Impact of Government Shutdown: Surveillance (10/01)

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Oct. 01 (Bloomberg) -- Full episode of "Bloomberg Surveillance." Guests: Stanley Collender, Daniel Clifton, Steven Anderson, David Stockman, Jon Kingsdale and Bill George. (Source: Bloomberg)

No further negotiations are scheduled as the federal government shuts down.

Speaker boehner seeks to six fairness, president obama will not allow the gop to extract a ransom.

Unfortunately, congress has not fulfilled its responsibility . it has failed to pass a budget.

As a result, much of our government must shut down until congress funds it again.

This morning, markets rally as investors shrug off the for low of eight hundred thousand workers.

Majority leader harry reid says the senate rejoin the does a -- rejoins the debate at 9:30 this morning.

Good morning, this is "bloomberg surveillance." i am tom keene.

Tuesday, october 1. joining me, sara eisen and scarlet fu.

We are finally here.

We are finally here.

It happened at midnight.

Also the ramifications, which we will talk about throughout the hour.

First, overnight news that happened, including in japan, the prime minister or the first sales tax increase since 1997. there were some questions going and whether he would go through with it.

He has raised the sales tax.

Germany, and employment increased in september and chinese manufacturing, pmi, rose less than forecast.

In the u.s., we get manufacturing numbers.

That is due out at 10:00 a.m. and auto sales will trickle out throughout the day with ford coming in first and then chrysler and general motors.

No economic data today, affected by the shutdown.

I is a manufacturing comes out for supply management, private report.

Jobless claims will come out but we do know the jobs report on friday -- it won't be coming out and construction spending, was is the commerce department report, probably not coming out as well.

Are we all three taking off on friday?

Hardly.

This morning, walgreens out with earnings.

The pharmacy very much in focus, especially as the president's affordable care act exchanges go live today.

You heard francine saying not much affected in the markets.

You see with a data check.

Look at equities, bonds, currencies, a bounce.

Yields higher.

Currencies -- we will get to the yen in the moment.

An upward field to the core data check this morning.

On we go to the fix to see were that close that yesterday.

This is interesting.

Dxy breaching 80. a weaker dollar.

Still strong yen.

Look at sterling.

Were you surprised to see rising stocks?

No.

we will see the next couple of days.

How long will the shutdown go?

And what does it mean for politics around the debt limit?

First, time for our front page.

The most important stories we found.

We need to go through the shutdown.

Every single major paper has a foreboding shot of the was capitol building in washington with clouds overhead.

Here is what is going on.

The federal government is shutting down for the first time in 17 years.

Congress phil to break the standoff forwarded budget.

Certain house republicans have tied to a delay in the president's health care law.

About 800,000 federal workers will be furloughed, more than one million others will be asked to work without pay.

How does that work?

Air traffic control will continue.

We know large number of federal activities are considered nonessential and to be you are from the irs to passport centers will be suspended.

One estimate in terms of the monetary impact, it is from ihs.

They set partial government shutdown would initially cost the u.s. at least $300 million a day lost economic output.

I like our graphic.

They were negotiating until the end in 1995 and 1996 in the last couple of days have been marked i absolutely no conversation between the two sides.

Senate majority reid throughout the house bill that was passed over to the senate yesterday.

Let's hear what he had to say.

We will not go to conference with a gun to our head.

The first thing the house has to do is pass a clean -- they could do it right now.

That is what the house did not do, has a clean version.

It would to the house, they put in changes to obamacare, said about to the senate.

Obviously, that wasn't going to pass.

House speaker john boehner says the republicans are the ones trying to keep the government open.

The house has made its position known very clearly.

We believe we should fund the government and we think there are to be basic fairness for all americans under obamacare.

Tying it back to provisions in the president's health care law, specifically, delaying the enactment of the law.

I like how they threw back with the idea that all of the hill would pay for the health insurance program, including the junior staffers.

So you're squeezing by in washington for 85 thousand dollars a year and you have an x number of $1000 cost?

Thank you, mr.

Senator.

Thank you, mr.

Congressman.

President tweeted his reaction.

It crossed twitter about nine: 24 after headlines on the senate rejected me how stopgap funding plan went through.

Note how he calls it obamacare himself.

And he says "they" did it.

Phil mattingly has the latest.

He has been up all my long.

Give us the run through, the play-by-play.

I went to bed around 9:00 and missed most of the action.

Basically what we have around 8:00 is the house and back another version to the senate.

This one delaying the individual mandate and health care law as well as the subsidies issue that tom was talking about.

I don't know many junior staffers are making $85,000. the senate table that again.

Basically, house republican and leadership did not really have much other option.

They try to bring lawmakers together in a conference.

The senate said, not a chance.

We're here today, shutdown started at 12:0 one.

No negotiations going on right now.

The senate will meet at 9:30. those that are awake, nothing is planned.

You're basically in the wait and see mode.

I'm glad you move on to tell us what is next.

John boehner did speak after midnight about the next step.

He says it should happen for congress.

The senate has continued to reject our offers.

Under the constitution, there is a way to resolve this process, and that is to go to conference and talk to your differences.

I would hope the senate would accept our offer to go to conference and discuss this was the we can resolve this for the mac and people.

I we finally going to see some sort of discussion?

No.

here he read in until he dispatched and said, you have to pass a continuing resolution clean before we even consider this.

House republican aides told me this is really their last shot.

They figure they don't want to be holding the ball with the clock struck zero.

Let's toss it back again.

They knew the senate wasn't going to do anything, so at least they're not holding on to it maybe they can deflect some of the blame.

We will see today.

