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Memo to the President: Road Map for Secnd Term

Aired January 19, 2013 - 20:00   ET


FAREED ZAKARIA, HOST: Barack Obama is entering his second term. Only the third Democratic president to be re-elected in the last 75 years. He faces deep domestic challenges. Above all, a still weak economy. He faces a world in flux and in crisis from Iran and Syria to North Korea and China. Perhaps most visibly, he faces a domestic political deadlock that seems to overshadow all else.

With this hand, what can he do? What will he do?

I've asked for advice from the statesmen and women who have stood beside presidents as they have made their most difficult decisions.

From Republicans like James Baker.


JAMES BAKER, SECRETARY OF TREASURY UNDER RONALD REAGAN: If we didn't have the dollar as a de facto reserve currency of the world we would be Greece.


ZAKARIA: From Democrats like Robert Rubin.


ROBERT RUBIN, TREASURY SECRETARY UNDER BILL CLINTON: In a democracy you can only move forward if both sides are willing to come together to govern.


ZAKARIA: And independents like Michael Bloomberg.


MAYOR MICHAEL BLOOMBERG, NEW YORK CITY: When you have jobs that we need to get done but Americans won't take, letting the crops rot or letting the farms move south of the border is just insanity.


ZAKARIA: And at the end, I'll write my own memo to the president.

Let's get started. While most of the world was ringing in the new year with revelry, the United States Congress rang it in with anger, strife and confusion. The ugly battle over the fiscal cliff was emblematic of one of the biggest crises facing this nation.

Politics in Washington is so divided, so bitter, that even kicking the can down the road is almost impossible to get agreement on.

So what to do?

Ronald Reagan faced an opposition majority in the House of Representatives. And he still got major legislation passed, including a major tax reform bill. James Baker was Treasury Secretary at the time.


BAKER: I think the only time it was -- has ever been done, maybe at least in 100 years, and we did it with Democratic votes. That was Ronald Reagan as president. We did it with Democratic votes. Danny Rostenkowski was chairman of Ways and Means. He was not going to come with a bill that wasn't very pro-Democratic, and so the question was whether we would sign on to that bill, passed it in the House and then try and fix it in the Republican Senate.

Our Republican House members came to us and said, if you try and do that, we're going to roll you. Dick Cheney, Trent Lott, all, they came down to my office at the Treasury Department. They said, if you go forward with this, with this Rostenkowski bill, and we then say you're going to fix it in the Senate, we're going to roll you and they rolled us on the rule. They defeated us on the rule.

And I went over to the White House, having been Reagan's chief of staff for four and a half years, and I said, Mr. President, you've got to come out forcefully in favor of passing the Rostenkowski bill so we can get to it to the Senate and fix it, and that means rolling out of our house Republicans.

Well, guess what? After a little interregnum, he did it. He did it. And we did it. And that's how we got there. It was successful and initiated a period of extraordinary economic growth.

ZAKARIA (on camera): But you're describing a situation where you had to do a lot of compromising. You stood up to House Republicans, you supported a Democratic bill. It's difficult to imagine in today's partisan climate.

BAKER: I think that President Obama could do that. President Obama wants a legacy. He deserves one. He's not going to have a legacy if he can't fix our economy.

ZAKARIA (voice-over): Kay Bailey Hutchison is the recently retired senior senator of Texas.

KAY BAILEY HUTCHISON, FORMER TEXAS SENIOR SENATOR: This is his time to step out from his base and away from the fringes on both ends and say, here is what our country needs right now.

ZAKARIA: Ken Duberstein, chief of staff in Ronald Reagan's second term, thinks that point about stepping out from your base is even more important since Obama's re-election.

KEN DUBERSTEIN, CHIEF OF STAFF UNDER REAGAN AND G.H.W. BUSH: The second term, it's the order of governing, not the art of campaigning. They're very different skill sets. In the art of governing, you have very much to -- almost makes love to your opponents and say no to your -- some of your fiercest supporters. In campaigning, it's the exact opposite. So you have to figure out ways that you can accomplish things realizing that time is an enemy. Get as much done as you can but don't overreach.

