captioning sponsored by macneil/lehrer productions >> lehrer: good evening. i'm jim lehrer. the world economic summit ended today without resolving key currency and trade disputes. >> brown: and i'm jeffrey brown. on the newshour tonight, sewell chan of "the new york times" reports from the site in seoul, south korea. >> lehrer: and judy woodruff gets an assessment of the summit's successes and failures. >> brown: then, margaret warner updates congressional efforts to end the military's ban on gays serving openly. >> lehrer: mark shields and david brooks provide their weekly analysis. >> brown: and ray suarez has the story of russia's hunt for a spy who defected to the u.s. >> lehrer: that's all ahead on tonight's newshour.

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and with the ongoing support of these institutions and foundations. and... this program was made possible by the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you. >> brown: the summit of the world's 20 leading economies ended today in south korea.

it closed with general statements on key issues, but it left specific actions for another day. president obama arrived in japan this evening, hours after the g-20 gathering concluded in seoul. at a news conference before leaving, he acknowledged the lack of policy victories, but suggested the expectations are sometimes too high. >> and we should not anticipate that every time countries come together that we are doing some revolutionary thing. instead of hitting home runs, sometimes we're going to hit singles. but they're really important singles. >> brown: for example, an agreement to set guidelines for measuring trade imbalances. the president had wanted to go further, in light of the huge u.s. trade deficit with china. but he claimed progress just the same. >> here at seoul, we agreed that growth must be balanced. countries with large deficits must work to reduce them, as we

likewise, countries with large surpluses must shift away from unhealthy dependence on exports and take steps to boost domestic demand. >> brown: coming into the summit, the president also hoped to push china to let the value of its currency rise. u.s. officials argue it's kept artificially low to make chinese goods cheaper. >> it is undervalued, and china spends enormous amounts of money intervening in the market to keep it undervalued. it means some adjustments for china. and so we understand that this is not solved overnight. but it needs to be dealt with, and i'm confident that it can be. >> brown: but the global leaders refused to make a strong statement on the currency dispute. in fact, mr. obama faced criticism that the federal reserve is engaging in currency manipulation by injecting billions of dollars into the

u.s. economy. >> from everything i can see, this decision was not one designed to have an impact on the currency, on the dollar; it was designed to grow the economy. >> brown: the president likewise argued the u.s. will get a free trade agreement that opens south korean markets to american beef and autos. that agreement eluded him on this trip. >> i think we can get a win-win, but it was important to take the extra time so that i am assured that it is a win for american workers and american companies, as well as for korean workers and korean companies, because i'm the one who's going to have to go to congress and sell it. >> brown: overall, the summit left lingering questions about american influence and president obama's own overseas clout. but he was quick to dismiss any doubts. >> it wasn't any easier to talk about currency when i had just been elected and my poll numbers were at 65% than it is now.

it was hard then and it's hard now, because this involves the interests of countries, and not all of these are going to be resolved easily. and it's not just a function of personal charm; it's a function of countries' interests and seeing if we can work through to align them. >> brown: after a regional economic summit in japan, the president returns home. he'll face a lame duck congress next week, fresh off the bruising midterm election, and having found little relief overseas. sewell chan of "the new york times" was in seoul covering the summit. i spoke to him early today. sewell chan, welcome. >> hi, jeff. >> brown: an agreement, but one without a lot of detail or teeth. fill in the picture, first, on what they did agree to. >> they... the leaders here agreed to refrain from a trade war. they agreed to move toward

market-based exchange rates, which the u.s. views as a very positive development, and they agreed that the... on the broad goal of reducing the trade and other imbalances that could threaten the global recovery. >> brown: what had president obama wanted? >> the obama administration had initially proposed a specific target or limit on the surplus or deficit that any individual country can run. china and germany are very large surplus countries; they export a lot and they don't spend a lot. the u.s. and the u.k. are very big deficit countries that have tended to borrow and consume a lot and not save enough. and the idea behind this discussion on imbalances is that if they... if there's a more equitable system, the likelihood of these dangerous buildups of capital and other economic distortions is reduced, and thereby, the chances for another financial disaster like the one

we had two years ago will be lessened. >> brown: one sticking point clearly was china and its currency, which the u.s. and others say is kept artificially low in value. and the president used some pretty strong language about china at this meeting, right? >> absolutely. president obama said that the u.s. would be monitoring the chinese currency very closely. he called for china to play a greater responsibility consistent with its greater economic power, its greater development. and he expressed hope that when the chinese president, hu jintao, visits washington in january, that that could mark another step forward in a relationship that, frankly, has been pretty intense in the last few months. >> brown: but china wasn't giving in at all, it seems. was there a feeling there of it flexing its muscles? >> yeah, there's broad debate on that. i mean, the chinese, on the one hand, definitely would have resisted and did resist any specific target or limit on current accounts and, particularly, the chinese in particular resisted any appeal

