captioning sponsored by macneil/lehrer productions >> brown: good evening. i'm jeffrey brown. president obama defended his decision to compromise with republicans on extending tax cuts, and said the deal will help spur the economy. >> ifill: and i'm gwen ifill. on the newshour tonight, paul krugman of the "new york times" and stephen moore of the wall street journal" assess the merits of the agreement and its real world impact. >> brown: then, as the founder of wikileaks is arrested in london, we get two views on whether the u.s. government can prosecute the web site for the release of secret documents. >> ifill: we have a report from dublin about what sparked ireland's economic crisis. >> brown: from cuba, ray suarez fills us in on his latest assignment and his upcoming reports.

>> suarez: cuban society is debating future economic reforms, and this developing country is moving ahead with a first world industry, biotechnology. i'll have more from havana. >> ifill: and we talk with education secretary arne duncan about the state of u.s. schools. >> we have been complacent, and other countries have outeducated us, outinvested us. a big part of what i'm trying to do is raise the profile of education to get america to wake up. >> brown: that's all ahead on tonight's newshour. major funding for the pbs newshour has been provided by: >> opportunity can start anywhere and go everywhere. to help revitalize a neighborhood in massachusetts; restore a historic landmark in harlem; fund a local business in chicago; expand green energy initiatives in seattle. because when you're giving, lending and investing in more

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this program was made possible by the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you. >> brown: president obama used a white house news conference today to make the case for the tax cut deal he struck monday. he also appealed to disgruntled supporters to reconsider their criticism. the president went before cameras and heard a chorus of complaints from democrats about the tax cut deal. he argued he put the good of the country ahead of politics and he blamed republicans for their demands to extend all tax cuts even for the wealthy. >> i've said before that i felt that the middle class tax cuts were being held hostage to the high-end tax cuts. i think it's tempting not to negotiate with hostage takers unless the hostage gets harmed. then people will question the

wisdom of that strategy. in this case, the hostage was the american people. and i was not willing to see them get harmed. now i could could envoyed the... i could have enjoyed the battle with the republicans over the next month or two because, as i said, the american people are on our side. this is not a situation in which i have failed to persuade the american people of the rightness of our position. i know the polls. the polls are on our side on this. >> brown: the proposed compromise comes with a price tag of up to $900 billion. it would preserve the bush era tax breaks for all income levels for two years. extend jobless benefits through the end of next year, cut social security payroll taxes by 2% for one year, continue the tax credit for college students and expand the child tax credit to more families, and revive the

inheritance tax with a 35% rate on estates worth more than $5 million. not surprisingly senate republican leader mitch mcconnell said the plan got a positive response from most of his members during a closed-door meeting this afternoon. >> i think the vast majority of the members of the republicans of the u.s. senate feel this is a step in the right direction, an important step to take for the american people, and i think the vast majority of my members will be supporting it. >> brown: the president dispatched vice president biden to lobby wary senate democrats, but majority leader harry reid suggested there will have to be changes to get enough democratic votes for passage. >> well, the concerns are wide ranging. some... some dealing with matters other than taxes frankly. but we weren't able to work our way through all this today. we're working through the

issues that people have and will continue doing that. >> brown: the differences of opinions also played out in the house where republicans seemed encouraged while democrats voiced frustration. >> i hope what it demonstrates is the president's desire to work with the incoming majority in the house of representatives. we haven't seen that kind of collaboration in the past two years. what i'm hopeful for and what i pray for is that this is the initial step toward a much more collaborative and positive relationship. >> i will vote for it but the republicans and some democrats to preventing a tax increase that is scheduled to go into effect a very small amount on the richest people in america. >> brown: but the president firmly rejected criticism from those on the left that he betrayed his core principles. it's a critique, he said, he's faced before. >> this is the public option debate all over again. so i pass a signature piece of

legislation where we finally get health care for all americans, something that democrats had been fighting for for 100 years but because there was a provision in there that they didn't get that would have affected maybe a couple of million people even though we got health insurance for 30 million people and the potential for lower premiums for 100 million people, that somehow that was a sign of weakness. and compromise. now if that's the standard by which we are measuring success or core principles, then let's face it. we will never get anything done. people will have the satisfaction of having a purist position and no victories for the american people. and we will be able to feel

good about ourselves and sanctimonious about how pure our intentions are and how tough we are. in the meantime the american people are still seeing themselves not able to get health insurance because of a pre-existing condition. or not being able to pay their bills because their unemployment insurance ran out. i don't think there's a single democrat out there who, if we looked at where we started when i came into office and look at where we are now would say that somehow we have not moved in the direction that i promised. take a tally. look at what i promised during the campaign. there's not a single thing that i've said that i would do that i have not either done or tried to do. and if i haven't gotten it done yet, i'm still trying to do it. and so to my democratic friends, what i'd suggest is let's make sure that we understand this is a long game. this is not a short game. and to my republican friends, i would suggest... i think this is a good agreement

