Inside the fundamentals of the US economy

>>> us now on the set here in new york, editor in chief of buzz beat, ben smith . also with us, edward mcbride. washington bureau chief of "the economist" who has the cover story in the latest issue of "the economist." "the america that works." a special report on the competitive surge that even washington cannot stop. i love the focus of this piece because it's so -- in light of everything, edward , hopeful.

>> well, thank you. i think the idea is just to give a sense that even though washington seems totally mired in dysfunction and all the problems that we're used to wringing our hands about seem so intractable, actually if you go out into the rest of the country things don't look so bad. there's headway being made in those areas.

>> like in what sectors? what parts of the country? what are you seeing that works despite washington ?

>> well, think of some of the things that people normally talk about when they say not only is the economy in a hole because of the recession, but our long-time competitiveness is looking bleak. things like infrastructure. things like education. government regulation. in the states, in cities, governors, mayors, state legislatures are taking on those problems. and producing some quite innovative and quite effective responses. infrastructure is my favorite one. just because we sit around every year lamenting the gasoline tax is bringing in less money. there isn't enough money for road building anymore. at the federal level . in the states, they're coming up with reforms. virginia just overhauled its gas tax to raise more money for road building . chicago has this scheme to try and channel private money into -- not just road building , but all kinds of infrastructure investments. look around the country and you'll find lots of examples that if congress had its act together they could easily follow.

>> ben smith , would you agree?

>> i do think this is one of these classic things where washington gives itself too much credit and also, you know, either for destroying the economy or for rescuing it. i think if there's a recovery, barack obama will get 100% of the credit politically speaking on the national stage. i think what edward 's talking about, which is these -- there are big economic forces at work that are not -- that even congressmen screaming at each other cannot stop.

>> which is always great news. again, we talked about the '90s a good bit. the democrats made some tough choices. republicans made some tough choices. but it helped that we had a tech boom that also grew the economy.

>> and every politic who was in office then took credit for both increasing spending and cutting taxes which is magic you can do when the economy is good.

>> right, right. so it seems to me that if you look at the long term, edward , you look at the fact that by 2020 the united states is going to be the number one exporter of oil. look at the natural gas revolution that's going on here, that's going to help fuel a lot of our manufacturing growth and our base. plus the fact that even china suggests we have eight out of the top ten universities on the planet as far as tech research. united states , you suggest, is in pretty darn good shape if washington can do no harm.

>> innovation. you mentioned universities. that's -- that's an area where we're constantly told america 's sliding. it is sliding in the sense that there's an awful lot of money that goes into r&d in other countries around the world more than used to. also still money going into r&d here in the states. we recently matched the size of investment relative to the size of the economy that was the previous peak in the u.s. during the space race . 2.9% of gdp devoted to r&d. we hit that again in 2002009. it's not as if the u.s. is slacking off in these areas. it's just that the rest of the world is also in the game. that's no bad thing. it means that there's innovation and growth all around the world and we should be happy about that.

>> is it possible, edward , this president might be one of the reasons why some of this is working?

>> no. absolutely not.

>> well, i mean, as far as investment in r&d is concerned, absolutely. that's one of his things. whenever he says the word investment republicans say investment means, you know, spending. the report is good things have been happening have been happening largely despite washington . not thanks to washington . that holds true for the president and congress. the things that are going on, and you mentioned just now the shale gas boom and all the benefits that flow from that. sure, you know, congress, the president, they haven't particularly gotten away. but they certainly didn't usher this along. that happened totally unexpectedly, unbeknownst to them, thanks to the private sector , basically.

>> ben ?

>> i was going to ask ben , a lot of talk back and forth about whether a deal gets done, whether a deal doesn't get done. i'm a bit more optimistic than most. what are you hearing?

>> well, i do think things like "the economist" cover give -- you know, make republicans in particular in congress think, you know what, maybe we can weather this. sort of the growing sense that there's a recovery has two political sides. one is obama sort of raising the pressure saying, like, you guys don't want to mess this up. also i think there's sort of an anti-spending talk that says if we can weather this, if there's the appearance of a recovery what's the rush?

>> mark?

>> well, let me ask the question of edward , what's going on overseas? the american economy can't really grow without markets overseas, without partners. what other countries seem to be doing well on the metrics you looked at for the u.s.?

>> of course, there are lots of countries making advances. that's basically the root of the concern, right? if other countries have good schools, if other countries invest in innovation, surely america is falling behind. in some relative sense i guess that's true. but, i mean, looking at the very long term, america has at its fingertips the tools that will help it to build the infrastructure that it needs 20 years from now. it's making the education reforms that should again help produce the workers it'll need 20 years from now. there are lots of other countries doing that. not so much in east asia . people always fixate on china. china is making big strides. but it's coming from way behind. more so in europe. yeah. the economy of europe looks miserable now. but those countries are the ones that have the -- you know, the educated students, the infrastructure and so on that will help them compete 10, 20 years from now.

>> john heilemann --

>> i want to ask a question of ben .

>> ben takes anything.

>> my sources tell me that buzz feed, i know you're very familiar with, is expanding into business coverage.

>> what?

>> we've been talking about business here a little bit with edward . i'm curious, are you guys -- pictures of kittens at work, that kind of thing? are you guys going to hard core business reporting?

>> i think the classic buzz feed is both. the language in which he write is kittens.

>> gifts.

>> when are you getting into business, man?

>> as soon as we can. we're staffing up now. send your resumes.

>> i like that.

>> this is huge. you guys are not going to stop. you're like kudzu growing up the side of a georgia barn.

>> kuz feed is what they call it.

>> i loved your article. thank you so much for being on. you hear people whining about the united states and all of the problems that we're having. but, you know, i've been saying for some time, no country's better positioned to accexcel in the 21st century than are we. america has 27 of the 30 universities that put out the most cited scientific research . as you say, china is starting from way behind. i think we're pretty good for a while.

>> as long as d.c. doesn't totally destroy the progress that's being made in the rest of the country, yeah. i think we're in good shape.

>> the issue of "the economist" is out now. edward mcbride, thank you so much. ben smith , stay with us if you can.