0 thank you so much. we will talk to you later in the day. thank you all for watching "state of the union." i'm candy crowley in washington. stay with cnn for continuing coverage of the george zimmerman verdict. kate bolduan and chris cuomo will return at 11:00 eastern. i'll be back at noon. i'll be back at noon. "fareed zakaria gps" is next. -- captions by vitac -- www.vitac.com 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 great show for you today, beginning with an exclusive interview with the new secretary of the treasury of the united states, jacob lew. i'll ask him about the american recovery, about cyber attacks from china, edward snowden's revelations, the irs scandals, lots more. also, is political islam dead in the wake of the egyptian coup, or is it now more deadly? we have a terrific panel. then -- why are hollywood movies today so bad? so many prequels and sequels and so many formulas and just -- >> fast. >> the producer of "sleepless in seattle" explains that there is hard logic and cold cash behind it all. and as egypt goes through convulsio convulsions, we found a dangerous near-failed state that is actually looking up. but first, here's my take. let me tell you what worries me most about the events in egypt. the greatest blow to islamic terrorism in recent years came not from the killing of osama bin laden in his compound in abbottabad, pakistan but rather from the arab spring. when millions of arabs went out into the streets in protests against their dictators, the world saw that they were asking for freedom and justice, not an islamic state. indeed, perhaps the sharpest blow to the jihadi worldview was to see egypt's muslim brotherhood, the largest islamist organization in the arab world, join the 2011 mass demonstrations in tahrir square to ask for elections, not sharia law. the leader of al qaeda, ayman zawahiri, an egyptian, certainly saw this danger, and he denounced the brotherhood for participating in the democratic process. now morsi's government, a disaster in many dimensions, was almost certainly to be roundly defeated in the upcoming parliamentary elections. had it failed politically, electorally, and democratically, that would have been a huge boost for the forces of liberalism and reform in the arab world. it would have sent the signal that political islam may be a heartwarming, romantic idea but it is utterly unsuited to governing, that mullahs can preach but they cannot manage an economy. instead, the great danger of what has happened in egypt is that the followers of the muslim brotherhood will once again become victims, gaining in stature as they are jailed, persecuted, and excluded. and some of them will decide that democracy is a dead end. the most important debate in egypt since the july 3 ouster of the democratic government is taking place behind closed doors and on websites and chat rooms, and it revolves around this question -- how will followers of political islam respond to the brotherhood's ouster? for decades there's been a dispute among these groups on whether to embrace democracy or work through underground means and methods. the brotherhood has renounced violence for some 40 years and chose to work through social and political organization since then, pressing for democratic change. this stance was actively criticized and opposed by many of the more extremist groups in egypt and beyond like al qaeda, which advocated violent struggle as the only way forward. these groups now feel vindicated. somalia's al qaeda-affiliated al shabba movement weighed in with a series of tweets. yes, it has a twitter account. they went like this -- "when will the muslim brotherhood wake up from their deep slumber and realize the futility of their efforts at instituting change?" and "it's time for the brotherhood to revise its policies, adjust its priorities, and turn to the one and only solution for change, jihad." in egypt the muslim brotherhood ruled terribly, even unconstitutionally. were i an egyptian, i would never vote for the party. but it did win at the polls three times. it won in the parliamentary elections and the presidential election and then in its referendum for the new constitution, which passed with 64% of the vote. and what came of all that? well, last year a judge dissolved the lower house of parliament, and now the constitution has been suspended and the former president is in jail. egypt does have a second chance. the military has done some things right since the coup, quickly scheduling elections and the drafting of a new constitution. but the central challenge it faces is to bring the forces of political islam, the muslim brotherhood, back into the political process. remember that they still represent millions and millions of egyptians. the muslim brotherhood has to be allowed to compete in elections at every level. otherwise, egypt will be neither democratic nor even stable in the foreseeable future. for more on this go to cnn.com/fareed. you will find the link to my cover story in "time" magazine this week. and let's get started. this week in washington treasury secretary jacob lew and secretary of state john kerry played host to their chinese counterparts. the annual meetings are dubbed the u.s.