watching. mandy drewrey is sitting in for becky who has a much deserved vacation day. she will be back tomorrow morning. joe, have you already bought -- >> i wasn't going to -- >> roses thing. i shouldn't have admit that had so early in the broadcast. sometimes dials us up later in the show. >> yeah, i think that even if you haven't done it, i don't think you say you haven't done it to anyone. you do it and pretend it that did you plan it and given it a little thought. >> i have a thought. i haven't done it yet, though. >> here we go. >> assuming she is not watching right now, can you tell us what the thought is? >> have something ready to go, wrapped. >> maybe you could use -- >> the card and everything. >> my husband uses, every day is valentine's day for us, that's a good one. it's a good one. >> i have an anniversary that comes less than a month. i try 0 to 0 combine. >> that's terrible. it's like the birthday and

christmas present combined. >> my daughter's is december 26th. we overdo it because of the idea that you don't want to skimp on it. most of the ladies are wearing red today. >> and i should be wearing the red tie. >> you're wearing a red thong. >> thank you. thank you very, very much. >> this squawk ward moment has been brought to you by joe kernen. >> wait a minute. i'm not the one wearing a red thong. >> this squawk ward moment has been brought to you by joe kernen. >> what happens on "squawk" stay on "squawk." >> men wear two. >> this squawk ward moment -- >> a not so happy valentine's day card. warning, it may cut the aaa rating of france, britain and austria -- >> wow, you go. >> red bull, that's where it's from. last week you missed it. >> you weren't here. >> i was so wrong.

>> he said, guess what, it's made in australia. i looked at the can, it's made in austria. >> in any event the ratings agency also downgraded, italy, spain, and portugal. it cites growing risk from europe's debt crisis and this is becoming a bigger and bigger issue. 12 to 18 months down the road we may see a down grade. maybe it doesn't matter. maybe it matters. >> i don't know. >> maybe it does matter. >> if people pay attention to that. in washington news the budget hearings begin today. yesterday president obama september his plan up to capitol hill. today treasury secretary tim geithner will appear before the senate finance committee. meantime defense secretary leon panetta will go before the committee as well so there's lots of stuff going on in washington. >> a number of key economic reports at 7:30 eastern the nfib will release its monthly survey of small business sentiment and we will get those numbers first on "squawk box" and then at 8:30

january retail sales and import prices. at 10:00 the government reports on business inventories for december. and a successful bond auction in italy happened today. more on that from ross from london. futures did move higher following the results of the auction out of italy and it added to our 72 points. you saw baron's talking about 15,000 which is 2013 it seemed like a revelation. i heard some of our people yesterday. >> you were there first. >> i heard some of our people talking breathlessly about the possibility of hitting 15,000 in basically two years from 13,000, basically where we are. as if that's -- because they're not used to to it. but just having lived through 800 on the dow and watching it go to 14,000, it's not that incredible to go up a couple thousand points even though we've been treading water for so

long, ten years. it sounds impossible. it wouldn't be that unbelievable. so we look at the futures already. a quick look based on what we saw, up another -- oh, no. those are the european markets which are almost solidly all in the green except for athens which is not happening over there, burning buildings. in asia, we'll take a quick look. mixed. some up. some down. the nikkei up 9,000. how long has that been below 30,000? >> ouch. >> unbelievable. >> i want to talk to you, too, there is a valentine's day -- >> we don't celebrate it to the degree that you do here in the states. do you know where they really celebrate it? in japan. i know we're talking to godiva later on. it's a huge thing in china as well. they're getting a double whammy because they have their own chinese valentine's day. they're getting greedy.

they want more chocolates. >> can i ask you if you've done the google video yet today? >> i did not. i saw that. >> you go to google today there is a -- >> let's have a look. >> it's cute. you have a little girl skipping rope. >> right. >> and the guy comes up and gives her different gifts and nothing really fazes her until they skip together. >> okay. i'm doing it now. it's kind of cute. >> it's done to some good music. you can't have music. >> that is cute. >> july 4th is not big. right? >> we have to make it big in australia. >> what about thanksgiving? you don't have a thanksgiving either. >> we don't have thanksgiving either. what do we have to be thankful for in our perfect country with beautiful sunshine and beaches? >> you don't eat turkey, you eat kangaroo, so i wouldn't be that thankful either. it's gamey. >> it's very gamey. there's no fat on it. it's got to be fatty to be yummy. >> i don't think i ate kangaroo. >> it largely goes into cat food

but -- we do eat it. >> i can't even believe it. >> i don't know why -- asia and the oil board t. asia was thinking -- anyway. there's the crude -- you know, and rude, that $4 gas finally starting to happen. >> it was mentioned to me. >> you wouldn't have any idea. you don't even know whether it's in dollars or pounds or what. >> i'm not even sure if the car takes unleaded, diesel, super unleaded. i'm not sure what we do. >> let's say that geeves, i don't know, was indisposed when he pulled in, would you be able to handle that? >> i would get out. i would take my credit card, slice it through the thing and go -- >> you can do that. >> i like the gas stations where you can click it in and it stays. do you know what i'm saying? >> that's thofl to you, isn't it? >> this some states it doesn't say. >> have you come across sliced bread? that's really -- that's really catching on. >> that's a good one, mandy. i'm glad you're here today. that's going to work out.

>> she is only a guest today. >> that's true. >> keep it together. >> the day is young. >> below 2% again. and then let's check out the dollar in gold. it's only taken me 11 minutes to get through three boards. 1.3195 and finally gold which has always been in the low -- there it is. it's down $5. and the big question, over 2,000 this year or not? i said no. i don't think. i don't think it will. >> did you see "60 minutes"? >> i did. here is the thing -- >> you saw india, what a big deal -- >> but gold -- if -- if the dow goes to 15,000, you would think gold should not. >> no, it should. >> it should. >> it's like a risk asset as opposed to a safe haven these days, right? >> i think people might -- what's your argument for it not? >> because it's just overdone. it's been a long -- >> that would be my argument. >> because the risk is too high. >> people would say the printing press also stay on full force in

europe, it's a race to the bottom. gold is the only place to go but that's so known already that i just wonder. it went from $300 to $1,800. >> year after year it never fails to move higher. i guess it depends whether you think this is a real comeback year for the u.s. dollar using the ugly contest analogy that we're maybe the cleanest dirty sheet in the laundry basket. >> right. >> i use leper with the most fingers. >> we don't do tallest -- >> no, no, no. no, no, no. tallest small person in the room, is that what you would -- >> the tallest midget in the sfloom. >> no, no! >> was that wrong? >> that was a bit much. ixnay -- >> we don't have a squawk ward moment brought to you by mandy. >> this squawk ward moment has

been brought to you by -- >> mandy. >> there you go. >> in other headlines, bhp bill ton and rio tinto are raising their bets on global copper demand. companies approving plans for a $4.5 billion expansion of a massive mine. bhp plans to reopen a u.s. copper mine idle three years ago. copper is seen as a bellwether for industrial demand. prices have fallen, though, 17% from record highs above $10,000 a ton a year ago. the price is still more than double the level reached in the depths of the global financial crisis and the first wand denominated gold etf on the hong kong stock exchange with a weak showing. some analysts are showing demand will pick up as investors become more familiar with the product. >> the bank of japan easing monetary policy today by boosting assets purchases. and the surprise move the central bank added $130 billion to its asset buying and lending scheme. under that program it buys

government and private debt and lends cheap funds across various types of collateral. the boj setting a near term goal of 1% consumer inflation. policymakers are responding to growing calls for more action to help an economy in deflation, just cannot get out of it and weighed down by a very strong yen. the key interest rate remains unchanged. elsewhere in asia china's vice president xi jinping will sit down with president obama and vice president biden on agenda key issues like the economy, nuclear threat, trade and human rights. the visit is important because he is expected to take over as china's next president. that will be next year. >> just ready for that pronouncement. i would have called him 11 jinping. >> because of roman numerals. >> i would have skipped it. >> the vice premier. >> i would have said 11. >> i would have said "z."

>> or you could have done a heavyweight chinese man is here today. >> i go with kim jong i, ii, and iii. we're going to get some is mail on this, too, that this is somehow anti -- >> it isn't. >> i'm not feeling anti anything. >> i'm sure they will be pleased to give us some enjoyment in our day. if you can't laugh at other people's names what can you? >> at 6:11 in the morning there's little to laugh at. >> global investment banks cutting pay in asia between 30% and 40% last year. industry recruiters and sources within firms say that many bankers received no bonus at all and pay was flat. time for the global markets report. ross westgate standing by in london.

>> i know no thanksgiving, i know no july 4th. valenti valentine's day, ross? >> we have been infect. thank you for that commercial creation that you shipped over to us. >> that sounded somewhat sarcastic. >> imagine what life was like before the creation of valentine's day for guys, joe. >> it costs you money, you have to think about it. i'm sorry, ross, that you have to somehow recognize your significant other, that that's such a pain for to you do that really. >> except you do that every day of your life through the little actions that you do. >> that's what you tell your wife as well? >> the commercial event, the commercial event is valentine's day. >> unseamly. ok okay. sorry. >> here we are in europe, ahead of the u.s. open we're weighted to the upside 6-3 advancers. the biggest move after a solid

eye t italian auction this morning. they raised the $6 billion l they planned. $4 billion was from a two-year issue, the 2014 and what they did was the yield on that 3.4% better than we might have thought. here is the key thing to put this into context, two-year money, this same issue when they opened in november the yield 7.89% and that's been the benefit of the ltro. another one the end of this month but that has underpinned the bond and the rise in bank stocks which has all helped out equities. the ftse 100 after being negative pretty flat at the moment. the other key thing for the uk, of course, is moody's putting the uk on a negative watch. the first time -- they also put france in negative watch but the s&p is already downgraded france. that means it's about a 30% chance of them being downgraded. the uk, they say, they cited weaker growth prospects and exposure to the eurozone to which they can do nothing.

so the ek on the negative watch. gilt got sold off. sterling got sold off. we had some good news. inflation data came in as expected, down to 3.6%. the bank of england says that should fall to 2% by the end of the year. there we go, the government saying today that's why we need our usausterity plan because of this warning from moody's. back to you guys. >> all right, ross. thank you. and for me to you, and i feel totally comfortable saying happy valentine's day -- >> happy valentine's day to you. >> without any regrets. i can't say that you're my only valentine but -- >> which would be kind of cre creepy. >> really? >> yeah. well, you know, for you to ross westgate. no, no, i take at that back. that would be kind of sweet. >> i hope you do take that back. it would be. >> there's so much love in the air, if you turn around -- turn around for a second. just look -- >> let me do that. look at that wall. >> that is nice.

that is nice. >> look at that. you have a full of hearts. >> the notes come home from school saying that if your child wants to give another child a valentine's day card they have to give everyone in the class a valentine's day card, boys and girls, because no one should be left out. >> my son asked me about it yesterday, specifically is it a boy's holiday or a girl's holiday? mostly it's a holiday for girls. what is ours? and i said st. patrick's day because we drink a lot of beer. he goes, i like that. and then he got some green braces, new ones, when we we went -- that was my day yesterday. and he told that to his mother and sister yesterday. valentine's day is okay but he's waiting for st. patrick's day. >> are the producers playing us out to commercial or they want to play beyonce? >> i'm disturbed you know who this is. i don't know. >> do you know who adele is? >> absolutely. she won six grammys.

