>> from our studios in new york city this is "charlie rose." >> charlie, the obama administration unveiled its $4 trillion fiscal 2016 budget.

here to talk about it is the man who assembled it, omb's shaun donovan. thank you so much for being with us. a budget is a pathway, and architectural plan. what is the theme or message of this budget? >> nobody puts it better than the president. he said at the state of the union that this is about middle class economics. we are hearing from different folks that this is the most comprehensive vision for middle-class economics that they have seen. really, if you think about it, we have made enormous fiscal progress and economic progress in our country. but we are still not seeing the wage growth that we need to. because of that, inequality is too high. what it tries to do is lay out

the three things we need to help families raise their wages. we should try to make their paychecks today go a little further. second, what can we do to spur the growth of jobs? whether it is in emerging technologies or manufacturing. and what are the things we can do to make sure our people are ready for those jobs? starting with early childhood education and all the way through community college. >> one of the cliches of this town is that budgets are dead on arrival. they always say that. we know 95% of this budget will be enacted. it is the margins that make the difference, the 5% or 10%. in a $17 trillion economy, can that generate change? >> look at what has happened the last few years. we have gone through gridlock and sequestration.

and if you ask real people whether the fact that the government couldn't pay its bills, that we were choking off funding for building our roads for educating our kids, for research and development -- our economy is the most innovative in the world. choking off the basic r&d that leads to that, we felt that in the economy. and whether it is close to the one million jobs we lost because of the economic uncertainty, and when we started to reverse it, we reached a deal that set new funding levels and got rid of some in the sequester. we saw confidence start to rise. there is no question in my mind that if we get this right, that it makes a difference. i'm not going to say changes the world immediately but it does make a big difference.

>> to get it right, you have to get it through a congress controlled by republicans. the reaction from republicans has been rather hostile. has anything surprised you? have you seen anything that says it's better than i thought? >> first of all, the model we are building on is the model that worked a couple years ago. it's called murray ryan. it said we are not putting enough in the short run to help things in our economy grow and build the middle class. we have longer-term fiscal challenges with medicaid and medicare. deficits and debt. let's take savings from those longer-term things, move it to spending on the discretionary side. >> that budget said it is class envy and class warfare. the action is pretty hostile.

>> those are good soundbites. i came from 3.5 hours up on capitol hill. two striking things to me. everyone up there was talking about how to help the middle class. i said to members on both sides of the aisle, i am glad you agree this is our challenge. i have seen a lot of agreement on both sides of the aisle saying that maybe this is the right model to move forward. and the sequester. we need more money in international defense. we need more money into things that are going to move our economy forward. i am pleasantly surprised i have seen as much agreement as i have. >> you think they are playing on your turf? >> i think it is safe to say the president has laid out a pretty clear plan. >> corporate tax reform. there were some promising comments

from your point of view on that. what are the odds of it actually occurring this year and the biggest hurdles? >> i think this is one of a number of cases where this is able to come together and get something done. >> better than 50-50? >> i would say at least 50-50. for the first time, we have put a real thing on the cover -- a bridge. making the point that we need to invest in infrastructure. we have a proposal with bipartisan support to reform our corporate tax system and take the one time profits of companies bringing money back from overseas, it is forever untaxed. bring it back and put it to work

for infrastructure. dave camp's recommendation is to assemble a structure -- we have seen legislation following this. >> what is the biggest hurdle? >> look. the biggest hurdle is that everybody agrees, in theory, we need to get rid of loopholes broaden the base, and lower the rate. the president said we should lower it from 35% to 28%. when you start to talk about specifics, it gets hard. what we are hoping we can do is that everybody is serious enough that we can close a bunch of these loopholes. people agree it is riddled with unfairness.

