>>ose: welcome to the broadcast. tonit, part two o our conversation with peter orszag, he's the director ofthe office of managemenand budget and very mh volved ma policy considerations othe deficit and alth care reform >> the sense of freefall has dissated. 're not yet in a perd of sustained economic growth. but it's so the case you can't go from minus% declines in onomic activity to rapid growthvernight. there's always a transition. we're in at trantion period. >> rose: andwe turn to foreig policy with former naonal security advisor general brent scowcroft. >> it's just apractical fact of fe that you have to deal with countries as they are not as you woullike them to be.

and iran is one of tho fficult ones and the recent events in iran have. may ve made it somewhat more fficult foboth sides to engage a diogue. but i think... i think that it's so important tt we ought to nd every effort to see ife can't succeed. >>rose: we conclude with wit technology i a conversatn withichael arringt of techcrunch. what is ggle becoming? it's almost like everybody's chasing twitte right now. and facebo clearly is. but when it comes down to it thsocial aspect of facebook, whe your friends are recommending this to you which could be products or news items and the constt loging into the site 25 time a day ising googleeeds to address. >> rose: pet orsz, grent scowcroft,ichaelrrington next.

captioning sponsored by rose communicaons from our studios in new city, this icharlie rose. >> rose:ast night we broadcast part one of our interviewith peter orsg, president obama's budget dirtor. here's part o of that coersation about the economy. as you kw with respect to the stimulus bl, the real critism-- which i'm going to come to in a moment-- i that it wa't written by cgress. that $787 billionas written by congss and therefore all these earmas came into play

and therefore in the end ofthis year you will have only spent 11% of the stimulus money. >> all right. let's dealith the recovery a becausthat seems to be blding into the health care reform debate. a couple things. >> ros bleeding in everywhere or bleeding in this table? >> no, i tnk it comesp in the sort of commentary the covery act is not working therefore heal care reform won't, eith which is a huge nons.e.c. weer the >> rose: i agreeith that. let's dealith a recovery. judging the success or flure based on thenemployment rate isisleading. the recovery act was intended to build up over time and in fact... we'll come bk to its economic affects in a second. secondly, inerms of the spendout rates, 8% of the money has already been obligated. so $220 billion, roughly 40 in tax relief and $180illion on the spending side, mo than a quarter the total hasbeen obligated. thisas intended to ramp up and

ifnything it's sligly ahead of schedule according to the governnt accountability office. thd, what is the economic impact of that? ldman chs andther private analysts suggest therecovery act addin 3% to g.d.p. in the second and ird quarrs. inther words, g.d.p.is likel to... we'll have the numbers out later is month for the second quarter, it's like to be better than at was happening in the fourth quarter of last year whe g.d.p. was fling 6% or in the first quarter of this year. >> rose: what do you expect it to be? >> private stor forecasters are expting 1% to 2% dline. and since a freefl minus 6%, let'say slight stabilizati at minus o to two, if you take the prive sector analysis of the recovery act, a lot o that difference fm minusix to minus one to two is due to the recovery act. and then t final question is why is the umployment rate not tracking that g.p. number, for example? andhat's interesting is i rst unemploymentends to lag

behind economiactivity any case, secoly, there sms to be something unusual happening in that the up employment re is 1% to 1.5%% higher based on actity activity. the traditional relationship between g.p. and unemployment seems to be oen. there are varioeasons that can be diussed but that disjuncture doesn't have anythinging to do th the recovery a. >> rose: do yo see... when you look at the unemployment rate anpeople who believe it will be at 10% and some believe it even more, what are your assumpons about what unemployment will be in 2010. >> the unemployment rates going to remain elevated for some period of time. let me try to explain why. >> rose: above 10% do you thin up to 1? >> pall volcker said pick a number orate but never both. that's we advice, especially in this kind of environment.

private sector forecasters a now suggesting that posite economic growth, g.d.p. growth, might retu in the latterart this year. for the sake of argument, let's say that is true. >> rose: does that mean economic recoveryas begun? >> yeah. >> rose: the last quarter of this yr? >>et's say. >> rose: october, nember, december. some private ctor focasters are suggting it i happen in the third quarter. >> rose: i would love to know what the directo of office and managent and budget tnks about at. >> we'll have more to say when we relee our mid-session review next mont but here'she point. if you look bk at the last two recoveries, e unempyment rateeaked a year and a half ter the recovery ban. so evenfter.d.p. growth returns, the unemployment rate still goes up fo some period of time. >> ros because it's a lagging dicator? >> becse it's a lagging indicato for several reons. onis y need g.d.p growth above.5% year before you en start creating downward pressure. and a wholeariety of reans. people... firmlike to hir..

