Transcripts For CNBC Squawk Box 20170523

Flat. The dax in germany up by. 30 . The moves would undermine opecs effort to try and control supply and raise prices. The wti is still sitting 50. 64. 22 are dead and Dozens Injured in manchester england. In this case, police say a suicide bomber likely detonated an improvised explosive device on monday night as people were leaving an Arianna Grande concert. Officials say that they believe they have, in fact, identified the bomber. The singer, Ariana Grande was not hurt. And several hours after the bombing she tweeted, in her words, broken, from the bottom of my heart. Im so sorry, i dont have words. Britains Political Parties have agreed to suspend campaigning until further notice. And donald trump made a joint statement with the palestinian president in bethlehem. So many young, beautiful, innocent people, living and enjoying their lives, murdered by evil losers in life. I wont call them monsters. Because they would like that term. They would think thats a great name. I will call them, from now on, losers. Because thats what they are. Theyre losers. And well have more of them, but theyre losers. Just remember that. Trump went on to say that terrorists, extremists and those who give them aid and comfort must be driven out of our society forever. For more on the uk bombing, lets bring in retired army colonel and msnbc analyst, jack jacobs. Its good to see you this morning. Its never like a new thought for me or a revelation, but i can never get past the idea that to pull Something Like this off you, you know, youve got to sneak around. Youve got to find someone who knows how to make a nail bomb, to take all these steps to inflict horrific injury to children or teenagers. That just sums up how wicked this ideology is and how evil it is. And i dont know to what end any of it, you know, it seems pointless, but very frustrating and it comes right after the president made the speech, and it reenforces they can do this whenever they want, i guess. I guess thats what they want us to think. Well, i think this has been in plain for quite some time. Whoever the perpetrator and apparently now the authorities know who that is. And thats going to deliver quite a bit in terms of intelligence, but whoever it is had to plan it in advance, it had all the earmarks of an isisinspired attack. Had to put together the explosive and finding out what kind of explosive it is, is also relevant. Load the bomb with shrapnel in the form of nuts and bolts and other things. And also, its worth noting, that this was the fourth anniversary of the death of lee rigby, the british soldier who was murdered on the streets of london. Colonel could you hold with us for just a moment . Prime minister theresa may is speaking right now. We want to go do that right now. Ever to hit the north of england. The police and Security Services are working at speed to establish the complete picture. But i want to tell you what i can at this stage. At 10 33 last night, the police were called to reports of an explosion at Manchester Arena, in Manchester City center, near victoria train station. We now know that a single terrorist detonated his improvised explosive device near one of the exits of the venue, deliberately choosing the time and place to cause maximum carnage and to kill and injure indiscriminately. The explosion coincided with the conclusion of a pop concert. Which was attended by many young families and groups of children. All acts of terrorism are cowardly attacks on innocent people, but this attack stands out for its aappallinppalling s attack on young people who should have been enjoying one of the most memorable nights of their lives. As things stand, i can tell you that in addition to the attacker, 22 people have died and 59 people have been injured. Those who were injured are being treated in eight different hospitals across Greater Manchester. Many are being treated for lifethreatening conditions. And we know that among those killed and injured were many children and young people. We struggle to comprehend the warped and twisted mind that sees a room packed with Young Children not as a scene to cherish, but as an opportunity for carnage. But we can continue to resolve to thwart such attacks in future. To take on and defeat the ideology that often fuels this violence, and if there turn out to be others responsible for this attack, to seek them out and bring them to justice. The police and Security Services believe that the attack was carried out by one man. But they now need to know whether he was acting alone or as part of a wider group. It will take some time to establish these facts, and the investigation will continue. The police and Security Services will be given all the resources they need to complete that task. The police and Security Services believe they know the identity of the perpetrator, but at this stage of their investigations we cannot confirm his name. The police and Emergency Services have, as always, acted with great courage. And on behalf of the country, i want to express our gratitude to them. They acted in accordance with the plans they have in place and the exercises they conduct to test those plans, and they performed with the utmost professionalism. 400 Police Officers were involved in the operation through the night. And many paramedics, doctors and nurses have worked valiantly, amid traumatic and terrible scenes, to save lives and care for the wounded. Significant resources have been deployed to the police investigation, and there continue to be visible patrols around manchester, which include the deployment of armed officers. For people who live and work in manchester, there remains a large cordon in place around Manchester Arena and Victoria Station which will be in place for some time. Thetati the station is closed and will remain closed while a detailed forensic investigation is under way. People are still trying to find out whats happened to their children, brothers and sisters and loved ones. So please, think of those people who are experiencing unimaginable worry and, if you have any information at all, relating to the attack, please contact Greater Manchester police. The threat level remains at severe. That means that a terrorist attack remains highly likely. But the independent joint terrorism analysis center, which sets the threat level on the basis of the intelligence available to them will continue to assess this throughout today and in the days ahead. Later today, i will travel to manchester to meet the chief constable in hopkins, the mayor, andy burnham and members of the Emergency Service whose have come to manchesters aid in its moment of need, and as i announced last night, the general Election Campaign has been suspended. I will chair another meeting of cobra later today. At terrible moments like these, it is customary for leaders, politicians and others to condemn the perpetrators and declare that the terrorists will not win. But the fact that we have been here before and the fact that we need to say this again does not make it any less true. For all so often while we experience the worst of humanity in manchester last night we also saw the best. The cowardice of the attacker met the bravery of the Emergency Services and the people of manchester. The attempt to divide us met countless acts of kindness that brought people closer together. And, in the days ahead, those must be the things we remember. The images we hold in our minds should not be those of senseless slaughter but of the ordinary men and women who put concerns about their own safety to one side and rushed to help. Of the men and women of the Emergency Services who worked tirelessly to bring comfort, to help and to save lives. Of the messages of solidarity and hope, of all those who opened their homes to the victims. For they are the images that embody the spirit of manchester and the spirit of britain. A spirit that through years of conflict and terrorism has never been broken. And will never be broken. There will be difficult days ahead. We off our thaoughts and prayer to the families of those affected. We offer our full support to the authorities, the emergency and the Security Services as they go about their work. And we all, every single one of us, stand with the people of manchester at this terrible time. And today, let us remember those who died and let us celebrate those who helped, safe in the knowledge that the terrorists will never win. And our values, our country, and our way of life will always prevail. Lets get back to colonel jack jacobson. Things come to mind quickly, and it helps to have a leader with words of solace, obviously, colonel. But immediately, i cant help but think of trying to make sure it doesnt happen again. And you know, we see this m. O. Of not going into the concert but waiting for people to come out. I dont know what you do about that. You know at the airports now they go to the ticket counter, they dont go in. So i dont know how you can protect places everywhere like that. And they seem to be evolving. Trucks, not necessarily bombs, so its very i dont know disheartening to think about what we need to do other than maybe rounding them all up in one place like the president was talking about in raqqah, but then theyve already fanned out, the diaspora, theres 3500 in the uk supposedly. Thats a number they used. There is no answer, is there, colonel . Thats the biggest problem. Its a twofold difficulty. The first is that we live in free societies, and you have to balance safety with Free Movement. And in an answer larry way, its difficult to round up everybody. Because your intelligence isnt be perfect, and second, youre absolutely right about the fragmentation of the threat. You have people inspired through the internet and so on. I think it will be interesting to see now that they know who it is, theyll be able to go to his apartment and determine to what extent this was planned, whether or not there were conversations between the perpetrator and people either overseas or still in the uk. I think its interesting to note that the Prime Minister said that the threat level would not be further raised. Indicating that theres no immediate indication that theres going, that another attack is imminent. The suggestion being that this is a selfradicalized person, not a conspiracy until they find out more information. But no, you know, its difficult to combine or to deal with the circumstance in which we have a free society with Free Movement on the one hand, and a fragmented and sometimes locally motivated radical, tough to deal with. And the Prime Minister also suggested something that we should all keep in mind, that this isnt, its not the first time weve had to do this. And there are difficult days ahead. That should be a note of caution, not just for the people in the United Kingdom but also in the United States. The threat level was i dont know their system over there, but the threat level was very high already, after the thames, the bridge. People were talking last night on cable that an imminent attack is possible at any time, and we knew that before that. Whats the threat level above where it is, colonel . Is there one higher than where they already were . Yes, its the second highest level. Second highest . Yeah. This threat level says that attack is likely, i think is the wording. The next highest, higher, and the highest is that its imminent that there will be an attack. And they havent raised it to that level. Okay. So its at the same level it was before. But we should, and our level is high but not at the highest either, we should all keep that in mind. Back to the false sense of security that we have an ocean and that maybe its more difficult to find a bomb maker over here domestically, but i mean its probably a false sense of security and, you know, anyone can rent a truck. So yeah. Its happened. And its liable to happen again. Yes, we should not have a false sense of security. One thingive not of note, with to that, we have to note that the threat level is less for our own consumption than it is for Law Enforcement. That gives them certain freedoms that they dont otherwise have. So the threat level is really important for Law Enforcement, less important for, for average citizens like us. I want to follow up on something jo asked earlier. We dont know if its a conspiracy. With a bomb like this, doesnt it sort of have to be a conspiracy, that somebody else or one or a group of people have be to involved in making this bomb . No. One person can do it himself. Its happened before. You can get the recipe online, get it all together, get the right chemicals to do it and you can do it in your kitchen, and it has been done before. It does require i mean, many of the incidents in the past have been conspiracies between those overseas and those in the host country or among those in the host country, but there have been attacks before in which a lone bomber has notten agotten his information passively online and put it all together. Whenever we have you on, its bad, colonel, but thanks. Yeah, we got to change that. We have to have a happy event. Mix it in once in a while. Anyway, we do appreciate your time today, colonel. All right. We will continue to update you on the situation in manchester and any developments as they come along. In the meantime, were also focussing this morning on american politics and the economy. The white house is set to unveil the 2018 budget. We are joined with some of the details. 3. 6 trillion. Thats how much the white house wants to cut Government Spending over the next decade. About half of that would come from significant changes to entitlement programs. This does not touch Social Security and medicare as trump had promised on the campaign trail, but just about Everything Else is fair game. 600 billion from changing the formula for medicaid and phasing out money from the Childrens Health insurance program, 272 billion from restricting food stamps, the earned income tax credit, the Child Tax Credit and others, 143 billion consolidating the federal student loan program. One of the only areas that gets a boost is defense spending. They are requesting 5 more than this year. Veterans affairs would get an almost 6 bump. The proposed budget would start to reduce the balance next year and it would balance by 2027. That hinges on the assumption that the economy will reach 3 growth, which as you know has been hotly debated. It also assumes that the white house will get its tax package going, the business rate will go down to 15 and theyll be able to streamline the personal side. But beyond that, this budget does not provide any other details. We know this is the white house wish list. The next step is for congress to pick it up. And where are the battle lines drawn right now when it comes to that . Right now minority leader senator Chuck Schumer is already calling this plan a meat cleaver to the middle class. So youre seeing some very big distances between democrats and where the white house is, and the white house will need democratic support in order to get this budget passed. But youre also hearing some rumblings from republicans as well. Theyre concerned that some of the entitlement programs, such as meals on wheels might get cut and even representative mark meadows, one member of the freedom caucus, says thats a program he supports. Thank you very much for your time, and we will be speaking with Kevin Mccarthy, the majority leader a little later this morning as well. And coming up, a full run down. This mornings big market movers. And later opec members are meeting in vienna this week. Well have more details on that, coming up. Huh . Dont you mean dad kind of ruined our hawaii fund . I thud go to the thothpital. There goes the airfair. I dont think Health Insurance will cover all. Of that. Buth my fathe without that cash from aflac we might have to choose between hawaii or your face. Hawaii what . Haha. Hawaii you might have less coverage than you think. Visit aflac. Com and keep your lifestyle healthy. Aflac thereit comes to technology, about my Small Business so when i need someone that understands my unique needs. My dell Small Business advisor has gotten to know our business so well that is feels like hes a part of our team. With one phone call, he sets me up with tailored products and services. And when my advisor is focused on my tech, i can focus on my Small Business. Welcome back, everybody. Lets take a look at whats happening with the u. S. Equity futures, yesterday was a higher day. This morning are indicated higher. S p futures up by 3. 