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Fareed Zakaria GPS

Global Affairs Panel Discusses Syria, Iran, Mitt Romney, President Obama; Guns and America; Economic Panel

Aired July 29, 2012 - 10:00   ET


FAREED ZAKARIA, CNN HOST: This is GPS, the Global Public Square. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria.

We've got a special and important show for you today. We will start with a powerhouse global affairs panel; Tom Friedman, Paul Wolfowitz, Richard Haass, Anne-Marie Slaughter, on Syria, Iran, Mitt Romney, and President Obama.

Later in the show, two of the world's leading economists, Paul Krugman and Ken Rogoff, go head-to-head on the most important economic matters of our time; the economy, the fiscal cliff, the euro and much more.

Also, why in the world does the United States find itself number one on a top ten list with Yemen, Iraq and Serbia? I'll explain.

But, first, here's my take. Mitt Romney has picked a bad time to launch an attack on Barack Obama's foreign policy. As he was speaking to the annual gathering of the Veterans of Foreign Wars this week, charging Obama with weakness, betrayal and mendacity, "NBC News" and the "Wall Street Journal" released a new poll.

It turns out that on "handling of foreign policy," Americans prefer Obama to Romney by a whopping 15 points. Romney's principal charge against Obama is that he has angered America's allies and emboldened its enemies.


MITT ROMNEY, GOP PRESIDENTIAL CANDIDATE: Shabby treatment of one of our finest friends.


Well, it turns out, again, that there's some recently released data that contradicts the claim. The Pew Foundation released one of its global surveys in June, soliciting opinions from several countries around the world.

When asked if they have some or a lot of trust in President Obama, the numbers are overwhelmingly positive across most of the world. In Britain, for example, which was Romney's first stop on his foreign tour, 80 percent of people trust Obama, compared with 16 percent who trusted George W. Bush. Most countries surveyed have much higher approval ratings of America in 2012 than they did in 2008, when Bush was President. And, by the way, consider the reasons Obama's ratings are low in one area in particular, the Arab world.

The two strongest justifications given by people in every Arab country that was surveyed were, first, that he has not been fair in dealing with the Israeli-Palestinian issue, and second, that he has used drone attacks in Afghanistan and Pakistan to go after terrorists.

In other words, the reason Obama has lost some of his global popularity is that he is perceived as too pro-Israeli and too hawkish. Think about that, Mitt Romney.

Romney has tried to use the standard-issue Cold War Republican attack on Democrats; the world is dangerous, our enemies are growing strong, Obama is weak. The problem is most Americans recognize that none of this is really true.

The world is actually quite peaceful right now. Our adversaries, like Iran, are weak and isolated. China is growing strong, but it has not used its power to contest America in major national-security terms.

The one enemy Americans recognize and worry about remains al- Qaeda and its affiliated Islamic terrorist groups, and Obama has been relentless in attacking them.

Now, Mitt Romney is a smart man who has had much professional success, but even Republican insiders have admitted to me that he has been strangely amateurish on foreign policy.

His campaign, they note, is not staffed by the obvious Republican foreign policy heavyweights, people like Robert Zoellick, Paul Wolfowitz, Richard Armitage, Richard Haass, Stephen Hadley.

As a result, he has blustered about Russia's being our greatest geopolitical adversary. Actually, it is a second-rate power. He seems willing to start a trade war with China. He's vague yet belligerent about Syria and Iran. He's gone back and forth on the timetable for withdrawal from Afghanistan.

Romney faces a tough problem. President Obama is the first Democrat in nearly 50 years to enter an election with a dramatic advantage in foreign policy. The last time was Lyndon Johnson vs. Barry Goldwater in 1964. But, unless Romney can craft a smart, strategic alternative, that gap will only get wider.

For more on this, you can read my column in this week's "Time Magazine" and on

Let's get started.

Foreign policy is the flavor of the week, finally, so let's get to it. I have a great panel. Paul Wolfowitz is former deputy secretary of Defense under George W. Bush and, then, president of the World Bank.

Two former State Department policy planning directors, Richard Haass, now the president of the Council on Foreign Relations and Anne- Marie Slaughter now back at Princeton University.

Finally, joining me from Washington, the "New York Times'" foreign affairs columnist, Tom Friedman.

Welcome. Tom, let me start with you. You talk to a lot of people in the region. What is your sense about whether Assad can hold on? So far he has defied many expectations and has held on.

