>> this is "gps" the global public square. welcome to all of you in the united states and around the world. i'm fareed zakaria. we'll start today's show with an exclusive interview with man who dealt with government shutdowns, threats of default, and partisan politics. james baker, ronald reagan's chief of staff, and then secretary of the treasury, on how to fix washington and the political parties. then the view from outside america's borders. i'll ask two of our favorite foreign observers, martin wolf and zani minton beddoes to tell us whether the damage to america's credibility is already done and can it be repaired? and a story of democracy working. i'll talk to chile's president about that nation's successes 40 years after a bloody.

>> the crisis has been resolved but the respite is temporary. to understand why, you must recognize that for the tea party the stakes could not be higher. republican senator ted cruz put it plainly in the recent values voter summit in washington. >> we're nearing the edge of a cliff and our window to turn things around is not long. it's not ten years. we have a couple of years to turn this country around or we go off the cliff to oblivion. >> he took 42% of the vote. more than three times his nearest rival. cruz's national approval rating might be an abysmal 14% but to the base of the republican party, he's an idol.

modern american conservatism was founded on a diet of despair. in 1955, william f. buckley, jr., began the movement declaring that the magazine stands athwart history yelling stop. hardline conservatives have been yelling stop ever since. john boehner tries to tie into this pattern of opposition saying that the federal government has spent more than what it has brought in in 55 of the last 60 years. but one might respond, what have been the results over these past 60 years? the united states has grown mightedly, destroyed the soviet union and lifted citizens to high standards of living and income. at the end of his 1961 speech that launched his political

career, ronald reagan said -- >> if you don't do this and i don't do it, one of these days you and i will spend sunset years telling our children and our children's children what it was once like in america when men were free. >> but the menace reagan was warning about, medicare, was enacted. it's provided security to the elderly. there have been problems regarding cost but that's hardly the same thing as killing freedom. after all, the right wing heritage foundation ranks many countries as more free than america ever year. for example, switzerland and australia and they have universal health care. for many conservatives today, it's not about economics and health care but about culture. a persistent theme of commentators are decay of the country. compared to almost any period in u.s. history, we live in a

culture that values family, religion, work and above all private business. young people today aspire to become mark zuckerberg and quote warren buffest and read twitter feed of bill gates. even after the worst recession since the great depression, there are no obvious radicals, black panthers are other revolutionary movements except for the tea party. now for some consultants, extreme rhetoric is just a way to keep the troops fired up but rhetoric gives meaning and shape to a political movement. over the past six decades, conservatives language of decay, despair and decline created a group of americans who believe in this dark narrative and are determineded to stop the country from plunging into on l on live.

they will make the piece with today's america. they are misty eyed in devotion to myth and memory and yet they're passionate in their dislike of the messy multiracial capitalist democracy that america actually has been for half a century. a fifth of this country's history. at some point will they come to realize that you cannot love america in theory and hate it in fact? for more on this go to cnn.com/fareed and read my "washington post" column this week. let's get started. james baker was ronald reagan's chief of staff and then treasure secretary and then he was secretary of state under

president george h.w. bush joining me now from the baker institute at rice university in houston, texas. jim, thank you so much for doing this. >> thank you, fareed. i'm glad to be with you. >> tell me first with treasury secretary and secretary of state hat on, what damage do you think this whole episode has done to the united states or can we bounce back? >> well, we can bounce back. and i'm convinced we will bounce back. that's not to say that this was not a harmful episode. it's not to say that as far as i can tell there really weren't any real winners here. my party, the republican party, i think was a loser. i also think that the president and the democratic party was a loser because the world saw us in disarray. it really saw a failure of government. it raised some serious doubts in the minds of people around the

world about our country. >> the president's argument is he had to do something to end this practice of what he calls holding the government ransom and holding full faith and credit of the united states ransom. as someone that spent a lot of time in the oval office, do you think from a presidential point of view it sort of makes sense to maybe end this process of using the debt ceiling as a negotiating tool? >> if i'm wearing my treasury secretary's hat, which i wore for four years, i would love to see us do away with the requirement for increasing the debt ceiling. but as a taxpayer and someone that thinks the greatest threat facing the united states today, the huge ticking debt bomb out there and us continuing to spend and borrow without restraint, i think it's something that we need to keep.

