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Fareed Zakaria GPS

Political Panel; Interview with Robert, Edward Skidelsky; Debate on Fracking

Aired October 28, 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.

The debates are done. The race is heading for the final stretch and it is still all about the economy. So we'll start with a great panel to talk about the American economy. What is actually going on?

Then, you've often heard that fracking is controversial. Why? We have a debate to help you think it through.

And do you think you have enough money? What would be enough? We'll have a fascinating discussion on the subject with Lord Robert Skidelsky, Britain's most prominent economy historian, on how to answer those questions.

And why in the world did the nation of Mali get more mentions in this week's foreign policy debate than Japan, Mexico or all of Europe?

But, first, here's my take: The International Monetary Fund's latest World Economic Outlook makes for gloomy reading. Growth projections have been revised downward almost everywhere, especially in Europe and the big emerging markets like China.

And yet, when looking out over the next four years, coincidentally the next presidential term, the IMF projects that the United States will be the strongest of the world's rich economies.

U.S. growth is forecasted to average 3 percent, much stronger than that of Germany or France at 1.2 percent or even Canada at 2.3 percent.

Increasingly, the evidence suggests that the United States has come out of the financial crisis of 2008 in better shape than its peers because of the actions of its government.

Perhaps the most important cause of America's relative health is the Federal Reserve. Ben Bernanke understood the depths of the problem early and responded energetically and creatively.

The clearest vindication of his actions has been that the European Central Bank, after charting an opposite course for three years with disastrous results, has now adopted policies similar to the Fed's and, thus, averted a potential Lehman-like collapse in Europe. Kenneth Rogoff and Carmen Reinhart, the leading experts on financial crises, argue that the United States is performing better than most countries in similar circumstances in history.

Consumers are paying down debt and consumer confidence is at its highest levels since September 2007. Every American recovery since World War II has been led by housing, except this one.

But, finally, housing is back. Two weeks ago, Jamie Diamond, the chief executive of JP Morgan Chase, declared that housing had turned the corner and predicated that, as a consequence, economic growth in 2013 would be so strong that the Fed would have to raise interest rates.

Corporate profits are at an all-time high as a percentage of gross domestic product and companies have $1.7 trillion in cash on their balance sheets.

American exports, which have climbed 45 percent in the past four years, are at their highest level ever as a percent of GDP.

The key to long-term recoveries from recessions is reform and restructuring and U.S. businesses have been quick to respond. Government intervention, believe it or not, has assisted this process with banks, with auto companies and even in housing.

Banks had to undergo stress tests and had to raise capital. The Economist Magazine, which had initially opposed the auto bailout, reversed itself because of the manner in which General Motors and Chrysler were forced by the government to cut costs and become competitive.

Now, all these good signs in the economy come with caveats. Europe continues to weaken, the fiscal cliff looms ominously. But compared with the rest of the industrialized world and with the arc of other post bubble recoveries, the United States is ready for a robust revival.

This is partly because of the dynamism of the U.S. economy, but also because of the timely and intelligent actions of the Fed and the Obama administration.

The next president will reap the rewards of work already done. So it would be the ultimate irony if, having strongly criticized almost every measure that contributed to these positive trends, Mitt Romney ends up residing over what he would surely call the Romney Recovery.

For more on this, go to cnn.com/fareed for a link to my Washington post column and let's get started.

Let's get straight to our terrific panel to talk about the economy and, obviously, a little politics as well. Joe Klein is Time's political columnist.

Amity Shlaes is director for the Four Percent Project at the George W. Bush Institute and the author of the forthcoming, "Coolidge: A Biography of America's 30th President.

Ken Rogoff, whom I just mentioned, is a Professor of Economics at Harvard University and Chrystia Freeland is the editor of Thomson Reuters Digital and the author of the new book, "Plutocrats."

Welcome back to all of you.

So, Ken, the piece I mentioned, you wrote a -- you and Carmen Reinhart wrote a piece almost trying to correct what a couple of Romney advisors have written about how the U.S. was doing.

And you said, look, compared with other big financial crises that lead to recessions, we're actually doing pretty well. Fair?

