[laughter] that's good. you know, i think ron has done a very good job of describing an extraordinarily volatile not year but period in american life we are living through and that is i think what we saw further proof, and was the result of a bad economy obviously, that is the office also a kind of national mood, and i thought as we went through the year and as we did "the wall street journal" nbc news poll which i helped organize the there were two numbers i saw during the year that illustrated the mood as well as anything i can think of. the first one was we asked several times in the campaign whether if the voters were offered an option to check one box on the ballot and for what everybody in congress with one vote would lead would or not at all three times we ask if 50% of people said they would do so which if you think about it is pretty astonishing.

toward the end we ask a different question we said if you had a choice in the vote for the representative from your district in the house of representatives between somebody who had ten years' experience in congress and somebody who had no experience whatsoever who would you vote for and 50% said i would vote for the person with no experience whatsoever. so that's the mood that produced the result that ron described. now often, perhaps incorrectly that was described as a motivator. i think that is a little off. i think somebody from ohio lecture on this and the more i thought about the more he's right is a mood of fear. this is fear the country lost its way, fear that the country was slipping, fear the country was leaving kunkel with its own destiny and the economy was a big part of that obviously, but it was a little deeper than that and so that is what i think produced the election results and the question we all ask ourselves and i will address

briefly is what does that do to the agenda in washington and in the congress that will now a writer of the lame-duck session next month and more importantly to start over again in january, and i think the overall effect of the vote will have been in the words being read by republicans in particular to narrow the agenda in washington down to a few core subjects. the economy obviously which means job creation, spending, debt and deficit. i think republicans are looking at this and saying that's what the agenda is. now they will also say repeal of the health care bill is part of our mandate, but they don't actually i think believe that. i think -- has the believe the people who sent them here on that to happen by and large, but they also recognize it's not going to happen. so i think the house will pass some votes to repeal the obama healthcare looks stock and barrel. they will die, those votes will die in the senate or maybe they will somehow be a collision that sends us to president obama's desk to die and they will go

back and try to defund parts of the health care bill and stop parts of it from being put into affect and i think that is an important thing politically but the core issue of republicans is spending tax levels and that is i think the overall and first effect of the vote is going to be reduced the agenda in washington to the subjects of particular which isn't going to be pretty the way because those are the core questions in the political system which is what is the role of the government and the 21st century. what is the role of the government in americans' lives in the 21st century. that is really what the 2008 election was about and people felt maybe it's this and no, no, another election maybe it's moreover in destruction but i think the country, and i don't mean the political, and in the country kind of results in a general way the question of what is the role the we want a government to play on the 21st century i think we will have a lot of swings back and forth and meanwhile in the next two years

a lot of ugly debate about issues surrounding the question in washington. sliding toward going to have, you know, a lot of discussion about which government programs can go, which government programs can be cut in half, which defense programs are we willing to seek out the door, are we willing to attack entitlements or not, but i want the jury going to have a lot of resolution of those questions. republicans like to say they are prepared to cut $100 billion of spending right now which is fine. my question and response to that is where do you find the other $900 billion of spending the you're going to have to do to attack the deficit. so even $100 billion of spending cuts gets to the low hanging fruit, not the high hanging fruit. there will be an exercise in december in which the deficit-reduction commission of president obama that is bipartisan and bicameral will either produce or not produce some kind of a report saying what might be done to attack the deficit, but i think in this environment is likely to be minimalist in scope and probably

short-lived on this debate. i think there's a more important political date coming up early next year and a chill of the conversations will crystallized and it is in the march, april, may time frame there is a need to cast a vote in congress to raise the federal debt level. this is already emerging as sort of the flash point in which the tea party people in particular and their friends and congress, people elected by the tea party explosion and enthusiasm if not actual tea party candidates themselves are saying essentially no, we are going to draw the line. we are not simply going to do what washington does and vote to extend the debt ceiling. we will extract a price from the ad ministration for doing so, and the administration is likely to say well, you can shut down the government if you want, but that didn't work so well last time the republicans tried that and i think a lot of democrats in congress are going to say you

