culp. plus we will track dangerous developments in parts of the mideast, egypt and iraq. i will ask egypt's foreign minister about more than the 1,200 brotherhood muslim supporters sentenced to death in his nation, and about the american government's money in arms that may begin to flow again in egypt. and iraq held an election this week, but the new yorker says it's already clear who won: iran. also, why america's middle class wants t class, once the envy of the world, is no longer number one. but first here's my take. it is long well known that the author of the 700-page best seller capital of the 21st century argues that free markets tend tnequalities of

wealth that become synocratic. reading the book, it's clear that he recognizes that, as he says, over a long period of time, the main force in favor of greater equality has been the d diffusion of skills and knowledge. after all, countries like india and brazil had increasingly high tax rates in the 1970s and 1980s without sharing broad growth. an increasingly skilled work force managed to achieve both growth and relative equity. this is not an argument against higher taxes, but rather one emphasizing that for the best long-term results, education remains crucial. a la alas, it's an area in which the united states is failing. if they remind us of the

troubling inequalities of wealth, reading the reports on adult skills in rich countries provides a grim picture of the inequalities of knowlede, one that for the united states, is terrifying. 36 million american adults have low skills. and these are not just older workers. in two of the three categories tested, numeralcy and literacy, rank dead last. testing on these is related to all kinds of things: jobs, productivity, good health, even civic participation and political engagement. inequality of skills was closely related to inequality of income. the picture the united states painted here is deeply troubling. despite having among the highest

per capita gdps, the country does poorly along almost every dimension. it is below average in literacy and technological proficieficie and third from the bottom in numeralcy, third from the bottom. profficiency has become entrenched. what we learn from this study is really just an extension of what we have discovered in the visa tests that the oec conducts for fourth and eighth grade children. those tests are designed to test problem solving, not road mem memorization. now, the rankings is not that the united states is doing worse than before, but that other countries have caught up and are doing better. the american system of secondary education and adult training is

clearly inadequate in the new global environment. it shows no signs of improving. the bipartisan backlash against the common quote, a national standard agreed to by governors show that many, many american schools are not teaching their children enough. the tests must be at fault because the kids are brilliant. some left wing groups and teachers groups are upset with the emphasis on testing. though randy wieingarten, the head of the federation of teachers has actually accepted that. largely the obama administration happens to back this project. here's another quote from piketty's big book. the principal force for

convergence of wealth the dif fusion of knowledge is only partly natural and spontaneous. it also depends in large part on educational policies. in other words, america needs to reform the system, spend money where needed, such as early education, and get to work on it now. for more go to cnn.com/fareed. let's get started. on friday, president obama and german chancellor stood together in the white house rose garden to make the case for sanctions against russia and argue that coordinated sanctions will make president putin change course. this came four days after the u.s. announced a third round of russian sanctions against seven high-ranking russians all said to be part of putin's inner circle. they were hit with asset freezes and travel bans, and 17 russian

countries were also sanctioned. russia's foreign deputy minister claimed the sanctions meaningful, shameful and disgusting. the american officials responsible for sanctions joins me now to talk about existing and future measures. david cohn is undersecretary for terrorism and financial intelligence at the united states treasury department. dav david, the united states seems dedicated to this path, yet most observers and experts don't think these sanctions will work, that they're too limited, too narrow, just a few people. why are they wrong? >> this path we're pursuing, i think, is a strong and strategic path. what we have been doing is imposing sanctions on those involved in violating the sovereignty and the territorial integrity of ukraine. we're going to continue to do that, but more broadly also

including sanctions, as you noted, on some very significant business people in russia, on some banks in russia and some significant energy companies in russia in part to cause some damage, and president putin himself has said that the sanctions are causing damage. but also in part to signal that we are prepared to do more, to create an uncertainty in the marketplace, and that uncertainty is, in fact, punishing the russian economy. if you look at the numbers, and we can go through this, the gdp numbers, the stock market, the cost of borrowing from the russian government, it's all having a very significant toll. >> so explain how these sanctions, particularly the american sanctions that are really sanctions that do not allow these companies, russian companies, to in some way participate in the american financial system, why do you think they're so effective? >> well, they're very effective