Achy so much, phil mattingly come from washington.

-- they do so much, phil mattingly, from washington.

This is the top of my google page this morning.

Yosemite, 1890. sara eisen climbed this once.

No, i was planning to, but now it is shutdown.

A partner at corvus communication, chile our expert on the u.s. budget -- truly our expert on u.s. budget for joining us now.

The idea is yosemite park shuts down.

What else do we need to know this morning?

All the national parks, any national monuments, that will be one of the first visible signs of what is going on.

Irs offices, visas, passports.

If you had a question for the department of education about a student loan or china play apply for veteran benefits, it is gone.

How long will this last?

At least a week.

I put it up on my blog last night.

First of all, there's nothing going on today that will move things along very quickly.

Unless the house simply gives into the senate, which i don't think is going to happen, this is at least a couple of days going.

The most important thing, these members of congress to their constituents to feel the pain.

It will take several days for that to happen.

Probably by the end of the weakest when contractors and others will start to realize they're not getting paid, that their invoices or dubbing process.

They may have to lay people off.

I find it interesting the markets rallied overseas.

You didn't see any immediate panic.

The economic impact of this?

You mentioned the per day.

$300 million per day at least.

But you won't see it initially.

Is a fraction of our gdp.

It is a percentage, minimal.

I would expect it to hit the washington, d c economy externally hard.

Anywhere there is a large group of iris -- irs employees.

The multiplier effect.

Stan collender with us for this entire hour, dave stockton will join us later on "bloomberg surveillance." we have a true fit line up to give you -- we have a terrific lineup.

Outside washington, google closing in on the joke european regulators.

The competition she says the company is made significant improvements in a proposal to in its antitrust battle and are up -- europe.

Regulators have been looking into whether google promoted its own product such as google news and search results.

A slowdown in emerging markets it's unilever.

They say sales in the third quarter will rise three percent.

Down from the 5% the company and posted in the first and second quarters.

Unilever said growth in emerging markets loaded the last period.

The company gets close to 60% from those markets.

Latin america bracing for corporate default.

Ogx is set to miss a $44 million bond interest payment due today according to the wall street journal.

Ogx has more than $3.5 billion in bonds outstanding host up its stock is down 90% this year after the company missed out the targets.

Batista is no longer a billionaire.

Today's company news.

The economist with a 14 page work up this week on brazil.

I was stunned at the gdp slowdown in brazil.

I did not realize how really -- slamming the brakes.

Which is why they're seeing higher prices, weaker economy.

Coming up, we will talk about the u.s. think the government shutdown is bad?

Way to you here what happens if they miss the debt ceiling deadline.

? good morning.

"bloomberg surveillance." we are not shutdown.

Neither is "in the loop" with betty liu.

Sara eisen here with tom and scarlet.

800,000 government workers are sitting idle after congress failed to avert a government shutdown last night.

Michael mckee says the real catastrophe lies ahead of congress fails to raise the debt ceiling.

We hear a lot about this october 17 deadline.

You're thinking this could be a bigger deal, earlier.

Most people think you could hit before the deadline.

October 17 is when the treasury department says they will start spending more money than they are taking in.

They have a cash pile sitting there, about $30 billion.

It should enable them to continue funding the government for a little while after that.

The real dates start to come in november.

November 1 they have to make a $67 billion payment into the social security, medicaid/medicaid, veterans program.

November 15 is the first time they will be auctioning new notes in the treasury may not have the cash to settle that.

That is when the danger of default actually could come up.

From where you sit, michael mckee, this morning are republicans and democrats, but focusing on republicans, are they calm and patient because they have time?

That is one thing that probably plays into it.

The markets are not reacting seriously.

They believe they will get this settled.

There is no external pressure.

We have been to the shutdown before, 1995 and 1996, costing $1.5 billion and that would 28 days.

I'm sure there's a feeling down there that, yes, we've got time, it is not an immediate crisis.

Stan collender, michael mckee says there is no external pressure but inside the republican party, pushing some movement?

First, the external pressure is going to come relatively quickly.

After four or five days, people will go from watching the spectacle of the shutdown and instead of having reports about less traffic in the washington area, we will have reports about contractors not getting paid.

That will create some pressure on members of congress from the outside.

On the inside, although they did admitted, dike, there were people who were able to say, look what i was willing to do for you.

The democrats who are willing to say were now able to say, look what they did to you.

By the way, he said something earlier about the difference between 1995 and 1996. there were some appropriation signed in 1995 and 1996. that is one of the reasons economic impact wasn't as small.

There were two d-up shutdowns.

The first one, about 800,000 workers were off but only 270,000 were off in the longer shutdown that went into january because they had passed some appropriations bills.

Look at the big picture.

We have rolled from crisis to crisis and dysfunction to dysfunction and you can count up the economic data, but can you measure the impact?

A washington that isn't sure it can pay its bills or fund its government come it has to leave an impact.

But there is crisis fatigue.

We heard that in the report does before you came on the air.

A lot of folks overseas are saying, i have seen her before.

They will figure it out somehow.

Boxers the 1995 perspective.

Let's go back, 28 days total, very different.

The speaker of the house at the time of the revolutionary november 1994 when was newt gingrich.

His comment was to the point, we hope the president will decide -- president clinton -- we hope the president will decide to talk with doesn't have a discussion about how to get this solved.

Stan, the republicans caved.

Do you assume you'll see that again?

I do.

I don't see where they will go from here.

I think within a week or so, they'll start getting pressure from their constituents.

All you need are 16 republicans to start saying to john boehner, we got to fix this or we're going to get hurt.

Boehner no longer has the majority at that point.

