>> from our studios in new york city, this is charlie rose.

>> time magazine has named its person of the year for 2013. it is the individual that has most influenced to the news and our lives for good or ill. this year's choice is pope francis. he has reshaped the image of the church dramatically. for pulling the papacy out of the palaces and into the streets, for committing the world's largest church to confronting its deepest needs and for balancing judgment with mercy. i am pleased to have nancy gibbs here at this table. this seems so obvious. >> in one sense. in another, it was such an interesting year because there were two finalists where the vast majority of us had not heard of. one was edward snowden, another

man with a mission who brought a crucial conversation. which one was the more important? in a sense, it was a surprise. >> was a close? >> it was close. to the extent that we talked about it quite a lot. i would be the first to argue that what snowden has done, we are probably only beginning to see the impact of it. he has been indicted for espionage by the united states government. he is a hero to privacy activists. but a u.s. tech company who may be looking at losing hundreds of millions of dollars in business because your servers are no longer going to be trusted, the implications of his leaks are huge. >> i find that so inconsequential in terms of comparison because it seems to

me that he did exactly what he said. he started a conversation. whereas the pope is doing more than to start a conversation. the pope is engaged in a day by day process himself, by his actions and his deeds. in one of the most important institutions in the world. >> one of the biggest, one of the oldest, one of the richest. >> exactly. so this is no contest. >> i have been struck at the response that naming pope francis. it does reflect one thing that motivates us, which is the people are fascinated by him and not just catholics. people who are lapsed catholics, people who have never been near the church, evil of other faiths are interested in what he is saying. >> tell me why.

i find, in terms of what he says, the way he behaves, how he takes on the roman catholics , the way he says let's not get crazy by dogma without giving ground on doctrine, all of that. >> he talks of the church as a field hospital. he says the world is broken. we have to tend the wounded. he doesn't talk the way we expect folks to talk. >> you can feel and touch his language. >> also, when he gave up the red shoes and a gilded cross -- he wears an iron cross around his neck. he is not staying in the papal palace. he is staying in a guesthouse in the vatican city. he is saying basically i am going to play by different rules.

some of this is bringing the internal essence of the gospel. he isn't saying that in some sense hasn't been said in 2000 years. but he is using 21st century tools. he is very aware of those tools and what he says and does is instantly shared and spread all over the world. >> but here is a guy who had no experience in what was going to happen to him. he was a cardinal in latin america who had been doing what he is doing now on that stage. yes? >> first non-european pope in 1200 years. i think that is enormously important. the places where the church is growing, where its influence is spreading is outside of europe

and outside of north america by and large. among the things he's doing institutionally and trying to stir a change in the vatican is you have this counsel of cardinals he is talking to. they are not from rome. they are from chile and congo and honduras and boston and australia. it is a much broader reach. who needs listening to, who he needs talking to -- he feels like a very global pope and he feels like a parish priest. >> i have spoken with dolan and other cardinals. they were surprised. even though he had come in second the previous time, their favorite was not him going in. >> he was all set to retire. he had it got his retirement. he is 76. he had picked at his retirement home. the people who had known him a long time are quite struck by

the transformation. if he is just animated by joy. he seemed younger. he seems to have a kind of energy. he has his kind of i'm just going to go for. it is very clear to him what he is called to do and he is writing his own rules to do it get and it is really striking to see that sense of liberation and joy and lack of self- consciousness. and then there is just profound humility. again, when he is photographed washing the feet of a female muslim prisoner, that is an incredible image to be seen. again, these are gestures that are right out of the gospel and yet there's something about seeing them reenacted in the modern age that has people watching and wondering and saying this is extraordinary. what was most interesting to me was the soothing to him preach.

he will deliver his lesson in italian and there are priest standing by to deliver it in german and french and english. sometimes he would drop the script and just start talking and he would get the crowd responding to him. i'm thinking this is a nightmare to those who have to translate and tweak and keep up with what he is doing. when he is speaking extemporaneously, there is an energy that comes from him. it was quite something to see. obviously, he is treated like a rock star. he attracted more people when he was in rio for world newsday. the rolling stones couldn't compete. >> and they treat him like a poke. this comes right out of your publication. how do you practice humility from the most exalted throne on earth?

