world. i'm fareed zakaria. we begin an important show with the most important topic today. the economy. to talk about it, we have no lesser an authority than president obama's top economic advisor, that's gene sperling, director of the national economic council. why isn't employment picking up? we'll ask him. then we'll go global. who should be the next president of the world bank? should it be an american, as always, or should it be opened up to emerging economies, in asia, africa, south america, nigeria's finance minister says she should be the bank's next leader, and she has some very influential supporters. we will talk to her. also, the new kind of warfare we're seeing pop up more and more. dirty wars. that's what the "new york times"'s jeffrey getleman calls them, and we'll talk to him about it. first, here's my take. as many regular viewers know, i have been following the tense back and forth with iran very closely. i continue to believe it is the single most dangerous crisis that we confront today. and i'm struck by the pessimism surrounding you it. everyone seems to believe that whatever the momentary ups and downs, there is unlikely to be a deal between iran and the great powers that will avert war and prevent iran from acquiring nuclear weapons. that's not clear. there is a path to a deal. if, as with any successful negotiation, both sides can come away with something. so what would a deal look like? the united states has long demanded that iran stop all enrichment of uranium, a process that allows it to produce the fuel necessary for an atomic bomb. iran has insisted it has the right to enrich for a peaceful nuclear program. now, there's a way around the deadlock. washington has signalled that it will ask iran to stop enriching uranium to 20% or more, the level from which fuel can easily be converted for military purposes. iran has indicated that it might be willing to accept a limit and would only enrich up to 3.5, or 5%. iran can claim it's right to enrichment, but it is very hard to weaponize from that level. there are the sticking points, but iran almost accepted a deal in 2009, and it proposed one in 2010. statements from officials in both sides suggest they might embrace elements of those proposals. the crucial point on which iran must make deep concessions is comprehensive inspections. the 2011 international atomic energy agency reports lays out a series of indicators that iran might be pursuing a weapons program. the great powers should use that as a checklist of activities that iran would commit to refraining from and insist that iran allow the iaea unfettered access to its sites until the agency is satisfied that any military program has been shut down. but iran would have to receive some award for allowing such unprecedented inspection, and the obvious option would be the relaxation of sanctions, step by step, as inspections proceed unimpeded. now, for any deal to stick, it has to be accepted by two groups. the first are the hardliners in tehran led by the supreme leader ayatollah khomeni. he might be amenable. he might be cure enough to accept a deal. he has beaten back the green movement, accommodated one key rival, sidelined another, president ahmadinejad. he has also given himself room to make some concessions on the nuclear program, saying recently, islam considers the possession of nuclear weapons a grave sin. but if iran does make concessions, the united states would have to be able to accept then and relax some sanctions. this is where the second important group, republicans in washington, could be an obstacle. if they demagogue the deal or refuse to reciprocate on sanctions, the whole thing will unravel. the administration has handled its allies, russia, china, the united nations, and even tehran with skill. to succeed now, however, it has to tackle its most formidable foe with whom it has not had much negotiating success so far. republicans. let's get started. gene sperling, thanks for joining us. >> thanks for having us. >> the job numbers that came out were not what people hoped. while the economy has generated some decent growth, it is not generating jobs at the pace that anyone would want or that the administration was predicting early in its tenure. why is that? >> well, i think if you look at the actual job creation you've had over 2011 and 2012, it actually would be solid in most other context. in 2011, we actually -- our economy actually created 2.1 million private sector jobs. and if you look at the first three months of this year, even with the fact that march was below expectations, it's still about 630,000 jobs. that's well -- that's over 200,000 a month. above the pace of another two million jobs a year. you're having very solid private sector job creation. the problem is obvious. we started in a very, very deep hole. when you are starting in a hole, you have a long way back, and so we just have to stay at it and stay at it. i will say that we never thought that the pace we were on was fast enough. that's why the president went out in september and proposed the american jobs act, $447 billion initiative, which people estimated would have added an extra 1 million to 2 million jobs. now, fortunately, it got the payroll tax cut, the veterans tax cut, the unemployment insurance, and those are helping, but just think about how much stronger the job market would be if just two of the things he had proposed that the republicans said no to had passed. one, teacher layoffs. secondly, construction jobs and infrastructure. i think if those two things had passed, we would be knocking on the door of going under 8%, being into the 7% unemployment, and making much further progress, but at least we've been able to pass the important components that at least have helped keep the recovery strong even with some of the headwinds. >> let me ask you about the buff felt rule. the buffett rule, it is suggested, is going to raise billions over the next ten years. he is going to spend $45 trillion. so is this about economics? is