i'm becky quick. andrew ross sorkin. all those promises that maybe the government would be open by now. not so fast. the treasury department warns that the government will not be able to pay its bills after wednesday. senate leaders have taken over negotiations. they spoke by phone yesterday. they failed to reach a deal. the senators are at an impasse over sequestration cuts. bipartisan group of 12 senators had put together a proposal that would reopen the government and funneled it at current levels and fund it at sequestration levels for six months. it would raise the debt limit through january 31st. >> january 31st on the debt ceiling, march 31st on the cr gives us time to work. >> i do believe we're going to see a resolution this week. >> but there are still doubts.

>> i'm not going to vote for any plan that will get a majority of republicans in the house. >> as a result take a look at the futures this morning. you will see that there are some red arrows once again. dow futures down by 93 points below fair value. the s&p futures down by 10 points. andrew, i'll send it over to you. >> the bond market today not open because of columbus day which may have a little bit of an impact in terms of the odd dynamic between the stock market and what people think is going on. also reaction this morning to the situation in washington. imf chief christine lagarde she's now warning of, quote, massive destruction to the global economy if the u.s. debt ceiling is not lifted. deutsche bank ceo says it would be, quote, a very rapidly spreading fatal disease. i haven't heard it put in those terms in a very long time.

jpmorgan boss jamie dimon warned banks are spending money. quote, we need global growth. we are on the verge of getting it. please, let's not shoot ourselves in the foot. on a similar note, former treasury secretary larry summers pending an op ed in the financial times he argues a small rise in the economic growth would entirely eliminate the budget gap. if even half the energy that had been devoted over the past five years to budget deals were devoted instead to growth strategies, we could enjoy sounder government finances for restoration of the power of the american people. joe, i think that's a message that republicans and democrats have to learn. to hear larry summers say that and if he can get some of his democratic friends on board, it could help a lot of things. >> he lives. >> he lives. >> we're going to try to get him back on the show. >> kind of like he's coming out.

debutante. >> he was not around and now he is. what was the store bring before that that you said, andrew? >> we had jamie dimon, we had -- >> jamie dimon. jamie needs some growth. needs to make a little money for the bills, the legal bills, right, from last week. >> definitely needs growth. >> we all do. >> i don't know what larry's growth is. instead of arguing about a budget should have been doing proactive things to create growth or -- >> no, he's back on infrastructure. he's back on what is the role. some of it is how do you reduce some of the regs and things like that. a lot of it is what else can we be doing on the infrastructure side. it solves all the problems as you like to say.

>> you're borrowing money from china to do the infrastructure stuff. >> i bet republicans would take spending for cutting entitlements. >> it's monday, "walking dead." this other stuff, i feel like it's out of my hands now. i've tried. >> you know what, i feel -- >> i've tried. do something. just get it done. mcconnell. >> two steps forward, one step back with this. now we're back to looking at sequestration level. >> i know. obama. just i feel like it's out of my hands, andrew. >> you feel like you're going to washington on thursday. >> i think you're going to washington on thursday. tomorrow is the day i'm worried about. today i'm not so worried. >> i don't think you should be worrying. >> you think they have it organized so there's nothing to worry about? >> no. i think it's going to happen. i'm tired of the back and forth. >> i think it will happen so late on wednesday we'll already be in washington. that's my prediction. >> go down there.

anyway -- >> jill, why don't we take the last -- what's the last flight out? >> yeah, i'm not tlieflying. i like the train. get buffalo chilly. >> -- chili. >> you try new seafood items on a train. say what? you have a muscle crab risotto. okay, bring it. china's official news agency is calling for the creation of a deamericanized world. i'm not sure what that means. it sounds scary. the destinies should not be left in the hands of what it calls a hypocritical nation with a dysfunctional government. >> they have the taliban. >> yeah, their -- right. let's throw them together, china, russia, the taliban. the news agency doesn't want the

dollar used as the international reserve currency. >> even though they've pegged the dollar for how many years. >> kick us while we're down. we'll remember this. check the markets. the futures are down. we made up 400 on thursday and friday. >> that's because there was hope. >> yeah. >> there's always hope. >> 15:2,237 is where the dow wa. we came rolling back up. if i were mr. gold, and i'm talking about bouillon, i'd be showing signs of life. we'll look at that. energy, that makes sense. you figure that might go down. the dollar, maybe we're not quite as nice as the best house in the neighborhood with what's happening. it's only -- what month is it? is it october? i'm thinking of europe in the summer. would he have time to get back

below 130 and maybe below 120. this should be moving. let's go. the world is -- i mean, this has never happened before and no one's rushing to the quality of gold. that's weird. if we're going to default, i think gold would be reacting a little bit more positively than 12,076. we're getting near the multi-year low. time for the global markets report. ross westgate is standing by in london. i guess you've got some stuff over there, but i think about saturday and what i saw with college, i think about all of the nl and al championship games. i think about tom brady yesterday watching what happened and all of the other -- bengals. i feel sorry for you. you don't have all of that. what went on in the u.k. over the weekend worth talking about in toermgs of sports? can you name one thing?

i hope you get a football team. >> world cup qualification games, joe. >> world cup qualifiers. that was it? >> yeah. it's the last -- >> are you open to saying that's something worth -- >> if you like that, sure. >> in brazil -- this is what's coming to brazil next year. >> could you get nfl games if you wanted to over there? is there a way to do it? >> yes, you can watch them. yeah. >> but you -- >> i think there was -- >> you know what, i'll bet you you saw more football than andrew? >> probably true. it is probably true. i spent the weekend at a pumpkin patch. >> oh, yeah? >> that's nice. that's nice. >> i did. we went on ponies and did all sorts of things like that. not sports but, you know, we're working on it. >> where is that? 31st and lex? where is the pumpkin patch -- >> had to leave the island. >> what? >> we had to leave the island.

>> what? >> yeah. we rented a car. >> a zip car? >> we left the island. >> a zip car? >> it was a real car. >> a real car. it was an suv. >> to largo. >> i drove. >> no way. >> i drove and we went out and we spent the day out there. >> in what state? >> in los angeles. we got corn and we got pumpkins and we did ponies and we ran on camels and llamas. >> did your kids love it? >> they did. but we have business to attend to. >> you're now set for five years or so seeing all the greenery. sorry, ross. ross is like, do do do, i come here, wait, finally get introed. anyway, sorry. >> no, that's okay. i'm pleased andrew got out of the city for the weekend. that's good news. despite where futures are trading right now, which you were just pointing out, joe, european he can witt its haven't done very well. we're pretty evenly paced around

decliners. little more relaxed. global investors, no one thinks the u.s. is going to default. there schbt huge pressure. you can see it's up 600. absolutely flat. ftse has been flat this morning. it was up a little bit on friday. up half a percent. the cac up .10. now we're not too concerned. there are other issues we're looking at. basic resourgss are up. that's despite chinese data is down to a 17 month low. it's contracting. basic resources would normally fall on that number. the good news is that there are imports and they're dogs fairly well. technology down a little bit. auto is very much in focus

off 1/4 percent. here in europe, down to the two stocks. peugeot, the french car maker, they are talking about a 3 billion hike. a chinese partner will have to come in. they may take between 20 and 30%. down a quarter percent and bmw talked about chinese sales up 20% for the last nine month period. they're talking about another record number of sales. pretty contained session. now back to you. >> sorry about the interrepresentation of ponies over the weekend. >> no, you're riding llamas? >> i wasn't riding the llamas. >> camels. >> camels. i don't think you can ride -- can you ride a llama? you can ride a camel. >> you can try.

>> probably can try. i don't know if you'll get bucked off. >> camels definitely spit. >> there was a lot of spitting and bucking going on in washington. john harwood joins us to give us a little bit of an update over what happened or rather what didn't happen over the weekend, john. >> well, what didn't happen was the deal got purt in place to resolve the debt ceiling and reopen the government. i think we're getting closer. you have knnenknow negotiations mitch mcconnell and harry reid. the longer it goes on at current levels the more democrats feel like they can't alleviate parts of the sequester. already the republicans want a short debt limit extension. democrats want a longer one. i do think that mcconnell and

reed are likely to work that out. if they do, then you could get a deal through the senate that the house would have little choice but to accept and i think that's a strategy that even house leaders are counting on, too. something comes over from the senate. the speaker puts it on the floor and it ends up passing whether or not conservatives within the house republican caucus object to it. >> john, what's the timing at this point? >> i think the -- we're looking early today for some sort of agreement from reid and mcconnell. if that happens, the senate can put it on the floor relatively quickly. the target date since you know since you've scheduled your show to come down here is thursday. there's still time for both things to happen, that is senate consideration of passage and house consideration and passage by thursday, but if they don't get an agreement today, that's in jeopardy. >> there's some talk, john, that

if the senate doesn't get a deal going today, boehner plans to put up a new proposal tomorrow. what would that look like? >> a short-term debt limit extension, perhaps a government spending bill as well to reopen the government, but something very short term and i think look, the senate has no deal and boehner passes that, that has a good chance of becoming the outlook as well. i sense the commitment shared by leadership in both parties that will likely be controlling that we are avenue not going to breach the debt ceiling on thursday. >> if you wanted to handicap it, you would put the odds that we don't go over? >> i think the odds that we go over, that we breach the debt ceiling are pretty low. i think that, you know, one in five? >> no. >> stop worrying. >> i like that.

except that one in five shot comes true and we do breech it, the consequences are pretty grave. so i think -- >> i'm packing my bags. >> i love you but i'm not packing my bags. >> what do you mean? >> i'm not coming down on thursday. i'll be down that weekend. >> you're not coming? >> note thursda thursday. >> he's betting we'll get a deal before wednesday? >> oh, okay. >> is that what you think, we'll get a deal before wednesday late on it will go down to the wire? >> i think it will go down to the wire. wednesday midnight. let's put it this way, i don't think it will be done before 6:00 p.m. on wednesday. >> wow. guys, in looking at what happened in bringing the sequestration levels back into it, the democrats are going to push the advantage at this

point. is this just talk a who he had of it or making a point that, by the way, we had agreed to go ahead with the sequestration talks. >> yeah, i do think there's a human danger that at the end of this process the democrats pushed their leverage too far the hubris having beaten back the republican demand which they considered way out of bounds, they pressed too far. there is a common desire. remember, the house republican proposal to the president was also about alleviating sequestration cuts in long term entitlement changes. what they're doing in trying to press their advantage is to make sure that the debt and deficit negotiations that follow this agreement don't foreclose them getting anything because if republicans rule out revenue and if you also rule out alleviation of the sequester, all there is are additional entitlement cuts.

