assistance. >> one more look at the markets this morning before we end "squawk box." the futures this morning have been higher throughout the morning, no impact at least in terms of what we've seen out of that terrorist attack in the uk. right now the dow futures indicated up another 40 points. the nasdaq up by 12. steve, thank you. >> pleasure. >> if you're not here tomorrow make sure you join us to, please -- >> ain't no place i'd rather be. >> "squawk on the street" is next. good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber. markets in the u.s. and past europe looking past the attack, the deadliest in the uk in over a decade. we await the official budget proposal here in d.c. the ftse up about 0.3.

dollar flat, ten-year 224 and moderate action in crude. budget priorities the white house out with its 2018 budget plan today which targets big cuts to medicaid, food stamps and disability. >> plus u.s. markets are shrugging off global terror concerns. futures are aiming for a fourth consecutive day of gains. isis claiming responsibility for the deadly concert bombing in manchester, uk. the worst terror attack in the uk since the london bombing in 2005. the white house set to unveil the president's budget for 2018 which aims to eliminate the deficit in ten years, the budget includes $3.6 trillion in spending cuts over a decade, including medicaid, food stamps, welfare, student loans and disability benefits. the plan does call for an increase in military spending, most notably, jim, calls for 3% real gdp from 2021 all the way through 2027. >> yes, i don't know what to

say. you read the "new york times," notice i didn't call it the f l failifai failing "new york times." this is ridiculous. in a news story, not a news analysis, but maybe that doesn't matter but when i was reading it, i said, well geez, this is just, if i came out here and said that this is going to happen, i think you'd look at me and you'd say jim, i've always known you as a rigorous thinker, hopefully you think that, and this is the first time you've really said something on air that i have to tell you, really just doesn't jive with reality. that's how i kind of felt. >> it would take nondefense spending as a share of the economy to about 1.5% by the end of the next decade, the lowest it's been since they started keeping records or at least going back to 1962. >> i mean plus the growth is -- look, i love the growth. it would be fantastic. the cuts, you know, basically you see the thesis which is now

is the time to get these people to stop getting help from the government, and stand up on their own, and whether you hate it or like that, that is not what the issue is in terms of the true entitlements, that's the smaller part but medicaid obviously it's a third rail, if you want to take it on. >> another key part of this apparently according to -- well, a number of people, including larry summers, former treasury secretary, who writes in an op-ed in "the washington post" that the budget being proposed includes the benefits they see from tax reform, but does not include any of the costs from the actual tax reform proposals that may eventually perhaps, and we should talk about this in a minute, come to pass. but he says this is an egregious error, akin to buying a company assuming you can make investments that will raise profits but then in calculating the increased profits counting the higher revenue failing to account for the fact the investments cost some money. >> this is a business

administration, and i think that if you were to do an analysis of a company, and you predicted this kind of growth you know it would cost a lot to get this growth. the government is not facebook, okay? the government is not facebook. we don't all put content out there and the government reaps the gain. i mean, this is the government is facebook. they've got the business model of facebook. not even the google business -- google wishes we had the businesses. >> we wish we had the operating margins at the u.s. government. any margins would be helpful. >> it would be great i charge $72 for a beer and think everybody's going to come. can you imagine? i'd quit this job in a nanosecond. gary kohn, if he put forward this budget at goldman, i think some may say you have to raise the compensation levels. >> well summers pointed to david's point it is a classic double count that you would give an introductory economics

student a failing grade if you turned this in. we'll hear more about it today. john harwood will interview the treasury secretary att the peterson institute in a little more than an hour. at the least they are couching it as a reframing of government benefits. if you are able bodiy eied you stop getting benefits you perhaps do not deserve. >> right. that is, i wish they had come and said let's be more touchy feely. this is an extension of the clinton government putting it on the backs of people. it doesn't ring true. there was a way to couch it you could say look it's going to cost, there will be some costs up front, we have to raise some taxes. >> right, but the two biggest parts of the budget are untouched, medicare and social accurate. >> if you were to say everything i just said, this is an environment where people will say you hate trump.

no. it's a business plan and it's a business plan that if you put it in front of "shark tank" who would -- what would cuban say about this business plan? he would just say, pass, who would he give it to? you think mr. wonderful would go? >> i don't think so. he's pretty clear-eyed, mr. wonderful. >> robert corcoran? >> maybe. pie in the sky. >> are you surprised defense is not up more? there's been some discussion about that. >> no, because we got everybody else paying for the defense now. i went through the orders that lockheed got yesterday in saudi arabia. the saudis are making a commitment that is extraordinary and if you get all our allies to step up like that, then you won't have to produce as much for our country. they're our allies, i think they are but someone probably says jim you call the saudis our allies? but i think they are our allies. >> i think it's an important point to make in terms of for our audience in particular what

all of this means for tax reform, or the prospect of tax reform, which is the single largest issue dealing with the business community, as we watch the president about to depart for rome. >> for rome, yes. had the bilateral, is having a bilateral with abbas today. already gave a speech this morning with netanyahu, goes to rome after this, and on his way to sicily and brussels. busy week continues. >> it does. and a lot of things need to happen in washington as well. back to the point i was making about tax reform, because i think it's a very important one, and it gets somewhat complex for people to understand, which is that in order to actually have tax reform and do it under reconciliation, you've got to pass a fiscal year '18 budget through congress. because that will dictate the

terms of reconciliation. so if people can follow me, i know it's hard to, especially when you're watching these great pictures, as he leaves tel aviv, but you're not going to get tax reform. the long -- this delays everything. you put up a budget that is far out of the consensus, and you're going to just take longer to get it done. >> thank you. >> not to mention everything else that's going on in washington involving this president. >> right. >> and it simply puts, makes the prospect for actual tax reform under reconciliation, which they needed to do because they can only do with 51 votes much more difficult. >> thank you, that is my point. if they made it here's where we're going, the direction. this is what we're thinking. ♪ but let's do some economic growth first. you're right, they have to have something. we're getting caught in the calendar situation is what you're saying. >> yes. the idea we're going to see something in '17 is hard to imagine. remember, they always seem to do health care reform first because

that was reconciliation off the '17 budget. now we're looking for reconciliation off the '18 budget, the one that's been submitted today. how much debate is going to need to be taken on over this budget that is clearly not in the broad consensus, if you want to call it that. >> bring it full circle. what stocks have been going up? the stocks of companies that need no help whatsoever from washington in terms of taxes. that's what yesterday's rally, what they all had in common. >> great point, jim. you know what? all those companies that would have benefited the most from tax, they stopped going up in january. and they are actually lower now than they were after the election. >> yes. i mean, this is rally involving a couple of companies involved with secular growth trends involving -- look, there was a horse that won. there was a horse right here, his name is cloud computing. it won on saturday and won on monday. cloud computing.

>> understood. >> but you're watching the tape. >> no -- yeah, i'm, i hope people follow this. we made an important point, and again it's all about tax reform for our markets to a certain extent in businesses at least as the big story for this year and by the way it may end up being the story for next year. >> it's interesting, pope francis a compelling figure you're not going to have trump being involved in the news flow but the secretary of treasury obviously but yes, i just have given up on tax reform, given the fact this was it. i just threw my hands up on this one. >> leader mccarthy on "squawk box" this morning said he thinks it gets done this year, given everything you guys just talked about. >> i love that level of optimism. the phillies are going to win it. these are the things that i come to think about when i read about optimism. i want the optimist to give out so much in life. this one is a tough one. >> jared kushner is saying

good-bye to netanyahu. in that speech in tel aviv said the palestinians are ready to reach for peace, but not going anywhere near whether a two-state solution is part of this deal that he ostensibly hopes to make. >> it felt like when clinton decided to get everybody in a room. >> they came close. >> very close. >> oslo. >> right, oslo was very close. look, i don't want to be too far afield. i see the stocks that are coming -- look, one of the biggest stocks today if i can transition for a second, nobody else is going to do manchester but take two interactive, major game, "red dead" which is what i'm looking for, delayed by six months. the stock is up huge. why? because this is that new generation. that is about nvidia. this has to be equaled to the nvidia chip. that's how good the game will be. the stock is up. it's the economy, the stay at home, have doritos, call

