significance. guest: there is an old saying things that -- two can get congress to act -- crisis and christmas. the solution was to create a central bank. there was a great deal of debate over what shape that bank should have. forcedil woodrow wilson the two sides to compromise, were they ready to compromise. because someting things never change. we are still having many of the same fights we had 100 years ago. our bankers to powerful? is it doing enough for main street? for wall street? host: we will hear from ben bernanke in a moment.

important is the tapering and what are the next moves? i think we could call this the beginning of the end. if you go back to 2008, when the crisis was at its worst point, the federal reserve through all its conventional wisdom had it. -- at it. so they initiated quantitative easing. they did that into subsets of rounds that did not succeed. they began a third round, last september. that became known as qe3. in the last few months, ben bernanke and his colleagues concluded that that benchmark had been reached. the economy was getting better and they could begin dialing

this thing back. they said they would not be going to zero. they did not say they would raise interest rates. they are merely saying they will loosen it at a slightly lower right. hopefully by a year from now, the whole process will be done. host: let's hear from ben bernanke. [video clip] know, we have been purchasing $85 billion per month in treasury and agency mortgage- backed securities. in january, we will be purchasing $75 billion per month. it is important to note that even after this reduction, we will be still expanding our holdings of longer-term securities at a rapid pace. we will also continue to roll over maturing treasury securities.

our sizable and still increasing holdings will continue to put downward pressure on long-term interest rates, support merging -- mortgage markets, and make conditions more accommodative. it should help move inflation back toward the objective of 2%. reduction in the pace of asset purchases reflects the belief that progress toward the economic objectives will be sustained. if the indications support, we will likely reduce the base of securities purchases and further gathered steps -- measured steps at further meetings. future adjustments to the pace will be deliberate and dependent on incoming information. host: what does all of that me to the average american? -- mean to the average american? of the themes of the

bond buying program is to hold down a long-term treasury yields. because mortgage rates are rates --inked to bond , theyhe last eight months began to sell off bonds. thatmr. bernanke hopes is i gradually continuing the process, that there will not be continuing upward pressure on mortgage rates. i think it is his foot of confidence in the durability of the recovery. in the of confidence durability of the recovery. host: and that made the markets go up. guest: the fact that they were going to buy back had been the subject of talk for weeks.

all the selling had been done by the time they finally did it. host: barbara, kalamazoo, michigan. good morning. caller: good morning. i have been washing you folks for quite a while -- watching you folks for quite a while. you talkike to know -- about the bonds and the things and people buying them more and get involved more -- we have lost enough money out of all of this nonsense. don't quite know how people,t -- all of us everybody is saying we have had all of these jobs growth -- service may be.

on can't make a living mcdonald's or pressing close or babysitting. you can't do that. host: she is touching on many different parts of the economy. speak about minimum wage. guest: let's talk about the nature of job growth. we have created roughly 7 million jobs since the bottom of the economy in 2008-2009. on the surface, that sounds like good news. beneath the surface, there are troubling aspects. it is the case that we have created jobs and the producing sector. to recover forin huge loss of jobs that occurred in the years prior to that. many of the jobs created pay very little wages. the rate of wage growth has not been even enough to cover the

inflation they have experienced. have madeh we progress over the last 4-5 years, it is disappointing relative the historic and smart. -- benchmarks. we have a long way to go. host: let's dig a little deeper into the unemployment numbers. in november, the unemployment rates were as follows. tell us more. guest: the differentials you are -- identifying, those disparities have existed for a long time. they existed when the economy was strong.

those groups did suffer more as the economy worsened, but those things have come in in the last couple of years. people talk about the underemployment rate. the unemployment rate does not count people dropping out of the workforce, part-time jobs -- they look at this expanded unemployment rate and that is still over 13%. that has still come down since the peak, quite a few percentage points. even though there are still a lot of hidden unhappiness because of these different numbers, we believe that that hidden unemployment is also coming down. one of the puzzling things is that a lot of people have dropped out of the labor force. not looking for work. we don't know why they have dropped out. this into every tired, i don't know, conduct of school -- perhaps they wanted to stay home with their children. we do not believe that a lot of these people who disappeared

from the labor force are ever going to come back. host: duane, upper marlboro, maryland. caller: good morning. thanks for hearing me. i appreciate your show. i wanted to touch real quick on the direct things i don't see -- emphasis i don't see put on americans who have lost their ,obs in the field of finance the car industry. i lost my job in the finance industry. the company closed down. i went back into the car hour,ss making $12 an working 60 hours a week with the hope of a commission one day. everyone has information on cards now but a salary needs to

be made. that is i think on the border of slave wages. when the information wasn't out there on how to buy cars. everybody needs to save money but something needs to be done for the employee in the company. right now i am totally struggling not even making 1/3 of what i made five years ago. the attitude is that the economy never affected anyone. where is the emphasis on that direct point, the person within that field that was directly affected? host: thank you for calling. guest: even though a lot of jobs have come back, they are not paying what they did four or five years ago.

speaking, the government support programs have not been aimed at specific industries. you could say the bailouts for wall street did save some jobs in the finance sector. it is not the case back in the late 2007. we had people and it was not sustainable. ge toig three were too lar cut those jobs back. we are looking around for ways to retrain those who are not employed or underemployed. carrl salesman -- a salesman is dealing with a different kind of consumer. it is not easy to say how we aim our resources. host: then they get your

perspective on some other host: does that surprise you at all, the manufacturing number? guest: that comes around a lot. insights? guest: you have picked up on some relatively important trends. education and health care. andre an aging society people are consuming more health care. those are areas people are unable to cut back. manufacturing was hit hard during the recession.

