captioning sponsored by macneil/lehrer productions >> lehrer: president obama announced his plan to lower the deficit by $4 trillion over the next 12 years. it would cut spending and raise taxes on the wealthy. good evening, i'm jim lehrer. >> ifill: and i'm gwen ifill. on the "newshour" tonight, kwame holman reports on the president's speech and the reaction on capitol hill. and we have a newsmaker interview with treasury secretary timothy geithner. >> lehrer: and paul solman explores how the bond market views the debate over raising the debt ceiling.

>> ifill: ray suarez examines what's behind those soaring gas prices and how they could affect the economic recovery. >> lehrer: we update the war in libya-- the fighting and the diplomatic sparring. >> ifill: and jeffrey kaye reports on health hazards facing employees at an apple assembly plant in china. >> workers making components for ipods in this factory outside shanghai say toxic chemicals are making them sick. >> lehrer: that's all ahead on tonight's "newshour." major funding for the pbs newshour has been provided by: in 1968, as whaling continued worldwide, the first recordings of humpback songs were released. ( whale singing ) public reaction led to international bans. whale populations began to recover. at pacific life, the whale symbolizes what is possible if people stop and think about the future.

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this program was made possible by the corporation for publ broadcasting. and by contributions to your pbs station from viewers like you. thank you. >> lehrer: the deficit battle in washington was fully joined today, as president obama laid out his ideas. "newshour" congressional correspondent kwame holman begins our coverage. >> reporter: the president took the stage at george washington university in washington and called for cutting the deficit by $4 trillion over 12 years. >> it's an approach that achieves about $2 trillion in spending cuts across the budget. it will lower our interest payments on the debt by $1 trillion. it calls for tax reform to cut about $1 trillion in spending from the tax code.

and it achieves these goals while protecting the middle class, our commitment to seniors, and our investments in the future. >> reporter: to get to the total, the obama plan would end tax breaks, fst instituted by president bush, for households earning more than $250,000 a year; look for up to $400 billion in new defense spending cuts; reduce domestic discretionary spending by $770 billion and, exact $480 billion in fresh savings from medicare and medicaid. the plan vision outlined by the president today came two months after the release of his 2012 budget proposal. that blueprint did little to address entitlements, prompting republicans to accuse mr. obama of failing to lead. today, they portrayed his speech as a do-over. the president gave congressional leaders a personal preview of the speech at the white house this morning. but republicans emerged cool to his plan, especially to tax hikes. >> i think the president heard

us loud and clear. if we're going to resolve our differences and do something meaningful, raising taxes will not be part of that. >> reporter: mr. obama anticipated those objections in his speech. >> some will argue we shouldn't even consider raising taxes, even if only on the wealthiest americans. it's just an article of faith for them. i say that at a time when the tax burden on the wealthy is at its lowest level in half a century, the most fortunate among us can afford to pay a little more. >> reporter: the president's overall strategy today, was to draw a sharp contrast to republican ideas. especially, to last week's proposal by paul ryan, chair of the house budget committee. he called for reductions of more than $5 trillion over 10 years, well beyond the obama numbers. ryan would revamp medicare by paying private health plans instead of reimbursing doctors and hospitals directly. and, the g.o.p. also would

transform medicaid into block grants, giving governors less money but more flexibility in caring for the poor and disabled. the president insisted those changes would end medicare and medicaid not strengthen them. >> i will not allow medicare to become a voucher program that leaves seniors at the mercy of the insurance industry, with a shrinking benefit to pay for rising costs. i will not tell families with children who have disabilities that they have to fend for themselves. >> reporter: congressman ryan rejected that criticism. >> i'm very disappointed in the president. i was excited when we got invited to attend his speech today. i thought the president's invitation to mr. camp, mr. ensign and myself was an olive branch. instead, what we got was a speech that was excessively partisan, dramatically inaccurate, and hopelessly inadequate to addressing our country's pressing fiscal

challenges. >> reporter: beyond republican opposition, the president acknowledged today he faces skepticism from democratic allies, leery of any cuts to entitlements. >> i understand these fears. but i guarantee that if we don't make any changes at all, we wont be able to keep our commitments to a retiring generation that will live longer and face higher health care costs than those who came before. >> reporter: with both major plans now on the table, house republicans plan to push through their budget by week's end. it faces little chance of passing the democratic- controlled senate. >> lehrer: and now to our newsmaker interview with treasury secretary timothy geithner. mr. secretary, welcome. >> nice to see you, jim. >> lehrer: in general, the house republican leadership said that the president's speech today was not a plan, it was a political statement based on his reelection campaign. what do you think about that?