netflix, read your facebook page, have the food delivered play video game economy. i'll take a picture of you and we watch people play e-sports at the garden. they have winning teams at the gard garden. >> esports we've got to be on this. >> niche should buy an esports team and start winning. >> the sixers ownership have bought some. >> who owns, the koreans are the best at this. who owns the korean national team of esports? >> i don't know, who? >> the chinese. they like winners. >> with all of that, we do have isis this morning claiming responsibility for last night's suicide bomb attack in the uk. willem marx is live. >> reporter: manchester police arrest aid couple of individuals, executed one just two miles from here and another in fallow field, 300 miles where

i'm standing. ment i'm down the road from manchester arena where the horrific attack took place last night. we're getting details of the victims and 22 that lost their lives last night, some of them were children, according toing prime minister theresa may. 29 have been treated in area hospitals, children. outside number ten downing street talking about the threat level following this attack in the uk. let's take a listen. >> the threat level remains at severe. that means that a terrorist attack remains highly likely. but the independent joint terrorism analysis center which sets the threat level on the basis of the intelligence available to them will continue to assess this throughout today and in the days ahead. >> theresa may was talking to president trump prior to that little press address you saw there. he described it as a wanton and deprived attacked. she said it was the result of a

warped and twisted mind. police and authorities in manchester have carried out two arrests, a further arrest this morning, that's now three individuals we understand have been arrested by local police. they're going to try and identify exactly who these people are their relationship and the motivation behind this horrific attack. >> willem marx in manchester, thank you. still to come this morning the treasury secretary mnuchin, john harwood will sit down with him at the peterson institute to talk about tax reform, the budget and more. later on alan simpson of wyoming on the budget and all things white house. take another look at the pre-market, the nyse will hold a moment of silence for the victims of manchester at 9:25 a.m. eastern, in about ten minutes. we're back after a break.

say carl, we have a question about your brokerage fees. fees? what did you have in mind? i don't know. $4.95 per trade? uhhh. and i was wondering if your brokerage offers some sort of guarantee? guarantee? where we can get our fees and commissions back if we're not happy. so can you offer me what schwab is offering? what's with all the questions? ask your broker if they're offering $4.95 online equity trades and a satisfaction guarantee. if you don't like their answer, ask again at schwab.

for years, centurylink has been promising fast internet to small businesses. but for many businesses, it's out of reach. why promise something you can't deliver? comcast business is different. ♪ ♪ we deliver super-fast internet with speeds of 250 megabits per second across our entire network, to more companies, in more locations, than centurylink. we do business where you do business. ♪ ♪ we're counting down to the opening bell. we have a little while and also the moment of silence for the victims of the horrific attack in england. where is your focus this morning, my friend? >> i mentioned take two, that's

already out there. we're 3 for 3 basically on earnings. toll brothers this morning the magnificent quarter, many factors brought buyers off the bench. it was interesting, best spring selling season in over ten years. lot of times people talk about seven years, over ten years, that was the heyday and bob toll putting up fantastic numbers. you want fantastic numbers? adulence, from hewlett-packard, it's a life sciences and diagnostic company, put up 6% in life science, extraordinary, both stocks up. pi can't believe it hasn't been bought by someone. it's always a bridesmaid, never a bride. >> it's been around for so long, as you point out, jim. you're right. maybe they don't want to give up the incredible symbol, the letter "a." >> i would love to be the letter

"a." >> spins from hewlett-packard. >> a lot of wealth created. hp is up. not hp, that's helm rick and payne. >> but hp, i inc., printer comp. >> agilant, toll strong and take two strong. if you look at the market and decide how is it itting on earnings, 3 for 3 is pretty darned nice. >> you made an important point, as we watch the president depart tale veef those companies believe to ben fit the most from tax reform have actually had the worst returns. >> yes, the market is so smart. the bond market is smart, there isn't' going to be a new expansion of the budget and the stocks right because they've taken up everything that is literally is just spend, spend,

spend, doesn't buy back stock. what you have is the stock market and bond market that are smarter than the average bear who played the market negatively betting somehow the trump trade being off would bring the market down. >> and leader mccarthy may think one thing in terms of timing for tax reform this year but what i hear from market participants is another, is the lack of consensus like the b.a.t. somebody brought up to me. spend so much time talking about it, never going to happen but it was delay, delay, delay. >> i think there's kind of a enui down there now. there are fewer leaks. they have a special prosecutor, lots of policy debate, we have the president overseas and when everything is stalemated we come back and we start buying nvidia which makes sense. the market is back to this narrow group of stocks that

move, and we did the 15th anniversary of -- >> netflix. >> of netflix and someone sends me the "house of cards" is coming netflix. you know what i say? yes, probably. we are into a ridiculous market. they release house of cards, hey i'm taking my price tag netflix off. the other thing going on, who kraft is going to buy. i went through the supermarket aisle by aisle. i see campbell's soup and pinnacle foods. those are two i said why not? >> why not what? >> why not heinz kraft -- >> are you trying to work that now? >> no, i saw the two stocks up on big option fund. >> browns foreman was up. >> i have two classes of stock. >> family is true.

>> diagio is having a great quarter. johnny walker an old friend of mine delivering on top and bottom line. >> some of these economic numbers out of europe, record high, as we said earlier, eurozone pmi, six-year high one reason you're looking at the ftse and the green. >> john deere had such a quarter over there. it's amazing. >> we will get a moment of silence here at the nyse in a moment remembers the victims of the terror attack in the uk. don't go away. i was wondering if an electric toothbrush really cleans... ...better than a manual, and my hygienist says it does. but... ...they're not all the same. turns out, they're really... ...different. who knew? i had no idea. so, she said look for... ...one that's shaped like a dental tool with a round... ...brush head. go pro with oral-b. oral-b's rounded brush head surrounds each tooth to...

...gently remove more plaque and... ...oral-b crossaction is clinically proven to... ...remove more plaque than sonicare diamondclean. my mouth feels so clean. i'll only use an oral-b! the #1 brand used by dentists worldwide. oral-b. brush like a pro. michael dorf is a frustrated musician turned urban winemaker. he started city winery to put together all of his loves, a restaurant, a winery and a music venue. he's taken the leap expanding now to five cities.

the no, stock exchange is about to observe a moment of silence for the victims of the bombing in manchester last night. the latest numbers we have, 22 people confirmed dead, at least

59 injured. about a dozen of those children, as they were leaving that ariana grande concert in manchester. it is the deadliest attack in the uk since the 2005 london attacks on the transportation system there. let's get this moment of silence here at the nyse. [ moment of silence ]

[ moment of silence ]

i'm here at the td ameritrade trader offices. steve, other than making me move stuff, what are you working on? let me show you. okay. our thinkorswim trading platform aggregates all the options data you need in one place and lets you visualize that information for any options series. okay, cool. hang on a second. you can even see the anticipated range of a stock expecting earnings. impressive... what's up, tim. see options data like never before.

with thinkorswim only at td ameritrade. ♪ predictable. the comfort in knowing where things are headed. because as we live longer... and markets continue to rise and fall... predictable is one thing you need in retirement to help protect what you've earned and ensure it lasts. introducing brighthouse financial. a new company established by metlife to specialize in annuities & life insurance.

talk to your advisor about a brighter financial future. . you're watching "squawk on the street" live from the financial capital of the world. opening bell in just under a minute's time. the fallout from the manchester attack in the uk last night, but the president making his way from israel to rome this morning. meanwhile, a fair amount of research, jim, we're looking at, the lululemon website down and trying to look at what every day means in terms of lost comps. >> there's tremendous margin pressure. i can't express to you how important that website is for business, because that's where they put out what they want to

find out what's hot. they use that. so this is bad for them, more than most. >> luluen lemon stock about 0.1% so far. [ bell ringing ] let's get the opening bell s&p, it's charles river labs celebrating its 70th anniversary and the nasdaq legg mason celebrating exchange traded funds. >> it's been a remarkable performer, my nephew who writes my show with me said it's 1-800-rats which doesn't work, but they are the guys if you go, you have the dat log and they do life science just like we talked agilent. life sciences has not been cut back so far, federal government never been as good but it pays for a drug company to outsource to charles river labs. that's who does the testing on animals and they try to do it --

look, the peta people are mad at me, in order to figure out whether drugs are a go or not go, charles river fabulous stock. >> you mentioned toll earlier. not only is it they say the best spring selling in ten years but the stock is at an 11-year high. >> the company bought back stock when they were fed up what new people thought. two quarters ago people were bemoaning their big urban initiatives, three quarters ago. i looked at the urban initiatives in order to see how badly they were doing. if you bought one you're up huge. you could flip it if it weren't for the mansion tax. they've done some incredible urban stuff that i think they're not getting credit for until now. what a company. and there kb homes i think they're one and two. kb homes is a lot of california real estate which is incredibly short supply because of zoning issues.

