i'm becky quick along with joe kernen and andrew ross sorkin. the government has shut down for the first time in 17 years. democrats and republicans on the hill remain deeply divided over the budget, obama care, the debt ceiling and they failed to reach a compromise before midnight last night. that was the deadline. the budget impasse on capitol hill means nearly 800,000 of the government's 3.3 million belowees are on unpaid leave and are deemed nonessential personnel, including half of the defense department, most of the irs and park rangers. the departments that will continue to work are the federal aviation administration, including air traffic controllers, the military and the postal service. president obama commented on the shutdown in a message to the military. >> i'm going to keep fighting to get rid of those across the board budget cuts, the sequester, which are hurting our military and our economy. we need a responsible approach that deals with our fiscal challenges and keeps our military and our economies strong. and we're going to make sure you

stay the greatest filt in the world, bar none. that's what i'm fighting for. that's what you and your families deserve. economist mark bandy says a shutdown that lasts several weeks could reduce the nation's gdp by 1.4%. we will talk more about the shutdown with john harwood in just a few minutes. also, later this hour, we have congresswoman debbie wasserman schultz and congressman mick mulvaney debating the issues. also we have steny hoyer who will be our special guest at 8:00 eastern time. let's get over to andrew. >> on to the next potential government crisis, it is, of course, the debt ceiling. jpmorgan, jamie diamond are expected to meet with the president tomorrow. the white house official tells "the wall street journal" they will make while they're in town for one of their annual meetings. jpmorgan's $11 billion

settlement of the government mortgage probe became a little bit more complicated. the fdic has now an issue over the responsibility for losses at the former washington mutual. that was the failed bank jpmorgan took over during the financial crisis. now here is the complicated part. the agency could be on the hook for billions of dollars, probably close to $3.5 billion while jp's panel could be reduced. this all has to do with indim dem anifications. also, wales fargo, they're going to be paying freddie mac $780 million to settle mortgage claims. this would resolve all repurchase liabilities on home loans sold to freddie prior to the financial crisis. joe, over to you, sir. >> okay. didn't get out of hand yesterday. down 128. it watts down 150 for a while. today it's going to rebound at least a little bit. let's check on the markets this morning. in the past, shutdowns after they're reopen, it does a little better than it did before they

were shut down. probably not worth it to do it, but hopefully that will be the case again this time. 52 points is not bad. wrapping up september, the dow did add more than 2%. for the quarter, the inded decks rose by 1.5%. for the s&p, it added nearly 3% just last month, nearly 5% for the quarter. and the biggest winner was the nasdaq, which was up 5% in september and up nearly 9% for the quarter. >> but apple? was that the big driver? >> apple helped, i would think. you know, the internet stocks have been doing really well. >> facebook has rebounded, too. >> facebook is the nasdaq, you remember the -- >> even though it's two. >> even though they're doing -- >> and netflix and other -- >> netflix, priceline. >> priceline is killing it. >> others are, too. >> it's kind of amazing.

>> it is kind of amazing. you wonder whether it's -- do you see any -- >> did you read that article in the "wall street journal" today? >> the article in the "wall street journal" simply quited two investors we had on a week and a half ago. it was warren buffett and carl icahn. >> the same people? >> it was the same people. >> i mean, but the two main investors that they quote, they put the pictures on, they spoke on krn, they quote them on cnbc from a week and a half ago. >> but that piece is -- i don't know. we'll see how many people take too much away from that piece today. >> it's interesting, people asking if we've gotten too high. oil prices were, in fact, down yesterday by about 0.5% or so. they're down another 32 cents to 102.0 on 1. the ten-year note at least at this hour is yielding 27655%. the dollar has been weaker, but you're fought going to see it necessarily against the yen. a little weaker against the yen. but the yen has been under pressure, too, because of shinzo

abe deciding to go ahead with some of the tax increases in japan. you can see right now that the euro is at 1.354. gold price res slightly higher, but there was a big drop off yesterday for gold prices. this morning, up by about $7 to $1,334 an ounce. the government shutdown has both the leaders of the house and the senate pointsing fingers. >> the house has made its position known very clearly. we believe we should fund the government and we think there ought to be basic fairness for all americans under oh bam in care. the senate has continued to reject our offers. but under the constitution, there's a way to resolve this process and that is to go to conference and talk through your differences. and i would hope that the senate would accept our offering to go to conference and discuss this so that we can resolve this for the american people. >> we like to resolve issues, but we will not go to korns with a gun to our head. the house has to pass a clean

bill, they've had that before and they can do it right now. if they do that, then we'll agree to work with the government and funding the government for the remainder of the fiscal year. >> joining us now, cnbc's chief washington correspondent, john harwood. when, john? i mean, something will happen soon, won't it? what are you hearing? >> think so. think so. republican leadership aid ves said they don't believe the shoutdown is going to last very long. the shutdown may be useful to them, useful to john boehner because the more pain that republicans feel as a result of this, the more leverage that boehner will have to reassert control of his caucus and try to get a deal. and wa a deal appears to, you know, life is full of surprises, but what we believe is a deal is ultimately going to end up with, given the unity among democrats and the divide among republicans is an extension of government funding, maybe some negotiation

on a budgets deal. you know, what are some people who still think t possible, because remember, wa we're fighting about now isn't about the budget. this is about the desire of some members to try to launch one last assault on obama care. it's not the budget talks. both house and senate have passed budgets. they have not gone to conference on the budget. and this could be a lever or a mechanism to get that going. but sooner or later, john boehner is going to have more ability to move his caucus toward what seems to be the inevitable end to this. >> yeah. right. and then we get to move on to -- are you boning up on the next stuff, john? are you getting ready? h, my goodness. one of the hopes of people who have been watching this, some of both sides, is that if you have a shutdown, which, you know, it's bad. it hurts some people. but it is not long-term harm for

the economy if it doesn't last too long. but that might be useful by generating a certain amount of shock in markets and voters that would cause both the extension of funding and the debt limit to get raised at the same time. you would have kind of a big bang solution, but there is some belief among the caucus, leadership was saying the other day, no, we're going to have to go through this again. and that's why the president is brinking bankers down to talk to him at the white house and why you have an increasing drum beat. and i think you'll have increasing nervousness among markets. i just got a message from our friend, mohamed el-erian who said the longer this goes on, the time between now and october 17th, that is going to raise the stakes, raise the pressure, and that's what ultimately ought to drive a solution. >> john, do you see that there would be some sort of solution where, you know, the house has already proposed this whole idea of getting rid of the tax for

the medical devicemakers? that is something that the senate has voted in favor of in the past by something like 73 senators or something. do you see that being part of the negotiation, if you could wrap up, let's say, the debt ceiling, the budget, all in one and do some sort of tradeoff for that? >> i think absolutely that could be part of the solution in the end. you had 79 senators who are on record as saying that they oppose the tax. it's not very important to obama care. it's $30 billion over ten years. it has nothing to do with the functioning of the law. it just helps pay for it. so, yes, get rid of that law. you could make the deficit bigger. remember, our deficit has come down quite a bit in the near term or you could replace it with some other source of revenue. so yes, i don't expect that tax to survive long-term, but i don't expect given the way this crisis is playing out, i don't expect that to happen as part of the immediate solution to

government funding or the debt limit. >> but why are you so convinced that this is all going to happen happen yidly? i'm anxious that we're going be -- >> you're anxious? >> i am anxious. i don't really -- i don't see the wall of worry -- >> were you going to the statue of liberty today? do you have any plans? >> can you even get on the statue of liberty these days? >> yeah, you can. >> i thought you couldn't go. >> you could until today. >> that was my plan and now that it's no longer there, i'm anxious. >> the reason that i'm sang win about this is that it is so obvious what the rationale solution to this is that they get past these two issues. they're not going to stop obama care. you get past these issues and you get into a budget negotiation. everybody knows -- >> but that's if you have rational people -- >> literally, everybody knows that the -- what the country needs to do is have a long-term

budget deal that whatever it does in the short-term to the deficit may not have to do anything given the way they're coming down. but it proposes some long-term discipline on entitlement programs and that is going to require democrats so swallow the entitlement reforms, republicans to swallow a little bit more revenue. that is the deal that's on the table. everybody knows it. and it's just a question of when we get there. >> but i understand andrew's point. what's is the short path to get them from here to there? >> prices. i mean, you know, we do respond to crisis in the country. and if you have a big market shock that causes people to move, you know, there are many pressures on members. you've got republican members who are concerned about primary challenges. you've got national republican strategists who are concerned about the party's ability to win prtal elections and you've got democrats who want to govern,

they want to hold the senate and, you know, the president doesn't want to leave office without having addressed the entitlement process. >> it's entitlement. and andrew, when does -- the depression before anxiety or does depression follow anxiety or -- >> no, depression is after anxiety. >> you heard even harwood says that -- here is the narrative. for the mainstream media. the term in the house of representatives -- they're trying to strangle and just deliberately hurt the country. when, in fact, in the back of their minds, they think that the entitlement and long-term budget issues are -- i mean, they're all -- you would say that they're all -- i daresay patriots. that's heresy to say that one of the right is doing this. but did you see google today? mean stream media. you know who google is celebrating today. this is just perfect.

>> who is that? >> the anniversary of yosemite. you can't go there today, even though -- >> you know, you laugh about it, but i feel bad for all these kids who are going to washington, d.c. who -- >> if i were making the kids -- >> i'd be anxious if i was. >> which you have. >> yes. >> and, john, did you see that -- >> the daily show's moment of zen again last night? >> no. >> the second time in two weeks. >> what? >> for the second time in two weeks, an exchange between you and me on this program was the moment of zen on the daily show. >> wow. >> before, it was on national pirate day and you informing me that it was national pirate day. or talk like a pirate day. last night, it was our exchange yesterday on, you know, the line about the president will negotiate with iran, but not with the members of congress.

>> oh, they probably didn't like me saying that, did they? >> you know, it's like 15 seconds long. you can take a look. >> okay. i'll do that. i would like some of their demographically correct viewers, i can tell you that much. >> well, we keep this up -- >> the local channel guides for where to find us. because i don't think ralt of those people watching jon stewart are necessarily watching us right now. >> we keep this up and jon stewart and the daily show will be a conveyor belt for this program. >> i wonder if he would be a guest. >> we know his brother. his brother works at the new york stock exchange. we could work on jon. >> make it happen. >> his viewers aren't up at this hour, though. >> no. but they might get up. >> you know how i found out about it? my daughter. >> that's what i'm talking about. it's just a thought. that would be a whole new idea for us.

