>> 70% effective tax rate for the 0.01%. >> yes so how do you, you know, when you hear that things were good, i don't -- it gives a lot of argument to the other side that tax rates don't matter for growth. >> tax rates matter for growth. the 70%, that was a period, i don't know what you mean by effective tax rate for the top 1%. you just don't have good data on that. that was a time where basically all sorts of ways to avoid taxes. it was not an efficient system and of course some people can find a way to get around those high marginal rates. 70%, you get to keep 30% of what you earn, what's the point of trying to do things to get a raise, trying to put those better, efficient ideas into practice? it just across the board, and there is a lot of that. >> the 0.01% are not trying to get a raise, they own the company.

the money that's coming in is capital gains, it's dividends. we're talking about two different things. it's not about working harder, right? that's what part of the debate is about. >> capital gains of course is a reward taking a risk, investing, whether you're in the top 0.1% or trying to get into the top 0.1%. it's capital gains reward and taking the risks and if you reduce that reward you'll get less of it. very rich people sit on the cash rather than taking the risk. why should they if the rewards sore small. >> andrew you're talking about a 70% effective rate but if you look historically, whether the marginal rate was 70% or higher or the marginal rate was lower than it is today, historically the government gets around 18% of income, and it doesn't matter, because if you've raised the rates, people are going to find ways to take deductions or expenses or defer income, and that's the history of the last at least 50 years, or longer.

so that this myth that by raising the rates, somehow you're going to solve the deficit -- >> 18% of? >> of personal income, is as a general rule, regardless of the top marginal rate what the federal government gets and that was the case when the marginal rates were 70%. >> if you look at the tax breakdowns, some people are paying 10%, some people paying 30. should we make sure it's fair across the board? >> the bowles-sipson idea of a 24% rate works. >> john what do you think about the bowles-simpson rate 24%? >> i think some kind of reduction in the marginal rates is good, evening the playing field is good but i think the incentives for investment are important. economists argue you should try to get a lower tax on capitals, intermediate national good to production so be careful about raising dividends and capital gains rates. you've got proposals to lower marginal rates and on the carpet side it's an important proposal

the president put out. looks like we'll get that reform and the reason is, people realize that the high marginal tax rates on firms are a disincentive and that's why it's becoming bipartisan to get the rates down and that's one of the most promising things that's happened in the tax debate in the last few weeks. >> john, thank you very much for joining us today. it's always a pleasure talking to you. >> thank you. >> that harkens back to our monday interview with warren where i was trying to, 400 all right, here's why they pay nothing, because the dividends and capital gains. let's do something about it. if you change it, you have to think about how it affects capital formation. dividends were higher -- >> even at the same level of ordinary income so if you treat it all as income. >> very fast in the early '80s and that's where the rates were. >> 28. not -- dividends are going to 50 if we do nothing.

>> with this president. >> yes. paying at the pump, congress looking to ease the strain of high gas prices on americans. louisiana senator david vitter will join us next. [ male announcer ] if you believe the mayan calendar, on december 21st, polar shifts will reverse the earth's gravitational pull and hurtle us all into space, which would render retirement planning unnecessary. but say the sun rises on december 22nd and you still need to retire, td ameritrade's investment consultants can help you build a plan that fits your life. we'll even throw in up to $600 when you open a new account or roll over an old 401(k). so who's in control now, mayans?

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welcome back to "squawk." our next guest says the strad strath jik petroleum reserve is not the answer to higher gasoline prices. joining us is senator david vitter, appreciate you being on the show. >> good morning, andrew. good to be with you. >> why is the strategic reserve not the answer? >> it's the answer for crude strategic emergencies for national defense concerns, iran moving to close the strait of hormuz if they ever do that, it's specifically for that. it's not to play around with the price in an election year to get reelected. >> is there a price though at which you say okay, we need to tap this reserve? >> i don't think so. it's for national security emergencies. we need to act with regard to price and act in increased supply, we need to do keystone

and domestic production, we need to do a lot of things that can have an impact, including pretty darned quickly, but strategic petroleum reserve isn't one of they will. >> in your mind the strategic petroleum reserve can be tapped only when? national emergencies, if something were to happen in iran and prices were to spike is it quhapz in iran that forces the issue or prices spiking that is the issue? >> andrew i'm referring to why it was set up, it was set up for national security emergencies for disruption in supply. there's no big disruption in supply right now. they're generally increasing prices because we don't have enough supply long-term, including because we're not producing nearly enough in this country, we're putting basically 95% of our resources off limits. >> governor pataki is on the set. do you have a view on this? >> i agree with senator vitter on this. i think the whole idea of the strategic reserve is, there's some political ly caused

disruption of supply that impacts the price. if that's the case the price does matter. only if it's caused by some political disruption globally, not just the market. i think the overwhelming reason oil is so high is supply and demand. the senator's right we have to do more to make more american resources available and one point that is always missed is having zero interest rates, quantitative easing and a weak dollar, oil is globally priced on the dollar and we have a weak dollar, the price of oil goes up, the price of other commodities like wheat and corn go up and it has a devastating impact on working american families. >> that's absolutely true, a great point. ben bernanke is appearing before our banking committee in a few hours and that's one of the lines of questioning i'm going to pursue, because there are some negative impacts clearly to

this zero interest rate policy. >> i think that's one of the reasons that you heard bear nan key yesterday backing off a little bit on the commitment to 2014 because he sees gasoline possibly hitting $5 a gallon, understands that a weak dollar is one of the major factors. supply and demand, weak dollar and political concerns, and i think he's saying, well, maybe this is going to have a negative impact on growth as opposed to the zero interest rates, which he's been trying to use to stimulate growth. >> senator vitter, we've had on our show in the past jim bullard, the st. louis fed president. he was on just last week once again. he has talked about oil prices, other commodity prices, how he believes that could be in part because of the quantitative easing that we've seen. >> right. >> he doesn't say in full, he says in part because of that. >> right. >> what would you like to hear from ben bernanke on this point? >> i'm just going to ask him to acknowledge those negative

impac impacts. there are clearly impacts to this policy of zero interest rates, including increasing commodity prices, including the price of oil, and just like the governor said, that's not the only issue, that's not the only factor, but it is a significant factor, probably one of the top three, so i'm certainly going to ask him about that, because that does impact growth, the economy, and in particular a lot of people on fixed incomes. >> senator, we're going to leave it there but thank you for joining us this morning. >> thank you. >> good luck with your questioning later today. >> thanks. when we come back, more from our guest host george pataki, former new york governor. and we'll have the numbers and the instant market reaction. "squak squawk" goes to the

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♪ coming up a few minutes away from weekly jobless claims and take a look at the dow futures ahead of the data. "squawk" is coming right back. that's going to have to be done by a certain date.

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at 8:30 we're going to get personal income and jobless claims data. rick santelli will give it to us and jim yurio is going to comment on it. rick what are the numbers?

>> reporter: i'm going to give it to you all right. all right, 351,000 on jobless, that's from a slightly revised what was 351, went up to 353, lop off 2,000, here we hsit 351 continuing claims, the ones we continually string along with us basically unchanged at 3.4 million. personal income january up 0.3, close to expectations. spending up 0.2, half of expectations. last month's half of 1% jump in income, unrevised, spending last month was unchanged and unrevised, so you know, i don't know. if i look at income and spending, somewhat matched, somewhat light. it isn't really definitive news in my opinion one way or the other in initial claims are at a low level and i continue to think the average will continue to converge to these lower levels, and of course, just because people aren't coming every week applying for benefits, doesn't mean that

there's more people employed, but most likely there's a pretty good correlation. we don't know what the correlation is. interest rates moved up markedly yesterday in some sectors of the globe and we're up about ten basis points totalled over the last 30 hours but it's over that psychologically important 2% that as the "wall street journal" pointed out not to be construed in negative fashion, mr. bernanke holds a lot of power, that historic figure behind the curtain in "the wizard of oz" and when he says things or doesn't say things and most people can't understand either side of that equation, he can move markets but the ltro, europe and the uk probably were a little more blunt about certain issues, and i think that he was just kind of included in that ven diagram. back to you. >> rick, on a different subject, if you were a credit default swap buyer and you were going to get, you saw something go to

40or 50 cents on the dollar, would you be miffed or buy another one? does that seem fair? >> reporter: let me sell you something. if you ever have a chance to read the rules and how they delegate it to certain committees and people that represent certain groups on who ultimately decides what's a credit event and what isn't, i'd personally, i don't believe in regulation. let people buy whatever they want to buy. if you're asking me would i buy something, would i get a haircut like that and somebody from up above behind another curtain says default, no default? not on your life! >> do you think that was a bad decision then? >> listen, i personally think a default is a default, but in the world we live in, nothing is as it appears to be. >> all right, that's true. for more -- thanks, rick. let's get to jim yurio of tjm institutional services.

jim, the claims number, there's just no doubt about it, 350, remember 400 was the number and someone had an interesting study, they went back, 400 has always been the number and you thought it might have changed. >> it was bullard. asked the fed. >> did it change in the last 60 or 80 years whether 400 was the number and you would have thought with all the changes in society it would have, the 400 is the number and 350 is better and maybe 8-3 is the real number. >> the market has thought 400 is the number, when the market decides that they don't let the facts get in the way but the fact the facts back it up is good. we're getting used to good solid numbers so there's no arguing at all that the economy is headed in the right direction. as far as the stock market is concerned, up to this point we've been rallying on an economy getting better, plus incredibly loose central banks here and in europe particularly so in the last couple days the ltro was aggressive but out there, kind of behind us and at

the same time the fed has not taken the punch bowl away but moved it further down the table where it's harder to get to and now we have to shift our focus just to the economy getting better. that's a vulnerable period for the stock market. everyone talks about how we're due for correction. i'm in that cap. if we get a correction in say decent time as long as we change our focus. >> all right, so what do you think of next friday? i know it's too early, but what are you expecting on this 8-3. gallup is out saying that their same bls service has it closer to 9%. >> first of all the 8.3, we try to compare it to these time frames through the '90s and the 2000s, where we had just lofty numbers in construction, and everyone was a mortgage groeker. there were so many jobs -- perhaps that was unrealistic and we have to dial to a more realistic number right now. >> reporter: you no he what that's called, jim? >> what?

>> reporter: structural problems. >> amen, brother, i agree with you 100%. >> reporter: why do you -- okay, stop there. >> okay. >> reporter: do you think ben bernanke and the world's central bankers are doing a good thing, providing all this liquidity? >> you know i don't and you know what i think they're doing -- >> cool. >> reporter: -- is for people on fixed incomes, middle income people they're down the low path. >> reporter: let's connect the dots, they're funneling the money to lower an unemployment rate where there's structural unemployment issues. ben bernanke knows that. they all know it. they think the world's a bunch of saps! >> guys let me interrupt for a minute. we have news from walmart, i want to get this out, it's a blue chip and moving the stock. look at shares of walmart and where they are indicated this morning, company now saying that's going to be increasing its dividend and that may not be a surprise, the company increases its dividend every year since march of 1974 but raising it by 9%, paying an

annual dividend of 159 a share versus the 146 it was paying. comments from mike duke says they're doing this because they actually see their core walmart u.s. business back on track, and because their financial position allows them to increase that payout to shareholders. for the record they played out $11.3 billion to shareholders during fiscal 2012. but that speaks to the company's strength. 9% say pretty big deal. >> it's a 9.5% yield, sorry, not a 9.5% -- it's a 2.5% yielder, add 9% on to 2.5% and 10% of 250, and 2.75%. >> part of the larger story so many people that we've had, investors who we had on the show have come on and said get involved in dividend paying stocks. and this is another connection. >> alan schwartz spoke to this yesterday. >> people are watching and

saying okay -- >> alan schwartz told us that again yesterday, too. >> you got a lot of for and above retailer. >> for a retailer that's good because they put -- >> back to the cash issue. if you don't spend the money, m&a -- >> when the aftertax shield goes from 2.5 to 1.25, when it's taxed at 50% it's not nearly as attractive, seriously andrew, 4% yielder which right now taxed at the low rates your aftertax is 3.5% so that's something -- >> becomes less attractive. >> the whole value of the stock market if you're basing any of it is on aftertax dividend yields it's much less attractive if rates go up to 50% which is where, if nothing is done, if things go back to the bush tax cuts expire and other tax cuts go in and the obama care, i forget, this he don't call it -- >> the likelihood of all of the things you said happening. >> if nothing changes right now. >> macy's closer to 1% and home

depot 2.5%. >> at&t or verizon or pfizer, and there are some others. >> 5.5. >> there's some incredible yields. >> you agree the chances of that are slim. >> of what? no, i think we're -- >> you think we're going to 50%? >> reelected i think we'll go to 50% on dividends, yeah. don't you? >> i take the other side. >> i don't think it's impossible at all. i think it's very possible. >> in 25 capital gains? >> 25, yeah, that's what's proposed. >> that's what i think it goes to, okay. >> thanks to rick and jim. we'll have both back soon. when we come back on "squawk box," jobs, the economy and the race for the white house. virginia governor bob mcdonnell will be our guest, just after this. "squawk" will be right back. n. it's truck month! no. it's truck month! no. it's truck month! no. it's chevy truck month!

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welcome back to "squawk box," the battle for the white house revving up with super tuesday just days away, when virginia holds its primary. let's get perspective from one of our squawk heads of state, virginia governor bob mcdonnell joins us, also chairman of the republican governors association. we've had some great conversations with two other governors today, governor, with governor pataki, and governor rendell. where are you on whether the republican party has been

damaged or chances damaged by the sackry moanious season? there's too many governors. you're the one we want to hear from. you have the floor for the next five or six minutes. >> good morning and hello to my friend governor pataki and all of you there in new york. i appreciate being on with you. all things considered, sure we'd rather have a nominee ready and go toe to toe with president obama at this point but this is democracy, the process. you remember in '08, hillary clinton and barack obama were duking it out until june 7th of 2008. this is part of the process. it sharpens the candidates but creates more fodder for the campaign and during the general election. i think this is what's going to happen. there's only three issues, it's about leadership, jobs and the economy and it's about tax and spending debt and deficit and once we get a nominee we're able

to focus on president obama's abysmal record on all three of these issues, i think conservatives and republicans, libertarians, independents are going to rally behind our nominee and we'll have a very spirited contest and i believe we'll win this year. i'm not that worried about it but i wish it would be over soon. >> in our conversations with governor pataki, he hasn't endorsed anyone yet. he still has some reservations about how strong a candidate -- is that fair to say -- romney would be that president obama might be able to point to some weaknesses in governor romney, then maybe someone like a jeb bush, christi, your name. >> bob mcdonnell. >> your name is thrown in there as well, what kind of convention, an open convention. >> an open convention, if it came to that. i think a lot of that depends on what happens in ohio next tuesday, if governor romney wins big in ohio, i think at that

point i would hope the party will start to look to come together, but i just disagree with governor mcdonnell on one thing, you were pointing out how in '08 president obama and hillary had this brutal contest into june. the difference then is at the same time we were having our own internal battle over who our nominee is. this time the president is out there acting above the fray, and the american people are paying attention, and so i think it's far better for us to get this behind us, so that we can focus on the president and his weaknesses in those three areas you talked about, as opposed to taking shots at each other. >> governor i agree, that would be the perfect world but the fact is the president is in the fray when it comes to jobs, we're all glad the unemployment is going down. we're down to 6.2% in virginia, the lowest in the southeast but the fact s governor, we've had an 8% unemployment rate fort

entire obama's presidency except for his first month, done nothing but increase the national debt $4.7 trillion, even when he had his party in charge of congress for two years, no debt reduction and it's over $20 trillion with his budget, no real plan on jobs, on energy, and continues to blame everybody from president bush to wall street to the founders for what's wrong with the country and that's not leadership. he doesn't get the shots directly but his performance has been abysmal and i think independent voters who will control the outcome of the election they want good jobs, they want a stable environment, want a government that's responsive and want somebody who is going to lead. when we go toe to toe with governor romney and president obama i think we win. >> governor, you know the media, they love a good story, and the latest narrative is that you're governing and in the back of your mind thinking do i need to stay in a certain ideological

position, so that i can be a good vice presidential candidate? have you any bills anything based on prospective chances for being the running mate of the nominee? >> you know, i got the job held by thomas jefferson and patrick kennedy, there's no better job than that. i'm not auditions or campaigning for anything. i do want to win more republican governors race this is year and want to see a new president because i'm concerned about the left-ward lurch this president is taking us. i've been doing this 21 years, try to do the right thing for a conservative cause, i'm a fiscal and social conservative. i'm not making excuses like the president. that's my governoring style and why virginia is the best place to do business and where why we've had $1 billion in surplus the last few years, that's why we're solving problems. >> virginia is for lovers. can you explain that to me? what does that mean? >> it's a great theme. doesn't it make you want to come

to virginia and spend money? that's our motto for our tourism department. it's something our folks created decades and decades ago, it's the mantra for virginia. we tie our whole tourism theme around that, and it's working pretty well. >> nobody took no states are for haters. lovers, that won't work. that's a crummy slogan, for haters. >> we're more lovers of elections, too. >> hope to see you again, governor, a lot between now and november to weigh in on a lot of these things. appreciate it. >> appreciate it. have me back, thanks. >> okay. coming up we'll talk stocks on the move with the "squawk on the street" crew, we'll head down to that famous new set at the new york stock exchange, coming up next, when "squawk" returns. >> when you miss "squawk box" you fall behind on global business news. when you fall behind on global business news, you make bad investment decisions. when you make bad investment decisions, you lose all your

