tv PBS News Hour PBS November 1, 2011 6:00pm-7:00pm EDT
captioning sponsored by macneil/lehrer productions >> brown: the financial fix for europe's debt crisis was put in jeopardy today after the greek prime minister called for a vote to approve the bailout measure. good evening. i'm jeffrey brown. >> woodruff: and i'm judy woodruff. on the newshour tonight, we get the latest on the turmoil in athens and the tumbling markets around the globe. >> brown: then, ray suarez examines the rise and fall of a brokerage firm led by former new jersey governor jon corzine. >> woodruff: two stories about budget battles: we update the progress of the
so-called "congressional super- committee" facing a deadline for action on the nation's deficit. >> brown: and spencer michels reports from california, facing its own partisan gridlock. >> i think it's the same as at the national level. you have two sides that are, you know, trying to one- upmanship. things don't get done. >> woodruff: plus, margaret warner talks to npr's steve inskeep about his new book on the tumultuous mega-city of karachi, pakistan. >> one of the most remarkable things about this city is the way that it springs back to life after a violent incident. it sounds brutal, but they keep pushing to make their lives just a little bit better than they were. >> brown: that's all ahead on tonight's newshour. major funding for the pbs newshour has been provided by:
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shaken today by new fears that the european debt deal might come unglued. major stock indexes across europe fell 5% or more. and on wall street, the dow jones industrial average lost 297 points to close below 11,658. the nasdaq fell 77 points to close under 2,607. it all started with stunning news out of greece. the wave of selling came less than a week after european leaders thought they had finally wrestled down the continent's debt problems. investors and governments alike were jolted by a surprise announcement last night that greece would hold a referendum on a broad new european bailout plan. prime minister george papandreou called the move "a supreme act of democracy." >> ( translated ): we have a duty to give priority and highlight the role and responsibility of the citizen, showing in practice not only our respect but also our fundamental thinking that this citizen is
the source of our strength and of our very existence. this, dear colleagues, is the referendum. >> brown: austerity measures in greece have already proved deeply unpopular, leading to violent protests and strikes. the new european agreement calls for additional spending cuts, in return for having banks forgive 50% of greece's debt. that raised fears today that the greek people would reject the deal outright in any referendum. >> we're entering uncharted territory. we will see the greek economy going back many decades. >> brown: the greek turnabout also touched off warnings across the 17-nation euro-zone that the debt deal could unravel, taking down the euro system and potentially triggering a new global recession.
>> it's just the level of just unknown that it's injected back into the markets. this referendum probably isn't going to happen until next year, and then there's the risk, well, if they don't vote for the bailout, what happens next? so when we all thought it was all done and dusted last week, it all been thrown completely back up in the air again. >> brown: against that backdrop, german chancellor angela merkel and french president nicolas sarkozy held emergency talks by phone today. sarkozy spoke afterward, in paris. >> ( translated ): france wishes to recall that the plan adopted last thursday unanimously by the 17 states of the euro-zone is the only way to solve the problem of greek debt. giving voice to the people is always legitimate, but the solidarity of all countries in the euro-zone cannot be exercised without the consent of each effort. >> brown: the french and german leaders planned a separate meeting tomorrow with other european officials, and with greek prime minister papandreou, ahead of the g-20 summit in cannes, france. meanwhile, the u.s. today
pressed the need for quick action. white house press secretary jay carney. >> it remains the case that the europeans have the capacity to deal with this crisis, and they need to implement the very important decisions they made last week to provide a conclusive resolution to it. >> brown: back in athens, the referendum news threatened to bring down the greek government. several members of the ruling socialist party demanded that papandreou resign, and a confidence vote was tentatively called for friday. a short time ago, i spoke with john psaropolous from athens. he's a free-lance reporter and writes a blog called "the new athenian". welcome, john. we said this was a surprise. apparently it was even a surprise to people in the prime minister's cabinet and party. what's known about why he suddenly decided to call for a referendum on the plan? >> at the moment the prime minister hasn't explained his thinking other than what he
said in parliament to his m.p.s yesterday which was that the country had to move for on a democratic basis. it had to have hope for a better day after the austerity period was done and that in order to achieve this he wanted his government to have the authority of a popular vote of approval for what was going to be the last phase, i presume, of the austerity measures that have been so painful up until this point. >> brown: it caused an immediate fire storm there with a lot of opposition even within his party. tell us what's happening now. is his power threatened at this point? >> well, at the moment the prime minister's power seems to be slipping. 24 hours after his announcement to have the referendum the entire opposition-- that means left wing and right wing parties-- have said they will not back this decision. people have expressed... he has had three defections within his own party which now puts him at 150 m.p.s were his