18 to 49. aren't there some people like that watching? >> come on in. >> john, thank you. >> big ten. i like that expression. >> because? >> i'm not sure why. because i think we need a big ten. >> i think we do, too. welcome everyone. time for the global markets reports right now. louisa bojesen is standing by in london. >> hi. i love it. here in europe, that's compactly what we're doing this morning, popping up a bit. yesterday on the close when we spoke, we were looking at all of our european markets in negative territory. but this morning, though, it does seem by and large that we've been baking into the pie that a partial government shutdown could indeed happen. st stoxx europe 600, up right now by 0.3%. a lot of people are saying it might be a buy opportunity, especially if we don't see anything before october the 17th.

there's no reason for them to get any deal done by the 17th. and if it draws out a bit after the 17th, that, again, might be a buying opportunity for markets given that both the u.s. and european markets are stronger than where they were a couple of years ago or a couple of months ago, even. the stoxx europe 600, on the last three months, we've seen gains of approximately 10%. so you'll note during the month of september which, of course, now is behind sxus we're into october already. we've managed to see gains coming off a little bit here over the last couple of days. but by and large, the quarter has been positive as set up by just over 10%. our main european bothers this morning, most of them in positive territory. the xetra dax, the cac 40, ftse mib all higher. the ftse not quite making it, led lower by tliex of unilever amid a warning on profits. as we take a look at the fixed income markets, there's been a lot of noise about the italian

yield. we have had a vote of confidence taking place where the prime minister needs at least 19 points coming from the pdl party or from the five-star movement in order to stay in his position. right now, yields are lower but we're nowhere near the 7% plus level that berp looking at from the italian yield over the last couple of moss. guys. >> thank you for that report. we're going to talk about japan right now. prime minister abe announcing a significant tax increase. it's his first major step towards tackling the nation's massive debt burden. we're going to go to tokyo now. for more on this story, i'm told we can't talk to you too much -- well, we can't talk more about it. anyway, how are you this morning? >> good, ross. thanks a lot. yes, we're going to talk about the sales tax. it's going up to 8% from april. that may not seem like a lot to people in the u.s., but this is the first time in nearly 16 years the sales tax is going to

go up in japan. it's starting in april. i think that was pretty much expected from the prime minister. but he tried to counter that and the negative impact it's going to have on the economic picture with a stimulus package. but a little bit of disappoint that we're going to have to wait until early december to get the details on that. the markets tomorrow, when they wake up here, might react with a bit of disappointment because we were expecting a bit more det l detail, potential corporate tax cuts. and instead, the prime minister just referred out there and said he's going to talk to his ministers and think about kb consider a corporate tax rate cut. so on the one hand, it's time to lure more foreign investors back into japan. but he didn't really detail any sweeping measures. instead, it's a piecemeal approach that investors might not like. but i think the feeling in the financial markets is that they're willing to give the government the benefit of the doubt for a while. and that is why ten-year paper is still going at 0.7%.

the economic data we had out of japan this morning suggests that we're getting the wrong kind of inflation. sure, we're coming out of deflation, but it's cost push inflation. and what's happening is the household spend sg still very negative. so put together with the consumption tax hike, there's a lot to worry about in terms of how much of a slowdown we could expect from the japanese economy next year. >> kaori, thank you for that. we have the slowdown there and we have our own issues. not so great for everybody. coming up, find out who is still getting paid five years after the financial crisis and breaking bad breaks records. it's awesome. it was so awesome. >> i thought it was just sort of a -- >> there's nothing wimperish. >> if i could end a show, this is how it would end. >> what about homeland? >> i watched it last night.

>> and? >> no comment. we'll talk about it after the break. >> maybe we'll talk about it in executive edge. probably not. as we head to break, check out a couple of the best and worst quarterly performers. netflix leads the way over the last five months. and jcpenney, which not only saw the departure of bill ackman, but a big spub offering. they added another 80%. the ocean gets warmer. the peruvian anchovy harvest suffers.

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time now for the executive edge. this is our daily focus that gives business leaders a leg up. this morning, we have a story under the radar. berkshire hathway is about to collect on a financial crisis era investment. he converts gold mak sacks into live shares. that initially gave berkshire the right to buy 43.5 million shares at a 9% stake in goldman. now, that deal was aemed earlier this year to give berkshire a smaller stake, but one that would not require it to pay any money to exercise the warrant. berkshire will get about $13.1 million goldman shares, making

it the bank's sixth largest shareholder. >> so, becky, my question on this -- and you are the warren buffett expert on this. how long does he tell does he stay in goldman sachs? is this a path to exiting the firm? >> i don't think so. from everything he has said about goldman along the way, he likes the company, likes lloyd bla blankfein. i think as smsh who is going to put his usual investment thesis to work here, this is a stock i believe he's going to hold on to for quite some time. >> when lloyd was on, and he was very politically correct about that investment and whether it was mutually beneficial, in reality, i think lloyd feels like that was very, very expensive. >> for goldman sachs. >> and if you -- if your bank ever sent you, like, credit card charges or interest rate charges, on money that you borrowed from your bank, you

would feel like -- >> right. >> fair enough. but remember -- >> i know where they are. >> buffett called -- i'm pretty sure lloyd called buffett. >> you are 100% correct. >> they needed him. but in hindsight, it's like oh, my -- how much money? how much money overall was it that changed hands there? >> $5 billion. >> to the benefit of warren. and what do you think the interest rate was for the time -- >> oh, it was huge. wasn't it like 9% or something? >> 9% or 10%. but then they had appreciation and everything else. >> i remember buffett talking, he had clocked it down to the minute about how much he was making down to the minute because of those preferred shares. >> i'm just saying warren government the best end of that deal? >> lloyd in other context had suggested this was a very expensive friendship. i was hoping to get lloyd to say

that. >> he's politically correct. >> but there's no question that that investment, while expensive, has been a huge boost to the goldman sachs franchise. >> such a kindly, avuncular individual, talk about warren and just, you know, when -- if he's smiling and being real nice, just hold on to your wallet because he is going to get the best of you. >> but like i said, this is not a deal buffett came up with. >> no. he's laughing. he's like, you're kidding, right? really? >> at the time, though, the transition -- >> no, way. not with ge, too? >> you have to put yourself back in that mentality. >> you had to believe that the government was really going to be there. >> but it wasn't just the government. i mean, just because the government was there didn't mean that your shares were going to do well as a result. what you needed to show was that an outside investor had faith and was willing to put money in. and that was the kind of thing that was keeping a run on the banks. >> you've got the cream of the

crop. any financial services firm is going to survive, it was going to be goldman. >> and that's why i think he's not going to be selling shares. >> this is something that people have told me that if you are going to bet on the on end of the world, your timing that's be really, really good. >> yeah. >> because it only happens once. so if you were betting that it was going to happen that time, there was risk. if you were thinking this probably isn't going to be in, and you know it's going to cause that if you read the complete editorial in the "wall street journal" today, we know the end of the world is coming and we know what's causing it. >> but it's not climate change. >> now, it is. i'm adding to it every day. >> yes, you are. anyway, i was out yesterday, guys, but the water cooler buzz was all about breaking bad finale. over 10.3 million viewers tuned in to see the high school teacher turned meth kingpin wrap up all unfinished business. the finale's record ratings put

"breaking bad" only behind the sopranos and sex in the city. >> wait until walking dead. that's coming soon. >> the scenes that we're showing are very -- >> i saw jessie with a beard. i don't want to know anything. >> but that's because you're many seasons behind. >> no, i'm not. i'm in the middle of the third season. let me just check my machine. >> you check your e-mail. i'll say it again, the best finale ever. >> really? >> i don't know if you had view owes sopranos. people had views on the dexter ending. this was an ending to beat all endings. it was done so perfectly. >> the whole series was done perfectly. >> and yesterday i was thinking, how can it end, is there a way i can like walter and like jessie -- >> do you like skyler? >> that sounds like a yes. >> did you finally end up liking

skylar? >> i know you don't like her. i never disliked her. >> yeah, you did. because you've argued with me. your wife like skyler, you like walt. >> i do like walt. but that's not because i dislike skyler. >> she's not watching. >> i know. >> you can say you don't like skyler. >> is taits takes one to know one. when we come back, wall street hates uncertainty. right now, capitol hill is generating a lot of uncertainty from the future of the debt ceiling. what should investors do right now and is the economic recovery in jeopardy? that is next. and at the top of the next hour, value investing master legg mason's bill miller will be our special guest. he is guest holding this morning from 7:00 to 9:00. "squawk box" will be back right after this. (vo) you are a business pro.

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sdmroo good morning and welcome back to "squawk box" on cnbc. i'm joe kernen with becky quick and andrew ross sorkin. a government shutdown is in effect for the first time since 1996. lawmakers failed to resolve the dispute over the continued government funding by the midnight deadline. much more on that in a moment. in other headlines, amazon.com plans to hire 70,000 workers for the holiday season. did you see macy's yesterday? did you see it? >> i did. it was -- 85 up from 80 last

year, wasn't it? >> it was an increase of 3,000, i thought. >> what was the company to yesterday that so much of their staff actually comes from these temporary workers. >> that they hired afterwards. >> that they hired afterwards. >> here it is, 83,000, up from 80,000 last year. right. and their year-round employment stands at 176,000. so this is a pretty massive chunk of their labor force. >> for amazon, that would be higher than last year. it's going to convert thousands of those jobs in the season when the holiday season ends. >> check out a short-term extension of their agreement over the networks like epsn and the disney channel. the two sides didn't know how long it would last. they're trying to work out a longer term deal and have key

issues including the costs of sports programming, espn, and everybody at nbc, fox, it's so awesome. it's just wsh you know, no dvrs. >> but did you get get pushed on to a premium tier, i think the economics will all change. >> the economics of sports, right? epsn -- >> oh, you mean for espn and fox? >> one day, i'm convinced that a steady march, sports will get put on a premium tier. >> because will the nonsports watchers be willing to subsidy decide? >> because there's all sorts of debates about how much. >> those who say oh, it's 20% of the population who are watching and 80% are subsidizing. >> you just don't know. but will they pay ten bucks, 20

bucks, 30 bucks a month? >> did you call nielsen? we have a viewer than 18 to 49. >> we don't have a viewer. i've gotten seven or eight tweetes from guys who say they tape the daily show and watch them in the morning. >> can you send him the nielsen phone number? >> i'm favoring a bunch of people. >> when i said they have 20 questions, they said bo is your most admired journalist? >> did you say jon stewart? >> i did. >> a huge portion of the nation get their news. anyway, just how much economic and financial fallout can we expect from this government shutdown? joining us right now to talk more about it is michelle gerard, chief economist at rbs and darrel kronk, wells fargo private bank. i've been looking through some of the numbers and some of the forecasts. ihs is shaving 0.2 percentage

points if this is a week long showdown. so they were looking at 2.7% in the fourth quarter. >> everyone, those are the kind of numbers that people talk about, a tenth or two tenths of a percentage point off growth for a week. in '96 we were out for 21 odd days we lost a quarter of a percentage point. i think those are the kind of numbers which in the scheme of things are not necessarily that large in terms of it doesn't risk derailing the expansion. it will have an impact. it simply depends on the duration, i think, in terms of what the ultimate fallout will be. >> i've seen much longer numbers if we go 21 days like we did in 1996 of. >> those feel too large to me. again, you have people who think that the sequester took a percentage point to have off of growth in the first quarter. so that's -- i think it depends on the assumptions you may about the multipliers, of less

spending and so forth. but i think whether or not away from the government sector, all of this undermines activity in the private sector in the sense that it keeps businesses from doing things. the truth is, it feels like we've gotten a lot more used to these kind of events. looking at the markets, we're not seeing the disruptions we've seen the last time. >> businesses themselves are starting to take this in stride. in that sense, it may pose less risk than you might think. >> if you look at the futures this morning, the futures indicated up by the dow by about 50 points. >> government shutdown, that's what the market reaction is. >> the markets are just kind of pushing it aside. i think if you go back, becky, this is now the 18th partial shutdown in 1996. the prior 17 times, we've seen the markets from the point of shutdown, the equity markets specifically from the point of

