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FAREED ZAKARIA GPS

The Politics of Supreme Court Health Care Decision; Morsi Sworn in as Egypt's President; Interview with Nandan Nilekani

Aired July 1, 2012 - 10:00   ET

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


FAREED ZAKARIA, CNN 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.

We'll start today's show with American politics in the wake of the Supreme Court ruling on health care. What does it mean for the presidential race, for health care? What about economics? I've got a star-studded panel to discuss all this.

Then, we go overseas to Egypt's election of Mohamed Morsi. What can we expect from an Islamist president? Two of the top Egypt experts tell us.

Next up, how do you count and catalog 1.2 billion people? I'll ask Nandan Nilekani, the man creating a revolutionary, biometric ID for every one of India's citizens. Also, the housing bubble caused the crash. Will a coming housing boom finally power this anemic recovery?

But, first, here's my take. What to do about Syria? Western military intervention looks fraught with difficulties, but the situation on the ground is a humanitarian nightmare and is producing greater instability by the week.

I was recently in Turkey and Russia and I've been persuaded that there might be a path forward. The pressures on Bashar al-Assad's regime are real and mounting; it is running out of cash and it now faces real military pressures from Turkey. These pressures could be combined with smart diplomacy to push Assad out of power.

But it would mean trying to work with the Russian government rather than attacking it. The U.S. has been bashing Russia for shielding Assad, coddling an ally at the cost of human lives, for arming the Syrian military. Some of this is true, some false, but all of it is unhelpful if the goal is to oust Assad.

Unless the U.S. intends to ask Iran for help, Russia is the only country with any influence with the Syrian regime. Now, the first thing to realize is the extent of Russia's links with Syria are limited. The economic ties are weak.

Russia is Syria's ninth largest trading partner, accounting for just 3 percent of Syrian trade, well behind the E.U., Iraq, China. Political bonds are not strong either. Assad's first trip to Moscow took place five years after he became President well after he had gone to France and Britain and Turkey. This is not the behavior of a client state.

Russia's naval base at Tartus in Syria is often described as highly strategic, yet it is rarely used. It has been allowed to crumble. No Russian ship is based there.

Now, Russia is the main arms exporter to Syria though its deliveries to Syria are marginal; less than a tenth of what it sends to India every year, but its ties to the Syrian army could be very useful.

Moscow could reach out and make Syrian generals understand that they could preserve the military if they assisted in dislodging the regime and moving to a democratic framework. That's essentially what the Egyptian military has done, and while the revolution there has not been perfect, it has certainly been preferable to a long and bloody civil war.

Now, Russia might be unmovable. Its officials are paranoid about Western interventions that topple unpopular regimes. They see Kosovo, Afghanistan, Iraq and Libya as part of the pattern, but they're also concerned about what would come after Assad in a country, Syria, where 40 percent are minorities, especially if a long sectarian war would energize jihadi groups.

Russia has had and continues to have struggles with such groups in its southern regions and border areas. If the Russians could be persuaded that Assad is going to fall and that the best way to prevent radicalization is to push for a transition now, they might be willing to help in that transition.

It's a long shot, but it's not impossible that Moscow will shift from being part of the problem to part of the solution. It's certainly worth the effort before we move toward a wider and deeper war.

For my on this, you can read my column in this week's Time Magazine or at time.com Let's get started.

Joining me now to discuss this wild week in America and maybe we'll get to Europe as well, Jeffrey Sachs, the economist who serves as the director of Columbia University's Earth Institute. Peter Schiff is an economist, businessman and author who recently ran for Senate on the Republican ticket in Connecticut.

Peter Orszag was President Obama's first budget director. He is now a Citibank executive and a columnist for Bloomberg and Katrina vanden Heuvel is the editor and publisher of "The Nation" magazine.

Welcome to you all. So the first thing we have to talk about, inevitably, is the Supreme Court ruling and none of us are constitutional scholars so the question I would ask is, politically, Katrina, does it help Obama -- because you can see both arguments, does it help Obama or does it energize the Tea Party.

VANDEN HEUVEL: I think, on balance, it helps Obama. It's a victory for Obama. It's a victory for American people. It's a victory for the forces who've been fighting for a sane health care policy for this country, human, moral.

I think it also helps with the legitimacy, leadership of his presidency because that was a question. And it helps in the sense of renewed priorities because this president, if he gets out there and makes the case, explains provisions that show -- even Republicans, when it's broken down, like this plan.

He needs to get out there and make the case. Sure, it'll energize the Tea Party, but they're energized anyway. Will it help marginally with the independents, who seem to be the savior and key to this election?

