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U.S. Dysfunction Threatens Global Economy; Iran Talks Wrap Up amid Signs of Promise; Imagine a World

Aired October 16, 2013 - 14:00   ET


CHRISTIANE AMANPOUR, CNN HOST: Good evening, everyone, and welcome to the program. I'm Christiane Amanpour.

So has Washington finally dodged the bullet as Congress prepares to put a budget agreement to a vote after weeks of brinksmanship?

Sixteen days of government shutdown and just hours away from a potentially crushing default, one thing is strikingly clear: this is no way to run a country much less a superpower. So here is the state of play.

Senate leaders worked through the night and into the early hours of this morning on a deal to reopen the government and raise the debt ceiling just today, before the U.S. loses the authority to borrow money to pay its bills.

It's a short-term plan, though, funding the government until January 15th and raising the debt limit until February 7th. The deal calls for negotiations between the House and Senate on a long-term budget plan starting in December. And it mandates a small technical tweak to President Obama's signature health care law.

Ultimately, though, it comes down to Speaker of the House John Boehner to override his extremist Tea Party wing and to pull together a bipartisan coalition to pass the bill. The word among some Republicans has been about negotiating the terms of their surrender.

But in every way, this has been an expensive and even embarrassing venture. Across the globe, the world looks on in shock, tinged with horror, splashed across every headline.

My guest tonight says that unfortunately the joke is on all of us, that the United States Congress has become the biggest threat to the global economy. And Laura Tyson should know better than most.

As a leading economic adviser to President Bill Clinton, chair of his National Economic Council, she was at the table for the last government shutdown in 1995 and '96. She's also advised President Obama and she was the dean of the London Business School in the early 2000s.

She joins me now from ground zero for this budget battle, which is, of course, Washington, D.C.


AMANPOUR: Laura Tyson, thanks for being with me tonight.


AMANPOUR: Well, I don't know whether it is, because are we, in fact, in the worst crisis that America has faced in a long time, as one observer has put?

TYSON: I do think that our democratic institutions are suffering from very severe stress. And I'm delighted that it looks like we have a short- term resolution of the immediate crisis. But we have kicked the can down the road. And I would put the fundamental problem here in the House of Representatives. We do not have anyone in charge.

Speaker Boehner cannot control the Republican majority. And there is a significant number of Republican representatives whose goal really is to undermine the functioning of the government and, of course, to defeat President Obama at any price.

AMANPOUR: How is it different than the last time?

You were there in the mid-'90s when there was a longer government shutdown.

Why is this different?

TYSON: Yes. Well, I think it's different in a couple of respects that go to this point of starting with the lack of a unified Republican opposition. The president -- President Clinton negotiated with the leader, Newt Gingrich. He was a powerful leader. He was able to control his party.

It was a failed tactic on their part; they ended up suffering in the polls and they ended up helping to reelect President Clinton the next year.

But he had control of the tactic and he had control of what they wanted to get.

Here we have a situation where the Republicans are not united; Boehner cannot raise a deal, as w saw just yesterday. And there are a number of people in his own party who have different demands. They want different things. They don't have a kind of here's what we want.

I mean, some want to undermine ObamaCare. And some want to reduce the size of government dramatically. And there are a whole bunch of issues; there's not a unified position.

AMANPOUR: Let's talk about the economics of all of this. We said that it's been costly, it's been embarrassing as well. You've seen all the headlines. Last night on this program, we had the head of the OECD, and this is what Angel Gurria told me about the cost to the global economy.


ANGEL GURRIA, SECRETARY GENERAL, OECD: The United States, even, you know, having a slowdown in the economy, they were the only bright spot so far. It was a good place; things were happening. Jobs were being put back and growth putting (ph) in the United States.

And then this happens. And of course, the rest of the world is suffering the consequences and will suffer further the consequences.


AMANPOUR: So it's (inaudible) shooting ourselves in the head, is what he's basically saying. What everybody's trying to get out and grow the economy around the world.

TYSON: Yes. And I think the lost opportunity here, going into this year, the U.S. economy looked considerably stronger. We had an improve housing market. We had consumer balance sheet much improved, very strong corporate balance sheets; state and local governments, for the first time, able to increase their spending a bit, no longer in budgetary crisis.

