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FAREED ZAKARIA GPS

The Fiscal Cliff Deal; Flashpoints for 2013: What We Should Expect; Will This Be India's Awakening?

Aired January 6, 2013 - 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 coming to you today from London. Happy New Year.

On today's show, we'll look ahead at what 2013 might bring around the world. I have a great panel. Richard Haass, Anne-Marie Slaughter and Ian Bremmer whom I will ask to gaze into their crystal balls.

Will Assad fall? Will Israel bomb Iran? Will the euro zone finally break apart?

Then, the fiscal cliff, the view from across the pond. How did our political process look from a perch overseas and what will it all mean for the U.S. economy and the global economy.

Also, will this be India's awakening? The nation confronts its own dark corners after a despicable, deadly act. I'll take a look at some parallels with America's recent tragic school shooting.

But, first, here's my take. The deal to avoid the "fiscal cliff" is a small victory for sanity, but what it says about the future is somewhat bleak.

Washington will lurch from crisis to crisis, kicking problems forward and placing Band-Aids, small solutions, on those that it does address. There will likely be no large-scale initiative on tax reform, entitlement reform, energy policy, probably even immigration reform.

And this is the real worry because beyond the self-inflicted crises of the cliff and the forthcoming debt ceiling, the United States faces a much deeper challenge.

For more than a decade now, for many decades, by some measures, America's growth rates have slowed, recoveries have been jobless and median wages have declined.

Some combination of the information revolution and globalization has placed tough pressures on high-wage countries like the United States. These new forces are accelerating, and without a strategy to revive growth, long-term growth, all of our problems get worse, including and especially our debt.

Washington's focus so far has been on raising taxes and cutting spending. It should be on reforming and investing in the American economy.

Historically, when the American government or the World Bank or the IMF advised countries that got into trouble, they usually stress that achieving fiscal stability, austerity, was only a part of the solution.

The key to reviving growth is structural reform to make the economy more competitive, as well as crucial investments in human and physical capital to ensure the next generation of growth. Yet we have not followed our own prescriptions.

The United States has plenty of areas where it could become much more competitive. It has a gargantuan and corrupt tax code that clocks in at 73,000 pages, including regulations. It has vast areas of the 3conomy, like agriculture, that receive massive and distorting subsidies for no larger national purpose.

If the case for reform is important, the case for investment is urgent. The big shift in the American economy over the last 30 years has been a decline in the quality of physical and human capital.

Take one example relating to our physical capital, infrastructure. It is estimated that it will cost $25 billion to upgrade America's air traffic computers to the next gen system that would allow for much faster and safer air traffic.

By not making this investment, we are measurably slowing down economic activity and growth. Multiply this example by dozens and dozens and you get a sense of the scale of our infrastructure problem and deficit. Or consider the decline in human capital. We used to lead the world in young college graduates. We now rank 14th and dropping.

The federal government spends plenty of money, but the largest part of our budget now goes directly to entitlements; spending on present consumption, like entitlements, has large constituencies. Spending for the next generation of growth, investment has few supporters.

Recently, the Washington Post interviewed the Harvard scholar, Ezra Vogel, who famously predicted that Japan would become the world's No. 1 economy in the 1980s.

Vogel explained that while Japan's economic miracle was real, and its economy stayed very sophisticated, he never foresaw how its political system would seize up and become unable to solve the challenges it faced in the 1990s.

Today, Japan remains a rich country, but with a diminishing future. Its per capita gross domestic product is 24th in the world and falling. Its gross government debt-to-GDP stands at over 230 percent.

Let's just hope that 20 years from now, people do not look back and say the American economy was vibrant, but the American political system seized up in a similar way. For more on this, take a look at my column in the Washington Post and my recent article in Foreign Affairs. For links to both, got to cnn.com/fareed. And let's get started.

First, with flashpoints for 2013, what we should expect. So what will 2013 bring across the world, let's look into our crystal balls and make some well-informed predictions.

Joining me now are two former heads of the State Department's internal think tank.

Anne-Marie Slaughter is now a professor at Princeton University and Richard Haass is now the president of the Council on Foreign Relations. They were both directors of policy planning at the State Department. Also, Ian Bremmer. He is the president of the Eurasia Group, a global risk consulting firm.

Welcome, all. So the first one I want to talk about is Assad. You thought last year that he wouldn't -- he would have fallen by now and most people did.