for them to quickly move or to set what they consider too premature a timetable on appreciating the currency. but they did sign onto the broad goal of reducing these imbalances and the goal of getting exchange rates to match market fundamentals, at least in principle. so the question is really when and how soon the chinese will allow their currency to move . >> brown: another issue there was germany and others not happy with the recent action by federal reserve to stimulate the u.s. economy. tell us how that played out at the meeting. >> it's fair to say that the united states got quite an earful here in seoul from other countries that were not happy with the fed. in fact, the fed's decision to inject $600 billion into the american economy kind of came at a pretty bad time. it came right after the midterm elections, which were fairly disappointing for president obama, and right before this g20 summit, where the u.s. was trying to get other countries to cooperate. that said, the american officials tried to put the best face on it. they said the fed was trying to help the american economy, and

that that assistance is really crucial to helping the global recovery. and they also said that the fed wasn't trying to weaken the dollar, even though, in reality, the fed's action does have somewhat of that effect. >> brown: but germany and others weren't buying it? >> they weren't buying it, but also, frankly, for strategic reasons, it helped them to get some leverage in negotiations by, you know, creating a little bit of noise and expressing some unhappiness with the american actions. i heard from sources that, behind closed doors, the fed's actions didn't come up all that much, but they made for good theater. >> brown: there was also a bilateral negotiation here involving a hoped-for trade deal with south korea. what did the u.s. want and why did it fall short? >> sure. the u.s. and korea negotiated a trade agreement in 2007 during the bush administration, but it's pretty much languished in congress. and the key sticking points are non-tariff barriers, so barriers other than tariffs to american exports of autos and beef to korea. and those issues are very technical, very thorny.

there are a lot of constituents in the united states, like labor unions and ford motor company, that oppose the agreement in its current form, so president obama basically has said that he wanted to wait and continue to work toward an agreement that would really work, rather than make concessions that could possibly lead to an agreement that would not be approved by congress. in some respects, it was a disappointment, but both sides are saying that they are still hoping that the deal can be finalized eventually. >> brown: finally, let me ask a sort of "atmospherics" question. there was the big mid-term election loss of president obama's party. and there's been talk of whether that weakened his ability to get his way in seoul. how did it feel there in watching the leaders and delegations interact? >> i don't think anyone would say that the americans left here with a rousing victory. these kind of summit meetings are almost not designed for that kind of outcome. but to the extent that the americans succeeded, it was in

their ability to still help shape the agenda for what the world's nations talk about. the americans clearly put this issue of imbalances front and center, and they got the other countries to make at least a conceptual agreement, an agreement in principle, on reducing those imbalances, even though many of the specifics were punted over to next year. >> brown: okay, sewell chan of "the new york times" talking to us from seoul, korea. thanks for joining us. >> thank you. >> lehrer: we have more on the outcomes of the g20 summit coming up. that's followed by the military's "don't ask, don't tell" policy; mark shields and david brooks; and a spy story about a russian defector. but first, the other news of the day. here's hari sreenivasan in our newsroom. >> sreenivasan: wall street had its first losing week after five weeks of gains. stocks fell on worries that china might raise interest rates to curb inflation. that, in turn, could slow chinese growth and hurt the global economic recovery. the dow jones industrial average lost 90 points to close at 11,192. the nasdaq fell 37 points to close at 2,518.

for the week, both the dow and the nasdaq lost more than 2%. president obama today hailed iraq's efforts to form a new power-sharing government. the country's main political factions agreed on the deal yesterday. but almost immediately, sunni lawmakers walked out of parliament. in south korea, the president acknowledged that challenges remain, but he voiced hope. >> all indications are that the government will be representative, inconclusive and reflect the will of the iraqi people who ask their ballots in the last election. this agreement marks another milestone in the history of modern iraq. >> sreenivasan: the president also called to congratulate iraqi prime minister nouri al- maliki. he'll remain in power under the agreement. in afghanistan, a suicide car bombing hit a nato convoy just outside kabul. a civilian was killed, and a nato soldier and an afghan soldier were wounded. another nato member was killed in a separate attack in the east. and in the south, at least 15 suspected militants died in heavy fighting in the sangin

district of helmand province. drama built in myanmar today, as supporters of the pro-democracy leader aung san suu kyi awaited her release. her house arrest in the former burma officially expires saturday after seven years. we have a report narrated by paul davies of independent television news. >> reporter: the democracy movement has been crushed by the burmese military, but its followers have been gathering again around the home of the woman who still represents their hopes. aung san suu kyi has spent 15 of the last 20 years under house arrest. rumors that her release is imminent have drawn this crowd. a senior member of her party arrives and is mobbed. he confirms her latest period of detention expires at midnight, but as yet, there's no sign of her. "hopefully, tomorrow," he says. aung san suu kyi's american lawyer remains skeptical.