Gingrich was much more popular than john boehner.

One of the reasons it started to crater for the republicans back then was he started to won a little bit.

He also bragged about shutting down the government.

Friday, no jobs report?

Literally, no jobs report?

Unless they settle in the next 24 to 48 hours with black what are we going to do?

There will be no jobs report.

What are we going to do?

We will all have a contest.

What are we going to do?

We could read the funnies like the mayor.

Will it come out some random day?

That happened back in 1995 and 1996. the cpi report was generated, so they put it out.

The jobs report, not completely finished, so they will wait.

Michael mckee.

Looking ahead to the debt ceiling.

Our twitter question of the day -- tweet us.

? this is "bloomberg surveillance." in top headlines, japan's prime minister orders the country's first sales tax increase in 16 years.

The tax will rise to 8% from five percent.

He also announced $51 billion in stimulus.

Surprise rise in german unemployment.

The number of people out of work rising by 25,000 almost 3 million people in september.

Economists were looking for the client of 5000. the unemployed rate in germany rose slightly to 6.8%. in sports, the tampa bay rays are in the playoffs.

They beat the texas rangers 5-2 in a tiebreaker game last night.

It will play the cleveland indians a one-game playoff tomorrow night.

Tonight, the cincinnati reds take on the pittsburgh pirates.

Go red!

What do you think?

I mean, nobody is really for pittsburgh, are they?

The morning must read.

Did money to all of those watching in pittsburgh.

-- good morning to all of those watching in pittsburgh.

The managing founding partner of westwood capital says it is the ruts we can't get out of.

He writes -- he says for the last three years this is why we've had a slowdown in the second half of the year, in the middle of the year, where you fall into this where people are wondering, what happened to those?

And all the shenanigans in washington aren't helping.

On a lighter note, they have a lot of fun on the late-night shows about the government shutdown.

Have a listen to what david letterman had to say.

Americans don't care.

The last time americans cared about anything was when they shut down the twinkie factory.

That is what people cared about.

And it is kind of true.

People are just so -- i would agree.

People are like, so what?

Within the number of days, long and it is -- not a so what.

A little humor there on the step the government shutdown.

Coming up, we haven't seen a day like this in more than 17 years.

Neither side blinks of the government shuts down.

The politics, economics, the financial market reaction coming up on "bloomberg surveillance." ? this is "bloomberg surveillance." the u.s. government shuts down an stock index futures rally.

They bounced off a tough day yesterday.

Let's do a data check.

A stronger euro by a bit, futures up, 10-year yield is higher which is a relief rally.

The s&p 500 hat -- hit its three-week low yesterday.

And it's seventh decline.

On the first day of president obama's health care law, the insurance exchanges are operating and we have community health systems is a big you on elevated options volumes.

It is one of the seven companies that started signing people up or exchanges under the affordable care act.

It is the top story of the day and many people are waking up this morning to no resolution from washington.

Let's go straight to the capital with phil mattingly.

After about a week of both rhetorical and procedural volleys back-and-forth between the senate and house, last night night was there last opportunity to do anything and if you talk to aides on either side, there was never any real chance of a resolution.

There was no actual negotiations.

The house met a couple of efforts to send over legislation that would have made changes to the obama elk care law which is a nonstarter with senate democrats on the white house.

By 930 p.m., everybody was resolved it was time to let this happen.

Let's see what happens and see how this moves forward.

Right now, there are no meetings or negotiations planned for today.

The senate will come into session at 9:30 a.m. to deal with procedural issues.

We are all in a wait and see mode.

Everyone wants to see when the constituent start calling in and who gets the blame for this.

Thanks or the run down.

Not a sense of urgency here.

At least right now but that may change.

Must read political notes -- he has been out front with the complexity of the politics that surrounds healthcare and caused the government shutdown.

How divided our republicans this morning and how urgently are they awaiting the first polls on this government shutdown?

I would start off by saying you will start seeing a bigger divide in the republican party over the next few days.

The conservative wing pulled john boehner in a direction he did not want to go and they wanted to have this fight on the debt ceiling where they had more leverage on the continuing resolution so you will see that cracks widen in the next few days.

When you look back to 1995, you started to see the approval rating of both resident litan in and the republican congress in the initial run.

-- both president clinton and republican hungers in the initial run but then it started to turn around while the blame went to the congressional republicans.

The longer this goes on, the harder it will be on the republicans.

What will you be watching this morning?

The first thing is -- what are people waking up to?

People are waking up to such incredible volleying going back between the two political parties and voters don't understand that.

They will wake up this morning and see a government shutdown on their screen and it is about the psychological impact of the greatest nation on earth and their legislators cannot agree on the budget.

We know the phones on capitol hill will be ringing off the hook.

You can see live pulling on a daily basis in this day and age and you see how the blame is falling.

What we are watching is the generic ballot.

Who do you want to run congress?

The presidents overnight rating and who you want to run congress will be very telling.

Most shutdowns are only a couple of days long because the outrage starts right away.

You hear a lot of talk about republicans being hostage takers and we are starting to see that about the polling, let's talk about the democratic strategy.

President obama play golf saturday and harry reid said no copper mice and nancy pelosi was not willing to come to the table.

Wasn't that a risky strategy?

Absolutely, but when you have 51 votes in the senate, you can do whatever you want.

On the debt ceiling they had 60 votes which would have for the compromise.

The republicans would have had the leverage but what harry reid has to do is walk the most vulnerable democrats off the plank.

That's not a winning clinical issue in louisiana or arkansas.

If this is going on and those senators are feeling the pressure, it could be that you start seeing the democratic divide and that would put pressure on getting some sort of deal.

