continue. >> every story needs a hero who beats the odds and comes out on top. this isn't just a hollywood story line, it's happening every day all across america the every time a storefront opens or the midnight oil is burned, when someone chases a dream, not just a dollar. they are small business oers. so if you want to root for a real hero, support small business, shopmall. captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> charlie: the house of representatives passed a last minute deficit reduction plan that would raise the death ceiling and cut federal spending. the senate will vote on the bill tomorrow. the deal would prevent a u.s. default by raising the country's $14.3 trellian. there's 1.2 trillion of spending cuts in the next decade. a bay partisan committee will recommend deficit can cuts by the end of this year. the deal contains no tax increases. this agreement follows months of negotiations over the u.s. debt ceiling and deficit much the bill must pass the senate by tomorrow's august 2nd deadline to avoid default. joining me is peter orszag manager of budget, john heilemann the "new york" magazine and mark halperin and al hunt. mark halperin, tell us what happened today. >> the good news charlie is the house has passed this agreement which avoids the cataclysm of faults, i suppose lessons for credit down grade. that's really good news. the bad nooses -- news in the short term is this deal does absolutely nothing to address a pathetically anemic economy. the bad news in the long run is it really is delusional as far as dealing with long-term chronic deficit. so it's a good deal in avoing a default. it's pretty hard to argue and i find very many democrats or republicans who would argue it does anything significant. >> charlie: it will pass tomorrow and the president will sign tomorrow. >> it will and he will there's no question of to the. unlike the same sun's committee, unlike the gang of six, unlike all the plans conceived by peter orszag, this does nothing about taxes and does nothing about entitlement. and that's a problem. >> charlie: this is just the beginning or is this somehow give us a period of which we can sort of watch the country and the congress and the president consome date and think about the next two years. >> look i agree with al, its biggest benefit is it avoids catastrophe and immediate crises. it's a step. it's about 2.1 trillion is about 1% of gdp. if you think the deficitas ing to be about 5 or 5.5% over is last decade, it brings us in the right direction. it has an interesting innovaon, which is this trigger, both parties putting gun to each other's heads and seeing if that can help move the ball. what i'm most worried about though is this is the most salient example of the hyper polarization we've been experiencing and just a fundamental dysfunction in the political system and it doesn't really address that. >> charlie: mark. >> i look on the optimistic side as peter and al said, avoiding a default is pretty important. i think you can say there's the glimmer of bipartisan cooperation which we need in almost every issue that's facing the country today. nancy pelosi and john boehner voted for the same pce of legislation today. if they could build on that i the doesn't address entitlements or social security. it doesn't address new revenue. and it also doesn't address a third piece which is the st important piece for ler deficit in the future, which is robust economic growth. so having averted t crises, i hope now they can find a way and not have washiton be consumed by the super committee doing this next round of cuts. but actually come up with a way to spur economic growth because that is the solution to the deficit. >> charlie: does the president have a plan to spur economic growth in this context. >> he talks about a package of ings that are already before congress about encouraging more exports, about patent reform. there's one or two other things he tried to have but i don't think those are things that are likely to move very quickly or will capture the public imagination in a way that's necessary. we haven't talked about the politics of this and there's clearly politics. >> charlie: coming next year. >> but the substances of it i think is a real problem because i think said before every challenge facing the country now is going t require john boehner and harry reid and the president will have an agreement how to move things forward in the congress. i don't see a lot of goodwill coming out of this to build on. i see an obsession now with this next round of cuts again i fear will dominate washington dialogue between now and the super committee's report to the congress. >> before we start to drill on the micro politics of it, this conversation has been extremely polite as these conversations usually are in this wderful room i don't have the optimism mark has. i think this entire thing is an embarrassment and spectacle that's ended up with a deal that's pretty much a sham for the reasons all three of my colleagues talked about. it's been this horrific experience, object lesson in everytng that's wrong, everything that's dysfunctional about washington. peter talked about the polarization about it demonstrated that on steroids and on stilts. and yet we ended up with a deal that in substance, in the politics of it are not particularly good for anybody. both parties, the president, everybody has made a fool of themselves in this process and we ended up with a deal that's a least common denominator. it averted deal and it was the only deal can could get done. >> charlie: if it was the only deal that could be done, why there -- >> it's great we have no default. deal should never have been on the table in the first place. we have a deal that literally neither side really