helps us. we're not going to extend it forever. the original bill sponsored had more money that wound up in the program ultimately. i think we ought to continue. estimate are that if we put another $2 billion in it will get us through until september. we can get another probably 500,000 cars off the road, continue to increase fuel efficiency, continue to help those auto dealers who have been

in trouble and the auto industry. >> are you worried about what happens after that? what happens to demand? >> well, i think what we're seeing is that this is stimulating demand. you know, this is anecdotal. what i've heard from auto dealers in new hampshire is they've had people come into the showrooms who haven't qualified for the program and still got the car. so i think what we're seeing is something that's encouraging families to buy big items. that's one of the things we need to do in order to get the economy going. >> the one thing we've seen, if you've already exhausted the $1 billion that was originally set up, you're talking about roughly 250,000 cars that have been bought. people have questions, and i have questions, about how much demand, future demand this is stealing. are you going to go through a rough patch again? after 9/11 when the automakers started off with zero percent financing you saw a huge boom in demand for cars but eventually that caught up to the automakers and it was stimulating a false

sense of demand out there. do you worry this will do the same thing? >> what we've seen is the first time that sales are up in a year for most auto dealers. for ford it's their first sales increase in two years. you know, even though it may fall off a little bit it's still an increase. it's still helping for this period of time. it's still helping those families who are turning their cars in. and i think that's a success. >> how committed do you think demint and mccain are for following through? >> sadly, there are a lot of people who want to see this president fail. and i think that motivates some of the concern about it. there are a lot of people who just don't believe government should work. i happen to feel differently. i think we need to do everything possible to try and get this economy moving again, to try and make sure we're creating jobs, and that's one of the things this program helps us do. >> you're saying it's not a

disagreement with the policy of cash for clunkers, but that it's some would argue a rare victory for the president, it's working, effective and they want to steal it away? >> i'm not going to argue to their motivation. they have to explain that for themselves, the people who oppose it. but i think one of the things we've seen is opposition to any effort to get the economy moving again. >> if you take it to the -- let's say you ask someone, listen, some people down the street need a new car. we'd like you to ante up $4500 to get a new car, or strangers in another city, you take it to that level and you can see where some people would say, listen, this is not what i should be doing. >> i'm not taking it to that level, though. >> why -- >> i'm saying we have a n program -- >> it's the same -- it's an issue of helping someone who maybe wasn't ready to buy a house, helping them with their mortgage. some people just don't deep down want to step up to the plate and

help someone who has been -- >> and certainly -- >> it's not that they're against president obama. they just don't think the government should be taxing them for others to buy new cars. >> they should vote that way. i'm arguing this is a program important to the economy, providing help for families and moved us in a way that makes our cars and trucks more efficient. >> if you're going to stimulate some way, this seems to be stimulus that works. >> it may be the biggest bang for the buck. >> once you acknowledge it works, if you agree to the $800 billion anyway, you might as well do something where it actually has an effect. >> this is a program that's been endorsed by the association of manufacturers, by the chamber of commerce and the afl-cio, so when you get -- >> strange -- >> that varied organizations together, it must be doing something right. >> are there rules we should know when we play with these microphones? >> like this. what do you generally say --

>> once you turn it on, it's on. i still haven't gotta right. once it's on, it's on. i keep pressing it, turning it off -- >> i usually move mine out of the way so i can deal with my notes in front of me. >> and you got these behind you whispering -- >> we're sitting on pads of paper, big, thick -- >> reams of paper. >> don't you feel small? >> i do, actually. >> that's not a good feeling around washington, to feel small and -- >> feel short. >> i feel like i'm talking to mr. potter and he's offering me a job. >> you can't get the chair in. >> bottom line is, they're lower than you are in the chair. >> that's true. >> senator, thanks for your time. >> nice to be here. when we come back, a look at this morning's top business  stories. and the director of the white house office of health reform will join us as "squawk" in session continues. and later, six senators, three republicans, three democrats, one "squawk" session.

they question witnesses every day. now we're turning the tables and asking the tough questions. the issue at hand, america's health care crisis. the witness list, senators alexander, bingaman, hutchinson, reid. chairmans quintanilla, kernen and quick will gavel the session open at 8:00. i drove my first car from my parent's home in the north of england to my new job at the refinery in the south. i'll never forget. it used one tank of petrol and i had to refill it twice with oil. a new car today has 95% lower emissions than in 1970. exxonmobil is working to improve cars, liners of tires, plastics which are lighter and advanced hydrogen technologies

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any comment or anything you see here today on "squawk," we'd love to hear from you at squawk@cnbc.com. when we come back, we're getting ready for our "squawk" summit, the focus primarily on health care. we kick things off with the director of the white house office of health reform, known as the health czar when we come back. this friday, "squawk box" live at leen's lodge from maine, for the most important number of the month, the government's read on jobs. 30 economists, monday managers and business leaders gather to discuss whether green shoots are growing and if we'll see a rebound in economy later this year. steve liesman fishes for answers

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welcome back to "squawk box." we are live this morning in washington, d.c. among the stories that we've been following, toyota is cutting its annual loss forecast thanks to cost-cutting measures, also some government stimulus measures that are boosting auto demand. but the company remains cautious on just how fast the global economy will recover. plus, putting trump back into trump. donald trump has won the bidding contest to win trump casino resort, the casino he once ran. his bid was chosen by the competing bid. trump lost control of the company when it emerged from a prior bankruptcy four years ago. a bankruptcy judge still has to approve this bid but this looks like the early read. some auto news, the first all new redesigned ford taurus rolls off the assembly line in chicago today. our phil lebeau joins us this morning with a preview.

phil, some of these pictures for 2010 look good. >> huge improvement, carl. huge improvement. alan mulally said we're going to change the name of the ford 500 and call it the taurus because it was great brand recognition and he thought that was the start of the bringing the taurus back. they've redone it. take a look. this is a huge improvement for ford. it comes to the market at just the right time for this company. the reason ford has spent so much time and money redesigning the taurus is because of the name recognition. before that camry was best selling vehicle. here's the problem, 50% of the consumers had an unfavorable view of the taurus by the time that it was, you know, around for about 15 years. so what they have done is they are coming out with an all new taurus, hitting showrooms -- comes off the assembly line today, in the next two to three weeks it will be there.

