consideration of tax reform with former senator bill broadly. martin feldstein of harvard and david leonhardt of the new york sometimes. >> it's the same thing as saying we want reallyevere cuts to social security, medicare a the military. and the question is when push comes to shove, which path is the party going to take. >> charlie: tim comes to assess what's going on in iraq today and what happens to american troops. >> there's this great sense on the streets of this understanding that their country is so fragile they still need u.s. presence. the occupation ended a long time ago. there's this pride that comes into play where they just want americans gone. their lives haven't become much much better. >> charlie: a program note,

the actress vera farmiga will be seen at a later te. if you've had a coke in the last 20 years, ( screams ) you've had a hand in giving college scholarships... and support to thousands of our nation's... most promising students. ♪ coca-cola 5-note mnemonic ) every story needs a hero we can all root for. who beats the odds and comes out on top. but this isn't just a hollywood storyline. it's happening every day, all across america. every time a storefrontpens. or the midnight oil is burned. or when someone chases a dream, not just a dollar.

th are small business owners. so if you wanna root for a real hero, support small business. shop small. captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> charlie: tax reform is an age-old dispute in u.s. politics and rarely end with that ran court. the debate surrounding taxes is again front and center. it was a key stick point in the recent debate overi the debt ceiling, further discored will

continue as a 12-member congressional committee look for revenue increases and spending cuts. on monday the billionaire investor weighed in the op ed and "new york times" called for increased taxesf the super rich. president obama reacted to mr. buffet's opinion that day. >> warren buffett had an op ed where he said we've got to stop coddling billionaires like me. [applbe&e] that's what warren buffettñi sa. he pointed out that heçó pays a lower tax rate than anybody in his office, including the secretary. he figured out that his tax bill, he paid about 17%. and the reason is because most of his wealth comesrom pital gains. you don't get those tax breaks.

you're paying more than that. now i may be wrong but i thinkçi you're a little less wealthy than warren buett. that's a guess. the point is if we're willing to do something in a balced way, making some some tough choicesn terms of revue cuts and some folks who have done very well even in a tough economy, weñi cn get control of our debt and ficit and we can start still investing in thingsike education, and basic research and infrastructure. they're going to make sure that our future is right. >> charlie: joining me here inñi new york is bill bradley a former senator from new jersey. 25 years ago he was instrumental in forging a bipartisan tax agreement with president reagan. party feld stein is economic add viertsz. from washingtonçó d.c., david leonhardt. a columnistñrçó for the new york sometimes and won a pulitzer

prize for reporting. i am please to do have each of them at this table and in washington to talk about taxes. but i want to begin with the question, what do you think of warren buffett's op ed and his appearance on this program or the core of his argument that the rich, the super ch are being coddled by washingto >> i think that just take a look at some numbers, okay. if you have dividend income, which he reported, so he has 100,000 shares, $1 dividend and that's a 15% tax, that's all, right? not really bause you're the owner a company. the company was already thoracicked -- taxed before you got it. that means you taxed 125,000 down to 100 by the corporate tax and then you have your own personal income x which is 15%. that's true. but then state and local is 12. so your 125,000 is 73,000. to do those that have more pay

more. yes i think that's probably the way to do it. i'm not sure what he suggested was the only way to do that. you can also make deductions worth less for people in high incomes by allowing the deduction to be against a lower rate as opposed to the top rate. charlie: martin feldstein, what did you think of warren buffett's op ed. >> he wanted to range the percentage points with people on income over a million dollars. that's a small group of people, about 300,000 people. if you actually did that, you would raise less than one half of 1% of gdp in additional tax revenue. that's not a way of really dealing with the fundamental problems of the large fiscal deficits that we face. >> charlie david leonhardt. >> of course the president's proposal goes much further down the income distribution. >> charlie: i want to get to

t$date, the buffet proposal. >> setting aside warr buffett, the fact most people pay a higher tax rate than middle class people or lower income people. for a variety of reasons. of them have more garden variety income than warren buffett does. but having said that, the tax rates on the rich and very rich have fallen more than they have for any other group than they have over the last generation. and those are also peat pull who have gottenñi the biggest pretax raises. if you're looking relative to where we a, where we've been historically, it is true the faxes on the rich and very rich are quite low right now. and that cannot by itself, as party was saying solve the deficit or come anywhere close tight. but there is enough income there that canñr make a substantial >> charlie: now we come to this segment. what happened when you worked hard on tax reform. what did you create and what's happened to it in the years