I think so if he gets out there, as the Democratic Party needs to, and explain provisions; pre-existing conditions, being a woman is no longer a pre-existing condition, your kids can stay on your health care plan. This is the kind of America millions want to live in.

ZAKARIA: You know I take it you didn't like the ruling.

SCHIFF: No.

ZAKARIA: But on the politics of it, do you think it will energize the Tea Party?

SCHIFF: Probably. I think it gives you more of a reason to support Romney if you're goal is to get rid of Obamacare. The Supreme Court didn't do it and, now, we have to do it legislatively.

But, you know, this is not the kind of America I want to live in and I would disagree. You don't need to be a constitutional scholar to recognize this is a terrible decision. It diminishes individual rights.

And listen to what the Supreme Court said. They said that Congress doesn't have the power to force us to buy something, but they can tax us if we don't. That is a distinction without a difference.

And I think, more importantly, if you want to label this a tax, it is unconstitutional on its face because this is a direct tax on American citizens who don't buy health insurance. The Constitution says it must apportioned. This is an unapportioned direct tax. It is constitutional.

If the Supreme Court is now saying that the Constitution doesn't apply and the federal government has unlimited taxing powers, then it's a real sad day in American history because what it means to be an American has been irreparably changed.

And, by the way, this is a disaster for health care, for the economy. It's going to cause insurance rates to go up, health care's going to be more expensive not less. This is not good economics. It's not good policy. And it's clearly not constitutional.

ZAKARA: Peter, as one of the authors of the health care plan, what do you think the net effect will be? ORSZAG: Well, look, actually there's some very exciting developments that have been happening. Health care costs, over the past three or four years, have decelerated dramatically and I don't think it's all because the economy has been weak.

We are moving away from fee-for-service payments. We are moving towards a digitized health care system. The dividing lines between providers and payers are eroding and that's all good. So over the next --

ZAKARIA: And there are provisions in the health care bill that will accelerate this?

ORSZAG: -- That will continue to encourage it, but that's where I think the focus should be. We need to continue that progress. If we don't move away from the fee-for-service system, we will not succeed in continuing to slow health care cost growth and we will all be better off if we succeed in that effort.

ZAKARIA: What do you think, Jeff?

SACHS: I agree completely with what Peter just said and with Katrina. This is a good decision for the American people. It brings us to a fairer and more normal state and it also creates a basis for getting our health care costs back under control.

We're moving to -- more towards the kinds of systems that other countries have, which cover everybody and keep the cost down. We have a system which is "most market-oriented." What do we get for it? The worst coverage and the highest prices and the kinds of things that Peter helped to put into this legislation are going to make a difference.

SCHIFF: You have to understand why the health care is so expensive right now. It's because of government. We got to get government out of health care. We got to have individuals buying their health insurance the same way they buy auto insurance, life insurance, fire insurance. We don't have problems there.

ORSZAG: Peter --

(CROSSTALK)

SACHS: All the other countries have more coverage at lower cost and better outcomes --

SCHIFF: Just because other countries --

SACHS: -- and more government.

SCHIFF: -- Just because other countries make mistakes doesn't mean we should emulate them.

(CROSSTALK)

VANDEN HEUVEL: (inaudible) (CROSSTALK)

SACHS: My point is that their outcomes are better than ours --

SCHIFF: No, but --

SACHS: -- and you want us to go even farther away --

SCHIFF: No, I want to go back to --

SACHS: -- we've tried your way.

SCHIFF: No, we haven't. We did try it my way a long time ago and it worked great. We had a much better health care system --

VANDEN HEUVEL: When did it work great --

SCHIFF: -- that was more accessible before the government stuck its nose in.

VANDEN HEUVEL: Give me --

SCHIFF: Before the government got involved.

(CROSSTALK)

ORSZAG: Get back to the health care system of when exactly?

VANDEN HEUVEL: Yes.

SCHIFF: Well, before we had Medicare and Medicaid. But you already --

(CROSSTALK)

ORSZAG: You would rather live --

SCHIFF: -- before we had a tax code that.

ORSZAG: -- you would rather live with the health care system in the 1950s then the one you have access to today?

SCHIFF: I don't want the technology of the 1950s, but I want the free market of the 1950s. That would be a vast improvement on what we have today.

ZAKARIA: All right, we've got to move on. I'm sorry, but I want to ask about the economy in general. You've been gloomy about this recovery from the start and you -- unusually for somebody who generally is thought of as left of center, you were critical of the stimulus because you thought it was too much fueling consumption not enough fueling investment.

SACHS: Well I thought it was fueling the deficit, but not really providing much of a lift and, also, not a lift when it was going to count which is the medium term. Unfortunately, the administration used its ammunition in the first couple of years and here we are, the fourth year, a weak economy not going any place and feeling a lot of headwinds.