this about deficit reduction, or is it, as your critics charge, class warfare? >> i think what it is about is it's about the basic fairness and trust in our tax code and in our government, and it's about also putting together a larger deficit reduction plan that includes the values of shared sacrifice, so, yes, on the fairness side, i think when people call for tax reform, what a lot of people are talking about, typical americans, is, yes, they want less complexity in filling out their own taxes. the most well off people in our society can then actually end up paying less than a lot of middle income families who are struggling to make ends meet. the buffett rule is very simple. it says you can do all those kind of tax planning and you can do all want, but at the end of the day, there's kind of a flat rule. if you make over $1 million, you are going to play -- pay at least a flat 30% rate. now, on the numbers, if you kept tax rates where they are today, this would actually raise $160 billion, which is significant. $160 billion over ten years. and if you allowed the tax rates to go back to where they were in the clinton era for the most fortunate, which would be 39%, then it would raise $47 billion. well, of course, that alone isn't going to solve our deficit, but that's not the issue. the issue is that an important component of an overall deficit reduction plan? and the reason why i think it is is because people in our country are absolutely willing to sacrifice if they believe we're all in it together, there's shared sacrifice. when you look at the house republican budget, they're willing to cut medicaid for people with disabilities, poor children, people in nursing homes by one-third, 10 years from now, by $810 billion, and then at the same time they won't raise one penny in revenues. they'll actually have tax cuts that could give the typical millionaire $150,000. that breaks that kind of social compact. and we're not going to put those types of burdens on the most vulnerable people in our society just so we can keep people who are making over $1 million from contributing even a single penny to deficit reduction, which i think quite a lot of them are more than willing to do as part of a balanced, pro-growth, pro-deficit reduction package. >> but you don't have a tax reform plan, and the president has never proposed one. are you going to propose one? >> well, the president put forward, as you know, a corporate tax reform plan that brought the top rate down to 28%. had a lower rate for manufacturing, more around 25%, and had a similar type buffett rule for foreign earnings. basically saying minimum tax on foreign earnings. >> i mean a comprehensive 1996 type tax where you get rid of what is essentially get rid of most of the loopholes? >> i think the president believes that what he has done in individual tax reform is put out the principles that would guide a tax reform that would essentially be part of a bipartisan negotiation. then i think, you know, to be honest, you haven't seen any of the major parties go overly detailed on tax reform because i think, as we saw in 1986, in the end the day when this happens, it usually happens because there's a bipartisan negotiation where everybody works hard, you know, holds hands, and jumps together with it, and that's the kind of thing we would like to do, and i think the biggest problem that we've seen is just that there's been an unwillingness to understand that if you're going to be cutting spending and asking for constraints in areas like medicare and domestic spending, that raising revenues has to be part of a balanced deficit reduction plan, as every bipartisan agreement before has included, and as boles/simpson and other independent groups have called for and made a foundation of their deficit reduction plans. >> we will be back in a moment to talk more to gene sperling, the president's top economic advisor, about the new fiscal nightmare that might be headed our way. in just eight months time. we'll be right back. 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[ kyle ] it's like we're connected. no we're not. yeah, we are. no...we're not. ♪ the allstate value plan. dollar for dollar, nobody protects you like allstate. this is my grandson. and if it wasn't for a screening i got, i might have missed being here to meet him. the health care law lets those of us on medicare now get most preventive care for free like annual wellness visits, immunizations, and some cancer screenings. and that's when they caught something serious on mine. but we could treat it before it was too late. i'll be around to meet number two! get the screenings you need. learn more at healthcare.gov. you don't want to miss any of this! the american economy seems to be doing better, but in eight months, the united states might find itself in a nightmarish fiscal mess. let me explain. three things are likely to come down around the same time. on december 31st, 2012, the bush tax cuts will expire. on january 2nd, 2013, the sequestration, or automatic budget cuts set in. sometime right around then, the debt ceiling limit is likely to be reached again. it will be a time when the american government as a whole has some very tough decisions to make very fast, and we've seen how poorly washington has stood up to great fiscal challenges in the recent past, and if president obama does not win election, he will be a lame-duck president. so, gene sperling, president obama's chief economic advisor, is going to explain how we get out of all this. what are you going to do? how are you going to get congress to somehow find a will to compromise within a few weeks on big issues that they haven't been willing to do for two and a half years? >> well, first of all, i actually don't know. i don't think any of us know exactly when we hit the debt limit again. i think whenever that is, i would hope that we as a country would agree that however we fight and battle and argue over deficits that we are never ever again going to see anybody using the default