5, and the nasdaq up by 7. For more on the broader markets, lets bring in the chief strategist at t. D. Ameritrade. And chief market analyst of the Lindsey Group as well as a cnbc contributor. It seems that the markets are looking past any of the issues in the uk. Terrorism on the minds of everyone around the country and around the globe at this point. But j. J. , if youre looking at the primary drivers to the market today, what are they . I think its the fact that weve had this, you know, obviously, outside of terrorism and the market has recovered. Its amazing how the market just brushes this stuff off now. I think the primary thing is the fact that were coming off a very good earning season, every time weve sold off, as last week proved again, its been a buying opportunity for people. Wouldnt surprise me to see us, were just off the highs again on the s p 500. It wouldnt surprise me to see them go back up and test them one more time. The numbers coming out from the economic reports are still pretty good. But at the end of the day, primarily, its going to be earnings that drive the market. Were seeing good earnings, facts like ford that have been beaten up, starting to bounce back. Theyve buying stocks that were beaten up but with good yield, because bonds are having trouble recovering. And theyre buying ford, verizon, at t. You think the change in leadership at ford is enough to actually wipe all those problems away . It seemed to me like the market has a lot of big doubt. Smart fields wasnt given a long runway in terms of trying to figure it out. And the new leader doesnt have much experience when it comes to car companies. What i would also say is there is a lot of opportunity on the table. And they can take advantage of some of it. And maybe a change in leadership will often give people an opportunity to do that. We were talking in the break, and you mentioned that things changed with the trump election, your outlook on the market, your view on things. Where do you stand right now . Well, the way that i define the year is that we have this hopedfor tailwind of regulatory and tax reform. But on the flip side you have this monetary headwind where you have all five major Central Banks in some fashion removing accommodation this year, obviously, the fed being the most noteworthy, but the ecb i think is going to be a major factor in the second half. The question now is, the tax reform, does it happen in 2018. And its going to be the back and forth. The russell 2000 was back to where it was in december. The transportation index closed at, before it was before the election. So its still a bifurcated market with a few different names driving the headline indeces. But im still afraid that Central Banks are going to ruin this party at some point. Just the idea that when you hook around, theres not a better alternative because rates have been artificially low. You think the fed may continue to raise rates. And thats kind of where were your bias is in all of this . You look at the european bond market and german yields, still negative seven years out. Those yields arent going to be there, the deeper the ecb gets and imagine what happens to those negativeyielding bonds when they start removing negative Interest Rates. So thats an accident waiting to happen. I doesnt know wh dont know when it actually matters. The german today hit a record high post french election. That has been the big conundrum, trying to figure out the signals from the bond market and the signals from the stock market, looking at very different things. Absolutely. And peter brings up a good point in that there are a lot of things to be concerned about, but i think that you wont really see that. We talked about this fed put for how many years . I almost think theres a tax put. And until we get some full details on what the tax plans going to be, i think that will be the catalyst for the other bad news to come out. A lot of people are still trading on the fact that with this moneys repatriated. Some of these Companies Hold such big dollar amounts overseas can bring it back, put it back to work, technically in infrastructure, and remember infrastructure isnt just roads and bridges but also technology. And people often forget that. So i really feel that thats what people are sort of waiting for. However, its going to be very difficult for the details to live up to the hope so to speak. I want to thank you both for being here today. Really appreciate your time. Coming up, the impact of Health Reform on Small Business. Well get a hiefrn report from Contessa Brewer in louisville, kentucky. And then a look at the s p 500, winners and losers. Im dr. Kelsey mcneely and some day you might be calling me an energy farmer. Energy lives here. To err is human. To anticipate is lexus. Experience the lexus rx with advanced safety standard. Experience amazing. The power of a low volatility investing approach. The power of smart beta. Power your clients portfolio with powershares. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Containing this information. Read it carefully. What if we could bring you by having better values . At blue apron, we work directly with more than a hundred family farms. So instead of spending on costly middlemen and supermarkets, we can invest in the things that matter most making farmland healthier. Cutting down on food waste. And bringing you higher quality, fresher ingredients for less than you pay at the store. Because food is better when you start from scratch. Get 30 off at blueapron. Com cook welcome back. Youre watching squawk box, live from the Nasdaq Market site in times square. Good morning, everyone, and welcome back to the squawk box. We are at the nasdaq this morning. Weve been watching whats been happening with the markets in the wake of the terror attack in the United Kingdom. So far the markets have been unfazed by that. Not only here in the United States but overseas and europe. The dow futures are indicated higher to open up higher about 45 poiptds. The nasdaq up by 10. Our top story this morning, that attack, about 22 are dead and more than 50 injured. The explosive was an improvised explosive device and british and u. S. HLaw Enforcement say they have identified the bomber. British politicians have agreed to suspend campaigning until further notice. We will get an update from manchester later this year. Small Business Owners Rank Health Care reform a top issue. But opinions vary on how health care should be legislated. We have more on the potential impact of repeal and replace. Contessa . Reporter you can see the skyline of st. Louis. Its a booming incubator for Small Business, in part because of the cost of living and the highlyregarded state Health Insurance exchanges. They started their company less than a year ago, they provide concierge tours. They left east coast jobs with benefits to take this leap and now both get subsidies to pay their Health Insurance premiums, but the uncertainty over coverage is clouding their plans for expansion. We would like some stability and ability to plan. And obamacare has been what weve started our business with, and it would be really difficult at this point to imagine a growth future with it being rolled back. Our business is absolutely going to hinge its growth on what were able to do with future employees, and if providing health care isnt one of them, we cant have future employees. Reporter kentuckys former governor presided over the States Health care system when it served as a model for the Affordable Health care act. And he takes issue with how republicans characterize obamacare. If they characterize kidisasr of the uncompensated rate going down, i would love to see what their definition of success is. Other Small Businesses here say gunequivocally, this is nota success. We will hear what they want from washington when it comes to providing health care coverage. And for the record, the skyline behind me is louisville, not st. Louis. Steve . Oh, right, we missing the arch there. Because ive been i think, on the kentucky side, where theres a Railroad Line there, that youve got to stand on to have st. Louis in the background. I thought you may have been in the same place, and i looked and i couldnt see it there. Im on the indiana side, so right across the ohio river so we can have this beautiful shot of louisville. And i said to my producer yesterday, by the way, why do i keep wanting to say st. Louis . But i mean its obvious, but anyway, out of the mouth without thinking about it. Its louisville. Were lucky we had the gentleman producing the show is from louisville. All of us were kind of sitting here, and he had to confirm whether that, luckily, we had an inhouse expert. Arent you from louisville, dave . Or are you from kentucky . Hes from kentucky be, maybe not louisville. But we got it straight. Reporter kentucky, it counts. Its not an aftereffect of the bourbon. And youre in indiana any way. Its all confusing. Im totally but i can swim across. Dont do that. Dont do that. Theres undertows. I would like to point out how fabulous the information was in the report that you favgave, contesta, a contessa. And he want to thank you for that report. Thank you, steve. It could be a green screen anyway. You could be at 30 rock. And you think the moon landing was a fake. The flag shouldnt have waved. Well be talking much more not about that issue but the Health Care Issue and the impacts at inc. Magazine on june 7 in new york city. The one day event. I love when buzz lightyear, buzz aldrin punched that guy. After saying the moon landing was a fake. He chases him down the street. If you sit on top of one of those things and they light that baby and you risk your life and you go up there and you come down and somebody says you didnt really do it . Yeah. Id be mad. President trump surprising energy markets. His budget plan includes a proposal to sell half of the u. S. Strategic oil reserve. That would counter opecs measures. Joining us is managing director at Clear View Energy partners. What we think, jacques, tell me whether im wrong or not, i like watching what happens in vienna, i love vienna, too, and we do expect some cuts there, but is opec the swing producer now or do we control a lot more of that with what we do in this country now . Can they still do it . Thats a good question. And i think the essential its really final exam time for opec. If they can keep their compliance up. The world uses about 2 Million Barrels per day more than the first half of the year. So if youre going to impact supply and demand, the second half of the year is the time to do that. Then come 2018, 2019, brazil, canada, thats going to make more of a difference. What do they need to do, when the market went back above 50 and it was bullish, what is it expecting opec to do . Additional cuts of how much more . Its not so much worrying about too much oil coming off the market. Its keeping this oil off the market. And as i said, if you get into the second half of the year, youre going to start seeing the inventory reductions. Because the first half of the year, inventories were pretty flat when you balance them out. But because of the higher demand in the second half of the year, thats when they can really make the bang for the buck. But i do think they will announce a little bit of increase on the cuts, and thats just to get some Market Attention as well. An increase on the cuts, trying to figure what you mean, okay, increase on the cuts. In either event, you expect this recent trading range of 4550, you think it gets resolved, and we see 5560, eventually . Have i got that right . Yes, because the key thing that opecs trying to do is reduce the inventory overhang, and they venezuehavent been sul on that yet. But because of the fact that you have this higher demand kick in the second half of the year, youll start seeing inventories down and oil up. We started turning things on here again. Every week i see more rigs and more things being brought back online. 50 is plenty for that to happen . Oh, yeah. Yeah. And youre right about that, that the u. S. Rate count is moving up, and u. S. Oil supply is moving up. But the key for opec is they have a window of action. And the window of action is the second half of 2017 and into 2018 before the impact of all these rigs starts to impact supply. Jacques, there was a surprise in the president s budget overnight, one is a proposal to selloff the Strategic Petroleum reserve. The second is to open the Alaskan National wildlife refuge for drilling, would that have an impact . Would that change your mind about these opec hikes if they happen, would they be successful . I think the thing to worry about here is short term versus long term. The spf sales theyd like to do it over the course of ten year if its approved. And of course drilling in alaska could take some time too. So this is supply for further down the road. Theres an interesting question thats raised by becky here. Which is now that were one of the biggest producers in the world as the economy has suffered in the wake of the price downturn, investment fell off, employment fell off, and now, as joe points out, rate counts come back, employment and mining comes back, where is the price interest of the u. S. Right now, you know, the net cost or net benefit here, when it comes to oil . Well, in terms of the producers, theyve been able to lower their costs so that they can be profitable at a lower level, and thats what were seeing, and thats why we saw the rig count essentially double. Whats best for society . Right. For the economy. Whats the, hilike goldilocks. Just high enough to keep the guys employed in the Energy Business but low enough so its not a tax hike on everything. Thats a good question, me be being an oil guy, i guess im a little biased in terms of trying to get oil prices a little bit higher so that you can generate more production. But in terms of the overall economy, i think gas prices, weve started to see demand dip a little bit this year pause be of the rising gas prices. So it is starting to have some impact, i think gasoline is down about 3 . And an ocean og rafr. Thats jacques cousteau. I am a scuba diver. Do you rent equipment . When you get equipment, theyre like, yeah, right, jacques cousteau. I talked to pickens. What jacques was saying, theres a price low enough that keeps the pressure on the Oil Companies to continuously work on efficiency. Coming up next hour, a live update from manchester on the concert bombing. We will talk to bill bratton. And later, Kevin Mccarthy will join us to talk about the president s budget and the prospects for tax reform. Stay tuned. Are you watching squawk box on cnbc. Tired of paying