This is complicated by the debt ceiling which has to be lifted by october 17. it seems the two issues may collide together.

How that pressure hits the democratic senators or the conservatives in the house is going to determine how this gets decided.

I wonder if you can link this to sequestration.

Aside from a couple of days where it immigration lines were long, people said they did not feel the effect.

How would a government shutdown be linked to that?

Sequestration was a five percent cut.

It only affected them on the margins.

This is a complete shutdown, a stoppage of a lot of government services.

Where it could have had the biggest impact is if the president decided to shut down the air traffic control system.

He has decided not to do that but people will feel the effect immediately.

Dan, you wrote about this.

Dan clifton, who wins if there is less sequestration?

Once we go into this government shut down, the question is whether the 30 or 40 republicans will vote for reopening the government.

My guess is they're not and that may force john boehner to cut a deal with steny hoyer and the price may be less sequestration were some relaxing to get the government reopened.

Though stakes are pretty high moving into the debt ceiling debate.

Today, the president's legislation the health exchanges go live.

He spent yesterday in a rare visit from the white house with the prime minister netanyahu of israel.

Does he need to play a bigger leadership role here?

Does he need to get out front and tell his party to lead in a different way and avoid the debt ceiling?

He can tolerate a government shutdown but it would be hard if the president of united states had to tolerate a u.s. default?

That's correct, they need to set the tone on the continuing resolution that they will not be held hostage on the debt ceiling.

Will the republicans come back with the same ideas on the debt ceiling?

The president needs to start engaging him what the solution will be on the debt ceiling and the reopening of the cr and that will present complexities for them.

All other options do not stand a chance in the house of representatives.

That is where the real compromise is.

The government shutdown may actually have some sunshine at the end where it may force them to compromise them a something they could not do without it.

That is an optimistic outlook.

The longer this goes on, the less likely the debt ceiling will be an issue because they will put it together and will have gotten their pound of flesh.

It is not clear who the president would go shoot with.

John boehner does not speak for the republican caucus.

They don't let him cut deals.

To me that's the heart of the matter -- why can't the president negotiate with the leadership of the legislative branch?

Because the leadership of the legislative branch cannot control the votes in the house.

Two or three specific times in the last week, john boehner has put a plan in front of his caucus and they rejected that plan which forced them to call an audible at the line.

That's why they have been living for them day to day.

It is the rank and file and most of those members are from republican districts meaning they have 10% rate or voter registration and they are very much against the president and it is harder for john boehner to control them.

Thank you so much.

He is all worked up today as we all are over washington.

Coming up, a man who has seen 20 of budget rattles in congress and the white house.

We will talk with ronald reagan paused budget director, david stockton, in the next hour.

This is "bloomberg surveillance," streaming on your phone, your tablet, and bloomberg.com.

? the statue of liberty -- a live shot her and you cannot go there and visit because the u.s. government is shut down and it means federal parks across the nation are closed to u.s. tourists.

This is one of the more popular ones in new york city.

This is out quote bloomberg surveillance." the securities and exchange commission is close to issuing research from its new system that monitors the markets.

It will use data from the commission and it will include research on high-speed trading.

The research could help determine if new regulations are needed to address trading strategies.

The bank of england may push for management changes at banks that fail stress tests.

It said it could take steps to remove executives if it revealed weaknesses in governments and capital planning.

-- governments and capital planning.

--governanace and government -- and capital planning.

The average rent in new york city has risen.

The national average for an apartment rent is $1073 per month.

What did you pay for your shoe closet?

Three times the national rent.

My apartment is a shoe closet.

And the expensive one.

Let's get to a single best chart.

She has an eight room, six fireplace house -- she has a walk-in shoe closet.

You can come to my house anytime.

Structs traditionally shrug of government shutdowns but the biggest -- stocks traditionally shrug off government shutdowns.

This chart shows is what happened when the s&p 500 downgraded the aaa credit rating in 2011. the s&p 500 plunged 19% which was a correction.

Following that, the s&p 500 more than recovered coming evening more than 50%. bank of america believes that what is likely to happen here in terms of a shutdown is that there is a short-term extension of the budget and the debt ceiling with modest concessions that are unlikely to have a significant impact on the overall economy.

It's a bigger wall of worry.

We have had many shutdowns and stocks and investors have shrugged it off.

Given what happened in 2011, the debt ceiling is a concern especially with concerns about what is happening around the world.

Do politicians wring their hands when these things happen?

Are they oblivious to how we feel?

To a certain extent, they are oblivious.

They care less about the debt ceiling then interest rates.

In that chart, interest rates were falling at the time even though the s&p 500 was downgrading the u.s. debt rating.

Their constituents don't care so much about the market but most politicians don't know what goes on in new york.

They've wonder if their constituents can afford to buy a house.

Interesting.

Was there a variable or two in that chart?

Yes, but there is plenty of uncertainty this time as far as what the fed will do with its bond buying program.

Each time it's different but the backdrop does not change.

We will bring healthcare into this conversation.

The affordable care act exchanges opened for business today.

Which industries are winners and losers?

That's coming up on "bloomberg surveillance," on bloomberg television and streaming on your phone, your tablet, and bloomberg.com.

? we've got company news from the files of "bloomberg west." amazon will hire 70,000 full- time seasonal employees to meet demand.

They say it is a 40% increase over last year.

The company expects to convert thousands of the seasonal workers to regular employees once the holidays and.

Dish and walt disney are reached -- have reached a deal to avoid a blackout.

They are trying to work out a longer-term deal.