It looks like a better prediction this year, but it seems as though it's even conceivable that he would wait out 2013 or no?

ANNE-MARIE SLAUGHTER, BERT G. KERSTETTER '66 UNIVERSITY PROFESSOR OF POLITICS AND INTERNATIONAL AFFAIRS, PRINCETON UNIVERSITY: No, I don't think so. I would say he hasn't fallen yet, but we're now into the end game where it's clear he's going to fall and it's a question of how long.

Not just we're predicting we want him out, but he really is on his way out. So I don't think there's any way he'll survive 2013. But I'm not convinced that there will be a government to replace him by the end of 2013.

ZAKARIA: Why has he stayed as long? I was more skeptical that he would fall quickly and the reason was simple, the Syrians have a great army -- I mean a very strong army and they have been incredibly brutal in their willingness to use it against the rebels.

RICHARD HAASS, PRESIDENT, COUNCIL ON FOREIGN RELATIONS: Well, that's part of it. It's a real state. This is not like Libya. This is a real state. Plus, the Alawites are a minority.

They looked what happened, say, to the Sunnis in Iraq. They took their cue from that. They know it's not going to be pretty, the aftermath. Plus they had important external support, the Russians and the Chinese diplomatically, the Iranians, in many ways, physically with military and economic support, oil support.

So you add all this up and they had this combination of real reason to hang in there plus some external friends has enabled them to do it. Plus, one other thing, the opposition is not a single opposition.

The opposition is really plural, hundreds and hundreds, if not thousands, of groups, militias. It's almost hard to dignify it with the word opposition. And this, too, has given them an awful lot of space.

But, Anne-Marie's basic point is exactly right. They're going to be gone and the real question is going to be is how messy is the aftermath.

ZAKARIA: And how messy is your sense because you guys have done some work on just the incredibly fractured nature of Syria?

IAN BREMMER, PRESIDENT, EURASIA GROUP: Right and how messy both within Syria because it's very unlikely there'll be an effective government to replace Assad's regime as they withdraw.

But, also, the enormous impact of refugees streaming across the border, over 500,000 already in Jordan, in Turkey and Iraq and North Africa, as well as jihadists, Salafists, that are causing violence in places that Jordan and Iraq.

So it's not only mess in terms of a continuing bleeding human rights problem on the ground in Syria, irrespective of whether Assad at the end of 2013 or not, but, also, because we're going to see more sectarian violence metastasizing because of the outcomes from Syrian people.

SLAUGHTER: I think Ian's absolutely right. If you look at the numbers of refugees, they are already starting to destabilize Jordan just in terms of inability to cope.

In Turkey, if Syria splits into multiple regions, as I think will certainly happen for a while, you're going to have a Kurdish autonomous zone in Syria that is going to create major trouble for Turkey.

And Lebanon is already being destabilized actively by supporters of the Alawites versus supporters of the Sunni opposition. So we're already seeing it and it's going to get much worse.

ZAKARIA: Just to spell that out, so a Kurdish autonomous zone in Syria would mean you have Kurdish militias, potentially, trying to link up with their brethren in Turkey ...

SLAUGHTER: Exactly.

ZAKARIA: Who want an independent Kurdish ...

SLAUGHTER: Exactly and in northern Iraq, right? Northern Iraq is basically a separate state from the rest of Iraq in many ways and that's what the Kurds have always wanted. That's the Turks worst nightmare and that's just one part of the fragmentation of Syria.

ZAKARIA: Now, let's talk about the one other one, which is Iran. So, I mean, all these things -- the United States has, in some ways, marginal influence because these are very deep internal dimensions.

The one thing where we have -- the train has left the station, we have said we will not allow for containment and we are going to do something.

I was at an event recently with a former senior official and I said, "Do you think the United States should have said, 'ruled out' containment." And this guy said, "Well, I worked for many, many presidents and they all said things they later had to live with." And he said, "We said that about North Korea."

What do you think is going to happen with Iran?

HAASS: I think the first thing that'll happen, there'll be a big push for diplomacy and we'll see whether -- against this backdrop of sanctions that are having some effect, whether you can come up with a deal that's essentially enough for the Iranians and not too much for the United States and the Israelis.

I think you'd have to be a little bit skeptical about that happening. And, then, the real question is then what the Iranians actually do?

And I think the more probable trajectory is they stop, at least for the time being, just short of a nuclear weapon. So that wouldn't trigger Mr. Obama's comment.