since? >> well tax reform like most laws are like castles next to the ocean. they wash away. what we did then wa we crafted a bill that attracted republicans and democra. we lowered tax rates, which is what republicans wantedand to pay for that we eliminated loopholes. by doing that we got the tax rate fromñr 50 to 28%. the result was, it was revenue neutral,ñr didn't increase the deficit and it also didn't reduce the deficit. and that people in the upper income ended up paying a higher percent of the total income taxes than they did prior to that. why? because they were availing themselves of the loop holes that lowered their tax rate and left the rest of us who didn't use those loopholes paying a higher tax rate. it was i think an example of bipartisan support and içó think the economy benefited from that. >>harlie: and so what what you do today if the president came to you and said okay, you're my man on tax reform.

i nt to continue the fight, what should i do? >> well, i would say first, mr. president, how committed are you to it because you need a president who is really committed to it. it's not easy to take on special interests in washington what which is what you have to do. and will your secretary be in the financial negotiating. who do you have in congress in the finance committee and ways and means committee. they he to believe that their political future is furthered by tax reform. then if have you some zealot out there. >> charlie: i talked to my sick, i talked to the chairman of the house ways and means but he's interested in -- >>irst of all you have to define what you mean bxó tax reform.ñi it means different things for

different people.ñi do you mean revenue neutral, cutting rates, loopholes or increasing or decreasing the deficit. that was 198 6. 4nor cutting more loopholes reducing tax rates which will rules the budget dicit. so y have to define specifically what it is. otherwise you're going to get up on capitol hill if you're vague and you're going to get rippe apart by all the interests and all of the powers that will be trying to shift things around. so i think it's very important to put out a very specific proposal as to what he means by tax reform. and then there will be reaction to it. he can then adjust and come back with a second version thatill be the version that he will think of a politics hound to get it past. >> charlie: what do you mean by tax reform. >> i mean simultaneously lowering tough tax rates and broadening the tax base by going after some of the tax expenditures.

these features of the tax law, special deductions, special exclusions that reduce tax revenue. remarkable thing about the 1986 tax reform that bill was so critical in getting through, thatax reform bringing do you know the top rate from 50% to 28% led to a very large increase in taxable income of high income individuals. so it's possible to raise revenue and at the same time to lower tax rates if you combine it with a limit to e t exnditures that areçó in the tax code. >> charlie: davidthis question i've aske often on this program, we even flirted with it earlier. do lower tax rates and reducing

deductions generate economic growth? =economic growth but they don't pay for themselves. so if you look at the bush tax cuts, for example, the overall amount of revenue that the united states government was taking in after the bush tax cuts fell quite sharply after the tax cuts. so it wasn't the case that we got fast enough growth after those tax cuts to pay for them. but there certainly is a component in which tax cuts particularly of the kind that we're talking about here, if you do tax reform in which you simplify the code, can help boost economic growth. the problem is given the size of our deficit we probably can't go to this and say we're going to have revenue neutral tax reform, and we hope that in the long term that will pad so much economic growth that itçó will make a meaningful contribution to our deficit f we want tax reform to reduce the deficit in the political current environment it's hard to see how we're going to have the time or space for tax reform that does anything but reduce the deficit.

then it probably needs to close more loopholes than it does bring downates in terms of the dollar figures. >> charlie: is what bursting bolz wanted to do and senator simpson and what the gang of six wanted to do, essentially the the right rectdirection bulb they cp homes d that's how they cut to reduce the deficit. let me get back to my point. if the fax rate is 35%, and i have a mortgage, i dedu!: the interest on that mortgage and i save $.35 of every dollar that i pay in my mortgage off my taxes. if you instead limit to that deduction to the 28% rate, i only save 28% and that means those who have more will pay more in taxes. and i think that those are the kind of things that the simpson bolds commission talked about.