So I would have rather seen a strategy the built out our infrastructure, that improved training and education skills and many other things over a decade perspective rather than putting everything up front.

And I think we're in the situation right now where we don't have ammunition right now and the economy remains weak and the headwinds are not only internal, the kind that comes from this deleveraging process.

They are not only, unfortunately, coming from Europe, which is the biggest mess in the world, but now they're coming from slowdowns in the emerging economies as well. So we're seeing a kind of synchronization of slowdowns almost everywhere in the world economies. Rather dangerous.

ZAKARIA: A lot of the recovery, such as it has been, has been fueled by exports and if so those exports slow down, you have --

VANDEN HEUVEL: What strikes me about this election is it's an extraordinarily important election, deeply, ideologically polarizing. At the same time, some of the enormous issues of our time aren't fully engaged in it.

A global economic crisis roiling the planet, what's going on in Europe people don't -- the campaign isn't fully engaging maybe because it doesn't have the leverage. But I do think at the heart of it, Fareed, is that there is kind of establishment consensus around some form of austerity, not growth.

And unless this country, whether it's movements or electives, treat joblessness as the great threat to our country, not deficits in the short-term. Joblessness will become the new norm in light of the structural economic problems and how will we address that.

(CROSSTALK)

ZAKARIA: We've probably got a three to one here so I have to let Peter get his view in.

SCHIFF: Well, first of all, I disagree that we even have a recovery. All we did was borrow more money and spent it. I think, as a result, we're in a deeper hole.

But I think our problems are self-made. I think the mess in America is bigger than the mess in Europe. We are less capable of paying our debts than Europe. We have more debt than they do. It's a bigger percentage of our GDP.

And, more importantly, when interest rates go up in America, they're about 7 percent right now in Spain and the world is wondering if Spain can afford it. America can't afford 7 percent interest rates. We're actually less able to pay that than is Europe or Spain and that's going to happen.

And you're talking about creating jobs. We're not going to create jobs by creating governed by expanding consumption or deficit spending. In order to create jobs, we need to get the government out of the way of the economy.

We need more capital formation. We need more savings. We need more production which means we need less government. We need fewer regulations. We need less government spending. If we're simply going to expand government, we're going to destroy the economy.

(CROSSTALK)

SCHIFF: and we might get jobs.

(CROSSTALK)

VANDEN HEUVEL: do what I call -- my main -- one of the main things quickly, Fareed --

ZAKARIA: We got to take --

VANDEN HEUVEL: -- public/private investment in infrastructure. Public/private. Who could be opposed to that?

SCHIFF: I can.

ZAKARIA: We're going to have to take a break because we're going to come back and see if there's any agreement on Europe. We can't agree on America. We'll try and see if we can agree on Europe when we come back.

(COMMERCIAL BREAK)

ZAKARIA: And we're back with Jeffrey Sachs, Peter Schiff, Peter Orszag and Katrina vanden Heuvel.

If you look at countries that have their own central banks, which means that they have the ability to print money, none of these countries are having trouble borrowing; that is Britain, Sweden, Japan, the United States, Switzerland.

SCHIFF: The operative word --

ZAKARIA: That only countries that are having trouble are countries whose debt is effectively denominated in a currency they do not control.

SCHIFF: For now, but, you know, you live by the printing press, you die by the printing press. The fact that we can print money isn't a Panacea. That's going to make it worse because eventually our creditors are going to realize that getting paid back in money that has little value is the same thing as not getting paid back at all.

And I think it would be a mistake for Europe to follow our bad example. You know, we're going to pay a heavy price for our quantitative easing and our bailouts. What Europe needs to do is solve these problems not kick the can down the road.

Now, Europe actually has the resources to make that mistake. I don't think we do. You know, a lot of people think that we're suffering in America right now because of the problems in Europe.

Actually, that's the best thing we've got going for us right now because people are so worried about Europe, they're buying dollars. They're buying treasuries. That's keeping interest rates artificially low, that's keeping consumer prices lower than otherwise would be the case.

But when Europe finally confronts its problems, right or wrong, you know, whether it pushes them down the road and makes them worse or deals with them, the spotlight is going to move to America and we don't have the kind of time that Europe does.

VANDEN HEUVEL: I mean we have a federal reserve. We have a central bank. To me, one of the great political dangers looking out at Europe and what austerity has done, even to countries which control their own federal bank, like the U.K., is what a Mitt Romney and what a Republican Party determined to slash spending in the face of a weak recovery.

