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Fareed Zakaria GPS

Interview With Pres. Felipe Calderon of Mexico; Discussion About the U.S. Economy

Aired March 28, 2010 - 10:00   ET



Welcome to all our viewers in the United States and around the world. I'm Fareed Zakaria.

This week, the United States joined every other industrialized country in the world on extending health care coverage to all its citizens. It's an important moment and, in many ways, a thrilling one.

Not only is it a matter of basic human values, but it has some added economic value. It will lessen the impact of the steep rise in American inequality over the last two decades. It will ease the anxieties of American workers and make them more ready to move from job to job and career to career in a world that is clearly marked by greater volatility and globalization.

So, at one level, I'm delighted. But, this is a struggle for me between the heart and the head. This bill is not quite like Social Security or Medicare. Those were simply creating entitlements. This one is also about reforming a broken system.

Few Americans, given our current budgetary trends, would have supported a vast expansion of our current health care system, one that costs twice as much per person and delivers worse results than any other in the industrialized world. So how real is the reform part of this bill?

Well, there is no fundamental break with the basics of the system. The employer subsidy, which disguises costs, or the fee for service practice, which provides a huge incentive to doctors and hospitals to proliferate services without necessarily increasing health care. There are real cost control measures in the bill. But they're largely untested and we don't know whether they will really succeed.

The problem is that all the tough ones have been pushed into the future on the strange theory that Congress then will have the courage that it now lacks. So, the expansion of the system is for sure, and the cost controls have likely been underestimated. The cuts in services, added taxes are all still to come.

So this becomes a test for American democracy, and especially for American Democrats. They will have to be steely-eyed about following up on the reform part of the bill and not merely the expansion.

As for me, I'm hoping that the battle between my head and my heart works out this way -- that my heart wins.

On the show today, we will discuss this issue with two great heads, probably the two most articulate commentators in the health care debate who happen to disagree on the bill, Paul Krugman of Princeton and the "New York Times", and Robert Samuelson of "Newsweek" and the "Washington Post".

But first, a rare opportunity. I traveled to Mexico City to speak with the president of that country, Felipe Calderon, on the violent drug war that is enveloping the whole country, sparking civilian death rates that rival even Iraq and Afghanistan.

You wouldn't want to miss it. Stay tuned.

I want to bring to your attention one of the pivotal countries of the world, America's neighbor to the south, Mexico.

Now, you know that Mexico is engaged in a titanic battle with the major drug cartels, a battle for no less than the future of the country. The violence is staggering, so much so that this week, in an unprecedented display, the Secretaries of State, Defense and Homeland Security traveled to that country.

But here's something that will surprise you. Mexico is, in some ways, increasingly an economic success story. People talk a lot about emerging markets, and in Latin America they usually mean Brazil. But Mexico actually does better on almost all economic measures -- its growth rate, its per capita GDP, its debt levels, yet, in America, it is violence and, of course, illegal immigration that dominates the conversation about Mexico.

Well, I flew down to Mexico City to talk to President Felipe Calderon about all of these issues.


ZAKARIA: Mr. President, thank you for joining us.

FELIPE CALDERON, MEXICO'S PRESIDENT: Thank you. Thank you for the invitation. It's a pleasure.

ZAKARIA: A lot of people feel that you have taken on this -- this war, you have, in a sense, taken the battle to the drug lords, and that frankly maybe this was too much to take on.

CALDERON: Not at all. No.

Let me tell you, so the first duty of a president, the first obligation of any government, is to prefer -- is to preserve the liberty and freedom of the people. Now, when I took office, I received this problem, growing for several reasons, mainly because the traditional Mexican cartels that used to export drugs to the United States, they started new business in Mexico itself, since probably 10 years ago.

And the new business is retailing and distributing drugs in Mexico and trying to allocate drugs among the people, and that provoked a new way to operate, a new forum to express violence. So they started to fight each other, and that is the main reasons of -- of this amount of homicides in Mexico.

ZAKARIA: So it's not the police going after them --

CALDERON: No, no, no.

ZAKARIA: -- it's an internal drug war?

CALDERON: Yes. Above 90 percent of all these very violent homicides are related with this battle between one cartel and another, in particular in Ciudad Juarez is the battle between the Juarez cartel against the Sinaloa cartel, disputing this market, if I can say that. And, in addition, Juarez is the main point of entry of drugs to the United States, so they are trying to take the control of the territory, and that is the reason of the battle.