compromised in any significant way. democrats were beaten to submission on a few issues. nobody accomplished something great here because as everybody's acknowledged, entitlement reform not don tax reform not done, we ended up with a deal that is basically just the barest thing that could gedone to save us from castrophe. that's pretty slim grounds for aunt missal where i sit. >> charlie: who are the political winners here? political winners? >> well, the political winner, the only political winner i see right now is the tea party which came in with a very good set of goals. they're not happy with this deal, they don't think it was tough enough. they kept demanding. they banged their hand on the table and serially for the last three months, democrats gave in on everythi that they wanted, to the pointhere the tea party bought 95% of what it was demanding. i can't see, they have won from their stand point whatever you think on the matter of substance, they accomplished a great deal politically. they took on their own leadership and the other party and won i think a tremendous political victory for their side. >> charlie: what impact do you think this will he on the 2012 elections? >> i'm not sure charlie because i don't think this is necessarily a zero sum game. i think obama and the republican brand have both been weakened and hurt by this. i'm not sure how it plays out. the obama people will tell you it's ephemeral. yes he took a hit now, associated with washington, he'll come back a get the upper hand on the rich versus the paul ryan/medicare fight next year. republicans will tell you once we get a nominee, those problems we have will at least diminish. i'm not quite sure how it will play out. i do think this. let me tell you why i think even peter is slightly too optimistic on the substances. youirst go to the super committee. there's no reason in the world -- no no, you weren't, but even in your realism i think you were a little bit -- well anyway. i think the super committee, there's no reason in the world to think that paul ryan and ken conrad, if they're on it, will agree. it's no different than what we've been through. then if it doesn't go and we go to a so-called trigger advice i think that's largely a fraud. one quick example, this he go that way to a trigger, that would envision cutting over the next ten years, $825 billion from the defense budget. now peter orszag can tell you probably without a great deal of trouble where you get 500 million but you can't get 825 billion. that's just not realistic and this whole thing is not realistic. >> here's what's interesting about that. i agree. i think we are at this point more likely to wind up with the trigger mechanism than a deal coming out of the super committee. the way they've written the rules it's much harder than you would think toave that tgger happening. it's going to set up an interesting dynamic where you have an imausibly painful thing about to happen and no way to kind of loosen the constraints or at least no forable bay to loosen the constraints which the budget office which does not normally like to score these contingent trigger things at all says this one's tight enough that we'll count it. >> charlie: when you look at boehner's leader. >> s hip. >> for what i was trying to do he got what he wanted. the republicans control one third of the government or one half of one third of the government and yet they largely control the contours and the train of this deal. and i think he was very, a very cool customer, as he always is, in talking to his members, knowing where the votes are, knowing what would be required to get the votes. from attack -- tactical pointed of view, it was his demeanor able to pull that off. >> charlie: and hry reid. >> you know, it's still not clear to me how democrats are livi with themselves over this deal. they still control more of the government. i don't know why they gave in except they weren't willing to default. i think both senator reid and mcconnell did a great job. something had to get done. i don't think -- >> part of the way the democrats live with themselves and it's hard but i wonder if it goes partly to what peter was just saying. you guys know much more about the budgetary process than i ever will. the trigger is moarlings tight and solid, it seems to me that does create a circumstance in which the likelihood, greater likelihood than we've seen of late that there might be some revenues in the deal because that's the only way you're going to get to the target you need to get to. jo boehner put on the table in the conversation, in the context of the grand bargain, $800 billioin revenues. it seems there's got to be, there's some chunk of the boehner loyalists among the republicans in the house who are open to the ideof revenues of at size. do you not think, peter, there's some chance that you could get a deal out o this? again it wouldn't solve the long term deficit picture like a long shot but the revenues might come out of the super committee for that reason. >> it's interesting to see who is appointed because if the appointees, appointed in the next two eks with, if they are from the house of howks, no. then if they're a gang of six types, then yes that prospect is open. i find it, if i had to bet, i would be betting right leaning. >> john boehner and mitch o'connell would be killed by their party if they appointed anyone with the least bit of kanwisheryness on tolerating revenue. maybe they would appoint someone who isn't open to revenue but don't think they could appoint any one moderate. >> boehner proudly said the other day i put $800 billion of revenues on the table. he's out there in principle as having staked s leadership on a deal that would have included $800 billion in revenues. >> you