because the dollar is the dominant currency in which all international trade occurs. and when we impose a sanction on a company, that means that they cannot have access to u.s. financial institutions, u.s. businesses or, really, to trade on the dollar. so if they are purchasing a tractor or selling a tractor, it is likely that that transaction will be -- the currency used in that transaction will be the dollar. and if that company is sanctioned, is frozen out of the u.s. financial system, they won't be able to complete that transaction. >> and we can do that unilaterally without anybody else involved because the u.s. financial system is really the kind of central nervous system of global commerce? >> exactly. the vast majority of global commerce uses the dollar, either directly or because whatever currency is being used, they need to change the currency into dollars in the course of the transaction for the transaction

to go forward. >> was that your experience with the iran sanctions, that this was the most powerful piece? because the united states could close off that dollar transaction. >> yeah. absolutely. the sanctions we've imposed on the iranian financial system which has largely isolated it from the international financial system has had a dramatic impact on iran's ability to transact with the world and the economy. the financial sanctions, which prevented iran essentially from being able to trade freely with the world has had a very significant impact. >> when you talk about ratcheting up the pressure, are you watching on a sort of daily basis? in other words, should we expect that there might be additional sanctions, not in the next several months but in the next several weeks? >> we can apply sanctions at the time and place of our choosing

and the fashion of our choosing. i think everyone ought to expect that we will continue to watch the situation carefully and we'll choose our steps in response to what's happening there. and i think it's an important point. what we're trying to achieve here is to change the calculus of the russian government. we're trying to create an incentive for the russian government to recognize that what they need to do is deescalate the situation in ukraine, to take a different path. and we are going to continue to work on creating those conditions in the russian economy and in the people close to president putin to try and encourage them to make the right choice there. >> do you think putin cares about economic costs? he's 20 points up in the polls. >> i don't think any leader can blindly ignore the fact that their gdp, which was, at the beginning of the year, thought to be growing, the economy growing at about a 2% rate, and

census estimates now shows essentially no growth in russia. the imf has significantly reduced its projections for growth in russia. the fact they tried to do a bond offering last week in rubles, just tried to raise money in rubles, there was so little interest in lending money to the russian government, they had to pull back the bond offering. the fact the stock market is down 13% this year. i don't think any leader can just ignore those sorts of very significant economic weaknesses. >> you've been very explicit in saying you're going after putin's inner circle. you even made a reference once to certain entities in which putin had investments. so lots of people wonder, do you know where putin's money is? >> i'm not going to talk about what is an intelligence matter. >> but you do know? >> i'm not going to comment one way or the other. >> david kohn,cohn, a pleasure

have you on. >> thank you. next i will ask israel's leader why more than 1 million people have been sentenced to death in his country. there's a saying around here, you stand behind what you say. around here you don't make excuses. you make commitments. and when you can't live up to them, you own up, and make it right. some people think the kind of accountability that thrives on so many streets in this country has gone missing in the places where it's needed most. but i know you'll still find it when you know where to look. [ female announcer ] there's a gap out there. ♪ that's keeping you apart from the healthcare you deserve. ♪ but if healthcare changes...

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this week an egyptian judge sometimes described as the butcher sentenced 683 supporters of the muslim brotherhood to death in connection with a police officer. then he deferred 529 death sentences he gave out last month, also to muslim

brotherhood. they we president obama was deeply troubled by this. this took $615 million of military aid as well as helicopters. the aid stopped after president morsi was oust bid the military in july of last year. since then his rule has been outlaw outlawed, more than 250,000 people arrested and many killed during the unrest. here to talk about it is bill fonti. thanks for coming o. >> thanks for having me. >> i know this is a really good process, but the atmosphere that egypt has created around these prosecutions, what seems to be these incredible penalties being placed on people for what is largely being seen as political activity, political opposition, seems to be very different from

the kind of transformation of the country that you've been talking about. >> the first case has already been appealed. the only verdict that came out was 37 people, not 520. nevertheless, the attorney jena peel -- general appealed that the next minute on due process. in the second case, it's still going. there's no conviction yet. >> that's usually a formality under egyptian law, but let's see how it goes. >> we'll see. i'm not going to convict anybody or announce anybody innocent. that's for the court to do. your point is valid. the industry is tough. and it leaves question marks. and i've been addressing them. i address them the only way i can by saying we encourage due process. >> how do you come to a