KEN ROGOFF, PROFESSOR, HARVARD UNIVERSITY: Yes, that's a fair characterization of what they said and what we said. I mean it's fair game to say we can do better, we have a plan where the economy's going to grow better.

But if you're going to evaluate what happened, was it a bad recovery, was it s good recovery, I think you have to compare it to deep financial crisis.

This was not a plain vanilla recession and you have to compare it to deep financial crises we've had in this country, which don't happen very often, and other countries around the world.

And if you go by that metric, the United States has not done so badly. I mean I think part of the argument is they say well, we're not growing that fast now. But the other side of the coin is we didn't fall that far at the beginning.

I mean what people are really interested in is are we better off than we were four years ago and not did we get a lot better in the last year having sunk mightily.

So I think that was sort of what the debate was about. Carmen Reinhart nor I have been backing either of the candidates nor advising them privately.

But we felt that -- especially since our work we being cited again and again and again, not just in op-eds, but in press briefings that we heard back from, we just felt we had to set the record straight.

ZAKARIA: Fair to say we're doing pretty well compared to other countries in similar situations?

AMITY SHLAES, DIRECTOR, THE FOUR PERCENT PROJECT AT THE GEORGE W. BUSH INSTITUTE: Well, you -- we're better than the worst. Is that good enough? That would be the question. What's interesting is about what Ken is saying is deep financial crisis, yes, it is part of a great pattern that he and Carmen have analyzed and highlighted.

However, our deep financial crisis -- it sounds a little exonerating, doesn't it? Deep financial crisis, nothing the average person could do about it, it has to do with political policy.

For example, vis-a-vis, housing, if our federal government hadn't guaranteed all housing everywhere both through Fannie Mae and Freddie Mac, the FHA and so on, we would have had less of a crisis.

The whole world believed in our housing. So I disagree just with the exonerating tone. This was the result of policy that voters supported that was erroneous. It wasn't inevitable.

ROGOFF: Yes, but a lot of it happen before, you know -- earlier I mean, to be fair.

SHLAES: Right, but it was -- no, no, it wasn't inevitable like weather.

ROGOFF: Right.

SHLAES: We tend to -- when you talk about financial cycles as kind of, oh, that's the weather, we can't do -- this was a result of policy by both parties.

ZAKARIA: Chrystia?

CHRYSTIA FREELAND, EDITOR, THOMSON REUTERS DIGITAL: Well, sure, that's absolutely true, but it's not -- it is policy by both parties. So Republicans, of course, like to talk about the housing, which Democrats were very supportive of, wrongly I believe.

But Democrats like to talk about and they should talk about bank regulation. And, you know, if you want to talk about regulatory failure, if you want to talk about government failure, surely the deregulation of the financial sector up to 2008 is one of the great moments of failure.

ZAKARIA: But, Joe, let me ask you a question about the politics of this. Whether or not, you know -- will voters really understand the Ken Rogoff argument that this is a, you know, deep financial crisis causes overleveraged consumers and balance sheets get out of whack and it takes a while before all this straightens out.

They're just looking at it and saying Obama's been president for three years and he hasn't fixed anything.

JOE KLEIN, POLITICAL COLUMNIST, TIME MAGAZINE: I think that's right, but I think that they might understand it if it were Bill Clinton explaining it to them.

I think that Obama really has been awful at explaining his policies and explaining the state of the economy for the last three or four years.

SHLAES: I'd like to just say, again, policies do matter deeply. Example, for the viewer, next year it's predicated we'll go into recessions again if the fiscal cliff is not addressed and we do go over it. These are decisions that have to be made by lawmakers before Christmas time or the New Year in regard to tax and sequester and spending.

It's there in the books and it's probably accurate. I think we've let ourselves off the hook when we compare ourselves to Europe. It's not so great just to be less bad than the others which is where we are.

ZAKARIA: So there's a lot there. Let's talk about the fiscal cliff. Is it going to happen?

KLEIN: No, it's not. I mean, you know, I've been doing this for 43 years and I suppose I should be a cynic by now, but I'm not.

I'm very optimistic that this is going to be handled because a good part of the blockage was the fact that Mitch McConnell set, as his goal, the fact that Obama wouldn't be reelected.

