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Fareed Zakaria GPS

Panel Discusses Middle East; Interview with Roger Altman, Niall Ferguson; Interview with Nate Silver

Aired September 09, 2012 - 10:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

FAREED ZAKARIA, CNN HOST: This is GPS, the Global Public Square. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria.

We have a smart show for you today. We'll talk mostly about what else has been going on in the world outside of the Democratic National Convention.

Things have heated up with regard to Iran and Israel, with Syria, with Afghanistan. I've got a great panel to discuss all of it; Anne- Marie Slaughter, Richard Haass, Martin Indyk.

Then, a different spin on a familiar question in the presidential campaign, will Americans be better off four years from now? One of the world's top bankers, Roger Altman, thinks so. Harvard's Niall Ferguson isn't so sure.

Next up, can't we just predict the election results now and be done with it? I'll ask Nate Silver, the New York Times' brilliant statistician.

Also, the crisis you don't know enough about that could have a big impact around the globe.

But, first, here's my take. Both conventions are done and what can we say about the upcoming campaign and election. Well, one hardy prediction about American elections remains likely to hold this November.

The winning party will be the one that is more genuinely optimistic about America even in the midst of a struggling economy. Now, it used to be that the Democratic Party was the glum party.

In the 1970s and 1980s, Democratic Party leaders often criticized the country relentlessly for its behavior at home and abroad, for its inequities and injustices, think of civil rights and Vietnam. "The Democrats," Gene Kirkpatrick said at the 1984 Republican conventions, "always blame America first."

But, today, it is the Republican Party that often seems angry with American.

(BEGIN VIDEO CLIP)

MITT ROMNEY, GOP PRESIDENTIAL NOMINEE: We deserve better.

(END VIDEO CLIP)

ZAKARIA: Read the best-selling books by conservatives these days, watch Fox News or attend a Tea Party rally. They are filled with rage, often combined with a powerful nostalgia for an America that has gone away.

Ronald Reagan was the essential optimist. He advocated radical change from the 1970s liberalism, but he was very comfortable with America of the 1970s, from Hollywood to California in general when he was a popular governor.

Reagan was said to be three parts optimism and one part nostalgia. Recently, the formula seems to have been inverted. In 1996, Bob Dole gave an astonishing convention speech that attacked those who believed that the United States had improved over the previous decades.

(BEGIN VIDEO CLIP)

BOB DOLE, FORMER SENATE MAJORITY LEADER: I say you're wrong and I know because I was there and I have seen it and I remember.

(END VIDEO CLIP)

ZAKARIA: Well, so much for progress on civil rights, women's rights, or even progress towards building a more open and meritocratic economy and society.

Anger and nostalgia are at the heart of the Tea Party. In their book, "The Tea Party and the Remaking of Republican Conservatism," two scholars, Theda Skocpol and Vanessa Williamson, use polling data, surveys and interviews to explore the roots of the movement.

Skocpol and Williamson describe a segment of the electorate that is, in general, older, white, religious and deeply troubled by America today.

"It's so sad the way the country is now," they quote Bonnie Sims of southeastern Virginia, who then explained that values like hard work, thrift and obedience to the law are no longer taught in the U.S. "You have to select English" for daily transactions, Sims explains to the authors.

The Tea Party love America, but it's an America that is an abstraction or a memory. The nation of today, with its many immigrants, liberated women, increasingly liberated gays, myriad government programs, open trade and a Spanish-language option on every phone tree, seems to scare them.

For many conservatives, the rot set in a while ago. Ron Paul and his supporters argue, for instance, that the creation of the Federal Reserve in 1913 marked the beginning of the fall.

Others see the New Deal as deeply illegitimate. For many, the culprit is the social changes ushered in by the 1960s, but these are shifts that have been with us now for 100 or 75 or 40 years.

And these shifts broadened opportunities for women and minorities, gave income support to seniors, helped create stable economic growth that has been the envy of the world. At some point, the changes become part of the fabric of the country. Can you really love America and hate so much about it?

The staunchly conservative senator, Lindsey Graham, gets it. "We're not generating enough angry white guys to stay in business for the long-term," he explained to the Washington Post recently.

The Republican Party has an important and powerful economic message for America today. But to sell it, it needs to convince voters that it understands and appreciates America today.

