. >> rose: welcome to the program. this evening we begin with hank paulson the former treasury secretary and ceo of goldman sachs, his new book, dealing with china, an insider unmasks the new economic superpower. >> americans say to me, you know, should we be concerned? is china going to sure plant the united states as the greatest power onñr earth? and what i say to them all the time is, we are the greatest power and the only threat is our inability to deal with some of the challenges we have and the things we need to do to restore our economy. don't use china as a scapegoat. >> rose: and speaking of china we talk to steve wynn the founder and ceo of win resortsx shp &c% abouut mccoo and the gambling business swells his friendshipñi with frank sinatra and finally

the power of tax incentives in entrepreneur ship. >> a gambling device has no intrinsic power. it is a source of revenue if the place itself is populated with people who like that sort of thing, but what brings people is something else. a fans civil environment, a chance to eat and shop, to relax and enjoy themselves, to have fun and most importantly, to be well served because these fancy buildings like most institutions are what they are the day they open but that may be ten percent of the franchise going forward. what makes a place enduring is people. because only people make people happy. and that is the culture of my company. >> rose: hank paulson and steve wynn when we continue. funding for charlie rose is provided by the >> rose: funding for "charlie rose" has been provided by:

>> rose: additional funding provided by: >> and by bloomberg, a provider of multimedia news and information services worldwide. captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> rose: hank paulson is here she the former chairman and ceo of goldman sachs, he served president george w. bush at the 74th secretary of the treasury, he is a founder and chairman of the paulson institute at the university of chicago in those roles he traveled to china more than 100 times since 1991, over the years, he has built unparalleled relationships with some of china'sw3çóñ2hsj business and political leaders. including its past three heads of state, to the lessons he learned from those experiences

into this book is called dealing with china, an insider unmasks the new economic superpower. i am pleased to have hank paulson back at this table. welcome. >> charlie, it is terrific to be here. >> rose: now here you rewrote a book your first book now you written this and now think, are thinking of a third book. this is your post secretary life is about? >> no. i am afraid a, you know, you and i were jobbing beforehand that when i told wendy i was maybe going to write a second book she said i think i might date again. and this wasn't --, you know the crisis we got to relive it emotionally, but this was a harder book to write, more difficult book because the crisis is the beginning, the middle and the end, and this was just more difficult. >> rose: and the thread that runs through it is china? >> yes. the thread, it is all china. >> rose: what is your love of china. >> rose: what is your affection for china? >> well -- >> rose: what is your interest in china? >> so let me -- the reason i

spend the time i spend there today because i think everyone needs to ask themselves where can i make the biggest difference? and the history i have there, the relationships that i built and, you know, made competent really focus on, this and then i said this relationship, the u.s. china relationship is, i believe, by far our most important bilateral relationship, and i see this becoming more complex and difficult, because during the time i have been working in china, china has now emerged as a formidable competitor. it is much more active and pus dollar on the global stage, and so i think this consensus that china's rise is a good for the united states is be going break

down. and people are saying increasingly why should we be working with china? and i look at it and say this is more important than it has ever been. we are going to be competing and there is nothing wrong with healthy competition. we don't want there, want that to devolve into destructive competition and the important issues that i see in the world today whether they are environmental issues like climate change, sustaining global economic growth peace combating terrorism whatever i think there they are easier denuclearization, they are more difficult if we are working at cross purposes to china so i see a real need to recalibrate that relationship and -- but i tell the story, you know in this

book of the development of china, and i say the other thing that keeps me coming back is because i found the leaders that i have dealt with to be very pragmatic, problem solvers looking everywhere they can in the world for the best practices and often taking advice. so i wouldn't go there if i didn't think it made a difference on the issues that were important to me and i dedicated this to my grandchildren. >> rose: exactly. i mean, it is easy to say now when you look at china's place in the world and the u.s. place in the world that all the big problems are better off if the united states and china are working together even though they may not agree on nuances and on some particular solutions if they are working together they are more likely to raise the possibility of a better outcome. >> yes. >> rose: and if they don't