want to extend the debt ceiling fine, you vote for it we are not going to. this is what you get when you get power you get to make the tough votes. i think it's going to be -- it's going to begin moment in which some of the questions are how much are you willing to cut to the front of of line because republicans are going to try to say this is the price for extending the rates on the debt ceiling. you agree to this package of government spending cuts and i think democrats are going to say not what we read in the election. so i think that is the core of the elite. it raises the question about some other issues. what happens to them along the way, and some issues that are particular importance to this group. so let me tick off a couple of those and then we can move on. but you're going to talk of free trade i know. i think actually -- free trade and things like desultory and free trade agreement probably get a little easier to deal with in the new congress versus the old clunkers. will be interesting to see with the tea party caucus says about free trade. the are not free traders by

instance, and some of them are somewhat isolationists. we will see whether that is an over all dread. you also have new republicans like rob portman, the senator from ohio, who ran on in a difficult environment in an industrial state a platform of explicitly saying free trade is good for my state, it's good for a while, it's good for industry in the u.s., and he wondered 17 points? something like that. he won easily. and by the way, his running mate who ran for governor also was attacked for being a free trader. he also defended the free trade position and he also won. so we will see about free trade. immigration reform i think is less likely in this congress again that he party influence is somewhat nationalistic and not for immigration reform. both parties have the political need to deal with immigration, but they don't have the environment or the votes to handle a very well. the business community to give more h-1b visas is not offset for the republicans. the price of the political and immigration bill that has something somebody can call and mystique, so i think that gets

more difficult. i defy anyone hear me you know i can't remember the ad i saw this year in which a candidate said something pro or con about ratifying the s.t.a.r.t. treaty. [laughter] maybe i missed it. maybe in vermont. [laughter] i assume because it can slip under the radar screen it may be a little easier to just get it done in the lame-duck congress but i could be wrong because it's one of those things i think republicans probably don't want to take a stand on. they don't want to spend a lifetime are doing. it wasn't the easiest thing may be to move on but i'm just guessing because i've got to tell you, i haven't heard any discussion about it although there should have been. there has been a lot of discussion about another issue that i think will have consequences which is the demonization of china. this, you did see an ad after ad after ad this year that china is the enemy, china is destroying our economy, china is the problem. it's overstated in the campaign

ads as everything is overstated in campaign ads but it's the kind of rhetoric that has consequences in the long run. what consequences? i'm not sure exactly but i don't think figuring out a rational approach to do with china the next ten to 20 years because an advance in the campaign. finally, energy. it's interesting. i did an interview with mitch mcconnell the other day and asked him twice, i guess twice because i'm a little slow and wanted to make sure i heard it right, i said what can you agree with president oh-la-la on? and both times he said there's some energy things we can agree on. he said clinical technology, nuclear power, electric cars. those are things we can agree on. we can't agree on cap-and-trade crothers energy things. and white house people will say the same so i think energy is one of those areas there might be some possibility if everybody wants to show that they are responsible adults acting responsibly than maybe something would happen. but that's been it and that is the agenda the next two years, and i really do think much of what we have had and much of

what rahm described sets up in 2012 it has forward for the political system. >> let me ask you one question about the numbers in the house. back in september, congresswoman michele bachman from minnesota announced that she was sitting up called the tea party caucus. there was nervous laughter and no one was quite sure if anyone -- in overtime, a very short amount of time, something like 100 members of the house conference joined the caucus. if you look at the house republican conference in january, is the tea party half of that conference? is it a dominant part of that conference? >> i don't think it's have the caucus. i think it's less than that. i think it's influence on the caucus is much greater. by the way, i also think it is an influence on the remaining laughter democrats and there's only about 23 or 24 of those that's going to be enormous, and more importantly, its influence on -- there's a group of

senators, 23 democrats run in 2012. they come from states like nebraska, west virginia, montana, colorado, florida. if you want -- if you're a democrat running for reelection for the senate seat in 2012 and want to decide the tea party, good luck with that so i think there is a tea party influence that transcends the numbers but i would guess that the party caucus stands at 100 notes probably 150 when it settles next january. >> which side do you think, if either, has the senate try to find agreement or do they both mostly feel they are better off sharpening differences and heading into 2012? i kind of feel like the deals in washington happened not so much because of the specifics of the policies that both sides made the fundamental calculation they need to reach agreements. does either side of the impetus? >> this is where i think the