>> charlie: and the gang of six. >> yes, the gang of six. same basic thing. but you have to have a set of principles if you' going to get into this field because it is land mine of political special interest. so you have toeasure what you're doing against a set of prinples such as do you believe the market is most efficient allocator of resources. yes. beubl equal incom should pay about equal taxes. yes. do you believe those that have more should pay more. yes. those are the three pencils against which you would measure tax reform. >> charlie: marty. >> i think what you have to recognize the exclusion for employer payments for health is not just an issue for high fact taxpayers. they distort and cut revenues substantially.

if you just focus on people whose tax rates are above 28%, u get a little bit of revenue but you're not really dealing with the problem. so i think what nee to be done is to put some kind of a general cap, a general limit on the extent to which anybody can benefit from these tax expenditures. >> the real problem here is politics. i mean, we could put into a room some really thoughtful conservative economists and some oughtful liberal economists. we could close the door and lock them up for a day or week certainly and they could come out with a really nice tax reform plan that was revenue neutral or that raid some revenue, you name it. and i think they could compromise and agree tight.ñr the problem here is not only are there special interest defenders of these tax holes which is a big problem. but also a lot of these are politically popular. when you look at what are the biggest corporate tax breaks that are many of the things that president obama likes to run around talking about as being the good things. they'rethe tax break for

research and development. on the individual side there are things like the mortgage deduction that people love. and so this is really a question, this leads right back to 1986, this is really a question of how do you figure out a way to make the politics of this work when once you actually g into specifics they are so hard. >> i'll give you an example -- >> that's why you have to cut tax rates at the same time. and people, yes they love the mortgage deduction but they could be happier with less mortgage deduction with a cap on the size of the mortgage deduction if at the same time their tax rates were reduced so they had more of their encompass to spend on the things they want. >> charlie: do you think that would have been sufficient for peat -- the people who are members of the tea party who are very much against the dt ceiling talks? >> i think you have to separate the pure politics of positioning on taxesñi versus spending from

the substance. to me, the idea of reducing spending as the key way to reduce the deficit is right. but i have to say that a lot of the spending is spending that is done through the tax code. and that was the great point emphasized by the bolz simpson commission. if you go out and i buy low, high efficiency pool i get a tax break. that's a social of subsidy. it's a form of government spending and the tax law is full of those things. and if we cut back on those, then we can have lower tax rates and raise revenue. >> i agree with what david said. you have to clearly understand where the mon is. the money isn't the tax credit for families of alzheimer's patients between 70 and 85 or

some narrow thing. the big money is in mortgage deduction,ñr in property tax reduction, in charitable contributions, in the exclusion from income for healthcare, the exclusion from income to pension build up and life insurance. those are the big dollar amounts and unless you're willing to really tackle those, you are not going to get sufficient revenue to lowerñi rates and you're certainly not going to get sufficient revenue to substantially reduce the budget deficit. >> charlie: suppose the president comes to you and said bill let's go shoot some baskes and then he comes back and says economic growth. you still got that jump shot, don't you. so then heays look, tell me my goal is creating economic growth. more so than the deficit. that's what i want to do between now and the next election. >> you increase wages and

salaries by 1% and you have $15 billion more in the federal treasury. so if more people are working, more people are paying taxes. the most important thing is to get more people working in america today. there are 25 million americans who are looking or don't have a full time job. >> charlie: how would you nd jobs for them. >> i would the following, charlie. i would say to every company in america, if you hire additional workers and don't lay any off, that the federal government will pay 20% of the salary wage compensation of ose workers. and will be done on a first come first serve basis. and so that means if you're a company, you will hire another worker only if you think it can add productivity because you're going to pay 80%. do you know what, if nobody shows up, we're not worse off than we are now and we won't spend any taxpayer money doing it. i think this is the most targeted approach to get more jobs in america.

i do it for 50 years, limited to $50 billion first come first serve basis. >> charlie: david what do you think of that. >>hat's the approach a lot of economists like. because so far it's across the bored idea saying you don't have to pay some portion of your payroll tax for existing employees. the problem is not so much existing employees it's getting more hiring going. from a cost benefit standpoint there's a really good argument for however you struure the tails there's a really good argument for somethin th rewards new employees. we're going to be an economy funk for a long time, that's what financial crises do. but that doesn't mean there's nothing we can do to make a difference. >> charlie: marty, how much has the political landscape changed in terms of what you can do in tax policy? >> well, i think bill put his finger on it when he talked about building castles out of