>> assuming you get a deal, is there a lasting impact for either party or does it matter or is this just the messy game that is washington? >> there's lasting damage to the democratic party. they're pushing it too far. >> even if the deal gets done? >> yes. but i think the intensity of the damage sort of fades over time. this is a pre-existing condition, if you will, for the republican party that hurt them in 2012 that is getting burned in now. >> also of kind of in the middle of people that are still -- you know, they haven't decided whether they want what we talked about last week. you saw the one poll came out about who wanted a clean cr and it was like 60% said, no, i'd

like to cut. the "times" big piece yesterday was maybe the republican's chances of taking the senate have been diminished. it wasn't about losing the house, it was still even with the idea that they could retake the senate in 2015. it was a front page piece that said maybe the chances of doing that are at the margin. we'll see. >> i agree with you. it is at the margin. memories fade. people's attention moves on quickly. republicans need to deal with the perception that they are a party that's speaking to a small number of people and not the broad swath of the american public. that will get solved when they get a nominee and chris christie redefines the party. >> there are people that would make the case that governing by polls isn't the way to go anyway. if you have ideas about what's

right and you don't damn the torpedos, it's not about poll, then it stands for something instead of sticking your finger up every five minutes in the air to see which way the wind is blowing. >> i know what your' saying. it's true but it's about the realistic exercise of the power that you want that the voters have given you. >> i'm with you. there's a lot of important things happening in terms of the national league, the american league. >> did you watch the end of that game last night? the roiblgs and -- >> no. >> no, it was too late. >> oh, my god. >> 6-5 i saw, the red sox pulled it out. >> that was a game for the ages. >> did you see the patriots as well yesterday? >> yes. >> great stuff. >> yes. i also saw the redskins get whipped by the cowboys. that was not good. >> yeah, i know. i know. that's why i'm mad at these guys. it's like i need to focus on some of this other stuff. you know -- >> bengals in overtime. >> that was something, too.

>> they've beaten the packers and the patriots which i would never have predicted. anyway, we're getting yelled at. >> john howard in washington. thank you, sir. lady in red. >> he can say thank you back if you want. >> we need to thank him. >> we do need to thank him. every monday morning felling us wh telling us every weekend what did happen. we have erskine bowles joining us. he's going to bring his rise above. bob corker will tell us what's going on. then we have mark bertoloni. >> who? >> bertolini. >> as long as you get mark right. >> don't worry about it. >> how twitter is getting a great deem from the banks. being really cheap, aren't they?

they're allowed. you know what, you have power. you have power. anyway, it's the lowest in the year for the fees. first off, here's what we were talking about, some of the stuff. sports news in the sunday night game. the cowboys beat the redskins 31-16. what an ending in the patrio patriots/saints game. he heaved it 17 yard touchdown pass to kenbrell tompkins. five seconds left from the 17 yard line for new england to beat the previous unbeaten saints. big night for boston sports as well. david ortiz hit a game tying grand slam in the eighth inning and then watch this. a walk-off single in the bottom of the ninth which gave the redskins -- the red sox a 6-5 bins win over the tigers.

now it's 1-1. the dodgers have to get it going. the tigers will host game three. now the forecast. >> hey, guys. the storm system moving here in the plains. this is a big weather maker. this is going to open the door to a lot of very cold air across the country over the next few days into next weekend be. for today looking at severe storms in places like nebraska in through kansas. rain out ahead of that in places like minneapolis. the rain tomorrow tracks into the biggest cities like chicago, indianapolis. we could see maybe severe storms here tomorrow. pretty wet and unsettled. by wednesday the storm system reaches the east coast. more gloomy skies there in new york city, boston, d.c. going to be getting more rain as well. as i mentioned though, more cold weather ahead. in fact, 10 to 20 degrees below average. those temperatures spilling out

across the u.s. by the end of the week. more "squawk box" when we come back.

welcome back. it's time now for the executive edge. focus on giving business leaders a leg up. twitter is said to be getting favorable terms from the banks to go public. they're going to collect fees of 3.25% of the money raised. that would be the lowest amount

paid on a u.s.ipo. twitter is finalizing a $1 billion credit line. it can use it to help their finances grow. they're squeezing firms on both ends, the banks on both ends. >> you know, it's funny. traditionally there is an argument made that it's an au antitruant antitrust issue. pandora paid 7%. however, what we didn't note there dsh. >> they paid 1%. >> absolute dollars, more than twitter. >> facebook squeezed the banks and got a huge loan. >> that's right. >> the idea there's collusion at 7%? >> there's been a long debate as to why is there no competition going on in this market. it's because this is like a -- this is a reputation enhancer.

that's why people are willing to give very little. >> facebook, they say you get what you pay for, 1%? >> well, because the question is do the banks make it up? i don't know this. is it made up on the debt side? >> is that why grub ber has the best auction? >> that was one of the reasons the fees have been there. >> you take money out of an atm at 7%? >> no way. no way. >> i did 3%. >> you did 3%? >> that's yesterday. >> that's crazy. >> were you in vegas? >> no, i had to take out $400 to get it at 1%. >> that's what i did. >> i feel better. they should have bought me dinner. >> vegas, 7%. >> i'll make it back. >> they're a dibted.

they'll pay anything. 3.25 still sounds like a lot to me. it does in the stock business. >> it does. >> everything else has been squeezed much lower than that. people used to pay a mutual fund front end load 8%. >> those were the days when the brokers had big clients. another story. the home builders are trying to lure buyers. sales in some markets have been hurt by rising prices and by higher mortgage rates. the upgrades that you can get at this point, free appliances, blinds, premium flooring, closing costs, covering some of the downpayment on paying to reduce the buyer's mortgage interest rate for a year or two. we thought you'd have to get past the point where you needed give aways, but they're back with full force. >> is that ep hansing or masking a larger problem in the indus y industry? are we not appreciating what's

going into this? >> i think for a while that had gone away. that was a great sign that the home buyers had the upper hand. this is what happens when you raise the mortgage rates 4.5%. it's still an incredibly low mortgage rate. when you're talking of rising 30 or 40% -- >> like you said earlier, three steps forward, three steps back. we're at that 58% number in terms of they can get a great job, lose the current job. we're not rocking and rolling in the employment picture. >> until we get going, you can't imagine the pre-2007 type of activity that we had. >> right. >> even with rates this low, that's what's a little disconcerting. that's why the fed is still here. full bore.

>> do you think they're going up? >> i don't know. i don't know. it wouldn't surprise me. 85 is such a-who picked 85? why not do a hundy and leave it there? >> oh, boy. we'll have to ask them how they came up with 85 billion. >> round it up. >> potentially. in the meantime, let's talk about the chinese smart maker, ute. they sponsor the houston rockets hoping they can boost their brand in the united states. the company could be a security threat. zte's ceo says they've long been looking to build a connection with the u.s. public. they're sponsoring a game between the rockets and indiana pacers. >> you can get a good deal at the new york giants. >> do they need a little help? >> need a sponsor. >> you can get it cheaper than the -- >> yeah. i'm not that bothered by that. are you bothered by that?

>> would you own one of these phones? would you are would be rird everything you say -- >> do you know how hard it is for me to get to where i am now? >> is it on the iphone? >> from the blackberry? >> yeah, white. something i have been doing. >> talking. >> using siri? >> yes. i did a six sentence e-mail and i had to change one thing. >> way to go. i'm impressed, joe. >> you don't have to use the fingers. >> you can do it. think if it really works. >> that's true. i wouldn't have to worry about not being able to drive. >> that's what i mean. >> okay. >> i'm there. i'm there. >> think about it. own the iphone. >> i think i'll have one before christmas. >> you think android is what you're thinking. >> no, i think iphone. >> he is. zpl i'm already thinking i want to test it. >> battery life is longer. >> i want to see. >> i want everything on one thing. >> it's a better phone. you can have the mac phone,

ipad. i want one thing. >> i'm done because i can't run multiple systems and transfer files and everything else. i'm going to do one system, that's that. >> did you take shots of the pumpkin patch? >> i do. during the break i'll show you. when we come back, still no deal on the debt ceiling or the government shutdown in washington. as a result you can see that the futures are giving up some ground this morning. right now the dow futures are down. we're going to talk about the list from the markets in the days ahead right after this. plus, richard branson firing back at critics. he says that he is not a tax exile. we'll have that forstory when "squawk box" comes back.

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four select tires with the ford service credit card. where'd you get that sweater vest? your ford dealer. welcome back to "squawk box" this morning. we have headlines for you. this one is for ross westgate if he's still watching. richard branson is denying being in tax exile in the u.k. in an article in the u.k.'s "guardian" he said he moved his main residence to his private caribbean island seven years ago for what he says are health reasons. branson has made nekr island the

island he bought in the 1970s his tax base. i don't understand. do you pay taxes to yourself if you own the island? >> reason to buy the island. >> as a result he have can only spend between 46 or 183 days in the u.k. income is not taxed in the british virgin islands. he plans to spend his remaining years on nekr for the sake of hess health rather than to protect his bank balance. comments? questions? what do you say about that? >> i'm saying you are in a unique position to tell us about that place. are you not going to cop to having been to -- >> i have been to nekr. >> i know you have. are you going to sit there and say nekr island, like i've never heard of it. what's it like? >> it's amazing. out of control. i'm sorry. >> if you are able to -- >> it's one of the coolest places you'll ever go. there's a main house which had a fire a couple of years back. >> i remember that. >> maybe only a year or two ago.

>> maybe five or ten other bedrooms. i think they charge if you want to rent the island, you can. it used to be about 200, $350,000 a week and people bring -- >> you didn't pay that? >> i did not pay that. i went there on a reporting trip. >> oh, yeah. >> that's why now you can -- at least you can report -- >> reporting trip. it's pretty crazy. it is a pretty crazy place. the ratio of staff to people has to be maybe one to one if not more. if you want be to learn to kite surf, i took a lesson. >> i understand what he's done. i think it's fair to say that i'm doing this for health reasons. if that's the case, if you're just doing it for health reasons and not to evade taxes, pay your taxes in the u.k. >> i don't know. he says it's so much more comfortable to live there. >> i can understand. you're saying, do it. i did this so i don't have to

pay taxes. >> richard branson, he's always next to union jack. he sort of wraps himself in the whole u.k. thing. >> for all of his businesses, virgin businesses. >> right. he is almost an icon of london, of the whole country. >> that would be the first guy that -- >> but that -- >> on that side of the aisle. >> say you did it because the taxes are too high. you need to work and find ways to keep that money here or keep it there. >> there's a reason to do that. this would not be a lear jet. this would be a boeing business jet liberal probably. >> he had a very nice plane, that i do remember. >> duh! he owns an island. >> you couldn't land on an island. you had to land on the island next door and take a boat. >> look at the value added you're bringing. you were just sitting over there. >> i was sitting there. >> we asked you for comments about the story. >> that was an amazing -- >> it was a weekend. you didn't know i knew, did you? >> it was about climate change and green. you remember everything.

