you also point out that the united states should deploy its own satellite to ensure that the reported mass graves are not tampered with. i point out that this subcommittee has long and aggressively everywhere in the world on every continent where this has occurred, has emphasized not only stopping the atrocities and genocide in the first place, but holding those who commit those atrocities to account whether it be charles taylor who by early fall is likely to be sentenced. just recently as we all know a bosnian-serb was finally found. there is no statute of limitations on crimes against humanity and genocide. he was hunted down and i was in srebrenica a couple of times including once for a mass burial of people who were slaughtered during an infamous couple of days in july, and the same thing

happened in rwanda. the same thing happened in the congo in the same thing has happened obviously in kordofan. "

continues. host: peter coy from of bloomberg "business week," the economics editor, joins us. all of the economics news in this morning's paper is not positive. is the u.s. poised to go back into a recession in your view?

guest: i would say there is a good chance -- i do not want to put a percentage on it. president reagan's chief economic adviser told bloomberg television yesterday that he sees about a 50/50 chance of a recession. most of the economists put the number slightly lower, but if you look at the numbers lately, most of them are pretty bearish. look at the gdp growth over the last two quarters. look at the factory index, dipping almost into confectionery range. consumer confidence being at recession levels. the bloomberg consumer comfort index is at a level that is

normally associated with recessions. many arrows are pointing downward. host: we have been talking about this new super committee that will be making supposedly $1.20 trillion in spending cuts by november-december. what is going to be the effect of that type of spending? is it going to be a good effect or not? guest: in the long term, it is essential to shrink the budget deficit. that is the topic of my cover story. i was talking about that long run projection. if you trace out spending and revenue over the rest of this century and into the next, you see that the numbers of diverge unhealthy way.h

an economist from boston university estimates that the long-term fiscal gap is $211 trillion, just staggering. in the long term, it is essential to shrink the deficit. the problem is that if you aggressively shrink it in the short term, you could actually throttled the economic recovery which would leave us in a japan-like situation in which we cannot get the growth that is needed to shrink the ratio of debt to gdp. what matters is not just a level of debt by the ability of the economy to support that debt. if the economy is shrinking, even if the debt does not go up, it becomes more and more

burdensome. it is essential to get growth going again. these latest numbers point in the wrong direction. it is exactly what nobody wants. so what we want to do is find a way to get growth going, at least staving off another recession. that might require holding off on the immediate deficit reduction, postponing it a year or so until the economy can get back on its feet. host: i want to go through to article in little bit. "it gets worse" is the title. you write --

guest: yeah. so, the fiscal gap is a concept that the congressional budget office uses as a supplement. what that does is look forward, not only what obligations we have already incurred as a nation, but what obligations we are on track to incur if we continue on the path that we are on. for example, current law says the bush tax cuts will expire. if it does an alternative fiscal scenario which is probably more

realistic. in the alternative fiscal scenario, you see that the gap between debt and gdp -- between revenue and spending is a little bit over 8% of gdp in newly. over the next 75 years. that means that are spending will exceed revenues by 8% of gdp. over the next decade, that is in the range of $15 trillion. much bigger than that over a 75- year period. it shows you the magnitude of the problem that we face and of the bargain that was tried to be struck a few weeks ago. host: you write that that is why

-- mr. coy, we just got the monthly unemployment figures. i went to get your reaction to this. of the number of people seeking unemployment benefits dipped last week, a sign that the job market may be improving slowly. the labor department says applications for unemployment benefits edged down 1000 to 400,000, the lowest level in four months. the previous week's figure was revised upward to 401,000. what is your reaction to those numbers? guest: of course, those are the weekly claims numbers. the important number will be the one coming out tomorrow. that is more reliable. we will be watching it more

closely. the weekly claims numbers are quite volatile. so you do pay attention to them. it sounds like good news, but i would not get too jubilant about it until tomorrow. host: one more area from your article before we start taking some calls on the economy, the national debt itself is on one such squishy concept.