sand. there's a deal done in 1986 to lower the tax rate and broaden the tax base, and then look what happened. 28% rate went up to what, 38% under george h.w. bush and to 40% under president clinton and it's been notched up a little bit more than that under president obama. so a lot of people who would say i would be happy to make a deal, want to know whether they request ke a deal that would actually last. and so i think there's been a lot of damage done by raising tax rates contrary to the deal that was struck back in 1986. >> charlie: it was said the president always insisted he exmexed a three to one ratio between spending cuts and t increases and he didn't get it. thatñi was his argument. you saw republican candidates

for the presidency be asked a question about a 10 to one ratio. would they take $10 in spending cuts to $1 in tax increase and they all said no. >> i think the republican party is set with an ideological fervor and fever. if you looked at ronald reagan, ronald reagan raised taxes twice. he had a big tax cut in 1981. in 1982, closed loopholes and raised more taxes than any president up to that point. and he had another tax cut increase before his term was over. see that's the story that conservatives don't tell us. conservaves tell us we believe in lower taxes look at reagan. they don't say in 82 and another time during his term heraised taxes. >> charlie but he also ended up with a big deficit too did he not. >> that's because of defense. >> charlie: well that's spending. marty. >> i think the key thing in all

of this is to get people to understand that cutting snding includes the spending that isin the tax code. if we cld focus on that, if we could agree that government subsidies for healthcare or government subsidies for home improvements or other things, that those are really a form of spending, then i think we could bring on board the people who say i'm, i want to see spending cuts, not jt tax increases. >> charlie: david. >> and there's a second piece to that too. i agree, we should get people to understand that when the government foregoes revenue for some reason like these tax breaks and potentially spending. the second thing is status quo is we do not just get to continue as we have been. the fact is if we decide not to raise taxes at all, that involves radical changes to so combination of social security, medicare and probably the military as well. we have an aging society, we have a society where thank

goodness we have scientific and medical progress which allows us too much more medically than we were able to do before. what that means is the cost of government, the cost of healthcare i gng to go way way up not because of new programs but primarily because of medicare. saying we don't want anymore additional taxeswhich is certainly a legitimate position philosophically, it's tantamount to saying we want huge cuts to medicare. paul ryan was fair about that when you got down to details. when you say we don't want more tas is the same thing as saying we want really severe cuts to social security medicare and the military. and the question is when push s to shove, it's the tax reform many enomists favor we are will took have more revenue or no we're going to go down the

more ryan path which no moreñió tax revenue at l, major changes to government as we know it. >> charl: and we'll take the political risk that is inherent in that position. that's what they say. i think that's what paul ryan said. >> yes. i talked to mitch daniel, the indiana governor and we had a nice disssion you can be for bigger government or smaller government but you can't be arithmetic. if you'reçó for smart government you need the taxes that pay for them. if for the bigger government, you need the taxes to go for it. you can'tñr be for small government xes and big government programs. >> charlie: go ahead. >> the otherçó thing, marty and david make good things of points. theçó question is are the conservatives of today and the republican party tea party, whatever you want to call them, are they thexd inheritors of te legacy of ronald reagan, or are they really racal? if they're inheriting the legacy

of ronald reagan, then they'll do what marty feldstein said and say loopholes in the tax code are spending just like appropriations. and therefore they will be reasonable and we'll close loopholes and raise revenue. if on the other hand they say no, anything is a taxncrease. if anybody in america has to pay more taxes, then we're in a hopeless situation. and that leads the rest of us who don't have those loopholes paying a higher tax than we otherwise would have to pay. >> charlie: the ball's your court marty. >> i ha to believe that people will come to understandñi if we say it enough and if you explain enough and if dav leonhardt's newspaper explains it enough that people will come to understand that changing the spendingçó that is in the tax code, the special subsidies for different kinds of individual behavior that cost revenue, that those really are spending and that they ought to be put on the

spending side of the ledger, even though they technically raise revenue. >> charlie: okay then, who nailed to failed make that clear. is that the president's fault, is it john boehner's fault, my fault, is it david leonhardt's fault of that evidentual point. >> it' a relatively new idea. when i talk about it -- it's been around for decades and yet in the political discourse in washington, if i say to people in washington, tax expenditures i get a quizzical look, explain that to me, what's that all b well yeah i suppose maybe that's right. but it's not there yet and it's going to take a while to get it there but i think once people come to accept the fact that

