weather? if your nation was just a few feet above sea level, you would be really worried. we'll talk with a former president of just such a nation. and why am i wiggling my finger in a mirror here? to try to understand the wonders of the human brain. come along for an amazing tour. first, here's my take. the attacks and counterattacks in this presidential campaign are, i suppose, inevitable. but let's be honest. they're largely untrue or irrelevant. whatever the paperwork shows, mitt romney was not running bain capital after february, 1999. and even if he had been, outsourcing jobs to lower companies' costs and thus ensure its survival is not sleazy, it's how you run a business efficiently. is president obama suggesting that we put up tariff barriers to prevent outsourcing in the future? on the other side, romney's recent claim accusing the president of shoveling government grants to his political supporters is so twisted that it earned him the "washington post" fact-checkers' highest score for distortion -- four pinocchios. and his recent refrain that obama's views are foreign -- [ applause ] >> get it -- is, frankly, disgraceful. below all this mudslinging lies a real divide. obama has been making the case that the u.s. economy needs investment in infrastructure, education, training, basic science, and technologies of the future. those investments in the president's telling have been the key drivers of american growth and have allowed people to build businesses, create jobs, and invent the future. romney views that america needs tax and regulatory relief. the country is overburdened by government mandates, taxes, rules that make it difficult for businesses to function, grow, and prosper. he want to cut taxes for all, reduce regulations, streamline government. all this in his telling will unleash america's entrepreneurial energy. both views have merit, and would make for a great campaign if the country had a sustained discussion around these ideas. then the election would produce a mandate to move in one of these directions. now i think obama has the stronger case. we do need a tax and regulatory structure that creates strong incentives for private businesses to flourish. the thing is, we already have one. the world economic forum's 2011/2012 global competitiveness report ranks the united states number five in the world and number one among large economies. whether compared with our own past of, say, 30 years ago, or with other countries around the world, the united states has become more business-friendly, not less over the last 30 years. america is worse off than it was 30 years ago in infrastructure, education, research. the country spends much less as a percent of gdp on infrastructure, research, development, education, and training than it did in the 1960s, '70s, and '80s. we spend half as much on r&d as we did in 1960. we're falling behind fast. in 2001, the world economic forum ranked u.s. infrastructure second in the world. in the latest report, we're 24th. in the 1970s, america led the world in the number of college graduates. as of 2009, we were 14th among the countries tracked by the oecd. in other words, the great shift in the u.s. economy over the past 30 years has not been an increase in taxes and regulation but, rather, a decline in investment, in human and physical capital. president obama has real facts on his side which makes it somewhat depressing that his campaign has focused on half truths. let's get started. steve ratner was one of the founders of the quadrangle group, a private equity firm that once managed $6 billion in assets. more recently, he was the obama administration's car czar, tasked with fixing the u.s. auto industry in the wake of the financial crisis. so he's somewhat a defender of private equity and somewhat a defender of president obama. a unique position to be in these days. i wanted to ask him about the realities of private equity. welcome back, steve. >> thanks for having me, fareed. >> so first let's just talk about private equity because there are people who say that the attacks on him are legitimate because private equity is quite different from just being engaged in business. jacob wiseburg has a piece and says, look, this is money made through financial engineering, these company, private equity companies, often buy a company, then load it up with a lot of debt. use that debt to pay themselves fees, maybe the company then does well, maybe it doesn't. but they enrich themselves regardless of whether the company they bought does well. is that fair? >> so like so many things in life, the truth lies somewhere in between. there are some very commendable aspects of private equity. i think private equity has made a serious major contribution to sharpening up management in this country by going in and saying we just care about the bottom line. we want this company to be run efficiently. we don't care about your corporate jets are going to go, all this kind of stuff. and i think they've had a real impact. that's the good side of private equity. on the other side, yes, there is a fair amount of financial engineering involved. sometimes private equity guys do what you alluded to which is they put so much debt on so they can take money back out and realize return on their investment, and then sometimes later -- not every time, of course, the company goes bankrupt. and they end up, the private equity guys, end up end in money. employees lose their jobs. the investors lose their money. but private equity by and large is a perfectly legitimate business exercise. what it is not is a practice of creating jobs. where i -- part companies with governor romney is where he starts to claim credit for creating all these jobs. that's not what private equity does. private equity