>> well, you know, i sat with the president and the leadership of both houses, both parties this morning at the white house and actually i think we came away from that more optimistic, more confident that this is a moment where we have a chance to get both sides to come together and lock the congress into a comprehensive, balanced, responsible plan to bring our deficits down over time. i think everybody recognizes this is the necessary thing to do. it's something we can do, something we have to do, and if you listen to people carefully, we agree on a lot. we agree on a $4 trillion objective for reducing the deficits. we agree we need to bring them down in a way that allows us to start to pay down our debt burden. we have big disagreements on how to do it, but that's a good place to start and we can take advantage of this opportunity to get the congress to lock itself into a set of constraints to live within our means that would be an enormously positive

accomplishment. it would be very helpful for recovery, make americans more confident washington can work and, again, listening to people talk, look carefully. people have to say a bunch of things as politician bus if you listen carefully to what they're saying, i'd say optimistic. >> lehrer: i was listening carefully to what the president said. he said there is no way he is going to permit the taxes for the wealthy, for the upper income group in america, to get a tax cut. period. he said it twice. no way. and the republicans said just the opposite. "we will never support anything that has to do with raising taxes." now what did i miss? >> well, you're right that there's a fundamental disagreeme here. but let's talk about what's at stake. if you look at the most fortunate 2% of americans today, their actual tax rates are very low. they pay a relatively small share of income relative to in the past. and if this country wants to

keep those rates where they are, then we have to do one of two things: we have to either cut savagely deeply into basic commitments for our seniors, for the disabled, for the poor, or you have to ask me and my successors to go out and borrow hundreds of billions of dollars, trillions of dollars over time from our children, from foreign investors, from the chinese to make that possible. now, it's not responsible to go out and boar trow finance those tax cuts, you can't afford them. and it is not necessary to solve our... in order to solve our fiscal problems to cut so deeply into basic commitments generations of americans have made to the elderly and to the poor. so we do disagree on how to do this, but we both agree it's necessary, it's important to get the deficits on a downward path and that requires the congress commit itself to live within a set of constraints so the country can live within our means. we want to do that in a way that preserves our capacity to invest

in things that are critical to how we grow in the future, in education, basic science, research and innovation. we want to maintain those commitments to the elderly and the poor and disabled and we want to make sure that we're fair to the middle-class. we don't leave them with a larger burden than they already bear today. those things are completely achievable to do. we just have to decide to do that. it's important for people to understand that this is going to be hard to do. because our deficits are very high. they're unsustainably high. but it's something we can do. and we can do with acceptable costs for economy as a whole. but we have to do it right, in the right way and the responsible way. >> lehrer: but can it be done without raising taxes? >> oh, no. there is no plausible way... again, unless you're going to cut deeply into commitment wes need seniors and to disabled and the poor or ask the country to go borrow the money, you can't solve this. again, that's the conclusion that the bipartisan fiscal commission reached. that's the premise in which a

bipartisan group of senators have been operating on. and it's a... it's a basic reality we're going to have to live with over time. now, it's true we're apart on this. >> lehrer: but it's hugely part. >> but let me take the optimistic side. >> lehrer: be my guest. >> we spent the last two years preventing the great depression, getting the economy going again, cleaning up terrible messs in the financial system. both parties came together in december and did a very important thing giving families and businesses some well-designed temporary tax cuts. you saw both parties come to agreement just last week on a way to restrain spending, cut spending but preserve critical parties to both sides that matter a lot for the trajectory of spending going forward. we've got good examples of people coming together and, again, both sides recognize now that this is the right thik do for the economy. meaning to lock in now a set of reforms that will put our

deficits on a path that we get them low enough that we start to bring down our debt. of course we disagree on how to do that. but even on parts on how to do it we're closer than people think. >> lehrer: one of the four main pillars to the president's plan was tax reform as well as raising taxes on the wealthy. and there are a lot of things about deductions, like for housing and that sort of thing. if you remove deductions you're essentially raising taxes, too, are you not? >> well, what the president said is we want to take and build on the model laid out on the fiscal commission led by erskine bowles and alan simpson. that was a bipartisan commission and had support from democrats and republicans. they propose to take some of the spending in the tax ket and reduce the spending and use savings to potentially lower rates but also our deficits. and that is i think the best idea out there. the best idea out there for trying to figure out how do we

fix the tax code and make it more simple, more fair, less complicated. but also help make sure we do things that are responsible for a long-term fiscal position. >> lehrer: it was written in the "new york times" today that "finding a way to raise taxes may well be the central political problem facing the united states." do do you agree with that? >> i think that's one of them. but we have to make sure how we can meet our commitments to seniors, the disables, and the poor. and the country divided and both parties are apart. but, again, where we agree-- and this is very important, this is a necessary commitment for progress on this-- is we agree we have to put it on a downward path. we agree on how far we have to go, what it's going to take to do it. there's lots of areas where we think we have common ground and we have to figure out how to again lock future congresses in, this congress in, to those kind of constraints so we're living within our means and we can