>> brian sullivan did not know yesterday. >> really. >> gave him a the lot of hell about it on the show. >> he's a creep. >> what rock has he been living under? >> i don't know. coming up, in honor of valentine's day some match making of the corporate kind, companies likely to tie the knot next. >> i'm very interested in this absolutely. first, though, "sports illustrated" unveiling its 2012 swimsuit cover. >> i'm interested in this, too. >> david letterman having the honor of making the announcement last night dropping a sheet from a new york city billboard. this year's cover model i have met. >> you know kate upton? >> i said hello to her at dinner last year. >> the correspondents dinner because darren rovell, she was darren's guest and she will be on with darren on "power lunch" this afternoon. she is very cute. >> she's not coming on this morning? >> she was 18 -- and she had a little blemish. i thought, wow, supermodels get zits, too.

but when you're 18, is that a surprise? she's 19 now. as we head to break, i'm glad at this point. >> you still get zits? is. >> i do from makeup. and i appreciate it. i don't even pop them. check out the global market headline. tomorrow he's too big to fail. he's the hammer. what happens when too big to fail faces on the brink? it's another squawk exclusive you won't want to miss. hank paulson. until the end of the quarter to think about your money...

♪ that right now, you want to know where you are, and where you'd like to be. we know you'd like to see the same information your advisor does so you can get a deeper understanding of what's going on with your portfolio. we know all this because we asked you, and what we heard helped us create pnc wealth insight, a smarter way to work with your pnc advisor, so you can make better decisions and live achievement.

welcome back. this hour looks like the he ceq futures are slightly higher making the headlines, texas instruments hiring an adviser on the sale of its factories in japan and the united states. last month the chip maker said it would close a factory in southern japan and another in houston. elsewhere intercontinental hotels is looking to emerging markets and especially to china to drive future growth. the owner of the crowne plaza

says recovery meant the united states in a string of new chinese hotel openings helped to push up its 2011 profits by 26%. andrew? >> we're celebrating valentine's day cnbc style. corporate match making. what you might call the long courtship. >> unfortunately all day i think you will be hearing valentine's day puns. this is not the end of it. >> this is just the beginning. >> and we call it this a long courtship because the state is pretty dire. we did see the big xstrata/glencore deal last week. if you take those numbers out year to date deal volume is the lowest since 2003 and you're not really seeing a lot of stuff get announced barring a tiny deal getting announced yesterday. this transformational deal set to continue as is the case.

these have been in the pipeline. if you look at how this deal actually got done, i know this is about a week old but i think it's interesting when you look at glencore it had a 40% option in xstrata's 2002 ipo. people expected the deal to happen since then. the last five years xstrata had been rebuffing from glencore and when i was living in 2010 -- >> sounds like my dating life. >> unfortunately, it does. but in 2010 when i was living in london, this was a deal everyone was waiting for. then xstrata said go public. get some currency. let's see what your company looks like on the inside. glencore is a black box. they wanted to see what the company actually looked like. so finally they said go public, they did that with a giant ipo last year and now you see this deal at what appears to be a tiny premium and of course

shareholders are balking but it looks like it's in the pipeline for a long time because it has and the other deal is bidding $7.5 billion for illumina. we know that roche takes its time. it's a patient company. >> so to keep the pun going, why is everyone playing so hard to get? >> people are able at this point to look at the highs of the stock market in april of 2011 and say our 52-week high was up there and even though the market has recovered, it hasn't recovered to that level. if you get to april 2012 and the 52-week high hasn't been reached again, then ceos are starting to think, hey, was that stock level unsustainable? can i actually get back there? that's the issue because they can always say no pointing at that-to-that 52-week high. >> do you have a prediction match making -- really i'm continuing the pun here. match making for 201 it. faber andy talking about it. we think this is a tough year, not a good situation.

>> not a lot of love in the air. >> stop me if you've heard this line before but corporates have a lot of cash on the sidelines. >> yes, i have heard that. >> so of course that's the line that everyone is taking and i think you are going to get to the half of the year -- you have the 52-week high issue come into play. you are going to have the fact that they do still have this cash and at that point shareholders, you've seen a lot of activism but shareholders will get even more antsy for them to put the cash to work in the back half of the year if it's still making no money. the one that i want to talk a little bit about, though, is dollar thrifty. i think a lot of people thought this deal was dead. if there's anything we're clinging on to it's this $2 billion deal. hertz had an agreed deal at some point in this two-year courtship. it's october but behind the scenes they're still trying to get ftc approval.

my understanding is they will be negotiating for price. it potentially would get clearance in some of the conditions that's put forth on this deal. they have the option not to do that but that's one that a lot of people in the merger arbitrage world are looking at and saying this is one thing we can sort of look at and figure out where it's going to go as far as targets and what people are looking at otherwise. >> sounds like an adele song. less like an alanis morrissette deal. >> or beyonce -- you are across the -- >> i was going music this morning. trying to continue the valentine's day -- >> and you know all of these. >> alanis is very angry, alanis morrissette. >> "you ought to know." >> adele is upset and frustrated. >> thank you. >> thank you. >> for the match making, the courtship. >> you will be back. >> i will. >> good. we'll see you in about half hour. >> yeah. we're not going to tell them

when it's going to be. people just have to keep watching. >> great tease. we're going to go to the markets now. kevin joins us from the cme. >> good morning, joe. >> what do you say? what about this italian thing? that one all right? >> yeah, they have some data off. first of all, there's no news like you rolling in that 30-footer live on tv last week. that was pretty awesome. not sure about that dance after you made it. >> the dance was in reference to the prior 15 holes. it wasn't a dance, it was like finally something. those greens were like glass. i don't know. there's something about crowds and cameras that don't go with my -- >> incredible timing. they went to you live. >> faherty, i know him and he was funny. he couldn't believe that happened. i couldn't believe it happened either. elkington read the putt and then left me the next day with an

injury so i was on my own. what do you think? >> we have good news out of germany and you have xi jinping coming here to talk to us and the europeans are going there to beg for some more money. i think you have to watch these developments. the one thing that we're watching is that although you had decent moves, the s&p is still balking at what we think is a level that's important and that's 1355 and the futures. and so watch the market after we get our numbers from retail sales today. if you make a little surge up and the market starts to fade, the afternoon could get real interesting. >> mandy? >> i didn't know whether i could jump in on your space. >> please. >> okay, jumping in. i was going to say i read about a lot of bullishness, a high level of bullishness out there. i guess february is normally a

seasonally weak time of year for stocks and yet we're up one, about 3% so far on -- would you say more an absence of bad news as opposed to particularly good news? would you say that? i'm trying to work out what exactly is propelling money into this market right now. >> here has been our opinion. we think if you go back to october/november, that's when we said things were going to kind of, court of work out. so this move is four months old for us. i think really what we've seen is we thought if you brought some stability, if you killed down some of the volatility that was emanating from the currency markets, mandy, that can haonfi would go up. now what we're really seeing or what i'm catching from the professional community. high level of professional skepticism. the the growth prospects.

the consumer and so we're a little more cautious up here but, again, that's only because it's on a stellar run for a little over four months now. >> we'll leave it there. i don't know what's next, portugal. things aren't done in greece at least in terms of the general population. >> a little bit of a benefit from the yen being down this morning. the euro is sucking all the air out of the room but the yen being down is a good benefit and they're jumping back into the qe with another trillion yen worth according to last night's announcement. >> the stock market is quiet so a little bit floating upwards a little bit. i saw baron's but a good january.

february now at 2%. almost. i'm not a smart man but if we were to do 2%, 3% a month we would get to my target, my 30% target for the year. >> i think they were still heading in the right direction. we call it falling up right here. it's a tuesday. the market has been stressing for a high. we have numbers coming out here. you really want to see how it reacts this afternoon as things sink in. >> we see a lot of that -- a lot of that falling up in the management ranks. you would never say that, would you. >> i wouldn't but i would laugh when you do. >> all right. but you wouldn't laugh on camera? >> not on camera. i saw you snicker. >> and do it very slyly. >> okay, great. kevin ferry, thank you. r rupert murdoch expected to face a hostile and angry staff when he arrives in britain this week. those details next. and then tomorrow don't miss a "squawk box" exclusive. former treasury secretary hank

paulson. hammering hank live. it's hank the hammer. >> hank the hammer. >> at 7:00 a.m. eastern. where do you have to go? >> the man who may have saved the world and the economy. >> and he saved a lot of birds, too. >> and he saved a lot of birds. we will see him in manhattan tomorrow. and we'll be live. we can all talk to him. >> are you that close now? >> he doesn't drink beer. >> what does he drink? >> he's a christian scientist. iced tea. >> are you going to make a comment about that now, too? >> no, no, i was just correcting the record. let's head to the break. >> cannot come fast enough, right? >> check out yesterday's winners&losers.

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will likely face hostile and angry staffers when he arrives in britain this week. he's dealing with a growing rebellion within his newspaper business. murdoch wants to end the talk that his flagship son could close following a string of journalists on the newsroom floor. andrew, you're worried about the sun going away, right? >> it's very important part of the culture. >> something to look forward to. >> did news of the world have a page three? >> i don't believe they did. >> like a whole page three isn't it? >> you know what it is? >> i have a fair idea. not like i subscribe to it. >> there's no reason for you to. >> i lived there. i lived there. every day. and we used to get it at the office every day. >> so you would turn to page three, after one and two -- >> no, after one and two. you flip through. you might pause for a little bit

longer on the page. these are the things that happen. a chinese company says -- >> i was younger. >> you were younger then. will have customs officials to ban apple's ipads due to a dispute over ownership of the trademark. all of apple's ipads are manufactured in china. global sales could be affected if authorities agree to enforce the request $468 billion yesterday. now it's not the first time that we've seep a tech company here in the u.s. get above -- get to half a trillion dollars. it's happened before but it didn't last long at all when they get there. i'm thinking of cisco. and there may have been some others that got close. i believe ge was over half a trillion for a while, not a tech company. >> $506. think it's going to go to $600.

it feels at the moment like it's unstoppable. as we know from history that eventually everyone has their crown knocked off by something. rert that hoopla last year about the apple stores popping up all over china, the fake apple stores, and a lot of the employees in those stores didn't even know they were work iing f a fake apple store. >> my law of large numbers was $339. >> that was your number? okay. >> and i watched it go up and below that for a while but then it's like going from $34 now it's at basically $50. so that's a 50% move. but what do i know? >> we'll keep watching that. heene time -- >> really? >> it is the quintessential valentine's -- >> that was just a way to move a away. he's not going to watch it. >> godiva chocolates, we'll ask the company's ceo after the break. ♪

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♪ we got it together, didn't we ♪ ♪ we've definitely got our thing together ♪ >> the ultimate valentine's voice. >> that voice. >> no one has a better voice than that. >> i mean, really --

>> have you heard there are some racy things in his song, take off that brassiere, my dear, i don't want to see no -- >> it's valentine's day, bring it. >> you say bring it. >> bring it. >> who can bring it better than barry? 36 million heart shaped boxes of chocolate will be sold for valenti valentine's day. joining us on set, jim goldman, ceo of go die have a. so in one sentence, jim, we talked about brassieres -- she was naked as a jay bird. we know that except for the hair and the horse. >> lady godiva. >> she is named after a naked person. >> she is our icon. everyone has to bring chocolate to those that they love. >> you're right. and what do you have -- what did you bring in with us? you can't eat that bear, can you? >> you can't eat valentino the bear. >> is that who that is? >> vaten tino the bear. >> not named after rudolph.