i know you're aware and your viewers are probably aware of the fact that when he was as senator from illinois, senator obama voted against increasing the debt ceiling and was ready to see us go into default. this is a political exercise that occurs any time there's a necessity of raising the debt ceiling. if you look at it from the chair of a treasury secretary, you would like to get rid of that. on the other hand, it does provide some restraint on the tendency of our government these days to enter into unrestrained spending and incurring additional debt. >> the president outlined in his remarks after the crisis three areas where he thought even though there were big disagreements in the parties and polarization there was way forward. he said we can come to an agreement on a budget deal and

cited what he's been willing to put on the table and paul ryan in an op-ed echoed that suggestion. he talked about immigration and he talked about a farm bill. how likely do you think it is that we'll get a deal on any of these three things? >> i think there's a good chance we might get some sort of a deal on the farm bill. we need a farm bill. i would hope we would get a deal on immigration because i think that's an issue that needs to be resolved and resolved in a bipartisan way. i think my party, for instance, needs to understand that the demographics in the country are moving against us. and there's no reason on god's green earth why we should not get a healthy proportion of the hispanic vote. hispanics believe in family. they believe in work. they believe in religion. they believe in some of the same

principles and values that republicans hold dear and so we used to get a large percentage of that vote and we need to do everything we can to get back to that. we also need to seek the votes of other minorities particularly asians but other minorities as well because we will need those votes. we'll continue to need those votes. they are ever growing voter blocks and if we're going to win an election. >> on the budget, jim, the question is is there a deal to be had where republicans give in somewhat on some tax increases and the president gives in on both entitlement reform and spending cuts. that seems to be where there's a possible deal. >> here's my view of that, fareed. the biggest problem we have fiscally facing the country today is this huge debt bomb, which has been created as a result of ever more government

spending. and much of that spending of course is not legislated by the congress. it happens automatically. the entitlement programs keep spending automatically. we have got to get a handle on that somehow. we got to get a handle on it. that's what we ought to be focusing on. yes, i understand the president and the democrats will be saying fine, if we're going to talk about entitlements, then you need to be willing to talk about increasing revenue. the real way to increase revenue is to increase growth. one of the problems that -- one of the adverse effects of what we've just been through is that it diminished to some extent various numbers thrown out there but some people say 0.6 of 1% of gdp. well, that restrains revenues coming into the government. that's the way to grow revenues. to grow the economy.

now, you talk about increasing tax rates, we've just been through a great big tax increase in january of this year. we raised taxes at the president's request and the republicans went along with it. by $640 billion. so the question is how much -- what's the amount? all of that has to be negotiated but you can't just say that we will do an equal amount of entitlement restraint for an equal amount of additional tax increases. we've already raised taxes this year by $640 billion. these are all things that need to be negotiated and, yes, hopefully there will be some way to negotiate a budget or a major fiscal reform package. paul ryan has got some terrific

ideas. paul ryan frankly in my view is one of the upcoming stars of the republican party. and he's got the right idea. and he's extraordinarily bright and i am delighteded to see that he's the one representing my party at the table. >> we'll be back in a moment. more with james baker including his thoughts on his own senator who is of course ted cruz. >> i do not like green eggs and ham. i do not like them sam i am. customer erin swenson ordered shoes from us online but they didn't fit.

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>> we're back with james baker, one of the legends of american politics, former treasury secretary, former chief of staff, former secretary of state. what do you think about the man representing your state? >> the houston chronicle" talked about kay bailey hutchinson saying they wished they never endorsed ted cruz for the job. do you think ted cruz represents your views in the republican party? >> i'm not sure that he represents my views in the republican party. but i'm not going to sit here and dump all over my junior senator particularly given the fact that he worked for me in 2000. he was a very fine lawyer in

that recount battle we had in florida. and he was a good solicitor general for the state of texas. was he wrong on this most recent episode in my view? yes. it hurt us. it didn't gain us anything. we kicked the can just three months down the road. we didn't accomplish anything. it didn't take a rocket scientists in my view to figure out that if you don't have a senate and you don't have the white house, you're not going to be able to defund obama care. it had no chance of being accomplished and therefore i think it was a mistake. i think it was senator john mccain if i'm not mistaken who said that and i'm not disinclineded to disagree with that. >> what should happen now that

the can has been kicked? mitch mcconnell says two kicks of a mule and second kick you're not going to learn much meaning we shut down the government in the mid '90s. it didn't work. we shut it down this time. it didn't work. how should the republican party approach the issue of this next time this same issue comes up? >> here's what i think for next time. first of all, i would hope we would abandon this idea of adopting a maximus position on defunding obama care by shutting down the government. the way to defund obama care is for us to get out there and win elections. win control of the senate in 2014 and white house in 2016 and keep the house and repeal obama care and we should. it's a horrible law in my opinion. one of the adverse effects of what we've just been through is