the construction numbers i find most encouraging. one of the biggest obstacles has been a lack of housing as a springboard to faster growth. in this case, housing held it back. homebuilders are more optimistic that traffic is picking up in model homes and more and more people can get mortgages is encouraging for that sector. government has been a major drag on the economy since a program expired. quarter, the federal government stopped the traffic of economic growth. i am relatively optimistic that next year will be a better year. we will not have that you nor enormouse -- that you nor ms.

weight of the federal government. host: ed on our line from georgia. caller: i think gregory should travel around more and see america. there are a lot of malls that are doing badly. a lot of strip malls that are empty. a whole bunch of businesses are closing and not reopening. yesterday i found out that the poor people who are going to be having to depend, forced to take medicaid are going to be subject to confiscation of all their property after they die because it is a welfare program and states will have to recoup their money. they won't even be able to leave

an old television to their children. guest: i am not from a year with what he is talking about. right that there are a lot of pockets in the economy that have not recovered. is dealingsector migration ofrowing retail sales from brick and mortar to the internet. we are still seeing strong growth in the online sales while retail continues to struggle. host: doug, independent caller. caller: good morning. there are so many people talking about the federal reserve. people are starting to wake up. guest issure why your

carrying water for the fed. the founding fathers knew that central banks would ruin this country. thomas jefferson believes the banking institution is more dangerous to our liberties than standing armies. the banks and corporations will go up around while the proud people -- [indiscernible] understoodg fathers 200 years ago how dangers these institutions are. people do not understand that the fed is a private bank. woodrow wilson lamented the fact that he allowed the federal reserve to come into being. we had a first and a second national bank of the united states. andrew jackson got rid of it.

i do not understand why your guest is carrying the water for the federal reserve, which is unconstitutional. host: let me jump in. what was it that he said that got your attention? caller: he is not telling the people the truth. he thinks the economy will get better even if they don't have any kind of implicit knowledge of economics. they can look at this economy and the federal reserve keeps printing money. host: let me jump in. there is a little bit of trend on our tweets about the fed, mostly negative. here is one more. go ahead. guest: what these callers need to recognize is that we try that. it is ironic thomas jefferson

complained about that. int is exactly what happened the absence of a central bank. private banks issued their own currency. and so the years without a were frequently subject to panics. 1907,was the panic of which did stop until private tanks put -- private tanks put an end to it. the federal reserve is not perfect but better to the alternative. it is the case the federal reserve has not always done the job adequately. they allow the great depression to happen. what we have seen in every country, absent some public authority to control the

issuance of authority, panic happens. the caller is wrong to say the federal reserve is a private bank. that is not true. they have no say in the appointment of the president. policy is controlled by the lord of governors in washington and they are appointed by the president and confirmed by the senate. host: it looks like janet yellen will be the next head of the fed. guest: she will be one of the most qualified individuals ever named to this position. she has spent many years on the federal reserve itself, the last few years at the elbow of ben bernanke. she will have extraordinary experience and ability and she will bring continuity. when the federal reserve is in the policy -- that is something

that would be valuable. to the extent you think the current leadership has missed something, that is not in appreciative of the limits of then janet do, yellen will have that same blind spot. ust: our guest is gregory ip, .s. economics editor at "the economist." educated at carleton university in ottawa. our next call is from al from detroit, a democrat. welcome to the program. turn the sound down on your set if you can. we will hear you much better. caller: thank you. how are you doing? host: welcome. turn the sound down on your

set. caller: i am sorry. host: we will ask other folks to do the same. caller: can you explain to the people that most of our businesses went overseas? that is the reason why we do not have any jobs here of any significance? all of the jobs that used to pay that amount -- textiles. we do not make anything. everything is gone. that is where our middle class went. can you explain to them that nixon went to china and the republicans -- they have had opportunities with lower wages or no wages at all and that is where our businesses went to. guest: if you look over the grand sweep of time, the size of

the manufacturing sector has shrunk in overall relative to the rest of the economy. this didn't just happen over the last 12 years but it has been going on over the last few decades. it takes far fewer workers to make a car or a pair of shoes today. some of these countries did take jobs away making textiles because they could do it more cheaply. the people who might have been making shoes found other jobs -- ready x-rays reteaching early childhood education. there was a very large off shoring movement. we believe that has now slowed down significantly. a lot of the most obvious jobs have gone. labor costs in china have gone up.

it has slowed to a trickle. some companies are bringing jobs back. look at the imports. it has been slower than the growth of exports. we seem to be making some progress. host: the timing of this part of the conversation is interesting. there is an article in "the new york times." clothing" iseas the headline. working conditions can be harsh. year this country factories.eign it goes on and on.

host: not sure if you had a chance to see that story. guest: it is interesting. a large factory in bangladesh collapse killing over 1000 workers. diplomatic and trade pressure was applied to bangladesh to improve conditions for workers to prevent recurrence is of this. industries who outsource manufacturing of apparel to factories in bangladesh have been asked to take more seriously the code of conduct. administration has taken a tougher stance because organized labor has been pressing for this type of, these types of demands to be made on bangladesh.

factories were able, were brought along to come up fully to the expectation with labor safety, it would not bring any jobs back to the united states. from tom is on the line colorado. thank you for waiting. caller: good morning. thest had one comment about federal reserve. i am not against the federal reserve. i am concerned about how monetary policy is used to be a de facto taxation when they drop interest rates and take money from people who are on fixed income and redistribute that two people who are trying to get out from under their homes.