>> you would fund the infrastructure proposal as a one-time tax on foreign assets. but that is not a permanent solution. >> recognizing we have been kicking the can down the road for months at a time, six years is a pretty good solution. what it would allow you to do is, first of all, increase the amount we are investing in infrastructure by 40%. it is a big boost to what we are currently doing in infrastructure. six years is a pretty big space to look at what those longer-term sources of funding might be. we think it is gaining momentum in terms of support. >> gasoline prices are at the lowest they have been in five years at least. why isn't this the perfect time to increase the gas tax? it would be good for the environment. it why is this the good time to do it? >> there are a number of folks that are vehemently agreeing with you.

there are a group of disagreeing with you as well. i heard that in my testimony this week. the president is saying he has put a constructive proposal on the table. we are happy and eager to talk about longer-term sources as well. we are not going to be dogmatic about what it has to be. >> in your administration, the deficit has come down dramatically. it's a third of what it was five years ago. the president has said it's not the short-term deficit but the chronic long-term deficit. even though you brought it down over 10 years, it would average $587 billion. is that dealing with a long-term chronic deficit? >> these are not our numbers. most of the folks that look at

these issues say if you can get deficits under 3% of gdp, you have met the key fiscal test. we do that every year through the 10 years. here is the irony. we get credit for the short-term. we tend not to get credit for the already substantial reductions we have seen in the long run deficit. why is that? the president came in office and said we had two big challenges. health care costs are growing too fast and we have this demographic bubble we are facing where, because of the baby boomer retiring, we will have more and more retirees per worker. the math is inevitable. we have made real progress on health care costs. we brought down the cost of medicare and medicaid by almost $200 billion in the year 2020. >> why isn't this the time to go all out with taxes?

>> a couple of big picture things. social security is not the key driver of our long run deficit. the president has put forward principles for social security reform. we are ready to engage. we should recognize, what is the most important thing we can do for social security? comprehensive immigration reform. the more workers we bring to this country, just this week the actuaries said that the relatively small steps the president took last year on immigration, the executive actions, has helped social security. if you think about what it would do, it's one of the most important steps we could take. >> the social security

disability fund runs out of money at the end of next year. what do you do? reallocate other social security funds? or is this an opening to look at social security reform. >> let's take a page out of the book of congresses, democrat and republican, for many years. that is a simple reallocation. take a bit of the payroll tax, move it to the disability trust fund. combined, when you do that, both trust funds have reserves all the way through 2033. and if we are going to be serious about reform, we have plenty of time to do that. but what we should not do is cut benefits to workers who have paid in this system and have

become disabled by 20% next year. it is a simple fix that has been done many times before. >> one of your other proposals is free tuition for community college students. these are an engine of growth particularly for new arrivals. the problem is dropout rate. why not propose reforms like only giving money to those schools that graduate 50% or more? or a program for support and books and counseling? >> those are such good ideas. we've adopted them in our proposal. what we do is we say that you have to demonstrate high enough quality in terms of not just graduation rates, but what you

are teaching within that program is helping folks get jobs.- >> is there a number on it? >> the way it is framed would allow us to do that. we say you can only get these as a student. you can only get this help if you are keeping your grades up and graduating in a reasonable time. >> do you think it will be enacted? >> we think it has a real shot. this is not a mandatory federal program. we will make matching dollars to states that want to do this. >> you face a short-term potential crisis the next couple of weeks. funding for homeland security. the white house has made it clear that they will not accept any writers that undo what the president did on executive

action. is there any face-saving you can give? more funding on the southern -- it can only be a clean bill? >> this is not rocket science. homeland security has traditionally been a very bipartisan agency. it is unclear what the solution is but pass a clean bill. >> the vast majority have already voted against the bill by adding those writers. >> republicans in congress have made it clear that they want to govern. i was encouraged that in december, we got a full year funding bill or every other agents he. other people thought we wouldn't. i remain hopeful that they do the right thing. this seems to me to be the most basic -- maybe because i'm the budget director.

but isn't the most basic job of congress to fund the government and on time? we're hoping we can get back to regular order in the budget process but we're not going to get to a productive solution on 16 until we get the 2015 funding done. of all the things we should be playing games with at this point, homeland security funding, at a time when we have cyber issues and a whole range of other things, this ought to be easy. it let's just get it done and move on to the important work. >> we thank you so much for being with us today. we will be back in just a moment. ♪ >> anthony foxx is here and has been u.s. secretary of transportation since 2013. he is also the former mayor of charlotte. he unveiled a report called "beyond traffic." it is a copperheads of assessment of the challenges they will face over the next few years.