But let me --

ZAKARIA: Juarez is right across the border from --

CALDERON: El Paso, Texas. Yes.

And the problem that we have is to say, well, we are next door to the largest consumer of drugs in the world, and it's not easy to live this way. And that is one of the main reason that we have such types of violence.

ZAKARIA: Is it also true that many of the -- the guns that are used by the drug cartels come from America? Because there is some dispute about whether or not this is, in fact, true. What is your view?

CALDERON: I know that there is the dispute, but -- but the answer is yes. We seized 66,000 weapons in three years, half of them assault weapons. We made a sample one year and a half ago, above 80 percent of those weapons came from the United States.

And you can observe that there are more than 10,000 weapons or gun stores in the border -- American border with Mexico, and most of them -- most of them are coming to -- to my country.

So United States must stop the flow of assault weapons to Mexico, and it's not a problem of law. It's a problem of enforcement, because there is a law that forbidden (ph) to export such kind of weapons to the countries where are forbidden, which is the case with Mexico.

ZAKARIA: So -- so this -- this would be saying that nobody in America can sell an assault weapon because it is illegal in Mexico to -- to have this weapon.

CALDERON: Yes, nobody -- no one in America can export -- ZAKARIA: Export. Yes.

CALDERON: -- or sell to export to Mexico.

ZAKARIA: But, of course, it's tough to enforce.


ZAKARIA: How do you know whether this gun is going to Mexico or not?

CALDERON: It's -- its' probably difficult to -- to know in the very beginning moment, but do you have a store in the border, and you can see that somebody coming from Mexico or even American is buying, I don't know, 100 assault weapons. You make -- you need to have some kind of control. But --

ZAKARIA: But when you -- 10,000 gun stores on the U.S./Mexican border, all in the United States.


ZAKARIA: When you tell U.S. officials this, what do they say?

CALDERON: They say that they are facing strong oppositions and very powerful lobbyists in the Congress in order to change that situation.

But we are improving our cooperation, and there are American authorities that are trying to do better efforts in order to -- to stem the flow. Actually, we saw last year the beginning of several trials in order to -- to attack the problem -- this crime. It is a crime -- a crime even in the United States to export to Mexico.

So, the traffickers of weapons are one very important problem or part of this problem.

ZAKARIA: I mean, I look at the drug war, and it started out -- and the supply was coming from Miami in the 1980s, so we cracked down very hard in Miami, and then it went to the Caribbean, and we cracked down in Panama. We went in and arrested the president of Panama.

Then it goes to Colombia. Then we go in with Plan Colombia, massive military effort there. And, to a certain extent, this migrated to Mexico.

Is the -- is the fundamental answer legalization of drugs?

CALDERON: I think it's a very difficult debate, but the main point in this is if the United States don't legalize or even don't put in place such kind of debate, this -- inductive (ph) for us to do so, because one of the --

ZAKARIA: It means you can't do it -- you can't -- you can't think about this if the U.S. doesn't stop --

CALDERON: I can think about it, but it isn't useful if we try to establish such kind of debate here or trying to take action in that.

I don't agree -- I don't agree --

ZAKARIA: Because we -- because we have the -- the have the mother lode of demand.

CALDERON: You know, I don't agree with legalization, but even the -- the main point of the arguments in favor of legalization is how to reduce the price of the black market in order to reduce the violence.

Now if United States, the largest consumer, establish the price, United States is establishing the black market. So, there is no case for developing countries, small economies try to -- to legalize or try to modify, in economic terms, the problem, because it would be absolutely un-useful and probably we -- we will worsen even more the problem.

For instance, we can, in Mexico, try to do this. We will -- we will receive traffickers coming from our underworld, from Afghanistan to Indonesia, of course, South America. So it's -- it's the worst position for us.

So, it's a very important debate. I realize that it's very difficult and very sensitive, and there are arguments, serious argument in favor and against that.

I don't agree. I do believe that it is possible to enforce the law. And, let me tell you, my main goal is not to erase drugs, it's not to erase the consumption. That is impossible.

But my -- my main goal is to enforce the law in Mexico. I want to make Mexico a rule of law state, because that is the first step for development. I do believe in that.