afford to meet other commitments to the country. >> lehrer: you say you're an optimist and the president said beginning in may there's going to be a bipartisan group of folks put together under the chairmanship of the vice president, vice president biden and we'll work the this thing out by the end of june. do you really think that's realist snick >> we don't need to come to a comprehensive solution on how to do tax reform or how we solve our remaining health care problems between now and the end of may or june. that's not possible or necessary to do. what i think we can do is again get people to come together and agree on a basic framework of targets and limits that allow us to go back to living within our means and the president proposed a set of targets far consisting with what house republicans proposed over the next ten to 12 years and what the fiscal commission proposed and then he proposed a stro enforcement mechanism. so in the event washington is unable to make the tough choices necessary, then... >> lehrer: like on taxes. >> on both, on spending and

taxes, then there will be some automatic changes that will come in time to make sure we achieve those objectives. our slope that you make that enforcement mechanism tough enough to make it easier for politicians to make these decisions. >> lehrer: finally the debt limit ceiling. there's going to be a vote on that in the next few weeks. you have said if that does not happen it would be a catastrophe. what's youreading... and the republicans have said wait a minute, we're not going to vote far if we don't get more cuts out of this. in other words there's got to be a tradeoff. >> the congress will pass an increase in the debt limit because they have to and the leadership of both houses have recognized the country has to meet its obligations ander in not prepared and should not be prepared to take the risk that that's called into question and we heard the leadership of the republican party in both houses make that commitment to the president today. that's very important to recognize that. and, again, there's some people up there who are going to want to take this to the edge, to the brink, but we can't take that risk.

and so you want congress to move as quickly as possible to raise that and of course they recognize they have to do that. of course, we also want to work with them to try to put in place a framework that can help put our deficits on a more sustainable path. >> lehrer: what's the brink? >> well, for a letter to congress a couple weeks ago we have into june to solve this problem but we don't have much more time beyond that. i think the leadership? both house rises that. you don't want to call into question the commitment of the united states to meet its obligations. >> lehrer: mr. secretary, thank you very much. >> thank you, jim. >> ifill: tomorrow, we'll get reaction to the obama plan from economists douglas holtz eakin and paul krugman. still to come tonight on the "newshour": paul solman on the coming debt ceiling debate; gas prices spike again; the standoff in libya and health hazards for iphone workers. but first, the other news of the day. here's hari sreenivasan.

>> sreenivasan: the u.s. economy has improved in every part of the country this spring. the feral reserve released the findings today, in its regional survey. on wall street, the news helped stocks recover from early losses. the dow jones industrial average gained seven points to close just under 12,271. the nasdaq rose 16 points to close at 2,761. in pakistan, intelligence officials reported u.s. drone aircraft killed six suspected taliban fighters today. the officials said drones fired seven missiles in a forested region of south waziristan near the afghan border. pakistan's spy chief met with c.i.a. director leon panetta on monday, and reportedly asked for new limits on the missile attacks. former egyptian president hosni mubarak has been detained as part of a far-reaching corruption probe. the announcement came early today, hours after mubarak was hospitalized. we have a report narrated by carl dinnen of "independent television news." >> reporter: when people learned

hosni mubarak was in hospital last night, they gathered outside. under questioning from prosecutors he'd suffered what's being described as a heart crisis although some reports suggested he'd deliberately not eaten for 48 hours. but mubarak's hospital is now his prison. he's been detained for 15 days pending the investigation. it's a striking turn of events for a man who was president of egypt just two months ago. investigators said he had bridled at being called the accused, telling them to remember he was president. the reported answer: no one is above the law. >> ( translated ): our prisons are made for some people and not others. no prison is reserved for any wrongdoers and this is a courageous decision from the public prosecutor. >> ( translated ): honestly, i was very happy because since the first day he said he was stepping down he should have been investigated and his children as well. >> reporter: and his children are now being investigated. cairo's torah prison, the new

home to mubarak boys gamal and alaa. they join more than a dozen former regime officials detained so no discreet retiremnt to a luxury villa in saudi for the most notable victim of the arab spring. instead, a closely guarded hospital built in the shape of a pyramid-- the ancient resting place of egyptian despots. >> sreenivasan: plans now call for mubarak and his two sons to appear in court next tuesday. thousands of women and children marched in syria today, demanding the release of some 350 men detained in a crackdown on dissent. the protesters blocked a main coastal highway between the cities of tartous and banias. the men were detained in that area. witnesses reported about a hundred of the detainees were later released. a federal jury in san francisco has convicted former major league baseball's home run king barry bonds of obstruction of justice. the jury deadlocked on three other counts in the former star's perjury trial. the judge declared a mistrial on those. bonds was accused of lying to a

federal grand jury when he denied that he knowingly used steroids and human growth hormone. stereo equipment magnate and "newsweek" magazine owner sidney harman died late tuesday in washington. a family statement cited complications from leukemia. harman made his fortune in the 1950s, as his company harman kardon pioneered the first high- fidelity stereo receivers. later, he served in the commerce department under president carter, and was married to former congresswoman jane harman of california. sidney harman was 92 years old. those are some of the day's major stories. now, back to gwen. >> ifill: as we've just heard from secretary geithner, the administration is also preparing to do battle over whether to raise the nation's debt ceiling. "newshour" economics correspondent paul solman looks at why investors and the markets are keeping an eye on the potential impact of that battle as well. it's part of his ongoing reporting on "making sense of financial news."