For more on this, you can read my column in this week's Time Magazine or on Time.com. Let's get started

America's focus has been directed even more inwardly for the past two weeks of political parties in conventions, but, in the interim, some of the world's biggest troubles have gotten worse; ever escalating violence in Syria, tightening tensions between Israel and Iran and more insider attacks in Afghanistan.

What to make of it all? I have three great guests to offer answers; Richard Haass and Anne-Marie Slaughter are both former directors of policy planning at the State Department. Richard is now the president on the Council on Foreign Relations. Anne-Marie is a professor at Princeton University.

Martin Indyk was the U.S. Ambassador to Israel and Assistant Secretary of State for Near East Affairs. He is now the director of foreign policy at the Brookings Institution.

All right, Syria first. Anne-Marie, do you think that we're at a situation now where the United States is going to be forced to intervene? So far, it has found a way to stay out despite providing some help to the Syrian rebels.

ANNE-MARIE SLAUGHTER, PROFESSOR, PRINCETON UNIVERSITY: I'm -- I think we are losing time and losing opportunities daily. It's now gotten to the point I think actually we ought to be supporting a no- fly zone. You have people, even like Bill Perry, the Secretary of Defense under President Clinton, calling for a no-fly zone.

The numbers of refugees that are streaming across the borders are now at tens of thousands, hundreds of thousands. The brutality just keeps getting worse.

We are really risking all out war in the region through Syria and we're missing an enormous opportunity to actually shape what happens after Assad falls.

ZAKARIA: Can we intervene in a smart way?

RICHARD HAASS, PRESIDENT, COUNCIL ON FOREIGN RELATIONS: Well, the answer is we already are intervening in all sorts of ways with sanctions, with various types of intelligence support.

I think the real questions are two; one is whether we intervene with providing arms and it's a mixed blessing. On one hand, you strengthen the people you want to strengthen.

On the other hand, you lose some control and it could make the aftermath that much more difficult. The other is direct military intervention whether it's no-fly zones, no-drive zones, all the way up to, conceivably, U.S. forces.

And the question I think we have to ask ourselves is will it make a bad situation less bad? Who is it we're going to be helping? What kind of responsibility do we take on? If a little bit of intervention isn't enough, do you then move to a lot of intervention?

ZAKARIA: And how do you answer those questions?

HAASS: It's one of the reasons I'm nervous about going down certain paths. I've actually moved a little bit. I'd actually be more willing now to provide arms to the opposition so long as we're very careful about which opposition forces we do.

I understand all the down sides, but this is a situation where there's no good options anymore and I think Anne-Marie makes a fair point. The passage of time is not improving the situation.

We're not getting better options every day that goes by. This regime has more staying power than many people thought. The degree of external support from Russia, Iran and others is quite robust.

So I don't think you could sit here and say the course we're on is going to work and because of that then I do think you've got to put on the table some options that, up to now, we said we don't want to tackle.

ZAKARIA: Martin?

MARTIN INDYK, DIRECTOR OF FOREIGN POLICY, BROOKINGS INSTITUTION: Well, I think there needs to be a broad strategy with a number of branches for such an intervention.

We need some kind of international consensus that's going to support this. We need to be working much harder with the Russians to try to move them because, at the moment, they're sticking with Assad and vetoing any efforts to the U.N. Security Council.

And the future for them is only going to get worse and so, at a certain point; they're going to realize that all their worst nightmares are going to come true unless they start to shift their position.

The Turks are now increasingly anxious about -- not just about the humanitarian flow of refugees, but about the way in which the Syrian Kurds are becoming more autonomous.

And they're much closer to the PKK, which is a terrorist power of the Kurds that is causing problems for the Turks. So they are coming much closer to intervention and I think that's what we've got to look for.

No-fly zones are important for humanitarian reasons, but they're only going to work if there are boots on the ground. It's not going to be our boots on the ground. The American public will not support another war in the Middle East after the last two.

And so the question is will the Turks move in? They will need a no-fly zone under either NATO or U.N. Security Council cover if we can move the Russians. And that creates a context in which I think we've got much greater chances of affecting the outcome.

HAASS: Well, I wouldn't be in favor of a no-fly zone unless it was part of something much much larger, including a massive ground deployment. Simply to control the air, but not to control the ground I think would be a big mistake.