hundreds more a year in taxes and fees for your unlimited plan . Only tmobile gives you unlimited data with taxes and fees included. Thatll save you hundreds. Get two lines for a hundred dollars. Thats right. Two lines of unlimited data. A hundred bucks. All in. And right now, were giving you even more. For a limited time, get a free Samsung Galaxy s8 when you buy one. Thats two galaxy s8s for the price one plus, two lines of unlimited data for a hundred bucks. Taxes and fees included. Only at tmobile. Welcome back to squawk box. Team now for the executive edge. The white house will release President Trumps full Budget Proposal today. For a preview, we bring in jim mustle. He is now the president and ceo of the Credit Union National association. Thanks for joining us, i remember i covered you back in the day when you released budgets that maybe didnt get quite as much blowback. Of been youve been in the hot seat before. Whats it like to release a budget nobody likes. When you take about 60 of the spending off the table, you basically say medicare, Social Security cant be touched. Youre increasing defense, when you either take it off the table or increase 60 of the budget, its going to put a lot of pressure on the rest of the accounts, and thats what youre going to see in this release. A lot of peoplee folfolks are ge a lot of heartburn on this, and thats just in the republican party. Thats before you reach across the aisle and talk to democrats about passing legislation to make any of this realistic, passing a budget is one thing, then you have to do the hard work of tax reform or food stamp reform or anything like that to make this realistic, thats going to be tough. Lets split this discussion into two parts. The politics and the economics. Does it make sense politically to put out a budget like this. Whats the advantage the president has by staking out this position here . Or is there one . I think there is. One might be some form of triangulation. In other words, when you say were going to get to 3 growth, and then you paint a picture of how youre going to get to 3 growth. Most economists say thats unrealistic given the current trend line. But the white house will argue thats before you pass my tax reform. Thats before you pass some of the stimulus such as infrastructure, increases in spending or defense spending. When you do that, hes going to argue that that gets you back to the kind of productivity, the kind of employment that you need in order to get to 3 growth. So, when they dont pass it it, and we dont get to 3 growth, theyre going to say thats because you didnt pass my plan. So i think thats maybe the reason why they would put it out in this kind of format. Not just that, but isnt this just classic art of the deal negotiation, where you come out with your strictest points, and anything you take back from that point, it makes anything else more palatable cut if its a less draconian cut down the road . I think thats right in budget parlance, though, any decrease in an anticipated increase of any kind is a huge, draconian cut, so youre probably right. I mean, no matter where you put the number, people are going to scream that youre cutting spending way too far. If you were king, we all, we all saw what happened in the eight years with food stamps, disability. Were all familiar with, if you stay home, theres a number that you can pull in, with, you know, people abusing, i think, to somt the safety net, and we saw it explode during that eightyear period. Right. I dont know if you can take back an entitlement. But if you were king, there are certain things that you would try to do, thats in here, that youre going and its not going to its not going to make people happy, but you saw, if california went to universal to single payer, its more than the entire budget of california. If we go medicaid, if we have everybody covered by medicaid eventually, which is where were headed if we dont do something, theres not enough money anywhere to pay for that. So how do you do tough things like this . We need to rein it in a little bit. Right. But i dont know if you ever can. I think youre exactly right. And thats why i wouldnt take medicare and Social Security off the table. Those got to go, to. To some extent. I think theyve got to be on there. I think youve got to put the reforms out there in the out years and explain exactly how this is not going to affect the current recipient thats about the only way to do it. I have to just ask very quickly. Your sense on the budget projections in there. The idea that theres 3 in there . Is that unrealistic . Is that a fatal flaw of the budget like this . Economically . I think over the history, cbo has been closer to being correct on these numbers, and i think, you know, being at 1. 9, as opposed to 3 is probably more realistic. Unless there is some kind of big surprise, and they pass all of this. But i think right now thats not the current trend, either politically, or economically. Jim, thanks so much for joining us this morning. We hope to check in with you as this budget story develops. Thank you. All right coming up were going to talk more about the president s budget with House Majority leader Kevin Mccarthy. Shell join us at 8 00 a. M. Eastern. When this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. 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The bbc is reporting that a 23yearold man has been arrested in connection with the Manchester Attack. To this point wed heard it was a single perpetrator. The identity not being revealed at this point. But obviously the police are further along in their investigation. We will continue to bring you updates on the deadly bombing as we get them. And later well be talking terrorism with the former new York City Police commissioner bill bratton. Squawk box will be right back. The babys room wont build itself. And her paw wont heal on its own. Were all working forward to something. Synchrony financial can help your customers make it happen sooner. So she can plug into her dreams. And theyll have a new addition for their new addition. Whatever youre working forward to, even if its chasing squirrels, Synchrony Financial can help you get there. Breaking overnight a suicide bomber hits a concert in england, killing 22 and injuring dozens of others. Were live on the scene with the latest. President trump calling the attack the work of evil losers during a meeting with the palestinian president. Well have more on the president s big mideast tour ahead. And the white house releasing its budget for next year. Well tell you where the president wants to see deep spending cuts, and where he wants to see some increases. Former senator, democratic senator, max bachus will join us to discuss as the second hour of squawk box begins right now. Live from the beating heart of business, new york city, this is squawk box. Good morning, everyone. Welcome back to squawk box here on cnbc. We are live from the Nasdaq Marketsite in times square. Im becky quick along with joe kernen and steve liesman. And the futures at this hour have been indicated higher, despite this news overnight from this terrorist attack. You can see things are stable here in the United States. They are in europe, as well. Right now the dow futures are indicated higher once again. Up by about 47 points. S p futures up by 4. The nasdaq up by 10. If you take a look at whats been happening in the european markets you will see that in the uk, stocks are actually slightly higher. Ftse is indicated up by better than 0. 1 . The cac is indicated up by 0. 7 . The dax indicated up by more than half a percent. A developing story out of the United Kingdom. 22 People Killed in a suicide bomb attack in manchester after an Ariana Grande concert last night. Willem marx joins us on the phone with more from manchester. Willem, the choice of the you know, its hard to make it any more kidious. Youre talking between and teenagers. So just the choice is telling, isnt it, in terms of how evil this was . Absolutely. You know, weve seen that of the 22 dead, theresa may the british Prime Minister has made clear at least a number of them were children and thats the same for the 59 she said being treated in eight hospitals around manchester. Some of them still in life threatening conditions. Weve had some breaking news in the last few moments that a 23yearold man has been arrested in manchester in connection with last nights attack. Thats according to manchester police. Clearly, there was some serious knowledge about explosives involved for him to have put together this improvised explosive device. The man who was the attacker who died in the blast, police now looking to try to unravel to see if there was a conspiracy, trying to understand motive and whether this man acted alone. There has been an arrest here in manchester area by police of a 23yearold man in connection with the incident last night. At this point, i just wonder what that means exactly. And its impossible to say at this point. But its more than one, obviously. Yes. I mean seemingly there is some involvement of someone besides the attacker. Theresa may gave a lengthy statement outside number 10 downing street where the flag was flying at halfmast a few moments ago. She said that, you know, once again britain finds itself in the situation after an attack. We obviously saw the attack in westminster. That was a lone individual. But that again was followed by a number of arrests overnight following that attack on Westminster Bridge and around houses of Parliament Earlier this year. Clearly police moved fast in the situations, and around 400 officers involved in the investigation overnight. Im sure many of them working around the clock to try and unravel the incident and the Details Behind it. Willem, thank you. We appreciate you calling in for us this morning. Thanks. Prime minister theresa may says that the country remains on high alert. The threat level remains at severe. That means that a terrorist attack remains highly likely. But the independent joint terrorism analysis center, which sets the threat level on the basis of the intelligence available to them, will continue to assess this throughout today and in the days ahead. Joining us now is jack marchio, president of agogi group an International Consulting firm. Hes also the Principal Deputy undersect of Homeland Security for intelligence. Jack, thank you very much for being with us today. Good morning. This is something that, again, is a developing story, but its something that weve seen played out time and time again and both theresa may and President Donald Trump have in their statements today said we can expect to see this again. Obviously were on heightened security alert at this point. What does that mean . Well, certainly the british police, not only the british police, but police throughout europe, and even in the western hemisphere, are now cooperating even more so than they usually cooperate to find out if theres any pattern here, to find out if there are any other individuals that might be involved. Apparently one 23yearold man has just been arrested. So theyre now moving into high gear on this investigation. And of course, theyre looking at the forensics, also, around the crime scene. And in terms of where we are in the United States, weve asked this question earlier this morning, oftentimes, we feel like we are in a different position because theres an ocean separating us from many of the elements that have plagued the European Union and the uk. Is that a false sense of security . Or are we in a different situation here in the United States . Well, i think that is a false sense of security. I certainly we i think theres a more heightened problem with radical terrorism in europe, in the continent, in the uk. Theres different areas of different issues of assimilation of individuals, of immigrants, especially from muslim countries, if youre looking at that, they seem to assimilate into our society and our culture a little easier than thats done in europe. And in the uk. So we do have a little bit of better situation there. But it doesnt mean that were safe, or that we can feel that europes problem, its not ours. Certainly, United States remains the big ticket target for radicals that want to sow destruction. Obviously the largest terrorism attack in history took place on our shores. They would love to repeat that if, in fact, there are isis or al qaeda or other actors out there. They would love to hit the United States. But were a little harder to get to. And not only geographically, but also with our Police Intelligence and Law Enforcement agencies monitoring opportunities to attack us at all times. So its were a hard target but were very tasty target for those who would do us harm. We know that we have incredible Law Enforcement agencies that do Work Together. Where would you say we are just in terms of our safety versus a year ago versus five years ago. Are we Getting Better at this . Are the threats Getting Better at the same time . Well, becky, its like a cat and mouse game. We make a very we make some very, very good inroads to harden our target. We work very hard in the Intelligence Community and Law Enforcement. Were sharing information, but like anything else, its a chess game. So whatever you do to put up a good defense, you can always be assured that your opponent is trying to find a way to get around that. And so, we found that terrorists have been very, very uniquely motivated to find chinks in our armor, so to speak. Theyre looking for new attack modalities, new technologies, new ways to attack us, places to attack us. Certainly the low tech attack has become somewhat more popular than the more strategic and complicated attack as we saw on 9 11. So you have the use of individuals attacking crowds in Public Places with one person. Whether it be like we saw in manchester, an auditorium where there was a concert, whether its a sporting event, whether its a gathering of people for whatever kind of gathering that people do in the United States or other parts of the world, we see terrorists looking at those targets of opportunity. Jack, thank you very much for your time this morning. Thank you. President trump extended his condolences to the victims of the manchester suicide bombing saying that behind the attack were, quote, evil losers. Eamon javers joins us now with more. Good morning, steve. The attack came amid a trip in which the president s been focused on stamping out islamic extremism. Hes been visiting saudi arabia, hes been visiting israel. Hes going to go to rome this afternoon. But today he offered his First Response to the terrorist attack. Heres what he said. So many young, beautiful, innocent People Living and enjoying their lives, murdered by evil losers in life. I wont call them monsters. Because they would like that term. They would think thats a great name. I will call them, from now on, losers, because thats what they are. Theyre losers. And well have more of them. But theyre losers. Just remember that. So an emotional reaction there from the president of the United States. He has just arrived at the Israel Museum where were expecting him to give some remarks before he leaves for rome later today. Meanwhile, the president still having difficulty escaping some of the scandalrelated headlines back here at home, including a report from the Washington Post last night. Heres what the post reported, which the white house will be reacting to during the course of the day today. They said that the president called director of National Intelligence daniel coats and nsa director Michael Rogers and urged them to publicly deny the