Rate will rise to 40 next year, and reforms are only likely to slow the growth rate. China suggests that moodys was overestimates the difficulties facing chinas economy. The shanghai was flat. The hang seng was up by 0. 1 in europe, a mixed picture. Things are flat forever the dax and cac. Ftse up by 0. 25 points. M h na news, Constellation Brands made an offer to take over brownforman. And glencore making a takeover approach to bunge. Bunge says it is not engaged in talks with glencore. Pro and uber says it inadvertently underpaid new york city drivers for 2 1 2 years. The company took a commission from full fare prices. Uber says it will pay back drivers, with interest, for the mistake. The wall street journal said the average driver would be repaid 900, totalling 45 million. We will talk with adam lashinsky, author of the new book wild ride inside ubers quest for domination. Lets get to this. The United Kingdom raising the threat level to critical and deploying soldiers to key sites to prevent further attacks. Willem marks has more. Thats correct. Theyre still trying to identify here, authorities and investigators in this huge Police Cordon behind me whether salman abedi, the 22yearold man responsible for monday nights attack acted alone. Because they cant rule out if others were involved, they decided to raise the threat level to critical. The highest in ten years for the uk. Theresa may has been talking about that overnight. We also heard from the home secretary, uks highest security official this morning. She tried to explain this would not be in place for long. Take a listen. What were being told is that it is an ongoing operation. Until the we can be reassured that there is no continued activity around this operation, that it is entirely safe around this operation, its right that we are at this heightened state of alert. It is operationally driven. It is intelligence driven. Abedi travels back from libya, and there was also information claiming that he travelled to syria. We are seeing increased levels of police in manchester and also hear that 3800 soldier will be on british streets guarding Buckingham Palace and downing street. Three men have also been arrested in south manchester related to the ongoing investigation. Thats according to manchester police. Willem, thank you. Thanks for that report. Well check back with you later. Home improvement retailer lowes is reporting the first number that came out was70 cents, but that included a 4 400 million pretax loss, on extinguishment of debt, connected to the 1 1. 6 billion cash tender offer. If you back that out, it was 103 which is below expectations of 106. The stock is getting hurt badly. Down almost 6 . The guidance for the year was lowered but the street is look for 4. 64. The company said 4. 30. Theyre saying the diluted earnings per share outlook has been updated to reflect the loss of extinguishment of debt that you just mentioned and theyre reaffirming their operating outlook. Totem sales up 5 . Comp store sales up 3. 5 . Thats what they reported this time, too. I thought i saw a lower number for the Comp Store Sales. Comp store sales for the business up 2 . For the u. S. Business, 1. 9 overall. 2 for the business overall. They have to do better. Will be a showme situation. The contrast to home depots reports is stark. In this sort of vortex were in now, where we had disappointing new home sales, people are questioning this home builder trade. The context of this report is much different than the context where home detoe reported. The chairman and ceo, kind of acknowledging this may be his comments are its a solid Macro Economic back drop combined with our project expertise. They had a good sales to the pro customers, but that does kind of indicate if its not a problem with the Macro Economic, any issues are because of the companys own performance problem. Lows is still easier to navigate in terms friendlyness not the people but the colors. I havent ben to home depen. You know what i found from lowes . Theyre not always well supplied. What sorts of things are you looking for . Bathroom tiles. Weve bon some remodeling. Just basic things that should be on the shelves that they dont have in stock. When they try to navigate online, theyre not good with the computer system. Im very handy. Really . Yes. Ive gone there many, many times never for anything other than a light bulb. But you light hanging out there. I do. Makes you feel handy. Im still not handy. But they do have great we have weird lights. Different fixtures. So you need 50 different types of light bulbs . Right. I go in there, its intimidating. When i get out, i need somebody to hug me. I depth know what the other stuff is. Its high up. Theres ladders moving around. You know how we go back what was that . Poor tim got canceled. You know how we go back and forth between wine and beer and hard spirits. As a nation . Yes. Now i think its the nice blues, the subtle colors of lowes, feeling good about you see some bathroom fixtures, theyre presented nicely, versus home depot, where you go in i heard a comedian say lows is a home depot with lights. Thats right. If youre going to do it, you might as well go into the now we shifted back to where home depot hd dehas td depot has the advantage. I think im right. Yes, look at the stock price, just over the course of time. Shifting from Home Improvement to politics. President trump met pope francis at the vatican this morning. Eamon javers has more on this. The president is in rome where he just met with the pope. Hes also on his way now to meet with the italian Prime Minister. At that meeting of the pope, they had a gift exchange. They exchanged a fi trinketew t. The president presented the pope with a First Edition set of dr. Kings writings, and a bronze sculpture. The pope presented the president and each member of his delegation with a number of tokens in beautiful boxes. It was a successful meeting. These are the pictures that the whois was eager to have out on the world stage. This is part of the president s multi layered trip. Hes on his way to brussels after this. This is a globetrotting presidency right now. For all of the good pedestrian lines out of this trip, the white house has not been able to shake the air of scandal in washington, d. C. The president making it known last night that he has selected park kasowitz to defend him. And mike flynn had asserted his fifth amendment rights to not turn over documents to the committee. Now the committee will subpoena flynns businesses, saying the businesses themselves if incorporated are not eligible to take the fifth. Even as the president travels overseas, the troubles become home continue. The other thing thats been unveiled this week, you have the budget, the infrastructure bill, all of these things being rolled out. I guess thats not something talked about on the road. But what will the president do when he comes back to all of this whats been released while he was gone. The president ial budget is unusual to have the budget released when hes not in town. The white house says thats a quirk of the schedule, this is when the trip had to happen that said, this is a budget probably dead on arrival. They will write their own budget if they can muster the votes to do that and pass one. It lays out the president s overall priorities, the things the president said he wanted to do. Now the plitt cam wrangling begins on capitol hill. Whatever ends up coming out of this process will not resemble necessarily what the president put out yesterday. But it is the president putting a marker down on the debate saying this is where i want to go. Thank you. Back to the broader markets. Joining us is kathy jones from Schwab Center for financial research, and tim knudson. Welcome to the show. Eric, starting off with you. We have an interesting market unfolding. On the s p 500 about seven points away from record high levels. We got bond yields back down. Leadership and Consumer Staples up 7. 5 . Gold is a leader. How do you read the market . You have a real difference right now between a 1month perspecti perspective, where we are confident that a year from now wellhigher gdp growth, higher rates and inflation. Nothing looks particularly cheep. S p 500, bond yields back down to low levels. Vix, you know, volatility at quite low levels. How were finding opportunity now is were trying to find opportunities to take advantage of global growth, which we think is in a cyclical upswing. Even in the u. S. Where atlanta now forecasts 4. 1 for the Second Quarter, where we think well get connection between the soft data and hard data coming in, to find ways to capture that growth at good valuations. Thats leading us to places like europe. Its nowhere in the u. S. Where we like opportunities in the u. S. Are the cap spectrum. Smaller Company Stocks which are not at second yewlular highs. The russal is high. Russell is high. Indeed, but we believe well get some moderate tax reform within the next 12 months. We are talking about rates, low rates sort of a blessing in disguise, low rates can support higher equity evaluations. When you are expecting rates t o actually rise . The fomc minutes will be released today. We could get an indication of how they will normalize the Balance Sheet. Were looking for two more rate hikes this year. One june, the other in september. Best Case Scenario the fed phases out reinvestment of principle and interest over a period of six months, and then starts to let the Balance Sheet roll off. That will put some upward pressure on longerterm yields. But weve known this for a long time it will be the Economic Data that drives this. Earlier we saw the mick da econ data disappointing. We had a twoyear auction yesterday, the yields were at the highest level since 2008. Tremendous demand at short end of the yield curve, whether its municipal bonds, short end demand at the end of the kev will be met with rate hikes. Initially we need to see a bit of steepening as we get the roll out of the plan for winding down the Balance Sheet. Within the u. S. What do you make of staples . Looking at a group that has shown leadership in this market, close to record highs. Also sport evaluation of about 23 on a current basis, compared to the s p, which is 18. Trading virtually the same multiple as tech stocks. Right. Theres a real demand for quality forcertainty foryearold in the marketplace. We think dif kevidend yield are attractive. So staples are not reasonable right now . Theyre at the high end. We would like to rotate into areas that we think will benefit from growth on the margin. Also where you can lock in additional income. Environment w are rising, we agree that well get two hikes this year, june and september, and not enough rate tightening is priced in. So in our Global Allocation Fund were Short Interest rates. Where you can move to other areas and get high yields. Mlps are interesting and attr t attracti attractive. All right. Eric, kathy, thank you very much. Coming up, Home Improvement retailers lowes out with earnings. The shares are on sale. Theyre down. Well talk to an analyst after the company missed the top and bottom lines. Home depot has been the undisputed winner. 1 185 billion company growth. Maybe lowes is the Better Company now. Well find out when we return. The power of the Nasdaq Market. The power of 100 of the worlds top companies. The power of an etf. The power of qqq. The thinking we put in, clients get out. Power your clients portfolio at powershares. Com qqq. 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. Deartheres no other way to say this. Its over. Ive found a permanent escape from monotony. Together, we are perfectly balanced, our senses awake, our hearts racing as one. I know this is sudden, but they say if you love something. Set it free. See you around, giulia women welcome back to squawk box. Well get more data on housing and the fed. April existing home sales out at 10 00 a. M. Eastern. At 2 00 p. M. , the minutes from the fed meeting earlier this month. Dallas fed president , rob kaplan and Neel Kashkari a speaking earlier today. Tiffany reporting before the bell and after the close, hp. Opec ministers gathering in vienna will meet tomorrow to discuss whether to continue a cut aimed at tightening supply. Crude prices ahead of that meeting, wti is up about 0. 25 . 51. 59 is the trade on that per barrel. Lowes was just out moments ago with quarterly results. 1. 03 for the First Quarter. Revenue and samestore sales were also short of forecast. Joining us is brian nagel from oppenheimer. What were your rating lows before todays number . We had a buy. I like the name. I like Home Improvement retail. Like weve said for a while, i think home depot is a better performing company. Are they the same . As far as operators . Whats the difference between home depot and lowes . Home depot just operates better. Do they do the same thing . If im going to put in a new bathroom myself, does it matter where i go . Will i get the same kind of service . I have the same choices of different brands of stuff to buy . Across the board with all Home Improvement or is lowes different . Is it closer to Bed Bath Beyond or just like home depot . Theyre the same thing. Same company. A lot of consumers, i think, would lump them together. I know that im wondering whether thats really because the experience is different when you go toversus a home depot. And consumers have been going back and forth. It comes and goes. We saw in this First Quarter, as i look at the results this morning, this is another clear indication of when you have a more challenged sales environment, like we had in the First Quarter, home depot performs better. Thats a lot of little things. Theyre better at adjusting their merchandise for erratic weather. Maybe premotion s around that erratic weather. Their numbers were jumpy with a strong april what we will hear from lowes today is they didnt perform as well when sales bounced back. Because home depot was ability to be more nimble. Thats right. They have twice as many stores or the market cap is double . The real keys are higher volume stores. They have more stores than lowes, but the stores are higher volume. I made the point when he walked into a lowes the last couple of years, they didnt have the things in stock i was looking for. Thats just one persons view. You must have a much broader view of the stocking and supply chains at each of these chains. I dont hear that across the board. There are people who are lowes shoppers, people who are home depot shoppers. I think we i ask that because i want broader context for this. Other retailers out there, you have two companies that do the similar thing. One clearly better than the other, here poem depot tends to outperform lowes. People complain theyre not as good as home depot home depot must be a really, really well run company. They have a 6 comp. Nardelli, he wouldnt whats that whats warrens thing . He wouldnt trash nardelli, but about frank blake, langone would rave about him and his successor as well. You can make a difference at the top all the way down to all these stores, all these employees . The management makes a difference at home depot . Absolutely. Frank blake brought home depot back to its roots. He was always seen in those orange he looked like a guy you would want to ask a question to. Just very approachable. Who is the new guy . The new ceo who worked on frank, also very, very good. Home depot has gone back to how the founders ran them. You have to inspire every employee. They are good at home depot. As i said, im looking for light bulbs, i cant even find the aisle. I ask someone and they direct me. Im able to find the aisle. Then i usually ask them to find the actual light bulb. And to get the light bulb for you . If its high. Is this dip an opportunity to buy on lowes . I think so. But youd buy both. Its interesting they did keep theres noise in the numbers with a charge they took for some a onetime charge. They did maintain Sales Guidance for the year. Thats their way of saying that they as joe pointed out, investors want to see this. The stock is now down 7 . Show me youll get to 3. 