more likely to raise the possibility or more frictionñi and a less good outcome. >> absolutely. >> and as a matter of fact history has shown that in the past, when you have an established power and a rising power, they come to conflict, and there is nothing inevitable about that, but the -- i think the mix of competition and cooperation is going to be determined to a large extent by the choices our leaders make so i think this is very, very important and again i -- another point i make here is that china is beset today by some colossal challenges and we can make as big a mistake by over estimating china's strength as we can by underestimating their potential. so the range of possible out comes is getting wider and so,

again, i see this so often, americans say to me, you know should we be concerned? is china going to sure plant the united states as the greatest power on earth? and what i say to them all the time is, we are the greatest power, and the only threat is our inability to deal with some of the challenges we have and the things we need to do do restore our economy. don't use china as a scapegoat. if we fix our problems we are going to be the preempt innocent power for a long time in the future. if we don't, we won't. >> rose: there is a lot to talk about and i want to talk about the three stages chapter 1, chapter 2, chapter 3 a that you outlined in this book but i first want to go to this book

you earlier said that you fear we are growing apart. what is the evidence of that? >> well, it is really the various conversations i have had. for instance, there is a grave concern in the united states by those that would like to say, you know, including me and would like to see the political system continue to open up, and continue to see, you know -- it would like to see greater press freedom and freedom of the internet an what we are seeing is that, you know, the leadership at the same time peng, the general secretary of the communist party and president, what we see is he is working to free up the economy let the markets be decisive, at the same time he is doing that you know, he is -- it is tougher

on the internet and more controls on the political system. and there seems to be this -- this paradox which is very disturbing to many americans. but what xipeng sees is a party as a source of stability and these institutions to drive performance. i happen to think long-term and that is not going to serve the country well in an information economy. the most important thing he worries about is the survival of the party and he believes survival of the party is important to the future of the party and his own people. >> absolutely, you have got that, and he does that, and then he -- and then the challenges he is working on are rebooting an economy which has an economic model that is run out of steam rebooting urbanization model and dealing with the big political problems he has, corruption dirty environment, property

rights food security. >> rose: corruption. >> yes. corruption. all of those issues. >> and he is committed and we are now talking about chapter 3. he is committed to change in all of those areas. >> yes. >> rose: you know the environmental questions, he is committed to change this and developing alternative energy sources in a larger way than anybody in the world. there are people who say they worry about a bubble this china both in terms of over building as they did. do you worry about that kind of economic collapse? i mean they have two gone from double digit to 7.4 economic growth. >> yes. see, i look much less at the economic growth number in terms of i look at the source of that growth, and you mentioned, which is right they needless reliance on exports, they also need far less reliance on government investment at the municipal area in infrastructure, and so at we have seen happen, which is

disturbing, is we have seen a country that doesn't have a municipal finance system that really works today, so if a chinese mirror does, mayor doesn't have the revenues they need they take someone's land and sell it, they finance it with debt and they invest in real estate. so debt has grown much faster than the economy at the municipal level. now, that is on the one hand very disturbing, on the other, the chinese leaders see this and they are working to address it, and so what i look at is not the growth number. i look at what they are doing to get that growth. and i would much rather see the economy grow more slowly and have the right drivers of that growth. so i think today, in answer to your question specifically, they have got the capacity, they have got the knowledge, they have the

tools to address it, but the longer they wait and in addressing that problem the greater the risk that when there is a reckoning and there is going to be a reckoning because there are losses that are being built up that the government will have to be responsible for. the longer they wait the greater the risk is it spills over and does damage to the underlying economy. >> rose: when you look at them today, do you have conversations with them about the issues that you have suggested clamping down on the internet, human rights issues and issues of -- that have to do with the question of freedom. >> i have always been able to be very candid as you can see when i write the book, and, you know, the issues they look to me for are the economic issues, the environmental issues, but i tell a story in this book which was, it has to do with one of the few

really bright days i had in the middle of the financial crisis. i didn't have a lot of those. >> rose: yes. >> but one of those days, which is august 8th a week before i -- we needed to step in and put fannie mae and freddie mac in conservatorship i was visited by an anti--- excuse me a pro democracy activist, a man named yan, yan lee and he came to see me at treasury with his wife and two young children and came to thank me for what i had done in securing his release a year earlier. and what i found is if you make progress with the chinese on the economic issues, it is easier to deal with some others. so we found common ground that had led to the release of yanyan yang. >> and in terms of the broader picture, xipeng has been very very clear.