government to come to a vote of confidence on frye fry as scheduled. that means that if every party shows up to parliament for that vote of confidence at the end of the week and given the stateded position that the opposition parties not to back the government at this point because they disagree with the eventual referendum in january, then the government probably doesn't have the m.p.s from its own side in order to survive that vote of confidence. >> brown: what kind of gamble is he making? if it's a gamble to try to seek political cover, what do the polls tell you now about how greeks feel, whether they would support such a referendum? >> at the moment it's difficult to say because the latest opinion polls that have been published were taken before the present crisis erupted. yes, 70% of greeks did say in an opinion poll taken on friday after the latest deal was reached in burrus he wills
for $100 billion bailout which is greece's second bailout and published on sunday that they would rather have greece remain within the euro and presumably with all the pain that that involves rather than go back to the drak ma. 54% expressed themselves in favor of a refer referendum rather than a parliamentary vote. but at the same time it doesn't seem to have gone well in terms of the government's thinking or the prime minister's thinking which is namely that it seems to be that the government will seek to relegitimize itself and rebolstered its authority through the one issue on which greeks seem to be united which is that they want stability to remain within the euro and a sense of continuity rather than some sort of disorderly default. it seems that the government misjudged that this would be an issue that it could carry itself forward on in a january
referendum at least because it's too far away for that issue to remain in hiatus. the european summit was called in order to bring certainty and stability. this now reopens the issue and puts it in jeopardy. >> brown: john psaropolous in athens, thanks so much. >> thank you. >> brown: and for a look at how wall street reacted to all this, we turn to nariman behravesh, chief economist with ihs, an economic and industry forecasting firm. well, nariman, welcome back. clearly most greeks were taken by surprise and vefors as well. why the strong reaction? take us through that. >> well, markets hate uncertainty. as john was saying earlier, this call for a referendum by the greek prime minister has added a huge amount of uncertainty as to the outcome of this very torturous process about resolving greece's debt and hopefully making progress on the whole euro zone
sovereign debt problem. all of a sudden it's like it's thrown a monkey wrench into the works. >> brown: what is the concern about how the problems in greece kind of spin out to the rest of europe and then affect the world economy? remind us how that works. >> sure. let's say the greek public says no to this agreement. then the question is, does greece stay in the euro zone? does it leave the euro zone? so greece on its own is not that big. but then questions start to come up about what about portugal? what about ireland? what about spain? and what about italy which is a huge country? that's where things start to spin out of control. that kind of a crisis of confidence, if you will, could be very problematic not just for europe but for the world economy, including the united states. so that's a situation that some people have referred to as europe's lehman moment, of course, referring to the collapse oflyman brothers in september of '08 and all the problems that ensued from that. >> brown: you know, last week
there was euphoria even though-- and we talked about it on the show-- our viewers will remember, even though we knew there were many details that were not all very clear at all. and then there's a big reaction to something like this today. are the markets... i mean an outsider would think, what's going on? are they overreacting one way one day and the other way another day or is it all just very skittish markets? >> well, the markets are clearly worried in the sense that a lot of the economic news out of the u.s., even out of china today, was a little ify. it was a little weak. so the markets are worried about, is the u.s. headed for a recession? is china headed for a real slowdown? so that worry is there. that is sort of the back drop. on top of that you add this bombshell, if you will, and i think that was enough to send the markets sort of into a bit of a tailspin today. >> you're saying that if this referendum doesn't happen until you're talking about january, if it goes forward, that just means a longer period, an extended period of
uncertainty? >> indeed. i think we could see a number of weeks of extreme volatility in markets. every little bit of news, you know, the market goes up. every little bit of bad news it goes down. that's the worry here is that we could be headed into a period of extreme volatility. >> brown: in the meantime october was a great month for the stock market. we reported on that the other day. there were some decent signs for the u.s. economy. in the days ahead, you just continue to watch the mix of domestic and international news but even more so? >> indeed. so we could have days where, you know, the data coming in suggests a bit of strength. the market goes up. then there's sort of polls coming out on greece saying that, you know, the greeks are going to vote this down. the market goes down. we could have a lot of days like that. >> brown: nariman behravesh, thanks so much. >> thank you. >> woodruff: still to come on the newshour: a brokerage firm goes bankrupt; deficit wrangling in washington;
and a similar stalemate in california. plus, a booming metropolis in pakistan. but first, the other news of the day. here's hari sreenivasan. >> sreenivasan: thousands of protesters demonstrated in nice, france, today, two days before european leaders convene there. they called for shifting the focus from bolstering banks and markets to helping ordinary people. we have a report from james mates of independent television news in nice. >> reporter: the crisis of capitalism these demonstrators have long predicted may, they believe, now be upon us. as they march through the streets of nice ahead of the g- 20 summit due to start in nearby cannes on thursday, there came news of meltdown on the markets in the greatest political crisis since the creation of the euro. this sort of demonstration is pretty common now, whenever there's a major international summit. but the continuing chaos in the markets and in the chanceries of europe is only convincing these people that they're right, that something is fundamentally wrong with the system.