ZAKARIA: Short of Netanyahu's red line?

HAASS: Well, that's the bigger question because the Israeli tolerance is clearly less than the American tolerance.

And, then, so if the Iranians say we're 90 percent of the way or 80 percent of the way towards a nuclear weapon, can we live with that, the United States? Can the Israelis live with that?

Now, that might, in part, depend upon exactly what the details are, what degree of inspections or transparency we have, what's the timeline between where they arrive at, before they could actually have a nuclear weapon, do we feel we would have other opportunities to interrupt it.

My hunch is going to be the big debate of 2013. And what's so interesting about this, more than any other issue, this could be the one that affects not just the entire region because it's already on edge for all the reasons that Ian and Anne-Marie mentioned, but the global economy.

ZAKARIA: Iran.

SLAUGHTER: So I think this president will be different than other presidents in terms of actually being willing to strike Iran because this president came into office determined to move the world away from nuclear weapons.

He came in with the idea that if we have 30 countries in the world with nuclear weapons, we're going to blow ourselves up. Part of his legacy is to actually move away from -- to a less -- to a world that could imagine not having nuclear weapons. So Iran, for him, is not just about Israel's security, it's not just about Middle East, it is about if another nation gets nuclear weapons, we are never going to be able to stop this.

So I actually think if they go toward deciding to get a nuclear weapon, he will strike. He will not live with containment, but for broader reasons than other presidents had.

ZAKARIA: So the exit question, I'll start with you Ian, is simple, is there -- will there be an Israeli or American strike in 2013?

BREMMER: No, absolutely not, but I also am very skeptical that we're going to see a deal. I think there'll be a lot of headlines about diplomacy, but the timing is very difficult.

The Iranians have their own elections coming up in June. The Americans and others have so demonized the Iranians that even if we got to a deal that was credible, which is highly unlikely, our ability to sell it internally and externally would be very, very difficult.

But when we ask can we live with an Iranian nuclear weapon, hey, can you call this living. I mean this is a question. It's not really living, but we're going to deal with it and I think that's where we're headed.

ZAKARIA: So no strike, no deal? Would you agree?

HAASS: But the chances of a strike are not negligible. I would say they're somewhere around 30 or 40 percent because we can't live with a nuclear weapon and Israel and the United States may not be able to live with something that close to it.

SLAUGHTER: I think the chances of a strike are over 50 percent and because I think that's true, I think the chances of a deal are probably higher than Ian does because I think the Iranians are going to know that.

And there are an awful lot of reasons domestically, in terms of the falling apart of the Iranian economy, that means they are looking for a way to get a deal.

ZAKARIA: But you can't -- the deal and the strike have to collectively add up to 100 percent, right? Because so ...

SLAUGHTER: OK, so I would give it 60 percent of strike, 40 percent chance of deal.

ZAKARIA: All right. And we will be back. We're going to talk about the rest of the world, Europe, the United States, everything, when we come back.

(COMMERCIAL BREAK)

ZAKARIA: And we are back with Anne-Marie Slaughter, Richard Haass, Ian Bremmer divining the world. Europe, what do you think is the big trend in Europe? It is going to be a breakdown or are they finally going to come together?

SLAUGHTER: Europe's coming together. I think the biggest event of 2012 that people didn't pay enough attention to was the fact that the Greeks pulled it together in the face of austerity like no one has ever seen and actually voted for the party that wanted to stay in the euro zone, that wanted the terms of the bailout.

That was an incredible act of political courage and will. It means that Greece stays in the euro zone, it meant that, in fact, as halting and clumsy and awkward as the E.U. politics are, they are on their way to unified banking regulation in the euro zone.

They're crisis fund has stabilized. It's not going to be pretty and it's going to take a couple of years still, but we are on our way to a stronger and more unified E.U., with or without Britain over time.

ZAKARIA: What do you think?

HAASS: A little bit to positive to me. I would say Europe is probably not coming apart, different set statement than Europe is coming together.

I think the reason it probably won't come apart is not Greece, it's France. Sooner or later, that's going to be the real test. Monsieur Hollande, the president of France, is taking France in directions that are truly unsustainable economically.

But, for Germany, it's one thing if Greece were to leave, but for France, it can't leave. If you're German, that's the whole core. That's the whole concept, the dynamic of post World War II European integration, the Franco-German relationship.

So Germany will go to great lengths, I think really whatever lengths it takes, to keep France set. So Europe will survive, but economic growth in Europe is not going to take off.