shutdown to 30 days, 60 days later. over two-thirds of the time, the markets have been positive. positive shutdown. >> so if we get a reaction from the markets, it generally speaking is in advance of the shutdown. >> is it different this time just because of the debt ceiling that is looming, that debate looming just around the corner? >> you don't usually have the two coupled together, right? a government shutdown with a need to extend the debt ceiling almost simultaneously on the calendar, which is really a problem. i think as we look at the government shutdown and we look at what are the forces now that are going to propel us to get to the deal, there aren't a lot up until the debt ceiling. so we can be shut down to michelle's point for the next -- to the 17th within which will have some economic impact. it will be the impact in the fourth quarter. >> what about at which the market says database it's always hard to pick the day. sort of how long into this do you think the market says, okay, enough. right now, i'm going to stomach

it. it's fine. we can't stomach it any more. >> i think if you get into next week, middle part of next week towards the end of next week, i think the markets will start to get into anxieties. the reality is as foolish and as dumb as it is to shut the government down, and we all acknowledge that, the dangerous thing is the debt ceiling. so you can move from a foolish dumb scenario that the government has working through and they channel that energy towards a more dangerous scenario. >> i guess the hope is that, perhaps, if things come to a head as a result of a shutdown, that maybe the debt ceiling battle will be less. he has proven he's willing to go to the mat at this point, maybe he'll be able to pass a debt ceiling extension even if it's just, you know, with the democrats voting in favor of it. you know, that he's -- if he's proven. i mean, i guess to some extent -- -- >> it's a rationale world. >> the problem is, you need to

markets to put pressure on washington to do something. the more the markets think this is a short-term thing, the less pressure they feel and the long they are drags out. unfortunately i think that's why we've gotten to this point. if we had had pressure. but, you know, that's the other thing. washington has heard all of this brp. we've been warned the economic impact. unfortunately, this reinforces that view that, you know, this is not something that is that -- poses as much risk to the economy as people are saying. >> and i think the economy is in a much better place today than it was, for example, in 2011. whether we like it or not, the budget deficit is half of what it was at the beginning of this year. >> i think we like that. >> when you look at the budget deficit as a percentage of gdp, it's dropped from 7.2% at the beginning of this year to 4.2%. we had the payroll taxes income and corporate tax revenues are feeding into the system. the housing market has

recovered. so that's given us a little bit of indianapolis lagz. it's given the markets security and insulation in this environment. >> it's definitely much more balanced. that's less vulnerable. michelle, darrel, thank you. the government shutdown is just hours old. will lawmakers be able to rise above and find some middle ground? dnc chair congresswoman debbie wasserman schultz and nick mulvaney bring the debt and health care debate to the squawk floor, that's next.

welcome back. take a look at the u.s. equities at this moment. the dow is up by about 50 points, nasdaq is up 7 points and the s&p is up 7 points. >> joining us annoy at this hour, debbie wasserman schultz is joining us and congressman nick mulvaney is a republican from south carolina. let me start with you, nick. congresswoman, i'll be right with you. but what was the rationale? is it kind of a symbolic move, do you think, by some of the more conservative members of the house just to but the put the unpopularity of obama care front and center? is that kind of a pr campaign? because there was never any end game in sight as far as i can tell, was there?

>> i don't think it's a popularity game. so the extent we raise awareness about the bill, there's valuable to that. but the real thing is we're fiepting it. we don't think it's good for the economy. go look at the numbers on what obama care is going to do to gdp. we're serious about this. it's the most important thing to us and that's why we're taking this position. >> but there's no way to win in this context. i was more or less sort of -- and there are some people that think you can lose the pr battle and you're going to -- in 2014, if you've won enough seats in both houses in 2014, you could actually do something about it. so if this ends up hurting the party's chances in 2014, you wonder whether the pr or keeping it front and center, you wonder whether it was worth it. i get that calculus went into the some of the thinking, didn't it? >> again, you have to think at the end of the day, that good g policy and good politics or else

you night as well give up and go home. if you're doing what you think is right, you hope people will look favorly upon that. i think 60% of the population doesn't like the bill. we're on the side of the majority of the population of the united states. i think it's a good place for us to start. >> congresswoman? >> yes. well, let's look at the people who have been asked who would oppose obama care whether or not they think this was a good thing to do. overwhelmingly, people who oppose obama care think we shouldn't defund it as a strategy to change it or get rid of it. and they thought that the republicans serm should not shut down the government over delays or defunding obama care. this is a dangerous game we're playing. it is going to damage our economy. we have 800,000 federal employees who can't come to work today and won't be paid. national parks closed and all over what? over whether or not you have the ability to make sure that everybody has access to quality affordable health care. there are almost 750,000 uninsured and eligible south

carolinans today that now can sign up for the exchanges. they can sign up for health care coverage. you have almost 50,000 young adults in south carolina that can stay on their parents' insurance and that is what my colleague wants to deny them. this is an idealal -- >> you can't sign up because the exchanges aren't ready yet. >> nick, that is completely untrue. there is an exchange up and running right as we speak in south carolina. you can go online, sign up for it, compare coverage, make sure that you can get access to quality affordable coverage. and you know wa you're doing? you're telling almost 2 million south carolinans that as of january 1st, who have a pre-existing condition, that they could still be dropped or denied coverage for that pre-existing conditions. you're willing to shut down the government and the economy to do it. >> those are absurd numbers. >> it's also absurd that you have shut the government down over a settled matter. you know, if there are problems as obama care is complexed, then

we should sit down and work together and hammer out those problems. but obama care is law and it's going to remain law. and you guys are -- >> we have been trying to sit down with you for three years, since we got here, to work with you on this. >> but we're not going to dedelay or this up. this is from an opinion piece today in the "wall street journal." and scott gotley helped pin this piece. he's at the hhs federal health i.t. policy committee. he points out there have been a lot of problems getting some of these things up and running. half a dozen state exchanges won't offer full online enrollment. some of these things weren't tested before this morning. the first test is going to be live and running today. some of the oversight watchdogs -- >> half a dozen is six, there are 51 marketplaces open today across the country. there are going -- any time you have changes -- >> in my state they're using a

fax machine -- >> excuse me. any time you have changes this significant, there are going to be kinks. but over the next six months, you have americans across the country who don't have insurance coverage who have never been able to get access to it. 150 million of whom have a pre-existing condition who can't be dropped or denied coverage for that pre-existing condition. and that is what the republicans are even willing to jeopardize the health of our economy over. they've shut the government down and now in two weeks we have looming. this is a prelude to a disaster. you know in two weeks we're going to have the same fight over whether we can pay the nation's bills. >> it's almost as if the republicans need something. can we ever just do a clean cr? >> a clean cr. >> can that happen at this point? >> think it through from a negotiations standpoint. we sent them something, they sent us a clean cr. we sent them a third thing, they sent us a clean cr. is that a good faith negotiation? you tell me how you get off the center with that? they have got to come forward --

>> let's be clear, we're not negotiating over the -- >> there you go. >> we're not negotiating obama care over whether or not we keep the government -- >> i was hoping we could get you two to agree on something how we can do this. and i hear the music playing. so i don't know, maybe -- we can keep your mikes on, talk amongst yourselves. if you do arrive at something, tell the producers and we can open back up. >> thanks. >> thank you. >> i think it's a good idea. >> see? >> bipartisan trying to bring people together. get the rise above pins back? >> yeah. coming up, the health care exchanges are open. howard dean and toby cosgrove, they're going head to head in the next hour. but not energy or even my mood. that's when i talked with my doctor. he gave me some blood tests... showed it was low t. that's it. it was a number. [ male announcer ] today, men with low t have androgel 1.62% testosterone gel.

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the government may be shutdown, but wall street is open. take a look at the futures and you'll see at this hour, dow futures indicated up about 51 points. when we come back, investing when washington is playing politics. our guest host is bill miller of legg mason. as we quick off the fourth quarter, "squawk box" will be right back. ready to run your lines? okay, who helps you focus on your recovery?

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no deal, and the federal government has shut down. what it means for your money, the markets and where we go from here with guest host and market master bill miller. >> health care exchanges up and running. the cornerstone of obama care goes live. millions of americans can start shopping for health insurance but how many will actually turn out? we hear from doctor and former presidential candidate howard dean. and from the ceo of the cleveland clinic toby cosgrove. and steve israel on getting washington back on track. it's a busy day on wall street and "squawk box" is open for business. >> good morning and welcome to "squawk box" on cnbc. we are open for business. the government is not this

morning. i'm andrew ross sorkin. take a look at the futures with the government closed. the dow looking like it's going to open up about 50 points higher, the dow, s&p 500 about seven points and the nasdaq up a little over 12 points. white house ordering a shutdown of areas of the federal government including national parks and federal offices as lawmakers fail to reach a deal by the midnight deadline. did i just take your lines, joe? >> i don't think so, but they took my -- is this my read? >> it might have been. it's early -- >> let's go back. >> there it is. joe. the floor is yours. >> it's just a question. i mean -- do we want to keep viewers or not? we want to keep them. >> in which case, becky should start reading. >> exactly. >> the white house ordering a shutdown of areas of the federal government including national parks and federal offices as lawmakers fail to reach a deal by the midnight deadline.

what areas will be affecting businesses and the market? hampton pearson joins us with something about just when i heard nonessential employees, it struck home with me. and i don't know whether i don't feel essential or somethings hampton, but you know, that rang true for me. >> reporter: yeah. essential and nonessential in the eye of the beholder. specifically the reason we're here in front of the labor department behind me. in the grand scheme of things, the government says labor department functions, especially data collection are nonessential that markets might take a different view especially since one of the early casualties is -- if this building behind me is still closed, we will not get a jobs report on friday. the last piece of relevant government data that markets care about will be the insurance claims we will get on thursday. commerce is already shut down saying they'll have no data releases this week as long as shutdown's in effect.

on the flip side, by the way, across town from where i am right now, securities and exchange commission open for business, they have funding to at least last a few weeks before things would get critical there. now, in the -- oh, one other housekeeping matter, president obama did, in fact, sign the military pay act, signed -- passed by the house and senate last night. so troops on active duty will get paid on time for however long this lasts. in the wee hours of the morning, last night, we do have pictures of some things here around the nation's capital. iconic monuments like the lincoln memorial being closed, the national zoo. we also had producers out and about checking in at some of the government buildings that were in the process of being closed. and believe it or not, there were government employees going into their buildings in the wee hours of the morning essentially to shut down the buildings, shut down the offices and then go home. some of those nonessentials, if you will, joe, on the job in the

wee hours of the morning after congress, in fact, had essentially done nothing. so we do have the government shutdown and here we are gak to you guys. >> yeah. i want the -- now i'm thinking, again, about me and becky quick and andrew ross sorkin. >> i understand -- i totally understand. >> initially, this is -- if it's quick, we get some ratings and then we get the market goes up. >> we want our numbers on friday. >> but on friday, if it's going to mess up our friday employment report bounce in ratings, then i've got to draw the line, for me. >> hampton, what is the story on that, though? is this a situation where they have to be closed down until friday for us not to get the friday numbers or if they're closed down three days this week they're not going to have bodies around to tabulate this stuff during the week? what has the labor department said on that? >> you're breaking up a little bit on me. here's what i understand. beyond the whole issue of

critical nonessential employees, the issue with the jobs report is this, all the surveys and all the data in and, you know, the report was essentially done. or was there still work to be done to finalize the report? if it's the latter, obviously you would need key people to crunch the data, get it ready and get it out. now, 17 years ago, the last government shutdown, there was an issue with the cpi where they were so concerned it was going to get leaked omb green lighted a contingency group. that option we're told is available this time. but it all depends on essentially what happens in the next 24 to 48 hours. but as i said, bottom line, if these buildings behind me are closed on friday, we won't get the release of the jobs report. >> and it's going to be you friday, right? you could sleep in or something, i guess. what are you hoping for? >> well, i -- i don't get to

make that decision. as you know, joe, a lot of other people who decide at any given point if any of us are essential or nonessential. >> you mean the essential employees unlike us. okay. i hope we see you friday, hampton. >> he might be there friday anyway. >> especially since the weather's going to be great. >> exactly. all right. thanks, hampton pearson. he does a great job -- >> he does. >> and, you know -- better get it right. >> every time. our guest host this morning is legendary investor bill miller. he is the manager of the legg mason opportunity trust fund. and it's a pleasure to have you here today. it's great to have you here today to kind of interpret what this all means for the market. >> thanks, becky, it's nice to be here. >> you look at the government shutdown and think wall street might panic over that. but the futures are set to open about 50 points. is this just the beginning? we're shrugging things off.

