we have to wait for a few seconds. in just a few seconds, it's going to be six, seven, eight, nine, on your mark, get set, right now. 6:00, it is 6:00 on this seventh month -- no, the eighth day of the 2009th year. >> well, at 5:06, it was actually 5, 6, 7, 8, the, our thanks to dennis gartman for pointing out this trivia. i can see you're not impressed. >> come on, like this is the nerdiest thing we do all day? >> no, but -- >> it's going to be 2010 before we get another shot at this, right? >> that is. >> right. >> i'm at a loss. has he gotten any comments on the oil speculating or is it focussing on this today? >> no. there is a lot of over things that were in there. this is the thing that jumped out at us.

>> i think we have to be in base ten. number two, we happen to use the birth of jesus as the delineating line. it's not -- it just doesn't work for people in china. it doesn't work to jewish people. >> they have a totally different calendar and a totally different year. but i don't care. this is my six, seven, eight, nine moment. >> it's provincial for y to think that everything is revolving around -- >> coming from you, provincial. >> coming from someone who knows. >> copernicus. i'm very open. quarterly results from alcoa, they're going to kick off earnings season today. analysts are expecting the dow component to post a lost due to a large slump that we've seen in global demand. >> slump? >> shlump. you've been seeing the e-mails, too. >> it's schlumping. >> there are people that say

i -- it's not. it's just that i don't say my esses very well. >> one of our coanchors do that. i was reading something -- did you see what the journal said? alcoa results have to be with aluminum and only aluminum and there is so much aluminum around, they're going to post another loss likely. but i was trying eye -- >> to read broader into the economy? >> yes. and they said don't do that. >> if you tried to basalco ya's earnings on the economy the last several years, there have been a lot of problems that even when the economy was kicking along, alcoa was not necessarily outperforming. anyway, while traveling in russia yesterday, al coya's ceo said he is seeing signs of a recovery or at least a bottoming out in some sectors, including in the aluminum market. claude sighfield said china is,

in his words, out of the woods and things are growing there. >> out of woods. interesting news. the president is arriving this morning in the g-8 summit. >> china has asked for a debate on global reserve currencies. and then there's china's president who has decided to skip the g-8, head home to deal with riots in his country's northwestern region. it's being held in l'aquila, a region in italy. it's been designate d a disaste area after an earthquake last april. >> controversy abounding. before we go to the key issues, let's tell you about why we are in l'aquila. we've had tremors within the last serve days, 4. on the richter scale only last friday. so it is an earthquake zone.

there was over 3 hundred people killed here. over 50,000 people made homeless. and still berlusconi made a gesture by moving the conference to l'aquila, which is around about 117 kilometers due east of rome. but as i say, a lot of controversy, not just about the location, but also about the relevance of the g-8. you guys are talking about all kinds of numbers right now. the real issue here is is it g-8, g-17, g-40? because up to 40 nations and heads of international es will be here over the next few days hammering out all kinds of issues. as you mentioned, though, the chinese leader who has already gone home, that might save, actually, a little bit of discourse. he wanted a very extensive debate about the dollar, about foreign exchange policy and about imbalances. that one, of course, might not be such a big public debate now. >> it's been talked about in rehabilitate days how the chinese have successfully changed the debate. i mean, a year ago, we were

trying to tell them to open their economy, work on their own currencies. now they've got us talking about whether or not we need to change the dollar structure in global currency markets. i guess, could they afford to leave this summit? is that what it turned into? >> well, i mean, there are a huge number of chinese delegations here. it's not just the leader who has gone home to sort out those problems at home. but isn't it interesting? he's gone home to sort out problems in the north of the country, which are disruption from parts of the community. some people are saying it's ethnic. otherwise are saying it's economic. and yet the chinese have an economy that's growing over 7%. we would all like an economy growing at that speed at the moment. but one thing is very clear at this meeting. it will be a different focus from la ft year and the imbalances haven't helped the global economy. back in japan when they held the economy there, they were talking about inflation. now, of course, they completely missed the boat within the

intervening year and they changed focus to recession, exit strategist and all the other key issues you mentioned there. as much as the chinese would like a strenuous debate about the dollar, clearly, what are the alternatives at the moment? it's the only place where they can put around 70% of $2 trillion of international foreign holding pes. >> their words and their actions don't necessarily match up. we'll be watching closely, steve, where you are over the course of the next couple of days. steve sedgwick joining us from l'aquila, italy. >> just reiterating, if you're interested in the journal's take on alcoa, the first line is investors tempted to draw in the conclusions will commodity nand from alcoa should resist. one of the reasons thing have improved is because of what we know about china, restocking industrial forecasts in the first half. the other big problem for aluminum is there is way too much of it around.

there is more global production capacity still around for aluminum than a lot of other metals. corporate news today, google announcing that it's developing an operating system for pcs based on its chrome web browses. the move is a direct challenge to microsoft. it's called chrome os and it ll be available in the second half of the new year. google says its operating system will be initially aimed at notebooks which are compact, low-cost computers. there is an operating system for mobile phones. sometimes don't you in your spare time think about -- creating my own operating system? >> just jot down a few notes of code, of open source code? >> i've started one. >> would it be for mobile phones or -- >> yeah, probably. >> i try to write a thank you note, but it takes me about six

months. >> do you think google is tired of playing defense instead of offense? >> i think google, they're having trouble database -- >> overreaching? >> no. i think it's replicating -- like so many companies that get bigger and have so much success, it is difficult to continue to do that and do that and do that. >> they wasn't be christened. >> what's that new microsoft search? >> bing! bing. >> remember groundhog, steven -- >> bing! needle nose ned. ned, he could see with his belly button. bing! you don't remember that? >> no. >> you have to watch "groundhog day." bing! >> ned, how much life insurance you got? i bet you don't have any, do you? do you? am i right?

am i right? am i right? >> i'm going to have to review that one one more time. >> i was walking out yesterday and it was on one of the screens and i could read -- >> somebody here was watching that? >> no. it was on one of the screens. and andy, the beautiful model. i saw her go, you speak french? and i saw him go, wi. >> you remember that? >> i remember that. that was sweet. switzerland, or should i say schwitlerland will block ubs from handing over information to u.s. tax authorities. they say releasing the data would breach swiss law. u.s. authorities have asked swiss banks to hand over information on secret accounts for americans who are suspected of dodging taxes. investor appetite for the fed's tavl program is decreasing

down from 11.35 billion last month. investors used the money to buy nurly issued securities backed by student loans, credit cards, and loaned guaranteed by the small business administration. >> wha does that indicate? >> i do not know. i don't know. the numbers have been up and down, right? >> okay. but it almost -- it was put in to make sure there's plenty of credit forever consumers to do these things? but you salon sinksies or -- based on the anecdotal evidence within the banks will tell you they're lending and consumers are feeling the pinch. we hear it all the time. i can't qualify to either refinance, i can't qualify for this loan without putting down 20%, 30%, 40%. >> new credit card issuance is not what it is at all.

>> talk about the citi, which has been raising credit card rates. >> 30%. >> and fed funds may be 30%, but if you're a consumer, try getting anything near that. >> you know why six is afraid o seven. >> because seven eight nine. >> you heard me say that at the top of the show. >> i forgot about that. but somebody else wrote in and said big deal on six, seven, eight, nine. i remember june 7th it was 1, 2, 3, 4, 5, 6, 78, 8, 9. >> practices good. touche. it will be relatively interesting. earnings season begins tonight with alcoa after the bel we'll get tacks pretty low. art cashin' said we'll know

more. >> earnings season begins tonight? yes and out tomorrow. >> this is a great way to see -- >> i'll be here for the rest of it. >> i told you, i've got -- >> i'm taking off every thirst. >> oil is down six straight sessions, 13% to the down side. the crb is off 3%. clearly oil is trying to tell us something on the august note. the treasuries, 3.439%. the dollar has been relatively stable, although the yen is at the highest lel in a six wes as a sign of mor risk aversion. finally, gold which wasn't able to ever make those new highs when it goes up to 980 or whatever it was. now, $923.10. let's get overseas this morning. first to london where we'll check in with geoff cutmore. geoff, good morning to you. >> good morning to you, carl.

we have markets maybe a little firmer in the major indices over here in europe. let's show you those boards. only the cac is weaker here. but well, you know, i say firmer. we could probably call that flat, couldn't we, for the sake of argument? bank of france revising second quarter gdp. modest revision, but it's going in the right direction. minus 0.4 for the second quarter against 0.5. so as i say, very modest, but at least in their statement, they say they see stabilization in our trend in france. we're looking out today for a big of news on the credit sector. and there is another story christine will be able to pick on. we're following this developing story about some employees in shanghai apparently need to go be detained. is this to do with the

negotiations over iron ore we he ask ourselves. now out to christine in singapore. >> investors taking on a cautious stance and keeping an eye on comment for global japan. talk for a second stimulus in the u.s. saw stocks hit a week-week low. may orders surprising a surprising loss in main. the yen dpand some on jap please report rds. investors worry that china may back off its ease on policy concerning the second half. regulators in china warned that massive infrastructure relending was opposing risk to the p country's banking system. we're watching that story about four rio tinto employees being detained in china.

that is continuing to unfold. that's it from asia. back to you. >> christine, tlanks. allan sinai from decision economics, jeffrey sought with raymond james, let's start with the macro back drop in the economy. allan, i know we were cover in treen shoots, you thought that maybe we had seen the above in the economy. have you gotten more negative with whate sawday or i rece sessions? >> it's question of are we going to have the revery that everybodhas assumed wee going to have. reality test of th.gh a and the employment report kind of said,t might not happen as soons possible people think it's going to en. th was a setback. it's all about the busess sector now and it's slowing down and stabiling and at the momentth're still flashing

and convertling? i think the market is telling us they're worried about that. >> one we had of your peers taking that in a normal recession, job losses continue. the people that are getting laid off now could lose thei homes and become challenge consumers. what do you think of that? >> that alwayshappens. we have toet the nonfarm payrdown to something like minus 150,000, mine hundred 1 hin session. would you be about that? it's the processes of the other parts of the business cycle that, woulding towards some or

the of the economy? it's a question of what kind of recovery. this does not look like when it gets going, it's going to be an active private sector generated recovery. it's going to be government pushed and that is not as good from a profits point of view as whether you drive it from the private sector. >> that's another thick we heard of, that it's all being provided by government. still, this could be called a great recession. how long is it going to be if you're talking about an anemic sort of a bottom, not even a recovery that we see, not until the winter? >> it is a great recession. since the 1930s f the u.s. and wh is strike can for the global economy. cover 47 cntes and 43f them are in partilar right now. bu that recovery is gng to be anamic he think.