>> you have a steel trap of a brain. it was a climate change weekend back when -- i'll give you some names that were there. elon musk was there. tesla was just there. everybody thought he lost his mind. it seemed like a crazy idea. larry page showed up with his main girlfriend. i don't think he was married at the time. >> no. >> he went surfing. then the thing i will never forget is we went to an island next door. it was called mosquito island. >> that's crazy. >> tony blair was on this boat. we were all going across. this is all our friends on this little boat going to mosquito island. we get there and there's music playing and literally girls in bikinis. the whole thing was crazy. i would never forget richard branson going there and saying normally they'd be naked but the prime minister is here. >> really. >> the travel brochures, i don't

think that's a good -- mosquito island. that's a place where, hey, let's go to mosquito island. mosquitos everywhere. >> it's like this. >> mosquito island. >> they have one in the video so they named it that. >> mosquito. >> just listen. >> your life. i could sit here and, i mean -- >> as you know, you're quite a story teller. it's really good. the markets ending the week. who's out there? >> paul allen's boat was docked on the side and tvs supposed to land on the boat. the markets are ending the week where they grew more optimistic. futures are trading lower this morning. there's limb progress starting a weekend in the nation's capital. you have to figure out what

you're not going to do to figure out what you can do. i think you would say that there was progress even though it's not done. jeff is joining us. and aaron is joining us, chief economist at ihs will tell us what we can expect in terms of economic numbers overall. jeff, any pullback? did you buy on weakness? are you hopeful this gets worked out and you can stay long? >> i was actually in washington, d.c. i've been on the road for the past couple of weeks. i was in d.c. during the shooting, as a matter of fact, close to the studios. i agree with john, what your guy in d.c. said earlier in the show. i think you'll see a last-minute deal this week. that's the way it works. you saw the same thing happen with the fiscal cliff. i think a deal gets worked out this week. if you get a hit today, tomorrow into wednesday it's a by. >> and you figure something will happen by then. what's the maximum long-term effect you see if we do finally get something done this week?

>> well, i think the big hit, assuming they get something done this week, the big hit for the fourth quarter, we could see growth below 1%. already a lot of damage has been done. we saw that in the unemployment claims numbers. they spiked up. a lot of that was because of glitches in california. 15,000 was because of layoffs in nonfederal workers affected by the federal shutdown. so already it's having an effect. so i would say big hit in the fourth quarter. and if it's all done, then the first quarter and second quarter we could see a bounce back. >> a bounce back above where we would have been normally or -- >> yes. >> -- back to our crappy 2% level? >> no, more than normal in the sense that there are two things happening. one is there's some expenditures happening, spending, cars, that will come back. there are some we'll never see again. spending by federal workers on

restaurants, for example? >> how much of that that we'll never see again? we'll get back -- if it's below 1, people would go, wow. that's bad. if you get -- are we getting half of it back? >> we'll probably get half of it back would be -- rough guess we'll get half of it back. >> 2.5. we could use that. jeff, everything else notwithstanding, do you expect 2014 to be the year where we break out of this long-term trend of sort of just above stall speed? >> i think you're going to accelerate. i think the economy is stronger than the superficial figures show. a lot of people got burned with credit cards and they're transacting in cash which is not readily captured. i think that's what the stock market is pointing towards. >> i defended you last week. we had this i.i. stuff.

it's all the big banks around the i.e.. they get all the analysts but they're never at the top of the stock picking surveys. raymond james is usually there. some of the more localized firms. i want to let you know that i pointed that out. >> thank you vemp. >> what's your year end target for the s&p. >> i don't have targets, joe. if you go back and look at what the best and brightest they were saying in the end of 2008, they were so far off the mark. i think we will be higher at year end than we are now and i think we'll be higher at the end of 2014 than we will be at the end of this year. i think the chances we're in a secular bull market are high. >> that will be -- if we knew that for sure, that would be something because we'd be above 1700 at the end of this year and then above wherever that is at the end of this year. you're not looking for 20% next year but maybe somewhere up around 1800 on the s&p? >> i think you're looking for 12% earnings growth year over year between this year and next

year and it wouldn't surprise me to see the market track that as well because multiples, they might stay where they are. >> naerman, what is janet yellen going to do, do you think? >> well, i think she's been sort of pigeonholed as being a dove. i'm not quite convinced that she is but, okay. i think she is probably going to continue what bernanke has been doing. what we've got with yellen was continuity. that's a good thing in this environment. we have a huge amount of uncertainty about fiscal policy. i would say she'll probably follow in the footsteps of bernanke. big debate about when are they going to start tapering. the earliest i'll do it is december. even then depending on what the economy is doing they may wait. they'll wait until next year. continuity i guess is what we've got. >> you're not convinced she's a dove? >> no. remember, she -- >> i see the boston background. she's from berkley.

maybe you're from cambridge. she's -- >> she -- >> if you see something walking going quack, quack, quack, it has paddles, a big yellow bill, do you say that might be -- i don't know, that could be a dog? >> remember, she's been pushing this 2% inflation target pretty hard. >> you're scaring me. you're scaring me. you're not sure she was a dove. i don't know what would cause you -- quack, quack, quack, quack. >> that's the consensus. the consensus is probably wrong on this one. >> okay. interesting. >> what if her first act is to -- >> what if it's going to 65? >> all right. >> concession. >> thank you. >> thanks, jeff and naerman. i think he's on the other side of it, of the charles river. >> on the cambridge side or the m.i.t. side? >> cambridge. cambridge and m.i.t. and harvard are on the same side? >> oh, are they?

>> yeah. >> all right. when we come back we have your morning squawk planner. the business plans for the day. at the top of the hour, former citigroup chairman, dick parsons. "squawk box" will be right back. i love having a free checked bag with my united mileageplus explorer card. i've saved $75 in checked bag fees. [ delavane ] priority boarding is really important to us. you can just get on the plane and relax. [ julian ] having a card that doesn't charge you foreign transaction fees

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welcome back to "squawk." it's time for your "squawk box" planner. i can play vanna white here. it is columbus day, that means the bond market is closed. the day marks christopher columbus' discovery of the americas back in 1492. presidential proclamation calls on americans to observe the day

with ceremonies and activities and stars and stripes be displayed on all public buildings. and i want to know why we keep the bond market closed and stock market stays open. look for that news at about 8:00 eastern time. hopefully we'll bring that for you on "squawk." and it is, of course, day 14 of the government shutdown and you should head over to cnbc.com to vote for top ways to punish congress for the shutdown. little way to express your frustration if you have any. and that's your "squawk" planner today. anyway, coming up, we've got former citigroup chairman dick parsons going to join us. plus erskine bowles is going to bring his call to rise above "squawk box." stay tuned for that and a lot more. americans take care of business. they always have. they always will. that's why you take charge of your future. your retirement. ♪ ameriprise advisors can help you like they've helped millions of others.

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coming up, u.s. equity futures under pressure after friday's big rally. really, thursday was the big one. but we continue then on friday. we will welcome former citigroup chairman dick parsons when "squawk box" comes right back.

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good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick. and the futures this morning are under some pressure. this is coming as it is clear there's no deal, at least not now in washington. dow futures down by about 82 points, s&p futures down by close to 9 1/2. in our headlines this morning, as we mentioned, still no agreement to ending the government shutdown. now in the 14th day. also, no agreement on raising the nation's debt ceiling. that optimism that fueled the stock rally on friday faded over the weekend. with democrats and republicans still apart on key issues. democratic senator dick durbin told nbc's "meet the press" that reaching a deal to raise the debt limit is crucial. >> if in four days we default on our debt for the first time in our history, it is going to have a dramatic, negative impact.

this may be heresy, but i think simpson/bowles got it right, put everything on the table. >> in the next hour, we'll have one of those men that got it right. erskine bowles starting at 8:00 eastern time. and the company is using that to its financial advantage. according to the "wall street journal," twitter has been able to put bank fees for the initial public offers to 3.25%. that's the lowest for a listed ipo in over a year and close to arranging a credit line for the bankers as well. and netflix is in talks for services through set top boxes. those negotiations, though, are said to be preliminary with no agreement expected any time soon. lawmakers on each side of the aisle pointing fingers at each other for failing to reach a compromise on the debt ceiling battle over the weekend. here now barry and our guest host for the next two hours richard parsons who is a senior

adviser of providence equity. former chairman of city group and all kinds of -- like an iconic figure. great to have you here. you're iconic sort of. >> in my own way. >> well, we've made you iconic. predated coming on "squawk box," but you're there now, barry. if you were to just start -- >> i was wondering how you were going to get -- >> it's not easy. >> if you were just to give me the -- how you've been viewing this for the past three weeks, let's say. how would you summarize your feelings? >> probably like most americans, it's sad. there's no good story to tell. there's nothing that you can say, at least out of this will come x, y or z. this is just a case of massive dysfunctional lack of leadership. i think that's what most americans think. >> we just said, i don't know, on our website, we're allowing

you to complain, get mad at congress and punish congress. do you think -- okay, fine. congress has its policy. do we think we should get mad at the obama administration, the white house? there's blame on both sides. >> yeah, this is like anything else that you encounter in human interactions. it's never all one guy's fault, right? it's never all one guy's fault. everyone is contributing this. and in my judgment, it's -- it's a function of lack of leadership and -- and narrow focused as opposed to broad gauged focus. people wondering, what, how do i keep my job? what does my district want as opposed what's good for the country? >> it doesn't help, though, when there's this much animosity between the two sides. >> no. because even in the past where you have seen totally different opinions about what we should be doing, big government, small government, more spending, less spending, all of that. but it did seem to be some

collegiality. and that, these guys -- there's a lot of republicans that don't want to give anything to the president. and the president is so, you know, you can almost see his revulsion to even dealing with a lot of people on the other side of the aisle. it's bad, really bad. >> i think it's bad. and i don't profess to have insight into how it got so bad or why it got so bad. but there's no trust. >> obama care didn't help. >> well -- >> iraq didn't help. i mean, it goes back years. >> i think there's a new breed of politician. i think a lot of the highly conservative element that's come in -- >> i was reflecting -- they're actually anti-democratic. not anti-democrat. it's the will of the people, the will of the majority. it's no longer relevant. it's only -- it's relevant what i want and what my constituents

want. and so we're going to hold out and we're not going to -- >> yeah. the latest guy says bankruptcy of shutting down, going on the debt ceiling is not as bad as the bankrupt country. >> right. >> and that's what they're thinking. >> but i saw a poll this weekend on "meet the press," talking about how the middle of the country is 51%. if you add up the far right and far left together, you still get less than the majority. >> that's true. that's true. >> but they're the ones -- >> a lot of people holding public office actually don't believe when you strip it down that the majority should determine. >> well, they may reflect the views in their district. maybe it's a problem with the district. >> but i go back to the redistricting and gerrymand gerrymandering. it's we've set up a system that allows the polar opposites -- >> we've always had this system. wouldn't you think that after you have a huge financial crisis, it would create this

polarization. it's an extreme in terms of the macro economic outlook and situation. and so, look, roosevelt was a polarizing figure to be sure. and there's, you know, people still litigating that fight as to whether he did the right things, or not. i suspect the country will come back to the middle. i take a more sanguine view of all of this. the fact of the matter is, we manage to get the budget deficit above 10% of gdp to below 4%. the government spending has dropped, so we've gotten back to about the six-year average in terms of spending. and if out of this deal, we get some trading of discretionary cuts for entitlement cuts, they'll be small, they won't solve our long-term debt problem, but if they cross the rubicon, you have to view that as encouraging, we know that's the long-term driver of the debt. we may have some good come out of all this despite, you know,

all the acrimony. >> you think it was going to get done otherwise. you think you needed this blunt instrument. >> i think it was always likely to be highly contentious given the magnitude of the depth of the recession and increase in unemployment. there were always going to be divergent views on how you do it. i was studying economics in the early '80s. the debate was heated. and in that case, reagan and kempf and that crew won that fight. now we've -- we've had the same fight 30 years later and it was always going to be a contentious battle. >> there's a book called that. we keep fighting that over and over again. when did -- i mean, the great books on economics. we thought we settled this in the 30s, didn't we with hayek. we thought we settled it. >> the difference, though, i

think, and i was a part of the earlier fights. we didn't get close to the edge that we've gotten close to this time in terms of government shutdowns. and looking at a potential default on our indebtedness. which, you mentioned a minute ago, joe. someone said well, i'd rather have us, you know, default, run up against the debt ceiling and default on the payment of our debts rather than go bankrupt, you know, and have the -- our liabilities ultimately exceed our assets. it's been a long time since i practiced law, but my recollection is either one of those is bankruptcy. bankruptcy is either our liabilities exceed your assets or you can't pay your debts when they fall due. that's what we're looking at. so it's kind of a question, do we want to be a dead beat or be broke? either one is not so good. >> but, you know, if we did get

3% or 4% growth again, i bet you we wouldn't be as mad at each other either. >> that's true. that's true. >> and look at the unemployment picture and it's just -- it's 80% of the country thinks we're headed in the wrong direction. so, robert, it's the nobel memorial prize in economic science, it's a nobel prize. >> it's added in 1968 as a memorial to nobel. >> lars peter hanson and robert shiller. americans winning for their empirical analysis of asset prices. i was looking really quick to see what he's written. the last thing i saw him write was from october of 2007. interpretation in terms of changing popular economic policies. >> he loves animal spirits and i think he's -- he probably would've won if he wasn't on "squawk box" as much as he is. he probably still would've. this did not hurt.