Secondly, this can't be the centerpiece of American foreign policy in the Middle East much less the entire world.

You've got Israel and Iran which is potentially a much larger contingency. We've got the Secretary of State off in Asia and we've got all sorts of questions with China's role, South China Sea and so forth.

This has got to be looked at in context and I would simply say we have interests here, but I don't think these interests necessarily rise to the level of vital.

ZAKARIA: All right, we've got to take a break. When we come back, we will ask the question will Israel attack Iran, coming up next.

(COMMERCIAL BREAK)

ZAKARIA: And we are back with Richard Haass, Anne-Marie Slaughter and Martin Indyk talking about the world, the Middle East and, now, Iran.

Martin, is Bibi Netanyahu going to attack Iran?

INDYK: Famous last words, but I don't think so in the next couple of months before the election. So, as we get into 2013, either an Israeli or an American attack seem to me more likely unless the Iranians make a strategic decision to give up their nuclear weapons aspirations. ZAKARIA: So then why has he -- why has the rhetoric from Israel gotten a little harder in the last few weeks?

INDYK: Because I think that there are two things happening. Number one, the Iranian nuclear program continues notwithstanding sanctions -- crippling sanctions and an effort at negotiations.

They're moving closer and closer to the threshold. That makes the Israelis more and more nervous and they're adding to that this rhetoric of annihilating Israel so any Israeli prime minister has to be nervous about that situation.

There's potentially a window of opportunity before our election would jam the president to be, you know, fully behind Israel. I mean he'd be behind it anyway, but there may be a calculation there.

But, beyond that, there's also the sense that the Israelis have that the more that they threaten to use force, the more likely that the international community will get more serious about pressuring Iran to give it up.

So there's a combination to circumstances here that leads to this to this periodic threatening to use force. But, as they get closer and closer -- Iranians get closer to the threshold, the more likely it becomes.

I don't think that the prime minister is going to act, these are famous last words, but, in the next couple of months because he knows the president feels there's still time for negotiations.

And he knows that he's going to have to pick up the phone to the president after he strikes because the United States is going to be critical to the aftermath.

ZAKARIA: Do you think that the Israelis can not act? At this point, they have drawn so many red lines about this that unless the Iranians really, completely cave, the Israelis seem to have boxed themselves into a corner where they will act.

HAASS: Well, they cannot act before the American election, but I would say, probably, before the end of 2013, if things have not changed fundamentally, if the negotiations are essentially where they are now, which is nowhere, and if Iran continues to enrich uranium at various levels and the rest, I would think the pressures then will be extraordinary on either Israel or the United States to act.

And I think the Israelis have to say can they live with that kind of Iranian capability and I think most Israelis will so no. And, then, they have to make the bigger decision, in some ways, are they prepared to trust us to act.

And, at the moment, I think they're not sure. They're not sure about President Obama. They're probably not sure about the United States. My hunch is, as a result, we've got some time.

But, before 2013, again, I think the odds go at least even, possibly higher, that either Israel or, quite conceivably, the United States will feel compelled to act at the risks and costs of all that acting, as great as they might be, are potentially outweighed by the risks and costs of not acting.

ZAKARIA: Do you think that the United Sates is going to act?

SLAUGHTER: I think if the United States does act, it won't be about the ability to deter Iran or not, I think it'll be about the implications for other countries proliferating in the region. I think this president came to power talking about a global zero, wanting to actually get rid of nuclear weapons. If Iran gets a nuclear weapon, Saudi Arabia is much more likely to get a nuclear weapon and, then, you're looking at both Egypt and Turkey and the nuclearization of the entire region.

So, for this president, I think the decision to act would be more about the sense that if you get North Korea getting a nuclear weapon and, then, Iran getting a nuclear weapon, you're essentially throwing in the towel on proliferation and it has to be stopped.

I personally think this a decision of enormous gravity. To bomb Iran is to go to war with Iran. The consequences are enormous. At the very least, I think this has to come out of the situation room and be the stuff of public debate as it is in Israel.

In Israel, there's a very lively public debate. There's needs to be much more public debate here about whether or not the risks of bombing another Muslim country and bombing Iran, sponsor of terrorism of around the world, is worth the costs of what it would impose.