>> i think on your show yesterday, you guys put out some data showing the previous government shutdowns have no impact. and we're seeing it again today. >> we spoke with -- i don't know if it was an economist michelle gerard who pointed out the market has gotten used to this emergency situation. and as a result you've seen smaller and smaller reactions. less pressure put on the congressional leaders and the administration to try to get to some resolution. does that mean it could last for weeks and weeks on end. >> if it were something serious, obviously the market would react to it. the government shutdown for a few days or even a few weeks will have a marginal impact on the overall economy as has been said about this show and the shows the last few days. >> so if we get to the debt ceiling, which is only subpoe17 away and there's still no resolution, then what happens? from the market's perspective. >> the last time we had this was

in august of '11 and the s&p downgrade. but that was in conjunction with the european crisis. we don't have that european crisis now. and there's virtually no chance we'll have any kind of default or they won't make payments, treasury can prioritize. you know, read a time in the "times" yesterday that the president will declare the law to follow will be to pay the debt. the markets understand the debt ceiling will not be catastrophic. that would make lehman brothers look like a kindergarten show if they didn't pay interest on the debt. >> you don't think it's going to happen? >> i hope it doesn't happen, yeah. >> you know, we have had a number of guests who have come on cnbc in recent weeks. the journal kind of wraps up some of this today by pointing to carl icahn and warren buffett who have told us in the last week and a half that stocks at these valuations don't look cheap to them. that, you know, it's a lot harder to find deals these days. do you find the same thing?

>> absolutely. the market's fairly roughly valued. last year you could find things and we bought them last fall, netflix in the 60s, where it was pretty obvious unless something really was untoward, the risk/reward was fantastic. reasonably have a chance to be up 50% to 100% in the next 12 months. >> is that just the case in the u.s.? are there opportunities that look like that in europe or other places? >> you know, we mainly do u.s. stuff. europe is a different -- europe is getting a little better. but i'm not -- i'm still not wild about europe. the euro's way over priced. and there are companies over there we're looking at and might do. but, again, nothing looks like an easy 50% to 100% in 12 to 24 months. >> there because of the qe, right? >> you know, the euros are probably there for a variety of different reasons. first, it's not coming apart. second, if you look at the balance between the euro and the

dollar from a chinese export standpoint, they tend to kind of balance out. >> if they had tapered, i think the dollar could be 1.25. >> well, it ought to be about par, really. that's where it ought to be. >> all those markets. do you think they'll start this year? tapering? >> i don't know. >> does it matter to you when you look at the market? >> well, i think charlie monger at the berkshire meeting. charlie made a comment about -- nobody would predict what you're seeing right now. what the economy would look like. so the fed's running a giant experiment. and we don't know what the answer to the experiment's going to be. we're playing out in realtime. >> you say when you look around, it's very hard to find bargains like you've seen in the past and you still have a lot of stocks you like, something like apple. is that a stock you could see doubling in the next 12 to 24 months? >> apple, apple is funny.

there's -- when i listen to cnbc on the radio and when i'm driving, there's a commercial where a guy used to talk about refinancing being something like -- it's the biggest no-brainer in the history of the earth, right? that's what apple is right now to me. it just makes no sense for apple to trade where it is. 14%, you know, in essence, free cash flow yield. 10% simple free cash flow yield. if apple was a junk bond, it would trade 40% higher. but junk bonds, you know, junk bonds are a contract, they have a claim. but they have a claim on a typically bad balance sheet. >> a lot of large numbers. if it doubles, it's going to be almost $1 trillion. >> double, i think, is probably not likely. >> it's already the most valuable company. >> if it goes back to where it was -- if it takes two years to go back where it was a year ago, it's 50%. >> what's the trigger? this is a psychology game at this point for a stock like that. someone has to decide and enough people have to decide it's

actually worth more. >> it was a psychology game when netflix was 60 and now it's 300, right? that was a year ago. best buy was 13, now it's 38. the psychology can change quickly. to me, the -- when we saw the iphone get introduced, all the analyst, that's overpriced. sell 9 million phones, the highest decimal is 7 1/2. the store in london, a mile long line outside of it. and we've got a little video of people in tokyo in a typhoon sitting outside the apple store. they wouldn't go in during the typhoon. so, you know, yesterday came out that it was the most valuable brand in the world better than coca-cola. how much does coke grow? 6%, 8% a year? where does it trade? 18 times? >> the whole world -- what? al qaeda's tweeting now? did you read that? >> the president of iran. >> al qaeda is tweeting? you can follow -- >> yep.

>> and they probably tweet on iphones, terrorists, right? i mean, on homeland, they -- well, he's dead. who's the magician? have you heard of him? >> i heard about the magician. >> but the magician has -- >> i thought you say you haven't seen "homeland." >> i wanted to see how you kill off 200 people the entire, you know -- you saw what happened. i don't know how they resuscitate -- >> of last season. i can't tell the end of last season? >> the same thing with "breaking bad" all over again. >> all right. maybe it wasn't 200, maybe it was 199. well, we are lucky enough to have bill miller with us for the rest of the program. thank you and we have a lot more to come. >> thanks. very quickly, a couple of corporate headlines this morning. berkshire hathaway collects on a deal it made during the financial crisis. going to be converting goldman sachs warrants into common shares today. under the terms of the deal that were amended this year, berkshire will get about 13.1 million goldman shares worth

worth about $2.1 billion. walmart is opening distribution centers dedicated to filling orders online in response to a surge in the retailer business. the facility in ft. worth, texas, is already open, the other one in pennsylvania is set to open next year. and dish network customers will still be able to watch walt disney owned cable networks for now. the two sides have struck an extension. they did not say how long that extension will last. but, again, they do have that short-term deal. andrew? coming up next, health care exchanges going live today. millions of americans are expected to be filling out online forms. but will the new law do what president obama intended? we're going to discuss that all next and take a look at the futures this hour with green arrows. dow would open up about 46 points higher. "squawk box" will be right back. it's as simple as this. at bny mellon, our business is investments. managing them, moving them, making them work.

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welcome back to "squawk box," we are following the government shutdown closely this morning as well as the opening of health care insurance exchanges all over the country. joining us now to talk more about this, dr. toby cosgrove, the ceo of the cleveland clinic and howard dean the former governor of vermont and a cnbc contributor. good morning to both of you. >> good morning. >> i'm going to start with you. we have been expecting this. there's been some efforts to stop this. immediate impact.

is there any immediate impact that actually the consumer, the public is actually going to see in all of this? >> no, we're not going to see any impact of this bill probably until the begin of '14. people are signing up now, we're delighted to help them sign up and understand their opportunities. >> toby, when you think about price, though, are we going to see it as a distinct difference in the price immediately? or is that also isn't coming? >> well, you know, it's very hard to tell what the total effect is. some predict the prices are going to go down, some places the prices will go up across the country. we're probably going to see an increase in the inflation rate of health care. while it's been going down over the last couple of years, looks like it's going up because of the additional people coming into the market. >> dean, i want to come to you in one second. but you guys made some cuts. how big are those cuts? and have all of them been made already? it's about $330 million. >> well, we need to reduce our

costs some $330 million, and it's impossible to do that without beginning to understand the effect on employees because they're about 60% of the cost of almost any health care organization across the united states. so we're offering early retirement for some 3,000 people. we expect about 1,000 to take us up on that. but it remains to be seen. >> joe was giving me a hard time. >> no, i'm not. the producers are laughing in my ear -- we've got tony and dean, that's a band, isn't it? >> it could be. howard, different question for you, which is, big question about what's happening here in washington right now. if we actually take away the medical devices tax, what do you think happens to obama care across the board? >> first of all, it's not going away and second of all, causes $129 billion deficit over a ten-year period. this is all silliness. i do -- i just want to editorially say that it's a delight to be on with toby because the cleveland clinic is

one of the really great health care companies in the country for how they charge for their stuff. thanks for having me on. >> thank you. >> you don't like obama care. >> i do -- look -- >> i honestly think you would like it to fail to get to single payer. you've said that before. >> that is not true. i think obama care is going to work, i think it's going to work well. i actually do think there's going to be some impact between now and january 1st. most of them are going to find out, a, they can get insurance. >> you used to say it was a crappy bill, howard. why did you not like the bill initially? >> the reason i didn't like the bill initially, i think we desperately needed a public option so you could explain the bill. if we'd put everybody into medicare, we wouldn't be having this fight right now because people understand medicare. >> everybody? >> well, i would have put -- i would have left a public option for people to go in or stay in

their public insurance. >> would you like everyone to be covered by medicare? would you like that, toby cosgrove? >> well, i know what we have to do. we've got to change health care in the united states and we're in the process of major transformation. >> is that a yes? you'd like everybody in medicare? >> that's not what i said. i think the main thing we need to do is we need to be responsible about the cost. and there's a number of ways to do it, whether it's one payer or a mixture of government and private pay. we know that we have to reduce the cost of health care and we've been at this for a long time now. >> toby, should we be happy as members of the public that you've had to reduce your cost by $330 million? is that right? >> no, i think what we're looking at right now is almost a patriotic duty to reduce the cost.

and i'm sure we're going to be able to do that. we're going to continue. >> howard, assuming you think the other side is completely irrational, is there a way for you to come to a compromise with them? >> what? with the tea party people? >> yeah. >> i wouldn't pay any attention to them. they're a minority, they don't get to dictate a bill that's been passed by the congress and approved by the supreme court. this is nuts. what they're doing is crazy and i think it'll be reflected. this goes on 17 days like it did when gingrich shut the place down, i think we're going to take back the house. >> or you could lose the senate and maybe the bill actually -- >> we're already -- kay hagan in north carolina is going to get reelected and that was a tough seat for us. people are not going to put up with this kind of stuff. this is way outside the mainstream. >> howard, it all goes back there. you know what spawned the tea party is the way democrats passed health care. you lost ted kennedy's seat.

if that wasn't a metaphor for as it was proceeding that maybe you should have had -- something that big, maybe you should have had some participation from the other side. i mean, all the -- a lot of the -- people are saying this was the worst political environment since the civil war. it stems from the way obama care was passed, howard. >> i don't agree. this has been going on since 1994. but listen, why debate all this stuff. i'm looking forward -- >> because it's 17% of the economy. and if, you know, there are problems with the bill and if it ends up hurting the health care for the people that already have it are making it much harder. you expand the demand and then the supply doesn't keep up pace. >> the only reason -- we don't know what the problems with this bill are going to be, but we do know it's going into effect. there's a 33-state federal exchange. if that works well, we're on our way to a health care program just like every other industrialized nation in the world which will give health insurance to all the american people. >> they still come here to come to the cleveland clinic.