employer encompass as bill said, the employer payments for health insurance is not included in personal income, that's a multihdred billion dollar spending progr to subsidize health insurance. and we can put limits on it. we don't have to get rid of it completely and we don't have to just limit it to the rich but we can improve the economy and raise substantial revenue if we put caps on the extent to which individuals can benefit from these tax expenditures. >> charlie: i want to get bill into this. go ahead, david. >> there's also a fairly, there's a fairly effective counterargument from grover in which he's saying, wait a second you're sayinbecause the government creates this tax break and leaves the dollar of my hard-earned cash in my pocket, the government actually has more right to that dollar than i do. and you're saying that dollar left in my pocket is no different from the dollar that the government does collect and then goes and spends on a

program. and i think that's persuasive to a lot of people. it would be interesting to hear marty's counter counterargument but that's the respons to it. >> i hear grover's argument but the estion is who go that in the code. it was a lobbyist paid a lot of moy to reduce taxes for a particular special interest climate. and the poin is, equal incomes in such a world do not pay equal taxes. if america's about fairness it's about equal incomes paying equal taxes. >> charlie: have you ever thought a flat tax was good idea? >> well, we got the two rates, 28 and 15. flat tax is not, it ultimately is not going to work. if you're going to do a straight tax other than income tax you want to look at a gasoline tax that will raise a lot of money. if you put a gasoline tax on at the same time you increase the fuel efficiency of automobiles, you could put a dollar gasoline

tax on $.10 a year for ten years and by the fifth year people would be spending no more. >> charlie: if you were running for president, would you make that part of your platform. >> i don't know. i tried that once. >> charlie: marty, let me just ask this one question because bill raised an important thing, talking about ronald reagan, a man you worked with and for. are people in the tea party saying about taxing are they the inheritors of ronald reagan or not. >> they're the inheritors of what they're evolving to. they're a new movement. they have chosen not to leave the republican party. they're trying to push the republican party towards resistance to taxes. at least they wants to make it clear to the voters that democrats are more in favor of raising taxes and republicans are more in favor of cutting spending. but i think in the end, we're going to see compromises made.

and i hope those comprises will focus on these tax expenditure caps. >> charlie: would the president and would the arguments that he wanted to make have been better if in fact he had outlined cuts and entitlements that he was prepared to make and if he had supported bolls simpson. a much more candidpproach. >> i think a president is always better with specific lutions. now, what will happen is i'll put a specific solution out there and people will attack it and he modifies it. that's how i think you dobig policy. >> charlie: you put it out there and then you modify it. >> he hasn't done that at all. >> charlie: that's the point he's making that he hasn't done that. >> but you know, in one critical area, he came close, and that is

with respect to social security he did it by a series of negatives. he said social security for the long run is in big financial trouble. we have to fix it. we can't cut benefits for current retirees, we can't hurt the very vulnerable, and things like that. but what he was basically sayin is we can slow the growth of social security. and i think that has been a theme that's been around, bill clinton explored and george w. bush explored and i would hope after this next election we can make that a central part of controllg the long run fiscal deficits. >> charlie: david leonhardt. if you look at -- go ahead. >> no you go ahead. >> crlie: i want to hear what you s then i'll ask my question. >> it's hard to know from a process perspective what the president would have been better off doing. i'm certainly open to these arguments he would have been better off getting more specific

earlier. i don't know. i think what we do know is that he would haveñi been better off, anything hwanted to accomplish he would have been better off if the economy were in better shape than it is. so i think to a great extent, the biggest mistake they've made is consistently over estimating e present of the recovery. they did it when they were entering office in 2008, they did it in late 09, they did it in the summer of 2010 and they did it again early this year. and i think that is what drives so much of the political dynamics and political discourses. that is almost certainly from a political perspective their most costly error. you know charley, the more the debate is only about deficits, the debt clint, the deficits, that's a republican issue. however, 84% of americans care about bs. you've got to change the dialogue with a specific proposal like the one i mentioned. you have to talk about econoc growth, you hav to talk about

innovation. and as long as we're stuck in this morass of will the government close or not -- >> charlie: hold it. is it an either or proposition dealing wi the deficit or aling with -- >> no, i don't think it's either or i think y can say reduction of the long term deficit wr actually create a better environment for better investments. president says andñr i'llñr leae ô-all of you with this questions bus inñr iowa and other places. he's basically saying i'm going to martha's vineyard and when i come back in september i'm going to have proposal for economic . does he have less room because of the deal he's made on the debt ceiling? >> well i think it's unlikely republicans are going to goat a $50 billion tax credit for creation of jobs. i could be wrong but that gives him the high ground. that give hills the high ground in talking about the issue that