>> is there a campaigning that goes on behind the scenes? >> he's a market master. >> do you have surrogates behind the scenes working? >> nothing just happens. >> nothing just happens. >> he's is one of our market masters. >> he is one of our market masters. the nbc team working behind the scenes for this. >> cnbc teams. we're not part of the "squawk box" team. >> "squawk box." >> we're not part of nbc news, andrew. you know that, right? >> we're owned by nbc universal. >> friends at comcast. >> i understand. i understand. never mind. anyway, barry, thank you. richard will be sticking around for the rest of the show. >> symphony. >> yeah. >> we work closely together with them. we love them. >> what's going to happen in markets? >> well, we -- sure. we thought we'd have a 4% correction like we had in '95, '96 because there wasn't a risk of a big fiscal drag coming out of any deal that gets done.

and so we always thought it was going to be sort of a minor reaction. i think the reaction's done. the other effect it does create enough fog we've pushed tapering into next year. this clears up in the next day or two -- >> the futures look like they're down about 90 points this morning. if we don't get a deal done tomorrow. they're pushing their advantage saying they have questions about the sequestration. >> that's why we don't have a budget in the first place. >> they had agreed to that. now that the house said no thanks to that, the senate is kind of standing tough saying forget it, we're not going to agree to what we agreed to. >> they never agreed to that. >> harry reid said they had a back room deal, he and boehner agreed to that. he told them if he couldn't get that, he would bring the house. >> well, look, if you have a couple of days of fighting and

it lingers and the market sells off, you should buy that selloff. there will ultimately be a deal. and the point here is this is not going to be like 2011 where you have huge spending cuts coming out of it. we've done the bulk of that work. we're not going to have a big tax hike coming out of that. we've done that work. so what you might wind up with is actually stimulative in the sense you change -- trade short-term spending cuts for long-term entitlement cuts and you've got the fed on hold now. the outcome of this is likely favorable for the markets not unfavorable. >> in terms of how to come up with some sort of agreement, do you expect we will see more tax increases in order to get entitlements brought down? in the longer term. not in the next few days. >> in the longer term, yes, i do. >> okay. >> it has always struck me as odd that almost anybody who has any common sense would know. when you're running the way this

country's running, we're borrowing way too much, spending more than we can afford to spend. the answer has to be in two buckets. and you'll hear this from erskine bowles when he comes on, one, we've got to cut our expenditures and, two, raise our revenues. i think bowles/simpson got it about right. i think there will be some revenue increases in the form of tax increases but those tax increases may be simply eliminating loopholes, subsidies, doing things, increasing as the president has proposed the level of participation, social security, changing the inflation and those kinds of things. there'll be revenue side to any ultimate resolution, i believe. >> got it. stick around. a lot more to come. he's going to join us to discuss fixed income, the fed and what's going on in washington.

"squawk box" returns right after this. tomorrow on "squawk box," omega's chairman and ceo peter fisher, and sandy cutler is helping rise above the debt ceiling. all leading up to our exclusive interview with david teper. business leaders and the world's best investors come to one show, "squawk box." starting at 6:00 a.m. eastern only on cnbc.

millions of people are estimated to have visited health insurance exchange websites during the first week of enrollment, but many had trouble signing up. an a.p. poll of 1,200 adults found that 7% tried to sign up for insurance on the exchanges, when applied to the general population, that could be as many as 20 million people. 3 out of 4 respondents had trouble signing up, 1 in 10 successfully bought insurance. the obama administration is expected to release enrollment statistics at the end of the month. our guest host is dick parsons. one of the things we've looked at is the health care rollout. it hasn't gotten a lot of attention because of the government shutdown and debt ceiling debates.

how would you rate this to this point? this rollout? >> well, the rollout per se is obviously troubled. lots of glitches. that was inevitable given the complexity of the tax at hand. and i think that's -- that's -- that's the challenge the administration's going to have. fundamentally, most americans, i think, believe that there shouldn't be 40, 45 million people in this country without health insurance, without access to quality. but how do you provide it? how do you do it in a way that ultimately becomes seamless? how do you create a system that will rival, you know, social security system, rival medicare and do it in a hurry without hitting some blips. >> is it inevitable because the government was doing it? because google didn't do it? if google or facebook had done this, would we be in the same place? >> the answer is -- >> if time warner -- >> well, that's a different question. that's a different question still. it's a complicated piece of

business. you know, i watched -- let's take your first choice google. i watched them grow up and make mistakes and stumble. they did it over time. this is going to take some time to get right. it's going to be a lot more expensive than i think people had anticipated or at least some people had anticipated. >> expensive from the cost of technology or because the whole process isn't going to work -- >> exactly. the rule of unintended consequences has to bite on something this large, this complicated. but they'll get it right over time. >> one of those problems, dick, is that you're talking about something, health care's already 18% of the gdp. >> yeah. >> and obviously we had a massive problem that you had 45 million people who didn't have health care insurance. but this bill doesn't necessarily tackle some of the cost curve issues. there were two problems with health care. we're looking at trying to fix one, we haven't tried to figure out how to fix the other.

>> that's because the other's very tough. i don't know if you saw the piece in the times on sunday about -- >> how difficult it was. >> not only how difficult this was but the cost of drugs and generic drugs and prescription drugs and all that sort of stuff. and the comparisons to what those cost in other countries. >> right. >> a fraction. i mean, like 1/10 of what they cost in this country. we're going to have to tackle that. fundamentally our health care system costs twice as much as any of our other developed country competitors. >> do we do that by putting price controls, blunt price controls across the board? or do we -- >> no -- i'm not a price control person. i think that. >> that's how they do it over there. >> i think -- >> with drugs, i mean and get no innovation and we develop all their drugs and they cap their prices and, you know -- >> we're going to have to figure out ways -- and i think this was the thrust of part of the obama care piece to get market

competition, to get more competition going in the health care markets effectively to pull prices down. because joe's right in part, not complete, but in part. >> if i were going to -- when you say to get -- let's let the government control all of the health care so that market forces start working. does that make sense to you? does that not sound like a conflict in terms? >> well, i think, you know, what's the role of government? right. the role of government is to make sure that markets function effectively. and the other side of what you're saying, joe, is let's get the government out of it and let competitive forces. >> there are free market ways that it could have been done, i think. there's free market ways that you could -- >> you're talking about that article yesterday about the drugs. the market is not going to fix that problem. >> no, but the individual mandate is huge. you can't -- without making --

>> with generics, it's all about how long you give exclusivity, what is it worth to spend $1 billion. how long should you be able to sell that without competition. those are all things you need to figure it out. >> you can buy those drugs -- >> because there's price caps over there. >> correct. >> they aren't innovating anymore. >> right. but assuming their price caps remain because those aren't going to change, what do you do here to actually lower the price and continue the innovation? >> i don't know if globalization, we've got all these arbitrage. i don't know how you do it at this point. i can tell you it's alive and well, innovation in this country in terms of drug development and -- >> because -- >> one of the reasons it's so expensive here because we're ziziziz i subsidizing the rest of the world. >> i'm not sure the companies would say it's well. there's so much regulation. >> that's true. >> we use a lot of basic

research in this country for the government and make that basic research available for people to then build on. sort of like creating an open system if you want to use a technology analogy. however, we don't do that anymore. so these companies now have to go all the way back into the basic research. >> the nih and nsf. the universities are still -- >> even there. that's right. that's primarily where it happens. but the level of u.s. expenditures in terms of total u.s. expenditures which goes to basic research. it's like infrastructure if you will that goes to creating a platform of which other people can innovate has been cut dramatically because, again, i think shortsighted. >> discretionary stuff, we've already done what we can do. if we can do something on the entitlement side, you can bring it back to the discretionary side. >> i agree with that. that means that people that are rational and have the interest

of the country, long-term interest of the country in focus have to sit down and work their way through this. >> we're going to slip into a break. thank you, dick. coming up, seattle and kansas city vie for the honor of having the loudest fans. the details after the break. and black rock's peter fisher is going to join us when we return. time now for today's aflac trivia question. when was the debt ceiling created? the answer when cnbc's "squawk box" continues. ready to run your lines? okay, who helps you focus on your recovery? yo, yo, yo. aflac. wow. [ under his breath ] that was horrible. pays you cash when you're sick or hurt? [ japanese accent ] aflac. love it. [ under his breath ] hate it. helps you focus on getting back to normal? [ as a southern belle ] aflac. [ as a cowboy ] aflac. [ sassily ] aflac. uh huh. [ under his breath ] i am so fired.

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when was the debt ceiling created? the answer in 1917. >> you need to rise above the debt ceiling. >> did you know it was 1917? >> it was a while. >> i thought the case made last week was interesting. there's no debt ceiling. really? it's going up. i don't even know why we talk about it. >> it's weird we even have it. >> it's going up.

>> hank paulson -- >> it's going up. it's never going down. going to keep going and going and going. for years arrowhead stadium the home of the kansas city chiefs is known as one of the loudest places to play in the nfl and yesterday it officially became the loudest place. the screaming fans in kansas city reached an ear splitting 137.5 decibels in their game against the rivals. that's a new all-time high, beats an old record set by these other maniacs out in seattle. last month, 136.7, roughly about the same volume as if you were standing next to a jet engine. >> are you kidding me? >> the fans in k.c. have good reason to be so cheerful. under andy reid -- >> they're 6-0. >> they are. only three remaining undefeated teams, they only won -- >> denver? >> denver, k.c., i don't know

the third. >> did new orleans win? >> no. new orleans got beat in the last 20 seconds by -- >> i have to look that up. >> by brady. did seattle lose? they lost, didn't they? >> i think so. i know giants are 0-6. >> they're the opposite of undefeated. >> while we figure out the third, we're going to welcome black rock's peter fisher when we come back. plus, much more from dick parsons, former citigroup chairman and then the top of the next hour, erskine bowles will join us. the co-chair of the fix the debt campaign. sits on the boards of companies like facebook, morgan stanley, norfolk southern.