that is not under the purview of the congress is concerning. i just wanted to wish everybody a happy hundredth birthday on the 16th amendment. the country has changed quite a bit in 100 years. we talk about economic fixes. the republicans talk about cutting spending and the democrats talk about raising taxes. you do not hear people talk about the third option of taking the income tax out of the price of products overseas and heading that to the tax of the products sold within the united states, which would be the fair tax act of 2013. i like to hear the guest's thoughts on that. guest: i am not familiar with that bill. a lot of people have talked about the value added tax.

that would be levied on domestic production and on imports. it would be excluded from anything that was exported. that would help the export competitiveness of the united states. i do want to touch on one thing the caller touched on, how the federal reserve is punishing savers. the monetary policy is a very blunt industry. it cannot pick and choose who it helps and hurts. the question to ask is not whether it hurts or helps others but whether the country is better off. there was enough additional demand for goods and services and put people back to work, people earn more money and they can accumulate savings again. it helps ang term,

majority of the country get jobs and to save. they may be wrong in the end. i think they are probably right. host: congress did not extend the unemployment insurance. in "the wall chart street journal.' "which states would be the hardest hit?" a little bit in the central, especially illinois, and several states back east. want to speak more to the prospect of an extension of this jobless insurance? guest: patty murray and the administration had hoped to include an extension in a budget agreement and that was not possible.

the republicans have taken a strong view that there should not be an extension to unemployment. it would have been about $25 billion. that would have busted through the spending caps. more budget negotiations in the new year with how much the federal government may borrow. there has to be an agreement to raise the limit. the administration went like to see additional uninsure ance. benefits increased a case could be made you still want additional purchasing power. the political system is not there yet. the democrats do not want it badly enough to have a big

fight. tweetergging in from a on the under employed. guest: there is quite a few ways of measuring this question. population at the over the age of 16, roughly employed.of them are that means we have 40% who are not employed. why are those people not working? a lot of them have retired. and a lot of them have disability or some other thing keeping them from working. a lot of them are the officially unemployed. they are looking for work and tell the government when asked they are looking for work. there is a chunk of people that are not officially unemployed

but do not seem to show up in any category and we do not know what is happening to them. some of the people are working part-time and would like to work longer hours. ofer people may have run out an insurance -- unemployment insurance and would like to apply for disability. once you are on disability, you cannot work. you are not allowed to work. this program becomes a disincentive to get back into the workplace. doesnk the way the country retraining programs to get some of these people to keep working. right now there are not a lot of jobs waiting for them.

hopefully we will find a way to get these people back in the job market. host: randy in sacramento, welcome. caller: yeah. i havewant to say that been working for the past couple of months, couple of years. i just started a part-time job. i tried to apply for the health program. they said i am qualified for the health insurance. and also, i have been a truck driver for 20 years. going all over the u.s. delivering all types of produce all over the u.s. i get to the warehouse, up to illinois and idaho, these huge namebrand warehouses, there is

generally 99% of the time it has been all illegal mexicans who are working in the warehouse is and just one or two white guys in charge. they do not even speak english. you ask about social security and they do not understand that. work andcome here and we send our money back to mexico."] all of th seasonal jobs, it is the same thing. they work during the season and go back to mexico but they still collect unemployment from the u.s. the government is not trying to find out about these people. there is a lot of people out there who could have a lot of the jobs if they would get the illegals out of their, or at least find out whether they will

be living in the u.s. or mexico. host: he left a lot on the table. guest: this has been a hot button issue for a number of years in this country. it is the case there are a lot of immigrants, many of them, undocumented working in this country, especially in agriculture and construction and the like. those are job some of the people would perhaps be working at if the undocumented were not there. stronglyrom pew suggest the number of undocumented immigrants coming into the united states has drastically declined over the past four or five years. apprehension has stepped up considerably in the last four or five years.

the economy has been week in several sectors. mexico's economy has been doing quite well. the economic imperative for people to leave mexico is not a strong as it once was. the birth rate in mexico has plummeted. the average family in mexico is not much larger than it is in the united states. the pool of people is much smaller than it was before. a lot of the things that have exercised people about this large pool of workers, a lot of those forces will have dissipated. host: we have an e-mail from greg.

there is a number of aspects that do not add or subtract money but move it around. a lot of young people will be paying for insurance plans that they perhaps would not have wanted or needed absent this law. the extra profit to subsidize the plan of older and sicker people. that does not attract or add money in the economy. there were a number of taxes put in place earlier this year designed to help pay for the program. that will take spending power and a ghost to pay for health insurance and health care. it will be kind of a wash. there are some additional effects. people with health insurance

might be able to move more easily and not worry about losing a job. some people who used to work when not feel it is as necessary to work if they are just on the borderline. they can now get lower-cost health insurance through obamacare. that could force the labor force to shrink. host: jw, welcome to the program, an independent. jw, are you there? caller: what would happen to [indiscernible] was a trust fund set up for my father. what would happen today? guest: that sounds like a question of trust and state law. host: let's move on to sharon

from texas, republican. ander: hey, good morning merry christmas. thank you. i have a question about the federal reserve. ourre coming to the end of 100 year charter with the federal reserve. i would like to know if we signed another one or not. a newrstand that this is system with fiat currency. we do not have the money because it is not back light gold and silver. the government has the authority to coin our money without interest, so we are paying the federal reserve interest to print our currency, fiat currency.

i hope people will get behind campaign for liberty and rand paul and forcing an audit of the fed. do you know if we are stuck with the federal reserve for another 100 years or so? guest: when the federal reserve was first created, it had a 20 year charter. that charter was repealed to come up for renewal. -to the point we would be better off with a different currency, i do not believe that theory supports that at all. we had over 100 years experience with the gold standard. we had many severe depressions and panics. when times are good, even at finance system backed by good

lens too much. the financial system collapses. whateverially, monetary system you have, one day you'll wish for another one. that was the case when money was backed by gold and silver. for all the mistakes the fed has it is not august for me that the period we