need not only the committee to include revenue but then it needs to be enacted. one of the big risks in the igger, one of the positive parts of the bill, while it didn't anything afrmative, it didn't do a lot of fiscal contraction, a small share, 25 billion of it was done in 2012. the trigger would do a huge amount of fiscal contraction in 2013. so we are still going to have a very wk economy i think in 2013. we're in for a hard flog here for a matter of here's. >> charlie: what do you think unemployment would be come october, november, 2012. >> i have a bet with warren buffett. i think our bet is a little closer north of sevenand i think it will be significantly higher than that. chaie: below nine. >> i think it will be, look, i think we're in for a period of two, two and-a-half percent growth for a matter of aew years. that hard flock is a central -- by the way, at that point the unemployment rate's declining very slowly. it am a so makes the deficit numbers much worse. if we grew 2, 2.5% instead of the official projections, the deficit is two and-a-half trillion dollars therefore ping out what we just did. >> charlie: what happens to the president is unemployment is above 8%, al? >> well charlie, first of all i hope the bet with buffet is for half the net worth because i like peter's -- [laughter] charlie: n other words, you like peter's side of the argument? >> i do, i do. but i think if unemployment is around 9% next year, the president is going to have to count very heavily on a very -- >> charlie: weak opponent. >> exactly. that's always dangerous to do in politics. let me just say one thing charlie, i am a little bit, i'm much more skeptical than peter, he knows more about it. but if it, because i'm not sure one congress can combine another congress that way. i think the key person to watch if there's any kind of flexibility and i agree with a group that's not going to be, would be paul ryan. i cannot imagine paul ryan not being on that committee. if paul rya would move, tha would move a lot of people. i doubt he'll move. >> charlie: go ahead. >> i think the way you get them to move is what the fred tried to do with john boehner. you offer a package that's so big includinentitlement reform. >> charlie: a grand design. >> that they are willing to accept a little bit of revenue. the problem is i think the social security piece they could do in 20 minutes if they wanted to. it's the healthcare ones i think are harder in part because the republicans would insist on remaking the programs, doing damage to obama care in a way th the president and its supporters couldn't tolerate. >> charlie: when you look at this in terms of the pele who shape this, i mean who within the tea party had the most influence. gosh, i don't know if there is anybody. >> charlie: that's my point. >> i don't know if there is anybody that qualifies. >> charlie: the toy party in the congress, it's not connie -- >> the person in the leadership most awe tuned to them was obviously eric kantor. periods of time kantor ended up four square with john boehner side by side but for much of the negotiated period in these last two or three months i was giving comfort to that group and tuned to their demands and in times acted as their proxy, ving a little bit of walk out at that moment in thewhitehouse mitting when he came out and through a little bit of a hissyit, kantor did. there's leadership in the proxy but i don't think any of them would say that eric kantor is eir genuine leader. >> charlie: albert, when you look at this over the last year, say, what could the president have done that would have made a different result? >> well, he first could have shown some consistency, which he did not show. you don't go out and say things and draw a fine line and say i'm sorry. you can only have a clean debt ceiling bill. you don't go out and say there must be a balanced package and then blink the next day. you have to decide, are you really going to be tough on this or not and there was a total inconsistency. frankly from what i hear, the president as a negotiator, as a bargainer was less than effective. >> charlie: less than effective because he sort of was prepared to compromise early on and everybody knew where his compromise was. >>epublicans aren't convinced that yolkis tough. >> charlie: they think he can be had. >> they are not convinced that he is. that poses a problem and i think he conveyed that. i don't think handled this -- people argued he should have embraced. >> charlie: right. >> obama would come and say to you, hey if iad done that the republicans would say let's take that two thir we agree on and we'll pass that and ignore the revenues. the key w for obama and paul ryan to have embraced paul. if obama is at fault for that then so is ryan. >> charlie: ryan was on the commission. >> he was, he vote against it. >> charlie: when the president's critics in the party, i mean in the republican party, is this argument that if he had laid out where he wanted the country to go and where he stood on entitlements, he would have been better off. >> i think the republicans would argue that. i'm not sure it's true. i think their strategy of laying back was actually smart and essential, maybe not the best thing r public policy but for politics i think it was essential. the problem, there's a mystery to me in the macro situation. every public opinion poll shows that the public is totally sympathetic to the president's argument that this should have been done in a balanced way. every poll, revenue and cuts. and people want entitlement programs protected. and yet the tea party sensibility, if notny individual leaders, dominated the, set the table for this and set the terms of t discussion. i think there are two things the president could have done