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welcome back to "squawk box." in the headlines. we have sort of a headline to tweak from right before the break which is that there's now only two undefeated teams left, denver and kansas city. >> three teams with the perfect record. four teams with the perfect record. >> two of them are wins.

>> we're only -- >> giants are 0-6. >> if it wasn't for -- if it wasn't for -- we're trying to figure out how we messed it up. if they hadn't played the last 20 seconds of the saints/patriots game, there'd be three. it's just a mistake about the -- >> timing. >> timing is everything. >> timing. >> talking about timing, it is columbus day which means the government would be shutdown even if it wasn't already shutdown. the stock market is open, but the bond market is not. we're going to talk to peter fisher about why that's the case. no economic reports on the schedule. and a few earnings report of note, as well. another victim of the government shutdown, holders of winning lottery tickets in the district of columbia. the d.c. lottery issued a statement saying no winning tickets would be paid out until further notice but also said winning tickets would be honored once the shutdown is over. i wonder if there's any big winning tickets out there. also the thriller "gravity" which i saw over the weekend

remains atop the weekend box office. easily beat "captain phillips," starring tom hanks, which earned $26 million in ticket sales. i saw it in imax 3d with the glasses and it was pretty cool. >> apparently both movies are equally accurate. in terms of the level of accuracy that you can see in both. >> captain phillips is based on a true story. gravity is -- >> except the people there say it is no way representative of what happened. haven't you read? >> the astronomer from the natural history museum had a lot of problems. >> you should see how much debris is flying by at the speed of light and they're somehow dodging. one little speck if -- >> don't ruin it for -- >> and the chinese space station is a couple hundred yards from the one. let's just go over to that space station. do you know how big the spaces anymore -- >> don't tell me anymore, i want to see it.

>> it's neat special effects. >> wearing the 3d glasses. >> she's talking about her daughter that she -- >> stop. >> or when clooney -- >> i'm going to ruin "walking dead" for you next week when you don't stay up late enough. >> and you thought you were here to talk about -- >> and robert shiller. won the prize for their -- in the -- what society is this? the economic society. it's like some subgroup. their empirical analysis of asset prices, peter fisher passed over again. >> not going to happen. >> research began in the '60s credited with spurring the krags of index funds and hanson's work dealt with the risk and return there. and shiller, best known to cnbc viewers for the monthly case shiller home price report. won the award for his work on the relationship between stock

prices and dividends. wrote a book called irrational exuberance too. and he's big on animal spirits. which we are in terms of how that affects investor sentiment. and he's a "squawk" market master. he had that honor -- >> beforehand. >> before -- >> no, you don't think the nobel committee took that into consideration? >> maybe they did. maybe they did. >> but you're kind of snickering over there. aren't you? all right. we're going to give you a chance to -- >> all those guys deserve the nobel prize. >> let's bring in peter fisher, senior director at the black rock institute. he is also a senior fellow for the center of business and government at dartmouth. it's a pleasure having you here today, as we're looking at the government shutdown extended into these final days as we're about to hit the debt ceiling, people are wondering what the bond market reaction is going to be. we've heard that fidelity is selling off short-term bonds.

have you seen other issues that really show the bond market is feeling any stress at this point? >> i think it's a curve flater in flattener. people that run money funds, people are likely to want to cash in their money market fund in event we have a default, which i don't think we'll have. therefore they've got to stay liquid. they've got to sell the short-term bills even if there are other investors happy to gobble them up. >> has black rock been a net seller? >> i understand my colleagues in the money fund business have sold out of the very short dated bills. it's just -- you have to do that. those funds have to stay liquid. at the long end, hasn't backed up much. i'm afraid if we had the horrible outcome which wont expect of the government not paying its bills, it would be bad for growth and that means the long end would come down. >> that's interesting, though. you said the big problem is the government not paying its bills. so on thursday morning, if we wake up and there's not an agreement at that point, is that the day that the market really

reacts harshly? or is it later when we miss a massive payment? i think it's closer to the end of the month when you are looking at big payments. >> the payments i'm told on the 21st or 22nd. next tuesday. >> i ran domestic finance in the treasury. this is an art not a science. it's such a massive flow of payments that's got to go through the system that the financial management service is running and the bureau of fiscal affairs. i think what we see going on in washington right now is the usual shenanigans. once a bill has to pass. it creates dysfunction. >> in your judgment, what happens if we don't get past the 17th? if a bill doesn't pass? >> well, if a bill doesn't pass the 17th and the treasury is then stuck, the disruption to the economy is going to be massive. the economy looked like it was doing well.

one of my favoriindicators is household income, jumping up from five years of anemic readings. so right now we could've seen the economy picking up speed and i really think it'll be a hit to confidence. there's also an irony. what if congress did the right thing and said, look, we're going to sit down and talk about serious tax and budget issues. what's going to happen to business fixed investment? i think a lot of corporate planners will say, well, there's a serious tax reform on the table. you were saying earlier maybe we'll have tradeoffs of loopholes. they'll slow down investment. >> although, a lot of those things would potentially be things you're looking at several years down the road. some way of reaching a deal might be to raise some of the -- >> yes, but that's -- >> spending up right now from sequestration levels and longer term. >> but business leaders, corporate leaders have shown they'd rather be buying back shares and making tough investment choices. give them another excuse to delay that another six months. >> listen. i think people buying back

shares because they know -- at least they think they know what they're buying. most businesses still on the growth agenda, right. to be a public company in this country, in these markets, growth has to be at the top of the agenda. and if they had confidence they knew what the contours of the landscape were, they would start investing again. but buying back shares is is a conservative and kind of default way to go when you have excess cash, which a lot of companies now have. and you've got to do something with it. >> that just may be not very good for picking up speed here in the economy. >> no -- >> might be the right thing. >> i agree with you. the economy's doing better than most people estimate and the government shutdown obviously is a hit to that. and a default would be -- everyone says massive disruption in the economy. nobody spells out what that looks like. i think you almost can't. >> have you done anything in advance of this? is there any preparations you've

made? any models you've created? any sort of instruction manuals you've told your people, look, if this happens, this is what we do? >> well, i'm not running the fixed income group anymore. i've got colleagues doing that. but as we did in august 2011, we talk to our clients, try to make sure their guidelines reflect how they want us to respond to them. you don't want something someone wrote down on a guideline five, ten years ago to guide what's going to happen. we've got to rally. >> it's unthinkable. >> yeah, but if you're running a business, you have to have contingency -- >> jpmorgan and fidelity sold down all the short-term stuff, right? and i imagine -- is everybody doing that? >> everyone with short-term funds, you've got to be prudent to do that. there's a much bigger problem we're all facing here in the fixed income markets coming from the intersection and the fed. >> the fed. >> so the fed is clearly with less insight into the economy now without the data and with the shutdown going on and the

risk of default going to be stretching out the taper. when will they start tapering further and further out? but the longer they delay that and they've said this in speeches, the more likely it is when the time comes they'll have to let rates rise faster. however far off in the future that is. now, my way of thinking, that's like someone telling you, don't worry, i'm holding this beach ball under water and i'm going to let go of it later than you think. but when i let go of it, it's going to be harder to come bring it up to the surface slowly. they're really telling us there's future volatility in our future. they're telling us manana. >> it's inflating as you're -- >> they're going to say, we're going to let go of it later than you think. it's going to be harder to hold down. >> that sounds like a big market delocation. we thought maybe we had seen it when interest rates spiked a couple of months ago. when the fed didn't start tapering, are you telling me we're going back to big market

dislocations? >> qe has been volatility suppressing with all of their bond buying. and it's going to come back to haunt. i think there's a much simpler way to think about what the fed learned in the last six months. they were telling us a year, two years ago, not to worry, qe would have a stock, not a flow effect. they buy these bonds, hoard a little risk. it wouldn't have a flow efgt. effect. what did they learn this summer? they learned it had a big flow effect. just talking about taking away the flow effect moved markets. so now, they've got to realize the flow effect is much bigger than they thought on markets therefore the exit's going to have to be more gradual. >> you think they realized that sitting around the table? >> that's what the whole summer was about. they didn't like the tightening and financial conditions when they told us they were going to start to taper. >> what you're saying, though, they're not going to be able to manage. >> it's going to be hard. >> it's going to be hard for

them. >> what does that mean to an investor sitting at home listening? what do you do? >> i think you have to worry about volatility and be ready for it. we've lived in a world of very low volatility the last few years. that's what all the qe and forward guidance has done. i think the trick is, we're also living in a low nominal growth world. even though the u.s. is doing better, the imf is revising down its forecast. i don't think we're about to jump to very rapid growth and very high rates. i think we're going to have a little volatility in our future in 2014, what it feels like to me. it doesn't yet, i don't see the evidence of a really rapid growth rate for the u.s. or the world. so i would tell the investor, get ready for a little volatility, but don't do anything drastic. >> maybe don't keep a lot of stuff on margin. >> yes, i would not do that. >> peter, thank you very much for joining us. >> thank you for having me. coming up next, more from dick parsons and the country is on a path to bankruptcy and says

holding out on the debt ceiling is the only hope the country has to stop the spending in d.c. he'll join us in a couple of minutes. still to come, fix the debt campaign cochair erskine bowles. plus, mark bertolini.

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welcome back, everybody. as we enter this 14th day of the government shutdown. you can see that the futures are under a little bit of pressure. no agreement in sight yet. and as a result, the dow futures down by about 94 points. s&p off by 10 1/2. up next, alabama republican congressman mo brooks on the ongoing debt ceiling battle on why he's holding out against a higher debt ceiling. and at the top of the hour, erskine bowles will join us and mark bertolini with his perspective on what's going on in washington. on december 17, 1903, the wright brothers became the first in flight. [ goodall ] i think the most amazing thing is how like us these chimpanzees are. [ laughing ] [ woman ] can you hear me? and you hear your voice?