ZAKARIA: Let me move, just because we've got a little time, to Afghanistan.

Richard, what do you make of what seems to me quite unusual and increasing insider attacks where you have these Afghan troops who we're trying to train -- the whole theory was we're going to hand over Afghanistan to them -- attacking in a way that we seem to be completely flummoxed by?

HAASS: It just reinforces my instinct that we need to accelerate the drawn down of U.S. forces, reach the residual force sooner rather than later.

I'll be honest with you, Fareed, I think virtually no matter what it is we invest in Afghanistan, soon after that ends we're not going to have a lot to show for it.

This is going to be sand castles on the beach. The waves are going to come in and wash it away. This is going to be seen as a very expensive, very ill-conceived war of choice.

And it turns out to have been, in some ways, this administration's -- one of its biggest foreign policy bets or investment, the tripling of U.S. forces in Afghanistan. And I'm sorry to say I don't think there's going to be returns that are going to justify the investment.

ZAKARIA: And, Anne-Marie, you were there when the tripled the forces.

SLAUGHTER: I'm not so sure that the bet won't pay off, but I think the key is that we need to make clear to the other countries in the region we are getting out. They think this is our problem and we are completely enmeshed and China, for one, is perfectly happy to watch that happen. When it's clear that we're going, the economic interests and the political interests of neighboring countries are such that it's much more likely to do what Richard Holbrooke, for instance, always wanted to do, which is to bring together a regional group that will help stabilize the country and help safeguard I think real gains we did make.

ZAKARIA: Last thought?

INDYK: Look, I think that the cutting and running at this point is a bad strategy. We have to try to stick with the course we're on, which is to get out by 2014 and I think everybody understands that that is what is going to happen.

But we've got to give the Afghan people at least a prospect of some kind of order that's going to be maintained in the aftermath and there's only one way to do that which is train up the Afghan army.

And the police is clearly a problem, but the Afghan army can still play an important role in ensuring that it just doesn't descend into chaos after we leave.

I think there is a high risk of that. It becomes certain if we follow the approach that is being advocated by Richard and Anne-Marie. So ...

HAASS: That's not fair, Martin. We're not saying to get out. No one's talking about cutting and running. We're talking about accelerating the reductions to some kind of a residual force.

INDYK: I agree ...

HAASS: Very tough to tell an American parent why their son and daughter should right now be working with the Afghans giving what's happening and what's likely to happen ...

INDYK: It's also tough to tell American soldiers and parents of American soldiers who have already died that their investment is wasted while there's still a chance that a semblance of order can be left for the Afghans to take control.

ZAKARIA: We are going to leave it at that. Martin Indyk, Richard Haass, Anne-Marie Slaughter, pleasure, fantastic discussion.

Up next, What in the World? A looming global crisis that no one is talking about. This one is important. Don't miss it.

(COMMERCIAL BREAK)

ZAKARIA: Now, for our What in the World segment. Are we on the brink of a global crisis that you didn't even know about? This week we got a grim warning from three U.N. food programs.

They say that rising prices could turn into a catastrophe hurting tens of millions of people. The warning comes following a World Bank report with startling numbers. Global corn and soybean prices are at all time highs. Wheat and rice are also near historic peaks. On average, global food prices have risen 7 percent between April and July this year; a rate that extrapolates to a 20 percent increase in one year.

And, yet, economic growth has slowed almost everywhere across the world. What in the world is going on?

First, it's the weather. This past July was the United States' hottest month on record causing immense damage to crops. The U.S. will not produce only three-quarters of the amount of corn it was expected to at the start of the year.

Hot and dry weather has become a global problem. The World Bank points out that a dry summer in Russia, Ukraine and Kazakhstan will lead to a 10 percent drop in wheat production in these countries. Meanwhile, in India, a shortage of rain is expected to translate into a 2.5 percent fall in production.

Here's the part that I think people need to understand. Currently, the world produces just enough food to feed all of its inhabitants. External shocks, like extreme weather conditions, tend to upend the system, but only briefly.

And famines are usually the product of bad distribution, dysfunctional governments or some other political factors that prevent food from getting to hungry people.

But, looking ahead, there are some worrying trends. The world's population is currently growing at 1.2 percent every year, that's more than 80 million new people every 12 months, about the population of Germany.