>> placed himself right at the center. he has a point of view on all of it. >> he has an impact. all of them are laid on top of the other. >> back to the interview business. there is a famous quote in which you said "there once was a boy so meek and modest he was awarded a most humble badge.

congratulations. >> thank you. >> for all the reasons pope francis, time magazine's" person of the year 2013. back in a moment. >> the truth is that, if we

grow and we actually accelerate the growth rate, the debt will get itself managed. and if we don't, we will have all these cuts in the debt will not get itself managed. >> larry summers is here. he was harvard's president from 2001 to 2006. he served as treasury secretary under president clinton. he was director of the national economic council for president obama where he was interim role in shaping the nation's response to the financial crisis. today, the country appears to be on a rebound. the unemployment rate is 7%. the wave of good news comes ahead from the federal reserve meeting ahead where they may decide rolling back on the bond buying program known as quantitative easing. i am pleased to have larry summers back at this table. >> glad to be with you, charlie.

>> let's start with the budget. tell me how you see the budget agreement that was reached between paul ryan and patty murray. >> this wasn't a grand bargain. it was a little deal. but it was a good little deal. it prevented some mindless cutting from taking place over the next year. it allows some reasonable choices to be made. it creates some grounds for stopping the federal budget from being a big drag on economic activity as it has been over the last several years. >> because of sequestration. >> yes. and it also takes the risk of another bit of foolish brinksmanship where we close the government or worry about whether we will pay the debt off the table. there is not a lot of stuff in

it at some level. relative to some of these budget deals in the past, the stuff that is there is honest. there is very little accounting gimmickry. it is a pretty straightforward, positive, but small step. i am glad to see it happen and i think the way you restore trust and functionality is bit by bit. and this is a step on that road. >> bit by bit includes a level of bipartisanship? >> there was cooperation between both parties. i think both parties are to be credited with that. and we are avoiding what could have been quite costly in terms of further, deeper sequestration. make no mistake. make no mistake. this is a deal to stop digging deeper in the hole we are in. this does not get us out of the

hole. this does not provide for substantial stimulus to economic activity in the short run. this does not do anything about the long-run deficit issues that concern so many people but we were in a situation where we were continually digging ourselves deeper and weakening the economy and this puts a stop to that. and that is something to be praised. >> and adds some level of certainty and expectation which has not been there, resulting in because of the political issue, resulting in a lack of credibility. >> i think that's right. that is what i was trying to get at in the same way when i talked about taking the risk of a shutdown or something like that off the table. look, i think there's another thing that is positive about this. i think we've exhausted the productivity of debating the

budget in washington. for a while. and this puts an end to those debates for the next couple of years. i think we can focus on more fundamental questions, frankly, more fundamental questions, like how we will grow the economy faster, more fundamental questions like what we will do about inequality. more fundamental questions like assuring the containment to health care costs or that we get to the energy independence that is now possible as rapidly as we can. i think this puts the budget in a box for a little while. while i am sure that is disappointing to the people whose whole lives are negotiating budget deals, i think it is basically a positive thing. >> in speeches and columns, you are stepping forward to say that we need growth. we need to stop obsessing over the debt.

>> that's right. >> what makes you so sure you are right? >> in part, it is a judgment that the morality of future generations depends on many things. yes, it would be better not to leave my children a lot of debt at a 2% interest rate. it would also be better not to do for all the maintenance on the for structure they inherit. it would also be better to assure them and their children an adequate education. it would also be better to preserve america's scientific leadership in the world. it would also be better to pay government employees in a way where there is an effective functioning set of people running the government. the financial deficit is only one of them and not the least serious. the other part of it is simple arithmetic.