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the treasury department warning the government won't be able to pay its bill after wednesday. taking over negotiations with majority leader harry reid and mitch mcconnell speaking by phone yesterday. but the two failed so far to agree to deal. something perhaps in the works. mo brooks, congressman from alabama, congressman, do you expect a deal before the 17th? >> i don't know. a lot will depend on whether we can get a package, a proposal from the other side of the aisle that is financially responsible.

one that both opens up the government under spending terms our country can afford, raises the debt ceiling, again under spending terms our country can afford and also takes into account the need to minimize bankruptcy resulting from five consecutive years of deficits that average over $1 trillion per year. >> what does that mean? does that mean going ahead with the sequestration levels that you'd be okay with that? >> well, i'm open to any kind of suggestions on how best to walk this narrow path. it both opens the government, raises the debt ceiling and adequately minimizes the risk on an american insolvency and bankruptcy. to date, there have been zero proposals from the other side of the aisle that does that. and that puts us in a quandary on the republican side. we can open up the government at the spending levels that the other side wants, raise the debt ceiling, but all that does is kick the problem down the road where we are weaker and less able to address it because the additional debt burden we have taken on. >> do you want more

discretionary cuts? is it all about entitlements with you, congressman? >> i'm flexible on where the cuts can be. certainly, there is no part of the federal spending that is immune from efficiency, from spending cuts. personally, i prefer the give away programs, the welfare programs, the foreign aid, things of that nature that are less productive than the fbi which is law enforcement or the military which is national security. we're going to have to do a tough job of prioritizing. as long as we raise the debt ceiling, we kick the can down the road. eventually we'll have to address this issue. if we don't, then we're going to have an insolvency and bankruptcy. and the longer we wait, the more difficult it's going to be because the weaker our country will be because of the increasing debt load. >> congressman, dick parsons is here, we had a conversation earlier in the hour where you suggested there were certain factions of the republican party. i think that's what you were referring to that you thought

were being anti-democratic, not just anti-democrat. when you think -- congressman, when you think about the polarization of both your party and the country, do you think there's a part of your party that's anti-democratic? >> no, i don't. not at all. i think we're pro american. we recognize the seriousness of the financial issues that we've been in. heck, the president's own comptroller general sent us in writing a letter this year to the white house and the united states congress saying we were financially on a quote, unquote, unsustainable path. we need to heed these warnings. this is very serious for our country. we could slip down the road of grease where the unemployment rate is 20%. >> congressman, we -- we understand that we need to deal with some of this stuff for sure. but the financial calamity that could come from if we actually did default. and i'm not talking about if we just go over the 17th and we, i

don't know wait a few days and some people think there's a way of prioritizing. but the default itself and the financial near term financial calamity that could cause. it wouldn't be worth bringing that on just to get our long-term entitlement house in order or to make some kind of a point, right? >> well, to make a point, no, but to get our financial house in order, absolutely. a bankruptcy is far worse than not raising the debt ceiling as bad as not raising the debt ceiling may be. >> that's way off. bankruptcy is years off, right? you would take a near term meltdown of the global financial system to make the point about the long-term entitlement issues? >> i'm not talking about making a point. i'm talking about trying to fix a problem before it's too late. >> let's say the other side will not allow you to solve all our entitlement issues in the next three days. >> well, then we're in a world of hurt if they continue to be as financially irresponsible as

they have been with the solvency of a nation that has taken two centuries to build. >> i guess the question i have is, you know, you're defining insolvency as being unable to sort of having our liabilities exceed our assets. it's been a while since i practiced law, but usually insolvency was also failure to pay your obligations when they come due. either of those constitutes bankruptcy. and i'm trying to understand the differentiation you're making. >> fine. if you're talking about a default and the financial markets were really talking about the ability to pay our creditors. we have roughly $2.5 trillion in revenue according to the gao. roughly $250 billion a year. we have have the revenue -- >> you believe jack lew is lying to you? >> the gao says the president has discretion to pay our creditors if he wants to. >> do you think jack lew is lying to the 17th date, not as

the date we default, but getting close. >> he uses it in a more expansive way than i'm using it. >> congressman, we appreciate you coming on this morning. coming up, a man who knows a thing or two about u.s. debt and possible solution, erskine bowles is our special against when we return. tire event? your ford dealer. who has 11 major brands to choose from? your ford dealer. who's offering a rebate? your ford dealer. who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires? your ford dealer. i'm beginning to sense a pattern. get up to $140 in mail-in rebates when you buy four select tires with the ford service credit card. where'd you get that sweater vest? your ford dealer. they're the days to take care of business.. when possibilities become reality. with centurylink as your trusted partner,

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this hour on "squawk box," a triple play. we'll kick things off with erskine bowles. >> these politicians are playing games, jerking our country around from crisis to crisis. >> and then senator bob corker on the odds of getting a deal this week before the debt ceiling deadline. and aetna's ceo going to join us onset to talk about the challenges of obama care and finding a solution to the debt crisis. the third hour of "squawk box" starts right now. ♪ welcome back to "squawk box" here on cnbc. our guest host this morning, dick parsons, senior adviser.

first of all, andrew has more morning headlines. >> it's columbus day. there's not a lot of headlines. it is columbus day which means the government will be shut down even if it wasn't already shut down. the stock market was open. on the flip side, the bond market is not. fading over the weekend with democrats and republicans still apart on key issues. we'll talk more about those negotiations with erskine bowles in a moment. we are down about 100 on the dow, s&p would open about 11 points and nasdaq about 17 points, as well. and you can see what's going on in asia. things closing there actually up. the hang seng up over 1% and the nikkei up almost 1.5% on the day. and you take a look at what's happening in europe. it's a little bit of a mixed picture. i'll call that marginal across the board. we should also note that three americans have been awarded the nobel prize for economics.

eugene, peter hanson, and robert shiller have won the award for their empirical analysis of asset prices. robert shiller is a name familiar to many cnbc viewers, including those here on "squawk." one of the names behind the monthly case shiller home price report. and also "squawk box" market master. that's the real prize. >> there's no evidence that it'll help. >> i think that put him over the top. >> began in the 1960s and is credited with spurring the creation of index funds. and hanson's work dealt with the relationship of risk levels to returns. >> i don't see how won nobel prize for -- >> genius. that's changed a lot of things. >> and they do pretty well. it's good for average investors. you're not paying the fees you were paying for money managers that may or may not do as well

as the markets. >> an index fund. >> i like index funds. >> i think it's a great invention. >> our guest host this morning is dick parsons and we've been talking all morning long about what's happening in washington. how we reach some sort of a solution. have you -- you're a businessman. you're somebody who negotiates. you're somebody who knows how both sides have to walk away with something. what's a winning solution you could possibly see at the end of the day? >> if i could answer that question, becky. you know, i'd be in washington right now. it's very difficult because the fundamentals to any successful negotiation seem to have evaporated. there's no appreciation -- this is kind of like world war i. everybody's in their trench. and, you know, they move one trench to another, they move up 3 feet and back 3 feet, up 3 feet and back 3 feet. nobody gets out of their trench.

there seems to be a breakdown of trust. and most importantly, in a very fundamental way, we've lost sight of the interest of the country as opposed to our adherence to our ideological point of view. joe just said something i agree with completely to wrap up to the last session. he says you don't burn the house down to save the house. >> right. >> right. and that's kind of the path that we're on. now, i think we'll get off that path. i think that something will happen in the next several days that will avoid a complete, you know -- one of these days we're going to fall off the edge because we've lost the fear of falling off the edge. and we're going to burn the house down in an effort to save the house. >> there's been a lot of people buy a house and tear it down and put up a new house. >> that's because they can afford to. >> right.

>> we can't. >> that's very true. but that is something that, man, it happens. you see that a lot. >> you do see that a lot. i guess -- if we were still looking for a grand bargain, that's something that erskine bowles and alan simpson have been preaching for for a while. if we were still looking for a grand bargain, could that be the silver lining that comes out of all of this? >> well, not in the short-term. it could be if there is going to be a silver lining. that can't happen in the short-term. there isn't enough trust and will to get it done right now. >> the president appointed that panel. he did not like the findings of that panel. and there's been no interest in pursuing. there's a lot of stuff we don't like here. >> there's one of the reasons i don't think it happens in the short-term. >> it's about trust and the idea that the president hasn't invested in the other side.

and there's a trust issue. two people who didn't know each other before that situation, i don't believe -- you can tell me if i'm wrong on that there was probably zero trust and somehow magically you gave him a big old bear hug and did something in a short space of time. >> is that true? >> well -- >> >> shoulder grab. but it wasn't magic, right? it wasn't magic. i had a problem, he had a problem, we had to solve the problem. and we focused on, you know, how do we get ourselves out of where we are as opposed to, you know, i'm right, you're right, let's fight. and so you work on that. you work on that. you go, you visit, you talk, you try and understand where he's coming from. you try and meet people half way. >> that's two rational actors. >> in fact, joining us right now is the cochair of the campaign to fix the debt. erskine bowles.

he and alan simpson are launching a national ad campaign calling for lawmakers to fix the debt. erskine, we're looking at some of that video right now on this campaign that's launching. you see where we were last week, what's happened over the weekend. hopes are the senate will step in and reach an agreement. do you think that's a likely path? >> i think it's going to be tough, becky. all i can tell you is i walk through every single airport. people yell at me, you know, for god sakes, stop the madness in washington. get these people talking. solve the problem. they want real action. they don't care about the inside up there. they want to see the government opened again, they want to see us pay our bills. they think the talk of default is nuts and it really is. and they want these guys to get in a room and start negotiating. just like we did with gingrich back in 1996, '95, when we got

the government back open again. and both of us made compromises. and that's what they want to see. they want to see some logic brought back to washington. >> we've talked about the logical plan with you before. we've talked about it with dick parsons here today. >> yeah. >> and every time we've been on the verge of having some sort of a deal that would attack some of the long-term problems and maybe invest in today to try to help with the economy right now, every time we get close to that, you end up with a situation where basically the can gets kicked down the road. none of it is for the best interest of where the nation's headed. why is this time different? or is it? >> well, because we're right up against default, which is -- as you know as everybody has said today, everybody globally has said would be globally catastrophic. so hopefully we can get time line set up and an agreement that people will get in the room and talk about three or four things. they've got to talk about reforming the tax code so america can be globally

competitive. secondly, they've got to talk about reforming these entitlement programs, particularly bending the health care cost curves so health care costs don't grow faster than the gdp on a per capita basis. and thirdly, we've got to make social security sustainably solvent so it's there for the people who need it. we made a promise on social security, we've got to be able to commit on it. lastly, you've been talking about this sequester, there's an easy solution to the sequester. there's a reason why even the republicans in the house have found out they can't pass the appropriation bill because the sequester levels are too low. the sequester was stupid. it's across the board cuts and discretionary items. let's make some real substitutes of cuts in other mandatory program where there's broad agreement. that will help us in the long-term and also give us the funds we need to invest in research, education, and infrastructure and also make sure our military has real

readiness. >> how do we do that, erskine? how do we do that in the current climate of washington? is that -- is that just a wish list? or do you see a way that can actually happen? >> oh, it's not a wish list. i hate to tell you how many people come up to me when i'm in washington. i'm walking around and, of course, i've got my button on here which i believe rise above. they've got on their congressional buttons and come up to al and me and say save us from ourselves. get in there and get some negotiations started. if we can get some people in a room and build up some trust and put the ultra politics aside, the economic solutions are easy. it's the way we did it in -- >> can these players do it? is it too far gone in terms of the trust? >> i think it's never too far gone. look, we did it when they were trying to impeach clinton. it was pretty partisan back then i felt.

but i spent months and months locked up in conference rooms with gingrich and lott and we worked it out. >> should ome people say there'n to everybody's head and the markets are fearful that the global economy is fearful. there's all sorts of issues. or done with things are calmer. is this the only shot. we talked about it -- joe, what was your phrase? >> well, we were going to try to extract -- yeah, we need to do it. it needs to be done by thursday, right? it's the one way or another by hook or crook. >> yeah. my best bet is thursday's a soft date, i think it'll have adverse effects on the market if we don't go by thursday. but here's the deal, joe. i would open the government, i'd pay our bills and set up a tight time frame to negotiate this deal. >> that's what i thought we decided. >> let the people understand. >> that's what we decided to do last week. and that got -- >> yeah.