5 comps for the year. Thats right. Theyre in a bit of a hole here. They did 2 comp, theyre talking about getting 3 to 5. Do you feel comfortable as a longterm holder of stocks, buy home depot and lowes . Thats correct. Thank you. Someone wroelt someone wrote in lowes is softer and friendlier, home depot is more industrial. Someone said loweses was better for women. Right. I dont make decisions about the house. I know. I could see how that would make sense. To get it done i dont want to go into this im gender blind. Gender blind. We need to be. How about you . Gender blind . Sure. Okay. Good. Good to see you. Nice seeing you, too. When we come back, middle east peace in focus following President Trumps visit to the region. We will talk diplomacy and trade deals with george mitchell. Thats next. Right now, as we head to a break, look at yesterdays s p 500 winners and losers. Predictable. The comfort in knowing where things are headed. Because as we live longer. And markets continue to rise and fall. Predictable is one thing you need in retirement to help protect what youve earned and ensure it lasts. Introducing brighthouse financial. A new company established by metlife to specialize in annuities Life Insurance. Talk to your advisor about a brighter financial future. 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. And the wolf huffed like you do sometimes, grandpa . Well, when you have copd, it can be hard to breathe. It can be hard to get air out, which can make it hard to get air in. So i talked to my doctor. She said. Symbicort could help you breathe better, starting within 5 minutes. Symbicort doesnt replace a rescue inhaler for sudden symptoms. Symbicort helps provide significant improvement of your lung function. Symbicort is for copd, including chronic bronchitis and emphysema. It should not be taken more than twice a day. Symbicort contains formoterol. Medicines like formoterol increase the risk of death from asthma problems. Symbicort may increase your risk of lung infections, osteoporosis, and some eye problems. You should tell your doctor if you have a heart condition or high Blood Pressure before taking it. Symbicort could mean a day with better breathing. Watch out, piggies child giggles symbicort. Breathe better starting within 5 minutes. Get symbicort free for up to one year. Visit saveonsymbicort. Com today to learn more. Welcome back. Youre watching squawk box live from the Nasdaq Market site in times square. Good morning. Welcome back to squawk box. U. S. Equity futures at this hour, tough to really say what will happen throughout the session. But there is more green. Up 13 on the dow. Up 15 on the nasdaq. Nasdaq strong. And s p up 2. 5 points. Shares of toshiba jumping more than aft8 on reports tht Western Digital is offering 18 billion to buy the memory chip business. Intuit reporting better than expected results. The company raising its fullyear guidance following a hardfought tax season. The strong results come amid that companies could be hurt by President Trumps proposal to simplify the tax code. Thats hilarious. We have to sell these stocks because people might be able to do their own taxes. If you reduce it to a postcard, theres no need for a planner. Shares of container store, surged by more than 30 . Earnings beat by a wide margin. They included a Restructuring Plan which include layoffs at stores. The market cap around 200 million. This is a seriously small cap company. The instability of the middle east in focus following President Trumps visit to the region. Joining us now to talk about opportunities for a path to peace is senator george mitchell. He is the chairman emeritus at dla piper, former Senate Majority leader and the u. S. Special envoy for middle east peace. Thanks for being here. Thanks for having me. We watched netanyahu speaking with trump yesterday. Both of them have a warm relationship. Both of them made comments about peace in the middle east. How likely do you think that is when you take the other side into account, the palestinians . I think there are two major positives from the president s trip. The first is hes trying on israeli and palestinian peace. The effort is important. Obviously difficult, but times and circumstances change, what may not have made sense 5, 10, 20 years ago may make sense now. When there is no ongoing process, no visibilisible effor violence tends to rise. So visible effort is a good thing. The second major positive was in saudi arabia. Isis, al qaeda, and the terror groups consistently want this conflict to be seen as and to be a conflict between all of islam and all of the west led by the United States. Frankly the president s rhetoric and the allmuslim ban until now have plied into that narrative. Have been supportive of that narrative. The presentation, saudi ayrabia framed it in the more accurate way. This is a conflict between a violent extreme minority within islam against the majority of muslims and the west led by the United States. That framing is, as i said, more accurate, more consistent with u. S. Interests. I think that effort will hopefully pay off in the overall conflict in the region. The Israeli Palestinian conflict cannot and should not be seen in isolation from the region around i it. It affects the broader conflict. I used to think that was the root of all animosity between the arab world and maybe the nonarab world. You could solve that now, its almost its a bigger issue now. In a perverse way the rise of iran seems to have maybe looking at israel than iran. It makes peace possible with israel, it seems. Lets be clear. Iran and the arabs have an ancient hostility. That goes back a long time. When Saddam Hussein went to the gallows, the last words he spoke were damn the persians. So there has been a longstanding hostility. It existed while the sha was there. It is a major factor in the hostility to the gulf arabs to iran. That will continue and we must resist that. But it does represent a common interest between israel and the arab countries. I think theyve come to recognize their principal worry is iran, longstanding and will continue for a long time rather than israel, which is there to stay. Whatever they may think, they know the United States is committed to israels survival behind defensible boarders, and therefore an agreement with the palestinians is a step in that direction. The president went to saudi arabia to make that a focal point of his effort. President obama cited the arab peace initiative. The only agreement he did mention on the day he announced my appointment seven years ago. Since then iran is the real threat. So there may be a chance here. Tell me whether im wrong here. Somehow finding a slight to israeli and the palestine issue is necessary but not sufficient to make total peace between. Theyre still furious about other things, maybe they want to bring a caliphate back youre quite right. First off islam is driven by several conflicts. Some go back to the 7th century, the death of the prophet muhamm muhammad. The prevailing group was the sunni, the losing group was the shia. That conflict has gone on for 1400 years. You can see the results now in yemen, libya, iraq. In syria. And thats going to continue as the population in that part of the world increases dramatically. Right now 1 in 5 persons on earth is muslim. In 40 years, when the worlds upon lags gets close to 10 billion, 1 in 3 will be muslim. Solving the palestinian israeli conflict in itself will not solve those conflicts, but its a step in the right direction. Are you talking about a onestate solution or a onestate solution . Theres no alternative to a twostate solution. One reason why it survives, despite many president s and palestinians and israelis to achieve it is because there is no alternative. Thats the objective. The president framed it in that way. Lets hope and pray that he succeeds. It would be a huge step forward. Though as joe suggests and i agree, by itself it wont solve all of the problems. The saudi perspective now, was it the government that was friendly with the hard line the wajabi sect or the individuals inside saudi arabia supporting that or have they at this point pushed away from that sincerely . Do we still think that behind the scenes the grand bargain made when the original king, the father of the current and all other kings, since he died, abdul aziz, was that he would use the military force of the wahhabi sect, and the grand bargain was they would handle religion and education, he would handle the affairs of government. Thats been the case so far. It presents them with a difficult problem. Which persists to this day. They are aggressively pursuing indoctrination in their view of islam all around the world, in indonesia, pakistan, large muslim countries. At the same time they recognize their future lies in a modernization in their society. So its an internal effort to in effect move away from the past thats impeded by many in society who dont want to move away from the past. By thats true in every society, including our own in a different context. But the 70 are under 30, i think in saudi arabia. So theres hope for so theres hope that the Younger Generation might finally move beyond that, i guess. They need jobs. And you have the deputy crown prince who is 31. Its significant that the king invested so much authority in a very young person, actually young, but by saudi standards really young to be in a leader position. Soon theyll approach a milestone in which they will have to go to the next generation for a king. The next king will be the first one not to be a direct son of the founder, abdul aaziz. So theres conflicting forces within their society and there are conflicting forces within our society. Theyll deal with it in their way as we deal with our issues in our way. Senator mitchell, thank you very much for coming in. Thanks for having me. Coming up, markets in focus, mohammed el aryelerian will be guest host starting at 7 00 p. M. And Governor Andrew Cuomo will join us at 7 30. Later, senator rob portman will join us. Stay tuned, youre watching squawk box on cnbc. You think traffics bad now, the futures going to be a nightmare does nobody like the future . Cmon, the future. He obviously doesnt know intel is helping power Autonomous Cars and the 5g network they connect to. With this, wont happen in the future. Thanks, jim. Theres some napkins in the glovebox. Okay, but why would i need a napkin . You could have just told me a bump was coming. We know the future. Because were building it. Welcome back to squawk box. Time for the executive edge. Were watching shares of gopro. The ceo said the company is on track to meet Second Quarter revenue guidance and hes happy with the turnaround hes seeing in gopros business. Heres woodman yesterday on closing bell. For the last year and a half we have suffered challenges, both selfinduced but also there are headwinds in the digital images industry overall that have been unavoidable. I would like to focus on the vob were doing now moving forward. The restructurings weve had which included important leadership at company. We have a strong coo in the form of c. J. Probert and the rest of the team at gopro has never been stronger. Woodman said gopro has seen stronger behand for the hero 5 line of products than the previous generation of those products. Apple says it saw a spike in government requests for data relating National Security in the second half of last year. Apple said 6,000 requests in the second half of 2016 were double that of the first half. They can ask apple for information in a National Security letter. Tom cruise says a top gun seek ququel is happening. Im not sure how this could work. He could come back as a teacher. Hes too old. If he wasnt too old, i could have clint do another dirty harry movie. I would see anything clint is in. I would, too, but he cant be dirty harry anymore. Love clint. Unforgiven favorite movie. But Harrison Ford in that star wars thing i love him in the star wars thing. Oh, god. That was good. I dont know. Wall street had a seek welqu that was the worst thing ever put on film. Cant do top gun again. In an interview on i would rather see rocky come back and fight someone . Oh that did happen. Cruise says he expects to begin shooting the sequel in the next year. He has to be the commanding officer, get some officer hes the flight who was the guy okay. All right. At the end of top gun he went back to flight school. And get clints son to be the new hot flyer. Chiselled. Any way, he didnt provide details on what thats why were making them up for you. Fill in the blanks. Top gun was the highest groe grossing film of 1986. Goose cant come back. Hes dead. Val kilmer is so fat, you couldnt fit him into he lost weight. But you couldnt weight he came back after cancer scare. Val kilmer cannot be a new ice man. New ice, new goose. Youre so literal in terms of the sequel. Its not just the same characters coming back. They can create a whole new plot. You know about sequels. You can count on one hand the number of sequels that g2. That was great. Jaws 2. That was terrible. Jaws 2 was much better than jaws 3 and 3d. Jaws 3, he followed him down and he terrorized seaworld. And in finding dory an octopus drives a truck. Sequels are no good. No good. All right. We have earnings that are just out from tiffany. The retailer came in with earnings of 74 cents a share versus the 70 cents the street had been anticipating. Other metrics here, revenue shy of forecast. Samestore sales were down by 3 . Analysts were looking for Comp Store Sales of 1. 7 . Stock off 6 cents. Coming up, uber admitting it underpaid tens of thousands of new york city drivers. Thats the latest problem for the ride hailing service. Are these growing pains . It makes you wonder. An author takes us inside the mind of the ceo, travis calkal k kalanick, thats next. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. Im dr. Kelsey mcneely and some day you might be calling me an energy farmer. Energy lives here. With this level of intelligence. Its a supercomputer. With this grade of protection. Its a fortress. And with this standard of luxury. Its an oasis. The 2017 eclass. Its everything you need it to be. And more. Lease the e300 for 569 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. 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. It has been a bumpy few months for uber. A new book takes us inside the mind of embattled ceo. Lets bring in the author adam. His book is titled wild ride inside ubers quest for world domination. Adam its good to see you. I guess the first thing id ask you, all companies that are disruptors go through growing pains like this. Is it more than that . Or is it what you would consider somewhat typical for i mean, this is an amazing idea. Amazing company. Yeah. The poor guys that have medallions they paid a million and a half for, worth like 400,000. Its tough to take over a whole market like that. And youre going to have a pushback. Is it them . Is it the pushback or is it him . The growing pains that normal Young Companies go through are what i would have described as what happened before 2017. They went through this entire cycle. Uber did, of being disruptive, building a big business, courting a lot of controversy and having problems. Having regulators push back. Then 2017 came. I mean the last several months have been like nothing ive seen. Really any company can the list is just, you know, as long as your arm. The last several months all these problems that have come up from the accusations of sexual harassment, and not treating their employees fairly, from stealing things, a lot of those are things that happened before this year, right . Its probably an ongoing culture issue, some of these situations . Agreed. But it all surfacing publicly one after the other. Not to make any excuses, many of these things theyre facing are things that other companies face. Right. But theyre in the penalty box. They have nowhere to hide on any of this right now. In terms of just like these the attitudes in silicon valley. A lot of these things are the norm. Why do you think its happening to uber again and again . Well, uber is the brashest, the roughest, the most ruthless of any of these companies. Do you mean uber or do you mean travis specifically . I dont. Okay. I dont mean i dont mean him. But, you know, hes not the company. But he sets the tone for the entire company. I mean everything thats good and successful about the company you can trace back to him. And everything that people want to hate about the company you can trace back to him, as well. Does it get dinged on valuation when it goes public because of all of this . Well, i dont think its going to go public any time soon. I dont think its an exaggeration to say it two be 2019 before they do. Because of all these things . Or they dont want to go public . I think the line was that they didnt want to. But it is also because of all these things. Its gotten extremely messy. They lost a ton of money in china. Selfdriving is a huge investment. Theyre not ready. And theyve got all this controversy. And yes the valuation gets dinged. But nothing is an existential threat at this point . No, i think they do face existential threats. Really . From lyft . From selfinflicted . They cant seem to shoot straight. Im optimistic everybody gets ubers. Youre not going to say oh, im not going to get an uber. I think they have a business. And it very well may work out. It could work out. But theyve got a lot as i said, more than average head winds right now. Travis the guy to lead them out of it. He certainly thinks so. And i dont know. I can tell you that he has no intention of letting go. So this theyre looking for a cheap operating officer. Thats about as big a hire as a company can make right now. Adam, thank you. Thank you. When we return, squawk market master Mohamed Elerian will be our guest host. And later new york Governor Andrew Cuomo is asking President Trump to use federal funds for much needed repairs at penn station. The governor will join us at 7 30. Ing more range of motion. Im fine. 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And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Why invest in average . Market test. Key comments from the fed. And an upcoming opec meeting all on todays agenda. Squawk market master Mohamed Elerian joins us as our guest host for the remainder of the show. The president and the pope. A look at the historic visit at the vatican as the president s trip continues today. And if youve ever been in penn station you know it is in major need of a makeover. New york Governor Andrew Cuomo calling on the federal government for funding. He will join us to talk about rebuilding the big apple. The second hour of squawk box begins right now. Live from new york where business never sleeps, this is squawk box. Good morning and welcome back to squawk box here on cnbc. Go ahead. Come on, becky. I dont care. Live from the Nasdaq Marketsite in times square. Have a seat. Im joe kernen along with becky quick and melissa lee. The futures at this hour indicated up a little bit. Trying to no, well the s p is up. The s p is up 1. The dow has now turned negative down less than a point. The nasdaq continues to be strong on a relative basis up almost 12. Check out european markets this morning, they were mixed earlier. And continue to be so. Red in most of the bourses but not by much. Half point half of a percentage point is the biggest move in italy. Heres whats making headlines right at this hour. The Federal Reserve will release the minutes of its most recent meeting at 2 00 p. M. Eastern time today. Liesman went to d. C. For the release of these minutes. I told him your gravy train is ending. Microanalyzing every little comment who was it we talked to this week said the fed is here and here to say. Elerian can talk about that. They said the fed is trying to get out of some of this stuff but basically they never will get out. Mohamed is here. There is a term for when theres a crisis and the government designs a program to address a crisis, that Program Never goes away. I forget do you know the term . There is an actual term for that. And this there is and this will never the fed will never go away. Why are they normalizing the Balance Sheet . Thats just a cover . Its a cover . How much how much they have a long way to go before they get there. We have training wheels. Have you ever ridden a bike with training wheels . Yes. Its no fun. Its no fun. You cant do any of the fun stuff that you do on a bike. Thats who we are right now, riding around with training wheels. Its no good. No government ever voluntary reduces itself in size. Im looking up to try to find the term. Liesman knows it. Its some i think it might be german. Anyway, investors are going to be watching closely for any new information about the pace of Interest Rate hikes. About 81 of traders expect a rate hike at the next meeting in june. Thats according to Thompson Reuters data. Elsewhere, i have to say it wrong on purpose, the National Association of realtors. Realtors. Realtors. Nuclear. You added the i. Realtors. Oh, i know. But everybody says it wrong, will release existing home sales for april 10th for april at 10 00 eastern. This one may get some extra scrutiny after yesterdays report on new home sales showed an unexpected drop of more than 11 . Consensus is looking for a deline of 1. 1 . Home improvement retailer lowes taking a sizable hit in this mornings premarket trading. The Company Earned 1. 03 a share for the First Quarter, three cents below estimates. Revenue was also below forecast and samestore sales increased just 1. 9 versus an expectation of 2. 9 . So the stock at this point indicated down over 6 . Opec ministers are gathering in vienna. Theyll be meeting tomorrow to decide whether to extend that output cut production to Production Cuts aimed at tightening supplies. Analysts had been expecting that the cuts will be extended through the First Quarter of next year, and a big wild card is they will make those Production Cuts even deeper than they already are. Right now wti is relatively flat. Down by a penny to 51. 47 a barrel. The United Kingdom raising the threat level to critical and deploying soldiers to prevent further attacks. Willem marx has more on the Manchester Bombing aftermath. We heard over the last hour or so that three men have been arrested in the south of the city. A couple of miles from where im standing right now near to the Manchester Arena where the attack on monday night took place. Police still focused on trying to decide whether salman abedi, the man suspected of carrying out the attack, had accomplices. The threat level seemingly has been risen to critical here in the uk, because theyve not been able to rule out that he may have had other people helping him in that attack. This morning the uks top security official, thats the home minister amber rudd, she said that the threat level was unlikely to stay at this level too long. Not too long. Lets have a listen to what she said. What we are being told is that it is an ongoing operation. Until we can be reassured that there is no continued activity around this operation, that it is entirely safe around this operation, then it is right that we are at this heightened state of alert. It is operationally driven. It is intelligence driven. Shes just come out of a meeting with the Prime Minister and other Security Officials this morning. She said that salman abedi recently traveled to libya. She wouldnt comment on French Interior ministers view that he may have traveled to syria and had direct links with islamic state. Islamic state claimed responsibility for monday nights attack. There will be more armed police here in manchester over the coming days and amber rudd, the home secretary, has confirmed there will be up to 1,000 soldiers deployed at sites around the uk, including Buckingham Palace, the palace of westminster and downing street. All right, willem, last time i said goodbye, said well see you again. I dont know if well see you in the 8 00. We can only hope. Thank you for that report. Appreciate it. All right, is the trump trade back on . Stocks now on a fourday winning streak. Joining us now guest host Mohamed Elerian allianz chief economic adviser and richard e it terno blackrocks chief investment strategist. We had russ on and i asked him, is he going to be replaced by c3po or r2d2. A lot of people are getting replaced at blackrock. Thats not really true. Your job is safe . I like you so im not going to ask you that. This is the first question to someone you like. Its very small amount remember what sorkin did to poor larry fink when i was on about the replacing everybody with robots . I dont remember what andrew asked him. Just asking. And its a very small amount. So, okay. Wasting time. Thats the first time i ever have, i think. So you heard the you heard the intro. Is the term trade back on in your view . I think the reflation trade is back on. People have priced out of a lot of the trump trade but they conflated the decline of the trump trade skepticism about how quickly tax cuts would come through with the ongoing reflation trade which started well before the u. S. Election and the recent data suggesting thats still firmly in place. I think were transitioning to a sustained period of above trend growth coming not just from the u. S. But globally which gives confidence that actually this could last for a long time. And the anal sis tells us were in the middle of potentially a very long cycle indeed. It would have to be because its been in place for awhile already. Is any of it dependent on getting trump legislation through . Or hes already done some deregulation . Theres already some animal spirits with Small Businesses and maybe large businesses, too, with investments in capital. Or does it have are we dependent on a Republican Congress to do something . Were not dependent on a Republican Congress to do something. I think you have the reflation trade supported by the fundamentals in the economy, seeing growth picking up. The start of the animal spirits return in terms of investment spending over time. I think if you did get a material tax package now coming through in the end of this year, or 2018, that now would come as a net positive surprise. Most of the investors i speak to now are placing a very low probability on that happening. So when you think about the risk to market, actually the risk that we get any sort of tax package coming through to the upside. One of the big lessons is people have been very focused on the shortterm political events. Very focused on the potential to get a tax package through. Actually what they should be focusing on is longterm fundamentals which is growth looks great, were in a long cycle. Were in an environment where youre absolutely being paid to take risk. And in particular paid to take risk within many equity markets right now. Mohammed, we talk about it all the time, and we still dont know, we havent decided what the answer is, would the fed becoming less prevalent in our lives, could that be a positive for the economy . Or is everything theyve done so far been supporting, you know, the economy after the financial crisis . Theres a whole contingent of people that think that not only has it been the law of diminishing return, that their efforts didnt help as much, but that its actually hurt investment, or is actually, you know, all this easy money, people have done things with their money rather than with their Business Plan. The benefits of fed interventions are coming down rapidly. The benefits . Arent there negative consequences . Absolutely negative consequences. And the longer we stay in this mode the bigger the negative consequences. Savers . We are distorting markets. We are making people do things that i think over the long term we and they are going to regret. You mean like bubbles in the stock market . So to go back, i dont think this is any more a trump trade. If you look at the internals, if you look at the spread between the u. S. And germany, if you look at the dollar, this is no longer a trump trade. This is somewhere between a reflation trade, but much more importantly, a liquidity trade. This is a liquidity driven market. The hope is that we hand off to reflation market. That is the hope. The hope of five years. You talked about that like five years ago. I have. And i think we have underestimated, and i have underestimated the strength of the liquidity injections. Not just from the fed but i think the increase in inequality has meant theres been less consumption and more investing in the market and the profit share is so high that the markets put that money back into that the Companies