hard financial facts are meeting growing popular resistance to austerity. and right across europe-- not just in greece-- the result is not pretty. >> sreenivasan: authorities in france have deployed more than 12,000 police and other security officers for the summit. bank of america dropped plans today to charge a $5 monthly fee for debit card use. a bank statement acknowledged the decision was at least partly a response to a customer backlash. several other major banks had already canceled tests of comparable debit fees. for more, we're joined by dominic chu, correspondent for bloomberg television. thanks for being with us. >> thanks, hari. >> how bad was this back lash? put it in perspective for us. >> well it was a big back lash. you're also talking about this whole occupy wall street protest that's been spreading all over the globe. consumers were getting a little bit fed up with what was happening with the banks and the profits they were making. what you saw in terms of this cancellation was of the debit card fees was a response to
what was happening with them but also to competitive pressures a.s.l. with. like you said all the other major banks in the u.s., the jp morgans, the wells fargos, u.s. bank had all scrapped their plans prior to that. that would have left bank of america as the only major u.s. lender to keep this debit card fee in place. think of it like when an airline tries to raise fares and nobody else matches them. they tend to go back to the old fares themselves. that's what you saw today. >> remind us why they would have put this fee on the in first place? is it because their competitors did or were they in a bad financial situation? >> well, what these banks are trying to do right now is cope with a new changing landscape for regulation, things like the dodd frank act, things like regulation taking away other sales or revenue sources for the banks. there used to be a trangs action fee applied to debit card purchases. if you were a shopper, there was a fee that was transacted when you used your card. that fee was slashed in half. our analysts over at bloomberg government calculated it and would cost somewhere between
around $8 billion annually in the lost revenues for the biggest banks in america. what they're trying to do is make up for some of that lost revenue by charging fees elsewhere. that was what this $5 debit fee was meant to do: make up for some of the lost revenue. >> thanks so much for your time. >> thank you. >> sreenivasan: auto makers had a good month in october. volkswagen led the way in u.s. sales with a 40% jump for last month. among the detroit three, chrysler reported a 27% gain for its best result in four years. the gains were more modest at ford-- up 6%-- and at general motors, with an increase of 2%. october also marked the first month that toyota and honda dealers had inventories near normal levels. the earthquake and tsunami in japan last march had disrupted supplies. across the northeast today, there was no letup in the long slog to restore power after the weekend's rare october snowstorm. power companies had to pull crews from 15 different states to work on downed power lines.
1.7 million homes and businesses were still in the dark today. hundreds of schools remained shuttered, and supplies were running out at grocery stores. but connecticut governor dan malloy appealed to the public not to panic. if you have a half a tank of gas or three quarters of a tank of gas, you know, wait. this is not 1973. there is a flow of gasoline. there's no embargo underway. and i think there's a fair amount of worry or panic involved and people are sitting in long lines. >> sreenivasan: authorities have blamed the storm for at least 23 deaths, including one in canada. dorothy rodham, the mother of secretary of state hillary clinton, has died at a washington hospital. she passed away early today, after an undisclosed illness. rodham mostly stayed out of the spotlight over the years, except in 2008. then, she campaigned by her daughter's side during clinton's unsuccessful bid for the democratic nomination for president. dorothy rodham was 92 years old. in syria, the government of
president bashar al-assad announced an agreement today on starting a dialogue with the opposition. state media reported a deal with an arab league committee, but the arab league said it's still waiting for damascus to respond to a package of proposals. they include releasing prisoners detained since the uprising began in february and pulling security forces off the streets. those are some of the day's major stories. now, back to jeff. >> brown: and we turn to the fall of a major securities firm and its well known c.e.o., who ray suarez has the story. >> suarez: mf global holdings is not the kind of financial firm most americans are familiar with. but when the giant trading company filed for bankruptcy yesterday, it became the largest failure by a u.s. securities firm since the collapse of lehman brothers in 2008. and some of the reasons behind its fall may sound familiar from the failures earlier in the financial crisis. mf's chief executive, former new jersey governor and u.s. senator jon corzine, bet heavily on
european debt, and the company reportedly put clients' money at risk as its troubles grew. here to fill in the picture for us is joe nocera, "new york times" business columnist and editor of the "executive suites" blog. joe, let's begin by explaining just what mf global was doing that got it the scrutiny, the trouble and eventually bankruptcy. >> well, to start with, you know, it used to be an old- fashioned broker/dealer. all it did was match buyers and sellers who wanteded to buy derivatives or trade derivatives but that business is becoming increasingly less profitable so when corzine took it over in march of 2010 he decided he wanted to bet some of the firm's own money, which is riskier but it's also potentially more profitable, on european sovereign debt. his theory was that european governments were never going to let this debt fail and that ultimately this would be a big winner, a big contrary bet. ultimately they built up a gigantic $6.3 billion position,