and the rise of autonomous cars are among the many ideas explored. on monday, president obama presented a $4 trillion budget. i am pleased to have anthony foxx at this table for the first time. >> good to be with you. >> tell me about this report. we all know how important infrastructure is. including roads and bridges and lots of other things. we know it is in a terrible way. we know that and that there are repeated calls and we need to do something and we need to consider infrastructure as an investment in the future. it provides a job and it gives us better infrastructure is there is increasing urbanization in the country. >> i hope this report is a wake-up call to the country that the house is on fire.

use any euphemism you want but we are not taking care of what we have and we are not even being as smart as we could be about how we use the assets out there today to enhance mobility and get people moving again. we are stuck in traffic. just about everywhere you cut it. >> we build this great interstate highway system. >> in the 1950's. using the fuel tax. it helped us build the infrastructure to have the highway system we did today. but we have two problems. a legacy system that has to be maintained and fast-growing areas of the country that need new capacity.

both problems we did not have a 1956. i think it is easy to take for granted. it eats away slowly at the foundation, but it doesn't necessarily topple you over. americans are starting to see longer travel times, more congestion on the freight rail system getting goods to market. there are all kinds of things people are seeing and this is the time to deal with it. >> and if we don't? >> travel times and become longer, congestion will become greater and all it will go slower. >> and death and injuries. >> there is a safety consequence to not addressing these issues. >> [indiscernible] what you are trying to do here is take a long view and take it beyond politics and budget arguments? >> yes. sometimes i run and when you're running and looking at your feet, you don't run as far or

fast as if you're looking at the horizon. we stopped looking at the horizon when it comes to transportation. it means we have to look at the investing. and we've got to work in more coordination to make sure our investments are going as far as they can. >> there are some alarming notes here. if we don't do anything about it, 2045 traffic congestion in omaha, nebraska could be as bad as it is in los angeles today. >> congestion is coming. we are going to grow by 70 million more people by 2045. more people trying to get places. >> the american society of civil engineers says that we need to invest $1.8 trillion by 2020. five years, they need to invest 1.8 trillion dollars. the entire budget the president

is presenting is $4 trillion this year. >> there is local money going to transportation, private dollars. >> this is not an action plan. why is it not intended to be -- it is a survey. why is it not an action? >> decision-making is so fractured. you have federal, state, local government. transit systems are largely local. rail systems are largely private or semiprivate. your aviation system is backed by the air traffic control system.

no one entity will develop an action plan. it leads all the players to get to the table, coordinate better, and help us shape the future. >> we had a terrible accident in new york last night. we are investigating, getting all the facts to prevent it from happening. can you tell us anything? >> we are still investigating. as facts come to light, we will, of course, be looking on if there are things that need to happen at metro-north to make sure it doesn't happen again. a terrible tragedy. >> governor cuomo said to me this morning that it was horrifying to be there. it was just graphic and -- >> it is horrifying.

it points out the fact that in everything we do in transportation, we first have to concern ourselves with safety. it is a big part of what the federal rail administration does. >> tell me more about what you're urging us to do here as we look toward 2045. >> three things. we've got to take better care of the system we have. the idea of bridges in disrepair and roads that are crumbling that is not the america that will be a prosperous america in the 21st century. there are places that are growing. in the south, it's one of the

two places that will see the most explosive population growth in the next 30 years. they will be overwhelmed. unless we hit more capacity. i think there are some smarter ways we can utilize our infrastructure. technology, automated vehicles innovations. >> what do you want to do with this document? start a dialogue. have a conversation about transportation. and you think it is necessary to change the dialogue. >> we are not having the right conversation. success in this area is viewed as getting the highway trust fund replenished. it is running short because people are driving and using less fuel. they are not generating enough funds so the fund has fallen short. we are budgeting to numbers but not to outcomes. climate change is obviously an issue. there are all these things the

country has to confront. >> you said that it breaks my heart because in places like mississippi and alabama, in some cases, they just can't get from a to b. >> i did a bus tour back in april. they were having to reroute around bridges. school kids were having to spend 20 to 40 more minutes on a bus just to get to school because of this. this is not the country we want to have in the future. this is a set of problems we can deal with entirely of our own making. and we have a choice in the future to fix them. >> there is talk on the part of kessler and google about driverless cars.