Put that money back into the marketplace. So this is this is more, so far more a liquidity trade than it is a reflation trade. We had ben bernanke here maybe three or four weeks ago and asked him at the time if the inequality situation in america was compounded by the feds actions . He was pretty defensive about it and said no. Do you think thats the case or not . I would be defensive, too, if i were him. Yes it is the case. When you use the asset channel, when you boost asset prices in order to promote growth because thats the only tool available to the fed, who owns the assets . It is the rich. So they benefit. I think the main concern about the inequality is less income and wealth and much more that now that the perception of inequality of opportunity. And once you deal with the inequality of opportunity it becomes politics. And it becomes much more complicated. In terms of the distortions in the markets, richard, thmohad is talking about, you know, one way the fed is distorting the markets is because Interest Rates are still so incredibly low. So were seeing this chase for yield that is propping up areas of the market that dont necessarily correspond to this notion that there is global i mean, take a look at consumer stapings. Were seeing this reach for yield plays in this environment that may not necessarily i mean do you think Consumer Staples for instance merits 23 times multiple in this sort of market . Were in an environment where Interest Rates are exceptionally low and likely to remain very low for a long period of time. So we sit in these meetings debating whether the feds going to raise rates once or twice by 25 basis points. These are very gradual moves. The path of future Interest Rates is going to be one where rates are going to be moving very slowly back towards more normal levels. And starting to remove some of the distortions weve talked about. But in an environment where real bond yields are close to zero, you have to think about what is the fair value for equities in that environment . And the answer is, that the valuation is higher. So this is the valuation is higher. Particularly in an environment where growth is now starting to come through. So the one i come back to on the description of the liquidity trade. It is a liquidity trade. But whats been disappointing for many years is that liquidity is sitting on the sidelines. It hasnt translated through to stronger investment spending. And until very recently it hasnt translated through to stronger investor op tight. Investors have been sitting on large amounts of cash, and particularly on large amounts of bonds, safe haven assets due to their shortterm concerns. What were seeing just in the last few weeks are the first signs, actually, not only that companies are starting to become more confident and spend more, so look at the durable goods numbers, but investors are starting cash on the sidelines coming in to further support the market . Thats actually true in your view . So were seeing we saw in the last few weeks record flows into european equities an area deeply unloved for many years. Were now seeing positive net flows in all major geographic equity markets for the first time in this cycle. So were just starting to see that cash. And not just cash, money sitting in fixed income starting to move back into equities. So, last question, mohamed, so, others would say the fed had very little to do with setting Interest Rates at unrealistically low levels. They were only responding to the global environment. German bonds, you know, at 40 basis points or whatever it is. That the feds in the right ball park. Others have said that the u. S. Would have been big enough to drag everyone out of the slow growth area if it wasnt for the fed, and that global rates would have risen if the fed that we actually, it was our fault in the first place for yields to be this low. Where are you on that . So, europe has had an influence on our yields undoubtedly. But, the biggest influence has been that the fed has followed markets rather than led markets. And we saw it again last friday. We had one bad day on wednesday, and next thing you know, on friday a fed president comes out and says ooh im not sure we should raise Interest Rates twice more. We have conditioned the market to expect the fed to be their best friends forever. And thats my concern. Right. And the liquidity its not just about the level of Interest Rates. It is that the system is starting to overpromise liquidity. Were seeing a proliferation of etfs that promise liquidity. Thats not going to be there when normal conditions there was a time when the fed was watching the developments in cyprus. And you know were not sure we can we were going to do something, but Economic Conditions in cyprus. I was like, where the hell is its like i thought it was a golf course. When i say cypress im talking about Cypress Point no im kidding. But the mandate is now 100. Not a dual mandate. Its like 100 mandates. The markets go anyway. Thank you. Well talk more. Richard, thank you. My pleasure. See tlc3po. How about r2. You can be replaced by how. Have you seen it . I have seen it. Max headroom. Thats right. Coming up the house ways and Means Committee holding a hearing on increasing u. S. Competitiveness in preventing jobs from moving oversays. Larry lindsey of the Lindsey Group has been asked to testify. Hell join us after the break. And later President Trump meeting with the pope this morning. Well speak with former ambassador to the vatican in just a bit. Youre watching squawk box on cnbc. 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 . 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. That is a very cool art installation here in times square. Oh, its right behind us. Its right behind us downstairs. Oh, my god. Meanwhile house ways and means where is that . Joes going to run out. Ways and Means Committee holding a hearing now you can enjoy it. Holding a hearing on increasing u. S. Competitiveness and preventing jobs from moving overseas. One of those asked to testify about tax reform is our next guest Larry Lindsey, president and ceo of the Lindsey Group. Larry, good morning to you. Good to have you with us. Its good to be here. Thank you. You know whats so interesting is when people want to attack tax reform, the thing they latch onto is 3 gdp in 2018. When the economy is actually averaged 3 growth since world war ii. Why do you think thats i mean, why wouldnt tax cuts unleash how do you sort of bat those criticisms away . Sure. Well, you know, it depends on how you structure them. What we had so far, since 2010 when the recovery began, is literally the worst recovery in u. S. History. Weve averaged 2 growth. And the reason is clear. Its twofold. One, weve had a 40 drop in the rate of capital formation. And weve had a drop of almost twothirds in the rate of product it growth. Those are very easily targeted by tax changes. Not simply by throwing money out there but by targeting the issues of Small Business creation and capital formation. And id like the house blueprint, because thats exactly what it does. And i think well be able well actually create conditions that are better than the historic average. And i think for a time, anyway, were going to have growth above 3 , assuming they get it passed. Does it matter that the estimates are so far above the blue chip consensus . An oped today in the wall street journal saying no other budgets in the past have gone above the blue chip consensus by more than 0. 1 , and the plan here thats been proposed goes above by 1 . Yes, well, jasons a friend of mine, and i dont mean to pick on him, but when he was there, their average miss on what actually happened was over 1 . Every single year, year after year. So, it turns out blue chip may have been there, too, but they were simply wrong. Again, i think were going to accelerate from there, assuming we get something done. And honestly, the only thing i disagreed with your with mohamed on was the question of do we need a stimulus of some kind, a supply side stimulus and i think the answer is yes. We have expectations now that are very, very high. Theres a lot of corporate spending plans. That are about to be decided later this year. If theyre not the kind of incentives that the bill has, such as expensing in it, i think a lot of those are going to go away and i also think Small Business optimism is going to collapse. We are long, long, long into this expansion and were at full employment. Youve got to move the wall somehow or were going to hit it. Larry, given that expectations are sky high, not just among investors but also household and corporate sector if you look at the soft data, speak to us a little bit about the process from here. How do you see the reconciliation of what the administration wants in the budget, what congress wants, and the sequencing with other policies that are priced in already . Yeah, well i think what the administration wants is a signing ceremony. I dont think theyre organized enough to be able to try and shoot for anything more than that. And a signing ceremony would be great for them. They got one. I think what were going to see is the house youre asking about taxes. On taxes, i think, you know, the folks in the house delegation are very, very knowledgeable. Theyve been at it for most of their lifetime. That includes ryan, includes muniz, also includes mr. Brady. I think the senators are less wedded to the type of tax reform they want. I think theyre going to be more focused on, you know, what flies politically. So i think were going to see the structure of the house bill, but dialled back in order to meet the needs of the senate, and then the president s going to sign it. Larry, its been pointed out that a lot of the cuts to food stamps, and medicaid, and some of the other disability programs, that theyre not really cuts. Theyre just slowing down the growth that is that is expected in the future. But its still going to be politicized. Its all youre going to hear about. De blasio said people are going to die. I think pelosi said people are going to die. They dont just say that maybe theyre draconian. They say people are actually going to die. Thats the current state of where we are. And would it be easier to accomplish some of this stuff if youd look at medicare and Social Security . And then maybe the food stamp cuts, or whatever you want to call them, those wouldnt have to be as large on a relative basis . Is that one of the problems with this budget . Joe, i think what youre saying is you want even more people to die if i understand. Youre going to hear that rich people are getting a tax cut, and that youre getting it from people that need help on the safety net. I mean is the whole idea of getting people off of the safety net and into a productive environment of work and earned success and the dignity of work, is that something noble that we should be trying to do . Weve had one of the most massive increases in the safety net. Were now up to 18 of personal income as a transfer payment. Stated differently, transfer payments in america are larger than all of personal income in france. At 18 , were talking, over 2 trillion. Were talking about 7,000 per person. Not per poor person, per person, 28,000 for every family of four. And youre saying that theres no room to cut that . No, no, im not. Thats just overwhelming. Other people are saying it. I know what theyre saying. Yeah. All right. Well have you back. You know, we need to talk more about it to get some of the, you know, both sides. We dont hear that side much. Larry lindsey, thank you. All right. Coming up, new york Governor Andrew Cuomo. Who im sure thinks cuts are too draconian. Hes looking for President Trump for help on his Infrastructure Projects in the state. That interview straight ahead. Time now for todays aflac trivia question. Are you ok . What happened . Dad kinda walked into my swing. 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 ltry align probiotic. N your digestive system . For a nonstop, sweet treat goodness, hold on to your tiara kind of day. 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Good morning, welcome back to squawk box here on cnbc. Were live at the Nasdaq Marketsite in times square. Among the stories front and center were watching shares of tiffany this morning. The luxury goods retailer did beat on the bottom line by four cents posting quarterly profit of 74 cents a share. Revenue missed forecasts and compstore sales posted an unexpected decline. Were seeing shares down almost 5 premarket. Jim immelt is in the spotlight. Hell be the keynote speaker at the Group Conference in florida which will feature appearances by honeywell, united technologies, and others. Ge shares have been pressured lately. Lately . Longer than lately. 16 years . Specifically lately following a Deutsche Bank downgrade which questioned the quality of the companys earnings. And a takeover deal in the Insurance Industry fidelity and guaranty which sells Life Insurance and annuities is being bought by cf corp for 1. 