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FAREED ZAKARIA GPS

Interview With John Kerry; Interview With Husain Haqqani

Aired August 1, 2010 - 10:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


FAREED ZAKARIA, HOST: This is "GPS," the Global Public Square. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria.

Now, as most of you know, on this program we have spent a lot of time debating whether it's best to start cutting the deficit now or to enact a second stimulus. Most conservatives have been very concerned about America's sky-high deficits. They believe they are a dire and urgent threat to the country's future.

So when an opportunity presents itself to cut that deficit massively in one fell swoop, you'd think they would jump at the chance, right? But they haven't. You see, George Bush's massive tax cuts are the single largest chunk of our structural budget deficit.

Take a look at this chart. It shows the deficit growth over the next 10 years and the red stripe shows just how much those Bush tax cuts add to the deficit. Well, those tax cuts are due to expire at the end of the year.

Were the tax cuts to expire, the budget deficit would instantly shrink by about 30 percent, or more than $300 billion. But Republicans are now adamantly opposed to any expiration of the Bush tax cuts because they say that would weaken the economy.

But wait a minute. They have been arguing for the last year that what's weakening the economy most is the prospect of unending budget deficits. They should look across the Atlantic at Prime Minister David Cameron, who realized that to get serious about his deficit he need spending cuts but also tax increases.

Democrats for their part only want to let those parts of the cuts expire that affect the richest Americans, those earning more than $250,000 a year. But this too is political pandering. The truth is that George Bush cut taxes irresponsibly for everyone.

Federal tax receipts as a percentage of the economy are at their lowest point since 1950, and they had dropped to very low levels even before the recession. Half of Americans now pay no income taxes. We have to be willing to pay for the government we want, which by the way is among the smallest in the industrialized world or we have to dramatically cut the government, which means cutting popular middle- class programs, since that's where the money is.

So I have a proposal. Let's let the entire slew of Bush tax cuts retire. That would take us back to Clinton-era rates, when the American economy had its strongest growth years in three decades and the budget was balanced for the first time in four decades.

If the economy still needs a bit more stimulus, fine, extend unemployment benefits for another year. Give some aid to the states. Those are temporary measures, and the money will get spent. Unemployment benefits work because they go to people who are living from paycheck to paycheck. They spend the money.

By contrast, we have had three tax cuts since this economy went into a slump, two under George Bush, one under Obama, and in all three cases people saved the money rather than spent it. Everyone wants Congress to act.

But this massive change actually requires that Congress do nothing. Let the tax cuts expire. A do-nothing Congress will have done something truly important for the country's future.

On the program today we have an exclusive interview with the former Democratic presidential candidate John Kerry, who is of course the chairman of the Senate Foreign Relations Committee.

We will also ask Husain Haqqani, Pakistan's ambassador to Washington, what his reaction is to the war logs and what they tell us about what "The New York Times" calls Pakistan's double gains.

Now quite clearly, the Taliban are clear that we are the enemy. Why then should we lack clarity that they are all our enemy?

Finally, a panel tries to figure out whether Obama is truly in trouble or whether we are all hyperventilating. Let's get started.

And we are in the offices of Senator John Kerry, Chairman of the Foreign Relations Committee. Senator, thanks for having us.

SENATOR JOHN KERRY (D-MA), CHAIRMAN, SENATE FOREIGN RELATIONS COMMITTEE: My pleasure. Thanks for coming.

ZAKARIA: What was your reaction to the wiki logs?

KERRY: I think -- well, my initial reaction was some concern because of the reports about the ISI. But once we got a chance to really examine the documents and get the timeline, I think they're not particularly revelational at all.

We knew almost everything that's there. It gives a little color to the battlefield struggles and to, you know, some of the difficulties within the villages and so forth. But basically, they are an incomplete presentation of the challenge and not particularly game-changing.

ZAKARIA: You remember what it was like when the Pentagon papers were released --

KERRY: I sure do.

ZAKARIA: -- in 1971.

KERRY: Yes, big-time.

ZAKARIA: You were in a very different place then, but you don't see these as comparable?