It's still going to be extremely weak because it doesn't have in place any of the prerequisites of robust economic growth.

ZAKARIA: Ruchir Sharma, the head of Morgan Stanley's Emerging Markets Fund, had a piece in the FT where he said Europe is actually going to bounce back in 2013 because they have paid the price.

They've done a lot of the difficult reforms that countries often have to do in these kinds of crises and that they'll reap the benefits.

BREMMER: That's starting. Greek labor rates right now are about 25 percent less than they were at the start of the crisis. They're becoming more competitive. They're trying to export more. You see Spanish exports picking up as well.

Certainly, bloated public sectors in Portugal and Spain, even in Italy, are coming back and you're seeing more competitiveness. It is a very slow process. Europe is in recession. Unemployment is at record levels. That's not going to stop in 2013. So I am very optimistic that Europe stays together. I think 2013 still looks like Europe muddling through, but it's not muddling in place.

It is moving into a better direction over time and the most important player is Angela Merkel. Merkel has almost 70 percent approval ratings right now, astonishing given what she's done for all of these shiftless ne'er-do-wells in the periphery.

And, furthermore, there was even 47 percent approval as opposed to 42 percent opposition in Germany for additional Greek bailout. Isn't that astonishing? And that's really the story here. The Germans are on board.

ZAKARIA: Right and she'll probably win reelection ...

BREMMER: Very easily.

SLAUGHTER: Yes.

ZAKARIA: This program continues. Let's keep moving. China.

Richard, the pivot to Asia has been very successful, but, in the sense that other countries -- you know, the Asian countries from Indonesia to Vietnam to Japan to India, are happy that the U.S. is more engaged.

Is there a danger that this turns into a kind of containment policy against China and the Chinese don't much like it and that produces its own U.S.-China rivalry?

HAASS: If we were to move too much towards a containment policy, sure there's a danger then it would become self-fulfilling and it would reinforce the growth in nationalism that we're seeing in China.

What I think works against that though is that most of the countries in the region aren't ready for that. They don't want to have to choose between the United States and China. They don't want to push us into to containment.

What they really want to do is keep us close and what we want to do is keep them close. We don't want them each going their own way, say with nuclear programs or military programs.

On the other hand, we don't want them to feel they've got to appease China. So what I think you're seeing is actually fairly about right. I don't much like the word pivot, it's too sharp. I'd like to see more economic dynamics to American foreign policy to really push a new Trans-Pacific Trade Agreement, the partnership.

But the basic idea that we're going to dial down somewhat in this turbulent Middle East, which I think we should, and we're going to dial up in Asia and, to some extent, in North America, which is our energy and economic future, I think is about right.

ZAKARIA: And we have a new Japanese Prime Minister who is himself a big nationalist.

BREMMER: Yes, we do. And this is his second go, the first time in 2006. His first trip as prime minister back then was China. His first trip as prime minister this time around will be to the United States.

You know back at the beginning of 2012 we were talking about this was going to be a big year of transitions, China, the United States, France, Russia and none of them ended up mattering all that much, even France in -- euro zone stayed the same.

But, Japan, the Japanese election really matters. The Restoration Party did very, very well. It's like a Japanese Tea Party, a Green Tea Party. And Japanese ...

(LAUGHTER)

BREEMER: You know, put it together.

And, also, Shinzo Abe now has a supermajority. He has a liberal democratic party. I think that, unlike these Southeast Asian countries where the Chinese feel more comfortable that over time they'll do well, there are massive Chinese business communities living in those countries that also are orienting them towards China, that's not true in Japan.

Japan doesn't have that link and the Chinese don't need the Japanese. They don't need the money and they don't need the technology. They can get it from South Korea and Taiwan.

So I think the danger of China-Japan conflict in 2013, for me, is the single biggest geopolitical tension that is underappreciated right now and one we're going to have watch very carefully. It's one that the Americans could really end up getting sucked in.

ZAKARIA: OK. Exit question on this one. It's a totally different subject and we don't have a lot of time for it, but I'm going to ask each of you.

Will the United States get its act together? By getting it back together, I mean will Congress and President Obama be able to enact a series of measures that will stabilize the American economy for -- you know for the future?

SLAUGHTER: I'm going to say yes. I'm just going to say yes. I think 2013 is the year where Obama feels strong enough and has learned enough lessons and the country understands what is at stake very fundamentally and the economics are starting to get better.

