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"Leadership in a Networked World" from Jonathan Zittrain

Terrific presentation on "Leadership in a Networked World" from acclaimed Harvard professor and scholar of law and the internet Jonathan Zittrain for my course on "Becoming a Leader" at the Harvard Kennedy School this past May.

Political games overshadow debt debate

By Ed Hornick, CNNJune 30, 2011 5:35 p.m. EDT Debt talks hung upSTORY HIGHLIGHTSSenate Minority Leader Mitch McConnell wants Obama to meet with himDebt ceiling talks are at an impasse over taxesObama says members of Congress need to find a solutionEconomists warn of potential catastrophe if debt ceiling not raised by August 2

Washington (CNN) -- As the clock ticks down to the August date in which the U.S. officially defaults on its debt, lawmakers on both sides of aisle appear to be playing a game of political volleyball.

It was evident during President Obama's news conference Wednesday in which he chided congressional Republicans for the impasse on the debt ceiling talks.

"They are in one week, they are out one week," he said. "You need to be here. I've been here. I've been doing Afghanistan and bin Laden and the Greek crisis."

Read more of Obama's remarks

On Thursday, Senate Minority Leader Mitch McConnell called Obama's bluff, inviting him to Capitol Hill for talks. The news came after Senate Majority Leader Harry Reid announced that the July 4 recess would be canceled.

House members, meanwhile, are on one of their weeks at home, instituted when the GOP took over in November. The goal is to provide greater access for constituents. They'll be back in Washington on July 6.

"I'd like to invite the president to come to the capital today to meet with Senate Republicans ... (on) why what he's proposing will not pass, " McConnell said. "And we can discuss what he has in mind. And we can start talking about what's actually possible."

"We're waiting," McConnell added.

Senate shortens holiday to work on debtIs the debt ceiling constitutional?RELATED TOPICSBarack ObamaU.S. EconomyU.S. Congress

The president had a much publicized fundraising trip to Pennsylvania on Thursday. In his daily press conference, White House press secretary Jay Carney said Obama would not cancel the events -- and that leaders from both parties had already met with the president at the White House this week.

Other Senate Republicans are furious that Obama isn't willing to change his plans.

"Where is the president? Campaigning," said Sen. Rand Paul, R-Kentucky. "We are here Mr. President and we will have an offer. We don't want to raise the debt ceiling."

"As Republicans, for the good of the country, we are willing to raise the debt but only, and I repeat only, if we have significant budgetary reform," he added.

On the other hand, Sen. Pat Roberts, R-Kansas, said that while the Senate will be in session, "we're going to be here unfortunately not working on a deal because a deal doesn't exist."

"Now he says it isn't worth his time to come down and talk to Republicans," he said. "I remember when he talked to Republicans before and all we got was a lecture. So maybe if he'd just take a valium and calm down and come on down and talk to us, it might be helpful."For his his part, Reid said negotiations must continue. Failure to raise the debt ceiling, he warned, would plunge the economy into a "full-fledged depression."

"The work we're doing to cut the deficits and create jobs is too important, the obstacles too steep and the time too short to waste even a moment," the Nevada Democrat said. "There's still so much to do to put American back to work and cut our deficits."Is the debt ceiling unconstitutional?

Senate Democrats are irate over what they say is the GOP's willingness to walk away from the talks.

"They've taken this extraordinary step of walking away, walking away from their responsibilities, walking away from the American people, walking away from a meeting of the Senate at this extraordinary moment," said Sen. John Kerry, D-Massachusetts, on Thursday after several Republicans failed to attend a Senate Finance Committee meeting on free trade legislation.

Sen. Chuck Schumer, D-New York, accused Republicans of wanting the country "to be in as bad shape as possible because that might help them electorally."

The whole impasse stems from the fact that GOP leaders have shown no signs of yielding in their opposition to higher taxes as part of any grand bargain with the White House. Recent bipartisan talks led by Vice President Joe Biden collapsed over the tax disagreement.

It was a point that Obama repeated at his press conference, saying that both parties need to be willing to "take on their sacred cows and do tough things" while moving away from "maximalist positions."

Boehner said Obama is "sorely mistaken if he believes a bill to raise the debt ceiling and raise taxes would pass the (Republican-controlled) House."

Top economic analysts have warned of potentially catastrophic repercussions if the ceiling is not raised by August 2, including skyrocketing interest rates and a plummeting U.S. dollar.

CNN Chief Political Analyst Gloria Borger said that when a president goes out of his way and really attacks the other party "it gives you a sense of how the deal inside the room could really be in the process of collapsing."

Read Gloria Borger's column

"I mean this doesn't help House Speaker John Boehner get back to that negotiating table, really does not."

David Gergen, CNN's senior political analyst and former aide to several presidents, agreed.

Read David Gergen's column

"One had a very distinct sense today that they are not making the kind of progress the country needs in these talks or he would not have taken the tone he did today," he said. "If you're in a critical moment when you're trying to build trust, you don't go public and scold the other side and issue all these sort of snide insults about them."

Obama, GOP spar over debt ceiling

Will Obama's barbs help or hurt debt talks?

By David Gergen, CNN Senior Political AnalystJune 30, 2011 8:56 a.m. EDTSTORY HIGHLIGHTSDavid Gergen: At news conference today, Obama slammed GOP on debt debateHe says Obama wisely tied issue to jobs, taking debate into realm voters care aboutHe says approach may irk GOP, but as with Afghanistan, plays well outside BeltwayGergen: Obama's stance won't bring agreement closer, will likely end up with short-term fix

(CNN) -- "When they won't see the light," goes the old saying, "make 'em feel the heat." That was the strategy President Obama employed today in his press conference as he skewered Republicans over deficit negotiations. But where will it lead?

The president likely scored political points with two arguments. First, he skillfully made the case that in refusing to end tax breaks for oil companies, millionaires, and CEOs on corporate jets, Republicans are taking money away from hard-pressed Americans who need help. Who would want to do that?

After the conference went on so long that he seemed bored, Obama came alive with a question from CNN's Jessica Yellin about the debt ceiling. Speaking with exasperation, Obama argued that the debt ceiling is not some abstraction but "a jobs issue." Most analysts have talked about the debt ceiling in financial terms; Obama wisely tied it to jobs.