>> to celebrate valentine's day, a day that we love. it's our super bowl. people want to do the right thing, bring chocolate to those they love. >> is this the biggest selling day of the year or maybe yesterday? >> no, today is is the biggest day. people will be in our stores, in department stores, specialty stores looking for godiva. >> these guys haven't bought anything for their wives yet. can they -- >> what guys? >> this guy. this guy hasn't bought anything. >> speak for yourself. don't throw me in there. >> andrew, you are the norm. >> thank you. >> you can feel good. >> really? >> as long as you get it done by the end of the day. >> i wouldn't feel good about it. >> it's 6:45 in the morning. >> he's given it no thought. >> oh, come on 0. i know exactly what i'm doing. i have a plan. >> let me give you some suggestions. our dipped strawberries, freshly dipped. we do 15,000 an hour. people love them, bring them home and enjoy them. our satin heart, this is a big deal at valentine's day for us. we have a story of a gentleman,

i love this story, 20 years ago he bought one of our satin hearts and every year he comes back in our store to fill it. this year's new chocolates -- >> he brings the same one. >> isn't that terrific? >> he just makes other guys look bad. >> i worked the store today and it's my highlight because, yes, we make some money today but more than anything we really delight. >> this is our most popular classic item. it offers the best variety and it drives our business at valentine's day. >> double price on valentine's day. >> you don't lower them, i know that. >> pu we offer a variety of price points so one of the things we've done is have is all kinds of special novelties that are great for kids. a hug heart. and so these are under $10. these are $8. big in china.

i think it's interesting. that has to be all commercial. you're what, doubling your stores in china or close to. they're really lapping this up. >> it is now a global holiday. i was in asia last week. in japan and china and they love valentine's day. they, too, like to celebrate those that they love. interestingly in japan only women give to men at valentine's day. here this north america everyone gives. from children to significant others, men, women, late, preplanners. >> i'm late. quick question for you which is the last time i saw you i think i was the guest host that day, maybe a year ago and cocoa prices were going through the roof. where are they now? >> they are down versus a year ago edging up the last couple of months but they are actually down. >> how much do you buy out? how do you hedge against future price for cocoa?

>> we look at it carefully and depending on the circumstance we will hedge. we're not speculators but try to make the right business. >> can you speculate on what you think they'll do in six to nine months? >> it has to do with the harvest. the demand is not subsiding. this year at valentine's day, the national retail federation expects sales to be up 8.5% and for this to be the largest valentine's day in ten years so we know prices and delicious chocolate are in vogue and -- >> will it be back to '07? >> will what be? >> sales. did you dip during the financial crisis and are you back to prefinancial crisis levels? >> we've grown double digit each of the last two years. >> so what does that mean? >> we're well above. we're well above that. we've grown the company by 25% over the last two years. >> how much did it go down? >> it went down 1% or 2%.

>> that's it? >> chocolates are loved in good times, in challenging times. >> you can't put a price on love. one real quick question. >> sure. >> any fear you're becoming too mass market, becoming too much like some of the other brands like hershey's as opposed to keeping the niche top end chocolate cache that you've got? >> no. that's a good question. our stores are unique. no one has more retail stores than we do, creating the experience we do. for a more impulse oriented product like a straw bberry truffle bar, we have a broader distribution on those chocolates. we love to get our chocolates in people's mouths but our stores create a unique environment. these satin hearts are only in exclusive locations and our dipped strawberries 15,000 dipped every hour today. you can only get those -- >> i may have to go out and get some. thanks for coming in this morning. appreciate it very much. happy valentine's day. coming up, silicon valley turning out an historic crop of overnight billionaires. now they are fighting to keep its bankers from trading in their wing tips for flip-flops.

the details coming up next. and then tomorrow don't miss this. we have a "squawk box" exclusive, former treasury secretary hank paulson. he's going to be live at 7:00 a.m. eastern time.

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♪ well, all day cnbc is taking you inside the battle that is the clash between wall street the banking giants and the rising ranks of silicon valley's elites, we've got a look at the faces behind that battle and what wall street is also up against. >> "new york mag" called it the emasculation of wall street, but we want to look at the faces behind the movement. the lure of the big bucks has been wall street's best incentive to attract the best minds and keep them, and thanks to mark zuckerberg and andrew nathan and reed hoffman, the dream of making it big has gone viral. >> i realized when i was a young kid that i had one big goal in

life and that was to get as wealthy as possible, as quickly as possible. >> reporter: for tristan walker that dream led him straight to wall street. growing up on welfare in the shadow of manhattan's high-rises, wall street was his way in. but after years as a trader at lehman brothers and jpmorgan, silicon valley came calling. >> i didn't want to be the victim of a bad culture. i wanted to be the creator of a great one. >> reporter: so walker headed west. he's now head of business development at four square, one of the valley's fastest growing social start-ups. but start-ups aren't limited to the west. >> the start-up environment a totally different than the culture on wall street. >> reporter: matt thompson took his skills and ideas east to washington. a former army officer, thompson left a curby gig at goldman sachs in los angeles last year after his brainchild, troop swap, a web base for the military community closed its first round of funding. >> the more i got doing my job at goldman, i realized every

morning, you know, i was going to work just for the money. >> reporter: it's no surprise that this desire to disrupt, to create a culture, to be a tech icon -- >> thank you, welcome to mac world. >> reporter: -- has also spread to the farm system, business school. >> should i be doing wall street as well, it's there in front of me. >> reporter: for robert jones who will graduate from yale business school, wall street seemed the surefire choice, what does he want to do with an mba from yale, join a start-up. there are many more who want to bypass it altogether especially with the new renewed threat of layoffs. mary thompson will be exploring the angle on "squawk on the street." >> does that mean there's a brain drain happening on wall street? >> i think it's been expected. since the first tech wave

there's always been this desire to do something different, the culture of wall street has changed a little bit, the security isn't so much there as it used to be and, you know, you are seeing layoffs, pay cuts. it's not really the pay off that people thod it would be. >> when you talk about facebook people are talking about the tech bubble 2.0, so there's that allure as well and the promise of big bucks whether it's true or not, it's completely not relevant, but i guess there's that as well. >> and, you know, i think it's interesting to look at and one thing that mary will look at is what percentage of the people actually chose to leave their jobs on wall street and go down a more unorthodox path versus those who were actually laid off and said, do you know what, this isa catalyst. >> joe said it, why emasculate wall street on valentine's day. he's calling on conservatives to take back the definition of fairness, we are going to talk taxes and regulation.

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loving america. ♪ can't get enough of your love babe ♪ >> american enterprise institute president martha brooks, pop culture, politics and economic life in america. is small business falling in love with workers? >> you got a promotion. >> yes, yes, yes, yes! >> breaking details from on how the engine of the u.s. economy is faring. the state of the banks, president clinton's top money man eugene ludwig on the future of the financials as the second hour of "squawk box" begins right now. ♪ what can i say what am i going to do

i cannot see when everything is you ♪ ♪ what kind of love is this that you're giving me is it in your ♪ >> you got to love barry on valentine's day, good morning and welcome to "squawk box" here on cnbc, i'm andrew ross sorkin along with joe kernen, u.s. stocks are up for four out of the past five sessions. take a look at futures. we've got green arrows, a nice way for valentine's day to start, dow up 14 points higher and s&p, two points higher and nasdaq would open up six points higher. the futures coming off their lows after solid demand of the latest italian debt auction. they sold 6 billion euros, and yields fell from 3.1% to 4.83%. the president's proposed fiscal 2013 budget will be the primary topic of discussion on capitol hill. treasury secretary tim geithner will be discussing the budget

before the senate finance committee this morning, and leon panetta will be appearing before the senate armed services committee. a chinese company is trying to keep apple from exporting ipads from china, where all the units are made. the jenjen won a court ruling say it owns the ipad name in china and want's china's customers to see all the units for import or export, apple said it bought the right to the name from the company ten years ago. our guest host this morning has a plan to get back on the road to freedom which also happens to be the title of an upcoming book, joining us is arthur brooks the american enterprise institute president, if people don't know what it is, it's a free market think tank, how would you describe it? >> ae1 is a think tank that

thought that people were trying to torque the economy more towards the social economy, and we are 200 people all headquartered in washington, d.c. >> when you read things, you realize during world war ii it's only natural for an economy to become more or less run by the government because all your resources are directed towards wartime needs, and it's hard to extricate an economy from government control after a war. but we successfully did it. >> right. >> i don't know -- >> a couple times. >> i don't know whether the last two wars would really qualify, they don't really for using that much of the government's resources, but here we are in a pitched battle -- and we'll mention your other book, the one that i admire so much, but here we are again arguing about the same things that hayak argued in

the '40s and '50s. why? >> it's the same thing over and over again, when the country has resources to spare it starts to spend them through the government on a welfare state and it's almost an inevitable process and free enterprise doesn't defend itself. we have a tendency to think that the free enterprise system is a self-correcting mechanism. the truth of the matter is when you get modern economies they tend to be more social democratic and more socialist as time goes on and unless people that believe free enterprise as a moral deal not just as a way of creating wealth, but something that actually creates the best life and freedom for the most people, unless people stand up and say we have to defend this thing even though it requires some sacrifice it won't be defended otherwise. >> i've seen when people will talk about president obama and say -- they'll say if someone were to refer to him as a socialist or having socialist tenden tendencies, it's almost like it's a ludicrous absurd comment

to make. in europe there are socialist parties and governments and it's a choice that certain democracies make and a path which you can go down and it's not necessarily a pejorative or like calling someone the devil to point out that you have the tendency to be headed toward a socially democratic state and i don't think it's a state that a redistribution mentality has been sort of the earmarks of this administration. >> well, and virtually every administration has gone more like this. when we look back on it in 1940, after the new deal only 15% of american gdp went through the government, was run through some level of government, by 1980 it was 30%. when reagan left office, the great budget cutter, it was 32%. it's 36% today and by 2030 it will be 50%. this is a natural process. it's not that obama somehow is a big socialist compared to everybody else. this is a process. >> in fairness, taking income away from some people and