And so, in this sense, I do prefer to talk not about war and drugs, because this war is in favor of the rule of law. I want to make Mexico a state in favor of the security of the families, and that is my main objective in this -- in this -- in this fight that I am -- I'm doing in Mexico.

ZAKARIA: And we will be back.



CALDERON: Each migrant is -- is a father that -- who never is going to see, probably their family -- his family, his mother, his a son. Four hundred people die trying to cross the border each year.

So, for me, it is not -- I don't want to see that anymore.



ZAKARIA: The second thing Americans think about when they think about Mexico, but used -- used to be the first thing, was illegal immigration.

Do you believe that this problem has gone away because of the economic recession, or are you still dealing with the -- you know, this -- the issue of Mexicans going to the United States on an undocumented basis?

CALDERON: The -- the only way to stop -- reduce illegal immigration to the United States is creating job opportunities in Mexico, and that is my goal. I don't -- I don't like to see Mexican people crossing the border and risking their own lives, you know, to -- looking for opportunities in the United States.

ZAKARIA: But this is a long-term strategy.


ZAKARIA: In the short-term, surely, there's got to be some way you can place some controls.

CALDERON: Well, in fact, we are -- we are doing our best in order to persuade the people to avoid to cross the border, and we are trying to advertise about the risk crossing the border.

And actually, another problem that we have with organized crime, is that they are now the dealers, the coyotes(ph), (INAUDIBLE), and they are abusing the migrants. Even migrants coming from Central America at the hands of the criminals suffer a lot of uses -- of abuses here in Mexico in the hands of the criminals.

But my point is there is no solutions in the short-term. Why? Because it's a natural phenomenon in social and economic basis.

And you can see that --

ZAKARIA: Meaning by that you have a huge wage disparity between Mexico and the United States, and so people are naturally going to try to go to the place which has higher wages.

CALDERON: That could be one reason. But to -- in a very aggregate level, American and Mexican economy are absolutely complimentary economies.

So American economy is intensive or abundant in capital, Mexican economy is abundant in labor. One is a big economy, the other is a small economy. The age of the American people, for instance, American people, the average, is older than Mexican people, so the American economy needs Mexican people, even to preserve the capability to -- to pay pensions for the older people. The average of Mexican people is 27 years old.

So it's a natural economic phenomenon, and it's almost a textbook case, if I can say that.

So -- and you need labor and you need capital to be productive.

ZAKARIA: What do you think when you hear people in the United States talk about these -- these immigrants? You had the conservative political action convention a couple of weeks ago in which some of the speakers were talking about people in America who can't even write their names and speak in English but are voting.

You know, there were -- these are all characterizations, of course, largely of Mexicans who cross the border.

CALDERON: I know. My perception is that that kind of behavior is contrary to the main principles of the American society. The main principles of the American society have been tolerance, plurality, and even America has been a country of immigration in history.

The other point is we need to be more clear about the nature of these phenomenon and also the advantages for the society and the American economy of immigration itself.

Again, I don't want to promote migration to U.S. I'm working, and working really hard, in order to create opportunities here in Mexico, for Mexican people. And coming from the state of migrants, Michoacan, in my state there are 4 million people, but in the United States there are 2 million people coming from Michoacan.

Now, I know that each migrant is -- is a father that -- who never is going to see, probably their family -- his family, his mother, his a son. Four hundred people die trying to cross the border each year.

So, for me, it is not -- I don't want to see that anymore, in the case of Mexico (ph). But, it's impossible to try to fix that -- that by decree.

There is a way, President Obama is working really hard on that, related to how to provide legal forum to this reality, to the people who already is working and providing services to the United States and their economy.

ZAKARIA: Do you think that any immigration reform, for it to be successful, has to include a guest worker provision? Because there are some Mexicans who coming into the United States, really for seasonal labor, to pick fruit or to do construction jobs, and then they -- they clearly want to go back.

Is that provision at the heart of solving this problem?

CALDERON: My perception is that, yes. These kind of programs could be useful to try to -- to deal with the problem.

Actually, there are a lot of Mexican workers that they don't want to establish in a permanent way in the United States. They want to get one opportunity for their families, they want to -- to come back to Mexico as soon as possible. If we can find a way that -- in which these kind of not permanent programs could provide the opportunity to -- to get a job, temporary work, at the same time, to help with the crops in the United States or to help with the special seasonal economic activity, and then those workers can come back to Mexico, I think will be very useful.