>> reporter: even fed chairman ben bernanke has joined the chorus. >> the implications of that for our financial system, for our fiscal policy, for our economy would be catastrophic. >> reporter: the dire warnings raise a host of questions. for one, who would spark the catastrophe? answer: the supposedly trigger- happy investors known these days as the "bond vigilantes." though they might call themselves paul reveres. these are holders of u.s. government debt-- our bonds. the fear is that, if we don't cut our deficits, they'd dump the bonds in a fire sale, as economist nouriel roubini warned us last year. >> the bond vigilantes have already walked out in greece, in portugal, in spain, u.k., ireland, iceland, but soon enough they're going to wake up

in the united states. >> reporter: wake up and smell suddenly demand higher rates to keep lending america money, and thus raise our cost of borrowing, meaning higher government deficits, thus even more borrowing. so last week, the budget impasse at its climax, we'd gone to the bond trading floor of nomura securities in new york for good footage of the stampeding vigilantes. >> you're not going to find any, no vigilantes here. >> reporter: what we would find, said joseph marra, who runs the fixed income desk here: lots of colorful computer screens, tracking the interest rate the u.s. has to pay when it borrows. in this case, for a five-year loan. so this is how much the u.s. has to pay in interest in order to borrow money for five years. >> correct. yields basically over the course of the year, in five-year notes, have gone from something like two and three quarters all the way down to 1% and then they bounced now close to where

they're back up, you know, around 2.30%. >> reporter: but 2.30%-- an interest rate of 2.30 percent-- is historically rock bottom. here are rates for the past 50 years. there's the recent rise. so what's kept rates so low for so long? huge investors, japan and china especially, which have so long found u.s. bonds the safest place to store their growing wealth. not exactly vigilante behavior. >> clearly the chinese and japanese are massive investors in the treasury market. by no stretch can you say they are vigilantes. >> reporter: indeed, even recently, troubles elsewhere in the world have prompted them and pretty much all other investors to want safe u.s. dollar investments: our bonds. >> i don't want to say it was the only game in town last year but if you were a big institutional buyer, a big central bank, a global bank,

you know, it... it benefited greatly from that backdrop of europe. you know, debt markets in crisis and a global economy that was still fundamentally not quite sound. >> reporter: so you could look at that as a flight to safety or a flight away from the unsafety of europe! >> absolutely. >> reporter: repuican economist douglas holtz-eakin said recently, "i'm told the united states is the best horse in the glue factory." >> i think there is some merit to that... to that statement. >> reporter: strategist george goncalves. >> there's a consistent buying from the foreign crowd that keeps our rates in check. >> reporter: but if further debt cuts can't be agreed to and the us looks like it'll hit its debt ceiling? >> then there could be some uncertainty embedded into the bond market which might cause yields to rise. in other words, foreign investors or domestic investors might feel concern about what's happening down in d.c. and might

start to charge a premium to buy securities. >> reporter: house majority leader john boehner puts it bluntly. >> we do not want to default on our debt. we should not default on our debt. these are obligations of the federal government. and i think not raising the debt limit would have very serious implications for the worldwide economy as well as jobs here in america. but having said that, we're just not going to do the typical washington thing, roll over, increase the debt limit, without addressing the underlying problem. >> reporter: and if the limit isn't increased? >> now here's what really would happen. >> reporter: j.p. morgan c.e.o. jamie dimon. >> every single company with treasuries, every insurance fund, every requirement, it'll start snowballing. automatic, you don't pay your debt, there will be default by ratings agencies. all short-term financing will disappear. i would have hundreds of work teams working around the world protecting our company from that kind of event. >> reporter: in other words, selling the u.s. bonds already out in the market, forcing the government to hike its interest

rate offer to get investors to make new loans, buy new bonds. but if j.p. morgan is going to sell tomorrow, the world largest bond fund figured it made sense to sell yesterday. pimco cleated its portfolio of u.s. bonds back in january. in an article earlier this oss compared congress to the cartoon character pepe le pew. citizens of america, hold your noses, wrote gross. you ain't smelled nothing yet. and according to nomura strategist jens nordvig, there are some ominous signs on the foreign exchange desk as well. >> if you look at the euro, if you look at the australian dollar, the british pound, the dollar has been significantly weaker against all those currencies over the last couple of months. >> reporter: a simple question then: why? >> there's two reasons i think. first of all, u.s. growth is kind of not really doing much