redistributing and making it be equal aside from rewarding merit. >> that's the two definition of fairness, in the whole conversation we're having right now, the president and the administration talks about people paying their fair share, people getting a fair deal. basically the definition of that is we need more fairness by getting more equality. most americans define fairness as people getting what they deserve. that doesn't mean we don't need any sort of welfare state or safety net, it's different from equalizing returns and taking risk out of life, you do that, you get a nonentrepreneurial state and that's what the most countries have gone down -- >> did you read the front page of "the new york times" over the weekend >> the social states have gone from being a safety net to the poorest people in the country to sort of moving up the middle-cla middle-cla middle-class? >> yes. >> what was so interesting about the piece there were so many people quoted in the piece, regular americans who said i

don't want that safety net, and yet when confronted with the choices about -- and realization about the things that they were taking from government, they realized that maybe they needed the things to at least maintain this standard, my question is, how do you maintain this standard and what's the transition like? meaning, how do we take the safety net at some level away, because i think that's what you're arguing, without the pain or do you say you have to suffer through it? >> there's always pain when you take something away from somebody. but remember that roosevelt, the great creator of the modern welfare safety net, said that this stuff that we're talking about today is the narcotic, the subtle destroyer of the spirit. he was the one who basically predicted a lot of the things that we're seeing today. the only way you can get out of the current system and get the middle-class back on its own feet without essentially being a welfare state that covers the middle-class is economic growth. we need economic growth policies and entrepreneurial policies, the only way you can grow out of this thing is by actually putting policies in place that create opportunity, growth, and

jobs which is exactly what we're not doing. >> in light of what you said about the article, the first book i was referencing was called "the battle," and you go through dozens and dozens of surveys that really point to the entrepreneurial spirit being alive with most people in the united states. >> yes. >> all of these -- >> americans alone? in another part of the world we hold americans up as people who appreciate success. >> between 60% to 70% most polls said they would prefer individuality. but the point of this article is people say that, but at the same time they're the first ones to sign up for things that can benefit them or make life a little bit easier for them, so i wonder whether polls really matter when people say that. >> this is the thing. there's a cognitive dissonance, and it happens in the welfare state. so, consider this, 80% of americans are completely dissatisfied with the way they're being governed, the highest level since polling was undertaken in the 1970s.

70% of americans say they love the free enterprise system and want more limited government. and 70% of americans take more out of the tax system than they put into it. how do you square all of this stuff? we're welfare recipients and takers as a nation more and more and more, and we love free enterprise as an ideal and we're angry at what the government is doing. and the answer is the government is trying to do something it can't do. >> there's a disconnect between the philosophy and the idea i would love to have free enterprise and have somebody take your money away from you? >> it's hard to take your money away from people. and 60% americans say the government should give us free health care, you can't square it with the actual free enterprise system or do damage through it has to why we have to defend it through growth policies and people that speak honestly about it. >> do you think it will happen? >> i think it's a good shot, but it won't start happening until people that believe in the free enterprise system, all of us, make a moral argument for the

system itself. >> you think we have a battle between now and november when you make the point this is going to be a multidecades problem? >> exactly. >> 20, 30, 40 years and we're not guaranteed of winning the battle, we could very -- >> we'll be dead by the time the battle is over. >> that's the other point you make about fairness, is it fair to leave each and every child in this country with what kind of bill to pay based on -- what -- i was staggered by "the wall street journal" op-ed piece today, the main one, about where we are as far as how much debt, public debt, that we hold. it's 75% or 76% right now, up from 30% in 2007. >> no, it's crazy. it's crazy what is happening. and, in fact, that truly isn't fair. it's not fair. the president says we have a fairness crisis and he's completely right. with the crushing burden of debt we're putting on our kids. the special deals that people have access to the government. people and corporations have.

these are unfairness problems that we have in this country. those are the real unfairness problems, not that we have income inequality, because the entrepreneurial class is pulling away. if we equalize incomes as opposed to the true sources of equalization, and think about it cash for clunkers which passed through the public policy system, that's asking your kids to buy you a car. since when is that fair? i mean, that's the kind of thing we're doing and we don't pay attention to it from the fairness standpoint. >> i want it now and i won't pay the price later. >> all right, arthur, stay with us. glad to have you in today. >> great to be with you. >> great questions. >> absolutely. still to come, on "squawk," find out if the stocks love affair will continue and how long it will last? and later on howard bedean tries to work out with reagan's

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checking the futures right now, we've got green arrows. dow looks like it would open up 14 points higher, and the s&p two points higher and the nasdaq 6 1/2 points higher, but the big question is will the recent stock rally continue or is it

running out of steam? join iing us is the chief investment miser for the huntington cyphus fund. you probably saw the cover of "barrons" this weekend, 15,000. >> makes us all very happy. >> it does make people happy, and joe kernen is expecting a higher number, 30% on the year. >> like kissing your sister. >> 15,000 by the end of next year. we deserve more than that, randy. >> i gather, randy, you are not as optimistic as the rest of us? >> i think we're optimistic on the stock market and the course that's there, but what we are looking at is the number of converging factors that will kick this economy into a little bit slower period. this has been a number -- scenarios that have taken place that will be pretty much long-term in nature and all apologies to pimco and their new normal, we think there's nothing normal about the particular

recovery and the environment we're moving into. in fact, we're calling it the new abnormal, if you look at demographics and debt and regulations, all of those are pointing to slower economies in the developed nations and exactly the opposite in some of the developing nations, so we're looking at all our opportunities offshore or for opportunities to export to those countries enjoying that type of growth. >> in the new abnormal period that you're talking about, randy, where we've got slow growth, i wonder if that will mean qe-3 which a lot of people feel is baked into the cake and as a result of that could you think we could see, you know, a stock market rally, some kind of asset price lifting? >> if you look at asset allocation models, you can pretty much throw them out the window for the last 30 years. bonds have outperformed equities at about the third the level of risk, so people are looking towards equities to provide them not just with growth, but also yield. because there's no yield in the fixed income market. so we think you can see a lot of those dividend-paying stocks do

extremely well in this environment as people try to substitute their salaries for the yield that they're going to get from their investment portfolios and it's not going to come from bonds, it's got to come from the equity market. >> you hear it a lot particularly last year people were talking about the growth of the dividend plays, but what we're seeing so far in 2012, what has worked was the opposite of last year. in january the nondividend paying stocks were up 8.3%, so is there the possibility that may continue for this year? >> oh, it's certainly a possibility. our customers are telling us they want yield. and everywhere you go, people are wanting yield, and there's so few places to find it that if you can find a good company that is also growing and can pay a large -- >> like which ones? you got a couple of names for us here, randy? >> one of the things we like is terra nitrogen, farm income is up last year 28%, and along with 28% growth the previous year, it's got an 8% yield right now

and it's got an opportunity as we see the export opportunities that are out there in the agricultural sector, you know, farmers will be planting more and they'll need more fertilizer in order to achieve the production goals. >> i want to take you back to the beginning of the interview when perhaps you said you had to look outside of the u.s. for real growth. which markets in particular, would you look to, randy? >> you know, it's interesting because if you're looking for yield, there are two different scenarios that are unfolding. you can look at those countries that have issues that are having to pay up in yield because of their creditworthiness, but you can also look at those countries that are paying up in yield because there's a demand for capital, and that's what we're looking for, those countries that have and those companies that have a demand for capital out there that will be very significant, we like brazil and indonesia and china and india and we think those will be scenarios that will unfold because of the demographics that are out there and their growth is going to be projecting will

change things. >> well, certainly, the emerging markets have come back in a big way after a really bad year in 2011. >> yes. >> but what's the risk here? i guess the first thing you could pluck out of the air you could say, oh, well, europe, but, you know, we get bad headlines on a europe on a daily basis, downgrade yesterday, greece deal today, no deal tomorrow. >> the greece situation is interesting, the population is less than los angeles, and the gdp of greece is less than that of philadelphia. now, if philadelphia were to default, i don't think the whole world would go into the panic that it's going in to with regard to greece, so there's a lot of other things that are taking place out there that you have to be mindful of, but if you look at world gdp since 2000, all the way through 2011, it's a parabolic move upward. there was no adjustment for 2008, even though japan, united states, england, and europe went

through the worst depression -- or recessions that they've had since the great depression. there was no blip, and it's because the world growth is taking place now in those emerging nations. and we need to find ways of to take advantage of that, either to sell to them, things we produce very well in the competitive advantage scenario or find those countries that will do well in their own domestic economies. >> randy, thanks for joining us. >> just cream cheese and i think tea sticks. and strong comcast there. and you get uncomfortable when i mention that, why? >> corporate parent, the comment earlier you looked a little bit -- >> i feel great. >> did you notice that? >> you don't need to do that, don't play it safe. >> you're not a risk taker. >> risk is on! >> we're a nation of risk takers. coming up, the relationship

between small business and hiring. breaking news from the nfib is next. and later no love on hill, the fight over taxes and budget cuts. former presidential candidate howard dean, he's on today, and former reagan adviser david stockman. they're going to duke it out.

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time for a check on overseas markets. ross luftgate will have another chance in our london bureau to be a little more sensitive to the way people feel on this very important day, ross, happy vd, ross. >> thanks very much, indeed. happy valentine's day to you, 6-3 is where we stand right now in terms of advancing outpacing decliners, so european stocks have opened this morning have risen a little bit, and one of the key points is the italian

debt auction we had this morning, 6 billion they raised and that's what they were target, the 4 billion came out of the 2014 issue and yields on that declined once again 3.4% was the average yield paid for that in november, 7.89% for the first run of that issue. so, that just helped us get extra confidence as you can see here, that was the italian auction that came in. before that we had germany rising sharply higher, much bigger than expected, the best level since april, 2011. at the same time, of course, we've also been focused on what's going on with the uk, the ftse was up a percent, the ftse 100 somewhat of a laggard. two bits of news here. first of all inflation data came in as expected, the annual rate falling down to 3.6%, melvin king said it should be towards 2% toward the end of the year. there's a lot of factors that may impact that. the bigger, of course, has been the moody's out of any rating agencies threatening uk aaa

status by putting the debt on a negative watch outlook, citing weaker growth profile and the exposure to the euro zone, a 30% chance it may get a downgrade. happy valentine's. >> thank you, ross. looking to connect to "squawk box" online, you can twitter us, and the newest numbers on our air, also big banks are the object of investors' affection, we'll take the pulse of financials, and we'll continue this wonderful valentine's day puns all the way through the show.

are you still sleeping? just wanted to check and make sure that we were on schedule.

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♪ ♪ two hearts look at that heart. >> i saw that. >> a lot of loving at the table here. and now it's beautiful, isn't it? >> blur the sides.

>> and now liesman's here. >> and now liesman's here. if we could bring santelli -- if we bring santelli -- >> is this for me? >> you two need it. >> there's valentino, the bear. >> the chocolate. >> okay, it's out. >> okay, you know, geez, if someone else was before us, they are really screwed, go ahead. with that introduction, this is an important report, i was going to tell you, you should listen to what i'm about to say, he was about to say, but i'll tell you the national federation of business, it said in january it ticked up to stand at 93.9, be still joe's beating heart. here is the index and this is instructive. it's recovered from its decline earlier this year but remains below its level at the beginning of 2011. how many charts do we have that

look exactly like that? you could put jobs over that. you could put essentially gdp over that. it remains a weak recovery for any recovery in a 30-year history, but it recovered from 2011. i want to show you the components and then we'll show you the other thing joe will tell you. you can see what happened. business conditions, expenditure improved. that came up. inventory is too low came up. i want to talk to bill about that. plans to create new jobs ticked down one tick there and expecting higher sales came up. joining us now, the thing that joe was really excited about was the bill bunkleburg, i apologize for the introduction, but -- >> he the man. >> i am sure if you asked joe deep down he believes that small business is critical to the economy and that's why we have this -- >> don't sell your soul. >> we're soul mates. >> he says all the right things and he says things you can't stand here.