ZAKARIA (on camera): What you're suggesting is that President Obama needs to make love to the Republicans and betray the Democrats who helped elect him.

DUBERSTEIN: Well, I wouldn't use the word betray as much as I would say that sometimes it takes the ability to say yes to your opponents and no to some of your fiercest supporters.

ZAKARIA: A lot of people say President Obama should be schmoozing a lot, he should be playing golf with John Boehner, he should have Republicans over.

Do you think that kind of thing is atmospherics or does it produce real results?

BAKER: No, I think it's not just atmospherics. If I'm negotiating with you and I have in the back of my head I can trust what you tell me we're much more likely to get to -- get to an agreement.

ZAKARIA (voice-over): Steven Ratter, President Obama's car czar, says that Republicans in Congress today are just unwilling to cooperate.

STEVE RATTNER, FORMER CAR CZAR: The president might have spent more time in the first term reaching out to congressmen, playing golf with them, having them to the White House, certainly couldn't have hurt, couldn't make things worse. That's for sure. Might have -- might have helped. But at the same time, I think people who went to see the movie "Lincoln" and said, well, if we only had Lincoln in the White House we could have passed any amendments to the Constitutions we wanted.


DANIEL DAY-LEWIS, ACTOR, "LINCOLN": Blood's been spilt at this moment. Now, now, now.


RATTNER: If we only had LBJ in the White House we'd have the civil rights act again are kidding themselves. This is a different era.

ZAKARIA: Robert Rubin was Secretary of the Treasury during another very partisan time.

(On camera): How did you deal with Republicans on the Hill for something like the '97 budget agreement while they were trying to impeach President Clinton?

RUBIN: The partisan divide was bad in that period. I think it's worse today. And in order to have a political system that's effective, I think we have to do exactly what President Obama said right after the election.


BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I want to be clear. I'm not wedded to every detail of my plan. I'm open to compromise. I'm open to new ideas. I'm committed to solving our fiscal challenges. But I refuse to accept any approach that isn't balanced.


RUBIN: In a democracy, you can only move forward if both sides, albeit having very different philosophical views, are willing to come together to govern. And that's what we've been lacking. Without it, I think we're going to be in terrible trouble.

ZAKARIA (voice-over): John Podesta, Bill Clinton's chief of staff, says that presidents can make things happen even without congressional support.

JOHN PODESTA, CHIEF OF STAFF UNDER BILL CLINTON: The president has enormous power under the Constitution and the laws of the United States. I'll give you an example. He has authority to change the mix of energy in the country through the use of existing powers that he has under the statutes, particularly the work that he could do through his EPA to move toward the more dirty forms of polluting fuels to cleaner fuels.


ZAKARIA: It might be hard to make it happen but James Baker's point holds. President Obama will need to get some help from Republicans if he wants to get things done. Otherwise it's just talk.

If he could get 30 to 40 House Republicans on his side, Obama would have created a governing majority, something every successful president has had.

Next up, the economy. Is there a silver bullet that will get it going? We'll tell you when we come back.


ZAKARIA: Fixing the American economy is the most urgent crisis President Obama faces. Despite the recovery, unemployment remains high, growth isn't where we would like it to be and the national debt has grown to historic proportions.

The bills signed in the wake of the fiscal cliff crisis is a small fix. Is there a larger one?

Once again, James Baker.


ZAKARIA (on camera): What would be your advice to President Obama?

BAKER: Well, my advice to President Obama is, Mr. President, whatever happens in the second term, you're going to bear the consequences of. Our country is in sick shape financially. Economically, we are really in bad shape. We -- if we didn't have the dollar as he de facto reserve currency of the world we would be Greece and we have got to fix our economic problem and that's -- and it's not going to be fixed without leadership from you.

The Republicans maintain control of the House. And so we have divided government. He's got to take the lead. He may score some short-term victories over the Republicans. In the medium to long term, it's his enchilada.

ZAKARIA (voice-over): President Clinton's Secretary of the Treasury, Robert Rubin.

(On camera): When people look at what President Obama should do, there are a number of people who say, well, he's got to get the fiscal house in order, he's got to deal with the deficit. Why is that important?