84 billion. Thats a premium to yesterdays close. Cf is a Blank Check Company whose Business Plan centers solely around raising money and acquiring companies. New york Governor Andrew Cuomo calling on President Trump and the federal government to provide funding and a longterm solution to deal with the massive problems that have been taking place in penn station. Joining us right now to talk about improving infrastructure in the empire state is new yorks Governor Andrew Cuomo. And governor, thank you for being with us today. Thanks for having me. Good morning. Good morning. Weve just seen the details, or some of the details, of the president s infrastructure bill, a trillion dollars in spending. What is it that you would like to see this administration do for penn station . Yeah. Well, longterm, i think the president s direction on infrastructure is exactly right. Vice President Joe Biden spoke about it in the previous administration. Were way behind on infrastructure. Were living off not our fathers and mothers legacy but our grandparents legacy. We havent built an airport in over 25 years. Were not building bridges. Roads. Tunnels. So, longterm we have to get back into business of repairing the infrastructure. Shortterm, were now paying the price of ignoring the maintenance. We have penn station. Which is pennsylvania station in new york, but it is the main hub for all the amtrak trains going through the northeast corridor. And it is literally crumbageing. Its been underfunded for 50 years. The tracks are coming apart. The ceiling is leaking. Theres been tremendous delays. Derailments. Its also dangerous. And it has to be fixed, and it has to be fixed right, because it is having a tremendous impact not only in the new york metropolitan area, where its the heart of the system, but, the whole north south corridor for amtrak goes through penn station. Right now, the Amtrak Corporation is suggesting that they can get it fixed during the summer with emergency repairs. I think this is a lot more than emergency repairs. I think its a lot more than the summer. And i think if we dont do it right and we dont do it quickly were going to have significant, significant delays all through the summer. It will be catastrophic in some ways in the metropolitan area. And i dont think were focusing on it. And i want to focus on it before its too late. Youve called for the replacement of amtrak in terms of the maintenance and repairs and running penn station and your hope is that theyll bring in some sort of private contractor or someone to do it instead. Whats the response that youve gotten from the federal government so far . We havent heard anything back. Now its only been a couple of days, and i understand theyre busy with a lot of things. But we havent gotten a response yet. And basically i offered three options. I said look, let amtrak bring in a private company. This is basically a construction project. Let them bring in a private company. Amtrak doesnt have the best record of doing this type of work. Or, the state will take it over. And ill bring in a private company to do the work. Or the port authority, which is a fivestate agency, new York New Jersey will do it. Somebody has to do it. It has to be done right. Someone has to be accountable. And it has to be done quickly. Because were now making up for the lack of all the maintenance that should have been done. And its a big system and it is crumbling by the day. Governor, people will probably say wow, you know, new york has pretty high taxes. And maybe this would have been something that earmarked some funds for, you know, out of the years that its been in decline. And i saw on article about, you saw what happened in connecticut. They finally said, you know what . We just cant hit up our wellheeled people any more than we already have. Theyre starting to move out. We cant just tax our way out of this. So i guess my bigger question is, as a democrat, when does it do you get to the point where you say you know, we just cant be all things to all people . And its got to be on not on the taxing side, but its got to be on the spending side, that we start making some really hard choices. I mean, i dont envy you. But its something you must think about every day. How do you do it . Yeah, well a couple of things. First you appoint i understand the general point. Its factually incorrect on penn station, because penn station is owned by the federal government. Okay. So it has nothing to do with the state of new yorks funding. It was owned by the federal government. The federal government owns amtrak. They were supposed to provide the funding to do the repairs. Right . So that had nothing to do with new york. In terms of the stereotype, you democrats, you republicans, you oversimplify. My spending increases in the state of new york over seven years have been less than any governor in recorded budget history. We had a 12year governor, a republican governor in new york, my spending increases were less than the 12year republican governor. So its not true that all democrats want to spend this was a bigger this was talking about the overall budget were looking at now. You see going back and forth about whether, you know, the safety net is being hurt, and the republicans would say the safety net has gotten to where its not a net anymore, it actually makes up the ground floor for a lot of people. Its just a philosophical argument about, you know, about what we should really try to do. People on a safety net, you hopefully get eventually its a bridge to getting a job, and dignity of work, and earned success and all the things that we want for people. And you heard mulvaney, i think he said, yeah, this is a compassionate budget for the taxpayer. We want to be compassionate to everyone. But we constantly have this argument between the two Political Parties about what the role of government really is. Yeah, lets stay with this for a second. We have the argument because we want to argue from the extremes. And you have an extreme left that is very loud. And you have an extreme right that is very loud. The truth is, like most situations in life, its balance. Look at what we did in new york. Ive been governor seven years. Your tax rates are lower than they were seven years ago. For every new yorker. Not adjusted, not with inflation, taxes for every new yorker are lower today than the day i took office seven years ago. And the quote unquote safety net is stronger than ever before. Its balanced. Now do i believe this federal proposal is bald . No. This federal proposal says tax cut for the very rich, the government that we believe in, more money for defense, more money for the pentagon. You want to talk about waste, thats an area where you could find waste. And where do they find the money to pay for the tax cuts for the rich . Affordable housing, health care for the poor, food for the poor. Have a nice day. No housing, no health care, no food. I dont think thats balanced. And thats the problem. You have an ultraconservative ideology operating in washington now. These are not moderate republicans. And thats the problem. I would ask new york i would have asked president obama inside of President Trump. He was in for eight years. You should have hit him up for some of this for penn station. Look theres no doubt that the government overall, federal government, state government, local governments, nobody has funded the infrastructure the way they should. Why . Because its maintenance of roads and bridges. It is not sexy. It is not fun. And its the first thing that gets cut on the budget. Lets be honest. And its very necessary and were being faced with those issues right now as we see the problems that have been popping up. Governor let me ask you one other issue about the overall tax bill, or the tax reform thats being discussed right now in washington. One of the ideas thats constantly been brought up is this idea that you should not get a refund or a rebate for your federal on your federal bill for your state and local taxes. And i can understand the state like florida, or state like arkansas that feels like they are paying for other states. But what woo that mean to a new york, a connecticut, a new jersey, if that were to happen . California, new york, new jersey, connecticut, it would be utter devastation. I mean, it could not be a more hostile attack. After all the controversy we went through with health care, and were going to go through with tax reform on the rates for the rich, now youre saying to states like california and new york, to the extent people deducted their state and local taxes from their federal taxes, were going eliminate that. So why should states like to 40 increase. Absolutely. But why should states like a florida or an arkansas or any of these that dont have local taxes, why should they be subsidizing us . Well, we have costs that they dont have. You know. We have more poor people. We have more people without health care. We have more homeless people. And we believe, in a state like new york, that you cut food stamps on the federal level, we believe people shouldnt go hungry. And the federal gospel that you preach is, states rights. Shrink the federal government, give the authority to the states. Yes, unless you disagree with the states. And then you want to do it your way. It is an utter act of hypocrisy. It is double taxation. I believe its unconstitutional, and illegal. Because you now want to tax the tax that people pay to their state and local government. And this entire philosophy of well lets do a tax cut for the very rich, and that will stimulate the economy, and in the meantime we cut the safety net, theres nothing new here. This was trickle down. We did it. It failed. This is trickle down on steroids. This is trickle down as the Niagara Falls of trickle down, right . But it didnt work then. Its not going to work now. Cutting taxes for the rich doesnt stimulate the economy. And when you say to the little guy, the safety net, no housing, no food, no health care, in this environment, where you have anger and polarization, and the worst income inequality in the nation, i dont think its healthy for the body politic. Governor, want to thank you for your time today. We do appreciate seeing you. Thank you. The april tally of existing home sales out later this morning and could be a shocker. Diana olick joins us now with some Early Warning since. Diana . Melissa, we already got some really disappointing numbers on sales of newly built homes in april and later this morning we get the bigger number, sales of existing homes which make up about 90 of the Housing Market today, if Mortgage Applications are any indication, theyre not going to be great. Total Mortgage Application volume did increase 4. 4 on a seasonally adjusted basis last week but it was entirely driven by refinances. They jumped 11 weektoweek. Thats because Interest Rates dropped to the lowest level since last november. 30year fixed hit 4. 17 on the Mortgage Bankers association is your sprap but home buyers, they were not especially excited by the drop in rates. Mortgage applications to buy a home fell 1 from one week earlier, and theyre just 3 higher than the same week one year ago. The trouble is a severe shortage of Affordable Homes for sale. Now we saw a steeper drop in Mortgage Applications to buy a newly built home last month, and thats because new construction comes at a Price Premium to comparable existing homes. Builders are offering some cheaper models and stripping down others of amenities but its not like theyre plowing into the starter home market again because they really cannot afford to. The prices of land, labor and materials just keep going up. And are squeezing builder margins. Lots more of these numbers online at cnbc. Com. Thank you very much. Coming up, a historic meeting at the vatican this morning between President Trump and pope francis. Well talk to the former ambassador to the vatican in just a bit. So new touch screens. And biometrics. In 574 branches. All done by. Yesterday. Banks arent just undergoing a face lift. Theyre undergoing a transformation. A data fueled, security driven shift in applications and customer experience. Which is why comcast business delivers Consistent Network Performance and speed across all your locations. Hello, mr. Deets. Every Branch Running like headquarters. Thats how you outmaneuver. 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. This time for just because of the start to the relationship, would you say, mayor . Yeah i think its very important that they get off to a good start. Its always difficult, and you know the media defines, you know, what the issues are prior to the meeting. But i watched it on tv. I thought they did fine. You know, i go way back with john paul ii. So ive been there. Many times. Many years. Ive been in politics 40 years. So i kind of have been around the block on this. But i thought donald trump did fine. And pope francis did. And there you know the thing is now is, you know, theyre reaching Common Ground, but whether or not they can develop an issue that really brings out the best that shows achievement, accomplishment, let me give you one quick example. I was very close to john paul ii. And over the years i became close to Ronald Reagan as well. Now, in my lifetime, one of the most important developments in politics that ive ever seen is the collapse of communism. Who did that . John paul ii. And Ronald Reagan. Boy ill tell you the world benefited. John paul ii benefited. And Ronald Reagan benefited from that. So if they can find a Common Ground issue, religious liberty, persecution of christians, or any one of these, Human Trafficking is what the daughter was talking about, theyve got themselves an issue that can go down in legacy as a defining, important issue. Yes. We all remember john paul ii. And the the current pope francis, mayor, have you i understand it is a popes probably primary responsibility or duty to help the to really have compassion and help for the poor, and people that are on the low end of the economic scale. But has anything he said, being from south america in terms of capitalism, or in terms of how to approach the worlds problems. Have you had a problem with any of the things hes said . Have you disagreed or sort of shaken your head and thought about you wouldnt go ahead. Id say that most important job of the pope is saving souls. Right. And getting people to heaven. Giving people encouragement. Material things are, of course, important. Thats really the job of a politician. A president of the congress. The pope can add his voice to that. But, you know, really what you need, you need two things, dont you . You need a political voice. And you need a moral voice. Sometimes when the political establishment doesnt do what they should be doing then its time for a moral voice. Now heres the thing. When they both work together, not necessarily the same ideology on every single issue, but on those key issues. Human trafficking they were talking about yesterday. Or christian persecution. You know, i traveled all these countries, in africa and different places. Its genocide. Rwanda, burundi, and its genocide in the middle east. Persecution of christians all across the different parts of the world. Now, if they could get working on some issue like that, dealing with that, you know, they dont have to be dealing with food stamps, and all these other issues. Right. The politicians are pretty good at that but the media is going to the media is going to write about Climate Change and immigration. And theyre going to stir things up, and thats going to be what they want to write about. You know, let me tell you something. As i said, im in politics a long time. They dont have to let the media write about that. They can give the media a sensational, important issue that is going to show Common Ground, and its going to show unity, and its going to be beneficial to society. And to these two important leaders. Lets hope so. Thats an excellent lets hope thats what happened. Thats a good thats good advice, mr. Mr. Mayor, mr. Ambassador mayor. We appreciate your time. Sure. Good to talk to you. Youre not related to mike flynn, are you . No. No relation. Okay. Were the poor irish. All right. Thank you, mayor. See you. When we come back, former walmart u. S. Ceo bill simon testified in favor of the border adjustment tax. Hell share his thoughts on the president s plan after the break. And then senator rob portman reacts to the president s budget and offers his views on tax reform. Squawk box will be right back. A trillion dollar price tag. Retail ceos head to washington today. Former walmart u. S. Ceo bill simon makes the case for the Controversial Border tax. Were watching crude. Opec leaders about to gather in vienna. What to expect from the big meeting, straight ahead. Plus, keep on trucking. Why one Company Hopes Stock Options will keep drivers in the big rig industry. 