KERRY: Not in the least. Not in the least and I'll tell you why. the Pentagon papers revealed government, our government, that had been engaged in a long pattern of deception with the American people. There's no such thing here.

ZAKARIA: I want to spend some time, since we're talking to you about the central player in all of this, who is of course Hamid Karzai, our ally, the president of Afghanistan.

And so much of the conversation has swirled around the issue of is he trustworthy, is he somebody we can deal with. You've spent hours with him. In fact, there was a very important moment where the administration asked you to be effectively the principal negotiator for the United States on some very tense issues. How do you find him?

KERRY: I find him to be a very interesting person with a certain skill set and like anybody in public life, myself included, we all have our foibles, our down sides, flaws, whatever you want to call them.

ZAKARIA: Does he deliver on what he tells you that he will deliver --

KERRY: He delivers -- well, he did in the time we sat down. There are problems today and a lot of people have been engaged with President Karzai in discussing how to approach those problems. We need more progress. There's no question about it.

But I believe we make a mistake if we put all of our energy into churning around, you know, this question can we work with him. He's our -- he's the president.

He's the guy we've got to work with and I find that he is a patriot who wants his country to succeed, who has a better understanding of a lot of parts of the country than we do, and we need to listen to him a little bit, too even as we push him continually to improve the delivery of government services.

That is the key. The biggest single recruitment support factor for the Taliban today is not the presence of American troops, though that has some impact.

It is the lack of adequate governance and the fury building up within the afghan people about the inadequacy of their own government. That's pushing people towards something else, and too often that something is the Taliban.

ZAKARIA: That's a tall order. You're asking the Afghan government to develop a kind of coherence, legitimacy, and competence that it hasn't had for 30 years, and some would say even before that it was a weak central government --

KERRY: Always has been.

ZAKARIA: You're trying to kind of fast-forward modernization --

KERRY: Not what I'm doing. No, that's not what I'm doing and that would be a big mistake if that were the pattern we were trying to follow.

And I don't believe that's what the administration is trying to do. I think the administration has a pretty good sense, darn good sense, as a matter of fact, of exactly how difficult it would be to create this centralized model. And they don't want that.

ZAKARIA: Do you think that the administration is fundamentally on the right course, tactically, strategically in Afghanistan?

KERRY: Fundamentally, I think the administration has a very good sense of how difficult this is, and you know, the president has purposefully set the goals that he set with respect to transition because he wants to underscore to the Afghans themselves and to the Pakistanis.

That they need to begin to make this their battle and the only way to get them to do that is for them not to believe you're there forever. It's a delicate balance, obviously.

But you don't need 150,000 troops on the ground at a million dollars a troop, or whatever it is, in order to be able to achieve the goals that we have.

ZAKARIA: But do you think that come next July, when the deadline is on us for the beginning of the drawdown, that there will be a drawdown from Afghanistan and that it will not be trivial, it will be --

KERRY: Well, I'm not going to speak to the triviality or whatever it is, or the numbers. I think it would be a mistake to do that. I think the president is determined to begin to turn a corner.

He is also determined not to undermine his own effort and not to undermine the military effort on the ground and the sacrifice that our troops have made. The president is not going to suddenly pull the rug out from under the very efforts that we've all been engaged in over these years. That would be folly and I don't see him doing that.

ZAKARIA: What if General Petraeus says I need more time, I need maybe even 10,000 more troops? What would you do?

KERRY: I personally would say no, I don't think troops are the answer. The answer is a political resolution and that political resolution has to come about by engaging to a greater degree with India, with Pakistan itself.

But I think we should also engage China, Russia, and I would say to you that the possibility could exist even of Iran playing a role in helping to change the equation on the ground.

ZAKARIA: And you would talk to Iran about that?

KERRY: Absolutely. You bet I would. I think it could become a way even to get in on the other issues of concern to us, not just nuclear but the whole regional issue.

But I think Iran has interests in Afghanistan. They don't like the Taliban. They don't like narcotics being transited. There are reason that's they would want a stable government there.

And I think that we should -- you know, diplomacy is the art of playing to everybody's interests and everybody has some interests with respect to this outcome.

