was that my -- oh, goodness. >> -- can fall flat. thank you for watching "state of the union." i'm candy crowley. go to cnn.com/sotu. fareed zakaria is viewing for those of you in the united states. this is gps. welcome to all of you in the united states and around the world. i'm fareed za car yeah. we'll start with the elections. the white house is the obama seat of power. france is coming up, china will change hands later this year. what could all of this change mean on the world stage? we have a great panel. they will look across the globe and into their crystal balls. also, james wolfo oh ns has

many claims to bank. i'll talk to him about the global economy and more. later a. look at the silicon valley facebook, pay pal, zynga. reed hoffman has been at the ground floor of all of them. and why is one of america's friends, india, friends with one of its sworn enemies? i'll explain. but, first, here's my take. we're going to hear a lot of polarized rhetoric over the next few months. the republicans and democrats will seem to disagree about everything. but there is one huge and important area where there is a possibility, a possibility of bipartisan action. that's tax reform. most americans, republicans and democrats, dislike the tax code. their right to do so. america has what is arguably the world's most complex tax code. the federal code plus irs rulings is now 70,000 pages long. the code itself is 16,000 pages.

the state of france has only 1,909, only 10% of ours. and then there are others that have innovated and moved to a flat tax with considerable success. you have to understand, complexity equals corruption. when john mccain was still a raging reformer, he used to point out that the tax code was the foundation for the tax code of corruption. see, vast amounts of cash for campaigns and in return they get favorable exemptions or loopholes. in other countries, this sort of bib bree takes place under bridges and in cash and in envelopes. in america, it is institutionized and legal but it is the same thing. cash to politicians in return for favorable treatment from the government. the u.s. tax system is not simply corrupt. it is corrupt in a deceptive

manner that has degraded the entire system of the government. congress has favorite funders through the tax code without anyone realizing it. for those who despair at the role of money in government, the simplest way to get it out is to remove the prize that congress gives away, preferential tax treatment. almost no ex sem shuns does that. the simplest fix to our tax code would be to lower the income tax dramatically, and instead raise revenues through a national sales tax or a value-added tax. the u.s. is the only rich country in the world without a national sales tax. germany has one at 19%, britain at 17%, the government loses

several hundred billions of dollars a year to tax reform. second, it provides the government with a more stable source of revenue than income taxes. income taxes flux greatly. third, americans consume too much, often using credit and leverage to do so. a consumption tax would moderate this behavior. government will always get less of behavior taxes and more of what it subsidizes. the american system is more progressive than those in europe. the federal government gets about 43% of its total tax revenues from taxes on individual incomes and profits compared with only 29% in germany and 22% in france. the balance for france and germany comes from the vat, which is. one study showed that the top 10% in america pay a larger share of total taxes.

45.1% than do the top 10% in any of the 24 countries examined. in germany they pay 31% of the taxes and in france, 28%. the best thing about tax reform is that it kills corruption. so if you ask me what type of tax code i'm in favor of, i'm in favor of any new tax code that fills one requirement, it should fit on two pages. let's get started. if 2011 was the year of revolutionary change, maybe 2012 will be the year of electro change. that includes four of the five u.n. security council members, the united states, of course, and also france and russia where mr. putin, not surprisingly got the knot and china has a big

leadership change coming, too. this represents 40% of the world's gdp. what does all of this potential change mean amidst all of the other challenges in the world? i have a great panel to talk about this. annemarie and richard are both for the state department. ann marie is and richard is the council of foreign relations. on the other side of the story, bruce is professor of politics. welcome. richard, when you were in government, would you find that there was an election? let's say sarkozy loses. will it make a difference? >> actually, it will. mr. sarcozy is running as though he wants to change france into jeerm knee and given the situation in europe right now, this might be an election that does matter. mr. hollando would implement 20%

of what he's saying, it might be a ma sure. >> ann marie? >> i think he might want to do all of those things but i'm more friend of trends in german politics. i think the eu depends on france and germany and france and germany depend on the eu continuing. >> the issues you're talking about is hollande is proposing a very, very large role for the state? >> yes. >> 75% tax rates. and also proposing that the french get out of the business of this partnership with germany in forcing discipline on southern europe? >> yes. >> you think that they will have to continuing doing that but you're worried the germans won't