because i know that they're swallowing some things they don't like as well. i'm looking forward to seeing them on the field of competition over the next two years. >> brown: house democrats will meet this evening to discuss the agreement. it remained unclear when the deal might be put into legislative form and scheduled for a vote. we get our own reaction to we get our own reaction to the deal now, and its potential economic impact. paul krugman is a nobel laureate at princeton university and a columnist for the "new york times." and stephen moore is the co- founder of the conservative club for growth, and a member of the "wall street journal's" editorial page. paul krugman, the president seems to be saying it's not all i want but we have to protect americans in need. yesterday you wrote he should say no to extending all the tax cuts if necessary. what do you say today. >> i still think it's a mistake. it's not as bad a mistake as it seemed before we saw some of these other elements. he got the payroll tax break and the unemployment

extension. but this is basically if you think about the u.s. economy, this is a lot of money. weren't we all worrying about deficits just the other day. that is very badly designed to help the u.s. economy. so we're spending a lot of money in an ineffective way. a lot of this is is just going to be money handed over to people who will not spend it. it's not actually going to boost the economy. we are setting up a dynamic which may sit unfortunately more likely that those tax cuts, the bush tax cuts which are not affordable, never were and certainly are not now will in fact be perpetuated. i'm not ravingly unhappy to the extent that i was before we got the other stuff in here, but it is a bad deal. it's also a signal basically that, to the republicans that they can take hostages and, you know, the president basically said i cave when they do. >> brown: steven moore, do you view this as reblicans basically getting what they wanted? you want those tax cuts to be extended permanently.

>> i think it's very important for the economy. i think we need to do extend them for everyone not just people who make less than $250,000 or a million. when you're talking about those people at the top, you know, the so-called rich, there's no question about it. the people, those people are employers. they're wealth rour producers. they're the people who put americans to work. i didn't see how raising taxes on businesses at this time when we have this fragile recovery, raising those taxes on businesses made a lot of sense. now, look, i think there were two real triggers to this deal getting done. the first was obviously the election where i think the american people said, look, what's been going on the last two years with all the spending hasn't worked very well. and the second trigger for this was the unemployment number that came out on friday which showed we have a 9.8% unemployment rate. that is after two years of the types of policies that paul krugman has very much favored of spending money to the tune of about a trillion-and-a-half dollars even after two years

we still had a near 10% unemployment rate. i think this was a smart move politically for the president. i think that this is going to get done. i think it very much reduces the chances of a double dip recession in 2011. >> brown: paul krugman the president on the economy first the president himself did say that a lot of the concessions he got, the payroll, the unemployment benefits, the various tax credits, those would have a stimulative effect. >> they will. i mean we're talking there are various people trying to crunch the number. they're not as good as actually going out and hiring people which is what we should have been doing. just i want to correct steven moore. there really wasn't very much spending in the obama program even from the beginning. this year the spending portion of the recover recovery act is on the record of $240 billion but is not very much in a $15 trillion economy. we never did get that kind of program. we're certainly not getting here it here. yeah, everyone sensible will agree that next year there will be somewhat more jobs

than there would have been if there had been a complete breakdown in negotiations over the taxes and everything else. >> brown: steven moore, of course, the criticism of the conservatives and paul krugman just said it a little earlier, weren't we just talking about the deficits the other day. on the one hand there is all this talk about the deficits and the debt. on the other hand, the insistence on extending tax cuts for the wealthiest now. a lot of people say that is sheer hypocrisy. >> well, look, i think the biggest concern that, you know, conservatives like myself have is that we were only extending these tax cuts for two years. look, i look at the economy in a bit of a different way than paul does. i think that what really drives the economy is investment. we've got to get businesses spending again. we've got to get them incentives so that they will expand their operations and bring on more workers. raising capital gains taxes and dividend taxes and employer taxes didn't make a lot of sense in that kind of environment. so the problem is if you only

do this for two years, businesses are making investment decisions, you know, as professor krugman knows not on just a two-year basis or a five-year, ten-year, 20-year basis. i'm not thrilled about the idea that we're going to have to fight this fight, paul krugman and i will be on this show two years from now refighting this because all of those tax cuts expire again in december of 2012. >> can i break in here. yes it's hypocrisy. we now had an object lesson in the fact that all of the fuss about deficits was just a stick with which to beat back anything that democrats wanted. if it's something that republicans want, no one cares about the deficit. this has been... this was a teachable moment as the president likes to say. we've learned they really don't care at all about the deficit. >> brown: i want to ask you, paul krugman, to follow up on that. you watched this through a political... you watch economics through the political prism here. is this a kind of breaking point for lib rams and progressives as you go forward in the sense that you can no

longer look at what the president says and trust his economic principles? >> look, i mean there's a lot of discontent brewing. the people progressives are not going and vote for sarah palin in 2012. but there is something... there is a fraying of trust here. i have to say that the president going after his progressive critics-- and this was enormously self-indulgent. what does he think he's going to accomplish by doing that? i mean, is this what he thinks he needs to do, fine. i can't see who he thinks he's going to win over to his side by going and complaining about people on the left who don't understand how hard his job is. >> brown: steven moore you said earlier that you thought this was a politically good move for the president. >> let me just first address this issue of fiscal hypocrisy. i've been very tough over the last eight years or so on republicans. i think there's no question when republicans ran congress before that they ran up this deficit by spending so much money.