ZAKARIA: What about you? Talking about political settlement. You're talking about talking to people. What about talking to the Taliban? You know that Karzai claims that he wants to do it and part of what's --

KERRY: Well, I think the administration absolutely has to be involved. There is no way for it to work without that. There are complications with President Karzai being involved on his own because you have Uzbek, Tajik, Hazara, and others who are greatly concerned.

That all you have is, one, possibly a Karzai family deal and they're left out, or you have a Pashtun deal and they're left out. Either way, they're left out. You have to have a broad base that brings a whole lot of players to the table. It's a very complex negotiation.

ZAKARIA: But we don't seem to be engaged in it. We seem to be waiting and watching. The military seems to want to clobber the Taliban more before they -- it's like a guy with --

KERRY: Well-I think there's a feeling --

ZAKARIA: We're waiting for the stock to rise before we sell it. Why don't we just get in and start doing this?

KERRY: That's a good way to put it. Well, Leon Panetta testified before Congress about a month ago that he saw no predilection by the Taliban to want to negotiate or convert at this point because they think they're doing fine.

And there's a general perception that you've got to change the balance in the field a little here, and that's part of the reason for the surge.

And remember, the surge has not yet in effect, you know, taken hold. Not everybody's there. Not everybody's deployed. The Kandahar operation, other things, have not yet been put in place. So I think you have to wait and any judgment about that is premature.

ZAKARIA: Do you think that the Democratic Party will wait? The president does not seem to have a lot of support in his own party. KERRY: Well, Fareed, I've been through this. I guess I -- you know the old saying, I've seen this movie before.

ZAKARIA: And it didn't end up very well the last time.

KERRY: Yes, it didn't end up very well. But this is very, very different, very, very different. In Vietnam, we were fighting a proxy war in the cold war. We jumped in the middle of a civil war. That's not where we are here yet. It's not a civil war yet in Afghanistan.

There is an insurgency that has a history of being linked to an organization that attacked the United States of America and not only have they done it in the past, they continue to do it now.

And most recently the New York City bombing attempt that came out of Pakistan is linked to this whole unsettled region, the Jihadism that has a bad history of coming out of there.

ZAKARIA: But my -- my point is the Democratic Party is the place where you see --

KERRY: Well, here's -- I'm a Democrat, and I'll tell you, I think that it's important to remind our party and people in this country of what our real national security challenges are. You know, I give the administration huge credit. They have targeted and gone after and had a significant success.

They should be talking about it more about the way in which they have actually put al Qaeda under pressure. To walk away from that or to diminish that I think would -- you know, history would be pretty harsh in its judgment of where we wound up there.

And it's up to President Karzai to seize this opportunity. This isn't a one-sided deal and that's where he's got to kind of step up now and help to make things happen more on the ground.

We have a right to ask that. We have a right to expect that and he has an obligation, frankly, to deliver that.

ZAKARIA: And we will be back with John Kerry, senator from Massachusetts, in a moment.

KERRY: We need to make sure people understand how difficult this road has been against constant, non-stop republican obstructionism.

(COMMERCIAL BREAK)

ZAKARIA: And we are back with Senator John Kerry, the chairman of the Senate Foreign Relations Committee. Let's talk about some other issues. You have long supported the idea of a more active engagement with Iran.

KERRY: Yes.

ZAKARIA: Does the fact of the green revolution, the fact that you had these people out on the streets, that they were brutally suppressed, that the regime appears to be more fragile, does all that mean that this would not be the right moment to be trying to do it?

KERRY: Well, it certainly hasn't been the right moment from the moment that that happened. I think we have to respect the effort of people on the ground at that moment of time.

But I think that time has now passed and it's clear to me and most of the intelligence community and people who report from there and elsewhere that that regime is not about to topple tomorrow or in the near term.

So we have an obligation to try to engage and have some discussion. That doesn't mean we have an obligation to give in on anything. That's not the nature of diplomacy or negotiation, but we do have to get there somehow. I think the stakes are too high.

ZAKARIA: The administration seems like it's paralyzed right now. Should it --

KERRY: No, I don't think it is. I think it's unfair to say the administration is paralyzed.