The agreement avoids a blackout of abc and espn for dish tv subscribers.

At&t is set to battle google in austin, texas.

It is rolling out fiber-optic internet access to the city.

At&t hopes to get a jump on google.

The search giant is to introduce its own high-speed fiber optic service in austin, next year.

Today, the affordable care act goes alive.

The healthcare exchange is meant to encourage more americans to sign up for new insurance plans subsidized by the u.s. government will happen.

It is a hallmark law for the president and could create industry winners and losers.

With doctors expected to be busier than ever, there will be more people insured and they will seek more doctors and drugstore chains are looking at pickups.

They beefed up their in-store help and have formed partnerships with medical groups to the livermore haitian services like managing long-term diseases.

Look at the pharmacy section of cvs.

It accounts for 1/10 of the size of the retail space but can account for 70% of sales and half of the profits for an entire store.

That will only go up of more people are insured.

Stephen anderson is erin yes -- is our guest.

Is the president's health care legislation driving major changes in the way your pharmacies do business?

It is, our members are doing things every day in order to be more responsive to the consumer.

Our members are your traditional drugstore chains, supermarkets, and pharmacies.

It is having a big impact on our members are living up to the trust and expect haitians that the american people -- and expectations that the american people expect.

You are expanding education and some of your services.

Is it creating more american jobs?

It will be interesting to see.

The program is being implemented in different ways in different states.

You have states that are in the federal exchanges or there is a hybrid with states.

The supreme court considered this issue and they upheld the constitutionality of the act but they struck down portions as it related to medicaid.

That will have a different impact based on what state it is and the impact in terms of the amount of medicaid prescriptions that will be filled by our member stores.

There is also tension that would result from pharmacies taking on more of an active role in speaking with patients.

The physicians lobby, they don't look favorably on pharmacies doing so much more with the patient's. in terms of being responsive to member's needs, we are not focusing on the politics of this issue.

We are focusing on patients.

For many years, pharmacists are the most respected profession in the healthcare community.

They are approachable and accessible.

We have a store five miles away from everyone in the country.

They depend on what we are doing.

The number -- the amount of innovations we are doing, we are not just filling prescriptions.

We are focusing on providing more pharmacy care.

This is really important -- are you trying to replace physicians?

No, we are not.

In terms of the number of people that will be covered, we are providing immunizations in stores, more pharmacy services.

You come out of pharmacy school with a doctorate and there is a con -- a concept of therapy management, getting people to stay on their medications and people who don't adhere to their medications and that adds 290 though lien dollars and added healthcare costs every year.

-- add 290 ilion dollars -- billion dollars to added healthcare costs every year.

You are seeing more pharmacy services that will be provided in-store clinics.

There is a shortage of primary care physicians.

We have a shortage of about artie thousand physicians now -- there is a shortage of about 30,000 positions now.

What is an in-store clinic?

You see them all the time when you go into pharmacies.

You see them in supermarkets and mass merchants as well.

In terms of providing healthcare to people who sometimes -- sometimes cash patients will go into those doors but they are providing services through nurse practitioners and pharmacists who are practicing medication therapy management where we can focus on keeping patients on their medication.

We are not in competition with physicians.

We are collaborating with everyone in healthcare and providing coverage to the american people as healthcare care has expanded through the affordable care act.

Less than 40% of americans are actually in favor of obama care.

You engage with consumers and people all the time.

What is your take on the knowledge level?

How informed are americans about this legislation?

As pharmacies did when the medicare part d prescription drug program was enacted in 2006, we are providing advice and guidance and focusing not on the politics of this but on the patient's that are involved.

We are doing that in different ways.

To be quite frank about it, there are many people who will sign up for exchanges who have never bought healthcare before.

This is a highly complicated bill.

It is a new law and we are doing what we can doing that through weinar sources and we have had navigators in the stores providing advice and guidance.

We are helping assist the american people as they are understanding the law and as an attempt to pick products that will help them meet their healthcare needs.

Thanks very much.

Stephen anderson, joining us from the national association of chain drug stores.

I don't mean to be critical's of -- critical of pharmacies but this is one of the big issues of this affordable care act.

Who will be the primary caregiver?

And who will be the educator for the american public?

People don't necessarily know about it.

What is in?

Clinic it is giving people another source of information.

These are not people who do surgery but there is a certain level of care -- you cannot even get into see some physicians now.

You are the budget guy.

Here is a forex report -- the u.s. dollar is weaker today and the euro is stronger.

I threw in the dollar index which looks at a broad measure of the u.s. dollar.

Even the president talked about yesterday.

Coming up in the next hour, and david stockman former omb director under ronald reagan to talk about the shut down.

? this is "bloomberg surveillance." no further negotiations scheduled as the federal government shuts down and john tanner seeks fairness and president obama will not allow the gop to extract a ransom.

Unfortunately, congress has not fulfilled its responsibility.

It has failed to pass a budget.

As a result, each of our government must now shut down until congress funds it again.

Markets react as investors shrugged off the layoff -- the furlough of 800,000 workers.

Congress comes back at 930 eastern time this morning.

This first tuesday of the fourth quarter and joining as always, sarah eisen and scarlet fu and hurt yes post is they've it stockman who knows a little bit about budgets.

Good morning.

We will kick it off with a morning brief.

In japan, the prime minister ordered japan's first sales tax increase since 1997. it was expected and there were questions whether he would go through with it.

The economy is not exactly roaring but they are concerned about their 200% debt level to gdp.

In germany, unemployment unexpectedly increased for the second month in a row and in china, pmi rose less than economists anticipated.

We got some european manufacturing numbers this morning.