and at th moment was there's a question about even that. it's a correctn in the equity market just on will it really happen after the assumption that it would happen. >> jeff, after listening to that, would you tell anyone to put their money in equities? >> i was on your show back the first week of more, telling people to do exactly that. more recently, however, we've been writing that the stock market looks to be a short to intermediate tops. we have had more than 90 points to the down side. last week, you fell through a number of moving averages and yesterday you closed between the 200 day. so i think the correction is at hand sdmrp to new lows, or no? >> i don't think you're going back down to the 666 loy. i agree with allan, the most recoveries that are pulled forward by autos and home building and those are debt driven sectors, if you will.

and it's very tough for me to see a v-shaped recovery because of that. >> well, then why -- you just said i don't see us going to new lows and then you gave some negative indicator. >> i think i think the markets are going to be very easy comparisons and will look pretty good on a year to latter basis. >> we have had people in recent sentiment. some that cover sentiment and they've made the case that new lows are not out of the question given that so few people are expecting it and that it happened back in earlier this decade in 20301. we got that one low after september 11th. and then wnl the next low, you mate may it new pay eggs to save

them. >> very true. but i think that's a small probability. >> so that the economy won't stay so bad that it warrants the edgety markets doing that. when they got down the first time, they were overshooting what happened and it won't happen again? >> that's what i think. >> barclay's wealth gave 60% chance of protracted slow recovery. 20% of a -- with a lot of momentum and 20% depreson >> doue dips. >> yeah. >> down to a pression. ooupg of that, alan? >> no no, policy mashgs around the world won't let that happen, even if they go bankrupt they're ing to stop us from having a 30s result. we have something that ishe morn kay counterpart tthe depression. i think we're par the worst. we're in the middle of a pointed time wre all that stimulus is just beginning to touch.

i think by next year, you'll see for the so-called new nmal a decent recovery. by the end of the year, we'll be discounting that. >> last word quickly, jeff, how low will this take us on the s&p? >> 820 and 830 and then we'll see. >> okay. gentlemen, thank you. allan sinai and jeffly saut. see you guys later. thanks. coming up, notice your commute to work may be getting easier? this could be a troubling sign for the economy. first as we head a to a break, a look at yesterday's winners & losers the. companies the planetinflul

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welcome back, everybody. a new report predicts that worldwide container traffic will drop more than 10% this year. that would be one of the steepest declines ever. a london-based maritime consumer says cargo ships will carry 27 million container by year's end than they did a year earlier. if you want to put that into perspecti

perspective, that's the rough equivalent to all the cargo containers 457b8ed by the five busiest shipping ports every year. a texas transportation institute study says rush hour traffic congestion nationwide has now declined for two years running. los angeles still tops the nation's list of traffic jams, though the drive is getting better. but washington' traffic is getting worse and the nation's capital now ranked second. >> because that's where all the action is. that's why the jobs are, that's where the people are flooding, right? >> that's where the money is right now. >> and that's where they're moving to, joe. >> power lunch today? 12:3456. is going to be 123456789. we thought we were so cool. >> we won't be able to rereact that exact sequence until 3009

when -- >> power lunch, we want to welcome you. can you do that? >> no. >> you're the guy who can do it. >> no. >> we want to welcome pup. >> i don't know what you're talking about. >> coming up, beck. >> still to come, we'll get to this morning's top stories. plus the futures pits from chicago today. then in the next hour, a country in crisis from california to illinois, states struggling to keep their states and economies afloat. we have former new york governor george pa tacky. also minnesota governor tim pawlenty and pennsylvania governor ed rendell. we call this a meeting of the minds or a squawk summit.

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good morning. welcome back to "squawk box." we welcome you. i'm joe kernen along with becky quick and carl quintanilla, the master, the rich little of cnbc. we've been talking for months now about corporate retreats being canceled left and right. but the biggest media confab of the year will be on. the allan and company fest is going on in idaho. that's where we find our own julia borstein, the only person that traveled commercial to this site. was it like a ghost town, jewel yeah, or do the private jets go

there, as well? >> let's say there are probably more private than commercial jets, joe. the economy may hit a lot of companies here in sun valley, but it has not affected this event. media mogul, financiers are here to at that talk about issues and they're here to try to make some deals. for this once a year event, it reportedly costs allan & company over $10 million. these ceos pull out all the stops. dozens of corporate jets piled into the airport last night and caught up with some of the titans attending and heard their take on the economy. ceo allan stringer is on a panel that focuses on navigating companies through turbulent time pepts. >> i say green shoots, but it's a light shade of green. whether it's a double dip recession, it's too early to tell. but the consumer electronics business is usually the first in

and last out of the recession. >> the media ceos here have plenty to worry about, the shift of media consumption online without a plan to monetize it. >> maybe we want to try to put the jeanie back in the bottle here. maybe they're like, well, we'll work with you again, but the consumer will have to work with you again. >> this morning, the agenda is working with the panel on the state of the finance, looking the crisis over and discussing the most important actions that can be taken in and out. guys, i'll be back on squawk on the street with the two stock plays, the media giants here in sun valley. >> julia, it's not just the media giants who gather there. a lot of the technology guys gather, as well. one of the headlines we've been talking about this morning is how microsoft could be under attack with this new browser system that google is coming out with. is that something that's going to be discussed there? >> bill gates is a regular at sun valley. i'm sure it will be discussed.

as well as some of the google guys, larry paige and sergei brents. eric schmidt, he is also expected, though some of his representatives have told me that his plans are still up in the air. but it would be real interesting if bill gates and mr. schmidt sat down over lunch. these the guys are socializing together all day and it seems like those professional rivalries take a back seat once they're here at sun valley. >> we'll have to see if they team up later today. jew julia, thank you very much. now to the u.s. trading day ahead. bob eye clean know is standing by this morning. bob, people are looking at where we are and what's happened with the markets over the last few days. what has happened here? has the steam run out of this? where do you expect things to go

over the next few weeks? >> i have a joke for you guys. what has two thumbs and is sick of hearing about green shoots? this guy. this is not the catastrophe that we thought was happening back in march. you have to not expect this after a 30% run that the next 30% is coming. these pullbacks are to be expected. >> they are, but you're talking about a major pullback. now you're talking about stocks being up 25%. people are wondering do i need to worry that i'm going to give back that 25% or is this a position where you think markets are going to be able to hang in there? >> it might be able to hang in there. but there sloont have been anybody that dumped all their money in once we get up to 20%.

the 25%, 30% we got in the 90s was not realistic. the 30% we got in the last three months is not realistic over the long haul. and you're right, it is a major pullback, but it's a point where if you've been earning money which is the key problem with the jobs number we saw on monday, if you've been earning money, this is the place to put it to work. >> bob, do you get the sense investors are trying to determine whether they want to be in or not? >> there was less money at work, less volume and the move came faster. there were fewer market participants. even traders got carried away with this thing. the pullback that we had, it was not waterloo and it's not nirvana. if investors would start expecting 8% to 12% a year spread out over the next five years, we could have a more balanced move. >> you probably have people who are more jittery than they were let's say two or three years

ago, right? >> absolutely. and that's the problem. a lot of investors in the market right now are younger investors that don't particularly remember the oil shock of the 70s. i'm younger than that, too, just so you guys know. when you have something of this nature, that's a historical disaster, so to speak, for the equity markets. it's going to make people jittery. in the past, that's wiped out entire investors in the stock market. that's what i'd like to see. >> what's the most important thing you're watching right now? >> right now, i want to see the s&p get above 80 and stay there. you saw overnight that it went to 8250 and pull back a little bit. i want to see it pullback and stay there. if the second event is a rally, i want to see it focused directly at the consumer and not on things like climate change. i'm glad the g-8 is talking about climate change and personally, cleaner air is good. but that's not going to fix the

jobs number. >> bob, great to talk to you. >> thank you. >> any comments or thoughts on that, we would love to hear from you. our address is squawk@cnbc.com. we'll take a quick break and followed by phil lebeau. some interesting new findings on hybrid cars. l

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alex witt joins us with a roundup of the headlines. i'll bet you talk about yestday at some point, right? >>yeah. we'll see the president first.

good mning, joe, an to all of you. following meetings with russian leaders this morning, president obama switches gears while in italy he will sit down with world powers at the g-8 summit to address global issues of climate change, the economy and world hunger. as joe mentioned at a public tribute that was part church service and part concert, a who's who gathered to say good-bye to michael jackson. the defining moment came when michael's 11-year-old daughter took the stage with a heart-wrenching good-bye. that was hard to watch. and one news station has found a way to keep michael jackson and his dancing alive. so far, individual listeners's videos have been edited together to help build the moonwalk that ner ends. that's kind of cool. some of them weren't that bad, either, which is pretty amazing.

