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How many companies is Weezer doing ads for now anyway?
OK. I should warn you ahead of time that I’m going to be linking to NPR programs a lot. The reasons for that are: I am an NPR junkie and podcast several shows to listen to on my commute and NPR is simply the best shit out there. And by “best shit”, I mean the best media going, period. Is it liberal? I don’t know. It’s intellectual and intellectuals tend to be liberal in my opinion. Anyway, I listened to the June 30th airing of Fresh Air which had Fareed Zakaria as a guest. If you don’t know who he is, Fareed is with Time Magazine and CNN. I think I successfully linked to the transcript of the show. I want to quote some pieces of the show because Zakaria speaks so matter of factly about the world, the US and our current political situation that it’s refreshing. Dude is mega-smart and you can tell.
Here are some quotes:
GROSS: So as a result, what are some of the areas in which the U.S. used to be number one that we aren’t anymore?
Mr. ZAKARIA: I’ve looked through a kind of funny little list which, you know, doesn’t tell you everything but is emblematic. You know, the tallest building in the world is now in Dubai. The biggest factory in the world is in China. Of course, the biggest 50 factories in the world are in China. The largest oil refinery in the world is in India. The largest investment fund in the world is in Abu Dhabi. And the largest Ferris wheel in the world is in Singapore.
And needless to say, 25 years ago, almost every one of those categories was dominated by the United States. Now more troublingly, we are also losing our grip on some key indices such as patent creation, scientific publications and things like that, which are really harbingers of future economic growth.
And that - in the area, for example, of citations, the number of journals -scientific journals you produce and that are cited - the United States has had the lead, has been the number one country in the world since the 1930s. We overtook Germany in the 1930s. I think, in three years, China will overtake the United States, and that is hugely important in terms of the generation of scientific knowledge, technological advancement and therefore your ability to dominate those industries.
GROSS: And you say China is expected to outpace us in the number of patents it files.
Mr. ZAKARIA: That’s right. The number of patents one produces is again one of these bellwethers of future economic growth: How many ideas are you producing in the realm of industrial applications, chemical products, pharmaceutical drugs?
And again, the United States has absolutely dominated this field for almost a century. The fact that China is even close tells you that this is not just about copying Western ideas, about cheap labor. This is about a country that is moving up the value chain, as they say, producing more and more complex products and is determined to actually become a scientific leader and innovator.
GROSS: Now you say we’re moving toward a post-American world, and as other countries grow, America’s share of the pie will be smaller. What do you mean by that?
Mr. ZAKARIA: In economic terms, the rise of the rest is a complete win-win. The more countries that get rich, the larger the world economy, the more people there are producing, consuming, investing, saving, the more people we can sell to, the more people who can loan us money.
If you think about this financial crisis, without the centers of wealth around the world, we would not have had all the cash that came in to save American banks, even before the federal government infused money, money from China, from Singapore, from the Middle East.
This is - we’re talking about tens of billions of dollars. We would not have anywhere near the level of economic growth we have today if not for the fact that there were people in China and India and Brazil and all over the world who are still growing quite fast.
GROSS: And who are buying our bonds, like China.
Mr. ZAKARIA: And who are buying - they’re buying our bonds. They’re buying our goods. They’re buying, you know, all kinds of things, and they’re investing in our stock market. They’re investing in our - in all kinds of American instruments.
Now politically, however, this is not a win-win because politics and power is a realm of relative influence. So as China expands its role in Asia, its influence in Asia, whose role is diminishing? Of course, the established power: the United States. As China expands its role in Africa, whose role is diminishing? The United States. It’s not possible for two countries to be the leading dominant political power in Africa at the same time.
The United States is still, by most measures, one of the world’s most dynamic economies, one of the most competitive economies in the world. We have the leading companies in the leading sectors in the advanced industrial world. We have an incredibly dynamic society. We have high levels of entrepreneurship. We have the best universities in the world.
So in other words, we are an economic dynamo. We also have impeccable credit. In the history of the United States, we have never defaulted. What we don’t have is a political system that can take the very simple measures we need to take to deal with our short-term deficit problem.
To put it in perspective, if Congress were to do nothing, which is something it does so well, the Bush tax cuts would expire next year, right. That by itself, the expiration of the Bush tax cuts, would yield $3.9 trillion to the federal government over the next 10 years.