and the bet, you know, it just turned out to be wrong. it's as simple as that. what we've discovered since is more troubling. in the last really in the last 24 hours with the possibility of customer money being missing. >> suarez: we spent much of the beginning of tonight's program talking about things unraveling in europe with perhaps a greek referendum turning back the deal. but did i, in fact, turn out to be a bad bet? have those mf global purchases, those bonds, actually lost their value? >> well, not ultimately, ray. but that actual actually doesn't matter. that's like a.i.g.saying, you know, back in 2008, "well, these mortgage-backed securities will ultimately pay off." that is is not what the question is. the question is, what does the market value it at a particular moment? and most of these bond purchases usually have collateral calls attached to them so if the value decreases
in the marketplace, if the market value decreases, you know, the counterpart can call for more collateral. this sort of thing feeds on itself as the collateral calls come so you have less money. investors get jittery. their customers get jittery. then they can't get the loans they need to run the business on an overnight basis. once they lose that, they're dead. in effect it's a modern rsion of the run on the bank. that's what happened in this case. >> suarez: in addition to it ending up being a bad bet as you say, was this more than just a business decision that didn't work out? is there allegations of... are there allegations of wrongdoing that may hint at something much more sinister going on? >> that is certainly a possibility. and we don't want to get ahead of ourselves because we don't really know what the story is here. really within the last day, it now appears that the reason
that corzine was unable to sell the firm over the weekend, as he had expected to be able to do, was because the potential buyer found a discrepancy in the customer accounts. literally billions of dollars of excuse me, not billions of dollars, $600-$700 million has been missing. subsequent to that, regulators have been investigating and there does appear that the company commingled customer assets with its own assets which is a huge regulatory violation. if that turns out to be the case, they could be in a lot of trouble. >> suarez: what's the problem with the commingling? don't customers give their money to firms like mf global to have it invested? >> no. most of their customers, please remember, were parking their money as part of a broker/dealer. in the same way, ray, that you
and i might have our stock parked with our broker. in those situations, the customer's assets are supposed to be absolutely segregated from the customers' own cash. this is a violation of regulation if in fact that is what happened. the general theory is... i mean it's just totally a theory and a rumor. perhaps as the company was getting more and more desperate it began to use customer money to help shore up its own capital position. i really don't know if that's true or not. that's certainly the rumor that one has been hearing in the last i'd say four or five hours. >> suarez: and the wall street journal is reporting that $600- $700 million, as you say, is perhaps missing from those customer accounts. >> yes. >> suarez: in your column... go ahead. >> i was just going to say for the record the "new york times" is reporting the same thing. >> suarez: okay. in your column, you suggested that this was a very retro kind of crisis. this was the kind of thing that we were having hear about
during the bad days of 2008. >> i think that's absolutely true. one of the things that's really strike... striking about this is that mf global, kees mu e.leverage ratio was 40-to-1. that meant they had $40 of debt for every dollar of equity. those numbers compare... i mean, those are crazy numbers. lehman brothers was 5 to 1. bear stearns was 30 to 1. those are numbers that absolutely reflect the mind set of 2007, 2006, 20208, not the mind set of 2011. you really do have to wonder what was corzine thinking to create that much debt, that much leverage in an environment that is pretty risk-averse now. >> suarez: but before everything started to unravel in the last decade, there were people on wall street making very big fortunes with bets just like that one. weren't there? >> well, sure they were.
there were also fortunes that were being lost the same way. think about long-term capital management a decade ago. so, yes, i mean, the whole point of the exercise is the more risk you take, the more reward you can gain. but by the opposite is if the risk turns out to be wrong, you can lose everything. that appears to be what happened in this case. >> suarez: joe notice suero of the "new york times," thanks for joining us, joe. >> thanks for having me, ray. >> woodruff: now, two takes on the struggle to find common ground on tough budget issues. we begin in washington where, on capitol hill today, the joint select committee on deficit reduction held its fourth public hearing. newshour congressional correspondent kwame holman has our update. >> holman: with just more than three weeks to go, the deficit super-committee is hearing
rising calls to "go big" on rolling back the red ink. that message was reinforced today by the co-chairs of president obama's deficit reduction commission, erskine bowles and alan simpson, and the co-leaders of a separate task force, alice rivlin and pete domenici. bowles was chief of staff in the clinton white house. he and simpson want nearly $4 trillion in deficit cuts over the course of a decade. >> we didn't make $4 trillion up because the number four bus rode down the street. $4 trillion is not the maximum, it's not the ideal amount-- it is the minimum amount we need to stabilize debt. >> holman: rivlin was director of the office of management and budget in the clinton administration. she, too, urged the committee to set $4 trillion as a target. >> we must go well beyond the
minimum charge of $1.2 trillion. even savings of this magnitude would leave the debt rising faster than the economy can grow. >> holman: on the republican side, former new mexico senator pete domenici called for the super-committee to tackle entitlement programs and tax reform. >> let me be blunt-- a plan that does not fundamentally restructure medicare and other health entitlements will fail to adequately address the debt crisis we face. both sides-- those who are against any fundamental health entitlement reform and those who oppose any revenue increases-- will be equally complicit in bringing the country to the fiscal brink. i hope you heard that. >> holman: and fellow republican former wyoming senator alan simpson talked up the need to give up various tax breaks, and he insisted that's not a tax increase.