>> i saw an interview who said aretha franklin who said, we all tried it. anyone who denies that is lying. >> we've all tried it. >> i was sitting here thinking, i want to try it. but not with them. >> just with no video on you. >> sure. a new study shows this morning diesel cars will deliver greater ownership savings over hybrid. so the question now is diesel could take the all mighty prius down? phil lebeau has that this morning. >> i'm not sure we're quite to the point where we can see the prius will be dethroned by a diesel. what we've seen today in a study of diesel versus hybrids, this gives you food for thought. diesel is becoming more popular in this country, but lags way behind priuss and hybrids. the volkswagen jetta tdi, when you look at the cost for owner

savings, it has far saving versus the toyota prius versus camry model. keep in mind, you're working off of a higher sticker price there. what does this mean tore those would say, listen, diesel is the way to go? volkswagen has been pushing clean diesel and it is becoming more popular. they have a marketing program out for it right now. but you have a lot of people who have a lot of question marks about whether or not diesel along with the taxes that are involved with diesel is a smart way to go. that's why when you look at the prius, when you look at hybrids, that's still the primary option that people look at as an alternative fuel source to standard gasoline vehicles. there are only 2.4% of overall sales, but we're seeing more models being introduced. and when you factor everything in, insurance, maintenance, the cost of gasoline and the savings there, hybrids still may be the best option for everyone. >> what we're saying at intellichoice is that hybrids

make sense because they are cheaper to insure, cheaper to maintain, cheaper to run every day as well as having that benefit if fuel prices continue to rise. >> bottom line, hybrids are not getting as much attention this year because gas prices have not gone as high as heavy in the past. between hybrids and between diesel, it is clear there are more options coming to market. and what indtellichoice is saying is the cost of ownership savings is substantial. that's something that you need to consider more and more when you're going out and looking at a vehicle. it's not just the difference in sticker prices. it's the cost in ownership savings over time. >> so diesel a lot of times it costs more than premium, too, doesn't it? >> right. and the taxes involved, that's part of the issue here. people would like to see that change. the other issue with diesel, there's a stil stigma there. joe, you and i both remember what diesel is like back in the

'70s. now companies will say, well, clean diseasel is totally different. and they're right, it is different, but you have to change that stigma. >> '85, i had a mercedes. it was supposed to be a good car, but the transmission didn't seem great. i was always waiting for it to shift and i didn't like the smell and no acceleration. >> and did you hear that sound? >> do you diesel cars need to look like cheese wedges or they're allowed to actually look attractive, phil? do you know? >> they are allowed to look attractive. >> unlike the hybrids where you have to make it look ridiculous? >> it's called a wind coefficient. >> wind coefficient, carl, is right. and that's why the insight and the prius -- >> do you need to make it so it looks -- and you're screaming out i'm green, or no? >> no. i think that -- >> i think that segment of the population has already moved in to buying a hybrid. if they're in it for the looks,

if they're in it for the green prestige, if you will, that's already happened. >> i'm green. i use one toilet paper square. what? shreyl crow, tmi, i know. when she told us that, it was definitely tmi. >> he got into it with shreyl crow. >> hi. you're cheryl -- whoa! >> toe me a favor, stop saving the planet, right? >> right. phil lebeau, thanks. when we come back this morning, from sea to shining sea and the nation states as we know are in crisis. we're convening a summit of their leaders led by a man who has been there and done that. former new york governor grge pataki wiljoin uat the top of theour. could someone to me an eleven sixteenths ench over here? here you go. eleven sixteenths... and st fuel-efficient jet engines... to blding more wind turbines

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we're in the chairs. ways you can tell you're in recession, mcdonald's does well, walmart does well. have you noticed, i guess, that the number of people running marathons increases. >> skyrocketing? >> a lot in percentage terms. what else happens? the times come down. >> the running times. >> the running times come down. there's so many people out of work that have time on their hands and they're able to train. >> you have to do 15 been 20 miles. you need a long run on the weekends. >> you need the time.

the other thing bringing the average time down, the elite athletes coming out of college, the runners, the ones that are good. in a job market like this, they decide, i'm going to focus on getting even better. why should i go out and get a crummy job when -- >> something you can control, an accomplishment you can reach. are you going to do it? >> me? you are a runner. >> i am a runner. >> and the average age is close to 50. >> thanks for that, carl. but i don't think that's good on your knees, things like that, ankles. i'm in pain already. >> soiling yourself is not up your alley, right, as a lot of runners do. u lose control as you cross the finish . >> that i didn't know. that i didn't know, but thank you for that. you know what? i've never -- i wasn't going to run one,anyway, but -- >> especially not now. >> i remember that one years ago that the female, the really good one crawling across the -- you

know, i can't remember which one it was. but she was a -- greta. he been that one? it was like, why do people -- >> i did thinkt was greta weiss. el-erian has written -- it's in the ft's online version but he writes a piece this morning terrifying after biden's comments about how these misread the severity of the economic downturn. he now says the debate at this moment is shifting from the normal sxwagz, saving housing, saving the consumer to countering the worse than expected deterioration in jobs and wages. and he says having already contained the worst thing you can think of, the problem is now threatening the potency of the economic policy making is apparatus itself. that means we can have big problems later on.

>> and remember that's what bernanke talked about very early on. when they asked him, will the political will be able to continue to do this because it's not happening overnight. >> navigating the adverse implications of the all the policies that we've put into place. >> health care built by the end of the summer? how do you to that? >> i can't imagine that you can get all these people back on the same page and get something so >> regulation cap and trade. >> i was looking at a story today, which i don't know how many times you guys actually look at the calorie count when you go somewhere. they show you in restaurants, a lot of restaurants choose or are forced in some cities to show you the calories for everything on their men urgs.

i look at the calorie count if i'm there, i like to know what i'm getting. >> like the fat-free yogurt on seinfeld. >> there's a big story, whether they work or whether they don't. part of what it brings out, when you send these things in as scripps television sent several items in to their own lab to see what the calorie count was, they were way, way off the numbers that were posted. for instance taco bell's fresco grill taco, the steak one, says 160. came back at 297. that's almost twice as many as they told you. apple bee's cajun lime tlapia -- in almost ever case they were undercounting calories. the restaurant chain will say because not every kitchen is the

same, not every item they put out was the same. but it was almost consistently, the posted number well below the actual number. they have a quote. there have been great attempts to provide americans with healthier food over the last 15 years or so, but we've become fatter. >> i have not. you know that's a real guy. >> you said that was the name. i said i didn't believe you. >> interesting. but i'm sure -- >> did you do that story just so you could quote harry baldwin? >> no. not entirely. coming up, more of this morning's top stories. the state of the state. we have a "squawk" summit of the nation's leaders. local economies in crisis. minnesota governor tim pawlenty, ed rendell, pennsylvania's governor. first hello to guest host george pataki will be with us for the next two hours. stay right here.

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state of the state rebuilding local economies, rebuilding jobs, dealing with budget deficits. our lineup ready for action. guest host former new york governor george pataki, plus pennsylvania governor ed rendell and minnesota governor tim pawlenty. "squawk box" begins right now.

good morning, everybody. welcome back to "squawk box" right here on cnbc. i'm becky quick along with joe kernen and carl quintanilla. after a major selloff, dow futures up 26 points above fair value. let's get to our top stories this morning. google announcing it is developing an operating system on pc based on chrome web browser. it will be available second half of next year. initially aimed at notebooks, compaq computers. will it be given away for free. what does that mean for microsoft. july demand dipping to 5.4 billion worth of loans down from $11.5 billion last month. president obama arriving in italy this morning for the g-8 summit. agenda items include global warming, trade, iran's nuclear ambitions, economic stimulus. steve sedgewick standing by at

the summit in l'aquila. steve, good morning again. >> reporter: good morning. see behind me security personnel beefing up presence in what will be three or four hours time a visit to this earthquake zone. behind me the old town, still a ghost town in l'aquila, 307 people killed in an earthquake in early april, still tens of thousands of people living homeless in tent communities around here. the g-8 circus has come here on the whim i'm saying of silvio berlusconi. but the question is that everyone around the world is asking and markets in particular, what are we going to get out of this. i say we'll get something, some progress. do all the politicians, including president obama and first g-8 conference actually want concrete measures on the host of issues you mentioned. i would suggest progress not final conclusions. the president has his own

agenda. in pittsburgh the good-20 will be meeting after the previous meeting. i would suggest to viewers then is when the president will reach concrete agreement on environment, aids, stimulus, of course regulation as well. though we want to see progress on key issues, i would suggest the president would also keep an eye on the future agenda which will hopefully be a conclusion of the world trade talks, sometime in 2010. thank you, steve. this morning states in crisis. guest host no stranger to navigating budget woes. senator pataki served three terms as governor, presided over his showdown. good morning, nice to see you. >> good morning, joe. >> easy to see this, in flush times you think they are never doing to end. you ramp up services.

then when you're hit with a cycle like this, you just haven't done you what needed to do. is that it? >> maybe that's the easy way to see it but not the right way. one of the things leadership is about, not just dealing with today but trying to look into the future. i know that when i was governor, i had an enormous battle in 2001 early in the year, because we saw wall street declining, we saw profits in the big banks going down, which had an enormous impact on new york revenue but the legislature wanted to continue spending as though there was no end to the boom times. that year we didn't have a budget in place because i refused to allow them to spend as though the good times would never end. unfortunately i think in the last year or two, you've seen governors who have done that, look the other way. legislators always want to spend more and allow these states to approach, as in the case of california, near bankruptcy. >> good intentions, right?

you want to give as many services to your people that live in your state -- >> you want to say yes. >> try and do everything. >> it's always harder to say no. there's never a group there saying don't spend more on school lunches or don't increase welfare benefits. but you always have people in the hallway clamoring to do that. the natural inclination is to say yes with groups that have an interest. you can't do that it's not why you're elected. you're elected to protect and advance the interest of the people. that hasn't happened. >> how much of the problems. lou at new york and think a lot must be self-inflicted, to deal with a crazy state senate. you never saw anything like this. how much of the crisis then nationwide are of their own making? >> obviously we're in a serious recession that has an enormous impact on state revenues. i don't think people could have predicted before the liam bankruptcy that we're going to go off a cliff. but they could have predicted

that the boom times were not going to continue forever and that you had to prepare for a rainy day. states couldn't do that certainly part of it was unanticipated. no one expected the magnitude of recession. but a lot of it was self-inflicted. what bothers me most is not what happened last year and the year before when they should have been preparing but what happened this year. new york state increased spending by 10% this year after the economy had gone off a cliff. after we saw what happened to wall street profits and bonuses. that's inexcusable. >> it's precisely because the economy went off the cliff they want to provide that social net. >> i think it's because they had the chance to do it. i fault washington to an extent here because you had the federal stimulus package pouring billions of dollars into state budgets with no strings attached. if i had been in washington, i would say, all right, we're going to help you out deal with your financial crisis but you're going to have to meet certain criteria. you're going to have to not increase taxes that would

counter-act stimulus from washington, spending below the rate of inflation. we don't know how long the recession will last. it didn't happy in albany, now a fiscal crisis, not just massive debts in washington but other states as well. >> in california you saw i.o.u.s. >> we could get arnold but it's 4:00 in the morning there. >> kind of remind me of something like a treasury bill but only a full faith in the credit of california to back it up. the rope i bring thaup, seems like some of the disturbing trends we saw in the states we're seeing in the federal government right now in terms of wanting to do sch you can for the people that live in this country. i'm talking about health care and everything else. is it okay for the federal government to do it because we can print the money? >> joe, i don't think it's okay for the federal government to do it. i think it goes back to rahm emanuel saying a great crisis is too great to miss. that's not about helping america