FRIEDMAN: Well, Fareed, you know, I think it's the nature of these kind of regimes that they're strong, they're strong, they're strong until they aren't and then they go quickly. We just don't know when that moment will be. But the reason he has held on up until now is because he, clearly, has support -- support of the minority that he represents.

First of all, his own Alawite sect, an offshoot of Shiism, that's about 12 percent of the Syrian population, and, then, Christians who basically fear a Sunni Muslim majority taking power in Syria and, then, some Sunni Muslims who have been aligned with the regime for business and other purposes.

So this isn't a one-man show. There is support there. It's basically tribe and sect-based. They're deeply afraid. They're cornered and they're fighting that way.

ZAKARIA: Do you feel like he can hold on?

SLAUGHTER: Well, I think, actually if you look at it, he's losing ground steadily. I mean it was back in February when the Chinese and the Russians vetoed the first U.N. resolution. They essentially gave him a couple of months to roll up the opposition.

He did actually make some real gains, but, then, he's been steadily pushed back. And even a month ago if you'd said they would be fighting in Aleppo and Damascus and that you'd have an assassination of some top people right in Damascus, people would have said no.

So he's holding on, but he's getting steadily weakened. I think we're moving toward the end-game actually quite rapidly although it could be long and bloody and U.S. policy actually has something to say about that.

ZAKARIA: You think we should be doing more.

WOLFOWITZ: I think we should have been doing more a long time ago and the arguments that I heard at the time for hanging back were that the country would be broken, it would descend in chaos, the regime would collapse. All of that stuff is happening now with our not having done anything.

And I think one thing that is certainly happening as this goes on his position may be weakening, but the people who are fighting for him are now more desperate. They have blood all over their hands. It's going to be much much harder to achieve any kind of reconciliation.

I think the country's going to suffer and our interests are going to suffer as a result.

HAASS: My concern is that, ultimately, more people are going to die than the say the 17 or 18,000 people who have already died afterwards.

This is a sect-based country. You've got tremendous amount of arms. You've got all sorts of fear and vengeance in the air and I actually think as much as our time as possible now ought to be devoted to preparing for the aftermath.

Thinking who's going to help essentially prevent Syria from going the way of Iraq and Lebanon and becoming a prolonged, sect-based, violent, revenge-filled country.

ZAKARIA: Tom, you've been skeptical about U.S. involvement precisely for that reason. I think you once wrote that, "Syria won't implode, it will explode."

FRIEDMAN: Yes, I mean my concern is, Fareed, and I wrote this the other, that, you know, Syria is really a lot like Iraq in many ways; a minority-led regime, multisectarian, a state with deep fear and mistrust among different communities.

And that, you know, when it does break, you're going to need some kind of midwife, some kind of armed and trusted mediator to referee it's transition from dictatorship to some kind of new, consensual politics without getting stuck in a Hobbesian war of all against all.

And I think the American people have limited patience and desire for any high profile, Iraq-like, you know, mandate of the United States to take this on. So, you know, I'm certainly ready to listen to any alternative, an Arab League Force, U.N. force.

I don't know, but I think it's a bit of a stretch to believe that the opposition will cohere, reach out to the Alawite and Christian minorities and they will find a way without a midwife. When you have no midwife and you have no Mandela, you have a prescription for, I think, a long war.

ZAKARIA: What do you think?

SLAUGHTER: I think all these are exactly the reasons we actually do have to do much more now. I mean I think Richard actually outlined the scenario. If the conflict keeps going, it becomes increasingly sectarian; the chances of it spilling over to other countries are much greater.

We can't plan for a transition if we're not willing to help bring it about. If we try to bring it about now, it's much more likely to happen on our terms. And what we do is support the commanders on the ground who are now declaring safe zones. They now control territory, particularly on the borders. What they need are anti-tank weapons and anti-aircraft weapons to prevent Assad from pushing this back again.

I think Assad actually probably would be willing to use chemical weapons on his own people. I'm certain he will bomb them. He will do whatever it takes ...

WOLFOWITZ: And it's not just a military matter. I think American political leadership would make a real difference here in terms of helping the opposition both to cohere and to cohere around a plan that would give Syria a better chance afterwards and we shouldn't underestimate our ability to do that. I think it's important.

ZAKARIA: Paul, what do you think the lesson that you drew from Iraq is to prevent the kind of post-war problems that Iraq had?