We would go to the bottom of the pack in terms of deficit as a percentage of GDP among the rich countries in the world. We would basically solve our fiscal problems short-term. We have a longer term health care issue, but we would solve our fiscal problems literally if Congress did nothing.
GROSS: So getting back to raising the debt ceiling, if the U.S. does not raise its debt ceiling, if we end up defaulting on debts, what impact do you think that would have on the U.S. and the global economy?
Mr. ZAKARIA: I tend to think it would be catastrophic. And I think that, more importantly, there is a high enough risk here that this is surely a game we don’t want to play. But have we’ve learned over the last three years, whether you look at Lehman Brothers and the effect that that collapse had on the world economy. It’s that there are these kinds of things the economists call low-probability, high-impact events that you don’t want to test. You don’t want to see whether this is one of those things that is an unlikely situation, but once it happens could have a huge seismic global effect, because then the cost of dealing with that - the aftereffects is just cataclysmic.
I think it would be huge. The United States has never defaulted on its debt. It is the leading country in the world. It has the reserve currency of the world and I think it is madness for us to be doing this when Congress has, in effect, already mandated that we borrow more money. This is what I don’t understand. By choosing to spend money at a certain level and setting tax revenues at another level, a lower level, what Congress has implied is we’re going to have to borrow the difference, right? So raising the debt ceiling is the logical consequence of Congress’s decision to spend a certain amount of money and to tax at a lower level. How can you have second thoughts about this when you, Congress, were the ones that set these levels in the first place? And besides which, it’s unconstitutional.
The 14th Amendment very clearly says the validity of America’s credit and its debts cannot be questioned. I don’t have the exact phrase, but it’s about as clear as you can get. And so for people who believe in the Constitution, it is to me, beyond bizarre that they’re doing this. And I think that President Obama should if he is forced to assert that what Congress is doing is unconstitutional and simply use his executive authority to do what he needs to, to make sure that the United States makes good on its debts.
GROSS: A lot of people in America are saying this fight in Congress, it’s just brinkmanship, it’s just politics, they’ll definitely raise the debt ceiling because they have to.
Now you have contacts around the world. So when you talk to your financial contacts and political contacts in different countries, countries that would be affected if we began to default on our debts, are they thinking oh, this is just politics, this is just brinkmanship, they’ll eventually raise the debt ceiling because they have to? Or are they really scared?
Mr. ZAKARIA: I would say, as you can imagine, it varies. I was in Moscow three days ago and on a panel discussion, a very senior Russian official said we think that the United States will come to its senses and do the right thing and raise the debt ceiling. And then he gulped and he said: in any case, the consequences of thinking otherwise are too grave to even consider. In other words, people are hoping that the United States will come to its senses, but certainly, this has been one more event that is eroding America’s political legitimacy and power.
You know, power is a very intangible thing. A lot of it is perception. And if there is a perception that the American political system is completely paralyzed over what most people around the world see as a bizarre debate. Because with the gap we have, there’s simply no way you could close it without doing both tax increases and spending cuts. And that therefore, you know, it seems to everyone the obvious answer is to have a compromise. And that we cannot even achieve that simple compromise is strange. You know, the worrying thing here is we are approaching a debate that’s really about money in a theological manner - as though there is simply no way to bridge these differences. But this is not theology. This is not something, you know, where a Muslim is talking to a Christian about the definition of hell. This is about money. You literally can split the difference, and that’s what compromise is.
GROSS: Spell out a little bit more what the catastrophe would be like if we defaulted on our debt.
Mr. ZAKARIA: If the world worried that the United States was losing the political capacity to deal with its balance sheet, its fiscal issues, its tax and revenue polices, they would ask for more money to lend us money. In other words, they would want higher interest rates to lend us money. Now to understand what that would mean, if you would were to have a doubling of interest rates in the United States - which is not an unimaginable scenario, only a few years ago interest rates were about twice what they are now - that would be, I think, $500 billion a year more. In other words, that would be a huge cost to the American system. The deficit would explode. It would mean that you would have no ability to spend any more money; it would be crippling. We would go from a budget deficit that’s nine percent of GDP to 15 percent if GDP. So this is a huge, huge danger. And for us to be playing, at a time when we are all concerned about the long-run fiscal health of the United States, is, to me, bizarre. And as I say, you know, it’s so easily solvable.
