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week on vation in martha's vineyard. >> we want t welcome to walter reed -- "washington journal" with author of "bailout nation," barry ritholtz. let me begin with the news of the day, the renomination of ben bernanke. does thisurprise you? >> guest: not at all, we have be debating this amongst my colleagues, strategists and economis, a number of people have been scratching their head. i thought from a game-theory approach, the safe bet was to reup with ben bernanke. if anything goes wrong, it's hard to blame the president if you just reappoint somebody who

has been widely thought of as doing a good job. on the other hand, if you were to put his own personal in and there were problems down the road, it comes back to the president. so this was a safe, conservative pick. >> last week mr. bernanke met with the president in the oval office and he headed to wyoming to meet with colleagues. do you have any other becomeground on the dynamics that led to this decision? >> guest: not really. it has been closed mouth. a lot of people are wondering why the president hadnt said anything and why it it was going on so long. we were waiting to see how the economy pyed out, what was going on with interest rates, with jobs, with economic acvity and most importantly, what was going on with the credit isis. you know, i give ben bernanke high marks for being the right guy there when the emergency struck.

in terms of how well he's going to operate as a fed chair under normal circumstances, well, the jury is still somewhat out on that. in terms of a great depression like threat it was the right guy to he there at the right time. he's an expert on depression. he's looked at the things that the fed did wrong in the 1930s that either made the depression worse or preventedt it from getting better sooner, and took aggressive stops to aiding that happening. as a fed governor when he was workg under greenspan, i'm a little less impressed with him. a lot of the blame, by that by no means all, a lot of blame ends up on greenspan's plate and he was very much a -- like the rest of the fed, not very challenging, far too deferential to former chairman grnspan during the formativeeriod that led to the crisis.

>> host: that gets to your book. you write how the united states"

>> guest: good morning. >> caller: hank you for taking my call. the in t complex we don't have oversight on the spenng. that spending was done on the military we are spending for the -- gng to healthcare and everything to bails out and supposed to be holding the ubs bank in switzerland accountable. president was golfing with one of the people he was suppose to be holding accountable. this group is controlling a lot of what goes on.

so we had accountability from this war and i think we would be able to get back online w. that problem with the torture, bring the accouability for the war and all administration and that will open theoor for the other stuff and he will be able to have this pressure off to implemt some things he's trying to do. >> host: reginald, thanks. let me go to this viewer tweet. the fed will print all the money obama wants, but remember we have to pay it back. wait and see when the interest goes up. >> guest: well, that is the big risk. the date today is are we in for dlation or inflation and what the tweet is referring to is hype inflation. so i was one of the people before therash that thought we had excess inflation, that the fed had taken rates too low that, money supply had grown too fast and the cost of of

eferything had gone up too mu. and when you look at -- let's talk from 2001 to 2008, we saw the price of oil go from $2 to $147. healthcare going up 18% a year. education going up 15% a year. foodrices going up. we had huge inflationary run, which the crash and collapse flipped into deflation. right now we're in the deflationary portion of t economic cycle and that means we see stock prices have come down, evenith the 52% rally off the marcows we're still 30 or 40% off the highs. we look at home prices, continuing to fall. look at a variety of factors, wages, income,n a real basis, actually negative for the past 10 years. so right nowe're in a deflationary environment, that whll eventually end and the question is: what is that placed with? inflation or hyperilation?

the only thing we have as comparison, at least in the modern era, is japan from989 to 2003. theyad a 10-year long recession. they ran decits. they printed a ton of money. and obviously japan isn't the united states. their culture is different, their spending habits are different, but they managed to avoid inflation over that period. they never ended up, despite the low tes and the money printing, in a real inflationary environment. so right now the fact is deflation. the forecast is possibly inflation. it really depends on how the fed pulls out of this very liquid, ve stim laative monetary posture they have us i and are likely to continue having us in for the next couple years. the final word on piehyper inflation, speak to the goldbugs

and people who compare us to the republic in germany in the late '20s and '30s. that is a possibility, but i thk it is a lesser possibility if the fed acts responsibly and takes some of the stimulus away. that is no means or guarantee. no such thing as a sure thing. i would say 1-4 chance w get a high level of inflation and it would require the fed to mess up a bit as they remove the stimulus. i don't have a lot of faith they will get it perfect. we're all hoping they get it closer to right than wrong. >> host: this e-mail from a viewer who says, the bailout is in progress, regardless of whether or not it was a good idea in part or total, it's here. so if you could wave a magic ju wand, what would you do and how would you do it? >> guest: that is tough question. if you give@@@@krrk%drr

e line, merrill, bank of america, citigroup, the people whopockets not just tens of millions of dollars, but hundreds of millions of dollars and saddled taxpayers with trillions of dollars in debt. that money has to come back. i would make it very clear that all the various things that led to this crisis, i would reverse, so that means reinstating -- monetization act, repealing the

b be stearns emption. making rules that prevent the fed from taking rates too low and keeng them there. look at the european central bank. they have one charge, fight inflation. in the united states, we gave our central bank two chges, full employment and fighting inflation. often those two are at odds with each other because what is good for the economy is often bad for inflation and vice versa. so if the feds' only charge was to fight inflation, you wouldn't haveeerates below 2% for over 36 months fm january 2001 to late '05. you wouldn't have seen rates at 1% for over a year. that was part of the "we want to get the economy moving again," and that is where we run into problems. so if the sole charge of the fed would become fighting inflation, we might be betr off in terms of dealing with hyperinflation

and the spiral that was caused by 1% rates. now recognize as soon as you do at, the next time theres recession and people are screaming, you got to cut rates to stimulate the economy, the fed will turn around and say our charge is not to stimulate the economy tis to fight inflation anwe are comfortable with rates up here. it is very much a double-edged sword. the are things i would do, go through and undo all the bad legislation that was dole over theast 10 or 15 years and revitali the idea of in a capitalist system when your company fails, you lose yourob and value of your stocks a bonds based on that company and someone else will come along and try to run the company better. >> hoct: a comment from kathleen wright. the bush admin stragsz loved "mrauszible deniability," an wall street was drunk on the liquor the bush administration gave them, all trus out the door. and tala is joining us.

>> caller: i would like to have history on the spread and libor rate and how thi affects our economy and a little hisry there. if barry doesn't know the aner, would c-span do a seg oment this particular item and have someone on that can answer the question? >> guest: understand what libor is, london lending rate and the tedpread is you want to see how wide the difference between essentially u.s. rates and u.k. oruropean rates. i'm grossly oversimplifyin it it, but let's just put it in thatway. you want to see how wide that differen is between rates. the ted spread basically gives us insight into ho confident people are in american fixed income markets versus overseas it also gives us a snapshot of

the general state of distress of lenders and so during the height off the crisis a lot of the spreads and y could do when you do a spread you a looking at the difference between any two different fed income products. so a lot of people like to look a@'%rr

rallied. that is tellingou two different aspects of the capital markets are saying they'reore comfortable with the amount of risk that is out there, with the possibily of of default and the expectation of how well the economy is going to do going forward. neitr of those markets are perfect, they both gett wrong from time to time. it is not a cncidence that the spreads narrowed at the same time the rkets rallied and same time people started to become more confident the worse is over. we're in a mild ression at this point, but theeneral sense is the real hair-raising free-fall tailspin, that par of the show is over. >> host: barry ritholtz, the book is "bailout nation," how greed corrupted wall street and shook the world economy. this is part of a series of conversations this month. an excerpt from the book: wall street has been a brutal mar to being rase, success is based on skills and smarts and ability to

identify opportunity while simultaneously managing risk. eat wha you kill is the classic wall street attitude tard risk and reward, profit and loss. so based on that, a viewer in maland h this. as long as greed runs our economy, nothing will change o wallstet. we need to regulate the industry more tightly because they will not do what is right, only what puts the most money in their pockets. your response? >> guest: well, tha is partly true. one thing you have to remember is -- and in the book i lam blast a lot. i don't by any stretch of of the imagination, exxonor rate wall street. the companies had run a muck and need to be held accountable. we paint wit too broad a brush and forget something, the vast majority of people working on wall street had nothing atsoever to do with this.