ZAKARIA: They're not moving forward.

KERRY: Well, you know, there's a moment for everything. I think right now everybody needs some signs from Iran that there is something legitimate to actually talk about, not just an excuse to step away or to kind of get out from under sanctions or something.

ZAKARIA: Let me ask you a little about politics. You are the --

KERRY: Politics.

ZAKARIA: -- the senior Democrat in a state that began the conversation about President Obama's weakness with Scott Brown's election. Is President Obama doing badly in the polls, is this likely to pass?

KERRY: I think what's happened is, Fareed, that in the last six months I think there was an article even in the paper this week about people no longer blaming Bush. They're beginning to target this White House.

That's a natural course of events as you go through any administration, but I don't think it's fair to the president. The president has passed -- I mean, think about what's happened. We just passed the most significant and important financial regulatory reform, legislation, in 40, 50 years or something.

And the entire conversation was about Mrs. Sherrod's firing for three days. I mean, nobody heard about this. I think that part of the problem is that a lot has been accomplished, but the story has not been sufficiently told.

And we need to go out with some passion and energy and a little bit of anger even and make sure people understand how difficult this road has been against constant, non-stop Republican obstructionism. I mean, everything requires a cloture vote, 60 votes. We have judges who are held up, and then they get 90 votes when the vote finally comes or 95 votes. I think it's frankly an insult to the Senate what's been going on, to the institution, to the Congress, to the American people that everything is a no.

Not even a legitimate effort to try to work out a decent energy bill. The night after we announced we didn't have 60 votes to do something serious about global climate change, China announced that they're going to price carbon.

China is going to price carbon and the United States of America is sitting on its hands. Two years ago, China produced 5 percent of the solar panels of the world. Today, they produce 60 percent.

If we sit on our hands much longer, we're going to be written out of the marketplace in these technologies and the United States is going to be clawing at trying to make up for jobs and opportunities over the course of the next years.

We're cutting our own throats here and it is the most serious dereliction of duty in my judgment, and we have done more despite the obstructionism than any Congress since Franklin Roosevelt.

That's not a bad record. We have not translated that into the impact that it's in fact had on people's lives, and we need to translate that over the course of these next months.

ZAKARIA: Senator Kerry, pleasure to have you on.

KERRY: My pleasure. Thank you. Good to see you.

ZAKARIA: And we will be back.

UNIDENTIFIED MALE: The Pakistani Intelligence Services are working effectively to contain all terrorists, including Taliban from Afghanistan and from Pakistan.

(COMMERCIAL BREAK)

ZAKARIA: So what is Pakistan's response to the allegations that its intelligence service, the ISI, was working directly with the Afghan Taliban?

I'm now joined by Pakistan's ambassador to the United States, Husain Haqqani. Welcome, Husain.

HUSAIN HAQQANI, PAKISTAN'S AMBASSADOR TO U.S.: Pleasure being here, Fareed.

ZAKARIA: So what was your reaction when you saw these logs? One hundred and eighty entries about the ISI working with the Afghan Taliban.

A lot of Americans say look, we're giving the Pakistani government -- we're giving the Pakistani military enormous amounts of money and in a sense they're working with the enemy.

HAQQANI: Fareed, as President Obama has said, there is nothing in these entries that we haven't heard before. The important thing is that over the last two years Pakistan and the United States have entered into a special collaborative relationship.

That said, we are aware of historic concerns, we are addressing them, and I can say with a great degree of comfort now that the Pakistani intelligence services are working effectively to contain all terrorists, including Taliban from Afghanistan and from Pakistan and then these allegations are not necessarily reflective of what is happening today.

ZAKARIA: But Husain, let me press you on this because the past is interesting and important. And in one sense I think you must surely or your party, the Pakistan People's Party, which was led by Benazir Bhutto, must surely in some sense agree with some of this intelligence because you were alleging this during the campaign.

There were arguments being made by people surrounding Mrs. Bhutto that, you know, part of the problem in Pakistan is that the Pakistani military has played this game off, maintaining too close contact with Jihadis. So it was true at some point.