>> i'm happy to have the people go to the cleveland clinic, a first rate medical organization and they actually understand how the system has to change. >> i don't know. an incremental bill with rahm emanuel, got rid of preexisting conditions, got rid of the only two insurers per state. there was a way to do it when you take 20% of the economy. every other big entitlement, you've had both sides have had a say in it, howard. and i blame you because you were dnc chair and you pushed us even further. >> we've got to leave it there. toby and howard, otherwise known as tony and dean. >> tony and dean. >> it's a good band. >> they had three or four number one hits. >> pleasure. we will have much more with our guest host bill miller of legg mason. we'll ask him about value stocks and where he's putting his money to work and then steve israel on the government shutdown and what is next for lawmakers. "squawk box" will be right back.

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now the answer to today's aflac trivia question, "breaking bad" edition. what was walt's original car? the answer, a 2003 pontiac aztec. when we come back this morning, what traders can expect now that the government's shut down. we can hear from those with skin in the game about what they're planning on doing with their portfolios. and steve israel joins us about getting a deal done. the debt ceiling and much more. right now, though, as we head to a break, check out the u.s. dollar. "squawk box" will be right back. ♪

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welcome back to "squawk box" this morning. in the headlines, lawmakers failing to reach an agreement on the continued funding for the government. a shutdown went into effect at midnight. we're going to be talking about the effects of the shutdown in a moment. nation's automakers report their numbers. predicting industry sales down 3.7% from a year ago.

that would break a 27-month streak over year-over-year increases. but says maybe mostly due to a calendar quirk. this year's labor day weekend sales were mostly counted towards august whereas they occurred in september last year. other economic data out today, we've got to keep an eye on august construction and spending, also the ism september manufacturing index, both of those at 10:00 eastern time. well, it -- you can't go to the statue of liberty. if you're planning to go to the washington monument, turn around. it stands 555 feet tall, it was completed in 1884, it is closed thanks to the government shutdown. >> crickets? >> crickets, yeah. nothing going on there. although, hk, didn't he -- who was it? who's helping? >> david rubenstein, i believe is helping with that. >> helping with -- >> during the earthquake.

remember, the earthquake about 2 1/2, 3 years ago it was damaged by it. >> would you have any problem taking that elevator in that little closed area and -- >> i've done it. it's no problem. >> i'm okay with it. >> i did it in -- up in new hampshire in that mountain -- >> i told you a story, i was stuck in an elevator for like 12 hours once and i'm okay with this. >> was it big enough to sit down? >> i did. i sat down, i was by myself. >> you were buy yourself? >> by myself. >> can i tell you some news -- >> at least it was someone you loved. >> thank you. news out from merck. they're announcing a global initiative. they're affirming their full-year target of 345 to 355 which is already the street looks like it's there. they're also talking about plans to have new workforce reductions of about 8,500 positions. in addition to pending previously announced reductions. their goal is to try and have target net reduction in annual operating expenses of about $2.5 billion by the end of 2015.

the news here is 8,500 jobs they are now talking about cutting in addition to the other cuts they'd talked about to this point. right now, it's time to talk markets and what you can expect today now that a shutdown of a federal government is in place. on currencies this morning, we have boris, on oil, carl larry from oil outlooks and opinions. plus chuck gabriel. our guest host this morning is bill miller, the legg mason opportunity trust fund manager. and boris, why don't i ask you about the dollar. we just mentioned the effect, the impact that the government shutdown is having on the dollar. do you see this continuing as the shutdown continues? >> you know, i was just talking to howard dean. and you know what's wrong with this shutdown? they didn't close down the airports. if they closed down tsa, how long do you think the shutdown would last? maybe one second. that's why the markets are having a half hearted reaction to it. wait and see mode, the dollar is mildly weaker but not significantly weaker. but the longer we go, it kind of becomes like a lobster being

cooked in hot water. more of a problem it becomes as far as government services. the more an impact on the downside. >> is that something a week from now or a month from now? >> i think a week is about the maximum amount of time the markets are going to have patience for. the one key take away, the taper off the table for october. and only if we have the best possible scenario where everything goes hunky dory. do we have a chance of a fed taper in december. the dollar in my opinion is capped because of this developments. >> you've seen this before, what it does it mean for the markets? is this time around different? >> no, probably not, becky. we think on a scale of 1 to 10 with august of 2011 being a ten, this is more of a four or five. it's really not about money, it's about obama care. and, frankly, you know, what the markets might be reacting to this morning is the reassurance that, yes, this is front loading

debate and squabble that was going to last a few months anyway. how can that be too bad? and we've got a bernanke put on the other end of it as boris pointed out. >> if this is something that lasts 17 days and bumps into the debt ceiling, does that change the picture? >> well, again, we are heading toward that one way or the other. if it lasts 17 days, of course, everybody's going to -- i think the conventional wisdom is every two to three days it knocks a percentage point off. it pushes back tapering. but everybody should know that mid october was always what this, you know, where this battle was really going to be waged and fought and october, you know, was going to be a bit of a day of reckoning or a testing of this incredible sentiment. >> carl, oil prices have come down. how much of that is because what's been happening with iran? and how much of that is because what we're seeing with this debt? the government shutdown? >> well the government shutdown has an immediate impact on us. they're talking about people who aren't going to work, people who

aren't driving. and the bigger -- or the longer the shutdown goes, the more people we start seeing cut back. once you cut out the united states postal service and at some point they're going to have to cut spending at the dod, which is the largest buyer of fuel in the world. these things start to affect us and prices will go down. but that temporary dip is maybe a false hope for a lot of people looking for low prices. >> right. carl, chuck, boris, gentlemen, thank you for your time today. right now we'd like to spend more time talking to bill miller too. you said at this point in time this is something you shrug off. you talked about apple being something you see as a real bargain. you talk to us -- >> six months ago. >> when you told us, look, this is a new paradigm for investing in airlines. that still continues. you still hold many of these stocks. >> yeah, i've heard jim cramer talk about the shutdown being a negative for airlines. it's a short-term negative for airlines. an opportunity to buy them if they don't go down very much.

the one we like the best is united. and what's interesting about united, the delta, which is one of the top ten performers in the s&p 500 this year up 98%. delta and united have the same rough revenues. and yet the market cap of delta's $20 billion, the market cap of united is around $11 billion. the reason is that delta has better margins, delta's integrated northwest faster. and i think over the next couple of years, the margins will converge which gives you a 50% move and united just to get to where delta is today. >> and you also like u.s. air. where does that fall? >> u.s. air has one of the highest returns on capital relative to the cost of capital in the industry. if the amr deal goes through, it's great for u.s. air. if it doesn't go through, it's less great for u.s. air. >> do you think the deal should go through? >> i do. >> you think it will go through? >> i don't know. they lost the initial battle

with having the thing pushed out until the spring. the chances of a settlement probably are greater because of that but i think it's a toss-up. >> in terms of the airlines overall, they've moved a substantial amount too. is there a point where they get a little too rich for your blood? >> there's always a point they get too rich. >> what is the point? >> part of where i see the airlines. basically the cruise line industry except with a really bad history. it's very similar except people don't have to go on cruises and they do have to fly. and if you look at where carnival trades, twice the valuation of airlines, mainly because that industry is consolidated, it's also been historically quite profitable where the airlines have been historically terrible. i would use that as a template over the next three to five years. >> and i remember you arguing at one point this was the railroads. and i think we talked to warren buffett about this either in omaha or either on the show and he said, you know, you can still

always get an upstart in this business. there's always somebody. there's a glamour to this business that somebody -- some entrepreneur out there is going to come in and try to ruffle some feathers. >> yeah. there's basically very little entry into the business. they hope, they hope to get to 2% market share. so there's really nobody out there that either spirit, which is one of the newest ones. there's basically no one out there that can go after the market share of a united or delta, which is 25%. >> would you touch southwest or jetblue? >> i think they're all reasonably attractive. i think the legacy carriers are much more attractive. delta's 5 1/2 times. reporting record profits. >> all right. >> you like poulty homes. >> if it takes two years for them to go back to where it was in may, you make 50%. 50% in two years will beat the market. just at the housing conference, by far the best housing analyst

in the world got the top right, bottom right. and what was very clear at that conference was we had a little bit of a hiccup with the interest rates going up in july. but we've picked up again in home sales. all the home builders are optimistic. stewart miller made the point that it was roughly 1.3 million to 1.4 million new shelter units needed per year. we'll do 900,000. that just pushes the cycle out again. we like them all, basically. but lennar is already close to peak gross margins, peak operating margins and early in the cycle. >> thank you very much, we're going to continue these conversations. bill miller is our guest host today. and up next, we'll head to washington and hear from the chairman of the democratic congressional campaign committee. new york congressman steve israel joins us after the break. (announcer) scottrade knows our clients trade

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andrew, you're between anxious and depressed about the -- >> yeah. can i get a kleenex too? my tears -- >> government workers in various departments sleeping in this morning. that's one of the good things. you do get to sleep in, but it's not for a good reason. congress failed to agree on a funding bill. leaders on both sides still unable to come together for a compromise. >> the house has made its position known very clearly. we believe that we should fund the government and we think there ought to be basic fairness for all americans under obama care. the senate has continued to reject our offers, but under the constitution there's a way to resolve this process and that is to go to conference and talk through your differences. and i would hope that the senate would accept our offer to go to conference and discuss this so we can resolve this for the american people.

>> we like to resolve issues, but we will not go to conference with a gun to our head. the first thing the house has to do is pass a clean six-week cr. they have that before them, they can do it right now. if they do that, then we'll agree to work with republicans on funding for the government through the remainder of the fiscal year. >> and joining us now, congressman steve israel. congressman, you know, i'm worried -- we're at a point where it's already happened. if we're just going to scream and yell and disparage the republicans, it's not going to help. you go into the chamber every day with these guys. i know you don't throw mud. there's no fights. people aren't down on the ground fighting. how can we -- what do we need to do to put out an olive branch? let's settle this right now. what do we need to do realistically to get this cr done? what do you need to do?