with the crisis, with the collapse, with everything across the line, probably the wildest ample of that is if you look at a.i.g. at their peak, they had something like 115,000 employees and the division that caused all the trouble was a.i.g. financial products, essentially unregulated hedge fund hidden beneath the skirts of well regulated insance company and sout of 100,000 plus employee firm, four people causeded the mayhem that brought a.i.g. down. same is true with bear stearns lehman brothers. the vast majority of people working in the fi had nothing to do with the rklessness that led to the firms going belly-up. most of wall street is looked at, and motivated by money. they do what they do, it is a

stressful job. it is not easy. a lot of these guys end up having ulcers and coronary problems. it is very tough job for which they're extremely well comp s t compensat compensated, but these aren't the people that cause t problem. look at each of the major wall street firms, i think lehman brothers at peek had 26,000 employees. it is less tn a thousand peopleesponsible for what went -- what was the problem. i'm in favor of more aggressive gulation. i think when we talk about regulation, what we are talking about is moderating the behavior of the worst element necessary a firm and making sure there is a bright line and people know how far they can go and not further. what i've been calling in the book radicness that took place overhe last 20 or 30 years led to that bright line becoming fuier and fuzzier until it was just a @@@@@@a))rrrr)rr

a lot of things are foolish, but they don't threaten the global economy. i think the caller's suggestion we regulate some of the behavior is not a bad idea. yo need a bright line. people need to know how far they can go and not a step farther. >> host: the book dedicated to wendy, who bailed me out of a few jams. do you want to elaborate? >> guest: sure, that is my wife. e's one of the people who early in my career, you know, i was educatede as a lawyer. found when you become a lawyer, you're basically surrounded by other attorneys and trust me, th's no fun. so i had always been interested in the stock market as a kid growing up. my mher was a real estate agent and is played t market and this was dinner table conversation. so i had done some work for a friend who was running a firm.

i ended up starting as a trader with him and eventuay worked my way into the research half of wall street. but that was a long transition and very often i would stop and say, what am i doing? i could have an easy life as a lawy. why am i involved in this craziness and my wife kept me going. that is why the book was dedicated to her. >> host: the book is cald "bailout nation." he is's graduate of nyu. howard isoining us from columb columbus, ohio. welcome to the program. >> guest: thank you. this is boo my 500th episode of c-span. i appreciate mr. ritholtz, he seems to be an executive guest. i'm curious, if barack obama does what he ss he's goingo as far as reducing healthcare, the price of healthcare, ending

the iraq war, cutting back the bush tax cuts, would that help stimulate the economy eventually considering that he hasn't used even half the stimulus money? if he was too what he says he would do when he was campaigning, shouldn't that help our economy? with that, i'll just let it go. >> guest: you know, one thing i find fascinating, whenou ask most economists something like that, you usually get a very xyz, here is what is going to happen. i have to tell you, i have no idea what is going to happen. the bush tax cuts are schuled to sunset next ye. when you look at how t economy did pre-tax cuts in the '90s, they seemed to do fine, so i don't think they'll be the be all and end all. lot of economists have said once the tax cuts end, the

economy will grind t a halt. most of those people are telling yo what the polits are, not what the economics are. the war has been unbelievably costly. if y want to make the argument that the war in iraq was a war of of choice as opposed to the war in afghanistan, which is where the 9/11 attacks came from, you're not going to get an argument from me. i think we've spent about a trillion dollars in iraq. quite frankly, there are better things that could be done with a trillion dollars than losing 5000 soldiers and causing that situation in iraq to be so unstable. on the other hand, i don't know what is going to hpen with the healthcare policy. theris no doubt in my mind as the country, we spend more per person and get less from our healthcare system than any oer industrialized country in the world. so the sysm is right for a change. quite frankl i would love to gerid of the absurd

advertisements for various drugs. we're the only western%z#@@@@rrr it's going to take time to work through the mass amoun of foreclosures we're dealing with, for home prices to revert back to normal levels. even at these low rates home prices are above their historical metrics relative to income, relative to renting and relative to overall g.d.p. when you look at the massive amount of debt taken on by both the govnment and by nsumers,

consumers completely leveraged up in the '90s and 2000 and spent money they dn't have. right nowe're dealing with the deleveraging of that, that will take a couple years to work through and eventually ings will get tter. what the government can do around the margins is lay the groundwork for the private sector to create jobs, to create businesses, to goorward without gting too much inhe way. the healthcare questn is the one that i find most intriguing. i'm not a hethcare analyst, it's not an area i cover remotely. i just continue to wonder why we spend as much as we do and relative to other nations, get so little. if you have unlimit resources, u can get fantastic healthcare coverage in the united states, but you have to be willing to write a big fat check. r most you may not have access to the top medical options. then you are fighting your

insurance company to get whatever you need done and it is a whole crazy universe. my own experiencwith a tor rotatorcuff, i used to pitch in high school, just unbelievable insurance nightmare to deal with. so i'm biassed, i'm not objective and probably not the right person to ask about healthcare. the bottom line is as we look forward five years we'll eventually work our way out of this. the united states always has and m confident we will again. >> host: our guest has his own blog, a link available to c-span.org, his financial blog is called the big picture. from the book, lockheed bailouts led to the chrysler bailout in 1980, the chrysler bailout kickd that can fther down the road and by 2008, g.m., chrysler and ford were in shambles and allowed toyota to become the largest automaker. had the chrysler bailout not

occurred in 1979, it is very likely the detroit aumakers would look quite differently than they currently do. sherry is joing us from texas. good morning to you. >> caller: k you very mu. the united states has a legalized bribe system where lobbyists give all the campaign money to congress. tom delay paid his wife a half miion a year. he paid his daughter $100,000 a year salary. the dcretion aary cost from the funds is -- when we look at stimulus, look at the bailout, shouldt we be highly suspicus of plunder? >> guest: absolutely. in fa, when we look at every company that's gotten a bailout, it's not just small comnies or mid-sized companies.

it's the companies large enough to have a very effective and costly lobbying effort. it's companies that are very well connected politically that have been making donaons and in fact if you look at each of the major bailouts they seem to take place around a presidential eltion. lockheed in '71 and '72, presidential election. chrysler in '79 and '80 and 2008, obviously those bailouts that took place before nomber, another presidential election. the things don't take place in a vacuum and in fact in the middle of the crisis it was either january or february, senator dick durbin was complaining out the banking lobbyists runng around capitol hill. i'm paraphrasing, but he said, we are in the middle of a crisis and the guys are running around like they own the place. it makes them very, very unconfident that we're going to se any major formf regulatory

reform take place. whatever is going to get through will be a compromise and wll be back á@@"4)rrgrr freearket interest rate that wasn't manipulated and allowed everything to coordinate? guest: well, remember, we actually have that right now. the bond market sets the long-term interest rate. all the fed can do is set the shorter-term interest rates. the fed fund rate is is not the same as 10 or 30-year yield. obviously all the other bonds follow that. but heres is the problem and

've had a number of people say, you ow, if if we could get rid of of t fedll these problems go aw. go back to the crisis that took place after the 1906 earthquakes and the fires. what happened i most of the insurance for san francisco was written out of london. th cost back then was stgering, the equivalent of billions of dollars in actual money. london found themselves sppin all this cash and gold to the united states to make good on thosensurance payments. it became a problem because they started running into not sufficient capital in the u.k. when that was taking place. so the bank of england came up with a simple solution. they raised interest rates and said if you lend the bank of england money or put capital with us, we wl pay you 6% and everybody else wasing 3% or maybe 5.5%. all this cash flooded into the

u.k. and filled the hole they had from having paid out that money to san francisco. that is the risk of if every country agreed to get rid of the central bank, thatould be one thing, but it is almost like nuclear disarmorment. if you get rid of of the central bank and let the bond market set prices, whatill end up happening, instead of looking to federal reserve for leadership, it will lk to the bank of englandnd the european central bank for leadership andhey'll set rates to the benefit of thr nation as opposed to ours. so you almt need a federal reserve just as a defense against other federal reserves. it's hard to imagine a system where there isn't a central bank operating in a major country like the united states, but japan and eland and the e. u. and cna all have central bankers opatin i think it would p us at tremendous competitive