>> i agree with 95% of it. >> let's face it -- >> that's a new one. >> valentine's day, joe. >> i love you, too. >> yeah? >> it's cable, steve. what are we going to do? it's conflict, go. >> okay. here we go. let's take a look, bill, first of all, i forget what the first chart we have here is because they scrolled past my little list here, but let's start off with the outlook for business that seems to have ticked up. >> it is true that we've seen improvement now in the last five or six months on the net percent of the owners thinking business conditions will be better and we're pretty close to balanced as about as many think it will be better as worse, and it's pretty close to zero. there are better expectations, still historically weak to where we should be at this point in the expansion, but it's good to see it headed up rather than down, because six months ago the numbers were depressed. >> and the outlook for the future has gotten better,

though. >> it has. expected real sales which is, of course, the reason you might hire somebody or order more inventory which unfortunately didn't happen. >> let me cut you off there, bill, because we saw cappex is not too bad, but inventory as a sign of what people think their confidence in the future ticked down. >> it did. we lost five points on the index which was quite a decline. we do see that we're very satisfied with inventories, actually more firms say inventories are too low than say they're too high which is very unusual in the 37-year history of the survey, so we should see them buying there, so maybe we can chalk it up to a little bit of an anomaly, we'll have to see, but it was really a surprise decline there given that capital spending was up and plans were okay and really thought we'd see a better number than that, so we hope they'll buy the inventory because inventories are building and we need the guys and gals to order the stuff, and get it in the hands of consumers.

>> bill, businesses complain about the difficulty of finding the right workers all the time. >> they do. >> but when you look at the latest data, they seem to be complaining more than normal, what is going on? are we in a historic mismatch here in the inability of people to find the right people for the job? >> well, we did see an interesting three-point jump in the percent of firms that they had said a hard-to-fill job opening. that's a good sign. that's what we use to predict the unemployment rate, it means the unemployment rate will go down, which it did. it means in some areas in the u.s. the market is getting a little bit tight. we did a special study about the people that had hard-to-fill job openings, the usual culprits, math skills are not good, grammar skills are not good, but surprisingly the third important reason was appearance, bad dress, you know, bad attitude, you don't smell good, you didn't take a bath, all of these things are under the control of these people, they can fix that and get hired. >> interesting, bill, i wanted

to ask you because we'll run out of time here. when i look at what is the happening in the adp small business report, they have jobs going through the roof here. when i look at your jobs report, it's really muted, what accounts for the difference? what do you think is the real story here about hiring at the small business level? >> well, you know, there's -- they have a different sample of firms than we do. most of our people don't use a service to get their accounting done like that, so it's a different sample that they're talking to. you know, we've been looking at our numbers for, you know, over 35 years now and they predict pretty well what's going on. we have the unemployment rate, of course, coming down again further this year, so that's good news for some people, but i think that's basically it. >> bill, one of the things that irritates me with this administration, one of the many things, the difference, the dichotomy between big business and small businesses, the reverential tone we hear when they talk about small business and the dismissive tone talking

about big businesses needing to be reined in, how much of a small business's directly or comes from customers that are big businesses, subcontractors and et cetera? do you have a number for that? it's a huge number, isn't it? >> we don't know what that would look like. obviously in the manufacturing sector, we have lots of little manufacturing firms and lots of them are in the supply chain. >> exactly. >> -- of some of the big producers and they are a segment out there. the manufacturing firms are doing well and hiring. so, our little people look happy like the big manufacturing firms do. service sector there was no growth in service sector last year, that was a killer for us. >> got to ask you about the fed. you did some work on how the fed changing its attitude on the economy caused small business optimism to decline. do you think they're behind the curve here in how they characterize the economy and would it make a difference to the economy if they changed their outlook? >> well, i think that's an interesting question.

we did look at it. we found that surprise changes in policy really did impact owner expectations, not only that, but later, you know, a few months later actual spending and actual hiring were adversely when you had the surprises, the prantransparency not be the good way to go. the fed looks optimistic, our people don't seem optimistic, we hope something will happen this month to make them more optimistic, but odds are it won't happen. >> bill, thanks for joining us with the all-important small business optimism index. >> i have a really important economic question. did you support the love economy today? >> not yet. >> oh. >> terribly embarrassing. >> another one. >> i am blessed with a wife, bless her for many reasons, but

doesn't care that much about valentine's day. >> have you trained her not to care about valentine's day? >> let's go to a small mexican restaurant around the corner, that's for opening. >> oh, come on! up next, the stamina of the world's biggest banks, we're going to get to the heart of the situation, all of these valentine's day -- >> puns. >> -- little puns, gene ludwig will be our guest. [ horn honks ] hey, it's sandra -- from accounting. peter. i can see that you're busy... but you were gonna help us crunch the numbers

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♪ give a little bit of heart and soul give a little bit of heart and soul ♪ good morning, everybody, welcome back to "squawk."

rio pinto are raising its bets on the copper profile, they are going to invest in a massive mine in chili. they plant to reopen a u.s. copper mine idled for three years. copper is seen as a bellwether for industrial demands, prices have fallen 17% from the record highs about $10,000 a ton a year ago, but surprise it's still more than the double reached in the depths of the global financial crisis. boeing has signed its larger ever commercial airplane order. lion air is buying 230 jets worth $22.4 billion. the deal was announced in november and it includes options for 150 additional jets. andrew, over to you. complaints against the volcker rule piling up to last night's deadline, some warning it would put a stranglehold on the market. gene ludwig, the former comp

troll of currency under president bill clinton, great to see you. let's start with the volcker rule, i know you have views on what is going in europe as well, ultimately how does the volcker rule get implemented and what is the short- and long-term impact? >> andrew, that's a very good question, and happy valentine's, everybody, on the show, valentine's day. the volcker rule is an important rule in the dodd/frank panoply of rules, but it's critically important that the regulators get the balance right. they've made a proposal that's workmanlike, thoughtful, a lot of questions as to what the rule should be. the way they've done it to date, it's too tight. there are two big exceptions to the volcker rule for market making and hedging. they're critically important for the well-being for the economy, how you can issue securities on the one hand and the other hand the degree to which you can engage in safe and sound hedging activities. right now the rule is too tight

and would restrain those activities. for example, for start-up companies and fairly illiquid markets they need the flexibility to have the liquidity necessary and i think the regulators will get it right at the end of the day. but this is an important matter. the comments, the panoply of comments reflect the degree to which people are concerned. i think it will come out well, but there need to be some changes. >> let's go across the pond for a second and talk a little bit about europe and european banks specifically, and i'm curious about where you stand ultimately on whether the european banks are going to be in trouble. it looks like greece may be coming through this, maybe not. but sort of give us an assessment of where european banks are right now. >> well, it's a delicate situation. the european central bank is making intelligent moves in liquefying the markets. the banking system globally has strengthened, certainly the united states the banks are a great deal stronger. and the right steps are being

taken, but this is a very delicate situation in europe and it's one that has to be followed almost on a day-by-day basis, because what you need in europe is growth. at the end of the day it's really growth that will balance budgets and provide for a future here. too much tightening, too much countercyclical activities at this point could be dangerous. >> gene, am i right that europe will not do bank stress tests this year? is it a bad thing or does it not worry in the slightest because they were not very credible anyway? >> the fed and the treasury were wise in doing serious stress tests at the depth of this crisis. they calmed the market by showing what the problems were and the strengths were, we had the money to liquefy them at the time. having strong stress tests are a good thing. europe's stress test originally were not credible and it undercut both the krecredibilitf the government institutions and

the private sector. that's not a good thing. they ought to be doing stress tests and they ought to be making them transparent, but they don't believe they're ready for that yet. >> arthur brooks here, gene, quick question, how should we be understanding the exposure of the american economy and the american money market as to what's going on with european banks? >> we are not exposed directly. we are in some sectors, money market funds to a degree. but the real issue is the overall economic impact on the u.s. economy and, therefore, on our own financial sector of anything that goes on in europe that is really destabilizing. so, having a strong and growing europe is very important to the united states. it's a big trading partner. and a destabilized europe is a bad thing. but it's the indirect effects that are more impactful here than the direct effects. >> i know you are not an investor and i know many of these banks are clients. but, i'm curious, would you be

investing in u.s. banks, but a better question, would you be investing in european banks right now? >> i'm really not an investor. i can't invest in the large institutions that i advise. and i don't. but i'll say this, that the banking system in the united states is dramatically stronger than it has been for a very long time. we have an increase in tier one capital 40% above precrisis levels. we have a stronger system, and as the economy comes back, these banks are going to do well in my judgment. >> gene, thanks so much for joining us this morning. >> happy valentine's day. >> you, too. >> get some more thoughts from our guest host arthur brooks, american enterprise institute president. in the past you've weighed in on the occupy wall street movement and said they really have a very solid point about a lot of things, mostly about crony capitalism which is not really the way capitalism is supposed to be run. do they know they have the point or they feel something and they're not really sure how to

put it -- >> it's not the income inequality, it's the crony capitalism. >> it is. it's the thing that we all have to recognize, capitalism and crony capitalism are not the same thing. they can't distinguish pen capitalism and crony capitalism, we should call it corporate cronism. it's more scentive. >> is it rampant? >> it's a huge problem. it's the co-dependent wife of statism. you can't get corporate cronyism unless you have a huge government, in washington, d.c., it's full of lobbyists, it's full of, you know, government affairs offices of large corporations that remain competitive have to pump millions and millions of dollars into their washington operations and stay close to the government, why? because through the accountants and special lobbying efforts they can actually get on the inside of the system, and they have to do it to remain effectively competitive, so i don't begrudge them that, but i don't like the system and none

of us should like it either. the occupy wall street guys are right, three just don't understand that's not the essence of capitalism. that's -- >> what do you think the response -- the official response to the occupy wall street movement, what do you think is the correct response? a lot is said about this. >> well, the official response depends on where you sit in the political spectrum. it's been used by both sides an awful lot. it's a punching bag for the right and the left has kind of tried to adopt some of its messages. and the obama administration has correctly seen it as a big threat. it could get out of control real fast and turn on them, so they've tried to basically say, you guys don't have a central message, we're going to try to provide you with a central message. we're the 99% administration -- and they understand it's a much bigger threat to the left than the right ultimately in the american mainstream political spectrum. the right's understanding of this should be, look, there's an outrage in this country just like the tea party movement and we should recognize when the people are saying things that are correct about the american economy.

corporate cronyism is a major threat to the free enterprise system just as an out-of-control government is. we don't talk honestly about it -- >> do you think the occupy wall street believe in free enterprise? >> no. i think fundamentally they are confused about free enterprise and corporate chronny i cronyis need to say, you are exactly right. people don't fundamentally understand the free enterprise system, but the people under 30 in the polling they are most entrepreneurial generation since we've been collecting data. this is the big opportunity. talking about freedom, individual opportunity, entrepreneurship and then you'll start winning their hearts. >> they are a bunch of ron paul supporters for some reason. >> ron paul is a gateway candidate toward the right, right? >> right. >> it's kind of a respectable way for people who voted for president obama to start experimenting with right-wing views apparently.

