With upcoming trip to Israel, Obama on CNN clarifies views on "undivided" Jerusalem.

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On today’s edition of CNN's "Fareed Zakaria -- GPS," Senator Barack Obama (D-Ill.) appears on the program to discuss foreign policy. A full transcript of the program is below. “Fareed Zakaria – GPS” airs Sundays on CNN/U.S. at 1 p.m. (ET) and on CNNI at 8 a.m. and 3 p.m. (ET).

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Full Transcript

THIS IS A RUSH FDCH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

FAREED ZAKARIA, HOST, GLOBAL PUBLIC SQUARE: Welcome to the GLOBAL PUBLIC SQUARE. I'm Fareed Zakaria, and let's get started.

ANNOUNCER: Today on GPS, an exclusive interview. Senator Barack Obama's first wide-ranging foreign policy discussion. Tough questions on the world's greatest crises from Iraq to Afghanistan, from Israel to Iran.

The places and problems that could change the course of history.

And later, if they're scared, you should be, too. The world's smartest economists do the math on the global economy, and it doesn't add up.

Today on GPS.

ZAKARIA: I'm sure many of you have seen Senator Barack Obama interviewed on television. But I think the conversation I've just had with him is different. It's not really about the daily minutia of campaigning, what Jesse Jackson said this week on Fox News. I've tried not to play "gotcha journalism."

This interview is a broader discussion of the world, how he thinks about it, and how he'll deal with it, should he become president.

I caught up with the senator on the campaign trail at a school library in Dayton, Ohio.

(BEGIN VIDEO)

ZAKARIA: Senator Obama, thank you for doing this.

SEN. BARACK OBAMA, D-ILLINOIS, DEMOCRATIC PRESIDENTIAL CANDIDATE: Thank you so much for having me.

ZAKARIA: Tell me, what is your first memory of a foreign policy event that shaped you, shaped your life?

OBAMA: A first memory. Well, you know, it wasn't so much an event.

I mean, my first memory was my mother coming to me and saying, "I've remarried this man from Indonesia, and we're moving to Jakarta on the other side of the world."

And that's, I think, my first memory of understanding how big the world was. And then, flying there and landing. This was only maybe a year, or even less than a year, after an enormous coup, the military coup in which we learned later that over half-a-million people had probably died.

But it was for me, as a young boy, a magical place. And I think that probably is when it first enters into my consciousness that this is a big world. There are a lot of countries, a lot of cultures. It's a complicated place.

ZAKARIA: But you were an American in Indonesia. How did that make you feel?

OBAMA: Well, you know, it made me realize what an enormous privilege it is to be an American. I mean, it certainly was at that time, even more so, because the gap in the wealth of the West at the time compared to the East was much wider.

But it wasn't simply the fact that my mother was being paid in dollars by the U.S. embassy, and so, that gave us some additional comfort.

It was also becoming aware that, for example, the generals in Indonesia or members of Suharto's family were living in lavish mansions, and the sense that government wasn't always working for the people, but was working for insiders -- not that that didn't happen in the United States, but at least the sense that there was a civil society and rules of law that had to be abided by.

My stepfather was essentially dragged out of the university he'd been studying in in Hawaii, and was conscripted and sent to New Guinea. And when he was first conscripted, he didn't know whether he was going to be jailed, killed -- that sense of arbitrariness of government power.

Those were the things that you felt you were protected from as an American, and made me, as I got older, appreciate America that much more.

ZAKARIA: Then, you get to Columbia. And you decide to major in international affairs.

OBAMA: Right.

ZAKARIA: Now, this is at the end of the Cold War -- what we now know as the end of the Cold War -- the Reagan years...

OBAMA: Right.

ZAKARIA: ... just before Reagan and during.

What were you thinking then? Why did you major in international affairs?

OBAMA: Well, obviously, having lived overseas and having lived in Hawaii, having a mother who was a specialist in international development, who worked -- was one of the early practitioners of microfinancing, and would go to villages in South Asia and Africa and Southeast Asia, helping women buy a loom or a sewing machine or a milk cow, to be able to enter into the economy -- it was natural for me, I think, to be interested in international affairs.