whereas growth in the rest of the world has been improving. so that's been number one. but i do think this fiscal concern is sort of in the back of investor's heads, it's something that makes them a bit uneasy. it's often the case that the currency market reacts before other markets and i think this is an example of that. >> reporter: but for the moment, at least, the bond market has been quiet as a dormouse. and here's why, says nomura's chief economist, david rensler. >> i think there's a lot more reason for optimism that there will be something done on the long run budget deficit than there was a year and a half ago. >> reporter: so that the traditional fear of the bond gilantes is in your mind allayed because we're actually finally dealing with or at least discussing? >> so the bond vigilantes have had to carry the heavy water of watching the government and what it does to make sure that those actions are accurately reflected in financial markets. it's a much broader-based vigilantism that's going on and

we have a lot more eyeballs watching this problem. >> reporter: not just the bo vigilantes. >> not just the bond vigilantes. you and i are watching it. >> reporter: and as we watch, the pressure on debt cutting continues, for better or worse. >> lehrer: now, another economic fill fail correction to paul's story, john boehner is, of course, the speaker of the house not the majority leader. >> lehrer: now, another economic story that's particularly personal right now-- rising gasoline prices. ray suarez has our update. >> suarez: the national average for a gallon of gasoline isn't quite $4 yet, but it's getting close. the average is $3.78. in some places it's over $4 a gallon. in chicago, you may pay $4.59. in los angeles, the price can be as high as $4.70 a gallon. a new poll today suggests prices are already affecting spending habits. an ipsos survey found two out of three americans said they cut

back on other expenses because of gas prices. 62% said they drive less. we look at gas prices and their potential impact with david kirsch, director of market intelligence service for pfc energy an energy analysis and advisory firm. david, it's a question people are probably asking all over america as their needle points toward "e." why are gas prices so high right now? >> well, there's two main reasons. i think probably the biggest reason why we're already right near $4 a gallon is, of course, the unrest in the middle east. we've lost a significant volume of oil coming out of libya. this is very high-quality oil that was typically used to create... to make a lot of gasoline. but that's led to oil prices across the board being significaly higher up, some 20%. the other factor, though is that even prior to this demand had also been increasing, along with

the general economy had been improving, especially over the last year. americans had been driving more and so we saw our inventories, our stock, our excess supplies of gasoline slowly coming down over the last several months. that's also led to it. so we have factors on both the supply and demand but it's really the crude oil price that's gotten us so quickly to $4 a gallon. >> suarez: if america's crude comes closefully closer places: canada, mexico, venezuela, why does a crimp in the libyan supply affect our supply at a pump in des moines. >> right, exactly. especially you're at the pump in des moines you're doing a little bit better because you've got some canadian crude coming in and it can only go to the u.s. market. but by and large americans import around $8 million barrels per day of oil and it's a global market. so when the libyan crude was

lost, the europeans and to a certain extent the asian customers who had been buying that crude, they're looking for other sources. they're coming to other suppliers, west african, latin american producers. so they're bidding up the price of crude around the world, including the crude that would normally come to the united states. >> suarez: what's been the effect on household decision making you're paying so much more to fill up a big tank? >> right. well, there's primarily two effects. the first and most immediate is that spending on gasoline-- which most americans do see as necessary and not as a discretionary expense-- that starts to crowd out other spending. particularly entertainment. americans go out to dinner less often. they go to the movies less often. this is the type of behavior we've seen in other price increases. but the second impact is that americans tend to have a less

good feeling about their own economic well-being. they have less encouragement about future economic prospects so they also delay major purchases of durable goods, washing machines and the like. they don't make the investments in their houses. they don't buy the non-durable goods and this leads to a longer term slowdown in the economy as well. so it's those two two channels that primarily affect the broader economy, not just from the higher gas prices in and of itself. >> suarez: that perception of the lost $10 or $20 bill. does that that have enough of an effect when you graph it out over tens of millions of households and automobiles to slow down what looks like a gatherer economic recovery? >> and i think that's the real threat here.

consumption accounts for about 70% of the u.s. economy. so what we've mean? the past is that americans end to actually overstate the impact of higher energy prices on their overall household budget or, to put in the another way, you would they that lost $10 should only account for a $10 loss in the economy but they tend to save, we'll say, $15 if you will or something along those lines. so the impact on the slowdown in the purchases of durable goods or investments in their own household does tend to have a much larger impact on the economy than would be suggested nearly at looking at the increase in what gasoline prices are at the typical consumption basket. >> suarez: david kirsch, thanks for joining us. >> thank you. >> ifill: now, an update on the unresolved standoff in libya. nato nations and others met today in doha, qatar debating what any or all of them should