disadvantage. >> your colleague at nyu, albani, who wrote "praising your work," had a piece in the financial times getting a fair amount of attention. he is talking about higher prices and has this conclusion frchlt yesterday's financial times, the recovery is likely to be anemic andelow trend i advanc economq and there is a big risk of a double-dip recession. your comment? >> guest: in the stearn school of business, he's been very right on thi crisis f quite a whil and one of of the things that we're doing and again this comes back to noeyree lunch, you have to pay the piper. a lot of the stimulus programs that are in effect,oo at the sh for clunkers as an example. they're not causi new economic actity. at least not completely. what they're really doing is pulling forward from the future

activity that would have happened anyway, but instead of happening in the first half of 20t 2010, it's happening in 2009 of the cash for clunkers, 3 billio that was spent as of yesterday, my best guess is that two-thirds of it was cars that would have been bought eventually, we are just buying them now. perhaps some people were motivated on the margin to turn in a clunker, the $4500 made the difference to buying a newcar. look what we are doing with the $8000 new home tax credit for first-ti buyers. along with the voluntary mor moratori moratoriums on foreclosures, you are not stopping foreclosures, u e not selling more houses. you are just putting pple into them a little earlier. instead of saving and building up that extra$8000, which the tax credit gives them, the government is giving it it to you. you are pullingt it forwa a

couple months. that is the risk of what @@@@@ r

spent out. they're working off excess leverage and i we go back and look at the great depregsz as an example, after an event like this, you tend to see a change in sentiment in how consumers behave. what i call sports shopping or some people call retail therapy, that's not goi to come back any time soon. i think people are going to be more cautious and more concerned about their jobs, more concerned about having a little nest egg, saving some is cash for a rainy day an that's going to, you know, impact the entire economic system. so i think nurealis right, we'll see a real possibili of a double-dip recession and again, the cure for what ails us is going to be time. it will take a few years to work out the excess leverage, excess debt before we start a norl healthy recovery.

>> host: the comment from lynette, sends this tweet. this country will not recover until we have jobs dennis from north miami beach, florida. good morning, dennis. >> caller: yes, thanks for taking my call. i have two short questions. >> host: we'll take one at a time. >> caller: okay. the first one is this is a repeat, large repeat of the s&l bomb tha fell on the united states in 1998 and 1999. we cleaned that up realfast. we didn't give people money. put people in jail. why isn't this taken care of the same way? >> host: we'll come back with the follow-up. >> guest: that's a really good question. the s&l crisis was different in a number of ys. first, we were just starting the process of regulating banks,

but hadn't completely deregulated them. there was little in the way of oversight of s&l's. a lot of them made bad loans to friends, to family, to oth compies. there was a real ement of willful corruption to begin with and remember the depository banks are covered by fdic insurance. with s&l we had to setp parate sl d-insurance to cover it it. the beginning part was an insurance payment, but it was about $185 billion and that is in 1980 llars, not in modern dollars. and that was essentially an insurance shortfall that the taxpayer had to make up. so in some ways there was some similarities, tre was recklessness, krupgcorruption, of irresponsibility, but it was

fferent. the bailout there was not so much a bailout as an insurance payment. we had basically guaranteed the depositors if yot put your money with banks that the government ensures your money will be safe. even if the bank failse'll recover you. look who has been bailed out today. a.i.g. is not cover by ic insurance, bear stearns, goldman, merrill. look at bank of america and citioup, we didn't make good on the losses of the deposits, we made good on the investment banking side, the derivative and the bet they made, not the loans they had me in general. if if you look at where most of of the bad lending took place it was not necessarily the banks, but it it was the nonbank lenders, a lot of of them located in southern california. if you go to mlimplode.com, we have over 350 of these banks have already gone bellyup. nobody is bailing them out

because there were no deposits, they weren't really banks. they start with a pool of money, lend it and as soon as it is gone they sell mortgages and start l over. those guys have gone bellyup. it is a different set of factors that led to this. you have the ultralow rates from the fed, the giant housi spiral, you have all of the deregulations of commodities and just a tremendous amount of leverage in the system. all those factors led to a -- you know, not a perfe storm, it was inevitable this happened, but they led to a point we cl it it a singularity where it all blew up and hit at once. i look at that differently than the government making good on their promise to depositors if approximate your bank goes bellyup, we'll cover the insurance a we'll make sure that you're doing the right thing, you are saving money in a sangs account, we want to make sure people don't go back to

hiding it under@@@@@@%jrr stiglet won the nobel prize, two nobel prizes. he said, the rating agencies were the prime enabler of the problem, but without that, none of this would have haened. let me give you a specific people don't realize, we have junkie mortgages, which areold to wall street, who then takes them and turns it into a derivative, turns it it into

something once removed. cmo's collateralized mortgage obligations, which they then sell in trauyches. 95% of them have as part of charters and is rus, they are only allowed to buy investment-grade paper. these are the foundations, the trusts, the big pension funds. a number of mutual funds and number of bond funds. all the buyers of this paper, which is based on junkie mortgages, sub-prime mortgages, poorly written mortgages, their rules say you can only buy investment grade. no double b or c, has to be a rated or better. in order for 95% of the stuff to be so, the rating agencies had had to slap a triple a on it. in the old days, going back to the 1970s, when the sec gave the

rating agencies a special recognition for their purpose in the fancial landscape, they were paid by theond buyers. in other words, if you were a bondund and wanted to know morebout the bonds, you would pay the rating agencies and get their research. that changed over the past decade and leading right up to this crisis, inead of the buyers paying the rating agencies, the investment banks paid the rating agencies. and not just a little, but tens of billions of dollars. look at their sales, they went like this and so did profits and bonuses. you end up with a situation where the people who are writing the checks are also saying, i need a double or tripl a on this paper. it is absolutely corrupt. there is no reason why the rating agencies shouldn't be put through the same terminal executionhat arthur anderson did with enron.

they are me at fault than arthur anderson was. it is criminal they are allowed to continue in this form. i think what should happen is we remove their special status, we open up ratings to competition. therare lots of small companies out there that do this and you also find yourself in a situation that all the special protection they get, it's absolutely unacceptab. we should complety strip them of the benefits they had because they clearly can't handle it and lastly, investment banks shouldn't pay rating agencies for ratings. i call it pay for play in the book and payolah, it shoul be strictlyurchaseded on the bond buyers side and that will event the same situation from ever happening again. >> host: "bailout nation," the guest is@@@@@@ after the

executives who had big compensation packages. can we really do that if the executives acted within the law? second question is you had mentioned that many of these companies use chrysler as an example and you mentioned a.i.g., should go bankrupt. what would have happened to the employees of the company fist those bankruptcys occurred? thank you so much.

great program. >> gue: two good questions. ken feinberg is now the paczar and the basis for this cla back, i'm not suggesting the government operate oside the law, the legal basisf the claw back is fraud. if if you are making representations to your board of directors, yourshareholders and claing that you're earning a certain amount of profit, but the reality is that profit is a phantom because at the same time you're taking so much risk that it is inevitable that that profit will go away, that is his basis and i think that is a valid approach. essentially the losses over the past two years have wiped out 10 years of profit. so go back over that past 10-year period and you're looking at any profits that were based, any bonuses, stoci options, etcetera based on the profits and that will be the

basis of his proceeding. i assume he will threaten litigaon and then settle for $.50 on the dollar. if you are sam o'neal and have millions you may b kicking back millions. he was the c.e.o. of merrill and a few before him. the second question, refresh my recollecti collection, what was the second question beyond the pay? >> caller: actually it it leads to something you write in the book, which is how this whole process works. you wrote theliche no one should see how sauge logs are made is tru when it comes to bailouts. the amounts involved are especially egregious. >> guest: no doubt. you end up with bailout companies are often or always politically connected. they have given a lot of money in campaign donations. they dump a lot of money io lobbyists and s the whole idea

of a democracy formed by the people becomes a plutocracy formed by the wealthy interests and that i not how the system should work. the other questio someone had asked about was: aret innovators always going to work their way around regulation? the answer is for most of history, the answer is no. it is only when we basicly drop the recognition that regulation is necessary and tell people don't worry about it it it, the free market will cover it, we don't need real regulation, i think we creed a culture that ignobed the idea there is a rule of law and things that you are allowed to do and things you aren't. if you dra a bright line and say, you know what, you are not allod to take loans from your clients and use that to buy speculative investment then people won't take loansrom their clients. there is a dozen examples of what was done that coul have

been easily precluded with a simple law. are there people around the margin that will come up with clever ways to test it? yes. but look at the sec, they are the biggest law firm in the country and for the past 10 years we've cut their nding, reduced their headcount. instead of growing them and saying, you guys have to be ever vigilent and look for new forms of scams and new forms of problems, we pretty much handcuffed them and a lot of what took place in this crisis took place while we h the c operating with one hand behind their back. i think you have to really revitalize those cops on the beat, they are essentially the prosecutors. and make sure that they're looking not just for little things, you know, the martha stewart and mark cubin cases were minor. i would like to see them use the same technology wall street is using to sift through the data.