WOLFOWITZ: I think Iraq and Syria are almost completely different situations. We're not talking about a major American ground force or an American force at all.

I mean, if anything might has some parallel, it's Bosnia where, for three years, we sat back while the country was shatter and, then, ultimately, we had to provide half of a 60,000-person peace-keeping force.

But, I think, look, Syria is going to be governed by Syrians and I don't see why people are so comfortable saying we shouldn't be arming, but it's OK for Islamist governments in the Persian Gulf that don't share our objectives, it's OK for them to be arming them.

I think trying to shape the political agenda of that future Syrian government is very important.

ZAKARIA: A lot of Americans listen to all of this and say, yes, but how are American interests directly involved? So Syria's a mess.

HAASS: We have two sets of here. We've got a humanitarian interest. I think the United States, as a matter of principle, ought to turn a blind eye when innocent people get killed the way they are in Syrian.

We have strategic interests. The fact that Iran is as involved as it is gives us, I think, a strategic stake here. Do I think either of these interests rise up to the level of vital? No and that's why the president, I believe, is right not to make an unlimited or unconditional American commitment here.

ZAKARIA: Quickly.

SLAUGHTER: Well, we do have vital interests. If you put al- Qaeda on the on hand, who are infiltrating, and chemical weapons on the other, that's the one place everybody agrees. You've got chemical weapons stocks and you've got terrorists on the ground. I actually think we have more vital interests here certainly than we did in Libya and just, on the face of it, this is one of the most strategic countries in the most strategic region in the world.

WOLFOWITZ: And it's an ally of Iran, which makes it maybe not a vital interest, but certainly a very important strategic interest.

ZAKARIA: All right. We are going to take a break. When we come back, we're going to talk about Iran and we're also going to talk about Mitt Romney with two people who might be advising him or might not when we come back.


ZAKARIA: And we are back with Paul Wolfowitz, Richard Haass, Anne-Marie Slaughter and Tom Friedman.

Tom, let's just talk about Iran for a second outside of the Syrian context. What do you think is going to happen? Obama was able to diffuse the issue of a possible war with Iran by saying, I really take this threat seriously.

I'm going to press and press them hard as possible. Containment is not an option. We will not live an Iranian nuclear program that could become a weapons program.

And so, at this point, either the Iranians have to surrender completely, I think, or President Obama faces a problem. In other words, he's kicked the can down the road, but it's going to come back soon.

FRIEDMAN: I think the Iranians are very good at reading power in the global power scene and I think they've taken the measure of the world right now and they don't think that anyone's going to force them to give up their nuclear program.

I think they realize that Israel would be very, very wary of undertaking a military action before the American election or at a time that it could tip the global economy into a downward spiral right now. I think they realize President Obama doesn't want to take military action.

They certainly know the Europeans aren't going to do anything. So I think the only thing that would get to them to move, Fareed, would be if the president put on the table the kind of minimum Iranian demand that they want, which is for some kind of peaceful, internationally-monitored, civilian nuclear reprocessing program for peaceful purposes.

To actually go right to the bottom line and say we're ready to offer you this. If you're not ready to take it, then we're ready to act militarily. I think other than facing them with that choice -- they've read the scene quite well. I don't think they're going to do anything.

ZAKARIA: Ann-Marie, the problem is if Obama does look for that kind of win-win where he gives the Iranians something, but they have to make the concessions. Does he have the political room to make that kind of concession to Iran?

In other words, part of what Tom's saying, I assume, is, and we will roll back some of the sanctions that we've put in place, et cetera, et cetera. He goes to Congress to a Republican House and says would you please roll back these sanctions in Iran. They're going to call him an appeaser.

SLAUGHTER: Well, he's not going to do anything before the election. I essentially think this issue is on hold until after the election. He's not going to attack until after the election if an attack ultimately becomes necessary and he's not going lift sanctions.

HAASS: Oh, I would keep lots of sanctions in place given their support for terrorism, given what they're doing in the neighborhood, given what they're doing for their own people.

At the end of the day, I'll be honest with you, Fareed, I not only want to deal with the Iranian nuclear program, ultimately, I would love to see Iran run by a very different kind of government.

And the United States ought to, I think, consider, over the long run, we want to have a different Iran that's part of the region rather than a threat to the region.