ford sales are down 21%. while that's not the most wonderful number, keep in mind ford is the only automaker to pay post monthly sales figures. when you take a look at ford stock at one point was trading for $1 a share, now $8.44. coming up later today on "the closing bell" a first on cnbc interview with ford president mark fields. we'll be talking with him regarding the taurus and what's to come in the future. guys, that's the latest on taurus. back to you. >> phil, do you think -- are all three going to post positive sales for august? >> i don't think so. i think that we'll probably see it again from ford. i think there is a chance with chrysler. we're getting to the point where we'll have favorable comparisons because july and august are really when we started to see

things fall off last year. september it picked up huge momentum where sales really dropped off. that's working in their favor. i don't know if we'll see positive sales for the month of august, though. >> and how much of it do you think depends on getting these additional funds approved for cash for clunkers? >> a lot. >> what percent anl of the equation is that? >> a lot. if you take a look at the sales in july, you can give cash for clunkers credit for at least a 25% bump in what they were getting there. at least a 25% bump. keep in mind, the last week of the month, ford sales pace was running at 15 or 16 million units just in the last week. now, we don't expect that to continue even if the program's extended but clearly there's demand out there. >> interesting. joe, what do you think? did you get a look at the taurus as the video was rolling. >> i've seen it. i like it. >> you like it a lot, right? >> i think ford's lineup is solid. i do. i didn't see -- is it pipas --

>> the pipas? >> yeah. what did you learn? >> i think the biggest thing is they honestly believe they're in the sweet spot in terms of the product rotation and people coming into the showroom. one of the most interesting things he had to sayed, they're seeing people coming in, aside from cash for clunkers, who are now willing to step up and take on an auto loan. that is a change in the psyche out there amongst consumers we've noticed in the last three or four weeks. not a huge shift but it's starting. >> what do we need for leasing to beat to where it was two or three years ago? i don't -- do you understand it? why is it so tough? is it the residual value of these vehicles? >> that's been the biggest problem. frankly, when you -- the combination of the residual values plus the fall off in the auto loan market, those two just put the hammer down on leasing. now, gm said yesterday, we're going to step back into that market, take a look at it. there is a market for leasing in this country. got way out of whack a few years

ago. i think what we've gone through has essentially cleansed that up a bit. i think there's going to be some real demand there for leasing. >> i'd like to ask a question from the distinguished gentlemen from illinois. phil, real quickly, we always hear about the lack of credit that these car dealers are dealing with. has it loosened up a little bit, especially since cash for clunkers came out? >> it has loosened up. it's not back to where it was a few years ago. i would say if you -- if you went and talked to most dealers they'll tell you they can now get about 80% to 85% of the loans written they want to write. not all of them. there's still a chunk of 10% to 15% in there where they're struggling a bit. that's what they need to see come around before they say, we're back to where we want to be. >> she said distinguished gentleman, i think. that's why you looked away, looked for smbs in the room, phil? >> i think she was referring to santelli. >> no, no. i meant phil. >> i'm the forgotten godfather

movies. >> phil, we have to go, but is this the shadow banking system that's gob we've heard about? does that have anything to do with not having lease money available? >> no, i don't think that's the primary issue there. i mean, you touched on it with the residuals. that's when a lot of companies said, this isn't worth it. it does not make sense to stay in the leasing game given what we're dealing with on the residual side. you add that along with the financing issues, that's what killed it over the last two years. >> it's much more expensive to try to lease a car right now, even a ford or a gm. you might as well buy it. >> yes, it is more expensive. and that's one of the reasons why they got out of the game. the combination of all the factors didn't work together so they said, let's just drop it. >> all right. phil lebeau, you are a distinguished -- he's a gentleman, too? >> gentleman. >> distinguished gentleman from illinois.

>> he's going to yield his balance of his time. >> check on markets right now. we are indicating for at least open a little weaker this morning, as you can see. is that a -- can you read that? is that down 53 or 63? >> 53. >> a total of four or five point. doesn't mean we're going to close lower at 4:00 after the s&p got over 1,000 and the nasdaq got over 2,000 yesterday. we'll be right back live from washington, d.c. we'll take a quick break and come back to this hallowed ground, really s what i'm calling it now. still ahead, congress racing against the clock to pass health care reform. joining us all morning, congressional leaders, white house officials and industry experts. the diagnosis, the treatment and more than a few second opinions. a spoonful of "squawk" may help the medicine go down.

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they follow us everywhere, i don't care where we are. did you hear the pretentious music drown out by the animal orchestra? if you go to facebook, there is an animal orchestra appreciation page on facebook. >> this group is for all those who support the animal orchestra, the magnificent group of horn-playing walruses and belugas that appear on "squawk." they have the uncanny ability to put everyone in a good mood each morning, except for carl. >> in your face. >> in my face. >> in your face. you didn't start that. >> you can't argue with facebook. archer daniels reporting 10 cents a share versus expectations of 44. because revenues were so far above expectations, hard to believe that is a number that you can directly compare to 44 cent. it sees signs of improving demand in various food, feed and

fuel demand. stock is indicated lower but maybe some items in there, or maybe not, but 10 cents versus 44 cents. caremark, tom ryan on our summit last week, apenny ahead of expectations. revenue also above, full year guided to 259 to 264, slightly above the company's prior guidance. marvel entertainment reporting second quarter net of 37 cents a share. everyone excited about "ironman"? >> yeah. >> robert downey jr. is doing well, and mickey roushg rke is g to be -- i mean, he looks like a villain. he looks so different than he used to look. i don't understand the whole thing but he looks like that wrestler he plays. he has a few miles on him, but in a good way. they report 37 cents, six cents

ahead of expectations. for the year they raised the low end of guidance up to 125, had been at 110. henry shine, 81 cents a share, 6 cents ahead of expectation. dental supplies. >> speaking of which -- >> i have another five appointments. >> you have added to demand this quarter, no doubt about that. >> i had a root cut. you know what it was like? it's like getting a root canal. it was like a sauna. >> you said you would still rather do that than do earnings central? >> i still preferred the root canal. emerson, third quarter net was 51 cents, below expectations and revenue was below. full year guide 220 to 230, had been 240 to 260. reuters is at 230. also revenue is guided to 20.8 to 20.1 billion.

it had been above 21 so that stock will be under pressure this morning. finally, the intercontinental exchange reporting $1.12 in line with expectations on revenue. we're going to go to ben? let's get a check of what's going on with the markets at the cme group. i don't know if we've seen you, ben -- i took my glasses off. that was pretty cool. have we seen you since we made this assault on 1,000? >> no. i was on vacation last week. what we've seen yesterday was extraordinary in many ways. for one thing, i was really impressed by the fact that the market was able to hit that 1,000 level and hold there. one thing, there's a little concern in my opinion, most of this rally we've been seeing through the 900s into 1,000 has been tech-driven, nasdaq-driven and s&ps following. yesterday i think the s&ps got ahead of themselves and the nasdaqs was lagging, which was a

turn of events from what we've been seeing. right now, futures have pulled back a little bit. in my opinion, we're at extraordinary levels here. the dow hasn't hit these key levels that we're looking at around 9200, 9300, not quite as impressive as that flat figure in the s&ps as we're seeing over 1,000. we're overextended by far at this point. similar to the way we were overextended back in march on the extreme lows. on the other hand, overextended is a relative term, just like overbought. and so, you know, could we go higher? yes, no question. does the market need to have a little bit of a pull back in terms of regaining a little composure and health? yes. i think, again, i'm always a big advocate of two steps forward, one step back. we really haven't seen that one step back in a while. we need to do that right now. possibly today will be that day. at some point this market's going to stall a little bit and will develop a little horizontally but right now the market is in extreme vertical development. in that case it's seeking value.