$1.3 million starter home in san francisco. my daughter said dad i'm thinking of going to san francisco. i said happy to visit. you want to visit all the want. >> we'll get new homes in half an hour. auto retailers are going to take it on the chin again. auto zone misses. >> no one is getting into the zone. it was a bad number and that had been a consistent deliverer but when you see a number that is almost minus one comp. and in it, same-store decline at 8%. very interesting. they blame the timing delays of the irs. we heard of the payments time and again, the beginning month wasn't that good and it got stronger, but people are tired of hearing about the irs tax claims. they're tired of. >> the irs what? >> the delay in funds. the really good guys haven't heard it and why didn't the delay in refunds affect length tronnics arts take two and activision blizzard? people are still buying games.

>> it was a real thing, returns were late. >> it was a real thing, but the fact is, the really good ones you didn't see that big decline. and there weren't that many good ones in retail. look i think autozone is a play on a tough winner. whether you need a lot of stuff for your car, because the axle is broke. everybody's axle breaks on interstate 78. that was just like, that had to be one of the great, great things for the autozone industry was our ininfrastructure. >> the budget has it 210 billion over ten years. we talked saudi yesterday, sent blackstone stock up yesterday. >> up $2, big move. >> saudis throwing a lot of money around $45 billion we think to the vision fund run by softbank which had its first close at $93 billion, which will be abactive participant in our

place focused on companies like internet of things. >> did you see the internet of things notes today on dish? >> i did. >> they did it again, david. this time it said they wouldn't be an odd couple. this is a citi note. sfwlts >> it's a think piece. >> what does that mean? >> it's not as though they're getting messaging from either companies. the team at citi that follows telecom put out an interesting piece, worth a read about basically you're going to have the creation of these, of a new wireless network conceivably in their mind for the internet of things, for all the things to communicate, not for us to communicate and conceivably dish with all of the spectrum it owns could help to power that, and amazon might benefit if it were to make an internet of things service part of its aws service, kind of combine the two. so you get it all. you get computing power, and you also get the ability for all

your things to talk to each other, if you're a corporation, and we'll run that, too, but you need wireless spectrum to do it. they bring up this idea, could there be a partnership between amazon and dish, could it be more, who knows, interesting thoughts. i would point out charlie ergan, the man who runs dish will be speaking later today at an investment conference in boston. >> you have a good relationship with him. >> i do. last time i e-mailed him he gave me the heisman. >> really? i had c.o.n.e. last night, data farm. they're putting data forms up all over the country, one in quincy, washington. they need hydro power. amazon, you need data farms. big kinds -- both agriculture and data are great stories right here in terms of farming. >> huh. just in terms of improving yield. >> what you need -- >> you know a square meter of your farm is yielding. >> whoa! >> it's crazy. >> by the way the seed group has

been incredibly strong. there are sec tar growth stories here. i cannot believe how hot data farming is. i cannot believe how hot real farming is. >> is real farming hot? >> it's very hot. not in this country. >> deere might. >> i've been listening to deere calls forever. they were optimistic! >> and as you say we know data farming is only growing. the crops are growing to the sky but to your point you need power. >> you need so much power. >> that's why google owns a lot of hydroelectric dams or partners in them. >> dominion low-cost provider, texas has a lot of wind, low-cost provider. these matter a lot. >> deere all-time high and so is google alphabet today. morgan stanley on the $70 billion valuation basically talks about alphabet as an incubateor for massive tax spin-offs. >> amen, this is a piece ever

since i wrote in a wamo car, take me to the best pizza place, the highest rated pizza place in palo alto and it will get you there and it looks, inches out, has a sense that guy is going to run through the light and this guy is going to pull out. 2 is it is remarkable and about time. if mark fields lined up with wamo instead of fiat now but it's lyft this is the company. they have the cheapest and the thing called the engagement. how often do you have to engage with the car? everyone says bmw is spending a fortune. go look at how well wamo is doing. the kaleical motor vehicles it's incredible. they can drive hundreds of miles without having a human engage. >> they're way ahead in terms of data. again back to our point about data. that's the algorithms keep needing to improve themselves and the only way to do that is drive more miles. they've driven the most miles. >> the machines can learn. >> yes they do. they don't seem to mind it.

>> do you think google would ever spin out what may end up being a key engine? >> no, i think that's a mistake because what they're trying to show is that they are not just a search company depending upon advertising. this is i think a nice way to talk about what's within the company, but the company is developing wo because they don't want to be any more viewed as something as hostage to the $600 billion ad market. wamo is capped. that'se that's a mistake. ruth porat doesn't want anything that's not making money. >> morgan stanley's point is that their target of 10.50 doesn't reflect any other bets. >> the piece is brilliant. i'm just saying that when they speak with you, they want you to know wamo, how much it could be worth. they take you to other bets because they want to show you guys, stop valuing us with a low multiple because all we are is taking a declining piece of the

pie, which is the advertising dollars. it's not. this is a real company. and the other guys do not have as good a chip and a solution and we are going to be in driverless cars. >> oh, yeah, with our vr goggles on in the back. >> really? >> sure, why not? >> how you play nba 2k? >> do what you want. worse than now, everyone walking around looking down. >> have you watched it? >> watched? >> i was in a virtual reality at a hospital, i won't mention the hospital but where they can show you my brain, and the synapses. >> i'm not sure i want to see that. >> like a strobe light. >> it was a horror story. i look at it -- that's what's going on in there. and you know i look calm it's like -- >> who said you look calm? >> it was quite an extraordinary thing to see what was going on, the hell in there, i got to tell you.. it's like wow. i'd like to see a man with two brains.

>> i would have maybe thought you had them in, two separate little brains. >> is this a normal brain pattern? they said -- >> no. >> no. >> not really. jim, jcp hired a new chief merchandising officer from lowe's. >> oh, areal? >> who will marci grebstein will join in june. >> lowe's has good merchandise. i wish they put a few more people behind the register so we wouldn't have to wait so long for tomato flats, go to home depot where the plants are droopy and next thing i know i'm going to local, period, end of story, apropos of lowe's merchandise. >> uh, okay, thank you. okay. >> dow is only about 50 points from recovering its pre-wednesday sell-off. >> what does that say? everyone thought that was -- i was watching a person on air who said this is the beginning of the end, and there were many other beginning of the ends. there is no beginning and there is no end, that's what people have been saying since i got in the business in '79.

>> like the universe. >> no beginning, no end. >> did you ever read the stephen king story about the end of the universe? >> no. >> pretty cary. >> there can't be an end. >> what is on the other side? >> nothing. that's the problem. that's why when i think of stephen king i think of the ceo of david foster -- >> nothing's got to be something. you've got the brain here that's -- >> stephen king's got the brain. >> deep discussion to start the market day. >> stephen king was in, he got himself in, not "breaking bad" but but "sons of anarchy." >> really? pretty >> pretty smart guy. he's the charles dickens of our era. >> courtney reagan, dow is up 37. >> equities are high to start the session a mid the suspected possible terrorist attack in manchester, england and ahead of the budget release that's big news when we get all those details. investors also getting a bit of a break from the d.c. market moving med lines at least so

far. european markets managing modest gains. more details emerge. the uk ftse index new highs led by the banks. asian markets lower. the safe haven yen strengthened after news of the bombings so some reaction there. it looks like a risk on rally so far, albeit is a modest rally, technology, materials, industrials, all leading when we are looking at the sectors and then lagging in early trade. we see energy and utilities though crude oil is holding above $51 a barrel. auto retailers on the move, lower this morning. we walked through some of this, but autozone missing on earnings, revenues and comp. sales. the ceo noted the trend improved towards the last seven weeks but it wasn't enough to offset the stocks. stocks down almost 9% at this

point. advance auto parts kr, fo stepping down in august pulling down names, o'riley auto and genuine parts down there, too. toll brothers beating earnings on a dime by stronger than expected revenues. more homes delivered and more contracts signed this year over last. the average home price did follow. ceo strengthened the broader economy and had some good thoughts and said our buyer, benefiting from a solid employment picture, strong consumer confidence and a robust stock market. clearly the new home market is alive and well. some good notes from the toll brothers ceo. lot more market moving news through the kay. we have a lot to come especially out of washington. carl, back over to you. >> courtney, thank you very much. let a's get to the bopped pits and kek check in with rick santelli at the cme in chicago. >> good morning, carl. the horrible events of manchester may have had a bit of an effect on the market, pushing rates down just a bit, but it is a bit strange, because bund