WOLFOWITZ: Which, by the way, I think what's happen in Syria is so important. I mean we sit here comfortably saying Assad can't survive. That's not so clear. If Assad does survive, I can't think of anything that would be more discouraging for political change in Iran and I agree political change in Iran is where the real solution will come.

ZAKARIA: Tom, the Egyptian elections. What do you make of the election of the Muslim Brotherhoods candidate, actually their second candidate, to be president of Egypt?

FRIEDMAN: Well, you know, it shows you Egypt's divided. In fact, the secular, more liberal, progressive, traditional, whatever you want to call them, voters in Egypt were a majority, but they're weren't able to, you know, coalesce to actually win the election.

So we have a Muslim Brotherhood president. We're going to have to work through this. You know, my view is very simple. Iran today is a story of political Islam in power with oil. Saudi Arabia is a story of political Islam in power with oil. Egypt will be the story of political Islam and power without oil.

How that will ultimately shake out, I have no idea. I'm just taking notes, but I find this desire to predict that it's all going to fall apart, it's all going to be wonderful. I don't know. I'm not smart enough.

Watching the Egyptian Muslim Brotherhood run Egypt, that's like watching elephants fly, something you never expected before. First rule of journalism, whenever you see elephants flying, shut up and take notes.

ZAKARIA: All right. I want to close by asking the two of you a tough or awkward question. You may choose to see it how you will. Romney does not seem to have developed a very -- a large, coherent foreign policy, a set of positions.

I mean he has sort of flip-flopped on the Afghan withdrawal date. First, he was against it. Now, he seems to be for it. He has a couple of slogans on Iran that he would be tougher without really kind of specifying exactly how. He called Russia the greatest geopolitical foe the United States has. What's going on?

HAASS: Is this a trick question, Fareed? I think what he's got to do is tie his principle theme, which is the economy to foreign policy. And this would basically make the case that restoring the foundation of American economic power needs to be front and central, much more of an emphasis on trade, which has been one of the weaknesses of the Obama foreign policy.

ZAKARIA: But he's threatening a trade war with China.

HAASS: The most recent speech actually put that to the side. It was talked about China potentially being a partner can't cheat, which everybody agrees, but it can be a partner in the world economic order.

Much what -- he's also recently said something about immigration that people with high skills and high education, stapling that to ...

ZAKARIA: You're culling all the parts that you like ...

HAASS: Well, no, but what it says I think is this is the air -- this is what makes the most sense for Romney foreign policy is to take the economics that's central to, obviously, to his campaign. You know that and everyone watching it knows that.

That's really what this campaign's going to be about and basically show him where the connection is between foreign policy and that and, to the extent he does that, I think it actually -- I'll leave it to others to say whether it's good politics, but I think that's good policy and I would actually hope the administration would do the same thing.

ZAKARIA: Fareed, I'm not a Romney advisor or a Romney spokesman so I'm speaking for myself here. I think, look, President Obama's lucky. There aren't, unless Syria collapses, which it might, we don't have a media crises. And I use the word kick the can down the road about Iran.

China's a problem, but it's a problem down the road. Most of our problems -- Afghanistan's a problem, but they've sort of kicked that can down the road. But I think it's legitimate to question, first of all, the degree to which, on Syria in particular, but more generally we are ceding to the United Nations.

We are allowing the Russians and the Chinese to veto actions that are really quite important to American interests. And, secondly and quite importantly, to use a phrase the president likes to use about false choices, posing a false choice between nation building abroad and national building at home.

The United States can't afford to lead unless we fix our problems at home, but we can't afford not to lead. The world is too dangerous and our role is, as a Democratic Secretary of State Madeline Albright said, "our role is indispensable."

So we have to fix our problems both for the sake of this country and for the sake of our leadership in the world. That's what I'd be saying.

ZAKARIA: Paul Wolfowitz, Richard Haass, Anne-Marie Slaughter, Tom Friedman, thank you very much.

Up next, "What in the World." How the U.S. compares with other countries on gun crimes and gun control. The data will surprise you.


ZAKARIA: Now, for our "What in the World" segment.

It has now been ten days since a lone gunman opened fire on moviegoers in Aurora, Colorado. The airwaves have been dominated by soul searching.

Most of the pundits have concluded that the main cause of this calamity is the dark, strange behavior of the gunman. Talking about anything else, they say, is silly. "The New York Times'" usually extremely wise columnist, David Brooks, explains that this is a problem of psychology, not sociology.