HAQQANI: Fareed, General Pervez Musharraf when he was president had his own strategy, had his own priorities. The elected government has developed a new strategy. When I go back to being a professor, I will certainly teach history.

But right now I'm working along with my colleagues in the U.S. government on trying to shape history and what we are working on is how do we change the present and the future.

It's not important right now from our perspective to dwell on the history, but let us be very clear. Pakistan does not share or appreciate the Taliban's vision for Afghanistan or for Pakistan.

We want to make sure that we enter the 21st century as a modern Muslim democratic nation, and we do not wish for Afghanistan anything we do not wish for Pakistan.

ZAKARIA: All I'm wondering is if two years ago they had these ties is it reasonable for us to assume, are we being asked to assume too much to say just because Mr. Haqqani is now the ambassador and his views are, you know, wiser that the Pakistani military has turned its back on three decades or four decades of activity in one year?

HAQQANI: I know that the general view, and you also expressed this many times, is that the Pakistani civilian government is weak. Now, I understand that there will be misgivings based on the past.

But the U.S. leadership, and you will notice that President Obama has weighed in, Admiral Mullen has weighed in, we have heard from National Security Adviser Jim Jones, they've all made it very clear.

That what is happening today is very different, and I think that the American public can trust their leaders because they obviously know what is happening on the ground.

ZAKARIA: So the acid test as to whether Pakistan and the Pakistani military has changed is whether it will go after the Taliban or whether it will go after terrorists in Pakistan, but not those who attack Pakistanis.

There you obviously have an overwhelming self-interest. These are forces that are trying to overturn -- overthrow your country, your government. But will they go after those other terrorists?

In other words, not will they take the battle to south Waziristan, if we can talk about this geographically, but to north Waziristan, which is where the Pakistani Taliban are, which is where the Haqqani faction are.

So far we keep being told yes, yes, yes, we're going to get around to it, but somehow you haven't gotten round to it yet.

HAQQANI: North Waziristan is a part of sovereign Pakistan. There is no way we will let terrorists of any hew or persuasion, whether originating from Pakistan or other parts of the world or our neighboring countries congregate there.

The only question is we will do it when we feel we can succeed militarily and also there will be a massive intelligence operation that is already underway. We will make no exceptions and I'm being very categorical in that. No exceptions. Because let us understand --

ZAKARIA: Including the Pakistani Taliban.

HAQQANI: The Pakistani Taliban, all groups that are responsible for terrorism in our region. We have had more attacks in Pakistan in the last two years than any other country. Our military has been attacked. We've lost general officers; we have lost 74 ISI officials. And there have been more than 250 ISI officials injured. Now, quite clearly, the Taliban are very clear that we are the enemy. Why should then we lack clarity that they are all our enemy?

ZAKARIA: What about another group about which there has been very little done so far, the L.E.T., Lashkar-e Taibi. This was the groups behind the attacks in Mumbai. The organization has finally been banned but it has regrouped by every independent observer's analysis and it still continues to flourish within Pakistan. When are you going to take action against them?

HAQQANI: The individuals who were responsible for the Mumbai attack are all now under arrest. And we have requested our Indian neighbors to provide us with evidence in the sense of allowing Indian officials who have knowledge of this matter, to travel to Pakistan and give evidence in our court. And we will be able to complete the prosecution process and convict these people.

ZAKARIA: This is, frankly, if it happens, a big change in Pakistani policy.

HAQQANI: Well, look, Pakistani policy changed very clearly, even after 9/11. It started changing. I think the changes are in much faster gear now. Our military leadership, our intelligence leadership, and our civilian leadership are all on the same page. I understand the cynicism of people. Pakistan's history has given a lot of people reason for cynicism about democracy, about our relations with our neighbors, about relations with the United States. And then there is cynicism in Pakistan, will the United States walk away from us again, will something go wrong with Afghanistan again.

So this cynicism, but in this environment of cynicism I think we need to be very clear about one thing. Pakistan as a nation can have a good future only if we resolve our problems in our neighborhood, our neighbors are reasonable about it, the United States support this process of transformation, and Pakistan emerges as a democracy. Pakistan wants to play well with the world, and that is where our future lies.