why is this trading suddenly happening with thi stock a week before thi news comes out? somethinis wrong here. a lot of techniques can be de and i don't think we are doing a good job doing it ye it's going to take a full revitalization for that to take analysts dis cussed the afghan

election at t broogings instition today. this is an hour and a half. >> believe it or not, the director of foreign policy at brookings. and we're very glad to have the opportunity to host this session on the prospects f afghanistan's future, assessing the outcome of the afghan presidential election and its implicationsor future american policy in afghanistan. i don't quite know what all of yoare doing here in washington this week but we're very glad to see you. we are very fortunate to have a very experienced panel to lead

our discussion today. i will just introduce them quickly and then we'll hear from them som opening presentations. we'll have a bit of a discussion between us, and then we'll turn the audience for questions. the leadf speaker will be michael hanlon who is director of research in the foreign policy program at therookings institution. he specializes in u.s. defense strategy, the ese of military force, homeland security, and american national secity policy. he has just come back on monday from a visit to afghanistan where he participated in the electi monitoring with the international republican

institute. mike, as you may know, is @lso the overall@@@@ @ @ @ @ @ @ @ @ coauthored wit curt campbell. before he came to brookings, mike was an analyst in the congressional bget office and has also worked at the institute of defense analysis and has been an adviser in particular to general petraeus both when he was commander in iraq and now.

tony has got to run out at 4:00. i hope you will excuse him. tony is so, i think were very well known here and across america. he's tat csis. and national security analyst for abc news. he during his time at csise's been a director of the -- assessment project, principal vestigator over the homeland defense project. he, too, is a prolifi author. in fact, i think he probably is a little more prolific, in fact, wherever possible, than michael nlon since he's written 50 books including a four volume series on lessons of modern war. he formally served as national

security -- with joh mccain on the senate armed services committee and as director of intelligence assessment in th office of the secretary of defense. tony and kim kagen, who i'll introduce in a moment, both worked in afghanistan recently part of a team that was sent out there to advise general mcchrystal as he looked at his review of u.s. strategy there. kim kagen is the president of the institute of the study of war. she's a military historian who's toured theilitary academy at west point, yale, georgetown and at american unersity. kim has conducted six battlefield circulations of iraq since may of 2007 asn adviser

to the commanding general. and i think it's now two tours in afghanistan. one for general m she has a host ofther advisory roles to the military. she's theuthor of "the eve of command." and of "the surge in military history." finally we'll have our very own. bruce has had or 30 years' experience in the cia as an analyst. but more recently has worked in senior capacities at the nationa security council where

he has been a middle east adviser and south asia adviser tohree presidents. bush, clinton andbush. he has also served in the senir position in the defense department and also as the intelligence adviser to the supreme commande of nato. more recently, bruce was tapped by president obama in the early days of th administration to chair the strategy review of the strategy towards afghanistan. and he is also the author of a recently critically acclaimed book on the search for al qaeda. so as you can see, we have a very distinguished panel. deeply experienced in the issue that we're going to discuss today. and i'll call on mike o hanlon

first toead us off about te electi gls thankyou, @@@@@ rbrb norma cramer and others part of that group led by rich williamson. i want to say a few words about the election and tee up one or two qui thoughts on broader ises i'm sure tony, kim and bruce will delve into in more detail. let me just say a few words about the eltions. this is almost getting to be the sortf topic where you check the website every six or 12 hours to see what's developed. because it's a fairly exciting period nows w try to see not

only who might be ahead andy how much but how the different forces within afghanistan are frankly vying for their proper role in this election process, withresident karzai and his office and sporter have said been quite early to declare overwhelming victory, that would be sufficient that no second round of volting would be required. you probably know you need 50% plus one to avoid a runoff. karzai has been out there along with his people saying we've got 70% of the vote. no nee to worry about the runoff. it's interesting to see the jockeys and the independent election commissn now saying today they've only counted -- or can only vouch so far for 10% of the votes. out of the 10% it's almost neck and neck between karzai and former foreign minister abdullah. i have no idea. i can't give you an idea of what the real numbers are. i will apologize and be up fnt

in advance. let me say a few things about wh was good about this election from my per spegtive, what w not so good and finish wup a couple broader thoughts. there were a lot of votes. a lot of good things and a lot of bad things about this election. i think the glass is somewhere around 55% full just to give you a sense of my bottom line. that's notoo precise of a figure but there's plenty of both to go around. in terms of the good things about these elections, th m mechanics of how election day was conducted in most of country, anyway, i think was pretty good. all the votin stions we went into on behalf of iri in kabul and in most other parts of the country where we could observe looked like they were being fairly proficiently organized and run. people seemed to be on top of their game iri observers who know comparative electio much better than i do said that the overall level ov professionalism

among the workers was pretty good. there were actually a lot of acclades for the performance of the afghan police and army who provided security at the sites. we read a lot of news about the violence on election day a week and moremore tgically toda in kandahar. nonetheless, despite several hundred taliban attacks and broader insurnt attacks o election day itself, there were quite modest numbers of overall fatalities. most of these polling stations seemed reasonably well secured by primarily afgha security forces. now the big caveat, i was not in southern kandahar or helmand. none of us were. there were undoubtedly some irregularities tha occurredn places like that in the war torn parts of the country that were worse. and there may also have been some fraud. you're seeing a healthy

disagreent right now between mr. abdullah, president karzai and others about how much fraud may have occurred onbehalf of the state in these places. but most of what i saw was pretty well organized. couple other quick things. i'm going to speed up here. the campaign process of the summer. i was not in afghanistan for most of that. we were lucky enough to hear from a lot of people who were and who organized watchdog organizations who ran eitr private or government sponsored but inpendent organizations. and they documentedhe amount of press coverage of dferent candidates and so forth. state-run media definitely favored president karzai. quite a bit too much. but private media seemed to have done a pretty good job of covering all of the candidates more or less in proportion to what their respective standing would seem to warrant. there were lie televised presidential debates. there were campaign rallies around the country including in kandahar b several major candidates where people actually talked about the issue with abdullah, abdullah,@@@ @ @ how

much coverage they gave him versus anyone else the enthusiasm of the afghan people is not very high because frankly they didn't see any candidate, apparently as being all that stellar they like president karzai and recognize his na. are prepared to see certain virtues to continuity. they also know he hasn't done a great job for their country. there'a certain amount of frajle optimism we've seen in afghanistan that we've seen in some republican nional institute poles andther surveys recently. it's probably quite shallow and ajle. of course the overall trend line of the last three or four years is declining optimism, declining pro-americanism, declining views towards nato and towards afghan zoned government. when you sum it all up, the public opinion polls are better

right now about all these things, the future, nato, us. bute better take advantage of this last opportunity. because i have a feeli that it's the last fresh st@rt we can really have in afghanistan. the security environment was actually, and obviously quite poor, but there were close to 300 attacks initiated by insurgents. on election day alone there were big car bombs that went off in kabul twice during election week and a number of other problems. turnout was quite mediocre to my my. from what i saw and from what colleagues had told me, i would have to guess that the national turnout was probably closer to the 30% ballpark than to the 50% ballpark that has often been discussed. that's a reflectioof the combination of fear and apathy. that can't be a very healthy when when you look at it that way. that's my ovall view on te

election. two quick points to finish up broaderissues. i'm sure tony and bruce -- kim can discuss in further details. we have all these legitimate questions. even though i'm a supporter of the mission. one thing i came awayrom this trip firmly believing, even though i haven't worked with him as much as others on this panel, general mcchrystal who now leads nato andther american forces an outstanding leader, on a par with general petraeus in terms his understanding of these kinds of missions, his commitnt and intensity. his ability to accept bad news, not build a blind eye around it. he's fully aware right now we are not winning this war. so i just want to give a rsonal expression of admiration for him as a commander that most persons don't know yet verywell. i hope he'll spend aittle bit

more time speaking to the american people. he's got a war to fight right now. and the pentagon has to figure how much to ask him to come back to talk about the war in the coming months ver su how much to let secretary gates and admiral mullen do thetalking. my personal view is general mechanic cryst mcchrystal is the right guy. last point, admiral mullen this weekend, this aually gets to my point about why i think mcchrystal is the right person to speak to the public. i'm a big fan of admiral mullen. but i don't totally agree with the message he conveyed this week whend when we said the siation in afghanistan is coinuing to worsen. i think it has not improved. it's worrisome. but if it's truly beginning to become worrisome, people could rightly ask why we should -- a little more textured detailed explanation of what has happened

far this spring and summer and what still must happen for us to be suck eszful is @@rbrb@á >> let me focus somhing if i may a bit different. i think having watch u try to fight counterinsurgency for half a century,e often find rselves focusing on the threat or focusing on the host country and rarely focusing on ourselves. mike quite correctly pointed out the importance of general mcchrystal.