interesting anomaly on which the house changed hands but the senate didn't, and that's unusual item because it's important. of the senate had changed hands, i think would be much more important to the republicans to have an agreement than the current circumstances which they can shoot free throws in the house and pass whatever they want, they know what will body in the senate or under the veto of president obama and they don't have to take the blame. republicans in the senate don't have to take the blame for it. i'd think the republicans view that nothing has to happen next year with in a sustainable one of the get full control of congress but they don't. i get the bottom line to me is that it's probably more important for president of, but also more difficult for president obama. >> am going to ask chris to speak next because one thing we establishes this election was about the economy and it wasn't about foreign policy, let's stick for the moment to the election was about and i will finish up with a few things and it wasn't about at least not

directly. >> okay. well, thank you very much. pleasure to be here. and i just want to respond to one thing that ron said, and canadian by the become your moving toward parliamentary system. you are making it very bad [inaudible] [laughter] and in actual parliamentary system if you actually control the legislature you can do what ever you want. and -- >> as opposed to doing nothing at all. >> right. i recently príncipe added in a conversation between paul martin, the former canadian prime minister and paul brolin, and paul martin probably as big accomplishment in canadian politics and was to balance the canadian budget and he did that having it on the back of a big conservative accomplishment which would introduce a value-added tax. and it was obviously difficult, you guys are now aware of the sort of national balancing the

budget, etc.. anyway, quite recently paul and bald were talking about this, and reminiscing on what it was like, and apparently the day after the crucial vote in parliament to balance the budget paul martin was the minister of finance, and bob said to him how did it go? how many months of negotiating did it take and paul said you don't understand. we control the party. it took a year. this is the budget and they voted for it. so i said you still have a long way to go. [laughter] which is not a bad lead into what i want to talk about which was the implications for the economic parts of the foreign policy of the midterms and actively i know that jerry's point about s.t.a.r.t. not appearing in the campaign is an important one that the foreign policy right now in so far as it

figures and people thinking about their domestic policies in the u.s. is about the economy. so i would like to pick out four big issues i think will be of concern to america and the rest of the world. the first one jerry e. loaded to already which is china and trade, but i would ephriam it in maybe a more complicated way. which is both financial and balances. i think it is a really big question, and if nuclear arms negotiation were sort of maybe the dominant issue of the 1970's and 1980's, the big framework for the international discussion, looking for a big framework for the international discussion for this decade is going to be to giving out a global financial and balances. and that includes figuring out what should the exchange rate become the right framework for figuring out the right exchange

rate, but it also includes a something a lot more complicated and which has never really been a subject of international relations between states, which is what should be a country's level of savings in the country's level of consumption, and we already see this with of the treasury going out and saying particularly for the chinese and for the germans we think you are not consuming enough and you are saving too much. this is actually quite remarkable. but in foreign relations we would be talking not only about how many guns people have pointed at us and not about the control of the defeated islands, and not even about international standards or about the collective international states. we are now in what i think are the most important discussions between countries talking about what is your savings rate. the chinese are seeing what is your national health care system you guys have to improve your national health care system, kind of rich coming from americans i would say, in order

that your people don't have to save so much money so this is i think you really important really complicated issue, and i think really, really difficult because we have no idea how much tolerance national populations germans, chinese, are going to have for the global discourse starting to have some bearing on these sort of intensely personal intensive domestic issues. second sort of big issue i think these elections will have a bearing on in the global discussion is u.s. inflation. in some ways we are here talking about the midterm, but i think you could argue that the most important political event this week was ben bernanke and the huge quantity defeasing program that he announced, and that is sort of fascinating because from

what from injury described i have come to the conclusion there is going to be durkan good luck and jerry i thought had a final analysis of the motives of the two parties, so the elected politicians are not going to do anything. meanwhile, we have the on elected head of the central bank announcing a quantitative easing program which is almost as big as the stimulus was to read its huge. and it is hard not to conclude, particularly if you are a foreign observer of u.s. policy that there is this kind of unspoken consensus that won a politically less painful, and actually economically not so bad to start unwinding this problem of a huge foreign debt used to print some money. it's nice if you're issuing debt

in your own currency to read actually you can just pay the money back by printing it and getting it to the chinese and that is what we are starting to see happen and just as much as you have in u.s. politics the demonization of china and undervalued chinese currency was the culprit for the u.s. economic. i think you are already starting to see in life and you can see much more dynamic outside of the united states of other countries starting to accuse america as being an unfair economic player particularly if you see a lot more quantitative easing and people say come on, you guys are just plain unfair. the third point which will exacerbate the second thing that has happened is what happens with the u.s. economic recovery.