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 melissa lee. Andrew is off today. Our guest most this morning Mohamed Elerian, allianz chief economic adviser. More from him in just a bit. Futures have been right around flat. Nasdaq is stronger. Nasdaq indicated up 14, the dow up 8, s p up 2. 3. Treasury yields, twr between 2. 2 and 2. 3 last time i looked. This morning, the 10year 2. 28. 2. 28. A few retailers under pressure after releasing quarterly results. Home improvement retailer lowes earning 1. 03 a share, three cents below what the street was expecting. Revenue also came in below forecast and samestore sales increase was 1. 9 , below the 2. 9 the street had been expecting. The stock was off by quite a bit more earlier this morning. Right now down 3. 8 . The comparison to home depot has been rather stark. At least in this last go around. Also check out shares of tiffanys. The luxury goods retailer beat on the bottom line by four cents posting quarterly profit of 74 cents a share. But revenue missed forecasts, and compstore sales posted an unexpected decline and as a result that stock is down by 5. 5 . On the agenda, today the Federal Reserve will release the minutes of its most recent meeting at 2 00 p. M. Eastern time. Investors will be looking for any new information about the pace of Interest Rate hikes. According to reuters data its about 81 of traders expect a rate increase at the next meeting in june. Opec leaders are getting ready to gather in vienna. Jackie deangelis joins us here on set with more on this. Were seeing all the headlines trickle out from various Oil Ministers this morning. Theres a lot of opec jaw boning going on here for sure. I did a little analysis that leads me to believe they may not be that off base. I think theyve made a dent in the glut thats out there. Were seeing Oil Prices Trading over 50 a barrel with enthusiasm about this potential to extend or deepen the cuts at the meeting tomorrow. But how did they actually do with respect to the promises they made . Thats the question here. Lets dig in. Opec pretty much the saudis here, hit and exceeded their Production Cut of about 1 Million Barrels a day. The nonopec players, their target was under 600,000. That was the russians responsible for half of it. In reality the cut looks like about 385,000 barrels a day so not great participation there. Balance that with the fact that here in the u. S. Production went up, 359,000 barrels a day since january so thats basically a wash with what the nonopec players executed. The total stocks in the u. S. Went up by about 30 Million Barrels in the first five months of the year. Which basically cancels out roughly a month of what the saudis cut in terms of supply. So the remaining four months, january through may, that Million Barrels a day gives you about 120 Million Barrels. If that continues, if they cut deeper, they are making a dent and the rebalance is happening. The market has priced in a six month extension but maybe they say on thursday well get nine months or go deeper from here. A lot of different possibilities. But net net for those who were doubting it, they are making that dent. I will say, its very fragile, if we go and take 300 Million Barrels from the ftr and dump it on the market you could cancel all of this out. Although Goldman Sachs came out with a note saying they wont actually make any sort of a dent when you compare the total oil market, right . And even the cuts that opecs making compared to how much would be sold on a daily basis from the spr. Right. And thats one piece to look at. You also have to look at what the other producers are doing. As i said, nonopec wasnt that great. The saudis really complied. But iran, iraq, were still on the fence. Jackie, previous opec Production Cuts agreements were undermined by two things. One lack of opec discipline. And nonopec behavior. Now we see somewhat better opec discipline but the nonopec behavior is still an issue. How long does opec continue if the nonopec members dont abide by their promises . Thats the question. And weve got a saudi aramco ipo that tells most people they will continue. And i think thats where people were really surprised. The agreement to participate for the opec members. And i think the new secretarygeneral has a lot to do with that. I think hes taking a little bit of a tougher stance and making sure with his committees that everybodys doing what they said they were going to do. And cuts dont like cuts and theyre painful or whatever but in actuality opec members are actually making more money on a daily basis in terms of what they right . Because of the higher price of oil in general. They are. Look, higher price is good for everybody. You dont want it to go too high but you certainly dont want it to go too low. They like it over 50. Its definitely working for the budget. All right. Weve settled into this 45 to 55 dollar range now for awhile. Do you think it holds Going Forward . At this point were going to summer driving season so demand is going to pick up in the United States. Traders are telling me, analysts are telling me over 50 is pretty much here to stay. Were going to get a slow grind higher probably until 60. I will say before i really crunched the numbers i was doubtful but im starting to believe it now. Jackie, thank you. At a Senate Banking Committee Hearing treasury secretary Steven Mnuchin sounded a clear warning about the Controversial Border adjustment tax. One of the problems with the border adjusted tax is that it doesnt create a level Playing Field. It has very different impacts on different companies. It has the potential to pass on significant costs to the consumer. It has the potential of moving the currencies. We want to make sure that we create a level Playing Field. That was at a summit at the Pete Petersen foundation. At a Senate Banking Committee Hearing our next guest testified in favor of the border tax. Joining us right now is bill simon. He is former president and ceo of walmart u. S. And bill, thank you for being here today. Great to be with you. When i first heard that you, as the former ceo of walmart u. S. Were in favor of this tax, i went back and reread it all to make sure that i was hearing it correctly. You are the only retailer or former retailer that ive ever heard come out in favor of this tax. Why is that . Well, im not the only one. But, it is a limited group. And, the tax itself, ive long been an advocate of u. S. Manufacturing and launched walmart to u. S. Manufacturing initiative. And the tax itself, as part of the broader tax plan, will allow and reinforce a resurgence in American Manufacturing and american middleclass jobs, which actually is a lot of the problem youve been discussing already this morning on the program. The middle class doesnt have job progression. This does that. Now, it is serious, and the impact to retailers, as the treasury secretary in his statement is dead on, it doesnt apply equally. If youre a large importer the tax would hit you disproportionately. And rather than just, you know, kind of stiffarm it and say no, because its an important component of the overall tax plan, i think its important that retailers sit down with ways and means and the house or the authors of the bill and find a way to get through it. Both the speaker, and chairman brady have indicated a willingness to work on a transition plan to make sure those things that the treasury secretarys worried about, and that the retailers, my friends in retail, are really honestly concerned about dont come to pass. If we can figure that out this will be a great, great thing for americaning manufacturing and american jobs. Part of the argument that says that retailers would be able to get through this is that the dollar would adjust. That it would go ahead and appreciate in value and that would take care of some of these issues. And its a pretty scary theoretical if youre a retailer whos looking at the numbers coming in on a daily basis. What happensif those things dont take place . Well i agree, you know. Its supposed to happen that way. And other places in the world where its occurred it has happened. Its pretty theoretical. But its awful hard if youre a ceo where in the world has this happened . Well, in the uk, and Larry Lindsey you just had on has a real wealth of knowledge on the issue. If you could find a way to build a transition plan that pegs the expected impact of the dollar to the implementation of the tax, for example, you sort of take that issue off the table. Or if you could find a way to build a tax incentive or credit in the event that it doesnt turn out the way that you would like it to, you could take it off the table. Thats what im trying to figure out how to do. Can you build a bridge . Is it possible that you can build this into the tax plan, and allow for the fact that the currency may not adjust at the rate or at the pace that you would like it to. And can you figure out a way to bridge retailers so they dont get hurt, so that consumer pricing doesnt go up and we dont just stiff arm the whole thing, and really risk one of the most important elements of the overall tax bill. Bill, your testimony stood in stark contrast to that of targets Ceo Brian Cornell and in fact, walmart along with target, theyre among 100 retailers in the americans for Affordable Products Group which oppose the border adjustment tax. So why are you taking the opposite stand now. I dont want to say youre unshackled now, but you are effectively are unshackled. What do you think the retailers are missing or what do you think the motivations are for them aside from profits . And what are you seeing that theyre not admitting to . Im not im not at odds with the industry at all. Everything that theyve said is accurate. If you know, if it comes to pass on day one as a 20 tax on imports, it would have a devastating impact, theyre correct. Brians a good friend of mine. And i didnt disagree with him at all. What id like to get to, 240e, for the industry, is this notion that we can sit down and figure out a bridge. The problem is, that 97 of apparel, for example, is not made is not made in the u. S. Thats exactly the problem. Its a problem for retailers. But its the problem for american industry and manufacturing. And if we just say, well no it cant happen, that it will always be made outside of the u. S. , it will never come back, it will never it will never evolve back to a place where instead of entitlements people have job progression, and instead of, you were talking earlier about transfer payments. Instead of transfer payments going up, Job Opportunities will go up. And if we just look at that and say, 97 offshore, thats the way it is. Thats the way it will always be, thats not the case. Im sitting here in greenville, north carolina, and this used to be one of the bastions of u. S. Manufacturing in the apparel industry was really vibrant around here. Its all gone. It can come back if we can figure out a way to build a bridge. You know, you talk about a transition period, a period of time where these things would happen. And just the idea of seeing manufacturing coming back to the United States, in the apparel industry, thats the type of thing that would take years to build factories, to find the qualified people to be running looms or doing some of these things again. So how long of a transition period do you think we would need for this . You know, its a long time. It took 30 years for it all to go away. It will take some time for it to come back. Best example i can give you is a bicycle factory in south carolina. It started in 2013 with a walmart initiative and they first started just assembling bikes. Parts werent available in the u. S. So they brought them into the u. S. And they assembled them here. And you know, theyve evolved into painting, and, you know, powder, and eventually rolled steel, and finally theyll get to the stage where rubber and tires will be made here. But it doesnt exist today. And if it doesnt exist today, we say the reason that we cant take action is that it doesnt exist today, then it will never exist. And so, somewhere along the way, people need to, you know, with common interests need to sit down at the table and say, i get it. Its a real problem if you do it this way. But, if you could do a, b, c, maybe we could get this to happen. Bill, theres a lot of disagreement about what should happen. But theres quite a bit of agreement on whats likely to happen, which is that we wont have that tax. Do you agree with that . Are the is the outlook really very dim for this tax . Well, you know, at its current construct it would be very dive cult to implement. But you know, the building of a tax bill is about discussion and negotiation and the legislative process is messy and so having these ideas on the table, ideas that find ways to level the Playing Field for american manufacturers, are really, really important discussions to have. And thats why, as somebody who is, as you said, unshackled. Im not opposed, i dont mean to be openly opposed to the industry that treated me so very well, and im not. Im very, very conscious of their issues, and i wouldnt do anything to put them in jeopardy, but i would encourage them to sit down and find a way to make this work. Let me ask you for a number, your probability that we get this tax. What is it . There is no tax. All there is is a blueprint written by the house. When its written into a tax bill, when its gone through the senate, and its finally approved, i think it wont look like its been written in the blueprint. But the discussion that exists in the blueprint should be part of the discussion. Thats what im saying. Bill, i want to thank you for your time today. Thank you, appreciate it. Thanks for having me. Again, bill simon. Coming up in the next half hour, well be talking to levi strauss ceo chip berg about the border tax and why he thinks it could be bad for the retail industry. Up next well talk to senator rob portman about President Trumps blueprint right after this break. Youre watching squawk box on cnbc. Your Insurance Company wont replace the full value of your totaled new car. The guy says you picked the wrong insurance plan. No, i picked the wrong Insurance Company. With Liberty Mutual new car replacement™, you wont have to worry about replacing your car because youll get the full value back including depreciation. Switch and you could save 509 on auto insurance. Call for a free quote today. Liberty stands with you™. Liberty mutual insurance. Whats Critical Thinking like . A basketball costs 14. Whats team spirit worth . cheers whats it worth to talk to your mom . Whats the value of a walk in the woods . The value of capital is to create, not just wealth, but things that matter. Morgan stanley President Trumps 4. 