i'd say the same thing of ambassador iken berry. we don't normally talk about following the money or following the troops. when you talk about theay you resource -- but over the last seven years, we have had almost no coherence in our strategy, in our simple military plans. it tooks more than half a decade to begin the serious resource -- most of the aid money has goneutside the country, been wasted or been corrupt. we found oselves only seriously beginning to create afghan forces in terms of actual -- moneyn 2006. our troop levels have never approached the troop levels we've had inside iraq. and in the process, we went from a batred remnant of the taliban to a movent which,

arguably, because no o really knows. our intelligence can't kor specif -- cover specifics accurately. a steady process of deterioration since 2003. w, general mcchrystal and ambassador iken berry will come back in september or october. and if they are successful, they are going to have to ask for substantially more resources. and article in the "washington post" which directly quoted the ambassador noted that they needed a budget more than twice, the budget he is currently given. i think that is a minim estimate of what it would take to create the civilian se. u.s. troops are going to be needed because no other country's going to provi them.

we are going to find ourselves having to finance, a major expansion of the afghan security forces. they may have with considerable americans at work been able to secure a few polling placesor several days. but the police is so far largely a failure and th army is still emerging at the battalion level. we have not provided any strans parent or honest reporting on the growth of the threat. the throatest we have are metrics which came out in a department of defen report issued in july. that does not show the expansion of the area anywhere in the document. up till january we were still reporting as if there were only 13 out of 364 districts threatened by the enemy. that was flatley dishonest. it did not reflect any of the

maps which showed the penetration of threat influence. so we do not hav traps paraphernaliasy. we do not have integrity. and we have not resourced this war. what frighteninge most, because i think mike is right, is is ourast chance, that there is very sharp pressure on general mcchrystal and on ambassador iken berry from the white house and the national security council not to ask for specific additions in resources when they come back in september or october. if they don't, it takes 6 to 12 months to go from an increase in resources to an increa in deployed action. that to me would be far more important than the election. because if what they issue are concts which are politically

correct,omething that was forced on former ambassador ron newman by a different administration, i believe we will lose this war. and i think what i found being v what do our rts cover, what do our troops cover, h much of the population can we secure? we are fightg a war half a century later that we lost through similar reasons half a century earlier.

the level of coordination between the u.s. embassy and mission team is extremely poor. while we were out there peopl were trying to draft for the first time a military plane for operations inside afghanistan for the u.s. there was major pushback against having that plan developed and implemented. and frankly i don't know how it came out. when you talk to senior officials you hear again and again about the problems inside the nato effo. not because of nato, but because of individual country caveats and restrictions. they're considerably worse at the level of aid. where there are no measures of effectiveness, generally no public audits, and no indication of whether it is actually serving the problem of

counterinsurgency. we do need to build up much larger afghan security forces. this is far more difficult than simply puttingeople through a training cycle. and there is heavy resistance, the number of veterans, trainers and partners that are being provided. but in the last report the department of defen isish shud,e had less than 40% of the trainers required to deal with the -- you cannot double the afghan forces with those levels of resources. when we talked about troop increases as mike did, it's important to note that it can take you three to six months to actually place troops in a new area, achieve a reasonable level of security, and begin what we

call. we talk about the elecon regardless of who wins, we will not have people capable of governing. karzai is corrupt and lacks capacity. abdullah has governed precisely nothing by way of a large scale structure. everywhere we went we heard about the construction and lack of capacity in far too many provincial governments who were not elected and who were not given money. and the situation in districts was far worse. if we are to win we are going to have to create capabilities a the prudential andistrict level that do not create. do not today exist. above all, if we are to have a strategy based on sha-- we ed t start talking about smart power as if we have it. don't have the civilians in the field.

the so-calle civilian surge will not come close to the minimal requirement. at the end of it, 80% of the people doing the civil and aid side of the work will still be in unifor and if we can't define better, what iteans to do the civil side of operations, we will continue to alienate the afghan peopleather tha secure them and give them a ture. and as yet you cannot find anywhere in american military literature dinition of what it means or a single statement by any u.s. official to indicate when the capability, the manpower, or person power, to provide them will be deployed. we've lost too many wars in too many places of this kind@@@@ rb off and discuss the

comments that admiral mullen made over the weekend that the suchuation in afghanistan was serious and deteriorating. a comment with which i agree on the basis of the time that spent in the field this summer workg with general mcchrystal and his assessment team. i do not, of course, speak for general mcchrystal, so let you give you my personal opinions about the tuation in

afghanistan and why it is that we are facing a serious and deteriora deteriorating, really, set of circumstances. the first thing that i would like to point out ishat we can overfocus the problems of our own institutions. and we are, in fact, fighting an enemy in afghanistan. and so before we blame ourselves for all of our failures, we have to understand that whener a lae suicide bomb goes off or a large vehicle bomb goes off, that is an event initiated by a thking enemy. a person. a group of people who are trying achieve very specific objectives on the grod. the enemies we face in afghanistan are really quite startling in their shared objectives, first of defeating western powers in afghanistan

and secondly of distributing power within affidavit such tha they get a major share regardless of what comes in the future. and so we have a competition bor political power among enemy grps. th're also trying to contr the population and see to it that the population supports their ornization rather than the government organization. and, therefore, when we look at what t enemy is doing on the ground, it's more than just these spectacular attacks that we see. or the ieds that go off and kill american soldier. what we see is an enemy trying to intimidate the population of afghanistan.

in the southern area of afghanistan where the afghan taliban is quite active, we see the taliban is providing services to the population normally the government would provide. essentially, they are protecting the polllation. they are engaged in extracting taxes or providing justice through courts. and they are enjoyed in a campaign of intimidation against the population to ensure that the population does not have faith or confidence in the afghan government. so as we look a these group, their reach and their expanse, i think we see the areas that they control are actually increasing. the level of control that they are able to exercise is increasing. and what is why i think particularly in souther afghanistan this situation is serious and deteriorating. likewise, in eastern afghanistan where we see groups such as the

honey network which has all sorts of links to terrorist groups in pakistan including al qaeda, we actually see an enemy that is becoming more capable of conducting spectacular attack we have to understand we have a capable and adapting enemy that is expanding in its reach. and in a certainense ourocus over the past years on violence against u.s. forces has prevented us from seeing what these groups are doing against the population itself. the second thing that this means for us is that we do actually have a counterinsurgency size to fight in afghanistan. it's really sort of the prerequisite to a counterterrorism campaign. and it can't be fought without a ct campaign. but we can't have a campaign without -- the truth of the matter is that we haveo secure afghanistan such that the

government of afghanistan actually has -- institutions actually make a difference? and i think the first thing that we hav to recognize, but we have not been pursuing a

couldn't insurgency strategy on the ground or afghanistan. it's a n truth that wept in over the course of the spring. and according to president obama's meeting, resource for class, have not actually been put to use. well, and they are actually allocated to areas that are sometimes marginal to the fight, the popution, to the government. and they are not on the whole concentrated enough to conduct the kinds of shaping, clearing, honing and builds corporations tony has mentioned. although we have forces in afghanistan and although they have been conducting a campaign this summer, an area in helnd process, they haven't been doing it right. that's something tt i can tell noonlyrom my visit to afghanistan, but by contrasting when iaw in afghanistan with

what i saw on my six or seven visits to iraq with general petraeus and general odierno. although the marines in helmand probably one of the best forces in this rega, as are the folks from the 82nd airborne decision in rc east, we do not have counterinsurgeon say campaign. we're at large in afghtan. let alone the kind of operational level syneres between provinces that neral o odie yeier ya. we've seen none of that going on within afghanistan.