and oddly enough, the biggest concern that the rest of the world has about the united states, the biggest source foreign policy issue the rest of the world has about the united states as well the u.s. economy recovered, and everyone is hoping and praying as intensely as americans actually that it does because this great, you know, burst of global prosperity that we've had for the past two or three decades has been a very considerable degree powered by the u.s. consumer who isn't consuming that much anymore. final point on sort of big foreign policy issues. i think -- and this is something i think is already evident in u.s. politics but will be more so globally is one important thing we are seeing as we have been talking inevitably since the election about the partisan divide, and i think a really

important split that we are starting to see is the tale of two cities when it comes to globalization and technology revolution. we actually see some parts of america, some of the big multinational corporations, but also some of the smart entrepreneurial business people. need particularly in technology and finance but also some manufacturers for whom the global economy, the technology revolution are absolutely fantastic. this is a time you can build a company, built a branch almost overnight, and the global economy offers huge success to read it also means actually that your fate is much less tied to the fate of the country overall. that old line about what is good for general motors is good for america. it is less and less true and for more important data point is the idea through the quarter results that were about ten days ago

where ibm reported that the economy in the first three quarters of this year the profits have gone up 29%. that's kind of amazing in a crummy world economy, and what was i think even more interesting was part of what is driving it is this huge shift in just less than a decade of ibm from being an american country to a truly global one, so in 2003 they had 7,000 employees, now aged 75,000. and over that same period, the same seven years, they have reduced the u.s. workforce by 40,000, so it's now around 110,000. not that much more than the indian workforce and this is ibm, this is a u.s. corporation. so that split meanwhile i think a lot of the heartland of voters

who ron was talking about our having a very different experience in the impact of the globalization and the technology revolution, and i think this -- fees' conflicting results of what is going on are going to be driving kind of the process within both parties actually because i think both parties have a little bit of support for people on both sides. and then my final point on one thing we should be watching as this may be a little bit out of my -- i may be venturing outside the resolution, there's kind of the national debate in america decides its government, and one country that americans should be watching very closely which is britain. britain had that debate before the election and they made an incredibly radical choice. i asked economists when we would start to see if that was working or not.

i called the nobel prize winner and he said of 15 years -- incredibly useful for policy-making. i think it could be sooner and it could even be really bad or really good, and i do hope that americans, maybe it's not going to be in the campaign ads but maybe washington can watch that quite closely because it is an experiment in what happens when you cut the size of the deficit but also the size of the government really sharply. >> say one more word about the british experiment. if you were to try to translate the british experiment into an american program what would it look like? >> well, what the of fun is just under 20% cuts. in the government services apart from health care and education. and that means about half -- it means about half a million jobs lost. that's a lot for the british economy, just like that.

british populations at 55 million. >> but also means big defense cuts. >> absolutely. defense we have not shielded all. the only areas the have been concerned about is health and education that had kutz but much smaller. the big -- there's an economic question, which is by throwing that many people out of work so quickly in a week to veto weakened world economy, are they going to do with britain into a much deeper recession or the argument which is everyone will suddenly feel confident the british budget is back on track and the private sector will win. so we will see. >> we will see if that changes were not shortly. >> i think you will be less than 50 years, but somebody is trying it out, so we are kind of lucky we are not british -- [laughter] we can see whether it works or

not. >> will you send us an update? >> i think other people will be watching, too. >> thank you very much. that's terrific. now, even though we said at the beginning of this session and even if repeated that the election wasn't about foreign policy, and i know that hurts me and almost everyone in the room to think about that because those of us to spend a lot of our time thinking about world affairs and foreign policy in a strange way would like every election to be about foreign policy, i'm not sure -- a cui should be careful what we wish for. but, clearly this election will have an affect on foreign policy. and it's also worth remembering that 2012 presidential election will be partly about foreign policy and this election will lead us into that so let me say a few words where we've been on foreign policy and seek the immediate effect swear that will put us in 2012. >> oddly enough although it is not almost unnoticed, the first