yields mostly steady but the two-year shot yields were higher. we're close to unchanged, just under 2.25. look at a one week of tens, clearly see where we're not really going anywhere but also not selling off, pushing yields back to what had been the bottom of 2.30, 20.16 2017 range. look where we're trading versus the left side and year-to-day of twos trading versus the left side. the curve flattening but it jumps out at you looking at the two charts extremes of the yield curve. year-to-date of the european two-year, this is interesting. here it sits today, minus 64, minus 65 and looks like yields have moved much higher, 30 basis points higher which really of course plays into the conversation of where's mario draghi's exit, paint brush to at least start painting in the

frame. look at a 20-year chart most of that dissipates. it's hard to think that that economy isn't, doesn't have training wheels on, when you look at their two-year yield on that particular chart. let's switch to the currency. the euro currency is hot. seems as though all investors want to get on board. it's like the dollar index was about nine months ago. look at one-year of the euro versus the dollar. doesn't look bad there. if you look at a five-year chart, boy, looks like it has some room to breathe. carl, jim, david, back to you. >> rick, we'll check in with you in a little bit. still to come the 15th anniversary of netflix as a public company will discuss the past, present and future with one of netflix's board members. dow is about 60 points or so from recovering its losses from that wednesday sell-off last week. we're back in a moment.

i'm only in my 60's. i've got a nice long life ahead. big plans. so when i found out medicare doesn't pay all my medical expenses, i looked at my options. then i got a medicare supplement insurance plan. [ male announcer ] if you're eligible for medicare, you may know it only covers about 80% of your part b medical expenses. the rest is up to you.

call now and find out about an aarp medicare supplement insurance plan, insured by unitedhealthcare insurance company. like all standardized medicare supplement insurance plans, it helps pick up some of what medicare doesn't pay. and could save you in out-of-pocket medical costs. to me, relationships matter. i've been with my doctor for 12 years. now i know i'll be able to stick with him. [ male announcer ] with these types of plans, you'll be able to visit any doctor or hospital that accepts medicare patients. plus, there are no networks, and virtually no referrals needed. so don't wait. call now and request this free decision guide to help you better understand medicare... and which aarp medicare supplement plan might be best for you. there's a wide range to choose from. we love to travel - and there's so much more to see. so we found a plan that can travel with us. anywhere in the country. [ male announcer ] join the millions of people

who have already enrolled in the only medicare supplement insurance plans endorsed by aarp, an organization serving the needs of people 50 and over for generations. remember, all medicare supplement insurance plans help cover what medicare doesn't pay. and could save you in out-of-pocket medical costs. call now to request your free decision guide. and learn more about the kinds of plans that will be here for you now - and down the road. i have a lifetime of experience. so i know how important that is. toll brothers having a pretty good morning.

they come in 63 cents, beat by a time. revenues were ahead but overall home builders are looking at four days of gains which they haven't done since january. >> they ran up in anticipation. this is a tremendous spring selling season. so few homes for sale. that was a major topic on that very good home depot conference call that no one paid attention to because the stock's been down. no one. and i got to tell you, i'm going ospend some time on this group tonight because this group is signifying great health as is employment and yet so much of the rest of the economy is not signaling great health. that's why it's been such a difficult read for us. you just, if you read those numbers you just think this is the greatest time in the history of home building. and then you look at you know, what other companies are saying, let's say use the example of mark fields and auto. it's not a great time for autos. >> we had a pretty good -- >> right, so autos came first.

you need a car. remember, one of the great fallacies of the great recession, people did not turn in their car keys. they turned in their house keys. because you need your car to get to your job. there is a sense retail so not great. auto not great. home fantastic. everything that goes into a home we'll hear from best buy soon is really terrific, tvs, people spending a lot of money, i've gone over and over the video games. people don't stop talking about this. they're telling me, jim, if you get the nintendo switch you will stop your gardening entirely and go to have a corona and play nintendo switch. >> switch. >> switch. >> you know what it did for target and their electronics. >> they went from minus 9 to plus low digits because of the switch. i don't know. >> i got to get on that. i don't know. >> were you ever in -- you never did last year's craze either? >> no, oh, the pokemon? >> no. >> never did.

>> you never looked for the post office? >> no. >> you didn't look for the post office? >> no, we talked about it though. >> why was i so into it? >> you're into everything. today marks the 15th anniversary of netflix's debut as a public company. if you invested $1,000 at the ipo price today you'd have $146,000 and that does top amazon's performance over its first 15 years as a public company. after all the seemingly existential crises they had in quick stirrer, amazing. >> when hastings went from disc to streaming, and remember he had the two different companies, one of the great things about him, he is the most humble. i screwed up he said. talk about things you're not supposed to say. "i screwed up" and one of the things i love about him when i saw him is that they have, they can intuit what people want. amazon has this tremendous ability to find out.

they go deep learning and then they overlay reeds judgment and his decision to make movies that were loved in brazil that we loved, these are the kinds of things, these are the boldest moves. his projects that tend to be renewed when so many different things are canceled in the broadcast, i revere him. i revere him. i did a couple segments with him. at the end of it i said holy cow, what is narcos? he said request you like scarface and breaking bad in this is spannic breaking bad meets scarface. >> when it comes to the stock itself there were a lot of opportunities to have bought it. >> over and over and over. >> it's not as though it was a straight line up. for a long time it was -- >> i told an toll buy it. >> now its market cap is larger than viacom, cbs and discovery combined. bigger than fox, too. >> i used to say they're bigger than u.s. steel. that was the godfather. so out of date. >> that's '73.

that's '68, that's '52. you're way out of date. >> bigger than amazon. >> we will get stop trading with jim in a moment. dow is up eight points. don't go away. i need someone that understands my unique needs. my dell small business advisor has gotten to know our business so well that is feels like he's a part of our team. with one phone call, he sets me up with tailored products and services. and when my advisor is focused on my tech, i can focus on my small business. ♪ ♪

did you know slow internet can actually hold your business back? say goodbye to slow downloads, slow backups, slow everything. comcast business offers blazing fast and reliable internet that's over 6 times faster than slow internet from the phone company. say hello to internet speeds up to 250 mbps. and add phone and tv for only $34.90 more a month. call today. comcast business. built for business.

time to stop trading. >> xilinx, downgraded by wells fargo. not a lot of catalyst. maybe the business is growing slower. let me give you the skinny. people were hoping the analyst meeting would be canceled and they'd announce they'd be acquired by someone. suddenly stuck with the fundamentals. they're good, not as great as others. it could impact the whole group. >> jim what's tonight on "mad"? >> i am so excite being this. schneider is a trucking company doing well. this is real economy, intermodal, last mile and i've got to tell you, these are companies that are doing well because of e-commerce and because of just the business being done in the country is a little bit stronger than people realize. i cannot wait to speak to new company, doing well. >> we can't wait to hear it.