It's not enough -- again, I need to say that -- but it would be very useful.

ZAKARIA: You are one of the first foreign leaders to meet President Obama. What was your reaction?

CALDERON: Well, I think he's -- we are building trust between United States and Mexico. It's a very difficult process.

My perception is that he's a very honest man, and, of course, with an amazing leadership. And my first thought about that is he will be very useful in order to reinforce the relationship between Mexico and the United States.

ZAKARIA: You feel like the relationship, your dealings with the U.S. government right now, are in good shape?

CALDERON: In good shape, yes. I -- I'm finding a very active collaboration coming from the American government, especially in several sectors or issues from the bilateral agenda, in particular in security.

It's very, very important that the American government participate in a more coordinated way in order to fix this problem, because this is not a problem of Mexico. It's a common problem.

Drug trafficking is a common problem, violence is a common problem, particularly in the border. And, of course, the stability of the region, the stability of the society, it's a common problem.

ZAKARIA: Mr. President, thank you very much.

CALDERON: You're welcome (ph).






ZAKARIA: Now for our "What in the World" segment, what got my attention this week was this woman.

(BEGIN VIDEOTAPE) ZAKARIA (voice-over): Her name is Hissa Hilal, and she's a Saudi Arabian housewife, not a group necessarily known for controversy. But Hissa, with only her eyes visible through a tiny slit in her nikab, the veil that covers her face, Hissha has rocked the Arab world, causing great controversy and bringing death threats upon herself.

She's a participant on one of the Arab versions of "American Idol". This one is called "Poet of Millions", and instead of being chosen for singing ability, contestants are picked for their skills in Bedouin poetry, and Hissa Hilal apparently has great skills on that front. She's so skilled, in fact, that she made it to the final round. Women have never made it that far before.

But that's not what is causing the controversy. It's the message of the poems Hilal has been writing and reciting on the show.


ZAKARIA: She says in one of them that she has seen "evil from the eyes of fatwas." Hilal rails against radical Muslim preachers "who sit in the position of power", "frightening" people with their fatwas, "preying like a wolf" on those seeking peace.

The Arab press quickly seized on her poetry calling it a direct attack on one of the most important clerics in Saudi Arabia, Sheik Abdul- Rahman al-Barrak. Last month, the cleric issued a fatwa calling for the execution of any person who promotes mixing of the sexes, and Ms. Hilal is definitely in favor of mixing of the sexes. She has said it is a necessity for daily life. But she says that her poem was not directed at any one cleric or any one fatwa in particular.

The TV show's judges praised Hilal's courage in expressing her opinions honestly and powerfully, but al-Barrak's flock see her as a villain, a heretic and an infidel.


ZAKARIA: On at least one extremist website, there was reportedly discussion of how to kill the poetess, with one poster going so far as to ask for her address. She says she takes the threats seriously but only slightly.

Women still cannot drive in Saudi Arabia, yet some of them are demonstrating greater courage, intelligence and farsightedness than most men there.

And we will be right back.


PAUL KRUGMAN, NOBEL MEMORIAL PRIZE WINNER IN ECONOMICS: In the past we had an escape valve (ph). In the past we could be irresponsible with health care spending and deal with it by basically reducing the number of people with insurance by casting the -- the most marginal people in American society out into the outer darkness. Now we can't do that, so we will, in a way, be forced to deal with the costs.



ZAKARIA: Joining me now, on my left, "New York Times" columnist, Paul Krugman, and on the right, "Newsweek" columnist, Robert Samuelson.

Paul, you are probably the most influential person outside of government who has been advocating the passage of this bill. Now that it's passed, do you see it as fundamentally about economics or fundamentally about morality? By which, I mean is this really a bill about widening access or is this really a bill about reforming what I think most people regard as a dysfunctional system?

PAUL KRUGMAN, NEW YORK TIMES COLUMNIST: It's a little bit of both. I mean, the selling point, like, the sugar that makes the medicine goes down, it's expanding access. The United States has been alone among advanced countries in not having some form of universal health care. Now, we sort of are there. That's what makes it saleable. It's not purely a punishment. But there's a lot of cost control in there as well. Those things really have to go together. That's what history tells us. It's what the international experience tells us. There's big reforms which will be slow to take effect about the way we pay for health care, about how we decide whether treatments should be applied, but all of that wrapped inside a package that finally gives more or less universal access to health insurance.