expand hours beforthey expand new rkers. and so unemploymen lagsbehind. it going to remn stubbornly high for an extended period of timevenf recovery... even if the economic activity returns and even if the recovery act is ing as it should. >> re: there's noay to ask thisquestion because if i say toou what's an unaeptable unemplment rate... the the >> theurrent rate is unacceptable. >> rose: exactly right. bui mean what wouldbe scary to yo at the end of 2010? what would be scarely. >>he currentates areoo high the current rate are... i don' know thatit's constctive for me to us words lik "scy" but ey are unacceptably high. 10% ofhe labor force bei unemployed itoo many people. >> rose: will you begin to see a decline by the end of 20, do you think? >> again, if u accept the traditional relaonship, it uld be sort ofn that... around that time frame. >> rose: that's about the time. the beginning of 201 >> if things wor as they have historically have. but i would ain noteomething fferent is happening in the

lar market today than traditionally. >> rose: which is? >> which is e unemploymt rate is much higher than you predict sed on economic activity. itay be...ere's an interestinthing. may b disproportionally as older workers become more reliant on 401(k) plansrather than definedenefit plans, the downtu in the stock market ses to be causing people to delay their retirent. so, foexample, lab force participation rates ve increased among old heenwhile declining r younger men. in addition, o of the things that tendsto holddown unemployment is geographic mobility. there's a jobver here and you move the. the problemsn the housing market maye imimmediating that mobility. there seem to bespecial factors elevating the unemployment rate but even without those, it wou be too high. >> rose: with 20/ hindght, at do you wish you had done or recommended to the predent that y didn't do? >> that is a difcult question i meanthere are a whole

variety of tngs justn terms of policy recommendatio to the president. >> rose: in other words,hat d youo wng, is one way. or what did y fail toee? i'm ging you the value of hindght now that perhaps you could t have seen ithen you took office in january of 2009. >> frankly i'd return to what weere just discussing, which is the unempyment rate has trended higher than you wld ha expected basedon wh's been hpening to economic acvity and g.d.p and that... you know, that was surprise. >> rose: are your assumptions about the economy a little bit different or significantly different, say, from t congressiol c.b.o.? >> when we update i august, our so-calledid-session review, our assutions will be inline th private sector forecasters anthe most recen set of congressional budget offic projections for the onomy. >> rose: s you're suggesting by... within a month wall street c.b.o., office of management and budget will have ptty much the

same basis. >> roughly in lin, yes. and one of the this that happenedast time, there's bee a loof discuion about this, is when you okay down the assumptions, when the tuation is evolving rapidly, camatter. so our assumions for the februaryudget document were loed down in december. and athat time they were in lineith private sector forecasts in the intervening peod, private sector forasts kindf dehere in your rated then we we a little bit out of line. >> re: if the economy is going to begin a rovery in the lt quarter, why willhat have happened? >> i thi it will have happed for a variety reasons. ones at there's the norl business cycle. i mean, there just a normal cycle to economic activity. leavinthat aside second pce is.... >> rose: where are we in the cye? beginning another cycl or... >>o, what i wld sayis the sense of freefallas dissipated. we're not yet in a period of sustaid economic growth.

but it' also the ce you can't go from minus 6% declin in economic activity to rapid grthover night. there's always aransition. 're in that transitionperiod. the things thatould lead.... >>ose: go ahead. but how about the stimulus program? what d that contribute? >> well, again, so the ivate sector alysis that iave seen ggests that in the second and thir quarter the recovy act is addg three rcentage points to g.d.p. sonstead of minus 1% to 2%, thatould be minus 4% to 5% without the covery act. same thi in e third quarter of this year. so that's a pretty signicant impact. >> ros this question has been asked a thousand times, too. >>kay. >> rose: if you had signed the stimulus program, yes? >> yes. up? rather than coress. how would it have en different? >>t might have been diffent inome of its details. but lete try to dcribe.... >> re: if you say "notuch," at's an interesting respons >> but letmedescribe the

tension that existed at thend of last yea the gap between w much the economy could produce and how ch it was producg amounts to about of g.d.p.. th's about a trillion dollars a year. again, projectio that it might go on for more than a yearor two. so that would suggest recovery act that was $1 to $2 tllion size in terms of macroecomic necessity. onhe other hand, you start lining up all of the specific policies that spend out immediately and that he high bang for theiruck, yomay have $200 to $300 billion package. so thenou have this tradeoff. do you try to meet me of the macroenomic necessity even acknowledging some of t things you're put in pla don't spend out as rapidly as you'd like or that have less bg for the buck tn you'd like when they do spend out. and you start blding up the package to include tax cuts-- which are partially saved rather than spent--nd other provisns that spend out re slowly than a six-month period, for example. we wou upith a $700 to $800 billio package, balancing that