Repeatedly during the 70 minutes, Obama took snide jabs and belittled Republicans. He surely infuriated many of them. They won't appreciate being told they are not as responsible as his young daughters doing their homework. They especially won't like him saying they have been going home too much, and should stay in town to work on the deficits.

Borger, Gergen pan Obama's 'performance'Obama: 'We have to seize this moment'Is the debt ceiling constitutional?Obama, GOP spar over debt ceilingRELATED TOPICSBarack ObamaNational DebtGovernment and PoliticsU.S. Congress

Who is he to take that poke, they will ask? Only a few days ago, a conservative columnist argued that Obama himself had gone to nine fund-raisers in the previous two weeks while spending only an hour and a half with his Treasury secretary on the economy.

Such personal slights will only prompt Republicans in Congress to dig in their heels. They will insist -- with justification -- that mammoth deficits are due in large measure to a government that spends nearly a quarter of the GDP, the highest levels since World War II. Their voters have also told them they don't want any more tax increases. Republicans on the Hill will be more alienated from the White House after today's press conference.

But as we have seen in the past, Obama can turn off the inside-the-Beltway crowd even as he builds public support for his position. His Afghanistan speech last week was a flop in Washington, as critics attacked his pull-out strategy from every angle. (I was among them.) Yet a Gallup poll today showed 72% of Americans support his withdrawal plan.

And so it is likely to be with today's press conference: It will prompt hard feelings among conservative leaders and won't really please liberals who worry that he isn't doing enough to goose up the economy and may give away the store on deficit reductions.

Out in the countryside, however, his comments are likely to help him politically, as a majority all along has wanted to raise taxes on oil companies and millionaires. He has also begun to build a case that if talks blow up, Republicans are to blame.

But where does this all leave prospects for a deficit plan before the debt ceiling crunch in early August? From this corner, this press conference made it even more likely that the White House and Congress will be unable to forge a mega-agreement before August 2.

Neither side really wants to let the government go into default. So, the prospect of a short-term fix grows, and this is something that won't please anybody, will rattle the financial markets, and will once again send a message that the circus goes on.

Breaking Down the Budget Disagreement: Who Will Step Up to the Plate?

YOUR MONEY

Transcript from CNN's Your $$$$$ Aired June 26, 2011

GLORIA BORGER, GUEST HOST: The battle lines are drawn in the debt ceiling negotiations. Its taxes versus Medicare.

Welcome to YOUR MONEY. I'm Gloria Borger. Ali is off this week.

It's this simple, if Republicans won't put tax increases on the table, Democrats won't agree to big spending cuts. In until they figure out a way to get around that, there will be no deal.

Dana Bash is CNN's senior congressional correspondent. Dana, taxes and entitlements are obviously the real big issues here. Both parties are refusing to budge which makes you wonder, are we going to end up seeing a really big deal here, or in the end, are they going to have to settle for something smaller in order to get this debt limit raised?

DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: That's a good question. At this point, you would think that, as you said, both sides are so dug in that they might have to settle for something smaller. My understanding from sources who I am talking to are familiar with the talks, these talks that have been led by the vice president that have been going on for a month and a half is that they actually had been doing pretty well when it comes to finding areas to cut spending.

It's just a general blueprint that they found about $2 trillion, $2.5 trillion. But the Republicans specifically wanted to go a lot higher as you know. They wanted to find about $4 trillion to eat away at the deficit in order to agree to raising the debt ceiling. Whether or not they can get there, that is you are right a big question.

But it's going to be kicked upstairs now Gloria. You know the president is now going to be involved more directly. As well the house speaker around the Senate majority leader to try to find out if the answer to that is yes.

BORGER: So this is the big moment for the president, right? What makes us think that the president can actually get everyone to the table to cut a deal any better than the vice president did, right?

BASH: Yes, exactly. Because the vice president actually has a pretty good history of getting deals made. He cut the deal at the end of last year to have the extension of the tax cuts, Bush era tax cuts for two years. But look I think the reality here is politics. I know that's a shocker, right, Gloria? And a lot of people who are in this room, particularly the House majority leader, Eric Cantor, he simply did not want to go further than he had because people who are close to this process say that he was worried about the fact that he was going to get a lot of blowback from his rank and file if he actually cut a deal that they didn't like, which is why he's kicking it upstairs. It's just maybe a matter of political will. If the top guys have it, maybe they can get there.

BORGER: Maybe they can convince their caucus actually to go along with it right Dana? Thank you so much.

BASH: Thank you.

BORGER: Thanks.

And David Gergen is with us now; he is CNN senior political analyst.

David, according to a new CNN poll, 87 percent of Americans say they don't want to cut spending for Medicare and Social Security, but they do want the deficit to disappear. So, David, I guess the question is, does the American public want to have it all without giving up anything?

DAVID GERGEN, CNN SENIOR POLITICAL ANALYST: Absolutely. Right now it does. And it wants to keep all the entitlement programs in place. These huge majorities Gloria, as you pointed out, on keeping entitlements just the same and not cutting them. But also very large majorities against any tax increases except on the wealthy.

But the general public is not willing to accept any tax increases either. Now, that's the reason why the Democratic and Republican leaders in Congress are so unwilling to compromise, because they have the public looking down at them saying, don't do these things. When the Republicans won the house this year, it was partly because in their districts, they promised not to raise taxes. And people voted for them. So it's understandable that we now have this rigidity and these deep divisions. What it requires is frankly some serious leadership to turn this around.

BORGER: That's right. Let me go now to Mark Zandi, who is the chief economist with Moody's Analytics. Mark, people want everything. But in the simplest terms possible if we don't raise this debt ceiling, what are the people really going to get? Does the sky fall?

MARK ZANDI, CHIEF ECONOMIST, MOODY'S ANALYTICS: Yes, pretty much. We have to balance the budget literally overnight. That means very aggressive, significant cuts in spending. So Social Security recipients, Medicare recipients, they won't get the benefits that they normally get. There will be government employee furloughs. Everything the federal government does will be affected and that will affect all of us.

The cutting will be so severe that we'll be thrown into another recession. So that means lost jobs, higher unemployment, the stock market, I think, would get nailed. That means we'll all be a lot less wealthy. It's a very dark scenario.