but you know there's a lot of hypocrisy on the left, too, paug krugman. the same people who gave us this trig i don't know dollar spending binge which i think was the most expensive policy flop in american history and didn't have any regard for the deficit are now saying we can't afford to do these tax cuts because we're worried about the deficit. i think there's some hypocrisy on both sides. here's the point. in january the republicans will take over the house of representatives. before we call them hypocrites let's see what they do. let's see if they take the knife and the scalpel to this budget and start cutting some of this, you know, massive budget build-up that we've seen over the last 8 to 10 years. if they don't cut the budget i'll agree with paul krugman they're hypocrites. if they bring down some of the spending, then i think it's premature to say they don't care about deficit spending. >> brown: a last response here? >> look, we've had years in which the republican leadership, the current republican leadership has had a chance to propose specific spending cuts. they've never come up with anything except really trivial

things. remember, they were not telling us spending, they were telling us deficit. we're terribly concerned about the deficit. it turns out when we're going to blow up the deficit to give them what they want they don't care about it at all. utter hypocrisy. >> brown: gentlemen, we will continue this discussion. no do you. paul krugman, steven moore. thank you very much. >> thanks a lot. >> thank you. >> ifill: still to come on the newshour, the legal case for and against wikileaks; how ireland went from boom to bust; ray suarez on changes in cuba; and education secretary duncan on the state of our schools. but first, with the other news of the day, here's hari sreenivasan in our newsroom. >> sreenivasan: elizabeth edwards died today after a long battle with cancer. her family said she passed away at her home in chapel hill, north carolina. edwards was an attorney and author and was married to former democratic presidential candidate john edwards. they separated this year after he admitted having an affair. in recent years, elizabeth edwards also campaigned for

health care reform. she was 61 years old. the u.s. has given up trying to get israel to stop building jewish settlements in the west bank. that word came today from an unnamed senior american diplomat in jerusalem. he said the obama administration concluded "this is not the time" to pursue the issue. an israeli moratorium on new settlements expired this fall. since then, the palestinians have refused to continue direct peace talks. iran wrapped up talks with the u.s. and other major powers today on the iranian nuclear program. the country's chief negotiator, saeed jalili, said there will be further talks in january. but he insisted his government will not discuss its uranium enrichment activities. >> this expression of readiness should be looked on at an international opportunity. we do not believe in talks where other parties use pressure to push their agenda. we will not subscribe to that.

>> sreenivasan: in tehran, president mahmoud ahmadinejad warned that future negotiations will fail unless u.s. and u.n. sanctions against his country are eased. defense secretary robert gates arrived in afghanistan to assess the war effort there. his visit came as white house officials ready a review of where things stand. gates visited a forward base near the pakistani border, and said the taliban's momentum is breaking. but he also said, "we will suffer tougher losses as we go." the u.s. supreme court heard arguments today involving a new twist on workplace retaliation. a kentucky man claimed he was fired from a steel plant because his fiancee, who also worked there, filed a discrimination complaint. the court will decide whether so-called third-party retaliation is grounds for suing under federal law. wall street struggled to make any headway today. the dow jones industrial average lost three points to close at 11,359. the nasdaq rose three points to close at 2598. those are some of the day's major stories. now, back to gwen. >> ifill: the latest legal troubles for wikileaks' elusive founder.

kwame holman begins our report. >> reporter: the man behind wikileaks handed himself over to lis in london this morning. julian asang was denied bail and sent to jail pending possible extradition to sweden. he's accused there of rape and other sex crimes, but he denies any wrongdoing. instead, asang and his supporters say the charges are retribution for leaking classified u.s. government documents. >> anybody who looked through the details of the case this week, this shouldn't have happened today. this is an innocent man. >> reporter: in afghanistan, u.s. secretary of defense robert gates had to say about julian asang's arrest. >> that sounds like good news to me. >> reporter: but in washington state department spokesman pj crowley said the u.s. played no part in the swedish case. >> i cannot say that the united states has been drawn in to this issue this morning. this is an issue where british authorities have arrested him based on a warrant for his

extradition to sweden. >> reporter: until today asang had been in hiding, appearing only by video but the worldwide search for him intensified after wikileaks released some 250,000 secret u.s. diplomatic cables last week. it was the latest publication of classified documents by wikileaks, and it fueled demands for the u.s. government to pursue legal action of its own against asang. one came in today's wall street journal from the chair of the senate intelligence committee, california democrat dianne feinstein. she wrote he intentionally harmed the u.s. government. the release of these documents damages our national interests and puts innocent lives at risk. he should be vigorously prosecuted for espionage. senate republican leader mitch mcconnell went further on nbc's "meet the press" on sunday. >> i think the man is a high- tech terrorist. he's done an enormous damage to our country.