and so general mcchrystal needs to reallocate force within afghanistan to these new priority areas. see to it that they are conducting counterinsurgency. and in my opinion he will need more troops in order to obtain the kind of -- in the places where we have a challenged by the enemy against the population that would aually make the popution turn against the taliban or turn around the honey network and think about working with -- lastly i would like to say that one of the things we're missing in afghanistan that we hadn't -- was the search of afghan forces that uld compare to the search for iraqi forces we saw in 2007. during this time in afghanistan. and he was able to create about 100,000 the ground

in -- i'm sorry in iraq while he was cmander of the training command in iraq. we do not have nearly enough forces in afghanistan right now to turn over to the afghan army or the afghan police. and one of the things that we need to do is qckly surge the growth rate of the afghan army and afghan police so that we have enough troops to partner with our coalition forces to conduct joint operations to do planning together as we did in iraq so that there is actually something to tur over to. right now, we really do not have that capacity. we're talking about roughly 90,000 afghan natnal army folks. by deliberate design of american policy limited in c so they would not be too expensive. needless to say a brigade of afghans costs less to the american public than a brigade of u.s. rces. until those afghan forces come

on-line and are properly trained there will be a gap between what the country needs to defend iá@ @ rbrb@ @ @ @ irbrb

closing is that we have every opportunity to succeed if, in fact, we implement the right strategy with the right resources because we haven't done it yet. >> qualified. bruce? tell us about how the strategy is going. >> well, actually i'm going to bring us back from the arena of militarytrategy to the elections which is why we convened you to hear today. of course, i face the significant difficulty in that we don't have any results. is has to be the most agonizing election in recent history where we have a election and now fully a week later we can't ally tell you what's going on. and i think that the predictions that we're hearing from president karzai and his supporters of overwhelming victory should be put into the same category that any politician after election says, i've won an orwhelming victory. when you see a politicn who says, yes, i got beaten at the

polls tt's one you can believe, one who says they've won before the votes are counted shouldn't be taken too seriously. what i would like to do is talk a little bit about the election in general terms, then give you some basis for tnking about the results as you come -- as they come in, based on previous elections and then look at a couple of scenarios of what may happen over the course of the next two months. i think the first thing to recognize about this election was a test in the challenge for both sides in the war. both sides had something to prove and both sides were severely challenged. for the nato forces, the i saf forces and the governmt of afghanistan, the chaenge was to pull off a credible vote in order to rebuild legitimacy for a government which is largely lost its legitimacy over the course of its five years in office. rebuilding that legitimacy is absolutely critical for any effort to reverse the momentum that the taliban have built since then. if the government of afghanistan

now goes into free fall, something like the south vietnamese governments of the 1860s, then all the troops in the world really aren't going to matter. if we don't have a governmen we can point to, thatas some basis of legitimacy in the country, the best general, the best strategy isn't going to help turn it around. now, the first part of this staging an election, was a relatively low bar for nato. i mean, after all we have 100,000 troops there, we have somewhere nearl 150,000 afghan army and police a lot not very good but with a quarter of a million peopleo guard the polling places you should pull off an election. the harder challenge is to make it credible. and with the questions that we're now having about fraud, the questions about turnout, is is still an open-ended question. whether this electionill be judged credible by the people who counted the most the afghans is up in the air. it was also, though, a challenge and a test for the taliban and associated parts of the

insurgency that work with it. they set themselves up. the taliban said they were going to disrupt this election. they were not going to elect people to go out and vote. to a certain extenthey had some success in doing that. they were able to intimidate large numbers of ters, particularly in the south. but overall they did not prevent the election from taking pla. thtaliban had a second challenge here. and it's challenge that the taliban frankly has been facing for 15 years. which is to demonstrate that they're not just a movement. what we face in afghanistan today is not a nationwide insurgency. it is nothing at all like what the soviets faced in the 1980s when literally virtually every part of the country was in rebellion against them. we faced an insurgency among a minority of the population who are posh tune and with the taliban have been trying to do for 15 yea is to demonstrate that they are rlly a national force. and i think, again, although we don't have the election outcomes here, we probably will say the

taliban failed to do this. that once again they@@rbrbfáa há

more useful base to compare data as they come in in the future days. overall turnout in 2005 was under 50%. the government claimed it was 49%. most observers at the time said turnout was probably closer to 40%. that's your baseline figure to be facing turnout this time around. there were enormous differences by province in turnout. some provinces had staggering turnout. bamian in the center of the country famous for the buddhi buddhist -- buddhas destroyed by the taliban had a stagging 75% turnout. very few democracies in the world get 75% turnout at any kind of election. but there were also extreme low en and they're all n surprisingly in the poshtune south.

zabul province had less than 20% in 2005. orzagone, mullah omar's home province had a rnoet of about 21 kandahar at 25%, helmonday surprising in 2005 had a 35% turnout rate. i suspect we're going to see a substantial drop in that turnout. in other words, the 2005 elecon showed us that the poshtune belt in the south was already diseffected. it showed us something else very interesting. gender mattered enormously. afghan women after voting in 2004 lgely stopped voting again. there were exceptions. in 2005 one province, the taji had more female voters than male voters. but that was the exception. almost across the country, fele voting patterns were 20% lower than male voting patterns. and when you got into the

taliban heartland in the south, it was even more striking. zabul again believes 96% of the voters in zabul in 2005 were men. 4% were women. orza got 86% to 14%, helmond 86% to 14%. even in kabul where we had 33% turnout overall 70% of the voters were male. don't be surprised if in 2009 there's very little female participation. that's a trend in ahan politics which is now well established and dates back to before the serious deterioration in the security situation in most of the country. i think the key point to take away from this is this -- the poshtune belt in the south has been disaffected from the beginning. i think when we look back at this, the poshtune majority in the southern provinces to a lesser extent than the eastern provinces, but certainly in the

southern provinces have never bought into the legitimacy of what happened at the end@@@ @ rb isn't really hard to do the math. he had 56% in 2004. we'll assume he held his base and got10% more. where did the 10% more come fro? the 10% that [ inaudible ] him

one in2004. marry them together and there's your %. abdul is worth more than just a moment to look at. this is a man renowned for his brutality. even by afghan standards. that's a pretty high standard. is is a man who began his career in the 1980s ithe afghan communist army working with the soviet ha bui the only really loyal militia force that fought on behalf of the soviet union who was feared throughout afghanistan as being more cruel than the soviets in how it dealt with afghan mujahedeen. then when the soviets left he stayed loyal to the communists for a gd 2/2 years. it's defection from the communists in 1992 that led to the end of the regime. it also led to the beginning of the intermujahedeen civil war. mr.s dodin with his partners are

responsible for the destruction of kabul in the 1990s. he fought mass soods and then aligned with him and fought with him back andorth. he switched sides so many times in the civil war you had to use a pencil to keep track of what side he was on because you had rase it virtually every day. from a stronghold in the northern uzbek territories he was able to basically b one of the critical warlords in fighting the taliban. although from time to time he also aligned himself with the taliban. i haven't painted a picture yet of a man who is entirely sreputable then i've failed in the last couple of minutes. he had ben ousted from the north by the taliban and returned with operation enduring freedom in 2001. he was recently ousted again from afghanistan on karzai's instructions because of an interaction he had with another warlord in the uzbek areas. he came back in august at

karzai's request and endorsed the karzai government. the point here is, if karzai is returned to office now, because of dosdumb as his supporters than hopes for a good government are going to be rather bleak in the new second round of a kaai administration. on the other hand, if we go to a second round runoff, then really all bets are off. i don't think anyone really knows what a second round is going to look like. there is several scenarios and there are intricate linkages tween them. all of which are very complex. one scenario you will hear a lot is that there's going to be a back roodeal. that karzai and abdullah a@dullah if they go to a second round will somehow come to an arrangement which will overrate the need for an election and share power. i'm sktical of this. certainly possible, politicians making deals happens everywhere, but i think at this point if