that's pout putting in place spending programs you couldn't get through congress or get the support of the american people. when i look at our economic future i don't think running up trillion dollar deficits and increasing interest rates when we're trying to return houseing to some sense of normalcy is any way to do that. >> so many problems with health care, massive part of spending, it needs to be tackled. somebody needs a way to make it more efficient. >> i'm all for taking an aggressive new approach to health care. what i'm talking about is the fiscal policy coming out of congress and out of washington. almost a trillion dollars in so-called stimulus, much of it which isn't stimulating the economy, it's stimulating political constituency. running up these massive deficits that have an impact on interest rates. yesterday's ten-year treasury was what, 3.5% interest and housing, mortgage rates do up and we're trying to see that turn around makes it less affordable for people. >> even somebody like david walker, former controller of the

united states, that has been very concerned about the amount of deficits we're running up said in weak economic times it is the federal government's responsibility to spend more to try to ease some of the real pain consumers will feel. >> sure. but i think you need to have a balanced approach. what we've seen out of washington is massive spending in the name of stimulus, much of which isn't going to help the economy, i do not believe. we haven't seen anything to try to incentivize the private sector. what does all this trls of dollars of spending in washington do, to help our companies, businesses be more competitive in a global economy? nothing. we haven't helped our corporations. we haven't helped our small businesses that create jobs. in it's very disappointing for all the spending and rhetoric we haven't seen any action that led to -- >> energy is one of your pet

issues, right? >> absolutely. >> what is wrong with carrot and sticks to get people investing. >> as critical as imin washington, there's two things positive, one is trying to get energy independence and putting in place incentives for private sector to build wind power, solar power, new technology. i think that's a good part of obama's program. it's taken a long time to get it through the department of energy. i don't know a whole lot of funding has actually gone out the door. loan guarantees -- >> cap and trade. >> cap and trade, i think the way they have structured it is more to raise money for washington than to deal with -- it's too great a tax on the american people, as it's currently structured. i think we could work to have an intelligent approach. some very good ideas particularly on transmission that will allow that stimulus to get energy from places like the

great plains to the northeast. >> if you were governor of california, what would you do, and i don't mean start lifting weights and action films. >> when you don't have the money -- >> what about the -- >> you raise taxes. >> more business. >> when you don't have $30 billion, you've got to cut spending. >> to who? >> across the board. >> maybe not on the magnitude of $30 billion. but after september 11th we had three years of economic and revenue decline in new york state. we had back in 2003 i think it was a $10 billion deficit on a much smaller budget and we worked very hard. i proposed a budget that didn't raise taxes at all that reduced the size of the state's workforce, that reduced other spending programs, that used some of the resources that we had set aside in the good times for those rainy days. another part that is missing is the possibility of privatizing some government assets and using

those to unlock billions of dollars that are tied up that you can use to help go through this fiscal crisis. >> are there sacred cows to education, veterans? >> absolutely. there are sacred cows. that's why you don't say i'm going to cut everything equally. leadership is about making choices. there's certain areas you look at it and say, well, we can't do more with less. we have to continue the level of funding. >> as you look at the future, what it holds for the states, the ones in big trouble, california, illinois, ohios, anything done at this point or do we have to wait for this wave to hit us? >> i am very concerned about the states. it's not just this year, because i'm not anticipating great revenue rebounds next year. a lot of them are limping through because of the federal grants coming out of washington. are those going to continue

indefinitely? they are not intended to. i fear the states are going to become dependent on it. we're doing to be in a position a year, two years from now and go to the federal government and say we're broke again. hopefully by that point we'll see some recovery. when i was governor it was not that infrequent we would have in the middle of the year reductions based on where the budget stood at the time. take a look at those budgets. it's not as though they have been declining for the last ten years or five years. they have been increasing two, three, four times the rate of inflation. it's not as though they desperately need more -- i think they need discipline on the spending side. >> we're going to raise revenue. we don't want to cut services we're providing so we need to take a break and raise revenue on our viewers unfortunately. hopefully they won't lose -- >> submitting them to -- >> hopefully they won't move to

another state, another channel in this case. >> drop us a lawn, squawk@cnbc.com. futures pilmildly potion tiff. awaiting numbers. alcoa earning season ending after the bell. after the break, the trillion doll question at the g-8 summit, will world leaders tackle the problem of the dollar. you don't have to go to italy. one well connected man will give his take when we come right back. >> time now for today's aflac trivia question. who was the first professional baseball player to also play professional otball? the answerhen cnbc "squawk x" continues. you really nit these days. well if you're hurt and can't work it pays you cash... yeah to help with everyday bills well if you're hurt and can't like gas, the mortgage...... .and groceries. it's like insurance fodaily living.

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set along with mr. pataki. any significant dollar debate going to happen? >> a chance they were not going to have that except on the sidelines. it was not on the gend ash. china wanted to put it there. u.s., britain and others were resisting. probably not in the final immune kay. but with hu going back is a big deal. asians in general, chinese, face is important. he would rather be withis peers than hav to go back but shows how seriously they take this. >> theriots, unrest. >> exactly. >> where does that leave the debate over whether the dollar should be strong or weak? >> the irony is the strong dollar has no greater friend than china and no worst enemy than ben bernanke. chinese want a strong dollar.

to price them in dollars they have to reserve sa strong dhar. they want a strong dollar. why are they talking about strs, alternative currencies, the answer is they are trying to signal the united states, don't go there. don't inflate the dollar. inflation of the dollar is a wealth transfer from china to the united states. they are not going to stand for that. last time we did that in the '60s and 70s's, we took it from japan. we took it from japan to u.s. they stood for it, took it because we're the nuclear umbrella. china is not going to stand for it. that's what they are signaling. >> doesn't sound like we're doing anything to assuage their concerns if you listen to laura tyson say we need another stimulus. >> how can weaken the dollar, using zero interest rates, i'm sure there will be other ideas. >> jim, when you say china is

not going to stand for weakening the dollar, what do you mean? stop buying treasuries, stop selling them? what are they doing to do. >> not stop buying or selling. when it matures, treasury sebds sends you the money. you don't have to take anything. have you a reinvestment decision, you go by a one-year, six month. you have just as many treasuries, you haven't sold one, dumped them. you can't do that. you shorten maturity structure. it's like holding a bomb. they have a lot of time to get out. >> treasuries, see them go into increasing gold reserves. >> doubled bill reserves. stockpiling copper, oil. it's a two for.

they get double benefit. on the treasury side, the tick there shows they are maintaining total amount of treasuries but shortening up maturities. the steepening is great, bank profitability go up. ask why it's steepening, selling ten years and buying one years, it will steepen, u.s. lowers values, no suchb a good thing. >> with the argument with china unresolved, did you see anything good happen with the president and medvedev this week? >> not really. i don't think he was that well received in russia. his speech was a little silly, frankly. he said russia is a mighty river flowing through a canyon leaving its indelible mark on history. that's not true. russia is a great complex civilization that's very self-contained. russia's mark on the world has been limited compared on the english language, american

democracy. these things affected the war. russia is contained. a lot of rhetoric but what was he saying. >> gentlemen, one world leader not there but weighing in is the pope. he's saying what he'd like to see is a true world political authority charged with exercising greater authority and oversight over financial markets. this is a little unusual. popes do weigh in from time to time but seeing him writing about the financial crisis. jim? >> far be it from me to advise the pope but i'd say be careful what you wish for. it's 75 page, cyclical. he does call for this global regulator. but he presupposes charity, love, redistribution of wealth, a lot of very good things. you get a global financial regulator, not quite so benign. that's the problem. his cyclical does sync up with what sarkozy and merkel is proposing. >> i'm for charity and love.

i'm not sure the world is rallied for a global regulator. i don't know how you would choose them, how they would influence u.s. domestic or global economic policies. i think it's a wonderful expression of an intent to have us all work together but i don't know as a praccal matter it's the right step to take. >> see what happens in l'aquila, right? hopefully no more earthquakes. >> they will be getting out of there quickly. >> jim, always good to see you. >> thanks. >> in the next half hour, travel to minnesota. governor tim pawlenty will tell us how his state is dealing with its own budget crisis. our daily dose of stocks to watch. will there or will there not be appear appearance by -- what's the governor here? 8:00 a.m. another governor, pennsylvania governor ed rendell on battling the recession ihis state. "squawk box" will be right bk.

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if you have any comments or questions about anything you've seen, go ahead and write us. we'd love to hear from you. we respond to some people. our e-mail is squawk@cnbc.com. when we return we'll have more

of this morning's top stories plus the "squawk" state house has been in session all morning with guest host george pataki. up next, minnesota governor tim pawlenty joining us. he's been fighting a budget battle on the front lines and is mentioned as a contender for president. we'll get the view from the land of 10,000 kes when "squawk box" comes back. 

welcomback to "squawk box" for wednesday morning. our guest host former new york governor george pataki a lot to talk with him about. first the markets and headlines. futures are a little bit positive. waiting for earnings season to start tonight with the alcoa earnings after the bell. oil is down some six sessions straight, down 13%, another 40 cents today. $62.51. mortgage aps rose climbing off seven-month lows. mortgage bankers said average 30-year rates remained unchanged during the week at 5.34. google unveiling a new operating system taking aim at microsoft. based on chrome web browser and will first be targeted for network computers. let's get a check of the

markets. we've been going back and forth just talking equities, peter, about, you know, we come down 10% from that 30 or 40% bounds. now people are saying maybe the lows -- a test of the lows or breach of the lows is possible. where do you come down on that? >> if you're a pure technical analyst and you look at this thing, it makes a pattern called the head and shoulders. we're just finishing the second shoulder and then you're supposed to plunge down from here. and that's where you could easily reach the lows if you're a technical guy. coming bo earnings season, you've got the solo, it reconfirms that technical pattern you could break down here pretty badly. >> how can we tell whether it's going to happen or not. >> well, you hope that the data comes in better than expected and it doesn't happen. i think what will happen, the data comes in worse than expected, earnings are bad, the pattern of the market will follow and play out.