and we said let's take those out and to call that a tax increase is a terminological inexactitude-- it'd be called a lie, in other words. >> holman: the super-committee faces a deadline of november 23 to agree on at least $1.2 trillion in deficit savings. if the committee fails to reach that goal, it would trigger automatic cuts of $1.2 trillion, spread equally across defense and non-defense spending, including medicare. appearing yesterday in louisville, the speaker of house, republican john boehner, talked again of a grand bargain and voiced hope the committee will find common ground. but the senate majority leader, democrat harry reid, accused republicans today of holding up a grand bargain. >> what i thought would be good for the world and the country would be to do the grand bargain, big deal. started with boehner and the president months and months ago. but my friend john boehner wants
this grand bargain without any sacrifice from people who have most of the money in this country. >> holman: but reid's opposite number-- senate republican leader mitch mcconnell-- said the sacrifice also will have to come from areas that many lawmakers don't want to touch. >> we do have differences about the approach, but we know all our entitlements are in trouble. we know social security went into the red for first time this year. this is not spin, it's fact. we know they're all going to have to be adjusted at some point or they're not going to be there. my view is, why not now? >> holman: at the white house spokesman jay carney said the president still believes in shared sacrifice. everything has to be on the table. it needs to include the kind of discretionary non-defense spending cuts that were implemented, as well as defense spending cuts that were implemented previously by the president and this congress. it also has to include entitlement reform, and it has to include revenues.
there is no other way to do this responsibly. >> holman: publicly, at least, members of the super-committee have yet to identify a way to bridge the partisan divide. the panel will continue meeting in private, but has not set a date for its next open session. >> woodruff: i'm joined now by todd zwillich, washington correspondent for "the takeaway" on wnyc radio and pri. he was at the hearing today and has been covering the ongoing budget debate in congress. welcome back, todd. >> good to be with you. >> woodruff: it sounded like from kwame's report that the members of the committee were lectured today. >> it was a combination lecture. there was pep talk in there. lots of dire warnings about the results of failure. those four members one of my colleagues call them the go-big all stars. go for trillion and get a big deal. that's really not about the number. it's not really about the specific impact on the economy. it's about confidence. alan simpson the former senator from wyoming told them that. he said you need a credible
deal that the bond markets will respect, that the american people will respect. that's really what all this is about. it's getting people in a tough political environment to make tough decisions in a politically polarized environment to make a deal and make some tough decisions and difficult for them politically. >> woodruff: is there any tangible evidence of progress? >> there is no tangible evidence of proceed progress but we can't read too much into that because the committee has been very, very good at holding its card close to its chest. >> reporter: the leaks were tactical. those were the kinds of leaks that members of congress make in a negotiation when they want to lay their position out or they want to immunize themselves, you know, being reasonable when the other side maybe isn't being reasonable. if this ultimately heads for failure and the super committee has to fold its cards and go home they've made the leak now to show each side we made a credible deal. we want to do deficit reduction. they've done that. how close are they to the hard deal which is really when it comes down to it the balance between cutting entitlements
versus tax increases? we really really don't know. some of the reports say not very close at all but it's really impossible to know for sure. >> woodruff: what are we to make? we have speaker boehner just referenced there as calling them to do a grand bargain even though he walked away from that this summer. you know the republicans. there are these letters from bipartisan members of the house and the senate this week to the super committee saying go big. is that... bipartisan? is that saying republicans are coming around on revenue, on tax increases. >> well it may say that partly but you have to parse a little bit because there's a lot of cryptology in this. it says that everybody wants to be on the page of going big because going big has become the only acceptable political outcome. alan simpson and erskine bowls said it's the only acceptable outcome for the markets. they're trying to immunize themselves as being for the responsible thing or legitimately trying to pressure the committee to go big because they want them to.