of the united states for the first time in our history as a budget tactic. i hope that that will be off the table forever because it's -- it would be so harmful to our country and the credit standing that we've had since the time of alexander hamilton. now, the other two issues i think you're absolutely right, which is that we will face the prospect that on january 1st, if we do nothing, that we would see all of the bush -- so-called bush tax cuts for middle class and high-income americans essentially sunset and taxes would go up for middle-class families and you would have the sequester across the board on defense and discretionary. when we agree to that type of sequester said, well, that's a good policy to do. it was just the opposite. the idea was that's supposed to be such an unthinkable policy and so equally odious to both sides that it will force us to come to the table and work on a more honorable bipartisan agreement which we know our country needs, and, you know, i don't think there's any other way to say it. the main obstacle to that has really been the unwillingness, particularly of republicans in the house of representatives, to recognize that everybody else in this country knows, which is that if we're going to do something about our deficit, part of it has to be solved with revenues, particularly revenues that ask those that are most well off to contribute, and i think we just have to hope that with those guns to our head, that this would be a time when we -- people would put ideologies aside and have the type of honorable compromise that would help our country move forward, but nobody knows, and we will have to -- we'll have to see how it goes. >> paul ryan this week said the president walked away from simpson-bowles. he set up the cantor-biden talks to fail. he set up a sequestration process that he knew would unravel. that he is not serious about deficit reduction. >> well, obviously, i could not disagree more, and while i like paul ryan personally, i do not think at this point he has contributed in any way to our country moving forward on a bipartisan deficit reduction plan that reflects shared sacrifice. i mean, paul ryan talking about walking away from a balanced plan like bowles-simpson is like, i don't know, somewhere between laughable and a new definition for chutzpah. he was on the commission and voted against it. that plan, the bowles-simpson plan, actually calls for raising more revenues than president obama has. so president obama says that as part of an overall $4 trillion deficit reduction plan, you should have $1.5 trillion of revenue. bowles-simpson says it should be more like $2 trillion. paul ryan says, not only is it zero, but he proposes cutting taxes more and doing everything on spending cuts. so he -- his budget has become the poster child for an extreme budget that puts all the burden on the most -- on the middle class and the most vulnerable, and it includes no revenue. when the core of bowles-simpson was a balance of revenue and entitlement savings and a principle that you don't put much burden at all on the most vulnerable in our society. >> finally, let me ask you about a speech you made. you made a speech that was characterized by 'the financial times" as an argument for industrial policy. i'm not sure i would put it exactly that way. it was an argument for aggressively helping manufacturing return to the united states. christina romer, who used to work at the white house, criticized this basically saying when you give preferences to some one specific set of industries, they sit in place forever. look at the subsidies for oil and gas. the market distorting. the whole process gets politicized, and it won't do very much to change the essential transformation of the american economy that is going on that is a way for manufacturing and towards services. >> i think that the idea of an industrial policy where people in the government try to pick winners and losers, what particular industry or types of industry will be successful, i think, is not wise. i don't think we're smarter than the market, so i don't support that active type of industrial policy, but, a core of economic policy is that there are certain types of investments in your country that have a stronger benefit to the country and the workers and the productivity as a whole than any particular company can fully capture. what i was arguing was that the broad area of manufacturing -- not a specific industry within manufacturing, but the broad area of manufacturing punches above its weight economically. think about it. 90% of patents come from manufacturing. 70% of private sector research and development comes from manufacturing. 60% of exports. i think, you know, i cited a lot of studies, but the one i thought was most compelling was one by the "harvard business review" where they point out that when you lose your manufacturing capacity even for a moment, you don't just lose your capacity to build that product, which maybe could be made cheaper somewhere else now. you lose your capacity to win the products of the future, and so, therefore, when we let our manufacturing capability erode, it didn't just hurt us at that moment. we lost competitiveness to other countries, south korea and others, that we never should have, so i think this is not industrial policy that's picking winners and losers. this is just recognized that there are certain types of economic activity that have a broader positive economic impact for our country as a whole beyond what it does for the specific companies and workers in those private sector entities. >> gene sperling, thanks for joining us. >> thanks for having me. >> that was gene sperling, president obama's top economic advisor. up next, what in the world. since the start of the global financial crisis, the political backlash has largely been from the right. think of the tea party. so where is the left? we'll explain up next. tdd# 1-800-345-2550 let's talk about fees. tdd# 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