differently and may have gotten a better result. one is play golf with john boehner 18 months ago and then every month rather than just once a month. >> charlie: every weekend. >> maybe once a month. the other thing he could have done is find a way to win this argument, win the argument that this needed to be done in the balance way. the wealthiest people need to win the argument a. he certainly talked about it a lot but it's strange on the central premise of the dispute, a great public speaker, couldn't make that in the negotiations. >> charlie: why is that. >> i don't know charlie. >> charlie: did he interest you. >> he interests me terriy, he's a fascinating man for all these reasons. i look at it and i think one of the fundamental flaws is i don't think he or the people around m took the tea party people seriously enough at the outset. i think they overestimated john boehner's leadership. i think they thought they had more how far a counterparty that john boehner would be able to deal with them. as it rns out they were able to deal withthem the problem was he was the able to deal with his own caucus. if they had appreciated how deadly serious the tea party people were pushing this alter to the extreme and risking the full faith and credit of the united states for the first time in history, i think the president would have pushed for something he did not push for during the negotiations of the lame do you recollect session, extending the bush tax cuts he should have been negotiating for a clean debt ceiling then. there are some people in the whitehouse saying we tried to get that. i think if they really had understood, a, how boehner would prove to be with this caucus and b how serious how the tea party was, he could have gotten that deal. >> charlie: would he be weaker with his own party if he didn't have eric kantor there. >> if you think back to the reality, thinking back to newt gingrich, the revolutionaries who road into power in 1984, th were newt gingrich people. he was the chief strategist of that revolution. he came to washington with a huge amount of loyalty to him. he was the leader, he saw them that way. i don't think the tea party freshman, john boehner was the guy who happened to be the leader of the party at the time when the insurrection happened. they came to washington without any loyalty to him. >> charlie: they had no leader, in fact,orrect. >> right, as far as i can see. >> charlie: al i want to come back to this point, and peter both. what do we look for over the next two years, other than something triggering the trigger. why are we in terms of what might happen and where are the possibilities of this going south? >> well charlie, first of all we're actually exactly where we were three or six months ago. the fight over the super committee, what priorities, entitlements or tax cuts, that's going to be for all new. i mean it really hasn't changed a bit. and don't forget those two thousand, those bush tax cuts expire at the end of 2012. that will be another high stakes game as to whether obama's going to be tough enough to s i'm going to let them exmeyer if you don't end them for the rich. i don't ink the battle lines have really changed a great deal. >> charlie: you have been a champion of two years out because of what you said about the bush tax cuts. we had to have the revenue. without the revenue, where is the economy going to be in 2012? >> well i think the economy's going to again ben the hard flog regardlyless what we do in the median term fiscal problems. unless we get that kind of revenue, we're not going to fundamentally address that 2015 to 2020. >> crlie: where do we get that revenue. >> i think the most plausible scenario is to allow all the tax cuts to expire when they are scheduled to expire and the reason is that you don't need affirmative legislation to make that happen. you only need 34 votes. i know it's entirely unlikely at this point but having that optionality is possible. i think the bigger problem over the next 12 months or 24 months is this very weak economy with a weak labor market and i think it raises the question of what do you do to try to promote it. that's what you interesting almost see the curve of the left coming into play, where two correct observations are combining into an incorrect third one, growth reduces the deficit, that's true. additional job creation measures. >> charlie: and it reduces unemployment too. >> yes, can additional support can boost growt that's then combined into a third statement which is the stimulus is either free or can actually reduce the deficit. so it's rig to say growth will help theeficit but the question is how do you get the growth, and in particular how do you get it without spending so much money up front that you're just catching your own tail. >> charlie: what do you think the growth rate will look like in the first quarter of 2012? >> two t two and-a-half percent. >> charlie: in the last quarter. >> something in that range. >> charl: two to two and-a-half is what we're looking at going into the election. two to two and-a-half. >> here's the history of downturn following financial slum's. if you look across the advanced economies that have lived through the kind of thing w just did, you have very sluggish growth for years. unemployment rate across the advanced economies that have lived through the kind of financial slump that we experience, the unemployment rate peaked they to ten years after the crises. >> because this was a fiscal. >> financial. the reason that's different from an inventory cycle or the federal reserve ringing inflation out of the, you typically have very weak housing markets for a very long period of time. that's exactly what's happening to the u.s. >> charlie: i want to talk about the republicans