ZAKARIA: Robert Samuelson, you have been long skeptical about the cost controls.

ROBERT SAMUELSON, NEWSWEEK COLUMNIST: By not controlling health spending, we are making this series of unintended political decisions about what not to spend it on. We're not spending on schools. We're not spending more on basic research. Ultimately -- or on defense, or national security, or national parks. Go down the list of things that the government does, most of which are very good, and provide this sort of leviathan to squeeze out all these other public goods, I think, to our detriment. And we're also putting enormous pressure, upward pressure on taxes, squeezing private incomes. So a decision is being made by the failure to control health costs. But you need to find some mechanism, either tighter government control or the substitute for the market-imitating mechanisms, to actually force the structure of the industry to change so it becomes less costly and offers more high quality care. And that's what we have not been willing to do. I don't think any of the mechanisms in the bill will do that.

KRUGMAN: I want to say, the bill is taking a lot of steps in that direction. They're not huge steps, but, you know -- Robert, I don't know what political system you have in mind that is going to do better than this. I mean, the fact of the matter is the expansion of coverage in this bill is for the uninsured who are basically, primarily young adults, and they're fairly cheap. It's actually not an expensive thing to go to universality. The expensive cases, the elderly, are already paid for by the government. The question you want to ask is, what are we getting in return for this fairly cheap expansion of coverage. The answer is we are getting more steps to control costs on the expensive stuff, the care for the elderly, than has ever been done before. This is, compared with what a philosopher king might have designed, this is not compared. Compared with anything the U.S. Congress has done, hereto, it's terrific.

ZAKARIA: Let me ask about going forward. Paul, you look at this bill. Do you have a worry, as somebody who has staked a lot of your reputation saying this will control costs, that Congress will start repealing or making concessions, amendments and exceptions to the cost-cutting part of the proposal over the next few years?

KRUGMAN: Well, in a way, those budget deficits are going to stand in the way of that. Once we've established this, once we've established there's a government responsibility to pay for essential health care for everybody, then you ask -- then we will be facing -- you know, it clearly going to be difficult to bring U.S. public finances under control. If Congress says, well, we're going to start taking off all the controls, all the cost-control measures here, they'll have to say, how are we going to pay for this?

So I think actually, the belief that Congress is going to run wild and undermine all the cost-control efforts is actually wrong, because there will be a hard, fiscal reality, which will now be brought into firm contact with health care. In the past, we had an escape valve. In the past, we could be irresponsible health care spending and deal with it by basically reducing a number of people's insurance by casting the most marginal people of American society out into the outer darkness. Now we can't do that, so we will be forced to deal with costs.

ZAKARIA: Robert Samuelson, you're pretty sure that Congress is going to repeal a number of these unpopular measures based on its history.

SAMUELSON: I'm not sure of anything. But all I would say is that these deficits were on the record while this debate was proceeding. And they didn't restrain Congress from enacting a program that would increase spending over the next decade by roughly a trillion dollars. So my view is that Congress is not likely to be restrained until there's an actual crisis. And the only -- I reported this debate now for almost a year. And the only truly honest argument I've heard in favor of the proposals or something like the proposals that actually passed was from a doctor, M.D., who is also a PhD economist. And he said to me, this system is going to collapse. And the whole point of this is to get the uninsured in the system before it collapses, because if it collapses when they are out of the system, they will be victims. But he wasn't any great benefits for it. And he didn't think that it would control costs. His notion was, let's just get these people in, because the whole thing is going to collapse at some point. Then, there will be draconian changes and these people ought to be protected. I think that's a legitimate argument. I think it's kind of somber.

KRUGMAN: Can I say, think about -- we've had two major health reform measures, other health care measures passed. 2003 Medicare Part D, what just passed a few days ago. The first was completely without any concern for budget implications. The second one lived or died by the CBO score. They were not -- it was not even on the table that they would pass something that would increase the deficit as scored by the CBO. You might say you don't fully believe in the score or your think their going to do -- but clearly, clearly, the notion of fiscal constraints did play a big role in this legislation. So it's -- there's a point. I'm all for being as cynical as possible, but there's a point where you get to be too cynical. The fact of the matter is that, you know, this is, by the standards of how legislation has been done in the United States the past 30 years. This is a fairly responsible piece of legislation.