BORGER: It makes you wonder why the politicians really aren't out there, instead of talking about taxes, Medicare, spending, talking about the things that could happen if they actually don't do their job. But we'll get to that in a minute.

Let me bring in Jeanne Sahadi who is a senior writer with "CNN Money."

Jeanne, this week, the Congressional Budget Office said we can't afford our government anymore. But the politicians can't figure out a way to make it smaller in a way that the American public finds acceptable. That's really at the root of the debt ceiling standoff. So any ideas about how to resolve this in the end?

JEANNE SAHADI, SENIOR WRITER, CNNMONEY.COM: Well, I think that what a lot of people are saying is that we're not really seeing leadership in Washington. The Republicans always blame President Obama and they have a point in some respects.

But the truth is, Congress isn't showing leadership on this side either. They aren't being frank about what the issues are. Or they're being selectively frank in saying spending cuts are the answer or tax the rich is the answer.

They're basically sticking to partisan talking points, absolutist talking points, not really working. I use two statistic that always remind me why this is an issue. One in 2020, the GAO projects that we will be spending 89 cents of every tax dollar that comes in on four things, Medicare, Medicaid, Social Security and interest. That means we'll have 11cents left over to pay for everything else we do.

BORGER: So David, let me throw this question out to you, whatever happened to leadership in Washington? You know it used to be that leaders would make decisions and then go back to their constituents and say, this is why we made these tough decisions, because it will help our lives. Now it works the other way around, they're followers.

GERGEN: There's been an absence of leadership for a long time on these issues. I must say that I think in the end Gloria that the politicians will listen to Mark Zandi and to others of his stature and say; we have to lift this debt ceiling. I do think we're going to get some kind of short-term solution. People in Congress and the White House sometimes may not be very smart but they're not suicidal. So I think we'll get a short-term solution.

But what I do think on the leadership front, it's really up to the president, frankly, to go to the country and help people understand the choices, the trade-offs and the sacrifices that must be made by everyone. We have to reform the entitlements and we have to raise taxes. That's what the Simpson-Bowles Commission came to the conclusion of. And I think that's the sound and right approach. But it takes a lot of effort to go and help the public understand the trade- offs and why sacrifice is necessary and both parties have to join together on that.

BORGER: Mark, you have this uncertainty out there which also doesn't help, doesn't help small business. And don't the politicians sort of think about that and say, OK, uncertainty, bad for business, we need to tell business where we're headed? ZANDI: I think they're getting that message. I think businesspeople are telling them. And I entirely agree with it. I think the most significant restraint -- constraint on the job market, why we're not creating as many jobs as we need is because of that uncertainty. And it revolves around the debt ceiling.

Businessmen and executives can't get a narrative in their mind with respect to how we're going to address this issue. Until they do, they're not going to fire workers but they're not going to hire them. So we need to resolve this. I think if we do resolve it in a reasonably graceful way, then we're going to get more jobs.

BORGER: What's the graceful way?

SAHADI: I was just going to jump in. We're really allowing Congress to conflate two issues. The debt ceiling, reducing the debt. Both things are very important but they are in fact unrelated. We have now -- the public dialogue is now about connecting the two. So, yes, we're creating uncertainty around the debt ceiling. Businesses and bond investors they are like, we can't believe you're not raising the debt ceiling. Oh course you are going to. Boy, if they don't by August 2, you're probably going to see a very bad response.

BORGER: But you know there is a substantial group of people in congress who are saying that you don't need to raise the debt ceiling, that it's sort of a false issue. Mark, what would you say to them?

ZANDI: Well, I think if we go down that path, they'll quickly change their mind. You remember TARP? We had a vote in congress regarding the bailout fund. Congress voted that down and the stock market went south. And there was just panic. That is the scenario that I think we would see here if congress and the administration can't come together by August 2nd and raise the debt ceiling.

BORGER: Panic?

GERGEN: Yes.

ZANDI: Panic.

GERGEN: Listen Gloria, the Republicans ought to go back and read the letters coming from the Reagan administration to the congress saying, you cannot go into default, it's way too dangerous, don't do this.

BORGER: You know. But it is a political issue. The party in charge always says, you can't go into default. I remember Barack Obama when he was a United States senator by the way, did not vote to raise the debt ceiling.

GERGEN: They're going to raise it.

BORGER: They will.

GERGEN: But I think the question to Mark is, if they raise it short term, does that still leave a lot of uncertainty out there in the marketplace? BORGER: It does.

ZANDI: It does.

BORGER: Go ahead, quickly.

ZANDI: I mean ideally, they would pass the debt ceiling to a sufficient degree so we get to the other side of the election. But the second best is -- give us at least a couple, three or months so that we can nail this down.

BORGER: OK. And we'll have to leave it there for a moment. But David, Mark and Jeanne stay right where you are.

Because next, we're going to be asking, is there anything really a president can do about the economic situation right now, particularly in terms of unemployment? Does President Obama have anything left in the toolbox to save the economy? And of course, his presidency is on the line. So stay with us.

(COMMERCIAL BREAK)

BORGER: Welcome back to YOUR MONEY.

FDR was the last American president reelected when the unemployment rate was above 7.2 percent. Well, unemployment currently stands at 9.1 percent. So, David Gergen, let me go to you with this, can President Obama win four more years with unemployment sort of in the 8 to 9 percent range?

GERGEN: I think a lot depends Gloria on whether it's coming down at that point in a way that builds confidence or whether it's still stuck the way it is right now. If it's stuck, I think he's going -- it's going to be a very, very tough fight. If it's coming down, as we saw with Reagan, he was above7.5 but it was coming down from basically 10. People said the confidence came back, came surging back.

BORGER: So Mark, what can the president do? What does he have left right now to make people feel like things are going in the right direction? There's some talk about further payroll tax cuts, for example. What would you recommend?

ZANDI: Well, first and foremost, raise the debt ceiling, that's key.

BORGER: OK, we've got that.

ZANDI: On the other side of that, there are a few things I think that can be done that would make a difference in the very short term if we need it. So extending the payroll tax holiday for another year seems like a reasonable thing to do. I think that can get done politically. Without that payroll tax cut this year, I think we'd be skirting recession now because of the higher energy prices.