ZAKARIA: Husain Haqqani, always a pleasure.

HAQQANI: Pleasure talking to you, Fareed.

ZAKARIA: And we will be right back.

(COMMERCIAL BREAK)

ZAKARIA: Now for our "What in the World" segment. What got my attention this week was a drastic threat from Hugo Chavez directed straight at the United States. He said that he would immediately cut off Venezuelan shipments of oil to the U.S. if Venezuela is attacked. No, he's not worried about the U.S. invading Venezuela. His fears come from closer to home. His neighbors in Colombia.

Let me explain. It all goes back to the FARC. The name probably sounds familiar. It's the rebel army, the revolutionary armed forces of Colombia that has been waging a brutal guerrilla war against the government of Colombia for 40 years. The FARC are revolutionary Marxists, and Chavez supports them. But last week in a presentation complete with maps, photos, and videos, a Colombian official directly accused Venezuela of harboring some 1,500 FARC rebels, which has angered Chavez. So where does the U.S. play into any of this?

Well, nine months ago Colombia and the U.S. signed a deal allowing American military personnel to be stationed at seven military bases in Colombia; we help them with their war. So Chavez likened that agreement to an act of war against Venezuela and accused the U.S. of trying to destabilize his government. Now he's decided that he will brand Colombia's claims as part of some kind of American imperial plan. How committed is President Chavez to carrying out his threats? He said he would make good on it even if he and his countrymen had to eat rocks.

Well, they actually might have to because some analysts have called Chavez's threat suicidal. You see, last year Venezuela sent almost half of its entire daily output of oil to the U.S. if Mr. Chavez turned off the spigot, that would be about a quarter of his nation's federal budget revenues and about 15 percent of his nation's GDP disappearing in an instant. Now, he could certainly try to sell the oil elsewhere, and he has been diversifying recently, selling more and more to new customers like China. But trying to find a new home for a million barrels of oil a day is not going to be easy.

He needs to find someone who, a, needs the oil and, b, can write him a check for, oh, about $80 million every day. Right now Chavez can ill afford even a temporary slowdown in his cash flow. He has mismanaged the Venezuelan economy, bankrupting a once rich oil exporter, buying short-term popularity through expensive subsidies that have now begun to fuel rampant inflation. His anti-American rhetoric, by the way, is probably a way to distract attention from his miserable stewardship of the economy.

On the other hand, how much would it hurt the U.S. if the pipeline from Venezuela was suddenly cut? Well, not so much. Only 6 percent of the oil we use every day comes from Venezuela. And there is surplus oil floating around, which means there are surely oil- producing nations who would be thrilled to sell the U.S. an extra million barrels a day. So Mr. Chavez, go ahead, make our day. And we'll be right back.

You don't think David Axelrod is running the country --

HENDRIK HERTZBERT, "THE NEW YORKER:" I don't think anybody's running the country.

(COMMERCIAL BREAK)

CANDY CROWLEY, CNN ANCHOR: I'm Candy Crowley, and here are today's top stories. Pakistani government officials tell CNN the death toll from recent floods is over 1,000 people. Floodwaters have stranded another 30,000 on rooftops and other high places. Rescue and recovery efforts are under way, but they've been hampered by damaged roads and bridges.

In Iraq new government figures show July was the deadliest month in more than two years, 535 Iraqis were killed, and over 1,000 were wounded. Heightening concerns about the country's security. The violence comes as Iraq struggles to form a new government nearly five months after disputed parliamentary elections.

Those are your top stories. Up next, more FAREED ZAKARIA GPS, and then on "Reliable Sources," Howie Kurtz looks at the story behind the Wikileaks scandal.

(COMMERCIAL BREAK)

ZAKARIA: There are, of course, many other things to talk about in the world besides Afghanistan and Pakistan. Back at home there's still much hand wringing over how the administration is handling its various crises that are all coming fast and furious. So to talk about all that and Obama and a whole lot more, on my right, Ross Douthat is the op-ed columnist for the "New York Times." Chrystia Freeland is global editor-at-large for Reuters. And Hendrik Hertzberg is senior editor and staff writer at the "New Yorker." welcome, all.