"mad money" 6:00 p.m. eastern time. when we come back the latest on the terror attack in the uk. speaker ryan and republican house leader also hold a news conference on the budget. dow trying to hold onto a four-day gain. y. hey ron! they're finally taking down that schwab billboard. oh, not so fast, carl. ♪ oh no. schwab, again? index investing for that low? that's three times less than fidelity... ...and four times less than vanguard. what's next, no minimums? ...no minimums. schwab has lowered the cost of investing again. introducing the lowest cost index funds in the industry with no minimums. i bet they're calling about the schwab news. schwab. a modern approach to wealth management. usaa gives me the and the security just like the marines did. the process through usaa is so effortless, that you feel like you're a part of the family. i love that i can pass the membership to my children. we're the williams family, and we're usaa members for life.

you are looking at a live shot of the house gop leadership meeting holding their weekly press conference a few moments from now. john harwood on the right getting ready to talk to the treasury secretary, steven mnuchin at the annual peterson foundation fiscal summit. we'll take you to both of those event as soon as they begin. good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with sara eisen, david faber at the new york stock exchange. lot going on with the attack in manchester, the budget and of course the president making his way from israel to rome. >> let's get straight to that deadly attack, in manchester, england. willem marx joins us by phone with the latest as we learn a few new developments this morning. >> reporter: there have been, sara, they had a raid conducted by manchester police a few

moments ago. we can show you the police authorities here in manchester have been issuing a number of warrants, executed a 23-year-old man we now know and some of the names and ages heart breakingly of the victims have been made publicly, one 8-year-old girl amongst the 22 who lost their lives the 60-odd people in manchester area around 22 we've been told are children. theresa may speaking earlier outside number ten downing street, she described this as a warped and twisted mind-set that would be responsible for this incident. worth bearing in mind they have said there was one individual responsible for the improvised explosive device. these arrests subsequent although they've been told, we've been told they are linked to the explosion last night we have no guarantee the individuals will be charged. after the westminster bridge attack there were a number of

raids conducted over 24 hours and none of those led to charges. >> willem, what are we waiting to hear from authorities? do we know anything whether he acted alone or was part of a network? what sort of questions are you waiting to hear from him? >> reporter: they were looking to get an identity from the authorities, although they have themselves i.d.'d the attacker and not released that publicly yet clearly with a number of arrests going on around the manchester area, a couple miles from where i am in the city center, there are those they are looking to question about their relationship with this attacker potentially whether that means they're in the wider, that's clearly something they're concerned about. they've kept the threat level where it is right now. so hopefully -- >> willem, sorry for the interruption. we go to the speaker talking about the budget. >> we've seen taxi cabs driving back and forth through the night offering free rides to bring people to safety, and as we speak, people on social media are reaching out to connect families with their loved ones.

terror is a threat that we all face together, and with our might, and with our humanity, too. in that spirit, i want to express solidarity of the whole house of representatives to prime minister may and her government. we stand ready to help in any way we can. because freedom, compassion and peace will always prevail over violence and hate. >> in the face of heinous acts of violence we must -- >> speaker ryan talking about the attack in manchester last night. we do expect some comments on the budget in a few moments. when we get that we'll take you live. switching gears to the political news out of washington today, the white house is unveiling its 2018 budget ylan mui joins us with details. >> reporter: the white house is looking to cut $1.7 trillion out of the social safety net over

the next decade. the big items on the chopping block, about $600 billion from changing the funding from medicaid and phasing out money for the children's health insurance program. another $272 billion could come from restricting food stamps and low income tax credits among other things. $143 billion come from consolidating federal student loans. on our air earlier this morning, house majority leader kevin mccarthy defended these controversial proposals. >> when i look at entitlements and you're saying you're cutting them, no, you're protecting them for a future generation and we have to have a serious conversation about this, because it's going to take up almost every dollar we have unless we're able to grow the economy, reform entitlements and actually build so more people could have homes and send their kids to college. >> threshry secretary steven mnuchin just put out a statement saying that he would look at savings through reforms that

prevent taxpayer bailouts and reverse burdensome regulations that some of the benefits of this budget and the budget was sent to capitol hill this morning, and the politics are already kicking in had. senate budget committee chairman mike enzi applauds the president's proposal but considers it a suggestion. trump will need democratic support in order to get any of these proposals enacted. bernie sanders tweeted recently it's "incomprehensible that the president would give tax breaks to the top 0.2% while slashing programs like meals on wheels." sanders is the ranking member of the senate budget committee so no sign of a deal just yet. back to you. >> ylan mui, still early. for more joined by the president of the aspen institute, former "time" editor and chairman walter isaacson. we know the budgets are doa on

arrival, and this one comes with the added wrinkle, criticism for cutting safety nets that ostensibly aid a lot of trump's base, on the other end from others from the peterson institute who says it doesn't aggressively enough attack entitlements. where are you? >> it surprises moo he that the with the has done a budget that's very much sort of corporate big business, big tax cuts for wealthy, as opposed to doing the more populist approach that he campaigned on and i thought he was going to do. i mean, for me, the problematic thing is, not only cutting some of the medicaid entitlements, but student loans, and health, c.h.i.p. program, the national science foundation, national cancer institutes, national institutes of health, these are all the investments you make in the future, making sure our kids get an education, they have good health, and if you look at every

great innovation, you look at that stock ticker running right below you, whether it's intel or amazon or google, it all came from basic scientific research, including the internet, that was done by the national science foundation, and others. so it's a budget that robs from kids in order to pay off people who are quite wealthy and getting big tax cuts. >> walter, joining us this morning, alice rivlin, former fed vice chair founding director of the cbo. alice, good to have you with us as well. >> good to be here. >> how seriously are you taking some of these projections in real gdp growth after 2021? >> well, i think they're very optimistic. they're talking about 3% growth for the long run future, and we haven't seen 3% growth for a very long time. the more responsible projections

these days are about 2%, just under and that's a big difference. they are projecting a third as high growth as one can expect to see. it's hard to know what the reasoning would be. we have slow growth in the labor force that's because a lot of people are retiring and we've known about that for a very long time and the only way you get higher growth with a very growth in the labor force is to have high productivity growth. behaven't seen that any long time and this budget does not invest in future productivity growth. >> rarry summers calling it ludicrous and made other fiery remarks as well.

>> this is extremely optimistic rosy scenario's special given where the economy is now at full employment. if we had a lot of people to absorb into the labor force it would make sense but we have most people looking for work actually working. >> we also have the federal reserve nervous about the economy growing too fast with such low unemployment and announced it's going to start to continue raising rates over the foreseeable future. how you get this growth is a really big question. >> something we focused on is the process for tax reform.

i made this point that you need a budget resolution out of this congress in order to have reconciliation for whatever would be coming for tax reform. from your vantage point how likely to tax reform this year, something leader mccarthy they believe is still likely? >> it's important important for tax reform the country needs it. if you saddle it to this budget proposal not meant to be the type of proposal congress would say oh yeah, we can work with that, make a few adjustments. it was the type prove posal not having an easy time in congress even with the republicans who are upset. >> but everything from meals on wheels which is hard to cut to children's health, thengsz like that. if you're trying to find a horse something you can attach to tax reform it surprises me you could

have a budge eight peeling to the middle class, working class frustrated the way they've been going left out of the economic growth this cuts them out of any future economic growth. >> the ones that file for disability and assistance but obviously can work, is there not any value trying to reframe the way the government gives assistance? >> absolutely. we have not put enough emphasis on getting people who are disabled back into the workforce. that's a slow process and hard to do and i don't think there are large numbers of people. who would be affected. the important thing about the government programs the entight lmts as you noted earlier the

big ones aren't touched. the growth in the budget doesn't come medicaid from poor children. those drivers of future spending are not touched in this budget. all of the cuts fall on lower income people. >> hard to make a dent without touching those larger elements of the budget. alice, walter, we'll see where this goes over the next few weeks and months. good to see you both. alice rivlin and walter isaacson. >> as we head to a break here we'll take you to wash warm, john harwood is getting ready to sit down with treasury secretary steven mnuchin at the peterson foundation annual fiscal summit. we'll take you there live. "squawk on the street" will be back with the dow up 11 points.

q&a portion of the house gop leadership, weekly press conference. let's listen to speaker ryan. >> first of all, we want to work on our schedule not on a schedule of the cbo. sometimes the cbo can take a long time but the legislator's schedule is important to us to make sure that we hit our benchmarks and our time lines. we've done that. we have every reason to believe we're going to hit our mark. it has to save $2 billion. the last score was $150 billion. the last amendment was an $8 billion amendment.

again we just want to have an abundance of caution to make sure cbo scores have been unpredictable in cases in the past. we don't think that is the case but we want to make sure we dot our is and cross our ts the right way so when we send the bill over to the senate it is not as we say fatal. i can do one more. just three. [ inaudible question ]. >> i'm not going to give you any of it now. >> how concerned are you something like [ inaudible ]? >> you know, i won't go into the screening procedures of events like this. i went to all my concerts growing up at the coliseum in madison. just like, you know, our kids do that now. i can't get the. ic tour of this 8-year-old girl out of my head right now that we saw this have to be in solidarity with our friends in england, and it just shows how we have to be ever

vigilant ourselves with homeland security to make sure something like this can't happen again. to do everything we can to prevent that from happening. again, this is why i'm pleased the president's overseas working going on offense against isis. let's fight them over there instead of here. that's why we need a comprehensive strategy to go on offense against isis and the president is doing a great job of getting our sunni arab allies in the gulf to help us do just that. one more. [ inaudible question ]. >> i haven't seen the details yet. i don't want to get ahead of mulvane mulvaney. it's probably in an hour or two, not unveiled yet. i would say this, clearly getting to regulatory reform and tax reform will help us grow this economy.