conclusion which seems to be excludeing millions of people from the morsi government? let's assume half of all those people were deeply disappointed. that still leaves millions and millions of egyptians who felt these people represented them and now these parties are illegal, the people are jailed. how are you going to include those egyptians in this new egypt? >> it was not considered to be a terrorization. from june last year to november-december they were legal. and all we saw was every day more violence. there is a point when you can't accept violence. if you pursue violence for political purposes, you are a terrorist. if you are an egyptian and you want to accept the constitution as your charter and act peacefully, you will have your

role in society. that's clear. >> but i notice what you have now is another general who is going to run for president. isn't this sort of a return to the past of egypt that people were trying to move beyond? >> no, it's not a return to the past because three things -- i was going to say two, but actually three. 2011 revolution, 2013 revolution and this new constitution. the new president cannot appoint a prime minister without consulting with the party that has the majority. the new president has two-term period. he has 30% less power than the present president. and he has a people who have revolted twice against two presidents for exactly the same reason. exactly the same reason. let me say something which i shouldn't say. you have a tendency to push me in those directions. we have to keep our feet to the

fire. egyptians have to keep me as a government official and i will have to keep myself on target. as difficult as the issues are on violence or regional volatility, i have to deal with that and provide political tolerance as we go along. the country is going through a transformation. >> but the government has persecuted and prosecuted al gazir. >> if i'm not mistaken, it's the same case. if they are not the same case, there are not any new cases after that case. >> the general point is it does not feel like a new democratic -- a new birth of democracy and there will be an egypt that feels like a state that is targeting people. >> just so that we don't mislead

anybody, there is a determined government effort to ensure that journalists have full access, and we made a public statement saying this. you want to go out and commit a crime? i will arrest you. but if it's just asking difficult questions making my life difficult, that's part of your profession. >> let me ask you about the u.s. relationship. do you feel that things are now back on track between the united states and egypt, that the obama administration is giving you the support you want? >> i think the desire is there. i don't think it's there yet. i think definitely in this visit, everybody i talked to started by saying, look, we want to move on together. we will do our thing ourselves. we will do it consistent with international laws. we're not trying to create an isolated state here. and, yes, are there different opinions within the egyptian government? there are in your government, believe me, and there are in mine, not because we're against

each other but that's the nature of the political beast. >> but the hard liners of the military seem to be winning. >> not really. not really. and i love if you would come and witness our cabinet meetings. the idea that the military or interior minister are the ones who are always angry at the violence is simply not true. >> pleasure to have you on. >> nice being here. next up, i will tell you what the united states has in common with a country that some say is reverting back to the dark ages. (train horn) vo: wherever our trains go, the economy comes to life. norfolk southern. one line, infinite possibilities.

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i procrastin that corporate trial by fire when every slacker gets his due. and yet, there's someone around the office who hasn't had a performance review in a while. someone whose poor performance is slowing down the entire organization.

i'm looking at you phone company dsl. check your speed. see how fast your internet can be. switch now and add voice and tv for $34.90. comcast business built for business. now for our "what in the world" segment. one of the richest nations in the world this week put in place policies that amnesty international says will take the country back to the dark ages. where in the world are we? brunei. the tiny rich island. the sultan announced that brunei's experiment had begun

making it the first ever to adopt the penal code. if you failed to perform friday prayers or failed to get pregnant after you were married. those consuming alcohol will get punished with a whipping or even amputations. and in two years the death penalty will be implemented for crimes like blasphemy, sodomy or sulti i insulting the koran. the united nations condemn th e edict and the consultant says it goes against national law. the sultan who serves as prime minister and minister of finance

has been driving his population with subsidies. bruneians enjoy a lush lifestyle which includes free education and medicine, but over the last few years, brunei's economy has started to shrink for the first time in decades. by 2035, net exports of oil and gas will be reduced by almost half, so there are obvious and non-religious forces at work here. it remains to be seen how the new laws will be implemented and what role the british-based civil legal system will play going forward. to me still, it seems a step or several big steps backwards. but brunei is certainly not alone in its interesting of sha sharia. the hapointed out, the sharia i