RUBIN: I think it is imperatively important to design a sound fiscal program that both contributes to job creation and recovery in the short term and I absolutely believe a sound fiscal program will do that by creating confidence and by creating fiscal room for a moderate stimulus and also meets the long-term imperative for addressing what I believe is an unsustainable and dangerous fiscal trajectory.

In order to put ourselves on a sound fiscal footing, we clearly are going to have to have substantially more revenues, and more revenues means higher taxes, whether it's the tax rates or it's reduced deductions, one or the other, and that clearly is going to be a cost absorbed by those who pay the taxes. And there also are going to have to be constraints on the various of our programs.

Our political system has not wanted to face the difficulty of reducing expenditures, no matter where they are in the budget. And yet that's what you have to do if you're going to get on a sound fiscal path and the longer you wait the deeper your hole gets, the harder it is to regain confidence.

ZAKARIA (voice-over): There are others who say we need even more fundamental economic reform. For example, it's time to redo the country's convoluted tax system. With all of its rulings and regulations, the U.S. Tax Code is now 73,000 pages long.

Paul O'Neill, Treasury Secretary under George W. Bush, has an idea.

(On camera): You really wanted to scrap the entire U.S. tax code? PAUL O'NEILL, TREASURE SECRETARY UNDER GEORGE W. BUSH: I do.


O'NEILL: Because it's inefficient. It's ineffectively and it's fundamentally unfair. So I believe this. Revenue system should be used to raise money. It shouldn't be organized to distribute benefits. We should have --

ZAKARIA: So no -- no tax deductions?

O'NEILL: No deductions, no credits, no nothing. It's to raise revenue. And ideally we should do it with a progressive value added tax. That means --

ZAKARIA: That's a national sales tax. Correct?

O'NEILL: Well, it's not quite because I -- progressive is important to me. I don't want people to pay taxes if they have $20,000 a year worth of income. But it's $30,000, I might like for people to pay $1, just $1 so they have a legitimate claim for saying, I'm part of this society and I don't pay a lot but I do pay something.

Everybody participates and there's no game playing. It's a very efficient way to raise revenue. Right now, it costs us $431 billion a year to administer the tax system we have and the tax gap, the money we're not collecting that's theoretically owed, is $400 billion a year. We could do better than that. We can think better than that. And the president needs to lay that out for us.

ZAKARIA (voice-over): Even if we get more growth, we are still finding it difficult to get unemployment down.

Elaine Chao served as George W. Bush's Secretary of Labor.

(On camera): What would you do to create more jobs in America?

ELAINE CHAO, LABOR SECRETARY UNDER GEORGE W. BUSH: I think you have to keep the tax rate low. They are a direct burden on the resources of an employer. The unemployment rate has dropped now to 7.7 percent but that's primarily because labor participation rate has dropped to 63.6 percent, one of the lowest rates that we have seen in current years so what we're seeing actually is a lot of discouraged workers, people who can't find jobs, and they've just given up and they're no longer working and they're not counted in the work force anymore. So we've got to do better on the job creation side.

It's a private sector who does the bulk of the hiring and they've got to have the confidence and that confidence comes from a more reasonable taxation level, more reasonable regulatory reform and then also the fiscal discipline that we need in our country to restore our country's overall financial ratings.

ZAKARIA (voice-over): Democrats say what's most important is a stable, predictable set of rules, whatever the levels of taxation. Steven Rattner helped General Motors get back into the black as President Obama's car czar.

(On camera): One of the things people say that President Obama needs to do is to create a sense of confidence among the business community, which will drive investment, which will drive jobs. So how does he do that?

RATTNER: I think the president is off to a much better start but I think we need to have a set of policies in place which does involve Congress that are long-term. We need to have long-term tax policy, long-term budget policy, long-term regulatory policy. Not doing this a few months at a time, not careening from a debt ceiling debacle to a fiscal cliff to some other issue with tax credits that expire every few months and all that kind of stuff. And so I think somehow the government as a whole has to come together in order to give business the confidence it needs.

ZAKARIA (voice-over): The single most important cost that we need to get under control is health care, which now takes up 17 percent of GDP and still rises much faster than inflation every year.