be able to continue to do that? >> yes. the real concern is that germany decides it doesn't want to play the central role in the eu which has been the banker and the country that often makes sacrifices for greater political union and german voters are tired. it's in germany's economic interest to do that but politically that's not as sure of a thing as it has been. >> bruce, you do a lot of modeling for the cia, for the state department, for other governments. if you were to try to construct a model, do you think that -- about whether the euro is going to survive or collapse through this period of crisis, what would you say? >> i think the euro zone is going to likely survive for at least the next few years. longer term, that's a different story. i think richard is a little optimistic about the possibilities in france. >> you think sarkozy will likely win? >> i think he will likely win and i don't think it will make a

big difference who wins. they can move a little. they can't move far. i think we should note, with regard to france, that people thought when president obama was president-elect obama, that policies were going to be radically different than george w. bush and on the domestic front he certainly has and in some parts of the foreign policy he has. but mostly, we're still in guantanamo. we're still in afghanistan. there hasn't been this radical shift. >> well, we're pulling out of afghanistan and domestically, hang on. we've had financial reform, we've had health care. not of the scale that he proposed, but those have been bigger domestic changes that any other government -- >> there's one place that you have to admit, anne, vladimir putin becoming president -- i assume you don't think there will be much change in russian policy? >> i'm not so sure.

putin was elected, everybody knew he was going to be elected. that's not different. >> but he's already running the country. >> yes, he was already running the country and he clearly imagines another possible two terms. i do think he's going to be under different constraints. i think is he going to be facing either having to be much more repressive, really shutting down the opposition to now that he has not done or he's going to have to start reforming in the way he says he wants to do. his own account is, i stabilized the country, i increased the national income, we're now growing, we're now strong. now i can turn to sort of a more orderly transition to democracy. that's his story. that would be a way out with -- given the political pressures but it's also possible, given his background, that that's all talk, in which case he's really going to have to tighten the screws on opposition and then we may see a lot of turbulence.

>> do you think that putin is a person with whom the united states can continue to deal and he will be a likely cooperative partner on some issues like iran? because there's this whole idea that the obama administration has, which is we're going to reset relationships with russia, not because we like them but because we need for a bunch of things and we can establish a good working relationship. do you think that's likely? >> i think the administration was right to try the reset. now it's necessary to reset the reset. putin is a spoiler. when people face the kinds of choices that anne-marie described, the tendency is to use foreign policy a bit to vent and distract and my hunch is that putin will be less of a partner than he will be going forward, which is not much of a partnership. we're not talking about going back to the cold war but essentially the united states is going to have to attack this

without much help from russia. it might mean less and less role for the united nations f china and russia are not there as partners in the u.n., it's going to have to be a little narrower without the formality of the u.n. >> well, in broader terms, there is a difference between china and russia. china wants to modernize. it has a self fish interest that it wants to guard. the russians, on the other hand, are the only other that is an oil state. russia benefits from national tension. they don't benefit from the national tensions being solved. >> i think that's exactly right. the chinese benefits from tensions being solved because they need the oil and energy. the russian benefit from the price being high. and on betting on what putin will do if the price of oil is high, he will oppress because

that's the efficient way when he's got money to take people to the streets and bash heads in. then he will become more and then probably liberalize because that would be the solution. the likelihood that oil is going to drop is not real. when we come back, we're going to talk about iran.

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[ male announcer ] engine light on? come to meineke now for a free code scan read and you'll say...my money. my choice. my meineke. and we are back with anne-marie slaughter and richard haas. russia benefits from crisis oil goes up and china on the other hand benefits from int mags nal tensions being reduced and oil prices going down. but you thought that they don't quite behave that way? >> there's a gap between what you think chinese national interest would dictate and chinese behavior.