>> we're willing to do what the republicans asked us to do. they said here's our budget figure, take it or leave it. yesterday we took it and they left it. here's a solution that gets us out of this mess. the republicans have said they want to continue the operation of government at the level of $988 billion. democrats initially said that's too low, we want to go higher. yesterday we said to speaker boehner, made an explicit offer. all right, you wanted 988, we'll give you 988. in between the house and the senate. but let's keep the government functioning while we negotiate those differences. so you have said take it or leave it, we'll take it. and, unfortunately, the response was we'll leave it. as a result, the government is not functioning today, it is not open, that is reckless, it is irresponsible, and it puts the economy at risk in order to achieve a political gain. and i think that's unfortunate. >> do you think the republicans are at a point now where to save face they need some token? is there anything you can think

of that would work that way that you guys could part with? >> we gave them not a token, we gave them their deal. if i'm negotiating the sale of a house, i want to buy a house. if somebody gives me the price, i say, okay, i'll accept your price. there's something wrong with the negotiation. this is not a token, we gave them what they wanted. >> we haven't gotten to the medical -- just the medical -- you're still talking about -- they still want to delay a year on obama care, right? what was the most recent offer you got from them? delay a year and do the medical device? where are you? >> well, there have been so many offers and counteroffers at this point, the state of the union is now silly. the last offer that they put on the table after rejecting their own offer of 988 billion was the issue of the continued employer contribution to members of congress and staffs, members of congress must leave the federal employee health benefits program under the affordable care act, go on the exchange, so they

said, that's fine, except they want to take away the employer contribution. that's the vitter language. they had contraception in there, restrictions on contraception and the deal they've presented over the weekend. look, every time -- you know, my colleague from new york, peter king has said they go from dead end to dead end. every exit strategy is another dead end. we need to get beyond this, the american people are sick and tired of this finger pointing and blame and we have the solution. the solution is the republican budget they themselves offered. >> okay. when do you think if -- whisper to me. how is this going to play out? maybe no one will hear. will it happen today, will it happen tomorrow? how is it going to work? what's going to be arrived upon? >> well, you know, there's too little whispering in washington these days, there's a lot of screaming at one another. here's what has to happen -- >> is it going to happen? do you think it will happen? >> oh, it can happen -- >> you're with those guys every

day, how will this really end and when? >> i'm going to be brutally honest with you. anyone that tells you they know what's going to happen with this tea party caucus, you shouldn't be listening to because nobody knows. nobody knows. but here's the thing, this doesn't have to happen this way. there are enough votes on the floor of the house of representatives this morning to pass a clean cr at the republican budget level without all of these extraneous positions, without de-funding obama care. we could get this done in a matter of an hour. >> but it hasn't happened. >> but it hasn't happened. what's going to get you there? >> ultimately, speaker boehner has to decide, does he want to continue to govern by pandering to the tea party base in his caucus? or is he willing to suspend the rule and allow enough republicans to get this done? there are at least 218 votes, i think there's probably more like 230 votes, a critical mass of democrats, which is what got us

away from the fiscal cliff last january. there's a critical -- there's enough democrats. and i think enough moderate republicans to get this thing finished and have some solutions rather than the continued chaos. >> boehner could do it if he -- if he did what you just said. >> there are two examples. >> he could say enough and just let it go to a vote? >> well, he did it twice before with hurricane sandy and the fiscal cliff. what worries me is this is just the overture, the dry run for the debt ceiling. a republican member of congress said to me yesterday in the elevator, you ain't seen nothing yet. this is pregame. and that would be deadly -- >> and you didn't hit him? what do you guys do then? you're in the bathroom together. hey, how's it going, frank? that's weird. it's weird for us to watch that. >> well, it's weird and it's -- it's tragic and, again, it doesn't have to be this way. >> there's so much. the president gives a speech

every day just hammering the republicans. what do you expect? and there is -- he's got the bully pulpit and i don't know i don't see anything good happening ever again. >> well, you know, one thing about washington is we tend to get into these kind of reruns and repeats. we had the fiscal cliff in january. everybody was saying washington can't get anything done. when john boehner said we'll take as many democrats as you can give us and a few republicans, we passed it. when -- on hurricane sandy when for the first time ever the tea party republicans refused to provide my state and other states with relief. finally at the end of the day, the democrats in congress were able to find a few brave republicans and we passed that. we have to do that again. and i'm hopeful that speaker boehner will take the deal that -- not that we offered that he offered that we agreed to. it's not too late to solve this problem. and he cannot hold the whole

faith and credit of the government -- >> where's your district? >> well, my district is in new york, extends in queens out to central suffolk in the town of smith town. the north shore of long island and northeast queens. >> nice. did you endorse the blasio? >> i have a small part of new york city, small part of new york city. i think he'll be a good mayor. >> do you think he'd be a good mayor? >> i think he'll be a good mayor, yes, sir. >> okay. i wanted that tape in case we see you again. we'll see what happens. we appreciate it. thanks, congressman. >> thank you very much. coming up, we've got stocks you need to watch. and the top of the hour we have house minority whip steny hoyer joining us with reaction to the shutdown. and texas governor rick perry will sound off. "squawk box" will be right back. so i c

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if your travel plans involved any of the national parks or museums managed by the national parks service such as yosemite or yellowstone -- that's iconic. what is that? >> oh, i know it -- i was just

thinking -- >> what is it? >> el captain. >> look at that. >> beautiful. >> i want to go. when "squawk box" returns, minority whip steny hoyer. and later rick perry. checking the futures right now. you'll see despite the government shutdown, futures have been indicated higher. "squawk box" will be right back. bny mellon combines investment management & investment servicing,

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congress failing to reach a deal to fund the government. >> shut this down. >> i want a different answer. >> the house and senate reaching the midnight deadline without one. >> shut it down. >> as of today, 1 million nonessential government workers will be furloughed. >> shut it down. >> and some national parks and government offices will be closed. >> shut it down. >> we'll talk to house minority whip steny hoyer. >> what a shameful day this is in the history of house of representatives. plus, texas governor rick perry will join us onset. >> and health care exchanges launched today despite the government shutdown. we'll talk to the chairman and ceo of insurer ehealth on his company is working with the new health care law. the third hour of "squawk box" starts right now. >> i don't want to do this show

anymore. shut it down. welcome back to "squawk box" here on cnbc. first in business -- >> we are. >> -- worldwide. i'm joe kernan along with becky quick and andrew ross sorkin, our guest host this morning market master and the one i would say essential employee on the set -- >> he is essential. he's a key man. >> yeah. bill miller, manager of the legg mason -- u.s. futures have backed off a bit. now they're up about 37. and i -- i don't think i'd bank on that if these guys continue to just yell at each other. >> you're going to get headline watching all day everything that comes out of washington could end up eventually pushing the markets one way or another. >> overseas in europe where all those governments run so smoothly. they're down 22, up 27, up 45.

what happened in italy, just said we're leaving and there's like 12 different parties anyway, i think. so we've -- we've got our problems but, you know, could be worse. and in asia overnight, the nikkei fell 1.5%. that after abe, the japanese prime minister announced a significant tax increase in the first step toward tackling the massive government debt burden. congress failed to reach a deal as you know to fund the government. the shutdown is in effect. john harwood with more. is he all excited and, i was on "squawk box," look at this. i don't think -- it's not the same is it? why is that? >> i guarantee he's going to tweet it out as soon as he knows he's on our show. >> you're being sarcastic. like all the -- >> yes, i am. >> like all the congressional

people we've had on. what do we ask people now, john? you just know they're going to yell about the other side. anyone we have on yells about -- i'm asking, you know, how does this end? i want to know -- you know it's going to end. can you just tell me how? isn't it -- >> yes. it's going to end when republicans decide they've taken enough punishment. >> how can they do that? do they need any -- what is it at this point? i'll buy a bagel or something? what is it at this point they'll say i got -- to say enough? >> i think it's going to be when the damage to the national party is sufficient that donors that republican national strategists that john boehner himself, that mitch mcconnell say enough, the party is hurting, maybe some governors, as well. and then john boehner goes into his caucus and says to the 30 or 40 tea party guys who have been forcing this strategy on him we've tried it your way, didn't

work, now we're going to just cut our losses and move ahead and try to find another vehicle to fight on, perhaps a budget negotiation which, after all, is what we're supposed to be talking about. the -- how to fund the government of the united states. but what we saw last night, joe, was one series of back and forth between house and senate, the house tried to get the senate to go along with de-funding obama care, with delaying obama care, with getting rid of a medical device tax. and the very last episode before midnight is when the house then voted to say we're going to go to conference with the senate and try to get them into a negotiation here and harry reid said that was going to meet the same fate as the others. here are the two leaders last night. >> we were hoping that the senate will take our offer and go to congress. we also want basic fairness for all americans under obama care.

>> we like to resolve issues. we will not go to conference with a gun to our head. >> as a result of that, there's not going to be a conference, the senate will affirm that today. answering their phones and seeing what the reaction is. most people expect on both sides that republicans are going to take the brunt of the blame. but the white house understands the president's going to be hurt too. looking for a break as a result of public opinion and public pressure. >> you don't want to -- i thought you were going to toss out one other sound bite that -- >> i don't know the one other sound bite. >> work with me, will you? >> we had boehner and reid. >> you'll negotiate with iran but won't make a call to the leaders of the house? i mean -- >> that is -- that's -- >> one of those things that

sounds good but doesn't mean anything. >> i know, but still, people remember that. >> well, that was chief washington correspondent john harwood and "squawk" -- no, that's the one i thought you were going to start with. >> i'm sorry. i'm sorry. i was behind the cue. >> work with me. >> the sound is in. so it's basically something that you play and don't say anything. it's like the sound of one hand clapping or something like that. you're supposed to -- you're supposed to reach -- >> it's supposed to make you think. >> supposed to make you think. >> you have made people think with that comment. >> jon stewart is going somewhere, wow, i finally made it. >> his lucky day. >> maybe not. >> and he's going to har about it from all the grandmothers watching this show who let their younger children and grandchildren know that he was on. >> we've gotten, you know, tens of dozens of younger people that have written in that they watch

both -- >> i'm 24 and i watch. >> thanks, john. we've got to get to leader hoyer. >> for more on the government shutdown, we are joined by representative steny hoyer. leader hoyer, thank you for joining us this morning. you've heard us this morning and you've been serving in congress since 1981. so you have lived through some of these government shutdowns, how do you think this one ends? >> i don't think any american can feel happy about the situation we confront right now. every economist predicts it's going to be costly to the economy, dangerous to our national security and undermine the confidence of the american people. and of the people who work for them in the united states government. this is a policy that is very negative, very harmful and rejected by approximately 3/4 of the american people as a strategy that ought to be pursued. so no american ought to be happy

today. this shutdown which is the first in 17 years. the last shutdown we had, of course, was under similar scenario, republicans in the congress of the united states, particularly in the house of representatives were confronting a president of the other party, bill clinton and said if you don't do it our way, we won't do it. and that's what's happened here. and that's -- that's not the way democracy ought to work. in this instance. i know previous people have said we've agreed to a number for interim funding for the government at the levels set by our republican colleagues. they won't take yes for an answer and it's a very sad day for america. >> is there any way for the republicans to back themselves out of this corner? is it our way or the highway? >> well, i'd like to think there's a face saving way and we need to think about a face saving way.

they have to give some help on that as to what direction they think they can move. their constant focus, their destructive obsession as i call it with repealing the affordable care act with which they don't agree. we know they don't agree with, the american public knew in the election that didn't agree with it. but the american people reelected the sponsor of that bill, barack obama. they reelected and expanded the majority of the united states senate that adopted that piece of legislation. so it is unreasonable and irrational in my opinion to simply reject the voters of america who made a choice just a few months ago and say if you don't agree with us now, we're going to shut down the government which is what has happened. >> the way it was passed ushered in the tea party. so they have constituents too at this point. and i know both sides have -- you know, the republicans --

we've decided that they're in the wrong here. but, you know, the president at some point, did you just think between now and 2014, he doesn't talk to the house at all? because these are people he just can't possibly talk to. it's going to be day in and day out at another college campus with everybody laughing and nodding as he bashes the republicans day in and day out? is that what we're looking at until 2014? >> joe, that's not an acceptable strategy and you know that and i know that. we have a country for which we are responsible. we pledged an oath to respond effectively and positively to running that country on behalf of the american people. so that's not a strategy. we've got to sit down, we've got to talk. very frankly. we wanted to do that on the budget as you know. six months ago, three months ago, four months ago, we asked to go to conference on the budget so we could reach a number and come to an agreement.