Now, if Obama gets reelected, that blockage is passed and John Boehner is going to have to think about his future as speaker, whether he wants to stand with his Tea Party or whether he wants to stand with the vast, moderate majority of people in this country who believe that there has to be some revenues and there have to be some cuts and there have to be some entitlement reforms.

There's a rational, sane, middle road out there and if Romney wins, then he will have to deal with the Democrats in the Senate, which he'll want to do.

And he will have to say to his right wing, as he has implicitly over the last three or four weeks, that no, guys, we're not going to have this extreme policy.

And as for tax rates matters, I mean I think we all lived through the great depression of the 1990s after Bill Clinton raised taxes and the great depression of the 1980s after Ronald Reagan raised taxes, especially on business, three times.

ZAKARIA: All right, we're going to have to stop ...

(UNKNOWN): Do we do (inaudible) about that?

ZAKARIA: No, we're going to have to stop, take a break. When we come back, we'll talk, inevitably, about all this, but also going forward what's going to get this economy moving again.

(COMMERCIAL BREAK)

ZAKARIA: And we are back with Joe Klein, Amity Shlaes, Ken Rogoff and Chrystia Freeland.

So, term two, for whoever it is, a term two for Obama, a term one for Romney, Chrystia, what do you think will get America growing at 3 percent or more? FREELAND: Well, let me pick up on what Joe has said and tell you what is the truth that dare not speak it's on Wall Street right now and behind, actually, I think, a lot of the Wall Street support for Romney.

I think a lot of people on Wall Street are hoping and they actually believe that if Romney were elected, he would discover his inner Dick Cheney.

And that the way that the fiscal cliff would get ...

ROGOFF: That's a frightening thought.

FREELAND: Right, no, and the way the fiscal cliff would get resolved is that Romney would say yes to tax cuts and would say actually deficits don't matter right now, let's make growth a priority and because it was a Republican president that, therefore, you would have the Congress much more willing to go along.

Wall Street, at this moment, would see that as a very positive scenario, sort of stimulus by stealth.

ROGOFF: What I worry about is that neither candidate's really, if they win, going to get to execute their vision that they're going to be having -- you know it's like you marry someone, but there are a lot of unruly relatives you never quite realize were there and, you know, coming out of the woodwork.

And I worry -- I actually think both men acquitted themselves quite well in the debates. But the point is they're in this larger environment of what is going to go on.

And I worry we're going to see muddling through instead of clear- cut tax reform, clear-cut infrastructure program, clear-cut ways to improve education.

ZAKARIA: Joe, when you traveled around, I remember this was a couple of years ago, you did a --

KLEIN: I do it every year.

ZAKARIA: But you did a series of wonderful articles. I think it was before the midterms for Time in which you said, you talked to a lot of the Midwest middle class and you found that the -- China came up ten times as often as Afghanistan.

KLEIN: Twenty.

ZAKARIA: Twenty times as often as Afghanistan. And when you look at the -- what an average, middle class, American family is facing, particularly kind of, you know, working people who work in factories, they're up against probably a generation of this kind of wage competition and possibly wage deflation because of China and things.

Do you -- what do you think happens to the politics of America if that middle class is not appreciably five, six, eight years from now?

KLEIN: Well, we're heading toward, I think, a demographic period of real difficulty as the white majority declines. And there's a fear of -- out in the middle of the country of this new America that's emerging that is so multicultural, multiethnic.

But I do think, you know, once again, I'm going to be slightly optimistic here because, you know, you and I have both written about this, we're finally beginning to understand what hasn't worked in education.

The idea that college is appropriate for everyone hasn't worked. There is a major movement on in the country to match people skills with the jobs that are out there. Vocational education's making a big comeback.

And I think that even as manufacturing jobs begin to return because our energy costs are going to be lower and labor costs are rising in Asia, I think that those are going to be skilled manufacturing jobs.

And we're on the brink now where we can figure -- we're beginning to figure out how to rejigger our education in order to meet the economy of the future.

FREELAND: I'm, sadly, going to be a little more pessimistic than you, Joe. And I think, Fareed, you have asked the most important question.

I am less worried about structural unemployment, but I am really worried about structural lousy jobs as there's a great economic paper about the lovely and the lousy jobs.