ZAKARIA: Paul Krugman, Robert Samuelson, we'll be right back.


KRUGMAN: The proof of the pudding is the United States has still got -- you know, we have the most privatized, most market-based health care system in the world. We also have the most expensive health care system in the world.



CANDY CROWLEY, CNN NEWS ANCHOR: I'm Candy Crowley. And here are stories breaking this Sunday morning.

A top White House aide is defending President Obama's decision to make 15 so-called recess appointments. Here on "State of the Union," White House senior advisor, David Axelrod, said Senate Republicans holding up the nominations forced the president's hand. Republicans like Senator Lamar Alexander are upset especially about the appointment of Craig Becker to the Labor Relations Board.

Here's Axelrod and Alexander earlier today.


DAVID AXELROD, WHITE HOUSE SENIOR ADVISOR: We are in a position where the Republican Party has taken a position where they're going to try and slow and block progress on all fronts, whether it's legislation or appointments. Just to make the comparison, at this point in the Bush administration, there were five appointees who, on the floor of the Senate, who were not appointed when the president -- that President Bush made 15 recess appointments. We have 77 appointees who have not got a vote because they have been held up by the Republican Party.

SEN. LAMAR ALEXANDER, (R), TENNESSEE: And what the president has done here is throw fuel on the fire at a time when the debate about politics is a very angry debate to begin with.

(END VIDEO CLIP) CROWLEY: Former First Lady Barbara Bush is in a Houston hospital this morning undergoing what is being described as routine tests. A spokesperson for her husband says it is nothing serious. Ms. Bush has not been feeling well for the past week. The former first lady is expected to be discharged in the next few days.

Hopes are dwindling for 46 missing South Korean sailors. 58 were rescued shortly after their ship sank Friday night in the waters between North and South Korea. But since then, no survivors or bodies have been found. The country's defense minister says the ship appears to have split in half. The navy plans to salvage the ship in an effort to learn what happened.

And the tea party movement is kicking off a new tour. It started yesterday with a rally in Democratic Senate Leader Harry Reid's hometown of Searchlight, Nevada. The keynote speaker, Sarah Palin. The former Republican vice presidential candidate urged demonstrators not to back down in the aftermath of the health care reform vote.

Those are your top stories. Up next, much more "Fareed Zakaria GPS."


ZAKARIA: Robert Samuelson, what do you make of this argument that there is no market-based system you can point to that says, you know, this works better? You look at even emerging market economies, I can think of a country like Singapore, and health care is still basically a government-provided or government-paid, depending on the model. So can we be sure that a more marketized system would work better?

SAMUELSON: It is certainly true that health care is not part of the free enterprise system as we usually conceive it. Half the spending in the health sector is already by the government, Medicare, Medicaid, veterans, local support for clinics, so the spending is already heavily public sector. Almost every part of the system is regulated, nursing homes, drug approvals, on down the line. So the question is not whether or not we're going to have government controlled or a free market system. The question is what kind of system is going to help us reconcile these irreconcilable objectives that we have. How are we going to balance off the different things that people want? We have evaded that choice for most of my reporting career, which now goes back almost 40 years.

ZAKARIA: And what would you do? What would be the system you would put in place if you wanted to reform the system or widen access or do a combination? What would be the Robert Samuelson health care bill?

SAMUELSON: Well, let me concede Paul's point. Initially, this is not politically attractive. I'm not running for office. But I would start with Medicare, which is the largest insurance program in the country, which basically conditions the fee-for-service system. And I would change it to a voucher system. By giving people vouchers and saying go out and shop for the best health care system you can find, that would force the industry to restructure. You would create networks of doctors, hospitals, clinics, whatever. But we need to have people talk about these things candidly rather than just asserting that we're doing things that we're not doing. In my view, we are not bringing costs under control with this legislation?

KRUGMAN: Can I just say that this -- it's not just that it's not a popular proposal. Start to think it true. You give people a voucher. Clearly, elderly peoples' health condition is very, very different. So people, who are healthy, 66 years old, would be able to get great coverage with a voucher. And people who have a chronic condition, as many people do, would be unable to buy insurance at all. So you say give a voucher. Then you have to ban discrimination based on medical history. Then you have to regulate the care. Then -- you end up -- it actually turns out that -- it sounds like we can just give everybody a voucher and have a competitive market. But then you start the qualifications. You end up back with a heavily controlled system.