abdullah abdullah does get to a second round the desire to see if he can win the whole thing is ing to be overwhelming. secondly tre's going to be a lot of other deals going on. if mr. dostin can endorse karzai in the second round he can not endorse him in the second round. there are a lot of other politicians and warlords who will be in the same business a of whom who will be looking for promises for what job they're going to get in the next administration. thirdly the taliban and al qaeda are going to make a higher priority than ever before to do something they singularly failed to do in the run up to this election which is assassinate one of the candidates. had the taliban assassinated any of the 40 some odd candidates the election would have automatically been postponed evenf it was the least important of the 40. i they were successful in going after karzai or abdullah abdullah thewill throw the ole thing back up into the air. finally we may have a disputed

outcome. the odds certainly favor if the first@@@@ @ hbrbrb á

you only get three chances in baseball and in afghanistan i don't think you can expect a fourth chanceither. final point i would make very briefly, is that the outcome of these elections and how they're managed and whether they are credible or legitimate matters a lot inside afghanistan. it matters enormously pakistan. if these elections are seen in pakistan as having been a fraud, lacking credibility, and producing an illitimate afghan government, the conclusion pakistanis and particularly pakistanis in the army will decide is, the base for the american and nato operations in afghanistan is gone and that will reinforce through deeply held belief that we're going to cut and run in afghanistan sometime in the next two or three years and all they need to

do is wait us out and then their taliban friends will be able to take over least half of the country. thanyou to a four of you for excellent presentations. tony, you're going to have to go in a minute. if you allow me just to pop one question to you. "new york times" onhe weekend drew the comparesonetween obama's dilemma,resident obams dilemma now and president lbj, johns, in vietnam, back in the '60s. i wonde whether you think that's appropriate given your experience in analyzing all of these wars and what do you do if you're president obama, if it is the right analogy? >> well, first, i hate historical comparison in count insurgency because they're alwayshosen in ways that rig

the game. most of the time in counter insurgency you win quickly and brutally and the insurgency disappears it's only the bad cases that create t debates and they're all different enough so that when you do this, it's a sort of thing you might do in n op-ed piece which is, as we all know, the utter death of intellectualism. more seriously, however, the real issue for the president, i think is going to be ver simple. how on earth do you have a national security advisor who talks to a reporter for "the washington post" in the presence of a military officer in the field and says, don'tsk for more troops because the president might ask embarrassing questions terwards. we do have, i think, we've all agreed, probably one more chance. the real issue here is, can

ambassador eikenberry and generalcchrystal come back to washington, ask for the resources they think will actually make the difference, and the authority, because it isn't just troops and money, it's the ability to force coordination, to put pressure, to get these forces effectively used. if they come back and they' not allowed to do this, and my guess at this moment is that is the white house policy, the president has failed before this strategic review begins. just to make it clear, i absolutely agree with what k has said about both the threat and the need for more troops. it is not just civilian resources. the question, frankly, in october will be, is this administration and this president going to be one bit more honest about afghanistan

than president bush and his national security advisor?@@@ áb

25,000, 30,0 additional troops this year, and sacrificed so many american lives, and nato lives, with the nato total fatali tally for this year now

approaching 300 and the american numbers at 172, that at least tactically where we put these forces we can start to see that ey have some impact. that's not enough to add up to a change in mow men tunnel at the national level, but it may be enough to begin to talk about hopefully, you know, a potential for a plateauing of the threat and an unacceptable and dangerous but still graally stabilizing level. again, i'm dancing around semantic distinctns. don't disaee with kimnd i'm glad she was emphatic in her point because that does characterize what i heard from the troops and commanders that they areery sober about the situation but i also think i heard some people talk about how they are cfident that once they put resources in place, at least locally and tactically they're starting to see an impa and a difrence and so it's the idea of spreading the oil spot. we can just begin to see the faint outlines of some small oil spots and that's a reason for

hope but now we have to make those oil spots a lot bigger a reinforce and strengthen them. to clarify what i was trying to get at before and explain in answer to your question what i heard from people, that's the best summary i can get. >> kim, i wastruck by one thing you said about the fact that forces aren't being -- the new forces aren't being deplod in the way they should have been. i wonder if you could give us a little bit of an explanation why that is the case and also, a a query to that, if youe going to clear and build, you need an afghan government that's going to come in and build behind our forces and do you have confidence that that's going to be there? >> great question. martin, the first thing that i would like to do is takehe first part of your question and talk about how the new forces were added to the resours already existing in afghanistan.

because i think it is important to remember that we have to have forces doing the right thing in the right place. otherwise, we are not maximizing the effects that we can have in country. for example, some of the new forces that went into afghanistan or i should say many of the new forces that went into afghisn, went into helmond province which, of course, is an important area for the taliban. it is, perhaps, the area that they use to transit back and forth between pakistan andhe interior and more importantly, where they make the most money from the narcotics trade, not necessarily by selling narcotics but taxing the narcotic trade in a variety of ways. our british allie had been fighting hard in helmond province for a number of years.

sadly, i think that the marines were put in a place that has less importance than other p&

andlthough it may be the case that if you could stop those accelerants to violence coming from pakistan it would have an impact on ghanistan, we cannot stop those accelerants through intradixion and the majority of the insurgency in afghanistan is indigenous insurgency and the kinds technical expertise in funding that comes from out of country is but a fraion of what actually exists in the country. therefore the intrixion strategy was misguided, but the apication of resources this spring focused on that intradixio strategy. so, therefore, we have been bringing much farther south than

we should. likewise genal mckiernan had placed and reinforced a area his predecessors reinforced in the valley in the eaern region of afghanista agn, n too populace place, a ple we have seen some accelerants to violence coming from pakistan, but really, the amount of force that we're using in that area is disproportionate to the importance of that area and we've done a paper on that at understandingmore.org recently. that's the answer to your question. general mcchrystal came in late to change where the troops were going tis summer and what they were doing. as in those operations were prepared and were launched. and so we're only now seeing the reorientation of some of those marines within helmond province and some of the forces to other important areas of the south, such as kandahar which is vitally impoant to the insurgency. that's the answer to your first

question. the second question you asked was about the government and governance in afghanistan and i wholeheartedly agree with bruce, with mike, and with tony, tha we must create legitimate government institutions in afghanistan and that they are critical component to the long-term sucss of the state that we have not really succeeded in doinghat so far, and that any coi operation, any counter insurgency operation must have a gofernance focus as well as a focus on defeating the insurgents themselves. the issue is that i think as we saw in iraq, sometimes coalition foes need to fill in when the ingenous government is not ready to perform all of the functions of building the state. and again, what we're talking about or what we should be talking about is a gap as the government of afghanistan increasingly becomescapable. if ithould not do that,f we

do not focus on tha or if somehow the government that is chosen is not recognized as legitimate for other reasons, then we do have a problem, a very major strategic problem in afghanistan. >> thank you. bruce, i say any -- that the pl that you developed for a situation like this only lasted as long as it meets reality. you chaired the overall strategy review. w has reality impacted on your sense of the possibility for the strategy to actually succeed? i don't seenything in what we've heard today or what we've seen over the last six months that is substantially different than what iaw during the riod of the strategic review in february and march. to put it shortly and concisely, president obama inherited a

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be stabized with any amount of resources or is it jtst too little too late? we're not going to know the answer to that question in any serious way for at least 12 to 18 months. >> well, now we go to you, the audience, for questions. we have 20 minutes. i'm going to take three at a time and we'll let the pel go for them. i ed you, please to keep your questions short, that is to say, they should have a question back at the end of the sentence and i need you to identify yourselves, please. over here. >> just wait for the microphone, please. >> thank you. [ inaudible ]. given the rather grim picture you have painted, if we make it even a little worse, how do you

view the abity of the united states to sustain thiseffort, given the overall environment in which we are living with the federal budget deficit approaching 1 -- $1 trillion plus and the projections being made? in other words, given what it's going to take to sustain a counter insurgency strategy for the long haul which is going to be years i a conservative, very optimistic scenario and give the conflicting claims on exhausted federal finances do you think that there is politically the aying power to do whatever it takes, assuming that your advice is followed? that indeed, it's going to -- the resources are going to be requested d allocated? do you think that we have staying power to see this thing through? thanks. >> over here