So and then you have these wonderful technological revolutions going on in the United States, the shale energy revolution, the big data analytics revolution.

We have a lot of momentum, and then what happens? We have a sequester; we have a cut in the fiscal deficit which is so large that we take off a point and a half of growth? So we might have been growing this year at 3.5 percent; we're growing around 2 percent. Now consumer confidence in the last few weeks has fallen back to late 2011 levels.

Why? Because of all the uncertainty around the shutdown and the debt. We've had more stock market volatility, companies are saying I don't know what to do. Is there going to be any corporate tax reform or not?

So, yes, we -- the fiscal authorities in particular led by a House that I would argue is basically not governable right now, House of Representatives, have led us to a much weaker U.S. economy. And of course that has global implications. (Inaudible) is exactly right.

AMANPOUR: So let me then ask you, let's say a deal is reached and the U.S. does not default; the government reopens.

How is that -- is that going to suddenly spur the economy again?

Or are we going to be back to this place again in January and February?

TYSON: Well, I am quite concerned that we might very well be back. Now the good news here would be that for several months the radicals in the House have basically presented a conference being formed from the Senate and the House around budget proposals. There is a House budget proposal; there is a Senate budget proposal. They're very different. There have been no negotiations in a conference.

Now there will be negotiations in a conference. So perhaps -- perhaps -- we can get to a long-term deal. But there are going to have to be very, very serious compromises in making such a deal on entitlements and on taxes.

And whether or not at the end of the day, there are enough Republican votes in the House to pass such a budget, I don't know. The good news is at least we'll have a conference and a few months to try to get a deal.

AMANPOUR: All right. I want to just show you and show our viewers a graph. It was done in 2011. There was a similar crisis over the debt ceiling. And of course the Dow at the time that their deal was struck was OK. It was only, you know, 30 days later that it plunged. Everybody now is talking about the markets and how they're reacting and how they haven't really plunged.

Do you foresee, even after a deal is struck, you know, before midnight, that this could have an effect like that in a few days?

TYSON: Well, look, the problem is, of course it's all but -- it is impossible to predict market behavior.

What I will say is between now and when the budget deal is supposed to be worked out, December 15th, there are going to be a lot of ups and downs in are we making progress? Are we not making progress? There's going to be a lot of posturing about whether we'll -- people are willing to compromise or not.

I -- my prediction would be that the increase in volatility in financial markets which we've already seen because of fiscal uncertainty in the United States continue. So we have enhanced volatility now. And I think that stays with us because we don't have a deal. We've kicked the can forward. And set up a process with a deadline to try to get a deal.

AMANPOUR: Laura Tyson, thank you very much for joining me.

TYSON: Thank you, Christiane.


AMANPOUR: And while such an apocalypse is no laughing matter, it hasn't stopped political cartoonists from poking fun and pointing fingers.

This one in the "Financial Times" shows politicians arguing, as we've been discussing, while the debt ceiling is literally crashing down around President Obama's head. And the damage isn't limited to Washington, as this cartoon in the international "New York Times" suggests, the shutdown could also impact American foreign policy at the negotiating table with Iran.

Fortunately, there is encouraging news coming out of talks in Geneva. The top U.S. negotiator tells us it's too soon to pop the champagne, but there is hope. That's when we come back.




AMANPOUR: Welcome back to the program.

The two-day Iran nuclear talks in Geneva have ended and another round is scheduled for early next month. And all sides are saying that these were the most detailed they've been in a long, long time, signs of promise in the air included the Iranian and U.S. teams meeting separately on the sidelines.

Iran and the P5+1 or the E3+3, as it's known in Europe, releasing its first-ever joint press release and the Iranian foreign minister saying that he hopes these talks, the first under the country's new moderate president, Hassan Rouhani, are a sign of a start of a new phase in relations with the West.


JAVAD ZARIF, IRANIAN FOREIGN MINISTER: We had two days of extensive and fruitful consultations with the E3+3, which will hopefully be the beginning of a new phase in our relations.


AMANPOUR: So what about the substance?

What actual headway has been made in the West's non-negotiable demand that Iran prove beyond doubt that they're not making a nuclear bomb and Iran's demand to have sanctions removed?