i think he needs to be prosecuted to the fullest extent of the law and if that becomes a problem we need to change the law. >> reporter: a key factor in the u.s. bringing a case against asang could be a document wikileaks put out monday. it was a state department list of infrastructure sites around the world considered critical to u.s. national security. some critics viewed that as an invitation to target the sight. the justice department has been investigating possible action against asang since july when wikileaks first released secret documents on the war in afghanistan. attorney general eric holder said yesterday that espionage is just one option. >> people should also understand that that is not the only tool that we have to use in the investigation of this matter. i don't want to get into specifics here, but people would be... have a misimpression if the only thing you think we're looking at is the espionage act. that is certainly something that might play a role but

there are other statutes, other tools that we have at our disposal. >> reporter: in the meantime asang's british lawyer today insisted the flow of material from wikileaks will not be affected by the sex charges against its founder. >> i am advised that wikileaks can continue to exist, that a number of their... they have many thousands of journalists and a virtual journalistic community around the world. they will continue. we are only at table 301 today. we will see the rest of those 250,000 cables coming out so the full information is available. >> reporter: asang also has threatened to implement a so- called doomsday plan. he says another set of highly sensitive documents will be released if anyone tries to shut down wikileaks for good. asang >> ifill: now, for a look at the legal questions surrounding the assange case, we turn to jeffrey smith, a partner at the arnold and porter law firm. he served as general counsel of the central intelligence agency from 1995 to 1996. and abbe lowell, partner at the law firm mcdermott, will and emory.

he's been involved in a number of high-profile cases and has defended clients charged with espionage. geoff smith, what jeopardy is assange actually in. >> i think it's in serious legal jeopardy. i think he should be. obviously the u.s. government is looking at a variety of charges. espionage being the most central. but there are a number of other things as the attorney general said for which he might be charged. >> ifill: for instance? >> there's a variety of possibilities including mishandling of government property, theft, receipt of theft of government property, other things that i'm sure the government is looking at. possible disclosure of the identity of intelligence agents, any number of things. >> ifill: what kind of case can you imagine being made against him? is it one that can stick, mr. lowell? >> it's not hard to charge him because grand juries do that with not such a high level of proof. the question will be whether the charge sticks. that's depending on a number of factors. one is there's never been a prosecution of the recipient of this kind of information

under the espionage act when that entity claims to have first amendment media protection. one issue will be whether or not wicky leaks is a media outlet and whether or not assange is a journalist. if so it's one question as to whether that statute applies constitutionally. secondly, if it does there's cases that say that again it's easy to charge but to convict, the government has to have proof beyond a reasonable doubt that he had the highest specific intent to do harm to the united states that you possibly can have. that may be something that he can prove, but people shouldn't think that this is just a walk-away. it's not that easy. >> not a slam dunk. assuming that espionage is one approach which the justice department is pursuing, define what that means. >> in this context as abbe says it's never been used but the plain language of the statute does say that it is a crime for someone who has a national defense information without authority to convey it to someone else. knowing that it will do harm to the united states.

over the years, the courts have added to that knowing that it will do harm. the requirement that the individual will act in bad faith. my own judgment is that that will be pretty easy to prove here. i do not think that what assange did, this massive release of information with no sense of journalism around it, i think it's hard to believe that that will be constitutionally protected activity. >> ifill: let's just get that off the table, the whole question of whether he is a journalist and what he did is continues constitutionally protected. your opinion. >> the government will say that this is just providing the vehicle of a site in which raw material is dumped out with no editorial function and no real activity, ergo, it's not real he'll journalism. what journalists likely will say because the line is a very fuzzy one and it's a dangerous one under the first amendment and assange will say back is, no, acquiring information by whatever means and disseminating it to the public is the definition of

journalism. it has not been tested. it is ironic that this issue of what is the new media, what is the internet may be defined and tested under the auspices of a 1917 criminal statute called the espionage act. >> ifill: what we remember is the pentagon papers, for instance, the case of daniel elsberg who was not a journalist but released documents which were hard copy documents. it wasn't as many. does that make a difference in how we gauge this? >> there are a lot of differences. first the pentagon papers case as it went before the supreme court was a prior restraint case. that is to say the government was trying to prevent the "new york times" from publishing it rather than prosecute elsberg for disclosing it. even in that case, a majority of justices on the supreme court said, add mightedly not central to the decision, but said that prosecution of journalists might be possible in some circumstances. justice douglas dissented but i think this may be a case, i think he has no real hope to