host: why not? guest: do you want me to answer the question? i will try to answer it. remember, there are two debt numbers. the one i quoted in that article includes the social security trust fund and other government obligations. the debt held by the public is a $10 trillion number and in some ways is the one with the rubber meets the road because that is money that is legally binding on the government to pay back to creditors whether they are

americans, chinese, or saudis. that number does not include our future obligations to social security retirees, medicare, and so on. the $14 trillion includes the trust fund, so it starts to incorporate a view of what obligations we are incurring toward the long-term future. host: peter coy is our guest, the economics editor of bloomberg "businessweek. the first call comes from punta gorda, fla.. caller: i would like to know why businesses are not hiring and why like this grover norquist can have such a hold on the republican party for not

raising taxes on the wealthy and stuff like that. i think that -- why are they not checking out some of this? i know that schools down here are holding back their money from spending it. i would like to know why businesses are not hiring. guest: well, i have another article in the forthcoming issue of "business week," that will be out tonight. the article i wrote is already available on the web site. host: we have a copy of it right here and we are showing it. guest: there you go. that article talks about -- it tries to answer the woman's question. when the economy slows down to the point it has -- we had only 4% growth in the first quarter

and 1.3% annual growth in the second quarter. businesses start to say to themselves i was investing in some new equipment and hiring people on the expectation that demand was coming back, but maybe i should put a hold on that and we did little bit before i add some staff that i might need to lay off in a few months if things turned down again. that becomes a self-fulfilling prophecy. that person is not hired an cannot spend. some other business does not get the money. you can see how these things feed on themselves. economies are unstable that way. now, my article likens it to a rocket. it can either have enough thrust

to escaped eath's gravitational pull, or if it does not have enough thrust, it can slow down, slow down, and then tumble back to earth. the question now for the economy, which is a concern to every one of us, ordinary americans, is whether we have enough thrust in the economy to escape the gravitational tug or whether we are headed for another recession. host: you write in your new article -- in other words, some economists say if the economy grows too weakly, the slowdown could lead to a recession. maybe investors lose faith in the recovery so stock prices are already down 9%.

any such reaction could cause the very downturn that is feared. north carolina, marsha, you are on the air with peter coy. caller: yes, i would like to ask -- host: we are listening. caller: i would like to ask why is it that businesses here in the united states have not learned from the old adage-you have to spend money to make money. we all grew up in an era that in order to make money, you had to invest. if you do not invest in yourself, you are not going to make a lot of money.

i do not understand. host: mr. coy? guest: put yourself in the position of the business owner. you grow by sacrifice, hard work, investing for the future. on the other hand, maybe not is now the ideal time to take out a loan. what happens if you cannot pay back that loan? you may want to hold your cash a little bit and wait for the storm to blow over. you want to time it. the most important priority for any business is survival. they are going to put that ahead of making extra profit. so i think that is what is going

on in a lot of the heads of business people right now. when everybody does that, it creates what john maynard keynes said it was the paradox of thrift. one person spending is another person's receipt. you cannot save out of that in become so things cannot appeared magically out of nowhere. we are in danger of toppling into that paradox. host: i want to get your reaction on what president obama said yesterday. >> the american people have been continuing to worry about the underlying state of the economy, about jobs, about their wages, reduced hours, about fewer customers. of the economy is still in weekend -- the economy is still

weakened, partly because of things that we could not control. unfortunately, the debt ceiling crisis over the last month i think has had the necessary- impact on the economy here as well. i am meeting with my cabinet to make sure even as they have been thrown out these weeks are redoubling their efforts to focus on what matters to the american people which is how we are going to put people back to work, increased security, how we can make sure they will recover fully from the worst recession we have had since the great depression. guest: yes, i think that democrats and republicans alike can agree that getting people

back to work should be the top priority right now. the problem is how to get their. the parties are deeply split over that. obama did not say it, but the democratic line has been that we need more stimulus, more priming of the pump to get things going again. the republican line, especially from the tea party, is that all kinds of people, households, businesses, creditors are mostly concerned about the fiscal well- being of the country over the long term, and the way to get confidence back it is to show that we can bring deficits under control. you can see how those two alternate series lead us in the alternate directions. obama can not put through and find the political support for any new kind of stimulus. so when people look around --