because it will be about the republican battle which is taking place now. >> the president will be in the books, i promise. don't worry. >> charlie: what kind of challenge, not in terms of the candidate, what kind of pressure will the president receive over thenext two years as he shapes his campaign? >> well the mai pressure is if peter is even close to right and the republican fetter and the nominee can make this a referendum on the incumbent and say he's been in office for four years, he inherited a bad economy but we're still in a bad economy and he's only done things -- i will be the how can nominee campaign. you look at michele bachmann, you look at rick peery. >> charlie: when mitt romney says he's against the deal, why. >> he doesn't want to own it. he wanted to be away from washington and answering not just for the deal but what happens with the super committee. let's said he embrace it and the super committee came out and endorsed the tax increase. he has to say i made a mistake, i didn'tnow thimonster was going to be created. i don't think the way he executed his distance from it was particularly good. but he put out a printed stement, he didn't really own it. i think he should at least make a youtube video where he owned it more and showed people the logic and passion of his position. i think from a political point of view on the merits liked the deal or not. the political point of view he was smart to distance himself from it. >> charlie: mcconne's argument is we don't want to own this economy, we want this to be obama's economy. >> yes. and this is the, and i think there's a problem, there's a little bit of problem for romney in the context, in the way in which he handled this, not just the micro element but the way he handled, not having it for such a long time and coming down where he did, it feeds a little bit of the narrative his enemies is that he's a person without convictions and without a core and being political here and not acting out of strong conviction. but this is going to be the republicans want to make this a classic election, that is as mark said a referendum. and not choice. he has todo wt the incumbts had a hard time doing which is turning it into a choice election. had he have to make whoever the republicans nominate the unaccepting ternative, despite all of the flatness of the economy and rceived weakness of the president, they have to say this guy is worse than i am. and that will be much much harder to do for them if it is someone like mitt romney or rick perry or michelle bachmann for a variety of reasons i scary to some voters and are the kind of candidates who will motivate the democratic base to turn out which is a huge fear of the white house now. if there's a plain vanilla republican nominee, you'll get a low turnout election where the democratic base is not that excited, doesn't want to come out for the 3red because they're frustrated because of the deals like today. >> charlie: that's the highest likelihood. >> if rick perry becomes the nominee you will be an amed up electorate because there are a lo of things up setting and frightening and note valuating to black votersr young voters. let'john perry be the nominee or jon huntsman be the nominee. >> charlie: close this out for me, if you look at the congress over the next six months, what do you expect to see. >> i think it's very messy. i would be very surprised if that superommittee is able to come up with a recommendation and there will be a battle what that means for triggering and i think the bush taxuts will be front and center and will dom neat -- dominate a big part of the 2012 campaign. if barack obama runs, it will be colossal triumph of vanity over construcon. >> charlie: you have been watching this for a few years, albert. >> it was better than you thought, charlie. >> charlie: i always liked henry clay myself. w will this congress shape up. what will be the judgment about them, looking at this crises. >> certainly it's going to have the tea party in the lead whatever the historical judgment is. i must say based on only seven months, it is really a dysfunctional congress, it's one that lacks civility. i can't imagine much happening in the next year. [indiscernible] is -- obama is going to say he wants patent reform. that's not going to turn on iowa very much. i don't see very big accomplishments at all. >> charlie: the only thing that turns on ohio is jo isn't it. >> it is. i don't see this coming -- peter might disagree. i can't see any, anycenario by which this congress does anything significant in jobs. they conceivably could extent the payroll tax holiday, maybe something unemployment insurance but even that's going to be rather marginal. >> charlie: thank you, peter. thank you, john. >> thank you. >> charlie: tonight all eyes are on washington and the debt limit negotiations, the deal must be reached by august 2nd to avert a default. if the debt ceiling is not raised thites could not pay its bills and their credit down grading. how is this watched around the world and has it damaged u.s. credibility abroad. joining me is david sanger from the "new york times." i'm pleased to have him back with us here on this program because he wrote a fascinating piece on the "new york times." and i want to quote with it. he basically says with the deal reached sunday night, the united states has a good chance of escaping the debt limit with his creditrating in tact. the united states government may not be so lucky with its reputation. so what's the threat to our reputation? >> well i think charlie tha the major threat is that for the first time, you have seen major players in both parties but primarily in the republican party. hilling to use the reputation and the credit rating of the united states as a