The other thing that could be done is to help states with their unemployment insurance funds. Their funds are busted. They've taken loans from the Feds. They've got to start repaying that. That means they're going to start raising payroll taxes on businesses. So give them a little bit more help for another year or so they don't have to raise those payroll taxes. I think that would also be helpful. Those two things, I think would provide enough help to the economy to make sure that we're off and running.

BORGER: OK, so Jeanne, what about another stimulus? Some Democrats have been talking about another stimulus. I doubt you could get it through the Congress. Could that be a possibility?

SAHADI: They want to do infrastructure spending. I would ask Dana Bash that particular question in terms of how likely it is. But I think what is going to happen is they're going to push for stimulus measures and it's going to be a communications problem when they come out with a debt reduction plan that also spends $700 billion.

I don't know quite how they're going to cross that bridge. But like Mark said, the payroll tax cut, helping states preserve -- also prevent layoffs. The former CBO director who is like the budget deficit hawk in Washington. She was saying you know we really have to continue to give aid to states so they don't have to do anymore layoffs because that would hurt the economy. So it is about creating and preserving jobs.

BORGER: David, let me put this to you, President Obama's former top economic adviser, Larry Summers, wrote an interesting piece recently in which he said, and I'm quoting him here, that we are halfway towards a lost economic decade. Do you think he's right?

GERGEN: Gloria there is increasing conversation about that question right now. Carmen Reinhart the economist who wrote the book with Ken Rogoff about how to get out of financial crises over time has also been making the same argument that we're in danger of stumbling into a lost decade. The lost decade, of course, refers to Japan, which coming out of the '80s was steaming along, had big bubbles, things burst and it experienced not one but two lost decades.

And it's now a very demoralized country and it has really been set back. We're four years into what could be a lost decade already. And as Carmen Reinhart argues, the next six years at this point don't look overly bright. Maybe Mark would disagree. But the Federal Reserve has just lowered the growth estimates for this year and next year, not increased them.

BORGER: So is there any reason here for any kind of optimism?

ZANDI: Yes, absolutely. I disagree with that perspective. I think the U.S. economy's incredibly resilient. We've made a lot of progress over the last couple or three years, righting the wrongs that got us into this mess.

Right now, I think our biggest missing ingredient is a lack of confidence. And it revolves around our inability to address what really ails us. That's our fiscal problems,. If we nail this down in a reasonably graceful way, I think we're going to get that confidence and we're going to come back. The one thing I s know looking at the history of the American economy is; don't bet against it for very long. There's talk that we're going to lose a decade, I think that's misplaced.

GERGEN: But, Mark, if your argue is we can bet on the politicians, is that -- does that give you a lot of confidence?

ZANDI: Yes, that, too. Also history suggests that they will come through. What's that hold Winston Churchill adage? Americans will try anything and when they can't figure it out, they'll ultimately do the right thing. I botched that. But that's roughly what he said and that's roughly right. I feel that when it comes down to signing on the dotted line, we're going to do it.

BORGER: OK, Jeanne, I'm going to have you break the tie. Optimism, Pessimism where do you go?

SAHADI: I think we have a choice; we have a choice which direction to go David or Mark's. Politicians now is the time to think about these issues. What Carmen Reinhart and others warn about is that if we dawdle any further; we lose less and less autonomy. We don't want to hear any more from political leaders. And that is why we don't want to hear any more from political leaders.

BORGER: Fiddling while Rome burns, right? Absolutely. Thank you so much David Gergen, Mark Zandi, and Jeanne Sahadi thanks again.

And up next, how Americans feel about the economy and the one poll number President Obama might really have to worry about. That's next.

(COMMERCIAL BREAK)

BORGER: It's no secret that Americans are unhappy with this economy. But concerns about another great depression are even on the rise. Paul Steinhauser is CNN's deputy political director and he joins us now. Paul, can you give us a sense of what Americans are feeling about this economy?

PAUL STEINHAUSER, CNN DEPUTY POLITICAL DIRECTOR: Yes, Gloria, you and I pore over these numbers every day. They say the same thing. Americans right now, not very optimistic at all with the current conditions. And the pessimism seems to be rising about what's going to happen to the economy in the future, in the next year. In fact take a look at this, this our most recent CNN National Survey.

Look at that 48 percent of the people we question said another great depression is likely within the next 12 months. That's up ten points since 2008 at the beginning of the recession.

Go to the next graphic. Let's break it down by party. This is also interesting; you can see Democrats are a lot less pessimistic. And you can see that rises for independents and rises even more for Republicans and Tea Party supporters. I think that's kind of common.

Our pollster told me in the past, if your party is in power, you're going to be a little bit more optimistic. Of course, the White House and the Senate are in control of the Democrats right now, so they are a little bit more optimistic about the way things are going with the economy and the way things will go with the economy.

BORGER: How does this also break down demographically by age?

STEINHAUSER: There is a generational divide, no doubt about it when it comes to the economy and whether things are better or worse in the economy right now. Check out this number. We asked economic conditions today are very poor. People under the age of 50, 37 percent said economic conditions are very poor. But 50 and older, that number jumps to 46 percent.

So there's definitely a generational divide and Gloria there's also geographical divide as well. We see people in rural areas much more concerned about the conditions with the economy compared to those who are living in cities -- Gloria.

BORGER: That's what makes presidential elections, right, Paul?

STEINHAUSER: Yes, ma'am.

BORGER: Big country. Thanks so much.

Up next, Republicans want to cut spending. They think the government is too big. So is that going to lead a Republican to the White House in 2012? When we are back.

(COMMERCIAL BREAK)

BORGER: Welcome back to YOUR MONEY. Former Utah Governor Jon Huntsman officially entered the Republican race for the White House this week. Like many of his fellow challengers, Huntsman decided he would focus on the economy.

(BEGIN VIDEO CLIP)

JOHN HUNTSMAN, (R) POLITICAL CORRESPONDENT: Today Americans are experiencing through no fault of their own something that is totally alien to them -- a sense that the deck is stacked against them by forces totally beyond their control. No matter how hard they work, save and plan, the opportunities are not there for them that were present for previous generations.

The next highest Sara Palin is way down at just 14 percent.

BORGER: Now, according to our polls, Huntsman will have to climb his way back up in the polls. Our CNN poll shows and this is of Republicans -- finds that 42 percent of them think Mitt Romney is the most likely to win the Republican nomination. Ron Paul, Tim Pawlenty and Herman Cain in at just 3 percent. And as for Jon Huntsman he is down at the bottom of the pack with 1 percent. But of course there's plenty of time to go.