china ought to be there shoulder to shoulder partnering with us to get iran to behave. the last thing china wants is the streets to be closed and a war which would drive the prices to 3, $400 a barrel. they are a major importer. china is not there with us. they are essentially sitting back and they are not putting pressure on iran much with sanctions or anything else or even with north korea. >> do they care if iran gets a nuke? >> well, i'm not sure they care if iran gets a nuke. but, also, this is short-term interests over long-term interests because in the short term they can be cut deal with irans and get cheaper oil and actually benefit from the fact that everybody else is sanctioning iran. >> the longer term could be three or four months. they could find themselves where china has to do a rebalancing, they have a leadership transition and growth is coming

down. they've got a lot to deal with on their plat. >> suppose you were to try and construct again using game material. win-win solution that is not a war. is there a negotiated outcome? because we're having negotiations. nobody wants to put out what is the solution? what is the kind of inspection regime that would be enough to survive the world but not so humiliating to iran that they would accept. >> we have a problem similar to north korea. in the sense that in both cases we have a very close ally that feels threatened by their neighbor. we have this hostile neighbor that needs to deter. in the case of iran, therefore, i think the solution is for our government to decide, do we care more about the nuclear issue or do we care more about regime change? if there was a constructive

regime change, that might solve the nuclear problem. but our pressures on iran may be acti exacerbating the nuclear danger because of the fears that we are contemplating regime change. >> the more you threaten the regime with regime change, the more the regime will say, hey, i need to buy insurance. >> you're right. they need the capability to deter. >> i don't buy that. the iranian nuclear program has been in place for a long time. they want to use their nuclear capability to bolster their role in the region. what we want to do -- i think there is a negotiation here. i think potentially there is a negotiation which says there has to be intrusive inspections, legitimately suspect facilities and have to be real ceilings on what it is you're allowed to do and keep based on what you've done in the past. i don't think we try to get iran completely out of the nuclear business. we don't humiliate them.

but i think there's a potential deal. we've only got a couple of months to do it. i think what the israelis are very clearly signaling is that unless there is serious progress and they are persuaded that they are not using that tactically to get stuff done, they are going to either act or they will act unless they have confidence that we will act before our window closes. so i think we've only actually got a few months to show that negotiations are really going to bear fruit. i believe the israelis are more likely to attack. >> most of the conversation is about concessions by them. it seems to me that there is a deal that could be put on the table that would tie their hands to reveal the truth of what their intentions are and that is for us together with our european friends to arrange to deliver the civilian energy that iran claims it needs. they pay for it. they pay the price up to what they are spending on their

nuclear program allegedly for civilian purposes, and they are guaranteed the energy. as long as we deliver the energy, they allegedly have no reason to develop the nuclear capability. as long as they don't develop the nuclear capability, we have an incentive to deliver the energy. >> i don't think it's going to work because they obviously want to do some of this themselves. a lot of the conversation today has been about politics. you just recently had elections in iran. the so called principalists around the supreme leader won. either against this backdrop where they are willing to show no compromise before their elections, you could see iranian flexibility, maybe they are worried about military attack, they are feeling the heat of these sanctions or just the opposite. they've decided they can brazen in and out. they don't think the united states will make good on their threats or they might still be in better shape because they can throw the any inspectors out, there will be a rally around the

regime effect inside the country. we don't know. but i think this spring is going to be critical because either negotiations are going to show some promise or not. and if not, israel has to decide whether it trusts the united states to act or whether israel will act itself. so sometime in 2012th issue is going to come to a head and it's going to dominate the world, i believe this year. >> rt wiall right. the thing i worry about is the point you made, they have to make concessions but we have to make concessions. i can't think of any time in history where a regime under pressure has just cried, i surrender. >> i agree. >> they are likely particularly within divisions in their leadership. second of all, this is a hard time for us to make concessions. we have politics, too. and this is going to play out under the backdrop of an election year. >> and obama has space to go right but he has no space to go left on this issue.

if he were to start negotiations with iran direct and make some kind of concessions. >> no, but talks are -- i think he's made it clear that he's willing to go to war. the country doesn't want war overall and if he can now say, look, we are keeping pressure on, we've kept the military option on the table. we're going to prove that diplomacy can work. i think he's got some room. >> he's going to be attacked. if he goes in that direction. but he can still do it under our constitution and under our process. no one can stop him. the republican candidates can't stop him but he's only got a couple of months. not, again, because of our politics. it's because of the israeli politics. >> and woe've got to stop there. thank you very much. up next, a story that seems to be everyone's best friend. its buddies with america and israel just as it is with iran.