At one level, this makes sense, of course, as the proximate cause. But, really, it's questionable analysis. Think about this: are there more lonely people in America compared with other countries? Are there, say, fewer depressed people in Asia and Europe? So why do they all have so much less gun violence than we do?

The United States stands out from the rest of the world not because it has more nutcases -- I think we can assume that those people are sprinkled throughout every society equally - but because it has more guns.

Look at this map. It shows the average number of firearms per 100 people. Most of the world is shaded light green. Those are the countries where there are between zero and 10 guns per 100 citizens. In dark brown, you have the countries with more than 70 guns per 100 people.

The U.S. is the only country in that category. In fact, the last global Small Arms Survey showed there are 88 guns for every 100 Americans. Yemen is second at 54. Serbia and Iraq are among the other countries in the top 10.

We have 5 percent of the world's population and 50 percent of the guns. The sheer number of guns isn't an isolated statistic. The data shows we compare badly on fatalities, too.

The U.S has three gun homicides per 100,000 people. That's four times as many as Switzerland, ten times as many as India, 20 times as many as Australia and England. Whatever you think of gun rights and gun control, the numbers don't flatter America.

I saw an interesting graph in "The Atlantic" magazine recently. On a spectrum from yellow to red, red being the worst, it shows the number of gun-related deaths by state.

Now if you add one more piece of data, gun control restrictions, you see that the states with at least one firearm law, such as an assault weapons ban or trigger locks, tend to be the states shaded in lighter colors, meaning fewer gun-related deaths.

Conclusion? Well, there are lots of factors involved, but there is at least a correlation between tighter laws and fewer gun-related deaths. I've shown you data comparing countries, and comparing states. Now, look at the U.S. over time. Americans tend to think that the U.S. is getting more violent. In a recent Gallup survey, 68 percent said there is more crime in the U.S. than there was a year ago. Well, here's what I found surprising. The U.S. is actually getting safer. In the decades since the year 2000, violent crime rates fell by 20 percent. Aggravated assault by 22 percent. Motor vehicle theft by 42 percent, murder by all weapons by 13 percent. But guns are the exception. Gun homicide rates haven't improved at all. They were roughly the same levels in 2009 as they were in 2000. Meanwhile, serious but nonfatal gun injuries caused during assault have actually increased in the last decade by 20 percent as gun laws have gotten looser and getting weapons has become easier. We are the world's most heavily armed civilian population. One out of every three Americans knows someone who has been shot. Look, everyone is entitled to his or her own opinion. But not to his or her own facts. Saying that this is all a matter of psychology is a recipe for doing nothing. We cannot change the tortured psychology of madmen like James Holmes. What we can do is change our gun laws.

And we'll be back. Up next, a debate on the economy, Paul Krugman and Ken Rogoff join me.


CANDY CROWLEY, CNN ANCHOR: I'm Candy Crowley in Washington. "Fareed Zakaria GPS" will be back in 90 seconds.

But first, Mitt Romney took a break from meeting Israeli officials today to visit the Western Wall, one of Judaism's holiest places. The Romneys were joined by the same rabbi who also accompanied President Obama's visit to the site during his 2008 trip to Israel as a presidential candidate. We'll have live coverage of Mitt Romney's foreign policy speech in Israel at noon eastern.

Syria's opposition leaders are warning that a massacre may occur in Aleppo, the country's largest city. Military is using tanks and helicopters there to pound rebels. Some advice from the U.S. top diplomat in Afghanistan. American policymakers should heed the lessons of the recent past while weighing military options for the future in Syria and Iran. Ambassador Ryan Crocker, who is retiring this month, tells "The New York Times" that U.S. leaders should remember the law of unintended consequences and recognize the limits of America's capabilities.

Florida Republican Senator Marco Rubio was supposed to appear at a campaign rally for Mitt Romney in Iowa, but he couldn't because the plane he was on made an emergency landing in Albuquerque, New Mexico. Rubio, who's been mentioned as a potential Romney running mate, did address the Iowa rally by phone. An Albuquerque airport spokesman says Rubio's plane may have had an electrical issue. Those are your top stories. Now, back to "Fareed Zakaria GPS."