>> someone said that the comparisons aren't that tough for the earnings so. that might give -- hold us up a little bit because it was so bad last year. >> that's totally correct. when you're starting from a baseline of dismal it's pretty easy to improve upon that. i think investors are a lot smarter than that, and i think they will extrapolate numbers out and try to get a good gauge of where things are heading. growth rates have come down a lot. growth rates are very, very important to equity pricing. if you're going to start to get two or three quarters of data where you see a growth or lack of a growth, then the stocks become less frothy. >> do you expect companies to attempt to give outloose or will they say we're not in a position to be able to see what it's going to be like? >> well, you know, that's going to be accompanied by situations, i think.

if you have the manpower and you can keep track of your company so well that you're helping the analyst and you're providing them guidance that you're confident in, by all means you should do it. but if you're just going to throw out a lot of numbers and pull out the compounds in an effort to try and create a buzz or some sort of happy announcement of your earnings, i think the street is way too scrutinizing at this point and it's not going to work. >> peter, keep it short today. thanks. all right. this morning we are taking a closer look at states that are battling budget crises. among them is minnesota facing an estimated 4.6 billion dollars over the next two years. joining us from minneapolis, republican governor tim pawlenty from minnesota. governor, thank you very much for joining us. >> delighted to do it, becky, even if you do have governor pataki as a co-host, glad to be there. >> thanks a lot, governor pawlenty. >> happy to be here. >> governor, why don't we talk a

little about the economy and what it looks like from your state. what is the scene? >> well, minnesota's economy is mirroring what's happening nationally. it's not quite as bad as other states. we're middle of the pack. we've got a big deficit. we finished a legislative session where it's taken care of. the governor u.n. laterally makes cuts. historically in minnesota and most other states we've been spending beyond the rate of growth in the economy, beyond what's responsible, beyond what's sustainable and those chickens are now coming home to roost. >> where are you making those cuts if you can unilaterally make the cuts, where? >> we tried to use priority-based budgeting. every year has some reduction with some exceptions. a lot is health and human services at the federal and state level that's driving so

much of this spending. if we don't get entitlement reform we'll have a major problem. just to give you one statistic from 1960 to present, the average two-year rate of growth for budget in minnesota has been 19% before i became governor. we've dramatically slowed that down. now for the first time in state's history we'll have a budget reduction which i think is needed in these challenging economic times. >> what's it mean in terms of job losses for the state because that's the other question people have when you cut in times like this, tough economic times, is it going to add to the rate of unemployment in your state? >> yeah, minnesota's unemployment rate is lower than the national average. when you make cuts like i described, there are layoffs in our state employee base. that's unavoidable. we are trying to mitigate that by using early retirements or other means, attrition, some vacancies. layoffs, couple thousand or less we hope. >> what about the federal government, if they offered assistance and do you want their

assistance? >> they have offered assistance. we are taking it. minnesota for every dollar we send to washington gets 73 cents back on that measure we're the fifth largest subsidizer in the country. we have the federal government equivalent of the mortgage meltdown if they don't get their spending under control. they are on the pace to have a financial implosion in the next 15 or 20 years particularly if you see a hiccup of other nations buying our debt. federal spending issue worries me. while spending helps temporarily it will set us up for intermediate or long-term problem. >> you've heard christine romer and others say we'll do whatever it takes to help the economy. doesn't sound like they are unwilling to double down on that front. if you were governor and a second stimulus package was passed, would you accept those

federal funds for minnesota? >> it would depend on what the nature of the stimulus package is and whether the strings attached made it worthwhile. we have accepted the first round of it. but they do put conditions on that. we need to make sure we understand how the money is being used. one example from a federal level, general accounting office said of the nearly $800 billion stimulus package that was recently passed, they estimated only $160 million is actually stimulating the economy. the rest they disregarded or discounted as sustaining current programs but not stimulative. it would depend on strings attached to that money. it's one thing to complain, understandably so, about the federal government's willingness to print money, but if your own state is in pain, there's a good chance a lot of governors around the country will take that money if available. >> every governor took all the money in the last round. in minnesota's case the way we rationalize that in large part is we're paying way more than

our fair share. that stands in contrast to many other states. >> governor, what can you tell us about revenues. have you gotten through the worst times? are things starting to turn around? are you worried about tax receipts you've seen in the last few weeks. >> the revenues in minnesota are about tracking what we projected with our last formal forecast in february. but keep in mind that forecast was quite pessimistic and foreshadowed a declining economy for the remainder of this year with the beginning of a recovery late, calendar 2010 and beginning 2011. it's tracking the forecast but the forecast is pessimistic. >> governor, rightly or wrongly, as people fall by the wayside, your prominence is rising in the republican party, obviously. i'm wondering what you think the prospects are given most people are writing the republicans off to some extent at this point. and the president is so popular, i'm wondering if you're starting

to see that maybe some of the policies will start to affect the president's popularity rating. is there a chance the gop can come back in as little as two years or even four? >> first of all, i think the republicans are in a rebuilding process, there's no question about that we're going to need some new leaders. if this was a sports team we'd talk about draft picks and trade in a rebuilding year. in public policy and politics so much can change in a short period of time. i don't count republicans out in 2010 or 2012. i don't believe the obama administration policies of having this historic deficit, this staggering deficit and debt are going to work. i think the amount of government intervention in energy and health care and the car industry and finance industry is going to come back at least in the intermediate term to haunt us. so i think these will be shown to be misguided policies. i just don't know when that's going to happen and when the political affects of that will take hold. >> unfortunately you probably

have the number one and number two draft pick. >> there's a reason for that. you get the number one and fumble two and you're not doing well. >> but you have seen people fall by the wayside. you're on everyone's list. mitt romney, you think you're in there in a couple years? you too young? >> well, 48, i think -- >> maybe you just look young. >> yeah, just maybe. i don't know. youthful, not young. good lighting. >> we're still thinking of dusting off george pataki. i asked him and he talks about you and others. everybody is like hot potato, hot potato. >> i don't know what i'm going to be doing three years from now. in the meantime i'm going to work hard to improve my party. >> i was just talking about new york budget a mess, increased spending 10%. governor, if i heard you right,

this year's spending will decline electric last year. are there other states that managed to achieve that as well. >> i don't know the last part of that, governor. but minnesota has been a state since 1858. we have two-year budgets. nearest we can tell, this the first time in history where we've reduced spending in real terms. that's quite a thing for minnesota. no different from families, small businesses, everybody else is living on flat or declining revenues at least for a while, so i think it's reasonable to expect state government to do the same. even in this center left state of minnesota, most people agree with that. they say, yes, tighten your belts like we are. these other states raising tacks in this time of economic challenge i don't think is a wise policy. >> is it strange or painful to say the words senator al franken? >> well, the people of minnesota spoke. it took a little while to sort out the message they were sending. >> did they speak or was it the courts that spoke? >> ultimately it was the courts

validating what the people said and the process was frustrating. yeah, having senator franken there, it's good to have a full congressional delegation frchlt my standpoint i wish the results would be different. >> how about brett favre, vikings selling tickets, is he going? is he going to enemy territory? >> i think he'll be here. he had the surgery. by all accounts if his arm is working, he'll be here and we'll make a run for the playoffs hopefully to the super bowl hopefully if he stays healthy. >> can't keep that guy down. >> governor, thank you very much for join us today. >> delighted to do it. >> nice talking to you. we'll hear from you soon. >> thank you. >> back, a lot more from governor pataki including thoughts on his future of the party and why u.s. should slam the door on opec oil. democratic power player ed rendell, governor of pennsylvania fighting for the financial future of his state. talk about the budget battle there, what it tells us about the entire u.s. econy at the

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i don't see how we can do any better. we're moving fast. i think by the he said of the year we'll have a plan for america. we'll have an energy plan that will work and we will get off of foreign oil at some time in the future. >> boone pickens on "squawk box" yesterday. you may have seen that one year after rolling out the pickens plan. we want some response from governor pataki. did you hear what he said? >> i did. i think boone deserves a great amount of success. a man in the private sector out of patriotism said what we're doing is wrong, relying on foreign oil. i'm going to take the bull by the horns and try to force washington to come up with an energy package that will -- >> part it patriotism and part is putting his money where his mouth is as well. he'll benefit from that. >> boone always did that there's

nothing wrong with that. he's always been an oil and gas guy. >> and a wind guy he says. >> wind and water. >> he also believes ts is critical for america and i think it's right. >> for all the talk wind and solar gets at the core of his plan is nat gas. do you believe that? >> all of the above, wind and oil and gas and solar, all of /ñ it./ñ it's starting with barnett shale and marselis shale, new technologies we have to extract that from domestic sources, our supply, our potential supply is dramatically increasing. it's clean, a fossil fuel but clean. i think it is an important part of the future. but as i was saying, we needed oil, new domestic sources of oil. we need the renewables. one thing boone and i have been working on inhe energy bill,

federal perm transmissions. winds in the great plains. solar in the southwest but you can't get it to l.a. you need to have a federal program, not funding but permitting that allows us to access these new domestic sources. >> that's doing to entail the federal government going into this, plowing their way saying you're going to put the line down. >> federal government does it with natural gas pipelines. no governor is going to say, natural gas pipelines r my town. that, they say we need federal permitting, gas to the ñ southeast, we need the same thing with renewable energy. >> how likely you g that? >> i think it's possible. it's in a bill, determining the federal process to allow us high voltage multi state transmission. it's an important part of our whole goal for energy independence. >> we tried to press him on his views on cap and trade. he didn't want to talk ill of

legislation so close to getting done. i think he did, guys, would you agree, admit it would be something he could live with in order to get everything else. >>e didn't necessarily think it would go. >> he's hoping the senate doesn't let it happen. he's against cap and trade. it's obvious to me he's against cap and trade. he thinks the senate will not let it go. he thinks cooler heads will prevail. >> he said at the end it's a bargain he could live with. >> on camera. >> yeah. >> o camera. >> i think a lot of it, too, depends how you do it. one thing to talk about cap and trade, another to pass a bill that has a provision as i think the house bill does that have some protectionist provisions in it in the event other countries don't act. i think the last in the world is start opposing programs at a time of economic recession. we need to open up markets for

our products and not begin building walls as som in washington are talking about. >> when you look around at the most important thing that needs to get done, the president has said, we can be free of our dependence on the mideast within nine years. i think he said this last year, ten years, nine years left to go. do you think that's realistic. >> i think it can happen quickly but we need better programs out of washington. the washington programs have been focused on electricity, energy, stimulating wind and solar and at's all good. but when you look at petroleum. most of our petroleum is used for transportation. 97% of our cars, trucks, use petroleum-based fuels to get us from here to there. the stimulus package, as it's ñ called, doesn't really deal with that in an aggressive way. i think what is missing is across the board incentives to

incentivize the industry for transportation vehicles, cars./ñ cars that go 70 miles a gallon, all of a sudden we don't need any of that foreign oil. i think the technology will be here but you need to incentivize. we have not done that in washington. >> we're going to have much more over the rest of the show, another hour and 10 minutes to go. after this, don't be caught off-guard in today's trading session. tox to watch with some water bombs right after this. and later the leaders of the world's most powerful nations gathering at the g-8 summit today. we're going to pick the brains of two people who have been there and done that, former treasury secretary and former member of the counc of advisors coming up when "sawk" comes back. thanksso is our bike insurance. all the covege youeed at a great price. ld on, cowboy. cool. i'not done -- for less than a dollar a month, you so get 24/7 roadside assistance. right on.

