it happened, and i'll explain. next, more than 60% of the vote in egypt this week went to islamists. how worried should we be? then, is shale gas the answer to all america's troubles, or at least to many of them? you've heard about fracking, what is it, is it safe? find out. first, here's my take. president obama gave an important speech in kansas last week. whether you agree with all of it or not, he has begun a national conversation about the economy and the role of government. that's what this election should be about. and in presenting his view, obama shifted the economic conversation from deficits alone to the crucial issue of growth. after all, deficits matter because they could have a harmful effect on growth. so the question we should all ask is -- what would make this economy grow. what has stopped it from growing over the last few years, indeed over much of the last decade? one theory heard a lot these days is that the economy is burdened by excessive government regulation, interference, and taxes. cut them, the republican candidates all say, and the economy will be unleashed. it's a compelling picture, but the data simply do not support it. the organization of economic cooperation and development, the oecd, released a study last week measuring tax revenues as a percentage of gdp. of the 30 countries studied, the united states came in 28th, taxes are low in historical terms, as well. the lowest since the early 1950s. or look at competitiveness -- the world bank publishes a report that looks at doing business across the globe. the u.s. ranks fourth in the world. the world economic forum does an annual ranking of overall economic competitiveness. the u.s. ranked fifth. in both these rankings, by the way, the countries that score higher than the united states are tiny places like singapore and finland, with populations often 5% that was the united states. and these rankings have not slipped much over the last decade. so where has there been change? where have we slipped? the answer is pretty clear -- only five years ago, american infrastructure used to be ranked in the top ten by the world economic forum. now we're 24th. u.s. air infrastructure has gone from 12th in the world to it 1st. roads from eighth to 20th. the drop in human capital is even greater than the drop in physical capital. the united states used to have the world's largest percentage of college graduates. now we're number 14, according to the most recent oecd data. and american students routinely rank toward the bottom of the developed world in international tests. the situation in science education is even more drastic. the number of engineering degrees conferred annually decreased more than 11% between 1989 and 2000. in other words, the big shift in the united states over the past two decades has not been a rise in regulations and taxation but rather a decline in investment, in physical and human capital. an investment is the crucial locomotive of long-term growth. on this program, michael espn, the nobel prize-winning economist, pointed out that the united states got out of the great depression because of the spending associated with world war ii, but also because during the war it dramatically reduced its consumption and expanded investments. people spent less, they saved more, and they bought war bonds. that surge in investment by people and government produced a generation of growth after the war. if we want the next generation of growth, we need a similarly serious strategy of investment. let's get started. my first guess e guest today wants to be the next president of the united states. jon huntsman is a republican, but he served as ambassador to china under president obama. he was previously governor of the state of utah. and back when george h.w. bush was president, huntsman served as deputy assistant secretary of commerce and also had a stint in singapore as ambassador. a storied career already, but now he want the top job. jon huntsman joins me. pleasure to have you on. >> thanks, fareed. i'm honored to be here. >> why is it that most people think of you as the republican whom independents and moderates are going to love, but republicans can't really get warm and fuzzy about? >> well, republicans, as a matter of fact, are coming around and taking another look. they might have missed something at the very beginning. and that was a conservative track record as governor. i delivered the largest tax cut in the history of our state tax reform. we took that state to the number-one job creator in america. we reformed education by expanding choice. we created health care reform without a mandate. but i'm also the kind of leader who believes in bringing people together. i say we have too many levels of divide in this country. we forget that we're americans first and foremost. in order for us to get to the point of problemsolving, the underlying issues -- and i believe there are two major issues we must tackle immediately. one is the economic deficit which is very real, and it's a cancer metastasizing in our country that's going to shipwreck the next generation if we do nothing about it. and the other is a deficit of trust, fareed. that is, the american people no longer trust their institutions of power. they don't trust congress. they don't trust the executive branch, a president who hasn't led. they don't trust wall street. and i say as a candidate and then as president, i'm going to talk about a banking system that is too big to fail, which we have. >> and you want to break the bank -- >> i do because i believe that capitalism without failure isn't capitalism. if you've got banks that combined have assets that are roughly equal to 2/3 of our gdp, $9.4 trillion, if they are too big to fail, then those who believe in a system that ought to be functioning based on free market principles, you can do taxes, you can do regulatory reform. but if you're left with banks that are too big to fail, you're setting yourself up for disaster. >> let's talk about the temperament. it is -- seems to me -- one of your problems, which is that the republican primary wants people to say incendiary things. i mean, if you watched the rise of herman cain, you watched the rise of rick perry, newt gingrich, there's a market for people to say slightly outrageous things. as a way of proving that you're politically incorrect or willing to kind of not cotton to the mainstream media. you just refuse to say those kinds of incendiary things. >> it may give you your warholy and 15 minutes of fame, fareed, but in every case you've cited, they go up and come down because there's no staying