SCHIFF: (inaudible)

VANDEN HEUVEL: What that could mean -- what that could mean for this country. It is clear, putting aside our differences, that one of the grave needs is to put money in the pockets of people, consumers. How do you do that? Joblessness may be the best way to -- a job program to give people jobs may be the best way to avert --

(CROSSTALK)

SCHIFF: The government doesn't have any money.

(CROSSTALK)

VANDEN HEUVEL: Look at Spain.

(CROSSTALK)

SCHIFF: -- without taking money --

(CROSSTALK)

VANDEN HEUVEL: But Spain --

ORSZAG: The right approach, in my opinion, is a barbell one in which we are doing lots of deficit reduction that's not taking effect immediately, that's based on --

SCHIFF: But that's when we need it, right now.

ORSZAG: And, also, a bunch of infrastructure and other investment up front to try to spur the economy. We could do both. SACHS: There is an amazing point, which I think we mostly agree on is that, at least, looking over a period of several years, you have to get your books in order.

And it raises the most fundamental point and probably a point of pretty big disagreement between us about at what level should we balance the books?

Should it be all spending cuts? Should it be tax increases so that we can continue to do some kinds of spending? I think our biggest problem right now in this country is that the powerful political interests in both parties actually, though especially in the Republican Party, are so controlling the tax cut side that we've gutted the corporate income tax, we're gutting the personal income tax.

(CROSSTALK)

SACHS: Everything is moving offshore more and more and so the amount that we're collecting at the federal level is near historic -- is basically historic lows over the last 60 years. Now, it's up 16 percent of gross domestic product.

We can't run a normal civilized country at this rate and if we try to do that, we end up with the poor without any health care, people out on the streets, kids without an education, and that's where the Republican Party would take us.

The Democrats though, while the rhetoric is different, they also have powerful interests that are saying don't go very far on that. So both parties are basically tax cutting powers and we are bleeding in that way.

The difference of us is that we agree that the budget should come into balance, but I want rich people paying something --

(CROSSTALK)

ZAKARIA: All right, you get a chance.

SCHIFF: First of all, government spending right now is as high as it's been and it's not just the spending. I own a business and it costs me more to comply with regulations than I pay in taxes.

So it's a burden on the economy to pay all these taxes and to comply with all these regulations and the government sucks all the capital out of the economy by running all these enormous deficits.

The government doesn't have any money that it doesn't first take and if the government takes money from the private sector and spends it, it destroys economic activity, it ultimately destroys jobs. We don't want jobs, we want stuff. We need more production, more supply, not more demand.

Yes, the government can put us all to work, but we'll have nothing to show for it. SACHS: How about some skills, how about some infrastructure, how about an energy --

SCHIFF: That doesn't come from government. Meanwhile --

SACHS: Excuse me. We have public schools. We have children that need education.

SCHIFF: What a disaster that's been and you're talking about the federal reserve --

(CROSSTALK)

SACHS: Well, I know now you want to go back --

(CROSSTALK)

VANDEN HEUVEL: But, Fareed, nothing --

SCHIFF: -- financial crisis --

SACHS: -- you want no health care

SCHIFF: Well, I want the market --

SACHS: -- for the elderly. You want know public schools.

SCHIFF: I want the market to supply it. But the federal government is broke. Where's all the money going to come from?

(CROSSTALK)

VANDEN HEUVEL: (inaudible) back to the Supreme Court for the moment.

ZAKARIA: And for 30 seconds --

VANDEN HEUVEL: 30 seconds.

ZAKARIA: -- then we have to go.

VANDEN HEUVEL: We are living at a time of concentration of wealth, income and political power we haven't seen since the gilded age and the robber barons.

(CROSSTALK)

VANDEN HEUVEL: Corporate profits are at an all time high in decades.

SCHIFF: Thanks to the Fed.

VANDEN HEUVEL: So I think we need to take a measure of that. How do we limit that, end that and rebuild the politics for the 99 percent? ZAKARIA: And we're going to have to leave it at that. Peter Schiff, Katrina vanden Heuvel, Peter Orszag, Jeff Sachs, thank you so much.

Up next, "What in the World." Despite all of its economic troubles, America does have one core strength that sets it apart from other rich counties. What is it? We'll tell you when we come back.

(COMMERCIAL BREAK)

ZAKARIA: They say that all politics is local. Maybe all economics is local as well. A sample of Americans were asked how they rated economic conditions. Forty-nine percent said things were good or excellent in the city that they lived in.

That percentage drops to 37 percent for how Americans feel about their state; it drops to 25 percent for all of the United States; to 18 percent for Europe, and only 13 percent for economic conditions in the world at large.

So the more macro things get, the more despondent people feel. But at a local level, at home, things don't seem too bad. It got me thinking about housing, the most local of all financial indicators. It's making a comeback.