>> historically, the regime has repeatedly said on various occasions, both on the record and on background, that they were going to release her, and have failed to follow through on those commitments. so until i see her walking out of the house, or until her domestic lawyer is able to speak to her and confirm she was delivered a release order, until those things happen, i'm not prepared to say she's going to be released. although, of course, we very much hope it will happen. >> reporter: aung san suu kyi is 63 now, and it's been years since she's been able to freely address her followers like this. the generals who seized power in 1988 did not tolerate free opposition. despite advocating gandhi-style passive resistance, suu kyi, young leader of national league for democracy, was ordered to leave the country. when she refused, she was placed under house arrest. the generals, who've just seen the party they back win controversial elections in burma, have been under international pressure to free the nobel peace prize winner. but burmese exiles here distrust them.

>> if the government fears that by releasing her she could rally the masses against the government, they might postpone her release. so i share the excitement, but have some cautions. >> reporter: aung san su kyi's lawyer has said she wont accept freedom if it's on condition she abandons politics. >> sreenivasan: suu kyi's party won a landslide election victory in 1990, but the ruling generals refused to hand over power. she was barred from taking part in last sunday's voting for a new parliament. the u.n. appealed today for $164 million to contain the cholera outbreak in haiti. so far, the disease has killed at least 724 people, and it is expected to continue spreading. aid groups have set up temporary hospitals as demand for treatment mushrooms. officials have confirmed more than 11,000 cases since last month. a former tennessee college student has been sentenced to serve a year and a day for hacking into sarah palin's email account. it happened in 2008 when palin was the republican nominee for vice president.

david kernell told prosecutors he was looking for something to derail her campaign, but found nothing. a federal judge recommended he serve his time in a halfway house, not in prison. those are some of the day's major stories. now, back to jim. >> lehrer: and we turn again to the g-20 summit and to judy woodruff. >> woodruff: to discuss the take-aways of the meetings, we're joined once more by eswar prasad, a professor of trade policy at cornell university. he's also a senior fellow at the brookings institution and a former economist at the international monetary fund. and zanny minton beddoes, economics editor of "the economist" magazine. it's good to you have both back with us. we had you here earlier this week to preview the g-20. now let's talk about what happened. zanny beddoes to you first, we just her sewell chantel jeff that almost nobody thought thiss with a roaring success but did anything positive come out of this meeting. >> they had a photo op. they didn't have any huge public spats.

but i think actually there was progress, but it was such inching forward on difficult issues to be probably almost imperceptible to all but most of the the most devoted followers. as was pointed out there was progress on the thorny issue of imbalances. that the progress was simply that they agreed to find a mechanism, they called it indicative guidelines, which is a means of trying to measure whether imbalances are excessive or not. they didn't actually agree to any limits. the u.s. had been pushing a few weeks ago to have a numerical limit for what would be too big an imbalance. they refused to agree. but they will find a process to these guidelines to measure what it might be in the future it is not a huge breakthrough, not revolutionary as the president said but it progress. as we were saying earlier this week, that is what these summits do, they make progress relatively gradually. >> eswar prasad, i think you have a more critical view. >> i think there has definitely been progress on some fronts in terms of ratifying issues relating to

banking regulation, imf reforms, the new model for development, that's all very good. but the issue of the day is about currency disputes and what happens to macroeconomic policies. and there i think we're facing a real tension. we do have this-- with the advanced economies moving forward very, very slowly. they need more stimulative policies. the emerging markets are moving much faster. they need tighter policies. now the tighter policies like tighter interest rates, for instance. and the problem is that both these groups of economists are very large and the world economy has become more interconnected so there are spillovers. and making these policies consistent is very difficult and i don't think this g-20 meeting gave us confidence that these conflicts can be resolved very easily. >> woodruff: why isn't that something to worry about. >> course it is something to worry about but what issue i had laid out is the state of the world right now. he's absolutely right that emerging economies are growing much faster than the more stagnant rich world and that does create issues. it does create tensions. those tensions haven't gone away because of this meeting. the question of, i think the

way to judge whether these meetings is successful or not is whether it puts in place a process that helps us manage this. and i would submit that we've inched forward in that process. we certainly haven't gone backwards. i think we have moved to slightly better zone where it is no longer just the u689 is and china arguing about their bylateral exchange rates there is now much more of a discussion about imbalances broadly. and sure, this is going to be a very long road. there's going to be probably setbacks. i don't think this summit was a setback, i just don't think it made as much progress as one might have hoped. >> woodruff: but eswar prasad, speaking of currency, the u.s. did go in trying to get other countries to pressure china harder to let its currency rise. and meanwhile you had the fed action which all of the countries, the other countries were ganging up on the u.s. over. where does all that stand after. >> the u.s. was in a somewhat isolated position because there was a sense that what the u.s. was doing was in its own interest and it was not very concerned

about the pillover effects of its policies on other countries. and the reality is that in the u.s. the benefits and risks of quantitative easing are flooding the economy with money are unclear. >> woodruff: with the fed policy. >> the fed policy of putting more money into the policy. but to the rest of the world the risks are very clear and apparent and the benefits much more tenuous. so the u.s. started off on the back foot already. in addition, china has very effectively controlled the narrative on this issue arguinging that the fundamental imbalance in the world economy right now is caused by loose u.s. monetary policy and loose u.s. fiscal policy. there are very high levels of public debt they are building up. so in a sense the u.s. didn't achieve its objective of bringing other countries around to its point of view. the chinese currency policy was an important problem to be fixed as well. >> woodruff: how much of a setback is that for the u.s.? >> i think that the theatrics of this were the setback for the u.s. for one reason it was completely unrelated to the g-20 which was this failure to agree of bilateral trade