whether you believe in keynesian stuff about demand and stimulus or all of that, i don't know any economic class where they don't tell you that you can borrow money at 2.5% to the 3% or 1%, to invest in something that will pay at a rate of 5% or 10%, that that is not a good thing to do. i look at our country right now and we can borrow money. if we borrowed short at zero percent. if we borrow long at less than 3%. it defies belief that we don't have projects that have a payoff return that is much greater than three percent. that is the second thing that leads me to emphasize growth. the third thing is the simple knowledge that the most important determinant of what economists call debt dynamics,

how debt moves relative to income, is going to be how fast the economy grows. if we can accelerate our growth rate by only 2/10 of 1%, that will be enough to eliminate what the congressional budget office estimates as the fiscal gap over the next 75 years. and growth is also what is most important for middle-income families. it is what is most important for american competitiveness. it is what is most important for america's example in the world. that is why i keep coming back to growth. >> and the deficit is declining a little bit on its own. >> according to the congressional budget office, the best forecasts we have is projected to decline as a share of gdp for the next 10 years. after that, it is expected to increase. but the truth is -- the cbo

admits this, our ability to estimate the deficits 10 or 20 years out is frankly nonexistent. if you look at the budget deficit forecast just five years out and you look for a conference symbol, that confidence interval is 10% of gdp. we don't know where these numbers are going to be. and there is a question as to how much and how aggressively you should pretzel yourself over something you can't forecast with any accuracy at all. of course, we should be trying to control health care costs because that is the right thing to do whatever exactly the budget picture will be. but i worry about those who

would make austerity they focus on the 2030 budget deficit the driving preoccupation of american politics rather than raising middle-class incomes today, which seems to me to be at the root of what citizens want, at the root of restoring citizens' faith in our country and its government. i come back to any economic question and try to relate it to what can we best do to raise middle income. >> and as an investment in the future. >> the right public investment. the right removal of barriers to private investment. the right promotion of exports. the right steps to increase business confidence. harvard has a football stadium in the middle of an urban area.

it was built a hundred years ago. i didn't have bulldozers then. it took 18 months from the time the news conceived until the time the first game was played. can one conceive anything like that happening in the united states today? we've got to regulate wisely. there are all kinds of protections we need to make. but we need to make our decisions much more quickly and in a much more streamlined way to reduce uncertainty than we have. >> i want to come to dodd frank and the volcker rule in a moment. but is it possible, when you look at it, that we have lost some of our productivity potentially? people have been out of the labor force -- they will not have the skills for the jobs that come up in 2013, 2014, 2015. >> i think there is no question

that there are what economists call historesis. people have a very hard time going back to work. if you look at what the congressional budget office thought the american economy's potential was in 2014 as of 2007, and you look at their estimate today, it has declined by close to a trillion dollars. that trillion dollars, that is more than $3000 for every american. that is not what we are producing. that is what they think your potential is to produce. that is because worker skills have atrophied and that is why it is so urgent to promote growth in the short run because

growth in the short run also raises the level of long-run potential. >> when you look at unemployment and the budget deal that will be voted on soon, next week, what happens -- i was struck by this what happens to people who can't get unemployment insurance, who cannot get it extended and have no possibility of a job? what happens to those lives? >> it's tragic and there is increasing evidence that the children of those people end up being much less successful in school, having less chance to complete college, having lesser careers as well. so it is visited across the

generations here and some people go on disability insurance. some people are able to rely on some familial support. some people have an ability to draw down savings. but, you know, social scientists are increasingly confirming what common sense would suggest. for a child having a parent who is confident about their vocation, their work, their task is a very important and positive thing. that is part of what we are losing as long as we allow this unemployment and this non- employment to continue. seven percent unemployment is too high. but 7% unemployment makes it seem much better than it is. so many people have given up

working and dropped out of the labor force and are not counted. if all of them were counted, all of the people who withdrew are counted, we would be close to 10% of unemployment. >> it is a terrible cycle. you're not only a historian, but an educator in real life. this is called "missing from science class, why schools don't encourage -- it goes on to say that why america has fallen behind other countries in science and math is because we have written off a large part of our population as uninterested and incapable of succeeding. another point is why are we continuing to slide back in terms of math and science? is it because we, as a society, make less of an investment in those kinds of educational skills so that we fall behind to 18th and lower? or is it some other thing? you are an educator.