that we didn't get to see all of the problems that are taking place with respect with trying to implement that law. it's a disaster. that was overshadowed. what should we do next time? don't take a maximus position on defunding obama care but be tough in terms of fiscal reform. hang in there tough to get some spending restraint. not necessarily to shut the government down. although i would say this. i don't think there's anything wrong with hanging tough on the debt limit. a lot of times a party out of power does that. it is customary. it does give you leverage. if the administration doesn't control the house of representatives, they ought to expect they're going to have problems getting the debt limit

increased and if the president is going to adopt the attitude he won't negotiate an increase in the debt limit even though all presidents have before and he has himself in 2011, i think he'll pay a political price for that. that's different than saying i'm not going to negotiate on the defunding of my signature health law. >> as a political matter, you have played this game in washington better than most. the president does seem to have won. the republicans dropped 15 points in the polls. >> i agree. >> the president dropped a little. democrats dropped a little and obama care edged up a little. it seems to have helped the president. >> i don't think it's helped the president. the president's numbers have come down. the democratic party's numbers have come down. and the view or opinion of america has come down and he's the leader of the country.

87% today think that you take a poll, 87% say we're on the wrong track. only a few teens say we're on the right track. that's not good for the leader of the country. i would not argue that this is a win for the president. >> james baker, always a pleasure to have you on. i hope we can come back to you very soon. >> up next, what in the world. why africa's dictators no longer seem to be worried about good governance. an asian country is to blame. sort of. i'll explain coming up. i am today by luck. i put in the hours and built a strong reputation in the industry. i set goals and worked hard to meet them. i've made my success happen. so when it comes to my investments, i'm supposed to just hand it over to a broker and back away?

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now for are what in the world segment. there is a prize perhaps just as important for which there was no winner. i'm talking about the prize established by the sudanese billionaire. the criteria for winning are listed publicly on the prize

website. you need to be a democratically elected african head of state who has left office in the last three years and demonstrated excellent leadership. if you meet the criteria you get a $5 million award plus an annual pension of $200,000 that kicks in after a decade. the point is to provide a financial incentive for african leaders to shun corruption and yet for fourth time in its seven-year history, the awards committee was unable to find a winner from any of africa's 50 plus countries. bravo for holding high standards even if that means no grand ceremony. so what happened? for starters, presidents and prime ministers need to actually step down. africa's leaders are locked in a marathon to see who can reign longest. the leaders have been in power

for 34 years. zimbabwe and cameroon have had the same men in charge for 33 and 30 years respectively. these and a number of other african states are nominal democracies but they are essentially run by dictators. elections if held at all tend to be a sham pot marked by corruption. on freedom house's global map of freedom, africa is the region with the highest number of countries listed not free. on transparency international's corruption index, most african states are shaded red yesterday of yellow as least corrupt. inside dismal rankings lie a set of numbers singing a different tune. six of the world's ten fastest growing economies from 2001 to 2010 were african. according to venture's africa,

the continent has 55 billionaires. great strides are made in expanding development. there have been advances in all. despite these gains, where is africa so far behind on good governance? there are a number of decades old factors at play but one of them is new. it strikes me as an interesting one to highlight. china. for decades ngos and western countries have tied aid money and trade to promises for greater transparency among africa's countries. china has upended the system. beijing is known to give aid and sign trade deals with no strings attached. instead its priority is to extract commodities at the best possible price and that in turn has led to the commodities boom which has fueled growth in africa. according to a new york university study, trade between

china and africa has risen from 10 billion in 2000 to $166 billion in 2011. a 16-fold increase. china is now africa's largest trade partner. as i reported last week, china's total aid budget has surged as well from $1.7 billion in 2001 to more than $189 billion in 2011. a substantial chunk of that aid goes to africa. in the short-term, africa's leaders may rejoice at having struck a good deal. they no longer need to listen to western criticism because china and other countries like brazil and india are willing to trade no strings attached. africa's dictators should beware. all they need to do is look north to the arab world and they will see what happens when leaders suppress freedom and stick around too long. meanwhile, africa's young population and it is huge is getting smarter, more connected, and perhaps more likely

eventually to rebel against repression. up next, counting the damage from washington's shutdown. two smart economists, martin wolf and zani minton beddoes to explain it out. (train horn) vo: wherever our trains go, the economy comes to life. norfolk southern. one line, infinite possibilities.