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>> the governor requestedthat. >> i love new york. >> there's little kids going like this, a conductor. never gets old for me. the guy looks like wilford

brimly. you like the beluga whale? >> i can't say i like anything about it. the governor of new york requested it, i've got to take it. >> i think it's tremendous. >> have you shown it to willie and ava? it's the first thing your daughter will disagree with you on? here is stocks to watch. >> southern copper, freeport upgraded from buy to hold from citigroup, southern copper upgraded to hold with a target of 22. goldman sachs upgrading a couple of -- upgrading btu, downgrading. tractor supply, second quarter 148 to 150. that is well above expectations. you can buy cool clothes at tractor supply, flannel shirts, stuff like that.

overalls. family dollar reported 62 cents, guidance had been 54 to 58. look at that move. family dollar, fdo. energy rejecting officer from exxon. amgen, higher as a late stage trial of its bone drug worked better than one from novartis. m affirm b. >> humanize. >> humanize antibody. fda agrees with either application for a potential block buster drug, diabetes drug you use once a week. >> all right. coming up this morning, we'll get the top stories of the day plus "squawk's" governor's conference convenes the next session. joining us from keystone state ed rendell, democt trying to solva stalemate in thatstate.

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boone times are not going to continue forever. you had to prepare for a rainy day. states didn't do that. >> minnesota governor tim pawlenty. >> spending beyond the rate of growth in the economy, beyond what's responsible, beyond what's sustainable and those chickens are now coming home to roost. >> next up, pennsylvania governor ed rendell. "squawk box" begins right now. welcome back to "squawk box." i'm joe kernen along with becky quick and carl quintanilla. let's check the markets after a very rough session on tuesday and monday.

i just spoke on stocks to watch. i ended with amgen, then i said amgen, amgn and amln. there's only one letter difference. >> it s rude of them to have symbols so close together. >> whenou're getting old. i knew it was a diabetes drug. it was amln. >> will you start with the glses and a half you see me upstairs. >> tombrokaw. >> we can get awe cain as well. >> my street cred can goup a little bit. i can't quite make you out from here. governor, you did a great job. maria? >> very well, thank you. earning seasons kicks off with alcoa reporting after the bell. the aluminum producer is

expected to report its third straight quarterly loss. the ceo says he is seeing some signs of recovery out there. google meantime is firing a shot across the bow of microsoft. it's introducing a personal computer operating system based on its chrome web browser. it should be available in the second half of next year and it will initially be aimed at those so-called netbook computers. the question is, is this going to be free and what will that mean for microsoft. world leaders arriving in italy for the g-8 summit seeking a consensus on a wide variety of issues. steve is standing by in l'aquila. steve, what can you tell us? >> reporter: leaders meeting, having their lunches. see president obama, medvedev of russia shown around this earthquake zone still pretty much a ghost town this afternoon. as you say, beck y, a whole host of issues to be discussed. one thing that needs to be discussed is that this is a reality check going on. a reality check in the markets as we see has come back down to

recent lows. a reality check what the g-20, g-8, other international bodies can do to stimulate demand. in london in april there was almost a celebration that all this new money was going to be put in the system. two, three, four months down the line, the mope is in the system but what has it actually achieved? a whole checklist of things, some we've made good progress, others we have not. low interest rates in the united states, that's gets a thumbs-up from international bodies including ins. two percent of gdp globally thumbs-up. other areas are controversial, making no progress. one of them is protectionism. we have seen buy america clauses, buy china, support for auto industry all different parts of the world. when you think these leaders have made real promises first of all for 2009 and now for 2010,

get free trade back on track, they are a long way short of that. interesting to see where it's going, president obama and others today. back to carl. >> steve sedgewick joining us from l'aquila, italy. taking a look at states battling budget crisis pennsylvania a $3.2 billion budget, locked iman impasse over how to close that gap. joining us ed rendell, chairman of the national governors association as well as the former chairman of the dnc he joins us from washington, governor, welcome back. good to see. >> nice to be back. >> $3 billion is not good, at least it's not 26 and at least it's not in gridlock the way we have in new york, right? >> sure. our revenue decline was 8% from the first quarter of this year. the average mid-atlantic tate decline was 14%. our unemployment rate is a full point and a quarter lower than national. in balance, we're doing okay as a state. but we still have difficult

problems. the question is how to reach the gap we do have. i think we need to do it by a balance of cuts. i've already cut this proposed budget two and a quarter billion dollars and revenue increases. it's inescapable when you lose $2.3 billion in a year you have to do revenue increases unless we gut everything we do including education, including public safety. so many things we do as a state that are so crucial to the quality of life in pennsylvania. there has to be a balance. i've got republican colleagues in the state senate who want essentially to do an all cut budge. the bad news because of entitlements, state mandates, federal mandates the stimulus requires us not to cut too much. we can't do all cut budget, we have to do revenues. eventually we'll come to grips. we have the second lowest personal income tax in the country, 3.07.

wouldn't you love to be paying that in new york? >> we would. we haven't seen those kinds of numbers in a while. i want to raise it for three years until recovery takes hold. that's what we're battling about. >> are you wig to come out with laura and say a second stimulus is what we need. >> i actually think we do need a stimulus on hard infrastructure that brings us jobs and orders for pennsylvania and u.s. factories. >> that's what we thought we were going to do when we were putting this together in january. we saw how that went awry. >> governors met with president obama in december. that's the advice we gave him. he was very good for the states. without the stimulus program every state budget in this country would be in far worse shape. tons of state workers, county workers, teachers, police would have been laid off. i think there was too little of basic infrastructure. the projects we can start right

away. shovel ready fix it first projects. there was about 100 million of that. i i think it should be double, triple. a stimulus could be modest, $200 million of all infrastructure. that's what gets people back to work. i'll give you one example. governors do that first infrastructure under stimulus. refurbish a bridge one town to the other, important bridge economically. 38 workers immediately. but five vendors, one general contractor, all pennsylvania companies, all bringing people back to work in their factories. that's the key. because our two big job losses in pennsylvania, construction and manufacturing. >> in government, what's past is prologue, do you have any faith a second stimulus package would be any more targeted? >> i hope so. i think congress will give -- the administration

has learned a lesson a little bit. the congress is going to say, look, this has got to be job producing and not job producing three or four years down the road. not tax cuts which may stimulate the economy, may not. there's debate. something we know. if you spend a billion dollars on infrastructure, that creates somewhere between 25 and 30,000 jobs in construction, and it brings a lot of factory workers back, steel plants, concrete plants, asphalt, timber plants, you name it. >> i'm sorry, did i hear the numbers right on that, governor? did you say, $11 million? $2 million in additional spending? >> hard infrastructure. i'm not talking about broadband, building out the grid, because those things are important and they have a right to do it. but they are going to take some more time. i'm talking about things that we can literally be in the ground in four months. >> you're talking about needing much more than $200 million if you really want to stimulate and create jobs.

$11 million created jobs immediately. you probably need quite a bit more than that if you want to create a lot of jobs. >> did i say $200 million, i meant $200 billion. >> not 787 this time again you're saying 200. >> if it's 100% to job producing shovel ready infrastructure projects it will work. i can see even the money we have now, pennsylvania got $1 billion, a little more than a billion dollars in bridges and roads. i can see the jobs start to ramp up. they started in june, july, august, september, october. it's going to be good but we could use a lot more. >> we have governor pataki here with us. can you sympathize with any of this? >> sure i can sympathize wit. i don't know i draw the same conclusions. governor rendell, it's nice being with you again this morning. >> good to see you, george prfr question, we had governor pawlenty, he just finished his budget process, for the first time they are going to cut

spending from the prior year. how big a percentage increase is the budget in pennsylvania that you're trying to get north dakota -- enacted. >> it's well below inflation. we made $2.2 billion in cuts. state funding, if you leave out stimulus is actually going to be down last year, state spending down dramatically. but as you know, a lot of our spending is mandated. people don't understand that. in the medicaid program, if something is eligible, we have to take them in. in corrections. if judges send us prisoners, we have no -- we have an obligation to take prisoners and add prison guards as it ramps up. education, those are mandated programs. stimulus money has been great for the states. but there's maintenance of effort rules about stimulus, governor, that makes it hard to make all the cuts that you might

want to see or i might want to see. but there has to be a balance. look, governor pawlenty, they raised about eight small taxes and they also rolled back property taxes. they rolled back the property tax decreases, which is another form of a tax increase. there has to be a balance, 30 states before you've done budget have raised some form of taxes. >> you're not talking significant, half a point, a 50% increase for -- >> half a point stays for three years. >> okay. >> average median income in pennsylvania is $50,000. for the average person on median income, $4.75 a week. >> you kno governor schwarzenegger fairly well. do you see a way out fo him at this point? >> it's very, very dficult. very, very difficult. you know, i ighs with governor schwarzenegger because this problem has been building up in california for decades. you know, people who say the

referendum system is a great idea, i just refer them back to i think it was the late '90s or beginning of this decade when californians in one year voted free college for everyone. and the next year they voted to make sure xes couldn't increased without a two-third vote in the legislature. >> governor, people say this is going to end in tears. do you agree? >> it's hard to see a good ending. i think governor schwarzenegger mapped out a plan. i don't know if it's politically feasible, though. >> get your take on national politics given your role formally with the dnc. senator franken make a difference? rnc have an ad, dems have total control, no checks, no balances, in 2010 you can hold them accountable. >> it will make a difference on some things. i still hold out hope that on the major issues that are confronting the nation, climate change, health care, the economy itself, i still hold out hope that there's some level of by

partisanship. i would hate to see things passed in the senate with a vote for -- i have great confidence that senator grassly wants a health care bill that make a difference for america. i think he and senator bachus want to do this together. i know public option creates a lot of differences. but we've got to do these major things. it doesn't matter who is in control. if we continue this level of partisanship that's in washington, if we can't find common ground, we are absolutely nailed a as a country. we're never going to take the tough decisions we need to make to invest in our future and grow and progress as a nation. >> governor, good to talk to you as always. so many things and so little time. >> thanks, guys. >> governor rendell. >> thanks, george. >> thank you. coming up world leaders gather in italy, we'll pick the -- the

horrible visual, pick the brain. we'll try to glean information from a couple of people been there done that. a former treasury under-secretary and a member -- i don't want to pick any part of anyone's body. president's council of economic advisors will join us next. >> i am with you. >> are you? >> just keep our hands off ourselves and other people. later the president and ceo of american petroleum institute one year after crude's record run. a take on yesterday's tumble, like clock work for this guy what thearket is in he said lot of this. "squawk box" will be rig back.