>> first, we don't get the quality people going into teaching that many other people do in other parts of the world. finland, where they do the best, they get students from the top of the class at the best universities going into teaching and staying in it and they do it because of how they pay and they do it because teaching is a valued and honored profession. and we don't make teaching a valued and honored profession. there is a lot to complain about american education. when people go teacher bashing, which there is a lot of out there -- but when they go teacher bashing, they are making the problem worse sometimes, not better. so we need to make teaching valued and honored. certainly compensated and that will be good to italy important for people who are physicists or

mathematicians who have a whole set of attractive alternatives in the private sector. i think that is the first or. the second part is cultural. even in a place where i work, like harvard, if somebody didn't know the names of five shakespeare lazing can talk about shakespeare, they would be humiliated to admit it. but if they don't know what exponential growth is, they would say, oh that is a technical subject in mathematics. so we have a culture that treats mathematics as something that is ok not to know, that only geeks know. they don't have that culture in much of asia where they do much better and it is a broad cultural thing that goes to an attitude towards mathematics and science. >> one of the most fundamental speeches he would make about the

disparity in income, income inequality, what did you think of that speech and how it was phrased and what he could accomplish and what it says about this president? >> i thought it was an excellent speech. i think if you look -- until some date, people would say it was 15 years ago and some people would say it was 30 years ago, but for some long time after the second world war, if you look at a graph of the nation's productivity or the nations gdp and then you look at the growth of the average guys income, the two moved completely together. that stopped at some point. and there came to be a substantial divergence. it is still true that increasing economic growth will raise

everybody's income and is hugely important. but it is also true that rising inequality has meant that a higher share of the income is going to a smaller and smaller group in the population. some of that is probably unavoidable and not to be resisted. if our best performing artists now have a chance to perform for a world market, they will earn more and that is not coming at the expense of any other americans and we shouldn't condemn it. to condemn it would be class warfare. but if and when we allow the productivity of our tax system to be eroded, if and when we don't make investments that would give everybody a chance to have equal opportunity, we are increasing inequality, hurting

incomes, and doing something very costly to the country's future. and that is what the president was trying to and i think very effectively argue in his speech. what i think we will need to find -- and it is a balance -- is a kind of middle way in this country. americans don't like, and they shouldn't like, class warfare. there is nothing to be gained from tearing down the rich for the sake of tearing down the rich. the dream of great success is what propels a great deal in america. on the other hand, to be concerned about inequality is not to be engaged in class warfare.

i was struck, frankly, by the incoming mayor here in new york. he has proposed, as i understand it, to raise tax rates on people like you and me by .5 of 1% in order to provide for universal preschool. i think that is a important and universal and powerful idea. and people who call that class warfare don't get it. they don't get in terms of the short run or their long-run interests, in the country staying together and they don't get it as a matter of morality. that doesn't mean that everything that is proposed in the name of redistribution is the right thing. but we need to find a vocabulary and, with that vocabulary, a set

of policies. and i think this is what the president was reaching towards that finds a way that is opportunity reserving, that is not class warfare, but at the same time recognizes that how the pies cut matters as well and, in many ways, often as much as how big the pie is. that will be a central defining feature of our politics to it will be something that will go very importantly to how much respect there is for american institutions. because in many ways, an even deeper problem than the economic problem is the lack of respect

that so many people have for so many institutions. and i think the sense that the world is delivering for people is right. john kennedy could legitimately ask in 1960, after the tremendous growth of middle- class incomes and opportunity in 1960, he could legitimately ask people should think not what their country should do for them but what they can do for their country. but that is because standards of living had gone most of the way towards doubling in the shortest time since the second world war. it is much harder for president to ask that given what has happened to middle-class standards of living and it is also very important that presidents be able and leaders be able to ask those kinds of questions. and that is why these issues of inequality, together with growth, to affect middle incomes are so very important.

>> i think it will be a thing in the presidential campaign, inequality and the impact. and put those words right front and center. the interesting thing from my observation, and i know a group of wealthy people. most of them i know and have said it, they would not mind a tax increase if they had a real sense of where it would make a difference. and if it meant investments and programs so that it would make the country better and make the lives of people better, it wouldn't be bogged down. and terms like redistribution of wealth would not be part of the dialogue. on the other hand, i know lots of people who object to tax cuts and would very much be in favor of tax cuts and perhaps as a stimulus to the economy and corporate in tax and sad, if they could believe the whole

range of deductions, which a moneyed class has an opportunity to influence, were eliminated. do you disagree with anything i said? >> i would be very much in agreement with you particularly on what you said about tax reform. there are many people who would certainly support taxation and have concerns about how the money is used. there are other people who just want lower taxes for the sake of lower taxes. if you look at most of the people in the house republican caucus, i think they are ready reflexive on the side of low taxes and proudly. they are a governing block of our country, whether it is ideology or not. and there are some of the cases where it is more elegant to oppose a tax increase by