he said i don't aspire to have western multiparty democracy. i am not looking to have western values. he wants a good relationship with the u.s. but this is -- and what he does instead right now, he is focusing on the things that chinese care most about, you know as we said before the corruption, the environment, the property rights the income disparity. he has effectively done away with the one child policy but ultimately i think as more people move up and become more prosperous, i think there are going to be demands that he loosen up or the party loosens up. >> rose: he is an interesting man and as you know, evan who interviewed you at the asian society this week has written a very interesting profile, xipeng

in the new york magazine, the interesting thing about you from my standpoint is you singled him out before he became president, even before he was vice president, i think -- >> yes. >> -- and was a province leader. why did you do that? >> oh i tell the story in the book and it was, some people in the government afterwards said boy, how did you know hank and i should have said i will tell you later, i really did not know. >> rose: you didn't know? >> the reason i singled him out was this. i was very impressed with him, and he was focused on economic reform and he saw the private sector as being the key to china's future and where he worked, whether in the province or this was john jin province the private sector played a bigger role. so i had said to him, when i had one of the meetings in the united states, on my next trip to chinaly come see you. >> well, i was treasury

secretary and i visited him in hong jo and i wanted people in china to know i didn't think the world revolved around beijing just like i don't think it revolves around new york or dc in the united states, i want to emphasize the importance of the private sector and pay -- you know, meet with a leader i very much respected, and he had a great sense of history, so he arranged, we met at west lake at hungjo and photographed under the arch where president nixon met with joinlai and it was great but he -- so he -- he emphasized to me at the same time the current government at that time who shintbao there was a ten year hiatus when there was about lot of reform and the books tells you about all the

things that were driven and ten years where there wasn't a lot done, and now xipeng inherited an economy where they have waited almost too long, and so he is really working to get some very difficult reforms done and even know he consolidated a great deal of power he still doesn't have the consensus he needs to get some of the most difficult things done and it is going to take longer. >> rose: the big issue you point to that there is a division on, which can be critical to the future is cyber security. how do we find a way out of that? >> well, that's a tough, tough issue, and of course cyber security, people inflate it to include all kind of things. so there is the espionage, which governments engage in we do it chinese do it there happens to be the -- some people use it --

refer to, you know, the internet and cushing the access to cushing, cushing access to information .. i talk about it in the context of cyber theft of corporate secrets and because and i think this is very, very disturbing. i know very few u.s. companies that haven't had their computer breached. >> rose: and the argument that is made is that in chinese case the government or arms of the government are engaged in it for the benefit of enterprise. the private sector, so you get yfw and many people, you know, misunderstand that. and i think the reason this is -- i call it the most divisive economic issue for two reasons, it plays to the view thatçó the

chinese are lawless and don't play fair, and it is destructive of an economic system because i don't know how you have an economic system function and china is -- you know if you have these lawless behaviors china has -- has a big stake in this also longer term and i find it very difficult, because so many of these issues have been conflated, the u.s. has lost the high ground in this debate globally, but we -- i think it is one that we have to tackle. i think the best way to tackle this, frankly, is on a multilateral basis, and the u.s. working with other countries to come up -- >> other countries are engaged in it as well. >> yes. >> rose: let me ask you too because of the time we have. what was their reaction to chapter 2 of this book? how you

handled the incredible recession that we had coming out of the crisis of 2008 and did it affect their judgment of the united states? >> charlie i write about this, as you know, in the book and, yes, it did and to me there is a tremendous, tremendous lesson there, and the lesson is how important it is to preserve u.s.ñr economic strength and what that means to our a standing in the world, because we need to lead by example in addition to doing things. so the story i tell, and i write a whole chapter about the financial crisis through the -- you know through the u.s.-china relationship and they were very supportive and i think some of the relationships i had there made a big difference but i tell the story that in june of