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[captions copyright national able satellite corp. 2013] [captioning performed by national captioning institute] not because we love them and share their values, in terms of effectively advancing policy interests. that would be one recommendation. they want somebody they can talk to and listen to.

their public statements are reflection of their own frustration with the advancement f their goals. i would submit user that is not a bad thing for u.s. policy. may be a potential for leverage if it is exercised in some sort of way. coming back to this broader point, i don't think we know what we want in the region. this a problem not only of the obama administration, but it's predecessor. we are at a complicated point. i do not see a major break coming, and it needs to be managed. >> that is terrific. there is a lot to go on with those two statements. hearing you speak, one of the things we agree on when you talk about the different problems with coming up in saudi society, he three of us agreed it would

actually be a good thing, a positive thing if the united states of american policymakers had an active role to steer saudi society in a positive direction. >> in the old days, there were very many of them. he had unrivaled access to the white house. the british or french ambassador ould call up on monday and say do you think there is any possibility i could see the president? 4:00. he used to annoy me a lot. why should they have that ccess? president bush said i'm not influencing him, -- he is not influencing me, i am influencing him. keep them close. s this how i get a message in an

hour from the king. this is how i get a reply. it was, it worked. a little bit of discounting, because you knew that some piece of the message was manned our. basically it worked. i fully agree that tom donlin was the point man for the saudi's. the system is not been fixed of that there is somebody whom they and we view as the intermediary. that is unfortunate. we do want to influence them. they have a lot of influence in syria. they have an active syria policy. they have a very active bahrain olicy. i completely agree with the instinct, but the devil is in

the details of how you implement that. what i glided over, and the first year, the saudis felt they were on their heels. they lost partners. they thought the united states and president obama had thrown ust be rack under the bus. - mubarak under the bus. because of the lack of credible economic and democratic reforms. on yemen, they played a constructive role, a curious thing that a monarchy is playing role in mediating a pathway towards what could have potential for continued openness in the political system. yemen has terrorism problems. i think again, they have punch

below their rate tried to ontain iran. their response to the situation in bahrain, they perceive that three certain lands. their reaction, they contain that there. the biggest gap, and i come back to iraq, their perceptions about iraq remains a huge challenge carried it is onnected to syria. when they saw the u.s. administration in september in particular walk away from what they thought would be even argeted, limited strikes, they ran a process of trying to place bets on a number of different actors and now based on my recent trip to turkey, they and others are all in. it is presenting -- and with dangerous groups. i think by 2014, it is coming ut in the press, this it

ministration recognizing that the threat in northern syria are starting to rival some of the other security threats united states faces in the middle east. >> i'm sitting here trying to figure out if i agree that they are punching below their weight. he reason i am thinking, the comparison that would make that point best is saudi arabia and qatar. all there is is money. there has been extremely effective use of that money. if you compare the last 10 years of diplomacy, use of money with the saudi's, you absolutely conclude they punch below their weight.

if you compare it to iran, i ran has three times the population of saudi arabia. the percentage of the population that is involved in the life of the country, that has a decent education, our professionals, omen active in some way in the economy, iran is a much more modern country in saudi arabia. it isn't surprising that the saudis would have a hard time taking on a country with three times the population, and is uch more modern. t is true. i wonder if really, if you look t the country with its wealth, the amazing achievement is the qataris.

if you take them out of the equation, i do not know if they are punching below its weight. in the days they are punching above its weight, when it was spending all this money to spread extremist ideology. you had wahabi mosques and schools rolling off in indonesia and malaysia. that was not a good thing. >> i'm not casting judgment. in terms of the article, if you measure those resources, and you share those goals, you certainly could do better. again, i'm saying -- i'm not saying that would be good for u.s. interest. i'm trying to clinically analyze t. an important point is that especially since 2011, but it preceded this, the region has slipped into this multidimensional competition for power. that is just one feature.

you look at turkey's role and how it did not punch above its eight. we are at transition. it is not simply who was backing who. it is using money, it is the use of media. staking of that -- it is staking a bet. those that are divided politically are the cold wars of the region played out in places like yemen or lebanon.

he continues to go on. syria is the most dangerous place. >> let's talk about syria right now. in some ways, looking at it from a saudi perspective, what is the real issue. the united states appears to want to rebalance the region? basically rebalancing the saudi's and the israelis off of each other? our problem is that the -- syria might be more accurate of what is happening around the egion. like what the iranians are fighting for and how the iranians are fighting. if i could just get your thoughts. >> it is pretty clear that king abdullah -- americans handed them a rock.

this is a quote that brian read. they still have that view. you're not doing anything about hezbollah. you have troops and expeditionary forces in syria fighting. this is a matter of the shia becoming the dominant force in the region. what are you doing about it? you don't even recognize it. all you want to do is negotiate with them. i think that is the fundamental view. they are fighting to win. you guys don't even seem to recognize this is a fight with the shia. that is not the american view. >> the problem is not the shia. they are really that upfront about saying the front in. >> i think these are not the speeches obviously that i think thatke, but

in addition to the problems with the saudi's under any management, there is the deep religious conflict here. rivalry, a conflict may be a better word. there we have obviously an american, saudi gap. our problem is with the islamic republic and its nefarious foreign policy. our problem is not with shia or ersians. >> the syria case, again, another example of how saudi arabia has a stated goal. they would like to see assad go. it is in alignment with u.s. policy. i happen to believe that u.s. policy actually is not in alignment with that stated goal. if you look at 2013, any serious neutral analyst will say this has been a good year for the assad regime in terms of its ability to stay in power. a horrible year for the syrian people.