The Vietnam War had drawn to a close when I was fairly young. And so, that wasn't formative for me in the way it was, I think, for an earlier generation.

The Cold War, though, still loomed large. And I thought that both my interest in what was then called the Third World and development there, as well as my interest in issues like nuclear proliferation and policy, that I thought that I might end up going into some sort of international work at some point in my life.

ZAKARIA: There was one other issue that now looms large that you were introduced to very early, which was Islam.

OBAMA: Yes.

ZAKARIA: Do you believe, when looking at the world today, that Islamic extremism is the transcendent challenge of the 21st century?

OBAMA: I think the problems of terrorism and groups that are resisting modernity, whether because of their ethnic identities or religious identities, and the fact that they can be driven into extremist ideologies, is one of the severe threats that we face.

I don't think it's the only threat that we face.

ZAKARIA: But how do you view the problem within Islam? As somebody who saw it in Indonesia...

OBAMA: Right.

ZAKARIA: ... the largest Muslim country in the world?

OBAMA: Well, it was interesting. When I lived in Indonesia -- this would be '67, '68, late '60s, early '70s -- Indonesia was never the same culture as the Arab Middle East. The brand of Islam was always different.

But around the world, there was no -- there was not the sense that Islam was inherently opposed to the West, or inherently opposed to modern life, or inherently opposed to universal traditions like rule of law.

And now in Indonesia, you see some of those extremist elements. And what's interesting is, you can see some correlation between the economic crash during the Asian financial crisis, where about a third of Indonesia's GDP was wiped out, and the acceleration of these Islamic extremist forces.

It isn't to say that there is a direct correlation, but what is absolutely true is that there has been a shift in Islam that I believe is connected to the failures of governments and the failures of the West to work with many of these countries, in order to make sure that opportunities are there, that there's bottom-up economic growth.

You know, the way we have to approach, I think, this problem of Islamic extremism, which is real and (ph) there, is we have to hunt down those who would resort to violence to move their agenda, their ideology forward. We should be going after al Qaeda and those networks fiercely and effectively.

But what we also want to do is to shrink the pool of potential recruits.

And that involves engaging the Islamic world rather than vilifying it, and making sure that we understand that not only are those in Islam who would resort to violence a tiny fraction of the Islamic world, but that also, the Islamic world itself is diverse.

And that lumping together Shia extremists with Sunni extremists, assuming that Persian culture is the same as Arab culture, that those kinds of errors in lumping Islam together result in us not only being less effective in hunting down and isolating terrorists, but also in alienating what need to be our long-term allies on a whole host of issues.

ZAKARIA: If U.S. forces in Afghanistan captured Osama bin Laden, what would you do with him, and you were president?

OBAMA: Well, I think that, if he was -- if he was captured alive, then we would make a decision to bring the full weight of not only U.S.

justice, but world justice down on him. And I think that -- and I've said this before -- that I am not a cheerleader for the death penalty. I think it has to be reserved for only the most heinous crimes. But I certainly think plotting and engineering the death of 3,000 Americans justifies such an approach.

Now, I think this is a big hypothetical, though. Let's catch him first.

And the fact that we have failed to seriously go after al Qaeda over the last five years, because of the distraction of Iraq, I think we are now seeing the consequences of that in Afghanistan.

That's not the only problem we have in Afghanistan. We have not dealt with the narco-trafficking that's taking place there. We have not provided farmers there an option beyond poppy. I think the Karzai government has not gotten out of the bunker and helped organize Afghanistan and government, the judiciary, police forces, in ways that would give people confidence.

So, there are a lot of problems there. But a big chunk of the issue is that we allowed the Taliban and al Qaeda to regenerate itself when we had them on the ropes. That was a big mistake, and it's one I'm going to correct when I'm president.

ZAKARIA: We'll be right back.

(COMMERCIAL BREAK)

ZAKARIA: And we're back with Senator Obama.

You talked about the other threats we face. In dealing with these threats, how should we approach other nations?

John McCain has talked about a new G-8, the group of the richest countries in the world, which would exclude Russia, expel Russia, and not include China. So, it would be an attempt to draw a line in the sand and cast out, as it were, the non-democracies.