2008 when the chinese leader visited the united states and i pressed them to open up their markets he looked at me and said hank, you made my life difficult. you used to be my teacher but my teacher doesn't seem so smart anymore, so i, so i can give him all the points i had about you is to you have to learn from our mistakes and shine a light and clean up our problems but you know what? we need to maintain our strength, keep our economic competitiveness because i think everything starts there. >> rose: but you are beginning to see also a certain sense of initiatives by them, i am thinking of the asian infrastructure bank where we were a bit reluctant and not so enthusiastic and then you found the rest of the world agreeing to participate and then we sort of come along after that. >> right. >> rose: suggesting that the chinese have their own initiatives to play a bigger

role, with it has to do with reserve currency or whrit has to do with this kind of bank or this kind of world institution. >> well listen, they are going to and we want to, to the extent we can, and i think we will to alarm extent bring them into these global system and some of the multilateral banks, but, you know xipeng view is he is not waiting for rest of the world to declare them a major power. he believes they are a power, and he is acting like one. it is just like every other power before him has and like the united states did, but i thought that asian infrastructure investment bank received that issue a huge focus from the press and looked at as a big watershed event, and the u.s. government has got a lot, done a lot of things right. that one we simply didn't get right. china is is the leader in

infrastructure finance, we are not, they had anish if the, we should have said we want to work with you and figure out how to be helpful. >> rose: finally what do, are you recommending we do to make the relationship better? >> i think that the most, most important thing we can do is to get tangible things done where we have a common interest and we are both, both population accounts see the value of the relationship. now, the climate deal because good example of that but we can take that a lot further. i happen to think the most important thing we can do now is a bilateral investment treaty, because we are negotiating this with china, and this does two things. it helps the chinese reformers open up their markets it could be a leverage just like wtos which is going to benefit u.s. companies, it is going to benefit them, it is going to

benefit, you know, workers in the united states, and secondly help promote cross investment which i think will be strong linkages between the two countries. >> what you just said really touches me. it is the notion of developing some kind of trust. >> charlie, you hit the nail on the head and you know what? just talking doesn't develop trust. just having common interests doesn't develop trust. the the only way you develop trust is to have tangible things done that are meaningful, and you know what? they are difficult. we have common interests blue is nothing worthwhile in this world that is easy. and it takes focus one of the issues we have with china is simply this. we quite naturally and i am not being critical here, we -- the u.s. government goes from crisis to crisis and if there could be more time devoted to this

relationship, i think a number of the crises would be easier because we would be working at cross purposes with china. >> rose: the book is a called dealing with china, an insider unmasks the new economic superpower, hank paulson, thank you very much. >> charlie, thank you. >> rose: good to see you. back in añiñr moment, stay with us. >> rose: steve wynn is here, he is the founder and ceo of wynn resorts, he revitalized a las vegas strip during 1980s and nineties with a group of luxury hotels and casinos, they included the golden nugget treasure island, the mirage and bellagio a decade later he finished the wynn las vegas and encore in recent year they pivoted east too mccoo it plans to open another resort later this year. i am pleased to have steve wynn back at this table. >> my friend. >> rose: and in the public of

disclosure, steve has been a trend of mine and supportive of this program for a long time. one thing you identify with is the big idea. you changed las vegas because you saw big ideas. you saw it as ass more than las vegas, a place people could come for entertain. as well as gambling, you saw the move to china. you have created with ideas what a facility ought to be about. >> big ideas are a hallmark and you believe that they are essential, not only to companies but to the country and to progress in science and everything else. i do. >> rose: tell me. >> just a remark about my business. over the years as we built these hotels in las vegas each one of them, successively, one after the other, in order has broken all previous records of gaming revenue for a hotel that existed before it.

caesar's had the record mirage broke it. when caesar's won 400 million mirage was the first to win 500, mirage was 500, bellagio was 600 bellagio is 600 wynn was 700 wynn and encore did 800. >> what is interesting, charlie is that in each of those examples, never was casino revenue as much as half of the revenue. it was always more money in noncasino revenue than casino revenue regardless. last year, 870 million in casino revenue, a billion and one in nonref, noncasino revenue. >> everything, hotel, spas, shopping entertainment restaurants, the point is, that that -- those relationships are causal, there are slot machines and roulette tables and such equipment are everywhere from seattle to miami from bangor, maine to phoenix you could be at a gambling room with within an hour and a half in an suv or

without getting on a plane. no a gambling device has no intrinsic power. it is a source of revenue if the place itself is populated with people who like that sort of thing, but what brings people is something else fans civil environment, a chance to eat and shop, to relax and enjoy themselves, to have fun and most importantly, to be well served. "5 like most institutions are what they are the day they open, but that may be ten percent of the franchise going forward. what makes a place enduring is people, because only people make people happy. and that is the culture of my company, to concentrate on that human resource. >> what is the most important thing happening first in las vegas today? because i see a lot of emphasis on nightclubs. >> uh-huh. >> well, you know, your show about a hamilton is all about hip-hop and the changing tastes