you asked about revenue. democrats have drawn their line in the sand saying we already cut a lot of discretionary spending in the last round of debt reduction that took place over the summer. we're not doing anymore of that. we're certainly not going to cut medicare and social security if we won't have some give from republicans on raising taxes. that's where some of the cryptology comes in. lots of republicans are for raising revenue but not in the context of raidsing taxes. they might be for raising revenue in the context of some broad-based tax reform where probably not this committee but the tax-writing committees in congress at a future time close in the future attack the tax code, simplify it, get some revenue out of it and lower rates and pour it into debt reduction. >> woodruff: you were telling me that could be a place holder in an agreement if they were to reach one. >> it's too big and time is too short for this committee to tackle that. the tax code is too big. they would kick it down the road. >> woodruff: todd, give us the sense of the pressures on this committee. you have the europe december
crisis ongoing, no really strong good news in this country on the economy. how worried are the members about the reaction in the markets and in the public if they don't reach an agreement? >> that was part of the message from the four today in the super committee, the lack of confidence that americans will have in their congress to solve problems. erskine bowls told them that americans would think-- and rightly so-- that congress is basically a disaster and unable to solve problems. there were other messages from other members. the greek debt crisis, the potential unraveling of the european economy and the euro, their economy and our economy are tied together. everybody knows that. that only adds to the political pressure that is here domestically on republicans to not raise taxes. they have drawn very, very hard lines ideological lines in this environment about never raising taxes. democrats on their side don't go after our sacred cows of medicare and social security unless the other side gives. if you want to know how much they're worrying about europe or the economy more broadly,
on my way over here secretary of the treasury tim geithner i spotted him on the way in to the house at the carriage entrance meeting with members of congress, so they're getting briefed by the administration by the treasury secretary as we speak. >> woodruff: telling you there's some worry on the part of the administration and they're conveying that to these members. what is the real deadline for this super committee? >> they have a statutory deadline of november 23 to get a plan that would go to the congress for a vote. the actual deadline is a little bit sooner than that because the congressional budget office has to evaluate this plan. they have to score it. they have to say, here's exactly how much the debt would be reduced. members of the cbo, the head of the cbo, has said he wants to see some numbers by the end of this week. will that happen? we'll see. november 23 is their deadline. then congress has to vote by december 23 right before christmas. congress likes to put hard decisions right up against hard deadlines like thanksgiving and christmas. that's in there for a reason. and those are the deadlines for now.
>> woodruff: so there's a sense that realistically they could have something concrete that quickly? >> there's a sense that they're going to have to show whether they can or not. failure is a possibility. every leader has said failure is not an option. but of course they can fail. there are enforcement mechanisms in place to encourage everyone not to fail. let's keep in mind, if this committee can't reach at least a minimum of $1.2 trillion in debt reduction there are two swords of damocles hanging over this thing. for the democrats deep cuts to medicare which they don't want to see and for republicans especially deep cuts in defense which they don't want to see and they're already trying to undo. those are the two enforcement mechanisms encouraging everyone not to fail. >> woodruff: for various reasons both sides are worried about both kinds of cuts. >> they sure are. >> woodruff: todd zil i can >> brown: while washington
bemoans the partisan paralysis over the federal deficit, the nation's most populous state is wrestling with similar, perhaps even worse, gridlock. newshour correspondent spencer michels has our story. >> reporter: in california, with 37 million people, there's not much doubt that government is failing. even the head of the state senate sees it. >> the people are frustrated because our state government, its structure mostly, does not work. it doesn't work the way people expect it to work. >> reporter: and it may be about to get worse, because revenues are $700 million below expectations. under a new compromise budget that was already cut to the bone, additional cuts could be automatically triggered, further threatening state services and universities. schools are in bad shape and teachers are being laid off. prisons, under court order to reduce the inmate population, remain overcrowded. most attempts at rehabilitation
have been eliminated. health programs for the poor have been cut back. fixing those problems should fall to the state legislature and the governor. but, as in washington, sacramento is stuck in a pattern of increasingly partisan wrangling-- wrangling the public seems eager to end, but isn't sure how. "sacramento bee" political columnist dan walters has been covering the state capitol for 40 years. >> over the last several decades, california has undergone tremendous growth and change, creating all sorts of public policy issues, and the legislature seems to be unable to resolve any of those conflicts and just kind of buries itself in trivia. >> reporter: the result, walters says, is great cynicism about what happens at the state capitol. >> spending too much time bickering and too much time arguing. they don't get anything done. >> i think it's the same on the national level.