>> you're okay, mr. president, you're not negotiating, fine. all you're doing is we're going to write this now and we're going to make a plan to have a plan. let's raise it and do exactly what you're seeing. raise the government, let's start negotiating. whatever you want to call it, we're like little spoiled brats on both sides of the aisle. >> if you look at this -- and i say they're like children except they don't have any manners. it's unbelievable, childish, the way they're operating. >> you can't use the word negotiate. okay, we'll talk. does talk constitute -- i thought it was -- i still think that's all you need to do. raise the near term, but try to do something for some of the entitlement stuff and not just talk about that in five, ten years. >> how much do you -- >> joe, we've made promises, we've made promises we can't deliver on. and that's what we have to admit. whether it's on medicare, medicaid, social security, even dick durbin, you can't get any

more liberal than dick durbin, said that yesterday. >> if he says it -- >> we've got to make changes. >> how much do you worry, though, that the plan for another plan creates a whole new level of uncertainty between now and christmas or thanksgiving and just from an immediate economic impact we feel that? >> i am worried about it bouncing from crisis to crisis and not a good thing. because of a christmas shopping center, i'd probably make this negotiating period longer than i would otherwise and longer than i think is necessary so we don't disrupt the christmas shopping. people who want to close the government again or threaten default again, they've got that option in january if they want to do that. let's get busy, get people in the room. i think if we get people in a room, i think that will help restore confidence and give people hope. >> the president said he was not going to negotiate. the republicans have said they are not going to open -- they're

not open to the idea of new revenue. is that wrong? i feel like they gave the revenue back in january. >> look, they gave a little bit of revenue. $600 billion, $700 billion, we've got about $2 trillion worth of cuts. what we need to finish this process off is another $2 trillion of real cuts, not these phony cuts they were talking about this last weekend. but real cuts, things that make sense, have much bigger legs in the out years than they do in the early years. but real cuts and then have a small amount of revenue that comes from reforming the tax code. if you look at those tax expenditures, those exemptions, loopholes, deductions, credits, things i like. look, there are about $1.3 trillion a year. over ten years, that adds up to around $15 trillion. they're only talking about using $400 billion of that. that's not much. >> erskine, you know --

>> if i could get $2 trillion worth of cuts to go with that. >>. >> simpson/bowles. and i guess the question is, if we don't do something different. in other wordsious we've been down the road of putting wise men in a room and having them try and develop a plan to sort of rationally get us out of this. and it hasn't worked. what needs to change now for -- to begin to put this country back on the right road? >> actually, i'm not re-living simpson/bowles. what i'm saying is you could go whole hog and really solve this problem and the future of a country will be very, very bright. and i'm not saying, look, we're going to fall off the end of the world. you can do a smaller deal. come together and do it in steps. there are lots of ways to do it but you have to get in the room to get it started. >> i just want to make sure i have our numbers right. you said we need about $2

trillion in cuts in terms of spending cuts and about $1.3 trillion in additional revenue for closing loopholes? >> you only need about $400 billion to $500 billion in revenue and $2 trillion in spending cuts. >> when you talk numbers, we listen, i want to make sure we got those right. erskine, thank you so much for joining us and we'll be watching that campaign on television. we appreciate it. >> thanks so much. i appreciate it. >> index funds, we're shutting down a molecule that causes skin cancer. >> different category. >> coming up -- yeah, one's a real nobel prize. key debt negotiations moving to the senate after talks broke down in the house over the weekend. senator bob corker is next with more on what to expect from the government this week. and later, aetna ceo mark -- >> i'm not.

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negotiations in the house of representatives broke down on saturday. talks in the senate may be the best hope for a debt deal to end the government shutdown. joining us now bob corker,

member of the banking committee. i don't know when you get to tune into us, but we talked to john harwood earlier. he still gets the feeling talking to the various players that the senate, mcconnell and reid, something's forthcoming, maybe even today. do you have any input we don't know about? what's the latest? >> i think that's very possible. i've had some good conversations early this morning. it is between mitch and harry. and i think people want to see that come to fruition. you know, let's face it. republicans have overreached on the health care bill and i think that's widely acknowledged. over the last 48 hours, democrats feeling a little jumpy, if you will, overreached on wanting to actual bust or break the budget control act, which also is set a law. i think we're back to a place, joe, where we hopefully will resolve this in the senate. and the wild card is what happens if we do something here

when it goes over the house. we've got a major expectations game that needs to be managed here. and hopefully, hopefully we will do that. >> it seems to me if you did something half decent in the senate and then, you know, you give it over to boehner, he'd let the whole house vote at that point. he's held off enough saying i'm not going to turn my back on the far right on this. at this point, if it was anything that, you know, got the government running, kept us, you know, pushed it off into january. i don't know, do it for -- till january. that's not that long. >> yeah. >> and i think he'd let that come to a vote, don't you? >> you know, joe, the problem -- and i heard the last segment. you know, we keep putting off these episodes. and i do think on the other hand the moment, sort of the twitching hour is going to be when the next level of sequester kicks in on january 15th. that's a pressure point that, you know, democrats don't want to see happen.

they obviously were trying to overcome that over the last 48 hours. but i think that is a point at which maximum pressure on discretionary spending is in place and maybe it's that point in time when we have the opportunity to do some of the things that erskine was talking about. and that is to substitute some longer term mandatory spending reforms in place of those. so, you know, again, i hate to see us kick the can down the road again. i do think that, look, we're in a place where we're certainly, as you've mentioned earlier, we're not going to solve the biggest issues over the next three days. if a framework can be put in place, if we can do something for a period of time that gets us to that place, maybe we finally do those things that we all know need to happen and have been working on for so long. >> if you say -- it's almost like there seem to be universal truths. and that means we've overpromised. we need to get our entitlements

some day under control. we also know we don't want to default on our debt. if you go far enough left, there are people that say, no, we don't. what we've promised already is already a promise. we need to pay up on that by raising -- and then you've got guys on the right that say, hey, if we default, what's the big deal? that's the problem. what you just said, it's so obvious. >> it is, yeah. >> we need to do these things. you figure adults could come together and do this. >> you know, joe, believe it or not, i took a little bit of an issue with the last segment. and erskine is one of my -- one of my heroes, i really enjoy working with him. but, you know, there are candidly a lot of adults here. there have been some movements, you know, in a wrong direction. we've ended up in this canyon that candidly i predicted months ago. there are people that want to

solve these problems, and joe, what we've got to do and we've got to start in the senate doing this, we've got a deal between the 35-yard lines. we've got to get those folks not on the fringes on either side and solve this problem. what may come out of the senate is one of those between the 35-yard line solutions. when it goes to the house, it is a wild card and i've been clairvoyant on the outcomes and i'm still -- again, it's such an expectations difference when you've moved from totally defunding the central element of the president's agenda as your goal to now just doing some things that put us in a place to solve these problems over the long haul. that's a major expectations change we need to manage over the next several days. but the first step is to move something in a bipartisan way out of the senate. that's something that needs to happen soon. go ahead, yeah. >> you have been clairvoyant. so tell us what's going to happen next couple of days.

>> well, i said -- as i've said, this one's a little more difficult to pretty. because, again, the expectations have been at such a level. so, look, i do think there's a good chance that we will get back on the right page in the right paragraph today in the senate. and i think we have an opportunity to move something ahead on a broader, bipartisan basis. the question is, how is that dealt with in the house of representatives which has been off on a total, not only a different page, almost a different book, if you will over the last several months. so, again, managing those expectations, understanding the realities that all of you know. i was with a large group of finance ministers on saturday night and i do understand the impacts of all of this right now, even, before we've even brushed up against the 17th. go ahead. >> senator, you claimed the middle ground of your party.

so i'm curious, when you have conversations with people like ted cruz, how do those conversations go? what do you say to him? >> so i've been very blunt and direct from day one. and when i first heard the notion of this idea come up several months ago, i almost came up out of my chair at a lunch meeting. and, you know, it's a very direct conversation. i don't want to get into -- and, look, for what it's worth, i think that, you know, our republican caucus when you say i represent the middle, i think people are now very, very unified towards focusing on the things we should have been focusing on on day one, which is spending. and the kinds of things we know, you know we have to deal with. you know, i think this chapter, this sort of chapter that we've been through leading us into a boxed canyon is over, okay. and now, again, i think we're

all back where we should have been in the first place. and what i regret about this most is a lot of time has gone by where we could have done those things that erskine was talking about had we focused on this in the first place. >> okay. senator, thank you. >> thank you very much. coming up, mark bertolini. if you have the audacity to believe in straight talk, not double-talk. if you have the nerve to believe that in a puzzling financial world, clarity is king. [ man ] if you believe nothing beats a sit-down for knowing where you stand. [ male announcer ] join the nearly 7 million investors who think like you do: face time and think time make a difference. join us. [ male announcer ] for 90 years, it's how edward jones has made sense of investing.

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welcome back to "squawk box," the launch of the exchanges has been marred by heavy web traffic. joining us now to talk about the health care law and the debt showdown in washington, aetna ceo mark bertolini. he is the head -- i don't know, you're not the head of it, but you're on it, the fix the debt campaign. >> right, i was one of the initial people. >> let's talk about obama care for a second. >> sure. >> you guys worked on the rollout of this, or at least behind the scenes of some of the beta stuff. did you know it was going to be this bad? >> we were pretty nervous as we got further along. we helped them build blueprints on how to put the system together. and as they started missing deadlines, we were convinced it was going to be difficult -- >> did you tell them, don't do this, move it? >> we started to help them prioritize how to move ahead with the project. and, you know, they had their perspective on when they wanted to start.

so we did our very best to help them get started on time. >> dick said in the last hour this was bound to happen when you have big projects like this, stuff happens. how long will it take to fix all the kinks? >> well, that is a big question. when you implement a project of this size, the first thing is unit testing then application testing and then integrated testing and then scaleability testing and user testing. that plan is usually a lot longer than some of the application development itself. that's happening on the fly. >> none of that was done beforehand? >> all of it has been on the fly. we didn't get probably a month before the system went. >> well, you don't know what scaleability issues you have until you get all the functionality working and everybody starts hitting the system. so you've actually got to get the functionality up.

you don't know how many files you're going to hit or how many people will hit them. >> i guess what happens january 1st. if people are having troubles now, maybe they go through a few weeks of tough time. is everybody going to sign up by january 1? >> no, enrollment still open until march 31st. but i think the bigger issue is will enough people sign up to make it work? >> i want to talk about -- the economics of fixing just the technology behind it. then the larger economics. >> are there some people that don't come back and try again? they needed a lot of people to give it a shot because so many young people have to pay for so many sick and older people. will people say, i'll pay the fine. >> i think the attention span of the younger generation, if it doesn't work the first time, it's going to be tough to get them back the second time. as a result, website technology,

we are actually testing it with the types of users we want to use it. >> it's not like we have as long as this takes to get it right. we -- >> well. >> i think -- it's the law of the land, number one. number two, public exchanges are going to be here to stay. we need to make them work somehow. >> how do we get there from here? >> well, penalties may go up. >> penalties could force the issue. >> the question i would have is six months between now and march 31st. that's not a long time when it comes to doing all the testing and prototyping and evaluation and scaleability of a system this large. is that enough time? >> i don't know. we're in a place now where there's so much wrong you just don't know what's broken until you get a lot more of it fixed. >> i think we have to plow through it. it's nothing you ever like to repeat.