>> ron paul? >> yes. >> because it doesn't have the yucky budget stuff that people don't want to deal with until they grow up. >> grow up. why do you say they're the most entrepreneurial generation that you've seen? what is spurring that? >> if you look at the attitudes of people who are under 30, they are incredibly sympathetic that they can control their own faith and start their own businesses and you had a segment on earlier -- >> they need their space. >> no. exactly right. we have this culture that allows us to do it but if we don't take advantage of the moment, we're risking it. >> do you think a guy from the ae1 would be this sort of -- >> we've had ross on the show. >> not for two hours. >> he hasn't articulated -- >> you haven't started itching or scratching or chafing or anything yet. you've been fine. >> you've nodded a few times. >> kumbaya. >> i'm a free marketeer, too, i know you don't think that, but i

am, i'm sorry to tell you. >> it's new age libertarianism, man. >> new age libertarianism. >> you can say it any which way. >> thanks. they'll be more from arthur throughout the show. and the arrow in cupid's quiver, are investing? as we continue. also later on senator rob portman will join us to discuss the president's budget proposal, and if you missed it, a special issue of "sports illustrated" hits stands in time for valentine's day, the annual swimsuit is out, darren rovell, lucky guy, will speak to kate upton.

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♪ how am i supposed to live without you i've been loving you so long ♪ was it a cover? no? i don't know. >> i think that's one of his big, big songs. >> i saw him. >> he doesn't have hair like that. >> i don't know if paulson will help ratings this morning.

>> and he immediately accosted me. >> he must watch because he came up and said, so, the market is up this much and the economy is up this month, i guess we need to re-elect this guy. out of the blue he accosted me. >> did he sing it to you? >> no, he didn't sing it to me. let's take a look at stocks to watch this morning and see what's on the list. i don't know, maybe -- he didn't say that's not for attribution, but bank of america was downgraded from neutral to buy at citigroup. it will take time for them to address their legacy issues. the target was increased, however, to $8.50 from $8. i've seen him live, unbelievable voice, i mean, he's not very big, and i don't know how that works. i don't know how -- >> none of us are how we look on tv. >> no, i know. but how do you get a voice -- he's probably 5'8", 5'9" and he

can -- >> project? >> yes. he's an unbelievable showman. okay, when we return, budget talks and both sides of the aisle try to hug it out. the puns continue. and former vermont governor and david stockman join us to talk politics and the president's budget. "squawk box" returns after this. mornin'. i guess i'm helping them save hundreds on car insurance. it probably also doesn't hurt that i'm a world-famous advertising icon. cheers! i mean, who wouldn't want a piece of that? geico. ah... fifteen minutes could save you fifteen percent oh dear... or more on car insurance. laces? really? slip-on's the way to go. more people do that, security would be like -- there's no charge for the bag. thanks. i know a quiet little place where we can get some work done. there's a three-prong plug.

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the president trying to woo republicans to support his budget. ♪ i am so in love with you >> but it wasn't love at first sight for the gop. the former governor howard dean and former reagan budget adviser david stockman will break down the budget proposal. and getting the green light to continue hepatitis "c" drug trials may have the company looking attractive to potential buyers. and breaking economic data, retail sales, and import price numbers due at 8:30 a.m. eastern. it's valentine's day, and the third hour of "squawk box" begins right now. ♪ i am so in love with you

what's up? >> what happened to the music? >> we are loving it out and first on business worldwide, i'm andrew ross sorkin and mandy drury and joe kernen. the guest host for the past hour and the next, arthur brooks president of the american enterprise institute. joe? let's get a check on the -- he's from the ae1, but we'll go to europe, is that okay? boil go to the european markets and see what is happening over there, where socialism abounds, let's take a quick look. the cac up four, the dax up 19. and now i like that, we've added the athens composite which we found out earlier from someone the economy is the size of philadelphia and they don't -- >> it contracted, what, 7% on the latest reading? can i say earlier on in the show we were talking about the downgrades by moody's of various

european countries and we were showing the idyllic pictures of the fairy tale hills and the danube, and they should be showing lines of people. >> in certain areas, and the worry is that there's contagion from them -- >> right. >> a picture of crete. >> civilization started there and hopefully the breakdown of civilization doesn't happen there. look at u.s. equities which continued to do well in january, 2% on the dow so far in february. and basically flat, not a whole lot going on. the futures did get a boost earlier after solid demand that the latest option of italian debt. the country sold 6 million euros in three-year debt, demand was solid and yields fell to 8 -- i'm sorry, 3.41% from 4.83% at the prior auction. >> this is exactly what i was talking about. look at this view. it looks like an ad for air

greece or -- >> you wonder without tourism what kind of dire straits -- >> it's keeping them afloat right now and the chinese. and moody's is warning, mandy, was talking about this, may cut the aaa ratings of france, britain and austria. the ratings agency also downgrading italy, spain, and portugal, cites growing risk from europe's debt crisis and they are warning a little bit about the uk at this point, too. and that could -- >> next on the list. >> -- lose its vaunted aaa. controversies flowing about president obama's $3.8 trillion budget. and joining us former vermont governor howard dean and former reagan omb director david stockman, and i'll start with you, howard, because i've been speaking about this a lot. i was thinking if i was the president and i was going to propose a bill that i knew couldn't get passed no matter what, do i go and try to appeal to the base or do i get any

points at all for trying to come to the middle? and i don't know the answer so i thought i'd ask you. >> you don't get any points at all from antagonizing seniors and various groups like that, you know, this is clearly a political document. on the other hand, i think it's great that you guys showed what's going on in greece right before we got on, because there is a -- one of the problems in europe is there's probably too much youausterity, david stockm and i aren't too par apart in terms of conservatism. >> howard, that's great, what you glean -- there's something for everybody in greece, isn't there? so, you don't glean the welfare state and the overspending and -- >> sure, i do, joe. >> trying to address it is what's causing it? >> no, no, joe, i didn't say that at all. look, this problem's been 30 years of outrageous fiscal behavior. >> i love that. that's what you glean from it, though. that's amazing -- >> joe, you sure you want to be

on fox? you said something that i didn't say and then you claimed i said it. >> is that what they do? >> ooh. >> whenever you want to talk about fox, it's amazing it could go triple the ratings of the other three than the others by presenting something that might not be on the left. >> there's a significant group of people in this country that like propaganda. >> is that what it is? i thought it was unique. >> should we talk seriously about money again here or are we going to be about fox here? give me a break. >> instead of the spoon fed pabulum from one outlet, they get disparaged. >> i think cnbc is a nice, middle of the road station. >> no, i think we're heading for a bad place, but i do think it's possible to put the brakes on too hard. i would like to think what david says about that. >> david? >> since we're all talking about

greece, the lesson is if you bury your head in the sand for 30 years, you're going to run into a hard place someday, and it's not going to be pleasant to deal with. and that's what we're doing. and that's what this budget is. i realize it's an election year, it's a campaign document and so forth. but it simply isn't a budget. it's an equivalent of punting on first down. and frankically that puts the white house in the same camp as the republican fakers would have been screaming about deficits for who knows how long and yesterday threw in the towel and let's extend the payroll tax for $100 billion and not pay for it. both parties are leading us to the big bang -- >> what is the light at the end of the fiscal tunnel? >> there is no light at the end of the fiscal tunnel. >> it's valentine's day, you can't say that. >> at the end of this year there's a $7 trillion date with destiny. everything we've been kicking down the road every can is expiring. you at bush tax cuts, the estate

tax, cap gains, unemployment, this now payroll tax holiday. all of it expires and it will hit the economy like a ton of bricks and either, one, we defer all this or -- >> what if we don't get to the armageddon? >> i think they'll do nothing. armageddon isn't that far away. that's the end of this year. when we get they're either going to have to raise the debt ceiling by trillions which there is no votes for or they'll have to raise taxes by trillions by letting these things expire which the republicans are dead set against -- >> but, david, i ask you the same question i asked howard dean, if you are the president and you know about the political sillpy season we're in, what would you do? >> he should have done it a year ago when he had a bipartisan framework, i don't think anything can be done. our political process is so

broken that you can't even raise the tax word in this environment when we desperately need more tax revenue. the problem with the budget is that it only goes for the top 2%. now, i actually agree with the buffett rule, but it should be called the reagan rule, because his crowning achievement in 1986 was to have a level playing field, 28% rate on everything. earned income, dividends, capital gains, carried interest. if that was good enough in 1986, it's good enough today. it's a two-point argument, we ought to have it, move on. wall street should stop whining and the republicans should stop playing that we don't need more revenue. but what he also does, which i think is horrible, is extend $4 trillion worth of tax cuts for the middle-class. all the bush cuts, the amt package and so over and it's burying us deeper in debt. >> i have a question about that.

i agree with you and i think all the bush tax cuts have to be sunseted, so here's my question, economically speaking, is it too early in the recovery to sunset them for the middle-class people? the taxes on the upper end don't come out of the economy. the truth is they don't spend that money, but all the middle-class have to spend every dime that they have, so the tax policy that we have now is essentially a stimulus to the middle-class, i absolutely agree with david, it has to be gotten rid of for everybody, all of them have to and i think we ought to have capitated care for medicare that would save us a hell of lot of money and that should have been in the budget. but i worry about getting rid of the middle tax cut at the end of this year because of the economy. >> arthur? >> david, a quick question for you, i know you're all in favor of being a responsible grown-up here and cutting taxes -- or raising taxes as well as cutting spending. you know, we did a study at ae1, i know you are familiar with it, our chief economist talked about

fiscal consolidation across 21 countries in 35 years and what he found was the countries that failed were the ones that actually relied the most on tax increases and the ones that succeeded were the ones that relied almost exclusively on spending cuts. the countries that succeeded in getting out of the debt crisis, 85% of closing their gap actually came from spending -- spending decreases and actually the ones that the did best like finland in the '90s, i know you're familiar with that case, lowered their taxes even though they needed to cut -- to close the gap. you know, why does that not apply to the united stateses? >> well, because it all depends on your facts. figures can lie and the facts can figure. every country is different over time. our fact is the revenue under the tax policy the republicans want is 17% of gdp. spending is 23% or 24% and they're faking when they say they're going to cut anything. look at the ryan budget, they didn't cut a dime from social security, it didn't cut a dime

for ten years out of medicare, $500 billion, $600 a billion, they'll take a tiny bit out of the safety net which we shouldn't do and giving a pass to all the -- >> i thought it averaged 18% and in 2006 and 2007 it was 18%. >> revenue? >> yeah. >> under the current tax structure it would be 17% if we're lucky -- >> was it 18% a couple of years ago? >> yes. >> and it averaged 18% over time? >> over a long period of time it has, but we're not there and the current tax laws -- >> we had a -- >> no, i'm saying with a normalized economy and the tax law the republicans want to extend, no estate tax, capital gains at 13%. >> but we were growing 18% under those in 2007 and 2008? >> 2007 and 2008 we were at the top of the boom. there were hundreds of billions of capital gains coming in from wall street -- >> nice to have those again. >> but he's saying the same thing, it's a temporary blip. >> the 17% is a temporary blip?