ZAKARIA: As the American economy continues to disappoint, an old debate has resurfaced. Is there anything the government can do to get things moving again? Or is it all in the hands of the private sector? To talk about this, I have two very eminent economists. Paul Krugman is columnist for "The New York Times," professor at Princeton and has a new book out, "End This Depression Now." And Ken Rogoff is a professor at Harvard University and a former chief economist at the International Monetary Fund. Welcome. Paul, let me begin with you by asking you, just how bad is it? Because at some level, you know, compared with Europe, we're doing OK. We're growing at about two percent. And we still have no housing recovery, which presumably there will be at some point in a demographically vibrant country. So is the situation as dire as -- as, you know, you write about?

PAUL KRUGMAN, COLUMNIST, "THE NEW YORK TIMES": Well, you know, there's a -- the not as bad as is one of the issues that comes up here. You say this is not as bad as the Great Depression. It is not as bad as Europe. But it's pretty terrible. I mean it's -- the thing I like to focus on is long-term unemployment. We've got around 4 million people who've been out of work for more than a year. That's devastating, that's an ongoing process of enormous devastation to families. It also means probably damage to our long run future because people who have been out of the workforce that long find it hard ever to re-enter. Young people coming out into a high unemployment environment may never get properly started on their careers. So we're doing a lot of ongoing damage. To say, well, you know, we're not Spain, we're not Greece, and things -- we're not falling off the cliff, you know, this is good. I mean but it's -- it doesn't stop the fact that this is, in fact, an ongoing crisis.

ZAKARIA: Ken, would you agree with that?

KEN ROGOFF, FORMER CHIEF ECONOMIST, INTERNATIONAL MONETARY FUND: Oh, I certainly see an urgency to it. But it doesn't mean that there are easy answers. And there's certainly a role for the government. And we've had the government doing essentially nothing in terms of fundamentals. They didn't fix the tax system, health care, if I do say so, sort of half baked. I mean, there's something coming in, but there's a lot that needs to be done. I do think there's room for infrastructure investment. There are many things the government doesn't just have to sit on its hands. And I might say we have an energy bonanza in the United States, these new sources of energy. The price of gas is one fifth of what it is in Europe. We could be having manufacturing come back here. But the whole landscape is just so dormant from nervousness over where things are going that nothing's happening.

ZAKARIA: What would provide certainty that would get businesses investing again?

ROGOFF: Well, a decisive change in the election. Not necessarily a change in the presidency, it could be in Congress. But so that -- you could get stuff done. I, frankly, think having somebody able to govern the country and move things along would be better than being paralyzed for another few years. That doesn't mean I agree with all the ideas floating out there. You're right, though, our country's become more divided. The voters are more divided. States can swing from the very left wing senator to a right-wing senator, and that makes it hard to have long-term planning if you're a business.

KRUGMAN: I just don't buy any of this.


KRUGMAN: I mean, that's not quite true. I buy five cents on the dollar of it. I buy that there is some uncertainty out there and that is an issue. But the main thing is something which is not uncertain, but known, which is that everybody in the private sector pretty much is trying to de-leverage. Everybody's trying to pay down debt. And the one thing we know is that if everyone tries to do that at the same time, the result is a depressed economy. If everybody is trying to spend less than their income, since your spending is my income and my spending is your income, the result is going to be that we fail. That in the end we just have a depressed economy, which means that this is a time when somebody has to be -- has to be moving in the opposite direction. I would very much disagree with Ken. I think that there are easy solutions. Right now the private sector and investors are begging the government to issue more debt. They're willing to buy long-term U.S. government bonds, which are protected against inflation, at an interest rate of minus 0.6 percent.

ZAKARIA: What about the role of the Federal Reserve? You want the Fed to do more, you say it can't lower rates obviously, because rates are basically zero.


ZAKARIA: So it should do this sort of creative stuff it's been doing in the -- quantitative easing I, II, III?

KRUGMAN: Well, that which, you know, is a very uncertain in its effect, but it should be doing more of that. And I'm still, you know -- when we hashed over these issues a dozen years ago with regard to Japan, we kept on -- it kept on coming up that it would really help in situations like the one we're in now if the Fed would make it clear that it is willing to tolerate a higher rate of inflation over the medium term. It can't make that happen right away. But actually a signal that it's willing to tolerate a higher rate of inflation would be really helpful.

ZAKARIA: You worry about inflation, though?

ROGOFF: No. I actually ...

ZAKARIA: You agree?

ROGOFF: I actually -- sorry ...