political tool to win their way. while we've seen previous sites on the debt limit notely 1995, 1996, shortly after i moved back to washington and i covered those, they never reached this level where people around the world thought it was a serious possibility. that the united states political system may convuls as much in japanese or greek like state less important than settling scores. >> charlie: you say in fact the political his tronics has eroded america's already diminishing of the economic haven and with the power to lead the rest of the world at a financial crises and recession. it has chipped away at the glob authori of president obama. how do y measure this? >> well, of course measuring obalower is always imprecise. but in 1995 and 96, the last time we went through this, the soviet union who collapsed, there was no alternative super power. in this case, china has used every opportunity it could over the past few weeks to make the argument that this underscores the superiority of their political and mechanic model over the american model. now we look at this and say sure. around the world are not terribly impressed, certainly with the chinese political model but some are increasing impressed with the economic model the way they were impressed with japan's in the 80's. that does not mean that people are fleeing to china but it does mean we're more vulnerable and in fact the main reason that there was not a run on the dollar, that interest rates here did not rise significantly, was that europe and japan looked to be in worse shape right now. so investors figured they have no place else to go. >> charlie: how is china trying to exploit it? >> well, this fits into a name that the cnese have been pushing for two years since the financial crises began, more than two years. and that theme was that is united states runs a dangerously unregulated overly politicized economy and the rest of wall street running amuck -- that'sa false narrati and many others may as well. but they have basically been handed propaganda points by the way the u.s. has dealt with this. now does this chip away at american moral authority? i think a bit. because the american congress has looked to a great degree to irresponsibility legislators around the world during economic stress. >> charlie: it has been said before the most recent crises that part of the response of the chinese to the financial collapse of 2008 was to in some sense say to themselves our model is superior, and secondly say whatever aspirations weave to copy parts of the american model has declined or has been eroded. >> i think that's right. now this is highly calculated effort by the chinese. and we i think everybody sees it for what it is. they are looking for greater and greater influence not only in asia but to spread their soft power throughout the world. they're investing in africa and latin america trying to lock up natural resources, and part of the effort of doing that is to direct their funding and try to make it clear to recipient nations that they can trust that aid from china will be forthcoming. part of what's going onow with this age of austerity that is clearly settli in over the u.s. is the message aroun the world is that the u.s. is pulling back. the president of the united states came into office promising to engage the world is being forced at home to make cuts of one, two, three, four trillion dollars, which inevitably willrestrict over time the degree to which america engages at least economically with the rest of the world. the chinese are looking for a moment to fill that gap. >> charlie: that's the view of admiral mullen talked on ths program that he worried what kind over austerity department and defense. if we look at the discussion that's coming out of the crises in washington, is that no longer is the defense budget sack row santa. >> that'even within the republican party who has usually stood up for defense spending sometimes to a fault. you have people saying particularly from the tea party saying we don't need this large a defens budget because what this simply does is get us engaged in places around the world where we shouldn't be. so you see political republicans embody by john mccain and many of his allies and newly arrived members of congress who align themselves with various faions of the tea party making the argument that the u.s. does not need a military infrastructure anywhere near this size. and i think that's what you heard admiral mullen responding to. now of course admiral mullen is doing this at a time that he believes that while major cold war systems can be reduced, the u.s. is going to have to invest heavily in cyber war issues and invest in drones and so fort. >> charlie: didn't bob gates as he sort of left office that he was pleased he was leaving at a time that he did not have to deal with the kind of issues that the next secretary of defense would face, especially those of a declining defense capability. >> he said something along the lines that he never thoht that he would be around to deal with e time when the united states was willing to fritter away or shrink a military capability that would be the greatest in the world, he didn't want to go make tho choices. he said he's been in office four years over two presidents and it was time to go. he may well have proven that he timed his exit well. >> charlie: what do we know about esident obama's thinking on this? i mean clearly when he came into office, the cairo speech and other speeches, he talked about sort of america regaining its credibility. and now we have a different kind of assault on america's credibility. >> that's right. when he came into office, charlie, he talked a lot about engagement. he talked a lot about regaining the credibility that was lost was