we never hit 3% growth in the last presidency at all, since this recession. so if we can get to faster economic growth, that's going to help so many of our problems. the problem for us as americans is, we have embraced slow growth strategies over the last eight years, and now we have an administration and a congress committed to pro-growth strategies that get this economy growing again. whether or not we hit those numbers or not, i don't know the answer to that, because i haven't seen all of those numbers. but i expect that omb will put their projections of what they think the economy will reach inside their budget because that's the whole purpose of budgeting, that's the whole purpose of having pro-growth tax reform and pro-growth regulatory reform and all the rest. thank you very much. appreciate it. >> all right you've been listening to house speaker paul ryan taking some questions at the weekly gop leadership press conference. says he withal comes president trump's budget plan, has "common objectives" is waiting to see more details and talking up that 3% economic growth saying we

haven't seen it since this recovery. we can get there. we need tax and regulatory reform. that's been the common reframe from republicans on capitol hill continuing to say that will be realistic to see this year. >> markets hanging on to slim gains, dow is up 13 points. rick santelli joins us here at post nine to talk more about the action today in which the markets even in europe looking past the attack. lot of discussion about that on "squawk" paying more attention to the pmis out of the eurozone at multiyear highs. >> a little bit of the housing data perhaps as well. seems like the market is basically pulled itself back into the position it was in 10, 12 days ago. s&p 500 right at the highs, vix below 11. just this sense of the market finding a way to keep itself supported even when the majority of stocks really are not doing anything much to the upside. half of all stocks below their 50-day average. the big growth stocks and other groups are managing to keep

things together. the big question is, are we just talking about a trading range that we've kind of shuttled back up to the top of? this is a ceiling for two, three months and doesn't seem like we're getting here with a lot of momentum and a lot of, you know, kind of buy side aggression on the part of investors. >> does it strike you as interesting we're hovering just beneath 2400 but the ten-year seems to have moved to maybe a slightly lower ceiling. >> that's definitely, pretty conspicuous. you don't want to make too much out of a ten-basis point discrepancy but that's all you have. if you try to match up different now, versus 10, 12 days ago it is the bond market. arbitrage with european yields there's been talk it will run out of some juice bus if you hedge the currency you don't have a lot left. so maybe that gives an impetus for yields to lift a little bit but that's what's keeping bank stocks down. jpmorgan, bank of america, these are all 10% below their recent highs, so it shows you that it's

not at all inclusive market that's in rally mode. >> there is a defensive feel to the trade today. you look at some of the best performing sectors right now, staples, utilities, lower yields, also another weaker dollar kind of day. you just wonder is this signaling something about the federal reserve and how aggressive with hiking interest rates, something about the economy, something about the trump growth agenda? >> it's interesting, sara. you have that sense we're in a strong patch for growth. looks like a 3% to 4% in the u.s. if you look at the. pmi implications in europe a 3% stretch of growth in europe. you start to feel like central banks are flirting with being behind the curve. so it's this high liquidity, moderate growth environment that we got used to, let's say in 2015. the difference being overseas markets are really fully participating if not leading the way. >> we've spent a lot of time wondering whether the prospect for tax reform or diminished prospects for it would impact the market. it's interesting to note despite

this budget proposal today and the fact it may delay things even more for the prospect, that many of the stocks are companies that would rely or benefit the most from tax reform, already underperforming for some time. >> exactly. the market is not really been kind of extrapolating policy gains. they basically said we're finding a way with other stuff with the impervious growth stocks that can performenvironm. it's overdone at some point. you're not pricing in a lot of tangible policy help. if somebody came out and said absolutely no way we don't get tax reform in this administration with the market taking a hit, probably but for now if it remains as a notional thing out there, it remains part of the psychological makeup of why people are happy owning stocks at this level. >> if you're looking for big binary events in the next few weeks we'll get a jobs number, we'll get a fed meeting and a comey testimony, we deon't know when. what else are you looking for?

>> that's probably it. the fed meeting, the market thinks they're going to move and a matter of how much beyond that, that could be the thing. the ecb is remarkable. in germany, worried about that economy overheating and you think you have emergency monetary policy here? over there they're buying 60 billion euro a month and negative rates. so you have to kind of feel as if at some point there's going to be a signal out there that says okay, maybe the liquidity tide is about to shift. i don't think this market is in the business of overanticipating a negative potential catalyst. to say the least. >> lead against that for sure. don't go too far. thanks, mike. we'll take a short break. dow is up 23. we hope to hear from the treasury secretary being interviewed by our own john harwood in a moment. i count on my dell small business advisor

for tech advice. with one phone call, i get products that suit my needs and i get back to business. ♪ ♪ are you ok? what happened? dad kinda walked into my swing. huh? don't you mean dad kind of ruined our hawaii fund? i thud go to the thothpital. there goes the airfair. i don't think health insurance will cover all... of that.

buth my fathe! without that cash from - aflac! - we might have to choose between hawaii or your face. hawaii! what? haha...hawaii! you might have less coverage than you think. visit aflac.com and keep your lifestyle healthy. aflac!

i need the phone that's where i happen to be... to be the one that rings. i need not to be missed phone calls... to not be missed. i need seamless handoff... canyon software. from reception, to landline, to mobile. i need one number... not two. i'm always moving forward... because i can't afford to get stuck in the past. comcast business. built for business. the capital gains rate for high income taxpayers and to cut the top rate? >> well, first of all, let me just say on the budget that's coming out, i think the president made some very difficult decisions and the overriding issue is he feels that we need to make a significant investment in our military, and that's a priority in the budgets, and you see

that. i think also it is important that we get to a balanced budget within the ten-year period of time, as you've outlined. now, on the tax side, the president's agenda is all about creating economic growth, and what i would say to that teacher or anybody else, we have had sub par economic growth for the last eight years, and we fundamentally believe that the economy can get back to more normalized levels of sustained economic growth, which is getting to 3% gdp, and that's not this year or next year. it phases in over a period of time, and the president's agenda is to create economic policies to create that growth, which is around tax reform, is around regulatory relief, and is around renegotiating our trade deals to have fair and balanced trade. so our tax plan is about economic growth. on the personal side, we are cutting the top tax rate in return for eliminating almost

all deductions. >> right, but let me give you the results of the distributional table, tax foundation a conservative group last year after the president during the campaign rerevised his tax plan. they say the people in the 40% to 60% income bracket would gain 1.3% in aftertax income from the president's plan. people in the 60% to 80% bracket would gain 1.9% from the president's plan. people in the 99 to 100th tax bracket gain 10% to 16% from their income. in absolute dollars and percentage terms, much higher increase at the top. why is that necessary, given the tradeoffs required in the budget? >> well, let me just comment that i think you're looking at the campaign plan. you're not looking at our current plan. i was with the head of the tax foundation yesterday and they haven't scored the plan yet because they don't have all the

details. >> right, but the outline you guys have put out so far resembles reasonably well the -- >> not really. the tax foundation and others, and i've said this, when we come out with all the details of the plan, we're working closely with the house and senate and when we come out with the details it will be scored and the drks w l distributions reviewed and the president's priority is about creating a middle income tax cut. two things i comment on, you mentioned the estate tax and you mentioned capital gains tax. the capital gains tax is being eliminated as part of the health care reform, so that's not really part of -- >> doesn't have to be. >> -- taxes. it doesn't have to be but most people feel that the tax on capital gains is perhaps the most inefficient tax. capital gains are what increase investment in this country. >> let me just press on this one more time. when you look at medicaid.