Peter Orszag ran President Obama's Office of Management and Budget during the first term. He says Obamacare moves us away from a bad model where doctors and hospital haves a financial incentive to sell you lots of services.

(On camera): Getting health care costs down is absolutely fundament to the long-term fiscal health of the country. So what would it need to do in the second term.

PETER ORSZAG, FORMER DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: I think there's several things. I would point to moving much more aggressively away from fever service, even more rapidly. We don't need to wait until 2020. In addition I think the big gap that remains is medical malpractice reform and what I would favor is finding a safe harbor to a doctor.

If you can show that you're following an evidence-based protocol put forward by a medical association, I shouldn't be able to sue you.


ZAKARIA: Tax and health care reform would have huge benefits but getting them done will be hard.

Coming up next, is there an easy win for the president and the country? Actually, yes. Immigration reform.

Stay with us.


ZAKARIA: I'm Fareed Zakaria. Welcome back to "MEMO TO THE PRESIDENT."

On the domestic front, in addition to the economy, President Obama faces many pressing issues that will demand attention in his second term. But one seems ripe for a solution. Immigration reform.

James Baker, Ronald Reagan's chief of staff, explains why.


BAKER: Nothing concentrates the mind like being out of power for four years. OK? So I think that Republican attitudes are going to change -- hopefully they'll change -- in the aftermath of this most recent electoral defeat because everybody knows that the Hispanic vote was very important to what happened.


ZAKARIA: John Podesta, Bill Clinton's, chief of staff agrees. A grand bargain on immigration is now possible.


PODESTA: Immigration, I think, we've seen just a sea change as a result of the election. And I think that really is because of just the collapse of the Latino vote for Republicans. You know, we saw it drop from 44 percent for President Bush in 2004 to 27 percent for Governor Romney. And that's the fastest-growing part of the voting population.

And so I think the Republicans know they have gotten themselves in to a dark place and they need to come out of that place and they need to deal with the people who are here who are contributing to our society, get them legal, get them on a path to citizenship.

BAKER: First of all, we need to beef up our border security. Republicans like that. You need some sort of a photo I.D., Social Security card with biometric identification. Item number three would be a guest worker program. And the fourth item ought to be registering the 12 million to 20 million illegal aliens who here in the country today and giving them the right to travel and to work. Temporarily. Provided, A, they're not criminals. B, they pay their back taxes. And C, they pay a small penalty for having broken the law in the first place.

ZAKARIA (on camera): But let me push you on that because if you don't provide a path to citizenship --

BAKER: I don't think you have to say that they can become citizens. This -- that part of my four-point program's going to be attacked vociferously as amnesty by everybody -- by many people over on the Republican side.


ZAKARIA: But if they don't become --

BAKER: But it's not amnesty.

ZAKARIA: But if they don't become citizens, what are they?

BAKER: Well, they have a path to citizenship. They do the way every other immigrant does to become an American citizen.

ZAKARIA: What would you say to the Republicans who will say, look, these guys should be deported? They should have --


ZAKARIA: They should never have any path to --

BAKER: I understand that. And I think what you say to them was look what your position got us in this last election. We need to pay attention to demographics. OK? I said we need to be the party of hope and opportunity. Not the party of anger and resentment.

ZAKARIA (voice-over): Illegal immigration is just one problem with our current system, says Michael Bloomberg, the mayor of New York City and one of America's most successful businessmen.

BLOOMBERG: Hey, good morning.

ZAKARIA: Bloomberg believes that the current legal system is also hurting our international competitiveness.

(On camera): We let in lots of people from all over the world to study at American universities.


ZAKARIA: Particularly in science and engineering.


ZAKARIA: And then we throw them out. How would you fix the visa system?

BLOOMBERG: Well, first thing is you attach a green card to the diploma for any graduate student that gets a master's or a PhD in any of the STEM areas, science and technology. Then you have more h1b visas so companies can use those to get people here, then you have to -- if somebody is willing to start a business and can get financing, you certainly want to give them a visa because they will go and start businesses for Americans.