This week, we learned that U.S. house prices have now risen for the third straight month. The Case-Shiller index shows that residential prices in 20 key cities increased by seven-tenths of 1 percent in April. Sales of new single-family homes rose by 7.6 percent, the highest in two years.

The data highlights a trend and it provides reason to be optimistic for the broader economy. Why? History shows that in the immediate years following a recession, housing leads the comeback.

Look at this chart. It shows data for the first year of the last four American recoveries. The bar in blue shows what percentage of GDP growth that's attributed to investments in housing. As you can see from the last three recoveries, housing provides, on average, one- fifth of the nation's GDP growth following a recession. But 2009 was different; the housing bust kept home sales depressed.

Now, look at the second year of those recoveries, in red, again, positive in the previous recoveries, but negative in this one. That looks set to change. The latest data suggests that finally, slowly, the U.S. housing market having hit rock bottom is heading back upwards. Vacancy rates are down, rents are up.

A recovery in housing will have big ramifications: Construction will increase; so will jobs; so will the economy. For all the doomsday prophesies about the American economy, one reason to remain optimistic in the long run is demographics.

Accounting for births, deaths and new entrants, the U.S. has a net gain of one person every 13 seconds in this country. That works out to about 2.5 million people every year. These people will all need places to live, and so we can actually count on a future growth in housing construction and therefore those jobs.

Compare our demographics with that of other rich countries. Germany's population is set to decline by 170,000 people this year, a trend which will hinder growth in the future. Japan's slowdown is already in large part due to its demographics. Its current population is 127 million, but it is on pace to drop by a third by 2050.

Almost one in four people in Japan are over the age of 65. In the U.S., only 13 percent of the population is over 65. A fifth are under the age of 14, a guarantee that we'll have young dynamic entrants to our workforce for decades.

The crucial factor that explains America's unique advantage is, of course, immigration. Our fertility rates are not so different from those in Europe. What makes us demographically dynamic is that we take in about a million legal immigrants every year, more than the rest of the world put together. They are going to finally get us out of this sluggish recovery.

We'll be right back. Up next Egypt gets its first every freely elected president, but will he have power?

(BEGIN VIDEO CLIP)

TAREK MASOUD, PROFESSOR, HARVARD UNIVERSITY: If you really are serious about getting the military out of power you need a president who can unite all of these disparate forces, the revolutionaries, the liberals, in order to make a kind of united front against the military. Is Mohamed Morsi, who is the very faithful son of the Muslim Brotherhood, and lots of places he's been described as a Muslim Brotherhood enforcer, is he the guy to do this?

(END VIDEO CLIP)

(COMMERCIAL BREAK)

CANDY CROWLEY, CNN HOST: I'm Candy Crowley in Washington. FAREED ZAKARIA GPS will be back in 90 seconds, but first a check on the top stories.

Nearly three million people across nine states are without power after violent storms and high winds swept across the Midwest and Mid- Atlantic. The storms are responsible for at least 12 deaths. Maryland, Virginia, West Virginia and Ohio are under states of emergency. The governor of West Virginia described conditions in his state.

(BEGIN VIDEO CLIP)

EARL RAY TOMBLIN, GOVERNOR, WEST VIRGINIA: We have got the -- have had the largest power outage in the history of the state with 53 of our 55 counties without power. That serves about 688,000 people. The power is slowly coming back online. We still have over a half a million people without power. Yesterday was a tough day with no power with the nearly 100 degree temperature we had.

(END VIDEO CLIP)

CROWLEY: Near Colorado Springs firefighters continue to battle a massive wildfire that is responsible for two deaths and the destruction of nearly 350 homes. Colorado's governor said the fires have drawn communities closer together.

President Obama visited the region on Friday, declaring Colorado a disaster area and freeing up federal money to help fight the largest fires.

Those are your top stories. "RELIABLE SOURCES" is at the top of the hour. Now back to FAREED ZAKARIA GPS.

ZAKARIA: Nearly a year and a half after toppling Hosni Mubarak, Egypt has a new president. His name is Mohamed Morsi of Muslim Brotherhood. Morsi goes from being a member of the banned Islamist group to becoming the first freely elected president of Egypt. He is also the Arab world's first elected Islamist head of state. What kind of leader will he be and will the military allow him to wield power?

I'm joined by two academics who know Egypt very well. Steven Cook is the author of "The Struggle for Egypt." And Tarek Masoud is a professor at Harvard University. Welcome.

And you know Mohamed Morsi. You've traveled with him and okay when you were doing research on your book. What kind of a guy is he?