$8 mun billion cuts over ten years. that benefits vulnerable, poor, old, in nursing homes, why would you tell those people that a tax plan that has such substantial benefits for people at the top is fair? >> well again, you know, as i've said and i've talked about this repeatedly, we'll look at the distribution when it comes out. the president's objective is to create a middle income tax cut. it's not to create tax cuts on the high end and we'll look at those numbers. again, this is about economic growth. you know, i would just comment on the business side. there are many economic reports that show more than 70% of the business tax is passed on to workers. so another big part of our priority is to create a competitive business tax system. we have one of the highest tax rates in the world. we tax on worldwide income.

we have this concept of deferral. it's not a surprise, there's trillions of dollars left offshore, and making business taxes competitive will benefit american workers, which is also a big priority of ours. >> now, you said on my network, after the president was elected, that there would be no tax cut for people, no absolute tax cut for people at the top because the elimination of deductions would offset the rate reductions. now, your campaign plan had a cap on deducks but did not achieve that goal. it had a big tax cut for people at the top. are you pledging now that when we do the distribution analysis of the administration tax plan that there will be zero benefit for say the top 10% or top 1% of taxpayers, and a much larger benefit for middle income taxpayers? >> well, let me just comment that, that comment that i made on cnbc has now become so

infamous that it's been named the mnuchin rule. >> we coined it. >> curing my congressional hearings. i said i felt i was in great company with the buffett rule and the volcker rule, now that there's a mnuchin rule. so what we're doing now is working closely with the house and the senate. our objective is to come out with a unified plan that the house and the senate will support, and that can be signed by the president. so what i've said repeatedly is, the president's objective is to create a middle income tax cut. we're going to be working closely, but again, that's our intent. i can't pledge what the results will be, since the results are going to be a combined effort of the administration and the house and the senate. >> but your intent would then be a middle income tax cut and a zero tax cut for people at the top. >> again what i had said is the president's priority has been not cutting taxes for the high end. his priority is about creating a

middle income tax cut. so we'll see where it comes out. different people have different views but that's the president's objective. >> let me ask you about the budget and how it reflects taxes. you've said that you thought the administration tax reform plan would result in a $2 trillion boost to revenue as a result of economic growth, the dynamism of the tax cut. >> correct. >> larry summers, who sat in your chair, wrote a piece in "the washington post" today where he said that the administration budget has committed the most egregious accounting error he's seen in 40 years, which is this -- that the administration assumes that $2 trillion revenue boost that you talked about, but does not reflect at all the cost of the tax cut itself, which has been estimated by the committee for responsible federal budget in a median range of about $5.5 trillion.

he said that you are double counting the effects of the tax cuts in ways that he would flunk a freshman economic student for. >> well, let me first comment that i can assure you that when we come out with the details of the tax plan, we are not going to propose something that costs anything like $4 trillion or $5 trillion. we wouldn't thatthat. i said that repeatedly and people invested in that in my mind are not responsible because they don't know the details. as it relates to the president's budget, and again, let me just state that as you know, the budget process, the president proposes a budget. there will be many changes to this budget made by congress. congress controls the purse strings. we felt it was premature to put in any changes to the budget as a result of taxes, since we're not far enough along to estimate what that impact will be.

so the budget was built on what is the administration's economic plans and economic numbers which we've talked about, which are getting to 3% growth. so i think larry, i think in all fairness to him, the issue is more of this is a preliminary document that will be refined, as we go through a process with congress determining how money is spent and as we go through the process of working with the house and the senate on taxes. and ultimately, the numbers will be completely transparent. it will be scored by the joint tax group. it will be scored by outside groups. it will be scored by the treasury department. we have over 100 people working on there, and a completely transparent process. >> let's talk about economic growth. you have said that growth is your objective. and your budget projects that

you get on a sustainable basis to 3% growth after that. >> that's correct. >> mainstream economists that i have seen have settled on their growth estimates of in the range of 2%, a little above, a little below. where do you see that growth coming from in light of this fact? economic growth is a product of labor, and productivity. the administration is proposing through its immigration policies to actually reduce the supply of labor. where does the productivity increase come from that gets you to 3% that your economic colleagues think is unrealistic? >> well, let me just first comment on the immigration policy. the president is focused on stopping illegal immigration. >> although he's working with congressional republicans, tom cotton, for example, has been consulting with the administration's economic team on reducing legal immigration.

>> i understand, but the primary focus is on illegal immigration. now, two things i would comment. the published unemployment rate as you know is very low, roughly around 4.5%. good component of that is people that have left the workforce, because they can no longer find jobs, so they stop looking at jobs. so we think that if you look at the real unemployment rate, it's somewhere between the 4.5 -- forever people who want jobs and will come back into the workforce, and the other component as you said is productivity and capital investment, in a big part of our economic plan is about boosting capital investment in this country. >> let's talk a little bit about the path for tax reform. the initial plan from republicans in congress was to

have health reform on the president's desk by easter, have tax reform on his desk by august. you have said that for obvious reasons that that's an optimistic timeline on tax reform. mitch mcconnell, the senate republican leader said his aim is to pass tax reform in this congress. does that mean it is your expectation that if tax reform takes place, it is more likely to be in 2018 than 2017? >> well, i would hope that we get this done this year. it is critical to our plan for economic growth, and i can assure you, you know, we are working very closely with the house and the senate to get that done. and i think i had said on your show earlier in the year that we were going to try to do that by august. i think it's pretty clear now we're not going to get that done by august. >> you notice by the way that all significant things the treasury secretary says he says

on cnbc. i have to just point that out. >> i can't acknowledge that comment because that would be promoting your show which i'm not allowed to do. >> fair enough i'll handle that. >> just want to be clear on that. but our objective is to get it done this year and i'm still hopeful thats they' the case. it's our number one priority. >> you know it's difficult for a couple of reasons. first, you cannot move, if you're going to do the tax plan that republicans have envisioned through the reconciliation process, you have to first finish health care reform, which is very much not done, then you've got to pass a new budget, some variant of what you proposed and what republicans want, create a new reconciliation process and move on tax reform. all that's very difficult. senate republicans entertaining the idea of working with democrat, implies a different tax plan if you need democratic cooperation. what do you think are the chances that we end up with, as

something that can attract broad support a much more limited tax program that does not include some of the cuts in the top state tax and capital gains and focuses on international tax reform for example that bring money back that is parked overseas? >> well, i think it is critical that we do comprehensive tax reform. it's been 30 years since we've had a major change. i think the personal tax system is way too complicated. our plan, 95% of americans won't need to itemize and will be able to do their taxes on a large postcard. this will save an enormous amount of money and government resources at the irs. we're moving towards a large part of the population doing electronic filing, and this is about creating efficiency for the american taxpayer, and simplifying the system and

creating a middle income tax cut. so the changing the personal side is a big priority of ours, and same on the business side. this isn't just about, you know, bringing back one-time overseas profits. this is about changing the system so that american workers have a fair chance in competing. and the american companies can be successful. >> i had an interview recently with josh bolten, former white house chief of staff, former budget director, now the present ceo of the business roundtable, and he said perhaps for obvious reasons, since he's at the business roundtable that the critical element of tax reform is not the personal side. nice, some people might like to get a tax cut but the growth comes from the business side. is that true? >> well, again, i would say it's all true. so yes, we need to fix the business side that is what's pro growth, but we want to create a

middle income tax cut to boost the economy, and we want to simplify taxes for american people. and of course, this isn't easy. it hasn't been done in 30 years, so we can listen to all the reasons why it can't get done, but we're not going to follow that. and i hope this can be done on a bipartisan basis. the types of things that we're doing are pro growth and pro the american worker and i hope there are democrats that are on board with that plan. >> the president talks much more about deep tax cuts than he does about tax reform. so i think there's concern amongst some in congress that the least common denominator is going to end up just cutting rates and not doing tax reform. you don't like the border adjustment tax. there's resistance to eliminating the deductibility of interest, for example. what other conceivable ways would you have of broadening the

base to finance a drop in the corporate rate? >> oh, there's lots of ways. i mean, again, we have, as i said, we've got a huge team in treasury that's working on this, and this is about broadening the base. there are a lot of companies that pay no taxes. there are a lot of companies that pay a lot less than the 35%. this is about growth. >> is there anything you could point to that says we are going to press hard to close this loophole in particular? or to tax something that we're not now taxes? >> well, there are a lot of things that we can do, and i would just say -- >> any particular you'd point to? >> i want to be careful until we have a plan and releasing the whole plan, not to pick one thing. since one of things i think is important is that whatever we do, we create a level playing field. one of the problems with the border adjusted tax is that it doesn't create a level playing field. it has very different impacts on

different companies. it has the potential to pass on significant costs to the consumer. it has the potential of moving the currencies. we want to make sure that we create a level playing field. and on the personal side i think you've seen this. one of the biggest deductions that rich people take are state and local taxes, and we've said we think we should get the federal government out of the job of subsidizing the states on taxes and that that raises significant amount of money. for the two places that i've lived, which is california and new york, that's not creating a tax cut. >> it wouldn't offset the benefit of lower rate ending's skate, lower capital gains taxes for people at the top, mathematic mathematically. >> again, i i have you have to look at, we're looking at the capital gains as part of health care and health care reform. it was put on because of health