Do you think that's a good idea?

OBAMA: It would be a mistake.

Look. If we're going to do something about nuclear proliferation -- just to take one issue that I think is as important as any on the list -- we've got to have Russia involved. The amount of loose nuclear material that's floating around in the former Soviet Union, the amount of technical know-how that is in countries that used to be behind the Iron Curtain -- without Russia's cooperation, our efforts on that front will be greatly weakened.

China is going to be one of the dominant economies -- already is -- and will continue to grow at an extraordinary pace. The notion that we don't want to be engaged in a serious way with China, or that we would want to exclude them from the process of creating international rules of the road that are able to maintain order in the financial markets, that are able to address critical issues like terrorism, that are able to focus our attention on disparities of wealth between countries -- that does not make sense.

Now, I think that we have to have a clear sense of what our values are and what our ideals are. I don't think that we should shy away from being straight with the Russians about human rights violations. We should not shy away from talking to the Chinese about those same subjects.

I think that we have to be tough negotiators with them when it comes to critical issues. For example, if China is not working cooperatively with us on trade issues, I think that there's nothing wrong with us being tough bargainers.

But we have to engage and get them involved and brought into dealing with some of these transnational problems. And that kind of tough, thoughtful, realistic diplomacy used to be a bipartisan hallmark of U.S.

foreign policy.

And one of the things that I want to do, if I have the honor of being president, is to try to bring back the kind of foreign policy that characterized the Truman administration with Marshall and Acheson and Kennan.

But also characterized to a large degree -- the first President Bush -- with people like Scowcroft and Powell and Baker, who I think had a fairly clear-eyed view of how the world works, and recognized that it is always in our interests to engage, to listen, to build alliances -- to understand what our interests are, and to be fierce in protecting those interests, but to make sure that we understand it's very difficult for us to, as powerful as we are, to deal all these issues by ourselves.

We need to show leadership through consensus and through pulling people together wherever we can. There are going to be times where we have to act unilaterally to protect our interests. And I always reserve the right to do that, should I be commander in chief.

ZAKARIA: What about if you don't get that consensus, let's say, in a place like Darfur? You've called for a no-fly zone. But it's a U.N.

no-fly zone.

OBAMA: Right.

ZAKARIA: Now, but the U.N. isn't going to have a no-fly zone, probably, because the Chinese and the Russians will probably not go along with it.

So, in that event, do you want to have a U.S. or a NATO no-fly zone? In other words, do you want to do something, even if you can't get consensus?

OBAMA: Well, look. There are going to be times where it's the right thing to do, and the consensus is not going to be perfect.

I think our intervention in the Balkans ultimately was the right thing to do, although we never got the sort of formal consensus and coalition that we were able to achieve, for example, in the Gulf War. And so, the situations are going to vary.

My point is this, that we should always strive to create genuine coalitions -- not coalitions that are based on us twisting arms, withholding goodies, ignoring legitimate concerns of other countries, but coalitions that are based on a set of mutual self-interests.

In a situation like Darfur, I think that the world has a self-interest in ensuring that genocide is not taking place on our watch. Not only because of the moral and ethical implications, but also because chaos in Sudan ends up spilling over into Chad. It ends up spilling over into other parts of Africa, can end up being repositories of terrorist activity.

Those are all things that we've got to pay attention to. And if we have enough nations that are willing -- particularly African nations, and not just Western nations -- that are willing to intercede in an effective, coherent way, then I think that we need to act, even if we haven't achieved 100 percent consensus.

But the principle of us wanting to build effective alliances with other countries and to lead in that way through persuasion and organization, I think that's something that has historically been when we are at our best.

ZAKARIA: One area where you're outside the international consensus -- and certainly, perhaps, some others -- is the statement you made in a recent speech supporting Jerusalem as the undivided capital of Israel.

Now, why not support the Clinton plan, which envisions a divided Jerusalem, the Arab half being the capital of a Palestinian state, the Jewish half being the capital of the Jewish state?

OBAMA: You know, the truth is that this was an example where we had some poor phrasing in the speech. And we immediately tried to correct the interpretation that was given.