Global food production needs to far outgrow that number, that's to account for not only freak weather, but also for the nearly 1 billion people who go hungry currently. According to the U.N.'s Food and Agricultural organization, 98 percent of the world's undernourished live in the developing world.

As those countries inevitably get richer, its people will be able to afford more food and they'll demand different kinds of food. Rising middle classes in India and China will want fewer vegetables, unfortunately, and more meat. That costs more to produce.

Unless countries make it a priority to invest in agriculture research and production, we will confront a crisis. You only need to look back at the last major food crisis in 2008 when riots and protests broke out in many parts of the world, including, of course, the Arab world.

One last thing, what shocked me as I looked into food prices this week was how much of it we waste. According to the Stockholm International Water Institute, more than one-third of all food is either lost or wasted.

The Economist magazine points out that Americans waste 40 percent of the food they buy. In India, 40 percent of food rots before it even reaches the consumer.

So the situation is this, one-seventh of humanity can't get enough food and, yet, the two biggest democracies, for entirely different reasons, waste nearly half of what they have.

Hundreds of millions of people around the world are on the verge of starvation. We have the food to feed them. Can't we just find ways to get it to them? We'll be right back.

Up next, a debate, will America be better off in four years? Niall Ferguson against Roger Altman. Don't miss it.

(COMMERCIAL BREAK)

CANDY CROWLEY, CNN ANCHOR: I'm Candy Crowley in Washington. FAREED ZAKARIA GPS returns in a moment. But first a check of the top stories. Attacks against Iraq's military and police today have left at least 39 people dead. The bombings are the latest in a series of attacks targeting security officials. More than 70 Iraqi security officials were killed in August.

Mexican authorities say they have arrested a suspect wanted in the killing of U.S. border patrol agent Brian Terry. Terry's death led to a congressional investigation into the botched gun-smuggling sting known as operation "Fast and Furious." The Justice Department is set to release a report on "Fast and Furious" at a congressional hearing Tuesday. The "Fast and Furious" fallout led to the U.S. House of Representatives holding Attorney General Eric Holder in contempt of Congress.

A teacher strike is looming in Chicago. The head of the city's teachers union says while progress has been made on contract talks, a walkout date is still set for tomorrow. A strike would affect 400,000 students and nearly 700 schools in the country's third-largest public school system.

And those are your top stories. "Reliable Sources" is at the top of the hour. Now back to "Fareed Zakaria GPS."

FAREED ZAKARIA, CNN ANCHOR: Everyone agrees that what will matter most in this election is the state of the American economy. And most people agree it's doing pretty badly. But one of America's most successful bankers says that he sees the beginnings of an American revival that will surprise us all with its strength and vigor. Roger Altman is the former deputy secretary of the Treasury and the founder and chairman of Evercore Partners. He will explain his optimism. Niall Ferguson, our old friend from Harvard University, the historian, will explain why he is less sanguine. So, Roger, start by telling us what are the elements -- you actually list them that make you confident that over the medium term this economy will bounce back strong.

ROGER ALTMAN, CHAIRMAN, EVERCORE PARTNERS: That point you just made over the medium term is an important one. Because I don't see this occurring this year or next year. After all, the most noteworthy thing about the U.S. recovery so far has been how weak it is, as you implied. But looking out, let's say, three to four years, I think it's quite possible that we're going to see a boom. And there are five factors that I think play into that. One is housing, one is energy, one is the recovery in the banking system and the impact of that on lending, one is factors related to industrial competitiveness, and the last, which I agree is more speculative, is the prospect that in 2013 we're going to solve our deficit and debt problem, which would promote confidence in private investment and the stock market.

ZAKARIA: So, let's take the biggest one first, which is the housing. The -- weak -- every recovery since the Second World War has been led by housing. This has been the weakest housing recovery -- that is not really a recovery. What makes you think it's going to change?

ALTMAN: If you look at long term -- long term ratios, or things like housing starts to population and household formation rates, the likelihood I think is that we're going to see, as I say, a really steep up-curve starting next year, reaching probably 1.4 million housing starts by the end of 2014. And rising from there. And I think housing's going to make a big contribution to GDP growth and to job growth over the next, let's say, the four to eight-year period from now. And I think that will be one of these five factors that pushes the economy into three to four percent growth rather than the 2.5 percent long-term potential, which most economists would say is what we're looking at.

