Transcripts For CNBC Squawk Box 20120320

against hasty budget measures. he'll testify today and according to prepared mark, he'll suggest that economic growth is likely to be weak for some time. he will say the path of fiscal consolidation should be gradual with a multi-year phase in of reforms. and he'll warn heavily indebted countries not to resort to draconian measures to fix their budgets. he argues this would risk a self reinforcing negative spiral of growth killing austerity. they have to shift the way they think over there. their response has been raise taxes, cut spending. but they really need to grow. they're so focused on budget, budgets, rather than facing down all the vested interests. >> would you hand over your money to somebody who doesn't have a budget? >> i would be more likely to hand over high money to a country that fine he wially sai the aloligarchy, we'll bust the. >> we know what's the most important swing factor is growth. when growth started to go by the wayside as austerities sang in, that's when we really started to see the response of the bond markets before the ecb rode in to the rescue. the question isn't just whether -- i think what they've learned is austerity can mean two different things. there are reforms. that's pine. i think they're trying to move in that direction now and not necessarily just the across the board spending cuts that we've seen sort of start the negative feedback loop. >> they're too fearful p doing the harder stuff. it's actually easier to raise taxes. >> you almost sounded like you were fall manaing in the krugmap in the importance of growth over the us a terry. >> did i see a shudder? >> it's early. thought we would make it interesting. >> the importance of growth is a platitude. everybody knows that. if anybody says growth isn't important, they must live under a rock, right? so the pact that krugman and i both say that growth is important -- >> the big issue is how you get there. >> absolutely. >> we have the same fight here in the united states. >> we come. >> and we'll be talking about paul ryan's budget and the question is will they do the same thing, to shift from spending cuts towards more programs that encourage growth long term. and i think that this as we look over the past year and learn a little bit from europe, you'll probably see policy continue to move in that direction. >> we'll talk to paul. i'm excited to hear about the plan. >> lower tax base. >> the big question is how does it get paid for. >> or how does it ever get done. >> or how does he fight off all the lies that will be said. >> my question is how does it get paid for. >> through growth. because they're growth reallying measures. see, when the economy grows -- >> i think his budget last year included some baseline assumption of returning like a 5 4%, 5% growth. >> we've also got economic reports, actually only one of note today, but it is important. housing starts and building permits set to it will the table at about 8:30 a.m. eastern. likely rising by 1.3%. it's a big week for housing data. yesterday the national association of home builders said monthly was unchanged. and ben bernanke going back to school today. actually got an e-mail about this this from spb wome be who going to the class. he'll talk about the history of the federal reserve to a group of about 30 students at george washington university, the first time a fed chairman has helped teach a college class while running the central bank. students were chosen after writing a one page he ises say on what they hoped to learn from the chair than before he joined the fed he taught at princeton and stanford. his lectures will be streamed on the website and the student e-mailing me is very excited about this class. so i wanted to correspond with him after. but we'll get to see it. >> i'd love for him to sell the seat in the classroom as an economic exercise. >> how much do you think he could sell the seat for? >> i would imagine quite a bit. of course it's all frowned upon, but if it weren't, i'm sure it would go for a pretty penny. >> buffett for lunch goes for -- >> that's a little different. it's usually in the hundreds of thousands. >> i thought it got close to seven figures. >> and we're also watching oil prices this morning. jeeves is all over this one. global supply concerns were eased a bitti following news th would return to levels last seen before the civil war. i don't think the audience understands the joke. meantime china announcing that it is raising retail gasoline and diesel rises between 6% and 7%. biggest increase in nearly three years. the news adds to worries of course about potential demand destructi destruction. house republicans will unveil their fiscal proposal, call for a reduction in individual tax rates and brackets. this place of the six bracket, they will propose just two, 10% and 25%. the plan would also cut the corporate tax rate to 25% from 35%. and it would tax only companies domestic earnings. and it would scrap the alternative minimum tax if an op-ed, chairman ryan says his budget proposal deals with the deficit and, quote, overts the fiscal crisis ahead. he writes in part, our budget tacketts this crisis head on by cutting debt as a share of the which i by roughly 15% over the next decade putting it on a path to balance and paying off the debt p by contrast, the president's debt pushes it even higher and allows the government's fiscal position to deteriorate after 2022. congressman ryan will join us live at 7:45 a.m. and in other political new, illinois is holding it presidential primary. if mitt romney wins decisively, he'll create a clear path to the nomination. if he loses or barely win, we could be looking at the first big fight during the republican convention in nearly lthree decades. >> i'm already betting on a brokered convention. >> journalists want it for sure. >> but i think even people in the party. if they were clearly rallying around one candidate, but i think there's a sense that we haven't done this about in forever, let's see what it is actually like. >> i think it would be horrible for the party just as a practical matter. i think the damage that would be done in a brokered convention would be off the charts. i would think. >> there were times when brokered conventionses meant violence in the streets and and you would kinds of crazy stuff. >> there is a sense, and i don't mean to attribute this to republicans in particular, but i do think there's a sense of let's see what this would like look. >> it would be interesting as a theoretical matter. it would make better tv. >> that's the sat truth. rick santorum is in in-gel for 10 of today's 54 delegates because he filed paperwork too late. john harwood will join us. he probably has a lot to say. >> and let's get a check on the markets this morning. dow would open up about 60 points off. and s&p 500 would also be off. i should say it would not open up down. recently i've been saying the dow would open up down so many points and i got an e-mail recently that said it couldn't open up down. it has to open down. so i want to make clear to -- >> the markets unfold to the down -- >> it would unfold to the down side or as mhe said yesterday, t would hug the flat line. let's tee a quick look at the ten year. >> this has been exciting. >> look at the yield withere. almost 2.35 for our radio listeners. kind of exciting. >> i love the yield curve. it's one of the most elegant and wonderful things out there. >> certainly more endo you remembering in the u.s. than emerging markets. it is a great way to watch and game what market participants think about growth and where we're headed. >> still trying to get over the elegant yield curve. >> it tells you so many things about what people who are putting their money down really believe about the future. and i just think it's great. and right now, we have this dilemma, right, what is the yield curve telling us. is it good or bad for the markets? because interest rates are rising. but as art cashin likes to say, at some point good news is bad news. where does it all -- >> that's why it's pot thmot no elegant. >> you have seen a little more steepening in the yield curve. that's general lay goly a good . for bank earnings for the economy broadly. you like to see it steepen about if you're going to have growth. the question is how much are we read pentagon to what's happened over the last couple weeks. are we reading too much in to this move. and remember where we were a year or two ago. >> how can hone 30 yecan money now be cheaper than five years from now. >> you're geeking me out. let's tee a quick look at the dollar board. i'm always focusing on the euro because of the planned vacation this paris. off slightly against the euro. and let's take a look for our gold bug friends where gold is headed. rate now 1649. >> down about 1%. a tough run in the last couple weeks. >> time for the global markets report. rebecca meehan is standing by in london. and she's really in london. you're hot going to walk across the set. i don't know if you saw yesterday, but ross retended that he was there and then all of a sudden, can he flying through and he was sitting there and it was very confusing for all of us. >> yeah, i'm sure it was. he's pretty clever that way. but, no, i am actually in london. i'm in a building with no windows, but i'm 100 meters from st. paul's cathedral. but looking at what's going on on the european market, we're seeing a second day of declines for stocks at least. this is the picture shaping up behind me. excuse me, i just fell over. there we go. this shows we're down across the board. hopefully i can get around to this without falling over 100%. down by about 0.9% overall. but yesterday we were looking at declines which put us just fractionally off the highs that we have seen for the past eight months or so. so just a marginal turnaround. ftse 100 down. dax down by 1.2%. cac also down by just over 1.1%. now, moving along to what's going on to his forex market, euro-dollar standing at 1.3195. euro-yen is at 110.5 #. dollar-yen 83.78. but i want to bring you through to sterling. dropping by 0.8% against the dollar. that t. has inflation figure has came out this morning which showed inflation in the uk is easing back a little bit, still well above the bank of england's target, but while inflation is coming down, it's pot coming done as quickly as many market watchers had hoped. we're stuck at levels that are well above the bank of england's target. so that could cause a headache for the authorities here in the uk trying to stimulate growth at the same time as bringing inflation back under control. so 3.4% is where that currently tap stands. while we did have a bit of a relief for spanish debt, the yields have been moving lower. ten year at 2.03%. here in the uk, 2.44, but spain 5.2%. that's the yield on the ten year. a little earlier this morning, we had the results of a debt auction of shorter term debt, 12 and 18 month debt auctioned off in spain. those yields came down really quite strongly on each front. so that does show a great deal of relief for this country which is seen as a peripheral eurozone country as has had very high yields. so any relief on the government debt there would take it very positively by the rest of the eurozone. i actually stood up for the rest of that. >> was there something on the floor there? >> you know what, they tried to catch it out by putting this like little shelf right behind me so if you stand like an inch too far back, then you go. >> you recovered beautifully. all right. in other corporate headlines, bank of america says it as no intention of issuing additional equity. if you look at this chart from yesterday, you can see right into the close of b of a shares have surged since last week. shares up 71% this year. below five bucks at one point. after falling 58% last year. in other financial industry new, goldman sachs reportedly cutting staff in its trading an investment banking divisions. cuts follow 2400 positions that the firm eliminated last year. and a brazilian prosecutor says chevron has no way to stop a leak in an offshore oilfield. the area is the site of a november accident. chevron cut safety margins, but the company says it followed industry drilling normses. receive ron says it stopped the november leak in four days and is capturing residual flows from the affected oilfields. and facebook is only going to be paying a 1.1% fee on its ipo to its underwriters. that's much slimmer than the typical underwriting feel. analyst investment bankers from many of the firms attended a meeting with facebook executives at the company's headquarters yesterday. kayla previewed that for us yesterday. apparently mr. zuckerberg decided not to dine -- was not present. he was a no show. but the 1.1% is interesting only because it is de minimis on a relative basis. and i remember being told by a banker when the underwriting process was going on and they were being picked that they expected that there would be no negotiation over a fee, that you would literally get a phone call the same way that the treasury would call you up to work on the aig or one of the government hinge wills a things and held s you've been selected and this is the rate. if you want to be with us, let us know within 24 hours. if you don't, thank you for playing. >> and they took it willingly because it's so big that the money will be huge or prestige? >> both. and the residual business you'll get in the future. if you can manage some of the money of mark zuckerberg and others -- >> the new portfolio management that banks financial companies use. does this tell us who are about facebook or more about wall street? >> in terms of -- >> the fact that the fee is so low and the bargaining power that facebook really has. >> i'm not sure it says much only because i think there's one company like this every couple of years and if you're a bank, you do what they say. >> i was going it say, it's not and i incal for a huge underwrite to go have a very, very close -- >> it is typically lower. >> i just mention it because we have seen such a pull back in m&a activity will year compared to last year and certainly that wasn't the highest levels in the world. >> the other issue, there's 31 underwriters. >> is anyone not involved? >> no, everyone's under the tent. >> if you're not in this tent, you're a loser, right? >> that would be an interesting story, find the one or two firms that were somehow excluded and what that reason is because i'm sure it has do with like a vendetta. otherwise you