call himself a journalist. he even solicits people on his website for them to submit classified documents in secret. in some respects he's inducing others to violate the law. i don't think the courts would look favorably on that. >> the thing is that up until now these have been very selective cases with very selective disclosures. whether or not it's a single potential document or whether or not it's a single specific disclosure, not hundreds of thousands and not done in this fashion. therefore, the wikileaks case is going to be the test. at the outer limits of how far the first amendment may protect and what are those words in that very old statute the espionage act going to mean when they were written in the wake of world war i for a phenomenon of maps and ledgers and diagrams and being applied in 2010 to ter a bites of information. >> ifill: also to kind of a posteror environment. but i'm curious, one little detail which is he's not a u.s. citizen. how liable is he under these

laws? >> well, there's one case in which a east german citizen was convicted under the statutes. i don't think he would undoubtedly raise the question of extra territorial application but i don't think his citizenship makes any difference. it had an impact on the united states. i think the courts won't give any slack on that issue. >> and if he wants to, he will raise the defense of whatever he gets out of the first amendment which would be applicable to him in the united states even if he was not a u.s. citizen. so it will cut both ways but the coffee is not in the united states. it's the extra issue of whether he can be extradited. there's a whole different set of obstacles for the u.s. to get. it's just not that simple, that he's done something and we're going to have him here the day after tomorrow to face charges. >> ifill: nothing is terribly simple in this case. what about the idea that he has stolen government property, that he is in possession and disseminating something that belongs to someone else? >> i think there's a relatively minor dimension of this. it may be a case a charge

brought against him but much more serious is the espionage harm to the national security. i think frankly i'm hopeful that the government is able to obtain jurisdiction over him and successfully prosecute him. >> i think that's what the attorney general was referring to in part. it's easier case to make than to sort through the first amendment protection of the espionage act's application to the media. and the wrinkle there is that he's not the one who stole the information. at least as far as what being reported. >> ifill: a private has alleged... the army private. >> that's right. as to whether or not the normal theft of government information can be applied to him is yet another complication. now it is a serious crime. it can be charged and punished as a tell knee. it's always easier to go after the easier statute than it is to do the other. if you're looking at to what the federal government could do, they'll look at the espionage act. they'll like at the theft of government information or government material. we'll see if there's even a

more creative one that the attorney general had in mind. >> ifill: what is the different theoretically between what julian assange did in this case and what newspapers did in publishing the information he gave them, the "new york times," the guardian in london? >> i think it's a fundamental difference. what assange did was solicit this young private assuming that he's the source of it to give him the secrets. then he just put it out or is proposing to put it out. what the newspapers have done, in my judgment, is constitutionally protected. they looked at the material. they talked to the u.s. government. they asked the u.s. government what harm would result. they made certain redaxs in the documents. they did other reporting surrounding the cables to see how it fit in the broader picture of what's going on. and i think that's fundamentally different than what assange did. >> from a first amendment point of view, gwen, though not so fast. >> ifill: i was going to ask that. is there a broader definition of the first amendment protection here that could be applied. >> jeff is correct depending on what sort of conduct is

found whether or not he did solicit the private would be a very big difference but putting that aside let's just say that you are comparing apples to apples, and the apples were what he discloses to the public and what the other media disclose. if it's the same cables with the same redak shuns. if it's the same kind of information that will not distinguish his conduct well from what the other more traditional media does. i'll tell you whether or not it changes the charge it will be a very big part of his defense to show that those two acts are the same. >> ifill: sounds very much like from a legal sense that the story is just beginning. geoff smith and abbe lowell thank you both very much. >> you're very welcome. >> brown: next, the irish debt crisis and its fallout. today the country's finance minister unveiled one of the toughest budgets in ireland's history. we have a report on what brought the country to the economic brink. it comes from emma alberici in dublin for the australian broadcasting corporation.

>> reporter: it's been among the most dramatic weeks in irish history. the country's economy, once the envy of europe, is now on international life support. the prime minister, busy cutting wages and lifting taxes, is being cast as the grinch who stole christmas. >> given the sort of suffering that people are now enduring through tax increases, all the difficulties that people are having inflicted on them there is a sort of a clearly identifiable group of people who are at fault. that is the government. >> reporter: over the past five years, the irish government became enamoured with property. developers were given tax breaks, and banks were encouraged to hand out loans worth 100% of the price tag. construction took over all other industries to become the island's number one earner. when john and his family