worldwide in many places, especially in the west, but sharia is extremely popular in parts of the muslim world. i would argue that it is seen as indigenous to muslim countries, not an imposition to the west, and was historically associated with high morals and values as opposed to the brutality of the a rarabian desert. it is also seen as an improvement over the arbitrary rule of dictators. so when westerns lived under military despots, they would imagine an opportunity to it, shaped by their own morals and religion. he makes an interesting point. we often ignore the high standards that sharia sets. for an adult conviction to be obtained under sharia, for example, he said the suspect must confess four times or four men of good adult character must testify they witnessed the act in question. he said we also ignore the extremes of our own systems,

such as the life sentences that are routinely doled out for relatively minor drug crimes. as he puts it, it sometimes seems that we as sharia need westerners like we need islam. it is often like a foil that makes us look good. by the way, the one place that american law and sharis meet is the death penalty, something we were reminded of this week. on tuesday the cruellest of scenes unfolded in the oklahoma state penitentiary where a botched execution left an inmate writhing in agony 43 minutes after receiving what was meant to be a lethal injection. remember, the united states is the only western country that retains the death penalty. up next on gps, we will look at another death in america. it is the death of the american middle class. what happened to this once great part of the united states?

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because you can't beat zero heartburn. woo hoo! [ male announcer ] prilosec otc is the number one doctor recommended frequent heartburn medicine for 8 straight years. one pill each morning. 24 hours. zero heartburn. america's middle class has been the envy of the world for decades with its idyllic fancy homes, cars and white picket fences. but a comprehensive shows that america has lost yet another

number one ranking. america's middle class is no longer the richest in the world. david leonard is the editor of "the upshot." he and his team analyzed data and came up with these conclusions. the most startling piece of data was the shift that has taken place in the american middle class. and the way you look -- one way of looking at it, which you presented, is if you look at the median income of an american, and that's not the richest person, not the poorest person, the person smack in the middle, and i think the census bureau defines it at about $50,000 a year. look at this chart. since 1981, that's what's happened. >> it's not a good story, is it? in 1981, we had by far the richest middle class in the world. what has happened since then is that income growth in these

other countries has been substantially faster for the middle class and the poor. this is after tax income. it includes direct government benefits, things like social security. so this is really what people have to spend, and it's really worrisome. and it's not just a 30-year trend. you also look at 2000, which is often more pronounced than other years. >> the country had income growth at the median level, but since 2000, the united states barely grew at all. >> so the obvious question is what's going on here. one, we have economic growth that's quite similar to many of these other countries. faster growth than spain, particularly, recently. but it's not that the u.s. is growing faster than sweden or canada, it's quite similar. but more of a bounty of our growth goes to a small group of people, so our economy goes to

the people at the top. if you give more of that to fewer people, there is less left over for everybody else. not only do we have more pre-tax inequality, but those other countries do more to redistribute income. they do. canada, these northern european countries do more after people get it to say, we're going to take money from people at the top and give it to people at the bottom. but 3, i think, is really important. it's an issue you've talked a lot about, which is education. i know there is this notion out there that education is overrated, and to be self-critical of the media for a minute, sometimes we fan that in a way that's unhealthy. education is not overrated. these other countries have done a much better job educating their population. if you look at the graduates, their skills, that makes it easier to pay good-paying jobs. we used to lead the world in education and on income, we

don't anymore on either. >> let's get to another great upshot. one of the things you talk about, which is going to be, of course, every kid in america's nightmare, which is that getting into the i havy leagues, the mo selective colleges in america, has gotten much harder because it's now a global competition. >> that's right, it's now a global competition so a couple things have happened. since you and i applied for college, the population has grown. there are now more u.s. teenagers. not so much more than in the 1980s, but in the late '80s and '90s. these colleges are are globalized, so they have admitted other people in the world without expanding. that means they've shrunk seats for american kids. so when you combine population growth with the fact they've shrunk the number of seats, you see in places like, say, dartmouth, there are 24% fewer seats per college age american

than there used to be. >> other thing you had on which was fascinating, when you look at early childhood education -- we're used to imagining there are big disparate -- disparities in how people do at schools. i was taught to think race was a big one, socio-economic background of the but now at the kindergarten level, the single biggest difference of how kids do in school is gender. you see that with girls and boys. why? >> we have a big gender problem. we don't completely know why. girls have long done better in school than boys. boys used to do better because of how much terrible sexism there was. there's still sexism but there's less. >> i would assume that's when you get to the 10, 11, 12 range, boys start getting adolescent. you're saying this starts in kindergarten. >> right, so when kids arrive in