18 months of the obama administration were in a sense a period of a lot of bipartisanship in american foreign policy. it wasn't the sharpest point of disagreement between the two parties. far from it. yes, there were republican critiques of the obama administration especially the decision to set a target for the beginning of the drawdown in afghanistan. but compared to everything else that is going on, president obama got a pretty free hand for his policy of engagement on iran for example, which if you remember that 1908 campaign he was derided by the republican conservatives as hopelessly naive to think you could negotiate with the leaders of iran, north korea, and who was the third of the axis of people with the time? thank you. venezuela. >> cuba. >> that's right, castro may have been part of it.

the president got a pretty free hand on, even on pressuring benjamin netanyahu on selling israel that it immediately ran into trouble. it didn't work. i was bundled and that -- is essentially the president has gotten pretty wide praise for the way he's handled the drawdown in iraq. now, in an era -- in the earlier era we would have thought this was the normal tradition of bipartisanship, but we really haven't seen this for a while. why was that the case? in large part it was because barack obama moved pretty smartly toward the center in foreign policy. his withdrawal from iraq at the end of the combat mission was supposed to happen in 14 months. the deadline got kicked out. in afghanistan when the military can and asked for more troops he gave them more troops.

when they asked for more after that he complained about being asked for more troops and gave them more troops. we will see what happens if general petraeus comes in and asks metaphorically for a feared bite at the apple as july approaches and request for more troops it will be for more time. i think that will be tough. but i would argue that one of the affects of this election we just had, and the new calendar that leads to a presidential election in 2012 will be -- what you might call the real polarization of american foreign policy. there is now in the next 23 months every incentive for republican critics of the president's foreign policy and there are plenty of them out there for plenty of good reason to sharpen those critiques. reasons for substitutes and

political, and i think we are going to see that in two or three areas. one of them will clearly be the most important decision that's already on the calendar and that is the decision in afghanistan. well president obama decide to pull the trigger on the draw on that he promised we will begin in july? if the answer is yes. the answer is yes for substantive reasons. he's been a long time coming to the decision, and as far as we can tell he believes in it on substantive grounds, and the second is political. the main pressure on obama on afghanistan at this point is not from his right, it's from his left. his main danger between now and the election of 2012 is an anti-war democrat will render the primaries. it's folly to predict an election narrative two weeks in advance but it's the most dangerous thing for any sitting

president to have a challenger from the base of his own party. he wants to head that off. the easiest way as to do what he has already promised to do. but he wants to thread a needle. he wants to withdraw some troops gradually without creating chaos and prompting david petraeus to walk. that isn't a possible threat but it's the dilemma she faces. issue number two. iran. a crisis, if it occurs, if iran gets to the point of deploying a weapon, building a weapon or announcing the capability of building a weapon, but i think will instantly be the defining crisis of barack obama's foreign policy the next two years and how he handles it will in many ways he is defining moment

certainly as a foreign policy leader before the american electorate. it would be folly to predict how that might happen except i would note the administration's own people working on this believe that the iranians won't get their in the next two years. they say they are working assiduously to make sure they don't get their the next two years and when one of the white house top people was asked do you really mean your goal what this point is just to kick the can down the road to years, his response was in the business of non-proliferation taking the can down the road is a pretty major victory. so i think we can expect the can to continue to rattle down the road and the other unlikely outcome would be that iran might buckle in the face of the economic sanctions that have been ratcheted up and affect sue for peace. i don't think we need to spend too much time on that unlikely that barack obama and the rest

of us should be so lucky. the last major issue again in the "we should be so lucky" category is israel. at this point it is tough to see conditions in israel and the negotiations with the palestinians getting to rightness. if they did get to right now is that would be a dilemma for president obama. there are risks inherent for any president in investing a lot of time in trying to negotiate peace agreements in the middle east. not just the obvious risk of putting pressure on israel and irritating the supporters in the united states. among them the conservatives who have moved over the last 20 years from the democratic party, jewish conservatives from the democratic party and republican party, which has made is of the american party of lahood as the democratic party remand the party of labour.