The point we were simply making was, is that we don't want barbed wire running through Jerusalem, similar to the way it was prior to the '67 war, that it is possible for us to create a Jerusalem that is cohesive and coherent.

I was not trying to predetermine what are essentially final status issues. I think the Clinton formulation provides a starting point for discussions between the parties.

And it is an example of us making sure that we are careful in terms of our syntax. But the intention was never to move away from that basic, core idea that they -- that those parties are going to have to negotiate these issues on their own, with the strong engagement of the United States.

And if you look at the overall tenor of that speech and what I've said historically about this issue, you know, Israel has an interest not just in bunkering down. They've got to recognize that their long-term viability as a Jewish state is going to depend on their ability to create peace with their neighbors.

The Palestinian leadership has to acknowledge that the battles that they've been fighting, and the direction that they've been going in and the rhetoric they've been employing, has not delivered for their people.

And it is very hard, given the history of that region and the sense of grievance on both sides, to step back and say, let's be practical and figure out what works. But I think that's what the people of Israel and the people in the West Bank and Gaza are desperate for, is just some practical, commonsense approaches that would result in them feeling safe, secure and able to live their lives and educate their children.

ZAKARIA: And we will be right back.

(COMMERCIAL BREAK)

ZAKARIA: And we're back with Senator Obama.

You've also said that the chief beneficiary of the Iraq war has been Iran, which now poses a significant strategic threat to, or challenge to, the United States in the region.

If we were to leave Iraq entirely, would that not cede the field to them and allow Iran to consolidate its gains in the region and in the country?

OBAMA: I don't think so. Look, first of all, I have never talked about leaving the field entirely. What I've said is that we would get our combat troops out of Iraq, that we would not have permanent bases in Iraq.

I've talked about maintaining a residual force there to ensure that al Qaeda does not reform in Iraq, that we're making sure that we are providing logistical support and potential training to Iraqi forces -- so long as we're not training sectarian armies that are then fighting each other -- to protect our diplomats, to protect humanitarian efforts in the region.

So, nobody's talking about abandoning the field.

ZAKARIA: That might be a large force.

OBAMA: Well, it -- you know, I'm going to make sure that we determine, based on conditions on the ground, how we effectively carry out those limited, temporary missions.

But what is going to prevent Iran from having significant influence inside of Iraq -- or at least, so much influence that Iraq is not functioning -- is to make sure that the government has stood up, that it has capacity, that the Shia, the Sunni, the Kurds have come to the sort of political accommodation that allows them to divide oil revenues that are now coming in quite handsomely, that ensures that, in fact, we're serious about ending corruption in some of the ministries, that provincial federalist approaches to governance are being observed.

The stronger the Iraqi government is on its own -- not with us, but on its own -- the less likely that Iran is going to exert its influence.

And again, this is -- you know this better than I do, Fareed -- the assumption that, because many in Iraq are Shia, that they automatically are going to align themselves with Iran, ignores the fact that you've got Arab and Persian cultures that are very different. And there's -- if Iraqi Shias feel that their government is actually functioning, then I think their identity as Iraqis reasserts itself.

If, on the other hand, the perception is that the government in Iraq is just an extension of the U.S. government, then sympathies for the kind of mischief that Iran has been engaged in may increase.

Now, the last point I would make on this is, this is going to be a messy affair. There's no elegant and easy solutions to what I believe has been an enormous strategic blunder by this administration.

We're going to have to work our way through it. There are going to be -- there's going to be progress in some areas. There is going to be slippage in others.

What we do have to make certain of is that, by creating a phased withdrawal in Iraq, that we are mounting the sort of diplomacy and reaching out to our allies in ways that actually strengthen our ability to isolate Iran, if it continues to pursue what are unacceptable foreign policy decisions by their leadership.

ZAKARIA: But you could imagine a situation where, if the Iraqi government wanted it, 30,000 American troops are still in Iraq 10 years from now.

OBAMA: You know, I have been very careful not to put numbers on what a residual force would look like. What I am absolutely convinced of is that, to maintain permanent bases, to have ongoing combat forces, to have an open-ended commitment of the sort that John McCain and George Bush have advocated, is a mistake. It is a strategic mistake.