school, girls are way ahead of boys. i think the rise of single parent families has something to do with it. that has a worse and bigger effect on boys in those families than girls. >> and you see it throughout the economy later in life, which is one way to tell the story you've been telling about the american economy is girls have done fine. women's wages have gone up 35% or something, men's wages have gone down almost 20%. so if you look at unemployment, you see that male unemployment is much worse than female unemployment. the story plays itself out. >> yeah, and that's why we should think of these numbers as real. you can say, how do we know they mean anything? girls get better grades in fifth grade, better grades in eighth grade, and they're more likely to go to college. women have gotten 35% inflation increase in pay in the last 20 years. men's inflated pay is zero and a

lot that far has to do with education. >> diavid leonard, we have to have you back when you have another big slew of data, so come back soon. >> thanks for having me. up next, why is iraq such a basket case? just ask its neighbors in iran. i will talk to dexter fields who is back from a month in country and has some fascinating insights. with premium service like one of the best on-time delivery records and a low claims ratio, we do whatever it takes to make your business our business. od. helping the world keep promises. spending the day with my niece. i don't use super poligrip for hold because my dentures fit well. before those little pieces would get in between

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that's the value of performance. that corporate trial by fire when every slacker gets his due. and yet, there's someone around the office who hasn't had a performance review in a while. someone whose poor performance is slowing down the entire organization. i'm looking at you phone company dsl. check your speed. see how fast your internet can be. switch now and add voice and tv for $34.90.

comcast business built for business. nearly two and a half years ago on december 15, 2011, the united states declared an end to the war in iraq. on wednesday the country held its first parliamentary election since u.s. troops left. and regardless of who was declared the victor after all the votes are counted and coalitions are formed, the real victor will be iran. that is what my next guest de s dexter says. he was just there for a month. you didn't want to go there? >> no, i didn't. >> why? >> it's a tough place. it's hard. i checked into a hotel in the

middle of baghdad, and every morning there were five or six bombs going off. i had to be really careful. it's not a happy place, you know. >> there must be also a sense of disappointment. you saw so much american investment in lives, in treasure, in effort. and it really looks like the place has spiralled downwards and downwards. >> if you didn't know it walking around that city, driving around that city, i'm not sure you would ever know the americans had ever been there. obviously they have a parliament and elections, and that's big, but it looks like the city was ten years ago in the middle of the civil war. there hasn't been that much investment at all. the iraqis, this is a deeply divided country. it's still at war with itself. in fact, it's worse than ever. the civil war is roaring back. it's pretty sobering. >> and the reason i say that you say iran won in your piece is

it's pretty clear that malaqi and the party he represents which seems likely to win is essentially in its core nature annett in this case party, a shia party, and that it sees itself as affiliated in some way with the shias of iran, that that's it's simple driving imperative. >> i think so. through most of the american war when we were there, and maliki has been the prime minister since 2006, he was playing one against the other, us against them. you know, he had the united states, the big power with all the troops in the country, but then he's got to deal with iran because they live there and they're never going away and they're his neighbor. and then we left. all gone. and so -- but it rain yathe i r still there and he has to deal with them whether he wants to or

not. >> bombs going off everywhere. you would never know this is one of the richest oil kincountries the world. >> bizarre. >> then you have new york turning into a center. what's your sense of the country? >> it's a country that's sliding into a civil war, a sectarian war. so you have al qaeda militants, whatever they're calling themselves this week, in the middle of fallujah. >> they are totally cut off from the government so in a sense waging a war against it? >> yeah, it's back to 2006. but there's these weird pockets. if you go to the north in kyrgyzstan, i went to arbile, it is booming. they're pumping oil there, there's a jaguar dealership in the middle of the city, there's

oil flowing in. the iraqis are pumping in $3 million of oil a day. so it's -- there are pockets in the country that are in pretty good shape, but i think overall it's a pretty bleak picture. but i think the really terrifying thing there is that the border between syria and iraq, it's basically gone. it's just open territory. someone in the white house said to me, my gosh, that stretch of territory between alepo and syria and iraq must be the scariest place in the world, and i think it is. it's desert, it's open, it's the corridor that runs along the euphrates river. >> and if one tribe is killed in syria, they have compatriots in iraq. >> that was basically an iraqi creation. they crossed the border and went