you got two sides trying to oneupsmanship, then things don't get done. >> and it's because of the... i think, the evident dysfunction of the place, inability to balance the budget and so forth, and plus, it also reflects just people's general unhappiness with the economy and their... their lives, i guess, in california these days. and there's always a tendency to blame those in political power when that happens. >> reporter: citizens, fed up with what they consider governmental paralysis, are organizing to make changes themselves. some are taking classes, like this one at u.s.c. others are writing books like "california crackup," proposing constitutional reforms, considering political action. one business group, the bay area council, even started a movement to hold a constitutional convention. jim wunderman led the effort. >> the issue is, california is
hurting and the state is too good to become mediocre. and so, we have to make some changes. if we're just entering this period of stagnation, we're not going to be able to compete in this global economy. >> reporter: the constitutional convention movement ran out of funds last year and the convention never happened. but the questions it raised remain, and are being hotly debated by a public increasingly suspicious of politicians. this gathering in june near los angeles-- "by the people: what's next, california?", produced by macneil-lehrer productions -- brought 400 citizens together to figure out what's wrong with california and how to fix it. >> it may not feel like it right now, but you can vote the bums out of office and you can vote them into office. the ultimate authority lies with the voters. >> reporter: the group was asked to deliberate about several topics, including term limits that force politicians from office after a few years on the job... >> to me, term limits says to the american electorate, you're
not intelligent enough to pick your people. if i have a good representative in there, a guy i think is honest and capable, i don't want to be told i can't vote for him again. >> reporter: ... a full-time verses a part-time legislature... >> i like part-time, because i don't think the ones who are full-time are really listening. i think they're doing part-time already. >> reporter: ...proposition 13-- the california law that keeps property taxes low and other taxes hard to pass, a law that remains popular; and the initiative process, where citizens or special interests propose laws directly to the voters. initiatives-- a form of direct democracy-- drew a lot of favorable comment. >> what's gone wrong with the process that we're now at a point of saying we have to create initiatives to vote on this, because our legislators are not voting on it or not bringing it up. what's wrong there? >> i think the initiative
process is important because the people need to have a say in what's going on. >> reporter: the attendees were given background information and then polled by stanford professor jim fishkin, who zeroed in on whether the initiative process needs changing. some californians have argued it promotes spending without raising revenues, and is controlled by special interests. but the conferees liked it. >> they see the initiative as the people's process, and they want the legislature to keep its hands off it. >> reporter: dealing with the troublesome state budget was tough for the attendees. fishkin found many conference participants bothered by california's requirement that two-thirds of legislators must approve new taxes, which the governor says he needs to balance the budget. >> there was also a concern for governability, the feeling that the two-thirds vote threshold for passing new taxes was paralyzing action. so taxes are the hardest issue,
but people were finding new ways of thinking about how to make this system work. >> reporter: fishkin concluded: "regardless of party, the people wanted transparency and accountability, and they wanted government to be able to make decisions." but practical solutions to fix the budget process were off the conference radar screen. outsiders are examining california, as well, looking for ways to solve its problems that might apply nationally. paris-born nicholas berggruen, a wealthy businessman who is registered to vote in florida, but deliberately maintains no permanent home, has put up $20 million to fund a high powered reform panel called think long. >> california almost reflects a little bit of what's happening >> california is a little ahead
of other states, and because of the initiative process, we can actually do something in california that you probably can't as easy in washington. if we're able to make reforms here, i think it'll be a signal, and california i think is a bellwether for the country. it'll have influence. >> reporter: but in the past, voters-- despite their unhappiness with government-- have quashed reform proposals. still, citizens and politicians alike are under more pressure than ever to fix a broken state. >> woodruff: finally tonight, an author's take on one of the world's most vibrant and violent mega-cities. margaret warner has our book conversation. >> warner: december 28, 2009. it was a shocking episode of violence even by pakistani standards. >> a suicide bomber killed at least 30 people and injured dozens more in pakistan today. this security camera video
captured the moment the bomber blew himself up in karachi. >> warner: the he can plogss aimed at a shia religious procession were fired by massive arsonist fires through the heart of the merchant district. scores were killed and millions of dollars in property destroyed. ' 1 million people, it is the 10th largest city in the world the u.n. says. over the past 60 years the city on the arabian sea has become the economic engine of pakistan. the host of npr's morning edition has made numerous trips to pakistan. his new book is "instant city: life and death in karachi." steve upskeep thank you for coming in to talk about your book. >> thank you. >> warner: of all the places and stories you could tell trying to understand pakistan, why did you choose karachi? >> i could have chosen a lot of cities actually around the world because i was interested in growing cities in the developing world. they're growing everywhere, but karachi is huge. it's grown at incredible speed from a few hundred thousands
to 13 million people at least, maybe more. and the story is fascinating and the people are fascinating. it grew on me over a number of visits over the number of years. i just kept going back. >> warner: karachi, just give us a quick little history lesson here. it's a volatile mix of all these ethnicities, religions, even languages really coming out of the way pakistan was formed out of british india, right, from 1947. >> absolutely. if you go back to 1947 when india and pakistan were divided into two different countries from british india, pakistan was to be majority muslim. india was to be majority hindu. of course they worked unanimously so. karachi was a majority hindu city on the pakistan side so you immediately had massive migrations. hindus fled. some at the beginning and more over the next several months. hundreds of thousands of muslims came. they ended up living in tent cities there were so many of them. that's part of the reason the
city began growing so explosively. it's continued ever since. it's taken in migrants from all over the country and from other countries as well. it's the new york of pakistan in that way. there are cities like this all over the world that attract people because they want an opportunity for an education. they want an opportunity for money or they're desperate because things are disastrous on the countryside. >> warner: why did you focus on this particular day december 28, 2009 that saw this attack on this shia religious procession through karachi. >> because it was a very complex day which helped, to me, to reveal and boil down an incredibly complex city. you had the conflict between sunni muslims and shia muslims. you had this killing. you had the events that followed in which a substantial part of the business district of the city was burned down. you had the mystery of who did that and then you had the obsession over real estate. how is the property going to be used now? who is going to benefit from this? conspiracy theories flying everywhere.