MASOUD: Mohamed is -- he's a very -- the one senior Muslim Brotherhood member described him to me is that he is a fighting personality, which I think is absolutely right. He is absolutely a fighter and he was one of the best Muslim Brotherhood members of parliament from 2000 to 2005 in terms of standing up to the regime, in terms of ferreting out its corruption and holding it to account for its corruption and failures.

A fighting personality is a fighting personality. This is not a person who is seductive in the way that you expect politicians to be. He's not a glad-hander. He's not somebody who can really win over people. A lot of people have talked about his lack of charisma.

STEVEN COOK, AUTHOR, "THE STRUGGLE FOR EGYPT": That's probably a good thing.

MASOUD: It may be a good thing, but at this moment in Egypt's history what -- if you really are serious about getting the military about of power you need a president who can unite all of these disparate forces, the revolutionaries, the liberals in order to make a kind of united front against the military. Is Mohamed Morsi who is the very faithful son of the Muslim Brotherhood, and lots of places he's been described as a Muslim Brotherhood enforcer, is he the guy to do this? I'm not sure.

ZAKARIA: Do you think there is a way to unite the Muslim Brotherhood, the liberals and people like that to create a kind of common democratic front in Egypt? COOK: Well there is to some extent, the revolutionaries, the liberals lined up behind Morsi in the presidential election because they hated Shafik. They did not want a clone of Mubarak that would be the representation of the old regime.

Now the election is over and the revolutionaries have their own demands. Liberals have their own demands. And Morsi is going to have to juggle their demands. And it's clear that the revolutionaries still can make trouble, can still bring people out into the streets, perhaps not in the same numbers as they did during the uprising, but certainly have proven that they have been able to do that. And he's also going to have to deal with the military that is looking out for its own interests. This is not going to be an easy thing and it may not be a fighting personality that is the best thing in order of a united democratic front in Egypt right now.

ZAKARIA: Will the military action cede power? And what was going on for the last two weeks where the military seemed to engage in some very strange power grabs right at the last minute?

COOK: Well it's clear that the military is not comfortable with ceding its historic role in Egypt. And I think what we saw over the course of the last couple weeks was an effort on the part of the military to hedge against a Morsi victory. And they issued a constitutional decree just as the polls were closing which essentially stripped the president of major foreign policy powers.

They now have the ability to veto parts of a draft constitution. They are in essence trying to emulate the role that the Turkish military once had in Egypt, which may play a role shaping the political arena to the way they prefer it to be. I'm not convinced that they're going to be able to do this over the long term however.

ZAKARIA: Do you think that the military has the -- obviously there is if you look at just public opinion in terms of Tahrir Square and things like that people don't like it, but it doesn't -- it hasn't produced mass protests on the scale of a year and a half ago.

MASOUD: Well let's keep in mind that just a week ago almost half of Egyptian voters actually voted for a clone of President Mubarak. So I would go further than you went and I'd say there is probably a large proportion of Egyptians who are not only indifferent to the military's assertion of control, but maybe even actually favor it.

So the question is will they be able to do this? And it's not -- the reason is a question is not because we think there will suddenly be mass protests in every village and hamlet in Egypt, but because I think as Steve was sort of hinting at that because standing against them is the Muslim Brotherhood that now occupies the position of the presidency, which is a position of some considerable moral authority, and which has between 500,000 to 2,000,000 members on the street who are highly committed and willing to do things.

ZAKARIA: So the military's great concerns that people have traditionally said are they want to have over their budget, they want to have control over foreign policy in some sense, but they also want to control the sort of vast array of economic interests they have.

COOK: That's right. And the presidency has been the informal linkage between the presidency and the military, and thus the source of their power. It stands to reason with the first civilian president that the military will be more autonomous in seeking to secure those interests. It's a vast economic interest.

Its military budget, control over its own personnel and importantly the historic role of the military as the central source of power and authority in the system. And I think that's really where the rubber is going to hit the road here. The Muslim Brotherhood is going to seek to replace that and the military is not going to give it up very easily.

ZAKARIA: Let me ask you, Tarek, is it such a bad thing that the military is trying to assert its power? At some level if you look at the development of democracy it's often been these contests between two powerful groups that force limitations on power, the church and the state in the Western world. So here you have the military trying to check the power of the presidency and the president will presumably try to check the power of the military. Should we be worried?

MASOUD: So there are two issues here. In a sort or ethical sense of course this is a bad thing for the military to assert any kind of control. Control should emerge from the people.

At the same time, as I think you're saying, look, we have to be realistic. The military, as Steve has mentioned, has been in charge in one or another in this country for the last sixty years. It is unrealistic to assume that they are suddenly going to relinquish everything and hand over power to a kind of Jeffersonian democracy, especially one that's just elected Mohamed Morsi of the Muslim Brotherhood.