Italy is in a local crisis in manufacturing came in a bit soft.

We will get the read in the united states later today at 10 a.m. we will also get auto sales throughout the day.

We will get ford and chrysler and general motors.

No government-affected data today.

A report from that commerce department was expected to come out but we will not get that.

We also expected to get the jobs report.

We will probably not get that.

Walgreen is out with earnings at 7:30 a.m. wells fargo settles with freddie mac, agreeing to an 869 million dollars settlement having to do with faulty mortgages.

Part of this deal calls for an $780 million settlement.

Google closes in on a deal with european regulators.

The company has made significant improvements and a proposal to end its antitrust battle in europe.

A formal ruling could come by next bring an regulators have been looking whether google promoted its own products like google news in search results.

Latin america braces for a record-setting corporate default.

The oil company ogx will have a bond payment due today but they might miss it.

The company has $3.5 billion and bonds outstanding.

The company missed output targets so the stock is down.

Let's get right to washington -- peter cook is standing by who left capitol hill early this morning with the cleaning staff who was furloughed after midnight.

It was an interesting evening.

It wasn't very productive for members of congress.

This is "the washington post." i left close to 1:00 and i met two nice ladies who started their shift at 10:30 p.m. and they were told to leave their jobs and no idea when they were going to get paid less.

They asked me how long it was last and i said to brace for two weeks.

No indication at this point that we will get a quick resolution.

There are many frayed nerves and frayed relationships and no easy compromise.

No new bargaining chips out there after the back-and-forth negotiations we saw yesterday.

What is next for the house?

Speaker john boehner spoke after midnight about the next step for congress.

The senate has continued to reject our offers.

Under the constitution, there is a way to resolve this process and that's to go to conference and talk to -- through your differences.

I would hope the senate accepts our offer to go to conference and discuss the so we can resolve this for the american people.

Is there any sense realistically that they will talk through the differences and resolve this?

At 9:30 a.m. this morning, harry reid will step onto the floor of the u.s. senate and flatly rejecting it as he did last night what john boehner is talking about.

This is a negotiation that will not happen under these circumstances.

Harry reid and the democrats said maybe we will sit down.

There is no easy solution and this will last longer than people think.

I wonder what the president is doing today.

He tweeted yesterday that they pushed us into shutdown mode, referring to the republicans.

What is on his schedule?

It is not clear right now.

You will hear from the president at some point today.

Democrats are united in this.

He was encouraged by democrats to hold the line.

They think they have the leverage and they think the poll numbers are with them and politically they think this is good for them even though it may not be good for the country in the long run.

They said he should hold out because he will win in the end and that's the view of the democrats.

Expect the president to talk about that.

The question is whether he goes to asia.

I asked the number two republican in the senate if the president should leave and he said he that are not.

Good point, peter cook, bank you.

-- thank you.

He had a night of little sleep.

We need perspective from someone from another time and another place.

David stockman was the director of the office of management and budget under ronald reagan and he has a controversial new book.

It really takes a shot at the fed and we will talk about that in a bit.

Mr.

o'neill and mr.

Reagan could sit down at a table and have a conference or a negotiation.

Why have we lost that ability?

The partisanship is far worse today but also the magnitude of the problem is beyond anything those two could imagine in 1981. that is not withstanding huge fights we had them.

We had a budget process -- we have a budget process that is broken and we have not a past approach a -- we have not passed appropriations bills for years.

Back then, we took the budget resolution seriously.

We passed it every year.

If we could not make a deal with democrats, we put it row -- put it through with a coalition of southern democrats and republicans in the house and that is gone.

The reason is we've got taxes way too low and spending way too high and everybody dug in on entitlements, defense spending, and the tax code.

You are a republican but with your perspective in washington, give us a quality of the hatred this morning.

How much do these people dislike each other?

I think there is a growing intensity of partisanship and i think there is a resentment about the way that obama and the democrats drove obamacare through on a purely partisan vote with a margin -- they passed the legislation on a total partisan vote.

Very few republicans in either house voted.

An entitlement this massive, the greatest extension to the welfare state in the last 80 years, should not be rammed through the congress that way.

We did that on the tax cut in 1981 and i have written that is a mistake.

You live with it for years.

Now you have the resentment.

I think obamacare is a disaster.

I understand why the republicans are willing to hold up the government if they have to.

That's the point, really.

The question is, the strategy they are taking now to shut down the government and potentially threaten the u.s. default -- will that hurt the party?

It might but the party has to take a stand and we will find out in 2014 or 2016 whether the public things we can keep adding to the debt and entitlements and having a budget process that does not work.

The republicans have finally realized they have to take a stand.

I do not blame them at all for attempting to hold up the works.

They want to throw sand in the gears whether it is the cr for the debt ceiling to get these issues addressed.

Obamacare and the need for some kind of serious budget that will make a difference down the road.

David stockman is with us for the entire hour.

Let's do a data check -- equities, bonds, currencies -- dollar-yen goes stronger.

It is a rebound and the euro is stronger and the dollar is weaker but how much concern will there be in the next few days and weeks about the debt ceiling?

Peter cook says two weeks and some columnists say one week.

The deadline for the debt ceiling is not a hard deadline.

We will talk -- we will talk more about that with david stockman.

We will talk over the fight over the debt ceiling.

It could be much worse.

It is our twitter question of the day -- this is "bloomberg surveillance," on television and radio.

? good morning, everyone.

There is a shutdown in washington.

David stockman is our former -- is our guest host.

He has a wonderful book which is very controversial about the policy of your federal reserve.

He links chairman bernanke to the present shutdown.