musically and cultural expression, generation to generation. so the night, fill the nightclubs with the den of music, disk jockeys, wonderful guys like all of those people that work for us, it is a mating dance of sorts. >> rose: yes. and nightclubs and gatherings of young people have always been a mating dance so ironically the more things change, the more they stay the same. >> rose: how is macao difference than las vegas? >> discounting political overtones, which are quite a different thing, in terms of the motivation of the visitor and the experiential aspiration they have, they are exactly the same as they are in america. people come to live big, to have excitement, and, they like to gamble to test lady luck because that has intrinsic excitement to it so people you get on an airplane as i do once a month and fly 6,000 odd nautical miles

to macao you get off the mean and you are home again, mcdonalds, ralph lauren stores, colonel sanders, charlie, there is a very interesting, interesting lesson historically, my grandparent like so many came to this country during the great wave of immigration just before the turn of the last century, 1890, 1900. >> rose: came from?. europe, russia poland, italy, places like that. they came through ellis island, and they were broke, impoverished and took whatever job they could get in the eastern cities and started to have children just before world war one, frank sinatra and dean martin born in 1915 or so, my parents in 1916 they never saw a good day. they came of age in the 30s in the great depression, if they didn't go to war they had defense jobs and they came out of world war ii in the late 40s in their 30s into one of the great periods of expansion in america.

>> rose: post world war ii. >> what is amazing during the post world war ii berld is these people who never had seen a good day believed that anything was possible in america if their kid could get a better education than them maybe they could be president of the united states. and they had an optimism and a belief in this country that was founded on almost a mystical kind of belief in opportunity here. we noticed during that generation that they all had a pent-up demand for the good life and that was something, a called lack, a trip to the cope kabbalah, maybe las vegas, the desire for a good life is a very significant feature of first generation wealth, when people make the first buck in their family's history they know all about the good things that have been deprived of them before. >> rose: yes. >> they want it now and since they made the money themselves they have a very different attitude towards their disposable income, they think i made this, i can make more and do what i want. in china, today, all of this is

first generation wealth or very early second generation wealth, and whether creating millionaires once a week or something since deng xiaoping so what we are seeing in china is not a genetic predisposition to gamble what we are seeing in china is the same thing we saw, my father and my former wife's father elaine's father were both gamblers. they moved to bet on baseball and football and go to a casino. it is part of that first generation of success profile, so anyway, that is still going on. >> rose: we will come back to big ideas but a couple of things, you mentioned elaine your wife, you are married and divorced and re married, then divorced. helped you very much in billion wynn. there is a fight of some kind about membership on the board

her membership on the board in the interest of news. where does that stand? >> >> where it stands is that my company, like most public companies, is controlled really by outside directors, there are seven members of the board, ate members of the board, six of whom are independent directors and they decide what the slate of directors are to be when there is an election every year at the annual meeting, and there is proxy statements, the board is required to issue statements on why they change or make selections and they file proxy statements, the independent directors, i didn't happen to agree with them, but nevertheless -- >> rose: you didn't agree with them in terms of the board slate they -- >> i did not. and i am in an impossibly embarrassing position of either

not supporting my former wife elaine which i am happy to do and obliged to do, or not supporting my board of directors who are all very, very fine, highly respected, independent men. >> rose: all friends of yours? >> i have known most of them some more than others, but, you know, they are former governor robert miller who was chairman of the national governor's association before that, the chairman of the national district attorneys association, chairman of the university of pennsylvania, l shoumaker and before that first boston corp every one of these men are highly regarded. so on this particular issue, i have recused myself made public my opinion and i am not commenting on any of this sort of thing because i have nothing constructive to add to the conversation except that it is uncomfortable position to be in. >> rose: let me talk about a couple of other things you didn't want to talk about, back to big ideas and politics which