And I'm really worried that we're ending a period of structural lousy jobs. And these can be manufacturing jobs, but they're just not paying the same money that they paid. Forget about the 1950s, they're not paying what they were paying 10 or 15 years ago.

And I think we are entering a period, precisely as you say, because of this global labor market, where there is going to be a big chunk of the middle class that are the working poor.

They're going to have jobs. They're going to have jobs that we consider to be good jobs. They will have had the vocational training, but they will not be making enough money to feel good, to feel comfortable.

And what that does to the politics I think you already see. I think it makes the politics much nastier, much more divisive. There is much less a belief that you can have compromise. So I think it's quite a frightening prospect.

ZAKARIA: Amity, another big challenge, no matter who's elected, is going to be at some point we have to deal with entitlement spending. Do you think there is the political will, on either side, to actually cut spending, particularly entitlements, which is the big piece of it, not just ...

SHLAES: Oh, I actually do. I mean if we all sat here over one afternoon, we could come up with a Social Security compromise that reflected the impulses in all political parties.

Sometimes, I think we blow up, especially Social Security, we make it seem harder than it is. It's not that hard. So ...

KLEIN: So the Medicare one ...

ZAKARIA: It's economically easy, but politically.

SHLAES: It's -- right, so we need -- it's our job to convey to the viewer that it's economically easy to fix Social Security.

And if a politician tells you otherwise, from either side, that it must all be privatized or it cannot be touched because it's a Democratic holy cow, they're exaggerating so one is to view that as not insurmountable.

The health care is much more complex. But I want to mention that we all -- you know, we're talking in this very narrow band. We're concerned about Michigan, (inaudible) notwithstanding, or because of the auto bailout the unemployment is what, it's over 7, it's more like 9, the Midwest in the future there.

And just to widen our band, I'd like to offer what would happen, Dr. Rogoff, Ken, whom I admire so much, if we cut the capital gains tax to 2 percent in the United States, we would all fall off a cliff of deficit or would the U.S. grow faster and obviate some of the problems you've so well described?

ZAKARIA: All right. And that's the final word.

ROGOFF: Well, I think the answer is if we had a tax simple vacation where that issue was taken off the table is the best idea and it's outrageous that a lot of things get disguised as capital gains that are really income creating the biggest inequality.

SHLAES: so you say raise capital gains, for example, for hedge funds?

ROGORF: OH, if we didn't change anything else, absolutely. That is just criminal.

ZAKARAIA: One point of agreement. Ken Rogoff, Joe Klein, Amity Shlaes, Chrystia Freeland, thanks for joining us.

Up next, What in the World. Why a little known nation, Mali, is more important than Europe, Mexico and India combined, at least according to this week's presidential debate. I'll explain.

(COMMERCIAL BREAK) ZAKARIA: Now, for our What in the World segment. In the final presidential debate, the one on foreign policy, it was interesting to note the countries that got a mention.

Iran was cited 47 times, of course, Israel 34 times and China 32 times. It was also telling there was only one mention each of Europe and Africa and none at all of India.

But I was struck by the amount of play one small country got, one that doesn't usually register on Washington's foreign policy radar, land-locked Mali, with a population of about 15 million and a GDP 1 percent that of Mexico's.

Why Mali? Here's the story, briefly. Racial Islamist groups have taken control of as much as 2/3 of Mali's territory this year, including the historic city of Timbuktu.

Among these groups is al-Qaeda and the Islamic Maghreb said to have been involved in last month's attack on the U.S. consulate in Benghazi, Libya.

Together, these radical outfits have tormented Mali. They have destroyed historic shrines, imposed a draconian version of Sharia law and gone as far as stoning and beating people who come in their way.

Now, Mali was once considered one of the few stable democracies in Africa and Mali's capital, Bamako, would normally have been able to counteract these insurgents.

But the government tripped up this year. A coup took place in March. In the aftermath, soldiers deserted the army. There are reports many even sold their equipment for money so Mali is now essentially defenseless.

Last month, the interim president called on the U.N. Security Council to help and so it seems increasingly likely there will be some kind of military intervention.

Already, a regional group called, ECOWAS, the Economic Community of West African States, is pooling together a small army. France is leading the calls for action.