Manufacturing is coming back. It's actually coming back from offshore to onshore. We recognize how critical infrastructure is in the wake of Sandy and other things.

So I actually thing the ingredients are there. I don't think there's going to be one blinding moment where everybody sort of gets religion and says we're going to do it, but I think we're going to be on our way back.

HAASS: Some positive signs. Economic growth will probably pick up. I think there's a good chance we'll get comprehensive immigration reform in 2013, which would be could for any number of reasons. Corporate tax reform, there seems to be bipartisan support for that.

Will we solve, if you will, the fiscal challenges of the year, no. We'll still be kicking cans down the road. Use whatever cliche you want, but, all things being equal, I think there's a bit of momentum finally in the right direction.

BREMMER: There's economic momentum in the U.S. That will reduce some of the political pressure. The U.S. isn't Europe. A deal is not as urgent, it won't be in 2013 and so less will get done, but I think it will be a little less polarized than it has been in Obama's first term.

ZAKARIA: ON that optimistic note, thank you, all. Looking forward, it's a good way to say Happy 2013. And we will be back.

(COMMERCIAL BREAK)

ZAKARIA: Now, for our What in the World segment. The recent school shooting in Connecticut looked like a tipping point in public consciousness.

Americans have been asking themselves some tough questions; why does this happen so often and so much more in American than in other countries? What does gun violence say about us as Americans and what measures can we put in place to stop it?

I saw a similar bout of public soul-searching this week when I was in India. Across the country, tens of thousands of people took to the streets to express outrage over the rape and death of one unnamed woman.

The crime crossed unimaginable boundaries. Not only was she overpowered and raped by a group of six men, she was also beaten and violated with a metal rod; all this on a seemingly safe private bus in New Delhi.

The abuses were so violent her internal organs were severely damaged. She was thrown off the bus to die, but some locals alerted the police. The Indian government then flew her to a hospital in Singapore for emergency surgery, but she died.

The national attention over her death is shedding light on how unsafe Indian women actually are. According to the national crime records bureau, there were more than 24,000 registered rapes in 2011. That's one rape every 22 minutes in India. And those are just the ones we know about.

By some accounts, only a tenth of all such crimes in India actually get reported. Why such a shockingly high rate of violent crime? Indians are debating the reasons. The reality is this: This is one more example of a government that simply does not deliver. India has a broken public safety system, little to no public surveillance and CCTV systems, and a pathetic and corrupt police force.

According to the U.N.'s office on drugs and crime, South Asia has one of the lowest ratios of police officers to civilians in the world. It also has among the fewest prosecutors as a percentage of the population.

There could be other factors. India has a demographic crisis. According to its 2011 census, there are only 9 women for every 10 men in urban India, that's one of the worst sex ratios, and that doesn't happen naturally. It happens because tens of thousands of Indians opt for abortions if they know they're having a daughter.

But these conditions are not unique. Some of them exist elsewhere too. Perhaps, most of all, rape happens so often in India simply because it is allowed to happen. There is a culture of impunity. After 600 rape cases reported in Delhi this year, only one has led to a conviction. That's why the current set of sustained protests are something of a silver lining. People are genuinely upset. The rise of India's middle class has activated a powerful civil society. One that is now demanding better government. It did so a year ago regarding corruption.

Now it's asking for basic rights for women. In a way, this is India's Arab Spring. But it needs to sustain itself. And to lead to real reform and change. This Indian spring will only work out better than the Arab Spring if its national leaders recognize the need for radical and thorough change in their country.

Up next, a look at the fiscal cliff deal in Washington from the eyes of two great British economists and journalists.

(COMMERCIAL BREAK)

CANDY CROWLEY, CNN CORRESPONDENT: I'm Candy Crowley in Washington with a check of the headlines. Syrian President Bashar Al- Assad struck a defiant tone during a televised speech today. Assad rebuffed global calls for him to step down and blamed the conspiracy for the country's civil war. He also outlined the plan that he said would end the crisis. The Syrian leader's address was his first since June. Since then, tens of thousands of Syrians have been killed.

Pakistan says Indian troops attacked a Pakistani military post today killing one soldier. Indian's army is accused of crossing the border in Kashmir, which is known as the line of control between Pakistan and India. A Pakistani military statement said fighting continues in the region.