bought into this development two hours outside dublin, the developers promised there would be a children's playground and child care center on site. three years later, the builder is bankrupt. and this is what we now call a ghost estate. most of the houses aren't finished. less than half of them are occupied. there are no street lights. lamp posts don't have globes in them. they're not even wired up. >> knock them down. they can't afford to finish them. >> reporter: john and his wife both lost their jobs earlier this year, joining an unemployment cue that already represents 14% of the work force. >> it's all involved in one thing only with construction. just build build build. easy money. quick money. you didn't even have to have a qualification to be a builder. >> because prices were going

up, people thought that building a house meant that houses were built all over the country. very, very often in places where employment prospects were essentially zero. so again this was just a disaster waiting to happen. >> reporter: when the property bubble burst island's banks declared themselves broke. with one in ten families no longer able to pay mortgages on homes that were wildly overpriced, anglo-irish debt is now rated at junk status. as the government tried to plug the hole in the banks' finances its own budget became stretched. according to euro's own rules it should be no higher than 3% of gross domestic product but it's actually more than 10 times that at 32%. >> people are very, very angry. the governments are very angry that the eyes of the international world are focused on our country at the moment for all of the wrong reasons. >> reporter: protesters took

to the streets as the prime minister addressed the irish people first to tell them that there were no money left in the banks or the treasury and then to tell them they'd each have to contribute roughly $5,000 over four years to fix the problem. >> they are the most vulnerable. the people who depend on public services, they're left to fend for themselves while they move heaven and earth to protect the banks. >> reporter: how did it go so wrong? boom to bust in just three years? when island joined the european union and then the single currency, investors' eyes were fixed on this so- called celtic tiger. it was also the only english- speaking educated work force in the euro zone but more important than that, it gave them the lowest corporate tax rate in the developed world. at 12.5%, it's less than half the rate in britain and much lower than australia's 30%.

>> here in the heart of dublin's financial center. most of the buildings behind us have been built in the last 15 or 20 years. they're now home to all the world's major financial services and business. most of the top ten major global players in financial services are all placed here in dublin. >> reporter: the island chief business lobby believes it's foreign investment like technology and financial services that will help resuscitate the celtic tiger. but france and germany say that a low corporate tax rates gives island an unfair advantage. they want the government to lift the rate to help pay for the bailout. >> any increase in the corporation tax rate would actually be completely counterproductive to what the european commission and the imf are trying to do in terms of correcting the problems in public finances. we don't have a hole in on corporate tax revenues. we have very strong corporate tax revenues. ireland would have to become a higher tax country not in

terms of the corporate tax but in terms of having taxes on property. >> reporter: this couple is pondering their future. they can't pay their mortgage but if they leave, where will they go? >> now we are a nation of beggars. they've made us a nation of beggars. >> reporter: the international bailout won't help families like this, and it will come at a price some are convinced the government won't be able to afford. the interest bill alone is expected to cost $7 billion. a year. >> ifill: the budget proposed today includes higher income taxes, pension reductions, fewer welfare payments and cutting the capital improvement program for roads and public transportation. >> brown: now to a rare look inside cuba. ray suarez is there for us

reporting on a number of issues and changes taking place on the island nation. i talked to him earlier today for a preview of what he's seen ray, i know one of the things you're reporting on is the state of the economy and recent reform moves by the government. tell us what you're seeing. >> suarez: some people have called it an adjustment rather than wholesale reform. the communist party is going to still have a very strong place in the cuban economy, so they're looking at creating more space for private enterprise. deregulating some jobs so that people, entrepreneurial people, can take them on as self-employment rather than working directly for the government. more than 100 jobs will be open now to private business. really just in time because more openness in the private sector is a place where the cuban economy hopes to soak up half a million government employees that are due to be laid off over the next year. there will be a period of

adjustments. they'll get some continued support from the government. and then there will come a point where they are on their own. and the expectation, the hope here is that those people will move into the private sector because there will be more room for self-employment. >> brown: one area of growth is in high tech specifically biotech. i gather you visited a big biotech complex recently. tell us what is going on. >> suarez: well, the level of education for technical and scientific fields, very high. so cuba had, you might say, a surplus for a developing country of really superbly educated researchers, technicians, scientists, and they channeled them in to a biotech genetic engineering searching for waysçó to synthesize new drugs, create new compounds, treat new molecules. it's remarkable really to see the advances that cuba has made in this area. it's already the third largest

contributor to the national bottom line just behind nickel production and tourism. you know, necessity being the mother of invention and a lot of drugs being hard to get here in cuba because of the economic blockade by the united states, they really try to provide for themselves, try to provide the kind of drugs and treatment that it was very expensive for them to buy on the world market and impossible for them to buy from the united states. and they've already achieved hundreds of international patents. they've developed over a thousand different compounds that they've got in various stages of testing. interestingly, 45 substances have even been granted u.s. patents, but because of the lack of economic relations between the united states and cuba, those products cannot be made in the united states. can't be licensed for production in the united states.