It has submitted a proposal to the U.N. for Malian soldiers to be trained by the European Union. Those soldiers will then join a few thousand ECOWAS troops to retake Northern Mali. Remember, Mali was a French colony until 1960 and France continues to have trade interests in the region.

What about Washington's role? Haven't our leaders promised to go after al-Qaeda wherever it takes us? Yes, but that doesn't always mean we have to have boots on the ground.

Al-Qaeda and affiliated groups keep popping up in different parts of the world. When we suppress them in one region, they crop up elsewhere. It's a tremendous undertaking to keep following them, especially with troops. That's why it's heartening to see local and regional powers take up the fight. And Somalia, for example, Ethiopia and Kenya have been instrumental in battling the al-Qaeda linked Shabaab group. Other countries like Yemen have welcomed surgical U.S. strikes, even drone strikes, without a presence of U.S. troops.

But with or without the United States, there is a real prospect that the next war you will hear about, perhaps next years, will be fought not in Iran, but in the impoverished country of Mali. You heard it here first.

Up next, the human quest for success and money. We're all familiar with it, but how much is enough? When do you stop? We'll tell you the answer when we come back.

(COMMERCIAL BREAK)

CANDY CROWLEY, CNN ANCHOR: I'm Candy Crowley in Washington. "Fareed Zakaria GPS" will be back shortly.

But first, we've learned that New York City will suspend bus and train service starting at 7:00 p.m. due to Hurricane Sandy. We want to go meteorologist Bonnie Schneider at the CNN Weather Center in Atlanta for an update on the storm. Bonnie?

BONNIE SCHNEIDER, AMS METEOROLOGIST: Candy, the storm is definitely getting closer as it continues to work its way to the north and then make that turn back to the U.S., and that's what's so unusual about this hurricane. Of course, having a hurricane in October is unusual, as well. But this is going to be a wind and a rainmaker. We're talking about a widespread area impacted. In fact, millions of people potentially could be without power. When you look at the populations of large cities like New York, Philadelphia, and as far west as Cleveland, Ohio.

We're also looking at the threat for storm surge, this is very key because the winds are going to be strong, and we'll be looking for that water to pile up, particularly in the inner harbor areas like into New York harbor, Long Island Sound. All of these are at risk for storm surge and flooding.

You know, flooding is actually the leading killer in hurricanes. And a lot of that happens due to storm surge. So some of the rainfall totals you see are up to eight inches. But keep in mind, on the back side of the system, it's cold enough for snow. So Candy, we are looking at the threat for heavy snow in the mountains of West Virginia, as well.

CROWLEY: Wow. Big storm. Thanks, Bonnie. CNN will be covering the storm throughout the day. RELIABLE SOURCES is at the top of the hour. Now back to "Fareed Zakaria GPS."

ZAKARIA: How much is enough? Is anything ever enough? It sounds like a philosophical question, but it's also one about economics. So here's one way to approach answering it. A father and son write a book. The father is a famous economic historian. The son is a lecturer in philosophy.

I welcome Robert and Edward Skidelsky, authors of the book, "How Much Is Enough?"

What I'm struck by, Robert, in this book is it -- it's familiar. In the 19th century, there used to be many conservatives who would argue against industrialization because the feeling was this is just turning into kind of materialism, and everybody wants more, more, more, and then your great man Keynes wrote a piece in the '30s saying we're producing so much wealth that at some point everyone will have enough stuff. And they can all work for a few hours a day, and, you know, enjoy the rest of the day. Marx used to argue that as well in his own way. But it hasn't quite worked out that way for whatever reason as a predictor of how human beings will behave. We do seem to want more, more, more and more.

ROBERT SKIDELSKY, AUTHOR: We do. I think Keynes was heir to that moral Victorian tradition, in which money was regarded as a means to something, a good life. And he was the last really of economists, last generation of economists who thought in these terms and thought of economics as a moral science. And that you needed to ask always the question, enough for what, what is money for? Otherwise you are adrift. You just go on accumulating without end, without purpose. So he said enough for a good life. And he thought that technology was bringing that about, that it was actually producing such increases in wealth that we would be able to have abundance with a fraction of the work. That people would then do it, but that bit of it hasn't come about.