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and now for our "what in the world" segment. it's a country that is america's friend, israeli's friend and yet

it is also iran's friend. amid all of the talk of an israeli strike on iran, what is the country that stays friends with everyone? what in the world is going on? the country is india and it's been criticized in america for continuing to trade with iran despite coordinated sanctions. they are calling it the mullahs last best friend. they have israeli defense is this, happens to be among the world's largest consumers and importers. the type of crude best suited for india's needs happens to be iranian's oil. there have been reports that the two countries reached a trade agreement to circumvent sank

sanctions. >> are also geopolitical concerns. india lives in a rough neighborhood. pakistan has for decades believed that it needed to limit the influence in the region, particularly in afghanistan. islamabad has supported the al. they have always sided with india and its northern eallianc friends. india has rarely been a force for good around the region or around the world mainly because it has not been much of a force. new deli replaced passive. and so on with other crises in

the region in bangladesh and sir lan ka and more. new deli has really paid minor attention to its policy. 1.2 billion fewer dip me mats with the population of just four million people. americans stand to believe that all good things go together. india and america will have foreign policies, the friends and enemies. india, of course, is located in a different place. it has different interests. indians think that they can be free writers, exploit the stability of the kircurrent set. but for the world's largest democracy that is an unworthy mission. india does have a trist with --

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i'm candy crowley in washington. gps will be back in 90 seconds. president obama is in south korea today where he had a chance to peer into north korea. koreans were marking 100 days since the death of kim jong-il. mr. obama said bad behavior by the north won't be tolerated. >> north korea will achieve nothing by threats or by profve indications. on this, the united states and the republic of korea are absolutely united. >> president obama is in seoul for a two-day international summit. former vice president dick cheney is in a northern virginia hospital recovering from heart transplant surgery. he was on a cardiac transplant

list last october when i asked him about the possibility of having the transplant. >> i've got to decide on a heart pump now. i've got a piece of equipment inside me that supplements my heart. it works very well. i'm 14 months into the program and it's been functioning perfectly. >> a statement from the former vice president's office says, although cheney and his family don't know the identity of the donor, they will be forever grateful. a prosecutor in paris says the brother of a gunman killed in a standoff should be charged with complicity in seven murders and two attempted killings. they say he should also face terrorism-related charges in connection with the wave of shootings on his younger brother. he was killed after a 12-hour siege in the city of fa luge. now back to fareed zakaria gps.

only three people have ever served two terms as president of the world bank. my next guest is one of those men. james wolfonson. he's a native australian by birth but he has spent consulting here in the united states. thank you. >> thank you. >> so tell me, after a long life in the private sector, you went to the world bank and what was the -- what was your biggest take away inside -- in term of doing something that was often seen by people in the private sector as giving away money, that the foreign aid is wasted, that you can't really get growth in that way. what did you think? >> well, i went to the world bank because when i was there it was six billion people in the world and five billion lived in the developing world served by the world bank and it was already clear to me that the future was going to be in the

developing world. that the billion people in the rich world maybe in 40 years would be 1 billion 400 million. but people in the developing world would grow by several billion. so the waves towards developing countries was very clear and the fact that in those days people would look at them as the poor countries and not give them any great economic importance and while i was there, the momentum shifted and all of a sudden people said, what is china doing, what is brazil doing? and of course i was there during that period when we saw the leaders in the economic world starting to come from the developing world. but the other aspect of the world are the people left behind. the billions of people that, frankly, don't have enough to eat, have no real future, but

who are the weight of the world. and the world bank deals with those two issues. so i thought they couldn't be a more interesting place to go and when i was offered it by president clinton i said immediately i'd love to do it. >> and what did you find in terms of the aid programs? you know, there's a very standard -- not just conservative lament but a lot of private sector people say, look, all of this foreign aid is wasted. that's how you can't get growth. >> well, don't believe that foreign aid necessarily gets you growth. what i think it can get you is education of the local people, it can get infrastructure, set a framework in which the private sector can operate but it was never my belief that something like the world bank could introduce industrial projects and be responsible alone for employment. the most important thing that people want in developing countries, like in our country, is a job. they want to be able to support their families. they want to improve their lifestyle. and that is, at the epicenter of