Retired General Stanley McChrystal is speaking out for the first time since he resigned more than two years ago. In his new memoir McChrystal accepts blame for a "Rolling Stone" article that ended his career, but also questions the article's fairness and accuracy. McChrystal was the top commander in Afghanistan when he resigned. He stepped down after the article quoted his aides criticizing President Obama's team, including Vice President Biden.

Those are your headlines. "Reliable Sources" is at the top of the hour. Now back to "Fareed Zakaria GPS."

ZAKARIA: Shame, elation, confusion, irritation, disbelief. Those were just some of the emotions Americans felt this week as they watched the painful process of democracy in action or in inaction as we went over the fiscal cliff albeit briefly.

I am in London, and I was curious how it all looked from here and what it means, if anything, for the global economy. Joining me now are Lionel Barber, the editor of "The Financial Times" and Anatole Kaletsky, economics columnist for Reuters. Lionel, Americans are sure that this makes us look like complete idiots. What I'm struck by, is for the last few years, Americans have tended to look at Europe with a certain sense of superiority. Our Federal Reserve acted more quickly, the TARP and things like that were a case where American democracy sort of was able to act in a crisis. Does it now look like, you know, we're floundering as much as the Europeans, the Japanese, even worse?

LIONEL BARBER, EDITOR, FINANCIAL TIMES: Well, this was something of a Brussels -style fudge in the sense that something was resolved, but not everything. This was a many stop - mini deal, a stop gap measure, which essentially prevented, as you say, America going over the fiscal cliff. All the difficult decisions were really postponed on spending. So, I think there was some disappointment in Europe looking at America, but I think we need to be careful about saying that America is somehow ungovernable. The politics are very difficult, but catastrophe was averted this week.

ZAKARIA: A lot of people, Anatole, say well, you know, it's not so bad because, this is the Paul Krugman view, at the end of the day, all these measures or the solutions were all terrible because it was all more austerity than we need. That what we really need is none of this right now. No spending cuts, no tax increases and so, thank goodness, we had a very small dose of it.

ANATOLE KALETSKY, COLUMNIST, REUTERS: Well, I tend to agree with that. I noticed among your abstract nouns with which you started shame, confusion, and so on, you didn't mention relief because that's the one that actually I felt. Obviously, not as I saw the process. The process was very ugly, you know, as Bismarck said if people saw the way sausages were made, they would never eat them and it was very much an example of that.

But when I saw the votes in the Senate and then in the House, I must say I felt a good deal of relief because the scale of this deal for the problems confronting the U.S. and the world economy today and in the year or two ahead was actually about the right scale of the deal. We didn't want a bigger tax increase. We don't want more public spending cuts. We don't want faster action on the budget. This is about the right pace. Now, there are a lot of long-term problems that remain to be resolved, but it was completely unrealistic to try to solve those in three weeks after the November 6th election. So, I think, actually, the ultimate outcome of this is not bad and it actually makes me pretty optimistic about the outlook for this year. ZAKARIA: Except that we're going to do this, again, and again and again. Right? We're going to hit the - in two months these - the cuts start, again, unless we do something. What it seems like the problem here is that you're kicking the can down the road on all the difficult decisions.

BARBER: You said, what you're alluding to is the March 1 deadline where you are going to have a vote on whether to increase the debt ceiling and, also, you face the sequester across the board on spending. That could be very, very messy. And I think people have every right to be concerned about whether you will see any kind of sensible resolution between the Democrats and Republicans. What's worrying is that neither leader, neither John Boehner, speaker of the House of Representatives, he doesn't seem to be able to control his conservative Republicans in the House and Mr. Obama, President Obama, strangely reluctant to take the lead this week. He left it to Vice President Biden.

KALETSKY: Well, again, I would take a rather more optimistic view about the politics, as well. We can all agree that it's a very messy process, politics all over the world in Europe and in Washington, Lionel and I both worked for the F.D. in Washington, so, you know, we understand that process reasonably well. I actually think that the next two months. I'm more encouraged about the outlook for the next two months as a result for what happened in the last few weeks in Washington ...

ZAKARIA: Right.

KALETSKY: ... precisely because in a sense they've gone through a cathartic experience. This was very, very ugly and very, very difficult, I think especially for the Republican Party. So, I think that this potentially sets a precedent whereby you can see majorities certainly in the Senate and possibly in the House being formed from the Democrats plus a significant number of moderate Republicans, which would be capable of coming up with compromises, especially because as I think we've both agreed, it's not about taking really unpleasant decisions that would affect the year ahead, it's about the medium and longer term outlook.