going back to businesses again, things are not great now, so what is going to change? it is hard to latch onto anything and say here is the new thing that is going to make us all feel better and get in the mood for spending, investing, and expanding. " larry is a republican in virginia -- host: larry is a republican in virginia. caller: thank you very much. of the cold war ended years ago. instead of investing in other nations, would it is not be a better thing to bring those troops home and reinvest that money back into this nation? i think it would help businesses and housing industry. guest: yeah, there is no question at all that the deployment of troops abroad and

a massive spending in the military on iraq and afghanistan and our ongoing military procurement budget is a big drag on the economy. if we did not have that, we would have more money available for other purchases. the roman empire can tell you all about that. even though there is a consensus between the parties that some of the savings, a big portion, is going to have to come out of the military -- i was amazed that half of the cuts under the $1.20 trillion trigger plan that is being discussed are from defense. the pentagon is coming back and saying these are too draconian for us. the caller is definitely in tune

with the latest thinking in washington about what to do with defense. host: you write in your cover article -- host: do you want to expand on what you wrote? guest: i can imagine that the lightning rod in the whole paragraph is the last phrase about applying in part to current beneficiaries. sold the lights are probably lighting up with retirees -- so,

the lights are probably lighting up with retirees who want my head. the reaction i got on that from pittingple is that i'm the generations against each other. i do not want to do that. when you look at the size of the problem, you have to think that a lot of money going to not just future beneficiaries but to current beneficiaries -- if we hold that generation harmless, that increases the burden on the younger people, the working people, and people who are not even working like children. we have a big problem with youth poverty in this country. in an ideal world, nobody wants

to shrink the benefits of medicare and social security, but nobody wants to cut the support for younger people either. something's got to give. the question is whether retirees should bear at least a bit of the pain. before the calls start coming in, i will throw in one other point. i think it is even more important that the wealthy and share more of the burden with the poor. it is true that the wealthy already pay a lion's share of income taxes in this country, so you can say that they are already doing their part. on the other hand, there is a concentration of wealth in the top tier of the population. the top 1% or something has a

third of the wealth. i could have those numbers wrong. the concentration has grown. it is hard for the wealthy to argue that they have been harmed by the economy. maybe they should share with the rest of the public which would make it easier to help both the older and younger generations. host: peter coy has been with bloomberg since 1989 and is currently the economics editor of bloomberg "businessweek." wilmington, delaware, liz is on our democrats lined. caller: good morning. a question is in regard to grover norquist. there are only six people in the house and the seven in the senate that have not taken that pledge. this man has been atrocious for the american people.

why they have taken this pledge -- the only pledged they should be taking is a pledge to the american people and this democracy. i want to see every one of those republicans to tear off that pledge. i like to see mr. john boehner and mr. mitchell mcconnell pick only people who have not taken the pledge. otherwise, this super committee -- this should not be called a super congress. we have a congress. call them a "super committee ." guest: i tend to be against people tying their hands behind their back because it makes them unable to respond to circumstances as they change. host: jim is on our republican line. caller: peter, you mentioned

something about sharing the burden. i go home every night and turn on the news and see people of congress getting out of their limousines. for me, i am still getting a $9 hair cut bank i drive a pretty nice van. i am becoming the one with the draconian policies. i manage a quizno's. these punk kids come in and expect a free bigger chips. host: pittsburgh, pa.. i apologize for that caller. tom, are you with us? caller: ok, yes, i think we have been enjoying a false prosperity for maybe a couple decades. i suggest that we suspend the

minimum wage, suspend the prevailing wage, and the mos regulations that keep business out of making something -- of adding god you to something. we have to reduce our expectations because we have been overcompensated for our work. guest: you know, that is a really interesting point out that the caller makes. let's focus on one aspect. the minimum wage. in a completely unregulated economy, what happens is that businesses are not willing to pay as much for an hour of work because it is not worth it to them. the way that the market should

adjust is by people taking lower wages. we will still be able to have a full employment. that is the theor guest it seems ty. it seems to be more complicated than that. economists have looked at the impact of minimum wages. it is hard to say why, but it does appear that the existence of the minimum wage does not have a huge impact on unemployment overall. it certainly affects the least skilled -- for example, teenagers are more likely to be unemployed in places that have higher minimum wages. but i would not -- i can definitely see the document that there should be a sub-minimum wage for that population. i don't think at lowering the