The fact of the matter is -- it's actually the same logic that leads us to the health reform that just passed. You can't just say, let's let everybody buy insurance, and we'll ban discrimination based on medical history. A whole bunch of things follow from that. I think you really haven't thought this through.


KRUGMAN: The voucher system does not solve any of the problems. You do have to do something -- do you have to make some decisions that are made at a political level about what things we're going to pay for and what we're not going pay for. The idea that the market is going to absolve you from those decisions is just wrong.

ZAKARIA: And when you look at the -- the proposed budget cuts. You know, many of these measures are pushed out into the out-years. what about them makes you skeptical that they will actually happen?

SAMUELSON: Well, I am extremely skeptical. First place, I'm skeptical of the reductions in Medicare that are programmed into the system, into the bill, and are supposed to pay for substantial parts of the additional costs. I think that when Congress -- when those cuts are supposed to go into effect, that Congress will modify them or repeal them entirely. I think those cuts are iffy at best.

KRUGMAN: Basically, our system is so inefficient that there's a lot of low-hanging fruit. There's a lot of things that are being done in medicine that are expensive with no health benefit whatsoever. Just identifying those is a pretty big thing. You're talking about taking moves to at least start trying to reform the payment system for health care, which, right now, is basically by what you do, not by the results.

All of those things are uncertain, but this is what it's going to look like. If you ask the question, what could you ever expect to see happen in terms of controlling health care costs, it would be with a series of partial, tentative pilot steps. The CBO scores most of those things as being worthless because it doesn't know whether any one of them will work. The odds are that some of them will.

ZAKARIA: Why not go down the road -- I mean, it seems to me there's two-ways you could bring health care prices down. The one is that the government in some sense rations the service. The other is that the market, that is prices, the consumer rations the services through price mechanisms. You are a very distinguished economist. Wouldn't the more efficient way be to have prices rationed rather than government rationing?

KRUGMAN: So if you do -- if you get to the late chapters in your textbook in Econ 101, you get to stuff about possible market failures, lack of information, market power, monopoly power, the various reasons why markets can fail. The thing about health care is every single one of those market failure arguments applies with a vengeance in health care. This is just not a case where the market can -- does a very good job. We have actually seen that, right?

The proof of the pudding is the United States still has got -- we have the most privatized, most market-based health care system in the world. We also have the most expensive health care system in the world. That's -- in a way, the data are trying to tell you something. This is not a case where -- where the -- I'm a big believer in free markets. I think they do wonderful things in the market for wheat. They work pretty well in the market for cars, in the market for electronics. But health care is just not an appropriate domain for free-market ideology.

ZAKARIA: We will have to end on that note.

Paul Krugman, Robert Samuelson, thank you very much for a spirited discussion. Thank you.


ZAKARIA: Now for the question of the week. Here's what I want to know. As we head into the Easter period for Christians, and Passover for the Jews, I want you to answer an age-old question: Is religion more of a force for good or evil in today's world? Let me know what you think. As always, you can go to our web site to see some great answers to last week's questions.

Now, as I do every week, I would like to recommend a book. It's called "The Great Inflation and its Aftermath: The Past and Future of American Affluence." It's by our guest today, Robert Samuelson. It's one of the best books I've read that, in a sense, sheds light on the causes of the recent financial crisis. Its thesis is one of the most intriguing. Samuelson says that the crash was not caused by greedy traders or lack of Wall Street oversight, but that fundamentally it was by the wealth that Americans accumulated in the 28 years before the crash and the period of low inflation. He says it is boom and bust all over again in a sense. Read it to understand the unusual times we live in.

And now for the "Last Look." Don't bargain on women's rights. That's what this protest sign in Yemen says. But these women are not protesting for what we, in the West, think of as traditional women's rights, the right to vote, to hold a job, to be independent. No, they are fighting for a woman's right to marry even if she is a child. More than a quarter of Yemen's girls are married by the time they are 15. In some Yemeni provinces, the average marrying age for females is eight years old. Incredibly, these women want to keep it that way. And they are holding up their Korans because they believe the holy book backs them up.

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