If you were to enact Simpson-Bowles, the deficit reduction plan that that commission, that bipartisan commission put together, in 10 years the United States budget deficit goes from nine percent of GDP today, to 2.2 percent of GDP, which I think would make it the second lowest of the major economies in the world. We would solve our problems. And that plan is eminently sensible, you know, it is a mix of spending cuts and tax increases. Most of the tax increases are done by closing loopholes. It doesn’t raise rates. In fact, it lowers the corporate income tax rate. And yet, we can’t get behind something that sensible.
GROSS: So in talking about conservative opposition to raising taxes, Grover Norquist, who’s the head of Americans for Tax Reform, which is a group that believes no tax is good. He gets many Republicans to sign a pledge that they won’t raise taxes, any kind of tax. And a lot of Republicans have signed on to that. Is that an example of what you’re describing as a theological kind of debate, as opposed to a political debate of compromise?
Mr. ZAKARIA: Exactly. Because the truth of the matter is we tax at about 18 percent of GDP. We’re spending at 23 percent of GDP. There’s simply no way you can close that gap entirely with spending cuts. And the worst and most damaging thing that has happened in the last few weeks is that Grover Norquist has decreed - it’s almost like Vatican pronouncements - that even the closing of tax loopholes cannot be abided, because closing a loophole is technically raising taxes.
So that stupid loopholes that are really institutionalized corruption, that have been made in the tax code to favor certain industries or favor certain interest groups in return for campaign contributions - we can’t even close those because he says that’s technically raising taxes on someone and Republicans have signed a pledge that they will raise taxes on no-one. So you’ve lost the one kind of easy mechanism that the Simpson-Bowles commission found to raise revenues without raising general rates. And as I say, it leaves you with the feeling that the system has now become, essentially, paralyzed.
And, you know, this Republican dogma about taxes is one piece - one very important piece of it because you simply don’t, you know, this is not really about politics at this point, you know, political ideology. The math doesn’t work. You simply cannot get to closing a deficit and a debt of the nature we have without some additional revenues.
GROSS: How do American tax rates compare to comparable countries?
Mr. ZAKARIA: Well, there are two ways you could think about American tax rates. You know, I hear a lot of people say we are overtaxed. Now this can’t be a statement in the abstract. To be overtaxed means one of two things: we are overtaxed compared with American history, or we are overtaxed compared with other countries. We are, I think, we have the second lowest tax burden of the major advanced industrial economies. I think Japan is lower. We are the second. Every other advanced economy - Germany, France, Britain, all the northern European countries - all of them have higher tax rates than we do. Federal taxes as a percentage of our GDP in America are at their lowest point since 1950. In other words, compared with our own history, we have extraordinarily low tax rates.
If you look at job creation, by the way in terms of, you know, is the current tax structure helping or hindering jobs? Well, the thing you’re struck by is the American economy created jobs like gangbusters in the 1950s and ’60s, when the top marginal tax rate was in the 70 percent range. The weakest period of job creation in the United States over the last six decades has been the George W. Bush presidency, 2000 to 2008 when, of course, tax rates have been at their lowest. So it just - there’s no real empirical evidence that would suggest that by themselves tax rates are the only thing that determine job growth one way or the other.
GROSS: One of the questions you raise in your book and that you’ve recently discussed on your CNN program is what role should the government play, if any, in helping business and science innovate? So here in the United States there’s a lot of opposition to government funding for, you know, for research projects and for education projects now. And part of that is the debt problem and part of it is just more of a, you know, ideological issue. So let me ask you how you think we compare, as a country, to other countries in terms of government helping create innovation?
Mr. ZAKARIA: Well, you know, it is funny. We have this debate in America that is almost a theoretical debate about the role of government, the proper role of government in the economy and whether, you know, government should be involved and how distorting it would be if it were. And I worry that while we are having this theoretical debate, on the other side of the globe the Chinese government is vigorously promoting industry after industry. The German government is vigorously promoting its manufacturing sector, the South Korean government is vigorously promoting its manufacturing sector - and that by the time we’ve resolved our debate, there won’t be any industries left to compete in. In point of fact, it is absolutely clear that government plays a key role in - as a catalyst, more than as a producer of any kind - but as a catalyst in promoting long-run growth.
And it does this in two ways. The first is by funding basic science and technology, research and, you know, you do that in a variety of ways. And the second is by providing some industries with some early help while their products are, as economists would say, going down the cost curve. That is to say, when you start stuff off - you look at solar energy today, it’s very expensive to make. And then somebody needs to buy the product or subsidize it while the cost comes down. Now the odd thing is, of course, this is the history of America’s technological ingenuity and advancement.