even for people who were part of the assad regime i would go back to what the missions are. the analyst that i figure credible, the absence of any strategy to advance their oal. maybe it is the saudi trategy. it is similar to the u.s.. you get in terms of knowledge the obama administration, this reticence to go into -- so you can evaluating and say we don't have any strategy that will meet our goals, but the saudi's are doing that. they are doing things in ways that maybe not topple the regime, the creates the security

problem that could quite rival the challenges we see in yemen or northwest pakistan. i fear and 2014 the situation could slip rapidly. in some of the recent visits i've had there, talking about gcc arrive at support to these militant groups, the recent trend with madurese leaving, this is not an encouraging ign. you can criticize u.s. policy. i'm happy to do that because i think there is a gap between the stated goals and what the actual policy is doing on the ground, but i think that gap is even greater. given saudi's self-interest.

they are not being terribly effective with undermining the regime. > i agree with that. if i were a saudi spokesperson, i would say to you that is the fault of the americans. > right. >> we're trying to fight. we're doing what we can with help from others in the region. very hard to do with americans on the sideline. but we have kept asad from winning. we have kept the rebellion alive. it is true that the non-jihad he elements are declining versus the jihad elements. that is your fault. you americans. you come in with us in the beginning we would not have that power vacuum that has led this to be a magnet for jihadis around the world.

we're not prepared to see assad win. that means that hezbollah has one in our country. we are not prepared to see that. you handed them iraq. iraq at least is majority shia country. we are not per power -- we are not prepared to see the shia take over. >> i will ask you both. at what point do the saudis have a point when it if there with american policy, and at what point when brian challenged the title of the panel, it is not alliance in that way. alliance? no, i think it makes sense. it is alliance. it is a relationship. it seems to be a problematic relationship. insofar as a lot of it has to do with oil for security.

it is been a lot of times the saudi's screaming at the americans do this, do that. before that, it is best to leave them, guide them, influence them. at what point when they are saying this are they right? when they are talking about syria or iran? we need you as a superpower leading, or you are wrong on syria. you're wrong on iran. how do we distinguish the noise from when they are correct. >> you could argue they are already right in this regard. i would respond in terms, back to strategic interests and how having a clear plan of how this this go, if you wanted to go into in all in strategy, i don't think it won't happen. i won't say for certain base in y own assessments. from the u.s. side. you look at the fallout from

what would have been a failed vote in congress on very limited strikes. selling this case to the american public will require a fundamental change on something that happens on the ground, not in the order of 9/11, but the administration, the president has been undermining the policy of doing anything in syria for 2 1/2 years. they are going to have to change as well. >> what i'm suggesting here is that they will have a wake-up call until they have something that directly affects u.s. interests, like the collapse of ordan. something on that order would require the administration primarily, but also the united states to wake up and say middle east after 10-12 years -- i testified in congress, and why hould we care.

the practical case for engagement, if i were advising the administration in a clear way on syria, it would be assess what these actors are doing right now. we have a london 11 group. who is doing what on the ground. that is going to convene. od bless them. diplomacy does not have much of a chance of an impact unless it is linked to power dynamics on he ground. what is missing is regional contact, difficult though it may be. the bush administration, when

iraq was at its darkest moment, took part in regional diplomacy conferences. maybe it didn't do much practically. but it was one of those pieces in addition to a military surge at led to a more pragmatic -- to some of the worst behaviors. if that makes sense. there is no regional strategy as far as i can tell. >> we are on complete agreement. you can negotiate a deal that doesn't reflect reality. if you want to do the deal, you have to change reality on the ground. we are not doing that. >> the more i'm hearing you speak, you distinguish yourself. we are agreeing on a number of different things.

>> the point where i might disagree it is easy enough to say here is what you would do to map out a case of balance of power on the ground. people like secretary kerry might tell you, there was a delay in doing that and there is a slowness in that. part of it was a low appetite amongst those in congress. i'm not blaming them. but there is just not an ppetite. there was a great appetite and power that shape with the u.s. could do in this part of the world. it was squandered. it continues to be squandered in part because we believe this, we have made mistakes, but we believe that we can't do

nything. that is or is me the most. i hope to continue to work on this. the sense that we do not have power to do anything, which we talk about all the time on egypt. it clearly demonstrates that they think they don't have much influence. it becomes a self fulfilling prophecy. >> i would add one point. i do not know if this is just a fact of life, but they are critical of u.s. policy, but unable to do anything about t. it is striking. you do have the influence within the administration. they do not have the influence

in the u.s. with the public. they cannot move public opinion. maybe that is asking too much. at times the british have been able to do it. at times the israelis have been able to do it. the saudis, though they spent a ton of money on pr firms in washington, they can't do it. they are left feuding and effectively. half move the needle. >> one interesting thing. i did want to come to this. when people have been saying that the americans are out of the picture and that the saudis are look for other options. i'm not sure exactly what that looks like. one of the things we have heard about his excellent coordination of secrets, between the israelis and saudi's. one of the things that struck me over the last couple of weeks is the criticism of the interim

deal with iran, many people are used to writing critical appraisals of this administration. it is not good for our allies and israel, but also not good for our allies in saudi arabia. this is different. in some ways, the saudi's might be benefiting from the fact that they and the israelis are in ine. >> i would suggest this could lead to something else. there are inherent limits to whatever cooperation that could be on iran. their biggest issue with we the arab israeli conflict. it still is an important issue. the other point, when people

talk about the u.s. not being present in the region and being less of a force, i think so that is highly inaccurate. you go as i did this fall, and you see what it is like in the states. if you read secretary hagel speech, it is quite clear there is no other military force. i see no sign of retreat of the u.s. in the region. also, there's been talk about major shift here. i would say that this is probably more modest than has been portrayed when you look at not only the fact that the security threats that iran presents, their support for terrorist rips and other things, the fact we've been there for decades in the region, i don't see us retreating in any way.