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g-8 leaders have a full portfolio as the summit kicks off on the agenda. food security, climate change. the reserve currency. if they find time, they are going to solve a global recession. a few things on the plate. joining us ray lowery, former assistant treasury secretary for international affairs and managing director of the global

park group. kristen forbes, former economic adviser from school of management. welcome to you both. >> thank you. >> clay, let me start with you, kristen, we'll do it that way. what should be the priority? we're wondering in this country what our priority should be as we tackle everything. for these guys, what shoot priority be? >> the global economy. clearly without recovery in the global economy that will dominate the agenda in all these countries for the next few years. countries need to be comfortable that other countries are doing their best to stimulate growth. for some countries the concern is actually what comes next when recovery comes, will countries such as the u.s. be willing to reduce stimulus, fiscal monetary stimulus to make sure inflation doesn't take off. important for countries to reassure they will get out of the recession, then make sure what it takes to stabilize

recovery. >> getting even deeper with the stimulus, kristin. that's the latest thing on the table. vice president, some of the advisors, doesn't look like exit strategies. what we do, 10% of the 800 already. >> any talk about stimulus is dangerous. it could delay recovery for two reasons. first as we've seen with $787 billion stimulus, it takes a long time for these things to work. you say we've only spent 10% of discretionary spending. by september we've only spent about a third of the tax cuts and other outlays. it's going to take a while to work. if we start to discuss another stimulus now by the time we talk about it, pass it, get it to be up and running, by then hopefully be into recovery. recovery take off faster than anyone wants. the second reason we need to be very careful about even talking about a stimulus, the world is very worried about our debt and our deficit.

we saw that in a spike in interest rates from december to june of this year. if we keep talking about adding to our debt, that there's a good chance that could lead to another increase in our long-term interest rates which will in turn hurt housing markets, investments and delay recovery. i think it's very dangerous to talk about another stimulus now. >> what are thoughts? >> i completely agree with everything kristin said. basically i think at this summit they should take advantage of the fact that they are meeting with the heads of the g-8 to talk about issues kristin just mentioned but do it on a global scale. how does europe fix its economy. in some respects european is in worse shape than united states, japanese economy is in worse shapes. whar the steps they are going to be taking. what are the measures? what are we at the halfway point between the april g-20 summit.

>> does anything ever happen at these things. >> i wouldn't expect much to happen on the front kristin mentioned. it is by far the most important thing out there. i don't think a lot of happen. first of all a summit of leaders which is important. you don't have key officials, central bank, finance ministers are not there. i think they should be focused on these issues, have good discussion, find out where they are. probably most importantly try to figure out how to coordinate and not basically do beggar thy neighbor policies which are always a threat. >> they destabilize the entire planet. >> so can we do one more thing? should we do climate, anything else while we're there? you know they are going to talk about that. it's kind of pc, you know they will talk about climate. >> one issue i wish they would talk about, there seems to be widespread disagreement six months ago no economy would have

a sustained economy until they dealt with bad assets in the banking system. the u.s. put forward the plan which would have been one way to address it. that seems to have been shelved and everyone thinks our financial system is fine because the banks made some money. in europe there's been less progress. there's a general sense that the banks have done less of a good job for acting for bad assets on the balance sheet. i think that will hold back recovery around the world. i think they should address that. >> that will get plenty of discussion after the wave of did he fault sends us into a double dip. that's the fear. >> exactly. the banks are not going to start lending again, not a robust financial system until we deal with it. the lesson from japan loud and clear until you rebuild your financial system, strengthen your financial system, you're not going to have a sustain recovery. >> why hard to do something prescriptive? >> basically the obama team has

run into make of the same problems the bush team ran into. it's hard to figure out how to price these assets and hard to figure out how to get the banking system to get these bad assets off of the bank's balance sheets. plus the banks have done better. the stress test showed they are doing better than people had originally expected. and they are starting to make profits. to address the earlier question, i think the g-8 can still show some progress. there is a big question out there, why do we have a g-8, isn't g-20 where we should be going to, there's probably legitimate reasons for that. at the same time can the g-8 help food aid, food assistance for poor countries which is somewhat politically correct but at the same time actually very important, because countries are -- we saw a food crisis last year. you have to try to figure out how can you do longer-term things on basically agriculture productivity. that's something that could be important for the g-8 to address had weekend even though it

doesn't grab the types of headlines and the more important inside about trying to stabilize the financial system. >> okay, kristin and clay, in italy. >> not the g-8 anymore, g-7. >> i think it should be only seven. i don't think 20 other countries should be there, smaller ones. should be exclusive. >> watch berlusconi who has issues of his own. >> i'd like to put a tail on him, see where he hangs out. you know what i mean snfr i was going to ask if the governor wanted to weigh in. >> i did on protectionism. they should be talking about that as opposed to tailing berlusconi. >> all right.other issue. we're going to have more with the governor in just a moment. let's take a look at the price of crude oil because it's continuing to blast. down 90 cents, 62.03 is where it

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. a lot more "squawk" ahead with governor pataki.

the petroleum institute, i don't know if you saw inventory numbers yesterday raising real questions about gasoline demand in this country. the early buzz from the trading pits of chicago. keep it here on esday. "squawk"s ming right back.

welcome back to "squawk box" on cnbc, first in business worldwide. we are just one hour away from the opening bell. our guest host former new york governor george pataki. he is with us for the rest of the hour. we've been talking about lots of things but right now let's take a very quick look at the markets. yesterday there was a selloff. talking about futures above fair value but just barely. dow futures up 11 points above fair value. this comes after a day when the mark, dow at least down to the lowest closing level we've seen all the way back to april. rick santelli and rich berg standing by at cme group. rick, what happened yesterday? >> from an equity perspective, there's probably good reasons, especially at the beginning of

earnings season not look at overextension of the 6,000 plus level in the dow. look ahead where horsepower comes from, handicap things like banking and financial industries and where they are going to derive earnings power on fixed income, rates moved down. three-year note went pretty well, a ten year and 30 to go. from the perspective of interest rates, the best gauge handicapping weakness which pushes rates down versus endless supply to another stimulus package which has propensity to push rates up. that's where a good battle is fought. >> you're in the in the oil business but all this talk about cracking down on oil speculators. lead story today. what's the talk in the pit? >> so easy. the credit crisis where the over the counter market, think of the words. it was created to get around

rules, accounting, you name it. that same financial engineering has been applied to commodities for a number of years. if you want to stem what's going on with volatility in commodities, look how the otc affects the market. traders don't have a problem with limits of positions. it's the categorization of who is a hedger and who isn't. not a problem with speculation. these markets existed for well over 100 years. furthermore, you know, anybody who gets alongside, you're talking more volatility than ultimate moving average over a long period of time. >> what do you think? >> too much is blamed on the speculators. after all, at the end of the day you have to take deliveries or deliver oil. these are physical contracts with physical quantity behind them. i think we have volatility because partially in this day of information, things move globally so quickly that what

used to take months take days. you see volatility in all markets, not just the oil markets. the stock markets exhibit volatility. people in and out and it enhances volatility. they are trying to put blame where there necessarily isn't plame. >> these ideas of cornering the market that goes back for decades and decades and decades where in maler markets isn't this the case where somebody can push something around, push the price around? >> you can't print wheat, print oil, natural gas. so what you're saying is true. you could look at some of the past wheat markets, especially spring wheat at the minneapolis exchange writ went up to $25 a bushel on an expiration due to the fact there was more ownership of contracts than there was actual wheat. so yes, there's issues here. isn't the dynamic in the

speculators. let's not forget one of the biggest dynamic is the dollar. so the administration's past and present need to take a lot of blame in this regard as well. >> is there concern, though, when you start hearing about these rules to crack down on them? what would it mean for the market? >> you have all kinds of unattended cons quepss when you have non-practitioners, trying to figure out how do we create rules to get around this, keep this from happening. it gets dangerous when you have people who aren't experts trying to create rules to cure what they perceive is a problem. >> other people, you have these guys that get around every rule we lay out. >> maybe we don't have a problem. wasn't mr. beginsler golden before he was ever -- >> getting around rules, doesn't our own u.s. government get

around rules for not quite accounting for the money we have in debt properly. if they were a corporation weren't they going around the very rules they are criticizing corporations for. everybody does that in some way. you can point fingers but our government is the biggest culprit. >> rich, if you were on the board of a company that passed a boatload of resolutions without reading any of them, i think you could probably send them to prison, couldn't you? >> it sounds like stephens, you bet. >> thank you very much. good to talk to you.ñ >> thank you. >>et's hear more from our guess host governor george pataki. governor, we were talking after we had governor rendell on, talking about some of the numbers and the way to create jobs. just doing simple math, the governor is gone now, he can't talk about some of these numbers. how many jobs? 30 million for $11 million.