-china strategic and economic dialogue. this was the fifth installment. and their purpose is to hammer out issues between the two nations. cyber security issues were to be a big topic here, as they were when president obama and president xi met last month in california. since then, however, edward snowden's leaks have complicated matters quite a bit. i sat down earlier this week for an exclusive interview with secretary lew to talk about china and the u.s. economy. you will notice that the secretary is positively bullish about the u.s. economy. >> mr. secretary, thank you very much for joining us. >> great to be with you, fareed. >> isn't what snowden revealed very embarrassing for the u.s. government as it tries to get the chinese to stop their cyber theft? >> yeah, fareed, i think we have to just be very clear that what we're talking about with cyber theft is just different from any of the other cyber security issues that we've talked about. it is just a different kind of activity to be stealing trade secrets and to be using them to gain advantage against a competitor. and we've raised this issue. i raised it when i was in beijing a couple months ago. the president raised it when he met with president xi. and it is just a very different issue. >> so you're saying if they're doing stuff in terms of national security intelligence and we do it that's a separate issue, this is about spying on companies for trade secrets? >> look, i'm -- i think there are issues of cyber security that cut across all boundaries. and i've had this conversation a number of times with my chinese counterparts. we all face risks in the world. there are all kinds of reasons governments collect information on a variety of topics. it is not the accepted practice for a country to steal trade secrets from another country. and if -- for the two largest economies in the world this has to be the kind of thing we can talk to each other about openly. china wants to sit at the table as one of the leading economies of the world. they are one of the two largest economies in the world. we welcom that. but this is the kind of issue we have to work our way through. >> let me get a sense from you of what you think of the u.s. economy right now. there are in a way two schools of thought. there's one that says the u.s. economy is recovering very nicely, it's moving forward, you know, things are going well. and there's another that says when you look at the employment numbers, even more than the unemployment numbers, what you see is this is still a fundamentally depressed economy, we still need -- there still needs to be a lot more effort to stimulate it in various ways. where do you come out? >> fareed, i'm pretty optimistic about the american economy. i look at an economy that's proven its resilience. this year it's outperformed expectations already. this is a year when starting out the year we knew there were going to be some pretty strong headwinds because of government policy. the withdrawal of the payroll tax cut was a planned, you know, headwind. the imposition of across-the-board cuts known as sequestration was -- came about because congress failed to enact and we still hope will enact a substitute sensible middle and long-term balanced entitlement and revenue policies instead of across-the-board cuts. with those two headwinds it's roughly 1.5% of gdp drag on the economy. the economy's growing at about 2% at its core. if we didn't have those headwinds, it would be growing faster than that. it leaves me optimistic that at the end of this year, beginning of next year we're going to start seeing, you know, somewhat more roh you bust growbust growt the jobs numbers, housing, a variety of statistics, you look at manufacturing it's all been moving in the right direction. we've had four years of consecutive growth and increasing employment. what i am troubled by is the pace of it. it's not fast enough. we had the deepest recession since the great depression. and i am as impatient as can be to catch up and start creating enough jobs so that we're seeing the unemployment rate fall more quickly and not just the overall unemployment rate but when we start getting to the long-term unemployed. you know, what i worry about, we're in a path where barring a shock to the economy one can, without being wildly optimistic, see a return to more normal levels of unemployment overall. but the danger is there could be a lingering long-term unemployment problem, particularly for young people who came out of school during the recession or for older workers who lost their jobs during the recession and haven't been able to get back in. >> but if you see things as i think bullishly would be a reasonable characterization, do you then agree with those who think the fed should be talking about and thinking about tapering off the bond purchase, the extraordinary measures it has been undertaking to stimulate the economy? >> you know, fareed, as you know, it's a long tradition of treasury secretaries to refrain from commenting on monetary policy, and i will honor that tradition. i will say that the core strength of the u.s. economy gives me optimism. i worry about the shocks that we don't control. i worry about developments in the world. u.s. growth will not be able to completely offset slow growth or recession in other important parts of the world. which is one of the reasons i've spent a fair amount of time with my european colleagues because if europe grows 1% faster that's a good thing for the american economy. it's our largest export market. and why we spend so much time worrying about the chinese economy. we know china's not going to stay at 10%, but it makes a big difference if it settles off at 8%, 7%, or 6%. the united states even if we were growing at 3%, can't grow at 5%, 6%, or 7%. so these 1% differences in europe and china make all the difference in the world in terms of the overall growth. so there are a lot of risks out there. the one thing i can say with some conviction is that we in washington have to make sure that washington does not cause any more self-inflicted wounds to the economy. in 2011 we saw with the debate over the debt limit the debate over whether or not the united states should default. first time in our history there was a debate about whether or not we should default. it caused real damage to the economy. that can never be allowed to happen again. that's one of the reasons the president said congress has to increase the debt limit and we have to put at ease the concerns that the united states could once again find itself in a crisis of its own making. >> when we come back, we're growing to talk to secretary of the treasury jack lew about precisely that, how to avoid another debt limit debacle. >> they know they can't go back to where they were in 2011. it was a terrible thing for the economy. when we made our commitment to the gulf, bp had two big goals: