good morning. get your rally caps the dow posting the biggest gain in more than a year. ten stocks for everyone that sells on the big board. technology & has the biggest gains. we'll see if the momentum continues today. "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. our top story are the global markets today. stocks started 2013 on an incredibly bullish note. take a look there. dow jones industrial up with a game of more than 2.34%. that is the best points gain in

over a year. the s&p closing at a 3 1/2 month high. that's, by the way, just three points away from ending the day at a five-year high that came in at 1462. u.s. equity futures this morning are indicated slightly lower. slightly because of the massive gains that we saw yesterday. you might have expected to see a bigger pullback. the s&p is off by just over three points. so the nasdaq futures are down about five. in europe, the markets there are coming off some of their gains, as well. the ftse is off by just ov over .1%. in germany, the dax is down by about .3%. in asia overnight, markets in japan and china remain closed. they will reopen tomorrow. the other major asian indexes, as you can see, are slightly higher. the one that really stands out there, though, is the korean

kospi. that up by 4.7%. so a major gain in the korean market. among the headlines that have been driving action there, growth in china services sector accelerating in december at a fastest pace in four months. two other surveys suggest china's manufacturing growth was picking up in 2012. no question, the bulls had it as we got out to the start of the new year. >> thanks, becky. the fiscal deal, of course, a big part of yesterday's market story. now, it is officially law. the white house saying that president obama has signed the legislation passed by congress. as we've been discussing, another series of fiscal fights are just around the corner. s&p says the budget deal won't change its perspective on the outlook for the u.s. the state late yesterday, the agency says the budget compromise, quote, doesn't affect our view of the country's credit outlook, given that we believe yesterday's agreement does little to place the u.s.'s

medium-term public finances on a more sustainable foot. . it cut the u.s. sovereign rating to double outlook in 2011. rival credit agency moody's warning that the u.s. must do more than the recently passed fiscal cliff measures if the country is to deal with its ratings outlook. the new congress will be sworn in today at noon eastern time. the 113th congress takes its oath with 56 new democrats and 38 new republicans. in the house, john boehner is expected to be re-elected speaker today. a lot of intrigue around that. speaker boehner has already announced one of the first pieces of business for the new congress. he set a timetable to approve a $60 billion package for superstorm sandy relief. the house will vote on friday for a $9 billion down payment for storm-related support to the national flood insurance program. there will be then a second vote

on january 15th on the $51 billion remainder of the sandy disaster aid package that was approved last week in the senate. boehner's announcement coming after fellow republicans loudly criticized the cancellation of an earlier vote. >> this is 66 days and the wait continues. there is only one group to blame for the continued suffering of these innocent victims. the house majority and their speaker, john boehner. new york deserves better than the selfishness we saw on display last night. new jersey deserves better than the duplicity we saw on display last night. america deserves better than just another example of a government that has forgotten who they are there to serve and why. 66 days and counting. shame on you. shame on congress. >> angry new york/new jersey lawmakers say the house delay

marks a stark contrast to congressional reaction to hurricane katrina in 2005. a republican-controlled congress swiftly approved $62 billion in aid just days after the gulf coast hit the coast. >> why did the senate not have a bill until -- >> they looked at it for a long time. >> by the time we saw them, they had an hour to look at it. >> if it had been done earlier -- >> so why wasn't that done earlier? >> why didn't the house do something early earlier? >> i don't know. i guess because everybody was dealing with the fiscal cliff. >> people are so concerned about that, but they have been so long in digging their heels in and not doing anything about that. >> the senate received a 181 page bill three minutes, right? >> but that was because everybody was adding earmarks in it. >> everybody wants to help the sandy victims and no one is going to say you shouldn't.

and the knee jerk reaction is so obvious to say, yeah, they shoo done this long ago. but nobody wants to see a bunch of pork in there where people go crazy. to have three minutes to actually look at the bill -- >> this is an example of a dysfunctional government. 66 days later? the idea that you've had three minutes to look at a bill, this is a dysfunctional government. you have to blame both houses of congress. >> and huh come the other one was 12 days? >> 10 days. >> as a partisan, they're so busy trying to get that 39.6 back on the high earnerses, that's all we were focused on for 55 days. that's all we've been focused on for two years, latbasically. >> what's interesting about that is -- >> that's what i was going to say. timgs. horrible images of what happens after sandy. but i think -- i just -- i always sort of steered in my memory as those images of all those people at the stadium in

new orleans. you think that that just galvanized. there wasn't the fiscal cliff, there weren't these other issues. this is not to take the responsibility off of anybody, but if you're trying to understand how we got here, that isn't -- >> it is outrageous. >> but i also think it's outrageous that anybody would put pork in there. what i tried to look at with the hurricane katrina bill, was there pork in there? >> i watched it on the national news last night. not sanl report even referenced why there was any delay whatsoever. you wouldn't just throw in that some people were concerned that they weren't looking at what was in the bill. they wanted to know exactly -- you know, it was right after we're looking at this huge budget issues and you're talking about another $60 billion. everybody wants to help what needs to be helped, but no one was looking tek alaska -- what was it >> alaska ya fishery. >> you know these politicians and what they're going to put

into these things and had no time -- but i don't know why they had no time. judd gregg is coming on. he's a governor and a senator. yesterday i said all the governs ought to take the place of the senator sometimes. >> they had howard dean on today, too. >> howard dean. so is government hard? here we have one vote per individual. we're lucky we can get -- that's the way we do it. you have 50/50, off split. >> but we're a representative democracy. >> but how do you -- if you have diametrically opposed opinions on the way the country should go forward, when we see rise above, does that mean president obama gets to do whatever he wants? does that mean only the conservative republicans in deficit talks, they have to get

their way? it's just weird. >> it's complicated. >> but when it's all said and done, didn't we get something done? >> we did, but moody's looks at it and says, this is not nearly enough. >> it's a slow process that we'll be involved with any further. >> are you positive on -- >> no, i want to add judd gregg, has it actually formed -- because he willingly went into the senate knowing how difficult it would be to do these things. >> and it was a "60 minutes" piece. a month or two ago, looked at sort of congress over the years and i think it puts reason and -- in the same room together. i think that's what it was. and they talked about how frankly unbipartisan anything is and how it used to be. >> i think there's a "new york times" piece that laid out some

of the -- >> look at what harry reed is able to -- he controlled what's goes on at the senate more than anything else. maybe it is the individual players that were there. >> how about filibusters and -- >> but there's no tip o'neal on ronald reagan's left. they say brings up things that that. is this the individual permits? i don't know. i'd like to say that -- >> the senate started using some things that they hadn't done before. bob dole laid out some things where it used to be called hanging the trees or something. something about hanging stuff on the trees why you put all the different legislation in and you would fill up all the possible additions that could be done auto a became. >> i like to say it's broken, but then i just think it was hard work. the legacy is there.

drones, there. interrogati interrogation, it's there. all these things, it's getting solidified by your guy, isn't it? it's hard work, andrew. it's hard. isn't it hard? this democracy is hard. >> democracy is hard. >> being a decider. when you're a decider, you have to make these decisions, which makes it hard. >> i like your new view of things. >> but seriously, look at this legacy. it's intact. it's scary. really scary for your side on this. anyway, a busy day on the economic calendar. they got you. at 8:15 eastern, adp employment reports and 15 minutes later, a weekly jobless claim. tomorrow we'll get the government's december jobs report and important to watch today, auto sales which now in the journal, 15 million we're supposed to do. mike jackson is somewhere rubbing that all over himself, sitting in a hot tub. >> it's huge, but the question is, how much of because of

sandy. >> mike jackson is on tomorrow. >> not me. who is jack thorton? now he's dating some model or something. >> a big, swinging twitter person now. >> he dates models mow. >> and the private market is valuing like 11 -- >> she doesn't think of him as a nerd or geek or anything. she thinks he's the cat's mimi yao. >> as is normal, costco, one of the first retailers to talk about these things, the warehouse giant posting a better than expected 9% rise in same-store sales. let's check on the markets. we're back to 13.4 on the dow. okay. but we are at 13,5, 13.6.

>> because of the same reason congress can only move one leg at a time. >> we're only back at 134. >> we got to resolution, but now we know we have another two months. >> it can't go up every day, i guess. but the s&p is actually closer to the high end of the terrain than the dollar is right now. >> what is it, three points away from a five-year high? >> this is not going to last. >> although it was pointed out that he's not an equities guy. he's a bond guy. and he pointed out that people who get into bonds are people who are obviously more -- of something. >> but i was thinking about his point and what he was actually saying. and i get it because those bush tax cuts if possible should be around the rif knew and 98%

bel below. you say we're never going to have that. how are we going to replace that? how are we going to replace all that revenue that you used to get from the -- >> i think it was disingenious. it was supposed to sunset. >> but we have always said -- they always in future budget considerations, they always assumed it would be sun setting. >> right. but that are a lot of elected officials that didn't assume that. >> okay. i think you're going to hear how that's going to happen because i think one of the conversations that is going to come up in the context of all these cuts is additional ways to raise revenue. >> i think you might have -- >> nobody knows what it is if you say that tax. if you say vet, no one knows what you're talking about. >> in the uk they don't. but here they do.

>> yes. >> and by the way, it's possible, and i want to talk to peter about this, that maybe this doesn't last. >> they're permanent until we change it. >> maybe later this year if there is a real push on entitlements, maybe there's other tax regimes that we haven't been discussing. >> okay. oil did what was expected of it sunday if we're not intog into any keep of slowdown. it's sharply higher, closed above 90. what it was expected to do, even though the aurchlt continues on whether there's any actual supply and demand, normal dynamics going into where that is. >> the yen is the biggest story,

right? 86.96. and gold is down about $7 to $1681. >> it is now time for the global markets report. ross westgate is standing by in london. ross. you've got a -- >> good to see you this morning. sorry? >> you've got a nice mix there of red and green. it's colorful for the screen, but all that red doesn't help, i don't think so. >> well, yeah, but if we pan out a little bit, andrew, you'll see it's pretty even stevens, andrew, decliners marginally in the lead. there's five roes of red here, 4775 row eggs of green. you would spec that the pause we got off the the big gains yesterday, not that dramatic. the stoxx 6 let you know is up .25% to the moment.

smi, lux for the release tonight. the laggard, the ftse pretty flat, really. we had some good update today. some of these guys with down r down 4. r5%. the dax here only some 4% away from the record high that we've hit. 8,105. 7,755. not that far away. a lot closer to the all-time highs than other markets here in europe. so the losses we're seeing this morning, not that big. mining stocks are down today. they can look at profit taking after big gains yesterday, despite the fact that we saw official services pmi, manufacturing in china picking up to 56.1 and 55.6 last year.

and we've got here autos down really depressing auto sales coming out late last night in europe and italy. they are the worst auto sales for 2012 we've seen in over 130 years. that's in terms of new car registration. back to you guys. >> all right, ross. thanks. we'll see you soon, hopeful hopefully. do you feel room? do you have room there for piers morgan? do you want him back? >> you were talking about the poll. there's a lobby group to get him out of the united states. i think it's only exceeded, joe, by the machine of people here saying we dwoent want him back. >> keep it, yeah. >> as i understand it, yeah. >> what was that, elba? elbow? >> the island? >> it was an island somewhere thing, probably. i don't know. yeah, i thought so. you see, over there, there's a

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welcome back to "squawk box." dow looks like it would open about 31 points, nasdaq would be off about 5 and the nasdaq 300 would be off about 3 points. making headlines, the american banking association says u.s. consumers will continue to pay down debt. but the group is now warning that slow job growth and the expiration of tax cuts could mean it would become more dirveth to repay loans. bank payments fell to an 18-year low for the quarter. becky quick has sports news for us. >> theater. number 22 louisville rolling past fourth ranked florida 43-33 in the sugar bowl last night. makes me feel better the about the whole thing, right? >> on any given day, you get a couple of -- >> it's true. any given saturday, sunday, friday. >> did sips sn beat louisville, do you remember? >> i don't remember.

matt, do you remember that? >> the bear cats -- they might have. >> in the regular season? >> they ended up beating -- >> rutgers did not. we had a good game all the way down to the end. >> i was sure florida was going to kill them. >> so were a lot of people. the cardinals took the lead for good when floyd returns the recession from the first play on scrimmage. eddie bridge water flew for two touchdowns and was 20 for 33 for 366 yards. i'll look that up right now. >> i just figure, you know, florida, you get that whole state. you've got a city. i guess that's thinking of it wrong, isn't it? >> yes. because it's a big draw from beyond that. >> it's not a city versus a state. >> in. and florida used to be the draw for all those things. >> a pretty good year with the round ball, also. >> oh, yeah? >> some playing kentucky.

i haven't seen the end of the day. >> i don't pay any attention to basketball. >> i know you don't. >> sorry. i like the coach. >> when do you finally write 2013 on your checks? june. >> yeah, probably june/july is it, when you start remembering. >> you have a paperless transaction -- especially in the bathroom. but you haven't had a paper transaction in so long, right? >> i'm getting better. i'm troog to do my chick write ing i'm trying to get better. it's a much easier way to do that. >> i haven't made out a check in a while. >> by the way, when you deposit checks, how do you do it? >> that does go automatically. >> now just take pictures of it constantly. >> oh, yeah? >> yeah. it goes automatically.

i did notice it's half of what it was last year. anyway, a new year and a new focus on the risks facing multi national companies. let's take a look at some of the biggest obstacles and the best opportunities that come with doing business in some of the world eeps most complex environments. joining us from london is richard fening, global ceo of the independent business risk control risk. richard, should we -- is it that simple that you go to places where the risk is a little higher and you do expect that the reward is going to be greater, as well? does that hold true globally? >> no. it doesn't really hold true globally any longer. that was the paradigm that people were fixed with for quite a long time, that you could invest safely in north america and europe and other parts. if you wanted to take more of your risk and get a higher reward, you would go elsewhere. what we've seen particularly in europe with the eurozone crisis is that that in many ways has

been inverted, people looking at so-called emerging markets now as areas of much greater certainty and the so-called safe betts of europe and north america have got a kind of new volatility that, you know, we've been hearing for the last few minutes on your show is born out absolutely by the -- by the parlor game that's been going on in washington. >> yes. and then i thought back to the -- to when our commercial paper was locking up a couple of years ago. that was, you know, no better than like a ba man na republic at this point. you could feel safer in indonesia compared to what was happening here. >> you have to make sure you don't get a false sense of security over these markets. china is absolutely fascinating. new leadership coming in in china, the chinese economy going through one of those once in a generation readjustments where it goes from an economy that's been all about an export driven

economy, it's been about a chooep cheap labor economy. that's now changing completely. at the same time that the leadership is changing, there are huge opportunities there, butperils, as well. i think what we're saying is you can't really look at things with a stereo typical point of view. between emerging and kwomts good markets, it's somehow about label opportunities. it's all about the specifics of where you're investing. >> okay. i was going to make one more point. it's almost as if you can -- if you can get a greater reward in these places where its used to be riskier, it seems like that would cause you to maybe focus on some of the emerging markets. in el-erian's words, it's a multi speed world in terms of economies, you would go where the growth is if you don't have to worry about the downside. >> and people do and people should.

if you look at sub-saharan africa, that is radically different this coming year than it ever has been before. we see lots of smart investors looking at places like nigeria, looking at ghana, looking at other markets that historically have been offputting for people, but now right on the agenda. >> richard, thank you. going to keep it shore. thanks for your time today. >> thank you. coming, a bullish case tore 2013. stocks getting off to a strong start yesterday. plus, news about al gore and al jazeera ra. what is that all about? >> i know. of buttons on your tablet. isn't it time the automobile advanced? introducing cue in the all-new cadillac xts. the simplicity of a tablet has come to your car. ♪ the all-new cadillac xts has arrived.

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good morning and welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick and andrew ross sorkin. after yesterday's 300 plus point jump in the dow, u.s. equity futures are pulling back a little this morning. you saw yesterday they would be up 200, up 190, up 250 and then accelerated into the close. so giving back a little today. down about 33 points. more on the markets from a trader and a straight gist. first, though, here are some of the morning headlines. some guy named al is buying al's company. >> al jazeera. is announcing that it will buy current television with a cable channel founded by al gore and partners. this move is basting qatar. >> i don't know how you can

change it after ten years, you know? >> qatar based broadcasters footprint in the united states. they've been looking for a long time to find a way to get more air waves. the terms were undisclosed, but the deal could be worth as much as $500 million. al jazeera says it will start a new u.s. based news channel with this acquisition. >> 500 million? how much does big al -- >> al jazeera for a long time has been wanting to get more. >> i think they sunk a lot of money into this. the other thing is, eliot spitzer and all the people they put on to that network is a sunset. >> that's what it makes it sound like from al jazeera. google's executive chairman, eric schmidt will reportedly travel to north korea this year. the associated press says that schmidt could visit as early as this month. the news comes days after north

korean leader jim junk un signaled relatiimproved relatio. brookfield is buying general growth properties. it acquired 18.4 million shares of the developer. brookfield is offering ggp management the rights to acquire those warrants for the same price it paid within 30 deals. as part of the deal, purchasing squares has agreed not to acquire enough to exceed 18%. joining us now, yra harris and wake to both of you. kevin, we'll start with you since you're on set. look at what happened yesterday. big push higher. dow up bier month than 300 points. is this the beginning of more to come in the new year, or is this we're excited that we didn't go over the fiscal cliff, but now we have to reassess where we

stand? >> i think it's a latter. what we saw was the removal of some of the tail ricks that markets were concerned about as it related to the potential for a full blown fiscal risk outcome. that coming off the table gives you a relief rally. you're going to have to go through the debt ceiling in a couple of months. there will away whole round of talks about spending cuts in washington. so the government side of this is clearly moving to appoint where we're going to run large deficits for a long time to come. what we would really like to see in the new year, do you pick up in business spending. we would like to see some investment spending coming back and i think a lot of what happened in the fourth quarter, with the debate about the fiscal cliff, curtails some of that. one of the hopeful things that we see, fundamentals seem to be moving along in a positive direction. now with this behind us, it's a better reaction from private business. >> you know, yra, yesterday ash cashin was making comments. he said because we saw uniform moves in a lot of these different indices and a lot of

different stock prices that he thought this was a lot of new money coming back into the market in the beginning of the new year. are investors feeling better about this or are money managers looking to do what they needed to do at the beginning of the fiscal year and they thought, great, let's jump in? >> i think what we've talked about for months is that a lot of money is on the sidelines. they missed the first break when we broke down in the s&p earlier until 1360. then we got a powerful rayly. we broke back last week to about 1382 or 1383. they missed that because you were in the throws of a great share. no now everybody has to come back. >> so wait a second. are you suggesting that it was dumb money yesterday? >> yeah, i'm suggesting it's dumb money. they were going, you know what? i have to worry nat dividend rates are going to jump up to 39%. they didn't get that. i think that point was, hey,

i've got to come back in and chase some of this. >> maybe it was dumb money for taking money out last year. >> who is really dumb money is a lot of these corporations who borrowed money so they could pay these dividends. they made the decision that we were going to to 39% for the high end on dividends. so their balance sheets and financial statements will look far different because of this. >> they went up 70% dividend rate. >> yep. >> they didn't triple. they went up 70%. >> you know what? it's 70% relative to a ten-year yield of, what, 1.8? so if i'm buying verizon or a quality company -- some, not at all. and for some, not at all. >> for people make under $250,000, it goes up -- >> yeah, but -- >> we're talking to yra. he's like -- he made 250 so far

today. >> stop it, joe. but don't forget, interest, you know, people who pay -- who clip coupons off of u.s. treasury also would have gotten hit, too. so when you compare that, everybody would have gotten hit. now you compare, well, gee, i bypass these dividends. they've had to come back and put some money to work. i think we saw a lot of that yesterday, becky, and we're going to see that going forward. even though they're having to right the spending cuts. >> and i think that probably points out and yra highlights a lot of things, kevin, that you would talked about in your first point which is that we need some certainty. all of this uncertainty leads to hang ringing, no decisions on the part of business. >> yeah, i think so. and i think when you talk about the dinner table economics around the country, i think there are two themes out there that are somewhat contradictory and confusing. the average american is looking at debt instead of looking at deficits.

and they're feeling about sour about their future. it's very difficult to look at trillion dollar deficits year after year after year. the fact that we're looking at zero percent interest rates than the fed. we're six years into this process. i think what is happening is that people are looking at all of this with a sense of pessimism. so at the same -- so the response to that needs to be that, well, fix the deficit. to deal with the deficit, to begin to deal with some of those longer term issues. but there's a penalty to growth in the near term which politicians don't like. the focus is short-term. so it seems to me that -- >> but maybe we've started that. you have higher tax rates. if those tax rates are put towards bringing down the debt instead of -- >> well, it's a start. most of this is going to happen on the spending side. >> but if you get the spending side of it, it will go towards bringing down debt versus continuing spending. >> yes. i like to look at poll spending. look at federal, state, fiscal spending with it's approaching 50% of gdp. a couple of generations ago, it

was 10% of gdp. the trajectory is clearly unsustainab unsustainable. this has clearly longer term consequences. makes you act differently. maybe you've saved more because you're concerned about the future. >> what do you think about stocks for 2013? we have two months to try and get the other part of this under some control. what do you think we end up with by the end of the year? >> our target for the s&p is somewhere between 1525 and 1550. we have a barometer that we use to mesh fundamentals. that barometer has been rising for a couple of months now. as long assite supportive of that, you can see final demand rising employment, we continue to focus on a more optimistic scenario. and at $100 of earnings or $110 of earnings, which is the street expectations, we think that markets could easily trade to 1500 and a decent rate of return. not stellar, but a decent year. >> and not bad, not as much hang

ringing as we've put into this over the last couple of months and probably the next two months as we continue this. >> i think there's going to be plenty of hand ringing along the way. >> but if you step back, maybe it's not a bad situation? >> yeah. you have to look back three to five years in making your investment decision. as we go through this process, you have washington who is full boar in terms of fiscal policy as far as deficits, we're going to have deficits that will be significant for a long time, adding to growth. and you have a fed that is essentially full in apg long with many of the other central banks. >> you have monetary policy, fiscal policy. moving along and supporting all of this. but ultimately, we have to get our house in order and the deleveraging is has been going on in the private sector's first step towards that. now we have to see what happens with the government over the next several years. >> thank you for coming in. yra, it's always good talking to you. thank you. >> thank you. >> never too early. hillary got out of the hospital. she's better. 2016, we're talking about.

usa today within the first couple of pages, lessons learned from the fiscal cliff. lesson number three, the indispensable joe biden. and two pages later, and so the biden presidency begins. >> wow. >> biden/hillary 2016? >> one clear winner in all of this. >> joe biden. >> he would do well for himself. >> are those two going to have to fight it out in 2016? >> oh, i thought you were suggesting they come together. >> no. who is going to be the vice president on that ticket. >> that would be the problem. >> well, yeah, sort of. hillary is not going to be the vice president and biden has already been the vice president twice. >> we'll hash that one out. coming up, you've heard of matchmakers to the stars, but how about tutors to the ceos? our next guest teacheses america's corporate leaders. we'll try to teach ours a thing or two this morning. but first we ahead to break.