sort of specific progmmatic design with the macroeconomic need and a judent call that thatas about the right size. now, so of the details sure. you kn, there are particular projects... thoslast few days of notiating the details of the recory act involved saage making, but that's, again, that's always going to happ. rose: my question in other way is did you-- director of offi of management and buet-- recommend... did you rgo in negotiations wit ngress and everything else forgo immedie stimus iact, a, because congress had oer things they wanted to spend the money on or, b, because the president was dedicat to sustaibility programs like health care, educaon and clate change. >> re: no, i think, look... i guess. it's always ey to conduct this. i think we wound up in about the same size package at we had

descrid. the mimay have been slighy differt. but, look i can always npick. we got more ste fislelief than had ever been done before and than anyone would ve suggested was possible >> rose: thehrust of my questionthough, is to see what the learning experience is, not to sort of say tl me the magica.. >> theearning experice, i think, was we got the rovery act done 8 days after taking office. most economists would have sd at was possible. days afteraking office. up? most politicians, too. >> was it perfect? no,as hit in the middle of re let's get done something? and, you kw, this is a lite bit... this is too ce by half, but some of the looking back is a littleit like one of my colleagu said it's like a fifighter rescues your child from the fire and then youo and accuse the fireghter of kidnapping. it's a littleit of revisionist... we were in th middle of a seve collapse in the economy and we thought it was crucial to get something done raply. it's pretty good given that context. >> rose: i mean, the second... other th the deficit, the

biggest political estion i think now with respect to the esident and decision making is did theytry to do too much at one time? that's the secd question, and therefore build up deficit is alarng to lots of people. look, let's look at the budget deficit st as an example. the vast majorit of the budge deficit reflects the weakness of the econy which naturally uses revenue todecline and certain kindof spending-- like on ods stamps d unemployment benefits-- to inease. and theecovery act and financl stabilization efforts mitigad that downturn. nrdz, the fefighting i was discussing. so again what else should we have done? i think response was commensurate to e risk we face. i thk it's easy to forget that sense of freefal household n wealt fell by $5 trillion ithe last quarter of last yr. g.d.p. was declining by 6%. employment fell by almt two million people, two million jo. >> rose: thateems like an argument to do more and to

orient o stimulusprogram more towards immeate response. >> oy. and that's my poin the seof things that are immediately spendoutnd have high banfor the buck was maybe $300 bilon. cleay not commensurate.... >> rose: that's the max you could have gten any wayn terms of how fast you could work >> right. >>ose: do we ne another stimus? >> i think it's premature to be... again, t recovery act was alys intended to build over time and reach its peak i the laer half of this yearnd early next year. that's what's happening. we should gi it time toork. it's watchful waing is the approprie stance. >>ose: we turn to foreign policy with an anasis of the obama administration's por policy-- foreign policy so far. obama hashown a differe style fromis predecessor.

he'seen crediting with liening and improving america's image in the wor but the hard par is yet to come. ong the questions being ked are: will e president be able toeet th expectations he has set? will engagement work th countries liken iran? will strategs in ira and afghanistan sceed? joining me fm washington, generabrent scowcrt, retired air force generalhe was national security advisor r presidents ford and bush 41. i am pleased to have him back on this broadcast. welcome, sir. >> charlie, it's nice to be with you. >> rose: my pleasure. wh do you think of t president's foreig policy? >> i think so far s good. you kn, this is a many-act play, as yr iroduction indicad. and i think act one was to change the mood, chae the mood in this country and change the mood toward the country. i think he has done tt extremelwell. and so i would give him very

high marks up to now. >> rose: i aually heard him say once thathe in a way had a foreign policy simar to the foreign policy that you wer a part of with bush 4 does that renate withou? >> well, i don't have y... i'm not king exceion to any of the outlines the policies that he ha set out so far. how de it goes is ha to say. but i'm pleasantly... i recve th pleasantly. >> rose: all rig. let's tick off som of the thin. the secrary of state is aveling around the world. she's been in thaild and she' been i india and she saided in a recen speech about iran that maybe the midd east needs some kind defense systemif all se fails. is she on the right track? >> i think... you know, if our

pocy fails, weneed a lot of things. but at as i understand the policy toward iran, it is not that. the policy towd iran is t to engamehem in dioguend reason tether bh about the regionhere iran has borders on both the countriesin whi we have activ duty forces at the present time and t issue of nuclear weapon and i think that's where our coentration ought to be. >> rose: there's no question we have to deal with the administration that is i power in iran. >> that is correct. you know, i think it's just a practical fa of life that u ha toeal with countries as they are not as you would like them to be. and ir is one of those difficult os and the recent eventsn iran may have made it somewhat more diicult for bot sideto eage in aialogue.