but there is a somewhat more subtle danger for a president and that is when the electorate is asking him to spend full time on the economy negotiating peace in the middle east we already know it takes in the endgame weeks and weeks of concentrated presidential leader. every actor in the middle east has gotten used to having quality time from a president they are going to get there. none of them are going to agree to sign a peace treaty if all they get to talk to is the secretary of state or the national security adviser or even the vice president. joe biden would probably be very effective weapon to get them to finally sit down and sign a piece of paper. [laughter] so in a strange way i think the -- it's a terrible dilemma president obama me face that if middle east peace looks like a possibility, can he spare the time and energy to do it? it is an unlikely choice. mcginn key and we should be so

lucky, but i would be one of the problems he could face. in a more immediate sense of frequently, we will face a challenge, the administration will face some dillinger as i should say in the new congress. beginning with the s.t.a.r.t. treaty that jerry referred to on energy, trying to reassemble some kind of international energy, international climate change policy with cap-and-trade taken off the table was a possibility, and finally, the administration and the democrats in congress have been painfully trying to move step by step toward new openings and exchanges with cuba under howard berman who was the chairman of the house foreign affairs and the last two years the new chair of house foreign affairs is of course going to be a cuban-american from south florida who has no interest in relaxing the embargo so i think that one is off the table. now, this sounds like a dog your picture. i will close by saying that

paradoxically in a political sense it may turn out to be a good thing for president obama, a more polarized debate, sharp focus on foreign policy, actually allows a president who hasn't done a half bad job. you may disagree or agree with his policies that there have been idled agree no major disasters on his watch and that competitively speaking as a pretty good record. that will allow president obama to highlight his stature as a president who can operate in that view and to bring his opponent's qualifications and to the question and if he's looking and carries out his yacht on in afghanistan and have to withstand reasoned sensible conservative counter arguments against him and his political lieutenants will do their best to cast them as the party but wanted a long career, bigger and

tougher war and as he knows from 2008 that is not a bad platform to run on in front of the american electorate. >> i was struck and around the country to follow campaigns at the ambivalence and many conservative republican candidates about afghanistan. on the one hand, particularly in the tea party candidates there is a clear pullback from the bush vision of the u.s. kind of investing the treasury to make the will receive for democracy and on the other hand national republicans need to take a democrat is often the defense and every serious candidate opposed the idea of time limits for withdraw. so i'm just wondering if in fact petraeus and the pentagon do resist the drawdown obama envisions do you think there's a chance the white house gets caught in a squeeze between the republicans on the one hand and

the pentagon on the other basically raising a lot of barriers or resistance to him executing the plan he's laid out riss too there is a chance but it's not impossible to thread the needle. it's not impossible because the pentagon isn't a monolithic. it is not accept the tea party in the pentagon, but there are generals and bob woodward's baquero colin powell says to someone in the white house and mazie to barack obama you know, there's more than one general in your pentagon. you don't have to take the first piece of advice that's there putative if obama and his crew handle this badly, and it's possible. we don't know.

we may have a different secretary of defense of the pentagon. -- there's an x factor. >> you could have some kind of split on those lines and that would be dangerous. i will leave it to you whether in the electoral terms to be on the small or mac side rather than the large war side of your argument, but it is dangerous. >> i have a question, too which is to what extent do you think the economy will dictate as the decisions and afghanistan, to what extent does it become really hard to sustain a lot of planning in afghanistan at a time the u.s. economy is -- >> that is a terrific question because it has been striking how often, how blunt and how openly president obama talks about the economic cost of the war, and the opportunity cost of the war, to the many of us who covered the 2008 campaign the obama

argument that by downsizing of war in iraq and afghanistan we would have enough money to fund energy and education and health care seemed like a tricking talking point and it may have been, but there is no question that the enormous drain on the budget of those war weigh heavily and i still think in a sense the most important speech he's done as president in the structure of american foreign policy is his speech back in december at west point when he echoed eisenhower and said we have to learn to live within our resources, and so in a sort of a concrete immediate sense know, they are not going to make the decision based on the dollar costs and difference options but in a larger sense, yes, the framework of the obama foreign policy is intended to he goes from a very expensive neoconservative nation-building democratizing model of foreign policy to a much more economic model. a lot of good questions.