there's been refusal in the senate and the house to do that. you're absolutely right. the president and the democrats as well as the republicans have a responsibility. but we have a responsibility -- and i think the american people understand that to come to common ground in places where that is possible, not simply to say the election occurred. you're going to ignore the elections results. >> let me say, joe, let me say something. i'm glad you raised that. the tea party, i think, is a relatively small faction of the republican conference right now. i would say it's anywhere between 30, as small as 30 and as large as 60. the problem is not that the tea party who say that they're representing their constituents. let's assume for the sake of argument that that's true. but there are 150 to 160, 170 republicans who are not in that place but are allowing themselves to be led around by

ted cruz and the most radical element of their party. that is not acceptable. it can't happen in a responsible democracy. >> assuming you believe that entire group, then, is irrational, if that's what you believe. is there anything you can do, the democrats can do that they can offer as a fig leaf, an olive branch, as anything to try to get this across the finish line? >> well, i think we have a responsibility to find out what would do it. but right at this point in time, joe, you know my m.o., i do exactly that and that's what we need to do in a democracy. i have not yet found that element that they would agree to because they've been so adamant the only option for them is to repeal or delay the affordable care act. and when they say delay one year and that sounds reasonable, none of us believe on our side of the aisle they're going to change their opinion in 12 months. they haven't changed it in 24 months or 36 months. they're not going to change their opinion.

now we're going to be confronting as you know the debt limit extension. then assuming at some point in time we pass this legislation. we're either going to be facing november 15th or december 15th deadline. and that demand will be the same. it would be irrational for us to think if you do this the next time will be easier. it hasn't proved to be the case. >> yeah. >> actually, andrew asked a couple of those. i don't know which ones you liked and didn't like. if they were all okay, i'll take credit for them. you know what, i saw most recently -- the university of maryland i saw was like in the top five party schooling. that i did not -- i went to colorado, so i get tarnished with that every time it comes out. >> if we're going to to go to the university of maryland, let's go to the 4-0. beat west virginia 37-0. >> west virginia's pretty good, you're right. >> west virginia beat oklahoma state and they were 11. if we're going to focus on university of maryland, let's focus on the positive.

>> they got boomer esiason. i'm still working on steny hoyer. >> you're my man. >> what about a heisman pose? >> well, that's a little levity at a time when, unfortunately, there's not much to be happy about. >> i hear ya, but i know i can get you -- we try to end sh on -- >> i appreciate that, joe, very much. >> always with a smile. thanks, steny. also a couple of corporate headlines. berkshire hathaway collecting on a deal made during the financial crisis. goldman sachs warrants converted into common shares under terms of that deal. berkshire's going to be getting about 13.1 million goldman shares worth about $2.1 billion. merck cutting about 8,500 jobs calling it initiative to sharpen the commercial and r & d focus.

by the end of 2015. with this in previously announced reductions, it will have cuts of about 20% of the global workforce. also, chrysler reporting august sales increase of .7%. that's in line with estimates. and chrysler's best september performance since 2007. ford and gm will be out with their numbers later this morning. coming up, will the government shutdown mean a shocktober in the markets? guest host bill miller is going to weigh in. john rogers and harvey eisen. later rick perry will join us right here on the set. and then we're going to ask the chairman and ceo of ehealth how the company is dealing with the health care exchanges. we're back in a moment. [ bagpipes and drums playing over ]

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welcome back to "squawk box." we are feeling a little lonesome, it's about eight hours since the government shutdown. let's get to our esteemed market round table. joining us now from chicago,

john rogers. aerial investments chairman and ceo. and harry osmond chairman of wright investment holdings. and our guest host bill miller of the legg mason opportunity fund. since you are sitting next to me, just help me. do you have a view that's any different than bill's on what's going to happen here with this potential -- well, not potential, we're now in a shutdown. how long it'll last and what it means? >> oh, on that? no, total nonevent. >> and it's not changing. you will not buy anything today? you will not sell anything today? it's irrelevant to you? >> being in a 12-step program. i probably buy or sell something today, andrew. >> not as a function of what's going on in the government? >> carl who you talked about earlier said apple's a no-brainer. i think i'll buy some apple today. >> you going to buy some apple today? john, would you buy apple today? >> bill's made a compelling case. i saw him last week. and i said we have to look at apple for our large cap product.

>> what do you do, john? we've been batting it around. how long does this government shutdown last? what does it mean to the debt ceiling? and as a value investor, is there an opportunity here? or do we chalk it up to a big nothing? >> i think it's probably a big nothing. and inevitably it'll end. and if the markets go down because of this problem, i think it'll be a great opportunity to buy, take advantage of bargains that are happening because of this temporary phenomenon. >> you sort of teased us during the commercial break. i'm going to out you here. you said you might have an investment opportunity for the great oracle warren buffett. >> i do. >> and he may be watching right now. >> well, you know, he's probably on an exercise bike or with a trainer. that's what he does now. he's 83 you know. >> do you want to speak to him? >> hi, warren, how are you? you don't have anything to buy, the market's expensive. you just gave $50 billion to a guy named bill gates. bill gates has a company called microsoft, trades at ten times earnings yields 3.5% and raises

the dividend 15% a year. and even you, warren, can buy your position this morning. i would encourage you to look at microsoft. i think it's one of the no-brainers i've seen next to apple. >> hasn't microsoft supposedly been a no brainer for the past decade? >> what's the rush? >> in terms of the tipping point. bill, we were talking earlier about apple. we said what could go up 50% to 100% in the next two years. people for the past decade have been saying that's a stock that could or should go up 50% to 100% in the next two years. >> it has not. >> no, i thought microsoft -- it was a disaster for the last ten years because whenever i see mr. gates, all i have to say to him is how is your mobile phone doing? and smoke comes out of his ears if he's watching, you know, smoke comes out of his ears. >> and now you think smoke is not coming out of his ears? >> no, i think he's a grown-up now and doing fantastic things and that's why the nantucket project that you and i attended was great because we talked about stuff like that.

but the bottom line is bill's 100% correct. he's the best stock picker i know. these guys are hitting it out of the park and why? because stocks are cheap and everybody is terrified because they went up. >> i want to go back to the microsoft call for a second. is this a function of steve b l ballmer leaving? what put you on to this now? >> when i can buy a company that's an aboveground gold mine but they just generate cash, not gold, number one, number two, they're one of the five greatest brands in the world according to the survey yesterday. number three, they're buying back only $40 billion worth of stock. they trade at ten times earnings. >> and you got you're paid to wait. and if you look at any metric of microsoft since ballmer has been running it for ten years the sh. >> the stock price. >> and just shows you the margin compression since it was at 50 times earnings. >> here's the cherry on the

cake, not for you and me but for andrew. if you buy it at 3.5% today at $33. in six years, your yield will be 7%, $33 and raise the dividend every year 15%. but in 12 years, your yield is going to be 14% and that's what andrew's going to do for his two kids who have a birthday coming up. >> i have kids. i'm going to be here in 12 years, right, harvey? >> david rubenstein said the average age for white males to die is 81, but you better start thinking about it. >> john, we've got to go. if you had one stock for warren buffett this morning, what would that be? >> international speedway. nascar tracks, they got a new contract up 46% with fox and nbc. it's terrific. >> if it's related to nbc, i think it is terrific. john, thank you for coming on this morning. thank you for giving bill that big suggestion. we'll see if he takes it. >> i eat healthy, i'm running,

swimming, i'm -- >> me too. >> okay. >> and i'm waiting for the singularity. we may be on a grid. we may download our brains on the hardware eventually. singularity is near, harvey. cheer up. coming up -- google may cure death. much more on the government shutdown including a live report from nasa in houston where only about 6% of the employees are cleared to work. >> we'll be right back.

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oh, right. when we come back this morning, the government shutdown is on, scott cohen will rejoin us from nasa's johnson space center where only about 6% of civil employees are cleared for work today. and texas governor rick perry we'll get his take on the government shutdown.

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welcome back to "squawk box" this morning. let's take a look at stocks in the news. they're going to be helped by the dow jones industrial average. shares are higher in premarket trading on news of a cost cutting program that would trim about 8,500 jobs and save about $2.5 billion a year by the end of 2015. >> that makes no sense. >> going to be helped by merck shares. we're also watching jc penney hedge fund perry corporation is cutting the stake in the retailer a month after cutting holdings.

now 4.5% from the prior 8.6%. and buffalo wild wings is under pressure after raymond james ed it from outperform to strong buy. concerns over what it sees as a core demand environment for the restaurant industry in general. and i've got to say, i love wings, i don't know what's going on there. a partial government shutdown is in effect. and scott cohen is live at johnson space center in houston where only about 6% of employees have been cleared to work. scott, good morning. >> reporter: good morning, andrew, those were the employees necessary basically to protect life and property. include people who support the international space station which is still orbiting the earth. and you wouldn't necessarily know it to look at the johnson space center right now that it is subject to a wide-ranging shutdown here because people have been arriving. they started arriving before sunrise. a lot of these people are contractors. there are presumably some employees who are finishing up matters before they are forced

to leave. but this could very quickly become a very quiet place. and it is a big economic engine for this part of texas, certainly not the height of employment that it had during the space race. nonetheless, there's not only the johnson space center, but a lot of contractors that support this place and a lot of businesses around it that rely on the personnel. when the president was ticking off the effects of the potential government shutdown yesterday, nasa was high on the list. >> nasa will shut down almost entirely, but mission control will remain open to support the astronauts serving on the space station. >> but that is a very small workforce. here's the impact according to nasa. at the johnson space center, the total workforce here is about 3,200 people. the people cleared to work about 193 of them. and a couple hundred more that are on call if something were to happen. system wide, nasa employs about

18,000 people, of that, 554 people cleared to work through this government shutdown. so there is a big impact here, and they're bracing for it here in houston and throughout texas. back to you. >> speaking of, scott, thank you. got governor perry here. the shutdown is on and many government workers are staying home today after congress failed to pass a continuing resolution to fund the government. and texas governor rick perry joins us with his reaction in studio. awesome to have you here, governor, thank you. >> thank you very much. >> you are not -- i don't think you're in trouble in terms of elections and you're not in the house. so you can give us just an unvarnished take on what is -- is this a good thing for the republican party and its prospects in 2014? the mainstream media says this is a disaster. >> yeah, i don't look at it as a partisan issue.