ZAKARIA: Niall, you're more pessimistic.

NIALL FERGUSON, PROFESSOR, HARVARD UNIVERSITY: Well, you can tell that Roger's on his way to the Democratic convention because he's come up with a great new slogan. Will you be better off in four years' time than you currently are? And he's hoping that most Americans will say, well, maybe I will be. I'll stick with Obama. I think the problem is that between the scenario we currently have which is clearly a sub-par recovery and the scenario that Roger's describing, there's the thing called fiscal cliff. And the weakest part of Roger's argument he just admitted it himself is that we're somehow going to vault over this cliff next year.

Unfortunately, as soon as the election's over, we're going to be sitting staring over the edge of this cliff this December, and the potential hit to GDP if they don't figure out a compromise will be of the order of four percent each points of GDP. A pretty big shock.

So unless there's a great outbreak of bipartisan good sentiment after the election, which I would give a very low probability to, the more likely scenario is actually a double dip next year.

ZAKARIA: Roger, you are even optimistic, cautiously optimistic on the issue of some kind of compromise being reached on the fiscal issues.

ALTMAN: Yeah. Let me make two points in response to what Niall said. First, I think this possibility of sharper than expected economic recovery here plays out over the medium term, as Fareed said. Not in 2013. But in terms of the fiscal cliff, by the time 2014, 2015, 2016 rolls around, the impacts of what happens in the early part of 2013 will be -- will have washed out. Secondly, nobody just -- if you look at where the two parties are on the fiscal cliff, everybody agrees on about 90 percent of the tax impact. Both parties want to extend all of the middle-class tax cuts. The battle is only over the high earner tax cuts as it relates to tax policy. So whatever this -- whatever, though, however it plays out, the middle-class tax cuts will be extended, and if I can come back for a minute and talk about one more of these factors I talked about in the piece -- if you look at what's occurring in energy, I think -- I think far too people have stopped and taken a deep breath and looked at it. We're having -- and I think this is the right word -- a revolution in U.S. oil and gas production. It's a bit obscured by the debate, which is a proper one about climate change. But if you look at what's happening in natural gas production, this year we hit an all-time high. All-time high. It's going to have a big impact on GDP, it's going to have a big impact on jobs. Let alone what I talked about in terms of banking and the other factors.

ZAKARIA: What do you think about this -- is the energy piece of this a game-changer?

FERGUSON: I think it's partly a game-changer. But you have to remember, that although the U.S. will become more energy independent in the natural gas fracking age, it doesn't become completely independent of the rest of the world. The global economy is still highly integrated. And quite aside from the fiscal cliff, there's another cliff, that's the Euro cliff, that we haven't talked about. The last year of American economic performance has been more impacted by events in Europe than by any of the things that Roger's mentioned. And I don't think that's about to change. Remember, the Europeans are back from their vacations now. You get a month off in Europe, and that includes a month off crisis. But another crisis starts again, and we go back to discovering that, oh, dear, the Greeks haven't met their targets, the Portuguese haven't met their targets. That's going to play out and it's going to have a dampening effect.

ZAKARIA: You also think, Niall, am I right, that there's another issue here, which is the inherent lack of competitiveness of the U.S. and western economies. In your last book, "Civilization," this was one of the themes you talked about.

FERGUSON: This is also the theme of my recent BBC Reith lectures. And it turns out also to be the theme of the World Economic Forum's latest global competitiveness report just out. And once again, the U.S. is slipping down the global rankings. This is interesting thing which goes I think counter to some of what Roger was saying. If you look at the kind of institutional framework within which growth happens, the U.S. is definitely not improving. Indeed, in comparative perspective, there are certain things which are worryingly getting worse. There are a whole bunch of surveys, you don't just need to go to Davos, to the World Economic Forum to hear them, you could go to Harvard Business School, which show that in competitiveness terms, the U.S. is losing ground. These worry me deeply because I want to see the United States at the top of the competitiveness rankings where it used to be. But it isn't anymore. ZAKARIA: You advise businesses -- in the Europe and the United States, do you think that America is getting less competitive as an economy?