into syria when the civil war started there and got it going, so it's all cross-pollinated. but the scary thing when you look at syria is you have this civil war going on but the waves are going outward. it's spilling into iraq, as we've seen, where the civil war is starting again. it's spilling into lebanon where every fifth person in lebanon is a refugee. i think the fourth largest city in jordan is a refugee camp. so the heart of the middle east is coming apart. and i think the really scary thing is the homan lease was created in 1916 is by a few pen strokes. it's all coming apart. and that's the real danger. >> next time go somewhere cheery. >> thank you. up next, why you must pay your electricity bill even if you are a prime minister. i will explain.

and i don't need to be online for it to work. it runs office, so i can do schedules and budgets and even menu changes. but it's fun, too -- with touch, and tons of great apps for stuff like music, 'cause a good playlist is good for business. i need the boss's signature for this. i'm the boss. ♪ honestly ♪ i wanna see you be brave you stand behind what you say. there's a saying around here, around here you don't make excuses. you make commitments. and when you can't live up to them, you own up, and make it right. some people think the kind of accountability

that thrives on so many streets in this country has gone missing in the places where it's needed most. but i know you'll still find it when you know where to look.

countries around the world this week celebrated international workers day. from the first time since the fall of the soviet union in 1991, russia held a huge may 1st

parade in red square. it brings me to my question of the week. mayday was established in 1889 as a day of protest following riots which took place in what country? russia, italy, the united states or germany? stay tuned and we'll tell you the correct answer. this week's book is thomas piketty's "capital." it is at times dense, but highly intelligent, copiously documented, and whether you agree with it or not, you must read it or at least read about it. if you want to cheat, we have links to the guardian's review of it which is the best crib sheet you'll be able to find. now for "the last look. find out what happens when you don't pay your electricity bills. the hard way. electricity is often stolen or unpaid for in pakistan as it is

in many developing nations, and this week sharif directed his ministry of water and power to begin a zero tolerance policy toward theft and to crack down on the failure to pay bills. well, the minister of state for order and power agreed, and he shut off power to more than 18 government buildings, including the offices of the prime minister himself. the reason? failure to pay large bills. the lights were turned off for 48 hours in the prime minister's offices, but they were restored once the gibills were paid. hats off to mr. sharif for trying and for finally paying his bills. the correct answer is c, the united states. a coalition of socialist parties and unions established mayday to further the cause of labor rights after the 1886 hay market riots in chicago. ironically, mayday is not officially celebrated in the

united states. in 1884, president grover cleveland established a day for labor day. some say it was started in september rather than may due to those riots. thank you for joining my program this week. ly see y i will see you next week. good morning, imer in mcpike a and here are the stories we're following. in odessa, clashs killed more than 40 people. they attacked a police station there today, demanding the release of activists detained this week. police did release some of them and no one was hurt. ukraine's acting prime minister was also in the city today, meeting with local leaders and calling for unity after last week's violence. from london to los angeles

and beyond, people are taking to the streets demanding the nigerian government take action to find 223 kidnapped school girls. nigerian president jonathan is set to address the country on this situation in about three hours. the controversy surrounding the l.a. clippers' owners racist remarks isn't keeping the team from performing their goals on the court. they won game 7 of the playoffs last night. they are now advancing to the western conference semi-finals to face off against the oklahoma city thunder. meanwhile, they are appointing a new ceo to oversee the clippers' operation. last night was an annual dinner in washington. it was a chance for washington to poke fun at itself. president obama didn't shy away from mocking the problems of his own health care website.

>> of course, we rolled out obamacare.gov. that could have gone better. in 2008, my slogan was, yes, we can. in 2013 my slogan was, control, alt, delete. >> i'm erin mcpike in washington. "reliable source" starts right now. good morning and welcome to "reliable sources." i'm brian seltzer coming to you from washington the morning after the dinner. the dinner is the closest thing they have to the oscars, so the stars and i watched what has become a tradition, the president roasting himself and the media, of course, and this year the president saved some of his best singers for us, for cable news. he seems to think cnn might be covering the missing malaysian airlines flight too much. >> i am happy to be here, even though i'm a little bit jet lagged from my trip to