ZAKARIA: What can we learn from what is going on in Britain? Because you have - you are now into a year or so of the real, the austerity program really taking place and, you know, on the one hand there are people who say, look, John - George Osborne and David Cameron say, we had to do this. We had to get serious, we had to get our fiscal house in order and, yes, it is going to be painful. There are other people who say, look, the British economy has contracted more than it did during the Great Depression.

KALETSKY: Well, that's a great question, because I agree with the gist of your question, this been big theme of mine for the last two years. If you look at the amount that Britain has managed to reduce its deficit in the last three years, it's actually less than the reduction in deficit in the United States. The United States purely through economic growth without any tax hikes or significant public spending cuts has actually managed to be more successful in controlling its deficit and debt than Britain has with an austerity program, which is really second only to that in Spain and possibly Italy, among the major economies in the world. So, I think Britain is a very good object lesson for the United States of the danger of doing too much to soon in terms of trying to cut deficits.

BARBER: I think the problem with Anatole's argument is two-fold. First, America is not so exposed as Britain to the euro zone. And second, although I'm as big an English patriot as Anatole I just don't think we have the kind of muscle to be able to borrow on such favorable terms as the Americans. I think that it's a very easy sometimes for the Brits to encourage the Americans to have a very expansion in fiscal policy, but at the same time, be very supportive of the current austerity program in Britain. Two not easily reconcilable positions.

ZAKARIA: Lionel Barber, Anatole Kaletsky, pleasure to have you. Thank you so much.

And we will be back.

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ZAKARIA: 100,000 dead. That is the gruesome total we could see in Syria's civil war in 2013. Unless the violence is stopped. That's according to the U.N. Envoy Lakhdar Brahimi and that's on top of at least 60,000 people who have already been killed in this conflict, according to an exhaustive analysis released by the U.N. this week. Meanwhile, Russia, perhaps the potential savior in the crisis, continues to refuse to act. So, what is the solution? Joining me now is Fawaz Gerges, professor of Middle Eastern politics at the London School of Economics. He was on the Syrian border in December. Fawaz, you've heard people say the Assad regime's days are numbered. It is the end game. But, of course, people have been saying this for a while. You have always felt the regime had more staying power and, more importantly, more will power to stay than people have assumed. You still think this regime can hang on?

FAWAZ GERGES, PROFESSOR, LONDON SCHOOL OF ECONOMICS: What you have, Fareed, in Syria is a military stalemate and political and diplomatic deadlock. Neither side can deliver a decisive blow. Neither side believes in the political settlement. The conflict in Syria has not reached a tipping point yet. And contrary to the received (ph) wisdom, which you just mentioned, the Assad regime is not on the verge of imminent, basically collapse. But the reality is, what we have now, you asked me about the political and diplomatic balance of power. You're talking about the gravity of the humanitarian crisis in Syria, Fareed, is immense, just immense. More than 60,000 people have been killed. Millions of Syrians have either become displaced or refugees. This is a poor country.

ZAKARIA: So, how do we stop it? How - what - how will it stop?

GERGES: Well, I believe, I have become, Fareed, more and more convinced than ever that only a political settlement can rescue Syria out of destruction.

ZAKARIA: But you just said that Assad doesn't believe in a political settlement and, so how do you ...

GERGES: And that's why the question is how do you ease Assad out of power? How do you broker a historical settlement between the Assad regime and the opposition? I think Lakhdar Brahimi is correct when he says that the gates of hell have become open in Syria. I mean you are talking about 5,000 people are being killed on monthly basis since June. I would argue that 2013 would likely be more violent, more civilians will likely die in 2013, unless a political settlement is reached.

ZAKARIA: So, so, do you think that if the United States or other countries were to be talking to Iran, there would be some path to Assad? Because Iran has been, has thrown itself all in in a sense with the Assad regime. It is, as you say, they haven't backed down at all. They show no signs, neither Iran, nor Russia, but certainly not Iran of being willing to use their influence to get Assad to leave. On the contrary they're supporting him no matter what he does.

GERGES: Absolutely. And I think Iran is one of the most important players in the conflict. I mean not only you have an internal conflict, you have, also, a fierce, regional rivalry between Iran on the one hand and Saudi Arabia and the Gulf states on the other hand. An international rivalry between the United States and the Western powers and Russia. You need a historical settlement where by regional powers and the great powers reach a particular deal in order to bring about an end to the Syrian conflict.