And lastly, when you have jobs that we need to get done but Americans won't take, like working in the fields, letting the crops rot, or letting the farms move south of the border is just insanity. We need to get people in here.

UNIDENTIFIED MALE: I here by declare --

ZAKARIA (voice-over): That's a sensible solution that might actually happen. There's also a sensible plan that alas seems a long shot. Both parties see the problem. Our nation's roads and power lines, bridges and water pipes, are literally falling apart. The problem is, nobody wants to do anything about it.


ZAKARIA: Ed Rendell, the former governor of Pennsylvania, has a new book out called "A Nation of Wusses." He says the solution is simple.

RENDELL: As governor, I inherited a state that has the highest number of structurally deficient bridges in the nation. We had 6600 structurally deficient bridges. I borrowed a lot of money, put in it to bridge repair. The stimulus helped us mightily. That was one of the reasons that Pennsylvania had the lowest unemployment of any industrial state in the union.

There was in stimulus something called Build America bonds. The federal government said to the states, if you want to do major development and major construction projects, we will help you defray 35 percent of the interest payments. But it ran out when stimulus ran out and in an effort to reauthorize it as a separate program was turned down.

Now, the beauty of it is very little impact on federal treasury, the incredible impact on the amount of projects we could get going. This isn't rocket science. It's not like finding the disease -- a cure for Alzheimer's or Parkinson's or cancer. We know what the answers are. We know what the cure to the problem is, and all it takes is political courage.

ZAKARIA: Kay Bailey Hutchison is the recently retired senior senator of Texas.

HUTCHISON: I would ask the president to submit an infrastructure bank and it would leverage your public money with private money so about a 50/50 split and it would have a revenue stream so that you would be assured, the government would be paid back, and bring that money that is sitting on the sidelines into making a real effort to build highways. It would be bridges, it would be electricity grids. All kinds of infrastructure needs that are not being met now that could be done with lower amounts of taxpayer dollars and that would end up being a revolving fund.


ZAKARIA: In fact, the president has submitted just such a plan. But Congress doesn't want a bank that would fund projects based on merit. Much as they protest publicly, congressmen and women actually like pork.

Next up, foreign policy. Should we bomb Iran? Intervene in Syria? Quarrel with China? Stay tuned.


ZAKARIA: The Middle East is in turmoil. Israeli and Palestinians bear fresh wounds from the recent conflict in Gaza. Iran continues to play games with the world regarding its nuclear ambitions. And the Arab spring continues to reverberate. In some good ways, for sure. But also in some troubling ways. And the civil war in Syria becomes a bigger humanitarian crisis by the day. That's a lot of problems in just one region.

Here to give us his stake is Zbigniew Brzezinski, Jimmy Carter's national security adviser.


ZAKARIA (on camera): What should President Obama do with Syria as it continues its slow motion drift in to chaos?

ZBIGNIEW BRZEZINSKI, NATIONAL SECURITY ADVISER UNDER JIMMY CARTER: I don't know. And I'm not being evasive. I literally don't know. We have to have better intelligence. Who's really fighting Assad? Who started the fight? How was it financed? Where did the initial weaponry for the beginning of that struggle a year ago or so originate? There doesn't seem to be any clarity on it.

Secondly, what are the objectives of those who are really doing the fighting? For example, the suicide bombing in Damascus. Is that the work of the so-called more democratic group that we would like to see in charge? Doesn't that smack of certain forms of extremist terror that's associated with extreme groups?

ZAKARIA: Would you intervene militarily?

BRZEZINSKI: Well, I would intervene militarily if I knew that something has to be desperately prevented, or if I knew that the effort would not produce a regional war and would produce a desirable political outcome, and at this stage I don't see much evidence for a yes as the answer to either proposition.

ZAKARIA (voice-over): James Baker served as Secretary of State for George Bush, Sr.

(On camera): The president is going to face in his second term, unexpected challenges, but there's one challenge we know he's going to face which is what to do about Iran. How would you advise him to deal with it in the second term?

BAKER: In my view, we cannot let Iran become a nuclear power. Not because of the threat to Israel or the threat to the United States or the threat to our moderate Arab allies in the Gulf, but because of the proliferation effect of that. Everybody in the region then will want their own weapon and they'll have the means to get it.