and also autonomous cars. we are approaching -- autonomous cars. we are approaching a time where driving is changing. >> technology is evolving to enable cars to talk to each other. an accident that might have happened today in 2015 may be avoided because a car coming in one direction can see the car coming in another direction in a way that human beings can't. so we may find that safety improves dramatically. we have had 80% reduction in safety since 1960 because of technological innovations. we still have 30 thousand hwy accidents and fatalities that happened around the country. we think technology can solve some of that. a car actually recognizing the environment and being able to move within that environment.

and we think both technologies hold a lot of promise. the more rapidly we can get those tested, we think there will be safety and mobility benefits. >> you are the proud sone of teachers. how did you get into politics? >> it is a long story. my grandparents were both teachers. teachers are some of the most wiley politicians because they are watching the school board every week. i would hear about what is going on all the time. my grandfather, when he retired, got involved in grassroots politics. candidates would come by and ask for his support and he was very influential. i learned from him a little bit about the grassroots thing.

--about the politics. i never thought i would be doing what i am doing now. >> two terms as a city council member and mayor. how did the washington appointment come about? by the way, you got your city to be the host of the democratic national convention. >> i have done some things with transportation in charlotte. focusing on building out a transit to them in an auto dependent city. innovative projects with the airport and putting rail connectivity into our airports. i suppose i caught the notice of the president and i was happy to accept his request. >> what will you do when the administration ends? >> who knows? there is so much going on. i want to have this conversation with the country. i want to influence congress's work on the highway bill and aviation bill. >> they can't do anything unless

they get the budgeting process under control. so we are not lurching from disaster to disaster. >> there have been 32 short-term measures in the last six years which has crippled the ability of local and state governments to plan and do long-term projects. we do think there is a way to invest substantially in infrastructure. the president has put on the table the ability to do that. using progrowth business tax reform to not only plug the hole in highway trust funds, but move this country down. >> [indiscernible] which is right outside of charlotte. you went to nyu law school. rather than practice law as a clerk, you went to new orleans to play jazz piano? >> i really wanted to learn how to play the trumpet.

the only place in this country i could imagine learning to play -- the trumpet is the most majestic instrument in music. >> what makes it that? >> the sound. it's one of those things. >> wynton marsalis plays it. >> he is a wonderful person and you know that. i love louis armstrong. i go back to new orleans. duke ellington and his orchestrations. i could go on and on. >> thank you for coming. anthony foxx is the secretary of transportation. back in a moment. stay with us. ♪

>> we begin with mexico and what marks the first foreign visit to the white house this year.

president obama hosted the mexican president yesterday morning. and it comes at a critical time for mexico. all of those sweeping structural reforms won him the support of the international community. it has threatened to derail the economic platform. joining me now are some mexican observers. francisco goldman from the new yorker magazine. shannon o'neil is the senior fellow for latin american studies at the council of foreign relations. joining us in progress is jorge castaneda. how would you characterize the meeting between the two presidents and the state of the relationship today between mexico and the united states? >> it was very scripted and organized. there were no surprises. most of the things were

continuing works in progress. little changes, little announcements of progress on transportation. little progress on education. some of the exchanges that are happening. a continuation of a long-standing relationship between the two. they met twice here. they met twice in mexico. building on a solid base. >> how would you characterize the presidency of the mexican president as he comes to washington with respect to his relationship to the mexican people today? >> it is a relationship that is an unprecedented crisis in modern times. it is not just that he received the lowest poll numbers and the lowest approval ratings in 20 years since the disastrous economic crisis brought on by

the peso devaluation back in 94 and 95. his relationship with the mexican people is broken. maybe irreparably so. it is a complete lack of credibility anymore. he is a president that is perceived to be really indifferent. to a lot of the suffering. that was showcased in the public arena of how he reacted in the crisis of missing students. the crisis of the apparent corruption, supposedly his wife has the title. the deed was held by a construction group.