power, no sustainability there. i'm saying i've got a track record, i'm a consistent conservative when you look at my record. and my track record would speak to accomplishments as governor, i've lived overseas four times. three times as a united states ambassador. i've been in business. so when we get our war holly and 15 minutes of fame, coming as we build up a sustainable rise in new hampshire, we'll get our power -- >> you're predicting something about newt gingrich who is still up. you think that that candidacy will fade? >> it's hard to know. we'll have to see where the marketplace goes. all i can tell you is this, fareed -- i'm not going to pander, i'm not going bluster, i'm not going to contort myself into somebody i am not. and i'm not going to sign those silly pledges like everybody else has done. i'm not going to make that soldier into donald trump's office. there are just some things i'm not going to do. >> tell me about the way you will get this budget deficit under control. as you know, we're spending about 23% of gdp. taxing at around 14% or 15% of gdp. that leaves a very large gap. republicans are saying that they will not accept a dollar of tax increases for $10 of spending cuts. how can you make up that entire difference? are we talking about a 7% or 8% of gdp entirely by spending cuts. and what would the effect on the economy be if you liberally cut what would be roughly $1 trillion out of the economy? >> you've got to combine aggressive spending cuts. i like the ryan plan. i like what it calls for -- $6.2 trillion out of debt and spending. i think it is necessary such that it will take the standard 19% of our gdp that's allocated to spending. that which is more sustainable. we have to be smart enough, fareed, to couple the cutting. and the management of the debt part with firing our engines of growth. and i learned as governor that when you can fire your engines of growth in an economy, you can expand your base. and revenue will increase, and you can pay the bills. we've got to start paying the bills as an economy. we're not doing that today. and as you pay the bills and your debt to gdp is going to change, and you're going to get back on your feet again. i believe we have an opening to re-create a manufacturing miracle in this country, a manufacturing renaissance. when i was born in 1960, the manufacturing as a percentage of gdp was 25%. we exported $3 for every $2 we imported. we owned 36% of the world's gdp. i look at where we are today, an anemic 9% is derived from manufacturing. >> you slightly dodged my question on taxes so i'm going to ask it again. if you got spending cuts of the kind that you want to get, let's just take simpson-bowles as one example, where the spending cuts are roughly speaking $3 of spending cuts for $1 of tax increases. the increases achieved precisely the way you want to do, it broadening the base and eliminating loopholes. would you accept that? >> well, i would tell you that we do not need tax increases in today's environment. here's what i would do with the revenue. i would phase out the loopholes and the deductions in the tax code which i know some people don't necessarily agree with. i think it's exactly what this country needs. both on the individual side and the business side. out with corporate welfare, out with subsidies. i would reinvest that revenue back into the tax code which would allow you to lower the rate which would be good for everybody. >> this always sounds good in theory. let me ask you -- >> it's what i did as governor. >> no, no, no. >> it's what diaz governor, not economic theory. >> people like that and theory but when you tell them that the deduction on interest for mortgages is effectively a loophole, they recoil. that's the one that costs the most money. >> of course. >> $100 billion. would you be willing to phase out that deduction? >> of course. it's what i fought for as governor. i did the same thing as governor. again, i'm not speaking as a theorist here, i'm speaking as a practitioner. i've spoken to people in the mortgage industry and said, tell me you wouldn't be willing to trade off a deduction that first and foremost focuses more on debt than it does equity, not a good place to be prioritizing tax cuts or loopholes. if you had an in exchange a lowering of the rate. the answer was, so long as you treat everybody fairly and don't just pick on our industry, that would probably be fine. so all i want to do is pick on everyone equally. i just want to phase out all of the loopholes in total pause i believe that we have a tax cut code that is like a 1955 chevy, trying to travel on the superhighway of the 21st century. we're wondering why we can't stay competitive. it's that way on the individual income side and on the business side. when we come back, we will talk with the former ambassador, jon huntsman, about china, the rest of the world. stay with us. it seems to me given your poll numbers, it is possible for someone to look at your candidacy and say this man is running for secretary of state. we all have internal plumbing. but for some of us with overactive bladder, our pipes just don't work as well as they should. sometimes, i worry my pipes might leak. but i learned there's something more i can do. now, i take care with vesicare. once-daily vesicare can help control your bladder muscle and is proven to treat overactive bladder with symptoms of frequent urges and leaks day and night. if you have certain stomach or glaucoma problems, or trouble emptying your bladder, do not take vesicare. vesicare may cause allergic reactions that may be serious. if you experience swelling of the face, lips, throat or tongue, stop taking vesicare and get emergency help. tell your doctor right away if you have severe abdominal pain, or become constipated for three or more days. vesicare may cause blurred vision, so use caution while driving or doing unsafe tasks. common side effects are dry mouth, constipation, and indigestion. so why wait ? ask your doctor today... ... about taking care with vesicare. we are back with jon huntsman, candidate for the presidenty of the united states by the republican nomination. let me start with china about which you have particular and deep expertise. but iran -- because you have said essentially that you would use american military force to take out iran's nuclear program. is that a fair characterization of your position? >> it's fair in the sense that i would have all options on the table because you have to ask yourself the fundamental question -- can you live with a nuclear iran. understanding the proliferation implications in the