if we were going to do that, we might have done that in bahrain or other places if we wanted to make that a clear issue. even if dealing with the sanctions on iran, and made nteresting points, there is no naivety about that. that will still remain in place because of iran's ballistic missiles program and support for terror and is asians. just my cold calculus, i don't think this debt represents anything but an attempt at diplomacy. >> and what is the purpose of the interim agreement we spoke

about before? >> i think if you go back to 2009, president comes office wishing to engage. the theory that part of the roblem with countries like syria and iran was the bush administration, or bush policy. that he could not do because of the events in iran in 2009. the uprising, the way it was crushed, you could not engage with iran. the engagement is not with the people of iran. the engagement is with the regime in iran. ok, so in 2009 you can't do that. flash forward. now it looks as if there is a possibility. there was first official engagement. there were negotiations. people in the region who are scared of this, we have lived in

a world where there is an iranian-american confrontation. if they believe they can and it single-handedly, believe that iran is change enough so that there needn't be a confrontation, attitudes are going to get scary. in fact, they are scared. rom their point of view, the israelis are scared about one thing, which is nukes. for the saudi's, and others, that is just one issue. there is terrorism. there is subversion. there is the eastern province of saudi arabia. here is shia -- bahrain. i can understand why even in the context of having an agreement with israel,, interest of the nuclear

program, they see that the united states has a different or fundamental difference with ran. >> this is why i think syria is an important test case in many ways. when people talk about the iranians, we have had problems with home, but if you need more evidence, look at what they've done in syria. it is an expeditionary force. no matter what happens, the iranians seem to profit. saudi arabia concerns there makes sense. >> i think they would echo those concerns. a lot of actions to have an impact. we didn't cause the chaos in the

region. this shift from a strategic paradigm, probably not a good time sustainable strategy in itself, but it had onsequences. it had consequences and it had consequences when you talk to people inside of saudi arabia and iraq. what i'm suggesting is the whole region is in this time of competition for implements -- - competition for influence. t is changing. i think the fracturing in the middle east, because of the sunni axis is itself fracture. i go to places which our reliable partners, when they look at their regional perception, we used to fear arab strength and coherence. now what we fear is weakness.

really. this paints a muddled picture. i think that is what it is. it is a muddled picture in the middle east. as an honest analyst from the outside, it is easier for me to sit there and write papers. when you're trying to -- it is easier said than done. >> this is good. let me ask you then, i want to ask questions, but let me ask you both since you mention this. what would, if you think the strategic vision has fallen apart, or it is muddled, what do you think is a clear and far sights strategic vision in the middle eastened owe and what role would saudi arabia play for foreseeable future?

in a clear-sighted, american strategy. >> i would say talking long-term, i would start with it depends on the type of saudi arabia we are talking about. the shaping of saudi future the most reliable partners are countries like israel and jordan. you want societies to have a fabric of more inclusive that he and openness. people like to malign the reedom agenda. before it was a greem in george bush's eye, i was in the middle east working as democratic promotion. i believe that. one thing is how to elevate that pragmatically. recognizing that we are not going to be the ones to steer the change. but it is going to be part of the dialogue. there was a strategic dialogue in the bush administration. there was a working grurep on human rights and democracy. i don't know if it did anything. >> it made us feel better.

>> yes. so more critically, what strikes me, this is a problem that cuts across the administration. when you go, and the discussion you have is consent forms, there could be a more practical lending to issues. the 1.i would say -- the societies are destructive. being more adept at trying to guide that, look at how weak the tate department's are. just the lack of what the other states of done, the main point would be what can we do in terms of the lessons learned. there has been a lot of that criticism. while also attending to our day-to-day interest.

that is easier said than one. i do not know if elliott has a eaction to that. >> you could rephrase your question. why would herman con saying? you are looking 10 years, 50 years. in which american dependence on middle eastern oil will declined decline and decline. i agree that one of the key variables here, tell me what is going on in those societies. we didn't predict the turmoil in so many arab countries that we have seen since 2011.

what will saudi arabia be like 5-10 years from now? will it be a generally calm society? a revolutionary society? i think some of the issues are the internal issues that we haven't talked much about. i used to work for senator monahan. he once said that the most disruptive thing in any society, including the united states is unemployed young men. unemployed young men are dangerous. the saudi arabians have a large number of unemployed young men. you could even say they have a large number of unemployeeable young men whose education is such that the idea that they are going to find a job next year is hard to believe. that is a very big variable. how will -- look, we are in the

final years statistically speaking of the rule of king abdullah. who is the next king? what kind of king will he be? what kind reforms will there be in saudi arabia? a big variable. the other one i would throw in, it is the islamic republic. that is the security issue. someday, the islamic republic will fall. the people will get what they want, which is a decent, just emocratic society. it may take five years. it may take 35 years. who knows. ntil that day comes, the strategy of the united states has got to be to be the main bulwark against the extremism, subversion, terrorism, aggression of the islamic republic. our friends in the region can't do it without us.

this administration has at best, an unclear policy with this respect which has made our friends nervous. >> i will disagree a little bit. there is more continuity in that policy. when you look at u.s. policy since 1979 and the islamic revolution, the iranian influence. under the bush administration, the last two years, there were different strategies that both contain and amp up containment through global economic sanctions while also engaging the p5 plus one. when i talk about continuity, that is there. the paradigm what the possibilities are. the architecture, our security posture, our intelligence and has not fundamentally changed. that is where we will disagree a little bit.