a very big government contract that turned out his finance minister also had an apparent sweetheart deal. perception that he is indifferent to appearances of conflict of interest and indifferent to the security problems in the country. it wagered everything on a kind of public relations campaign to convince the rest of the world that it planned to modernize and reform mexico. but you can't really modernize the country that has plunged into this kind of impunity corruption, a state in which people perceive it is absolutely impossible to achieve justice at the level of official responsibility for any kind of crime.

this has distanced all of mexico's institutions and local parties, certainly, from the people right now. it is reflected in the polls and a lot of other things. >> i think they have to do something big. if this happened in the u.s. you would see cabinet ministers resign or be fired. you would see the president go to the town where the students disappeared and meet with the people. you bring in civil society groups that are protesting against you. give them a real say. none of that has happened. >> francisco, when it comes to the united states, what is he asking of the americans? >> i'm not sure but what i think what he is primarily asking for is some of his luster to be returned to him.

there are all kinds of stories in the mexican press recently where he is literally described as a laughingstock. our president has gone in one year from the cover of time magazine to savior of mexico to international laughingstock. he wants to get the perception out there that maybe, president obama -- by trying to affirm some kind of partnership, it can give him some of his legitimacy back. some of the things he should have done seems so obvious. that, i think, is what has hurt him with the mexican people. the ineptitude responding to these crises. the slow and often insulting

way, you know? one mistake compounded by another. he is going to come back to mexico. things have quieted a bit while the students were out on vacation. while he has been away, it is very important to mention, gathering steam has been the growing suspicion. did the army burn the 43 students in their incinerators? scientists, witnesses, and lawyers suspect it may be so. i think the president -- >> could he be forced to resign?

>> somehow turning against him and other powers, other citizens don't see pushing from behind. i think if the story gathers steam, this is not the story that municipal police in league with a local drug trafficking gang, somehow they disappeared the students. it turns out the army forces were directly involved and it was some kind of cover up -- it will be very hard to recover from. we are talking about what kind of measures could he take? something that people would be demanding in the united states. an independent prosecutor. an independent investigation. but that doesn't seem likely to happen.

it would be unprecedented in the mexican state take the initiative of launching an investigation against it self. but it would be really the most direct way to restore credibility. >> the one thing he has not done is expand beyond those. it's as if he came from new york and all his advisers are new yorkers. he hasn't gone broadly. it is something you might see with him trying to include other factions. >> how does it stand in terms of its economy? >> the global story has been china and its rise. and its grab for commodities and resources. brazil and peru and chile have benefited from that ride. a huge market and it economy. mexico has always been a competitor. it was selling many of the products china sold.

it was not exporting anything to china. china is fading from what it was and is not the engine of world growth the way it was before. mexico is a much more open and competitive economy. particularly the part tied to the united states. the united states is pretty strong. >> what impact does that have on mexico? >> it has a huge impact on mexico. it is the export destination. because of 20 years of nafta, we have an integrated production platform. we make cars, tvs, blenders, airplanes. as the u.s. economy strengthens, so does the mexican economy.

things that could hold it back -- many of those could be, maybe, addressed by these reforms. if you pass them, can you implement them? does he have the political capital to make them become reality? it is incredibly important. that is how mexico might have his moment. >> jorge, we are glad you could join us. give us a sense of how you see it. how do you see mexico, where it is at this moment, and what it must do to fully realize the reforms and the implementation of reforms in the economic possibilities. >> i think i heard both of our colleagues and i tend to agree with much of it. this is a severely weakened president that two years ago started off very well.

the weaknesses really were there from the beginning. shannon was saying that if he had all of his advisers from new york -- not quite. it's like having all of his advisers from new jersey. which is not quite the same thing. >> we love new jersey here. >> it makes a big difference. i know you would love to live there, charlie. in any case, it's a real issue there. the second point is that he did not, from the beginning, take on the issue of corruption. not only the reality, but the perception that mexicans have

that the pri is irredmediately corrupt. it's not necessarily true that an overwhelming majority thinks that. that's a lot of evidence seems to suggest that it is true. he was very severely wounded by that. he reacted in a very haphazard way to a real issue. i am not sure that the government's story is false. i tend to think that more or less what the government has said is true. no one has been able to prove anything to the contrary. that the army killed them, that they are still alive, that they took them away or any of these stories. i think that basically, the version is true. the issue is if he has been so severely weakened, barely two years into his six-year term. what he did already is all he's going to do. and from here on an, a sort of a lame duck for four years is going to have to administer a stagnant economy. the economy grew 2%. significantly less than the united states. we tend to grow a bit more than