it's a career ending event in a lot of cases. >> he worried if it's delayed a year. once you get people in entitlement, you never get them out. he p wanted to get it started, right? >> if the program blows up because the people don't sign up, then the program's not going to move ahead either all that well. >> so they delayed it a year? >> i would have if i would have been in their seat. but i'm not in charge and they couldn't politically -- >> republicans were telling them to so they definitely couldn't. >> and the politics got in the way of a good business decision. this is going to be 2017, 2016 -- i think the bigger issue for folks to think about is private exchanges have kicked off as a result of the private sector innovating against the law. and as these private exchanges move ahead and good experiences in a lot of cases, we'll be launching a number of them. we'll be in 15 this year alone. you'll start to attract people

to a different kind of marketplace. what will that do to the public exchanges over time? and how will that work? >> we had toby crossgrove in the last month, and he said they've announced a big cutting plan. others are doing the same thing. should we look at that as a good thing or a bad thing? >> i think it's a good thing. i think we need to redo the capacity of the system. and the only way that will happen is through economic events. >> when we see big headlines -- >> i thought the cleveland clinic was one of the examples. if it's affecting them too. and they're to the point where they have to have massive layoffs. >> this is going to be a messy and difficult time. i think we're going to have to let it shake out. if we were to do it rationally and stand back and say how do we fix the capacity of the system and how would we plan to move

ahead? that's what we had in the '70s with health systems planners and we got rid of them because they got in the way of economic progress. i think we'll have a messy situation and there'll be a lot of casualties as a result in the system. >> when we see headlines in the next year or two, i imagine we will see lots of them. different health plans are cutting back, different hospitals. we should say this is what it takes to shrink the system and we want the system to be shrunk. there was an article in the "new york times," article yesterday about generics and the cost of generics at broad and cost of generics here. those type of headlines ultimately, good, bad? >> we have to rebuild the system. >> from the ground up. >> unfortunately, we've got a system in play. >> how much capacity do you take out? >> some say 30% of what we spend every year is waste. >> do you believe that? >> yes. so if you think about that $2.7 trillion we'll spend in the last

year on health care, 30% of that's 810. >> we have two things going on. we're shrinking the system so we don't have as large of debt, the bad news is, those people don't have jobs either and either have to be retrained to do something else. what happens to them? >> here's how i would approach the system if we were to fix it. let me relate this back to the debt discussion. both parties are right in what they're trying to accomplish. the democrats believe we need to create entitlement programs and spend to help those less fortunate and damaged by this current economy. that's true. the republicans saying we're spending too much money, that's going to affect our economy. that's true. if you put the two thoughts together, the only way you do this is to fix entitlements. make them work better. if you were to take medicare, which by law and structure and charter does not allow the government to get in between the patient and the physician and structure programs that change the system that affects care. if we were to go at the system

and say let's change the revenue model, let's put a budget in place, let's do it with the private sector, medicare becomes a blocking fullback going through the line. the health plans follow behind and we restructure the revenue model in the business over the next 18 to 24 months. huge change. the second is that 5% of the medicare population drives 43% of the $550 billion we spent on health care. those were largely unmanaged. half of them below 65% and if we get them into better programs, managing them more tightly, passively enrolling them in programs that get the care right, if we have an impact there, cut 20% of that, you've got $110 billion a year that go back to the system. those are two places i would start. and the third is the affordable care act needs to be touched. congress runs medicare, by the way, i should note by virtue of

the law. if we fix the affordable care act with a few changes, those programs could begin to restructure health care entitlements. >> where have you been the last year? >> spending his time overseas. >> real quick, this issue, i don't know if it's on the table anymore about medical devices and the tax on medical devices. what should happen there? >> i think if you're going to fix the affordable care act, you get more flexibility, get rid of the health insurance taxes, the medical device taxes, everybody's paying taxes on their premiums. it's all being passed through to the customer. if we fix, again, the underlying entitlement, $810 billion a year, you could pay for the affordable care act and reduce the debt by almost 35% if we actually got those two parameters -- without raising taxes at all. >> let me ask you this, things are the way they are for a reason always. so you're suggesting that up to 30% of the total health care

spend is -- an efficiency and lack of focus in terms of how we manage programs. who are the constituencies that keep that in place? >> it's the interest in the health care system today so you need to change the revenue model. you need to say this is the budget. this is what we're going to spend on health care. and if we go after the sickest in the united states and make them -- make a program that's better for them and we change the revenue model so you're rewarded by putting people into the lowest cost venue of the lowest cost providers that are effective for them, we start to change the cost structure of the industry and that's where the re-employment begins. we're going to need people in the homes working with people and technology to help them stay home and stay healthier. >> okay. thank you for coming in. >> thanks, good to be here. coming up, much more from our guest host, dick parsons. netflix shares trading higher on rumors of a new

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welcome back to "squawk box," everyone. we're going to keep an eye on shares of netflix today.

making online video service available as an app onset top boxes. the tv providers reportedly includes cnbc parent comcast and sudden link communications. netflix recently announced a similar deal with virgin media. we have much more coming today from our guest host. dick parsons, stick around, "squawk box" will be right back. (vo) you are a business pro.

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from our guest host. dick parsons, also the former ceo and chairman of time warner. and the conversation we were just having around the table right now -- >> it's hard to produce this show because you just did a story over there. >> it was a story becky was talking about over there. >> which i liked because i don't want to hate netflix. >> you said why can't comcast have -- >> then we can all just get along and share the revenue. i wish netflix had never been invented so comcast had all the stuff they had on xfinity and i wouldn't need netflix. >> the question, why didn't it happen? >> because first of all, netflix is not new. it's been around for a long time and evolved into the space. >> i've got to go to my play station to -- >> well, it's all about the economics. ultimately if netflix has both the market clout and the economics, they'll get on the set top box. >> we'll be fenemies at that point, right? >> you won't be frenemies.

>> friends? >> you'll be friends. >> that market cap, it should have been on comcast. >> you think it should have been on comcast? >> yeah. >> but there's an argument that -- that's what i said during the break, they started -- >> well, you need to say it again. they have great mountains and good skiing? >> no, they were an upstart. nobody thought of them as a competitive threat. now people think of them as a competitive threat. >> to a certain extent, that's true. the big guys all have deep suspicion about the other big guys and a new service comes along when netflix first started, they weren't a threat to any of the big guys and now that they're larger, the issue is, you know, how do we expect friends and that's all about the economics. you're right, when netflix first started, they had off window times. they got to movies, but six months down the road. they weren't a threat to hbo, they weren't a threat to the pay

services, to the big cable companies. and then as they got stronger, they sort of closed all of those distances. and now, you need to contend with it. >> and who has the bargaining upper hand here? i would like to hit one where i go to on demand. i'd like to see netflix in there and go like that. >> everybody always underestimates the cable companies. they're the incumbent, they've got the in-home presence, they've got the clout. >> netflix, we ought to be able to get a deal. >> what happens to a company you spun off, time warner cable? >> it's grown -- >> you think it gets bought out? >> i don't think so. it's twice the size. >> do you think it it gets bought out by anybody? >> no. we always kind of figured we'd end up in a place with two major telcos and two major cable companies.

there are now two major telcos. i think the two major cable companies. time warner and comcast. >> and everyone else gets merged into those? >> ultimately. that's my view. >> and the folks in washington allow that to happen? >> i think so. i think so. >> it's a lot of other things that to happen? >> i think so. >> there are a lot of other things going on? >> folks in washington have problems right now. that's not imminent. that's not today. i think that's where it is going. these are scale businesses. you need to have a certain amount of scale and a certain amount of competition. there is room in the market for two big telecoms and two big cable companies time ink, the spinoff of the magazine, would you invest in the publicly traded version of time inc? >> i would. i think. people always told me that eventually the same thing is going to happen to the movie business, magazine business, tv

business. i don't believe that. i think that publishing, the value ad is twofold. one is the distribution value ad which has been disrupted by the internet and digital technology. the other is editorial value. you can't dingitize what she does. that editorial aspect or compontent is not represent cli kabul. >> you still think you can charge a premium? >> yes. >> another quick break. that's a good answer for becky, and those that apply a little bit of a trade in print. more from dick parsons. gulf oil is posting record production numbers. we have more on that story when we return. tomorrow on "squawk box," lee on cooperman will join us

for an hour and then an exclusive interview with hedge fund guru, david, tepper. you can't afford to miss "squawk box" tomorrow at 6:00 a.m. eastern.

welcome back to "squawk box." take a look at the futures right now. we are pointing to a red open. dow, off about five points, the s&p, 10 points. we have headlines for you. the increase in north american oil production expected to chip away at opex's market share. the iae estimates that saudi, kuwait and the uae and qatar set production records in the last three months. in september, it accounted for 18% of global demand, a level matched only twice since the 1980s. the sandra bullock/george clooney thriller, gravity remained atop the movie board. the new drama starring tom hanks

was topped by it. you can choose your own seat online. our guest host, former citigroup chairman, dick parsons. we're going to give him the last word when "squawk box" returns. o way we're going to let them die. ♪ like they helped millions of others. by listening. planning. working one on one. that's what ameriprise financial does. that's what they can do with you. that's how ameriprise puts more within reach. ♪ ♪ [ male announcer ] the parking lot helps by letting us know who's coming. the carts keep everyone on the right track. the power tools introduce themselves. all the bits and bulbs keep themselves stocked. and the doors even handle the checkout so we can work on that thing that's stuck in the thing.

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>> back with dick parsons. jamie dimon, great bank ceo, a witch hunt or overrated? if you were chairman of jpmorgan, would you be wondering about whether you need to replace him at this point? >> no, i wouldn't. jamie is terrific, a gooden ma. i don't think he is overrated. i just think that the banks are in the penalty box. they have been for the last four or five years. >> bank? >> banks. >> don't you think they are being singled out a little bit here? >> they are at the moment. citi was for a while when i was there. fortunately, for us but not for j.p., the puck moved. right now -- >> you didn't say anything bad about the white house. >> you have to play these things like they lay. he acquired -- it is not so much j.p. and franchise. he acquired bear stearns and those things have kind of blown up in terms of the problems he

has right now. jamie is terrific and they are lucky to have him. >> there you go. >> a lot of questions about that. he just settled it. >> well, we've had a lot of people settle it and it stays unsettled. >> now that there is a $23 billion price tag for the piggy bank out there. >> dick, thank you so much for joining us today. >> it was fun. >> that does it for us today. make sure you join us tomorrow. right now, it is time for "squawk on the street." good monday morning. welcome to "squawk on the street." i'm carl quintanilla with david faber and kelly evans and the new york stock exchange. cramer is off today. we are in day 14 of the government shutdown. futures are down. what appeared to be promising talks heading into the weekend. the debt limit expires on thursday. the bond markets are closed for the columbus day holiday. europe is giving up some ground. our road map begins with the risk of the u.s.