ZAKARIA: Why?

R. SKIDELSKY: I think a number of explanations. One is that our society's become much more unequal than it was when Keynes was writing. And the other is I think he underestimated the force of insatiablity. The relative character --

(CROSSTALK)

ZAKARIA: You end up with new needs and new wants. If you have one car, you feel like maybe it will be even more fun to have three. In the book, it seems to me -- correct me if I'm wrong -- briefly what you're saying is you need enough for a kind of good, what we would consider middle class or upper middle-class life in terms of material comforts, house, things like that. And that beyond that, the kind of constant accumulation of more stuff doesn't give you a good life. What gives you a good life is time spent with your family, building relationships, pursuing activities that you find interesting.

EDWARD SKIDELSKY, AUTHOR: Yes. Well, we break it down into seven basic goods, as we call that. These are the goods that together make up a good life -- health, respect, security, personality, harmony with nature, friendship, and leisure. So once you have enough money to enjoy these goods and once society has enough money to enjoy these goods collectively, then you have a good life.

R. SKIDELSKY: And it's insane to go on and on and on. ZAKARIA: And there's a tradeoff because in order to get more and more money, you have to sacrifice. You don't have the time for those friendships. You don't have the time for leisure. You don't have, you know, the ability to pursue that good life.

R. SKIDELSKY: In economic terms, they all have opportunity costs. Leisure has an opportunities cost, because it means when you're enjoying leisure, you're forgoing the extra income that you could be getting when you're working. And say if you're rational, you balance these things. But of course that's also an insane way of doing it. When you're poor, of course you need to work in order to get enough. When you're already rich, do this kind of calculation, and say, well, if I go to the theater, I'll -- I'll not make an extra $100 that I would get by staying at my desk. I mean, when you're already rich, that seems to me an insane calculation.

ZAKARIA: But how do you determine -- the problem I'd say is in America nobody thinks they're rich, they're all trying to get richer.

R. SKIDELSKY: That's because they think they're not as rich as other people, and also --

ZAKARIA: Is there an objective standard you could --

R. SKIDELSKY: Well, I think the other thing that Americans worry about, and indeed many Europeans, is there's been a big increase in insecurity. They may have wealth, but how long will it last? What about their retirement? What about the cuts in services? What about their jobs? They may lose them. So there's this insecurity. And one of our basic goods is security. We believe there was more security, actually, in the '50s and '60s, certainly in terms of jobs, than there is today.

ZAKARIA: The one thing that does seem to be clear is that the research on happiness, if one can describe this as serious research, but there are lots of studies that say that what makes people happy once they have achieved some kind of middle-class status, is human relationships, ties to their families, leisure pursuits, civic activities. It's not the third car.

R. SKIDELSKY: But these are the very things that don't get into gross domestic product statistics, which are entirely about the goods that enter the market and are exchanged in the market. All these other things that give people the feeling that they're leading a good life and it contents them -- they are sort of ignored. And so the pursuit of growth as such is a highly misleading objective, because it just concentrates on a narrow segment of goods, and you always really want to ask what is growth for, what -- growth of what? Growth of what? And if you say growth of pollution, that is absolutely rubbish. That's not something you ought to be thinking about. But growth of friendship, how do you get it into GDP?

The king of Bhutan, of course, he suggests substituting gross domestic happiness as the goal of his people. Well, I can see why in a way. Because if there are lots of people that are very, very poor, and you can persuade them that they're happy, then he can keep his palaces going, and people won't get discontented about it.

So it's a bit of a -- it's a bit of a poisoned chalis, that notion of happiness. Because also, unless you're very careful, you get into a brave new world situation, where rulers make people happy by giving psychic aspirin or something like that, and then they feel idiotically happy the whole time.

ZAKARIA: Skidelsky, pere and fils, thank you very much for joining me.

Up next, shale gas has revolutionized America's economy, but is it safe? We'll have a debate on the pros and cons, coming right up.