It weakens our ability to go after al Qaeda in Afghanistan. It continues to fan anti-American sentiment. I think it allows Iran to more effectively engage in mischief in the region. And it prevents us from isolating them and making clear to the world that they are the authors of their own isolation by their behavior.

Those costs cannot be borne. And that's before we even start talking about the hundreds of billions of dollars and American lives that are lost or profoundly disrupted as a consequence of this engagement.

ZAKARIA: And we will be right back.

(COMMERCIAL BREAK)

ZAKARIA: A final question.

You are going to Europe and the Middle East. You know that in places like France you have 85 percent approval ratings.

Isn't that going to make some Americans very suspicious? If all of Europe likes you, if France likes you, there must be something wrong.

OBAMA: Well, I tell you what. You know, it's interesting. As I travel around the country, here in the United States, I think people understand that there has been a price to the diminished regard with which the world holds the United States over the last several years.

It's something that bothers people. It's something that's brought up.

You know, when I'm doing a town hall meeting in some rural community, invariably, somebody will raise their hand and they'll say, "When are we going to restore the respect that the world had for America?"

And, you know, the American people's instincts are good. It's not just a matter of wanting to be liked. It's the fact that, as a consequence of that diminished standing, we have less leverage on a whole host of critical issues that have to be dealt with.

So, I think the American people are ready for a president who is not alienating the world. And if that president is liked a little bit, well, that's just a bonus.

Now, I don't know how long that will last. We'll see if my approval ratings hold up after I'm president.

ZAKARIA: You're bound to disappoint people. I mean, with approval ratings that high, it's bound to be a let-down. Don't you think?

OBAMA: You know, my job is to make sure that, here in the United States, the American people feel confident that I'm going to be advocating for their interests, that I'm going to keep them safe.

The way to do that though, I believe, is to make sure that we're paying attention to the rest of the world, their hopes, their aspirations, as well, and that we're leading with our values and ideals, and not just with our military.

ZAKARIA: Senator Obama, thank you.

OBAMA: Great talking to you.

ZAKARIA: Oil and food prices are sky-high, world markets are down, and the American economy seems to be slinking into a long slump. Just how scared should we be?

Well, I've gathered three of the top economists in the world to talk about all of this.

Lawrence Summers served as the United States' secretary of Treasury, then as president of Harvard University. Paul Krugman is the must-read op-ed columnist for the "New York Times." And Columbia University professor, Jeffrey Sachs, has spent years giving emergency assistance to economies around the world in the form of advice.

The first question to you, how scared should we be? In other words, are we in the phase of a crisis where the pain has been felt, and there's going to be a long, slow working out of this pain? Or are there more unpleasant surprises to come?

You know, what innings are we in?

JEFFREY SACHS, DIRECTOR, THE EARTH INSTITUTE, COLUMBIA UNIVERSITY, ECONOMIC ADVISER TO GOVERNMENTS: I don't know if Paul and Larry agree exactly, but one thing that could be added to this is the question of whether there's a way to counteract the downturn itself, not whether one should pump up the economy, and so forth. But is a recession at this point unavoidable? This is going from, you know, gloom to gloomier.

But I would say yes, and that the attempt early on in the next presidency to have a big stimulus and keep pushing, and do everything we can to avoid the downturn, would actually prove to be fruitless at this point, because there are so many imbalances that have been built into the U.S. economy in the last decade, and especially in the last few years, and now added to the -- now added on by the global markets -- that consumers really are going to have to adjust.

They've not been saving for years. The housing market is not going to be the way the economy is going to recover. There's going to have to be a lot of structural change in the U.S. economy. There's going to have to be export-led growth to an important extent, because we've been borrowing on an amount that we will not continue in the future...

ZAKARIA: So, (UNINTELLIGIBLE), a recession will actually have an effect of cleansing the system. It will take out some of these unsustainable imbalances.

SACHS: No, what I'm saying is that, the idea that there really are enough gears right now to just keep that headline measure of the total size of the economy growing at some positive, close-to-normal rate, is just not the case. We don't have tools like that, that can do that.