what the bank tries to do. >> do you feel as though things are getting better everywhere or are they worse? how do you describe -- you know, good governance, corruption, is africa moving forward, is asia moving forward? >> look, i think there is a progress. i started a campaign against what i call the cancer of corruption 15 years ago. and interestingly enough, before i talked about the cancer of corruption, no bank president had ever mentioned corruption because many of the shareholders in the bank came from corrupt countries. i think they are afraid of offending them. but the point is now on the table and i think that there is some improvement. but i think the battle is far from won. i think it will take a generation, more education of young people and then i think you've got a chance on the corruption issue. but i think what you need way beyond that is appropriate

education, health care, a chance to develop the human that you have in this country and it has to start with education and that i think there is some movement forward. >> how do you think obama is doing on the economy in general? >> well, i am not as great a critic as i think some are because i think he inherited a terrible miss. whether he could have done it better, i don't know. i think what is needed now is really some clear action and it's unlikely that we will get that action in an electoral year because he can come up in the program. the republicans can come up with a program and we all know what they are talking about is really dreams. it's not going to get them through now and it will be dependent on what happens in the election. but i think it's important for the nation to understand that we've borrowed too much and i think neither party disagrees that we've spent too much in

recent years and i think the simple son boi simpson-bowles report, first of all, is a very fine analysis and came up with what i thought was a pragmatic approach. i which we could get a debate on that but it's unlikely between now and the election. >> you've been a democrat but independent-minded. >> uh-huh. >> will you support president obama in his re-election? >> if you come into the voting booth with me, fareed, i will show you my voting slip. but at this moment i think i probably would. but i'd like to see who the republican candidate is and itd li i'd like to listen to them. particularly between now and the debate, between the president and the candidate, will be very important, certainly in the past i've been democratic. >> but you must know mitt romney. you know everyone. >> i barely know him. i barely know him. >> all right. final question. you are almost 80 years old. you are an olympic fencer. you talk yourself how to play the cello.

what is the secret to managing a life in which you are able to do so many things with such distinction? do you take a special protein powder? >> i do that. but i also have for years, at the beginning of every year, since i was 15, written down things i'd like to do. >> that year? >> that year. >> and, you know, if i've wanted to be president of the united states, that wasn't possible but i thought i can could be chief justice of australia. i would write these things down and i'd have two days of dreaming about what i wanted to do. i must tell you at 78 the options are a lot less. now it's about health and it's about some of the thing that i might be able to do. but i'm looking forward, i hope, to a few more years of active life. >> but you still write it down? >> it's gotten very short. >> it's been a pleasure to have you on. >> thank you very much, fareed. and we'll be right back. >> do you feel there's a shortage of people with skills?

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ree department d hoffman is the co-founder of linkedin and founding owner of pay pal and silicon famous startups, before anyone heard of them. his new book is called "the start up of you." welcome, reed. >> great to be here. >> now, you talk about really

you think of yourself as an entrepreneur. what do you think is different? >> two things. the first thing is, everyone should think of themselves as the interpreter of their own life, at the ceo of their own career. not just brand but how do you infest in yourself and how do you use business intelligence in order to navigate. us ago the internet, using linkedin to try to figure out how to invest yourself, build your skills, the connections with people, learn what is going on in industries, and be able to navigate the new world of work. it's changing. globalization and how do you navigate that to protect the downside, not get laid off in a bad industry and how to get upside in terms of how to break up the opportunities. since technology is the driving force, both behind globalization

and behind industry disruption, atuning yourself to what technology change means for you is i think very important. >> so you found in your life constantly meeting new people and learning new things, this was crucial? >> yes. i think it's critical for everyone. for example, one of the things that we advocate in the book is think about who you're going out to lunch with and occasionally go out to lunch with someone who is smart, accomplished, maybe two degrees away from you, how we first met, and then have a conversation with them where you're learning from each other. like what's going to change in the world? where is the world going? how is technology changing? because then that let's you have the skill set and knowledge to be adaptable and inventive to what you're doing. >> when you look at the competition that the silicon valley faces, do you think the united states can improve its edge in technology? >> generally speaking the answer is yes. i think that silicon valley continues to be a global leader in the kinds of technology it does. there are a number of policies