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peter orzag. but first, we are welcoming brad grossman. he can teach the ceo just about

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what do general electric executive beth comm is s, brian frazier and ron howard have -- it could be, right? all have in common? they're all coached by our next

guest. we saul him the ceo tutor. i met him, i don't know dish probably met you about five years ago. >> yeah. >> maybe six years ago when you were working with brian gray. there had been a big piece on him how he tutors ceos. you're not like a management guru, actually. you tutor them on culture and life. >> teach them hair care products? >> no. i think they knew a lot about that before me. i teach them anything they need to know, they feel they need to know, anything i feel they need to know. >> like what? >> now, you know, we're experiencing a world of intense digital disruption, which i no longer think of as disruption any more. it's now digital opportunity. and corporations have to change in a -- they have to change in all ways. there's new generations coming into the workplace. >> but you talk to people about

movies, culture and things that don't have to do with their day-to-day business? >> no. i'll teach them anything they need to learn about, not just for them, but for their customers and their colleagues. >> they said you would be to grazer what karl rove is to bush. >> okay. >> what is that but i think somebody who was a intellectual adviser who would think about the world and think about culture and think about society and the conversations that people are having in every single vector. >> i can understand how you wouldn't want to give out what you've told specific clients. but let's not name a client. why don't you tell me some of the more interesting things, offbeat things you might teach somebody, a ceo or somebody that they may not have known before. >> okay, one of the things that i do, as andrew mentioned, i do this thing called the zeitguide

which is a cultural almanac. what we do is try to give you a big picture sensibility of what's happening in every field from food, you know, so one thing that could be interesting is that the farmer is going to ew hero. >> farmer what does that mean? >> by 2050 we're going to run out of food. we're going to have to figure out how to grow 70% more food. and that can be very much begined with technology, because if you see what's happening in nigeria, people are using mobile phones to basically make sure that all the farmers are getting the right fertilizer, the right number of seeds to create transparency. more people are excited about investing in this community. >> so joe and becky, everyone will appreciate, is this idea that in the future we're not going to use e-mail -- or e-mail is going to change because we're all overwhelmed by e-mail. >> right. >> and there's like a new form of e-mail is going to happen? >> what people are talking about, especially sales force, which seems to be the leader or has the best marketing team

behind it is this new thing called the social enterprise. taking what we've learned on a consumer level, how consumers have been using the internet and social media and taking that mechanism into your business. so that you can basically communicate on a much easier level with your employees and your colleagues, as well as manage relationships with your customers. >> i don't know what that means. >> what do you mean? >> what does that mean? >> people spend 28% -- right now i e-mail with joe, cnbc sends out thousands of e-mails every day -- >> we're going to do it telepathically. we're going to have the classes where you can search the web with your glasses and i'm going to send you an e-mail using brain waves. it's going to be almost telepathy. which we have that already. >> then you don't need it. >> we don't. but -- >> you have 300,000 employees that you're managing and customers that are even, you know, multiple of that number, you know, you need it. i mean people spend 28% of their day answering e-mails. >> can you have a zeit guide for

1985? can i get that? i need the new stuff to communicate with andrew. >> uh-huh. >> he needs the old stuff to communicate with me. >> and that is part of my service. >> really? >> because andrew and i are similar in age. >> like chauncey gardner. he has no idea what i'm talking about. you bring up like argo and it's like ben affleck is a moron. i don't know anything he's ever done. we have a hard time communicating. >> you could do a weekly tutoring session for both of us? >> absolutely. that's our service. first of all it's not just me. i have an entire team and i hire somebody for each vertical. i have my tech guy, even though i'm saying that tech -- >> will you tell chauncey gardner is that not the greatest? >> absolutely. as brian grazer taught me, that is a movie bhaners. >> it's the greatest. >> and we had a money manager on who had never seen it and he started telling us that -- >> i had no idea. >> the stock market is like a garden. you need to grow -- i said you're joking, right? this guy. he had never seen it, either. >> right.

>> so i need -- we need somehow -- >> but that is part of my -- >> he's going to let us talk like we're contemporaries instead of father -- grandfather and son. >> again, i'm trying to say that andrew and i are from similar generations. >> maybe you could come on -- can you read the teleprompter? >> i've been trained, yes. >> well, there -- >> we know how to learn and teach everything. but again, they're not just ceos who are clients. we call them establishments. there's people who are at the top of their field and feel like that they need to keep learning and growing and evolving but also emerging leaders. >> i need the 2012 zeit thing. >> it's 2013. >> see what i mean? >> zeitguide.com. >> you already have a 2013? >> yeah, because i wanted to be the reference book that everybody goes to. >> what's new in the first three days of this year? what's in the zeit guide right now? >> well, it's published. but what am i thinking about? >> what's the new thing in the

last three days, of 2013? >> of course the fiscal cliff, we're talking about sandy, thinking about all that kind of stuff, optimism which you guys have been talking about. >> yolo is out, right? >> you only live once. >> they threw that out. >> well the first thing we talk about vuka -- >> what sit? >> vuka. >> you use that at a party? >> you can. or in the board room. whatever. so again -- >> so we help emerging leaders who need to learn about your generation. and established leaders who need to learn about -- >> well, thank you. >> thank you, brad. >> coming up the bulls take charge. coming up. this is america.

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storks on a new year's tear. but what happens now as a budget bell draws closer? we're rising above the debt threat today, with guest host former new hampshire senator and governor judd gregg. >> and our special guest, former white house budget director peter orszag and former dnc chairman howard dean. they'll join the conversation on how to weather the next fiscal storm. plus, breaking news on the employment front, and the state of financials. we've got all the details as the second hour of "squawk box" starts right now. good morning, everybody. welcome back to "squawk box" here on cnbc, i'm becky quick along with joe kernen and and drew ross sorkin. in studio with us as guest host this morning we have goldman sachs international adviser, former senator from new hampshire and former governor judd gregg. good morning, judd.

>> becky, great to be here. >> happy new year. by the way, judd is also a cnbc contributor. got a lot to talk with him about today. take a look at the futures which are dawn, but probably not a real surprising drop after that massive gains we saw yesterday. dow futures down by 40 points after picking up more than 3 pund points in yesterday's action. s&p futures are down by about 4.25 points. and this all comes after that very strong opening session for 2003. it was the market's best day in over a year. take a look at where things stand, and again, some major moves. i think the s&p is only about three points from a five-year high. we are just over an hour away from adp's december report on private sector employment. that number hits at 8:15 eastern time and economists are looking for growth of 150,000 private sector jobs for the u.s. economy last month. ultimate minimum reports say that google and the f.t. could be announcing a settlement today or tomorrow. in an ongoing antitrust case. google has been accused of favoring its own products in search rankings over those of competit competitors.

and that is something that google has denied. also costco is reporting a 9% increase in same-store sales for december. that is above analyst estimates for 6.5% gains. we are expecting more december reports for major retailers next hour, including target, macy's and gap and we'll bring you all those numbers as they hit. this, by the way, will be the last monthly sales report from target which is joining the ranks of retailers that have decided to only report on a quarterly basis. >> the global markets starting 2013 on a bullish note. dow rose more than 300 points in its best point gain in more than a year. the s&p 500 posting and nasdaq posting their best sessions in also more than a year. and the s&p closed at a 3 1/2 month high and just three points away from ending at a five-year high. stocks in europe coming off some of their strongest gains in 18 months, as well. in early trading this morning, they're all giving back just a little bit. >> and wall street and washington preparing for the bigger budget battle ahead. as the paint dries on tuesday's fiscal cliff deal. joining us from new york is

peter orszag citigroup's grown banking vice chairman, also the former director of 9 office of management and budget. great to see you. >> good morning. >> before we get into what's happening next i just wanted to get your views on what just happened. are you happy, are you unhappy? >> we've passed the midterm. the final exam is coming up. it's a pass. lots of good things. a permanent amt fix. i'm actually worried this is outside the, you know, political conventional wisdom but i'm worried that we've now locked into a revenue base by making even the middle class tax cuts permanent that doesn't really work in 2020. but that wasn't ever going to be any different. so it's a pass. >> to the extent that that's true are you thinking whatever the next negotiations ultimately become about that there really is a new discussion about new revenue enhancers, new taxes, whether it be a v.a.t. or something else we haven't discussed? >> i think that's the big question. which is how large is the next

stage? how big a discussion do we have? is it just over the sequester and the continuing resolution that's expiring in march, and raising the debt limit? or are we kind of stepping out onto a broader stage and going to be having a bigger discussion about some of the longer-term fiscal problems >> you know the president. the president said he will not negotiate for example on the debt ceiling. this is a nonstarter. is that a nonstarter or is that the beginning of a negotiation? >> i don't know that that statement frankly actually matters that much. they're going to have to negotiate over replacing the sequester was only delayed by two months. they're going to have to negotiate over that. you're going to have to negotiate over the appropriations bill for the funding the daily operations of the government. so if you're negotiating over those things, and the debt limits, kind of thrown in, you can say you're not negotiating over the debt limit but there will be negotiations in february and march. >> who's got the leverage in all this? i mean when you look back at what just happened over the past three days do you say the democrats won? do you say the republicans won? >> i think -- my own perspective

at least is the white house in this second best world won that round, but they, by not insisting that the debt limit be tied that to the package, it's entirely possible they're going to win the week and lose the quarter. and we'll see, you don't know yet until you see how february and march plays out, and i think there's no doubt that they have somewhat less leverage than they did in the round just completed. >> so in terms of what happens then in february and march, what do you think they put on the table? the white house, that is? >> we'll have to see. i would suspect that at the very least they'll put on the table what they've put on the table before, so for example, in the run-up to the fiscal cliff deal, the proposals that they had that were with interest, a little bit over a trillion dollars in spending reductions, i would be shocked if they don't put -- they might as well put those back on the table and that's about how much you need to waive the sequester for the next ten

years, which i think should be the goal of that piece of the discussion in february and march. now the real question is, though, do the discussions go beyond that. do you go back to some of the entitlement changes, the superlative consumer price index, medicare eligibility age, or even something bigger than either of those two things. >> judd's making a face. what are you thinking? >> first, i agree with almost everything peter says, which shocked me, which is why i'm making a face. but, i think the way they come back at this is they come back and he's absolutely right about the revenue side of the ledger. the president's not going to give up on revenue. this was just an opening number for the president. he wanted $1.6 trillion, he got $600 billion. so he's got to get another trillion in his mind or the people around him think that way. i presume this is all going to come down, if they're going to do something like that, to major tax reform, where you basically take these rates which are extended permanently and basically make them irrelevant because you completely redo the tax laws by hopefully reducing a lot of deductions and exemptions along the simpson-bowles line, and take rates way down.