To me the interesting thing, Chrystia, is the business community is very upset with him, which is one of these themes that has developed over the last few weeks, and I wrote a little something about it myself. But what I'm struck by is that if you look at public perception they still think he's being way too nice to the business community, that he's -- you know, that he's been too nice in both his public utterances, in his policies, that all that this administration has done is be nice to bankers.

CHRYSTIA FREELAND, GLOBAL EDITOR-AT-LARGE, REUTERS: Yes --

ZAKARIA: And the bankers think he hates them.

FREELAND: No, I agree with you. I think it's a really paradoxical situation. And like you, Fareed, when I talk to people on Wall Street, it is incredible to me the venom towards Obama. It's not just criticism. I think there is a feeling of betrayal. And the best way for me to understand that is there was a very strong identification with Obama, even among people with more conservative beliefs. I think it was quite personal. I think there was a one of us feeling.

ZAKARIA: Because he was sort of an Ivy League meritocratic --

FREELAND: He was someone they would have hired. He went to Harvard Law School. He was editor of the "Harvard Law Review." He was a smart technocrat just like them. And as you say, Fareed, when you look at the polls, when you talk to people outside of Wall Street, they feel he's being too soft on these guys.

ROSS DOUTHAT, "NY TIMES:" I think in a weird way both things could be true. So people out in the country see that, you know, specific businesses, specific lobbying groups, I mean, big pharma and the health care debate, for instance, exert a lot of influence and the Obama administration has gone out of its way whenever it has to pass a specific bill to, you know, if it's health care you have to get pharma on your side and sort of talk to the insurers, when they were trying to do energy, you know, you're dealing with GE and so on. So people out in the country see that. The business community writ large, though, just sort of sees this -- you know, it sees Washington sort of aggrandizing itself and gets nervous.

ZAKARIA: Rick, you were in the White House, and one of the things I'm struck by if you look at this recent business with the tape and the NAACP speech, is there an element to this White House that is too reactive on every side so that, you know, the public -- polls say you should bash bankers more and so he starts bashing bankers. You know, he won't be photographed; there are a couple of cases I know of where he literally would not be photographed with somebody from the financial industry. Even people who had nothing to do with --

DOUTHAT: I won't be photographed with anyone from the financial understand.

ZAKARIA: Then you have this business of worrying about, you know, that Glenn Beck might do a show on something, so you fire somebody. Shouldn't they be just kind of doing what they think is right for the country, or is that quaintly old-fashioned? HERTZBERG: No, I think that's very up to date and cutting edge, actually. It seems to me that the big -- the big factor in that mess was that the NAACP labeled her a racist. And of course then what's the administration -- isn't that good enough for anybody, if the NAACP says it? I don't think this was a case of -- I just don't think it proves what everybody seems to be saying it proves.

ZAKARIA: You don't think David Axelrod is running the country, in other words?

HERTZBERG: I don't think anybody's running the country. And I think that's probably the biggest problem for Obama, is the gap between -- between the fantasy that Americans have of a kind of all- powerful president and a tendency to interpret all events in the light of is the president showing enough spine, is the president doing enough of this, doing enough of that, when --

ZAKARIA: Has the president stopped the oil spill?

HERTZBERG: Yes. That's right. And on foreign policy he does have -- he does have a lot more leeway. But pretty much everything that's going on you can -- you can explain in one word the filibuster.

DOUTHAT: On the bulk of the Obama agenda I think the filibuster explains the slowdown, the sense of things getting clogged up, and some of the anger among Democrats. But in terms of, you know, health care's overall numbers, and health care reform is still an unpopular piece of legislation, and it isn't unpopular because the Democrats had to get to 60 votes to pass it. It's unpopular because it was unpopular.

HERTZBERG: But it's also unpopular because in order to get it passed so many compromises had to be made that, for example, most -- a lot of the benefits of the health care bill don't kick in until after the next election.

ZAKARIA: So you're saying the public doesn't see universal health care, they just --

HERTZBERG: They don't see much of anything yet.