If you look at when we have dominated the world, it was the ’50s, ’60s, ’70s, ’80s. What were we doing in that period? Well, the U.S. government was massively subsidizing research and technology. We were building this huge state university system. We were setting up the NIH, the NSF, all these institutes that spent billions and billions of dollars on scientific research and technology. The second thing that was happening is that the U.S. government was buying massive quantities of new industrial and electronic products.
The computer chip for example. The U.S. government was the only buyer of computer chips for 10 years while the cost declined. NASA was the only buyer of large computers. Then you have, of course, the case of something like the Internet, which was developed by the Defense Department at a time when the commercial industries looked at the project and said it was commercially not viable. So if we were to look at our own history we would recognize the powerful role that government has played.
Now look, when the government gets involved there’s danger. Some money, a lot of money maybe gets wasted, some of the decisions are badly made, but this is true in the private sector as well. But the key is that in the long run you find very few countries that have had sustained GDP growth, technological progress and advancement that have dominated the advanced industrial world, without some crucial role being played by government.
GROSS: You travel around the world a lot, so what are some of the things you see in the infrastructure of other countries that you wish we had here? Our infrastructure was so innovative when it was designed, and so much of it is old now - whether it’s sewers, trains, roads that are cracked, the electricity grid. And this isn’t true in every city and every suburb, but in many cities and many suburbs. So what are some of the things you see in other countries that you think we’ve fallen behind on, in terms of infrastructure and transportation?
Mr. ZAKARIA: Probably the most important place we’re falling behind, and it is absolutely vital that we catch up, is digital and energy infrastructure. You know, we like to think we’re the most advanced country in the world that has, you know, we’re at the cutting edge, we’re inventing the future. People would be surprised to know that in terms of Internet speed, connectivity, cell phone usage, we’re actually the middle of the pack, in some cases towards the bottom of the pack, in terms if the pack is defined as the advanced industrial countries. France has stronger Internet connectivity than we do. They have much stronger broadband coverage. Therefore they are able to do video on WiFi, for example, in a much more sophisticated way than we can. This is going to be the economy of the future.
Similarly, in energy, the most important thing that we need we can do easily - easily but expensively - would be to build a genuine energy electricity grid, so that energy could be distributed efficiently around the country. And then you can produce it in 100 different ways. Because I think everyone understands that there is no one silver bullet that will answer the energy problem. And again there, we are not doing nearly as well as we need to.
We all know about the roads and bridges. If you travel now, really, to any of the advanced economies, what you’re struck by is just how terrible American infrastructure is. And if you talk to economists who study this, they will tell you this is a huge cost to American business - that the cost of traffic in California materially affects California’s economic growth and its GDP. That the cost of, you know, the poor train system in the Northeast, materially affects our ability to be competitive on the world stage. But, you know, it’s very difficult again. People say, well, Amtrak loses money. Well, the highways lose money too. You know, trains nowhere in the world make money if you look at them by themselves. What you have to look at them in terms of is the broader function they fulfill in facilitating interstate commerce and international commerce. And that’s the only metric by which you can judge airports, highways or trains. And yet we seem to be stuck again in this sort of theoretical debate and we’re not noticing that meanwhile the rest of the world is building, well, world-class infrastructure.
GROSS: Are you worried that it’s just going to get harder and harder to catch up, the more the infrastructure decays?
Mr. ZAKARIA: You know, I worry more about education than infrastructure, because infrastructure you can build. It’s really just money and bricks and mortar. In the case of digital, it’s making a few sensible decisions in terms of what standards we use. The thing that worries me the most is our education. We are simply turning out a workforce that cannot compete because we’re not going to have the old manufacturing jobs that we used to. We are going to need people to be engage in knowledge industries, and they’re going to have to produce things in knowledge industries.
If you look at Germany, it’s a fascinating role model. The Germans have maintained their manufacturing edge, despite being a high-tax, high-regulation economy. Why? Because the government really set about ensuring that it maintained funding for technical training, technical advancements, apprenticeship programs. It made a concerted effort to retain high-end, complex manufacturing, you know, the kind of BMW model, if you will. And they’ve done that so successfully that Germany, which has a quarter of America’s population, exports more than America does. Think about that. We have four times the population of Germany and we don’t export as much as they do. Again, it might be worth taking a look at that country and asking what are they doing right?