Now Vin Weber is a former Republican Congressman from Minnesota. He is now the managing partner at Clark and Weinstock.

And I should also disclose here that you're advising the Pawlenty campaign. But take off your Pawlenty hat for a second and keep your Republican hat on and let me ask you, why should Americans believe that Republicans are going to be better at managing the economy than Democrats, given the fact that the first bailouts actually came in the Bush administration?

VIN WEBER (R), FORMER U.S. REPRESENTATIVE: Well, that's a good question, Gloria. But the fact is as time goes on, the Democrats and the Obama administration specifically are getting ownership of this economy whether they want it or not. And Debby Wasserman-Schultz, the chairman of the Democratic National Committee, basically said the other day the Democrats own the economy.

The TARP program when it was passed at the end of the Bush administration was such an emergency measure that most everybody in Washington did support it. And you are right as time went on, that became unpopular as, quote, the bailout. But the thing that began to crystallize public oppositions and massive government involvement in the economy was the stimulus package under President Obama in his first months in office.

The two Republicans that were actually in Congress at that time that were running for president actually voted against TARP So it seems to me that we're going to be able to separate ourselves from that somewhat. But the main issue is how has the president done by then in the four years he's had to manage the economy? Right now, it looks pretty bad for him.

BORGER: It's also, I might say, the polls show that the public is kind of tired of blaming George W. Bush. They now believe as you say that the president has ownership of the economy.

Let me go now to Roland Martin a CNN contributor. Roland, isn't there something to be said though for the major Republican argument which is that government has gotten too large and it's inefficient and it needs to be made smaller? That's a pretty good campaign argument, isn't it?

ROLAND MARTIN, CNN POLITICAL CONTRIBUTOR: Well, it's always been their campaign argument and again it sounds great until all of a sudden you raise the hood up and you begin to say, what does that really mean? For instance, when we had the BP oil spill, what was the one thing we heard? Where were the people checking these oil wells, why weren't they having these inspections? Then all of a sudden you go back and check and realize there were too few of them.

But then republicans will say, too much regulation, we shouldn't have onerous rules and too many people checking on these difference things. That's the problem. Here's what I find to be amazing Gloria. When I see these unemployment numbers, we've had 15 consecutive months of private sector job growth. But when the numbers have had a number of jobs, it's always been based upon losing government jobs.

I have Republicans on my show and I say wait a minute, how can you get mad at the unemployment numbers coming out when the job losses for government jobs on a local and state level? Then they would go, well you kind of got a good point but it still should be some better numbers. So it sounds great. But you have to define what do you actually mean by that or is it an empty phrase. BORGER: And let me bring in Chrystia Freeland here. Who is the editor of "Thomson Reuters Digital." The public has given President Obama low marks on his handling of the economy, less than all of them think he's doing a good job. Republicans clearly want to cut spending and Republican voters I should say like that in theory. But isn't there a question of whether that can boomerang when you get down to the specifics as Roland points out?

CHRYSTIA FREELAND, EDITOR, THOMSON REUTERS DIGITAL: I think that is an excellent question. We've already seen a little bit of that when it comes to the Medicare and Paul Ryan budget plan. We saw voters responding in the New York State race very, very aggressively to the idea that, uh-oh, cutting government spending is great as long as it's not spending on programs that I care about. So I think you know if the Democrats are smart, they're going to make that point. I think the other thing is --

BORGER: Well, haven't they already made it with Medicare, for example?

FREELAND: Yes, I think they have been. I think they have to do that more aggressively. The other thing is that I think Roland made the case for the Democrats more effectively than we are hearing this administration make it. And I think a real issue right now is the Democrats -- I think to win, to win on the economic issue, the Democrats have to actually be Democrats.

And they have to say, yes, you know what, to rescue this economy, we believe you need some government spending. We believe the stimulus was the right thing. And the only problem with the stimulus was it was too small. But you're not hearing that from the White House. I think that part of the problem that the Democrats face politically is they're not being very explicit about what their economic plan really is.

BORGER: Well, Vin Weber let me ask you do you think Democrats should be Democrats.

WEBER: I was going to say Chrystia and I at least agree on what we want to see the Democrats say. But maybe for very different reasons.

BORGER: Right, exactly. Go ahead.

WEBER: I think you know to be honest about it; you can make an argument early on in this process that intervention in the economy was necessary. But I think you can make an equally valid objective argument that as this economy is progressed the magnitude of our debt and the magnitude of our spending has become a potential or serious drag on the economy and a threat to the financial markets.

We're all worried about now that we're going to get up someday and find out that the bond market has collapsed because of the size of this debt. So it's not really incomprehensible that what was once maybe a good short-term policy has become a really dangerous long-term policy. I think if you're going to be honest in facing it, there's no way of dealing with that other than looking at Medicare, Social Security, the entitlement programs that make up the bulk of the increase in spending facing us.

MARTIN: Gloria, he just failed one thing. He would not mention defense. And this is the problem with this whole discussion about the deficit, Gloria. Democrats want to talk about defense. Republicans only want to mention entitlements. If he wants to be honest about the deficit, you cannot ignore defense.

BORGER: And I think, you know what I think there are some Republicans who wouldn't actually mind cutting defense. The new Tea Party Republicans.

FREELAND: Even Mitt Romney, right? I mean we've been hearing from some of the mainstream --

WEBER: I think there is a potential to cut the Feds. I'm looking at the trend lines show a rising percentages of GDP. And that's not defense.

BORGER: OK, guys I'm going to have to cut you off right there now. But I want you all to stay. Because when we come back, we're going to continue this conversation. We're going to continue to talk about defense. We're going to talk about the influence of the Tea Party, many of whose members want to cut defense, and how much that's going to affect the election. When we come back.

(COMMERCIAL BREAK)

BORGER: Welcome back to YOUR MONEY.

I know we've been talking about defense. But let's move on to something else because the budget proposed by Congressman Paul Ryan of Wisconsin is going to be at the center of the presidential debate. And there's one reason. And that is because that plan proposes an overhaul of Medicare. So let me go to you, first, Roland. If you're running a Democratic campaign, how hard do you push Republicans on the Medicare issue?