ZAKARIA: This seems like a low likely scenario. That is a low - the chances of a historical settlement where the Iranians and the Russians pressure the Syrians is low. What - so, the most likely scenario, not the one that you would desire or any of us would, is continued warfare, continued civil war, more people dying. The conflict getting regionalized and perhaps spilling over?

GERGES: You know, and as you know in civil wars and conflicts, we think that there's always a political miracle out there. During a political miracle, this is - this fight is to the bitter end. The Assad regime will most likely fight to the end and the opposition has already made it very clear. It will not talk to the Assad regime as long as Assad is in power. Certain conflicts have their own logic. My fear is that at the end of this conflict Syria will most likely be destroyed and Syria - Assad will go. But in the meantime, in the meantime, 2013 will most likely be very violent and more Syrians will die in the country.

ZAKARIA: And you still feel that it would be a mistake for the West to intervene.

GERGES: Well, the West has already intervened. The West is waging a war by other means against the Assad regime. Economic war, financial war, intelligence war. But the reality is, the West is very reluctant to provide arms to the opposition. I mean here is the irony. The West supports the opposition. In particular, the Syrian National Coalition, yet, also the United States has put the so-called Jabbat al-Musra the radical Jihadist, I mean, group.

ZAKARIA: One of the fighting forces of that opposition.

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GERGES: And it is ...

ZAKARIA: And they branded them a terrorist organization.

GERGES: Absolutely. Yet, they are one of the most important - potent and skilled fighting machine inside Syria. Here is the irony. What do you do? How do you provide the opposition with arms in order to really expedite the end of this conflict without the arms falling into the wrong hands? And here's the predicament of the opposition. The opposition says we will not talk to the Assad regime as long as Assad remains in power, yet, the opposition does not have the capacity to deliver a decisive blow against the Assad regime. What does it mean? It means you have a deadlock. It means you have more escalation, it means the humanitarian crisis will basically increase in the next few months and next year, year or so.

ZAKARIA: Fawaz Gerges, always a pleasure. Thank you.

GERGES: Thank you.

ZAKARIA: And we will be back.

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ZAKARIA: I am in London today enjoying one of my favorite things. A classic British cup of tea. And it happens to be national hot tea month back in the United States. Who knew. And that brings me to my question of the week. What tea growing area was recently given protective status for its name? Just as anything called champagne must come from the champagne region of France and Stilton cheese must come from Stilton, England. Is it A, Ceylon now known as Sri Lanka, B, Java, which is known for its tea as well as its coffee. C, Darjeeling in India, or D, Assam in India. 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. Remember, if you missed a show, go to iTunes, you can get the audio podcast for free. Or you can now buy the video version. Go directly there by typing iTunes.com/Fareed into your browser.

This week's Book of the Week is actually a magazine. It is the latest edition of the storied magazine "Foreign Affairs." Just out on the newsstands and online. The whole magazine has been redesigned and this issue has a great debate about perhaps the biggest foreign policy challenge facing the United States, facing the world. The future of China. Will it go democratic? It also has an article by me about America's biggest challenge. For a link to that, go to CNN.com/fareed and buy the magazine.

Now, for the last look.

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CROWD: Ten, nine, eight, seven!

ZAKARIA: More than 100 years ago the first ball was dropped in New York's Times Square to celebrate a new year.

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CROWD: Two, one!

CROWD: Three! Two!

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ZAKARIA: Today's cities around the world celebrate those first moments of the new year en mass.

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CROWD: Two! One! Happy New Year!

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ZAKARIA: But this year, there was a truly remarkable first. Myanmar, formally Burma, held what's believed to be its first ever public New Year's celebration. You see, the ruling junta had denied the populous the right to ring in the new year shoulder to shoulder as part of a larger ban on any large gathering. But with the pressure off on Monday night the Burmese were finally free to celebrate the passage of time from 2012 to 2013. As many as 100,000 people were set to have attended this event. Much of the price tag for the party was covered by international companies, all wrangling to get a piece of the action in this booming economy.

The correct answer to our GPS challenge question was C. If you're drinking Darjeeling tea, at least in the European Union you can now be assured that it was actually grown in the Darjeeling district up in India's northeast by the border with Nepal. This protecting of names like Darjeeling and Cognac is protecting the special terroir of specific foods. Thanks to all of you for being part of my program this week, I will see you next week. Stay tuned for "Reliable Sources."