1 trillion budget has been met with both praise and criticism. Joining us now ohio senator rob portman. Also former director of the omb. So youve tried to do this before. You know how hard it is, senator, its good to see you. Thanks for joining us. Thanks a lot, joe. Mccain, i think, said doa, a lot of senators talking about the budget, in terms that arent that optimistic. And these are republicans. So, is this a starting point . And where does it go from here, do you think . Its a starting point. And actually, with regard to defense spending, which is something that senator mccain has rightly pointed out we need to increase, you know, there are substantial increases. Theres also an assumption of a lot of growth. 3 growth is one of the criticisms, but also, it means that were talking about tax reform. Its interesting, joe, within the budget, which is a general document and its recommendations, theres Nothing Specific about tax reform. But theres the assumption there will be tax reform and its going help to grow the economy. That 3 growth, of course, is critical to them meeting their balance over ten years. Senator, everybodys got their own its a weird dynamic, with, you know, youre in the federal government, but youre representing ohio, so, ohio, governor kasich, and the medicaid expansion, so in your state its helped a lot of people. So, for you, trying to limit the growth in medicaid is difficult for you. For whatever for whatever reasons. How do you how do you approach things like that if youre the budget director, if you really think that transfer payments and the safety net is more than just a safety net at this point . That its gotten way too big. That the growth that were looking or the expected growth in future years is out of control and we cant afford it, but guys like you are going to say, no, im going to push back against any cuts to medicaid growth. Well, i think what you do is you reform the program so it works better for the recipients. And thats not normally something you see in a budget so theres not specificity to that. But they do say that there will be some reforms in medicaid, and what you want to do is give governors like my govern ever john kasich you mentioned, much more flexibility to be able to run a Better Program so you can cover the same number of people but you can do it in a way thats much more cost effective, and better for them. So, for instance, more managed care. For instance looking at preventive care. Giving governors the ability tody sign programs that work for individual groups within medicaid. And thats what the house and senate should be doing in my view. So my big concern, as you know, is that medicaid right now is the single biggest payer for drug treatment. And at a time of an opioid crisis, prescription drugs, and heroin and synthetic heroin we have to be sure we provide for the kind of help people need, rather than pulling out the rug at a critical time. I think we can do that. And im working on that with some of my colleagues. But a budget doesnt get into that level of detail. Right. But do you think that mulvaney, and President Trumps hands are tied by not touching Social Security and medicare . I mean, thats like the elephant in the room. That you got to do so much to these other things, it would be much easier to deal with the other things if you had an answer for the expected growth in those two programs. Wouldnt it . Yeah, well mandatory spending is by far the biggest part of the budget now. Those programs, medicaid and interest on the debt and a couple other smaller programs, thats where the money is. And its probably right now over twothirds of the budget. Well see what the final numbers are. But its soon going to be three quarters of the budget and by far the Fastest Growing part of the budget. You do have to deal with that and they do in a certain way because they talk about medicaid reform. But youre right, they dont take a serious stab at how to reform these programs to make sure theyre sustainable over time. Thats the challenge, these programs themselves cannot be sustainable at these high growth rates. Youve got democrats saying that you know people are going to die if you touch any part of the safety net that we currently have. And then youve got republicans saying that some of these promise like food stamps, or disability, that theyve grown so much in the last eight years that theres a lot of people that are working really hard supporting people that probably would like to get back in the workforce. That cant. Or that dont, because theyre, you know, its easier to stay home and stay on disability. Whatever it is. You know, theres obviously a safety net is needed for people that really need it. But, some people on the republican side think that theres people that are getting a free lunch with other people, you know, working really hard, middleclass people working really hard to support their lifestyle. Is there any merit to that, senator . Yeah, i mean this is again the challenge is to set up these programs so that there is an incentive to go to work, and there are two aspects to that, joe. Of course theres kind of the push and the pull. And you know, part of the pull is to assure that you have tax reform that actually does not create a penalty, a steep cliff when you try to go to work. So part of the tax reform effort for folks who are low income is to say, okay, if you take a job, youre not suddenly going to see both the loss of your benefits and a big tax increase. And there are ways to do that. Thats one of the things were working on. On the other side you want to create the opportunity for work and training and thats why, you know, there is a work requirement in some of the welfare programs, in others there are not. I think thats something that, again, if you look at the president s budget, i think he assumes there will be some sort of work requirements that the states would be able to put in place should they choose to under the new Medicaid Program theyre talking about. So its both. But, this gets us, again, to tax reform, where you dont want to have a tax code that penalizes work. You want to encourage people to go to work and get on the first and second rung of the economic ladder and thats something i think we can do as part of the overall tax reform effort. Is the budget ever going to look look like something that democrats will say, yeah, we like this . Is there any way a republican could write a budget where the democrats wont say that oh, my god youre cutting taxes on the rich, and pulling the rug out from the people that need it the most . Is there any way that you get to that point . Well, i dont i dont think you do with regard to this budget. But i do think with regard to what Congress Comes up with in the end, which will be 12 of i hope individual spending bills that there will be a lot of democrats who will support those. And look on the tax front i think theres also an opportunity to reach out to democrats. Lets face it our code is broken. Everybody knows it. We talked about this on this program in the past, even chuck schumer, the democratic leader and i came together about a year and a half ago with regard to the International Side because its crazy to have 3 trillion locked up overseas. We want to bring that back. Bring it back at a low rate, repatriate, invest that here in this country. So i think theres some aspects where we can find bipartisanship and joe we just passed a Regulatory Reform bill out of Committee Last week that had some bipartisan support that ive worked on for several years. So i think youre going to have to find individual areas where we can find agreement, and push those hard. Because, we do need to figure out a way to come together as a country and solve some of these problems. All right, senator, if mulvaney calls, i mean you did this before, will you answer the phone, tell him what he needs to do to get this budget done . I wouldnt even take his calls. Like im a senator now. You know, this is your no i talked to him now and again and in the budget, its a, you know, its a general document. Its a recommendation from the president , as was the one that i wrote that congress didnt think much of i guess because they didnt end up passing it. But at that time there were democrats in congress and i was a republican administration. Yeah. But also individual programs where i have worked with him on it and theyve actually made some adjustments on some of the programs, particularly the antidrug programs where theyve provided more funding in this budget. So you had a Democratic Congress to do it. I did. At least now the president has a Republican Congress, and things are going really well, and he can just count on them to back anything hes doing. Im glad things are different now. Its a much easier road. I think on regulations, where you know weve already made progress, 56 million hours of additional paperwork has been eliminated you know what i mean. Tell those guys they better do something or they really want to lose in 2018, they, you know, dont do anything, then they can live. Theyre afraid to do anything because of 2018. They dont do anything, then they will lose. Weve got to do stuff, youre right. By the way, back to tax reform again if you look at the budget, if i look at it, joe, it doesnt include tax reform in terms of costing the deficit more or less. In other words it assumes that its deficit neutral which ask interesting as a statement. Because theres been a lot of discussion about that back and forth. As you know, i believe it ought to be revenue neutral, but it ought to use the dynamic score, meaning a Macro Economic score that assumes that good tax policies might change behavior. Might do something. Weve averaged 3 . Weve averaged 3 for 100 years. We dont do it anymore. And now we supposedly cant . Maybe we can get productivity up. I believe we can. Maybe if we get millennials out of their parents basement theyll start having some kids and population will go up. Regulatory relief, tax reform that makes sense. Deal with the health care issues. Im hearing it cant be done. Er if it has to be done for two reasons, one is to help people the point and the second is to deal with debt and deficit hes prague it cant be done. You heard it earlier if they did but his point is that no administration has done it for that extended period of time, even reagan we can do it one year. Yes but the one year. The budget assessment is built on the every year. Lets shoot for it. He said yes we should shoot for that but you cant assume that thats going to happen. We cant assume. But that is what the budget is doing assuming. The average since world war ii. See you later, senator. We are making budget assumptions on that. When we return, Gordon Gekkos theory on the market rally. Between four and three. We recently had a heart attack. But we are not victims. We are survivors. We are survivors. We are survivors. And now we take brilinta. For people whove been hospitalized for a heart attack. We take brilinta with a baby aspirin. No more than one hundred milligrams. 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Kelsey mcneely and some day you might be calling me an energy farmer. Energy lives here. 3. 9 bill clinton . And according to this i dont know where furman gets 3. 9 reagan is 3. 5. He just puts in a bunch of excuses for why you know. Well, a couple of points he made that i thought were interesting i never considered before, again talking about jason furman writing on gdp gains and growth gains for the different presidencies he says under reagan it was partially because women were going into the workforce, and because baby boomers dont worry about clinton really a full i heard with reagan because of the defense buildup. Then you talk about winning the cold war that costs money and you get a peace dividend from that too. You can argue these points all day. He has to argue this because they never came close, they didnt again get 2 . Furmans point is under 24 budgets produced by president s clinton, bush, obama, the long run growth forecast never exceeded the blue chip consensus. They missed by a point. And this would be blue chip was wrong the entire time. And this is damage this is like anyway, welcome back, everybody. As you can see weve been arguing right through the commercial breaks trying to check our facts. 3. 9 for clinton. Well talk more about this right now. There is the president the content of all of this of course stocks here alltime highs, wall street legend also known as the real life guy on which the golden gecko character was based told us a plunge Protection Team is keeping the s p 500 from sinking. The plunge Protection Group was put in place to stabilize and keep markets normalized. And has been used many times along the way, including 2008, 2009 when we had these drastic downturns in the market. The plunge Protection Plan is run by it reports only to the president , these people, its run by the head of the s. E. C. , the head of the commodities trading group, the treasury the secretary of the treasury, and the head of the fed. There is a system in place, i wonder if this market is being manipulated by the plunge Protection Group. Were asking a discussion about asher. It really was gordon connectco. Probably a composite character. Who would want to brag that i was the icon the icon that it wasnt him. This guy, we used to have him on squawk a lot. He was like unhinged. Was he a Bernie Sanders supporter . He voted for Bernie Sanders, ardent supporter. Did say, many other sane, rational people, that a donald trump win would rally stocks. And he that was spot on. The last time we had him on i was like in shock with some of his strongly held right but this gets to the notion and we run this because it got a lot of buzz on the internet that the markets have been completely resilient to everything that has gone on. Volatility has just been sucked out of the system here. Why do you need a plunge protection when you have the fed . I was just going to say. Theyre part of the plunge Protection Team. They are . Joining us now alan krueger, economic and Public Affairs professor at princeton, our guest host today of course Mohamed Elerian. Alan, well all get a comment if you on the plunge Protection Team. You think its busy plunging away here . I was hoping youd come back and start arguing about gdp growth again. Oh, were going to do that, believe me. All right lets just fast forward to that then. In terms of gdp growth why not 3 by 2018 . Why is that such a rosy assumption . Given that is the average of the u. S. Economy since world war ii . Look were in a very different position than we were in terms of our demographics. Jason furman pointed it out in the wall street journal. Population growth is much slower, particularly of working age people. Labor force participation for women has been declining for over 15 years. So were in a very different position. The budget rules, i think, suggest that you should hope for the best but plan for whats most likely. Cbo forecast, the fed forecast, the blue chip forecast, theyre all projecting growth below 