>> my name is james me finish from alabama. i would like to ask christine, what is the end pediment to depreciate the dollar it seems to me to be clear this is the fed's approach currently and probably prospectively, so what is to stop the fed, and how can the rest of the world -- why would you expect that their best of the world would do anything but have to accept it? >> that is a good point, and it is what is happening. i mean, what we have seen as a result is competitive devaluation. so you know the real losers as the u.s. dollar depreciates didn't have an impact on china because the chinese link to their currency with the u.s. dollar, but the real losers are such as the other emerging economies that are seeing their currencies depreciate relative

to the dollar, so you have seen them starting to try to competitive depreciate their currency, too and the economic nightmare that's sort of the communist dream scenario is we achieve this great global pact to rebalance the global economy and china and germany starts consuming more and everybody's happy that the nightmare scenario is america prince lots of money to have little inflation come to appreciate the dollar and for the deals starts trying to see the same thing. >> there is one other danger which is people could start to build barriers to capital flow, not trade but capital flow. and which others are starting to talk about doing. so, when -- people who worry about a great depression like the downward spiral, which they attributed to protect and worry about the analog barriers, not

trade barriers. >> it's hard to blame the brazilians to much because trade is directly in recent memory was the yen when japan was caught in a similar economic situation to the u.s. interest rates incredibly low and so the smart thing to do was moving quickly to another and made lots of money magically. people are doing that now with the dollar. >> exactly. >> i'm from naples florida. i'm sorry, my name is herbert from naples florida. as the agenda unfolds under the months what is going to happen in washington, what is your prediction for tax policy? >> tax policy? well, first of all i don't have one because of rebuttal negative asked has given a different answer. nobody has a very clear in

hansard i think the only option that actually accumulates the votes in the lame-duck session is one that takes the can down the road to use your metaphor and that is i would think democrats would settle for one, republicans would demand to. extension of all the bush tax cuts which doesn't need anybody but everybody will have to live with. and it's not because that's the one that has gathered the consensus, it's because the fallback option for everybody and i think this kind of where we are at. republicans want to extend them all, democrats want to extend three-quarters of them or decouple the two. i don't think that there is a center of gravity on any of those solutions, so i think taking it down the road for a year or two is the most likely outcome. >> this is none of those times you get to say the sentence to read a couple, two weeks ago we interviewed the president and asked him about this and key in that conversation through a very hard line against extending all

the tax cuts and said if the republicans want to extend the earners have to show where there are going to make up the $700 billion. yesterday tom was a bold different in a press conference. in this press conference and also in the indigenous comments about this idea of maybe just kicking the can down the road. i do not think that would be his first from second or third preference. i think he would rather stand and fight as al gore what say about stopping the extension of the tax brackets. but there are going to be a lot of shell shock democrats in 2012 and he doesn't have the horses with him. >> you know, i think that is a stalemate. you take that issue into the new congress and redefault this package was some other things. there are trade-offs to be made. if you're a democrat you wouldn't want to make them in

the lame-duck session you want to make them in the new congress. so i think that might happen in this horse trading that is going to have an edge in the ceiling and other types of things in congress. the overall lame-duck i think our reporting is the democrats of a little incentive to help republicans results almost anything in the lame-duck. i mean it's just kind of you to put $100 billion, here you go. we will fund the government said january and you take it over and i think they want to kind of makes them confront the implications of their campaign agenda. >> the chamber of commerce helped a lot of republicans who have a position on the interest the chamber wants to see the world want to see it go away. but i think next year. >> next question to respect my name is gail stevenson and i'm from vermont so thank you for the -- my question is about the budget and you specifically mentioned cutting 100 billion was the easy part, and my question is one of the easy