politicians outrages at each other. rhetoric everywhere. it was an incredible day as well as a tragic day. it was a day that everyone in karachi that i met seemed to remember where they were that day, what they were doing. it was a momentous day among many momentous days. >> warner: as you were peeling back the layers of the onion it seemed you really revealed a city that is above all driven by the struggle for power and money rooted in the land, this very precious resource. >> yeah. we think about religious conflicts in pakistan especially. and we should because they're huge. but sometimes even the religious conflicts are about something else. a city like this at its heart is about making a living for the ordinary people and making a fortune for some people. >> warner: now you also had a poignant story about a man who, a developer really, who dreamed that karachi could be the paris on the arabian sea. like so many well-minded people in this city, ends up getting thwarted. >> this is one of my favorite
things that i discovered. this is a story that people in karachi knew the outlines of but i don't think many people knew the details of. he was a nightclub owner in karachi in the 1960s and '70s. dancing girls. it was a totally different city than you would imagine in the muslim world. a much more open city, for ber or for worse. and this man, who was politically connected because the prime minister at that time had been a customer at his nightclub, had a dream to open a gigantic wal-mart sized casino on the seashore. he got the property. he built the building. he found a guy from macou to bring in the roulette tables and all the other equipment. it was all set up and ready to go. they were waiting for approval in 1977. and then there was a military coups. it was a moment when karachi changed, pakistan changed, and in the long term the world changed because the guy who took over was general zio hawk who is famous among other
things for being a devout muslim who wanted islamization in the country. and the casino was never allowed to open, which is symbolic of many things that are happened in karachi and in pakistan since. >> warner: then you also have some wonderful mini-portraits in this book of people who are trying to do the right thing. i mean they're in this chaotic and power-snichl and money- driven stew, but they are trying to do the right thing, whether it's in business or altruistically. >> absolutely. think about someone like dr. seaman jimali, the direction of the postgraduate medical center in karachi, this big public hospital. because she directs the emergency department that means that her department receives the wounded and the dead again and again when there are bombings in the city. in february of 2010, there was a follow-up bombing to the attack that's at the center of this book. and the wounded and dead were brought to this hospital.
the families as they always do in these situations came rushing in. there were hundreds of people crowding the hospital. and then a second bomb exploded there. what an incredibly horrible situation. and yet they reopened that emergency department without much better security in less than 24 hours. she sat with me. and she quoted when explaining what motivated her life, quoted some words actually of muhammad ali jinna the founder of pakistan who actually wanted a country where people overlooked color, caste or creed and treated each other at equal citizens. she said that was something that she wished more of her countrymen knew and learned. >> warner: do these people trying to do the right thing operate as if they're in a normal city? do they have any real impact? >> i think if you spend a little time with karachi residents, someone will tell you this place is crazy. they know it's crazy even though they love it, even though they embrace this city. they understand the craziness of its politics of violence as
a place the danger of speaking out, the danger of offending the wrong person. and yet they keep adjusting. they keep going on and finding ways to live their life. one of the most remarkable things about this city is the way that it springs back to life after a violent incident. and the way that after someone is killed people will bury them and go on. it sounds brutal. but people have adjusted to that life. they keep pushing, they keep pushing to make their lives just a little bit better than they were. >> warner: thank you very much and congratulations on your book, steve inskeep. >> thank you very much, margaret. >> brown: again, the major developments of the day: world markets fell sharply after the greek prime minister called for a referendum on the european debt deal. the dow jones industrials lost almost 300 points amid fears the debt agreement might come unglued. thousands of protesters began demonstrating in france ahead of
the g-20 summit this week. and bank of america dropped plans to charge a $5 monthly fee for debit card use after a wave of customer criticism. online, we look at the decision by the united nations cultural body to recognize a palestinian state. hari sreenivasan explains. hari. >> sreenivasan: we examine how unesco's move will affect the palestinian bid for wider global recognition. find an update on our "world" page. on "art beat," jeff explores a major new arts initiative from the doris duke charitable foundation-- $50 million in grants for 200 performing artists. plus for those enjoying halloween candy leftovers, we have a story from our partners at "scientific american" about what draws people to the aroma of chocolate. that's on our "science" page. all that and more is on our web site, newshour.pbs.org. jeff. >> brown: and that's the newshour for tonight. on wednesday, we'll look at the planned strike in california by the occupy oakland movement aimed at shutting down banks, businesses and schools. i'm jeffrey brown. >> woodruff: and i'm judy woodruff.
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