Tonight the inside story from one of the major players, America's chief negotiator, Undersecretary of State Wendy Sherman. She joined me from Geneva just as the talks wrapped up.


AMANPOUR: Undersecretary of State Wendy Sherman, thanks so much for joining me from Geneva.

WENDY SHERMAN, U.S. LEAD NEGOTIATOR FOR IRAN NUCLEAR TALKS: Glad to be with you tonight, Christiane.

AMANPOUR: So you've just had two days of what everybody's describing as fruitful new nuclear talks.

What, to you, was different this time than all the previous times?

SHERMAN: What I think was different this time is that this Iranian government was elected by the people with a mandate for moderation, a mandate for economic change, sanctions relief and to address the concerns of the international community to ensure a better economic future for the Iranian people.

And so the -- Foreign Minister Zarif and his delegation came prepared for detailed, substantive discussion with a candor that I certainly have not heard in the two years I've been meeting with Iranians and my P5+1 colleagues some of whom have been doing this for quite some time, found a quite new and different.

All of that said, we are at the very beginning of a process. President Obama said that there are many years of mistrust, but there is also a very important objective, and that is to make sure that Iran does not acquire a nuclear weapon and that the rights of the Iranian people to access peaceful nuclear energy are recognized, if all of the concerns of the international community are addressed.

So we are testing that proposition. It will take some time, but this was a useful beginning.

AMANPOUR: Did seeing Iranians bring concrete proposals, for instance, some have suggested that there might be the outcome of this meeting a sort of an interim maybe six-month confidence-building agreement between you all while the final details are hammered out?

Is that correct?

SHERMAN: What is correct is that we've always had a framework and one which Iran has adopted as well, and that is we will have discussions about what our objective is, what the final steps should look like and what an initial confidence-building measure might look like to put some time on the clock to negotiate that comprehensive agreement.

What we did over these two days, we knew coming in that we would not, in all likelihood, reach an agreement. This is highly technical work when you're talking about an nuclear program and all the dimensions of it. That takes some time just to understand each other.

These negotiations over these two days were conducted in English for the first time, which of course increased the pace and the ability to have direct and candid discussions. We did so, but we have a great deal more work to do. That's why an experts level discussion with Iran is being scheduled heading towards another P5+1 round November 7th and 8th.

So we're trying to pick up the pace of this, to move quickly, because we don't -- Iran's -- want Iran's nuclear program to keep moving forward. At the same time, we are cautious as we test this new government.

AMANPOUR: You also brought with you a sanctions expert.

Why was that? Did you -- obviously you've just outlined your demands; Iran wants to have sanctions relief, as you mentioned earlier.

What was the purpose? And what did the sanctions expert in the room say?

SHERMAN: The purpose of having our sanctions team here with us is because as you state, Iran wants to get sanctions relief.

But they also have to understand what the range of our sanctions are, what they require, how they work, what it takes to implement sanctions relief, what sanctions we believe need to stay in place and we believe our core sanctions must -- the international community has created one of the most if not the most effective sanctions regime ever.

The United States Congress, along with President Obama, through executive orders, have put a tremendous effort in place. We want to be very careful to keep the international community united as we proceed forward here. And we want Iran to understand what is required. They have given us their thoughts, their ideas. We've given them our thoughts, our ideas.

I'm not going to go into the details of the negotiation because one of the other things is that one knows the seriousness of the negotiation by, quite frankly, making sure that all the details of that discussion do not leak out. And as much as I love the press, we're being very careful to note the seriousness of these discussions.

AMANPOUR: You also had a bilateral meeting with the Iranian foreign minister and their team. They say that you wanted to have that.

Why is that? What was the usefulness of that?

SHERMAN: We have not only looked for a bilateral discussions ourselves, but every member of the P5+1 has had bilateral discussions because we think it's very valuable to bring that information back into the P5+1 process.

Quite frankly, after President Obama had his phone conversation with President Rouhani, and Secretary Kerry had his bilateral with Foreign Minister Zarif, we had passed the bilateral Rubicon.

So although this is the first time at my level we have had such an extensive bilateral since 2009, when my predecessor now Deputy Secretary Bill Burns, met with Saeed Jalili, this was really in a different tone and manner because of what has preceded it. It was useful to the process and we hope and look forward to continued bilateral discussions as well.