agreement with korea. because i think that that showed somehow that the u.s. couldn't get something that was dear to its heart. and i think there was a lot of criticism behind closed doors as well of the fed's policy. probably more publicly. that people outside the u.s. are worried about this i think there is a sense, a real sense that the u.s. is doing what is in its interest or what it perceives to be in its interest rather than the world's interest. >> woodruff: on the trade question this was something the united states had been pushing for. president obama came out of that meeting and said we don't have it yet. he is sounding optimistic that it's going to happen. what do you think the prospects are? >> this was a disappointment-- . >> woodruff: we should say what it is about. it is dairy, it's cattle and it's -- >> beef and autos are a major sticking points between the two economies. and both economies really ranted it because it would have given them very good momentum going into the summit. unfortunately, the political differences turned out to be very difficult to bridge because, again, as with many

other policies that are very strong domestic pressures. it require ace fair amount of political leadership to overcome the domestic political pressures. and leaders on both sides ended up not being able to do it. there was a hope when the two presidents got together they would be able to bridge the differences but the baggage they were bringing to these negotiations just made it very, very difficult to conclude. >> woodruff: what about this sense, there is a lot of speculation, zanny, that going into and coming out of this summit that the united states, president obama his hand weakened because of what happened in the midterm elections in the united states last week. >> there certainly was. and i think there is a perception in the rest of the world that that is the case. i'm not sure how accurate it is on things like these broad imbalances. i just think the problem is more intractable, perhaps it is incredibly difficult, intractable problem and it will take a long time to unwind. and i don't think one midterm election makes a huge difference in that. but where i think there are, in areas other than just-- if you look at fiscal

policy, for example, where the rest of the world looks at the u.s. and says you know, their fiscal policy is a mess, why can't they sort it out. we're doingation terity programs if you look at europe. and you just have very different views about how economies should be managed. >> woodruff: are we overfocusing on this in the united states, do you think. >> this is a serious, because the u.s. is seen as creating a major problem. it has loose monetary policy it doesn't seem to be in any position to fix its trade-- its deficit problem. and then on the trade issue it doesn't look like the president has a great deal of interest or backing. so all of these put together suggested the u.s. although it has been doing a lot on the multilateral front may not be able to contribute that much to these global agendas. so i think is hurting the president's effectiveness. >> i'm wondering whether it is not that it doesn't contribute that much t just can't-- it can't run the agenda in the way it used to. and there is a clear shift there. and i think, you know, the u.s. is this global economic leader. a lot of -- it sets the

agenda or used to set the agenda at a lot of these summits. i think this time the agenda has really followed the u.s. again too, but there is a subtle shift happening which is that the rest of the g-20, you know, need to be brought on board and it's no longer quite as easy for the u.s. to push its way in the way it used to. >> woodruff: quickly while i have you both here, during, in the middle of this g-20 meeting some of the european leaders broke away to look at what is happening in ireland. deepening credit crisis, how big a problem is that? what should we expect there? >> the europeans want to keep it within the family and they want to make sure that nobody strays too much. and that actually is creating and additional set of problems because it puts a lot of pressure on ireland because germany, for instance, has made it very clear it doesn't want to give a bailout in easy terms to the irish. the real concern is not just what happens in ireland but how quickly this problem could spread to other very vulnerable economies in europe. so i think it is a potentially serious problem. >> woodruff: how do you see this? >> i think the problem with

the periphery economy, the economies in europe is a huge problem. i think what happened this week is an interesting case on the what can happen if you sound tough. i mean one of the reasons the irish debt blew out this week was because the germans had said we want the rules changed in europe so that next time that there is a bailout, the bondholders actually have to pay a bit too. we don't want governments bailing out bondholders. so everybody thought oh my goodness this means they are not going to get their money back. and so the spreads on irish debt blew out and the meeting was basically about the finance minister saying no, no, we're not going to do this, done worry t is all going to be okay. >> woodruff: one more thing to worry about. one more thing. >> the acute phase of the crisis may be over, but the ramifications are going to go on a long time. >> woodruff: we appreciate you both coming back zanny minton beddoes eswar prasad, thank you both. >> my pleasure. >> brown: now, to the continuing fight over repeal of the

military's "don't ask, don't tell" policy. today, the u.s. supreme court refused to intervene in a california case that would have blocked enforcement of the ban on gays serving openly. that leaves the matter in congress. margaret warner has our update. >> warner: there are more issues to consider than days left for congress to tackle them before the end of the year, from taxes to treaties. and then there's one long- simmering matter coming to a head-- whether to repeal the policy barring gays from serving openly in the armed forces. the matter has divided congress and the military for years, and now, it seems, a particularly high-profile political family, as well. on one side, arizona republican senator john mccain, who helped block a repeal of the ban as part of a defense authorization bill in september. and during his recent re- election campaign, he vowed to oppose repeal until it had been more thoroughly vetted. on the other, his wife, cindy.