>> early creation, $11 million bridge project that created jobs. don't know if that means more down the road. >> there's a broader point he. if you look at the stimulus program it hasn't worked. maybe yore creating 38 construction jobs. they are temporary. at the end the jobs are gone and you have to pay debt for 20 or 30 years. we're mortgaging our future. if you just heard fro italy, the experts were talking about í second smulus package, what it could do to interest rates, what it could do to the dollar. politicians don't think out that. they think i'm going to have more money to spend. it's not their money. borrowed money from the future. it means a weaker dollar, higher interest rates, homes are going to beorth less because your mortgage is going to cost you more. i just think when something didn't work the firstime you shouldn't go and do it a second time. >> okay. so we learned our lesson, let's give more money to the defense ñ

department which can spend more quickly, give people tax credits that buy durable goods, right and a half the whole point throughout the stimulus is that government is going to spend money and that is going to get the economy to go. it doesn't work that way. jobs created by the private sector, particularly by small businesses. there was nothing in the stimulus package to help small businesses create jobs, nothing toelp compete. if they are talking about stimulus, i would look at what we could do to stimulate private sector, maybe lower corporate tax rate. so instead of moving your company to ireland where there's a 12% rate you can build it in iowa where there's a 39%. how can you judge the package if only 10% has been spent? >> discretionary money. all the government money, the politicians are spending it very easily. look at every state budget adopted, you he stimulus money that's there. that's another concern, because it's supposed to be a temporary

package and it's built into permanent state budgets. what is going to happen a year, two years, three years down the road when that money is not there. you just heard governor rendell, i don't want to talk about him but he said 30 of the 40 state budgets adopted raised taxes. that's wrong. when we're trying to create jobs you don't want to raise taxes. >> unfortunately at this point there's incentives of corporations of any kind, it's distasteful to the poll lass mood we have in the country right now. for you to be pitching let's help the corporations more to hire -- >> the benefit -- this is what they are saying. people aren't happy with corporationsbut they wt more jobs. for eight years they would s we coddled the corporations and look what happened. maybe we didn't regulate but we sure taxed them a lot more than

other countries do. i'm not talking about doing something for the benefit of a company. i'm talking about doing it for the kraeg of jobs here in the united states. small businesses create two-thirds of ourjobs. what we're doing by increasing interest rates, lowering the dollar is hurting small busiss. what we're doing by having more government spending is hurting small business. by the way, when it comes to manufacturing, our mufacturing taxes are totally out of line. for companies here in the u.s. as opposed to the rest of the globe. >> it makes no sense, government for job creation. i know that. >> create government jobs. >> the government raising interest rates -- >> credit banks are the ones lending at 30% and cutting credit lines to small -- >> government deficits and government fisl policy when we run a multi-trillion dollar deficit does increase interest rates because they are borrowing

more. when the interest rate goes up it hurts everybody. >> when it's at 1% and average mortgage at 5.3% and a lot of people can't qualify to that. when you're looking at lines to credit cards raised 18, 19, 20. >> bank profitability the best in two years and bonuses and salaries and so forth at citigroup rising by 50% -- >> a lot of people feel like private companies are getting help and not passing it on. >> getting help in the form of a stimulus package which i think everybody, the vast majority of people don't think is right. we shouldn't be giving grants, massive bailout fundso the private sector. what i'm talking about is not picking winners and losers but in sentiviz incentivizing. instead of overseas, compete in the global economy, instead of the private sector, particularly small businesses to add jobs to work forces instead of

penalizing with higher taxes. >> there is a piece in usa "today," states are not using funds intended. they are -- >> on the other side, though -- >> every story about jobless people who can't qualify for stimulus funds, they are getting killed. >> are you really surprised that a politician who gets money from the government is going to do what they think they want to do with it as opposed to what the government hopes they will do with it. that's why you incentivize through the private sector instead of spending. >> we have built this country on the private sector generating the economy, generate revenues for government to do things. >> private sector is focused on keeping their margins as fat as they can and that's going to result in the biggest -- >> you're talking about -- >> doing so well then -- >> forgive me here.

>> we should not have a second tim lsu package. i don't think we should have this h a first one. we built a pretty good economy over the last 300 years in the private sector. >> we built this city. >> it wasn't built by the government doing things. >> they tried that. you remember, the wall, cuba, remember and a half a lot of people would argue with you. tennessee valley authority. this is a long discussion. we'll continue it. also watching crude oil prices, approaching $150 a barrel. if you look today it's around $62. this is a perfect time to talk supply and demand with the president and ceo of american petroleum institute. al take on the government's new target speculators. "squawbox" will be right back. (announcer) we speakar.

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you look at minister of energy of saudis. he says 75 by the end of the year. i wait two weeks, 75 by the end of the year. oh, what a prediction. >> boone pickens on "squawk box" one year after rolling out the pickens plan. let's talk with president and ceo of american petroleum institute. good to see you. >> thanks for having me on. >> you just heard what boone pickens had to say. opec calls the shots. that is clear? >> i can't predict what they

will do. production will be up over last month. i think what's most important is focus on domestic capacity. what we can do to bring additional energies to the marketplace for the benefit of all americans. >> by that making sure we're drilling in other areas? >> that plus fundamentally the policies put in place. we look at the debate currently going on in congress over the climate change question, early indicators are that the bill passed by the house heavily discriminates against the oil and gas industry. in fact, some estimates are we'll lose upwards 3 billion jobs across our economy. some will say well, reduce independence on foreign sources of energy. the way it does that increase dependence on foreign sources of ref fined product of the net affect of it is to hurt or destroy our refinery capacity in this country and turn around and rely on other sources for the finished product. so the policies aren't sinking with the rhetoric, if you will.

we're very concerned about that because we have huge dom particular supply opportunities here, as you know. until last year the congress had 85% of that placed off limits. >> although, jack, a lot of people say perhaps you look at it from the perspective of api, oil and gas companies at a disadvantage. others say including renewable energy sources at an advantage. something of importance over the long run, you have to get away from fossil fuels, renewable sources over a period of time and it will create a lot of green jobs instead of the jobs you're talking about. >> two points to that, becky. first of all, oil and gas in the united states currently employs about 6 million people. i would suggest in light of the economic situation we're faced with the first thing we do is do no harm. let's make sure we preserve those jobs, keep those good high-paying jobs in place. then let's seek to add all the green jobs. we're all for that in fact we're going to need all forms of

energy. a lot of people don't realize since the year 2000, there's been $133 billion spent to develop new forms of energy. 44% of all that investment comes from the oil and gas industry. we're the ones spending money to develop solar, develop wind, to develop geo thermal. so we play a critical role there. >> governor. >> good morning, jack. nice talking to you. i totally agree with you that we they'd took have more domestic sources of energy, not just win and solar and geo thermal but also oil and gas. now, a year ago when oil was $147 a barrel, the cry was drill baby drill. it resonated with the american people. now 62.50 and oil companies seem to be targets. you're the bad guy. what can we do when prices are down to be in a position we're

less reliant on oil from hugo chavez or the mideast and have domestic supply grow even when the price has been so volatile. >> i think governor you make a good point. first thing we need to understand is the factual situation b i that i mean our largest trading partner in terms of oil is canada. they are our biggest player, our largest relationship. we rely heavily on canada. i don't think it's anybody's intend to ruin that trade relationship with canada. at least i hope it's not. secondarily as we look while prices are down now, we need to think longer term. we have a lot of conversation in the short-term, what does this mean over the next two months, what's the price of food, six months, a year. you look at oil and gas investments, we're talking multiple years, talking multiple millions if not billions of dollars. we need to it see long-term horizon. all the experts will tell you that five, 10, 15, 20 years down

the road, we're going to need considerably more we have today. so the real question is, how do we grow all these new forms of energy on the renewable side while at the same time provide adequate access to our vast domestic oil and gas reserves? i think that's the balance. >> you know, jack, it's not just the oil and gas companies that are getting blamed for higher prices, it's the oil speculato s speculators. regulators are considering cracking down on speculators in the oil markets. how much of a role do you think speculators play? >> it's difficult to predict. i always have a difficult time defining what a speculator is. during this debate a year or so ago when the price of crude got well over $140, there was talk about speculators at that point. the next thing in the newspaper i read a front page article for the calper's fund that just invested a billion dollars in the oil and gas industry. so i think we've got to be thoughtful about what we do

here. we need to make sure we're providing the capital necessary to produce energy in this country. we're all for transparent markets. they should be transparent. they could be governed and guided, if you will, by supply and demand. but it's difficult to predict and understand, so we've got to be careful that we don't chase discussions surrounding speculation and fail to address the fundamental issues of supply and demand. >> do you think someone could manipulate prices, a large organization, someone, a trading group, a rogue trader? >> when you look at the oil markets, for example, it's a global marketplace. the price is set in a global environment. it's very difficult to take a market of that size and that quantity, it's difficult to understand how someone could manipulate that market. >> all right, jack, thank you very much for joining us. >> thank you for having me. good to talk to you. >> you, too. all right. the black and blue chips, the major averages tumbling to a

ten-week low on the eve of a new earning season which seems to come almost like it's every three months. like clockwork. >> we know it's here when you go on vacation. >> traders is very important. trader's edge ahead with art cashin. and this afternoon, don't miss american express ceo. it's a cnbc exclusive. oh, i have to cue something for "street signs." 00 p.m. eastern. could someone toss m an eleven sixteenths wrench over here? here you go. eleven sixteenths... (aouncer) from designing se of the world's cleanest and mostuel-efficient jet engines. touilding more wind turbines annyone in the countr.. the people oge are working together... creating innovation today for . thanks! you have questio. who can give you the financiaadvice you need?

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time for the trader's edge with art cashin. you saw what happened yesterday, art. we are waiting for the 17th now to see if this continues. futures have weakened a little bit recently. it's sort of going along in the way that you predicted yesterday. no? >> it happens. you get lucky. >> yeah. the next week, do you think we're down 5%? >> i don't know. i said we would know the course clearly by the 17th. i think the period of 15th or 17th will tell us how meaningful this correction is going to be. and whether we retest those lows or what happens from here. so my crystal ball isn't quite that good, but i do think we'll have a definitive answer by the

end of next week. >> does it matter what any of these companies say? >> i don't rally think so. as far as the earnings go, i'm discounting the earnings and looking more toward the outlook. i would like to hear somebody who feels they have clarity to talk about what's going on for the next three to six months. i think that's going to be hard to come by. i mean, everybody is beginning to understand that the so-called first stimulus package was part allusion, part hoax, part a variety of things. now as i wrote this morning in my comments, now that the fire extinguisher is probably empty because we misused all those trillions of dollars, we may not be able to help ourselves no that we really need it. >> thank you, art. >> okay. >> we'll see you soon. >> all right. along those lines we will get a parting shot from the new york governor george pataki after short break.

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