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i'm gloria borger in washington with a check of the headlines. the obama administration says a half million people have applied for federal care. the website has been plagued with technical problems since its october 4th launch. congressional hearings about the troubled processed set for later this week. for the first time since 2008 presidential run, hillary clinton is back in the thick of campaign politics. she appeared at a rally saturday for her good friend and feller democrat terry mcauliffe leading in the virginia democratic race. >> when you think of why people run for office at these times, if it's only about yourself and only about you wanting to get a job and get the perks that go with it and, you know, have people stand up when you come into a room, that's not enough anymore because it's hard.

politics is hard. >> and former president bill clinton is also scheduled to stomp for his good friend. same-sex couples in new jersey are a day away from being able to get married. the new jersey supreme court ruled marriages could go forward starting monday despite governor chris christie's request for a delay. those are your headlines. "reliable sources" is at the top of the hour. now back to "fareed zakaria gps." after the events of the last few weeks, america could certainly stand to look at itself in the mirror but how did it appear to those looking at it through the window? whauz d it me what does it mean for the economies of the rest of the world. martin wolf is the chief

economics commentator at "the financial times" and zanny minton beddoes joins us. how much damage has already been done? the fact that things are sort of resolved, where do we stand in terms of the damage to america's credibility? >> i think you have to kind of break that down into real damage and damage to reputation. the real damage to the world economy comes through damage already done to the u.s. economy. it's not negligible. there was hope that week by week it would have a small impact but people are beginning to downgrade forecasts for the fourth quarter of this year. i think economic damage is there and it's quite considerable and that's a knockdown effect on the world economy particularly since the u.s. was expected to be the bright light of the world economy next year. that's one bit. the reputational damage, i think it's really quite consider. around the world people have been looking at the u.s. with what are these guys doing,

scratching their heads. a lot of emerging economies that face real debt crisis and can't believe a country would manufacture one itself. there's that and then there's a sense of this is the biggest economy in the world. it's the leader economically of the world. it's playing with fire behaving so irresponsibly in the view of the rest of the world and they worry it could hurt them if playing by fire resulted in a real catastrophe. >> you wrote a column in financial times saying abolish the debt ceiling. explain very simply why. the united states is almost unique in the world. few other countries but no major economy that has this thing called a debt ceiling. >> it's an absurd device introduced in the first world war for obscure reasons. it's completely absurd because if it's not lifted, it requires the president to break the law and the president has an oath of

office to uphold the law, that is an absolutely criminal thing to do because the president is obliged to run the administration in such a way that spending obligations which are legal obligations, whether the tea party likes it or not, they're part of the law, that he does implement the spending obligations which congress and he have duly passed. if he hadnisn't allowed to do t and he would not be allowed if he couldn't borrow in certain circumstances and would default on something, i think the analysis is quite clear. this restrained potentially forces the president to break the law and that is also a situation that any law should do. >> i think the rest of the world has had a lesson in american civics. all kind of details of the american political system that people had no idea about they learned about. the debt ceiling does seem bizarre if a government or if a congress agrees on various

spending things, the idea it has to separately agree to raise the debt ceiling to raise the money to pay for them invites exactly what martin said which is internal inconsistency. congress says yes, we'll vote for spending but we won't vote for debt ceiling. >> martin, above your piece was an interesting piece by a chinese economists who we all know, david lead, really respected by the chinese respect, where he said it's mystifying how the united states is acting but mystifying why china continues to buy so much american debt. he outlines a simple way the chinese could diversify into a bunch of things saying chinese have so much money they could put a trillion dollars into other country's bonds which are high quality. don't you think people in china and perhaps in other countries are wondering for themselves maybe we should diversify.

we don't need those many treasury bills. >> i think that's perfectly plausible. if they regard these and they did in some ways as safest assets in the world, and then that must have taken a knock. it's clear that we're going to see this again in a few months. there will be this discussion. we don't know what will happen. it might be the beginning of an ongoing circus that clearly frightens wealth holders. treasuries are a bad long-term wealth holding. they need real high returns and david lee is right china should look at the whole asset ko composition of foreign assets and start diversifying away from treasury. >> we have to go. i want to get your sense as to whether or not you would agree something that zanny began with. outside of this, the u.s. looks remarkably resilient compared with other countries in the world and you have broad based,

slow but steady recovery. that's the tragedy here. >> the u.s. looks good. the u.s. economy has survived massive fiscal tightening. it looks quite robust. sequester cuts. and the whole deal. it's about 3% of gdp tightening and now over and so u.s. looks good to me. i'm really quite optimistic about the u.s. in the next year or two. >> not quite as bullish as that but the u.s. does have potential to accelerate. i worry that we've been here again and again and each time things are messed up and we haven't got beyond this 2% growth to bigger acceleration. i hope this time it happens. i think the answer to the question as always will depend on washington. depends on what they do early next year. if we continue this uncertainty, i promise you the recovery will not be as strong as it could be. >> pleasure as always. up next, remember the chilean miners buried underground for 69 days? where are they now? i spoke with the president of