today, she appears in an anti- bullying ad on behalf of the lesbian, gay, bisexual and transgender community, or l.g.b.t. >> our political and religious leaders tell l.g.b.t. youth that they have no future, they can't serve our country openly. >> warner: "government discrimination encourages bullies," she says: >> "our government treats the l.g.b.t. community like second- class citizens. why shouldn't they? >> warner: the ban has been in effect 17 years. some 13,000 service members have been discharged for violating it. but now, the secretary of defense, chairman of the joint chiefs, and their boss, the president, all want it rolled back. mr. obama spoke again last week. >> i've been a strong believer in the notion that if somebody is willing to serve in our military, in uniform, putting their lives on the line for our security, that they should not be prevented from doing so because of their sexual orientation. >> warner: the house okayed

repeal last may, but the senate turned it aside in september. many senators said they first wanted to see the results of a pentagon survey and study, due december 1. a draft of the study is now being reviewed by defense secretary gates and the top brass. and today's supreme court ruling gives them some breathing room. but yesterday, a leaked account of the survey surfaced in "the washington post." it reported that 70% of active duty and reserve personnel believe reversing the ban would have positive, mixed, or non- existent impact. "post" correspondent ed o'keefe reported the story. >> of those that replied, they were asked questions like, you know, "would you be uncomfortable serving with an openly gay colleague in combat?" "would you have a problem living next door to one, or showering in the same facility where you knew there was an openly gay colleague showering?" and generally, it looks as if the answers are "no, i wouldn't have a problem." and critically, it looks as if, when it comes to the question of

sort of intense combat situations, "would you have an issue?" most have said no, or they said it wouldn't really matter. >> warner: but, says o'keefe, there was also the contrary view, particularly among marines. >> there is a higher percentage of opposition in the marine corps then there are in the other services. the only number we know for certain is that about 40% of the marine corps is opposed or concerned with allowing gays to serve openly. >> warner: that resistance from the marines has gone public. under questioning from mccain at his confirmation hearing in september, the new commandant of the marine corps, general james amos, left little doubt as to where he stood. >> in your written statement, i quote, "in my personal view, the current law and associated policies have supported the unique requirements of the marine corps, and thus i do not recommend its repeal." >> yes, sir, that sounds accurate. >> warner: then, just this past weekend, general amos reiterated that sentiment.

citing the intimate living and sleeping arrangements among marines, he told reporters: "i don't know what the effect of that will be on cohesion. i mean, that's what we're looking at. it's unit cohesion. it's combat effectiveness." his remarks brought a swift rebuke from the chairman of the joint chiefs, admiral mike mullen, saying: "i was surprised by what he said, and surprised he said it publicly." >> the marine had been speaking out over last weekend saying, you know, we've got to be careful here, marines they serve in close quarters. and the source believed that amos at that point had seen the results to show high percentages of opposition amongst marines and was trying to get out ahead of the results and start to crack the arguments against lifting the ban.

travelling overseas last weekend, defense secretary gates said he hoped the senate would act before the end of this congress, adding "but i'm not sure what the prospects for that are." if the senate doesn't vote before congress expires, repeal would have to be reintroduced in a new republican-dominated house, where its chances are unclear. mccain's office says he's consulting with senate armed services chairman carl levin about whether to include or strip the repeal language from the broader defense bill. his office had no comment on cindy mccain's ad. >> lehrer: and to the analysis of shields and brooks-- syndicated columnist mark shields, "new york times" columnist david brooks. first, mark, on the don't ask, don't tell issue do you think the lame duck congress will take that up? >> no, i don't, jim. >> lehrer: why not? >> i don't think that the position is there for the white house.

i don't think the support is currently there. >> lehrer: do you agree in. >> i agree. it is an incredibly full session. tax bills, maybe a doc fix, the medicare thing, amt, there is a lot of stuff piling up. it is tough for me to see them get to it. >> lehrer: agree that -- let's move to what is likely to happen, if anything during the lamb duck session. >> which think that the middle class and beyond bush era tax cuts will be addressed and they will be extended. i think unemployment-- . >> lehrer: permanently, temporary. >> that is too be-- that is to be negotiated. but there is certain-- in the ranks of democrats because they feel the white house has already shown an overwillingness to agree too their extension rather than drive a hard bargaining positionment but beyond that i would say unemployment benefits will be extended. there will be there. they are important to the economy they are important to the people who receive them.