can't imagine why they wouldn't be brought into the fold. >> 31 underwriters? >> and the 1% will get split among the on that three. >> do tombstones still happen? >> will they do. >> last time i checked. >> they do, not as much as they should. and i've seen there are now digital tombstones that people are doing online. >> i hope on cnbc.com. >> that would be a good place. >> that would be fun actually. >> amazon degreed to buy kiva systems heinc. this they design robots. have you seen this video? >> this is like the jetsons to me. >> the technology will help amazon fulfill online orders quickly. i know we have the video because i've seen it on cnbc. i think jane wells was at a factor once when they did it. so cool. >> this is the end of humans doing that kind of stuff. if you look at it, it's amazing. if it actually -- if they keep it up, that's -- >> remember, they've been on the lagging edge here. a lot of other companies have been automating their systems in a much different way. amazon has been worker intensive. but even a lot of their warehouse races have come under scrutiny. >> i remember everyone's on their feet for too long, too hot. i remember years ago didn't they start using segways? before anybody else. >> you can't get around without it. the warehouse is enormous. >> i'll have to get myself a segway. >> no. >> i was going across the gw bridge in a segway? joe would love that. >> he would make fun of you forever. jeeves would be unhappy. jeeves would be out of a job. coming up, the national forecast. >> i'm not going to drive it myself. he'll be in the front. >> oh, i see. jeeves would drive the segway. i thought the first day of spring was the 21st. first day of spring. richard branson says his venture to launch tourists in to space has its 500th customer. you hey know him. it's none other than ashton kutcher. kutcher is thrilled with the prospect of being among the first to cross the final frontier. [ female announcer ] it's time for the annual shareholders meeting. ♪ there'll be the usual presentations on research. and development. some new members of the team will be introduced. the chairman emeritus will distribute his usual wisdom. and you? well, you're the chief life officer. you just need the right professional to help you take charge. ♪ futures looking down a little bit. wendy's knockingbu burger king from its spot. total revenue at mcdonald's rose 12% last year to $27 billion. gas cents in the last week. average price $3.87. and the highest recorded level for march. now to today's national forecast. alex wallace joining us from the weather channel. >> good morning. unfortunately, into the good morning across the southern plains in to texas. heavy down pours to deal with this morning out there and it's not moving very quickly. over the next 24 to 36 hours, look how much rain we're expecting. that area in the orange, that's six or more inches of rain. that could lead to big problems with flooding out there. plus we have the risk for severe weather, as well. stretching across east texas all the way into the midwest. damaging winds and hail. can't rule out a few isolated tornadoes. that threat will continue in a lot of the same areas. on top of that, of course we've been talking about record breaking heat. that's continuing, as well. huge ridge in the eastern half of the country will keep the numbers well above average. we're talking 20, 30, even in some cases 40 degrees above average. tomorrow, your wednesday high in traverse city, 43 degrees above average. morningnew york city, 70 degrees. feeling a bit more like summer. >>s feeling -- i didn't even wear a coat today. >> so awesome. >> craziness. there would be a conversation about global warming about joe was here. >> is joe a global warming guy? >> no. >> aim not a global warming guy messily, but i don't disbelief it either. gop presidential hopefuls storming illinois today, the site of the latest nominating contest. john harwood has blown in to the windy city will will be joining us live from there next. but first, attention shoppers, this is a viewer service, everybody. amazon is selling $10 gift cards today for this is today, today only. it's on amazon local. company vice president says the retailer wants for draw in both new and existing customers in hopes that they'll check out the company's offers from spas, restaurants and other businesses. the gift cards are also, and this is important, they're good for use on amazon.com. so this actually is crazy. half off basically everything. now as we head to a break, take a look at yesterday's winners and losers. if you are one of the millions of men who have used androgel 1%, there's big news. presenting androgel 1.62%. both are used to treat men with low testosterone. androgel 1.62% is from the makers of the number one prescribed testosterone replacement therapy. it raises your testosterone levels, and... is concentrated, so you could use less gel. and with androgel 1.62%, you can save on your monthly prescription. 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this is big news. it is primary day in illinois. john harwood joins us from chicago. do i understand this correctly, if will this is decisive for romney, then no brokered convention, about if not decisi decisive, possibility of a brokered convention? >> there is some small possibility of a brokered convention. i think it is highly unlikely. i believe that mitt romney is on track to win the nomination. what would prevent that from happening is a decisive break through at one point by rick santorum that shows can he consolidate conservatives and basically am mass a working majority to stop romney. if he can do that in illinois, he's come close in the big mid western states, michigan, ohio, but hasn't been able to break through, then he potentially could get on a role and if that happens, he could deny romney the 1144 delegates he needs. but if he can't, if he loses here, and i'm not sure the margin of romney's result matters, if santorum loses here, what that suggests is that he has the capacity just to come close must have to threaten romney, but not to beat him. and if that's the case, i think reality will begin to set in sooner rather than later among republicans everywhere that mitt romney will be the nominee. >> what's the chatter among republicans some we were talking about this earlier. is there a sense that they want the brokered convention? >> no, they don't want a brokered convention. if you're ron paul, potentially rick santorum, newt gingrich, you might want some of the openness and ability to maneuver that a brokered convention would bring about. but if you're a republican political professional or donor and you want to win the election and beat obama, you don't want a brokered convention because it has every potential of looking like a mess that would help obama. and yesterday i spent the day at obama headquarters trying to figure out what they're doing while the republicans are fascinating and it was fascinating the way they're amassing information, trying to build a grass roots network state by say ttate, use technol on compensate for the fact that they don't have the same cool factor and try to gear up a campaign to win. >> and did you see the santorum endorsing romney ad? >> i didn't see it, but i've seen the clip many times of romney endorsing -- >> why are they just breaking it out now as an actual commercial that they're airing on tv regularly now? >> they've been talking about this for some time. it's been out there. i'm not sure that this is the first time it's been in a video or maybe it's the first time it's aired on broadcast tv. but this has been part of the dialogue for a while. and i think at this point, they're heavily outspending santorum here and they're looking for whatever weapons they a their polling and focus groups tell them would be effective. this is chicago, hot bed moderate republicans. down state, more conservatives. and i think by having a commercial with rick santorum saying mitt romney is the conservative guy, that's why i endorse him over john mccain, they think they can diminish some of santorum's ability to lead down state. >> so what is a brokered convention? is this behind the scenes dealing, they all get in the locale and duke it out? >> the closest thing to a brokered convention this my lifetime or my lifetime as a conscious human being was in 1976, i was in college, ford and r ray again went reagam went to the convention. he had won a bunch of victory, but didn't have enough delegates to win. so you had a challenge over the credentials of particular state delegations to try to see whether the ford or reagan delegates would get seeded. and in that position was the possibility that the convention could go one way or the other. it wasn't brokered in the sense that people were getting together and saying, okay, we don't like either of these guys, who is the prince charming we can draft or who is the other factor. it was more a fight between those two people over a set of delegates that would put hethem over the top. ford ended up winning the delegate challenge fight and became the nominee. and then you had behind the scenes talks about putting them together on a republican ticket. but in terms of an actual brokered convention where they come up with somebody else, decades since that's happened. >> john, thank you so much. good to see you this morning. >> have fun in chicago. comments, questions about anything you see here on squawk, e-mail squawk@cnbc.com. coming up, if it's spring, must be selling season for the housing industry. is real estate ready to rebound some we'll find out next after the break. ♪ ♪ why do you whisper, green grass? 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[ male announcer ] solutionism. the new optimism.™ last season was the gulf's best tourism season in years. in florida we had more suntans... in alabama we had more beautiful blooms... in mississippi we had more good times... in louisiana we had more fun on the water. last season we broke all kinds of records on the gulf. this year we are out to do even better... and now is a great time to start. our beatches are even more relaxing... the fishing's great. so pick your favorite spot on the gulf... and come on down. brought to you by bp and all of us who call the gulf home. welcome back. 6:41 on the east coast on the first day of spring. making headlines, adobe said revenue growth slowed. the results missed forecasts and the stock down on the news. washington mutual emerging from bankruptcy protection two week after lehman brothers also emerged from chapter 11. wamu plans to begin repaying to creditors. andrew, back to you. >> it is back to me. it is a huge week for data. investors going to be playing close attention for any signs of a recovery. joe mason, professor at louisiana state university before give it to me straight. what kind of numbers do you think we'll be hearing about today and later this week? >> well, the numbers will show improvement. we've turned the corner on the bottom of the crisis. still the numbers that we've seen that we expect to see in housing starts and the numbers that we've seen on the s&p recently really only get us back to about 2008 levels. we need to get back to 2006 levels before we're out of this. >> so warren buffett was on the show maybe a month ago and then we had bill ackman. and they both said right nowestd you make would be to buy up single family homes and get a 30 year fixed mortgage. are we at a bottom, is that a logical invest hment in your mi? >> they left out time, energy and cash. there's still a big hole in the housing market. it tends to be about the 750,000 to about 5 million, 10 million level. that's the level at which people would typically need to wore row, but they can only get a conforming loan. above that level, markets are typically cash markets anyway. so this is a the hole where you have to bring cash to the deal and this is the type of borrower that traditionally leveraged themselves a little bit extra in the boom and they just don't have that ability today. so time, effort, but also cash. but they're right, will are great deals in home markets today. things that were going for a million and three quarters believe it or not are 250 now a days. you can pick up great bargains. it's not a speculative market anymore, but great deals. >> just a quick question about a we're starting to see more focus on this question of how banks will handle the foreclosure settlement. will they do it by writing down the value of loans. where do you stand on the idea of writing down principal. >> wait a minute. is this not a bank foreclosure settlement. the banks will take credit for writing down mortgages that are held in rnbs. holders are paying these costs. now, banks will be able to at that time tax credit for reallocating those losses among rmbs and you're seeing lawsuits already in that regard. >> in fact those lawsuits are one reason why if banks were to say instead of writing down the value of those mortgage backed security holdings, we'll do it through principal write do you understand. what happen ps it they purchas t avenue instead? >> they're unrealistic. if you just do the math from a representative say teaser rate pay option arm, and you back out what the principal reduction could have to be to keep that teaser rate which by the way the borrower still can't afford anyway, to keep that teaser rate in place, you're talking about a 45% or so prin mod. you're not going to see that in the market. >> what's a prin mod? >> principal modification. >> industry lingo. >> sorry. >> elijah cummings wants rin reduction, he wants the fha to take a serious stand and do something for the homeowner. does that make sense to you? >> well, fha is a little different animal. that's subsidized directly by the government. you're not talking about putting down on investors when investors bought something else here. that, though, indicates that we're still not out of this -- it's gone from a chicken in every pot to now everybody should own a home. that mentality has still not left washington. they're prepared to run up this bubble again to push home ownership on people that can't afford it and go through all this all over again. i think it's really silliness at the end of the day. we still have the highest home ownership rates in the world. there's not really a problem in u.s. home ownership markets. stop trying to push artificial bubbles, stop trying to drive a consumption led recovery with interest rates record low in the long term. we're creating economic imbalances that are just setting the sustaini stage for the next bubble and bust. >> and we have to hope a that will is no bubble and bust but i imagine you're right. >> it's a business cycle. >> thanks again. coming up, if you think squawk has been interesting so far, you haven't seen anything yet. we'll head to the chairs, share the off beat stories catching our interests this morning. >> you make it sound so scary. >> two girls today, so lots of legs, right? can i say that outloud? >> you just said it. >> but first as we head to break, pictures from our nation's capital. peak cherry blossom time there. hey, did you ever finish last month's invoices? sadly, no. oh. but i did pick up your dry cleaning and had your shoes shined. well, i made you a reservation at the sushi place around the corner. well, in that case, i better get back to these invoices... which i'll do right after making your favorite pancakes. you know what? i'm going to tidy up your side of the office. i can't hear you because i'm also making you a smoothie. 