>> brown: i know you were in cuba long ago. we all have the picture of 1950s car and the isolated time capsule look. how does it feel today. >> suarez: in many ways the same. but there are also a lot of differences. when i was here 23 years ago, the soviet union was still in existence. moscow was still providing heavy subsidies to the cuban economy. those are all gone. a lot of the work that was underway for historic preservation, a lot of the work that was underway to restore buildings in old havana had stopped during what became called... what was called the special period. it was a time when there was severe economic distress here and a lot of those kinds of projects stopped right in their tracks but at the same time because of the restoration of contacts between cuban-americans and their relatives here on the island, money and goods much more easily flow here. so you'll see people wearing

name brand clothing in a way that you didn't see during the 1980s when it was hard to get those kinds of things here. so you'll see nike and sean john and lees and levis and various popular western name brands. a lot of that clothing enters this country in suitcases that come from miami. so the cuban youth actually want that stuff. they wanted it for a long time. now because of the recent opening it's a little easier to get. in some ways havana is still that stereotypical place of 1950s cars, big cigars and potent drinks. but it's a much more complicated and i think much more interesting story in a lot of ways. we'll be telling it later this month on the newshour. >> brown: we'll look for that and your reporting on the health care system as well. take care. >> suarez: take it easy, jeff. good to talk to you. >> brown: you can look for

ray's blogs from cuba online now. >> ifill: finally tonight, a new global survey of school achievement shows u.s. students falling behind much of the rest of the world in reading, science, and math. the daunting results found in the program for international student achievement, or pisa test, showed 15-year-olds in more than a dozen countries, including south korea and poland, outperform american students. education secretary arne duncan called the results a "massive wakeup call." i spoke with him today during an education town hall at the newseum in washington, d.c. you're very blunt in describing our deficiencyates. how does that square with americans' desire to think of themselves as exceptional? >> i think it's my job to tell the truth. whether you look at these recent results which we are mediocre at best, whether you look at a 25% dropout rate in

this country, whether you look at in one generation that we've fallen from first to ninth in the world in college graduates by any measure we're not doing what we need to be doing to keep america great. i'm just absolutely convinced we have to educate our way to a better economy. that's the only way we're going to get there. this is the best long-term investment we can make. i think it's my job to be the truth teller. the only way we get better is to look in the mirror, except our strengths and weaknesses and figure out where we need to go. we run around saying we're number one and we're not. that doesn't help us get where we need to go. >> ifill: let's move on to a different question. this college completion rate. by 2018 i know you know this, america will need 22 million educate workers. it's on the trajectory to be three million workers short of that number. how do you begin to close that gap? and explain a little bit more fully exactly how we got to this point where so many people are going to college and so few are leaving college with a degree. >> if the goal is to dramatically improve college

completion rates not college going rates but college completion it's not just a college problem. i'll get there. you have to look at the continuum. we need a big focus on early childhood education. our early childhood education system is pretty good in this country. not enough students have enough opportunity. they lose their advantage because they go to poor schools after that. let's focus on our babies. secondly we've had this massive effort on k-12 reform. raising standards. great teachers great principals. raising the bar. huge amount of progress there. finally we have to build a culture around college completion at higher education both at four-year and two-year institutions. we're going to every single state. we're looking at every single four-year and two-year school in those states. we're telling them what their college, what their graduation rates are now. to hit the president's goal how much each of those universities has to continue contribute in terms of improving outcomes.

we can tell every single institution of higher education that they need to do to contribute. they can't do it alone. we have to fix the pipeline. we have to increase the quality of students going into higher education. far too many children need remedial education. they're not really ready for college. that's not higher education's fault. that's our fault can k-12. >> ifill: we have not prepared these students about what awaits them in college. the confidence or this just being admitted to college which is where our focus has been, has been the wrong one? >> we have been complacent. we have been complacent. other countries have outeducated us. they've outinvested us. a big part of what i'm trying to do is raise the profile of education and get america to wake up. i think you're seeing signs that america is starting to wake up. it's not so much... it's interesting. college graduation rates. we've gone from first to 9th. it's not that we dropped. we're exactly where we were nine years ago. sorry. a generation ago. we're just flat lined.

we haven't moved. other countries haves paed us by. they're outworking us and outcompeting us. we have to wake up and start moving. what do we do starting today as fast as we can to get to the next level? we have a reel really clear game plan of k-12 reform. invest in early childhood education. we have a cradle-to-career strategy to dramatically change those numbers. >> ifill: there are some people who say that part of the stagnation in u.s. test numbers has to do with what we call the diversity excuse. there is a preponderance especially in a public school system of immigrants or people of color who are not performing. what's your response to that. >> fascinating, gwen. that's one of the biggest fights i fight everyday. i have a set of folks that want to tell me that poverty is... what you see around the world is that poverty is not destiny. in other countries much more systemically student after student school after school year after year educate poor and disadvantaged young people. any one who says you can't