>> thank you, martin. edward joseph, health commission. if i had to sum up this excellent presentation, i would say the theme in two words was time and resources. and the key overriding question i think everyone would agree in making the case for that time that bruce was just referring to that's necessary and the resources that mike and kim and tony were talking about as well, is this question. does it matter? how much does it matter? now, of the speakers, bruce alluded to one of the ke factors which is pakistan and the fear of a vacuum and incipient vacuum dhat would deter the pakistanis from going after al qaeda and the taliban.

this k question of does it matter is -- seems to me is at the core of making that case. many people say it's not worth it or we can deal with the al qaeda threat in other ways without this time and resources. so appreciate the views of the panel on that. thank you, martin. >> okay. d one last question. before we go to -- yes, please. >> my name is [ inaudible ]. i represent myself. my question is very simple, do you think thathe stregy which is supported by right now is the right one? because it seems to me, without any innovation in strategy, you

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world. this woulde a victory on par with the destruction of the soviet union in the 1990s and those moderates in the islamic world who would say no, we have to be moderate, w have to engage, would find themselves facing a real example. no. he with just need toill them and we will drive them out. i think the stakes are enormous. >> is it sustainable? >> i was hoping you would examine ask me that one. kim is so goo on the strategy estion, that would be a good one to leave to her. >> i tnk so for the following reasons. the president's declared that afghanistan/pakistan is his top national security priority and he chose bruce reidel to chair his strategy review. we're very happy about that. that proves his point. he tres it as such. the idea that the democratic congress would pull out the rug underneath a president that has

declared to be his [ inaudible ] we'll hear complaints from congress and legitimate questions but we will not see speaker pelosi and majority leader reid and chairman of the apprriations and armed services committee deny the president money for a war he has said is his top priority until there is much more evidence that the strategy is failing. if nothing else it would be political suicide to do that in a run up to a mid term election. these are serio americans and i think they recognize it tes time. we need a greater dialog on this and mcchrystal and eikenbdrry need to explain the strategy more than we've heard so far but they will. secondly i would simply say that the money problems you've mentioned are obviously serious, but you know, when you talk about the money problems of the health care debate as we're aring quite a bit about now, the problem is not so much what happens this year or next year or the year after it's what happens in five or ten or 15 years and that's where our fundamental economic problems lie. our defit is so ridiculous the cost of the afghanistan war i a

rounding error. $1.7 trillion and the afghanistan war is $100 billion. even if we execute this strategy and add troops, we're not going to be substantially increasing a $1.7 trillion deficit and with this war, bruce says it will take a while and he's right, within a couple years i think we'll know if wre making progress or not. within four or five years, wll be able to substantially downsize, i believe, if we are making progress. the last point i'll make is sim y this, this is a counterintuitive point. president obama is doing better now on national security issues in terms of maintaing broad public support than on hisore domestic priorities. he has the ability to pull the country together when he is clear and emphatic about what we need to do to protect our security. i think in a way the afghanistan issue, as hard as it is, provides him an opportunity to do that, not that he should send more troops or resours just to win republican affection, but ironically he's actually done better on these issues with the

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another, that, in fact, it gives us as a nation an advantage, vis-a-vis the regional and global insurgent groups based in pakistan that are trying to destilize the entire gion of southeast asia. i do believe that we can win in afghanistan without winning in pakistan. i think that we hav a huge amount that which we can do within afghanistan that will give us greater leverage whin pakistan against enemies such as al qaeda or such as the pakistani tan. who actually threaten to destabilize the region. and so what weeed to do now is pursue aggressively counter insurgency campaign within afghanistan designed to create a legitimate government within

afghanistan, remove the enemies safehavens, allow the popion actually to support the government, and create the conditio whereby the united states can actually have an enduring relationship with afghanistan that rebounds to its relationship with pakistan, with iran and with the oth countries of the region. it is the right strategy. it is in some respects the only strategy and so we need to make it succeed. >> thank you. we have time for three more questions, if you keep the questions short. we'll go to the front and then to the back. >> geoe washington university. how was the situation in iran if it deteriorates, especially impacts afghanistan? >> i'm sorry. i didn't get that. >> i'm sorry. how will the situation inran, if it deteriorates, fight over the election will impact afghanistan? thanks.

>> okay. next to the television camera. >> thank you. library of congress. my qtestion, how can the transatlantic allies contribute to stabilizing t situation and in all likelihood will they actually do that? thank you. and do we have one other in this area. no. yes, pleas >> jessica lehman, i'm leaving in two weeks for afghanistan to be a cultural advisor to a commander in the south or eastern part of the countrien to the part of the human train system. my question involves the aid. dr. quartzman said the u.s. militarys doing about 80% of the aid and civilian work. does do they have the ability to do the work and how can they obtain it. >> do you want to take a go at iran? >> sure. ihi it's less what happens inside iran and more what happens between iran and the united states and iran and the

west. if we see a sittion in which the relationship between iran and the united stes is steadily deter rating and the iranians either correctly or because of their own politics come to the conclusion that the united states is trying to overthrow the regime or subvert the regime or prevent it from doing what it wants, one of the easiest ways for the iranians to fighback is in afghanistan. iran has significant influence in the western pt of the country and in the central azari region which is shia. if it stirs up trouble in those parts of the country, which have been by and large relatively quietor the last several ars, that will introduce a new front and as we've already discussed, we've got enough fronts in afghastan that we're dealing with now, we don't need another front. and i'll just take a moment on that. this is particularly matters for the transatlantic allies because

many of them have their forces@b world, take that as an invitation from me. we're starting to realize reality. for a few years we complaed while we were busy in iraq the allies wen't helping in afghanistan and ty should and could and that remains true but some are doing quite a bit, the british and canadians and dutch and dans among others. as bruce mentions the italians

and germans and norwegians are in dangerous parts of the country and our allies have suffered a combined 500 fatalities in afghanistan. weeed to acknowledge tha contribution. it would be nice if they would do more. they probably won't. therefore i think the american debate about more nato resources will focus on the potential need for more american resources. 's unfortunate, but that's as much as we can do and have to do but at least we're realistic and we know that there's only so much we can get in the way of additional allied support. there's an element of practicing maifrm in this debate even if at some level we're not getting asuch help as we would like. >> so would you like to answer the question about civilian reurcing? >> i -- >> i certainly would. first iouldike to take this opportunity r thank you for serving in afghanistan and wish you the best of luck on your travel and i think that you'll have a very interesting time. seeing some of the differences

tween what civilian organizations dond what military organizations do, in a counternsurgency fight, the first thing i would like to remind you of, though, is that there is a difference between economic support to counter insurgency and development. and we must not rlly confuse one for the other. when we are involved in a counter insurgency fight it is essential to provide the kinds of economicupport to a community that will help win the community away from the insurnlgtss and toward the government. whether that is providing jobs or whether that is pviding certain baseline of a marketplace in an area that has not been able to sustain a market for some time, those are all a variety of activities that our military forces can be involved in and do very wl and that have an impact quite

quickly on the -- on who's fighting against u.s., coalition and afghan forces. and quite frankl so far, a lot of the economic support that we have provided in afghanistan has not been focused on counter insurgency, it has been focused on long-term development and therefore is not having a qui impact or an immediate impact. so we really need t think about how to use the military resources order to create the immediate conditions for defeating the insurgency and set the stage whereby theonger term development projects that are handled by the civilian organizations and the ngos out in afghanistan can actually have an opportunity to succeed because if there is an insurgency in afghanistan, what we have seen is that the development projects can't turn off the insurgency, we can't devep our way out of this

insurgency. it is not possibl simply to build a dam and reduce the insurgency. we actually need to undertake the projects at are aimed at reducing the insurgency while creating the conditions for afghanistan to have a sustainable economy over the next 10, 15 or 20 years. so that's the challenge that you face and i think you'll see both sides of it out in the field. good luck. >> well, time has come to close, so i'm going to have a close out question tt brings us back to the question of the afghanistan elections. and it's very simple. when the results are finally counted who's going to win? this for all three of you by the way. it just has a one word answer, mind you. >> karzai. >> karzai. >> i do not know. >> that's three words. four. >> i couldn't predict the ouome of the democratic primary in the state i live in. i don't thi what my prediction about something on the other side of the world is worth

anything but i'll say karzai. >> i say karzai and i sa please join me in thanking our panelists.