FREELAND: See and what I think they do see is a weak economy. I mean, it's terrible to be so simplistic about it but I think really the issue right now is it's the economy, stupid. And the economy is in terrible shape, unemployment is nearly 10 percent. Even if you're not unemployed, job insecurity is very high. And it should be. I mean, people's jobs are less secure than they were 15 years ago. People are really feeling that.

ZAKARIA: Rick, do you think in a few, maybe in six months the economy improves a little bit, Obama's numbers will be stabilized, move upward, and all of this will be fine?

HERTZBERG: Yes, of course they will. His numbers are going to move in concert with the economic numbers. In fact, if you look at his numbers, they're actually reasonably good under the circumstances. And it's kind of an embarrassment for the pundit class, but it's the circumstances, stupid. And we deal with the froth on top of this enormous glass of beer that is America.

I mean, Obama's got very lucky in many, many ways. One way he wasn't so lucky was that the economy collapsed just -- just enough before he came in so that people are not too clear on whose fault it was. Most of the suffering -- most of the mistakes were under his predecessor. Most of the suffering has been under him.

DOUTHAT: But in a sense he traded -- I mean, he gained probably a good three percentage points and a few seats in the Senate because of that economic collapse. So in a sense -- so in a sense you have an administration that's been able to, because of the collapse and its impact on the election has been able to enact long-standing Democratic priorities on health care in particular but also through the stimulus, through the financial regulation package that they wouldn't have been able to enact otherwise. And I don't think anyone -- certainly no liberal who's committed to, you know, winning elections in order to govern should be weeping tears over the state of Barack Obama right now.

FREELAND: Well, except -- you know, and speaking to Rick's froth point, the point that isn't froth and which is connected with the big substantive issue, which is the economy, is I don't think we have yet heard from the White House a clearly articulated vision for how you get out of what I think most people agree is now a structural economic problem.

HERTZBERG: Yes, I guess they have to -- they have to deal with something that's very hard to -- for the average citizen or the economically illiterate such as myself to get their head around, which is that the right policy seems to be spend like crazy in the short run, cut that debt like mad in the longer run. And those two things are awfully hard for people to handle at once. It's very difficult to create -- to create a narrative, I guess, that accommodates both of them. Because that is what they want to do.

ZAKARIA: Ross, correct me, because you're the expert on all matters Christianity. But St. Augustine said lord make me celibate but not yet.

DOUTHAT: Yes.

ZAKARIA: So on that note, we've done all the froth. We'll get to the beer next time or maybe right after the show. Rick Hertzberg, Chrystia Freeland, Ross Douthat, thank you very much. And we will be back.

(COMMERCIAL BREAK)

ZAKARIA: Now for our question of the week. Here's what I want to know. Should the United States let all of the Bush tax cuts expire? If you're an American, I know, I know nobody wants to pay more taxes. But what do you think would be best for the country? Let me know. Don't forget to subscribe to our podcast on iTunes. That way you'll never miss a show and you cannot beat the price, it's free. Now, as I do every week, I want to recommend a book. This one is called "The Most Powerful Idea in the World." It's all about the steam engine, or steam power. What the author, William Rosen, plausibly argues is the most important invention in human history. He explains why it happened the way it did. British laws that promoted patents and property rights which allowed people to get rich off their inventions. Now, at a time when the U.S. is desperately trying to get innovation going again, this is a great tale of how the mother of all invention began.

Now for the "Last Look." I think you're probably familiar with the product on the left. It is of course Apple's ipad. You are probably not familiar with the product on the right. It comes from India. And it doesn't have a catchy name. In fact, at this point it doesn't have a name at all. But it is still pretty remarkable. Now, on an ipad you can watch a movie, read a book, check your e-mail, and browse the internet. The Indian government, which unveiled its device recently, says its computer can do pretty much all of that.

The big difference the price. The ipad starts at $500 and goes up to more than $800. The Indian computer starts at $35, and they hope to get that down to $10. In recent years we've seen global society changed by satellite dishes, then cell phones. A $10 fully functioning computer could certainly change the world again. Thanks to all of you for being part of my program this week. I will see you next week. Stay tuned for "Reliable Sources."