>> no, he's saying this is the top and we're at the bottom here. the middle is -- >> it's been 18% for years and back in 2005, 2006, and 2007 -- >> our economy has grown at 1.5% for the last 11 years since 2000, this budget projects 3.4%, it's not going to happen. we have today, last month, 132.5 million payroll jobs, same number as december 2000. no job growth for 12 years. this budget has 20 million jobs. >> we need to get to the right place, the laffer curve, because there's an optimal place for economic growth versus -- >> yeah, i agree with that, but the laffer curve was good when the rate was 28% on all sources of income including carried interest, which the republicans got their head in the sand and so do the -- and so does the white house, frankly, in this budget there's $19 trillion of social security and medicare, do you know how much they cut over 10 years? $30 billion, 0.2 of 1%.

>> a lot of people want to go back to the clinton years, to go back to the rates because they balanced the budget, but they only want to do it on $250,000 and above. it leaves you $4 trillion away, it leave $4 trillion that you need, if you let them expire, a lot of our debt problems go away. >> i agree with that, but the obama white house is saying -- >> howard, we saw the austerity in greece, it would be too much here, right, in we were tax the middle-class at the rate of the '90s, i don't think you can do that immediately, right? >> first of all, i'm not an economist, but my inclination would be to reinstate the bush tax cuts for $250,000 and up at the end of this year and reinstate's everybody's taxes so to go back to where we were with clinton. i agree with david, i think it's very interesting the statistics about how you come out of these fiscal problems. i don't think that 85% of our coming out of this needs to be

cutting because the deficit was essentially caused by these enormous tax cuts without cutting spending, but i think there has to be significant spending cuts in both social security and medicare. i probably would reinstate most of the tax cuts that bush put in at the end of this year and raise the taxes on those over $250,000, carried interest, all that stuff and i would do the middle-class the year after. >> governor, we got to leave it there, thank you very much. david, thank you. we'll have to have you back. >> yeah. >> and good conversation. coming up, it is valentine's day, so let's talk about hepatitis "c." ow! >> what a segue is that? >> it's a realistic segue, two hep "c" drug developments have been going on, and we'll talk to several companies about it. and we'll break down the president's budget with senator john thune. [ male announcer ] you are a business pro.

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welcome back to "squawk box" earlier this month fda regulators lifted a clinical hold on a hepatitis "c" drug

trial by idenix, joining us from the biogenics conference, is the ceo, this is a crowded area for hep "c," there are cocktails that work and there are also issues like we've seen with so many of the viral diseases where the drugs stop working unless there's a combination. is that what this drug that you're talking about would do, it would fill maybe the void in a drug cocktail for hepatitis "c"? >> good morning, joe, thanks for having us on this morning. it's a very exciting time for us and even more exciting time for patients with hepatitis "c," and i think it's a lot like you've chronicled over the years in the hiv setting, where we've seen a number of experimental medicines emerge early on that came over single therapies but over time the industry figured out to combine the medicines together and come up with an optimal okay tail in the hiv setting. fortunately we think it will

happen here, and the difference between hepatitis "c" and hiv, we think we can treat hep "c." >> and the possible cocktail with gilad and two drugs with 100% efficacy, if gilead, plus rib ribovarin, if you use those two, your drug is superfluous. >> we don't believe that. it's a combination of two drugs, we believe we can combine idx-184 with another potent anti-viral and get the same kind of efficacy. this is going to be a combination game. so, we're looking right now to partner our compound with our experimental medicine with another potent experimental medicine that we believe will

give us as much of a chance to be competitive with what we're seeing out there. the other thing that is important to point out hepatitis "c" is a heterogenous disease, within the disease there are 6 to 12 different subtypes and what we're seeing out there doesn't necessarily treat all of the subtypes, so what we're really looking forward to with idx-184 is coming out of the gate with a combination therapy that can address as many patients as possible. >> i'm going to jump in here, ron, and to joe's point a moment ago about it being a very crowded area and there is a lot of competition, do you have any other high-flying drugs out there, you know, things that are going to diversify your revenue base? >> we believe so. we're roughly 100 employee, more than three-quarter of our employees are scientists, and the singular focus is only on hepatitis "c," so we have two compounds or experimental

medicines, izx-184 in late stage clinical testing and we have a new program entered this year idx-179 which is a different compound that we're very excited about and we have two earlier stage preclinical experimental medicines that we're looking forward to bring to clinic later this year, a singular focus on hepatitis "c," we believe we have the largest effort as a standalone in the hepatitis "c" arena. >> ron, can you speak, about all the speculation around your company, given all the deals we've seen over the past year in this space, are you for sale, or are you buying? >> well, as a policy, we don't comment on m & a activity, i think what you're seeing out there is an urgency to consolidate a lot of very important experimental medicines and, again, get to the combination approach. you have all covered this space for quite a long time. you know that m&a is very much a

part of the biotech fabric, you know, we watch it, we keep a close eye on what's going on around us, but we come to work focused on advancing outside lines forward and try not to be distracted by everything that's going on around us. >> sounds like i should see him in the headlines. >> it certainly does, yes. it's not what they say, it's what they don't say quite often. >> right. ron, we appreciate your time this morning, thank you. good luck. >> thanks for having me. thank you. appreciate it very much. coming up, we'll have more of today's top headlines and still ahead, retail sales and important price data due out at 8:30 a.m. eastern, that's coming up next. we'll bring you the instant market reaction. [ male announcer ] let's level the playing field.

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welcome back to "squawk," making headlines, apple is testing a tablet with a smaller screen. "the wall street journal" said apple is looking to broaden its product pipeline and maintain its dominant market share. citi downgrading bank of

america from buy to neutral, it said it b of a needs time to address its legacy issues. and we've got breaking economic data and retail prices, moments away as we head to break. take a look at the dow futures data.

welcome back to "squawk," everybody, happy valentine's day. we're seconds away from retail sales and import price data, rick santelli is standing by for that, and steve liesman here in the studio. we won't get the numbers just yet, but let's look at the futures, they are looking kind of flat right here, and why don't we drop the board and take a look at what's happening with european markets. of course, yesterday moody's cut the ratings on italy, moldavia, by one or two notches. they don't care particularly toy stage, but athens is down quite a bit more than the others, 1.6% and they cut the uk and austria

to negative. let's look at what else we're seeing out there, the nikkei, 9000, we were talking about it earlier, joe, a far cry from 30,000 in the heyday. we've got data coming through, rick, what are the numbers? >> the import prices are up three-tenths exactly as expected, and the month over month follows an unrevised down 0.1, and energy, i'll have to comb through it. advanced retail sales up half expectations. we're looking for anywhere from up 0.7 of 1% up 0.4 of 1% and last month up 1% a goose egg, unchanged. strip out autos, it increases up to seven cents. strip out autos and petro, you are up 0.6, so the numbers on the "xs" are actually as good or a bit better than expected.

but last month's were also revised a bit worse. we still have business invent y inventory, and that's a december number. all the numbers i just gave you are january, so, of course, that business inventories has implications for our gdp. if you look at the market aftermath, we see yields lower, 310 on a 30-year bond, that's much, intraday was three and a quarter. dollar index was up a bit today and that's because that euro currency is approaching 131.5 versus 133. back to you. let's get more on this data. steve, you got your data crunching cap on. what is it telling you? >> this is a really weird set of data. it's the reverse of what people thought, right? let me read you what the expectations were. it was -- well, we'll use the dow jones. 09 on the top line number and 06 on the ex-auto number. it came in the reverse of that. 04 on the top line number and 07

ex-autos. why the top line miss? they're looking at a 1.1% decline in january auto sales after, you remember, we had phil lebeau on this station purporting that autos went on. i'm wondering if the government data even worth it anymore? i'll tell you, i'll break a little bit of news, not huge. i know that alan krueger, the president's economic adviser, is working on whether or not the government can make better use of private sector data. we know what that the autos are reporting what the autos are reporting, i don't think they're uniformly lying, that's an outlier there. when i get rid of that i see general strength in different categories. just be careful because a january dollar of retail sales on a seasonal adjusted basis is not as good as a december number, right? because they discount it because of january. but food and beverage up 13, gasoline stations up 14. general merchandise up 2%.

department stores up 1%. so, i don't quite see the -- i will tell you the number that carries into gdp here is up 0.7 and that will help the outlook for the gpd, but the number that carries into gdp for december was off sharply. and we discount those because the government gets them from other sources. this feeds into gdp and that was minus 0.4%, and december looks weaker on retail sales and either we'll get rid of the auto number or we'll revise it later, but the minus 1.1 does not jive with what we've heard from the auto. >> with, i guess, the comeback on the inventory. >> rick, how about that? let's get rid of the government data and let's use what private sector sources we have. let's use adp and mfib. what's that?

>> you get crazy government -- you get crazy government out of the kitchen, who will stew up the numbers? >> what are we going to argue about, right? >> well, i tell you what, i don't have any objection to that. i think that they could probably utilize private sector data a lot more efficiently than they've obviously used private sector tax corrections. >> yeah, well, that cue, by the way, diane swank said the auto sales were fleet and not individuals, and they were having five instead of four sundays. i'm just reading what comes to me. >> everybody's going to buy a coal burning volt soon. it's got to get better! >> all right. hey, rick, you weren't sitting here, but you probably didn't see it, howard -- governor dean came on and told me that we all can learn a lesson from greece and what do you think it would be just -- if you were going to

say -- >> oh, no, you know, i heard a bit of that, and i think he told a very big truth. he said initially we have to let the tax cuts expire for, you know, those detail detazilliona but after that you'll have to let the tax cuts expire for everybody else. there's a truth we can all put in the bank. you want to collect a nickel from a zillion people versus a dollar from a handful. that's the -- >> when you look at europe and you look at athens and you look at greece, is the first thing you think of is we've learned the lesson that austerity is the wrong way to go? i thought we learned some other things from the way they've handled themselves. >> do you know what, maybe the general public is tired of stop spending and deficits, but here's what i would learn from greece. that while the world is still subsidizing our overspending because we're a good place to do business and the capital comes in, right now unlike greece, unlike portugal, unlike spain, we can fix our problems.