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'cause he's a scotty. oh. scott: get scotts ez seed. it's guaranteed. seed your lawn. seed it! ♪ so be true to your school now ♪ we're in the chairs but it's kind of like opposite day because -- >> two girls, one boy. >> two girls, one guy. i think the "three's company" thing could be apt. maybe not. this story caught my eye in the "new york times" earlier today. think about this one. the legal business may not be so hot. lsats down 16% this year. people aren't taking -- >> that's the sign of an improving economy, isn't it? don't people go to law school when they can't get a job? >> you could look at it that way or you could look at it that the whole legal market was so overheated everybody was taking the lsats, not enough jobs. >> we've seen a lot of articles like this. my mom works in career placement at law school. it's a tough place to be now. you see so many people coming out of law school with so much debt and so few job prospects. people are realizing it no longer makes sense. >> couldn't we do with fewer lawyers? except your dad. except the students your mom is trying to place. >> fine by me. you were giggling before. what story were you looking at? >> there is cheating in chess. >> cheating? >> yes. i can't believe it. there's a new computer program from the university of buffalo, there's a guy, dr. regan, who specializes in trying to combat cheating in chess. >> how do you cheat in chess? >> i'm glad you asked. signaling and texting. back in 2006 a guy named silvio manolav accused another guy named kramex of consulting a computer in the bathroom. the organizers locked the bathroom, he forfeited the game, refused to continue until the bathroom was unlocked. the incident went down in chess lore as toiletgate. >> this is like watson. you have to go to the computer to look at all the potential moves? is that what's going on here? >> i think that's the idea, you can consult. didn't we see the computer go up against humans in chess -- >> crossword puzzles. if i'm at a black jack table, i always use the thing that tells you what to do, double down? >> you need that with you? >> it's an op-ed in the wall street journal today. ed morris is head of global commodities europe at citigroup. even as we're talking about supply shortages and high price of oil, there signs north america could become a more and more important player in the global oil market reducing the power of opec, could produce 3 million more jobs, there are north america, the most important source of oil. >> i think the shift that's happening because of technological changes. the one this evening i thought about with this story is, yes, reduced reliance on opec. if they have less money, more instability in the middle east, i don't know if it going to be one of those things where we say, wow, be careful what we wish for. >> saudi arabia, russia, they need oil prices in the triple digits to balance their budgets. >> that works. so what are we going to do? >> we still have to produce our own. if we can technology has to proceed and those other folks are going to figure out what they're going do. >> it's a $2.35 trillion transfer from oil consuming to oil producing nations. if you think about that transfer of wealth no longer going to those emerging market, good news here at home but what does it mean for those producers? >> through innovation, et cetera, not through forcing cars to consume, you know, more and more efficient over time. >> we can debate that. i would go for some form of a standard. coming up, a man so popular he has his on theme song. we'll welcome richard lefrak and paul ryan will join us on squawk. stay tuned for a big two hours. two of the most important are energy security and economic growth. north america actually has one of the largest oil reserves in the world. a large part of that is oil sands. this resource has the ability to create hundreds of thousands of jobs. at our kearl project in canada, we'll be able to produce these oil sands with the same emissions as many other oils and that's a huge breakthrough. that's good for our country's energy security and our economy. paving the path for prosperity. >> this is why we're active. this is why we're leading. this is why we're proposing and passing out of the house a budget to fix this problem. >> house budget committee chairman paul ryan unveiling a new blueprint for america's future. he speaks to squawk about the state of the economy and what needs to be done to keep it growing. >> squaring off in the land of lincoln. >> we need a candidate who is going to be a fighter for freedom. >> we're not going to be successful in replacing an economic lightweight with another economic lightweight. >> the donned will sound off on the battle for the delegates and economy. >> and guest host richard lefrak's latest on energy. the "squawk box" starts right now. welcome to "squawk box" here on cnbc. joining us this hour, larry kudlow. here are your morning headlines. we know gasoline prices are high. what you may not know is they are now at their highest ever for this time of year. the energy department says the average price is now at just under $3.87 a gallon. the old record set just last year was more than 30 cents lower. >> facebook will pay an underwriting fee of 1.1%. we're watching shares of dow component walt disney this morning. the company says its film "john carter" will generate an operating loss of $200 million for the fiscal second quarter. disness' studio segment will have a loss between $80 and $120 million for the quarter. the futures this morning, right now they suggest a negative open the dow lower by 66, nasdaq as well would open lower by half a percent. andrew. >> thanks so much. today's guest hose has been bullish on the economy for quite some time but today he's refining his position. joining us for the next two hours, richard lefrak is one of our favorites and a good friend to the show. thank you for being here. >> thank you, andrew. >> you're refining your view? not as bullish? >> first of all i think we had a little bit of a run-up in the last six months opinion when i was here in september i said i was aggressively trying to pursue assets. >> you aggressively pursued those assets and got some in miami. >> i got some in miami. we bought the hotel now known as the perry. miami is a spectacular market because it basically active different live real estate-wise than almost anyplace in the country because of the huge influx of money from latin america. it's kind of atypical. >> miami is the financial -- maybe even the cultural capital latin america. >> i agree with it. it is. they all go there. it's not just brazilians and argentineans, columbians. >> brazilians can try and i appreciate that very much but miami is in the united states. >> i agree. >> we talked about the last hour warn buffett on the show saying go buy up single family homes, i think it was in the journal today, all these hedge funds going down get 30-year fixed mortgages and say rent, rent and hope stuff goes up. >> i think it's a good idea to buy one if you're going to rent it. i don't think there's going to be a great deal of pressure on housing prices to go up for quite a while. we still have a huge shadow inventory that have to go through the system. and demographically you have a shift away from homeownership to renting. >> you don't think that's going to flip soon? >> no -- >> you look at the calculators and people say it doesn't make sense -- >> it's a local business. in some markets things will get better more quickly, other markets will stay depressed. what's interesting to me when i saw mr. buffett's statement here and then i saw some other -- the article in the journal yesterday, what was interesting to me was why institutional investors would want to get into the management of single-family housing. i manage 25 tuesday rental apartments i own. they're all under one, most 100 or 200 at a time, i have superintendent, i have people to watch them. once have a them spread out like that is corre that, it a nightmare to watch them. it's a mom-and-pop business, entrepreneurs. that's where it should remain. if private investors and hedge funds think it's a good way to make money, show me. >> is the home price story bottoming finally? >> i think it's bottoming but it's a market-by-market analys s analysis. you can't say what's going on in san jose is going on in detroit. it's a local business. >> and home building stocks have done very well. that doesn't necessarily mean it's actually there. >> i never talk about stocks because it's nothing that i know about. if you just look at the long-term trends, the long-term trends still say we're going to be going down from the 70% homeownership to maybe 64, 65%, which is a little higher than we are and we have this inventory to absorb. maybe that inventory is in all the wrong places. the lot of the inventory will get absorbed if they have a way to transition these homes into rentals for a period of time. that is a good idea. but i don't think it's such a great ideas as an institutional investment. if warren buffett wants to buy some houses in omaha and make sure the tenants are getting the services they need and that the roof doesn't leak, good luck to him. >> you're worried that it permanent, rising? >> to me my thought process on that is pretty clear. if the economy is going to get better, i don't see long-term tra interest rates staying low. right now there's a big advantage ownership to rentals. >> and if the economy and jobs are getting better, then incomes will get better. you're just really talking about where -- these rates are so rock bottom historically that they could go up 200 basis points and still be low. >> but if people are sensitive to mobility, which they are today, urbanization, which is a very critical things, they're coming to the city away from the suburbs, that all foretells a better story for renting rather than owning. >> a quick question because you're mentioned you're cautious on the housing market. weep just got earnings out from tiffany, which missed by a couple of cents and more softness in the fourth quarter than expected. how does that fit in with your world view? are we missing here as we see the stock market run up signs of more weakness below? >> i think the economy is improving, don't get me wrong. whether tiffany missed by 2 cents or not, i don't think that's an indicateor of anything except people didn't get shopping at tiffanys as much. a lot of move to make money is move. asset prices have come up, things have come up. we've had terribly great advantage with has to low interest rates. any good entrepreneur looking at long-term rates where they were should be able to make money in this kind of a market condition. that being the case, you know, they kind of went out and did it. things were being bought -- >> so low-hanging fruit has been gotten? >> can i turn to politics for a second, since we do have larry here and you are a romney supporter. >> yes. >> illinois today. >> do you have a prediction on how this is is all going to go down? is this a slam dunk? richard? >> no. >> so polite at the table. >> the poll in illinois looks good for romney. looks like he's closing well. santorum is a fighter. he's a bulldog and he's not going to give up. i don't know. i'd say right now romney is a big favorite for tonight. i think if he wins tonight this inevitability argument continues. i think he's got work to do, mitt romney. i think he's especially got work to do on the differences between romneycare and obamacare or the similarities between romneycare and obamacare, which is still going to be a very major republican issue and a national issue. in terms of the horse race -- >> if he wins tonight, when does gingrich go or get out? >> gingrich should have got i don't know out already because he lost alabama and mississippi. so his southern argument is kind of blown up. he's south carolina and georgia, that looks like it. he's probably not going to get out. they're all going to go to the convention. the latest -- i was at a paul ryan lunch yesterday with some political people. the latest shtick is they want to go to the convention and somehow deny mitt romney the delegates. i think santorum is a more interesting candidate because he's santorum. >> do you buy the argument he would be a better candidate against obama? >> i think romney has to deal with romneycare and obamacare. i'm a free market guy, i look him on taxes, i like him on budgets, i like him on entitlements, on energy. i don't have any quibbles with governor romney. i'm not sure about the health care policy. >> you support him. how do you feel about that issue? >> well, first of all, i think right now we're seeing a lot of what i call purists in the republican party who have these, you know, litmus tests about how they look at everything. at the end of the day when they have a choice between obama and romney, that litmus test goes away and they're going to support romney against obama because that's the main object of their anger. >> so the health care issue that he brings up is less of an issue once it's the two candidates facing off? >> what's their option? stay home? that's their option. >> massachusettscare, they don't get a better option under -- >> i think if you're an independent voter, this whole notion of morality, women's health issues, it was just kind of dragged into the religion, which was just dragged into the debate in the last month or so. i think that's a big turn off for a lot of people because they're not going to be that -- >> for santorum. >> the polls show the religious freedom argument, take the catholic bishops, actually is well supported, even by women. >> but i think the foundation of the country was religious freedom and not whoever's running for president's personal religious dereliction -- >> religious freedom does not mean the state has the power to tell the church what to do. >> i agree with that. i think when other issues were correlated like the women's health issues got dragged into that, i think that's a loser. >> i think santorum often goes too far. that's one of the reasons thehe not winning. >> obamacare is such a huge issues, polling shows 55 some-odd% are against obamacare. many if not most businesses are extremely concerned about the tax and regulatory mandates with obamacare as job stoppers. i think the intensity of the vote for romney is very important. in order, john mccain did not have intensity in 2008. bob dole did not have intensity in 1996 because in many respects their own supporters didn't trust them on key issues. and i think that's an issue for mitt romney. up know president obama will bring his base out, you know that. so the republicans have to do likewise. >> larry is here for the whole hour we're excited to say, as is richard. he's here for the reefmainder o the show. >> before we go, you have to go to amazon local, you pay 5d, you get the $10 coupon. i tell you that -- amazon local -- >> google amazon local. there are 63,000 cards left. >> they're limiting them? >> they're limiting them. you can only get one. >> there's always fine print. >> we're going to talk jobs with the democratic leadership council vice chair and senator from delaware, thomas carper. and ryan that cuts government spending and reforms the tax code. does it have a chance in the democratically controlled senate? that and more when "squawk box" returns. 