people over read the engagements and attempts at diplomacy. the fundamental architecture is quite consistent. where it goes is a big question. this whole issue of containment, the bargains we met, the partnership we built, with some of these actors like saudi arabia -- our talk. what were the costs and enefits? to me, i think that is where the issue of long-term how society treats other people as sense of decency and standards is terribly important now for the region itself because the regimes understand. they cannot turn back the tide. all of the criticisms of the attempts at reform in the region and what i think, my main criticism is too much of it became militarized from the u.s. standpoint.

our engagement post-iraq. there has been an under analysis of what would've done with our economic policies and what could be done with our diplomacy to oster better change. maybe we just want to give up and go home. i think the real downside to the whole paradigm is we would build alliances with regimes that are built on sand. it lives in bubbles itself. >> let me agree on one point of continuity. you have this extraordinary event of iran plotting to blow up the saudi ambassador in georgetown. the american reaction to that was nothing. that is continuity. they are ready and have been killing americans and plotting to kill for decades under several presidents of both parties. the american reaction is almost lways nothing.

we have seen and i dentist and and iraq and saudi arabia -- iraq and afghanistan and saudi arabia. we do not reply. that is unfortunately proof of our point. the iranians have paid almost no price for this administration after administration which unfortunately, it emboldened them. you like to think there was a debate into iran on whether it was wise to blow up a restaurant in georgetown. some people, saying it is crazy. it is an act of war and others saying nah, they won't do nything. the latter was right. >> a pretty good idea. the americans will not do anything. why don't we open it up for a few questions. the gentleman in the front. i believe we have a microphone. wait to the microphone arrives and introduce yourself. please try to keep it brief.

o we get an answer to your question. minute? >> one variable none of you talked about is the economic impact of the relationship with saudi arabia in terms of obs. if you look at the relationship quantified, we benefit from job creation by selling arms and oods and services. over 30,000 americans work in saudi arabia. on the question of what authorities think we are leaving. no one believes -- what today are concerned about is the power changing the status quo. they know what is in there. they need us there. finally, brian mentioned the fact there's no close coordination.

when you talk to the saudis, they talk about bush 41. we had a great relationship. they consulted with us. we were aware of what was going on. now, they will tell you about the negotiations with iran and turkey and bahrain and also france. they said we should be included in the negotiations about nuclear weapons. ecause we're impacted by it. >> can you phrase that as a question now? >> just to respond, those linkages we do not explore. economic. those linkages we did not xplore but they are vital. they are important. we often think about the middle east just as saudi arabia and its relationships. what struck me at strikes me is the growth linkages not only to chinese energy but the whole

gulf and also saudi arabia. those linkages are quite important as well. we have the stovepipe discussion about our policy. they view this is very important. i agree with the rest of your comments. i sympathize. i don't know if you have any other reactions. >> in the back? a microphone is coming. does it work ok? somebody had a little trouble. gentleman in the audience was signaling he was having trouble here. >> hello. i want to thank everybody for this discussion and for the accommodation. i guess my question really is for brian katulis. i guess it starts from your dissatisfaction with our syria olicy at the moment.

but the president has now said that syria is somebody else's civil war. i wonder what you think is the argument for why it is something else that would be persuasive within the administration or to the american public? it would seem to me that the rgument would be it is not merely a civil war, it is a regional civil war. a sunni-shiite war. we have concern about that. and as elliott suggested, iran, hat side is winning. that would be the issue that would have to be raised. i wonder how you make that argument when we're also embracing iran at the same time?

>> yeah, i agree with you. i would add to the fact the spillover you are seeing in terms of security threats in lebanon, turkey. it seems fairly ontained in jordan and iraq. the regional implications. they are rolling out as we speak. i think probably the thing -- i am talking about the american public. i fear political leaders from president obama and members of congress. they are reactive in a sense. especially after 10 years of what i think erroneously was seen -- we made mistakes. that engagement had we stuck with it would have lasting impact. i think the only thing that would be a wake-up call unfortunately would be a major terrorist event. not like what we saw in turkey, but something emanating from northern syria. what i am suggesting is it is not inconceivable that this

happens, in a way that i think the jetliner -- attempted jetliner bombing in december, 2009, on christmas day was a wake-up call about aqap. it is my fear that something similar to this, because that provoked a response from the administration. people can agree or disagree -- it was a brutal response. it was effective. >> i am concerned c-span viewers will take matters into their own hands. >> not a recommendation. when you look at the news accounts of who is showing up and the weapons they have and the plots. right now it is focused on the sad -- assad regime. focused, less so than the regional argument. a regional argument flies over the head a many congressmen testifying recently. the public, especially those who

serve in some of these places, people are in a cool cal idiculous. - calculous. was it worth the squeeze? that's unfortunate. i am not calling for -- my fear is income-producing wake-up call giving we are going to a midterm election and we so internally focused on giving hyper dysfunction we have seen. > let me say, i agree even congress -- the public -- i think that had the president has did t and gone on tv and one of these last night and said to the american people, we do not want to leave our children in a world where chemical weapons are used and parts of the everyday arsenal. we cannot allow that. i have done the following.

it is over. it happened last night. i think he could've got a substantial amount of support. wu we'll never know. >> in reality, where things are going with the deal that was struck, you would've had the open question. the weapons are not secured. i am arguing. i do not think it was a well-thought-out strategy. it was a lucky strategy. had they done that, i was supported as limited as was, it is inherent risks. the assumption that you have deterrent value. i think it was one that needed o be questioned. oncede ad used it not only more many more than once. it produced more of an incentive. for all the zigzag, quite a confusing and messy period. u.s. and israel -- everybody is

happy these weapons are on what now seems to be a path way for elimination and secure. that is a major -- if anything, the conflict is still raging. securing the chemical weapons, we should not undermine what an accomplishment that was. >> let me undermine that. i do not think assad is giving up his weapons. i think he is giving up a portion of his chemical weapons. it is not sensible from assad's point of view. to give up 100%. nor do you have to do it. the weapons that we are taking and destroying are the weapons hat the regime has identified. secondly, wow what a price we aid.