>> right. >> but if we wait until investors look at us with the same notion they look at other great empires that have gone downward, we'll be in a pickle! >> why can't there be two lessens from greece, the short-term austerity is not the way to go in the face of a -- >> i don't agree with that. i don't agree with that. do you know what, write a political commercial, austerity, here's what i say. you need to control your spending. call it anything you want. when you're cutting pensions by 20%, of course, people are going to riot. how long are we going to wait? we'll have to do the same thing. >> you're right. >> eventually. >> we'll have to do it eventually, but maybe not right now and create a long-term plan -- >> overspend right now and let the next president figure it out. amt is a big horrible, why? and when they put it on the books, they didn't adjust it for inflation, oh, my god, and it only captured a handful of rich people, how did that turn out several congresses later? several presidents later? the people in washington have no

self-control, everything goes on in an election cycle except for the fate of my kid. >> do you know what, rick, i love -- see, like you are some proprietary, like, asset, the jewel or the lemon and you are doing less as you are going back. i'm glad i got you to say something here. >> we don't need to save it. we just need to monitor the issues and, do you know what, we're not going to be pulling the levers for many, many, many months and all this circus stuff that's on tv and the newspapers will end. >> let's talk about the policy prescription here, rick, you're saying we need to cut spending right now. >> pro-growth, stop spending. we can't -- >> cut unemployment insurance benefits and we need to dial back -- >> oh, my god, i'm completely incorrect! >> you've gotten so much of what you wanted and not claimed any credit for it. >> name one thing i've gotten, buddy. >> let's look at state and

government hiring and spending. all of it has taken off as much as a percentage point of gdp, so we've gotten what you wanted, rick, why don't you claim victory? claim victory, rick. >> all i want is to claim at least an attempt to spend within their means. i don't want them to recycle federal dollars like it's an election year joke that sends $7 billion to california! >> it's largely what is happening at the state and local level, that's exactly what we got. right now it takes off mathematically -- >> you have to find religion every year, every state, except my state, illinois. illinois will make greece look like the utopia of europe. >> on that note -- >> hey, rick, arthur brooks here, you launched this unbelievable movement, the tea party movement, and some say you are the author of that thing, i hear all the time all over the united states that the tea party is done. i look at greece and they are

burning down buildings and -- >> let me tell you something, andrew ross sorkin -- is that andrew ross sorkin? >> no, it's arthur brooks. i want you to tell me -- >> pretend it's me. it's not me, rick, it's arthur. >> while the vandals or the street corners, the tea party conservatives, they're working the statehouses, the governorships, the mayorships, the senate, the house. see, they understand, they've read the constitution. if you want to make a difference, don't go break windows. okay? break some phony arguments that things like austerity are going to put you in a hole. we'll put you in a hole for borrowing 38 cents of every dollar you spend. that will put you a hole, pure and simple. everything else is political spin. >> all right. let's hope you're right. >> the borrowing by the government right now has put us in the hole, that is not what's dragging down the economy. it's really hard to make that point, in any way shape or form.

>> pro-growth because of bad policies that take capital and put it in places that -- >> rick, there's no example out there. >> hold on, hold on, hold on! steve, if i'm talking to -- if i was glowing ing tgoing to refi for three months and then it would go up, what would you say? >> i wouldn't buy into that. i wouldn't buy into that. >> the payroll tax cut for two years. the republicans are giving your money away as much as the democrats. >> they are trying to drown you out with love, guys. they are drowning you out with love. >> it's valentine's day. let me tell you something, andrew ross sorkin, i think there's a whole lot going on -- >> i was -- >> you are a long way away from market. >> you thought it was "the voice." coming up, the president unveils his budget, but can he win enough support for it to pass in congress? republican senator john thune is going to join us next on this special valentine's day edition of "squawk box."

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welcome back to "squawk box." republican leadership not ena r enamored of the president's budget and joining us now, senator john thune is a republican from south dakota, he also serves on the budget committee. our guest host continues to be arthur brooks, president of the ae1, and we've been back and forth about a lot of things, senator, and i guess what we've come to decide was that it's a

political document and a political season, and that the president probably wouldn't have gotten any points anyway, maybe a year ago, when simpson/bowles first came out, that was the time, but there was no time for him to propose a serious document at this point. >> well, that's only if you assume that we can afford to waste a whole year, and i don't assume that. i think that we got to make headway. we got huge challenges. we know the fiscal crisis isn't going away. you've been talking this morning on the program about what's happening in greece and europe. we're not far behind if we don't start to address these long-term entitlement challenges and that's where the president's budget completely fails. not only does it not take on the spending side of the equation and what's driving federal spending which is health care costs, but he also raises taxes massively, $1.9 trillion tax increases at a time when we got an economy that's struggling to get back on its feet. so, it's not a serious document as you mentioned. everybody's describing it as a

political document, a campaign document, but it just can't be taken seriously by the congress or the american people when the president punts on every major issue. >> i don't know whether you saw david stockman, but he thinks we need to close the gap, it's not going to come just through growth. he wants, you know, tax increases everywhere. i mean, but i -- here's the thing, senator -- >> 28%. >> yes. there's never a good time to cut spending for democrats but there's never a good time to raise taxes for republicans. the economy is always cited on both sides, so that just means the status quo continues. >> well, if you look at 2006 and 2007 when we had essentially the tax code in place that we have now, you had revenues in the 18% to 19% range. what's gotten out of control is the spending side. and you get up to 24%, 25% of our gdp in terms of federal spending, that's completely out of whack with any kind of historical average. so -- and frankly, i think when people talk about revenues, i'd

like to see revenues the old fashioned way, which is through economic growth, but if revenues were to be put on the table i think it would be assumed that they would be used to pay down debt, but the fact of the matter is this president and his allies here in congress want to tax more so they can spend more, you know, and spending goes up by 62% in this budget, the debt goes up by $11 trillion, this is not a budget that is serious in terms of taking on spending and i think that's what the american people want to see, and frankly, i think that people might accept a discussion about revenues if they knew that it was going to be used to pay down debt and make our life more secure. >> if you're going to get re-elected by the people that are benefiting from all that spending and it's not the real document anyway, why wouldn't you -- this is the document i'd float out there, too. >> well, look, i think that the president clearly was thinking about his re-election, and last year his budget wasn't serious either, as you know. we voted on it in the united states senate. it got defeated by a vote of 97-0. he in four budgets in a row now

have not taken seriously the challenges that face the country. we've got to have leadership from the white house to solve problems and we're not getting it, this is a fantasy budget and frankly the leadership we're getting out of the white house right now is fantasy leadership. we're not seeing the type of leaning into the problems that face this country and taking them on, and granted, it is an election year. but we don't have a year to waste. the clock is ticking. it's beengy described as a ticg time bomb in terms of the challenges we face and it will explode on us if we don't take action. >> senator, arthur brooks from aei, i have a question for uf. you said something i really agree with and you said the only real solution is growth, the key thing is -- the devil's in the details, we've got to have specifics about the growth policies. if you are talking to the presidential candidates, which i know you, what are the two or three specific growth planks in their platform so we can realistically talk about escaping from this mess? >> honestly, arthur, i don't

think you can start a discussion about economic growth without reining in federal spending. we know there's a correlation between spending and debt as a percentage of gdp and economic growth and we're losing economic growth and that means fewer jobs every year because we're maintaining such high-level spending and debt. but i think you also have to make the business tax rate competitive. you can't have a 35% tax rate and be the highest in the industrialized world and expect that your economy's going to be competitive. that's one thing that i think all the presidential candidats s need to be talking about is tax reform that broadens the base and lowers the prat and gets us more competitive in the marketplace, energy policy would be another place. and there's a whole range of policies that our candidates need to be addressing and we have to take on the spending and debt. >> senator, if the budget has come to the middle, if the president comes to the middle a little bit, do you think you could have found any way to cross the aisle and sing "kumbaya" together, really, in this election cycle? i ask it because i wonder

practically what the president is supposed to do at this point. >> honestly, i think, andrew, if we had discussions about -- i think there are republicans up here, and you know there are many on the house side, paul ryan and others, who have made bold proposals when it comes to reforming our entitlement program, there's a lot of us that want to work with the president on meaningful entitlement reform and tax reform and on reducing spenlding and debt and i think those are all things that republicans are anxious to work with the president on. my guess is if he had come to the middle on some of those things, there would have been republicans willing to meet him there, and frankly honestly, with the issue of receive nufs that you mentioned earlier, again, i think if the president was willing to acknowledge that the revenues would be used to pay down debt, there might be a willingness on the part of the republicans to accept that argument as well. the problem is he wants to tax more to spend more and that's not what we need more of. >> senator, thanks. >> thanks, guys. you bet. am cou am ka acoming up, we'

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we really turned around earlier on futures. implying a slightly higher open. completely different situation

now, moving to the down side in terms of futures. let's get down to the new york stock exchange. we have three hours of fun and games and hopefully a lot of love puns coming our way. >> fun and games could way to skribt. interesting that the moody's stuff, in the words of one trader, jim, has failed to shock. the rating agencies have lost their capacity to shock. >> think that people who haven't sold yet are done. or they are brain dead. they either had to get out or you don't care. look, the biggest worry going into this year, if you go back a couple of months is will italy be able to finance. it turns out that those italian rates what a buy. >> since march the lowest since march the yields today. >> so, i mean i think that the whole theory that europe can bring us down obviously tomorrow big vote on greece. but italy was supposed to be the real worry going into 2012. it turned out to be the real

buy. you got to be careful here. remember italian ten year were at 7% in november. this has been the greatest single trade i've ever seen was come in and buy libor italian bonds. >> we'll ask why citibank is downgrading bank of america today saying it's hard to find value in banks. we'll talk about "today" amazing dichotomy between what avon posted and what michael coors has posted. >> kept the dividend. >> carl, you will recall, you'll have to spend some money on judy today. godiva was here. you made the decision. we got all kinds of stuff. >> we have 1-800-flowers on later. we're hoping for a delivery. >> that might work. >> the question is not what i'll get for judie but what i'll get for you. >> statistically the girls spend

40% or less than the guys. >> you still care. >> i still care. i'll always care. >> with nan here should i say kyle >> your performance on "squawk" is all over twitter. >> she started tweeting at 4:15 today. >> tough job. thanks guys. we'll see you in just a few minutes time. looking forward to it. >> happy valentine's day. coming up we'll get some final thought from our guest host arthur brooks from the american enterprise institute. tomorrow don't nice. our exclusive half hour interview with former treasury secretary hank paulson. "squawk box" is back after this.

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now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities. siemens. answers. >> welcome back to "squawk box" on valentine's day. our guest host has been loving it. arthur brooks president of the american enterprise institute. we were talking off camera, i did not realize this. you're an independent. >> yes, indeed. >> i'm an independent. >> in the old case republicans stood for being resistant to change. so in the old style, old style liberal believes in personal

ininitiative. >> when you see republicans take the stance on taxes right or wrong? >> if they are against taxes i'm with that only matched with a pro growth strategy. number two -- >> are you a believer that by just taking away taxes that's a pro growth strategy? >> that's partly a pro growth strategy. other things we have to do well. why i asked senator thune that particular question. the things that republicans are missing today is almost not complete but almost incomplete a built to make a moral argument for the free enterprise system. what's written on our hearts has to do with the kind of life we want to live. >> does romney have a chance. i watched. he had a chance. it was tepid to his tax and private equity. >> he still has a chance. this is not just republicans that need to do this. president obama needs to do this too. don't bet against america. the only way we'll avoid the