A low interest rate allows fiscal people a wide run.

Absolutely, the congress has gotten so cynical about fiscal policy and the massive are a winning we are doing every month because they believe the fed will buy the debt if all else fails.

The fed will keep interest rates suppressed so therefore the carried costs is manageable and not worrisome.

As a result, they are simply playing games like those we see before our eyes this morning.

It will continue until the fed lets the interest rate rise and lets the market and the beltway find out the true cost of carry over the long run.

Then there will be fear and then maybe they will mobilize and sober up or . jpmorgan put the key in the door and locked the door until the crisis of 2007 was fixed.

Do we need a room with john boehner and harry reid in a room and throw away the key?

That would be a good idea but jpmorgan did not have a printing press.

Even though he was a huge power on wall street, he had to resolve the power -- the crisis of that power by choosing among the solvent and in solvent.

Let the insolvent go and nobody was going to tell out the street like they did in 2008. those are the days when financial rectitude and consequences of choices still made a difference.

How do we get responsibility?

Republican or democrat, how do we get the adults to take over in congress this morning?

They will not take over this morning or next week.

We will stumble from one mini0- crisis to another for weeks to come.

This shutdown may last a few days but it will bleed into the debt ceiling which is the big issue.

I doubt whether they will pass a debt ceiling by october 17. we will be in uncharted waters where the treasury for the first time will have to allocate the revenue coming in.

That means they will have to choose to put money -- we are getting $250 billion per month in revenue coming in -- so they can put it into interest payments are social security and leave something on funded.

David stockman is with us.

This is the perfect view of washington, dc this morning -- all is calm and quiet in the district of columbia.

? good morning, everyone.

David cridani is the ceo of cigna, front and center on the debate on your medical bill.

That is at 11:00 a.m. he will talk about where your premium and medical costs are going.

This is "bloomberg surveillance." our guest host for the hour is david stockman, the former director of the office and management and budget.

The prime minister of japan orders the first sales press -- sales tax increase.

/sinc 1997. a surprise rise in german unemployment -- the number of people out of work rose by 25,000. they were looking for a decline of 5000 of the on implement rate in germany rose slightly to 6.8%. the tampa bay rays are in the playoffs.

They beat the texas rangers 5-2 in a tiebreaker game and they will play the cleveland indians and a one-game playoff tomorrow and also tonight, the cincinnati reds take on the pittsburgh pirates in pittsburgh.

Are you taking off tomorrow?

No, i wasn't planning on it.

Do i need to?

Pittsburgh is very good and cincinnati is better.

Go cincinnati.

Here on bloomberg radio, i have a red sox mousepads.

. the new york yankees have gone home for the season.

Go reds and the other top story is the government shut down.

800,000 government workers are sitting idle after august failed to avert a government shutdown.

Michael mckee says the real catastrophe lies ahead if it congress ales to raise the debt ceiling.

-- fails to raise the debt ceiling.

The bright side is you have more people who can watch the baseball playoffs because they don't have to get up in the morning.

The issue here is in terms of the shut down and how long it lasts.

The day today cost is not that great but most of it is the salaries that are delay and in the past the government has paid those as backpay.

With the debt ceiling, you've got some real issues.

You could freeze the markets there.

The first date you care about october 17 is when the government spends more than it takes in.

On november 1, they have to make a big payment to the social security and veterans and medicare/medicaid programs and they could be short there.

We could default on those programs, the first time you might default on treasury note would be november 15, the next time they have to settle on a new auction.

Did any of the credit rating agencies say anything about this?

They are concerned about the default but not a shot down.

Standard & poor's and moody's said a shutdown by itself is not a major credit event.

Add to the fact it bears on the default issue, it is a concern.

Moody's and fitch said if we get to the point before default where it looks like it may be likely we could face dying rates run them.

-- downgrades from them.

David stockman is with us, formerly of the omb.

The money comes in, the irs opens our check, the money goes into an account -- we have a bank account at the government and that money runs out so they cannot cut the check november 1 or whenever.

How do omb people look at this?

Is there really no money in the account?

That's not really true but the idea of default, literally, like you don't make the bond payment, is a red herring.

It will never happen.

The reason for it is even if we get past october 16, there is 250 billion dollars of revenue coming in every month to cover the checks.

That money can be prioritized.

There is nothing that will stop the treasury secretary in an urgent situation to say i am paying $30 billion per month out of the 250 all you and dollars of interest.

He can easily cover the interest and he will.

He is paying $70 billion out of the in plover social security which is easy.

What about all the alarm bells?

Because it's a lot of political maneuvering to try to blame the other side for the fact that we don't have a budget, we don't have a fiscal process and washington is being run by irresponsible people.

I don't agree with david, with all due respect.

The inspector general of the treasury department is asked last year to look into this and the look that's a treasury planning.

Prioritization probably doesn't work or they process almost 100 billion bills per month.

It may be possible for them to pull out interest payments but to prioritize any other bills would be impossible.

We have never done it before.

I just don't buy it.

You could easily make interest payments and a few transactions.

You could easily make the social security payments.

They are already programmed.

This is pure propaganda coming from the treasury, trying to leverage the congress to do the bidding of the sanctimonious man in the white house.

This is just not true and we will find out when the debt ceiling expires that they have the authority to allocate and prioritize.

Much more with you, david stockman especially about the health care legislation.

Thanks to michael mckee.

You are very sanctimonious.

We did not even get into the deficiency act.

Sanctimonious mckee.

The obama care exchanges will open for business today we will see if they are up to the task and what that says about politics coming up on "bloomberg surveillance." ? this is "lou merck surveillance." -- this is "bloomberg surveillance." amazon will hire 70,000 full- time seasonal employees to meet demand.