And there are so many problems that need adjustment right now, and such a legacy of imbalance, that I think that heroics to stop a downturn wouldn't work.

LAWRENCE SUMMERS, FORMER U.S. TREASURY SECRETARY, FORMER PRESIDENT OF HARVARD UNIVERSITY: Jeff, we've been friends for 35 years, and I've never heard you say such a fatalistic thing.

I don't disagree with you about the difficulty, the challenge. And I think, no matter how brilliantly policy is carried on, the next three or four years are not likely to be three or four particularly favorable years in American economic history.

But I think it's a serious mistake to suggest that we should somehow accept our recession like a man, and that if we just do that, we'll cleanse the imbalances...

SACHS: No, but, I didn't use the word...

PAUL KRUGMAN, OP-ED COLUMNIST, "NEW YORK TIMES": But there's a definite...

SACHS: Come on, look, Larry.

KRUGMAN: But I think, look. OK, fair enough. But that's not what you're suggesting...

SACHS: Fareed asked me that, and I said that that was not what I was saying here.

ZAKARIA: That was my Herbert Hoover...

SACHS: That was not what I was saying.

KRUGMAN: ... Andrew Mellon. Liquidate the farmers, liquidate the workers. It will purge the roughness from the system.

SACHS: What I was saying is that, after many years of heavy borrowing, low saving rates, a mess in the housing sector, a mess with the dollar, inflationary risks, and so forth, we just don't have the tools. That's all I'm -- I think I'm saying, is realistically, it's not heroism to the rescue that is going to enable us to have normalcy, or close to normalcy.

ZAKARIA: It's kind of a long...

SACHS: That's all I'm saying.

KRUGMAN: Yes. No...

ZAKARIA: What you're saying is it's a long slog.

KRUGMAN: So, there is a case -- I think there is a case for another stimulus package. The next president might very well want to do something that tries to pump up demand -- probably a better stimulus package, something that actually does some stuff that we need, like repairing infrastructure, as well as just, you know, putting checks into consumers' mailboxes.

It probably is not going to be possible to avoid a fair bit of hardship on the way. But, you know, you don't want to just be fatalistic. You don't want to -- and by the way, if things really do tip -- you know, and tip -- look like they're tipping into something much more serious, then heroic measures are called for.

I mean, it's not the case that you never want to do something very dramatic. It's not -- it's one thing to say that it's not going to be easy. It's another thing to say that we should just stand back and let this thing happen.

ZAKARIA: Larry, you've been there. The president comes in. The economy is looking very weak. The Fed is doing what it's doing.

What realistically is the president going to have at his disposal? And what would you advise?

SUMMERS: You know, it's eight months off, and it's difficult to know what the world will look like at that point.

I think there's a strong case for more fiscal stimulus, because I think more unemployed resources, more problems in the financial system isn't going to serve any constructive purpose. And as part of the transition, I favor that fiscal stimulus.

ZAKARIA: And it would be a big infrastructure...

SUMMERS: And I think infrastructure's got to be an important part of it.

You know, one of the features of the structural changes in the economy, particularly the fact that there's not going to be a lot of construction for a long time, is that a core group in our society -- men who haven't been to college -- are really bearing the brunt of this downturn. And the right kind of infrastructure program can do a lot to provide them with opportunity. And I think that's very important for the country.

I think the next president and his colleagues are going to have to take a serious look at the financial system, at the way we regulate the financial system, at the so-called government sponsored enterprises.

We're going to have to make sure -- and it is not going to be easy -- that that system has enough capital in it to support a robust flow of credit. And making sure that that happens, rather than a vicious cycle of liquidation, has got to be a crucial priority for the next president.

There's going to be more to be done to prevent foreclosures. The house prices are going to have to adjust, and we're not going to be able to stop that. But there are things we can do that prevent foreclosures and prevent the tremendous waste that's associated with the foreclosure process.

SACHS: A new president has a new chance for a longer term agenda. It would be very easy for the short run to overwhelm the next administration.