have we found value yet? >> thank you, ben. >> my pleasure. >> we appreciate it. >> we have places to go, people to see. still to come on "squawk box" this morning, we are talking six senators, one hour, many, many issues, cash for clunkers, health care reform. the senators are headed to the hearing room right now. we'll have our discussion kicking off in just a few minutes. i've been growing algae for 35 years.

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everybody needs health care. this is a terrible problem in our country and an economic drain, too. i think solving this problem will help solve the economic problem. >> one of many voices on the street weighing in on health care reform. joining to us talk about the progress and the prospects for health care reform is health reform czar nancy-ann deparle, she joins us this morning from the white house. nancy-ann, good morning to you. welcome. >> good morning. thanks. >> none of us -- i don't really think anybody expected this process to be easy. but given just how difficult it is proving to be, i wonder, is it harder than you thought it was going to be when you agreed to take this position? >> you know, president obama always says, if this were easy, it would have happened a long time ago. we've been at this in our

country for about 60 years, working to try to get health reform. what the president's trying to do is very simple. he wants to build on our uniquely american system. and just try to get everyone covered in lower costs. i think as the woman you just heard from said, that's what we really need. >> yeah. how is his argument going to change, if at all, during the recess? >> well, i think he's going to be out there talking to people, as you've seen him so far. what we found is that when people understand that part of what we're going to do is build on the existing system, that for most people, nothing will change except they will be -- see their costs lower, that we're going to end some insurance company practices of banning people with preexisting conditions from coming in. if you're sick, you know, it's hard to get an insurance policy. we're going to make them more affordable. i think when people hear those things and the president's going to be out there explaining it, they support what we're trying to do. >> does it surprise you when you see some of these town halls, at

least the congressmen who have been going back in their districts, facing in some cases very disorderly constituents. in fact, tim bishop is no longer holding town hall because the cops had to wake him to his car last time. what do sd that say about the way the debate is shaping up? >> i think there's some organized things going on out there. many of the members of congress were expecting it. i was with them last week as they were leaving for the recess and they were expecting this, given some of what's going on. there's a lot of misinformation out there. when people look at their own situations, people know their premiums have been doubling, the costs are unsustainable. i think they support president obama in trying to do something about this. >> if the public plan becomes a sticking point, it's just insurmountable with the other side of the aisle, with republicans, will it go to reconciliation?

will you choose one over the other? what would you choose, reconciliation or co-op? >> we're a long way from that. what we're talking about right now, as you know, we're closing to getting health care reform than we've ever been. we have one in the senate who's already reported out a bill and one more to go. we're a long way from that conversation. the public plan is just one option among many that will be offered to people in this exchange. so for individuals and small businesses who have trouble getting insurance now, they'll have that option. >> but would that be the stumbling block? if the republicans will not go for a public plan, will you consider something other than a public option or will you tell congress to go through reconciliation? >> as i said, we're a long way from that. i'm not here to draw any lines in the sand. i can just tell you the reason why the president has offered a public plan option is because he thinks people need to have a choice and there needs to be

competition. i think most people know that often in many markets around the country, that's not there now. they don't have a choice of insurance plans. he wants there to be more choice, more competition for people. and i think that's something that both republicans and democrats can agree on. >> okay. but just to be clear, the white house is not -- not closing the door completely on a plan that does not include a public option, right? that's fair to say? >> i'm not here to open or close any doors. i'm telling you that what the president wants to achieve is to have a marketplace where people can choose among plans. where there's competition. so that's what we're looking for. >> right. i think we have to go. we don't have a lot of time this morning. but it's going to be a fascinating few weeks to see how this moves into september. nancy-ann, appreciate your time. >> thank you. >> nancy-ann deparle joining from the white house lawn. when we come back, a rare opportunity to sit down with six senators at one time. democrats ken conrad, bingaman,

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"squawk box" in session. joe, becky, carl on capitol hill. this hour, lawmakers taking on america's health care crisis, the economy, clunkers for cash, our lineup, senator kay bailey hutchinson of texas, senator lamar alexander of tennessee, senator judd gregg of new hampshire, senator jack reed of rhode island, senator kent conrad of north dakota, and senator jeff bingaman of new mexico. bring the gavel down. "squawk box" is in session. >> welcome back to "squawk box" here on cnbc, first in business world wide. i'm carl quintanilla along with

becky quick and joe kernen. we are in session live in the nation's capital. in hearing room for senate natural resources committee. i don't know how you ever felt more vulnerable or more small in your life. >> i like it up there better than down here. wow. >> i was saying, please never ever call me -- >> we don't ever want to be subpoenaed. we gathered six senators this morning from both sides of the aisle to talk about america's health care crisis and some of the other hot button issues of the day buzzing around the hill. let's walk through the lineup. republican senator lamar alexander of tennessee, appropriations committee ranking member, republican, senator kent conrad of north dakota, budget committee chairman and finance committee senior member. senator kay bale hutchinson, senator bingaman, this is his room, senator judd gregg of new

hampshire, republican budget committee ranking member and senator jack reed of rhode island, serves on appropriations and banking committees. senator bingaman, has anything like this ever been put together, as far as you know? >> as far as i know it hasn't, but i haven't -- i've only been here for 27 years. >> what do you to want talk about first? >> i don't know. >> i think health care. >> that might make sense. >> senator conrad, let's start with you, i guess. without trying to make this too formal, how do you think recess is going to go and how do you think september's going to shape up? >> my own view is that actually it's a good thing we're going to have this break and listen to the people that sent us here and have a chance to further refine the plan that we're working on ppt finance committee, there are six who have been given the responsibility to come up with a proposal for our colleagues, three republicans, three democrats.