the united states when the united states does well. has he been so severely weekend -- weakened that he won't be able to? there is nothing to indicate he is not able to do this. >> a bold step that he can take, or you suggest he may be so wounded that he can do nothing but be a lame duck? >> a lot of people have suggested that the first thing he should do is have a major cabinet shakeup. appoint people from different regions of the country from different professional origins different generations. that this team is exhausted and very unlikely to be able to go much further. he has to address the issue of the rule of law that he did not address during his two years.

are partly responsible for that because when we try to suggest a program that a lot like what he has done three or four years ago, we did not place that much emphasis on the question of rule of law. and we should have. he did not and he should have. he is president and we are not. not a minor difference. he has to do away with corruption at the top level. he should force his new cabinet ministers to make public their tax statements, tax returns, and asset statements. none of them are made public today. appoint to special prosecutor to investigate. and a new series of judicial

executions that took place yesterday in the city where, of 11 people killed by the army apparently five or six extrajudicial executions and the public square, according to them, it's a third step that needs to be done. drug cartels, organizing crime etc. president obama said publicly that the united states can continue to support mexico in its war on drugs. it's the stupidest fight you can have. what he should do is what people in oregon, washington state, washington, dc -- legalize marijuana. launch a campaign for an end to

the prohibitionist. the punitive regime that the u.s. put in place many years ago. and will be reviewed in a u.n. special session of the general assembly. >> i want to hear from each of you, the reaction to what the president intends to do with respect to cuba. and what impact it might have on cuba and latin america. >> we have seen a change in executive position towards cuba. we have had a policy in place and it hasn't changed things in cuba. the executive branch can't get rid of the embargo and do some of those things. congress needs to step in. it puts a put the ball back and castro's court. i tend to think they won't want to reciprocate because part of their strength comes from

excluding the united states. it makes it difficult to deal with deprivation. it might change u.s. relations with the rest of latin america. we are often a punching bag. sometimes rightly, sometimes not. the cuba target is easy and that is taken away. if the president goes to the summit of the americas, cuba will be there for the first time. obama has said that he will go and be there as well. it takes away this old dichotomy and the hypocriticalness. it opens up the u.s. to work with other countries. almost less for cuba and more how we deal with other countries. >> i agree with almost everything shannon said. it will be interesting to see in cuba, how it changes. i don't think anyone wants to

see cuba suddenly become a new version of miami. i think it's going to be really interesting to see if that crazy hybrid of that discredited communist totalitarian regime did have some remarkable achievements in education. how that very educated populace is going to adapt to a new system will be really interesting. an interesting laboratory for the rest of latin america. >> jorge, what about cuba? >> president's decision was a major step forward. for me, there is something that remains unclear.

whether there is a secret or understanding that even if it's done unilaterally, there will be a political opening. the embargo will not be lifted. the economic impact of president obama will be very minor for cuba. the symbolic importance is there. nothing much will change for the cuban people. whether castro is ready and willing to carry out the political opening or not will mean a lot for the cuban people. for president obama, and latin america. perhaps now, countries like mexico, brazil, chile, colombia -- they can begin to push and nudge cuba towards democracy elections, respecting human rights. stop accepting the principle of

the cuban exception. that they are allowed to do what people in brazil and in chile fought against for years and years. but when somebody else does it it's because the americans are against them. the americans are not bothering them anymore. maybe the mexicans and brazilians will tell you but -- cubans, it is time to have an election. it's time to let people out of jail. radio stations, unions political parties, freedoms, etc.. this is what they fought for for 30 years. >> thank you for joining us. francisco, thank you, from new yorker magazine. his new book is called "the

interior circuit: the mexico city chronicle." and shannon o'neil, whose new book is called "two nations, indivisible." thank you. ♪

>> live from pier three in san francisco, welcome to "bloomberg west." we focus on innovation technology, and a future of business. i'm cory johnson. a major deal in the health care industry. buying pfizer for $17 million, the biggest move since the