84% of americans care about it as opposed to 16 to 20% to care about the deficit. >> charlie: martin, if you re in charge how far doing mething not about the deficit but about jobs, we got a job problem but we also have a problem with housing. ifç!:could do something about te jobs where there's a lot ofñiñi employment -- >> the real value of the home, of housing that individuals own fell about 8% in the last year. that's a very big hit to people's wealth. and of course they get nervous, they cut back on their spending. so if we don't fix the housing problem, it's hard to get confidence on the part of households and hard to get spending. in some sense what we'll really drive businesses to hire is increased spending and we're not seeing that. so yes, i would as you said, i

would focus on trying to fix the housing problem. >> charlie: okay. david, what california -- can a president do about a job. what can he do after his vacation for the country in september. >> the only thing major that looks like has a chance of passing is this extension of the payroll cut which is broad based. but because it expires on january 12, 2012, it would be a tax increase for basically everyone. there is some chance that congress will want to go along with it. >> charlie: what's wrong with -- >> other thanñi that, it's sortf hard to see politically what's going to happen so thenñi we coe back to senator bradley'sçó modl talking about mo things congress doesn't want to pass and it wille a more political thing. i do think we're,major job actif washingto%(ju the ept fewmonths. which is not the same thing as saying there's nothing washington can do but it looks like there is nothing major that

washington will do. >> you see charlie, i think the focus has to be on the broad ddle class of america. from 1973 to 209, income for 90% of americans went up 10%. so they're making less than they were in 1973 in real terms. you say why didn't they revolt. th didn't revolt because one investment is their homes, borrowed off the home, home equity loan treated it like a raise. the result was when the crash took place, they couldn't get the loan anymore and they didn't have a raise. they'rstuck and they're angry and you have to address that so you give them some sense that they're going to have a better life and a job. >> and those are people, those homeowners are, we have 75 million homeowners in the united states. we have, what, 12 million unemployed, so there are a lot

more people who would respond to a policy that said we're going to stop this decline in house prices that happens month after month all over the last year. >> how would you do that. >> the key issue the administration has not addressed is the fact we've got about 15 million people whose homes are worth ls than their mortgages. >> in that environment, people are dealing, are walking away andñr that's driving prices dow. so we have to address the problem of under water mortgages and the government can do that with fannie and freddy mortgas directly and it can do it by extending the current programs which deal with just

monthly payments to principal adjustments. i think if they don't do that, we're going to continue to see a very poor situation for housing and their for consumerring spendi. >> charlie: and therefore for jobs. >> and therefore for jobs. >> charlie: based on all the people you talked to, is there a consensus it will be very difficult for the president to develop and initiate a policy that will rules the unemployment rate below 8%? >> i think so. in part because of how high unemployment is and in part because of what a long shadow financial crises mass and in part because there isn't a whole lot that the president and leaders in congress agree on. i do think it's important to emphasize though that it's not important to say that washington is not out of sorts. you can imagine by some bipartisan land a package that could make a difference on job. it could include the payroll tax cut, it would include some o the housing stuff. it could even include a grand

bargain on health reform to the extent that the uncertainty about health reform is caing people not to hire, that could make a difference, maybe you get rid of the mandate that keeps reform as a whole. it could include increased funding for energy stuff. there's a bipartisan proposal for aei and brookings on that. we're now entering one wonk. >> charlie: and it's the political season too. go ahead. >> one last point. imagine a deal is actually struck against all tawdz. there are billions of dollars in corporate treasures are now unleashed because the certainty issue is over. we know what's going to happen on social security, defense and healthcare. you have an incentive to hire people immediately.