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[ male announcer ] learn more at stamps.com/tv and get a 4-week trial plus $100 in extras including a scale and free postage to use during your trial. go to stamps.com/tv and never go to the post office again. we're back on this tuesday morning, the first day of spring, around 7:16. checking futures now, we've got some red arrows across the board. dow would open up about 62 points off, s&p 500 off about 9 points, nasdaq would also be off about 12 1/2 points. let's check out shares of tiffany. they did fall short of estimates. tiffany said the year ended with softer than expected sales, however its guidance for the current year is above analyst estimates. >> don't even see that. >> it's not the end of the world for tiffany. looked like bad news for a second there but the guidance went forward. >> joining us is senator tom carper. good to see you, sir. thanks for joining us. >> good morning, we're squawking here in delaware, a state that has about 300 chickens for every person. so we do a lot of squawking. we're excited about the delaware women's basketball team which goes up against kansas tonight. we're 31-1 and we're very excited. it's never happened before. >> great. the energy is offer. thanks for joining us. teasing. before we talk about the jobs act, we're going to have representative paul ryan on to talk about the gop presentation of the budget. what do you have make of the idea of reducing the number of tax brackets in the plan that he would put forward? >> irs kin bowles put forward an idea of limiting half of the tax expenditure, i think that's the way to go and use revenues generated to do that to help bring down the deficit, $3 down on spending side, $1 on revenue side. i think that's a winner. >> larry kudlow. good to see you. let me ask you about paul ryan's medicare reform. politics are brutal, people came at him, threatened to throw grandmothers off the side of the cliff. don't we have to have some kind of major reform to stop medicare from bankrupting the government is. >> medicare will run out of money in the next ten or so years. i think the key here is medicare, medicaid or social security, the key is not just how to make sure the programs are here for my generation but are they going to be around for my kid? my boys are 22 and 23. they don't think this's going to be a medicare or social security for them. we need modest reforms now and make sure the programs will be around to help the next generation and the generation beyond that. >> let me ask you, press you a little more on this. i don't know if it will ever get to the senate or not in this special but ryan has a side-by-side hybrid. he he has the existing medicare system and create as pro competition, consumer choice, more patient-centered health care. does that have any possibilities? >> i think there are elements of that that are similar to what alice rivlin has proposed and my hope is whether we get through the election, probably by the time we're looking at january 1st with the impending elimination of the bush -- so-called bush tax cuts, with the threat of sequestration, major cuts in defense spending, major cuts in domestic spending, that in light of that train wreck we'll agree to make some changes and the grand compromising is democrats agree to make some changes on entitlement programs and republicans agree to some revenues. we can agree to the revenues i think by lowering rates and broadening the base. >> you've introduced a bill that would reduce or raise the requirement when it comes to being able to go public. right now if you've got 500 shareholders, you're going to have to go public. you want to raise that number to 2,000. why? why did you sponsor this legislation? >> if you go back 50 years ago when this requirement was put in place and the way that we raise money and the size of a small company 50 years ago compared to today is a lot different. we have a bunch of companies in our area, wl gore, wawa that are private live held company but would like to have more than 500 shareholders, would like to go up to a thousand or 2,000 before they have to think about going public. i just think that's a good idea. the world has changed since 1964 when this requirement was put into place. we need to change the law -- >> the idea was to protect share holders in theory, once you went public the s.e.c. was going throb to protect you. so from going from 500 to 2,000, we just got a bigger population or what's the philosophical reasoning for this? >> right here in delaware we have a company call wl gore -- >> just because they want it, though, doesn't make it right. >> they're not growing. they're con strand from growing in too many cases. we want to give them the opportunity to grow, give them the opportunity to continue to focus on r & d, on growing their product base without having to worry about the kind of how do we perform to the next quarterly earning statement or annual earning statement. i think it's a good common sense approach. frankly so do most of my colleagues. the corollary is this, the question can we protect the environment in this country, have good clean air law, water laws and still grow the economy or not? i think that's a false choice. the idea that we can't modify these laws that have been in place 50 years at a minimum just a little bit, improve access to capital and protect investors, it's a false choice. . we should be able to use both. >> i noticed you used the word nurturing in relationship with what companies should do in order to get jobs. nurturing was the descriptive word. i own two businesses in delaware and delaware is a very nurturing state. would you describe the obama administration as being nurturing of business? >> in the last year or two we've seen significant changes. a guy who is in charge, cass sunstein, looking at all the regulations we've got in place and deciding whether or not they make sense be is there a reasonable cost benefit ratio. the administration has thrown out scores of regulations that were outdate and that don't make a lot of sense. the role of government is to steer the vote. we don't start or create businesses. we provide the nurturing environment to create. that's our job. >> coming up, paul ryan on the budget proposal. also, it's trump tuesday. but coming up, panda bears and tea makerschina are coming up for a very lucrative project. we'll be right back after the break. y, this is challenger. i'll be waiting for you in stall 5. it confirms your reservation and the location your car is in, the moment you land. it's just another way you'll be traveling at the speed of hertz. how they'll live tomorrow. for more than 116 years, ameriprise financial has worked for their clients' futures. helping millions of americans retire on their terms. when they want. where they want. doing what they want. ameriprise. the strength of a leader in retirement planning. the heart of 10,000 advisors working with you one-to-one. together for your future. ♪ [ leanne ] appliance park has been here since the early 50s. my dad and grandfather spent their whole careers here. 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[ brian ] there's a bright future here, and there's a chance to get on the ground floor of something big, something that will bring us back. not only this company, but this country. ♪ choose control. introducing gold choice. the freedom you can only get from hertz to keep the car you reserved or simply choose another. and it's free. ya know, for whoever you are that day. it's just another way you'll be traveling at the speed of hertz. . pretty shot of d.c. there. this is for all of you tea sippers out there. i have to say i'm not among them. but tea makers in china creating the world's most expensive tea made with the help of pandas. i know this sound as little strange. the organic green tea blend is fertilized exclusively with, yeah -- i can't believe we're saying this -- with panda droppings which tea makers say is highly prized due to its nutritional value. the first batch is being sold for nearly $180 an ounce or $13 a tea bag. if the price or the poop -- do i really have to read this -- leaves a bad taste in your mouth, doesn't worry, all the profits will be used to set up a fund to support environmental projects. so there you have it for the tea drinkers. are you a tea drinker? >> i love green tea and i paid $10 or $11 once for green tea, that was exorbitant. >> do you know how it was made? >> i don't think there were panda droppings. >> you're thinking about it. >> i might have to try it. >> oh. >> is the label printed in chinese so you don't know? >> still to come this morning, congressman paul ryan targeting taxes in his latest boudget proposals. and here's a look at where crude oil is trading again. squawk coming right back. it's trump tuesday. the donald phones in and talks politician, business and the state of america. that's next right here on "squawk box." ♪ why do you whisper, green grass? ♪ ♪ why tell the trees what ain't so? ♪ [ all ] shh! ♪ whispering grass ♪ the trees don't have to know ♪ no, no [ all ] shh! ♪ why tell them all your secrets ♪ ♪ who kissed there long ago? 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[ male announcer ] solutionism. the new optimism.™ welcome back to "squawk box." among the stories we're following this morning, restaurant chain wendy's has no bragging rights. a survey puts them fourth overall in restaurant sales and second among burger chains, pushing past burger king. and amazon.call is buying rot bottics maker tiva systems. the technology helps online retailers fill orders more quickly. andrew? >> voters in illinois heading to today's crucial gop primary. 54 delegates are up for grabs. joining us on the squawk newsline to talk politics as well as his latest brand expansion, donald trump. good morning, mr. trump. >> good morning. >> i don't know where you are right this second, whether you are wearing your new fragrance called success. i want to know what success smells like. >> of course i'm wearing it. i always wear it. it's great. it sort of guarantees success. >> donald, are you really wearing it right this second ? >> it's a little early in the morning as i watch you folks and my friend richard on television. success comes out at macy's along with ties and shirts that are setting records. >> seriously can you describe, i want to know this, what does it actually smell like? >> him! >> i would say the word is indescribable it's so beautiful. indescribable. i'd love to give you an exact definition but just absolutely indescribable. it is magnificent. richard will start wearing it very soon. >> donald, does it smell like money? >> well, actually that doesn't smell so good, it just feels good. >> you're supposed to say it smells look success. >> that's right, it smells like success. >> i imagine you're going to have to send some of this to romney. walk us through your expectation for tonight in illinois and more importantly how you see the calendar play out if he wins. i imagine you're going to say he's going to win but i don't want to put word in your mouth a. >> i really think he's going to do very well. i think santorum is not going to do well. he had a terrible speech yesterday where he said he doesn't care about jobs, cares about other things, but doesn't care about jobs and creation of jurors. that's not what this country is about. i think santorum really hurt himself yesterday and i think he hurt himself by losing his election? pennsylvania by 18 points, which is a record loss for an incumbent senator. i think romly is going to go on to get the nomination and beat obama. gas price, oil prices are going so high, i believe it going to be very, very hard if he doesn't do something quickly. and you can do something but if he doesn't do something quickly about oil and gas, he's going to have a hard time being re-elected in my opinion. >> donald, let's talk more about this oil and gas story. the president keeps saying we only produce 2% of the world's reserves. turns out the new estimates using the shale fracking discovery, 60 times more than the president is letting on but on federal lands production has gone down. when are we going to take the regulatory handcuffs off all this and let america really flourish and become energy independent? >> i don't think he's going to do that, larry. if you see what he's saying -- he made a speech the other day which i think is a record loss for him. he said last week that the president has absolutely nothing to do with the price of oil and they're kidding themselves if they think the president has something to do with it. and i would use