ROGOFF: I agree on this one. I think we should be willing to have a higher inflation rate for a while. This is a once in 75 years problem. The trouble is, how do you credibly do it? How do they make the signal? Paul has written a lot about this, and, by the way, Paul, what would you think of the idea of appointing you Federal Reserve chairman? It's a credible signal.

KRUGMAN: You know, people have been saying that Ben Bernanke should go around wearing a Hawaiian shirt, so he would be seem credibly -- and the fact of the matter is, he actually does have a taste for Hawaiian shirts. But it would be better to appoint me. Sure, that would help drive down the dollar. It would help drive up inflation.

ROGOFF: I wanted to create an argument, and I didn't get one.


KRUGMAN: No. The one thing is as long as somebody else does the actual work of running the place, because you don't want me doing that.

ZAKARIA: All right. When we come back, we're going to talk about Mitt Romney, Bain, and the explosion, the possible explosion of the Euro when we come back.


ZAKARIA: And we are back with Paul Krugman and Ken Rogoff. Ken, is Europe going to explode? Everyone thinks -- everyone says it's going to. But what I'm struck by is, the Europeans seem to somehow always just do enough to get by. The Germans write enough checks to get by, and they allow the European Central Bank to ease up in a variety of ways just enough to get by. Can they just keep muddling through?

ROGOFF: I'm not sure. I mean, it might be a slow-motion train wreck. I think a better description than just, you know, they're doing enough is the crisis keeps getting worse. And the response keeps getting bigger. But it doesn't get ahead of the crisis. And that still looks like where we are today. Spain probably will next need a program. Even bigger than anything we've seen. Because it's a much bigger economy. I believe there's no end game to this besides a political union among the countries that are in the Euro zone. And you can say -- you've got to be kidding having France and Germany in a political union, but I just don't think the single currency is going to work. They say, well, we don't need the political union, we just need to share fiscal revenues, we just need to share the banking system. But how do you do this without political legitimacy? And that is not even on the table at the moment.

ZAKARIA: But it's not going to happen. So, then, presumably the other binary choice is that the Euro breaks up.

ROGOFF: No, I don't say it's not going to happen. I feel like in my lifetime a lot of things that I didn't think were going to happen, you know, happened. The fall of the Berlin Wall and such.

ZAKARIA: Even France and Germany uniting their governments? I mean ...

KRUGMAN: Well, (inaudible) Europe is the even harder story. No, it's not -- you know, although the Europeans do have the ability to, you know, push back the disaster, the half life of those things keeps on shrinking. It used to be that a new set of measures would buy you six months of peace in the markets. Now you're lucky if it's six days. And so, I think we are heading toward a moment of truth. Probably, you know, it's hard to know exactly what it is. Probably involving Greece, because they're very close to the edge right now. And then domino ...

ZAKARIA: But despite that moment of truth, what happens?

KRUGMAN: One way or another, the Greeks run out of money. The Greek government can no longer pay its bills. Which means that there's a run on the Greek banks, which means that, you know, that the banks are closed. And when they reopen, they're ...

ZAKARIA: So, either the Germans have to transfer huge amounts of money to the Greek banks or the Greeks get out of business.

KRUGMAN: Yeah, that's right.

ROGOFF: And maybe the economy gets cauterized. They put in controls. You can't get your money in and out. So it's in the Euro, but not really in the Euro.

KRUGMAN: Yeah. But at that point -- then you have -- then you have domino effects. Then you're going to have at least fast jogs, if not bank runs, bank jogs. And I think probably actually bank runs in Spain and Italy. And then it's the real moment of choice. Because Greece, I think almost everybody thinks, is really a lost cause. But are they willing to lend the very large amounts? We are talking hundreds of billions, probably a trillion-plus of euros to keep -- to contain a run on Spain and Italy. And we don't know that. And if there's any hesitation on that, then you -- you can tell the story where the whole thing falls apart. It's amazing -- I can't believe that we're actually at this point, but I think we are. And they might string it out into next year, but it really does look hard.

ZAKARIA: One of the things you've been writing about is Romney.


ZAKARIA: You feel that the Obama campaign's attacks on Bain Capital, about his tax returns, do you think this is all legitimate? And you think that ...