do to help the rebels still attempting to overthrow moammar qaddafi. as they debated, fighting continued around misrata-- the only western libyan city still partly in rebel hands. we start with a report from jonathan miller of "independent television news." >> reporter: pinned down by nato warplanes, qaddafi's army remains a lethal force in the city of misrata. rebels here, and further east, desperate for nato to intensify attacks on libyan government forces, to tip the balance in their favor. yesterday, nato airstrikes destroyed 12 tanks in misrata; this attack, by british typhoon fighter-bombers. nato's now clocked up more than 800 strike sorties. but britain and france insisting that more muscles needed to break the military deadlock. nato is divided on this matter; today's meeting in qatar of what exposed the rifts. although there's broad consensus

that libya's political future should not include qaddafi. >> any viable ceasefire, any viable peaceful future for libya must involve the departure of colonel qaddafi. >> reporter: one proposal, from italy, calls for arming libya's rebels through a fund created from the regime's frozen assets. germany questioned the legality of such a move though, suggesting it would go beyond the u.n. mandate. on libya's eastern front, rebels continue to exchange rocket fire with qaddafi's forces. there's satisfaction at the international recognition accorded in qatar to the rebel national council. make no mistake though, there are many in this divided country who do support qaddafi. although after six long weeks, the number of his acolytes still chanting in tripoli's green square is dwindling. they don't like the news from the tiny emirate of qatar. if any plan hatched in doha that goes so far as to create a fund to arm the rebels using libyan

sovereign assets, this will incense the tripoli regime. tonight as the qatar conference ended, rather inconclusively, nato warplanes staged a daylight bombing raid on a munitions dump on the outskirts of the capital. >> ifill: for more, we turn to emira woods, co-director of the foreign policy in focus program at the institute for policy studies. and shadi hamid, director of research for the doha center at the brookings institution. welcome to you both. looking to that report, you can't help but wonder is there a stalemate now on libya? >> there is a stalemate. neither side can decisively beat the other. so the question is how do we get out of this? so the only real solution that i think would be viable for the rebels and also for the western nations is that qaddafi has to step down. but he's made clear he won't do that. so i think that's where we get into a discussion about nato intensifying its efforts and america and its european allies more aggressively using air

strikes and so on, arming the rebels, there's a variety of options that can be considered here. >> ifill: so emira woods, is this about the u.n. stepping up or there where it was supposed to be? it was never going to be resolved this easily. >> i think this is a reminder that military interventions are quite complicated and there are huge costs both in terms of treasure and in terms of lives when a military intervention is undertaken. i think clearly what's at stake here in libya is that we need all the tools in our international tool kit to respond to this very real crisis. the package that we saw today we still see civilians in harm's way and the international community must actually do its share but we have to have a slate of issues from financial sanctions to actually putting forward a serious effort to clamp down on the libyan regime. make sure we create a stranglehold. those political pressures are as needed as the other options on

the table. >> ifill: it's a question of priority. the priority now for nato to decide what its common goal is because everybody doesn't agree at nato is it to step up the military? is it to train the rebels? what should be the first option? >> well, there's lack of clarity about what the western nations are trying to do. the u.s. says one thing, france says another and this is really an opportunity for the west to unify its position but it's failed to do that so far. right now it seems the french and british are the ones pushing this forward. what we're hearing from the u.s. which is kind of odd compared to say, the bush administration, is that the obama administration is trying to minimize its role and say we're kind of stepping back and nato is stepping in, we're playing a support role. and we keep hearing that rhetoric. fill still that a good idea? bad idea? is that what the u.s. should be doing? >> it's nice for the u.s. not to be so unilateral. that's good.

but i think there comes a point where the u.s. as the world's superpower whether we like it or not we're still the indispensable nation. things don't get done without an active u.s. role and that's why the no-fly zone and the u.n. resolution wasn't going to happen until the u.s. declared its support for it. >> ifill: where is the african union on this? they came up with a proposal which involves at least in part allowing qaddafi to stay in power and that was a no-starter apparently for the rebels. >> well, the african union put out a very clear message that a cease-fire was what was needed first and talking to both the qaddafi side and the rebel side that all sides needed to agree to a cease-fire to put an end to the hostilities on the ground and an end to the violence against civilians. this is one measure they have put forward. but clearly the opposition said it was a non-starter. i think it is urgent now to look at all the options that have been put forward by the african union and by others. clear play is happening within nato is a fractioning of the coalition.