existence of any evidence of collusion during the 2016 election. Both coats and rogers according to the Washington Post refused to comply with those requests and thought it was inappropriate. So for this white house as they continue their overseas trip they will also continue to deal with these headlines back at home. Back over to you. Eamon, thanks very much. You bet. Joining us now for more on u. S. Policy, this really new u. S. Policy in the middle east, director of the Eurasia Group focused on middle east and north africa. Its good to see you this morning. Thanks for joining us. Probably thank you. Probably overstating to say its 180 degrees, but, its kind of like 180 degrees . I mean it goes from iran, and being, i dont know whether it was appeasement or what it was for under the Obama Administration, but it seems you cant get much further away from that policy from what weve seen so far on this trip. Absolutely. I think what youre seeing here is trump defining himself partly as not being obama. But theres a strategy behind this. Iran containment as a pillar of trump strategy. Theres robust support for the tradition of allies, be it israel or the arab sunni states in egypt. And it is about counterterrorism. More force against Islamic States, and groups related to that. Obviously, on the technical side of it, things will be difficult. This is just the first trip that the president is making. Getting these states to Work Together is going to be incredibly difficult. So an arab nato force or regional collaboration or regional stability is still not realistic in the meantime. Eight years ago, ayham, was it important to strategically to help iran become a larger counterforce to saudi arabia . And other parts of the of the middle east . What was the rationale in the first place with the Obama Administration to sort of help with was it all to get that deal done for a diplomatic win . What do you think what were they thinking exactly . Knowing that iran all along was a sponsor of terrorism . Why throw in with that why throw your lot in with those guys . I dont get it. So, i dont think that president obama or former president barack obama really tried to do that. I think the issue was iran was developing a Nuclear Program that had some form of weaponization as a potential. And he wanted to deal with that threat as an alternative to war. As in get an agreement with iran. The u. S. And iran never agreed to share the reason. Never agreed that irans actions in the region are permitted. But at the same time, subtly, what president obama probably recognized is that saudi arabia and iran at some point need to steer away from confrontation and need to get a deal between each other. Perhaps he went too far in letting these two states sort out their differences. The saudis definitely, from what they tell me, felt definitely concerned that theres a pullout of the security, pullout from all the security umbrella and that made them nervous. Perhaps President Trump is going the opposite direction. Yeah. It doesnt necessarily resolve the conflict, right . Just need to figure out a deal to share power. The Collateral Damage of the policy was to alienate two of our longest allies, longrunning allies, saudi arabia, and israel. And it was also to overlook in the deal you know, any guarantees on reining in their troublemaking in terms of sponsoring terrorism. And so you alienate israel, you alienate saudi arabia, i guess theres some disagreement as to whether youve really prevented iran from ever becoming a nuclear power. It just seems like the the costs may have outweighed the benefits and we were trying to reverse it at this point. So i think theres definitely an effort here to reverse part of the insecurity that these states feel, that the u. S. Has abandoned them in part. And definitely youre going to see that through arms agreements, arms sales agreement, through more robust intelligence sharing, through more cooperation and thats why trump is in the region. Hes there to say the u. S. Is back. The Nuclear Agreements with iran so far is working. Even the Trump Administration realizes that. So the strategy is actually not to walk back on that effort. The u. S. Strategy is to really curtail iranian influence across the region. To try to not only reassure the allies, but also force iran to withdraw some of its support to allies. You think that the will the stars ever align for some type of peace that were hearing from, you know, murmurings that this is the, you know, ripest its been in years for maybe something happening. Is that a false hope just to be dashed again, do you think . So i think every u. S. President for the past probably two decades, even more maybe, four or five decades has tried to establish peace between the arabs and the israelis. Where were not closer today, actually. I think that most of the israel hopes to get an arab israeli agreement is going to be tough, and the parties need to really sacrifice a lot. Its not clear that theyre ready at all. Okay. Ayham, thank you. Thanks for your time this morning. Appreciate it. Thank you. Youre welcome. All right. Coming up, a look at whats moving markets this morning. Well speak to two strategists about what theyre watching. And later new york city stepping up security after last nights attack in manchester. Bill bratton, former new York Police Department commissioner joins us with reaction. Stay tuned, youre watching squawk box on cnbc. Whats hap . Were facing 20 billion security events every day. Ddos campaigns, ransomware, malware attacks. Actually, we just handled all the priority threats. You did that . We did that. Really. We analyzed millions of articles and reports. We can identify threats 50 faster. You can do that . We can do that. Then do that. Can we do that . We can do that. Here are some of the corporate stories were following this morning. Nokia has settled a longrunning patent dispute with apple. In a sign of business Collaboration Agreement with the company. Under that deal nokia will provide network and infrastructure products to apple while apple will resume carrying nokias Digital Health products in its retail and online stores. Toll brothers reporting Second Quarter earnings that topped forecasts. Revenue rose 22 while deliveries of new homes rose 26 . Adulant technologies reporting Second Quarter results that beat growth. The medical equipment and Technology Firm is also raising its full year guidance. When we return well take a look at the markets and where you should be putting your money to work. Plus the latest on last nights attack in manchester after an Arianna Grande show. Whos responsible and how will the uk respond . Well talk to former ennpd commissioner bill rattan. 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S p nearly 5 points and the nasdaq over 13 points. Joining us is steve reese global head of equity strategy at jpmorgan Private Banking and sam stovall chief investment strategist at cfra. Sam, let me start with you. Again, the market seems to be impervious to Something Like this. Is it learning to live with these sorts of attacks . Well, i think it actually learned to live with these kind of attacks long ago. Back in 2004 you had the madrid bombing, the market was off 1. 5 the first day then bounced right back. In 2005, the london subway bombing we were down 0. 8. And now, really, its if its overseas its something that does not affect our economy, and the market just says its a tragedy, but were going to move on. Steve, whats your take on this . Somebody is trading this somewhere, but not necessarily would be the advice youd give your clients. I think first of all our thoughts are with the uk. Whats important today. I think the market unfortunately has become desensitized to these vents. Given events over the last week, last month and last years. Our position on investments is really longterm so were not letting this impact our view. Since about february we have been looking for more exposure outside the u. S. To places like your honor, and we still see the optimism there. So we think people of the uk and europe can continue to improve, and we think the outlook is quite strong there. We will be focusing our attention for equities outside the u. S. Right now. Sam, you agree with that . Yes. When you look to global gdp growth, overseas, 3. 1 was last year, 3. 4 is the estimate for this year. 3. 6 next year. Whereas in the u. S. , estimates are still in the mid 2 area. So basically the feeling is theres greater growth overseas. Higher earnings expectations. Lower valuations, and more attractive dividend yields. So i think were experiencing a reversion to the mean. Lets talk about Growth Prospects here in the states and maybe what the 10year is saying about that. You look at the 10year note its down to 2. 26. It was up, i think near 2. 60 for awhile. What is that saying about this prospect or the reflation trade that was out there . The idea that suddenly the period of deflation was over and were back on a normal tack here when it came to inflation . Well i think what its saying is that we have low inflation, and therefore low Interest Rates that are supporting the valuations that we have in the u. S. If you go back to the late 1940s, were actually in the Second Lowest quintile of inflation. And historically that has supported a p e above 22. For those saying oh, my gosh were at the expensive smallest bull market since world war ii and stock prices have to come down, theyre forgetting that there are two sides to the equation. Its valuations along with inflationary expectations, which are still likely to be in the very low 2 area by the end of this year. Steve, sell me on the growth story here in europe. The idea that ultimately i think draghi has to change policy here. He seems to be the last one to acknowledge it. Yeah. Whats your outlook both for the Monetary Policy side, and for the growth side . Yeah i think the Monetary Policy starts to become a bit tighter longerterm. I think the real issue for us on europe, we look at it a lot like the u. S. , not just a couple years ago, perhaps four or five years ago where youve got to really underearning market. Earnings in europe really havent gone anywhere for the last five or six years and thats really whats exciting to us, were starting to see the early signs of that rebound. Valuations look attractive as world equities have done quite well. If those earnings come through we think europe is not just a 2017 story but maybe 18, 19 or 20 store very as well. Looking at it from a longerterm perspective, people are underinvested. Most of our clients dont have any where near the european allocations they should. Sam started off saying most of the rest of the gdp of the world is outside of the United States. And the fact is, most portfolios are under globally diversified. Right, in that in different global asset classes, as well as unless youre dealing with u. S. Multinationals that are exposed thats a good point. You do get diversification through u. S. Multinationals. Sure. S p indices estimates that about 45 of the revenues for companies in the 500 come from overseas operations. Looking at the mscie from 69 to lets say Morgan Stanley international correct. The Morgan Stanley developed International Index thats been around since 1969, the best risk adjusted return was when you had a 75 exposure to the u. S. , 25 exposure overseas. Because of the poor performance of the International Markets since then, that best risk adjusted return has become 90 10. Meaning most people are therefore concentrated in the u. S. Youve been better off not being globally you have been better off. But i agree that now its more likely reversion to the mean. Hold on one moment, President Trump is speaking in israel. Lets listen in. Thank you very much. Very nice. And thank you to Prime Minister netanyahu. And i also want to thank sara for hosting us last night in really a very unforgettable dinner. We had a great time. We talked about a lot of very, very important things. And thank you to ambassador David Friedman and mrs. Friedman for joining us, along with a number of very good friends who have come from our country to yours, as we reaffirm the unshakable bond between the United States of america and israel. Thank you. Id like to begin my remarks today by sending the thoughts and prayers of the entire American People to the victims of the terrorist attack in manchester. You know, youve all been watching. Youve seen just a horrible thing going on. I want to send our condolences to the many families who lost their loved ones. Horrific, horrific injuries. Terrible. Dozens of innocent people, beautiful Young Children, savagely murdered, in this heinous attack upon humanity. I repeat again that we must drive out the terrorists and the extremists from our midst. Obliterate this evil ideology and protect and defend our citizens and people of the world. All civilized nations must be united in this effort. This trip is focused on that goal. Bringing nations together around the goal of defeating the terrorism that threatens the world, and crushing the hateful ideology that drives it so hard and seems to be driving it so fast. It is a privilege to stand here in this national museum, in the ancient city of jerusalem, to address the israeli people and all people in the middle east who yearn for security, prosperity, and peace. Jerusalem is a sacred city. Its beauty, splendor, are like no other place on earth. The ties what a heritage. What a heritage. The ties of the jewish people to this holy land are ancient and eternal. They date back thousands of years, including the reign of king david, whose star now flies proudly on israels white and blue flag. Yesterday, i visited the western wall, and marvelled at the monument to gods presence, and mans perseverance. I was humbled to place my hand upon the wall and to pray in that holy space for wisdom from god. I also visited and prayed at the church of the holy sepulchre. A site revered by christians throughout the world. I laid a wreath at yad visham honoring, remembering, and mourning the 6 million jews who were murdered in the holocaust. I pledged right then and there what i pledge again today. The words never again. Israel is a testament to the unbreakable spirit of the jewish people. From all parts of this great country, one message resounds. And that is the message of hope. Down through the ages, the jewish people have suffered persecution, oppression, and even those who have sought their destruction. But through it all, they have endured, and, in fact, they have thrived. I stand in awe of the accomplishments of the jewish people. And i make this promise to you, my administration will always stand with israel. Thank you very much. Through your hardships, you have created one of the most abundant lands anywhere in the world. A land that is rich not only in history, culture, and opportunity, but especially in spirit. This museum where we are gathered today tells the story of that spirit. From the two holy temples, to the glorious heights of mesada we see an incredible story of faith and perseverance. That faith is what inspired jews to believe in their destiny, to overcome their despair, and to build here, right here, a future that others dared not even to dream. In israel, not only are jews free to till the soil, teach their children, and pray to god in the ancient land of their fathers, and they love this land. And they love god. But muslims, christians, and people of all faiths, are free to live and worship according to their conscience. And to follow their dreams right here. Today, gathered with friends, i call upon all people, jews, christians, muslims, and