chile about that and much more. chile about that and much more. right back. with knee pain, whe. [ man ] hey, brad, want to trade the all-day relief of two aleve for six tylenol? what's the catch? there's no catch. you want me to give up my two aleve for six tylenol? no. for my knee pain, nothing beats my aleve. customer erin swenson ordebut they didn't fit.line customer's not happy, i'm not happy. sales go down, i'm not happy. merch comes back, i'm not happy. use ups. they make returns easy. unhappy customer becomes happy customer. then, repeat customer. easy returns, i'm happy.

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september 11th has a different meaning for the people of chile.

on that day 40 years ago, a general seized power in a bloody military coup. and new car replacement standard with our auto policies. so call liberty mutual today. and if you switch, you could save up to $423. liberty mutual insurance. responsibility. what's your policy?

>> were essential to creating the powerhouse chilean economy that we now see? >> chile was the poorest spanish colony and is the highest income and our goal and our mission is to overcome poverty before the end of this decade.

that was our main commitment when we came into power. it's true that during the regime, many economic reforms were on the take. we opened the economy to the world and introduced a social economy. those things were valuable. at the same time they were a huge problem with human rights. >> so 40 years ago you had the coup. it was a peaceful transition. it has been a very successful transition. what advice would you give when you look at places like egypt. what do you think made the chilean transition to democracy so successful? >> i think the main lesson is that you had to reach a very broad agreement.

you have to agree on basic issues. we're going to recover our democracy and all of us of responsible for that. you have to make the decision with respect to how will you face economic development. in our case, the agreement was basic. first, recover our democracy. our democratic system which is just a normal way of life for the chilean people. second, we made an agreement to follow the path of social market economy integrated in the world and third, we made a very strong agreement that human rights have to be respected always in every place and in any circumstances. at the same time that we have to reduce and eliminate poverty, those were the pillars of the agreement that was reached 25 years ago and that's why chile has been very successful since then. >> part of chile's success,

you've had 100 years of democracy interrupted briefly this military dictatorship. for the egyptians and many countries in the middle east, there's no history of democracy. >> we had the democracy interrupted only twice and in egypt the situation is different. they have never lived in real democracy so for them the transition is harder because they know they want to get rid of the military government but they have to learn to live in democracy and that's something that's not easy. >> i have to ask you before i let you go. you did something that no president in the world has done which is you sat in the desk at the oval office that franklin roosevelt, ronald reagan and of course barack obama has sat in. did president obama seem to mind? >> no, on the contrary. he went to chile and he also sat

at my desk. so when i came to the oval office and we had our meetings and press conference, i told him, look, since you were in my office, can i sit at your desk. it's called the resolute because it was taken from a ship that sank, a british ship. i sat there. president obama came and he stood behind me so he gave me that. >> a pleasure to have you on, mr. president. >> fareed, it's been my pleasure. >> that was sebastian pinera, the president of chili.

exactly two years ago today, qaddafi was captured and killed near his hometown in syria. he was the longest serving leader in africa and the areab world. what nonroyal national leader has run his country the longest? is it kim il-sung, fidel castro, mao zedong or joseph stalin. you can follow us on twitter or facebook. if you miss a show or special,

go to itunes.com/fareed and download them. this week's book is "the tea party and the remaking of republican conservatism." if you want to understand the rise of the tea party and who they are, read this book. now for the last look. in 1999, 10,000 people were killed when a ferocious cyclone hit eastern india. this past weekend, the same region was once again in the crosshairs. this time it was the region's most powerful storm this century. there was a much better outcome. a million were evacuated ahead of time. only 21 people lost their lives. thousands of others were saved. extreme climate events may be getting worse but technology has

truly enabled us to save lives. we're now better than ever predicting the scale of storms and cyclones and we're better than ever at getting the message out. of course you still need a government that manages these situations well and for that all credit to the government which learned from the mistakes of 1999. the correct answer to our gps challenge question was b, fidel castro leading cuba for an astounding 49 years. he outlasted nine u.s. presidents, cia plots to kill him and decades of economic sanctions. in 2008, castro finally decided to give up power to another castro, his brother, raul. thanks to all of you for being part of my program this week. i'll see you next week. stay tuned for "reliable sources."