part's the function of 150 international affairs budget so it's not so much about any one foreign policy but about the ability to have a foreign policy and executed all, number one and number two if so is it an omnibus reconciliation process? >> good question. >> i would encourage you to go to the defense department website and read those speeches over the last year. he has said quite explicitly not to very many people are listening i understand we are going to have to get at the office, and here is my plan for doing so. and in august he actually said in may and then again in august he took his building you have to give me $100 billion in defense savings over the next five years so that i can go to the omb and say here is to% of our budget. i'm getting it back to you. you give me a return of 1% increase so that i can keep the force levels at the level they are at now. and he is about to set out to make that happen. so, he's trying to get out in

front of the train that you correctly identified and do it the way he wants to do that and what i think rational people would say is a smart way. we will see if it pulls it off but it's not going to go on skates, and i don't know if republicans are going to think that bob gates, who is none of the above, i think it is inevitable. .. its own separate category in the budget so it would not be

counted. as for an eight, a prospect that horrify some of the folks at aipac and other supporters of aid for israel. so that will be -- that will be a fight. third? >> keeping in mind that miserable fiscal condition of this country and energy as well, do you think there's any likelihood for a major excise tax on fuel, for example, $3 a gallon for gasoline? >> know. i'll stop there. [laughter] part of the challenge going forward is that opposition for new taxes has really become a litmus test for republicans, so that the pledge and americans for tax reform conservative group puts out every senate once been a once and into post-tax increase under any circumstance, virtually every house challenger. think all but one house challenger find it. and it is just hard to see how

you get past that in a variety of areas. social security is another worth imminently possible to imagine a yield that would involve some benefit reductions raising the retirement age or linking retirement age longevity. but the political play to getting them to sign him for that benefit reduction is a revenue increase. really hard to see how republicans get there after a cycle in which you had two sitting senators denied renomination. i think they're going to be pretty leery of going in on those kinds of things. >> we've taken our time. so we'll take questions from anyone within six feet of a microphone. >> okay, if i may, i'm david brooks from santa fe council of international relations. this is a political question and not a firm policy question. as i understood the jim demint analyzing the election results say that when analysis that had been observed was that upper-middle-class whites were

moving from republican to democrat. >> in the last one he wears. >> i think i observed anecdotally. to what do you attribute that can be expected to continue? >> the democratic improvement among those voters -- by the way, we end up even as they best way for democrats with close to a 50/50 split. if elected predominately democrat. but they've gone from being predominantly democratic do outside of the thought obama carried a majority of white voters. while the user is partially foreign-policy impartial cultural issues. primarily, the flipside of what is moved blue-collar voters toward the republicans over the last 40 years. there's a famous book, with matter with kansas in which he argued republicans and from that commends blue-collar voters to

vote against their economic interests like getting them to focus on cultural -- [inaudible] >> thomas frank wrote that. by focusing on things like abortion, gun control and. as does become more prominent as the upper-middle-class communities where they are pro environment, pro-gun control. and also meaningfully in foreign policy this meanness attitude in foreign policy. by and large, it's the chilled in working-class america is sort of unilateral action and peace through strength of the best way to safeguard america's interests in the world. and upper-middle-class, white collar america in the polling tells much more towards diplomacy and alliance as the best way to save america's interests in the world. so i set off in foreign-policy functions in america politics at a social issue, like abortion really. it divides country on the saline abortion as other than than the economic issues.

so a full set of concerns becomes more prominent, democrats have long with those voters. and she sang twice though, what we'll see in 2012 is a lot of fun improvements happen under bill clinton, was moderate -- liberate tomato and foreign-policy issues. under too liberal on social issues, besides the era of big government is over. now coming into suburban upperclassman awaits her bill clinton democrats will see also barack obama democrats. the men in particular -- you tend to be leery of the big activist role for government. there was some erosion on that front, clearly in this election. >> and an end to our panel. please join me in thanking them very much. [applause] thank

>> as a way of counter-balancing our policy in iraq propose that we find -- we provide up to $15 billion over the five years from 2003 on to the treatment of people with hiv in about 15 countries some $25 billion later, at the time this was proposed we were talking about hundreds of millions of dollars going to hiv and aids and not much than that.