we're getting close, but much more work needs to be done. and i think more important than any artificial deadline is getting this right. it's enormously complicated, very important we get it right. >> we were just talking to miss deparle, i keep bringing it back to public versus co-op, whether we go bipartisan or reconciliation and i can't get an answer. are you make anything headway with your colleagues on your side of the aisle to consider co-op versus a public plan? >> yes. >> you are? >> but it's difficult, joe. to be fair, there are many of our side of the aisle who feel strongly about public option. you know, i was asked to come up with an alternative because in the senate, there are simply not the vote for public option. that's how i came up with this cooperative notion. in our state we have hundreds of

co-ops, telephone co-ops, co-ops that produce electricity for nine states and have a $2 billion coal plant. so the idea that co-ops can't be big, vigorous competitors, tell that to land o' lakes that's competing. >> you sound like a republican. who here -- senator bingaman, would you vote for something that didn't have a pure public option? >> i think we have to press for pure public option. i think part of it is understanding what this option would be. essentially the secretary would setp an insurance entity that would have to conform to local laws, capitalized with federal funds, which would have to be paid back and compete in exchange. so they would have to meet the demands of the marketplace. it is another way, i think, to provide some cost pressure -- cost competition.

so i think it's extremely important element of the legislation. >> but that's a line in the sand for some senators on the other side of the aisle. to get a bipartisan bill through that might be the line in the sand. they call that a predatory system rather than a system that provides competition. i mean, do you just not try bipartisan and go reconciliation? >> no. i think we have to continue as we have been doing. and both on the health committee, where i participated in deliberations along with senator gregg and senator alexander here. it was 50 hours of discussions. before that it was many hours of talking about issues, briefings. there was an attempt, and i think a genuine attempt on both sides, i think both chairman dodd were terribly thoughtful and cooperative to try to accommodate. then the finance committee today is engaged in a very long, but i

think worthwhile effort to try to reach a bipartisan comprom e compromise. we're going to try. >> i think you have to get a little bit down beneath the sloganeering on the public plan issue. what is a public plan? that's an entry-level question. if the purpose is to mirror the private sector, in other words, to create a plan that meets all conditions of a private sector plan and mirrors the private sector plan, created for the purpose of competition, which is the representation you hear from some folks who support the public plan, the cbo tells us that won't save any money. it has essentially no purpose. i mean, why not just stick with a private sector and allow the private sector to compete? the real purpose of a public plan f it is to save money, must be to limit spending and, therefore, it has to set up some sort of system where it limits reimbursement through price setting or through delays and rationing. that's the only way to get saving from a public plan. that's why on our side of the aisle, we oppose it.

we think it is a slippery slope to a system which inevitably puts the government if a disproportion way to set prices and deliver rationing and everybody has to flow into the public plan and you end up with a system which is essentially a single payor system. >> you bring up an interesting point. there are two basic problems when you talk about health care. one is the costs are rising, the other is universal health care coverage. there are so many people who don't have health care coverage if i can run down the line, what's the bigger problem, the cost issues or is it the coverage issues? senator reed, what do you think? >> well, they are both critical issues. wellpoint, the largest insurer just reported their quarterly report. they lost 3300 enrollees, they lost that premium money and have seen costs go up because people are in in danger of losing their health care. they're getting everything done they can get done. hospitals are afraid the next

time they see the person they won't have a health care card so they're going to go ahead and give them all the things they can right now. it's a system that is really sort of coming apart. and one is related to the other. if we can't get an expansion of coverage, if we can't integrate care, we won't control costs and we won't provide appropriate care for our citizens. the point i want to go back to, the public option point, with respect to the issue of rationing, i think, again, that is not what the legislation calls for. part of and a great deal of what a public option can do is provide integrative care. they can go ahead and insure that they're providing good quality care but they're not overprescribing. right now, and you saw the comparison in that article in "the new yorker" between mccowan, texas, and el paso, texas, the same group of

patients but one area is hugely expensive because everybody gets a test for everything. in fact, their outcomes aren't as good as places with less testing. that can be done. there are many other things. the way we crafted the bill is that it will provide, i think, the opportunity to do that. >> from the other side of the aisle, as well, senator alexander? >> well, the whole idea of a government-run health care plan, it would be the same thing as if president obama said i'm going to buy the rest of general motors to keep ford motor company on. then you say turn in your clunker and we'll give you a free car. we would have to put the government into every line of work. a government drugstore to keep walgreens honest, and a government hardware store to keep home depot honest. under the plans that we're considering, in tennessee, you

have 400,000 people to a government program called medicaid for low income people. that would shift after five years, cost to tennessee taxpayers that could equal either a 5% income tax in tennessee or if we pay doctors enough to see those patients, it would be a 10% tax in tennessee. so you can see the additional coverage in a government plan creates a lot more costs. so they're inter-related. it doesn't add up the way these bills are coming towards us. >> senator, it sounds like the republicans are stressing the cost issues first. and universal health care coverage second. is that fair? >> well, the cost issues are what we should be addressing. everyone -- you go down this panel, everyone agrees we need health care reform. because health care costs are so high. i come from a state that has the highest inunsured population. so people who are paying preem

ups do have health care coverage, are covering those people who don't have coverage in emergency rooms. so are property taxpayers because so many of our public hospitals that give care to people who don't have coverage go -- people go to the emergency rooms. what we need to do is talk about health care reform that gives more access in the private sector to more people. so we have more people covered. that in itself would bring down the cost of health care. what about medical malpractice reform where you could really make a difference in costs if you would just have some kind of reasonable cap on pain and suffering. people need to be compensated if there are drastic errors or forced errors, but if it is -- if you have some kind of reasonable cap, then i think you start bringing the cost down. we need to have more affordable options for employers to give

coverage to their employees. and that's where -- you ought to either give tax credits and subsidies to people who buy individual health care so you have more people covered or you need to give help to employers, not fine them and tax them as the bills before congress do right now. >> i've got three republicans, all no to the public plan. is that fair to say? >> yes. >> no, no, no? i've got a democrat that's fine with the co-op because you seem to realize that this is the situation on that side of the aisle. does it have to go that way or do you go reconciliation? i feel like one of those commercials where firemen run the world or -- i feel like things get so bogged down. isn't that going to be a sticking point? you cannot get a bipartisan bill with a public plan so why not go with the co-op? or are you going to do the reconciliation and do it on your own? you can't just get it down to this and get an answer? >> well, my view is that this whole issue about public option

versus no public option has been blown out of proportion. >> it's not going away. >> what's that? >> it's not going away. >> well, it may not go away, but the truth is, what the public option contemplates is the establishment of the nonprofit to compete with private insurance companies. and there are already nonprofits competing that, establishing another one is is not going to be the end of the world, not going to run anyone out of business, they'll be able to compete. i mean, on the one hand you hear government's totally ineffective, incompetent, can't do anything right. on the other hand you hear, if you let the government set up a nonprofit to compete with us, it will run us out of business. >> nonprofit is one thing. but if you subsidize -- pure public plan subsidized by the government, you've seen haw that works with medicare. >> what we adopted here in the committee is establish a nonprofit, the government provides up-front money so it can have reserves, so it can