makes money. makes profits in a very -- a legal and usually responsible way. but it's not a job creation machine. it doesn't qualify you to be the job creator and chief. >> what about the outsourcing because it does seem to me that over the last 20 years one -- i don't want to say trick, but one simple mechanism that companies have used, companies like general election but also private equity firms when they go in, is to say what part of this business could be done in china, in india, in the philippines, at a fraction of the cost? let's shut down the plant in kentucky, let's move it to china. and that critique, which is at the heart of the issue about bain capital from the point of view of the obama campaign, seems to be one that resonates. is it fair? >> yes. it's fair in the sense that every company in america or for that matter every part of the world, they're tasked with looking at their cost and always saying to themselves, is there a way to lower our costs? everybody knows we're living in a global world, and companies have to produce efficiently to compete. if you don't have the lowest costs, you will simply fail in the marketplace. so i'm sure bain's being very good at what they did, spent a lot of time saying how can we do this more cheaply. if it means call centers in india or manufacturing in china, so be it. and that, again, was their job. >> you know the world of private equity inside out. you also understand issues relating to sec document probably better than most. what do you think happened? why is it when mitt romney left the bain capital to manage the olympics, bain kept filing sec documents for several years, three years, with him listed as sole stockholder, chairman, chief executive and president? >> we don't know. one of the problems here is governor romney has created a level of opacity around his affairs that has led everyone to assume the worst. and which i think, frankly, is just politically stupid because what else can you think when he doesn't tell you actually what happened? one hypothesis that i hear in private equity circles that resonates with me as a possibility is, first, when he left to go to the olympic, he didn't know how long he was going for, a week, a month, x years, didn't know whether it would be an 18-hour day, a six-hour day. he left kind of instantaneously. there was no succession planning that seemed to be in place at bain. so there was no clear idea who was going to succeed him. and so they couldn't really file something else until they figured out who was going to succeed him. and that apparently -- not unusual that that took some time. and so it sort of drifted along. they just kept filing what they were filing before because they didn't have anything else to file. and that's where it -- it stood. >> what about the tax returns? is there something there that should worry americans? >> taxes are as much art as science. and i think what americans will find is that he pushed the envelope to the edge. he did stuff that simple, ordinary american won't be able to relate. to the $100 million ira. $100 million in trusts for his kids in which he will not only pay no estate taxes but through a complicated mechanism is able to put more and more into the trusts as the years goi on. i think it's going to make americans recoil, and i think that's why he's not seeing the returns. >> do you understand why you'd need a swiss bank picture? >> i understand the nature of offshore vehicle and why much of this occurs offshore. it has to do, like all this, with taxes. not so much taxes for romney in some cases anyway, but taxes for his investors with a collateral benefit for him. yeah, there are, again -- if you say to your tax people, as he seem to have done, i want every trick in the book, i want to push this to the edge, i will tell you that as a private equity guy i'm familiar with many of the things he did. and i know many people who have done many of the thing he did. i do not know anyone who did everytng that he did. some of what he did, like the ira, i've asked fellow private equity guys -- none of us had even known this was a possible trick, if you will. so he's pushed the envelope all the way to the edge to his benefit. and i think americans would find that very distasteful. >> and that stayed -- the ira that's currently valued at $100 million. >> $100 million. also some money offshore he's also deferring taxes on until he brings it home. every year the government is giving him an interest-free loan on all these deferred taxes at the expense of the federal budget in effect. >> and to the extent that this does rise to a larger issue as the "washington post" writes, that the reason it's -- in his opinion -- it's worth talking about is that it's -- shows that people like mitt romney and you have access to advice, mechanisms, strategies, to build wealth that really ordinary americans don't have access to. and that when you couple that with his agenda which is to cut taxes further for those people, it -- it gets to the heart of this idea that there are two americas, one for the very, very, very rich and one for everyonele. >> i think that's precisely the point. i must say i'm ashamed of myself in a sense for not seeing this as clearly in the years when i was a private equity guy, frankly having access to some of these tax management, shall we say, mechanisms. but when you step back and look at the whole picture, what you see are two americas. one where mitt romney can do all these things not because he has good advice, but because the nature of his business allows him to have $100 million ira. just because you're rich, you don't necessarily have it. but the nature of his business allowed it. real estate guys, oil and gas guys, certain industries lend themselves to tax management, as i said before. that's very effective. others don't. but the result is two americas. you can find plenty of rich guys out there paying 35% of their income in taxes without even the -- even though they have great advice because they don't have the right income, they're not in the right business. but the point is there are two americas. and i think that is not where this country should be. >> steve rattner, pleasure to have you on. >> thanks for having me. up next, what is going to happen next in europe? don't forget, there's a big crisis there, as well. some historical perspective from the great historian, neil ferguson. 