and the items that david had mentioned. what do you think will happen on the middle-age middle-aged-- let's start all over against where do you come down on the taxes issue and what they will do. >> i'm for a tax on the middle-aged, i should say. i will just mention that. >> you'll be there one day! >> anything over 70. you know, there was-- the original tax structure was if are you over 250 then obama wanted to raise your taxes and then preserve. then you began to see a couple weeks ago that moving, maybe 500,000, maybe a million and now as far as i can see that is all washed away and the most likely outcome is that we will have a temporary extension of all the bush tax cuts straight up and down the income ladder. and as mark indicated the most interesting thing that happened this week on this front is the restlessness in liberal ranks there is a sense that we're not quite sure we can trust president obama any more. he has not fought for us. we're not quite sure if he

is really with us. and so there's a great deal of, i think efforts behind the scenes going on to sort of stiffen him to show we will fight you if you walk away from. i think that is why nancy pelosi has so much support in become the minority leader. so that dynamic has become an interesting dynamic of people, enforcement on the left. >> lehrer: do you see the same dynamic at work? >> i do, just one correction. president obama does not want to raise the taxes on those over 250,000. he wants it to return to where it was under the prosperous years of bill clinton. >> but raise i meant going from 36 to 39. whatever mark wants to put that. >> no, no 35. >> lehrer: the dynamic question. >> i think that is-- important because that has been the argument, whether we where returning to what is the norm or whether we where going to keep these artificially reduced rates for billionaires that done all trump can continue to prosper. >> i was just reporting the

facts. >> do i want to get the dynamic. >> lehrer: among the liberals. >> among the liberals i think speaker pelosi's position has been strengthened by a growing restiveness toward the white house, just exactly who is barack obama what is he going to do. i mean the question has been what will barack obama do with this reduced majority in the senate, with the loss of this majority in the house. will he become bill clinton or will he become harry truman. and democrats don't know and they want, especially liberal democrats want to be sure that nancy pelosi is the coupon the beat. i mean that she will hold his feet to the fire. >> a couple days ago there was a story in the huffington post i think by harold feinman sayinging that axelrod had caved in, was preparing everybody for a cave in on this tax issue. i was struck by the emotional fervour on the left, reacting against that. which was-- there was almost

some anger involved. so a lot of the spirit that unified the democratic party, i think, is not there and it makes it very interesting for the obama administration. because obviously they have to win back independents in the midwest. but also have to keep this-- happy, so it makes their job incredibly complicated. >> lehrer: meanwhile the leadership situation on the democratic side in the house, nancy pelosi says i want to keep the job. there are some rumblings. read them for us? >> there is some open dissent and criticism from-- and from previous supporters. mike capuano from massachusetts who had been in charge of nancy pelosi's transition when she became speaker, congressman from somerville who nancy pelosi endorsed when he ran for the senate, went up with and campaigned for him in the race that scott brown won, ted kennedy's seat. he's come out saying that they got to change. you lose this many games, you fire the manager. mike quigley took rahm emanuel's seat in chicago said she's politically toxic.

but there is-- you can see among democrats the point we made about she's the coupon the beat. but there's a recognition of what she's done. i mean she has made the democratic party in the house the majority. now the question is did she contribute in making it the minority. and is she the person to bring it back. and at the core of everything beyond appreciation, respect and admiration for what she's done, every leader has to have the ability now to raise money. and nancy pelosi raises money and she does it without compromising her positions and i think that's part of her appeal. she will win. >> she will win if she runs. >> she will win if she runs. >> lehrer: what about the number two and three positions which are also, of course there's steny huher who was the majority leader and now he would become the mine orth. that job is already taken. he says he still want as that be jo. how do you see that? >> i don't know, mark-- i

heard secretly pelosi would like to have huher who has been her number two, is the more moderate. he has the more mad rate side and so i guess i think if she wants it she will get it. what is interesting to me is she is opinionly good at counting votes an smart. i think she can range this. the party dynamics is fascinating. i covered margaret thatcher debting deposed and there was a truism in that race in her own part in the parliament. the truism which i hear in this race too or,, or in the pelosi race is the person who sticks in the knife never wins the election. so if somebody is going to take down pelosi or huaier,or whofer they have to commit career suicide and nobody is willing to be that person, naturally enough. the other thing we said is people are up set maybe with keeping the same team but that doesn't mean they've got another team. and so-- . >> lehrer: who would you replace her with. >> right, there is schuller but he doesn't really represent where the democratic party is so there

is really no alternative hz. >> lehrer: how do you feel about the hauer-cladman thing. >> it could get nasty talking to the speaker's people that is what she is most concerned of avoiding is blood on the floor. the problem is there are four positions in the democratic leadership. when they control the house which they still do theoretically until january that is now reduced to three. so there are four people for three positions. >> lehrer: it really is a musical chairs. >> and jim clyburn has expressed reluctance to go back to being the democratic house caucus chairman because he had that position before he was elevated to whip. but citizenee hauer has been whipped before. he was whipped when nancy pelosi was minority leader. so there is a real tension there. >> lehrer: sure. all right, speaking of tension, what do you make of the debate, the deficit commission chairman's proposal for how to solve the deficit problem in the united states of america at

the federal level? >> first, i thought it was an excellent start to a discussion. it had a wide range of options, many of which are extremely painful. those of us who own homes don't want to give up our mortgage interest diduction. i'm sure people in their 60s don't want to postpone retirement age. but the fact is we're facing a national disaster and we're going to have to do some terrible things. they probably underestimated how many terrible things because they have some rosy scenarios in there. but they took the serious things that have to be done and they threw them on the table. and so i think they did a great service to the country. i think the secretary thing they've done is they've smoked out who is willing to have this conversation and who isn't. you saw people on the right like reverend rockquist and people on the left like some of the public sector unions said hell no, we are not talking about this. this is dead on a roughly radio. but then you had a lot of people, both democrats and republicans saying we hate this stuff. but we got a real problem. we got to talk about it. and so i thought they've smoked out who is really serious about this thing. and then the final quick thing i would say, all these things are very painful.