ZAKARIA: You know what a decision like that would do to the presidency, however, if there were major military action and Iran is a big country, many times larger than Iraq. It could derail almost all the other initiatives.

BAKER: It could.

ZAKARIA: How would you think about that?

BAKER: When I say you do what you have to do doesn't necessarily mean you're going to put boots on the ground in Iran, which I think would be a very, very bad mistake. And I'm talking about the potential for eliminating their nuclear program through surgical strikes and that sort of thing.

We do have technologies now that the Israelis don't have that could be effective to do that I think.

ZAKARIA (voice-over): Zbigniew Brzezinski sees the dangers regarding Iran quite differently.

BRZEZINSKI: Get off the silly argument, all the options are on the table. What does that mean? We better commit suicide as one of those options? Start a war? The end of which we cannot foresee? That doesn't make any sense to me as a matter of national policy and I don't think the country would support it.

And I don't buy the absolute ridiculous, irrational, argument that the Iranians are so suicidal that the country of 75 million people or 80 million people is going to rush into committing suicide the moment it gets the first prototype of its bomb. That even ignores the scientific fact that bombs have to be tested, that you have to have from a military point of view quite a number of them to be credible, et cetera, et cetera. So we're not dealing with an imminent threat, a reaction to which should be decided by somewhat else drawing red lines for us.


BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: A red line should be drawn right here.


ZAKARIA: What do you think going forward the president's strategy on Iran should be?

BRZEZINSKI: I think a war in the region will be a total disaster for the region, which would be set aflame. It would make our withdrawal from Afghanistan much more difficult. The war would spread to Iraq, to Lebanon and to Jordan very predictably. The price of oil would skyrocket.

These are calamities for us and we'd be stuck for another decade. I think that has to be avoided even if negotiations don't succeed. We have in my view a credible, historically tried, safe way of responding. Namely, to make it absolutely clear that any threat by them, the rife -- from their acquisition of nuclear capability will be viewed by the United States as an assault on the United States, if it is directed at our friends in the Middle East, and particularly Israel.

I think that would contain and deter the Iranians.

ZAKARIA: How would you handle Israel with regard to the Iran issue?

BAKER: I would tell Israel the same thing the Obama administration already told Israel. We -- it is not in the national interest of the United States for you to bomb Iran's nuclear facilities. We don't want you to do that. That's not in our national interest. And you let us take care of them. We have the potential to stop it. You have the potential only to delay it. And the consequences of your doing it are right now incomprehensible but they could be very, very dire.

ZAKARIA: Do you believe that it's important that in President Obama's second term he try to make a renewed effort on the Middle East peace process, even though, let's face it, so far what he's done has been unsuccessful?

BRZEZINSKI: I'll tell you why I think so. I think if we don't move and do what is necessary, the Arab masses will become more radicalized, more religiously driven and, therefore, eventually more jihadist, vis-a-vis Israel. And I don't think Israel can survive in the long run in that context.


ZAKARIA: Handling Iran will be a delicate balance between toughness and restraint. And unlike other foreign policy crises, the clock is ticking. We know that President Obama will have to deal with this one and probably this year.

From the most urgent foreign policy issue to the most important, the relationship between the United States and China. How to prevent a new Cold War, when we come back.


DREW GRIFFIN, CNN ANCHOR: I'm Drew Griffin. Let's get you caught up on the headlines.

Gun rights activists on one side, people calling for tighter gun control on the other. This is the week those two sides butt heads again. When the vice president and his task force send gun violence recommendations to the Oval Office. The head of the NRA says he's ready to fight.


DAVID KEENE, NRA PRESIDENT: The likelihood is that they're not going to be able to get an assault weapons ban through this Congress.


GRIFFIN: Police in San Diego were forced to shoot a man with a gun who ran inside a movie theater. The officers were responding to a domestic disturbance call yesterday when they chased that armed suspect in to a crowded theater. Moviegoers poured out as police raced inside. An officer shot the suspect, the suspect survived but is in critical condition.