suggesting that the government will waste money. and some of them may not be satisfied at all ever with how the money is being used. having said that, i think the deep tragedy in the challenges that obamacare has had over the last few months is not that people can't sign up for the website. that will work itself out. if you look at medicare part b, the prescription heart, the prescription drugs benefits, a few months in, that was looking like chaos and nobody remembers the chaos and now everybody is just used to the program. i think that will work its way through. i think that the greater cost is that, when you have moments like katrina, moments like the inability to construct a website, there is a loss of

confidence in the capacity of government to do things and that can be debilitating since government is the instrument through which we come together. the loss of confidence in government has important elements of loss of confidence in the society. >> you've been in government. let me take that for a second. you know as well. everyday there is another indication of somebody who tried to warn them, those people who were shaping the website and that this is not going to work. this is not what work. it is not ready. whether he got to the level of the president, i don't know. you would know. but in all of these cases, with hindsight, you see thousands of people saying a memo after memo and everybody looks for some justification and to cover their own performance, all of the

things that you are familiar with. but you wonder where was some guiding intelligence to say stop? >> i can say two things about that. it was an epic managerial failure. there is no excuse for. there is one other perspective that does not mitigate the first can one of the books i read in college that made a big impact on me was a book by a scholar named roberta wohlstetter about pearl harbor. what she showed was that there were a lot of warnings that pearl harbor was coming. she also showed that there were a lot of warnings and an attack was coming every month for the previous three years that turned out to be false.

so one of the things that you have to recognize is that there are always dozens of people running around with chickens with their heads cut off saying that the world will end about some problem. in most of the time, they turn out to be wrong. and you can't let yourself be completely hijacked every time somebody gives a warning or you don't do anything. so it is easy with hindsight, having seen what happened, to say, oh well, those warnings should have been heeded. but from the perspective of the people that were there, there were always a lot of warnings. all of that said, this one seemed very clear and predictable. so the president said there are not any excuses and i think he is right. but in terms of understanding the context, i think people, after one of these things,

always look and say why weren't the warnings heeded and don't recognize what statisticians call it false positive. >> but like you said, this was a gigantic fiasco. also, when you look at what the president said in terms of you, if you like your insurance policy, it will be fine. are you as generous in understanding that as well? >> i don't think the president and the administration handled the description of the program in the way that they should have. it shouldn't have been said in the way that it was said. as the president has recognized. >> finally, there is this about health care. will as a percentage of the

economy and percentage as a contributor to the economy be rising or declining in terms of the cost of health care over the next 10 years? >> my guess is that health care as a share of gdp will rise. but over the past four decades, it has been skyrocketing relative to gdp. and the new rise will be much smaller relative to gdp over the next decade than it has been historically. so historically -- i don't remember the numbers precisely health care has been rising on the order of 3% faster than gdp a year and it will be more like 1% faster over the next decade. nobody really knows, but the best guess is that it has been

bent for the last three years. that means that you are starting at a lower level and you will stay at a lower level. and the very great likelihood is that, not only is the level lower, but the growth will be lower going forward. i do think that when we, in the united states, sit down and there's plenty to get down on him a we have to recognize that we have two unsung triumphs. the first is we bent the curve on health care cost and the second is we are now on the path to being an energy exporter. those are two big things that american society has managed to do. they didn't come because of some signal, major mastro stroke of legislation from washington.

but there are things that have happened and they are really powerful things. >> and the consequences of it will be that we are a net energy exporter. >> it means that we are more secure. it means we are richer. richer and more secure and we will have a lot more jobs and the jobs will be in places like western pennsylvania. which needs jobs. and there will be physical labor jobs of a kind that will work for the people who have been hardest hit in the economy. so there is an element of luck in it. but there is an element that the written system can work. >> you chaired a commission that looked into -- and this is good news as i read it -- looked into the cost of health care around the world.