every faith, every tribe, every creed, to draw inspiration from this ancient city, to set aside our sectarian differences, to overcome oppression and hatred, and to give all children the freedom and hope and dignity written into our souls. Earlier this week i spoke at a very historic summit in saudi arabia. I was hosted by king salman. Very wise man. There, i urged our friends in the muslim world to join us in creating stability, safety, and security. And i was deeply encouraged by the desire of many leaders to join us in cooperation toward these shared and vital goals. Conflict cannot continue forever. The only question is, when nations will decide that they have had enough. Enough bloodshed. Enough killing. That historic summit represents a new opportunity for people throughout the middle east to overcome sectarian and religious divisions. To extinguish the fires of extremists. And to find Common Ground and shared responsibility in making the future of this region so much better than it is right now. Change must come from within. It can only come from within. No mother or father wants their children to grow up in a world where terrorists roam free. Schoolchildren are murdered, and their loved ones are taken. No child is born with prejudice in their heart. No one should teach young boys and girls to hate and to kill. No civilized nation can tolerate the massacre of innocence with chemical weapons. My message to that summit was the same message i have for you. We must build a coalition of partners who share the aim of stamping out extremists, and violence, and providing our children a peaceful and hopeful future. But a hopeful future for children in the middle east requires the world to fully recognize the vital role of the state of israel. And on behalf of the United States, we pledge to stand by you and defend our shared values so that together we can defeat terrorism and create safety for all of gods children. Israelis have experienced firsthand the hatred and terror of radical violence. Israelis are murdered by terrorists wielding knives and bombs. Hamas and hezbollah launch rockets into israeli communities where schoolchildren have to be trained to hear the sirens and to run to the bomb shelters, with fear, but with speed. Isis targets jewish neighborhoods, synagogues, and store fronts. And irans leaders routinely call for israels destruction. Not with donald j. Trump. Believe me. Thank you. Thank you. I like you, too. Despite these challenges, israel is thriving as a sovereign nation. And no International Body should question the contributions israel makes to the region, and indeed, the world. Today, let us pray for that peace and for a more hopeful future across the middle east. There are those who present a false choice. They say that we must choose between supporting israel, and supporting arab and muslim nations in the region. That is completely wrong. All decent people want to live in peace. And all humanity is threatened by the evils of terrorism. Diverse nations can unite around the goal of protecting innocent life, upholding Human Dignity and promoting peace and stability in the region. My administration is committed to pursuing such a coalition. And we have already made substantial progress during this trip. We know, for instance, that both israelis and palestinians seek lives of hope for their children. And we know that peace is possible if we put aside the pain and disagreements of the past. And commit together to finally resolving this crisis, which has dragged on for nearly half a century. Or more. As i have repeatedly said im personally committed to helping israelis, and palestinians, achieve a Peace Agreement and i had a meeting this morning with president abbas, and can tell you that the palestinians are ready to reach for peace. I know youve heard it before. I am telling you, thats what i do, they are ready to reach for peace. And my meeting with my very good friend benjamin, i can tell you also, that he is reaching for peace. He wants peace. He loves people. He especially loves the israeli people. Benjamin netanyahu wants peace. Making peace, however, will not be easy. We all know that. Both sides will face tough decisions. But with determination, promise, and the belief that peace is possible, israelis and palestinians can make a deal. But even as we work toward peace, we will build strength to defend our nation. The United States is firmly committed to keep iran from developing a nuclear weapon, and halting their support of terrorists and militias. So, we are telling you right now that iran will not have nuclear weapons. Americas Security Partnership with israel is stronger than ever. Under my administration you see the difference. Big, big, beautiful difference 73 including the iron dome Missile Defense program, which has been keeping the israeli people safe from short range rockets, launched by hezbollah and hamas. And david sling, which guards against long range missiles. It is my hope that some day, very soon, israeli children will never need to rush towards shelters again. As sirens ring out loud and clear. Finally, the United States is proud that Israeli Air Force pilots are flying the incredible, new, american f35 planes. Theres nothing in the world like them to defend their nation, and it was wonderful to see these mighty aircraft in the skies over israel recently, as you celebrated the 69th anniversary of israels independence. But even as we strengthen our partnership in practice, let us always remember our highest ideals. Let us never forget that the bond between our two nations is woven together in the hearts of our people. And their love of freedom, hope, and dignity, for every man, and every woman. Let us dream of a future where jewish, muslim, and christian children can grow up together and live together in trust, harmony, tolerance, and respect. The values that practiced in israel have inspired millions and millions of people all across the world. The conviction of Theodore Herzel rings true today. Whatever we attempt, there for our own benefit will rebound mightily and beneficially to the good of all mankind. As we stand in jerusalem, we see pilgrims of all faiths coming to this land to walk on this hallowed ground. Jews placed the prayers from their hearts in the stone blocks of the beautiful western wall. Christians pray in the pews of an ancient church. Muslims answered the call to prayer at their holy sites. This city, like no other place in the world, reveals the longing of human hearts to know and to worship god. Jerusalem stands as a reminder that life can flourish against any odds. When we look around this city, so beautiful, and we see people of all faiths engaged in reverent worship, and schoolchildren learning side by side, and men and women lifting up the needy and forgotten, we see that gods promise of healing has brought goodness to so many lives. We see that the people of this land had the courage to overcome the oppression and injustice of the past, and to live in the freedom god intends for every person on this earth. Today in jerusalem we pray and we hope that children around the world will be able to live without fear, to dream without limits, and to prosper without violence. I ask this land of promise to join me, to fight our common enemies, to pursue our shared values, and to protect the dignity of every child of god. Thank you, god bless you, god bless the state of israel, and god bless the United States. Thank you very much. Thank you. That is president donald j. Trump speaking in jerusalem, commenting on the relationship between the United States and israel. Also talking an awful lot about terrorism, and what he calls very hateful ideology, said hes going to crush it. Talking about obliterating this evil ideology to protect and defend our citizens and the people of the globe. He did talk extensively about the relationship between israel and the United States. Obviously very warm partnership between netanyahu and President Trump and we will continue to talk more about all of these issues as we go through the morning. Also tinge to hear more about what happened in manchester overnight with the blast there, the terrorism attack there. Coming at the same time that the president s been talking so much about trying to rule out muslim extremism. Were going to be talking more about that and much more with our next guest, former senator max bachus. Max, thank you very much for being here. Youre very welcome. You are not only former senator, former ambassador you see whats been happening with the president s just addressing. How do you look around the globe and kind of address and sum up whats happening when it comes to terrorism right now . I think that the he did a good job, frankly, of touching on the passion thats needed at this point. Trying to be a healer, in a certain sense, of bringing people together. Such a sad, tragic development. But also doing a pretty good job expressing a need to ramp up our efforts to address terrorism. Its a hard thing for a president to do. I noticed Prime Minister may did a pretty good job herself. But its good that hes doing this. Senator, theres a couple of things. Islamic state is claiming responsibility now for the attack at the Manchester Arena. I dont know if this changes anything here, but this Islamic State says the attack was carried out with an explosive device that was planted at the concert. Does that mean it was planted by a suicide bomber . That went up with it . Earlier reports wed heard suggested that the they identified and that they have identified i thought maybe just semantics. Are the new the new development here. And probably not a surprise for many people whove been watching this. Right. You know the reason that we asked you here today was to talk about the budget. Thats also coming down today, as well. And this budget does ramp up military spending. Theres some pretty severe cuts to domestic spending. It does ramp up military spending, though. Is that something that you think is warranted in this environment . Well, frankly, i think the whole new budget adds new definition to la la land. It is going nowhere. It is not even a political statement. Because it was a political statement it would have some juice. Might have something to it. Its going nowhere. Its because its a huge, big cut in programs which the congress, including republicans, are not going to cut, in addition its a huge, big tax cut which people like. On the other hand its a big transfer of wealth from lower income people up to the most wealthy. Its not going to go anywhere. If its not going to go anywhere, not just because democrats arent going along with it, because of objections of republicans, why do you think the administration did this . . What was the i think part of it is to appeal to its base. Even though its going nowhere the president can say look at all you folks out there who voted for me, im fighting your battle. Its a bit cynical, because i think he knows in some of the white house know that its not going to go anywhere. But i think thats the megsage. To make it a better budget would you look at medicare and Social Security . Or you just wouldnt cut anything . I would do what has to be done. That is do the hard work. This is not easy what does that mean . Okay, weve got a budget. Weve got to Work Together. Weve got to work with democrats. Most democrats you got to work with those who want to in good faith get some solutions, figure out how to cut some of the waste. Figure out what tax reform should be. It takes a lot of work. I was chairman of the finance committee. We enacted Health Care Reform. It took a couple of years to put all that together, put the pieces together. It also as chairman of the committee working on tax reform, it is hard. Its complicated. You got to work at it. You just said that the president has to work with democrats. And then you used Health Care Reform as as the model for how to work with the other side . There wasnt a single republican vote you didnt work with the republicans when you passed that. That was like the worst example you could have picked. No, no, thats the best example. The best example is youre dealing with it now. Let me explain it. When we did Health Care Reform we worked with republicans. We worked together. You would be amazed how well we worked together. Then at the very end republicans say hey its political so they just opposed it for political purposes also to oppose obama. Im just telling you, my personal view, you want to get something enacted thats durable, thats going to last you have to really work with both parties. Otherwise its just divided government. Maybe it would have been more durable and maybe it would have lasted if you had worked with republicans. You didnt hear what i said. No, no, no, no, no. They didnt work with us. We im being honest. Im being honest whomever was at fault you werent there. I know but there wasnt i was alive. Reading the newspapers. There wasnt a single republican vote. I dont need to have been in the thats correct. Because its all political. Its all political. And only republicans are political . No, no. Democrats i am not going to argue with you. Im just going to give you my assessment because i was there and thats what happened. So in terms of doing the hard work, plenty of other people will say if you really want to do the hard work you have to go after the entitlements. That you can entitlements have to be addressed thats correct. You cannot balance the budget without dealing with those issues. Thats correct. But you have to did it in a reasonable way, a thoughtful way, its a lot of hard work. Do you have an answer what we should do with medicaid . Should that become the its almost could end up being just universal health care. If everybody that doesnt have health care eventually ends up on medicaid, thats not what it was designed for. Will that work . Medicaid is a low income program. But its been expanded. And into you know most recently with the aca. It was expanded, increased coverage growing like crazy. The problem though is its not so much expansion. The problem is cost. Right. Its heat care costs generally in america. The way to address medicaid costs frankly is to do the hard work, to figure out how do you get better control of Health Care Costs in this country. Thats a major solution to medicaid. Senator, just to my colleagues, what i do for kicks the last couple days is ive come back and dont need tmi. Ive looked at the economic assumptions in budgets going back to the first budget put forward by president bush. Lincoln . No, we didnt have the tables and the pdfs. I couldnt make a file. It looks like this particular president is breaking with what appears to have been a tradition. Which is hechlt chwing closely economic forecasts of the cbo and wall street, the blue chip. Does it make a difference that instead of going along with those forecasts, they have their own forecast up around 3 or full percentage point higher . I dont know any reputable economist who thinks that the estimates in this budget are accurate. Anywhere close to reality. Why does it matter . Because its its its a false statement. Because it raises expectations that are not accurate. And its not honest. Senator baucus, want to thank you very much for joining us today. Thank you. We appreciate your time. When we return, Kevin Mccarthy on the washington agenda and the latest from manchester and the site of last nights terror attack. Isis now claiming responsibility for that bombing outside of an our jana grande concert. 