that as a sound bite if i'm mitt romney or anybody else. if you believe that, we are in big trouble. we are sitting on top of just absolutely unbelievable amounts of energy and especially natural gas. the problem is we can't get it because you have to go through environmental impact statements and the environmental stuff and you just can't take it out. so we continue to go to opec. opec continues to just rip us left and right like they are laughing at us all the way to the bank and between opec and china, we have two very, very friendly enemies, believe me. >> donald, when it comes to natural gas, would you like to see the government do more to encourage that specifically, to replace oil and carbon? >> well, they're doing nothing. there are certain little sections that are doing. they're having the trucks and cars made adjustable soap th thn take the natural gas and it's working out well at $2 versus 4 and 5. in my opinion you're going to have gas at $5 or $6 a gallon. if that happens with motorists, i don't see how obama will win this election. >> donald, doesn't mitt romney still have to clarify his differences between romneycare up in massachusetts and obamacare? it's going to be a big issue. he's being criticized, moderates, conservatives. doesn't he have to tell the public exactly how he's going to change obamacare and why it's not the same as what he did in massachusetts? >> well, larry, i think he's done a good job of doing it. i think it's an overrated issue. you look around and he's winning most states. he's been at the top for the longest period of time. there's nobody really challenging him. santorum can't get it. i mean, mathematically impossible for him. he's having fun. he's got nothing else to do. but he cannot get the nomination. it is absolutely mathematically at this point impossible. so maybe i guess he's thinking there's a brokered convention. he's not going to be the one to get it. for a period of time i said this is good because it keeps the republicans in the spotlight. but now it's getting to a point where it too much, it too long to have to focus on obama. they're spending a lot of their wealth, a lot of their money on this this campaign and they're going to have very little money left by the time it get down to going after obama. >> whee talked a couple weeks ago, you didn't think this was damaging to the party. we talked, there was a big story in the wall street journal survey saying it was really damaging the party and i thought your position was that it wasn't? >> andrew, i've said really from the beginning i think it's fine but now it's getting to a point it's too much, it too long. people like santorum won't happen. it's just not going to happen and they want to focus on obama and they have to start focusing. for a long period of time i have been saying it's okay, it's good. if you remember when mccain won, it's like there was silence for about four months because he won early, he won months ago four years ago and it was very, you know, there wasn't much happening. well, all they do right now is talk about the republicans. but i say now, andrew, it's time. it's enough already. >> hey, donald, can we shift gears for a second and talk a little bit about the economy? >> okay. >> you just made a big acquisition in florida of a large golf course complex, the iconic doral country club. >> right. >> is that an expression on your part in confidence on the economy or confidence in the golf sector or confidence in your brand? >> i think also confidence in miami. miami is really hot. it's amazing. i was lucky to get it actually because it was a very complex transaction getting it. you're talking about 800 acres right smack in the middle of miami. people like richard like that kind of thing. and i do. i look at it as the greatest hedge against inflation. a lot of people talk gold and different things. i like real estate. richard likes real estate. door doral is i think great. miami is very hot because you have all of south america that comes up and they love miami. that's their place, that's their place of choice. we did make that purchase and it going to be i think a wonderful purchase. >> i think it was a great acquisition for you, donald. >> are you betting on big inflation by the way? >> i am, absolutely. and i'm seeing interest rates at some point have to go up. you know, with the deficits that we have, we're going to be up to $16 trillion. at some point you're going to see interest rates go up. and that's where the government really is going to be in trouble, andrew, because when you see we're paying really a very low rate. the interest rate that the government is paying on bonds is very low. what happens when that goes up to 2%? >> donald, are you short treasuries? are you buying inflation protected securities? >> i don't like -- you know, look, i told you last week famous trump tuesday, i love that richard's on trump tuesday. >> what the hell's going on here? >> i love it. but trump tuesday last week i told you very strongly that i only invest based on what i see based on your show, right? and, richard, i bought a lot of bank of america. what do i have know about bank of america but some guy got on and said it was a good deal. we bought it at 6, i think, michelle, remember that? >> fantastic. >> i'm not a believer in buying treasuries when they're paying so little. they're paying almost nothing. i do believe treasuries when they start paying 2%, 3%, 4%, then this country is really in trouble. >> donald, aren't these rates going up because the economy is getting better? in other words, rates are too low because everyone expected a double-dip recession, now that we're doing better, rates have to normalize, people are getting out of these treasuries and going into stock ps. >> i think the economy is getting a little better and i think, larry, i know you do because i watch, prices are very fragile. i happen to think oil was the biggest culprit three years ago, the last time. i think that oil had a worse effect on the banks but that's at blood of the nation essentially, it makes it work. when oil got up to $150 a barrel, i really think that had a huge negative impact on what happened. >> i agree. >> i think that's ultimately than the stupidity of the banks. so i see oil going up. when interest rates do go up and the government now is paying three or four times what they're paying right now, you tell me, larry, what's that going to do to the deficit? >> if interest rates do claim 5%, 6%, 7%, the interest expense on the debt just explode. >> that's crazy. >> that becomes a driver towards massive enough deficit and bankruptcy. that's a huge conundrum. >> in ten years time or five -- people have been saying this is going to happen tomorrow for as long as the recovery has been going on. it's fine to talk about how dangerous a problem it can potentially be, but let's keep in mind the likelihood that happens, it's not just -- >> when the moment comes, it turns so fast. >> europe knows this. >> you never know what's going to happen. >> you got the feds keeping long-term rates down, too. >> donald, we have a new colleague -- >> if they don't keep the rates down, you talk about deficits, if the rates aren't kept down and people start getting -- you could say getting, that's the only good news is you'll get and who's going to get? china's going to get. they have a trillion dollar's worth. if we start paying 2%, 3% 4% instead of what we're pay, you want to see deficits, you just watch. it does go up quickly. we could talk about future. but all of a sudden you read one story and it does go up fairly quickly. that's the scary thing for the economy. >> are you confident that mitt romney will be a tough spending cutter? spending is the ultimate source of the problem for the budget and the deficit. >> i agree. >> do you believe romney will i tough on the budget? >> i think he's going to be a great candidate. i told him, i said the best week you've had politically was your week in florida. you won with two debates decisively, it was an amazing -- i hope that tonight and i think tonight is going to be another one. he's done very well. but his greatest week was the week in florida, what he did in florida when he won florida. i think he's going to be a great candidate and i think he's going to be a great president. >> speaking of florida, you were talking about doral earlier and your purchase there. anywhere else in the country you're looking at real estate, donald? >> i'm looking all over. most places very, very soft. new york is good, certain parts of florida are very good, palm beach is a unique place, just rich and good. that he was only affected by one thing, madoff. he took about $5 billion out of palm beach but i think they've recovered from madoff. palm beach is never affected by the economy. it's affected by somebody like a madoff. but i think there are many, many very weak pockets and that may be a good time continue to vest b -- to invest but i don't see a lot of them coming back very quickly. >> thank you for joining us. all wonderful to do "trump tuesday." >> and coming up at 7:00, talk finance with larry kudlow. >> we talk -- >> what's your number? joe's at 30% for the end of the year. >> i'm playing it short term. i don't know. i don't like to put out market forecasts. i just think the economy is better than people think. up know why? free enterprise. >> i degragree with that. not the government helping. >> no, in spite of the government. >> music to my ears. "squawk box" is coming right back. >> coming up, house budget committee member congressman paul ryan unveils his latest budget. will his deficit slashing plans fly a second time around? and where we are on the road map to america's future. hey, this is challenger. i'll be waiting for you in stall 5. it confirms your reservation and the location your car is in, the moment you land. it's just another way you'll be traveling at the speed of hertz. introducing gold choice. the freedom you can only get from hertz to keep the car you reserved or simply choose another. and it's free. ya know, for whoever you are that day. it's just another way you'll be traveling at the speed of hertz. welcome back to "squawk box." let's turn to our guest host richard lefrak. i mentioned tiffany's earnings reports came out. you said they missed by a couple of cents. their new york flagship store was up 2% in the quarter. are you picking up on similar signs of weakness in say the new york real estate market? >> the new york real estate market is highly correlated to the financial service industry. >> which would you think tiffany's would be, too. >> no because tiffany's is almost an iconic place for tour i. if anything it would be it was a little whack in foreign visitors in new york. but new york real estate is very tied in to the financial services industry, which unfortunately is going through a period of decline or shrinkage or however you want to describe it. a lot of the investment banks and commercial banks have been cutting personnel, reducing the amount of money they're paying personnel. that leaks its way into the new york real estate market. it's really that simple. of course the stock market has gone up. that's usually good for those industry -- those people associated with that industry. so my thinking is that, you know, in the next year or two we'll have a little bit of a revival. one thing also about new york real estate is that it -- that sets it apart is it's a home for foreign capital. there's a huge amount of foreign capital looking to buy things here, okay, but that doesn't change the underlying pattern of rents and other this eveningngs. >> there's so much focus on if there's going to be a slowdown in china. if there's going to be a slowdown in china, they think it's going to have a huge impact on kmod commodity. do you see a connection to miami or are you not worried about it? >> i'm not worried about it but there's an very interesting phenomena in miami relative to let's say brazil. when brazilian current scy weak, they run to miami to buy condos. when the brazilian currency weaken, they run to miami to buy condos. they're saying they don't particularly care for their currency under either circumstance. when you do real estate, these are long-term investments and you're not playing a moment-to-moment market. my own thought is that, yes, china could have a slowdown, brazil could have a slowdown but over a period of year two, three, it not going to really make a difference to the real estate prices because the real estate prices will still be good because people from south america love to go there. >> all right. thank you so much. let's move on to the big guest of the morning, house republican set to unveil a new budget blueprint today it breaks tax rates into two brackets and eliminates the alternative minimum tax. joining us is paul ryan, chairman of the house budget committee. from six tax brackets to two. we were discussing earlier extremely unlikely you're ever going to get any of this done so why propose it, even though i like a lot it have? >> we think we owe the consider an alternative path. what we're saying to the country is here our plan for economic growth, prosperity, debt reduction, fiscal consolidation to prevent a debt crisis and we think we owe the country this choice so they can decide into november which path they want to take in america. it's not enough for us to complain about what president obama is doing. we're also have to propose how we would do things differently. even though the senate isn't going to pass a budget for the third year in a row, which violates the budget law i would argue, and the president proposes more borrowing and spending. it's not enough to complain about that, we're showing the country how to do things different litsch so they can choose a sharp contrast in the path of two futures. >> congressman, how do you pay for this? how much revenue does this bring in compared to the current structure? >> we're proposing it brings in the same amount as the current structure. >> how is that possible? >> by base broadening. there's a consensus that's being arrived here in washington, in america between some democrats and republicans that the smart way to do this is to broad i don't know the base broaden the lower the tax rates. so you can wire us for growth. we think we should stop picking winners and losers through the tax code in washington by clearing out these loopholes you dramatically broaden the tax base to lower tax rates without sacrifices revenue. i would argue you'll trigger faster economic