but i think... i think that it is so importan that we ought to bend every effort to see if we cat succeed. >> rose: is there an way for a country ke the united states or countries in europe or even russia to influence the internal dynamic in iran? >> oh, think there is. not to say that it's easy. but there are two elements. e of the things thahas been demonstrated is that the iranian youth finding americas popar as almost any country in the world. th is one fact. on the oth hand, the iranian populationppears to bvery nationalistic andhmadinejad has en very successful in whipping up resentment at what he claims is demeaning licies by the united stas toward

them. so it's a complicated thg. t i think with skillful diplomacy,es, we can appeal to those forc which are beneficial to us and discourage others. >> rose: there have be a number of resetting strategy or rethinking stregy in afghanistan. general crtal, i think, has gone through even another o now. what ought beur stregy the? >> i think we have to go back and remember why we're tre in the first pce. and we were really there because the talan would not denyo al qaeda sanuary for training, equipment, and planning attacks on the west. that's why we went in. then it sort of morphed. well, there was a peri of neglect whilwe were fully cupied with iraq. th we started tothink,ell, the two are jus about alike, we immediate to do the same thing.

now we're getting back tohat fuamentally is our ise, and that is that afghanian again not be used as a sanctuary an traini ground by al qaeda and those forces determined to attack the west. i lieve now that we' getting ck on track there. and i thinke have to make afghanisn inhospitable to that kind presence. and that means tha we're really doingounterinsurgency rather than counterterror. now,hat's the differenc if your operatio are counteerror and you see a bad guy, a badeader, youo after him. and if tre is some oth... if

the are some other people killed, it's very unfortune, but you're after the bad guy if your mission coterinsurgency d you have the me situation, you don't go after the bad g. because what you don't want to do is alienate the pulation. and i think the presen team-- general mccrtal, general eikenberry, the ambassad-- they get that. and i think that the latest move, asou indicated, charlie. an i'm encouraged by it. >>ose: does that put a ceiling on the number of troops we should send ere? >> look, it's... this isot a military mission. we'rnot going to win it by mitary means. have to have some because therare parts of afghastan that a completely controlle by theadicals, not by the government but instead we need to take those partsback. but then weeed totart building up relationships with the local leadership councils,

thtribal councs, the provincial councils, find out what they need. let th know that we're there to help them run their live, not totake over and dictate to them. >> rose: this seems to be the elemenof the new stregy that came out of washington. >> well, i thi... you know, we've been leaing a lot o things all over again,charlie. you know, after vietnam, we said we, we're not going to do that again. we tore up all the things we had learned about vtnam and we had to len them all over again in iq. so i thi we've learned them now. >> rose: why do we do that? >>laughs) well,ounow, to me it goes back... secretary gates ia speech last ye said somethi i thought was very profound. and he said e've got to learn an train for the wars we are likely to fight, nothe ones w would like to fight." >> rose: is that reminisnt of e fact that generals are

always fighting e most recen war, not the future war? >> well, it's... you know, the military... the milary has a tendency to want t push techlogy. 's, after all, what we' best on. it enomizes the use of force. itives us all t advantages that we as a highly develop country have. kicking down doors in baghd, you know, is not high tech. so there is a reluctan to reduce ourlves to the low end in this fams phrase now, asymmeical warfare. but that's the kind we're facing. >> rose: wel that's where general mccrystal made his repution in part. >> absolutely. absolutely. as you loo around theworld, e chances of a high tech worl war i operation are pretty slim. the chans of more fail

states, staterecovering from vil wars,rom internal upse, bad gu here and the, that's a world that's all around us. >> rose: let me take you to the middle east then. what have... what shld we have learned and what shod the obama administration know as s senator mitchell in th region? whatught to beis mission statement? >> i believe now we'ret a state... a stage in the middle st-- and i that'm referring to the palestinian pce process-- whe we haveto change the way we approach it. we have, what, for about 50 years no been inhe process of getng the two sides to sit

down, encouraging themto talk together, offering suggestions and so on. i think time for that hasun out. and i think time for a two-state soluon is running out. an i tnk if f that's abandod it will be even more dangerous and tragi for the israelis and for th plinsians. and now i think it's te for a new approach and tha is for the united states to be more assertive. the outlines of a settlement ha been pretty clrly known by all since t end of the clton administrationand the taba accords were drawnp. and i tnk that the uted states should be prepared to put forward a proposal saying we believ this is a just and horable solution and we believe th parties should adopt