you have some that are saying intensify the strikes, intensify the military option, arm the opposition and others that are recognizing that if you set up this trust fund and actually create the opportunity to purchase arms the costs are going to be quite great. >> ifill: how dangerous is it if indeed, nato is in danger of being fractured on this mission? how dangerous is that? >> i think it sends a very bad message to qaddafi where he can say to himself "i'm going to wait this out, the rebels tlarnt strong, the west can't agree on what the goals of the mission are. they're not getting along with each other." so qaddafi can say "well, i'm going to stay in power and try to fight this out." that's what a stalemate is. again i think we have to be very clear about this. if qaddafi stays in power that's not good for anyone, for u.s. interests for the libyan people so we have to think to ourselves how do we great point "a" to point "b", and i think contrary

to what the african union was saying, a cease-fire is not enough. any deal that doesn't require qaddafi to step down is a non-starter because he can't be trusted. he won't uphold the terms of any cease-fire and this is someone who has killed thousands of his own people. so i think we're beyond the point where we can really come to a compromise with qaddafi and his family. >> ifill: what so what does nato and the u.s. do? sit on the sidelines and hope qaddafi spontaneously combust internally or there something they can do to force that issue? >> well, i think there can still be a lot of pressure put on the qaddafi machinery. remember, qaddafi, while he has a lot of weapons and money is still very much allyed to a machinery that's kept anymore power for the last 42 years. putting pressure on those forces are critical at this moment. but it's also important to keep negotiating, understanding that the pro-democracy forces have to have... >> ifill: let me interrupt you.

negotiating with who, exactly? >> well, that's a complicated thing because clearly the pro-democracy forces have many different spokespeople and it's quite unclear with whom on that side as well and on the qaddafi side the whole issue of credibility and legitimacy of qaddafi is very much at play as well. so it's actually trying to figure kout there be a road map in this complicated mess essentially that brings really all factions still toll the point where there's an exit strategy and a movement beyond this impasse. >> ifill: let me ask mr. hamid, negotiating with who? >> well, that's the problem as emira said. i think what we have to look at here is qaddafi is not going to step down. that's the only way we can have a real compromise. maybe there's some way he'll change his mind and get to that point. >> ifill: but you can't plan on that. >> you can't plan on that right now. so i think we have to... no one should take military action lightly and intensifying the

strikes. no one likes that, and that's going to generate opposition in the arab world and so on. but i think if we're in let's see this mission through and be serious about it. i think the bob with the u.s. is we have half-measures. we step? but we're not really sure, we don't know what we really want. now it's time to be clear and say to the international community "this is what we are trying to do. these are the goals of the libyan mission." let's be clear about what the u.n. resolution said. it said all necessary actions to protect civilians. and from my standpoint, civilians will never be safe in libya as long as qaddafi's in power. >> ifill: do you agree with that? that the u.s. needs to step up? >> well, i think we're having this dualialogue here. in the midst of a conversation about austerity meche yours, about cuts to health care and education and housing i think we have to really think about what would be the cost of yet another full speed ahead military

engagement that is unending for the u.s. i think we have to really be cautious what military intervention means. do we continue 800 sorties by nato, over a hundred a day by the u.s.-africa command aftercome. clearly stlez a cost and i think we have to really weigh the cost to the long-term issues which ultimately will need a political resolution. >> ifill: finally, before we go, we got into this, the u.s., because the president said this was a humanitarian crisis which needed to be averted. all this time later has the crisis been averted? >> well, i mean, this is the reason that the u.s. had to act. qaddafi's forces were advancing toward benghazi and if we stood by and did nothing thousands of people would have been massacred. >> ifill: now they're advancing towards misurata. >> and that's why we have to stop qaddafi forces from doing that. to me it was a straightforward humanitarian argument. would we as americans be comfortable... when we have the

ability to act, again, we are the u.s. we're not some random country elsewhere. we had the ability to act and if we didn't, the world would have said the u.s. stood by while thousands were massacres. >> ifill: very briefly. is the humanitarian effort still on sghoing >> the hue tarn effort has not been averted. if anything you have attacks that are actually... bombs landing on civilians as we've seen reported but you have a refugee crisis that is escalating everyday. you have also internal migrants, internally displaced people that are really in harm's way. so the humanitarian crisis remains and yet as we see, the military solution has not brought an end to the crisis. >> ifill: emira woods, shadi hamid, thank you both very much. >> thank you. >> lehrer: finally tonight, human costs from china's industrial revolution. special correspondent jeffrey kaye reports from eastern china for our global health unit. >> reporter: low wage workers in china's industrial heartland are increasingly speaking out about labor conditions.

workers at this factory say that in 2009, they were poisoned making iphones. >> ( translated ): i want to tell all the american consumers the story behind the iphones. we made iphones with our health. >> reporter: interviewed in a dormitory for factory employees, these workers say they cleaned iphone screens using n-hexane, a toxic chemical made from crude oil. >> ( translated ): i use my left hand to hold the iphone screen when it comes down the work line. and with my right hand, i used a cotton cloth dipped in hexane to wipe the screen. >> reporter: independent studies from around the world have determined that the chemical the workers used, n-hexane, causes neurological damage ranging from dizziness to paralysis. those symptoms compare to ones these workers say they suffered. >> ( translated ): i have sweaty feet and hands. i feel very tired.