start operating and that money has to be paid back. and then it has to competed. it can't set prices. it can't -- >> that sounds like a co-op, a quasi -- >> it doesn't function much differently than a co-op, but it's not the end of the world for private health insurance. >> how about that? >> it's important to note that was scored by cbo as generating no savings. >> it proves my point. >> that's the point. >> i thought -- >> there's no debate if you set up a plan that's basically going to mirror a private sector plan, which is what senator conrad is trying to do through a co-op approach, which is a reasonable approach. but the only purpose of a public plan is to move -- is a stocking horse to move a system where the government has the capacity to control prices. that's the only purpose. that's the only way to get savings. >> isn't that a legitimate complaint among those who say, your job -- and those on

finance, is, handicapped by the left and there's no way to bring a compromise because in the end you're going to get crushed in the middle by the left? >> i don't think i'm going to get crushed. look -- >> nobody believes that. >> i spent a lot of my life in the middle, but, look, at the end of the day, we're going to be measured by what we accomplish. and we're going to be measured at least on two metrics, coverage, because there's a moral imperative to cover more people, on costs there is an economic imperative because the fact is, the country is headed for the cliff. we are spending twice as much per person on health care as any other country in the world. one in every $6 in this economy is going to health care. if we stay on the current trend line, we're going to be at one in every $3 in this economy in health care. that is utterly and totally unsustainable. that threatens coverage. that threatens our families. the competitive position of our businesses. and the government itself.

so, look, there is no choice but for us to find a way forward. my own belief is, it's got to be on a bipartisan basis. that's why worry work working three democrats, three republicans to come up with a proposal for our colleagues. we're not the deciders. i want to emphasize this. the six of us are under no illusion. we are working to present a proceed proposal to our colleagues. they will be the decider. they will offer amendments, they will vote. my own view on the co-op, that is the only potential for a bipartisan compromise. if you don't have it, joe is right, you're not going to have a bipartisan agreement. >> you have to remember, basically the numbers don't work. i mean, that's what's driving this problem. you've got a proposal to expand coverage to tens of millions of people. and yet you're claiming you're not going to increase the cost to government.

well, the numbers don't work. cbo tells us the cost of government goes up by 2.2 trillion in the first year, some of that's paid for. on the house side they raise taxes on folks by about $500 billion. on the senate side they're talking about medicare cut of $500 billion. that still leaves you $1.2 trillion to $1.1 trillion problem. that's where the rubber hits the road. >> senator, let's -- >> let's talk about the cost. they also want to cut the disproportionate share extra funding for hospitals that do cover people who are uninsured. so now you're going to increase the amount of medicaid which underpays, which is made up with dispro payments and yet that's part of the pay for. you cut hospitals who treat people who are uninsured but increase the burden on them. the costs, we haven't talked

about that. the tax increases in the house bill, they have a requirement that an employer has to pay 72% of a premium, 65% if it's a family coverage. so employers get more and more costs, more and more tax increases, and we're trying to encourage people to hire people in this environment. >> this is, obviously, a very, very sticky question. senator reed we'll come back to you when we return to get more points on this. it's something that's not going to necessarily be worked out in this next hour, but we're hoping to make some more progress with it, if you'll bear with us. >> if we get consensus here, we get the credit. i just to want make that clear. we have much more to talk about with the senators this morning. it's not just health care, also cash for clunkers, the state of the economic recovery, plus don't forget, we have breaking news coming this morning, personal income and spending data at 8:30 eastern time. stick around. "squawk's" in session live from the u.s. senate. at 155 miles per hour, andy roddick

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acquire pepsi bottling for $36.50 a share. earlier this year pepsico had offered $6 billion to buy the shares it didn't already own but bottlers were holding out for a higher price. we've been watching that go on for a few weeks. >> it's a big pop in the bottling shares, up $2 in that premarket bid/ask. >> both of them. we are both with our all-star panel. since we're accomplishing so much, i'm not going to reintroduce everyone. that just takes away from the grift. senator reed, you were going to make a point when we went to break. >> thank you, joe. with regard to the point that senator hutchison made, i think the logic is if everyone is involved an insurance plan they will be showing up at the hospital with their insurance documents and they will be paid through their insurance company. so ideally the uncompensated care numbers will diminish dramatically.

the flipside is if we don't do health care reform, hospitals will be overwhelmed with all the people who are losing insurance. we can't keep up with that demand in terms of uncompensated care. another general point, too, the cbo scores which we respect and follow, have a very difficult time capturing the cost of prevention, the cost savings with prevention because they don't accrue cost. they're accrued to individuals, et cetera. a lot of costs in the systems we believe will be saved, but they won't be reflected in cbo numbers. >> i'll give you dynamic scoring on prevention. if you give me dynamic scoring on capital gains. >> the cbo won't give us those, we're in trouble. >> dynamic score, i'm not going to go there. >> that's what you -- >> i'm not sure what all this means in plain english. dynamic scoring is, the more you get into this -- you go back to your initial question, cost versus coverage. the cost, as senator gregg said,

don't add up. i tried to take what i could read of the two plans that have come out and apply it to my state in tennessee. i mention one thing, if we add 400,000 people to medicaid the costs go up $600 million. if we pay doctors so they'll actually see those people -- right now, 40% of people won't see low income people on medicaid, it adds 10% new income tax in our state. you've got those dollars. you have the cuts in medicare. now, wait until americans find out you're cutting grand am's medicare to pay for somebody else's new program. and then you've got the additional costs for small businesses. all these are costs somewhere. so where we have to start is cost. our objective needs to be, health insurance you can afford. when we're through, a government you can afford. >> all of those point that senator alexander just made, have been points that have been put out that have scared the american public to not going ahead and wanting any sort of

health care reform all the way back to truman. is there a way -- >> it's important -- >> i can just say -- >> i'm going to add one thing. >> okay. >> go ahead. >> the reason 40% of doctors don't see medicaid patients is because they're underreimbursed. same with hospitals. you put more people in medicaid, it's a state mandate, a federal mandate, unpaid for, which in our state will be $3 billion to $5 billion per year. we have a $12 billion structural deficit in our state already going into the next bi-annum. so you're underreimburing the hospitals, underreimburing the doctors. you're increasing the amount of people going on medicaid. it's a disastrous financial situation. >> senator -- >> if i could follow up on this point, because i think it's important. look, what we have is a disaster. anybody that thinks their current coverage is stable, just has to look over the horizon and