minimum wage overall would have a huge effect on overall unemployment. i think what you want to put this on, rather than the supply side here, is getting to man the going again. if we all start -- is getting demand going again. if we all start spending and investing for the future, we can grow our way out of this instead of spending less and less money and hoping that will solve the problem. host: back to your cover story in "bloomberg businessweek" -- all the americans have the clout to vote themselves benefits peter coy? guest: the last thing about the benefits can never be repeated -- you know what a ponzi scheme is, right? upon the scheme is where the

first people who started get paid -- a ponzi scheme is where the first people who started it paid by the people after that, and the second gets paid by the people after them. it has to be a pyramid, because the next generation has to be bigger to support the ones before them. mathematically, it has to run out, because the population is five. at some point, you run out of new people to bring -- the population is finite. at some point, you run out of new people to ponzi schemes are illegal. the economy itself is sort of a ponzi scheme in that young people pay taxes that go to benefits for the older people. it works very nicely as long as you have a high birth rate and a high death rate so that you're older generation is shrinking relative -- younger generation.

what we have now -- it is a wonderful thing -- people are living longer. we should be happy about it, but we also have a smaller birthrate. the pyramid is misshapen in a way that makes it very difficult to support those benefits for older people. what you start to think of is that children of today and their children as yet unborn simply on going to be able to get benefits as attractive as the one current beneficiaries are receiving. the only real question is when you start changing the formula of social security and medicare to right that balanced a little bit. host: peter coy, how worried, or do you worry about the u.s. bond rating going from aaa to potentially aa? guest: i would say it is likely

to happen at this stage. if you look at the actual quality of u.s. credit, it probably should have happened already. aa is not a bad rating. it is higher than the vast majority of private countries in -- private companies in this country. there is no reason that should have a huge impact on interest rates, because, after all, the credit rating agencies -- standard and poor's, moody's, and fitch -- would simply be ratified with the investing public already understands, which is that the u.s. is no longer perfect credit. it is more ratification that any piece of news -- than a new piece of news. it might not have much impact in contrast to what would happen if we defaulted this month, which would have been a true disaster. host: a tweet in to you.

guest: that's a good question. japan's recovery has barely been worthy of the name "recovery." they had an economy that sort through the 1950's, 1960's, 1970's and 1980's. the japanese miracle, which peaked around january 1, 1990, the time japanese real estate was the most expensive in the world. the japanese were buying rockefeller center, pebble beach golf course. it seemed like an unstoppable juggernaut. but it turned out that it was partly a real estate bubble. does that sound familiar? now we are seeing the same thing here. the japanese struggle for the past two decades. they called it lost decade. now it is like a lost two decades. country cannot get out of its

extended slump for a meaningful period of time. the risk is that the u.s. goes the same way and what we saw in japan is that they would start to grow and people would say now is the time to cut back, raise interest rates, cut spending. they would do that and cut short the recovery. we run the same risk here. while we should be concerned about fiscal solvency in the long run, if we do it too soon, we could trap ourselves into this malaise that does not ever seem to end. we just got out of recession that began in december 2007 and lasted until june 2009. a lot of americans think we never really got out of the recession. we technically did, and now looks like we might be heading back into one. what is it going to take to get long-term, sustainable, healthy growth? host: john in chicago, you are

on the air. caller: good morning. the thing is, i just have an idea about the economy, people going back to work. ok, now a thing of it is, i believe that every state should be responsible for manufacturing. every state built manufacturing, that they would be the co-owner of manufacturing, people would go back to work and they would have houses, cars, and the economy would start moving again. host: what do you think of buy america programs, mr. coy? guest: well, the caller is asking specifically about states being responsible for manufacturing. that is not a function of state government, it is a function of private industry making those

decisions. every state as an economic development agency that would love more factories, and some have been successful. mississippi, south carolina, alabama -- i could list many more that have done a pretty good job of bringing in manufacturing in recent years, and it is a huge benefit. to some degree, is a zero sum game. if a company decides where to locate, it will go where the most attractive incentives are being offered. on the macro level, national level, we need to create conditions so that the country as a whole becomes attractive for new factories and so is not just everybody grabbing for the few companies that want to locate a factory. i agree with the color bang's point that more manufacturing in this country would be -- the caller's point that more manufacturing in this country would be a good thing. we would be bringing in income from the rest of the world