ALTMAN: I agree with Niall. We were declining in terms of our competitiveness. But I think since the crisis, and really, in the last year or two, there's been such a -- a cost revolution in American industry. If you look at average production costs or unit production costs, that are down 11 percent since 2008. Almost every other advanced country has seen its costs flat or up. If you look at the cost differential in that category vis-a-vis China, you see it's narrowing very dramatically. And this isn't to say that America's going to zoom back to number one or number two in the next few years. I think it's a difficult, complex set of issues. But I think since the crisis, our competitiveness on the cost side has begun to improve.

ZAKARIA: All right. We will have to have both of you gentlemen back in a few years to make sure we see who was right. Niall Ferguson, Roger Altman, thank you very much.

ALTMAN: Thanks.

ZAKARIA: And we will be back.

(COMMERCIAL BREAK)

ZAKARIA: Now, let's take an assumption that many people make and that we made in the last segment -- that the economy will be the deciding factor in the election and put it to the test. Joining me now is Nate Silver. If you're interested in politics or statistics, you must read his great "FiveThirtyEight" blog on "The New York Times" Web site. Nate, welcome to the show.

NATE SILVER, AUTHOR, FIVE THIRTY EIGHT BLOG AT THE NEW YORK TIMES: Yeah, thank you.

ZAKARIA: So you point out in one of your blogs that economic data alone actually doesn't -- is not a very strong predictor of election outcomes despite the fact that people tend to think so. But let's start just with the economic data. When you look at election models that are based on, you know, essentially economic data, GDP, jobs, per capita income, what is the prediction?

SILVER: Most of them predicted a close election, and the reason they look really only at what's happened over the past year or so. Historically, voters have short memories and they care about are things getting better? And the jobs numbers have been -- have been mixed over the past years. We've had some decent months, some not so good months. But they've been ticking up from recessionary to average. And when the -- when the economy's average, the incumbent usually wins as a default. You can find models that are published and have Obama with a 97 percent chance of victory and some that have Romney with a 90 percent chance. If you take a consensus of them, just average them together, you get Obama with about a 55 percent chance of re-election which basically means, basically means a coin flip, a toss-up. But the conventional wisdom that Obama is doomed because the economy is not really reflected in the consensus of models.

ZAKARIA: So, now let's go to the -- the ones that do not just look at economic data. And tell us some of the -- the other factors that seem to be important. And what this data, Obama's has basically -- correct me if I'm wrong -- the models -- there is (inaudible), can you come up with a bunch of factors that when you go back over time seem to correctly predict--

SILVER: Sure.

ZAKARIA: -- all previous elections?

SILVER: Well, you know, approval ratings is usually a pretty reliable guide. You've looked at Obama's approval ratings right now. They are in the range of 47, 48 percent. That's about -- about break- even. Or about as many people say they approve of the president as disapprove. So on that basis alone, you might think it's -- it's a pure toss-up the election. If you look at favorability ratings, though, they are kind of more personal side, who would you have a beer with of things, Obama usually bests Romney there by a few points. So, it could be a case where just based on purely performance, it's a toss-up. But those personal factors might give Obama a bit of an edge.

ZAKARIA: What about incumbency? How important is it, you know, is there a default option that people would like to re-elect the incumbent?

SILVER: Well, that's one of the things people forget. If you talk about well, the economy, the economy's below average. How can -- how can Obama win. Well, the average incumbent, the true incumbent, meaning not someone who inherited the White House but someone who was elected already wins by an average of about six or seven points. So, if Obama won the election by two or three points, that would be in some ways a tenuous position for an incumbent. But incumbents have a lot of advantage -- they can dictate the news cycle, they've also run a campaign and a convention before. So, they'll probably make fewer errors around the margin. And experience helps a little bit. One advantage he does not have that incumbents normally do is fundraising. Romney's raised a lot of money so far. But the incumbency advantage even at a time when there is a lot of anti-incumbency sentiment is pretty powerful.

ZAKARIA: So, now let's look at the electoral college, you know, and the swing states. Because these are all national numbers. But when you narrow it down to looking at the places that are actually going to matter in delivering the magic 270 number, what do you see?