20% of every wage. it is not impossible that by august of 2012 that you could have uneloyment a little under 8%. >> charlie: thank you. bill bradley, thank you, david leonhardt, thank you martin feldstein a pleasure to have you here. charlie: we turn now to iraq. on monday the country experienced the deadliest die of violence this year. more than a dozen bombs went off across the country killing over 60 peopleiring many more. the attacks have renewed fear the iraq forces could get overwhelmed after the u.s. with drawvmentz it's a critical sometime that the american forces are leaving the country by the end of 2011. they are deciding whether to allow some forces to stay. with me is a baghdad bureau chief, i'm pleased t have him on this program. welcome. >> thank you. >> charlie: you followed

great footsteps from john burns and others. >> and they've all been on your show. >> charlie: indeed with great pride. so what's happening today. >> what's happening today in iraq. i'm not there of courseut everyone is sitting through t events of monday. what's remarkable is after eight years and so much money and lives lost, you can have a day like monday and nobody's surprised by it. and the recommendation is people are angry about their security forces and their government and they want to cast blame. >> charlie: when you look at the people who left iraq, have they come back in part -- >> the refugees. not very many. i did a piece on syria. more went to syria than jordan. i went to where the buses leave

for syriaand i found out the iraqis were saying it's better, so they're not come bagging in great numbers. >> charlie: what's the status electricity and stuff like that. >> when you talk to people it's the heat and electricity this part of the year. they fired the secretary minister second time in row. he did that last year as well. when i ask my iraqi guys, how much electricity, it's like four to eight hours. you see iraqis sleeping on the roof, doing anything to get out heat. >> charlie: who are the forces in contention and what was at stake. >> whatever's at stake is the future of iraq and you have this national unit, supposed national unit of government that was partly brokered by the americans last year where a secular shiite, led a largely sunni

left, he got largest votes. part of that is that he would have certain powers on this national council that s never come to fruition. the other thing that has never happened in terms of government, the completion of the government is security administrators have not been named. there's no ministry of defense or ministry how far interior. there's a functional stalemate persisting today well over a year since the elections. >> charlie: what is the conflict now when sunni and shi'a. >> on the street level you're see villages that were mixed and you'll see sunni and shi'a coming to live together. but a national political level it seems like they still identify by those sectarian lines. and there's no real politician that's emerged who sort of speaks for all iraqis who people can look to and say he's a

national unity. >> charlie: waiting for george washington. >> it will take another generation, thomas jefferson, they don't have an iraqi thomas jefferson. >>harlie: and whe is -- >> he is the one guy who has the most grassroots support on the street. he is in iran of course but maliki owes his second term o premiere at the end of the second year deciding to back him. he's come back in that period when maliki had launched those operations against the militia and he's com back as porful figure. >> charlie: they wanted him to go fther and they tort of stopped. >> yes. >>harlie: so that braise you at role of the ayatollah. >> yes, he's from that quitest sort of shiite tradition and you don't hear a lot but it's one of the stories i want to learn

about and spend some time. he came out during the elections last year and just short of urged people to vote. but he's sort behind the scenes and you don't hear a lot about him. >> charlie: the big question for me is what about iran and what role are they playing and whatole do they want to play. >> iran and iraq of course religiously they're very close, both shiite. so in the sou you'll see a lot of influence, politically they're very close because maliki has lived there. a lot of leaders in iraq have lived there out of exile. americans of course blame them for -- in june we had the most troop deaths since 2008. >> charlie: and they're supporting certain militia groups. and who are these militia groups. >> one of the problems of the brigade which is the remnants

of -- the madhi army. one is led by, it's short of a splinter group from the mahdi army. the military group will say they brout us in and they lay the weapons on the table and they'll go off the record and explain. they're seeing weapons now they were made in 2010 so these aren't weapons lying around for years. >> charlie: so what does the maliki government say about that? >> well, that's a tough decision because with the be said that answers to -- that's probably the biggest dividing issue for the americans and iraqis are saying they're getting attacked byes these shiite militia. the iraqi government is not doing enough they will say and it's sort of theituation while at the same time you have the americans saying we want to stay, we want to stay beyond 2011 but a the same time their hands are fide because they --

tied because they can't go over these groups. >> charlie: they'll make a deal for the americans to stay, some forces stay. >> i have said this alllong, and it's partly because if you talk to any litical, most political leaders, most iraqi military officials, they will privately say we need americans to stay. >> charlie: interesting thing too in relationship, not just with iran but also with syria. maliki has refused to criticize -- >> this is part -- we had other piece this week by my colleague. it was a remarkable sort of cooperation twin the maliki government and the are syrian businessmen. for many years a lot of suicide