(COMMERCIAL BREAK)

ZAKARIA: America's extraordinary natural gas boom has been made possible by an extraction method called fracking. That's the controversial process developed with the help of the U.S. government of shooting millions of gallons of water mixed with chemicals and sand down a well. When the water hits the shale rock, the rock that contains the natural gas, that rock fractures, releasing natural gas back up the well. So if it is helping to fuel our economic recovery, why is it so controversial? Let's talk to my next two guests. Abrahm Lustgarten won a Polk award for his series on fracking for Pro Publica. And Ann McElhinney is a journalist and filmmaker. She is the producer and director of the forthcoming film, "Frack Nation." Welcome.

Abrahm, let me start with you and ask you, just simply and succinctly, if you can tell me, what's the problem with fracking?

ABRAHM LUSTGARTEN, ENVIRONMENTAL REPORTER, PRO PUBLICA: Well, there's serious scientific questions about what its impact is on the environment in three areas -- in terms of its effect on ground water deep below the surface; the wastewater that's produced and where that goes; and emissions and air pollution that results from the drilling. All of which can lead to, it seems, can lead to substantial health concerns and health impacts.

ZAKARIA: So let's take the first one then. And this is basically the fear that you contaminate the water -- or drinking water reservoirs. Ann, what is your research telling you about that?

ANN MCELHINNEY, DIRECTOR, "FRACKNATION": They've been fracking in the United States since 1947, so it's not a new method of any kind. And I suppose the quote from Lisa Jackson, the head of the EPA, who is on record as saying, according to her, she has no knowledge of one case of water contamination. So you have a situation -- like now in the United States -- where there are literally millions of fracked wells all across the country. This has been going on for a very, very long time. It's not like it is something new. We've actually seen what happens -- nothing happens. There are no cases of water contamination. And this is, as you said yourself, there, Fareed, it's an extraordinary ability now for America to extract its oil and natural gas and become energy independent. It's amazing, amazing for America. ZAKARIA: Abrahm, how do you respond to that? There has been a lot of fracking going on, hasn't there?

LUSTGARTEN: There has. The science just is not as certain as we've just heard. The fracking process has been developed in various forms over the last 50 years or so, but nothing at all like it is today, not in terms of the volume, the type of chemicals, the slick water fracturing, the horizontal drilling. Really, this is just something that's come about in the last ten years at best.

And the other thing that's dramatically different from historical drilling activity is the scale on which this is happening. The thousands and thousands of wells, the speed at which they're being drilled, and the range across the country. So it's entirely different from historically how drilling has happened.

ZAKARIA: Ann, what about that famous video in "Gasland," where the guy opens a tap and flames shoot out. The argument is that this is the methane that's come from fracking that's entered the water supply.

MCELHINNEY: Yes. It's very interesting actually, because we actually challenged the director of "Gasland" on that very issue. Because you know, it's a very dramatic moment. You see the guy light the water, it's like oh my God, if they frack in my area, this is going to happen.

Of course, what they don't tell you in that film and we confronted Josh Fox about was, has this ever happened before in America? Does water in America light? And of course, the truth is yes, it does, and it always has. That's why in the United States of America you have towns all over America called Burning Springs, because the water always lit on fire.

And why does the water in America light on fire? It lights on fire because of naturally occurring methane, which there's a lot of. And in fact, actually, while that sounds like a bad thing, it's actually really, really good news, because that means there's an abundance of natural gas and an abundance of oil naturally occurring. So, you know, what happened in "Gasland" was this was very dramatic, this scene. People across the world have seen it and been terrified by it. It's just not true.

ZAKARIA: Abrahm, the argument is that methane mixes with water naturally or perhaps somebody drilling a water well hits a reservoir of methane. This is not necessarily a product of fracking.

LUSTGARTEN: Well, I think what you're hearing is a gross generalization. Personally, I've interviewed dozens of people, both researchers and homeowners, who have, you know, dealt with methane seepage, looking at cases for example documented by the Pennsylvania Department of Environmental Protection, by the EPA itself, by other government entities, where clearly the methane released in those -- in some of those cases has been caused by drilling activity, whether fracking or drilling or cementing or some aspects of the drilling activity. So it's just not true to dismiss all of those because some methane can occur naturally in some places.