ZAKARIA: What about relations with Israel? He has now said that all international agreements will be honored, but in the past Mohamed Morsi has said some pretty nasty things about Israel.

MASOUD: Well I think it's important not to be too alarmist at this point in time, but you're absolutely right. Mohamed Morsi when he has talked about Israel has been very tough. And he's somebody who in recent statements, I'm not talking about years ago, I'm talking about days ago, has talked about the need to keep the peace treaty, but only if the Israelis abide by it.

And he then goes on to describe what he thinks the peace treaty demands. And one of the things he thinks is in the peace treaty is a Palestinian state with Jerusalem as its capital. Well that's not in the peace treaty and it's in neither of the framework agreements of the Camp David Accord.

So I think there are -- he is somebody who has a very different idea about what the conditions of peace with Israel are. And I think it's very likely that if he's allowed to have influence over foreign affairs that relations with Israel are going to be very difficult. ZAKARIA: People say that the two countries most rattled by the fall of Mubarak were Saudi Arabia and Israel, strange allies. You think the Israelis are looking at this with great concern?

COOK: I think they are looking at it with great concern, but Egypt really is in no position to threaten the Israelis right now. Even under Mubarak they were under -- and the military is no condition to threaten the Israelis. What Morsi can do going short of breaking the treaty is he can empty Egypt/Israeli relations to the extent that they exist of any content and meaning without having to face the international criticism of actually breaking the treaty. As Tarek says, the Muslim Brotherhood does not believe that Israel has fulfilled the treaty. And that's why they are implacably opposed to any normalization with the Israelis.

ZAKARIA: Steven Cook, Tarek Masoud, pleasure to have both of you on. Thank you.

Up next imagine a system that could fingerprint and track nearly a fifth of humanity. It is not a pipedream. It is being implemented in India. I'll speak with the man behind the plan.

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ZAKARIA: Imagine creating a system to track 1.2 billion people, photographing them, fingerprinting them, cataloging them, giving them all IDs. My next guest is not just imaging that system. He is tasked with making it a reality in India. Nandan Nilekani is the chairman of India's Unique Identification Authority. His previous claim to fame was as one of the founders of Infosys, India's pioneering technology firm. Welcome.

NANDAN NILEKANI, CHAIRMAN, INDIA'S UNIQUE IDENTIFICATION AUTHORITY: Thank you, Fareed.

ZAKARIA: So explain how does one even think about this. And there are so many parts to it, but let's just first start with the technical things. So you are taking India's entire population, which previously had rarely been counted, let alone -- and you are going to try and give every single person a biometric ID.

NILEKANI: That's right.. We have enrolled 200 million people in the last three years since the project began. And we are using the biometrics to give them a unique number which so that they don't end up having more than one number, but what's most important is that this is a digital online ID. So we're taking people, many of whom have no ID whatsoever, and taking them to the digital world. So it's like a leapfrogging of identity.

ZAKARIA: So why is this so important for India? What one hears about it is that these people are supposed to get loans, or grants or various things from the government. And most of it never gets to them. And I remember the Prime Minister Rajiv Gandhi saying that of the one dollar that we spend on poor people, on average the poor person receives ten cents.

NILEKANI: Fifteen I think. Well it should be fifteen.

ZAKARIA: And as the middle mend take up all the rest of the money.

NILEKANI: Well actually, there are two primary drivers for this. One is that we have, still have millions of people who don't have a formal identity or acknowledgement of their existence by the state. And unless you have a formal acknowledgement or existence you can't get a bank account or a loan. You can't get a mobile phone. You can't get your entitlements. You can't get a job. You can't rent a house.

So everything is linked to your basic identity. So this in some sense you can think of as a massive inclusion program to get the poor, and the marginalized and the identity-less into the formal economy. So that's one part of it.

The other part is that the Indian government spends something like $60 billion a year on entitlements and benefits to millions of people. And they need to make sure it reaches the right beneficiaries. So by having this ID system we can make sure that people's scholarships, pensions, employment guarantee schemes all directly to the right person, either into the bank account or whatever account. So both it makes government expenditure more efficient, effective and equitable and it's a massive inclusion exercise.

ZAKARIA: How difficult is it? You were an entrepreneur in a space in India that is famously free of regulation because the Indian government basically didn't realize it existed, the high-tech space.

NILEKANI: And they were quite supportive of.

ZAKARIA: Well that's at least of mythology. Now you're in the heart of government. How much more difficult is it to deal with the bureaucracies, or which is worse, the bureaucratic obstacles or political obstacles?