that we need to be intelligent about, like high immigration, every silicon person beats that drum. it's really important. you're either going to import the talent or export the job. it's very simple. if you keep the job here, that person then employs restaurants, dry cliners, accountants, you know, auto mechanics, the whole thing. now, i do think that one of the things is we need to work a little more on some technologies, like manufacturing technologies and other areas. i think we're world class at software but we still have a ways to go -- i think we may not be competitively at the leading edge but i think there's a set of technologies we should be investing in. >> do you think that when you look at the young people who come out today, are they, in terms of, you know, science, technology, energy still world class? >> i think there is a group that is world class.

i think we could -- >> you feel there's a shortage of people with the kind of skills needed? >> absolutely. critically so. and in fact, actually, given the technology as part of what sets the drumbeat for the future, i think many more people with their hands on, how they participate in building and understanding deploying technology. one of the things that i've come to realize is, every organization should have a technology strategy. technology is disrupting industry. it's not just, oh, what am i doing to i.t. and what system do i use, it's how is technology changing the game that gets played in my industry, changing the nature of products and the nature of how we can deploy a service. if we use data, how do we use data to be a good business? part of that is coding and part of that is understanding how does that fit into a business strategy, into market, into product design? it's all aspects of it in terms of being competent in the modern world. >> do you think that all of

these new changes are moving so fast from the mobile to data and cloud computing, do you think that they will be a totally different set of companies? >> i think that the transformational speed was 65 years and in the '90s it was ten years. you have to invest in the future. that applies to organization and to individuals. given that accelerating rate, i think it's perfectly possible that that the transition happens at an accelerating rate. what that means is you need to keep investing and reinvesting in yourself. in the book we refer to that as permanent beta. never think of yourself as a complete product. that should be a company as well as an individual and think, how do i invest in the future, in the next generation? >> so when you apply the lessons in the book to yourself, at some

level you're incredibly successful, fabulously rich. are you done or do you think of yourself as very much still -- >> i think of myself as a work in progress in a permanent beta. >> so what happens next? >> i think being part of the modern world is -- i always ask, what should -- what question should i be asking because that's part of how you then adapt to the future. >> reid hoffman, pleasure to have you on. >> thank you. and we will be back. ckberry, pina colada... i can't imagine where she is... orange creme... [ grocery store pa ] clean up in aisle eight. found her! [ female announcer ] yoplait original. 25 flavors for you to love. ♪ [ multiple snds ng melodic tune ] ♪ [ malennounc ] at northrop grumman,

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stop in to meineke today for a free brake inspection and you'll say... my money. my choice. my meineke. april 15th is just three weeks away. that's tax filing day in the u.s. hopefully our american viewers have already filed. but it brings me to my question of the week which is, what percentage. u.s. federal budget goes to foreign aid? how many cents out of your dollars? is it, a, .5%, b, 1%, c, 10%, or d, 25%? go to cnn.com/fareed for insight and analysis. follow us on facebook. remember, if you miss a show, go

to itunes. go directly there by typing itunes/fareed into your browser. "paper promises, debt, money, and the new world order," if you want to understand the issues surrounding all of this debt that the world is washed in, this is the book for you. coggan says our debt addiction will cause governments to fall and bring about a new world order and with china and the middle east the lenders have great sway. it's a wonderful, interesting, intelligent book. and now for the last look. the questions have flown across the pacific for years, was china working on their first aircraft carrier or weren't they? had it been launched or hadn't it? well, it turns out china bought three carriers from russia a decade and a half ago with plans

to retrofit them. there's the one being militarized. take the kiev. it is now filled with software. very soft wear. pillows and lounges and sofas. you see, it is now a hotel and looks like the kind of place elvis presley might have called home, complete with surround beds. for entertainment, a restaurant serving mostly russian dishes, naturally. and if you peak outside your window, you might see the reenactment of a naval battle. after all, the carrier is now the centerpiece of a military theme park extoling the powers of china's navy. the answer was