22 killed and even more injured. Squawk box will be right back. Your muscles look good, but we should be seeing more range of motion. Im fine. Okay, well lets see you get up from the couch. Im sorry, what . Grandpa come. At cognizant, were uniting doctors, insurers and patients on a collaborative care platform, making it easier to do whats best for everyones health, every step of the way. You may need more physical therapy. Ugh. Am i covered for that . Yep. Look. Grandpa catch grandpa duck woah ha there you go grandpa. Keep doing that. Get ready, because were helping leading Companies Lead with digital. Breaking news. Officials arrest a 23yearold man in connection to the deadly suicide bombing in the uk. A live report from the scene straight ahead. President trump responds to the attack. I will call them from now on losers. Because thats what they are, theyre losers. Counterterrorism expert Richard Clark will join us. Plus the trump budget revealed. Well talk to House Majority leader Kevin Mccarthy about the proposal, tax reform and health care, as the final hour of squawk box begins right now. Live from the most powerful city in the world, new york, this is squawk box. Good morning and welcome back to squawk box here on cnbc live from the Nasdaq Marketsite in times square im joe kernen along with becky quick and steve liesman. Andrew is off today. Lets get a check on the futures this morning. Theyve improved even more than where they were earlier. Up 54 points now on the dow. Up almost 14 on the nasdaq, s p up just under 5. Our top story, a deadly terror attack in the uk. Police have arrested a 23yearold man in connection to a suicide bombing in manchester, england. At least 22 people including children are dead. And dozens are injured after a suicide bomber detonated an improvised explosion device. As people were leaving an Ariana Grande concert. Isis has now claimed responsibility for the attack. Several hours after the bombing the pop artist tweeting in her words. Broken, from the bottom of my heart. I am so sorry. I dont have words. We will have a live report from manchester in just a few moments. Plus well be talking to counterterrorism expert Richard Clarke coming up at 8 15 a. M. Eastern time. Well bring you any updates to the story as we get them. President trumps 2018 budget will be delivered to congress today. The proposal ames to cut 3. 6 trillion in Government Spending over ten years to balance the budget. Joining us now House Majority leader Kevin Mccarthy. We gave you an ifb, leader mccarthy. I dont know if you were able to hear any of the interview we had with former senator max bachus, did you hear any of that . No, i did not get you probably you probably have a pretty good idea, anyway, of what was said. Dead on arrival, even the i mean democrats are not going to go along with any of it, but he pointed out that even republicans, theres too many things there that theyre never going to accept most of those cuts. Is this a art of the deal type start to a budget, do you think . Or is this a serious proposal . I think its a serious proposal. Think about what it does. It sets a structure. It makes investment into the military that has been cut year over year. We look at whats happening in the world, and first and foremost, my heart and my thoughts and prayers go out to all those in manchester. Throughout this entire nation. But it puts an investment into the military. He balances the budget over ten years. He reforms welfare reform. So he puts people back into work. I think this is a framework that people are looking at, as we start the budget process going forward. Would you, if you were able to do whatever you wanted, i use the, if you were king before. People have a problem with that because they think im talking about trump being i dont know. Lets say you could do whatever you wanted, would you include medicare and Social Security . Because its such a large part of our future expenditure . Okay. If youre asking me personally, i would look at the mandatory side. Because that is making up 66 of our entire budget. When Ronald Reagan was president that was only 25 . And if we want to protect and actually have medicare for the future, were going to have to reform that. Social security, dont we want to protect that for future generations . Those who are putting in today. We need to reform that, as well. And thats continuing to grow. We have to make fundamental changes to make this economy grow but protect it for the future as well. So yes, we have to look at the entitlements if we believe that we want them to be there for future generations. Earlier i asked i alluded to the point that in during the Obama Administration a lot of, weve looked at the growth of what, take your pick, food stamps, or disability, whatever you want to look at. Its hard to take back entitlements, leader mccarthy. You know that, look what youre going to be called and tarnished, and its going to be tax cuts for people that dont need them, taking away from the lower income people that do need it. What what can really be accomplished in the current political environment . Well, i think youre falling into the talking points of democrats in this trap. Remember what happened after republicans took over in 94 when we tried to do welfare reform then. We had to send it to the president three times. Well when we were able to achieve that and everybody said the devastation, what would happen, what happened . More people went back to work. Government actually saved more money. More people were in the economy working, and what did that do . That helped families. That puts children through college. That buys homes. Thats what this economy has to get moving again. Look what weve been able to do in a regulatory end. Changing regulation actually helps growth, as well. Now weve worked on health care. Next were going to tax reform. Well have a tax hearing again today. We have to get growth into this economy if we want to solve any problems. Growth is the number one factor that will solve so many other problems of this country. And bringing growth up above 3 is really part of the solution to making this all happen. And when i look at entitlements, and youre saying youre cutting them, no youre protecting them for our future generations. And we have to have a serious conversation about this. Because its going to take up almost every dollar we have unless were able to grow the economy, reform entitlements, and actually build so more people can have homes and more people can send their kids to college. Leader mccarthy, lets talk about growth. You bring that up. This budget assumes 3 gdp over the 10year period. It also assumes that tax reforms get passed. If tax reform does not get passed how does that impact your assessment for where we will be in terms of gdp . Well, see, i always see the glass as half full i know what were doing here and what were focused on. Tax reform is going to get done. That is something that we have been continuing working on. We have the opportunity to do it now. Through reconciliation. And for the people that sit back and always want to look at whats wrong with this country, what did they predict after this election . That the market would crash. They did not believe the market would move up to new heights. They didnt put that into the score of what they were moving forward. Think about what we could accomplish with tax reform. If we lower the corporate rate, we make it fair and simple, where we take the seven rates, we get repatriation were bringing back trillions of dollars to invest inside america. I would argue with the growth rate, too, because i think it would probably be above 3 after that. And then what could we achieve . Those are the ideas and the optimistic feel that i think that actually happens here. Thats what i see taking place and thats what i see taking place in a hearing today, talking about tax reform. Congressman, former treasury secretary Larry Summers writing this morning in the Washington Post, says theres a double counting going on in this bud t budget. He says you cant use the growth benefits of tax cuts once to justify an optimistic baseline and then again depending tax cuts do not cost revenue. Are these going to be revenue neutral tax cuts and can revenue neutral tax cuts spur the kind of growth youre talking about . Well, first of all, you get a lowering because once you repeal the taxes for health care, you have a lower baseline. Yes. Its a philosophical difference that we have. I fundamentally believe if people are able to keep more of their own money, and invest it themselves, that the free market grows greater than government. Its a philosophical difference that well have. And it has shown time and again what i see is when we get a tax cut, when we go through and make, yes it will be budget neutral as we go through, because it will be through reconciliation. Well have to save at least 2 billion. We can get it through the house, through the senate with a simple majority, and sign it to the president s desk and thats what were starting to focus on working on today. I see this happening this year. Think about because you have to get health care done. You do tax reform, you do infrastructure. And then we no one talks about what we did when it came to regulation. Think about what government has imposed on so many businesses. Think about for the last five years averaging more than 80 major rulings. Meaning that it costs business more than 100 million. Well there was more than 80 of those every single year imposed upon business throughout america. Well you know what . Thats been peeled back. Never before in the history of america has there been a Congressional Review Act more than once signed into law. We have now done 14 in the short amount of time. That changes the climate out there. You have so much money sitting on the sidelines that people actually see a fundamental difference. Theyll make an investment. That puts more people to work, more tax dollars being put into the treasury because more people are actually working. So leader mccarthy, watching the first goaround with repeal and replace, democrats loved what happened. Republicans are probably scarred by and worried about how the next thing goes. So you were able to get that through. Now, i guess theres going to be more democratic talking points. Now youve got the russia stuff. The backdrop. Thats all weve heard for the past ten days. Now youve got the narrative, is that these guys, republicans are just just sitting on their hands, just, you know, wringing their hands, worried about whats going to happen, worried about 2018. Nothings going to get done. All these things that youre trying to do are going to be more difficult because youve got this investigation hanging over you. Youre working on that. But i made the point that, you know, this president , hell sign whatever you guys do. You had eight years where no one would sign whatever or six years where no one would sign whatever you did. And god you passed all kinds of stuff. You guys were governing left and right but no one ever signed anything. Now you got someone that will sign it, but you guys seem to, you know, be unable to live with the success of actually writing something to give him. Is it possible that it gets done . Its not only possible, it will get done. Now, maybe thats the morning shows that are worried about these different hearings going on. But i will tell you for the kitchen tables that are sitting in bakersfield theyre worried about how theyre going to pay their house payment. Theyre worried how theyre going to send their kids to college. That means about job creation. And thats what were focused on. Wait a minute, theres other morning shows . I know. But i hear from a lot of different ones. But this is what were focused on. Yes, we did regulatory reform. The most congressional in the history of america. Weve done health care out of the house. Now were having hearings on tax reform. Is it harder now . So the answer to the question is that this is not guys thinking about 2018 and whether they distance themselves from President Trump, and therefore they dont do this, it doesnt make it less likely at this point . You know what . Members of congress are going to be judged on the jobs they do. If theyre worried about 2018, i would tell them to get to work and make sure tax reform gets done. Bring growth around. This is what you were elected to do. This is what we said we would do. Thats where were continuing that might give them a chance to get reelected. Thats the piece in the wall street journal over the weekend. Thats the easiest way to deal with all this stuff is to actually do something. But when youre Walking Around there do you see guys that look pale and sort of queasy . I mean, do they have some intestinal fortitude, your colleagues . You know what . I see the men and women of the republican conference that walk into this capitol with goosebumps that theyre allowed to even be in this capitol. I watch them put up with the attacks and what they see time and time again, but i see what their faces are truly worried about. You know what . At the same time that we were able to Pass Health Care you know what was happening that week that i dont hear about in a lot of these morning shows . That 94 out of 99 counties in iowa will no longer have health care. That they are pulling out. That aetna is now pulling out of virginia. That 16 counties in tennessee will no longer have health care. That 18 of the 23 coops created under obamacare have collapsed. That the premiums in maryland, that want to go up more than 50 next year. So do you want us to sit back and do nothing . Yes, maybe its difficult. But i think that difficulty just proves how important this is to get done. Maybe health care didnt get done the way everybody wanted it scripted out. But it did get passed on this floor. And weve learned from that. And weve learned from that and well apply that to tax reform. Thats why were walking through the hearings today. And maybe the talking points want to continue to attack us but this country is too important to sit back and worry about what some morning show is going to say, but whats more important whats around that kitchen table. You keep talking about the other morning shows and we just have no idea what youre talking about. He wants to ask you a question. Golf channel. Lets say you had a roulette table in front of you and the numbers ran from 15 to 30, say. Okay . And these numbers represented your best bet for where the Corporate Tax was going to be posttax reform. Tell me where youd put your pile of chips on what number . Id put 20 or lower. 20 or lower. You think you get to 20 . Or not 22, not 25, but you think you can pull out a Corporate Tax number thats 20 or lower . Remember what happens when you just when you actually Reform Health care. You repeal those taxes. Well those are 10 basis points right there that you can lower it to down to 25. If we get overall tax reform, we could transform where were going. If we lower and look at the rates from 7 to 3 if we go to a territorial tax where we bring back this money from repatriation, the 2. 