region, saudi arabia, turkey, probably egypt following up with their own weapons programs. i think in that case, you have -- you have the elements of disaster longer term. so if you can't live with a nuclear iran, then you must keep all options on the table. that's where i am. >> we live with a nuclear north korea, we live with a nuclear pakistan. iran right now is very effectively contained as far as we can tell. there has been saudi arabia, the egyptians are publicly opposed to them. the israelis, of course, are both opposed to them and have a large nuclear arsenal of their own that acts in some deterrent form. the regime is having economic difficulty, it's having political difficulties. doesn't it feel as though they are cordoned and contained in a way that -- that should be enough? or do you really feel you need that fairly large leap of military action? >> well, you have to keep an eye on them. i don't know that the containment theory is necessarily as it was a generation ago with a much different iraq, for example. but i think the regime in tehran, i think they've already decided for themselves that they want nuclear status. i think they've looked at north korea, you mentioned north korea, they said, north korea, nobody's touching north korea. they have a few crude devices. and compare and contrast it with libya and say libya had a program, they gave it up for friendship internationally. and i think they've decided they want whatever credibility comes with -- with nuclear status. and i do believe that that runs the risk then of proliferation problems that would then be unmanageable in the region. so i say as long as the centrifuges are spinning and as long as they're moving toward what could very well be enough to sound material for a weapon, i say we have a problem. that means we've got to keep an eye on them. we've got to get inspectors in this. we've got to have openness and transparency which never has been part of the regime. and i'm not at all optimistic about where this is taking us over the next one year to three-year time horizon. >> let's talk about china. you think china is going through a transition. and a transition not just economically but politically. you see an economy that has grown at 9.5% for 30 years, but that can't continue to grow at that pace and is going to start deescalating. you see a political system that is going to go through a transition of its own to a new generation of leaders, presumably as you know, not by the father of modern china. and you said that you think this will cause enough uncertainty that it will actually result in a drop in foreign investment in china. >> i do believe that will be the case. and so quickly, they're making a transition from being the largest export machine created in the history of humankind to a consumption model. and as they do, they're going to have to bring their currency more into market valuation. they want more consumers. their entrepreneurs in china are demanding that they expand their consumer market. indeed, if they want to bring their population up the economic ladder, they have no choice. they have to begin moving more toward a consumption-based model. that all by itself is going to result in some diminution of growth. the rest of the international markets on which they've grown to rely on are throttling back. and it will cause unemployment to move upward. the political dynamic is a very interesting one. and that is, the 18th party congress is around the corner. we forgot sometimes, we have elections here next year. they have leadership changes. you'll hear politics play out because of those elections. you'll hear politics play out in china because of those leadership changes. they are sweeping, and they are significant. if you stop to ponder that 70% of the top 200 leaders are turning over in china, including seven of the nine members of the standing committee of the politburo, i can't remember a time since 1949 when this significant, this comprehensive a change has occurred in senior leadership in china. the fifth generation is coming to the forefront. i know many members of the fifth generation, as i did the fourth and some in the third. they have a different view of the world. it's based more on a nationalistic set of impulses. they don't necessarily remember the great leap forward, '60 to '64. they barely remember the cultural revolution, '66 to '76. they do remember 30 years of blue sky, 8%, 9%, 10% economic growth. that's informed their view of the world. they think their time has arrived. >> mitt romney says the chinese artificially keep their currency low. that makes their goods cheap on world markets. he says that when negotiating with them, they try to unfairly get the best deal. they don't protect the intellectual property rights of western companies. and that they have all kinds of advantages for national champions. that they basically don't play fair. they cheat. isn't that true? >> in every category, you can cite major challenges in the relationship. so we're celebrating 40 years since richard nixon visited, next february. gone from zero trade to $400 billion in trade, soon to be the largest trading relationship this world has ever seen. and there will be nothing like it for as far as you can see to the 21st century. so of course we have problems and challenges. are we dealing with them in ways that would allow at least some advancement of the marketplace? of course. it is slow going, it is painful. and it's the nature of the relationship. that's large and terribly complicated. >> but it sounds like you're not willing to be tough on them, and romney would argue that you're -- i would imagine, that you've kind of gone native. you spent time there as ambassador, you saw things from the chinese point of view -- >> you can talk to them about how native i went. i was locked out of travel to many parts, the way i dealt with dissidents. >> why wouldn't you publicly criticize them for all these things which are -- first of all, they're wrong -- >> i politically criticize them all the time. >> the munitions -- >> as a trade negotiator, i was on the front line of those issues. i've criticized them for a long time. i disagree with the idea as promoted by romney that you would slap a tariff on them the first day that he's in office for currency manipulation because i know what lies ahead. they're going to slap a tariff on us saying we manipulated currency because of qe1 and qe2. all right, that sounds great in front of certain audiences. but in practice, you start a trade war. >> was president obama a good executive to report to as ambassador of chin