the idea that politically with this country where it is right now, could pass any of this stuff, it's fantasy land. the country has to change first. >> lehrer: fantasyland, the country first if. >> i hope it isn't fantasy land this is not an eat your spinach plan this is an eat your spinach, eat your broccoli and finish your brussel sprouts plan. and if the test of political courage is the ability to simultaneously alienate both the political left and the political right, then allen simpson and erskine bowles have passed that test with fwliing colors. >> lehrer: they were on the program last night. >> no, they-- they had to do it. because the skmition not going to agree on anything. and they forced the debate. david is absolutely right. by doing this they preempted the debate and forced others to address this. the two things about it i think that are crucial, jim. first of all, people have been hiding saying we're going to balance this budget by hitting them.

rich people, taxes, whatever, closing loopholes or we're going to hit the fed, taking way the benefits from these freeloaders. he has basically said it's us, okay. >> lehrer: this isn't them, it's us. >> and they've laid out the plan and if you want to argue with parts of it, okay, fine. but you better come up with where you are going to get the money. and i think that's crucial. the other thing they've done is they have asked for shared sacrifice. and since ronald reagan beat jimmy carter. jimmy carter lost in 1980 accused of running on a platform of cold showers and root canal work. reagan came along and said i will double defense budget, cut your taxes by a third and balance the budget. boy, that sounded great. that was a real formula for success. of course he didn't do it. butever since then, every president with the minor exceptions of george herbert walker bush in his term and bill clinton in his first term, have basically gone on ouchless, painless prosperity. there has been no shared sacrifice this century at all. and what they are saying is are you up to it. are you in the american

tradition, are you willing to do it. >> i think that's the test. you got marines an soldiers in afghanistan sacrificing for their country. and you're not willing to give up your mortgage interest deduction or see a little raise in your capital gains tax? that is the question the country really has to ask. and i would say it's not, the change is going to happen in washington, there has to be a change in the country of voters saying yes, i hate this but i'm willing to do it or else the politicians will go nowhere near it. so there has to be some surge in the country first of people saying yeah, we're serious about this. >> lehrer: how can there be a surge without an election it is to the going happen before 2012. >> social movement as rise. we had the obama movement arose. the tea party movement arose. people got organized. institutions formed. >> lehrer: so it could happen. >> they changed the political dynamic. we would have to have a significant change in the political dynamic before politicians in either party will touch this. >> lehrer: one quick thing before we go. you mentioned george herbert walker bush. what do you think of george w. bush's memoir? >> with. >> lehrer: a minute left.

>> fascinating in the sense that it is a rorschach test. if you liked george w. bush and the way he operated, will you like this book. if you didn't like the decisions he made, then you won't like this book. and what it showed me more than anything else was his generosity and magna minuteity toward barack obama and how that deprived democrats of any kind of an enemy in the campaign of 2010. he just was so discreet, so circumspect, kept so quiet. and the tension between him and dick cheney which is real. >> covering him, he always projected certainty and no doubt. but privately you knew he had a lot of uncertainty and a lot of doubt. and the book actually opens up about that, so i'm glad that people can see that part of bush which i found more attractive sometimes than the bush out there in the open. >> lehrer: okay, david, mark, thank you both. >> thank you. >> brown: finally tonight, the latest in a russian spy tale

that has a whiff of the cold war about it. ray suarez has the story. >> suarez: in june the justice department announced it had uncovered a russian spy ring. they were russian citizens carrying on like ode americans in east coast cities and suburbs. and passing not very secret information back to moscow. the spies were deported to russia where they received a hero's welcome and one of them, anna chapman became something of a media sensation. >> now a new twist, a russian newspaper kommersant reported yesterday that i atop ranking observation in their spy service known only as colonel shcherbakov outed the spies. he and his family reportedly have left russia for the u.s. with way russian hit squad in hot pursuit. for more we go to jeff stein who has written extensively on intelligence. his column on intelligence appears in "washington post post".com. and in the newspaper and