growth, which would get more revenue, which we're not banking on in our budget but i would argue that would do that. we're not losing revenue to the federal government, we're targeting the current revenue line as we have it today but by a smarter tax code that puts news a better competitive position to grow. >> you know i love pro growth tax reform. talk to me about spending. in your plan how much would you take down the current path of spending, when can you get the budget in balance or move toward balance? how is that all going to play out? >> larry, we propose to cut $5.3 trillion in spending over the president's budget in the next ten years. depending cuts clearly but that's what is needed to get it under control. the cbo says under their current baseline it takes a long time to balance it. but we get debt underneath its dangerous levels and if we have faster economic growth we'll balance it even faster, within ten years we would estimate. we use cbo and cbo has a baseline that assumes slow growth. they think a massive tax increase will come in in january and therefore a bad economy as a result of it and we get scored on that. we have to use what we call a static score on how long it takes to balance the budget because we use cbo economics, which assumes really bad economic policy takes place. larry, you understand this well but the point i'm saying is we're cutting spending and growing the economy. >> in other words, if you've got pro growth tax reform, bring down marginal tax rates, broaden the base, you're going to flatten out spending baselines, that's great. so debt to gdp, which is an important issue, we're running, what, close to 75%, 80%. some people think that's pretty near the danger zone where we implode into bankruptcy, can't finance our bonds. what are you going to do about that ratio? can you stop it from rising? >> yes. we bring it down by ten percent and points in the first ten years and it steadily drops thereafter. it's down to like 10% in the 2040s and 2050s it's paid off. we bring it down and stabilize it. the president on the other hand in his budget increases the publicly held debt by 10 percentage points and then it goes off the rail, goes out of control and we have a debt crisis. we're showing specifically how we're getting debt stabilized, under control and preventing it from getting to these dangerous levels. >> don't move. we're going to take a break. here at cnbc, we always have a balanced budget, we have a surplus actually. we're going to talk to you after the break. reactions to the budget proposal also coming up from steve israel. 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[ man ] the receivables. [ male announcer ] michelin knows it's better for xerox to help manage their finance processing. so they can focus on keeping the world moving. with xerox, you're ready for real business. welcome back to "squawk box." first in business world wide this morning. also our guest host for the morning, richard lefrak, the president of the lefrak organization and, yes, he's right over there, larry kudlow, the man of the hours. let's look at equity futures at this hour. dow jones would open up down 68 points. i should say open up lower. it would open lower. michelle, back to you. >> let's get back to our conversation with representative paul ryan. your plan wasn't out and a week ago steve israel said already what you want to do is protect millionaires over medicare and he's taking issues with the reforms you want to put in place in medicare. it already started the whole pushing granny over the side of the cliff, et cetera. how are you going to combat this? this destroyed this argument last time. >> he standing here. i think he's going to come on and try to destroy what i'm trying to do. the president's health care law takes a trillion -- >> seniors who are watching right now, should they be worried? >> yes. >> should they be worried? >> yes. the president's health care lou lau puts new board of 15 bureaucrats in charge of price. we say get rid of the board, stop the raid, leave the program in tact for current seniors but if you want to save this program keep that promise to them, you have to reform it for the next generation because the program is going bankrupt. the way in which we propose to reform it is no different than the kind of system we have as members of congress. you have a list of options can you choose from and medicare will subsidize your premiums, more for the poor and sick and less for the wealthy. >> what's the age cutoff? >> 55 and above. what i'm trying to say is there's a growing bipartisan consensus this is the smartest, best, most humane way to save medicare and allows us to cash flow the commitment and promise for current seniors whose health care would i argue is placed in jeopardy by the new law president obama passed two years ago. >> can we talk about the loopholes that are going to disappear in all this, mortgage deductions. where is that? charitable giving, where is that? >> what the ways and means committee wants to con didnb co hear -- conduct hearings on just those points, what are worth keeping and what aren't. i think the smart way is to income adjust for people. more income is subject to taxation, albeit at a flatter, lower rate. eight out of ten businesses in america, they don't file as corporations, they file as individuals, as sub s corporations, partnerships. their top tax rate is going to 48.8% in january. that's a growth killer. we need to have lower rates, a broader base and there is a bipartisan consensus on that as well. so what we're trying to show here is we're giving the country a very clear and legitimate choice of two futures, one where we want to get us back to prosperity and growth, stop picking winners and loses in the tax code, grow the economy and get you are spending and debt under control so we can avoid a debt crisis, which i would argue is probably the most predictable crisis we've ever had. >> can we talk about this tax cliff, the whole tax system basically implodes, as you say. president has the proposal to take the top rate to 45%, triple the dividend rate, the payroll tax cut ends, all kinds of corporate tax deductions ends. what's the hell's going to happen here? what's the outlook? >> if the president gets his policies which you just accurately described, think you're going to throw us into another recession. if you hit the economy and job creators were those figures, it will be impossible to get the economy under control because nobody will be working and paying taxes. we feel we have an obligation to show the country how we would deal with that tax cliff, which is fundamental tax reform going forward that's permanent, certain, fair and competitive and get us wired for economic growth. if we win the election, we're saying this is what we want to do to replace this fiasco -- >> but there has to be a special session. i don't want to get into process but what -- in other words, you know the stuff is january 1st, the election is november. you're going to have a lame duck once again. is that when all this has to be sorted out before the new senate and house members? how does this work? >> my own view is we'll have to extend current law for a period to put these new ideas in place. i believe we'll have to extend the current tax system, prevent this massive hit from taking place on our economy to get us the time to put all these reforms in place. >> congressman, you mentioned the two new tax rates would be 15% and 25% -- >> 10 and 25%. >> what would be the income levels? >> that's what we would have to decide with the ways and means committee. those numbers have to move making sure we get enough revenue to pay our bills and set our tax expenditure policy. >> so within the context of your plan, mortgage deduction, is it in there or not? >> that's to be deen sided later by the ways and means committee. what we're saying is here are the tax rates. now we have to decide what income thresholds and tax expenditures are in or out. that's a decision we have not yet made in. >> in the paul ryan view of the world, you would do it how? >> i would not cut a back room deal. i would say what is most efficient. >> and the answer to that in your mind? >> i would income adjust these things. i would put income limits on who can have these kind of tax expenditures. in the paul ryan view of the world, a broader base, lower rates is a far better way to go but i'm not going to get ahead of the tax writers. i'm on the ways and means committee. we want to have a conversation with the country on how we fill in the details of getting to the simplified tax system. >> that's why it makes it so difficult to score then. >> but we can target our revenues at our current revenue line with these tax rates. what will happen the are two things you just identified. the income threshold at which these tax rates kick in and the tax expenditures, which stay, which go, who gets them, who doesn't. those things move and they determine whether our revenues hit our target or not. >> paul, let me ask -- i beg your pardon. >> go ahead, go ahead. >> i downloaded the tables from the path of prosperity last night looking at them. i can't help myself. i'm an old omb. i know this is a tough exercise. your deficits are basically you continue, i don't know, off average about $300 billion a year, much lower than the trillion dollars but still 300 is 300. the debt does go up from $12.3 trillion to $15.4 trillion. i want to ask your personal view. can we afford that? in order, even under a reform plan and under tougher spending cuts, which you are producing are we're going to have lingering debts and increase, can america afford that or do we have to go more draconian in the next five to ten years? >> we need more economic growth. if we get more economic growth, all those numbers are dramatically improved. we can balance this whole thing within the ten-year window. the key is prosperity and economic growth. we do bring the debt and deficit down dramatically compared to the president. we get whauunder what we call primary balance almost immediately, bring the size of government spending down to 20% of gdp within a few years. we get the situation stabilized and debt stabilized and going down but if you add to it the growth we would get, the numbers dramatically improve. >> congressman ryan, richard lefrak. the notion of broadening the base and bringing the rate down as a high margin, marginal rate taxpayer, i'm assuming that at the end of the day, even though that the rate is lower i'm going to be paying more taxes, not less. >> that's right. >> why doesnn't we just say tha that's the honest answer. you are asking higher revenue from the top 1% or however you want to define it. >> you get to park a lot of your money in a tax shelter where it's taxed at zero. we're saying we want to take away your shelter and we have lower rates for everybody and your money is taxed at 25%. so 25% of $1 is a whole lot more than zero of a dollar that was parked in a tax shelter. so, yes, we think we will have more of your income subject to taxation than where it is now. that's what we mean when we say broaden base. >> can you live with that, richard? lower rates but -- >> yes, i can live with it because i think eight fairer system. >> your effective rate goes up, though. >> my effective rate will go up. but i'm a high margin taxpayer anyway. i actually pay more than my secretary. i do. i admit it. >> you figured it out i guess. >> i admit i pay more than my secretary. for me if it goes to retire the deficit and straighten out the long-term problem that the country faces, it okay. >> and you'd still have incentives. >> entrepreneurs are restless. they always have incentives until the tax rate goes so high. >> but it's not going to change the way you do business, when people talk about carried interest -- >> i don't have any carried interest. >> don't you have partnership accounting? >> i have partnership accounting. >> which is a similar -- >> dividend tax rate would revert to the income tax rate and go higher in that sense. >> right. i would have asked the congressman -- >> congressman, i know you got to go. we're going to keep this conversation going after you leave. thanks for joining us and laying out the plan. good to see you. you were going to say? >> i was going to ask the congressman whether or not the 10 and 25 would apply to capital gains. >> as i understand it, he's going to keep the capital gains and dividends at 15%, as i understand it. >> i wish we could get him back. >> we will try to clarify that after the break. we'll make a quick phone call. in the meantime, treasury secretary tim geithner is warning the eu against hasty budget measures. geithner will testify before the house financial services committee today. according to prepared remarks he'll suggest economic growth likely to be weak for some time. he says that, quote, the path of fiscal consolidation should be gradual with a multi-year phase-in of reforms. he will not to go to draconian measures, saying it will create a cycle of growth killing prosperity. facebook will pay a fee of just 1.1% to its ipo underwriters. that's much slimmer than the typical underwriting fee of about 3% to 7%. analyst investment bankers for many firms underwriting the offering attended a meeting at the company's headquarters yesterday. as we mentioned in the last hour mr. zuckerberg for some reason was a no show. but that 1.1%, interesting for the banks. you're looking at me like i'm crazy about the no show. you would have thought mark dzizucke zuckerburg would have showed up for a meeting like that. on the european markets, stocks falling for a second day as investors take more profits after a rally to an eight-month high last week. take a look at that chart. >> coming up, reaction to congressman paul ryan's budget from democratic congressman steve israel. and then the health of the middle class. we'll bring you the results of a new survey in just a few minutes. welcome back to squawk on this tuesday morning, the first day of spring. the futures now looking a little bit lower. not horrible but not great. you can see the implied percentage open. dow would open down 5.5%. jefferies group, we've been watching this group. it's 4 cents above estimates with revenue also above consensus. firm says growth in its investment banking business and strong performance in fixed income helped drive profits. we all remember that big sean egan call and all of the fury about what was going to happen to that company. they pulled through. >> smaller, though. leverage