If the president comes in and says, "My God. We've got unemployment rising. We've got to do something. We're going to give another tax cut,"

for example, which will be very easy to be top of the agenda, fiscal policy will tie itself up in knots, we will not get to a long-term perspective, which we need to solve long-term problems in this country.

And I think an administration that starts with the desperation to avoid what is unlikely to be avoided, will not find a way to address longer term challenges, and would end up, you know, unsuccessful, I would say.

So, we've drifted so badly in this country, in this administration.

Everything of seriousness for the long term, starting from a fiscal structure that takes account of the demographic changes in this country, what we're going to need in the long term, the health sector, as Larry said, the energy sector, climate change, and a host of other extraordinarily serious long-term problems have been neglected.

And yet, we will face what will be looked at as a traditional short-term business cycle problem. And it could overwhelm the administration and overwhelm our politics.

If we spend most of our time on what we're going to do immediately about the housing crisis, what we're going to do about this, what we're going to do about another tax cut, and so on, we will not get to the things that really need addressing right now.

And a lot of what needs addressing is global. And we've gotten so bad at doing anything serious with the rest of the world, that those basic linkages internationally have to be recreated, and a president is going to have to spend a lot of time seriously on that. That's also going to cut against the grain of an economy in a big slowdown, and probably in an outright recession.

SUMMERS: I think there's -- Jeff and I...

ZAKARIA: Let me ask -- yes.

SUMMERS: Where Jeff and I agree is on the ends, that we've got to address the current situation, but that there are long-run issues that are absolutely critical to address in an effective way.

Where I think we do have a nuance of disagreement is that my concern is that, if the recession is not contained to the extent possible -- and I don't think, either, that it can be fully contained -- then I think it's going to be very difficult to do anything right for the long run.

And I think the prospects of..

ZAKARIA: So, you're more scared in a way than he is.

SUMMERS: ... maintaining the United States as a force for openness, as a cooperative nation working with other nations on these global issues of energy, on these global -- on these global issues that are of such concern -- I think those chances are much greater if we're doing all we can to make the American economy work for the American people.

And so, I think it would be a mistake for any administration to lose sight of the distress that Americans are feeling, because of the things that we've discussed.

And so, I think it's a matter of finding the right balance.

KRUGMAN: Well, actually, let me -- I don't even think -- I think these things can go together. I mean, I always think of the New Deal model, FDR, where a short-term crisis acted as a justification and a stimulus for long-term reform.

And we came out of the Great Depression with Social Security. We came out of the Great Depression with the Trade Agreements Program, which paved the way for the global economy of later generations.

We can come out of this crisis, actually, with an enhanced case, enhanced prospects for health care reform, with an enhanced prospect for a rational energy policy, which could also slide into a climate change policy.

I mean, what we really want is, we want the next president to say, "We have all these big problems. Some of them are short term, but they're wrapped into a long term. And here are the things we can do to fix them."

And we come out in 2013 with a much better society, a much better thing

-- partly, you know, exploiting the crisis, exploiting the crisis to do the right things.

ZAKARIA: We've had a somewhat gloomy discussion, but on that optimistic note, we're going to have to end.

Thank you, gentlemen. Thank you very much.

ZAKARIA: This week 78 years ago, construction began on the Hoover Dam.

Rising 726 feet above the swirling waters of the Colorado River, it was considered a miracle of modern engineering.

The dam was one of dozens of major infrastructure investments made by the U.S. government during the 1930s. The Golden Gate Bridge, the George Washington Bridge and LaGuardia Airport are three other examples.

In fact, from Thomas Jefferson's roads and canals to the interstate highway system of the 1950s, America has had a great tradition of building the world's best infrastructure.

But as anyone who has traveled in America recently knows, that tradition seems well and truly dead. Collapsing bridges and levees, crowded airports, clogged highways and a dysfunctional train system have become the hallmarks of modern American life.

The United States now spends less as a percentage of GDP on infrastructure than any other industrialized country, a mere 2.4 percent compared with five in Europe and nine percent in China.

The American Society of Civil Engineers estimate that we would need to spend $1.6 trillion just to bring existing roads, bridges, highways and airports into good repair. Then, we need to plan for the future. If not, projects like the Hoover Dam will become symbols of an America that could once think big and big tall, an America that is no more.