The NFL playoffs down to the final four now. The Atlanta Falcons kicked a game-winning field goal in the final seconds to defeat the Seattle Seahawks 30-20. Atlanta advancing to the conference championship next Sunday against San Francisco. Meanwhile, Tom Brady led New England to a 41-28 win over the Houston Texans. The Patriots play Baltimore in the AFC championship game.

Those are the headlines this hour. I'm Drew Griffin. I'll see you back here 10:00 Eastern.

ZAKARIA: The most important relationship in the world right now is the one between the United States and China. The world's number one and number two economies. Successful management of this relationship will be one of President Obama's most important tasks over the next four years. It's a mission fraught with potential pitfalls as the two powers compete economically and increasingly politically and militarily, as well.

A little over a year ago, President Obama signaled a pivot to Asia.


OBAMA: The United States is a Pacific power and we are here to stay.


ZAKARIA: A shift in America's attention toward the East. How's it working?


ZAKARIA (voice-over): Zbigniew Brzezinski helped to normalize American relations with China as Jimmy Carter's national security adviser.

(On camera): You say the main challenge that the United States faces at a very broad level in foreign policy is the shift of power to Asia, both a challenge and an opportunity.

BRZEZINSKI: That's just correct. I think our policy, historically, has been Europe focused. Today, the center of political gravity has shifted from Europe to Asia. In the sense that both are now important. We ought to think of our role in Asia, not in the fashion that because of two world wars, we are compelled to think of it in Europe, but more in the fashion that is similar to British role in Europe in the 19th century.

Britain was not protagonist but a balancer in Europe, and I think that's the model for us in Asia. We should avoid getting involved in mainland contests. For example, the Vietnamese, when they offered us the use of Cam Ranh Bay, we're not acting out of charity. They were obviously trying to get us to be in Cam Ranh Bay so that our Navy would be in a sense a form of asserted political support for them against the Chinese.

ZAKARIA: So the danger is --

BRZEZINSKI: Involvement which is not of the size of importance. I think what is important to us is that we be a balancer so that we discourage dramatic shifts or particularly the use of force. ZAKARIA (voice-over): James Baker served as Secretary of State under George Bush, Sr.

(On camera): There are a lot of countries in Asia that are looking at China's rise with apprehension and they have asked the United States to get more involved, Singapore, Philippines, Vietnam, Japan most importantly.


ZAKARIA: To a certain extent, Australia. How should we think about this pivot?

BAKER: I think we're wise, for instance, to stay out of the disputes in the South China Sea. See if we can get the parties to resolve those disputes peacefully. Now if those disputes end up creating an impediment to free navigation, freedom of the seas or something, that's a different issue. That would affect our interests directly.

If we ever wanted to build an alliance against the Chinese attempts to become hegemonistic in that part of world, we could do so. We could, for instance, ally with Vietnam probably today, interestingly enough. Our long-time opponent would be an ally of ours against China but I'm not sure that's the way to go. We will have to closely monitor China's military build-up. We plan to do that as I understand it. That's important to do. We must keep a robust military presence in the Pacific. We do that with the 7th Fleet. They have every bit as big an interest in getting along with us as we do with getting along with them. And, you know, where our interests don't converge, where we have differences, we stand up for our views and we stand up for our rights.

ZAKARIA: When you look at U.S. relations with China, do you think we should be doing anything different going forward?

BRZEZINSKI: I think we should certainly reassert publicly the importance of the relationship. We should avoid the kind of language that was used in our presidential campaign and particularly by the party that lost.


MITT ROMNEY (R), FORMER PRESIDENTIAL CANDIDATE: On day one, I will label China a currency manipulator, which will allow me as president to be able to put in place if necessary tariffs where I believe that they're taking unfair advantage of our manufacturers.


BRZEZINSKI: It sent a message to the Chinese to which then they started reciprocating in kind and with alarm and with anger, and I think that's the kind of stuff we have to avoid.

ZAKARIA (voice-over): Robert Rubin, President Clinton's Treasury Secretary, says that China is often used as a whipping post during presidential campaigns. RUBIN: One thing I think I could say with absolute assurance and I believe nothing is absolutely assured in life, is that if Governor Romney had been elected president, he would not have declared China a currency manipulator on his first day or any day. The presidential campaigns, there has been a tendency to point at China. But China is our most important relationship, in my judgment at least.