MARTIN: I would slap a sign on that Republican forehead and say, Paul Ryan, Paul Ryan, Paul Ryan, Paul Ryan, and Paul Ryan. I mean at the end of the day, we saw what happened in New York. And, look, whether we want to own up to it or not, Democrats and Republicans fear voter backlash. At the end of the day, you're going to have voters, especially seniors, who vote at a higher rate than anybody else. They do not want to hear this particular program because they say it is too severe. Of course you stick it to them, like Republicans stuck health care to the president and the Democrats in the 2010 --

BORGER: Let me go to Vin Weber on this. Because and politically speaking, did Republicans make a mistake here politically by going out on a limb, voting for this plan in Congress, which they did almost unanimously, knowing full well that it was not going to get out of the Congress but putting themselves on the record and handing the Democrats an issue? Was that a mistake?

WEBER: Well, it cost them politically up in New York, Roland's right about that. But I would say this; first of all, Republicans embraced the central reality which is that you cannot deal with this deficit problem without dealing with Medicare. They put out -- they led with their chin and away. But they put it out there and opened the debate on Medicare which you haven't had in a serious way in this country before.

So I don't think that it's -- it was a mistake to do that. As to what Roland said about going after the Republicans, I suppose they can do that it might be of some political value. Only if the president wants to make sure that he poisons the well against any curtailment of Medicare spending going forward and his own economists know that you can't do that.

You have to deal with Medicare at some point. So at some point, the deionization of the Republicans for wanting to overhaul Medicare is going to prevent any solution to this problem. My guess is the White House economic advisers don't want to go quite that far.

BORGER: But Chrystia, Republican presidential candidates have been tip-toeing around this Paul Ryan plan. Newt Gingrich got in trouble when he called it right wing social engineering, they kind of want to embrace it but not all the way because they're nervous about it, right?

FREELAND: Right. I think it's a question partly of the Republicans being torn between the primaries and the Tea Party and thinking about the actual presidential race because I think Roland is absolutely right. In the general election, Medicare is going to be the Achilles heel of the Republican Party. When people looked up close at the Ryan plan, cutting the budget sounds great. Everybody thinks that the government is fat and bloated and does nothing good for them.

But then when you say to people, hang on, instead of Medicare, we're just going to give you $6,000 a year, and people are like, actually Medicare is kind of fantastic. It's not only old people who feel that way. It's anyone who has older members of their family. I think Medicare could be a real, real Achilles heel for the Republicans. But you know as you pointed out, Gloria, they have to be careful because in the primaries they have to pass a sort of budget hawk litmus test in order to get through.

BORGER: Vin Weber is this just the result of Tea Party influence or is this the result of the economic reality in which we find ourselves?

WEBER: Tea party certainly has an influence on presidential candidates. But Paul Ryan understands the budget, I would argue, better than anybody on Capitol Hill, maybe along with Senator Conrad on the Senate side. He understands the difficulties that we face and that cannot be dealt with without dealing with Medicare.

He put out a strong solution to Medicare and it's attracting a lot of attention and a lot of criticism I understand that. The only way however I'm going to repeat that it becomes the kind of negative issue all the way through the next election that Chrystia and Roland are talking about is if the Democrats refuse to put anything of their own on the table with regard to Medicare, which means if they refuse to face up to the budget problem -- BORGER: They've proposed cutbacks --

WEBER: Let's see a credible plan that people actually believe will achieve some savings and then we can have a debate about that. And we'll find out if that's credible compared to the Ryan plan. Right now, there's nothing credible to compare it to.

MARTIN: Gloria, let's just show you. When we had the health care debate, when you had the OMB talk about the savings we would have when it came to health care reform, Republicans use the exact reform plan against Democrats. We can sit here, talk about what's credible or not. It boils down to what will impassioned voters, what will get them so fired up, we vote based upon anger, not really based upon what is right or just. If you tick off the opposition, you fire them up, you're in trouble. The Paul Ryan budget plan does that for the Democratic base. And the concerned independent voters who are also on the fence on his budget, that's the real issue.

BORGER: OK. We're going to have to end it there. I know everyone wants to get their voters out during this campaign. Vin Weber, Roland Martin, Chrystia Freeland thanks so much for being with us.

And up next, one man's garbage is another man's treasure. In this case, it could provide new material in an investigation linking a banking giant to the financial crisis.

(COMMERCIAL BREAK)

BORGER: Everyone loves a villain. To date, he's been the only Goldman Sachs executive named in a lawsuit against the banking giant. But in a new twist, his own laptop might just spill the beans. CNN money's Poppy Harlow explains.

(BEGIN VIDEO CLIP)

POPPY HARLOW, CNNMONEY.COM (voice-over): Could this laptop, found in the garbage, hold evidence in a case against one of the world's most powerful banks?

NANCY COHEN, ARTIST & FILMMAKER: I turned on my laptop and the name was there.

HARLOW: What do you mean the name was there? Where was it on your laptop?

COHEN: It's like on the screen.

HARLOW: Fabrice Tourre remembers him?

FABRICE TOURRE, GOLDMAN SACHS: I have been the target of unfounded attacks on my --

HARLOW: As the self-dubbed fabulous Fab, Tourre is the only individual sued by the Securities and Exchange Commission for helping to sell mortgage-related securities in the run-up to the financial crisis. Last year, the U.S. government charged Tourre and his firm, Goldman Sachs, with marketing toxic securities to investors without disclosing material information relevant to them, namely that Goldman intended to short some of their bets.

TOURRE: I wish to repeat, I did not mislead to the most sophisticated investors of these products anywhere in the world.

HARLOW: Goldman settled with the SEC paying a $550 million fine, but not admitting any wrongdoing. Yet the government case against Tourre goes on. That has Wall Street observers including the "New York Times" asking, why just him?

Last month, the times cited documents between Tourre and his lawyers provided to the newspaper by an independent filmmaker with no connection to Wall Street. Nancy Cohen. According to the Times, the documents allegedly show that Tourre was not the only one to market the securities deal, rather that he was part of a collaborative effort at Goldmans' mortgage unit.

That's where the story takes a strange turn. Cohen says she was given Tourre's laptop by a friend who found it in the garbage. Goldman Sachs confirms the laptop belonged to Tourre but insists it was his personal computer. After four years in her possession, Cohen says she recognized Tourre's name from all the news coverage.