you have a real interest in. it is the 100th anniversary of frank sinatra. >> indeed. >> rose: you were his friend. >> yes. >> you made commercials with him. >> yes. >>.>> rose: -- >> i am old enough to be his son, but not. >> rose: yes. >> not old enough to be his running buddy. >> rose: tell me about the man you knew. >> sinatra was a fascinating gentleman. everybody knows, because of the specials that have been done and his background, how he came about being frank sinatra, what was interesting is this is a fellow, professionally and that was my relationship with him, after all he performed quarter after quarter for five years. i was fascinated by sinatra's dedication to excellence. when it came to his craft, the music, the selection of songs, the relationship with the orchestra, the phrasing, his vocal presentation, he was a man

of meticulous pursuit of excellence and he has which i identify with, a tremendous respect for his audience, for his customers. frank sinatra was a normal man with normal emotions and temperament like any artist, but when it came to being on stage, frank rehearsed every time he ever worked, even at the -- in his sixties, his selection, i used to ride on the plane with him and i had the privilege of watching him do the song list and we had a little routine that was the first time we went we had a dc 9 and had a dining room in the front and we were having lunch he carried a briefcase and in it the lead sheets with the lyrics of all the songs he would take out a stack of these things while eating the chicken salad sandwich or whatever it was and he would start leaving through them and three stacks, yes, no, maybe. and here is september song yes new york, new york yes. my way, no.

to done it too often. >> the one for my baby, maybe. luck be a lady no. i was sitting next to him on these side by side chairs and i reached out and i picked up what -- how could you not sing luck be a lady? luck be a lady in a casino? he slapped my hand and said don't, you can sit there, don't ever, ever touch the music. nobody, nobody interferes with the play list. just don't. don't speak. >> don't say a word. and he got a twinkle in his eye but, frank -- what are you? a pest? don't -- and he has got the twinkle, the blue eyes that are twinkling and picked up luck be a later, don't ever and his eyes twinkled touched the miewfn and puts it over in the maybe. >> this began a routine that

lasted for five years. he would wait until we had lunch on the flight back east from palm springs because i had to pick him up and take him home which got to be a lot of fun because in later years in the second year dean martin joined us so i would have these weekends with frank sinatra and dean martin and be on the plane ten hours. the stories. and anyway, we had this little choreography that became sort of a family thing where after lunch, he would take out the music and then he would take out luck be a lady and rattle it in my face and of course we would play it on the fountains of bellagio and play it on the fountains of macao. and some of the most won, wonderful memories i have of being with sinatra but the thing that i think of professionally is how dedicated he was to the audience and to his trade. it was -- also, i have vision

problem, i don't see very well in the dark, and backstage he would take my hand in case i couldn't see a step or something. well, as time went by, he had an apartment at the wall dorch tower and i would stay there before andre and i had our apartment and we went to lunch once about geno's on lexington avenue 52 lexington and six first. >> yes and the hotel, ten blocks, it was a beautiful afternoon, i said let's walk back. he said, okay. i hope we don't get bothered. >> i said we will just walk back to park avenue. charlie he took my hand like i was three years old. >> i was walking down park avenue with frank sinatra holding my hand and i was 42 years old and i kept my mouth shut, i loved it. people would turn around and look at us, it was such fun. those were great years and dean martin he doted on dean martin, he loved him, frank sinatra loved comedians.

he was about guy that could tell a great joke himself. he loved to tell stories but when it came to funny guys whether red buttons or don rickles he loved being around comedians, dean martin was a naturally funny witty guy who said funny things just off-the-cuff right from the shoulder. and sinatra would egg on martin to tell steve what you did when we were making sergeants 3, tell steve what happened when we were doing this movie or that thing. and martin would tell the sorry electricity. he was a laid-back charming great guy and you could see the affection sinatra had for dean martin, they were completely noncompetitive personalities, sinatra was the alpha and dean was happy to just -- he was his own guy but he didn't worry about -- >> rose: no one has had a voice like sinatra. >> i don't think so. there are some great vocalist and great stingers but frank brought something even today i listen to him all the time i know you do and everybody else does, i remember one night in

connecticut, we did a customer party as we did, we used to go an where we had offices, and do parties with our customers and he and i would take pictures with everybody and we walked into this place called the venus demilo in new bedford and one of these places you get married and had different halls and our group of 150 customers and their wives were in the middle hall and on the left there was an event for brownies, you know the little girls like cub scouts before the girl scouts. >> rose: yes. >> and they had roped off the hall so they wouldn't interfere with us. we came through the door on a frigid january evening and all of these kids about seven, eight, ten years old were lined up and sinatra came through the door and took off his overcoat and they started screaming. sinatra was a little stunned, said this is marvelous. and he walked over and he started -- they were younger than his grandchildren and started picking up the kids and kissing them and the party that night, guys in their late