2 . This budget strikes me as extremely rosy. And if you go back to the obama budgets, even though we did miss on gdp growth we also missed on unemployment, in the opposite direction. We were projecting unemployment to be higher than it actually was. And if you look at the bottom line, the deficit came down more than we were projecting. You actually think 3 is achievable . So i think 3 is achievable. And alan i want to ask you a question, as an economist dont you worry that were getting the sequencing all wrong . That the budget is nothing more than a tool, and that before we should start arguing on the tool, we should get the vision right, we should have from the administration more details on the growth vision and how theyre going to get there and then deal with the budget. So whats the risk that we end up with very little because we are getting the sequencing of design wrong . This looks like it was reversed engineered. They started with 3 growth and then they made budget cuts that they wanted. I think most importantly, the budget tells us about the values of the administration. And the values that are enshrined in this budget dont accord with my views and i think that of many americans. We shouldnt be cutting benefits for children, benefits for the disabled, for the sick in order to accommodate a tax cut for the most well off. So, i think youre absolutely right, mohammed, that it would be helpful if more thought went into what the actual reforms are to these promigrams, rather tha just assumed cuts. Then we look through the effect. I think many of what the proposals that have been proposed in this budget would actually reduce growth. For example cutting job training by 40 . Thats not going to put more people to work. Its not going to get more people in good jobs. And its not going to raise gdp growth. Alan you just said it yourself, though, the idea that some needed reforms could really be used. Mulvaney made a lot of sense yesterday when he started saying that we used to be looking at some of the welfare statement estimates and things like that, the programs that were 27 , 28 of the population before the crisis went up to 47 during the crisis. You would expect that to happen during crisis, but its only come back down to about 42 , or 42 million im sorry, im using percentages. 42 Million People instead of 27 Million People. Thats where you kind of wonder whats gone on . Why havent we found a way to get more people off of these rolls . And maybe there is a useful way to go in and start looking 67 more closely at this. Well it depends on which program youre looking at. Unemployment insurance, for example, came down quite sharply. One of the main drivers i think this is not discussed enough, is that the rise in inequality that weve seen over the past 30 years is whats driving participation in these programs. The problem is that more people need food stamps because weve had such stagnant wage rolls disability rolls . Disability mainly because were getting older. Its mainly because the population is getting older and older people unfortunately are more likely to have disabilities. Alan got to leave it there. Thanks, allan krueger. Thank you. When we return a Trucking Company is using an ageold wall street method to curb the driver shortage. Well be right back. A used car, one Trucking Company is trying to lure new employees to the industry with stock grants. I forbade the producers to play the grateful dead. I said find another trucking song. Find something else. And they did. And you heard it. Youre at the Vince Lombardi rest stop. I know exactly where that is on the new jersey turnpike. I am. And the music choice was great. I really appreciate it. You guys always have the best music on in the mornings. But, despite a twoyearlong industry downturn trucking continues to struggle to get and to keep enough drivers. This is why gaske is now rolling out an Employee Stock plan. I spoke with the ceo and president about this this morning. He said the ability to offer this plan is a key reason he took the Company Public earlier this year. To our knowledge this is the first time a company, any carrier in the United States, has done this specifically for drivers. We think in order to grow we need to do things a bit differently. And a stock plan for drivers is the way to think out of the box, to help our drivers, at the same time attract the drivers we need in order to grow. So daseke is the largest operator of flatbed trucks in the u. S. This is a Small Cap Stock but a Company Planning to double through acquisitions over the next three years. So the way this Employee Stock plan works, employees, drivers, other employees like mechanics, will receive stock grants after a full quarter with the company. Those are going to vest in increments over the course of five years. Now i spoke to two different drivers for the company, as well this morning. Here both are really excited about this. And actually this is going to mark the first time either one of these drivers has ever been invested in the stoernl. But, of course, all of this speaks to the broader trend that is playing out in trucking right now as the industry faces a 48,000 driver shortfall according to the American Trucking association. Youre seeing these Companies Pull out the stops. Weve got the stock plan, but youre also seeing higher pay, more benefits like health care, and 401 k matches. Even bigger, better, more comfortable trucks that have more amenities. For example, like flatscreen tvs. So all of this speaking to this need for more people inside these big rigs. Guys . Morgan, thank you very much. Still ahead this morning, former walmart u. S. Ceo bill simon made the case for the Controversial Border tax earlier on squawk box. Up next, well talk to levi strauss ceo chip bergh about the potential impact he sees on the consumer. Hes one of the executives heading to the hill today. Stay tuned. Whos the new guy . They call him the whisperer. The whisperer . Why do they call him the whisperer . He talks to planes. He talks to planes. Watch this. Hey watson, whats avionics telling you . Maintenance records and performance data suggest replacing capacitor c4. Not bad. Whats with the coffee maker . Sorry. We are not on speaking terms. The problem is that 97 of apparel, for example, is not made or not made in the u. S. Thats exactly the problem. Its a problem for retailers, but its the problem for american industry and manufacturing. And if we just say, well, no it cant happen that it will always be made outside of the u. S. , it will never come back, it will never it will never evolve back to a place where instead of entitlements, people have job progression. It can come back if we can figure out a way to build a bridge. That was former walmart u. S. Ceo bill simon. Arguing in favor of the border adjustment tax and the impact on the retail industry. Retail executives are in washington today to talk tax reform, minus the inclusion of the border tax. Joining us right now is chip bergh. He is Levi Strauss Companys president and ceo. Chip its good to see you today. Hi, becky. Thank you for having me. Bill simon laid out the case for having a border adjustment tax, which is pretty unusual coming from a former retail executive. Whats your case for why it shouldnt take place . Well, i think even bill understands, and in his testimony yesterday indicated, that this would be really difficult for the apparel industry. I think its important to step back, you know, first of all, we do believe tax reform is necessary. We believe a reduction in the corporate taxes to make u. S. Companies competitive on a global basis is important. But including border adjusted tax as a way to fund this is absolutely wrong. Its going to be bad for our company, for sure. And i can take you through that. But we also think its going to be bad for the consumer and ultimately bad for the economy. Chip, there are two reasons that the border adjustment tax has been proposed. One is for funding, as you just acknowledged. But the second reason is that theyre really trying to make this a more hospitable place for manufacturers. And manufacturers who make things here in america they feel should be rewarded. The border adjustment tax is a way of getting it back. Whats your alternative if they wont do the adjustment tax to tray to make this a place where maybe more manufacturers would set up shop . The industry left the country 30 years ago, and largely because we make pants today the same way our jeans were made by levi strauss 144 years ago. This is a highly manual labor, labor intensive process. For jobs to come back to the United States, there would need to be some dramatic innovation that would change the way that apparel is made. It would have to be, you know, a new innovation that would significantly reduce the amount of labor input to make product. And ultimately, if that happened, and if we were successful doing Something Like that, i dont think it would create, necessarily, a lot of jobs. It might create a lot of robots making our product, but it wouldnt necessarily be translate to a lot of jobs. So your point is that labor costs in the United States have just skyrocketed too far, which is why we watched the sourcing kind of jump from country to country to look for the lowest cost of labor on a constant basis . And the fact of the matter is we actually do make product here in the United States. We have a line of product thats made in the usa. So every single component is made in the usa. Its retail price started about 89 and go up to 149. And the average American Consumer just wont pay that price. Its a relatively small part of our line. But border adjustment tax on that what would the basic price be . We would have to raise prices about 20 across the board if border adjustment tax went into place. Immediately across everything that we sell in the United States. The impact of border adjustment tax on Levi Strauss Company is it would wipe out our global profitability. And that is not an option. Our only real alternative would be to immediately raise prices. And, in fact, a study by the coalition of americans for affordable products indicated that the average middle class household would see a 1700 dollar increase in basic commodity costs on products that they buy if border adjustment tax went into place. Thats assuming it goes into place at 20 overnight. Bill simons point was that, look, there are things that would happen, maybe you could have this happen over a period of years, some transition periods, slowly have it take place and in the meantime the economists guess that what you might see happen is the dollar strengthens, so that as a result would increase the buying power in every american home. What do you say to those arguments . So i think Brian Cornell said this really well yesterday in his testimony at the house ways and Means Committee. This is all economic theory about the strengthening of the u. S. Dollar. And do you really want to jeopardize peoples paychecks against a case that is fundamentally just a theoretical case at this point . Phasing this in would be death by 1,000 cuts i believe. I dont think it would necessarily help at all. Consumers would still see price increases as our costs go up. They would still see price increases and it would ultimately have a negative impact on the economy and on jobs here in the United States. All right. Chip, thank you for joining us today. We hope to see you again soon. Thank you, becky. When we return, jim cramer live from the New York Stock Exchange. About your brokerage fees. Fees . What did you have in mind . I dont know. 4. 95 per trade . Uhhh. And i was wondering if your brokerage offers some sort of guarantee . Guarantee . Where we can get our fees and commissions back if were not happy. So can you offer me what schwab is offering . Whats with all the questions . Ask your broker if theyre offering 4. 95 online equity trades and a satisfaction guarantee. If you dont like their answer, ask again at schwab. Ready or not, here i come. Ek. anyone can dream. Making it a reality is the hard part. Northrop grumman command and control systems always let you see the complete picture. And were looking for a few dreamers to join us. 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 . Down to the New York Stock Exchange and jim cramer is joining us now. You like home depot stock more than lowes stock or lowes more . Definitely. Do no where do you like shopping more, home depot or lowes . Its interesting, i went to both this week. Home depot, they didnt water most of the plants i was looking. A and i decided to go to home depot. I was not going to wait ten deep. They had one cash register. You cant do that. So i thats not the way it works in business. Yeah. But anyway its my anecdotal looks to be coming true today. I have seen people say, wow, their parking lots are crowded. Its not always wrong to do the anecdotal sometimes it makes sense, right . The home depot had an amazing quarter. I think they have a bead on the professional. I think lowes is more of the of regular people and i mean noncontractor and its the contractors that are driving the big sales at home depot. Other than gardens, are you handy . Can you put in a fixture in a bathroom or something . Yes. You see, i have a thing called a wife and shes unbelievable at it. I call her. Like its better than like a phillips head. They call me when i go to home depot, and thats hard for me. Those are difficult. I need eight people to help me change it. Your honor, turning on a ladder 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. Flexshares etfs are built around the Way Investors think. With objectives like building capital for the future, managing Portfolio Risk and liquidity and generating income. Thats real etf innovation. Flexshares. Built by investors, for investors. Before investing consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. 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. Our thanks to Mohamed Elerian for being kind of a lefty guy but saying we can do 3s that are. Thank you for not molding your opinions to try to cover for the last eight years. Can we average 3 or do it for one year . I think we can average 3 , but we need to get going quickly on these pro growth measures. No kidding. I believe you. Now, im going to use that. Im going to use that sound bite every time someone comes on, we cant do 3 . Im going to use that, because you know, because youre Mohamed Elerian. Thank you for being here. Im not mocking you. I did not mock not at all. Go ducks, oh, sorry. Tomorrow squawk on the street join us tomorrow, squawk on the street is next. Good morning. Welcome to squawk on the street. Im david faber along with jim cramer. And we are live from the New York Stock Exchange. Carl quintanilla has the day off. Lets a look at futures as were one half hour away from the beginning of trade. Kind of a mixed bag at this
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