COHEN: I didn't like the fact that one person was being blamed for everything. That never makes sense, you know? Only 30, how many mistakes can you make by 30?

HARLOW: You copied the hard drive and gave it to the Times and said do with it what you will?

COHEN: I said; please try to look for something. I think there might be something there.

HARLOW: Cohen says she gave the Times the hard drive from the laptop. She says it contained thousands of e-mails and documents, but she wouldn't show them to us. The Times says it never accessed Tourre's e- mail account or asked to do so, but it did look at copies of documents that Cohen provided, and refers to at least one of them in its May 31st article. Cohen says she wasn't paid for handing over the files.

I think people watching right now might be wondering why she didn't go to the SEC Why didn't she go to the Feds?

COHEN: Because they hadn't done very much, you know? They really hadn't done their job.

HARLOW: So some might say, look, this woman doesn't like Goldman Sachs and now she has a laptop that she's given to the press, with information that could be incriminating towards others at Goldman Sachs. What would you say to them?

COHEN: Well, they're wrong. They're wrong. I don't -- I don't like the behavior of greed and the culture of greed. But I also don't think it's fair to pin an entire lawsuit on one person. HARLOW: But the SEC insists Tourre was principally responsible for the mortgage securities deal in question. A U.S. District Court recently dropped some of the charges against Tourre but he still faces at least four federal fraud counts. He's on paid leave from Goldman Sachs.

In the meantime, Cohen still has the laptop but says she deleted Tourre's messages. The "New York Times" may still have documents related to Tourre's case obtained from Nancy Cohen. They won't say.

(END VIDEO CLIP)

BORGER: Well, Poppy joins me now. This is such an interesting story. But there seems to be a pattern developing here, the SEC charges wrongdoing with a big bank. Then the firms pay to settle out of court. And then that's the end of it. Or is it? Because could this laptop lead investigators possibly to others?

HARLOW: Good question. It is certainly a question I would love answered. We of course asked the SEC whether or not this potential new evidence as described by the "New York Times" opens the door to more charges against the individuals at Goldman Sachs or other banks aside from just Fabrice Tourre. The SEC as expected had no comment. But they pointed to their original complaint Gloria, and in that complaint they argued that Tourre was pulled principally responsible for misleading investors in that Goldman deal.

That implies if you read through the lines that maybe others played a more minor roll, that said. The "New York Times" referred to documents that it says it got from the laptop that Nancy Cohen now has implicating others at Goldman. The Times could release in an article more documents going forward, and that could force federal regulators like the SEC to investigate others at Goldman Sachs who may have been involved.

The problem is we're not sure what the Times has off that laptop. They only published one e-mail in their article and they won't say if they have any other documents. They won't make that published. So we just have to sort of sit and wait and see. It is fascinating how, you know, this woman got this information off a laptop in a garbage can. I think the fact that she didn't trust regulators; she trusted the press more than the Feds.

BORGER: Imagine losing or trashing your laptop and then somebody picking it up.

HARLOW: This is a lesson to never throw your laptop in the garbage.

BORGER: Never do that. I will not. OK, I promise. Thank you so much, Poppy.

Up next, why a Hollywood ending could be just what Washington needs right now.

(COMMERCIAL BREAK)

BORGER: Time now for the "XYZ."

It is probably safe to say that the talks on raising the debt limit aren't going too well. House majority leader Eric Cantor walked out on Thursday because he won't think about raising taxes. Democrats are more nervous about cutting spending, especially Medicare.

So who's going to blink? It is hard to see how a deal gets cut when politicians refuse to lead. Here's the history. Republicans pummeled Democrats on Medicare cutbacks in health care reform in the 2010 midterm elections. Now Republicans support a budget that overhauls Medicare.

Guess what the Democrats are doing? Punching back, tit for tat. Only the country is broke. And there seems to be no grown-ups in charge. An old school idea, how about if both sides hold hands and jump off the cliff together actually fixing a problem? The landing might be softer than you think.

And that's my "XYZ."

Thanks for joining the conversation this week on YOUR MONEY. Ali Velshi will be back next Saturday, 1:00 p.m. Eastern and Sunday at 3:00.

And make sure you don't miss the debut of Ali's new show on Monday morning, "Wake-Up Call" with Ali Velshi. All you have to do is set your alarm for 5:00 a.m. That's right. 5:00 a.m. Monday morning. I'll be watching. And he'll be watching for you.

Have a great weekend.

Art and innovation uptown - By Christopher Gergen and Stephen Martin

By Christopher Gergen and Stephen Martin
Special to the Observer»Posted: Sunday, Jun. 26, 2011[image error]

From ashes, the McColl Center for Visual Art has become a notable success. McCOLL CENTER FOR VISUAL ART

The church was first built in 1926. A magnificent neo-Gothic structure on the edge of uptown Charlotte, its congregation once numbered 500 strong. But the decline of Charlotte's city center and an eroding membership base led the church to be sold in 1981. Four years later, a fire swept through the building and its singed carcass became a symbol of a bygone era.

Today, against great odds, it has emerged as a hub of creativity and a cultural touchstone for the community.

This unlikely transformation began when Bank of America bought the church in 1995. With funding from the bank, its Chairman Hugh McColl and the Arts & Science Council, a team of architects was given an unusual challenge: turn the church into an urban artist community.

Informed by best practices globally and artistic input locally, the result is stunning.

Spill over into the community

McColl Center for Visual Art boasts nine artist studios and more than 5,000 square feet of gallery space. The space lends itself beautifully to collaboration and artistic connection.

In the former bell-tower, Knight Foundation Writer-in-Residence P. Scott Cunningham types away on an old typewriter as he gazes up at the soaring rafters and windows above. A floor below, Cuban-born Quiesqueya Henriquez works on her collage and sculptures. Down the open hallway are Charlotte-based painter Isaac Payne and University of Chicago-trained, Vietnamese artist Thu Kim Vu.

The artists-in-residence program provides each artist with a stipend, materials budget, travel expenses and housing in a nearby apartment. There are three cycles of residents over the year. In the most recent cycle just 26 were accepted from a pool of 269.

The center also offers an "affiliates" program for artists within 50 miles. They don't receive the same material benefits but the creative advantages are undisputed - and spill over into the community.