it and i think... i think we would get strong support from oufriends and allies and i think that it is what the region needs n. and i think it's, frankly, wod be good for the administration, too, to take tsssue-- whi haseen a nagging issue for so long, and it is so crucial to everything we're doingn the middle east in terms of changing the aosphere, changing the approach. because whater the countries of the region think about the palestiniansthere is a heavy sense of injtice in the region to wt's been happening. d we catch some of t blame. we can change a lot o things if we would opt a more positive forcef attitude. >> rose: andow do you get the

benjamin netanhu government to accept the eentialoutlines of theaba agreement understandin it wasn't an agreement, it was annderstanding. >> yes, itas an understanding, that's rig. i believe rst of all by pointing out the consequences of thealestinians and the arab world abandoning a two-ste solution. to me that's nigmare for everybody concerned. that means thatsrael eher has to abando a jewish stat or abandon democracy or practice ethnic cleansing. now, thosere not ver good alternives. and itfurtherill radicalize not just the palestians but thehole arabnd muslim world against t only israel but t we.

think that should be a very powerful aument. and as i say, this is not punishing rael. th isallowing and helping israel to live in peace and hopefully prosperity an iendship with its nghbors. you can't move it, so we've got change the conditions of the region. >> rose: sohat should th united state do not punish butoersuade the netou government to take that direction? >> i think we should put this t as a u.s. plan and hopefully a plan which will be supported by the quartet. d that is our european allies, thesecretary again of the united nations and rsia.

and say this, we believe, is t st solution and we would like to begin by setting out the borders this palestinn state. >> rose: and what aut hamas? >> hamas is very difficult problem. i think hamas is... wl, they're ceainly not ridin highow, but they have no particular rean to compromise. and i ink to turn into hamas as a pre-condition foraking a movement would be a mtake. it seems to me that if the process starts and i the train stts moving hamas cannot affo to be left out. so they become a is uply cant rather tn demander. and i think that's the w to get hamas bacon track. >> rose: if things are moving down the roa they'llant to be on? >> absolutely.

now, would be open to talks with hamas. i don't thinke accomplish anythi by refusing talk to pele. th's not a sign of weaess to me, it's a sign of common sense. >>ose: sogeorge mitchell shouldo see the leadersf hamas, whether they're inhe gaza str or damascus? >> i think so. that doesn't mean giving away anything. d it's not a gesture of reect or anything els or building tm up, it' jt commonsense thatou talk to people with whoyou have probms to try to dl with the problemsather than have the... your oy option some kind of force. >> rose: let me move asia and china. what your sense of what china wants to do internationally beyond economics? >> that's aomplicated estion.

i think if you go clearack in thhistory of china, that is of communist china, the chinese started outn 1949 as kind of a hermit kingdom and they believedin awe tar, we don't believe in anybody, we dot havearticular relations with anybo, we'll jus deal with ourselves. that was a case even with respect e soviet uon until president xon went the d opened up, if you will with cha. but it was openg up only in a very narrow see. that , dealt only with the coern of the two parties abt the soviets attempting a hemony in into e asian

hemisphere. now, sense then, the chinese haveopened up gradually here and there. d most noticely, for example on north korea. a decad ago if you talked to the cnese about north korea they said "well... ey would say well, theywent their way, we wentur way, we don't have much to do with themnymore, dot talk to us aut them. thenhey agreed to the space walks and nshll they said... six party talks. en initially they said we will hold thealks, wll provid th venue, you do the negotiating. now they've come a are actively participang in it. in a way the same with sudan and thearfur problem. they said we buy oil from sudan d we selltuff to em, what they do is their business, not ours. now they're gradually saying yes we recognize that ha... at there are things we can do

and should do. i thinkit's a process of at rmer deputy secrety zoellic called havingchina become a reonsible state holder. and i ink they'r movinging in that direction. but they're movin slowly and gradually become involve in ings that aren't just in their very narrow bilater econost like economics. >> rose: but on the other hand, they believe at having a strong econoc posture is essential r them being able to deal with tir internal tensions. >> oh, absolutely. no qstion about that. an that... they single mindedly since deng xiaoping declar it in 1978 singl mindedly pursued economic strenh and well-being as a way t ensure their own position and t stability of the couny. >> rose: theresident went to scow, made a speech, said that

they're going toeset relations th the russians. wh should he do t reset the relatis? i think we've made good start. it's not going to be easy because there's a lot o.. well it's n extly hostility, t there's not mu love lost beeen the two sis right now. andñi while there were...hile there we someood attempts the... george w. bush, bush 43 administrationnd he and presidt putin made some... had so good meetgs together, that didn't permeate the bureauacies on both sides. d i think the symlism of resetting the relationship is a very importa one.