sixties, would behave like children and say frank i love you and go around table to table,. >> rose: let me talk about the country too. >> okay. good. >> rose:. >> we could do this all night. >> rose: yes we could. you are a republican? >> i have been both. i probably supported more democrats than republicans but lately, i have been to the right of the president. as most people -- >> rose: some of your friends are worried you are too -- >> well they probably haven't discussed it with me. i certainly -- i was the keynote speaker at the republican state convention several years ago. >> rose: in nevada? >> in nevada and reno and i got up and i did my remarks and i said, my wife and my two daughter a would never have an abortion but they believe it is women's right to choose and i said the reason i am here today is because my buildings have been highly celebrated and that was because of my cab investigation with a man and others who are gay and so my question is, since -- because i

know that citizenship and sexual preference are unrelated i have to ask a question as the is the elephant's back big enough for my friend and daughters and i got a standing 0 investigation that day so i have a mixed political ideology or approach to ideology but i don't think that is so important as today we are looking for strategic answers. how do we make the country better? where is it -- you know, everybody has all the rhetoric down dandy but what we are short on are specific ideas that lead to change that all people would consider as positive. we note in the history of mankind that only thing that has ever created a human life for human beings is a demand for their labor period there is no exception to that statement, we haven't been around in volume except in the last 10,000 years if you read spencer wells,

really and we might in 10,000 years since agriculture was invented from a few thousand humans on the planet to almost 7 billion now. the demand for labor gives us a better hive, less demand less better life, until finally when there is no demand we starve. so that raises a simple issue, what is the role of government? to make to create an environment where people can have a better life. with that thought, as a society the most powerful thing that we give to each other in the form of government, to the exclusion of all other things, is the right to tax, we agree to let someone else in a group take our moby mandatory means, if necessary, in taxation, i have noticed a trend in america for the last several decades, more and more to use the power of taxation as a punishment, as a

penalty instead of as a reward. we know for example in things that are too big to punish, training an elephant or a dolphin you can't punish an elephant or a dolphin, you can only positively reward one, you try to punish an elephant he will kill you, so will a dolphin in the world we positively reinforce things to get the right behavior. so for example considering the powerpower of taxation to be the single biggest weapon the government has and just talking about this one element for a moment, let's take 22 things that are in the public mind these days education and healthcare. those are two big one. we don't think are kids are being educated well enough we want to do it better, we don't think healthcare can continue to be the expense that it is in america, we want to make it better. let's take those two things and take a look at what is going on right now. we grouse about teachers unions ansay they are an obstacle to

progress. well, the fact of the matter is you can bray like a mule at the moon but people have a right to get together to form unions and there are probably good and bad ones. >> rose: do you have unions at wynn. yes never had a grievance in 40 years. good unions, bad unions but not the government's business about unions. and without do any good if they tried. what is interesting is, and this is my notion, for example, to give to put this in concrete strategy, if i were president of the united states and i had the speaker and the majority leader with me i would say look, we are going announce this program tomorrow f i am going to say that in each and every pta organization and school board in america they develop their own test of what they think it is, for example, that a third grader should learn about adding subtracting and multiplying or spelling, the school and the parent get together and decide

what represents a successful third degree education. we will acknowledge -- >> rose: third grade. >> third grade for example this would be true of every grade but let's just pick the third grade, if the teach in other words that school get 80 percent of their students to pass that test, we will give those teachers on a joint tax return for the spouse and the teacher $75,000 of tax free income, if 95 percent of the students pass the test, we will take that tax free income to $90,000. giving every teach never the united states with 20 percent you haven't interfered with unions you caused a whole bunch of people in college to change their curriculum and side-stepped the unions. right now the unions are the protector for a better life as a teacher, naturally the people go for their own self-interests and culled up to a union, you would and i would too, wherever we see our security. but the minute you make the kids getting a satisfactory test