To engage the citizens of Charlotte, each artist is expected to conduct two outreach activities during their residencies. For instance, artist Felicia van Bork worked with Project Art Aid and local cancer survivors to create paintings to raise money for the American Cancer Society.

San Francisco artist Daniel McCormick worked with the Nature Museum, Mecklenburg Parks and Recreation and students from Queens University of Charlotte to develop an eco-art installation designed to reduce erosion and clean storm water runoff in Freedom Park. The model proved so successful that the center is replicating it and establishing an environmental track to its residence program.

"Charlotte is dealing with the challenges of rapid growth and development which threaten our green spaces and water quality," says center President Suzanne Fetscher. "Our environmental artists create community partnerships that educate people about those challenges and involve them directly in environmental art projects. Beneficial art becomes the tie that binds people of all ages to improving their community."

Helping execs get innovative

The center also offers a summer institute for school children and has forged a partnership with the business community.

Launched in 2005, the Innovation Institute was Fetscher's way to foster a deeper connection between the city's leadership and the center's artists. She was interested in how the artists' daily creative process could help infuse innovation into corporations.

Kicked off with a three-year Knight Foundation grant, the institute has worked with hundreds of executives from most of Charlotte's leading corporations. The six-day sessions bring 12 executives together with artists and organizational development specialists. Each session focuses on developing a specific creative capacity. Themes include pushing boundaries, getting beyond the predictable, dealing with failure and having courage in the face of struggle.

Coming out of these sessions, 92 percent of participants have made changes to their lives and 79 percent made changes to their business. The institute's impact has inspired the launch of customized programs, including with city leadership, and workshops for individuals looking to infuse creativity in their lives and business.

It's worth imagining what might have been lost were it not for a clear vision and timely investment. The burnt out shell may have given way to a generic set of condos - or just crumbled further into disrepair. Indeed, similar buildings in communities throughout our state sit abandoned, waiting for the ideas and resources needed to transform them.

Investing in our artistic communities in a time of economic challenge is not intuitive. But if we are serious about maintaining our creative, competitive edge as well as our cultural richness - the center offers a model of where we should be heading.

Christopher Gergen is the founding executive director of Bull City Forward and on the faculty of the Hart Leadership Program at Duke University. Stephen Martin is a speechwriter at the nonprofit Center for Creative Leadership. They can be reached at authors@bullcityforward.org.

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Read more: http://www.charlotteobserver.com/2011/06/26/2407232/art-and-innovation-uptown.html#ixzz1QQXnwGj5

Analysis: Short-term debt hike more likely after talks fail

Tim Reid of Reuters has a good piece why I and others worry pols in DC will once again kick deficit can down the road. - David Gergen

By Tim Reid

WASHINGTON | Fri Jun 24, 2011 3:40pm EDT

(Reuters) - Nobody likes the idea, but a short-term boost to the U.S. debt ceiling might be the only way Congress keeps the United States from a default in August.

Time is simply running out and the collapse this week of talks led by Vice President Joe Biden underscores just how far apart all sides are on spending and taxes.

The United States has already hit its $14.3 trillion debt limit. If that ceiling on borrowing is not boosted by August 2, the Treasury Department will be out of cash to pay its bills and could default on its debt, sending global markets plunging and threatening to push the U.S. economy back into recession.

Biden's group failed to agree on a path toward $2 trillion in savings -- a Republican prerequisite for raising the debt ceiling -- due to a sharp divide over taxes. Republicans rule out any hikes while Democrats say they must be part of a deal.

"To get a package of that size with the time remaining is going to be very difficult," said one official familiar with negotiations. "The chances of a short-term package have definitely increased."

Talks have now been passed up the chain to President Barack Obama, Senate Democratic Leader Harry Reid and the top Republican in Congress, House Speaker John Boehner.

Officials insist the goal of negotiations remains a deal that will allow the United States to meet its obligations beyond next November's presidential election -- and that means an increase of $2 trillion to $2.5 trillion.

But a smaller, short-term package to stave off default is becoming a more serious option as the clock ticks.

It would buy a few months' time for lawmakers to make political decisions on spending and taxes, but it holds risks of its own.

Congress would need to add at least the $125 billion in credit the Treasury burns through each month. A temporary fix could weaken the U.S. dollar, push up Treasury yields and invite further warnings of possible credit downgrades from ratings agencies, investment analysts said.

Dick Durbin, the No. 2 Democrat in the Senate, and Mitch McConnell, the top Republican in the Senate, have both raised the possibility of a short-term debt limit deal in recent days.

"We're very likely going to have a patched-up solution," said David Gergen, an adviser to four U.S. presidents and a non-partisan political analyst.

"I have always felt they would raise the debt ceiling but would be unable to reach a major agreement until after next year's election," Gergen said. "The end of the Biden talks increases the prospects that Congress will raise it, but in the short term -- possibly to the end of the year."

Senator Charles Schumer, a member of Democratic leadership, asked about whether prospects for a short-term debt limit increase were growing, said on Friday: "We want to avoid a shorter-term debt limit increase at all costs."

Schumer added, "It could very well rattle the markets ... that's going to send a very bad signal."

Federal Reserve Chairman Ben Bernanke and Timothy Geithner, the U.S. Treasury secretary, have repeatedly warned that a failure to rise the debt limit will cause economic "catastrophe" because default will likely trigger panic in the bond markets and a dangerous spike in interest rates.

Three rating agencies have recently warned that the U.S. could lose its coveted top-notch credit rating if steps are not taken soon to curb the federal government's long-term deficit. It is unclear how markets would react would react to a short-term deal that does not tackle the long-term problem.

Similarly, conservative Republicans, especially in the House, are loathe to be forced to cast multiple votes on increasing U.S. borrowing authority.

They ran for election last November on a promise to shrink the size of the U.S. government and get control of the Treasury Department's credit card. Some have even called for letting U.S. borrowing authority lapse and requiring that bond-holders be paid beyond August 2, while leaving many government programs to shut down at least temporarily.

An aide to House Majority Leader Eric Cantor said on Friday that the Republican "goal is to do one debt limit increase" and even though he has dropped out of the Biden talks, that goal "has not changed."

(Additional reporting by Richard Cowan, Editing by Jackie Frank)

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