MCELHINNEY: I think the really good example is that, you know, if you think of what happened in Dimock, Pennsylvania. Dimock is always quoted as ground zero for this. Every documentarian has seemingly gone there, a lot of journalists have gone there, they've interviewed 11 litigants. There were 11 litigants who were saying that there was methane leakage into their water systems in Dimock, Pennsylvania, 11 litigants.

Well, we went to Dimock, Pennsylvania, and we found something that everyone else seems to not have found. We found 1,500 families who said the water there was always appalling, that they always had methane in the water because of the fact that the place is so rich in natural gas. They formed an organization called Enough Already. That's why we were making this film, "Frack Nation," because actually, when you think of how much 11 is out of 1,500, it's 1 percent. We're making a film for the 99 percent whose voices aren't being heard.

Mr. Lustgarten's voice gets heard. He talks about maybe, and could be, and what if and what would happen, and this article here. But very -- his citations are very, very weak.

The truth is that the evidence, if anything, is incredibly favorable, in favor of this method of extracting oil and natural gas, which is desperately needed, when America is putting itself in such danger from getting oil from countries that really hate America. So this is a very good news thing.

Of course regulation is incredibly important. And regulation is there and in place.

ZAKARIA: Abrahm, what about the argument that you have to compare natural gas to the alternative? If we didn't have fracking, if we didn't have this cheap natural gas, we would be getting our electricity from coal. Now coal is much dirtier than natural gas, almost twice the CO2 emissions. Also has, you know, effects in terms of the atmospheric disease-causing pollutants. And it also causes lots of deaths in coal mining accidents.

LUSTGARTEN: Sure. I mean, there's a lot of benefits to natural gas. I don't think that anybody really disputes that. I just think that it's also important when you look at those benefits to weigh them against some of them costs, and at least to have a very clear-eyed understanding as to what some of those costs are. There's very serious questions, and they need to be answered. And most scientific communities and government regulatory agencies looking at this agree with that.

ZAKARIA: Abrahm Lustgarten, Ann McElhinney, thanks for being with us. This is a very good, substantive, civilized debate.

Up next, why this odd-looking contraption could save thousands of lives in Afghanistan and around the world.

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OBAMA: You mentioned the Navy, for example, and we have fewer ships than we did in 1916. Well, Governor, we also have fewer horses and bayonets.

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ZAKARIA: That moment from the foreign policy debate got me thinking. And it led to our question of the week. During which war did the U.S. execute its last horse cavalry charge? Was it, a, the Civil War? B, the Spanish-American war? C, World War I? Or D, World War II? Stay tuned, and we'll tell you the correct answer. Go to CNN.com/fareed for more of the GPS challenge and lots of insight and analysis. You can also follow us on Twitter and Facebook. Also remember if you miss a show, go to iTunes. You can get the audio podcast for free, or you can buy the video version. Itunes.com/fareed.

This week's book of the week is "Plutocrats: The Rise of the New Global Super Rich and the Fall of Everyone Else," by my guest today, Chrystia Freeland. This book has very interesting data on inequality, it has great reporting, fun tidbits about the lives of the plutocrats, and very sensible policy advice about what to do about all of this.

Now for the last look. Take a look at this. From a distance it looks like a dandelion. Up close, perhaps an odd ball of toilet plungers. So what is it? It's called minecafon (ph), and it is a wind-powered land mine-clearing device. That's right. Propelled by the wind, it is meant to roll around landmine danger areas until -- [ explosion ].

It finds one.

Its inventor, Masud Hassani (ph), is an Afghan who has vivid memories of losing toys that flew or were kicked or thrown into landmine areas when he was growing up in the ear of war against Soviet Union. The problem goes beyond toys. Afghanistan is estimated to have perhaps ten million unexploded land mines, and more than 40 civilians are killed by these hidden explosives every month on average. So this might be a home-grown way to start fixing this problem. Necessity truly is the mother of invention.

The correct answer to our GPS challenge question was d -- the last American horse cavalry charge was in World War II. On January 16, 1942, the galloping horses of the 26th Cavalry Regiment surprised the Japanese in the Philippines and were victorious.

Now more recently, you might remember horses were also used early in Afghanistan by U.S. Special Forces, but that was not an official cavalry unit or an official cavalry charge.

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