5 trillion sitting overseas. What do they do . They bring them back in to america. They invest it into america. Or they put it out to their shareholders. That is fundamental growth. And if we want to compete around the rest of the world, why do we put ourselves through the disadvantage of america . Our current tax structure forces you to go put a domicile in another country. All it tells you, if you are successful you cant bring the money back to america. And that it rewards you to import instead of export and create the jobs in america. So, yes, for us to transform that is not an easy task. But i think it will be worthy for the decades ahead that we take on that fight. Dont worry about what 2018 says but worry about what is the structure were leaving for the next generation to make sure that the next century is ours. And yes, we are worthy of this fight. You have a clicker, right . I mean you didnt lose it, right . Because i i have one lawmaker tell me the only person that watches some of those other morning shows are journalists. Just journalists watching journalists and its like this big echo chamber where theyre all just so you know, use your clicker and check your local listings for squawk box. I mean look who hes talking to here. I these are the people you want to talk to. My name is joe. Actually is but what im so shocked by are, look at, you are cnbc. You are squawk box. You are looking at the economy day in and day out. Yes. You know what has transformed with this last election. You know what the people said across this country. You know what is happening with President Trump traveling the middle east, that those who are our allies are seeing that a new fortitude thats happening, a new partnership continuing to bound with our allies and actually talking about our enemies and making the world different. Youve watched what we were able to accomplish on health care. That we were being able to do it. Youve watched what weve done with regulation on these cras which no one has ever been able to do before except one time and we just did 14. Youve watched what weve laid out before this election when it comes to tax reform. That lower the corporate rate, make it fairer for the individual rate and let america actually compete. Were having that hearing at the end of the day. So, yeah, youve seen all this. You know it every day. Youve watched the market grow up to new highs after this last election. You know the opportunity and what america can actually accomplish. So lets be optimistic about it. This country is too divided. This country needs to come together to achieve the big things. All right. And remember what Winston Churchill always said about it, you can always count on americans to do whats right. After theyve exhausted every other option. So for the last eight years but after the last eight years weve exhausted all those options. All right. Were going to go to break. Im going to i think a lot of those comments were directed at liesman. Im going to talk to him when we go, and so were going to have a little discussion what are you going to talk about . Just optimism and markets okay. All right leader. Joe if you want to have a morning show youre going to have to go to break. Right. We do need we need to pay the bills. Leader its great having you on for an extended hit this morning. We appreciate it. Thank you. When we return, investigations under way after a deadly terror attack in the uk. We will bring you the latest from the scene. Plus Richard Clarke spent nearly ten years in the white house as a National Security and terror czar. We will join us right after the break. Squawk box will be right back. Its been over 100 years since the first stock index was created, as a benchmark for average. Yet a lot of people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Why invest in average . You wont see these folks they have businesses to run. They have passions to pursue. How do they avoid trips to the post office . Stamps. Com mail letters, ship packages, all the services of the post office right on your computer. Get a 4 week trial, plus 100 in extras including postage and a digital scale. Go to stamps. Com tv and never go to the post office again. Welcome back to squawk box. Isis has claimed responsibility for the deadly suicide bomb attack in the uk. Willem marx joins us right now with more from manchester. Willem . Good morning, becky. Weve heard now that of the 22 People Killed during the attack last night, several of them were children. Manchester police have arrest aid 23yearold man in connection to the incident. Theyve also yet to identify publicly, at least, the attacker who they said was responsible for this explosion using improvised explosive device inside the Manchester Arena just a few hundred yards from where im standing. Theresa may has spoken this morning. She said shell be coming up to manchester today after a Second Security meeting with her ministers and security officials. Lets have a listen to what she said about the next few days. The threat level remains at severe. That means that a terrorist attack remains highly likely. But the independent joint terrorism analysis center, which sets the threat level on the basis of the intelligence available to them, will continue to assess this throughout today, and in the days ahead. So becky, what that means is essentially that the Intelligence Forces here in the uk will be looking at whether there is intelligence, specific intelligence about an imminent attack. If theres not an imminent attack likely they will keep this threat just one notch below the top level here in manchester weve seen dozens of police on the street. There will be hundreds more involved in this investigation trying to understand who this man was, and what would motivate him behind the attack. Whether there were coconspirators working with him. One man already arrested at some point around lunch time in the Greater Manchester area. Well see whether this develops into a broader conspiracy. All right, willem, thank you very much. Joining us right now is former white house terror czar Richard Clarke. He is the author of the new book warnings finding cassandras to top catastrophes. I know you spent ten years in the white house kind of looking for the next catastrophe. The thesis of the book is that its not that we dont know these things are coming we just dont always listen to the people who are warning us. Ive already seen a Washington Post article this morning suggesting that this is the thing that so many people in the uk had feared, that theres so much time and money and attention being spent on protecting london that some of the outskirts, other major cities, havent received the same attention. Would you agree with that thesis . No i dont think so. I think the british have actually done a very good job throughout the country of finding terrorist cells and breaking them up. Theyve done over 200 arrests in the last year. Theyve broken up i think at least six attacks in the last six months. But you cant stop every one of them. You mentioned our thesis in the book. We have 14 case studies throughout different disciplines, where people were experts, people did warn about specific threats, and they were ignored, because they were outliers. The other experts didnt agree. And so were proposing in the book warnings a system to look for these experts who get it right. In terms of what you said, though, in this situation, that there are so many potential attacks you can only thwart so many and that sometimes ones going to get through. Is that just something we have to live with in this day and age . Well unfortunately we have to live with it until we can defeat the ideology. People dont do these things without motivation. And the motivation is largely a, bizarre to us, ideology. You will be doing this forever if all you do is go after the individual terrorist attacks, and planned attacks. If you go after the ideology at the same time, if you fight the battle of ideas, if you go after the root causes, you may some day be able to put an end to things like isis. The president speaking today in jerusalem, we took those remarks just a little bit ago, and his remarks were very pointed toward this, this is an evil ideology and one that we must attack. Is that the first step . Is he doing what you suggested . What else should we be doing . I was a little disappointed by his speech in riyadh, where that was the occasion where he could have said we have to go after the root causes. We have to figure out what they are and we have to fight the battle of ideas. He didnt say any of that. He said simply we have to draw them out. He seemed to give a green light to the governments in the region to step up their harsh measures, and their police staffings, and their oppression. That is actually counterproductive sometimes, particularly the way its been done lately in places like egypt where it actually drives people into the hands of terrorist groups. What is the appropriate response . What should we be doing . Well, we should try, for those people who are not yet radicalized, but are potentially a pool to be radicalized, we should try to have a government dialogue with them. And find out what their motivations are. Give it a little room for freedom of expression. Obviously, the people whove been radicalized we have to hunt them down. A and arrest them or kill them. But the ideology is on the internet, its in the mosques, thats where we have to fight it. How much of this is the economic argument . That there is not upward mobility available . How much do you think that plays into this . It does in turn. I dont think it does so much in the middle east because weve seen many of the terrorists in the middle east are actually fairly wealthy or come from wealthy families. In places like france and england, there is a socioeconomic problem. That they dont have job opportunities, the Muslim Community is ostracized in communities outside the mainstream of the country. They dont feel like they have a link to britain, to france, as a nation. That is part of the problem. Richard, again, back to the book. Youre looking at all kinds of potential disasters, not just terrorism attacks, but things like a stock market bubble, things like a flu pandemic. How how do you propose to do this . I know you also have a cassandra award. What is that and how would it work . Well, so weve developed over the course of these 14 case studies a criteria, a set of criteria, evaluative criteria where you can look at a potential issue or person whos predicting a disaster and make a pretty good judgment as to whether or not you should pay more attention. In terms of the award, what were doing is asking people to nominate experts who are warning us now, today, of disasters, and who are being ignored. And once a year a panel of judges from across different disciplines will pick some one cassandra who is warning us of a disaster, and being ignored. All right, richard thank you very much for your time today. We do appreciate it. Thank you. Richard clarke. Okay coming up, todays top corporate stories. And later the trump economy and the markets. We talk strategy at 8 30 a. M. Eastern. Stay tuned because were coming right back. Welcome back to squawk box. A number of Quarterly Earnings reports crossed the tape this morning. Luxury home builder Toll Brothers Beat Estimates by ten cents. Reporting 83 cents a share. New orders jumped 20 from last year. The Company Called the spring selling season its best in more than a decade. Opposite fortunes for auto zone. The Company Reported profit of 11. 44 a share. The consensus was 12 cents higher than that. Down almost 8 . I think the samestore sales decline of 0. 8 unexpected, as well. Take a loss there. Thats been a great stock over the years, though. To get up to 700. And just one economic report on the calendar for today. The government is out with april new home sales at 10 00 eastern. Economists are looking for a 1 drop compared to the prior month. Lets get back to the markets now and what to expect from tomorrows fed meeting. Joining us now, david joy, and mark wittner. David, let me start with you. I think that tomorrow we may, if were lucky, get some more information on what the fed thinks about this Balance Sheet and reducing the Balance Sheet. Is that what youd be looking for . Yes, i would. That plus the fact that, as they indicated earlier, they thought the economic weakness in the First Quarter was transitory, so be anxious to hear what they have to say about the expectations of the second and third quarters. But yes, Balance Sheet is going to be a big component of what they want to do going forward. Be interesting to see if they talk at all about the timing of future rate hikes and how they might work in some unwinding of the Balance Sheet and do it in what order. And in what relative agree of importance. Mark, before we talk about the outlook for fed policy i want to establish the the baseline here. Are we on track now . I know theres not a lot of data in yet. Are we on track with a Second Quarter rebound . We had the weak First Quarter came in under a percentage point and everybody was thinking about 3 or higher for the Second Quarter. Are we still there . Were still there. The Consumer Spending numbers were really heavy toward the end of the quarter. So, if we had no growth in Consumer Spending in april, may or june, we would still be up at a 1. 7 annual rate over the First Quarter. So, weve got a nice, strong start to the quarter even before we get any data. We feel pretty comfortable at 3 . The atlanta fed gdp now forecast is like 4. 1 right now. I dont think it will be that strong, but the 3 seems pretty doable. So what does that tell you about where the fed ought to go here . Rate hike in june pretty well baked in, you think . I think june is pretty well baked in. I think the markets have come off the idea that theyre going to go again in september. Were likely to see the fed ratchet up the rhetoric a little bit. I think they go in september. Because i think they get a pretty strong gdp number. We always do a bottomsup analysis in our forecast but with the residual seasonality the First Quarter always comes in below what the bought upsup analysis says. Theres a good chance we get the upside surprise in late july. That should make it pretty easy to do in september. David tell us how you think investors should handicap the possibility of fiscal stimulus from washington. Is tax are tax cuts this year is this a this year story . A next year story . What about other stimulus that may come from washington . Well, i think in terms of the economic impact, its clearly a next years story. Not convinced yet that theres that we wont see something on the policy front this year. But it wont have an impact for investors. And even then were thinking that maybe it adds, under best Case Scenario about 0. 3 to annualized gdp. This market has been hanging in there. Assuming that were going to get an acceleration of Economic Growth that will translate into decent earnings going forward. A lot of thats been baked in already. And the market is, i think, come to terms with the fact that policy machinery in washington has probably slowed down. Havent given up the ship yet that well see something on both fiscal stimulus and tax reform. But, i think the market has come to terms with it being a next years story. Mark, just pick up on that real quickly which is the administration has built in 3 growth in some of the outer years, not even that far off for its budget that it came out with last night. What is your opinion of the idea of can we get to 3 growth . We did get to 3 growth on a sustained basis. We might be able to get there for a short period of time. I think that the bottom line message for me, when i look at their analysis is that can we do better than weve done . And i think we can. I think that we can do better than weve done. We need to have a more growth oriented tax policy. I dont know that were going to make a huge move in that direction but we should at least take at least one or two steps in that direction. All right. David, mark, thanks for joining us this morning. I will point out, it wouldnt be the first time the economic consensus was wrong if it doesnt turn out to be 2 . Maybe it could be higher. Yeah. Coming up, the latest on the suicide bombing that left 22 people dead at an Ariana Grande concert in the uk. A suspect has been arrested in connection with the attack. Stay tuned. Squawk box will be right back. What . We gotta go. Where . San francisco. When . Friday. We gotta go. [ tires screech ] any airline. Any hotel. Any time. Go where you want, when you want with no blackout dates. [ muffled music coming from club. Blue monday by new order. Cheers. ] [ music and cheers get louder ] the travel rewards credit card from bank of america. Its travel, better connected. The travel rewards credit card from bank of america. I count on my dell small for tech advice. With one phone call, i get products that suit my needs and i get back to business. The power of a low volatility investing approach. The power of smart beta. Power your clients portfolio with powershares. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Cobut weve got the gettion. Tdigital tools to help. Now with xfinitys my account, you can figure things out easily, so you wont even have to call us. Change your wifi password to something you can actually remember, instantly. Add that premium channel, and watch the show everyones talking about, tonight. And the bill you need to pay . Do it in seconds. Because we should fit into your life, not the other way around. Go to xfinity. Com myaccount welcome back to squawk box here on cnbc. We are live from the Nasdaq Marketsite in times square. This morning we are recapping the latest developments in yesterdays Manchester Attack that killed 22 people and injured dozens of others. British police have arrested a 23yearold man in connection with this attack. That news came shortly after british Prime Minister theresa may vowed that anyone connected with the attack would be brought to justice. Isis has now claimed responsibility for the attack which occurred outside a stadium where singer Ariana Grande had been performing. And President Donald Trump condemned the attack during a speech just a little while ago in jerusalem. When we come back this morning, the white house releasing the 2018 budget. We have a rundown of the blueprint. The power of a low volatility investing approach. The power of smart beta. Power your clients portfolio with powershares. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Coltry align probiotic. Nion. Your digestive system . For a nonstop, sweet treat goodness, hold on to your tiara kind of day. Get 24 7 digestive support, with align. The 1 doctor recommended probiotic brand. Now in kids chewables. What we do every night is like something out of a strange dream. Except that the next morning it all makes sense. To power global ecommerce Fedex Networks are massive, farreaching and, yes. A little magical. Fedex. Com slash dream welcome back to squawk box. The white house unveiling its 2018 budget today. Joining us with some of the major details, ylan you had a little bit of time until 3 00, 4 00 in the morning you were probably crunching the numbers and looking at the data and going over it. We keep saying this 3. 6 trillion of spending cuts over ten years. I would point out its 7 of total expenditures. Is that a big number . Small number . The administration is saying that this is the biggest level of reductions that any administration has ever proposed, but the key thing here is that theyre saying that that 3. 6 trillion in cuts over a decade will help them balance the budget by 2027. So that is one key part that they are highlighting, that estimation also includes the forecast that there will be an additional 1 trillion to 2 trillion in revenue from tax cuts, so theyre betting that theyll be able to generate enough growth through tax cuts to help them relieve that deficit, and that theyll also be able to get there by cutting spending as well. But as you know, as you guys have been talking about all morning, that forecast for 3 might be a little bit of a magic. Before we do that talk about this issue of all of the spending cuts come from the discretionary, nonmilitary side of the budget. Right . Thats where all of it comes from . Well, not all discretionary. They do come from the nonmilitary side of the budget. But it is split between Discretionary Spending reductions, for Government Agencies that are appropriated every single year, and from mandatory spending changes that theyre hoping to achieve by changing the way that people qualify for entitlement programs such as Social Security disability insurance, medicaid, et cetera. So but defense is one area where we do see significant beefing up. There are a few other line items as well, like paid parental leave which will see some investment, as well. But, yes, nondefense is where most of these the bulk of these cuts are coming from. But this in context for us, have you ever seen a budget with this amount of cutting inside it, of programs that really just says you know what . We dont really care about the political backlash here very much. Do they . They dont. The part of what theyre looking at right now is to create this vision statement of where they want to start the conversation, and even though, you know, we do keep saying that this is something that is not going to be adopted by congress in its current form, this is really important for sort of shaping the conversation, and laying out the framework for where the administration wants to start those neerkss. There are several things in here that the democrats have already laid out as poison pills in the 2017 budget that was recently passed. So the fact that they are reinserting them here in 2018 shows that they are ready to rumble when it comes to is there a danger they go too far over that they create this budget with all of these cuts in it that you create these coalitions of opposition against it . Well, absolutely. Youre already starting to see that happen right now on capitol hill. With some moderate republicans coming out against portions of the budget, and the real danger i think is not the framework overall, you know, sort of the stance that if you want a Smaller Government you want bigger tax cuts. Thats a republican orthodoxy. But when you start getting into specific line items of promise you want to cut like meals on wheels, like farm subsidies, thats when you start to realize that there are politicians that have very vocal constituencies behind each of those line items. Theres a reason theyre in there in the first place. Thanks very much. Get back to reading the tables. Thanks. Get back to our top story, the deadly terror attack in the uk. Joining us now on the squawk Newsline Jamie Rubin former assistant sect for Public Affairs in the clinton administration. Mr. Secretary, thanks for joining us. Earlier we were talking about, you know, we are Financial Network and we were talking about the reaction in the past, and more recent past of the Financial Markets of these things about how maybe, you know, the markets are getting used to these. But the reason i bring that up was you met one of our guests mentioned the madrid bombings. That was 2004. So, thats 13 years ago just from that data. And i dont know, hearing that just made me think, god, are we making any progress at all on this, mr. Secretary . And im just wondering what, you know, what our path forward should be. I dont know whether we have him. Mr. Secretary yes, im here. Im here. Sorry about that. I think its a fair question. As to whether were making any progress at all. I think people should first bear in mind that it was, however many years, 15 years ago that a strategic attack, a major attack, thousands of americans and others died, and i think weve made progress in that few people in the business believe that that sort of thing could happen again, that weve been very successful in cutting off the kind of large terrorist groups who could conduct that sort of attack. But, the smaller groups that can always do an individual, a determined individual has always been capable of causing carnage with a weapon, with a car, with in this case a bomb in a very, very crowded area. This was a very clever operation. And im sorry to say that they figured out that in that area, you have an incredible number of people in a small place. Thats very hard to guard against in a free society. And perhaps maybe our politicians havent been as honest as they should be with us about the difficulty in guarding against that. And its been pointed out that this one happened, but the police in Great Britain have thwarted multiple attacks that didnt happen. So, obviously, you know, the counterfactual is that many more could have happened so there is some progress being made. But im reading another question to ask you, we had i think Richard Clarke said that the brute force approach might just cause more radicalization, and thats not the way to do it. Once again we have to go back and address the ideology, and the causes of the ideology. And then i think about that. You know, i think weve tried that route, too, and route or whatever but neither seems neither seems to be, you know, bearing the type of fruit that we need. And then my next question is, does it still trace back, do you think . Because the Israeli Palestinian conflict is back in the, you know, at center stage again. I used to think it traced back to that a lot. And if somehow we could solve that, that that might help the situation. Now i dont know, it seems like its an entirely different thing. That the ideology just is what it is regardless of if we were to settle that intractable issue. What are your thoughts on that . Well, let me take each one separately. On the second issue, the question of the Israeli Palestinian attacks question and the resolving that, i think what weve learned through the satisfaction of pretty much everyone concerned in the business over the last 15, 17 years, is that the Israeli Palestinian problem is not the central problem in the arab world. The central problem in the muslim world. The central reason for terrorism. I think the other issues that have arisen between shiites and sunnis, that is to a country like syria where 300,000 people were slaughtered, i think that the sunni muslim world will regard thats who died, the 300,000 sunni muslims, they have a grievance now, and unfortunately that grievance is going to grow and all the refugees, millions that came out of syria are going to have a growing grievance. One can hope that that grievance doesnt morph into terrorism and one perhaps can do things to prevent it from morphing into terrorism. But one i would say the Israeli Palestinian track is not the central feature. But, two, weve never really done full effort on the nonmilitary side. Weve done the military effort fairly well, thats why i think theres never been a large contingent of global terrorists capable of doing a 9 11 again, thats why isis didnt succeed and is about to fall completely, but so long as dozens of people are prepared to organize a simple attack, like the one we saw today, and because of their perverted ideology, thats occurred in history, im afraid its going to continue to occur. Perhaps we need to do a slightly better job on the defense front in terms of packages and you know, all the things that consumers and businesses hate, like the lines at the airports, and security measures, but countries like israel do that, and it works. Its just very daunting and just keeps happening and you hear the mayor of london, someone say we got to get used to it in our daily lives and you dont want to hear that either. So its just tough. Anyway, we appreciate your time and your insight there mr. Rubin. Thanks. Squawk box will be right back after a quick break. Lets get down to the new york stock exchange. Jim, first ive seen of the Greater Manchester police say a controled explosion was carried out at an address in manchester in the field district that is connected to the ongoing investigation, so its moving fast, jim, and not necessarily something that we normally talk about, but you know, here we are again. Theyre monsters. These are like 9 to 12yearold kids. Everybody knew that, goes to see the singer. Tweens and teens. So they tried to figure out who is the most inspect people, who are the people that would be most we would be most shocked and sick, and they filled it out. I mean, theyre evil jeepiouss, like you couldnt believe. Evil geniuses. Ballbearings and nails, the whole thing. Its tough, its just tough to take, tough to take. Yes. We had someone mention madrid and i mention this again. That was 2004 and that doesnt go back to 9 11, and prior to that, but you cant stop them all i guess. You probably shouldnt get disconsulate but it is, you know, thank god they stopped most of them, but do we really need to accept that some are going to get through . No, no, no. They have to move the security further away, and right. But what kind of people they target . Usually just there when you go in, theres security gone by the time you come out, which is a whole different way of looking at things. Youre absolutely right. This is a sick one. Theyre all sick. On your screen so to speak today anything we should be watching . The markets up again. Yeah, you know, markets now kind of inert to this, but we cant. No, thats true. I agree. See you in a cup offne you in a. Coming up, apples attack on android. Res, i have access to the oil markets and gold markets. Okay. Im plugged into equities trade confirmed and i have Global Access 24 7. Meaning i can do what i need to do, then i can focus on what i want to do. Visit learnfuturestoday. Com to see what adding futures can do for you. At bps cooper river plant, employees take safety personally down to each piece of equipment, so they can protect their teammates and the surrounding wetlands, too. Because safety is never being satisfied. And always working to be better. Mobility is very important to me. Thats why i use e trade mobile. Its on all my mobile devices, so it suits my mobile lifestyle. And it keeps my investments fully mobile. Even when im on the move. Sign up at etrade. Com and get up to six hundred dollars. Welcome back, everybody. Apple is launching a new attack on android. The iphone maker launched a website aimed at per situating Android Users to switch to apples smartphones. It isnt the first time. Two years ago it released an app called move to ios to help switchers transfer their data to apples products. Police in hong kong arrested 21 uber drivers for illegal car hiring. Its part of a clampdown against ubers operation in the city. Police said the undercover operation led to the arrest of 20 men and one woman or illegally driving a car for hire and driving without Third Party Risk insurance. Speaking of the operator of the mobile phone application, a Police Spokesman said a car for hire must be equipped with a permit required by hong kong laws. Uber said it stands with the drivers and would share legal assistance. One more look at the markets this morning before we end squawk box. The futures this morning have been higher throughout the morning, no impact at least in terms of what weve seen out of that terrorist attack in the uk. Right now the dow futures indicated up another 40 points. The nasdaq up by 12. Steve, thank you. Pleasure. If youre not here tomorrow make sure you join us to, please aint no place id rather be. Squawk on the street is next. Good tuesday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer and david faber. Markets in the u. S. And past europe looking past the attack, the deadliest in the uk in over a decade. We await the official Budget Proposal here in d. C. The ftse up about