if you look arod the world rit now, we have more things, i would say, with the russians where have aommon outlook than wherwe are really at odds. d i tnk we forgot what a traumatic event the en of the cold waras for the russians in tes of their political and economic positioin the world. and we sort of just bshed that aside and did what we thought was in our general interests. thout realizing that to the russianst looked like we were taking advantagef their weakness and it bred a lot of mubarak tillty >> rose: onef the interting historical questions is that after the war came down and gorbhev made thedecisions he did, did we fail to recognize the sort of insecurity of the ssians-- both the people and the leadership-- fm going to

be a great power to being athe mercy of a whole range of forces they dn'tnderstand and how does one nation instill a sense of confidence to the other so that they don't fear every move by the othernation? >> ihink thas an impoant point. and wve start outllight. presidengeorge herbert walker bush at thend of the cold war said nody lost the cold war, well won it. and wentut of hi way not to show any kind of sg superiority orny kin of gloating over the situation. buthen we tended to forget about it and we pursued things like makingeurope wholend pursuethe kinds of things to make the world the way we would like. but inhe process, we sor of forg about russia. d their own feelings. and i thi resetting the button and i would say to starte

ght to t nuclear business. because, afterll, nuclear, especiallyuclear weapons, is ere the russians are still a superper and we can reore their sen of importance and diity by starting on the bilateranuclear arms relationsh, on proliferati, on how we can promote nuclear power safely together and so on. i thk that's the place to start. >> rose: is i possiblehat we canave... we can eliminate nuclearweapons? >> well, i ink it's possibl, although i wou doubt it. what we cnot eliminate is the knowledge ofow to make nuclear weapons. and what i fear is that by

talking about a world without nuclear apons, we a in danger of neglecting the world we liven now and ying, well, let's justdo it. and wee not ready to do it now. and i think ha what we ought to do iocus on producing a situatio where nuclear weapons are never usedither by nations or stolen to be used by the bad guys. and i ink that' a much more actical thing. you know, the world was not a peaceful, happy place before nuclear weapons we developed. indeed, you know, there are me who makehe argument there hasn't been amajor war since. bui wouldn't go that f. but i think since we have conferred such awen nuclear weapons and many of our actio

have seemed to indicate ifou have nuclear weapo we'll li you alone that w need tohange the atmphere and need to put nuclear weaponsway in t backound so that there a no ciumstances under which nuclear weaponsould be used. and there i think we should start with the russians. and th bilateral relationship. >> re: general scowcroft, thank you very mh. it's aleasure always to hav you re and i appreciate you taking the time. >> charlie, i've enjoyedery much chatting with u. >> rose: back in a moment. stay wh us. rose: michael arrington is here. he's the foundernd edito of techcrunch, one of t most widely red blogs in silicon valley. tech crunch was foued in ty and w has separate sites coring specific countries and technologies. arrington ha formed acountry develop a tablet commuter

primily to use for the w. it is called the crunch pad. i'm pleased to hav him back on this pgram. welcome, sir. >> hello, charlie. >> rose: google versus microsoft. we nowhave bing, their search engine at microsoft, and chrome, which is going t be an operating system, a browser and an operating system. >> yeah, it's fascinating because you thinof google as a sech engine company which most of the revenis derived from sech marketing and microsoft as a sort of stware company. windows and offi, that's where they get their revenue. ese companies are competing head on vicusly because microsoft was search shar there's so much money it. so they've got bipg and they're trying to do ings with yahoo! and goog, i don't know if they want revenue from office and the operating system, but ty certainly want to ta that revenue from micsoft. you have them with crow mow and gole docs competing with windows and office. and ey're going at each otr's core businesses and it's fascinateing to watch. >> rose:o they really look to ha great success in that?

do ty expect to take away a lot microsoft's operating system? >> if you list to eric schmidt at google, it seems interpret serious that ty want to do innovative things their operating systemspace. i don't know what thr projections are. >> rose: there was thetory that eric was the one resiing gog ahead withhrome as an operating system. >> don't know if he resied or not but hs behin it now. ey also have android, of cour, the mobile phone operatinsystem based on linux. >> ros there's also bing. so bing got very good notices. people inhe business... e mossbergs ofhe world. >> bing is a greatearch engine. they lauhed it two months ago. it's a little too early to tell what kind of market share gains they'll have if any b it's definitely a great search engine. one ofhe problems with search--nd all the guys w do search test willing tell you this-- is oesn't matter what the results lk like if you have a testing gup blind sampling. if you put the google logo on top and ask them what they think of theearch results, they like it more than otherwise.