NILEKANI : Well I think the way I see it simply is in the private sector the number of people you're to come into is much less. You convince your management team, your board, your investors, your analysts and you go and do something, go in new election, buy a company, whatever.

In the public space you are answerable to a lot more stakeholders, the government, parliament, bureaucracy, activists, journalists, the judicial system, the investigators. So I think what I learned is the amount of time you are to invest in evangelizing and consensus building is hugely more in the public space. And crafting a strategy which is sort of acceptable to everybody really takes a great deal of time. And that's where the big difference to me between the two worlds.

ZAKARIA: Do you think you'll face obstacles as you try to do this because there will be people who are disempowered? After all, when you provide these benefits to people, --

NILEKANI: Yes.

ZAKARIA: -- it used to be that there would be a village chieftain who was the intermediary who would take away some of the benefits. There would be bank managers who -- there are all these people. Usually this is an act -- this seems to me the largest act of disintermediation that I can think of.

NILEKANI: Sure. Once we have millions of bank accounts and people's money goes directly electronically to straight to processing with a bank account fully auditable and they can go and withdraw that at any location like going to any ATM that obviously changes the empowerment game, but the way we see it is while there could be some people disenfranchised by this, look at the fact that 200 million or more will get enfranchised. They will get empowered. They will become allies for this change.

So our goal is we acknowledge any change there will be opposition. And I would remark all about this 600 years back, but it's more about how do we get allies who support this change. For example, because we use the banking system, the banking system will support this. So we created allies and, of course, finally the people themselves. They see their lives improving they will be the best ambassadors of this.

ZAKARIA: You first came to international fame as the man who told Tom Friedman that the world is flat.

NILEKANI: I just mentioned it kind of --

ZAKARIA: Well it's the first page of the book.

NILEKANI: Yes.

ZAKARIA: do you look at the landscape of these emerging markets that you were talking about and the way in which they had all these competitive advantages, or at least an equal level playing field? And do you think something has changed because you're seeing a slowing down of the BRICs?

You're seeing India's slowed down. China has slowed down. Brazil has slowed down. Russia is slowing down. Have these countries and there's an era of cheap capital where everyone was booming, have you hit a brick wall?

NILEKANI: Well, I think certainly the message is that I think there is one set of drivers or levers that they hear from, x $200 per capita and $1,000 per capita, but as you keep going up I think, and as you I want to cite it's about institutions about getting a level playing field. It's about regulation. It's about creating easy entry of entrepreneurs, competition. So then the thing gets much more complex, I think. And that's why a lot of countries are facing those challenges of migrating to that world.

ZAKARIA: Are you bullish about them still?

NILEKANI: Oh absolutely. I think the fundamentals have not changed. There may be some tactical issues, but the fundamentals have not changed.

ZAKARIA: Nandan Nilekani, a pleasure to have you on.

NILEKANI: Thank you, Fareed.

ZAKARIA: And we will be back.

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ZAKARIA: Happy birthday. I'll spare you the singing, but today's a big day for the international criminal court. It turns ten, and I'm sure The Hague is throwing a big bash. The birthday brings me to my question of the week. How many verdicts has the international criminal court handed down over the past decade? Is it a, one, b, five, c, seven, or d, 25? Stay tuned, and we'll tell you the correct answer. Go to cnn.com/Fareed for more of the "GPS Challenge" and great content from the global public square. If you ever miss a show or a GPS special, go to iitunes.com/Fareed.

This week's book of the week is "Land of Promise: An Economic History of the United States." by Michael Lind, one of the founders of the New America Foundation. Lind is a highly intelligent thinker and writer, and has given us a revealing history of the American economy, emphasizing the crucial role that the state has played in making America an economic superpower. It will unsettle many of your cherished beliefs.

And now for the "Last Look," South Korean and American troops storming a beach by sea, by air, shells exploding overhead as amphibious vehicles race toward the beach. No, the world hasn't finally run out of patience with North Korea. This was just a drill, but the date of the drill was telling, June 25th. Doesn't ring a bell? It is the 62nd anniversary of the start of the Korean War. To add to the symbolism, smoke bombs dropped in the shape of a "V" for victory.

The correct answer to our "GPS Challenge" question was a. There has just been one verdict handed down by the International Criminal Court. The sole verdict was a guilty one against Thomas Lubanga, a former rebel leader in the Democratic Republic of the Congo. He was convicted of abducting children and forcing them to serve as child soldiers.

Fifteen cases have been brought before the court, all of them also from Africa. Critics say almost $1 billion in ten years should buy more than one verdict. Oh, and remember the U.S. is currently not a party to the International Criminal Court.

Thanks to all of you for being part of my program this week. I will see you next week. Stay tuned for "RELIABLE SOURCES."