overcome these battles has a problem. having said that, we need to invest much more. these students need more help and the best teachers. there's so much we're doing wrong today. studies show we're one of three countries that doesn't invest more in disadvantaged communities. so folks who say you can't do it are wrong. folks that say keep doing the same thing is wrong. we need to invest in very different ways. get the students the support they need. get them the best principals. get them the great teachers. i promise you those students will do extraordinarily well. i've seen it all my life. >> ifill: wrap around services. what do you mean? >> i said earlier we need to lengthen the school day. we need to lengthen the school year. our calendar is based upon the a agrarian economy. children in india and china are going to school 25, 30, 35 more days a year. they're working harder than us. we need more time particularly for disadvantaged children who aren't getting those supports at home. if children are hungry. they need to be fed. it's hard to learn if your stomach is growling. we need to thak on.

if students need the blackboard, need eye glasses, if they need a social worker or counseler and the challenges they're facing in the home and the community we need to do that. the schools need to be community centers. they need to be open 12, 13, 14 hours a day six, seven days a week 12 months out of the year with a whole host of activities particularly in disadvantaged communities. when schools truly become centers of the community, where you have extraordinary teachers, the best teachers, the best principals, great nonprofit partners coming in during the non-school hours to support and do enrichment actives, social services then those students will beat the odds, will beat poverty, will beat violence in the community and sometimes dysfunctional families and be productive citizens long term. they will go to college. >> ifill: you've been in this job two years. are you confident that the people who control the purse strings on the city or state or federal level, are you convinced they share their vision. >> my confidence is growing.

are we there yet as a country? no. let's look at the proof. over the past two years you've seen more change than you've seen in the past decade, 20 years combined. so is this going the right way? yes. does everybody share the same sense of urgency and how critical this is for our nation long term? we're not quite there yet. >> ifill: what are the consequences that other countries outcompete us or outeducate us? what happens as a result of that? why should we care that that happens? the effect of that is the effect of a national permanent recession. what we will see is we will see jobs continue to flow overseas. we will see international companies set up their plants, set up their centers in other places. we have an unemployment rate that is staggeringly high today. the jobs of the future, as you know so well, are knowledge based. you need college educated folks to do this work. the consequences for our country are absolutely devastating if we don't start to behave in very different

ways. >> ifill: you mentioned the term accelerating learning. what does that mean accelerating learning? >> let me tell you the problem first. this is a devastating one. this is a the longer our children are in school the worse they do. the longer they're in school, the worse they do. >> ifill: on a school day? >> no, every year. year after year after year, our children's merits are falling further behind. our three and four-year-olds enter kindergarten okay. they fall further and further behind. each year children in other countries are learning more. than children in this country. so the gap between american student performance in singapore and finland and south korea and canada and these other countries, the gap widens year after year after year. we have to reverse that. the only way to reverse that is that students are learning more each year. that's the definition of the problem. >> ifill: you'll be able to watch more of today's >> ifill: you can watch more of today's digital town hall,

on our web site. >> brown: a correction before we go. last night in our story about iran's nuclear program, we said iraq had no yellowcake, a processed uranium ore. that was wrong. 550 metric tons were found there. again, the major developments of this day. president obama defended his decision to compromise with republicans on extending tax cuts. elizabeth edwards died after a long fight with cancer. she was 61 years old. and wikileaks founder julian assange was jailed in london on sex crimes charges in sweden. and to hari sreenivasan in our newsroom for what's on the newshour online. hari? >> sreenivasan: tonight and every tuesday, we turn to experts to help answer your questions on science and technology. it's a feature we call "just ask." tonight, learn more about the structure of an atom. on the tax cuts, patchwork nation looks at the communities who will benefit most. plus on art beat, jeff talks to the director of the museum of fine arts in boston about their new american art wing. all that and more is on our web site, newshour.pbs.org. jeff? >> brown: and that's the

newshour for tonight. on tuesday, we'll look at supreme court arguments on an arizona law that punishes employers for knowingly hiring illegal workers. i'm jeffrey brown. >> ifill: and i'm gwen ifill. we'll see you online, and again here tomorrow evening. thank you and good night. major funding for the pbs newshour has been provided by: >> where does it go? every penny and more went into making energy for the world. >> the economy is tough right now everywhere. >> we pumped $21 million into local economies into small businesses, communities, equipment, materials. >> that money can make a huge difference to a lot of people. >> opportunity can start anywhere and go everywhere.

to help revitalize a neighborhood in massachusetts, restore an historic landmark in harlem, fund a local business in chicago, expand great energy initiatives in seattle. because when you're giving, lending, and investing in more communities across the country, more opportunities happen. >> and by united healthcare, online at healthinnumbers.com. >> bnsf railway. and the william and flora hewlett foundation, working to solve social and environmental problems at home and around the world. and with the ongoing support of these institutions and foundations. and... this program was made possible by the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you.

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