ofy laterallism. if you take at the last six or seven months, what the psident has announced or failed to announce it gives you a different picture if you're looking in that part of word. when he gave his speech on afghanistan a few weeks ago giving a timetable for the withdrawal of the surge troops, there was very little, almost no discussion of the traditional counterinsurgency of building schools, building hospitals, of investing in the country. and in fact, he repeate a phrase from his 2009 surge speech at west point where he said it's time for nation willing at home. but that wasn't the only one. when the arab spring came along, he announced really no new money to help support the democracy movement in egypt. >> charlie: what does that mean, since we're going to focus here. what do traditional allies think. europe is one case, but what do people who look at the united states believe about our capacity to lead? >> well, they look at what the president has said and they look at what the president has done. and they realize that american is in no mood for either marshall plans or new war. and that comes as a relief to some but to others, it makes them wonder where the burden sharing is going to be. libya'an interesting emple. the president said that the u.s. would take the lead with unique capabilities for about one week. then it pulled back something of the secondary role and five months ler people are still wondering if moammar qaddafi is getting out of there. >> crlie: can we look at ere we are today and look at the austerity the country faces and the spending cuts it's faces and say the uned states because of its domesticeeds at home and its economic priorities no longer can afford the leadership that the world has expected from us. >> well it certainly can't afford it in the traditional ways we have provided it before, which is major aid packages, major use of both hard power and soft power. the country is exhausted by ten years of war. and the treasury is pretty well depleted in part because of the costs of those wars. the surprise about the obama administration i think though is so far we haven't seen a broad plan about how the u.s. is going to make up for that loss of influence in far less expensive ways. there are many people working on this in the administration, but you haven't heard the president address it directly. my suspici is that in the course of making these very tough choices in the budget, he's going to have to address thatooner or later. >> charlie: the issue also always comes back to presidential leadership and whether it suffers simply because of the way this crises unfolded. even though the president has tried to position himself in the middle. as one who was trying to offer a balanced approach, clrly questions of leadership come up at a moment like this. >> they do and there are many in the democratic party who believe that the president needed to get more forcefully out in front of this. he didn't see them visibly angry at where this was headed until a press conference two or three weeks ago. but it's very possible that there was nothing in this particular case that he could do because much of this depended on a house of representatives that he does not control. and in the end he sort of had to let everybody play this out. pass their resolutions. he on friday after the house passed its bill that he was going to veto, he basically called up and said thanks, congratulate laces -- congratulations for doing this. you have the long problems coming with the debt commission that reported late last year saw where all of this was coming. and yethe solution comes at these crises moment when you're doing slash and burn cuts. >> charli everybody is looking for direction and vision. how do you have a fiscal strategy and a growth strategy and no one has see exactly where the president wants to take us. >> we've seen a fiscal strategy out of this, at least a directio but i'm not sure we've seen a growth strategy. i mean this is a president hu told us during the 2009 recession that the answer was stimulus. the economy's slowing down again and now the answer is a shrinking of government spending. and nobody in the administration has completely squared the circle on that. >> charlie: they haven't argued that decrease in spending is a growth strategy, have they? >> they certainly have not. >> charlie: that's a deficit strategy. >> it's a deficit strategy, but if in fact it ends up fueling a shrinkage of the economy, it could of course shrink revenues as well. >> charlie: david thank you so much. pleasure to have you. >> thank you, charlie. >> charlie: we close this evening with appreciation of lucien freud one of the most influential painters of the 20th century. he died on july 21st at his home in london. he was 88 years old. he suffered from a brief undisclothessed illnes william grimes of the "new york times"ritethatreud's stark and revealing paintings of friends and intimate displayed nude in his studio recrass a proar operature and offered a new approach to art. freud himself said full saturated colors have an emotional significance i want to avoid. for me the paint is the person. he's a grandson of sigmund freud but established himself as an artist in his own rights. his subject ranged to kate moss and the king 06 england. we had an exhibition of his work at aquabela galleries here in new york city. here's part of that conversation. >> >> charlie: what's the fascination john with news, female news. he does a lot of nudes. there's no easy answer to that. >> there's no easy answer to that. he likes bodies. he likes very physical. >> charlie: and he paints the head last because he views the hid -- head as pt of anatomy. >> he's interested in other parts ofhe anatomy whether they are ladies or