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well kim -- welcome back to squawk this morning. some green arrows across the board. knead dab will open up a little more than eight points higher, and our new implied percentage open, a nice little green. carl, melissa, jim and david, all four in one place. it's an amazing thing. one shot. what are you looking at this morning? >> you're easily impressed, i must say. >> a question for everybody at the table. i don't know how much you've been focusing on this in greece and what santelli had to say about it, but doesn't this make you think that the whole credit default swap market shouldn't exist anymore? >> it's funny you mentioned

that. we are going to talk to bill gross, the man who buys a lot of insurance, the good question for him would be is this long-term damaging to that hedge, and will it have effects longer term on costs around the world? >> we've seen this already once before, when they didn't recognize potential default some time back, and therefore didn't trigger the cds, and people want to hedge their positions that way, so they'll sell them instead. it does raise the larger question. if i do want to hedge it with the cds, i won't feel it's an effective hedge. it eliminates potential buyers. >> i buy fire insurance for my house. the house gets on fire. they come and say, listen, that wasn't particularly the kind of fire that we're going to pay off on, that was a different fire. to me fire is fire, by maybe i don't know the difference. >> half your house is still there, you're fine. >> 20%. >> yeah, you have a bathroom and

a bedroom, sorry. >> why do you need the whole darn house? it doesn't seem right to me. >> we have that, all the economic data. and retail sales, what is up with gap today, blowing it out after expectations of a miss. >> it's incredible. >> these are number -- gasoline must have gone down big during february, because these kind of numbers are amazing. see you in about six minutes. >> thanks, guys. coming up, final thoughts, george pataki, "squawk box" is coming right back. the equity summary score consolidates the ratings of up to 10 independent research providers into a single score that's weighted based on how accurate they've been in the past. i'm howard spielberg of fidelity investments. the equity summary score is one more innovative reason serious investors are choosing fidelity. get 200 free trades today

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stock of the gang. that is gap, the retailer reporting better than expected monthly sales, surprising strength in north america, more than offset bigger than expected declines overseas. our guest host all morning has been former new york governor george pataki. can you wow us with final words of wisdom? >> i don't know that i can, but obviously the economic signs are very positive in the short term.

that will have a huge impact on the presidential election. if you look at this recovery in its historical context, it is pathetic in terms of job creation in comparison so others, so the president will be talking about how things are getting better, i saved america. if we have an economic program that in fact is right for america and if we can point out we have not created jobs remotely near what we have in prior recoveries, i think the republicans can win this thing. >> but the nature of the recession and the absence of construction jobs and the bounce in housing, that has something to do with how tepid it has been. >> absolutely. >> i keep asking people this -- is there any way that americans don't base how they pull that lever just on the economy? is there any way enough people say i have two visions for -- >> it's going to be the economy barring some foreign policy event. >> no one goes into the booth saying i don't want to go down

this path, the european style -- >> i mean, i agree, that we don't want to go down that path, but people don't think that in the heartland? implts i don't think swing voters will say that analogy works. >> anybody who thinks that has -- >> that's right, becky is right. this president it drives me nuts every time he gets on the tv and says the economy is doing well. it's like you have a kid who always gets as in school and then gets an f, and all of a sudden hey, we're getting dsic look how much better -- >> people have said this was the biggest downturn since the great depression, that's not a typical reveg you come booming back from. >> if you look at the history, other than the fact there was a financial elements we have not

seen that, and i think his pledge to raise taxes, obama care, the actions of the nlrb, the massive deficits he's driven up, all of these are looking -- when people look to the future they say, i'm not so sure. while we're having a recoveries i think republicans have a opportunity to point out how much better we could be doing. >> 8% as unemployment, is that the key? >> i think 8% is a pathetic number, but if we fall below that before the election -- >> if we get there -- >> anytime the unemployment goes down, it helps the id