see that our entire system is headed for the cliff. it is undeniable we're in a circumstance in which, as senator gregg has said, the numbers don't add up. let me just say in the finance committee plan, the bipartisan plan the six of us are working on, it is paid for. cbo has said it does bend the cost curve in the right way. this is their initial reading of what we've put together. in terms of medicare, yes, there are savings out of medicare, but in our plan it does not come from medicare beneficiaries. it comes from the providers. and the providers themselves have come forward and said, for example, the hospitals have said, we will save $155 billion. now, why have they said they're willing to do that? because with 40 million people more covered, they're going to get substantially expanded business. so they can afford to share some

savings with us to pay for the overall program. in fact, two-third of the costs here is not additional cost. it is reallocating cost in the current system by reforming the delivery system in the country, which virtually every expert that's come before us, republican and democrat, has said is absolutely critical. to build on the successful models we see, the mayo clinic model, the cleveland clinic, pennsylvania, these are -- >> dartmouth. >> dartmouth, outstanding work, done there. but he makes an important point here, because dartmouth has said, up to 30% of the money, spent does not improve health care outcomes. we can do so much better than that. >> one quick question just on politics. we've seen poll numbers that think the president's plan is a bad idea go up. we've seen cops escorting congressmen to their cars after town halls. what is different between what's happening now and what happened

in '93? why are the wheels not coming off the bus, in your view? i assume you think they're not. >> i don't think they are. and i was deeply involved in '93, i was on the finance committee then. i was part of the main street coalition, democrats and republicans, that produced then a compromised plan, but we were prevented from ever offering it to our colleagues. i thought that was a big mistake at the time. that's not a mistake that's going to be repeated. we are going to have a chance to offer a bipartisan plan to our colleagues. and it is, i think, a way of addressing what is absolutely essential for us to do. which is to contain the exploding costs. because if we don't, this whole system will be in jeopardy. >> all right. we are just minutes away from this morning's breaking news. we're waiting for the economic numbers. this is the personal income and spending report. it's the numbers for june. it is one of the key steps on the way to friday's job report. we'll have the numbers and instant reaction right after this. "squawk box" in session on capitol hill.

welcome back to "squawk." increment spending numbers coming out shortly.

interest rates moderating but only a base point or two from what is really the upper end of the range. equities are down. all right. income, down more than expected. down 1.3. last month, which was a big up at 1.4 was revised slightly to up 1.3. spending, this is up 0.4, in line. let's paint the picture. it's pretty much the option of last time we saw good income and weaker spending. this time we're seeing weak income and the spending is holding up, but skewed. the revision last time took away 0.3 down to 0.1. year over year inflater is down 0.4. i think that makes sense. i'm not sure what you do with it on a month over month. up 0.2, spot on. year over year moderating a bit. the headline says it a bit, weak income, holding on spending. is this a good thing? maybe in front of an unemployment report it speaks volume. the big story continues to be the dollar. many say it's a good thing, less

crisis. less crisis means fear isn't going to spawn foreign sponsorship. now to steve liesman with treasury news. >> rick santelli, thanks. we have breaking news from treasury. they're taking the unusual step of naming names of those banks and mortgage servicers that are and are not doing a good job keeping homeowners out of foreclosure. they're saying servicers covering more than 85% of loans are modifying the loans, and more than 400,000 modification offers have been extended. 230 trial modifications. let's get to the names here. jpmorgan, according to the treasury here, has started mortgage modifications of 20% of those eligible. those are 60-plus days delinquent. bank of america, 4%. citi mortgage, 16%. when i looked at the average in the table provided by the treasury, it is just 9% overall of those mortgages that are

eligible. treasury trying to modify some 3 to 4 million mortgages over a three to four-year period. they've done 230,000, and trying to ramp that up to 50,000 by november. part of the way they're trying to get this done is by publicly announcing who's doing an aggressive job by modifying these mortgages and who is not. once again, jpmorgan there. gmac on the high side at 20%. and i'm trying to see who the ear one is here. wells fargo on the low side at 6%. we'll see if this is an effective strategy for kind of, i guess you could call, it shaming the servicers into more mortgages. >> that is incredibly interesting information. i can't think of a time where you can really look back and think of these guys, named out like this. but we have the perfect guest to be actually commenting on this right now. we're joined by six sitting senators right here in the hearing -- energy hearing committee. folks, you just heard -- or

maybe you didn't hear but we were telling you about what these numbers are. the administration naming names at this point, the treasury department, as to who's doing a good job and would you say not doing such a good job of modifying home loans. jpmorgan came in at the top with 20% eligible. national city is at the bottom with zero percent. what do you think of this idea of the administration naming names? is this the right way to go about it? can you shame some of these companies into modifying more mortgages? senator gregg? >> well, it's hard to shainl shame them any more than they've already been shamed. but i think you've got to put those numbers in some sort of context. what are the nonperforming loans on their books? some of these companies may have already written down their nonperforming loans and what they may be looking at is performing loans and rewriting performing loans is a different issue than rewriting loans that are not performing. that information, although interesting, is -- and clearly could imply there's significant lack of effort on the part of

these groups to try to get these loans performing again, seems to me to be -- you're missing a big part of the answer to the question, which is, how many of these loans -- how many nonperforming loans do they have on the books and what are they doing with those loans? >> let's do cash for clunkers. >> while we have you here, 6% of the senate sitting in front of us right now. if cash for clunkers were to come to a vote today and they asked if you would extend it by $2 billion, can we ask how each of you would vote for this? senator reed? >> i would support it. i think it will continue to stimulate demand in the automobile business. i think also, too, locally auto sales taxes are usually a very large part of state tax revenue. and that would help our state. the dealers in the state would have more business. they would be doing better. and i think it's generated the first sort of consumer surge we've seen in a long, long time.