is down, too. >> part what they said they were going to be doing. >> exactly. >> i was just going to say just apropos of jefferies surviving, which is great in my opinion, the mf global fallout, all right, it went bankrupt, was quite limited. we should remember that, that bankruptcy is a tool in the arsenal of something called free market capitalism. >> that is true. i got e-mails from mf global customers that will tell you it wasn't limited. >> i'm not saying free market capitalism doesn't have pain, that there aren't losers in free market capitalism. of course there are. when you let the market system work, in the aggregate, it can work. just a little kudlowism. that's all i'm putting in there. >> morning house budget chairman paul ryan just joined us moments ago to discuss his new fiscal blueprint out this morning. here what's he had to say. >> we think wee should stop picking winners and losers through washington by clearing out the loopholes, you broaden the tax base and lower tax rates without sacrifices revenue and i would argue trigger faster economic growth. >> joining us from the other side of the aisle, i think you were standing to paul ryan's left. richard lefrak said it's like a beer commercial. you got one guy who says tastes great, the other guy comesoned says less filling. tell us why this is less filling and give us substantial as to why it's not as filling if that's your view. >> i've never had paul ryan as a warmup act. i'm pleased that happened today on cnbc. i'm going to surprise you. there are elements of this budget that i think can be a starting point for conversation. one of them is amt reform. i think we need a budget fundamentally that reinvests in the middle class, rebuilds the middle class, creates jobs for the middle class, invests in education and schools for the middle class. there's one element i think deserves discussion. i wouldn't go as far as paul ryan does and completely eliminate the amt. if you're making over $1 million, you should contribute something to the tax code. but i do think we should talk about increasing the exemption of the amt because it's capturing too many people it want intended to capture. this budget is deja vu all over given when it comes to medicare. last year they tried to end the medicare guarantee as we know it, they're trying to do it again today. why don't we have a conversation where we're start with corporate tax reform, making sure the wealthiest pay their fair share, make sure oil company executives are paying their fair share. let's go there first rather than consistently asking seniors to be the first to do without. >> it's not acceptable to you to tell americans 55 and under right now they would have a different form of retirement when it comes to their health care benefits? it's not acceptable to you? >> it is not acceptable to me to produce a budget consistently that asks seniors to be the first to sacrifice. there are other conversations that we should have. i don't know what this obsession is with finding ways to end medicare in republican budgets rather than having a conferring that asks the wealthiest in america, many of whom i represent, many of whom have said they'd be willing to do more as long as it was fair and the budget was balanced, i don't know what it is about this obsession that targets seniors first and doesn't do anything, not one vow about asking the wealthiest to help generate more revenues. >> we just heard from paul ryan. richard lefrak said he would agree with it. he is a great successful businessman. ryan would take away upper end deductions or exemptions or substantially limit them so they would wind up paying more in tax revenues, even while their rates go down. i understand your point of view but ryan is saying i'm going to do this in return for lower rates, i'm going to take away upper end tax benefits. is that wrong? >> because the budget they produced doesn't do that. the devil is in the details. it's a great sound bite but you can't budget by sound bite. you can't say we're go to simply reduce the rate and eliminate loopholes and not tell us what loopholes you're going to eliminate. only in washington, d.c. does two minus two equal four. they say they're going to balance the budget, by reducing corporate tax rates, asking the wealthiest not to do more but to do less. i want to make sure it's fair. >> but, steve, president obama wants to lower corporate rates. let me just ask you this, i know we disagree and it's great fun. on medicare itself, when you say ryan wants to do away with medicare, you're not being fair, not being truthful. ryan is saying the existing medicare system is an option. he's just grafting on this hybrid so when senator ron widen, a democrat, so you can have some choice in the calculation. and as michelle said, nothing changes for anybody who is 55 years and older. isn't that a starting point? i mean, we know medicare's gone bankrupt, sir. something's got to happen. what's your plan? >> one, medicare is not going bankrupt. >> would you repeat that? tell me that again. >> medicare is not going bankrupt. the plan that they produce actually asks seniors to be the first to sacrifice. again, we -- >> so medicare does not need to be reformed in any way? >> no, no, you're putting word in my mouth. >> i'm asking you, does medicare need reform? >> yes. we will negotiate improvements to medicare, strengthening -- >> there needs to be reform -- >> but not by asking seniors to be the first to sacrifice. >> if they're not the first, if they're the third, then do you reform medicare? >> don't take my word for it. listen to the congressional budget office, listen to the national commission for preservation of social security and medicare that says this program will ask seniors for more. i want to make sure i'm clearly understood. we will have a conversation and we are interested in having a discussion about how you reform, improve, strengthen and expand the solvency of medicare. why is it the first thing in the budget says we're going to lower tax rates on companies that are offshoring jobs and turn medicare into a voluntary allowance program, which is the best thing could you say about it. it fundamentally changes the dynamic and the the details of the medicare guaranteed benefit program. >> i was just going to say, congressman, thank you, we have to leave it there. we appreciate your perspective this morning very, very much. >> larry, thanks so much for joining us this morning. it's been great to have you, this key day for illinois. >> honored to be here with richard lefrak. >> big fan, larry. i'll be watching you tonight. >> you can see more of larry tonight, every week night right here on cnbc. >> coming up, the chairman and ceo of blackstone minerals will join us to talk oil, natural gas, u.s. energy security. first breaking economic data. housing starts are due out at 8:30 eastern time. we'll bring you the data and the health of the middle class as well. on december 21st, polar shifts will reverse the earth's gravitational pull and hurtle us all into space, which would render retirement planning unnecessary. but say the sun rises on december 22nd and you still need to retire, td ameritrade's investment consultants can help you build a plan that fits your life. we'll even throw in up to $600 when you open a new account or roll over an old 401(k). so who's in control now, mayans? only hertz gives you a carfirmation. hey, this is challenger. i'll be waiting for you in stall 5. it confirms your reservation and the location your car is in, the moment you land. it's just another way you'll be traveling at the speed of hertz. a living, breathing intelligence teaching data how to do more for business. 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[ beeping ] ...to bring all the right results. it's the at&t network -- doing more with data to help business do more for customers. ♪ coming up, the government's latest data on housing starts. we'll get the number and the instant reaction in the markets. squawk is coming back with the number right after this. an investment opportunity you didn't see before. fidelity's next generation ipad app lets you see what's trending around the world, as well as what over a million fidelity customers are trading throughout the day. and advanced charting lets you customize your views and set up your own comparisons. our ipad app can help refine your strategy or even find a new one. i'm velia carboni, and i helped create fidelity's next generation ipad app. it's one more innovative reason serious investors are choosing fidelity. get 200 free trades and explore your next investing idea. what makes the sleep number store different? the sleep number bed. the magic of this bed is that you're sleeping on something that conforms to your individual shape. wow! that feels really good. it's hugging my body. it works in a minute. i can get more support. if you change your mind once you get home you can adjust it. so whatever you feel like, the sleep number bed's going to provide it for you. at our semi-annual sleep sale, save $400 to $700 on our most popular bed sets. sale ends soon. only at the sleep number stores. where queen mattresses start at just $699. we are seconds away from housing starts data for february. rick santelli is standing by. he's got the numbers. steve liesman in studio. >> february housing starts just about as expected, 698,000 seasonally adjusted annualized units. this was upgraded to 706. with that upgrade, this looks as though it's down about 1%, a little over 1%. permits stronger than expected, 717,000 seasonally adjusted annualized units. we'll call that up about 5%. so as expected on starts, a little bit hotter on permits and 698,000 of course after last month's 706. that 706 now becomes the highest level since october of '08, which was 777, 7s are wild. back to you. >> thank you, rick. for more on the data, let's get to steve liesman. permits way better than expected. starts -- as rick said, pretty close, even though it was down 1%. what do you think? >> we've had this disagreement between the permits and the housing starts and permits may be doing some catch up right there. i think the way to look at this is year over year we're up 35%. but i want to just get to a big debate that's been out there among economists and even on the street, which is how much has weather been a factor, especially in the housing starts numbers and other parts of the economy. >> richard lefrak is nodding his head right now. >> goldman sachs is out with a report saying they are sticking with sluggish to describe the economy, even though their current activity index is running at a 3.5% rate, goldman is sticking with 2% gdp. they're saying the weather impact is going to reverse on the economy, inventory growth is going to ease and gas prices will weigh on the consumer. i want to just offer for consideration deutch bank out with another note saying weather is completely overhyped. they say weather acts as an offset to weather. they say housing starts are up 17.7%, almost 18% since the bottom and improving jobs means housing gains. my take is weather has definitely been a factor but i don't think it's the only factor. when you look over time, we have had a real improvement in housing and that's come in large part from improvement in jobs. >> richard lefrak, you nodded your head when we talked about the weather. >> obviously if you're a builder, you're pleased by the mild weather and you're going to accelerate construction. the winter is usually a time when people don't start building houses. i would be curious to know whether the statistics include multi-family space. if it does, it's totally explainable by the fact that the rental business is very good right now. >> richard, multi-family was a large part of the game here, up 241. in fact, single-family homes actually declined to 457 from 507. >> rick, thank you so much. steve, thank you. >> coming up now, a look at the health of the middle class. we've been adding more jobs but oil prices are up now, too. are u.s. households better now than six months ago. >> welcome. there are signs of pick up in attitude, some brightening of attitudes from six months ago. >> yes, some signs of stabilization. it's still fragile, people are worried about their financial situation, they're worried about job security and inflation. >> give us the good news first. >> people have a little more confidence on where house prices are going to go and that's key here. you have people sitting on unrealized capital gains. a third save they have problems with potential capital losses if they were to move up. a quarter of the people are still underwater, the value of their house is less than their mortgage. that's the head wind to overcome. >> 30% that have a capital gain -- >> a third are sitting on unrealized capital loss pepz. >> losses, not gains. >> if there was good news, it's that people feel a little more security about their finances now than they did. >> it's not a big change. >> most of it jibes with the fact that people are concerned about debt and just the structure of the american economic system. >> debt and leverage is still a big, big issue. people have got debt, 45% of them still think it excessive. their attitude to credit is changing in a major, major way. 74% say they're not going to increase debt over the next 12 months. this deleveraging may have further to go. there's a real loss of confidence in the american model in terms of does it work for the majority of americans. two-thirds of our sample say they don't think it works. only a third think that people get equal opportunity. only 40% say hard work is rewarded. the one that really sticks, only 20% think that income and wealth are fairly distributed. fairness, the issue of fairness just screams out of this survey. >> you asked this across political lines. you surveyed people who were republicans and democrats. people who were democrats were more concerned about income and wealth and equality. across the board there was an increase in concern. >> even 51% of republicans said that they thought the model wasn't working for the majority of americans. this seeps a very deep seeded issue. as credit has evaporated, people are realizing how unequal the system has become. everyone wants to get the economy going again but what stands out is they want to make sure the wealthiest pay a fair amount of tax, that corporates pay a fair amount of tax. i think labor's share of national income is as squeezed as it's going to get. over the next three years that's got to start