I think it is immensely in our economic self-interest as well as in their economic self-interest to have an effective relationship. I think a lot of what they complain about with respect to us, for example, our large fiscal deficits, one example. I think it would be in our interest to deal with. Similarly, a lot of what we complain about with respect to them, their export-driven strategy, the absence of domestic demand. I think it's critically important for their own self-interest if they're going to have sustainable growth going forward to deal with that issue.

So I think we have a common self-interest in dealing with many of the issues that we complain to each other about.

ZAKARIA (on camera): What should be the core elements of a U.S.-China relationship going forward?

BRZEZINSKI: The core elements of a cooperative U.S.-Chinese partnership is in many respects in the communique that was issued in January 2011 by Presidents Obama and Hu Jintao of China, went the great length in itemizing and then developing numerous ears in which we ought to be cooperating. Because it sets a framework, a framework in which the word partnership is really given meaning and a framework for something unprecedented in the history of human affairs, namely, when two major powers arise, they almost never to be collide.

For the first time in history, America and China have the opportunity to avoid that, to be partners and thereby do themselves well because in the present circumstances worldwide if China and America collide, if America and China collide, both will suffer.


ZAKARIA: So the lesson is to be careful not to drift into a hostile relationship with China.

When we return, I'll give you my own memo to the president.


ZAKARIA: We've heard from senior statesmen and women on what President Obama needs to do to have a successful second term. And a successful legacy. Here are some of my own thoughts.

Most presidents get just a couple of lines in history.



ZAKARIA: FDR revived the country after the Great Depression and won World War II.




ZAKARIA: Lyndon Johnson created the great society. And escalated the war in Vietnam.

The first line of President Obama's legacy has already been written.


OBAMA: We are done.


ZAKARIA: He helped usher in universal health care in America.


UNIDENTIFIED FEMALE: Take a deep breath in and out for me.


ZAKARIA: That is a historic achievement. But it remains to be seen whether it is the beginning of a path toward a more humane and sustainable health care system or one more step down a path of fiscal ruin.

Having expanded access to health care in his first term, Obama must now concentrate on bringing costs down using some of the mechanisms within Obamacare but expanding them and creating others. Getting health care reform right will be more important to our fiscal future than any other set of policies.

Beyond this, Obama has opportunities to make large moves. He could and should tackle immigration because it does seem ripe for resolution. He might even be able to find common ground on reforming the tax code, something most Americans agree needs to be reformed.

But none of these efforts will rise to the level of that second line for Obama's legacy.


OBAMA: Good afternoon, everybody.

(END VIDEO CLIP) ZAKARIA: That will depend on the future of American growth. The president inherited an economy in free fall. He helped prevent a second Great Depression. But he also inherited an economy that was fundamentally unbalanced.

For over 20 years, economic growth in America has been slow, recoveries have been jobless and median wages have declined. We need a new strategy for growth based on reform and investment. We need major reforms of regulations and tax policies to make America competitive and growth oriented but we also desperately need new investments for the future.

We need a world-class infrastructure, not one that is now ranked 25th in the world according to the World Economic Forum. We need highly trained workers. We need to rebuild our great state universities to be centers of access and excellence so that every American has a path to success.

In the 1950s and '60s, America spent 5 percent of its GDP on investments for the future. Today, that number is 3 percent. And it's likely to fall in the years ahead as entitlement spending crowds out everything else.

We now spend $4 for every American over 65 compared with $1 for every American under 18. We are demonstrating vividly our preference for consumption over investment, for the present over the future, and for our own interests over those of our children.

If President Obama can change this trend, he will probably not get much applause today, but he will restore the American economy, secure America's place in the world and his own place in history.

Thank you for watching "MEMO TO THE PRESIDENT." If you have an idea for the president, join us in the conversation online on #ObamMemo on Twitter or go to

And don't forget, you can see our regular show on Sundays at 10:00 a.m. and 1:00 p.m. Eastern. Thank you for watching.