GROSS: You grew up in India, and you came to the U.S. in 1982 to go to college. You’re now an American citizen. You’ve been watching the anti-immigration movement in the U.S. grow. So I’m just interested in your general reaction to the anti-immigration movement.
Mr. ZAKARIA: You know, the America I came to in 1982 was a much more open, tolerant place. I know it sounds odd, because I mean by many yardsticks we’ve made enormous progress and that’s real - gay marriage for example. But there was a spirit in the air that was much more accommodating, particularly of immigrants. Ronald Reagan used to have a wonderful line where he said Americans don’t care what your origins are, they care what your destination is. And I really felt that was true of the America I came to. I think it is less true now. I think there is a certain kind of closing of the American spirit. And here’s the tragedy, if you look at one of the absolute crucial strengths the United States has going forward, it is immigration. Why do I say that? If you look at every industrialized country in the world, we all have the same problems. We’ve got a welfare state. We’ve got too many people who are going to get old. We have health care costs rising. And, you know, those are things you can fix. They’re difficult, but you can fix them. The one thing you cannot fix, you cannot change really is demographics. Every rich country in the world is going to have fewer and fewer people.
The problem that Japan has, which is so much part of its 20-year decline, is that it is simply losing people. Italy will be next. Germany will be after that. One big exception: the United States. We are the only industrialized country in the world, the only rich country that will actually gain in people. By 2050 the United States will have 400 million people, which is why you talk to any CEO who understands these trends and they will tell you America remains a powerful, powerful economic dynamo because it’s going to have more young workers who are entrepreneurs, inventors, producers and taxpayers. So that means that the United States is going to be vibrant economically, demographically - and this is all because of immigration.
The only difference between us and all these other rich countries is that we take in, legally, every year, more people than the rest of the world put together. And this is our extraordinary advantage. We take them in. We assimilate them. We know how to do it. We’re the envy of the world with regard to this stuff, and yet, what we are doing is we are now trying to copy the immigration practices of France and Germany, which have utterly failed to assimilate their populations. We are adopting this churlish, hostile attitude towards immigrants.
GROSS: Last year you gave back an award that you had received a few years earlier. You had received award from the Anti-Defamation League for - it was the Hubert Humphrey First Amendment Freedoms Prize - and you gave it back when that group stated their opposition to Park 51, the Islamic cultural center and mosque that was planned for near the World Trade Center, near Ground Zero. Was that a hard decision?
Mr. ZAKARIA: It was a hard decision because I really admire the ADL. I admire the Anti-Defamation League. I think that what they have done for decades and decades has been incredibly exemplary work, not just on behalf of American Jews and in the cause of anti anti-Semitism, which is important, but they have often stood up for other groups. And that was why I was stunned that they would take on an issue like this one - where an entirely manufactured opposition to this Islamic cultural center had been created. We are constantly talking about how we should be supporting moderate Muslims. Well, this group of people was about as moderate as you get.
They wanted to build an Islamic center with a mosque that would also have separate prayer space for Jews and Christians, that would have a board with Jews and Christians on it. I mean you find me a Christian church that has Muslims on its board. So the effort here was entirely to try to build bridges between the Islamic community, the Muslim community and other communities. The location was really, from everything one can tell, a total happenstance. They were looking for a place. Nobody focused on where it was, the fact that it was three or four blocks from the World Trade Center site. And in fact, many conservatives applauded it at the time, for all these characteristics.
You know, George Bush - the administration of George W. Bush used to look around for projects like this around the world to support. I mean if this project has been happening in some foreign country, the chances are that the United States government would actually be funding it. And so in that context, for the Anti-Defamation League to weigh in on something like this on the wrong side, struck me as a terrible tragedy. I did it largely because I wanted to send them a signal, that I expected more of them. I think we all expected more of them.
It’s understandable that right-wing, you know, radio hosts and talk shows will use this. They’re in the business of generating - manufacturing outrage. I mean every day they’re trying to scare people about something. But that’s not the ADL’s business and it shouldn’t be the ADL’s business. It has a much higher calling. And I am confident that in the long run, the ADL will return to its roots.
There you go. I posted practically the whole interview because the guy is THAT smart and THAT clear thinking. Now, I understand that, just the fact that this guy’s name is “Fareed Zakaria” means that most conservatives won’t listen to him. I mean, hey, even though he’s an American citizen he’s still foreign, right? Probably even a Muslim with a name like that. That said, if you’ve read this far I’m giving you the benefit of the doubt. Peace, bros.