adjusting, corporates better get used to a smaerl share of national income than they've had. tax is an issue, not just for individual but for corporates. i think andipple's move yesterd says you can't just sit with that amount of assets on your balance sheet. i think if anything it favors small caps. they create jobs here in america and i think there is a suspicion that multi-national companies aren't paying a fair amount of tax. so i think there's a bias in here, it would be to focus on companies -- >> that suspicion manifests itself in what way? if i'm a ceo and i'm watching this program right now. >> i think the counterpart to the budget deficit in america is the fact that corporates are saving too much. it's a high corporate savings rate. you could argue, hey, that's understandable, it uncertain out there, it's tough out there but if you want to bring the u.s. budget deficit down, it's not going to happen without corporate cash flow being affected period. it's an economic identity. so the more we put pressure on politicians and policy makers to bring that budget deficit down, there will be implications for corporate america. in my mind there's no doubt about that. the only question is how that comes about. we're all hope there's going to be a great cyclical recovery, the uncertainty will lift -- >> are you arguing there's going to be some for the of tax -- >> i think companies have a choice. we either get back to a classic cyclical recovery quick or on a two to three year view, people will say hang on a moment, why are we giving corporate tax rates if they're not creating jobs in america? >> you don't think it works the other way, maybe they'd create more jobs in america if they had a more attractive tax rate? >> if you look back at the last ten years, corporate tax rates around the world have been coming here. >> except here. we're less competitive here. >> in the old days, you lower taxes, companies invest, create jobs and politicians get re-elected. i think globalization has changed that. i think companies are taking advantage of the most attractive tax location, the job creation is outside of america. >> it's exploded in some of the poorest parts of the world because of that. that's not a good thing? >> for the developed world it a big problem because they have to wrestle with big budget deficits and they are because companies no longer want to create jobs in places like the u.s. -- >> findings of a middle-class survey and other nations might have looked a little bit better. >> it's a deep seated issue. there's a lot more going beneath the surface. >> your survey gets into questions than the more well known ones don't. david bowers, thank you for coming in. appreciate your time. >> fascinating stuff. in the meantime, we have the politics of energy. the chairman and ceo of private mineral and royalty company blackstone minerals will join us next. 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[ male announcer ] michelin knows it's better for xerox to help manage their finance processing. so they can focus on keeping the world moving. with xerox, you're ready for real business. welcome back to "squawk." on the first day of spring, tuesday morning. the futures right now looking down. dow would be off .52 if we opened up right about now. >> consumers are awakened to a new reality with this year's 20% increase in gasoline prices while natural gas prices are near historic lows. joining us from houston is tom carter, chairman and ceo of black stone minerals, along with richard lefrak, who is a partner at the company. >> yes, yeah. >> look at him is that true, right? >> tom, how's it going? >> good. how are you today? >> i was talking to richard. how's it going? >> it's going great. fabulous. >> why did you invest in this company is. >> i believe you get the cream without any of the skim milk. you get paid from the top like a royalty interest so you don't take the risk and you get the benefit of energy price and technology. >> tom carter, how's it going when it comes to minerals? tell us what the metric is or how it compares when we see a rise in oil or decline in oil prices or natural gas prices. >> well, our business is very much like all other segments of the upstream business and higher prices generally mean higher revenues and lower obviously the opposite. we've had a little bit of a divergence here over the last couple of years with oil prices moving higher and natural gas prices moving lower. in many respects driven by the tremendous expansion of our capacity to produce natural gas in this country through unconventional shale resources. it's also happened in the oil side as well through the bakken. but oil is so much more a global commodity and the prices of it are driven by global demand supply issues whereas natural gas is much more domestically balanced. >> tom, it's kelly here. which in better in your point of view? is it better when the oil -- the difference between the two is lower? is it a better sign when you have natural gas more expensive relative to oil or vice versa, as we're seeing now? >> well, i think that when you have displacement in the pricing, it causes unintended consequences, which over the long haul inhibit economic growth and consistent energy policy. and i think that's what we're seeing right now. there are a lot of results of that that may not be in the best interest of the u.s. energy consumer. >> there's a lot of folks out there who would like to see some kind of government subsidies to make natural gas more pervasive when it comes to cars, et cetera. is that something that you support? >> well, yes. i mean, if you stop and think about the economics of it, which are very compelling, this country imports close to $400 billion a year of oil and other petroleum products from sovereign nations, like mexico, venezuela, nigeria, colombia and also canada obviously. and we're buying -- we're buying those imports at $100 a barrel. if you look at natural gas, which it trades on a 250 right now, the energy equivalent of one barrel of oil imported at $100 a barrel cost about $16 energy equivalent in the form of natural gas. >> i understand that. if natural gas is getting so cheap at some point, the conversion to natural gas becomes investable on its own right without government subsidies, right? why do we need to go will? >> i'm not sure we do need government subsidy. we need encouragement by the government to consume this cheaper product. if you think about the average consumer that drives up to the gas pump and fills his car up with $4 gasoline, if he could do that with $2 natural gas, he's going to have more money in his pocket. same thing with commercial consumers. and it just makes the cost of energy consumption in this country, it could make it much cheaper. we need a catalyst to cause this to be more readily accessible. obviously natural gas is not fungible in every sense with oil, but it certainly is in more places than we're making use of it right now. in addition to that, i think david bower was talking about tax revenues and the deficit. and every dollar that we spend on imported crude, none of those sovereigns are u.s. taxpayers. and if we're buying -- if we're buying that energy from domestic producers without picking up a pen and changing the tax code, you're creating tax revenues on every dollar of revenues that are generated domestically as opposed to internationally. >> excellent point. all right, mr. carter. thanks so much for joining us. >> you're welcome. >> coming up, we are going to head down to the nyse for a look at some stocks on the move this morning. squawk is coming back with more with that and a lot more. ready or not, the stock of the day is coming up. you're watching "squawk box" on cnbc, first in business worldwide. the freedom you can only get from hertz to keep the car you reserved or simply choose another. and it's free. ya know, for whoever you are that day. it's just another way you'll be traveling at the speed of hertz. how do you know which ones to follow? the equity summary score consolidates the ratings of up to 10 independent research providers into a single score that's weighted based on how accurate they've been in the past. i'm howard spielberg of fidelity investments. the equity summary score is one more innovative reason serious investors are choosing fidelity. get 200 free trades today and explore your next investing idea. here's a chance to create jobs in america. oil sands projects, like kearl, and the keystone pipeline will provide secure and reliable energy to the united states. over the coming years, projects like these could create more than half a million jobs in the us alone. from the canadian border, through the mid west, to the gulf coast. benefiting hundreds of thousands of families throughout the country. this is just what our economy needs right now. only hertz gives you a carfirmation. hey, this is challenger. i'll be waiting for you in stall 5. it confirms your reservation and the location your car is in, the moment you land. it's just another way you'll be traveling at the speed of hertz. welcome back to "squawk box." let's get down to the new york stock exchange. you guys are missing an exciting discussion about chia seeds. >> i got to tell you, we suddenly have become totally fixated on what's going on in china. china obviously has been slowing down. when some company squawks like a bhp and tells us it's slowing down, we say, a ha. geez. how could this be happening? chinese have been doing everything to slow things down for a while. >> great work by a producer down here who got ahold of bhp. this is nothing new. they have said this before about iron ore demand. >> i have coast national on tonight. clf. this has certainly not their rap. we have to put all these companies to the test, michelle. the news out of china is so conflicting. gloeldm goldman sachs say let's start buying joy global. >> see you in a few minutes. coming up, final thoughts from our guest host. don't miss "squawk box" tomorrow. wilbur ross. and we'll talk with congressman chris van hollen. all starts at 6:00 a.m. tomorrow. 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[ male announcer ] aggressive new styling. a more fuel-efficient turbocharged engine. and a completely redesigned interior. ♪ the new c-class with over 2,000 refinements. it's amazing...inside and out. see your authorized mercedes-benz dealer for exceptional offers through mercedes-benz financial services. stock of the day. tiffany's. take a look. higher by more than 4% now. the retailer's fourth quarter earnings fell short of analysts' estimates. company is forecasting higher sales helped by further expansion in asia and the americas. premarket trading, that stock doing very well. $2.82. up 4% to $71.50 per share. >> it's not as if they saw this weakness coming. they're turning around and saying, no, we still think it's going to be stronger for this year. >> let's get parting shots from our guest host. during the break we were talking there's two interesting almost competing op-eds or editorials "new york times" and "wall street journal" today. the jobs act. the act that would lower some of the regulations around investing. get people into ipos, things like that. the times says you scratch my back. the idea being that this whole thing is going to create all sorts of boiler rooms and that they need more regulation. the journal saying, you know, how is it that there's a proposal about new jobs that they say will create jobs and now everyone's complaining about it. the democrats in this case are complaining about it. you say what. >> tastes great, less filling. the same argument we've been listening to on television for the last three years. the truth of the matter is anything that's going to grease the skids of supplying capital to people who need it is probably a pretty good thing. if somebody wants to commit a fraud no matter how much regulation you put around it, they'll figure out how to commit a fraud. regulators, come on. >> talking about getting access to capital right now, you're on the board of a bank. >> right. >> you're also the user of credit. >> right. >> how hard is it to get a loan? >> if your credit is good, it's easy to get a loan. >> if you don't need the money you can get it. >> if you don't need the money they're throwing it all over you. if you need the money because your credit is marginal it's quite tough. part of that is because we just went through this period of time in which it was, let's say, too much lavish credit being bestowed upon people that shouldn't have gotten it. >> is that an expectations of management issue? people saying they should be able to get this money because i used to be able to get this money or the fact of a new regulatory world. >> i think you've got both of them mixed in. the regulatory world is very, very, very tough on this. the bank i'm on the board of is a $10 billion institution. we have 200 full-time employees that are engaged in regulation. it's almost 20% of the staff of the bank. >> as you mentioned this point about how banks are coming to you if you're credit worthy, i remember this factoid from a barclays note recently. if you look at commercial banks the loan to deposit ratio is 82%. lowest since 1994. >> right. >> which suggests to some degree there's a willingness to make loans if you're the right kind of borrower. that right kind of borrower isn't the borrower that wants the capital. >> right. but if the right kind of borrower feels that the business environment is right to start expanding, they will get the money now. because the banks are falling all over themselves to make loans to qualified borrowers. hopefully if that happens, we'll get a little joy spread throughout the economy. >> your yield rising sharply. where do you think interest rates are in a year. >> higher. over 3%. >> real estate. last time we saw you, i don't think you had bought a hotel down in florida at the time. >> i did but it was a secret. >> do tell us some secrets now. >> what's the next secret? >> what have you already bought that you can't tell us about? >> i haven't bought anything that i haven't told you about. but i'm looking at a lot of things right now. >> give us a state or two you're looking at. anything in arizona? >> no. i'm not looking at anything in arizona. i am looking at a -- at a very interesting parcel of land for development in dade county. which i think has a lot of potential. and i'm looking at an office property in los angeles. >> okay. thank you for the hi

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