google just has the brand in searchnd it's going to take t of time and a lot of money. >> rose: and alot of people have toay bing wasetter. someonsaid to me this interesting pointhat google sotimes worries about if somehow microst computers, p.c.s wouldn't take gooe. does that make sense toou? >> i think that microsoft in the past h made changes to internet explor that stopped the gathering of information from the browser... by the... by web sites,he browse puts up not firewall but youcan imagine something like that. that'sart of the reason wh google decided toackfire fox to have their own browser to stop that fr happening. but i think withhe w google.... >> rose: so it wouldn't be explorer? >> right. and explorer's maet share is droppi. but i think google wants to get microsoft out of t p.c. tirely. and ty're offering alrnatives across the board to microsoft softwa, which makes that battle so fascinatin >> rose speak to m about mobile phoneand mobile technologynd where are we? >> wre in an aweso place. think back. i know y talk about the iphone

quite a bit. the hone changed. absolely changed thmobile landsce and people said, you know... some people said th apple couldn't do this and they won't dot. >> rose: because they began to seit ast aomputer in itself? >> well, s. >>ose: that's what about >>ot just that. >> rose: and it looked good and everybody wanted to ha one because they thought it was so cool. >> they figured out web surfing on a phone wita small screen that's a touch seen but they figured out theestures to zoom in a out andit's an adequate weburfing experienc that they figured out. >>ose: what about the lm pediatrics >> it's a great phone. >> rose: why is it a great phone? >>t's areat operating system. it's quick, you can have lo of alps open, it's a great operatinsystem. the hardre on the phone i ink was rushed and feels a littleheap so for me i'm sticking with the iphone. but i came closeo choosing the lm prix becse of the phical keyboard i think is

really nice analso because i feel luke i'm getng too tied to apple. >> rose: tell me what crumple pad is. >> about a year agoiealized i just want a bi iphone. i wa a comter that i can sit on the couch and surf the web witht having a weird keyboard stuck to it that doesn work when you're not sitting at a desk. so wstarted this project on techcrunch just lking about it sang we want to build this and we want help from the community and grt things happened over the course of a year. we've hired ateam, we've had lots o peoe, parers come on boarand contribute their time, their resources, suggest partnerships. >> rose: did you get venture money? well, you know, i'mnot going to answer that question. >> rose: w not? >> because i haven't... i dot want to answerhe question. (laughs) >> rose: we ha our ways, sir. >> i think tha a. ... forgettingthe crunch p and th fact that want to build at, ple is talkg abt coming o with a table computer which is gog to be a

lae screen iphone id touch. i think that a good thing. i thinkhey'll sell a lot of them. gole's new operatin system chrome o.s. is a linux-based operating system with browser on top andhe idea is you never see the operating system you never go to the desop on the comper, it goes right the browser. we've been talking about it for a year. theye been working on it for a long time. i'm not suggesting we had it first. but 's coming to market as a free operating system. and wre going tosee netooks without key boards. we're going to see computers with other input mechanismcbs evening newssides key boards or alternative put mechanisms that are think is rlly exciting stuff. >> rose:acebook versus google. is that a big cpetition? >> last tim we tald it was facebook vsus myspace. and that's not theuestion anne asksnymore. >>ose: it's wt is facebook becoming? >> right. anwhat is google becoming. it's most like erybody is asing twitter right now and fabook clearly is.

but when i comes down to it, the social aspect of facebook where your frids are recommending thingto you which could be products or news items anit's the constant st of loging into the si 25 times a day is somhing thatoogle eds to address. and right now they.. >> rose: s that's zuckerberg's argume. who better to go for a arch than youfriends? ifou know and trust. >> exactly. extly. why no >> rose: because they kw who u are and what you're like. >> some of the startups that buy affic on google search are talkin abouthe conversio rates from those.. conversion rates meaning purchase or signup that they get fr from tha purchase traff from google is good but not nearl as good as the nversion rates from cebook and twitter. so if i just sendout a link sayingwow, i just saw this movie and it's good" and you click on that, you're more likely to see e movie than you are if you click o a paid ad from google. google ivery aware of at. free sff on twitterand facebook is bett than paid ads

on ggle and that has to be freaking them oua little bit >> ros what did youo? youublished some internal financial docunts from twitter? >> there this hacker.... >> rose: inow that. >> this french g got the cuments from twitter beuse of these guest books. >> rose: what did u do? >> i'llget to it. sohat he did was he wanted to warn twitter that, you know, ur security is awful. and also he wanted to get credit for doing ts. hacks, crackers do that. soe went to the french media and a french journalist...e was told about it, the french journalist went to ttter and said what happen andwitter wouldn't respo. he dropp it came t us and said.... >> rose: who came to you? >> that this hacker anomously. he sent us all this document. >> rose: what was in the documents? >> itas ndreds of documents tan from twitter's employees' attachments to eail accounts. and it included interview schedules, peop they interviewed in silicon valley,