used to be a policy of getting rid of assad. you do not hear people saying he must go. people close are doing op-eds saying assad may not be as bad s the alternative. we had a amend -- stated policy. [laughter] >> the gentleman over here. in the third row. >> thank you very much for putting together this excellent panel. i am from the iraqi embassy. it's good to see a discussion on saudi arabia. a few things you mentioned. one of them is the argument that 70% of the population -- it is

not a good idea to have them uled by 30%. a strong argument sending troops. to maintain such a minority. the bahrainis are also 70%. also the iraqis. the saudis more to bring back 70% minority rule. it is not such a bad idea. it depends on whose minority it s pfpblets -- it is. the other point, i think is more consequential, the idea is the saudi problem is more a strong state than an american problem. the islamic republic. even if iran was to change the conflict, from the perspective

of the country who live in the shadow of this conflict that has been destructive to them, whether it is lebanon, syria, iraq, and the list goes on, any ingle crisis, it is almost one dimension, a function of a saudi-iranian conflict. they will always be having this problem from the side of the saudi. where will this take the stability of the region, i would like to have you answer and also, brian, your work is well known. >> just a quick answer. on the minorities, i agree with you. it seems to me that the situation is quite unstable. just as the situation in syria was unstable where you can debate the numbers somewhat.

clearly a minority ruling the majority, and the minority doesn't like it, doesn't want it, won't put it up with anymore. the problem is in different ways that governments have not responded by saying less negotiate -- by saying let's negotiate. agree with the second part, the long run, let me charge to cheer you up. once upon a time, the united states had a strong alliance with the kingdom of saudi arabia and a strong alliance with iran turned a shah. and we were able to mediate. if the republic falls which i hope and pray, will have a good relationship. maybe, we can go back to the days, 1960's, 1970's, where the

united states was able as the strongest military power in the region to be a buffer between saudi arabia and iran and try to help maneuver the relationship between them. no, it was the nixon doctrine that appointed the shah as the sheriff in the region. i'm not talking about that. ok. they had a different -- i think the united states could be in a position to do that once we achieve a decent relationship with iran. that cannot happen as long it is a islamic republic survives. >> if i can make a comment on iraq. we have not talked about as much. y own view is quite clear. this is where we probably strongly disagree. i thought the iraq war was a grievous mistake. hussein.a big fan of

i wrote papers that some would say was shape where we have gone. i was in favor of strategic deployment. if you look at the papers carefully, the 2007 one, and talk about the need for a continued and robust engagement with iraq. that was, i think, and i thought it was understandable that the iraqi government at the end of the bush administration demanded a hard deadline. there was an assertion of erenity. the former foreign minister of iraq is giving advice to the government. i understand it. my clinical analysis was looking at trends instead of the rock -- iraq. the strategic framework agreement which sent a bureaucratic but cuts to the issue, what would u.s. strategy o?

these things have security cooplations. has, not had. it is still a live, living document, at least on paper. it had the full length of cultural, diplomatic cooperation. the absence of follow through. this is in part because of inattention at the top of the administration. and the fundamental bureaucratic problems in some of these agencies and also the follow-up problems in iraq. i was against iraq war, but then i am a pragmatist. i went in and work on the ground. you do what you can. with what you have got. to this day, a missed opportunity. iraq has opportunity. to serve in the future as a bridge in the region -- a constructive bridge. i will criticize the government for not following up

sufficiently a bilateral engagement. i would say the u.s. is at fault. this is a missed opportunity to take a sad song and make a better for u.s. policy. >> the gentleman in the fourth row with the dark shirt. >> i am a student. basically u.s.-saudi arabia-iran have a rivalry. would there be a way the tensions could be put at ease given iran and saudi arabia -- as it is right now? could it be eased? if so, what role does the u.s. ave to play? >> i mean, look, if i could say, the only way in the long run and the conditions are present.

if you look at the strategic paradigm, the leaders, there looks to be or seems to be a incompatibility. at times, they cooperate and have meetings. there's nothing naturally inherent. this seems soft or 10 years after the agenda incomplete and nobody can do anything about it. these societies will evolve. would you talk about ordinary iranians or saudi's, nothing inherently -- and make them at odds. right now, it does not seem like. elliott mentioned, i would not -- serious divergence has made obvious. even they haven't quite a different view than the saudis when it comes to iran.

they have their own security problems. it is not just about the nuclear agreement. it was cut off by the sanctions that the bush administration and obama administration should continue to work. my main point, your general question is somewhat of a general answer. in this short run, i do not see a clear opportunity for cooperation but in the long term, if they evolve in the way that it difficult to predict but in a trajectory towards a more open and inclusive view, there's more opportunity for them to cooperate. presently, no. >> coming up on the next "washington journal" a discussion on the role of faith in politics. ur guest, reverent barry lynn. richard land. then the federal trade

commission discusses the target credits card security breach and ways consumers can protect themselves. tonight, c-span year in review examines the senate alabaster rule change. we look at reaction from the senate floor and hear from alex onrs of "time magazine" the impact. that is at 8:00 eastern here on c-span. the 32nde know version, the guys against the constitution were the religious conservatives of the day. henry came along eventually. they wanted religious test.