the second thing i think that's going to happen here, which is really critical, and you touched on it, peter, is this issue of the cpi. i thought the president when he put that on the table made a major concession, and i almost think the house managed to snatch defeat from the jaws of victory by ignoring that session. i think that's a multiplier event, significant portions over the first ten years. probably 250 to 300 billion over 20 years you're talking trillions. so if we can get back to that number, that idea of adjusting the c.o.l.a. and make it accurate, in order to change cpi, that would be a huge step i think in the right direction. it's getting something substantive on entitlements. >> peter, are you a chain cpi fan? >> i am a chain cpi fan, it is a more accurate method of inflation, especially for example when it's used to update tax brackets. but, as you know, i'm in favor of a broader social security

reform, not just doing that. one of the harms from moving just to a superlative cpi or a chain cpi is you can impose some burden on the 85-year-old widow. there should be -- it should be coupled with other changes that address that problem. and frankly also do a lot more. we've got, you know, massively growing gaps in life expectancy, by education and income. that should be reflected in social security. social security also does some additional revenue. so the point is, yes, i'm in favor of that one step, but it should be a broader package. >> i wasn't trying to limit it to one step. >> i know you weren't, senator. >> that was on the table. that was agreed to, and then it came off the table when it went over to the senate because harry reid wouldn't agree to it. would be nice if they put it back on the table. >> a lot of people say the republicans have really stepped on this by not taking the zeal that was first offered back in the summer of 2011. that would have been $800 billion in cuts that was on the table. it's come down ever since then and then on this latest deal

they got no cuts. >> absolutely right. basically what you got was a tax increase. what the republican hard-core republican membership of the house wanted was to cut spending and not increase taxes. what they got was an increase in taxes and no spending cuts. you can't look at it as anything other than a fairly significant failure. >> where is the white house going to be willing to give on entitlements? >> well, they've put forward a few hundred billion dollars of health savings that they're obviously willing to, you know, willing to go with. again, i think the question, though, is at this point, look, the house republicans really need to decide what do they want. what is it that is going to be their demand in february and march? and they've got to figure that out and they've got to stick to it. because what we just saw was sort of all over the place, toing and froing, they've got to decide what they want and then i think the question will be is that something the white house can live with? right now the white house has put forward a few hundred billion dollars that are helpful, not massively structural changes but they are

helpful. >> peter real quick, you wrote a fees a couple months ago, maybe longer than that, talking about the polarization in washington, and actually, almost suggesting that we have a series of these sort of fiscal cliffs and cascades, sort of forcing things to happen as opposed to voting in favor of things. given what just happened this past week, did you still argue that point? >> yeah. and since then, actually, things have just gotten worse. in the election that was just held more than half of americans, 52% of americans, live in a county that land slided by 20 percentage points or more for one candidate or the other. we are rapidly becoming two different countries, united by a single congress and we're going to have these fights for as long as that's the case. >> well, that's certainly one of the big problems. which is the stratification of the house based on party. that's not the issue in the senate. shouldn't be the issue of the presidency. we ought to be able to get along and it's very discouraging that we aren't. >> peter, we're going to leave it there. we thank you very much for your

perspective this morning. great to see you. >> thanks for having me. >> all right. if you have any comments or questions about anything you've seen here on "squawk" this morning, e-mail us at squawk @cnbc.com. you can follow us on twitter @squawkcnbc is our handle. we'll have much more from our guest host judd gregg as we continue through this morning. take a look at the futures. you do see a little bit of a giveback. dow futures down by about 40 points. s&p futures off by just over 4. investors look like they could be taking some profits this morning, but again this is just a minor drop given yesterday's big gain. we do have two key data points on the jobs front that are coming up this morning. first up the challenger jobs report and then we get the private pay roll numbers from adp. those numbers could move markets at the open and we will have reaction to both of those numbers that are due out shortly. look past the fiscal cliff. markets ringing in the new year with a bang. so, can the bulls stay in control?

or will the bears battle back? we find out when "squawk box" continues.

take a rook at the futures everybody. right now those dow futures down by about 41 points. we have a dow component cisco that was upgraded by rbc. the price target increased to $24 there and rbc says many of the negative issues related to the company have subsided.

it also says cisco's market share has rebounded. >> a deal between the white house and congress setting the tone. he was uniquely qualified to speak because he was a governor and a senator so he actually chose to leave the state house and actually go to this other place in d.c. that we all view maybe not the senate but congress is so dysfunctional right now. we will be with us for the next two hours. we had a prelude to what i wanted to talk to you about at the top of the show. that. i was thinking about having you on. yesterday we had rendell and keating on. they were so reasonable. on the same debt commission. i just wonder if we could replace the senate with a bunch of governors, number one, i think we'd get a lot more done. because governors know how to do things. do they not? >> well, yeah, when you're governor for every action there's a reaction. >> the president was never a governor. can we send him back to be a governor for four years and then come back to be president?

>> that would have been extremely useful. >> it would have been extremely useful. and then you put him together with the senate and then the house, and here's where we are right now. >> the problem is, we've got so many house members that come over to the senate that the senate is now functioning like the house. >> but then i saw it's messy, judd. and it's dysfunctional. but it got done. >> in this country we just nailed it. we've got split in the population. two diametrically opposed viewpoints about how to go forward as a country. how do you expect -- how do we come together when we're $180 degrees apart, split down the middle? it's difficult. >> we're up to 180 million plus people -- >> which each have a vote. >> we have a fundamental shift in this country which is at the core of all the issues, i think. in the post world war ii period, the baby boom generation, largest generation in history,

productive engine for this country. and it was a huge productive engine. now that entire generation, which increases our number of retirees to 35 million to 70 million is moving into the wagon rather than pulling the wagon. and the wagon wasn't designed for them. and the folks who are pulling the wagon can't afford to pull it. so this fundamental shift is affecting everything. we're in a position where as a nation we do not have the resources we had in the 60s and the '70s and the '80s and at '90s of people to produce the wealth necessary to support the retired. so we're going to have to adjust. we're going to have to adjust fundamentally this entitlement society in a way that doesn't draconianally affect the folks that are tired but gives them time to adjust and be able to live well in retirement. supportable by the people who are working. >> the process is messy. we just got step one done but we did get it done and no one is dissatisfied, obviously. my next question was have things

changed with filibuster, with harry reid, with boehner, are the individual people that are causing the problem, or has procedures changed so there's no longer reagan, o'neill, tip o'neill? we can't do that kind of stuff anymore? >> three things have happened. first is this issue of the fact that we're dealing with much more difficult and harder to solve problem which is we simply can't afford the government we have. that's just the way it is. to change that in a society where people vote i have an ax up that says in a political society where you elect your le leadership when you have a massive demographic shift and an entitlement benefit strukt your, what do you get? unsustainable debt because nobody wants to make the duff decisions. >> you think -- [ inaudible ] >> no, not at all. i think they're well -- i actually think we're on the cusp of an explosion of economic well-being in this nation and growth if we can get our government under control. if we can straighten out our fiscal house. what peter orszag was referring

to is essentially how you do that. a comprehensive agreement that adjusts the entitlements. it doesn't have to be done tomorrow. that would be draconian and counterproductive. it has to be in place where you have a five, ten year lead time. >> in a democracy we don't tend to act until there's a gun at our head because of this idea that you were just talking about, these are unpopular decisions. >> very unpopular. but the difference today is that we've gone through all these exercises in getting to a conclusion, none of which have reached a conclusion, but all which have moved the ball further down the road, and winston churchill said so well about the american political system. he said america will try all the wrong things and then it will do the right thing. we're just going through checking off the wrong things right now. but we're getting towards the right thing. >> do it before the gun -- >> we were talking in the 6:00 hour, have things fuddly changed in washington? meaning we talk about this polarization with the players. it's the players, it's the people, are people actually using the filibuster and other things that they didn't use before? what -- how do you, what do you see?

>> two big changes in washington. first is stratification of the house, by political districts. so that -- >> that's a function of the people or is that a function of -- >> jerry manlderring? >> that's a function of legislators wanting to be re-elected. and so they go to their state legislator where they got friends and get their district protected. so you've got 60% -- 65% -- >> you don't think that happened 20, 30, 40 years ago? >> it happened before. but it's never gotten to this point where it so dominates the house. the house is 60%, 65% now stratified so it's actually impossible for a member from those districts to cross the aisle? why? because the one thing the base woengs tolerate in the district that they come from is compromise. so by governing they lose their seat. so they have to have political cover from either the president or people like boehner who let them cross the aisle. the second big change, and the senate which you referred to earlier is in flux. it's changing. it's adjusting. it's becoming more like the house which is unfortunate.

>> why is that happen? they don't want to be forced on the floor to vote on amendments the way we used to vote -- >> and they're not protected in the same way? >> no. there's no protections. it used to be when a bill came to the floor of the senate, anybody could throw any amendment at it they wanted on any subject and you had to vote it or you had to retire the person out until they pulled the amendment. i used to manage a bill called justice and that was appropriation bill when i come to the floor i knew that paul wellstone was going to show up with ten amendments i hated. but i had to take them. i had to listen to the debate, then we have to vote them down. they were tough votes because paul had creative ideas on the left to say the least. they don't do that anymore. because the majority party in the senate don't want to take the vote. so they fill the tree. >> filling the tree? >> and they make it impossible to bring up an amendment. and the filibuster fight isn't about stopping the legislation, it's about retaining the right

of the minority to throw amendments at any bill -- >> is this democracy at work? that's the discussion, right? is this democracy at work? >> i'm concerned that our democracy is starting not to work. >> look around the rest of the world. they got new governments every couple of years. they have six different, you know, six different parties, ridiculous coalitions between the far left, they get nothing done. they're out in you know, eight months. they're voting again for another -- >> you don't want under no circumstances do you want us to go to a multiparty system. you know you hear all these people say well i'm an independent, and therefore 50i78 not with either party. that's a problem. becaused ways our system works, reaches consensus is the first step the party system where you got two parties and they're very broad umbrellas and people gather and start to reach consensus. and that works its way up until you get candidates from those parties, and then those candidates either get elected or don't. >> -- already almost two parties and like mcconnell now is probably going to be assaulted

from the right. >> he'll be whatever -- >> -- didn't. >> and that's the right of the electorate to make that decision. but, the simple fact is that if you throw three or four parties in the system you're never going to get consensus on any of them. to get back to your problem -- >> we're going to get back to it. we have time. we just don't have time -- >> we have you for two hours. >> we just don't have time right now. we love commercials. we love money, money, money. >> coming up we are focused on jobs this morning. coming up tomorrow morning. the challenger jobs report is just a few minutes away. and we have the adp report coming up in the next hour to give us a little bit of a hint of what to expect. also later it became a hot button issue last year. bold predictions on the financial sector and tell you if it will repeat its bullish performance from 2012. also tomorrow on "squawk box" we have a big jobs friday lineup including our guest host arthur

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coming up next, breaking news on the jobs front from challenger, gray and christmas. still to come, howard dean on the fiscal cliff vote. and the next battle in washington, america's debt ceiling. plus, jobs in focus. payroll data from adp. it's a jobs friday primer, and it's only on "squawk box." t ins. because what you don't know can hurt you. what if you didn't know that boxes by the curb... make you a target for thieves? or that dog bites account for a third of all home liability claims? what if you didn't know that one in seven drivers is uninsured? and that grease fires have to be smothered? the more you know, the better you can plan for whats ahead. get smarter about your insurance. ♪ we are farmers bum - pa - dum, bum - bum - bum - bum ♪ ♪ [ indistinct shouting ]

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the challenger jobs report is out. john challenger, ceo of challenger, gray&christmas joins us with the results. when it was all said and done as far as layoffs, it was, i would call it the best year since 1997. the fewest layoffs? >> yeah, very strong numbers coming out of the downsizing. just 32,000 this month and the lowest we've seen in over 13 years. so, what it suggested, and it went along with, in fact, the labor markets, job creation was strong. averaging over 157,000 in the last 11 months. downsizing conversely was very weak. >> that -- that's not what we saw as we got into the middle, and latter part of the year, was

it, john? there was some concern. so things really did pick up in the last quarter. >> well, you're right. no question the downsizing was heavier for the last three months. so it seemed like the labor market, which was relatively strong for the first six months, plus, of the year started to slow down. we have seen the layoff increasing. but it seemed to fall back this december, kind of averting to a pattern we used to see, which is that layoffs for the last couple weeks of december, when the holiday season was upon us, really slowed down. now sometimes they'll get deferred into january, but over the last several years, because the pressure to cut jobs, to keep costs down were so great, companies just kept piling their layoffs into december, even into the holiday period. >> all right. so if you were to segment out things for us, what were the highlights of the different segments you follow? >> well, computer industry led the way. 46,000 for the year, actually.

second came transportation, which saw over 42,000 cuts. one of the big surprises was the government, which had been over the last few years far and away the heaviest sector cutting jobs, didn't seem to do much of that in 2012. now we don't expect that to continue with the fiscal cliff talks, and the spending cuts looming. inevitably we're going to see, especially at the federal level, job cuts pick up 2013. >> all right, john, we'll keep it short. thank you. we've got, i can't believe it, tomorrow's jobs friday already. anyway, thanks, john, we appreciate it. at 8:15 eastern we get adp, mark zandi is going to join us via the "squawk" newsline. >> the global markets started 2013 on a bullish note. the dow rising more than 300 points yesterday. its best point gain in more than a year. the s&p 500 and nasdaq posting their best sessions in more than a year. the s&p closing at 3 1/2 month high.

i didn't realize that. just three points away from ending the day at a five-year high. stocks in europe coming off some of their strongest gains in 18 months yesterday. also in early trading this morning, you can see what's going on there. take a look. we do have some red arrows. dow looks like it will open down about 37 points. nasdaq will be off about 5, and the s&p 500 will be off around three points. >> the fiscal cliff may have been avoided. but that does not mean that the nation's fiscal problems have disappeared. howard dean is a former vermont governor and former democratic national committee chairman. he joins us right now. by the way, he's also a cnbc contributor. judd gregg, the former senator and the former governor from the state of new hampshire is here for the remainder of the show, as well. and governor dean, welcome. it's great to see you this morning. >> thank you. and judd, we wish you were up here. it's minus 3 today outside the studio. >> perfect vermont weather. >> perfect. >> -- new hampshire, right? >> that's right. >> you know, howard, we were talking earlier, you were somebody who was saying before that the democrats very best deal they could get would be if

we actually went over the cliff. so what do you think about the deal that we got? >> well, i think the problem is that we're $4 trillion short of where we need to be. and the cliff gave us a $4 trillion -- about a $7.3 trillion reduction of the deficit over a ten-year period, what they did was they guaranteed -- this is where i have my biggest disagreement with the bill. they guaranteed the current tax rates for people under $400,000 a year. and made them permanent. so i don't know where you're going to go get the money for reducing the deficit. i don't think you can cut additional $4 trillion out of the federal budget. there were some good things in the bill. the biggest positive thing i think is the permanent fix of the alternative minimum tax. that's been kicked down the road for years. but on the other hand, just to counter that because they couldn't get it right, they had a one-year fix for the doctors, and that's, of course, going to put that big problem right back on the table for the next time around. so all in all, they really did just do what we all thought they were going to do, kick the whole thing down the road for a couple

of months. now we're going to get it all wrapped into the debt ceiling. now this was not a real tragedy. the fiscal cliff was not the big deal everybody made it to be. the debt ceiling is. that really could send the markets into trouble, and so forth and so on. so, we basically just moved this whole thing down the road two months. >> you think it gets uglier from here? we talked to bob corker yesterday and he thinks that this next battle over the next couple of months, because the republicans didn't get any spending cuts this time around, is going to get quite a bit uglier. >> there are some spending cuts. that's another thing they did right. if they're going to postpone the spending cuts, which they did, at least they only postponed them and didn't make -- didn't get rid of them as they did the tax increases. so, yeah, i think it's going to get really ugly because the debt ceiling is a real fiscal cliff. that is -- if you go over that, then you attack the credit rating of the united states in a serious way. so that, here we had some maneuvering if they let the bill go for awhile and they hadn't gone over the cliff it wouldn't have made much difference. the one in february is going to make a lot of difference.

>> i'm just glad your party finally, and you, finally realized how really effective and how positive those bush tax cuts were for 98% of the country, and finally you've done the right thing and you've made them permanent. and i don't know whether you -- i don't know whether you influenced your party to finally embrace those to the extent that you have. and guantanamo, and a lot of the interrogation techniques and the drones and all that stuff. that was a pretty good presidency in hindsight i guess, wasn't it? >> ah, going to be a hell of a lot more hindsight than we got now. the truth of the matter was, that that was political cowardice. on the part of both the democrats and the republicans. everybody's going to be terrified of reagan taxes on middle-class americans. this is something joe and i, oddly enough, agree on. >> i'm kind of needling you on that, howard. you're right. how -- that base is gone now? suddenly that's gone. we'll never now -- that's off the table now forever? >> yeah. >> that's really scary. >> it's a big mistake. because you can't get enough money out of rich people in order to balance the budget.

>> as much as you'd like to. as much as you and your friends would like to, you can't. >> a lot of people wish that were true. i think this is a big mistake. you cannot deal with the deficit -- look, one thing i think all we all agree on is the deficit does matter. >> yeah. >> unlike what dick cheney said or whatever it was, deficits don't matter. deficits have always mattered. and they matter whether they're under democratic or republican administration. they matter. and we're going to deal with it. >> but you may have agreements on that, how order, but i heard an interview this morning with nancy pelosi, on npr, and she said out this idea that if you're going to deal with these things, you do it by making sure we're looking at things like defense to cuts and things and that you're looking to rein -- she used some language, look at making sure that every federal dollar spent is worthwhile. which to me is kind of code for saying we're going to be looking at making sure we get waste out of government spending in terms of fraud and things like that. is there enough money by getting rid of the fraud to actually deal with the deficit? >> there's not enough money by

getting rid of the fraud. that's, you know, the current thing that everybody has been saying for years. oh, we can balance the budget. how do you do that? waste, fraud and abuse. that's nonsense. there is enough money, spending money that we can take out. the biggest thing that nobody's really talking about is, which astonishes me, is to fix medicare you do not have to cut benefits. what you do have to do is pay by the patient instead of by the procedure. if you only did that you'd have control over the medical budget. the medicare budget. which is the single largest item that's leading us into fiscal disaster. if you can fix that you don't have to cut benefits. >> howard you must have been crossing over into new hampshire and drinking new hampshire water. you said a number of things which make a lot of sense this morning. >> i always have, judd. you've just been drinking too much new hampshire maple syrup which we know is really secretly motor oil. >> oh. >> at least it doesn't come from quebec. >> oh. >> and it was stolen out of a warehouse. >> listen, the point is that this is all about health care.

i mean the only way you're going to get the deficits under control is to address the issue of health care. you can have all -- you know, i don't support the tax proposals but i do support your point, that this is a health care debate. and we're really not having a very good health care debate right now. because unless you change the way we reimburse health care, and there's a lot of great work being done up at dartmouth by both vermont and new hampshire both, on this issue of getting reimbursed and tied to value and outcomes versus repetition and utilization, you're not going to fix this. so i was interested in your saying doctor payment is the way to -- patient payment is the way to do this. are you talking about empowering the patient along the lines of, for example, premium support? >> no. that simply transfers -- that's why paul ryan's plan in my view was such a disaster. what he did was transfer the risk of a system which is out of control spendingwise from the government to the patient. that accomplishes nothing except for impoverishing patients. what you need to do is fundamentally change the payment system to essentially what would

have been called managed care. now it's not going to be exactly the same as managed care for a variety of reasons, we don't have time to go into this morning. but, basically you need to pay doctor by the number of patients they see, not by the number of visits, not by how many times they get tubes shofred into various places. but by the number of patients they take care of. once you start doing that, and you've got to pay the whole system, not just doctors that way, it's basically what i'm suggesting is kaiser of the cleveland clinic. that's the model. >> i wish we had more time to dig into this, because that's a fascinating idea. and with your background as a doctor, too, i'd love to hear more from you on this. maybe we can pair you two up again sometime soon dig a little deeper. you two know numbers, you know exactly how to dig through these things, and like i said, i wish we had more time now. but if we can, if you'll indulge us, we can dig a little deeper into this conversation that would be great. >> sure. >> thanks a lot. >> howard, thanks a lot. we appreciate it. >> see you, governor.

shares coming under pressure this morning. the company announcing a phase three trial of an als trial failed to reach its end point. down almost 7%. disappointing. not just for biogen idec but als, other than just treating some of the symptoms, not much progress has been made to date on in that horrific disease. coming up, financials were 2012. should you be adding names back into your portfolio? we're going to try to answer that question when we return. ♪

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available with advanced all-wheel drive. [ engine revving ] it's bringing the future forward. take a look at the futures. dow futures down by 38 points. s&p off by 3.5. this comes after some big gains yesterday when the dow was up by over 300 points. blockfield asset management is acquiring stock warrants to buy shares of general growth properties. bill ackman's persian square is selling those warrants which carry the right to acquire about 18.4 million shares of the mall developer. brookfield, which owns more than 40% of general growth already is

offering gdp management the right to acquire those warrants for the same price it paid within 30 days. as part of the deal, pershing square has agreed not to acquire shares of general growth that would cause its stake to exside 9.9%. ackman had been pushing for a share of the company. will low interest rates and tough regulations put pressure on the big bauns or will they power through in 2013? joining us now with her take on all of this, morgan stanley bank analyst betsy, great to see you this morning. >> thank you. >> so what are you thinking? are you buying financials even though we've had this nice little run last year? >> we had a nice run, definitely. but we are still overweight, large cap banks. we are overweight large cap banks for three reasons. one, we think the consumer is pretty close to being done deleveraged. secondly we do expect that with the fiscal cliff largely behind us, we have more certainty on

tax policy and that's likely to spur more corporate investment as we go through the year. >> even with all the conversation we've been having, even for the past two days? i know we've done past the cliff. but -- and we didn't jump, you know, we didn't jump over it. but here we are. and it feels like there's going to be a lot more negotiations to come. >> absolutely. you're right. but, you know, a couple of weeks ago we didn't know what tax rate to put in our irr calculations. now we have a much better understanding. so it change from here for corporate? absolutely. but, we know more than we did two days ago with certainty. and i think that helps investment spend decisions that companies are going to be making. and as you know, we really came pretty close to a standstill in new investment as we ground through the end of 4q. so looking forward we do think we're going to have better investments. you might not see it in first quarter but as you go through the year, second, third, fourth quarter, we think we'll get it. >> what's your sense in terms of the regulatory environment and the pieces of laws and provisions of dodd-frank for

example that haven't yet been implemented but i imagine will probably hit sometime this year in 2013? >> you're absolutely right. and that's the third reason that we're actually overweight large cap banks. regulatory certainty should be largely known, as we go through the year. the top three things, volcker, derivative legislation, and then the third one is the resolution authority and how your debt structure needs to be set up. >> give us some names that you like. >> city, j.p., capital one. those are our top three picks in large cap banks. >> because? >> because mainly you benefit from the three things i mentioned, in particular consumer. consumer willingness to borrow. that's obviously going to be helping names like city, j.p. and capital one large credit card businesses. two, we think that in citi in particular we'll have more restructuring announcements. we know they've put out their rotc eagle 10% we've got that baked in for our models that's part of the reason for them. and then on j.p. we think they're taking share in capital markets.

>> right. >> just essentially the growth. >> okay. betsy real quick, is there one that you don't like? >> is there one i don't like? >> i would say in our group we have overweights, underweights and equal weights. and the underweights that we have, pretty much the trust banks and it's essentially i function of the rate outlook at the short end of the curve not being positive for those names. i would tell you that, you know, we still have a little bit of upside to our price targets there but not much. >> betsy, thank you so much this morning. appreciate it very much. >> thanks. >> when we come back, he voted against the fiscal cliff deal. we have senator richard shelby. he will talk to us about why he voted against it. and what comes next when it comes to fixing america's miss cal issues. that interview just ahead. up in next kwk kwk, don't start your day without knowing the names that will make you money. joe has your list of stocks to watch right after the break. at a dry cleaner, we replaced people with a machine.

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we needed to cue it in the middle. we were -- >> okay, i like -- >> right, i don't know. they cued it to the wrong part.

>> got it. >> downton abbey. we'll talk about that at the end. let's take a look at some stocks to watch. biogen idec down sharply as the als drug failed to meet an end point. hormel is buying the skippy peanut butter. don't understand that one. peanut butter and spam? peanut butter and chilly? i don't know. we'll see. anyway $700 million. cisco upgraded to outperform from sector perform by rbc. saying execution is improving. family dollar reported quarterly profit of 69 cents a share, that was estimates and it's down $3. revenues were in line, they called the holiday season challenging. costco reported a 9% increase in december. above the 6.5% increase and analysts have been forecasting and the limited reported december same-store sales increased 3%, below expectations, 4.5%.

downton abbey season three is going to start. it's going to be -- >> the three loser men are addicted. and becky has no idea. but i -- >> andrew says it's like as the world turns. >> only it's so good. >> if it's pathetic that they know that part of masterpiece theater. so it has this high brow sort of pbs thing going on. and then you realize -- >> you see the "usa today," it is a global phenomenon. it is a global worldwide phenomenon. >> i'm interested. i'd like to -- i just don't have time. >> judd says, her interplay with maggie smith is going to be phenomenal. >> i like it because they're moving -- they're reflecting what a class society was which is where the president wants to move us. >> yeah. >> and the same -- plug for nbc for a second. the fellow who does this is going to do a gilded age gatsbiesque thing. >> a 19th century business

carnegie type stuff. >> i like it. >> so that's next on the docket here on the u.s. >> didn't they already do that with sabrina? >> shhh. >> but all the things that -- anything can be like the plot lines, they've all been done before. >> i don't know how -- >> you watch it when you want. >> i know. >> on demand. you watch it when you want either with a dvd or on demand. >> maybe as the kids get a little older then i can watch more tv. >> i watched it on an airplane. >> both your kids are -- >> but now i also show walking dead with my kids and downton abbey with -- you got to get with it. >> we're going to continue not only this conversation, but much more with our guest host today, senator judd gregg. plus when we return we have senator richard shelby. he is ranking member of the banking committee. he'll join us to give us his solution to the fiscal abyss that is coming up at the top of the hour. and believe me, this has become a much more complicated

negotiation from here. also, at 8:15 eastern time another piece of the jobs puzzle for the markets. the adp jobs report will be released. coming up at 8:15. the numbers and the reaction from chief economist mark zandi. he's in new zealand. but we have him on the "squawk" newsline. ♪ [ male announcer ] how could a luminous protein in jellyfish, impact life expectancy in the u.s., real estate in hong kong, and the optics industry in germany? at t. rowe price, we understand the connections of a complex, global economy. it's just one reason over 75% of our mutual funds beat their 10-year lipper average. t. rowe price. invest with confidence. request a prospectus or summary prospectus with investment information, risks, fees and expenses to read and consider carefully before investing.

washington's fiscal cliff deal taking some tax uncertainty off the table and the markets took notice. >> but members of congress were far less enthusiastic about a deal that postpones our debt problems for two months. >> it was like eating a you know what sandwich to vote for us. to me it was the rite of passage. >> we'll talk to republican senator richard shelby. he voted against this deal. plus, an early read on tomorrow's jobs report. >> can't believe we drove around all day and there's not a single job in this town. there's nothing. nada. zip. >> yeah. unless you want to work 40 hours a week. >> we get adp private payrolls at 8:15 a.m. eastern.

third hour of "squawk box" starts right now. ♪ welcome back to "squawk box" here on cnbc. first in business worldwide i'm joe kernen along with becky quick and andrew ross sorkin. our guest host this morning, judd gregg, former govern ever and senator from new hampshire. currently an international adviser at goldman sachs and more importantly, prestigious, cnbc contributor. still to come this hour, republican senator richard shelby. he voted against the fiscal cliff deal. we're going to get his take on the debt compromise. i think he voted against t.a.r.p. i think he votes -- he's not afraid. he votes against a lot of stuff. the budget battle still to come. we'll talk to him at 8:15 eastern. we're going to get adp's report on private pay rolls. at 8:30 the closely watched weekly jobless claims number.

at 8:40 debt and taxes with joe lockhart, former press secretary for president clinton. first, though, andrew has your morning headlines. >> okay. our top story the global markets, stocks starting 2013 on a very bullish note. dow rising more than 300 points yesterday. in its best point gain in more than a year. the s&p 500 and nasdaq posting their best sessions in more than a year as well. the s&p ending the day at a 3.5 month high just three points away from closing at a five-year high. take a look at u.s. equity futures this morning. we do have red arrows across the board. dow off 38 points, nasdaq off about 7.5 points and the s&p 500 off close to 4 points. let's flip around to europe, see what's going on there. things down marginally. but, can't say it's an awful day. and the fiscal cliff deal was obviously a very big part of yesterday's market story. but now it's officially lull. the white house saying that president obama has signed the legislation passed by congress. >> by auto pen. >> by auto pen, is that how they

do it? >> no, they don't usually. >> but he did it by auto pen? >> that's the word. >> i want to talk to you about that in a second. the new congress will be sworn in today at noon eastern time. the 113th congress takes its oath with 56 new democrats and 38 new republicans. in the house, john boehner, is expected to be re-elected as the speaker today. >> there is still plenty of drama unfolding on capitol hill, despite that deal to avoid the fiscal cliff. that is a deal our next guest voted against. joining us is senator richard shelby, ranking member of the banking committee, and one of just eight senators who voted no on this deal. senator, why did you vote no? >> well, for obvious reasons. one, it raised a lot of taxes, over $600 billion. and a lot of other things that we're finding out was in that deal. secondly, it didn't solve anything. we walk away from crisis to crisis. we're going to go from this crisis yesterday, two days ago, to another one in less than, what, eight weeks?

>> so, we are right back at the starting point for some of these negotiations. we spoke with senator corker yesterday who said he thinks this negotiation will be much uglier. you agree with that? >> i believe it's going to be tougher. i hope so. and i hope that the president will get involved. he's in hawaii now. i know he's on a vacation. but he wasn't involved before. i hope he will be involved in this. >> he already said he will not negotiate on the debt ceiling. >> well, i heard that before. also somebody said he drew the line in the sand, but that's not concrete, remember that. >> so, what would you like to see happen with this -- >> what i would like to see, becky, i'd like to see some real efforts to do something about entitlement. reform entitlement. we could do this. the president's got some capital but he is using it up very fast. he could get involved with us. a lot of us are trying to save social security, make medicare more efficient. do something about health care.

think of all these things we could do. not counting spending. we're hemorrhaging, we're committing financial suicide. everybody knows it. but they're not doing anything about it. >> but, senator, we know that when you say things like we'd like to reform entitlement, we'd like to make sure that these programs are around and that they are stronger, you can get everybody on it. i heard an interview this morning with nancy pelosi, she said it's the same thing it's the details that get really complicated. >> absolutely. >> what specifically would you like to see done? that's where you're going to run into serious problems? >> first of all we need to run the age up. we live longer and we could do this and it would not hurt anybody. people could plan on it. secondly -- >> how -- how quickly would you run that age up and how high? >> well, i would keep running it up to at least 70 years of age. >> for social security? >> absolutely. but i would do it in a measured way. where people could plan for it. because we are living a heck of a lot longer. secondly, i would change that -- the way you compute the cost of

living. it makes all the sense in the world. >> chain cpi? >> the president seemed to be on board on that. but we've got to get him to the table. >> the president was on board. he offered up chain cpi ands ajudd gregg pointed out earlier it was the house republicans who walked away from that deal. >> i don't think they just walked away from that particular deal. they would probably be very interested. and i don't believe you can say the republicans walked away from a real deal, they walked away from a bad deal, and they bought in to a bad deal. >> so, richard, first -- >> hey, judd. >> great to talk to you. >> you're one of the players in the senate and you have a huge influence there. how do you see this coming down, then, as we head into the two months up until the fiscal cliff comes back and you've got the debt ceiling and you've got the continuing resolution? how do you see this, you know, you're a master of the process in the senate. where do you think the capacity of the senate, and the house, and the president to come together, and what do you see as the mechanism that causes that to happen? >> well, that's an overriding

question. and you've been there yourself, chairman of our budget committee, and the appropriator, too. i don't know what's going to happen. but i do believe if the president gets involved, and uses some capital with a democrat in the senate, with republicans in the house, and us, too, that we can do something. whether we get it -- probably not but that's what we really want. but we've got to do something about spending. we're still hemorrhaging. and if we just give him the debt limit we just say oh, you can have it, go there, and get nothing out of it, we're losing. we're losing big. >> if you -- if you get the president in the room, let's say, what would you want from the white house in the range of a number on the spending side that would justify moving forward to take all these other issues off the table? or do you have a sense of that? >> i have some sense of it. and my sense is, is quit playing around the margins, but get to the real numbers.

you've seen when you were chairman of the budget committee, all these growth and spending. growth and taxes, too, now. but not curtailing spending at all. we've got to do both. we haven't done it yet. and it's going to take the president. he might not get involved. politics is on the other side of the ledger, and i guess his information is on the other side of the ledger. but, he is the president of the united states. he ought to be involved. but he's not yet. >> senator, i wanted to talk briefly about wall street and banking. you do run the banking committee, and what we should be expecting in 2013 coming out of your committee related to so many of the pieces of dodd-frank which, for example, haven't been implemented. and other pieces that are still up in the air, i think, in terms of what may ultimately happen to the consumer protection bureau and some of the moves that you may be pushing for. >> well, come noon today, i'll be moving over into ranking republican on the appropriations committee. i will still be the senior member of the banking committee,

but senator cray poe is slated to take my slot as the top republican on the banking committee. so that's who you ought to talk to. i will be involved. but he will be involved in setting the agenda. >> well, what's going to happen on the appropriations committee? you going to get any appropriations bills on the floor one by one or are we going to continue with these omnibus bills where virtually nothing can be reviewed because they come to the floor and they're unamendable? >> judd, i believe with leadership, barbara mikulski as the new chairperson of the committee, i'veworked with her for years, you have, too, i believe we're going to be involved and we're going to bring those bills to the floor. we have to do it. we've got to go back to the way we used to do business, more transparency, and work harder. work nights. work days. and we'll get something done. and we'll be a better senate. >> you expect to see a budget on the floor? unfortunately democratic leadership hasn't brought a budget to the floor in four years. >> that's an area you know a lot

about from your past experience. i'd have to see it before i believed it. >> you know, senator shelby, i feel sometimes like we're talking to politicians who are in two different worlds. when you talk to democrats about some of these things, they think that with these next negotiations they are going to see new taxes that are brought up once again. maybe a v.a.t. tax, maybe closing some loopholes to get rid of some deductions. when you talk to republicans they think that we are now going to tackle spending cuts and spending alone. what does that mean just in terms of how realistic it is to think we'll get some sort of a deal that's reached in the next two months? >> becky, that's a good observation. but we could get a stalemate. we hope we won't get that. but i think all is going to depend on how involved the president is in all of this. and is he willing to be the president of the united states, to bring leadership. you think of his legacy, but think of the people of the united states first. >> what makes you think the president's going to get involved now, richard, where basically he turned it over

to -- first he turned it over to harry reid and then over to vice president biden. i'm sure he had some direct control over biden but he wasn't actually physically in the debate, in the room. do you think that's going to happen? >> i -- i doubt it. i said he should be involved. but i doubt he's going to get involved. he's got to get in the weeds, he's got to come to the hill, he's got to be there. he can't be delegating it to somebody else. and that's what he's been doing. >> so, senator -- i mean, don't you think -- don't you think the crimson tide has had a little bit too much success and a little bit too many titles? wouldn't it be a little bit fairer to the rest of the teams out there if they would share some of these national championships? are you hoping for notre dame on monday night? >> well, i'm a crimson tide man and tuscaloosa is my home and that's my school -- >> -- i'm going to say it will be a good game. i believe alabama is going to win and be the national champion. >> so you have no problem with -- that's like the wealth kwl in this country, you don't

have any problem with the disparity between alabama and a lot of the other teams? you don't think that we should try to even the playing -- in a more fair way perhaps? >> if you look at history, things, you know, level out. it might take awhile. i hope it's going to be a few more years. >> that would be nine -- that would be your tenth one. that's too much for any -- no school needs -- no school needs that many, senator. >> well, you have to win things on the battlefield -- >> you've got to earn it, right? >> got to earn it. i hope we're going to earn it next monday night. >> we'll see. we'll -- >> thank you. >> all right. we love you, senator. but joe and i have to take the other side of that one. >> stay tuned. >> in the interest of fairness. >> roll tide. >> senator shelby, thank you very much. >> thank you, becky. >> bye. >> they have so much. coming up -- >> line backers -- >> he didn't? >> he played on the alabama -- >> under the famous coach. >> bear bryant. >> all right. yeah. >> coming up we're going to get the december jobs report.

up next an early read on private pay rolls, the adp employment report when we return. [ male announcer ] at scottrade, you won't just find us online, you'll also find us in person, with dedicated support teams at over 500 branches nationwide. so when you call or visit, you can ask for a name you know. because personal service starts with a real person. [ rodger ] at scottrade, seven dollar trades are just the start. our support teams are nearby, ready to help. it's no wonder so many investors are saying... [ all ] i'm with scottrade.

welcome back, everybody. let's take a quick check on some of the december sales reports

that have been coming up. target says the december same-store sales were flat. that is below expectations of a 0.8% increase. by the way, target also giving a current quart irearnings projection that is above wall street estimate. this is the last time you'll be getting monthly numbers from them. macy's saw 4.1% increase in same-store sales last month. that was a little better than estimates. however macy's fiscal fourth quarter earnings guidance is somewhat below the street consensus and maybe that is because of what you end up seeing with sales it brings in higher numbers but those are not as profitable sales and that could have been part of the problem. >> we've been worried a lot about what's been happening. >> at the end of the holiday season, didn't seem as strong as it did on black friday. >> a lot of lessons may not have been learned about how to approach and what other people should start. they moved all these hours earlier. >> the internet affecting it? >> we've got to do this real quick. we are just seconds away from adp employment report for december. steve liesman joins us. >> get your hand out, put it on

your head, start scratching. 215,000 total private employment growth estimated by adp. november revised up by 30,000 to 148,000. goods producing up 28. why is that? well, because manufacturing declined but construction up 39,000. maybe an effect of hurricane sandy and the rebuilding effort from their services very strong 187,000. there's the nonfarm payroll estimate of 150. and what you might see is you might see in this kay, this number of 215 is high enough that you might see some revisions. there's only less than 24 hours until just over 24 hours until the employment report comes out tomorrow. so you might see it upward revision here. it's enough to make people rethink it. and if you just look at a chart, comparing adp and the dls private sector it's been pretty good. this chain -- >> now we've got someone who knows what they're doing finally. >> there it is, guys. so you tell me. >> got some idea. >> i forget what my average is. >> i thought that the adp was

only two months ahead of -- >> well, it's been doing good on top of this. >> not since austan goolsbee took over. doing much better. >> -- averages -- >> that's who i meant. >> i meant -- zandi. goolsbee. >> that's true. so, but over the last seven -- twelve months, using the adp live data and their back data it's about 35,000 absolute difference. joining us from port douglas, australia, mark zandi. >> wow. >> chief economist. >> hello, everyone. >> how are you? >> you on vacation? >> i'm good. >> what are you doing there? >> isn't it tomorrow there? so who knows -- >> it is. it's tomorrow. i got a beat on it. i'm right off the great barrier reef so having a good time. >> what is it telling us about the job market? >> it's solid. the most surprising thing is despite all the brinkmanship over the fiscal cliff and the debate about that, businesses

didn't change their hiring patterns. they seem to slow up on their investment spending but not on their hiring. >> that's the head scratcher part of this. we have seen the decline in capital spending. capital spending and employment usually run together. a little bit of a delay. but we haven't seen it, mark. why is that? why are businesses cutting back on capital spending and not employment? >> well, good question, steve. i mean, in part, just to note that capital spending did come back in november. it wasn't straight down. you know, i think it's easier for businesses to pull back on their investment spending than on their payrolls. you know, you call up your i.t. head and say listen let's hold off on the server purchase for a couple, three months, see how this debate in washington goes. it's much harder to do that to your human resource person and slow things down. so, that's just my guess. i'm not really sure. but, all the labor market, not just adp but the payroll numbers, have held up very, very well. so no sign of any impact from

the fiscal cliff on the job market. >> let's take a look at some of the sector data. construction up 39,000. that's been on a run even before sandy it was on the increase. it's been negative for several months. tell us what's happening in construction versus manufacturing. >> well that's the really good news. i think we're just on the leading edge of a lot of construction jobs. and i think things got juiced in december by the reconstruction from sandy. but we are going to see a lot more homes built. a lot of new office towers built over the next couple, three, four years. and so i think we're going to see a lot of construction and construction related jobs. that's the most optimistic reason to be optimistic about the job market. manufacturing has been weaker but even there, i sense a turn. you know the production is picking up, exports seem to be firming. global growth seems to be better. so i expect the manufacturing job numbers to start turning up as we move into 2013. so i think everything will be moving north by midyear, by

certainly by this time next year. >> talk about business growth -- sorry, employment growth by size. small business, just 25,000. whereas large business, 87,000. and of course, small business employing the vast bulk of workers out there is even smaller than it appears. mark, is it possible we've gotten to a point, let's say, with the health care law, where you're into an economy of scale issue. that the bigger companies have the advantage in hiring employees and the smaller companies do not. but maybe because it's because of administration when it comes to regulatory burden? >> yes, i think that's in part the case, you're right. throughout the economic recovery since the job growth resumed about three years ago, the bulk of the job creation has been amid very large companies. firms that employ over 1,000 employees. and it's the small guys that employ less than 20, less than 50 employees that really are lagging behind. part of that is construction. the construction cycle is very important to small companies that they predominate in the

construction sector. and so i think in construction terms we'll see more job growth among small businesses. i also think the health care law and other regulatory issues are bothering smaller companies more. they're having a harder time nag gaving through it. there are scale economies involved with dealing with regulation. so it's easier for a big company to kind of spread that across their cost structure. for a small business that's tougher to do. >> mark, don't want to let you go without your outlook on the economy. we did 3.1% in the third quarter. but a lot of that was defense spending and inventory building. and then you have the fourth quarter here, which i've seen numbers between 1 and 2.5. where are you? >> you know our tracking is about 2.6%. >> wow. >> 2.6%. so the quarter, you know, i thought we'd be a lot weaker as you pointed out. the inventory gain in q3 was large but at least right now that's not happening. my point estimate for the quarter is closer to two so i do expect numbers to come in a

little bit weaker. all the economic data are looking better at year's end. so the economy is feeling good. you know, in a relative sense. much better than i would have thought just a few months ago. >> is the fiscal cliff deal change your outlook for 2013? >> no. you know, the deal came pretty close to what i anticipated. i'm expecting more. i do expect that we'll get some spending cuts as part of the deal to raise the debt ceiling. so i don't think the debate is over. and you know, i think we're going to still see some fair amount of brinkmanship that's going to weigh on job growth and general economic activity. but i think we're going to get a deal that most of us thought we'd get in the first place. >> you know, i think that's really important. because a lot of the smart money, and a lot of the economists that i've spoken to, and were talking to throughout this whole thing, were looking for a 1% to 1.5% fiscal drag in 2013 with the deal to come out. that's pretty much where we are. >> that's exactly right. i mean, with the deal that we

got earlier this week, that was shaved three quarters of a percentage point off 2013. just assuming we get some spending cuts as the next part of the deal we'll get 1 to 1.5%. >> we'll make that up with the uncertainty coming out of the market and with housing recovering. we should be able to make that up. we're in a much better position to handle it now, don't you think, mark? >> i think so. we've got two -- joe got 2% growth in 2012. i think we get at least that in 2013 and i think by this time next year we're off and running. i think we're in pretty good shape. >> don't want to keep you from the beach or snorkeling at the reef. watch out for the sharks. >> that's what i was going to say. >> thanks, mark. >> take care, now. >> coming up, weekly jobless claims set to hit the tape at 8:30 a.m. eastern. we're going to bring you the numbers and the market reaction. first in honor of national sleep day, here are the top five songs about sleep as rated by the national sleep foundation. >> today is national sleep day? >> it is. i got seven hours and eight minutes last night. hope to get more tonight.

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welcome back to "squawk box," everyone? just a few seconds away from the jobless claims number? rick santelli is standing by at the cme. steve liesman is here. rick, we'll send it to you for

the numbers. >> we see a 10,000 jump from a revised last week. originally 350, moved up to 362, tag on 10,000 you arrive at 372,000. the current read on initial claims. and then, if you adjust the time setting a little bit you end up with an increase on the continuing claims from 3.2 to 3.24 1/2 million. there's going to be a lot of debate on this with the holidays, and all these other seasonalities that affect the jobless claims. but indeed it is a bump up. i still don't know if it's going to give you any clues about jobs. people are still digest iing th better than expected adp. but i constantly hear on the floor they can't get a handle on it. it's been changed. they retro fitted it. will they change it again? you're supposed to look at it two months forward, two months back currently. i don't know if it gives us clues but people will cheat a little bit, not in a bad kind of illegal way. but you will see, even though

it's less than 24 hours away, most likely upward calls on tomorrow's number. they just can't help themselves. the big news, obviously, europe isn't looking as good on some of the recent data as the u.s. i'll tell you if that's the driving force or not there has been a huge welcome into 2013 and it isn't on the good side of the euro currency. boy, we went from basically trading a 133, now to trading 131, and today is a big down day. one market that actually is getting a little bit of a breath, but nothing on the scale of what the dollar and some of the other currencies are gaining on the euro, the dollar/yen. the yen has improved marginally today. but we're still on 87 handle on the dollar versus the yen. you want to pay attention to foreign exchange. we still have some other data today. the minutes we'll get later will be scrutinized, especially considering, you know, federal reserve and how it figures into

a post-cliff presealing debate. >> i'm glad you brought up the euro. dennis gartman did that earlier this morning and we didn't talk about it at the time. what do you think is happening? why has the euro turned around here? >> well, to me, i think that what the euro represents, or what the relationship between the euro and other currencies represent continues to be exaggerated by shifts in the ultimate dynamics of trying to score the economy. then you had in the big position growth that we've seen, and then you add in what japan is doing and i just think that you're really altering how the currencies are stocking up relative to each other. but i think there's very little doubt that the euro ended up with a lot more on the long side as the funding issues from europe moderated a little bit. probably pushing it to a level that was not really sustainable. >> rick, what's out there is this notion that japan is

purposefully weakening the yen, and so you get a little flight from the yen and it looks like in that flight the euro is catching more of the running money than the dollar is. i think that's one way to think about it. i also think that you don't have clarity here when it comes to the outlook for the u.s. fiscal policy. or the u.s. fed policy that doesn't really enjointer confidence in the greenback. again, i think most of it looks like relative to what's happening in the yen, than anybodying happening here in the united states. >> i agree, two comments. first of all you said because of the nation that the japanese may be intentionally weakening their currency. i don't think there's any doubt about that. i think the better thy neighbor dynamics of the '30s are going to be more intense this year than they were back then. but another point i would like to make, you know, there was some easy trades out there, viewers. you know, yesterday i commented twice about how the euro/yen started to lose its altitude about mid session yesterday.

so, there is indeed some clues. if the euro was starting to lose on the free ride against the weakening yen that really did give us some clues. and then, you know, if you would have shorted it or got long the dollar versus the euro yesterday when that yen cross started to turn, with the euro, boy you'd have made boatloads of money. i urge day traders out there, you got to have all the cross trades to really are some good clues, good signals. >> quick word about the jobless claims. labor department is saying it had to estimate claims data for nine states because of the holiday. this comes after the united states estimates the week before from 19 states. obviously government doesn't know these holidays are coming so there's no planning at all. >> they do that every year? >> every year there's some problem right around this time. but, i don't think it's -- it seems correct to think of the claims data in the 350 to call it 380 range and that can be

consistent with 150,000 of job growth, and then we can and should, at the appropriate time, start the debate over whether or not it made sense to continue unemployment benefits into another year, and the effect that that has on jobless claims. >> and not pay for it. >> and not pay for it. it seems like from maybe just a social or moral thing to do it's a nice thing to do. whether or not it ends up having an affect on the unemployment rate is something we'll need to think about. >> you think it's a moral hazard to continue -- >> absolutely. we know there's a moral hazard. we know for example and i must have said it 100 times, alan krueger chief economic adviser to the president has done the work that job search increases as unemployment benefits near an end. and we think that there's anywhere from a one quarter to a one percent impact on the unemployment rate from higher benefits. it's a good thing to do to help people who have trouble getting a job, but whether or not it keeps them on the unemployment rolls longer -- >> and dragging the economy, because there's mark zandi

saying the economy is going to go rather dramatically it appears to me and people aren't going to be out searching for a job. >> well, at that point they should be drawn in to the economy to look for work, senator. that would be the general economics. >> good intentions. >> good intentions and negative consequences. >> as we go to break, russian president vladimir putin has granted gerard depardieu russian citizenship. i don't -- >> you're kidding, right? >> no, not at all. >> he didn't want to go. >> he applied for -- >> he applied for russian citizenship and he has been granted that. >> dual citizenship? >> and he was granted on the basis of his influence in the cultural realm and his significant role in films about russian history and historical figures. he played rasputin in 2011. >> isn't the tax rate in russia 100% if he didn't like you? >> yeah. which is apparently russia's now less socialist than --

>> 50%. >> less socialist than france. so russia is a -- >> a lot of people moving from california -- >> oh, wow. >> a lot of people moving from california. >> to russia. >> you could adopt a french actor but not a french baby. >> and now -- i'm only sleeping, the beatles was left off that list. it was probably put together by a bunch of young whippersnappers that had no idea -- >> it had -- >> it had mr. sandman from the 1950s. >> why would this not be in there? the greatest song -- >> not every mind is set up exactly like yours. >> well, the -- >> my sons will tell you that twinkle twinkle little star should be on this list. that will put you to bed. >> coming up the politics of a debt deal. joe lockhart was press secretary under president clinton. we're going to ask what needs to happen for both political parties to come together and get a deal on the debt. c'mon dad!