That's it for GPS this week.

But before we go, I want to thank you again for all your e-mails. Last week I asked: What else, other than the Declaration of Independence, happened in 1776?

Many of you chose the one specific event I was thinking of -- the publication of Adam Smith's economic classic, "The Wealth of Nations," a 1,000-page book that became an instant bestseller, and could fairly be described as the intellectual foundation of modern economics.

Lots of you also noted that Thomas Paine published his famous revolutionary call to arms, "Common Sense," in 1776.

For this week, we've talked about the Hoover Dam. What is, in your view, the most impressive man-made structure in the world?

You can e-mail us at FareedZakariaGPS@CNN.com, and you can also visit our Web site, CNN.com/GPS, for highlights from this program.

See you next week.

- END -

4 Comments

Obama is an outrage. He has totally sold out his "change" promise -- yet again. Saying he'll leave troops in the field in Iraq is NO DIFFERENT than John McCain saying we might stay 100 years. Was Obama lying to Democrats to get our vote in the primaries, or is he lying to Americans now to get other votes now? Either way, he's a huge liar. The only bigger lie is that Obama is "Change We Can Believe In." I feel ashamed he's our party's nominee. What a spineless character he is. I hope to God we still can get Hillary back and give her the Presidential Nomination in Denver. That woman is steel and says what she means -- and knows HOW to fix things. Obama is shifting with the wind and we have no idea who he is.

Pfffft. Hillary may have a very steely and determined character, but she's a total flip-flopper. Let's not forget that she was "against the war before she was for it". The fact is that the situation has changed in the past 12 months, and that different conditions warrant different responses. Look at what a black-and-white approach to policy has brought us over the past 8 years. Any person of intelligence will recognize that we need a more nuanced approach that takes into account facts and not just ideology.

BARACK OBAMA IS GOING TO DO SOMETHING IN IRAQ THAT WILL MAKE YOU
PROUD, STOP TRYING TO BE A MONDAY MORNING QUARTERBACK, HE IS THE
ONE WHO IS GOING TO BE PRESIDENT, NOT YOU, AND STOP ACTING LIKE
FOX NEWS!
HE'S GOT MORE SPINE THAN YOU HAVE, AND YOU KNOW IT, YOU KEEP TALKING A GOOD GAME, BARACK OBAMA IS THE ONE WHO IS ACTUALLY ON
THE PLAYING FIELD!
LISTEN TO WHAT HE SAYS, AND NOT WHAT THE MEDIA THINKS HE SAID!
THAT'S WHY LYNN SWEET'S BLOG IS SO RELEVANT, SHE DOESN'T TELL YOU
WHAT HE DID, WITH HER VOICE, SHE GIVES US THE COMPLETE TRANSCRIPT
OF WHAT HE REALLY SAID!
EITHER YOU ARE A DEMOCRAT OR YOU ARE WITH THE LOSING SIDE!
WE'RE IN A RECESSION, DON'T PLAY PHIL GRAMM, A BANK CLOSED IN
INDIANA THE OTHER DAY, PEOPLE PLEASE DON'T KEEP MORE THAN 100,000
IN YOUR BANK ACCOUNTS, THE FDIC ONLY COVERS THAT AMOUNT!
THE QUESTION IS HAS THERE EVER BEEN A PRESIDENT LIKE BUSH WHO HAS
BEEN APART OF SO MANY CASTROPHIC EVENTS DURING HIS PRESIDENCY
BEFORE? THESE 8 YEARS HAVE HAD MORE PERILS THAN PAULINE!

Islam, for those how do not know it , is a peacful religion, and has no relation whatsoever to terrorism act. For those who want to know about islam , might find these webs of interest to them: www.islam-guide.com or www.islamalways.com . I ask GOD to let all of us, all the world’s inhabitants live in peace and harmony. Thank you.

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Lynn Sweet

Lynn Sweet is a columnist and the Washington Bureau Chief for the Chicago Sun-Times.

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This page contains a single entry by Lynn Sweet published on July 13, 2008 9:18 AM.

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