it's not good for america, it's not good for our men and women regardless of where they may be, regardless of your politics. the states are great laboratories of innovation. we're required to get our budgets balanced and work with both sides of the aisle. i don't understand why washington can't do that. >> was this the time for the fringe of the republican party to make a stand on obama care? >> well, i think it was an appropriate time to talk about obama care and really get the american people's attention. we've known it's been coming for a long time. we tried to educate as many people as we can about what a disaster it's going to be. it's the reason we did not expand medicaid in the state of texas, it's the reason we did not participate in the exchanges because it is going to be an absolute economic disaster. here's the bigger point for me from the standpoint of someone who has been involved in this business for almost three decades. the governor coming on for 13 years, i sit down with democrats

and republicans and i negotiate and i work with them. >> these are texas democrats. >> a week ago. a week ago, i thought that maybe they would come to their senses in washington, d.c. and sit down and negotiate a middle ground or negotiate it all. but we saw harry reid and the president of the united states stand up and say we're not negotiating. this is not negotiable. well, i've never seen something in the government that's not negotiable. so from my perspective, you have this absolutely immovable object. and we saw joe manchin who is a former governor who understands the art of negotiations standing up and saying, you know what, we can push this off for a year. we probably would be better off to do that. you have the unions. you had the teamsters standing up and saying this is not good for our people. so time after time you've heard all of these considerations that obama care is not what it was sold as. it's going to be very costly.

it's not going to be a process that is good for the american people. yet the president of the united states says, sorry, we're not negotiating -- i got this without any republicans and we're going to push it through. >> i made the point that it might have been a tactical mistake on both party sides. >> i think it probably is from the standpoint -- >> the law might be better if it was worked out better over the next year and the republicans might have been better off if they let it try to go in effect today and not work well. both sides were put there by the other side where they both might be -- >> i think that both sides look equally poor in this from the standpoint of the american people looking for solutions to issues that face the -- >> how would you cover all the people in texas that don't have insurance? >> well, we put health savings accounts into place? personal responsibilities we would have the flexibility with federal dollars that come in rather than this

one-size-fits-all. that's the problem with washington. there are 50 different states out there, laboratories of innovation. let them come up with the ways to implement health care. but washington is so stuck on we know best, we're going to implement these programs that are going to be effectual for all the country. they're proving it day after day. >> steny hoyer was on a bit ago and pointed out, this was the law of the land, it was validated be i the supreme court and the american public has had the chance to vote on the man who sponsored the entire bill and voted him back into office. >> we changed pieces of legislation all the time with those same types of parameters. >> you're talking about changing, not repealing. >> and that's what i talk about. >> should it be done in the context of the possibility of a government shutdown? should we not -- should we do -- is there an opportunity to do it in a different way? >> well, absolutely.

there should have been. the idea that you're going to, again, my way or the highway is not the way to run a government. >> who gets the blame for that? >> i think they all get the blame for it. there's plenty to go around. >> do you think it's unfair that the republicans are getting the blame for this? and will they in 2015 or '16? >> i don't know. government has been shut down before. since reagan's time, there's been multiple shutdowns of the federal government. it's not the end of the world. they'll get this worked out. it's great political drama. but the fact is, they need to get their business together, fund this government and obama care is at the heart of the issue. so if they've got the votes, they're going to pass the votes. and the fact is, then we're going to find out whether or not obama care is going to function or not. here's what it does to the state of texas if it is implemented the way it fully is put into place. it's $18 billion more over the

next ten years. it's $100 billion of all funds. and then there's still going to be millions of people in this country -- i think 31 million people in this country still don't have health insurance. we don't keep score in texas by seeing how many people we can put on public assistance to judge whether or not we're successful. we judge success by how many people have a job in the state of texas and they have the alternatives to buy insurance from various resources. that's how america should be judging success. >> you know, governor richard issuer issuer's been on a number of time. he's made the point, people write off texas' success, economic success, well, they got all that oil down there. he says it has to do with tort

reform, low regulation, low taxes. he rattles off a list of things that make it easier for the private sector to succeed in texas. what's the one thing that we need to do on a federal level to try and just jump start this tepid economy we have? >> i would do three things. i don't think there's just one. but i think there are three things. one is on the energy side. and he's absolutely correct. the gross state product in texas percentage today is the same as it was in 1984 relative to the oil and gas industry. we've had this huge growth of the texas economy and you've had increased cost of energy. i mean, oil and gas over $100 now. yet, it's still the same percent of the gross state product. so expand the energy business in this country, open up the xl pipeline. i mean, those are some simple solutions to getting a lot of people to work. just focused on the energy industry, as well. i put a flat tax into place. and then repatriate this money

that's offshore with bringing it back in here at a very low tax rate instead of this very heavy tax -- and those three things i will suggest to you will kick start this economy and americans will be back to work. and we wouldn't be having these conversations like they're having in washington, d.c. >> and you're a striking man. and there's nothing better than a uniform. a striking man in uniform. and i remember your shots when you were younger. you just love him, right? you don't care what he does? >> well, i do care what he does. >> it's so exciting, though, he's the most exciting player -- >> he handles himself fairly well. >> you think so? you give a thumbs up. >> i'm glad they didn't have video cameras when i was 20 years old to follow me around. >> yeah. >> even an exciting football player, you can't help but be excited to watch who they're playing. he's an exciting football player. >> it's awesome for college football this year. anyway, as you know he's an

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today. today, of course, is the day the kickoff of the health care exchanges. what impact do insurers think it's going to have on business? joining us now to talk about it, the chairman and ceo of ehealth. and good morning to you. >> good morning. great to be here. >> so here's the question i have, we've been talking about the politics of putting off these exchanges. i want to talk about the practicality of whether these exchanges are going to be successful on day one since you guys have been in this business for a long time. what are the chances we're going to see a lot of hiccups? what are the chances it's going to go smoothly? >> well, you know, like anything, this is the first day of something that's very complex. and in the technology world, these are not easy things to build. you're talking about government going into the ecommerce business. and if you look at the success/failure rate in ecommerce, it's not a great ratio. i don't have any inside knowledge, but i would expect that there's going to be turbulence and some hiccups. but i think even more importantly going back the comments i heard previously,

thinking government can do this alone, i think, is a mistake. >> what's the answer if government can't do it alone? >> well, putting aside the politics of obama care, but it is the law of the land. and we've felt a long time to make this successful you really need a partnership between both the public and private sector. you know, we've been doing this jaup line long before the words exchange and health insurance were part of the same sentence. the federal government is operating in exchange because the states elected not to. 14 states, mostly democratic states have elected to try to go it alone when it comes to enrolling subsidy eligible individuals. we think that's going to optimize enrollment and cost taxpayers money. >> how does this affect you? >> no effect at all. we're a private sector company. and depending on how this may have impact over time on, i guess, exchanges, although i'm hearing not. probably we become more important resource for consumers

to go to. but, you know, the government shutdown doesn't affect us at all. in fact, we have recently seen volumes of people coming to as consumers looking to learn more about the affordable care act. increase significantly, we expect that to continue. >> the states that aren't partnered that are doing it on their own, are there specific states you're worried about? are there systems you've looked at or heard about that have you anxious? >> well, not anxious. we operate in all 50 states. people have the option of using us in all 50 states unless they're subsidy eligible. these are lower income people. so my home state of california, for example, the largest population state in the country has elected at this point -- you can't use google here in the silicon valley, why don't you go to the library. and we don't think it makes any sense. in fact, in california, every

time we enroll a subsidy eligible -- and generate revenue. >> how much money could you save? >> well, it's a good question. we can -- every time you enroll someone online, it costs money. so the exchanges are going to have a cost in doing that. but more importantly in california every time someone enrolls, whether it's through the government exchange or outside it, the subsidy eligible individual well over $13 a month is generated from that health insurance policy. that's paid directly to the exchange to fund and support the exchange. every time we enroll one of those individuals, we support the exchange and generate revenue in this state. >> how concerned are you about accessibility? >> well, i think that's a great question. you know, we saw over 20 million americans come to us last year, historically over 40% of individuals who have done business were previously

uninsured. i think government has got an awful lot of work to do to generate awareness visibility. i think you could argue the administration has done an ineffective job up until this point. we just saw a gallup poll yesterday that said 65% of the uninsured are going to get health insurance under obama care. that's how they responded. but less than half said they'd use the government exchange. whether because they don't know about it, i don't know. but this, once again, argues to me that you need more than government work here to make this successful and effective. >> on that score, i completely agree with you. i don't think anyone understands enough about this to know what to do. we appreciate your time this morning. appreciate it. >> thanks so much. and coming up, the government shutdown is in effect. what does it mean for stocks? we'll ask jim cramer next. the most free research reports, customizable charts,

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. cnbc is celebrating a big milestone tonight. the 2,000th episode of "mad money" with jim cramer. he's doing the show from outside the new york stock exchange and, in fact, he's so excited, he's there already. jim, has it really been 2,000 shows? >> i don't know how that happened. one of the reasons is of course we do 250 a year because there's no time off and no co-host and they do kind of acouple late, one month after the bottom of the market. i can't wait to see this tonight. you're going to be outside the new york stock exchange. i want to get your take because bill mill ser is here. we've talked about the airline. he still loves the sector. >> the sector is good. there's not a lot of competition. if us airways gets the deal, my, i think that stock is a double. if you have a long shutdown, the airlines did get hurt last time in the sequester. but they percolated back. it's good to watch because they haven't had to watch in 30 years. >> bill, you came on and talked to us -- just about the time

bill came on, jim, you guys were looking at the same things with these stocks, right? >> revenue per passenger mile, very good. it's very hard to get a plane. all the planes are located. if they get new planes, their earnings go right up because 40% of their cost or fuel, the new boeings are so much more economic. i caution people, if this shutdown, which you guys were talking about all morning last, that's where the earnings per share are going to be earned. >> jim, thank you. we'll talk to you at the top of the hour and we'll see you tonight for the 2,000th episode. >> come on up. >> come on up. our

invested in the world. bny mellon.

our guest host bill miller, the last word. you didn't chime in on microsoft being a great buy when harvey isen talked about it. >> we own microsoft. >> do you? >> they raised the dividend

15.9%. i think it's much more likely the dividend increase will be 20% or more the next five years. so microsoft has been a terrible stock for a decade, started out stupidly overpriced and now it's stupidly underpriced. >> is the catalyst going to be -- >> if i told you alan mulally got the stock -- >> i'm getting steven elan gets the job. >> does it matter to you where the ten-year goes? do you assume it's going up? >> i assume we're in a 30-year bond bear market but it's a benign bear market to begin with. i think 39% we saw is probably it for the next few months money. >> what about two years? >> i don't think two years. i think the fiscal drag will be less than the economy

accelerates. >> at 3.5%, just any stock with a 3.5% yield if it's a quality company, if it's not going to just go bankrupt, you can assume there will be fluctuations in the stock price but if you're getting 3.5% over zero, it's not that bad. >> it's sort of a no-brainer, again to use that term. >> at&t, pfizer? >> well, i'm less enthused about an at&t or verizon. pfizer would be better i think. >> people hang on every word. any other no-brainers? general electric? >> yeah, ge is another one. most of the big cap names with dividend yields at or about of 10-year treasury -- the s&p 500 payout ratio is on in the low 30s. i think that's going to go up and dividend growth will be double digit for the next several years. >> you play media at all?

>> not really. >> it's hard, isn't it? and it's daunting and it's challenging and the landscape. >> why does he love comcast? >> i wasn't going to say that because i'm not quite as shameless as you. i just saw a piece in the "post." >> bill miller, thanks for being here. >> thanks a lot. >> "squawk on the street" begins right now. good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber at the new york stock exchange. we are in a partial government shutdown for the first time in 17 years. futures are working their way through it. gold actually down $35 today after a very long night in washington, as we also kick off the 4th quarter. ten-year yields around 2.63,