instead of just sharing it with ourselves. host: a twitter follower -- guest: germany did something even before 2008, which is to get its costs in line, to get its economy more competitive. you know, when west and east germany unified, the western portion of the country had to bring up the eastern portion, and that was a struggle. and then when at the euro form, germany had another struggle, because it's torchmark entered the euro -- its deutschemark entered the eurozone in an almost on a competitive level. add to buckle down and get serious and will align -- it had to buckle down and get serious and hold the line.

countries like greece were laggards. they did not take seriously the need to be competitive. they were happily accepting the low interest rates they receive as part of that euro zone and invested unwisely. germy deserves a lot of credit for doing all the right things to make -- germany deserves a lot of credit for doing all the right things to make its economy more competitive. right now it has the thankless job of having to bail out the rest of the euro zone by fiscal transfers from it to the poorer countries. host: peter coy is our guest. we have five minutes left with him. columbus, ohio. matt, you are on the air. caller: i wanted to take the discussion back to the national level and the wars. i am a republican, i have always voted republican, and i

chaired the republican party on my school campus. but what people tell me across the board is that people are tired of these wars. what is the money we spend on these wars each week? if we could take that money and put it back to paying out of visits -- therpaying our deficits -- there has got to be something done about these wars. people are tired of it. host: mr. coy, have you looked of the numbers -- go ahead. guest: i think there are a lot of republicans who agree with this caller. the tea party in particular, as we know, tends to lean towards the isolationist side. people like rand paul, for example, ron paul. that strain is having a big influence on the republican party.

you are seeing a historic change in the alignment of the parties. i would say that is a big reason why the budget deal calls for big cuts. it is because it lost its biggest supporter, which is the unalloyed support of the republican party. both parties are looking at defense spending and saying it may be that is a good target. host: mr. coy, do you think that the super committee, looking ahead, will be able to agree on substantial cuts? guest: it's going to be absolutely fascinating, because on the one hand -- i think you discussed this in your last segment -- there is going to be a lot of pressure on the leadership of the house and senate, both sides, to pick people who are purists g

democrats will want people on the liberal side, republicans will want people on the conservative side, making it a bipolar organization. all it takes is one of defection from either side to tip the balance to the other. if you are a democrat and you are putting in six people here, you don't want to put anybody who seems squishy to you. if that person sites with republicans, you have lost. it is going to be more polarized than congress as a whole. that speaks to the argument that there is not going to be ideal -- a deal. the counter argument is that if they cannot get a deal, the alternative is the mandatory cuts that are pretty attractive to both parties. furthermore, obama for once has the upper hand because he can simply tell the republicans if you don't do a deal with me, i

am going to veto all or part of the bush tax cut extension. in this town, it was the republicans who had the upper hand because they could force the debt ceiling to be invoked and force it to fall on the u.s. -- force a default on the u.s. this time democrats have the upper hand because of the impending expiration of bush tax cuts. host: you are on with peter coy of "bloomberg businessweek." caller: i think the recession right now despis by design. if you look at what the president said when he was elected, he said he wanted to fundamentally transform america. if you fundamentally transform it, you will go to socialism. they said that the way that you destroy capitalism and institute

marxist socialism is to overwhelm the system. get more people on government programs, tax people that are productive, you get more people not paying taxes. thereby, overwhelming the system. you cross capitalism to crash, and that socialism and the institute -- and then a socialism can be instituted. i believe he is a hard-core marxist. peter, maybe you could run a program and educate the people on exactly what these people -- date they are still around. they are teaching at colleges. host: peter clark, anything for the last caller? guest: no, i don't think it is correct. i don't think you can look at what obama has been doing the past two years and conclude he is trying to destroy capitalism. everybody is entitled to their opinion. host: peter coley o -- peter

coy of "bloomberg businessweek" has been our guest. the new magazine is out as well, and he previewed the a