gentlemen. >> charlie: what is that about. >> aren't we all? come on. [laughter] >> charlie: that part weighed in here. we look around your gallery over there next to your portrait is a male nude. >> he loved the body. he loved painting the by. it's a challenge for him. he likes painting what he sees. he paints everything as he sees it. and the body is one of the most interesting things to paint. >> charlie: i love this painting over here. do y like that. >> that's a great painting. that's called the artist surprise by a naked admirer. it started off as a self portrait. it's a mirror image that gives i a certain distance. he said he already started the self portrait when he got this fan letter from this girl and she wanted to sit for him. he got her in and tried to think of a new pose which no artist has ever done before, and then sort of twined her around his legs like that. and so it happens great a story this painting. >> charlie: i love it. the painting that's over here, i assume -- tell me about this. who is that? >> that's a man called martin gaford who is a art critic in london, friend of his. and he just thought he had an instant face and asked him if he wanted to sit. so it's a man with a blue scarf. >> charlie: exactly. when he paints, how does he start. >> first of all you never watch him paint unless you're sitting there. he won't start painting with anyone else in the room exct the sitter. in my case he started with a piece of charcoal on the canvas, just drew in my head pretty much trying to get the scale. and then he went down -- >> charlie: he started with your hea >> he does, he starts the head usually pretty much in the beginning of the painting. i an he starts the head and the shoulders. in my case he started with the eyes and the nose and worked out from there. then did some hair and then did many so shirt and it goes on and on. >> charlie: you said by people who look at thisow present company except, he likes to paint people as fat, ugly or indolent . >> that's not true. >> charlie: that's not true. >> no. he likes to paint faces with character and bodies with character too. >> charlie: i've heard people say, they wouldn't work for him to paint very thick bodies that's not what he finds interesting. >> that came out when he did the big portraits of lee bowery and fat sue. that's when that started, that kind of thought. a fat phase. >> charlie: a fat phase. what do we say about the fact he's sigmund freud's grandson? >> he's not interested in psychology. he's not interested in his grandfather. he liked hisrandfather. he was fond of his grandfather. but he takes absolutely no -- these an abstinent lack of interest in psychology. he admires his grand father enormously for being a suologist because freud started out as a zoologist. and he was the first to discover how to tell the sex of eels. this was more interesting to him than any psycho analyst. he was very fond of freud's favorite disciple, princess bonapart, prepare cess georgi of denmark. when he went to paris, he spent a lot of time in this very freudian group of princess bonapart. she was the first person to buy one of his works which happened to be a sculpture of three-legged horse. you should try and get that. i don't know where it is now. i never seen it. >> charlie: is there a group of collectors, just waiting for an exhibit like this, just waiting for the next. >> we have a list of collectors that are waiting for the next freud to come. >> charlie: and do you sell them before you have this kind of exhibit or this is where they come. >> we basically do because they come so slowly. some of the paintings we got a year ago. so it's hard to keep th unsold until the show ens. they end up selling them and then just have the show to see what he's done in the last two years. >> charlie: how does he think of himself? >> he thinks of himself as a veryedicated artist and is passiona about his work. is very truthful about his work. and i don't know what else i can add to that. it's his whole life. it revolves around his work. he works from 9:00 in the morning until about 3:00 in the afternoon. then he takes a rest and then he works from about 7:00 to about 11 or 11:30 at night. does that seven days a week. >> charlie: these paintings, just everything he's done in the last two years. how do you decide what you're going tout onyour walls in this exhibit. >> i don't. i don't decide, he does. he decides what he's going to let out of the studio. and there are instances, and i wa talking to john before just about, this is a very beautiful painting i've seen him working on when i was sitting withhim of a nude that looked to be great. e next dayr a week later when i was there i said how's it going, i looked and it was in shreds. he shredded the whole thing. he was working on it six nths. >> charlie: just shredded that. there was no way to save that pointing. >> charlie: you asked him why he did that. >> he said he didn't think it was a good painting. he said he didn't do with that painting what he wanted to do so he wouldn't let it out. anything he finishes with i get. i need enough to fill the gallery. >> charlie: lucien freud dead at 8 8. we want more from his friends and his contribution to portraiture. this footnote we met in london then his studio, had a remarkable lunch and went back to his studio. my mission was to get him to sit for an interview. he gave m the courtesy of thinking about it and talking about it but at the end of the day he said he couldn't do it. i gained a friend, i gained an oppounity to talk to a great painter but did not get to do the interview. more a lucien freud at another time. thank you for joining us, see you next time. captioning sponsored by rose communications ptioned by media access group at wgbh access.wgbh.org