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>> it's hard to do. one reason it hasn't happened yet is because this is much harder than leaving an exchange rate mechanism, what the europeans used to have, or sold standard, what we had up until the 1930s. because it's not just about the bank notes and the coins, those would have to be changed. much more importantly it's about what's in the banks because most money is, in fact, in bank accounts rather than in people's pockets or under their beds. exactly. what you would be talking about would be an announcement presumably on a sunday night along the lines of news just in, those euros that you have in your bank from tomorrow will be dragma, a teething problem because the atms won't work for a few days while we get that into place. don't panic, there's going to be a bank holiday until, let's say, thursday. now just think what that would do. not only in greece where there would be pandemonium, there would be pandemonium throughout europe because if one country leaves -- and this is an argument which i've heard again and again traveling through europe over the past few months. if one country leaves, the question is, who's next? so for one country to leave wouldn't just be hugely disruptive to its banking system, it would be disruptive to the entire european banking system. >> so if it were to happen, presumably the argument would be again mechanically all those bank accounts where you have euros have been digitally converted to dragmas, but your bank note will have to be restamped or something like that. in the old -- when the currency collapsed, they had people come in with the old hapsburg money and would stamp on it, this is romanian money, whatever it was. >> that is exactly what happened at the end of the first world war when the monetary union fell apart. we've come a long way. much less money is in the form of bank notes. much more is in bank accounts. it's not just about converting the notes and coins. that's doable, though it's clunky and difficult. the big problem is what you do with outstanding debts. if you owe somebody money, does it suddenly go from being a euro debt into being a dragma debt and at what rate? everything hinges on it being a weak currency. the idea would be to help the greeks out of a hole with a devaluation. from the point of view of anybody who owes money in euros inside greece, this would be christmas early because the debt would be worth a whole lot less. from the other point of view, the creditors' point of view, it's disaster. it's not just disruptive in terms of payments, it's hugely sdrip disruptive in terms of creditors and debtors. we haven't got to the cross border debt. the money that the greeks owe to others, that would stay in euros or become dragmas? it's a can of worms crossed with pandora's box at this point. >> i've rarely heard you mix metaphors before. so it must be serious. >> it really does. >> now let's talk about the part that seems really scary which is the spillover. so the problem is that this happens in greece. all of a sudden people say, wait a minute, maybe not all euros are created equal, and i'm just going to be safe. i'm going to put my money in the one country that isn't going to default. and that's germany. is that what you -- is that your fear? >> we've already seen tendencies of this kind. i was in barcelona just a few weeks ago. everybody from the taxi driver who picked me up at the airport to my editor was asking me, should i move my money out of a spanish bank and into a german bank. that's an option. not easy to do. it involves a certain amount of hassle, but it's doable. that's the nature of a monetary union. the moment people fear that tomorrow the euros are going to be pasetas in the spanish case, they start to think, well, i would rather have something that will be a deutsche mark the day after tomorrow if this whole thing is going down. what we started to see last month was people moving money out of spanish banks and into german banks. it wasn't a fully fledged bank run. some people called it a bank jog because it didn't reach epidemic proportions and there weren't loans in the street. but the fact that that could happen is, i think, one reason why this hasn't yet taken place. it wasn't so much that the germans relented and said, oh, okay, we'll cut the greeks one more break. it was more that it was explained to the german government, look, if you kick the greeks out or get them to kick themselves out. there's going to be a contagion effect that could come to spain and ultimately affect france, too. that i think is the reason why this monetary union is still hanging together. because the cost of dismantling it is incrediblyhigh. >> president obama is watching all this, and clearly the single-most important factor in the last three months in terms of the weakening of the u.s. economy must be the slowdown in europe, the fears that come out of europe. are they going to abate, or in the next four to five months as we approach the u.s. election, are we going to see more of the same, indeed perhaps a little bit more crisis? >> well, luckily europeans take very