AMANPOUR: You started by talking to me about the new, more moderate president of Iran and the wishes of the Iranian people.

So are you, as you go through these discussions, sort of aware that this Iranian team had to take something back to Tehran to show that their approach was working?

And were they able to take something back to Tehran?

SHERMAN: Well, they'll have to describe for themselves what they believe they got out of this negotiation, though my understanding -- I didn't attend the press conference -- but Foreign Minister Zarif thought this was off to a good start, that the process was going to move forward, that it was detailed, that we weren't going to be discussing the details in the public because it was a serious discussion and the beginning of a potential real negotiation.

And noted that we were going to meet again on November 7th and 8th, have an experts meeting with nuclear, scientific and sanctions experts at that expert meeting to try to really dig in and do the very difficult but critical work necessary to reach the kind of agreement that we're looking for to address all of the international community's concerns about Iran's nuclear program.

AMANPOUR: You know, the Iranians have said their red line is to have their right to enrichment recognized.

Is that something the U.S., the West is going to give?

SHERMAN: Well, we have been very clear; President Obama said in his U.N. General Assembly address that we respect the rights of the Iranian people to access peaceful nuclear energy when they meet all of their obligations and responsibilities under the NPT and U.N. Security Council resolutions.

So that is our position in these negotiations that, in fact, the -- not only the United States but the entire world gains confidence and a verifiable and meaningful way that Iran's program is entirely peaceful. We have a long way to go to address that concern. As I said today, and yesterday, we're useful beginnings. Now we will have to continue to see if we can make progress.

AMANPOUR: And just one last question: did they indicate the restrictions that they would be willing to put on their enrichment as a confidence-building measure?

SHERMAN: I'm not going to talk about details of what might have been discussed. What I can say is that we discussed everything from the objective we each seek to the final step that would be necessary to the first step that would build confidence. And those discussions were direct, specific, though there are many more details we still need to get.

There are areas of great difference that still remain. Nothing has yet been agreed. No steps have been taken to relieve sanctions in any way, shape or form because we have a lot of work left to do to begin to take those steps.

But these two days were an important predicate to that kind of agreement, both in a confidence-building phase and in a final agreement and, you know, Christiane, at the end of the day, the stakes here are very high. There is no way any of us, after these two days, can guarantee an outcome.

But I think everyone at our roundtable understood that the stakes are high. And we have to do everything we can to reach a diplomatic solution. There are other options, but a diplomatic solution is the best option. And we all have to do everything we can as quickly as we can to see if, in fact, we can achieve just that.

AMANPOUR: Wendy Sherman, thank you very much for joining me from Geneva.

SHERMAN: Thank you.


AMANPOUR: And Iran will also soon have another international platform to showcase a new face to the world, the World Cup. Iran has qualified again and it will share the platform with one of the newest and most war- torn nations on Earth, that is Bosnia and Herzegovina. When a game is more than just a game, when we come back.




AMANPOUR: And finally tonight, the political war in Washington has been compared to a blood sport between two bitter rivals where everybody loses. Now imagine a world where a sports team born from war brings everybody together.

Like the fans in jubilant Iran, delirious football fans in Bosnia Herzegovina filled the streets of Sarajevo to celebrate their national team's first berth in the World Cup against Lithuania last night. In a country barely 20 years old, where religious and ethnic hatred once pitted neighbor against neighbor and teammate against teammate, fan against fan, Bosnians, Serbs and Croats danced.

It wasn't always this way, of course; two decades ago the former Yugoslavia was drowning in a bloodbath of civil war and ethnic cleansing. The football team, once a source of national pride, became just another casualty.

I was there in Sarajevo along with so many of my colleagues from around the world when the bullets were flying and when just crossing the street was an act of survival for the people there. And throughout the war years, football fields like this one were turned into cemeteries. Only a diehard fan or a dreamer could imagine that the beautiful game could rise from the grave and help heal the scars of millions.

The wounds of war remain, though, even today; forensic teams continue to find mass graves in Bosnia, filled with hundreds of victims from that terrible time not so long ago. But for one memorable night, a nation was united and the dreamers were victorious.

That's it for our program tonight. And remember, you can always contact us at our website, and follow me on Twitter and Facebook. Thanks for watching and goodbye from London.