SILVER: Well, I think Ohio stands out first and foremost as being, as it often is, the most important state. You know, that's one state that you would think that if people are voting based on national economic conditions, maybe Obama wouldn't be doing so well. You do have a lot of working class voters there. But the economy in Ohio itself has been healthier. It's one state where we've seen the growth in the auto industry create a lot of jobs there. And their unemployment rate has fallen quite a bit. So Ohio ordinarily is just a tiny bit Republican leaning. In 2008, Obama won it by a smaller margin than he did nationally. But this year it's polled very close to the national average. And that means if you win Ohio, then probably you'll have won the popular vote in most of the other swing states anyway. So you're in a good enough shape. But Ohio might be a sufficient victory condition for Obama. It's very hard for the Republican to win without that state.

ZAKARIA: What about Florida?

SILVER: So Florida's another state that -- that is a must win I would say for Romney. It has so many electoral votes. Remember, Florida's a state where it usually leans a bit Republican. But if you see polls showing Obama tied or ahead in Florida, then you have to say that he's the favorite nationally.

ZAKARIA: OK. So, you've crunched all these numbers, Nate. Have you put any money on the election?

SILVER: I don't. I think it would be kind of a conflict of interest to bet. And I have my reputation on the line. We -- you know, we try and articulate what we think and look at it from as many angles as possible. But we do have -- we do have Obama as a favorite right now. In fact, his numbers have been going up in the past week to about 70, 75 percent. The reason being that Romney ...

ZAKARIA: 75 percent chance of him winning, correct, not that he would get 75 percent of vote ...

SILVER: Yeah. Oh, no. He certainly won't get 75 percent of the vote. But we think there's a good chance that he will win a close election. 70 percent chance that he will win by some margin in the electoral college, probably a small one.

ZAKARIA: Thanks so much, Nate. Keep doing the great work you're doing.

SILVER: Up next, a big, fat Greek fire sale. I'll explain.

(COMMERCIAL BREAK)

ZAKARIA: Both American political parties presented their party platforms at their conventions and with them a healthy dose of controversy which brings me to the question of the week -- which major American political party was the first to present a national party platform? Was it, a, the Republicans? B, the Democrats? C, the Whigs? Or D, the Populists? Here's a hint, it was in 1840. Here's another hint, the first line of the platform is resolved that the federal government is one of limited powers derived solely from the Constitution. Stay tuned. And we'll tell you the correct answer. Go to cnn.com/fareed for more of the "GPS Challenge" And, of course, you can follow us on Facebook and Twitter. If you ever miss a show or a special, you can get them on iTunes. The audio podcast is free, or you can buy the video version. Itunes.com/fareed.

This week's book of the week is "Interventions: A Life in War and Peace." It is the new memoir by Kofi Annan, the former secretary general of the United Nations and one of the most important statesmen of our time. It's a highly intelligent and well-written case for diplomacy, for multilateralism, for global cooperation by a man who spent his life serving that cause.

And now for the "Last Look." Have you always dreamed of owning a 400-mile-long highway like this one, or is buying a government building on your bucket list? Perhaps the Ministry of Education, Culture, Justice, Health, Internal Affairs? Have you ever gotten angry at the TSA and said I wish I owned this airport? So, how does a long-term lease of the Athens International Airport sound? That's right, all of your wishes and dreams can come true thanks to the good people of Greece. The nation has set up a fund whose sole purpose is to maximize the value of its governmental assets by selling or developing them. The Parthenon and Mt. Olympus aren't for sale yet. But here's what is up for grabs. 44 acres with more than 2,000 feet of shoreline on Corfu, or 444 acres of beachfront property, including an 18-hole golf course and roads. It can all be yours for the right price. And I think the Greeks just might be in the right mood to negotiate.

The correct answer to our "GPS Challenge" question was the Democrats. In the 1840 election, the Democratic Party and its candidate, Martin Van Buren, presented the first-ever party platform. Van Buren ended up losing the election to William Henry Harrison of the Whig Party.

Now, after this week's controversy ...

(BEGIN VIDEO CLIP)

MAYOR ANTONIO VILLARAIGOSA, D-LOS ANGELES: And the platform has been amended as shown on the stream.

(END VIDEO CLIP)

ZAKARIA: We went back and checked the 1840 Democratic platform. It mentioned neither God, nor Jerusalem.

Thanks to all of you for being part of my program this week. I'll see you next week. Stay tuned for "Reliable Sources."