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welcome back to "squawk box" this morning. take a look at futures. we do have red arrows. the dow looks like it would open off about 35 points. the nasdaq off a little over 5 points, the s&p 500 off 2 points. >> congress brought some breathing room with the fiscal cliff deal, but budget fights loom large on the horizon. joining us now from d.c. is joe lockhart, former white house press secretary under the

republican before george bush, bill clinton. he's also the former -- just kidding, joe, former vp -- but we know what a democrat is now i think a little bit better, and he's head of global communications. what do you make of everything that's happening as far as the cliff goes and what was said and done? i look at what the fix the debt commission said that judd gregg is part of. it's hard for me to find anyone who says this is really, even an average deal for the economy. >> yeah, well i mean i think that the biggest message of all of this is just how dysfunctional congress has become. you've got a system where compromise, making a deal, there are huge disincentives. you have very conference members of congress who reach across the aisle to try to get a deal, and the next thing you know they have a primary opponent popping up. the system is broken and we have to get to the root of that. which oddly is not really in washington. my view is it's out in the state houses. we have drawn these districts in

such a way, democrats and republicans, where ideological extremes are rewarded over people coming here who are pragmatic. i mean the good news on all of this is, you know, 80 republicans in the house stood up and we got a deal. it wasn't a great deal. it was kicking a lot of issues down the road. but we're watching, you know, we're going to see in the next six months whether that was the new rule, the new reality, or an exception and we go right over the cliff in a few months. >> joe, wouldn't you think it's safe to posit that ideological extremes are part of the what we're dealing with in the country as a whole and the people in the country? >> you know, i don't think so. i think if you look first off, most people in the country tune in to politics very, very rarely, and only at these moments of crisis or created crisis. i think there's more in the middle than people think. but those who are most passionate about it, both on the left and the right, seem to get,

you know, the lion's share of attention and are driving the process. you know, what we have to do is create incentives for people in the middle. democrats and republicans, to, you know, do sensible things. even if it's against the, you know, the dogma of their party and still get re-elected because ultimately, -- >> what common sense are you talking about? >> i'm talking about not having a primary opponent. not feeling like you're going to lose your job if you do something that works with the party opposite. and it's not that long ago that we used to do this. you know, the idea that the president would get half of his party or would vote with the republicans, and you'd have something in the '90s, this is how we got trade deals done. we got a bunch of trade deals done by getting a few democrats and a lot of republicans, because it was, president clinton thought it was the right thing to do for the economy and the country. >> what's the difference, joe? sorry, that's the elephant in the room. what caused bill clinton to

become more conciliatory and more centrist? he won the election. >> yeah. >> what caused him to -- he didn't just immediately, you know, stay on the campaign trail, line himself up with people standing behind him and basica the opposing party every chance he gets in acerbic tones. he didn't do that? >> we actually did a lot of that i think. republicans will remind you. in fact, i did it myself. the reality is, here's what's changed. and i don't think it's that complicated. which is, you know, even as recently as the '90s, you could go back to your district saying i worked with the president because it was the right thing for the country, and still get re-elected. right now we've drawn these districts in such a way that they are so conservative or so liberal i think the problem is more now on the republican side but that may just be a cyclical thing. good members of congress, who had the best interests of the country at heart they go home and can't get re-elected. >> that's only about half the problem according to nate silver of "the new york times."

he ran a bunch of numbers on this and gerrymandering is part of it, but i think it was half or even less than that was because of the redistricting. he thinks there's really just a change in the way that the population is feeling about this. >> well, you know, again, i do think we have -- there are bigger and broader issues where, again, even in the '90s, we didn't have, you know, the very partisan media where you could go to an internet site that you agreed with, or a cable channel that you agreed with. but you know, those are things that, as, you know, as governments we can't really attack. you're not going to be able to tell people you have to be more moderate. you have to be more fair. what we can attack, though, is we can go to the state houses and a lot of solutions don't come from washington. they come from governors, and i think we really do need to look at the way we're putting these districts together. i think because that's something we can do. >> joe, you know, i agree with both points. don't you really think if hillary clinton had been president she would have been in that room negotiating these deal? i mean the simple fact is you have to have leadership.

you have to have the president being willing to risk his political capital or her political capital to get it done. and in this instance the president kept turning it over to somebody else, turning it over to somebody else, and as a result, you had drift rather than conclusion. and it takes the president in the room to get conclusion. >> well, it's been awhile since i stood behind the podium. but i do remember the lesson of not answering hypotheticals like that. i will say, i'm slightly amused that the -- it does seem to come from republicans, and this wasn't my experience in the '90s, was if just with clinton era, if clinton was there it would be better. >> what a wonderful statement. >> but i remember -- i remember -- >> i don't remember talking like this in the '90s. but boy what a statesman that gentleman was, bill clinton. >> boy the first lady. she's just the greatest. >> a lot of republicans -- >> i've always loved her. >> i think the point is, and listen, i -- >> i just never knew until now. >> i don't agree with the premise that this was a failure of presidential leadership.

i don't. it is very hard to negotiate with people who won't negotiate. and i think that's the problem. >> but what kind of deal -- this deal, your guy negotiated? >> no, no, no. >> the republicans didn't negotiate? you got all tax increases and no spending cuts! you call that no negotiating? >> i think that we got to the point where we almost went off the cliff, because there was nothing. there was no compromise that the house republicans -- we didn't. and that is small piece of good news. we're going to have to face this again. >> although the president has said he won't negotiate when it comes to the debt ceiling. >> well, listen, i think the debt ceiling is something that i think hopefully we've learned our lesson from last year on that. that that's not a political football. >> you're in washington. do you think we've learned it? do you think we're going to be having this conversation at 11:59, you know, and 59 seconds in a month or two, when tim geithner says we're going to go over? >> you know, i would -- i would predict that whatever we do, it will be at 11:59.

and we'll both -- everyone will act responsibly? probably not. and again, the interesting thing is, if you're a political scientist this is going to -- this is a really interesting time to watch a political party. the republicans have got to figure out, you know, whether they want to get the best deal they can, or whether they want to try to, you know, obstruct the process. you know, we'll see what happens. i wouldn't -- >> you're killing me, though. because i'm thinking about how we all just blindly accept that this got turned in to a tax debate. with all of our problems with entitlement, and all those unfunded liabilities, and the deficit issues and all we have the one thing that the white house focused everybody's attention on is the top 2% and what their tax rate would be. and because you don't see any compromise from republicans on just that issue, they're the party that caused all the problems. when the white house didn't focus anything on all these huge issues that we've got. i mean, don't you -- can you hear yourself? you just swallowed hook, line and sinker that it was all about

just raising taxes on the rich? >> well, listen, that's -- listen a lot of the campaign was about that and that's what we were facing, you know, on new year's eve. if there is any apartment milk here it's the idea that we've brought some time that if, you know, very often you got to narrow the issues to get a compromise. in this situation, we're going to have to broaden them to get a compromise. because there's very -- there was no give, you know, among republicans. until the end. on taxes. >> finally it's over with the taxes. you got it. >> yeah. >> you're the top 2%. now, is he willing to come to the table and really try and solve some of our problems? >> well, listen, i think the president was out there and was pretty strong on looking at entitlements and it makes some democrats nervous and he'll take some heat over it. but i think you know, the one thing that we used to always feel at the white house, with president clinton, was if both sides aren't a little bit mad at you, you're doing something wrong. so we'll see mad at you, you ar doing something wrong. >> the huff post said take your medicine. the left doesn't seem that mad, nobody on the right.

you guys won. just take a bow. take a victory lap. just be happy. >> will do. >> joe, thank you. appreciate it. >> thanks. when we come back, we will give you your morning fix. can't start your trading day without jim cramer's stocks to watch. we will head to the new york stock e stock exchange right after this. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 that kind of focus... tdd#: 1-800-345-2550 that's what i have when i trade. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 and the streetsmart edge trading platform from charles schwab... tdd#: 1-800-345-2550 ...helps me keep an eye on what's really important to me. tdd#: 1-800-345-2550 it's packed with tools that help me work my strategies, tdd#: 1-800-345-2550 spot patterns and find opportunities more easily. tdd#: 1-800-345-2550 then, when i'm ready... act decisively. tdd#: 1-800-345-2550 i can even access it from the cloud and trade on any computer. tdd#: 1-800-345-2550 with the exact same tools, the exact same way. tdd#: 1-800-345-2550 and the reality is, with schwab mobile, tdd#: 1-800-345-2550 i can focus on trading anyplace, anytime... tdd#: 1-800-345-2550

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welcome back to "squawk box," down to the new york stock exchange, jim cramer joins us this morning. jim? >> how are you? >> i'm good. i was reading through some of your tweets. you like starbucks this morning. i don't know why that would be. you weren't on another program with starbucks? >> joe powered by starbucks and reminds me they have got this dollar reusable cup. starbucks is doing many things right, i think, ever since they had that analyst meeting they set things straight about china doing well and europe coming back t has been an up stock it remains an up stock. i don't want people to leave it. >> competing against "squawk box," jim, is that what i -- basically? just trying to think i can go on somewhere at 9:00? >> it was worrisome. joe, you will be proud of me, i mostly talked about how governor christie stood up to the state of new jersey. >> he did. he did indeed do that lately, he says -- he has always said what's on his mind about 80%

approval rating, i think? >> i think one of the highest i have seen of any public official. by the way, notice how he does it now, no long we are a smile, very statesman like, he gets the point across and people like it. a couple good years for watch. >> i think he would be a good candidate for the party. runs, he would be a force and a potential nomination. he brings the everyman to the table. he doesn't stereotype, republican, you know, green eyeshade guy like i am. he just communicates with people so comfortably, people feel -- have an identity with him. he is forthright. people love that people love a forthright person. >> he knows it's a war zone down there, too. i have got guys going down -- by the way it is still mostly just

homes that have been left vacant, people thought the money would be there i don't know why he is the only guy been down there and seen what it's like. the national guard is still making so it is a restricted area. it's just incredible. like katrina day five. >> more than two months later. >> more than two months later. here we are. jim, see you in a few minutes for "squawk on the street." when we come back, our guest host this morning has been judd gregg, the former senator from new hampshire. we will give him the word when "squawk" comes back. she knows you like no one else. and you wouldn't have it any other way.

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family dollar, was this on the list? >> was it? >> it was. >> top five?