ominent people that work in otr companies that didn't e upt twitter. very embarrassing stuff. credit card information r many of the ployees. e-mails, inbox screenhots, executive meeting notes, financial pjections, etc., etc., etc. just the wle sort ofhing. anwe looked a tt a said e're going to post some of this. some of ite're not." >> ros like credit car numbers, youe not going to post that. >> we' not goingto post credit cardumbers orhings that wld embrass people but somef this we thoughtas pretty darn newsworthy. rticularly the financial projections and execute meing notes from the last f months. so we engaged in aialogue with our readers and we said we have these cuments we haven't decided what we'll st, probably a coue documents. we talked to twitternd sent them documentso they knew what was going on. >> rose: did theyay go ahead and post them? (laughs) >> they said.... >> rose: we have no problem with this. >> the ultime answer was we know you're going to post a couple of these d that'sokay r most of those we hope you n't. >> we said that's not a problem.

and we worke with twitternd made sure they closed up securityoles they have. it the documents were fascite bug the interesting thing toe s the discussion th was gerated around whether shld publish theor not. and there are people that ve come out, majo journalists w said it was unhical for us to this. d there we journalists who came o and said it was fine and ethical. infact, their readers derve at kind of accs. and obously i have anopinion cause i'm in the middle of the story. but taking myself out of it, it's a fascinating discussion because i know ithe old days whenhe "new york times" or e "wall stet journal" got documents like this, they weren't... thedidn't have that discussion with the readers. >> rose: it's interesting how you di it. gaging your community. >> enged them a i would say 80% of my reader sagreed wi me. >> rose: w did you d it? >> it's funny, when i make decisions with techcrunch on whetheto publi, often times thinks are played outnd i say would i do things differently

with the benefit of hindsight and there are a coue ins stas in the past where i would hav in this case i absolutelythink i did the righthing and i woul't do anything differentl >> rose: do you ow the site called loopd? >> is aming. it's a mobile cial networking. and it's a aboutocation. >> rose: wherever you are you knowverybody in your block. >> i can turn it on... i don't have my phone withe. but i can turn it on and i can see everyone around me who's a friend. mine is set up differently so i'llee everyone who wants me to see them. it's a different way of networng socially. love it. i've writtenbout this where you can imagine atime where yo wa into a barand you pull out your pne and you see... for everyone thawants you tosee it... youaugh and it funny but it's big business. everyone's picture who's the opposite sexr whatever your sexu preferencewho are is single and maybe wants to... you can see th and thatay you can go flirt with them on the phone and it helps you meet people in aar. or you g into a biness cotail setting and y see

people on your one that you've met before and main it help i don't say with eir first name. that's theind of lings that looped and otherthings are doing that's gng to chang social networkin rose: so tell me how you see the future of social networking? i mean, is i.. >> i don't kw what it is. it's hard to define. it's. if you look at facebook, it's really the plumbing bend thenteractions online beten people and helping them map to the real wor. it'sclear that people love interactinwith each other on web sites. and it's clear th facebook has been ableo get third parties to build applicaons on their plform thatleverage you having your iends sort of seeing what you're doing. and it's clear also that they can then te that... you saw what they did wi cnn ound the elections and you can coent and your frien can see you comment. that's all... it's reay fascinating. what's unclear ishether it can ally become protable over the long run. because facebook has tse massive exnses and the revees are growing ridly.

but it's unclear from the long run they c make that vastly profitableike google has. >> rose: what about the kindle space in? >> t, book reader spac is very interesting and wouldn't expect a toll sta out of i for much longer totay out of it. but amazon has bn very successful in selling kindles. timates are they might ll a million or so is year. they sell lotsof books on top of it and uss scipgss so it's a great revenue stream for them. i'm argd that amazonhould not build a hardware deve specifically, they should bud the ftware and l anyone build a kindle. these are forcing sony and barnes & noble and apple and others to come upwith their mpeting closed off book systems. i think amazonhould say, lo, wel do the books and the software but oth people build the hardware. >> rose: you take car of the hardware. techcrun, thank you. thank you very much. >> ros michael arrington, thank you ry joining us see you next tim

captioni sponsored by rose communications captiod by media acss group at wgbh access.wgbh.org ed mapp grew up going

to the movies. i ink back on my childhood and remember

how important movies we to me. at thatime, it was the only wato see the outside world. ed decid to be a professor - an expert on the impact the media. today u have television. people he at least one tv set inheir home. whatever messages cong on that screen is being extended to the eire family. now that'awesome. it can baffecting our country anculture for years to come. that's o of the reasons why puic televisn is so important, because it does assume that responsibili. ed includ his public television stion in his will. consid joining the community people who want public television to spa generations.