>> ( translated ): at the very beginning, i didn't know i was sick. i st felt weak and tired. then slowly i found it difficult to walk or go up the steps of the bus. then one day i fell over and decided i needed to check what was wrong with me. so i went to a hospital. i went to many hospitals in many cities. i eventually became very ill. i couldn't walk. i couldn't wash my hair. i had become very weak. >> reporter: is there anyone else here who was hospitalized? how long we you in hospital? >> ( translated ): from november 2009 until july 2010, so about eight months. >> reporter: their employer is a subsidiary of the wintek corporation, headquartered in taiwan. >> wintek ranks number one among small to medium sized display manufacturers.

wintek also has the second >> reporter: besides supplying apple, wintek also makes touch screen panels for nokia, garmin, and other companies. >> wintek lights up displays that grant oncoming wishes. >> reporter: the case of the iphone workers has shed light on some of the human costs of china's rapid industrialization and prosperity. the nation of 1.3 billion people is transforming itself, turning increasingly into a country that consumes as well as produces goods. for example, apple's four stores in china, including this one in beijing, are on average the firms most profitable. china's increased wealth has raised living standards, although the nation faces a growing gap between rich and poor. at the same time, authorities struggle to balance the needs of

industry with the welfare of the environment and workers. to ma jun, a prominent environmentalist, wintek and apple illustrate a troubling pattern in the global supply chain. his beijing based organization, the institute of public and environmental affairs, tries to track china's growing problems with industrial pollution and worker health. >> wintek represent the fact that china is now the workshop of the world, we're manufacturing for the entire western world and while we are exporting all this cheap products overseas, millions of workers are exposed to something unhealthy, working conditions. >> reporter: wintek employees went public about their grievances in january 2010. although china officially bans strikes and independent unions,

worker protests are common and in a several-hour walkout over a wage dispute, the wintek workers also complained about their exposure to toxic chemicals. last may, wintek announced it had discontinued the use of n- hexane, had provided treatment as well as compensation for affected workers, and had stepped up monitoring at the factory. >> apple's response is very minimal, if not totally non- responsive. >> reporter: over the years, ma has complained to many multi- national corporations about their treatment of workers and the environment, but he says apple stands out for being particularly unresponsive. >> we're... we're not trying to single out any single company. apple singled out itself through the process by shutting down the door of communications entirely.

and so it's unique among all the, all the i.t. brands. >> reporter: both wintek and apple declined our interview requests for this story. but in february of this year, apple issued a supplier responsibility progress report. it said in 2010, we learned that 137 workers at the suzhou facility of wintek, one of apple's suppliers, had suffered adverse health effects following exposure to n-hexane. apple called the incidents a core violation and said it had required wintek to fix their ventilation system. the report added apple has verified that all affected workers have been treated successfully, and we continue to monitor their medical reports until full recuperation. but the workers here say their recovery is slow. this man says his symptoms persist. >> ( translated ): the specialist in suzhou hospital

said i need treatment immediately. but i went back to my company and they said i don't need to. so there is a dispute going on between the hospital and my company. >> reporter: why do you still work here? >> ( translated ): i couldn't get a job anywhere else because i have this occupational disease. because i have this disease, i wouldn't be able to get health insurance anywhere else. >> reporter: apple says wintek has covered the costs of medical care for the workers, but advocate debby chan says apple should do more. >> ( translated ): apple owes the workers an apology and a remedy. >> reporter: chan is with students and scholars against corporate misbehavior, a hong kong advocacy group that, for six years, has researched worker rights and safety issues. what more remedy do you expect? >> it should at least cover the long term health impact to the

workers because the workers worry that if they leave the factory, if their health deteriorates, that nobody will be responsible for them. >> reporter: for its part, apple, in its report, promised to better police its suppliers. it said it was requiring 80 facilities that were not properly storing or handling hazardous chemicals to change their policies. >> lehrer: jeff's next report will focus on reforming the healthcare system in china. >> ifill: again, the major developments of the day: president obama called for cutting the deficit by $4 trillion over 12 years with spending cuts and tax hikes. but on "the newshour", treasury secretary timothy geithner said there is no plausible way to cut the deficit without raising taxes. republicans strongly oppose higher taxes, but geithner said, "we are closer than people think." and to hari sreenivasan for

what's on the "newshour" online. hari? >> sreenivasan: there's more on the president's plan for cutting deficits and a look at the winners and losers in the last- minute deal on this year's budget. and on "art beat," jeffrey brown talks with the founder of the jazz label, impulse records, turning 50 this year. all that and more is on our web site, newshour.pbs.org. gwen? >> ifill: and that's the "newshour" for tonight. on thursday, views from the right and the left on president obama's deficit-cutting proposal. i'm gwen ifill. >> lehrer: and i'm jim lehrer. 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: >> oil companies have changed my country. >> oil companies can make a difference. >> we have the chance to build the economy. >> create jobs, keep people healthy and improve schools. >> ... and our communities. >> in angola chevron helps train engineers, teachers and farmers; launch child's programs.

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