KRUGMAN: Of course. I mean particularly since Romney, Romney does not have a coherent, comprehensible economic program. It's very difficult to figure out what if anything he's proposing aside from tax cuts for the rich -- for people like himself. A lot of it has been, trust me, I'm a successful businessman. I know how to make things work. And then the question is, well, exactly how did you achieve your business success, and exactly how did you get so rich? Those are legitimate questions. And look, we've always expected presidential candidates to be very forthcoming about their personal history. Their personal financial history, their business career if they had one. Romney is trying to keep everything that he did in his life before 2010 under -- under, you know, a shroud.

ZAKARIA: Do you feel like it's -- it's a legitimate relevant?

ROGOFF: I think the fact he was paying -- what -- was it, 14 percent tax rate is a real issue. It's incredibly unfair. Now he didn't break the law, he didn't make the law. But he ought to say my policies are going to change the law. That this is wrong. And so I think it's quite reasonable to talk about it. That said, I think a lot of voters may say, well, I don't like this, but I'm going to look at the economy anyway. And I want to take a chance. I mean that, unfortunately, you know, it's still a big issue.

ZAKARIA: Final issue, fiscal cliff. Do you -- I assume you think it would be a bad thing, a drag on the GDP.

ROGOFF: Yeah, yeah.

ZAKARIA: Do you think it's likely to happen?

ROGOFF: No, but I'm not sure because it's so divisive, and one side or the other may see a gain. I have no idea what's going to come out of it. I think the clear thing is we don't know which direction they're going to turn if they don't go off the cliff. Are they going to get higher taxes, lower government spending, some combination. I have no idea. And that uncertainty weighs very heavily on businesses right now.

KRUGMAN: Well, I mean, it's a game of chicken. And I actually think if Obama's re-elected, I think that there's a quite good chance that for a month or two we actually will go off the cliff, which doesn't do that much harm. It's brief, because I think Obama if he is re-elected, he has to save government by blackmail, it's not an acceptable way to run this country. And so, I'm going to call you guys bluff and let the people who are paying for your campaigns come running and demanding that you make a compromise with me. So I actually -- I would put, you know, pretty substantial odds that we will in fact, at least temporarily, see those rates go up. And then -- then it's a different game. ZAKARIA: We are going to have to leave it at that. The economy is going to be front and center for a while. So we will have both of you back. Paul Krugman, Ken Rogoff, thank you.

Up next, who is this man, and why the fuss over a new 3d model of his face? I'll explain.


ZAKARIA: How many countries are there in the world? You get different answers depending on whom you ask. The United Nations recognizes 193, including the world's newest country, South Sudan. The U.S. recognizes 195 nations. So that brings me to my question of the week -- how many countries are taking part in this year's Olympics? Is it A, 190, B, 193, C, 195, or D, 205? Stay tuned, and we'll tell you the correct answer. Go to for more of the "GPS Challenge" and lots of insight and analysis. You can also follow us on Twitter and Facebook, also remember if you miss a show, go to iTunes. You can get the audio podcast for free, and you can now buy the video version. Go directly there by typing into your browser.

This week's book of the week is called "The Righteous Mind: Why Good People Are Divided by Politics and Religion." This is an important book. It's by Jonathan Haidt, a professor at NYU. It's a rich analysis that combines psychology with politics and current affairs. Haidt explains that we arrive at our political views less through rigorous analysis and more through soft, even emotional paths. He shows us what values people on the left and right cherish, and he explains why conservatives understand liberals better than liberals understand conservatives. It's a deep and very intelligent book.

Now for "The Last Look." You'll rarely hear somebody on TV ask you to do this, but I want you to close your eyes for a second. OK? Now conjure up an image of Che Guevara. That was easy, right? You've seen his face on a gazillion t-shirts. Now, picture Che's fellow South American revolutionary Simon Bolivar. Nothing comes to mind, am I right? There are very few images of him. But don't worry, Venezuela's Hugo Chavez is coming to the rescue. This week, to mark the 229th anniversary of Bolivar's birth, Chavez unveiled a 3D impression of his face. And this is what it looks like. The likeness was created by artists who studied Bolivar's remains. Just like many politicians love to run in the shadow of Che in Latin America, Chavez has always tried to latch on to Bolivar's popularity. And surprise, surprise, Mr. Chavez is up for re-election in just a few weeks' time.

The correct answer to our "GPS Challenge" question was actually D, 205. How, you ask? Well, the International Olympic Committee recognizes a number of countries the U.N. doesn't. American Samoa, Aruba, Bermuda, the Cayman Islands, Hong Kong, even Palestine.

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