result by local standards a chance to make more money for me, the teacher then excellence becomes the order of the day, teacher goes for the prize for the carrot. if the government's strongest weapon is the power to tax sometimes the greatest exercise of power is in the restraint of its use, the restraint of the tax collecting power can be the greatest carrot the government has to get socially desirable behavior. let's take healthcare for a moment. again a strategic kind of conversation. we know that third party pay yours when you get your insurance from your employer like all my employees do or from the union, which we pay for anyway or from the government you don't give a damned what it costs for your doctor, just as long as you don't have to pay for it, it is going to come out i don'toutof your pocket, the idea a third party is paying it leads to a

very different mindset between a patient and a doctor. every expert that has studied the subject says if we can get people to have a one-to-one relationship economically as well as personally with their doctor, the world would change, so i would say this. let's say that a man and a woman have a joint income of $100,000 and tear tax is 20. i am inventing the number charlie, you know correct the arithmetic later. say the tax bill for this man and his wife is 20 grand. we say i tell you what, you could take 4000 dollars a year or $3,000 a year of that tax money, you don't have to pay it to uncle sam and put it in a health savings account either buy an umbrella policy that is cheap to cover catastrophic event and then the rest of it you can administer yourself and pay your doctor one on one. the punt you say that after you

establish a certain minimum level in that health savings account you can have the rest of it to spend as you wish, right out of the tax bill, you will immediately change the relationship with people with their pharmacist, with their doctor, you incentivize the kind of behavior that you know is constructive. we don't -- the affordable healthcare act, you don't do what we want you pay a penalty. we punish you. we use the -- >> rose: the contacts code is a punishment is a better idea. >> much better. >> rose: let's turn to other things before i go here. >> one other thing, charlie. >> rose: go ahead. >> energy policy. america's strategic role and the geopolitical world order would be immediately affected positively if the united states president and congress decided we were going to go on a rampage towards exploitation and development of all of our oil and gas reserves. we would hank paulson was

talking to to you in the new book, he said what can we do to strengthen our relationship with china? i have been there 13, 14 years, the concept of friend comes into play and that happens by making their life better if america became a big exporter of gas and oil we would immediately undercut our enemies, we would give pause to mr. putin and become a cosupplier to europe, we would also because we could export oil, lower the price of oil, undermine our enemies in the mideast, and become a friend to china because they don't have our natural resources, and we would be we would be lightening their load either if they bought it from us directly or from the saudi arabians at a lower price because canada, mexico and the united states, we could have a north american petroleum export group that is bigger than opec. >> rose: that is all true, but at the same time you know that there are a lot of people in the

country who are very worried about climate change and that they believe that fossil fuels have contributed to the assault on the environment and that's another debate which we don't have time for this evening but senate the argument. >> actually the ice bridge melted 15,000 years ago that let all of the cold water go into the atlantic through the st. lawrence seaway climate change has been going on a honk time, but we are talking about how to make a geopolitical change to either reinforce or establish. >> rose: america's friendship and relationship with china. >> and with everybody else economic -- >> rose: and give us an economic leverage in order to -- >> it changes the world order, to use henry kissinger's term. >> rose: thank you for coming. it is great to have you on the broadcast as always. your sense of pursuit of excellence is remarkable and it is part of who you are for a long, long time. in terms of so many areas of life and in terms of medical developments as well as pursuit

of great art as well as building a good company, all of those things in terms of your love of art has been something to be much admired. >> like you, my friend. >> rose: yes indeed. >> thank you charlie. >> rose: steve wynn from wynn resorts, and a friend of mine and a friend of this program thank you for joining us. see you next time. >> 0 for more about this program and early episodes visit us online at pbs.org and charlierose.com. captioning sponsored by rose communications captioned by media access group at wgbh access.wgbh.org

tomorrow's pbs newshour passing the puck, how nhl players are helping teach the next generation to break hockey's color lines. >> you are watching pbs.

announcer: a kqed television production. man: it's like holy mother of comfort food. kastner: throw it down. it's noodle crack. patel: you have to be ready for the heart attack on a platter. crowell: okay, i'm the bacon guy. man: oh, i just did a jig every time i dipped into it. man #2: it just completely blew my mind. woman: it felt like i had a mouthful of raw vegetables and dry dough. sbrocco: oh, please. i want the dessert first! [ laughs ] i told him he had to wait.