It says it is a 40% increase over last year.

The company also expects to convert thousands of those seasonal workers to regular employees after the holidays are over.

A slowdown in emerging markets is hitting unilever.

They say sales in the third quarter will only rise three percent which is down from the five percent i posted in the first half of the year.

It's a growth in emerging markets slowed in the last period and they get close to 60% of their sales from that market.

Edition walt disney reach a deal to avoid a blackout and will extend their agreement for short-term while time try -- while trying to work out a longer-term deal.

Unilever is a big deal.

They are a huge metric for emerging markets.

We love looking at the consumer through those consumer companies.

We are looking at the impact of the shut down across the economy and how you feel it.

The national parks service is will suspend all activities in the park except for necessary emergency services.

National park police plan to barricade all monuments.

In the case of open air monuments like the world war ii memorial, police will have to go to extra effort and expense is to shut the public out.

You saw the statue of liberty, the washington monument, the national zoo, and the smithsonian will close.

The statue of liberty and ellis island in new york and independence hall in philadelphia and alcatraz from san francisco.

Good news, the panda cam continues to be online.

It operates 15 live webcams.

The operators have been deemed nonessential personnel and must be furloughed tuesday.

As long as the panda does not move from that one spot.

Thank goodness.

It's like the royal baby.

This is better.

Good morning to everyone in london.

As is our royal baby.

Let's get more on this.

We need to go to washington where phil mattingly has the latest.

What am i looking for at 9:30 a.m.? to be honest, you are not looking for anything to actually happen.

Harry reid will come in and say what he said last night which is what ever the house has done to this, they will continue to reject it.

Right now, everybody needs to wait and see what the fallout is of the shut down.

No negotiations are going on right now, no meetings set forward, people are throwing rhetorical ons at each other for the next couple of hours.

We get an estimate of a one- week or two-week shutdown.

What would speaker john boehner armor georgi leader harry reid say would be the shutdown?

Aides on both sides are wary of putting a specific date on it.

There is no pathway forward yet.

Nobody has a middle ground and democrats will not negotiate and republicans don't have the votes to move up their position.

The question is -- what kind of pressure will they debt from the outside that might move them into some type of negotiation or get them to the table?

That could be calls from constituents and government services that are necessary.

That is where the pressure comes from.

Short of that, there is nothing to move them to the table now.

That is a huge point.

David stockman is our guest host.

There is no pressure or urgency.

If you look at the markets, we see a rebound in equity futures.

Jim bianco writes in that david stockman is right on the debt ceiling.

What is your characterization of what is happening in the markets right now?

Wax the the shutdown is overrated and i was through six of them.

The fact that people are ignoring as we look at the panda cam, the overwhelming part of the government system is considered essential service will not shut down.

The statistic on that is there is 3.5 million employees on the payroll, 2.8 million will go to work, 80%, therefore, all of the national security, law enforcement, border control, air traffic control -- they will all be there.

Anything that is essential will be there.

Therefore, the impact will be very minor for days to come.

Merck is cutting 8500 jobs which is 10% of its staff.

It will take a three though he and dollar tax charge as a result of these actions and overall net cost savings of about 2.5 l you and dollars on an annual basis the end of 2015. we are taking a look at where merck shares are trading which is higher.

Good morning, everyone," bloomberg surveillance." all of our interviews on the shutdown are on bloomberg radio + bloomberg tv +. we are thrilled to bring you david stockman.

He is the former director of omb under president reagan.

He has a most interesting set of opinions this morning this first day of shutdown.

We just got a major headline out of merck.

There are layoffs.

8500 positions, new workforce reductions in addition to pending previously announced reductions.

In the same statement, merck says it has reaffirmed its 2013 full-year earnings forecast.

This is a way to make sure it stays on target with this profit target by cutting positions.

8500 positions works out to about 10% of its employees.

This is merck u.s. when you look at how the stock price is doing, it is trading higher in the premarket following this announcement.

It will take a pretax charge of up to $3 billion cutting these positions.

It is reaffirming its full-year profit forecast.

It is a global healthcare company but today is the long- awaited kickoff of the affordable care act which will allow millions of americans to acquire insurance through healthcare exchanges.

Will it be all the president has envisioned?

John king dale is with us now.

He advises several of the state run exchanges and private sector vendors and is credited with leading the implementation of massachusetts mandatory care.

As these exchanges go live and people consider whether they want to sign up, is it going to be a cheaper option than the insurance plans they already have?

It's going to be cheaper in two ways for many people.

There is a way in which it will be more expensive for some.

There are folks who are currently trying to get insurance and they will see prices, depending where they live very come up but prices for a 27-year-old guy, on average, about $125 for pretty decent coverage, not super rich.

And that's per month.

For a family of four earning $50,000 after the tax subsidies, they will see very affordable care, around $300 per month.

For somebody who is young and healthy and is covered now, and it was not eligible for subsidies, they may see an increase in their premiums.

You will have winners and losers.

The on the issue of price which is the priority is the question of your doctors.

Everybody loves there'd doctors.

The more he read about it, we are seeing decreased options on insurance plans for the health care providers that will be part of the plan.

Is that true?

I don't think so.

I we are seeing increased options and that was our experience in massachusetts.

We started off with half a dozen plans available on the exchange and now there are 10. there are 25% of the issuers on the new exchanges who are new to the system.

I think you will see increased options particularly over time.

From your position and decades at tufts in boston, why are republicans

This text has been automatically generated. It may not be 100% accurate.

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