care, it's getten taken off because of health care. that is not part of the tax plan, and as it relates to the -- >> if you left it in place your plan would be more fiscally responsible. >> again, i think our plan will be fiscally responsible and just as you see the health care is paying for itself. we'll see the tax plan when it comes out. now look, the estate tax, also called the death tax, the reality is a lot of rich people use a lot of estate planning and don't pay it. this hurts a lot of farmers. it hurts a lot of people who have businesses that they want to pass on. >> if you look at the actual incidence of the estate tax is falls heavily to a pretty small number of wealthy families. >> it does, okay, and i would just say there's a lot of people who feel that the estate tax, death tax is a tax on top of when people have already paid taxes. and as you said, its impact for

those people it impacts, it does have a big impact, and many people have to sell their family business, many people have to sell their family farm. but again, there are people, this is something where people come down on both sides of it. >> very last question. the president -- michael peterson mentioned in his opening remarks that the president has pledged not to touch social, main social security and medicare. and he said that to the people who he said had been getting a raw deal and he was going to protect them. he also said he was not going to touch medicaid, during the campaign. the medicaid cuts that you propose in this budget and that were proposed in the american health care act go much beyond what would be required to roll back the expansion of medicaid that was in the affordable care act. so my question is, why did the president break that promise not

to touch medicaid? separate from the aca expansion, and does that mean perhaps to the gratification of people in this room, that he is also likely to break his promise on social security and medicare? >> i think the president has no intention on changing social security, and you know, i will tell you as a trustee of the social security trust fund, this is something that congress may look at, okay, but the president does not want to change entitlements. >> if he doesn't want to change entitlements, why did you go along with the medicaid reductions? >> again, i think the medicaid reductions and what's gone on, what the president is trying to do is control health care costs. i think as you heard in the introduction, health care costs are one of the largest challenges. we have a system that was broken, and we're trying to fix

that system and that's what the health care plan is all about. >> right, but he did say in the campaign he wasn't going to touch that health care program, medicaid and medicare as well. >> again, i'm not going to comment on the health care, the health care is going through the system. again, the tax plan is all about creating jobs and growth. >> secretary mnuchin, thanks so much for joining us. >> thank you, john. >> as the treasury secretary talking to our own john harwood at the peterson institute, finishing up their conversation, the secretary taking pains, guys, to say this is a joint effort with the house and the senate. that one-page proposal we talked about a few weeks ago is still wide open. some of the news he made, no tax reform by august but he already said an august dead line would be highly aggressive to unrealistic. maybe this year. >> he continues to say they hope this year, i think that's a key

question, particularly given the budget, and the fact as john asked him about, you need the senate and the house to sign off on a budget resolution before you can get the reconciliation plan in place to pass tax reform under reconciliation, and you ever still dealing with health care so the calendar is going by quickly here. you know, other things, i mean he was pushed on economic growth, sara, and it was back to this idea of more capital investment leads to higher productivity. >> more workers rejoining the labor force. that combo is how he sees economic growth manifesting. he said 3% growth this year or next year will phase in over time tax reform is imperative. he's also maintaining his position the biggest beneficiaries of the tax reform should be middle income people, not upper income and john went to great lengths to press him on that and of course what we got out of him on the budget, the president made some tough decisions but clearly his priority was increasing our

defense spending, something that you're seeing today. >> right. harwood tried to pin him down on no absolute tax cut for the wealthy. he wouldn't quite go there. said the president's objective was for a middle income tax cut. >> went back to something he mentioned a number of times, no longer the line of state and deductibility taxes sent shivers down the governors of california, new york and other high tech states worry it would mean a defection of high earners to go elsewhere to ben fit from a lower tax regime. >> he reiterated being against the adjustment tax. the ceo of target is talking about why the b.a.t. would be a bad idea saying a lot of middle income consumers shop at target. this would be what he called a budget breaker for some of those families. >> said it wasn't a shared sacrifice. >> after a long stretch when the

white house was trying to be non-commitical about the specifics of the b.a.t. he said it does not level the playing field. it picks winners and losers. i wonder if the market is taking this all in, the process is bogged down. it's not going to be fast. goin to be fast. this document doesn't represent anything we're likely to see in the coming months so let's not bother pricing this in right now. >> one reason the market barely moved at all, as mnuchin spoke. >> we'll continue to watch the market. the s&p 500 is still eking out about a three-point gain. utilities, staples and health care in the lead. nasdaq lags behind. we'll be right back.

is the bond market sending a big warning sign about the economy? find on it why. tradingnation.cnbc.com. more "squawk on the street" coming up.

the islamic state taking

credit for the deadly suicide attack in manchester, england, that killed 22 people, injuring at least 59. the bombing at the manchester arena took place during the ariana grande concert and is the deadliest attack in the uk since 2005. joining us is colonel jack jacobs. nice to see you again. >> good to see you, too. >> that is the new development since we last spoke at 5:00 a.m., that isis has claimed responsibility. how does law enforcement take that? is that to be trusted? >> well, isis in the past has taken credit for a large number of attacks in which they were not directly involved. isis is actually quite fragmented, especially overseas. the large majority of those attacks that take place overseas are done with isis-inspired people in places like europe. so, isis probably didn't have a direct hand in planning it. but the kinds of things that

include making explosive devices and so on are very easily gleaned from the net. and this is probably what happened in this particular case. somebody else was also arrested, a 23-year-old in south manchester in connection with this investigation. the law enforcement people are going to get access to wherever this guy lived and get whatever information they can possibly glean. but if the past is any indication, there was little or no direct relationship between this perpetrator and isis itself. just inspired, homegrown, probably homegrown disaffection in the uk. >> colonel, what happens to the perimeter of events of our own here in the usa as we get into the summer? >> yeah, it's kind of

interesting you bring that up because there's been a lot of talk about the level of the credit -- the alert level which is far in the uk has not gone up. and probably will not go up. and well in the united states where the level has been pretty level for a long period of time. operationally the average citizen won't see very much difference, but you can bet there's a great deal of conversation among intelligence organizations from the united states to the uk and back again. so, those addition the alert levels don't affect the average citizen but they do affect law enforcement. there's a great deal of cooperation that surrounds it. if it gets raised again in the uk, which means there's an imminent attack, you can expect there will be a raise here because there's a great connection between what happens in the uk and what happens in the u.s. for the time being, however, to

the extent that you've got homegrown -- homegrown terrorists who are operating, the likelihood is that the threat level will not be going up any time soon. >> i think it's the second highest from the top over in the uk where it's been since 2014. colonel jacobs, thank you for joining us with your insight on this story. markets in a tight holding pattern today. up 38 points. not far from the highs of a narrow session. we'll be right back. ♪ approaching medicare eligibility? you may think you can put off checking out your medicare options until you're sixty-five, but now is a good time to get the ball rolling.

keep in mind, medicare only covers about eighty percent of part b medical costs. the rest is up to you. that's where aarp medicare supplement insurance plans insured by unitedhealthcare insurance company come in. like all standardized medicare supplement insurance plans, they could help pay some of what medicare doesn't, saving you in out-of-pocket medical costs. you've learned that taking informed steps along the way really makes a difference later. that's what it means to go long™. call now and request this free decision guide. it's full of information on medicare and the range of aarp medicare supplement plans to choose from based on your needs and budget. all plans like these let you choose any doctor or hospital that accepts medicare patients, and there are no network restrictions. unitedhealthcare insurance company has over thirty years experience and the commitment to roll along with you,

keeping you on course. so call now and discover how an aarp medicare supplement plan could go long™ for you. these are the only medicare supplement insurance plans endorsed by aarp, an organization serving the needs of people 50 and over for generations. plus, nine out of ten plan members surveyed say they would recommend their plan to a friend. remember, medicare doesn't cover everything. the rest is up to you. call now, request your free decision guide and start gathering the information you need to help you keep rolling with confidence. go long™. ♪

welcome back. markets are mixed with consumer staples standing out as one of the leaders of s&p 500, on pace for fourth straight day of gains. let's send it downtown for start of "squawk alley". >> joining me, john along with sara eisen. dow up about 37 points. our top story today is going to be the white house, moments away from officially unveiling president's budget,