that could have effects in other areas without subsidies. so unless we get the consumer back in the game, going to have a much harder road to hoe. >> senator bingaman? >> i would vote for the proposal. i hope very much we can find a different way to pay for it than the house of representatives found. this idea we would take money from the energy loan guarantee program to -- which is long-term money that's needed to support a lot of projects, a lot of renewable energy projects that are on the drawing boards right now. i would hate to see us take the money from that source. so i hope we can find an alternative. >> senator conrad? >> normally i would not support it, but these are not normal times. and i must say i was very skeptical on the first round. i've been pleasantly surprised at how effective it's been. the thing that's been most surprising to me, and this is anecdotal evidence we don't yet have the numbers, but an

extotally how well it's working in getting old gas-guzzling cars off the road and getting people into more fuel-efficient cars. i really was quite pleasantly surprised. i got one of my staff's family owns automobile deermships back in north dakota was telling me yesterday how effective they're finding this program to be. and that people really are moving from old gas guzzlers into more fuel-efficient cars. much more than is required by the law. >> senator gregg? >> well, i just can't understand why we would set up a program which says to americans, we're going to give you $4500, which americans are smart enough to take. and we're going to give the bill to your children and grandchildren, which is what we're doing here. this isn't paid for. the house of representatives made it very clear, senator hoyer said very publicly in an aggressive way that they would refill the hole they're creating in the stimulus spending for the

energy bill, for the energy part of the package. so we're spending the money twice. >> what if the money came from the existing 787 -- >> if you could make it a hard decision that the money was coming out of the stimulus package and wasn't -- the stimulus package wasn't going to be replenished down the road here, and it's been publicly stated the house of representatives who plan to replenish it, then i might consider it. but i'm not going to pass a billion to our kids of $2 billion to buy a car today. i mean, that's just not fair to our children to keep doing this to them. we have a debt in this country that's going to overwhelm our children's ability to have a decent lifestyle. we're taking the federal debt and doubling it in five years, tripling it in ten years. we're taking the federal debt to 80% of the gross national product. we'll be like a banana republic in ten years. we're running a trillion dollars of debt every year for the next ten years and then $2 billion out of the blue and turn that bill over to our kids? it's not fair to them. sure, americans love the program.

you know, we're going to give somebody $4500 to go out and buy a car? of course they're going to love it. why not. if you stop and pause and think about it, is that right to do to our children? >> no, it's not. >> so i think i oppose it -- >> if it's out of the $787 you would consider it. >> i would consider it at that point. i thought the 787 was foolish. it's mostly spent on appropriations people want and 50% of this spending occurs two to five years from now. if you're going to accelerate some of that two to five year spending and put it into this year's stimulus and you can be sure down the road it's not going to be replenished -- >> so can it be written that way this week and you'll say yes? >> it cannot be written that way because the house of representatives -- >> so you'll vote no no matter what? is it going to pass? >> overwhelmingly. >> oh, it will. okay. >> senator alexander. >> i think senator gregg said exactly right, if it comes out of new debt, i'm against it. if we can take it out of money

appropriated for stimulus, then i would vote for it. the other thing it reminds us is that it might have been a very good idea for the congress to pass the republican proposal a year ago to give first-time home buyers or all home buyers for a year a $15,000 tax credit to buy homes, because it might have produced the same kind of resurgence in home buying, which led us into this economic downturn and begun to lead us out of it rather than wasting the money on nonstimulative projects. >> senator, how will you vote on cash for clunkers? >> again, i think judd gregg's point is very good. the auto dealers have been the road kill in this whole fiasco with auto manufacturers. the auto manufacturers got all the government subsidies and the auto dealers, even profitable dealers, were, shut down with no help whatsoever, with three weeks' notice in the case of chrysler, and so i have a great

sympathy for all the people who work for auto dealers. however, whether it is paid for or not is a big issue. and i think that if we could revisit the stimulus package and take off some of the down the road spending so we cut back on debt and start doing some fiscally responsible things here, then i think we have something to talk about at the table that could be bipartisan. >> senator, we spent half an hour on health care, we just did a few minute on cash for clunker. we're still -- we're still fighting about things that were already passed. stimulus still sticks in the kr craw of some members. wi will people be so bruised, that there won't be anything left for cap and trade, headlight care, is the house exhausted? >> i don't think so.

i think we'll be able to make progress on energy-related legislation this fall. i hope we can also pass health care reform. but, frankly, it could go either way. i think health care reform is very dependent upon us, able to get some bipartisan support here in the senate. we're struggling very hard to do that. i hope we're successful. energy legislation is -- can be of various types. we reported a bipartisan bill out of our energy committee earlier this summer. that i think four or five republicans voted for in addition to the democrats. some democrats voted against it. but it was a bipartisan bill. and i think we can pass that in the senate. and i hope we can do something on climate change. >> may i make a comment on that? nobody should be surprised for having big arguments over these issues. these are great big issues. and there are different ways to go. on health care many of us think

we ought to start over. you know, we got the mayo clinic and the democratic governors and congressional budget office all saying you're going in the wrong direction. we have 15 senators, ten democrats, five republicans, on a bill proposed by senator weeden and senator gregg, which is a different approach on health care. it doesn't create a government. plan. so there are other options. on energy, judd that dong a lot of good work on energy. i have a different view. i think we need to build 100 new nuclear plants. that's the way you have clean energy in this country at a low cost. republican senators believe that. we should have a big debate about a low cost clean energy strategy featuring electric cars and nuclear plants as opposed to $100 billion a year, you know, economywide cap and trade. we're not exhausted from that. that's what we're here to do. we look forward to those kind of

deba debate. >> we faced a remarkable situation. last fall, senator gregg and i were deeply involved in this, as was senator reed, we confronted a circumstance in which we could have had global financial collapse. and i believe that's precisely where we were headed had there not been very, very aggressive intervention by governments around the world. not just this one, but china, most of europe, russia, throughout the industrialized world there was a massive intervention to prevent a global collapse. yes, i agree entirely with senator gregg in terms of our long-term budget circumstance. we cannot -- we cannot continue on this course. but in the short term, and this is counterintuitive, you had to have stimulus. you had to have this intervention in the markets by the fed and the treasury to avert collapse. in the short term, that means

deficits and debt rise. but now we've got to pivot. now we've got to deal with this long-term debt buildup and it's critically important that we do. that means things have to be paid for. and cash for clunkers is a perfect example. i personally believe that is stimulative. i believe you go to any automobile dealer in the country, they'll tell you it's stimulative. but it needs to be paid for. and it ought to come out of the stimulus funding already approved. that is absolutely the right way to do it. to pay for it, but to continue it. >> and the language should make it impossible for the stimulus funding to be raised back up. >> yeah. you can't -- you can't be a backup deal. >> you already have a commitment from the house leadership, the democratic leadership in the house they're going to raise it back up and and spend the money twice. >> then it's not going to be done. we have to do it on the square here. we have to do it, ought to be paid for out of the stimulus and not be back doored. >> but if you could find it in the existing stimulus, if you

could find it and pay for it with money that's already gone out there, could you take that into committee and write it with the house bill? >> they left town. >> they left town. >> that's the problem. >> but they did take it out of the stimulus. so the question then is the question of not allowing it to be replenished in the future so it's really not paid for. oh, we're going to get this back, don't worry about it, but that's -- that's something we could decide in the future. for right now, it does come here as something that's paid for. we can take that and then we can insist that it stays paid for. >> we have to pay for this. >> it's amazing you got $787. when we come back, "squawk" in session will continue live from the u.s. senate. we'll talk politics. as we go to break, check out futures. they have been in a tight range, below fair value for most of the