bombers were coming through syria so that's dissipated and everybody believes iran pushing them that way. >> charlie: when you decided to take this assignment, what didyou go in expecting, what did you go in looking to answer. what was your own sense. >> i still he this idea of that romantic idea of the first draft of history. i wanted to do something different and so i just went in with that big question of what are we leaving behind, what is america leaving behind. and i had the great fortune of going at a time last year it was right before the elections so we had a bureau filled with people. i had to sleep on the couch the firs night and guys like anthony adid ask some questions and just see what's going on and go from there. >> charlie: if you can write it you're in good shape. >> i'm working on that. >> charlie: today the level of attitude about the americans

is what? not just the soldiers but the country. >> well, it's very different, you know. if you go, for example if you saw e solderrest, they're the most anti-american there. i've spent a lot of time in solder city and how they work on the street because they model themselves after hezbollah. sawedder launched this social organization and i spent time with them and i remember walking into their office a couple months ago and being greeted by the shake and he said as long as you come with a pen, you will be welcome. there's this great sense i think on the street of this understanding that their country is so fragile that they still needed an american principal, they'll say that. but at the same time they still, even low legally speaking the occupation ended a long time ago, there's still this pride that comes into play where they just want americans gone because their lives haven't become much

mu better. >> charlie: what's happening to the oil? >> the oil. the oil, they have third largest oil, some peopleay secon some say third. but they produce maybe 4% of the world's oil. and about 90% of their gdp is oil. >> charlie: but they had oil refineries. >> they're not getting oil out of the ground as much. everyone just hoped for the future. it's just a fragile thing to base the entire country on especially as i saw a couple weeks ago i went down to the gulf and the oil platform and it's basically this ocean going fuel depot. i was walking around there, someone was telling me that 85% of iraq's gdp flows through this one moment. and it was built in the 1970's. and it's just a long pipe that goes into the oil fields and you need to realize how fragile that is and how, you know, there's a

lot of worry for example that it's annvironmental disaster waiting to happen. so you have that and it's hoped for all this oil wealth so that's preventing -- >> charlie: do you need bids from foreign oil companies. >> just for services and refinery capacity and stuff. there's not very few american businesses. that's the other thingñi when yu talk to iraqis it's like we see your soldiers here, there is no business here. >> charlie: what's the answer to that. >> security and corruption. diplomatic official told me on that trip to the oil refinery, why aren't there very many american oil companies and it's well the chinese pay the bribes. americans can't pay the bribes. >> charlie: there is a heavy chinese presence. >> not heavy but in the oil, yes. in china, there is the chinese stateñi organization opening a bureauçó there. >> charlie: opening a baghdad bureau. how abou an american journalistic presence? >> there's us, there's "the

washington post." there's the l.a. times and there's the w1ri services. >> charlie: are iraqis optimistic about their future. >> not really, no. after eight years, they've had and it's not just the eight years, it's the sanctions and the dictatorship. they're just fired. there were protests in february but it was different. they weren't overthrowing their government, they were demanding better services. maliki cracked down on that hard. to this day there's still every friday a couple hundred kids gather there. they really don't have a voice in the political process. >> charlie: what do they think because you have plenty of time toçó talk to them. what do they tnk would happen if the u.s. had not invaded. >> and the arab spring happened. i asked a number of people that and they thought saddam would have slaughtered them. >> charlie: without question.

>> y. >> charlie: more so than -- >> it would have been uglier than syria. >> charlie: without the u.s. invasion nothing could have overthrown saddam. >> probably not in that time frame they don't believe. but who knows. charlie: tt was one of the arguments made, that with time. >> exactly. >> charlie: but iraqis say -- >> they don't believe so. >> charlie: is there any sentiment they're glad notwithstanding war, notwithstanding all the casualties and the toll of war that they're glad that somebody came. >> you don't hear that that often and it's a weird dynamic. i'll go on the streets and talk to people and say is your lives better and they'll say not really. i want a job, i want electricity. at the same time they're not yearning for the days of saddam, either. so it's this weird transition that i think willñr take a generation. >> charlie: what about young iraqis. >> they sort of feel they're completely stifled because there's this elite and people

who follow americ tanks. you can't look up and say they can lead the country to a better place in the future. >> charlie: this comes down to leadership. thank you tim, good to have you here. >> it was great. captioning sponsored by rose communications captioned by media access group at wg access.wgbh.org

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