and found out -- well, you tell me. >> we found one thing that transcends all the others. the history of man was that life expectancies everywhere were kind of the same. they were short. kids died young. then over the last 200 years, there was a huge divergence within some societies and others. >> and it was the quality of health care. >> science, health care -- people in some countries lived to be 75, others 35, in some countries one in three kids died, in others one in five. so a great divergence. >> in terms of your health, if you lived here versus whether you lived there. >> it is now within reach for the world as a whole to have over the next generation a child mortality rate like the one the united states did in 1980. it is now within reach for the

world as a whole to have infectious disease rates that were like the infectious disease rates that have characterized the industrial world during our lifetime. there is only one time in all history when there will be the prospect for convergence. for bringing it back, only this time a high in favorable level rather than at the low and in favorable level of the past. it is because science has made we have drugs that treat aids and vaccines good we have science, resources and we are richer than we were before. globalization. it is possible to spread the good news. and awareness. governments have to be much more

dedicated to the interests of their people. >> finally this, this is december 6 in washington, d.c. and you say? >> charlie, i think academic boycotts on principle are poor and if you believe in academic freedom, the idea that scholars anywhere should be isolated. the way to change behavior if you don't like it is to talk to people, not to isolate them. in this particular academic boycott is much worse.

it is much worse because the idea that, of all the countries in the world that might be thought to have human rights abuses, it might be thought to have inappropriate foreign policies, that might be thought to have -- to be doing things wrong, the idea that there is only one that is worthy of boycott and that is israel, one of the very few countries whose neighbors regularly vow its annihilation, that is beyond outrageous.

>> charlie, i said some time ago with respect to a similar set of efforts that i regarded them to the anti-semitic in their affect if not necessarily in their intent. and i think that is the right thing to say about singling out israel. if there was an academic boycott against a whole set of countries that stunted their populations in some way, i would oppose that because i think academic boycotts are important. but the choice of only israel at a moment when israel faces this kind of existential threat, i think it takes how wrong this is to a different level.

my hope would be that responsible university leaders will become very reluctant to see the university's funds used to finance faculty membership and faculty travel to an association that is showing itself not to be a scholarly association but really more of a political tool. >> back to you and your background, there is some talk that stanley fischer -- go back to the fed -- do you think that might happen? >> i have no idea. stanley fischer has done a magnificent job in everything he has done. he was enormously influential and effective as the managing director of the imf. he has really been a first-rate central banker. and an important presence in the international financial community as the governor of the bank of [indiscernible]

>> did he teach a course at m.i.t.? >> indeed, he did. >> and he had an influence on you? >> he taught a course in which i was a student and ben bernanke was a student at the same time and ken rogoff was a student. olivier borchard of the imf, 14.462, graduate monetary economics. they give courses numbers. >> what happened in that course that made you decide that maybe you would become an economist and then the youngest tenured professor at harvard? >> by that time, i was already on my way to becoming an economist. this is a graduate course. but what i learned in that course and saw more clearly in that course was that these

decisions that people make, like the quantitative easing decision, like adjusting the federal funds rate, they are not just abstractions that affect finance. but when those decisions are made well, tens of millions of people live well. and when those decisions are made poorly, tens of millions of people have their lives disrupted by forces they can't begin to understand or relate to. so it seemed to me that there was nothing more important one could do than try to contribute in some way to making those decisions in more wise ways, whether those were exactly decisions about monetary policy or fiscal policy. my conviction, charlie, was that, while a doctor has the satisfaction of seeing an individual patient before them and seeing what their impact is,

the impact of economic thinking and better economic thinking while the causal change is longer and you don't immediately see a and experience the result is pervasive in its impact, whether it is better to design approaches to promoting research and investment on vaccines that have contributed to the miracle and survival that we were talking about a few minutes ago or whether it is economic policies that avoid the kind of squeeze on middle class incomes and delegitimization of institutions. i came to think that the work of economics was profoundly important and stands course helped me to see that and helped me to see that various kinds of mathematical formulations that seem very abstract to me when

applied were ultimately very, very important.. >> economics has a human dimension? >> absolutely. >> thank you for joining us. see you next time. ♪

>> live from pier 3 in san francisco, welcome to the late edition of "bloomberg west," where we cover the global technology and media companies that are reshaping our world. i'm cory johnson in for emily chang. our focus is on innovation, technology, and the future of business. let's get to the rundown. we have just learned of a new candidate to replace steve ballmer, not exactly a household name. johnny-come-lately, that is the largest public pension and apple