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reporting live from the senate. here again, joe kernen. >> yes, it's me. we're winding down our "squawk" in session summit and we're

going to get some last words in we should talk taxes. i'm going to start with you, senator reed. taxes are going up. what's the average marginal rate going to be? all states are different. i've seen where i live in new jersey it could be somewhere pushing 16. is that what we're looking senate. >> i think at this juncture it would be premature to sort of  speculate. i will defer to my colleagues on the finance committee who are here that actually sets the -- >> you can tell me. they're not going down. >> let me take a run at this because i have a special responsibility to my colleagues in the budget committee and finance committee. i personally don't believe that raising the existing tax structure is the way to go. we've got a tax structure that is only collecting about 76% of what's actually owed and due. if we collected what was owed now we wouldn't have to raise anybody's taxes. my own judgment is we have to

fundamentally reform the tax system of the country because we've got a tax system that was never designed to be competitiv in an environment like the one we confront today. so we've got a tax system that's totally out of date, it's been patched, it's been amended. now we've got kind of the worst possible outcome, a tax system that does not collect the revenue we need to balance the  books, that is not efficient, that is not fair. and hurts america's competitive position. we can do a lot better than that. so i would put on the table fundamental tax reform to put america in a much stronger position going forward. >> i'm having deja vu. didn't the last administration have a panel and come up with a lot of decisions? >> it was disappointing. they got started in the right direction talking about fundamental tax reform but then they kind of ducked. instead of really taking on far

reaching tax reform, they starting rejiggering the code. that's not going to cut it in 2009 with the united states in the position it's in. last year, we financed 68% of this debt from foreign entities. that puts us in a vulnerable position and senator gregg is entirely right when he says we're on a course that's unsustainable and we cannot continue down this path. we have got to deal with the debt overhang in this country. >> can i recognize the senator from the great state of texas. i've always wanted to say that how was that? >> thank you, joe. i think we should step back and say we are are in one of the worst economic downturns in the history of our country. when we have had economic downturn ares in the recent past, president kennedy, president reagan, president bush, lowered taxes and it got the economy going again. today, we are talking about increasing taxes at a phenomenal

rate plus adding new taxes an fines on employers to pay for a health care system is that going to drive people into this government plan. so it is totally counterintuitive and against everything that's ever worked in the past to increase taxes and we are going to increase capital gains an dividends, which is  going to take away jobs. we're going to increase individual rates which is going to cause people not to hire people because half of the higher income people who are going to pay higher tax are small business. what are we thinking here? we're going against everything that's worked in the past in an economic downturn. we should be encouraging investment, encouraging hiring people, not discouraging it wit higher tax. >> but not getting an answer to your question though. the answer to your question is 45 to 50% is the answer to your question. to pay for all the obama administration proposals.

>> some people think up to 50 is okay. >> yeah and some people like the proposals but to pay for the health care plans and is other plans, you're up to 50%. then if you shift costs to the state, you add costs to the states. then cut medicare benefits and put fines on employers, you're going to add costs there. then you hear people say, well, it's only a millionaire's tax but we had one of those back in the late '60s to get after 168  people. today it gets after millions of peop people, if you make $60,000 or $70,000 a year, the millionaire's tax of the 1960s is something you have to pay. so tax rates are going up to pay for all this unless we say, whoa, this is not kind of change we voted for. >> senator reed, some will look at geithner and summer's comment s over the weekend, they're evasive over the tax question that they're playing the ground work to raise taxes on the middle class and claim that the deficit made them do it.

is that how you read it? >> no, that's not how i read t as senator conrad and others have said, we face a great pivot, we have to stimulate the economy, lot of direct spending, tax cut, too. payroll taxes, right to people to get them back to the marketplace, but then we have to in order to protect the dollar, to protect our standing internationally, we have to begin to turn it back and get back to a balanced budget again. >> but the question is when? right? are we talking a year down the road? >> we can't do it until the economy is self-sustaining with its own momentum because we'll just undercut everything we've done. the argument here, we always cut taxes to make the economy grow. '93 with the clinton plan, we raised taxes, we cut spending and at the end of that administration, we had a surplus and we had low unemployment and a very productive economy. bush administration came in, they cut tax the same logic,

well, this is the way you get through these periods of time, at the end of the administration, president obama faced the worst economic situation a president has faced since franklin roosevelt. so we've got to take these difficult steps and it requires cutting programs and sometimes raising revenues. >> senator, we would like to thank you all very much for being so gracious to with your time today, for inviting us into your house today and for something such a substantial conversation. >> i'll come back. >> any time we're welcome. >> if we can get back under oath. >> next time we're here, we're ready. >> we can bring our lawyers and say they're not a potted plant. >> thank you very, very much for such an intelligent conversatio today. we appreciate your time. the final gavel is about to fall our today's special edition of "squawk box." we are live from the u.s. senate. "squawk box" will be right back. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 i want everything right where i can find it. tdd#: 1-800-345-2550 anything that makes trading easier.

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dirkson building. there's something about, i ú think, having the senators face the media in this setting that just said something about accountability in this country, don't you think? >> i do. and it's trir see that we showed the white house. maybe we're going there next. >> and we're going to come back here, too. >> other country's parliament, we'll go around the world. hold these governments accountable. >> i'll hold down the fort. we get adp numbers on friday. "squawk on the street" is next. consumer spending rose 0.4 of a percent in june. it was more than than economists had anticipated. another key stat out national association of realtors releases june spending on home sales. and gmac loses $3.9 billion for

the second quarter compared to a year earlier. that's cnbc news for nous. i'm courtney reagan. live from the financial capital of the world, this is "squawk on the street." good morning, everybody. i'm mark haines, lot going on today after reaching multi month highs, stocks are going to take a little breather this morning while personal income and spending increase. >> and i'm erin burnett, treasury started naming names in h its first stat tut update on the home loan modification. only 15% of eligible home owners were offered a modification from the big banks. we'll get into that in much more detail but obviously the market, marx focusing a little bit of concern on the economy around the world. and on the income side, there was more grim news in those numbers this morning. >> but it's not terrible.

i middle eastern the futures down 690. >> there they are. >> we did need a point to bet to fair value. you're talking about a drop of 50 points in the dow but come on, we're going up for quite a while now so no big deal. >> let's delve into these numbers and find out what was in there. personal income and spending, obviously crucial. home loan modification very crucial today as well. steve, what do you see in all of this? >> spending more, earning less, typically american. one other thing, they're actually saving more. the government reporting a second straight monthly rise in consumer spending but disappointing income numbers although you might expect that with the unemployment. income down 1.3%. spending up 0.4%. the year over year inflation nuns up 0.2% but barely. let's look at wages and