jeff, who does kommersant say that colonel shcherbakov was and what did he do? >> he was the head of american operations for the svr, the russian intelligence service and that's a pretty big job. you can imagine a cia guy running operations russia and defecting to them. this is a very big hit, according to what we hear out of moscow. >> suarez: now the president, president medvedev confirmed the newspaper report. as far as i'm concerned what was published in kommersant was not news. i found out on the day that it happened with all its attributes. can we take him at his word? >> yeah, he must have had-- from laughing i think, according to all the russian experts and journalists i talked to, this was medvedev's direct hit at the head of the svr, and maybe a move, the first opening shot at a move to get him out. >> suarez: so this is internal quarrels inside the

leadership circles of the russian state and intelligence? >> that's what the russian journalist experts i talk to say. and of course spy stories are always hidden hands at work. and you've got lots of hidden hands in moscow at any time, in any political turmoil. and the svr plays a very, very, much more powerful role in russian-- russia than the cia does here, so it's a big struggle. >> suarez: is the loss of an agent this knowledgeable, this high up the food chain an embarrassment sort of already compounding the embarrassment of losing those deep cover cells in the united states? >> well, you know, the way the russians played that was they greeted them as heroes. they gave them lots of awards. anna chapman is a big star from russian intelligence. they've played it as if they were successful, with these agents for a long time. and then they got rolled up. so they did a nice spin on it.

and so now the fickle finger fate is pointing at the the head of the svr and there's no way they can cover up the fact that this was a big, big hit on them. it's interesting that the cia is not saying anything. the white house is not saying anything. on the hill, and the intelligence committees, they are mum. they wouldn't talk to me. people who are often talkative about this kind of thing were not talking today. and i suspect there is, as usual n spy storys a lot more to be learned. >> suarez: well, the fact that american intelligent sources aren't saying anything, if a fish this big turns coat, comes back to the united states, this has to be with the knowledge of american intelligence services, doesn't it? aren't they protecting him in some sense? >> i think the implication is that he was our guy. he was our mole, at the top levels of the svr. and we got him out just before we rolled up all these russian spies.

and one of the things that the russian media is pointing out is the guy had a daughter living in the states. his son left just before the rollup of the russian spies here. so ground was prepared, if we can believe what we've read so far. ground was prepared for this guy's defection it was not meant to be public, i don't think. the cia did not throw a press conference for this guy. i think they were very happy to keep it quiet so as not to roil u.s. public relation. he fell into their hands. he wanted a defector. he wanted to be a spy for us. he did. wand we got him out before he rolled up the russians last summer. >> suarez: the idea that a high level russian agent is now in the united states with a russian hit squad after him sounds dramatic. but the russians have assassinated officers in the past in third party countries, haven't they? >> well, going back to trotski in mexico but that was a long time ago.

there have been assassination of journalists. there was an assassination of an ex-russian intelligence agent in london with radioactive poison. but the russian sources i talked to said this is more bradadossio on the part of the russian officials talking in the press. they have to kind of swager as one of them said since they've been sort of resuscitated in recent years. and they're throwing their weight around in the press. and i think you could take this little grain of salt that they're going to send a hit squad here. and i suspect a russian hit squad coming to the united states would make a lot of noise, frankly. and which would like to think that the fbi and other homeland security agencies would be on at all right for them and be able to find them. i just find it hard to believe that moscow has tried to wipe out a defector under our care if they could find him on our territory.

i just find that extraordinary. >> suarez: is it easier to defect in the post-cold war world where borders are more open and you can just get on a plane and fly somewhere? >> well, that's a good question. i suppose it is a lot easier. i suppose it is a lot easier to spy too through electronic means. because you don't have to have as many personal meetings. you are not in trench coats meeting in alleys and all that. but no, when you are in the top levels of security services there is never easy to walk out and go into the hands of the opposition. but again, this is one of the points that the story in kommersant is trying to make, is that the svr was so incompetent they let the top of its american operations go. and no one will be surprised if the head of the foreign intelligence service goes down on this one. >> suarez: jeff stein, thanks a lot.

>> thanks for having me. >> lehrer: again, the major developments of the day: the world economic summit ended without resolving key currency and trade disputes; the dow jones industrial average fell 90 points on the day, and overall, wall street had its first losing week after five weeks of gains; and the u.s. supreme court allowed the military's ban on gays serving openly to stay in place while a lower court considers that issue. and to hari sreenivasan, in our newsroom, for what's on the newshour online. hari. >> sreenivasan: on this g-20 week, we look at diplomacy in the digital age. watch our interview with the state department's senior adviser for innovation, alec ross. he describes how new technologies are aiding foreign policy. and on the "rundown," view never-before-seen photos of president john f. kennedy as published on "life" magazine's web site. we interviewed the director of photography for "life" for the back story of the images. plus, jeff talks to "new yorker"

music critic about his new book of essays, "listen to this," which examines popular perceptions of classical music. that's on "art beat." all that and more is on our web site, newshour.pbs.org. jeff. >> brown: and that's the newshour for tonight. on monday, we'll look at the agenda for congress's lame duck session. i'm jeffrey brown. >> lehrer: and i'm jim lehrer. "washington week" can be seen later this evening on most pbs stations. we'll see you online, and again here monday evening. have a nice weekend. thank you and good night. major funding for the pbs newshour has been provided by:

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