MS. DIANE REHMThanks for joining us. I'm Diane Rehm. It's the first Monday of January in 2011. As President Obama and the new Congress prepare to get back to work, the new year brings new and continuing international challenges. These include the role of the U.S. in Afghanistan and Iraq, the global economic crisis, and the diplomatic fallout from Wikileaks.

MS. DIANE REHMJoining us in the studio to discuss some of what the President will have to deal with in the coming year, Charles Kupchan of Georgetown University, Eswar Prasad of the Brookings Institution, Nancy Youssef of McClatchy News, and David Sanger of the New York Times. And throughout the hour, your comments are always welcome. Join us by phone, send us an e-mail, join us on Facebook or send us a tweet. Good morning and happy New Year.

GROUPGood morning, Diane. Happy New Year.

REHMDavid Sanger, what was the biggest international story as 2010 closed?

MR. DAVID SANGERI think as 2010 closed, the three big things that jump out at me are obviously Afghanistan and Pakistan, where the President is setting himself up for what will be probably the biggest decision of his first term come this summer about the pace of which the U.S. is going to withdraw, certainly the rise in confrontation with Iran.

MR. DAVID SANGERWe've seen the remarkable year in which sanctions have begun to have some bite, but it's unclear that it has brought about the kind of strategic change that the administration hoped the Iranian leadership would come to on the nuclear issue. And meanwhile, the democratization movement in Iran has pretty well been crushed.

MR. DAVID SANGERAnd I think the third big issue, and the one that we talk about the least, is the surprising behavior by China over the past year as they have gotten increasingly aggressive. Not just on economic issues, which we expected, but I think laying out earlier than we had expected some claims to territory and influence throughout Asia that has really changed the way people are beginning to think about the balance of power in Asia.

REHMWhat about the START treaty, Nancy Youssef, that Congress passed just before the end of the year?

MS. NANCY YOUSSEFWell, we saw last week in Russia the Duma passed it, so it looks on its way to being ratified. It was surprising because there was a lot of opposition from the Republican party, and then it passed late in the year. It's supposed to cut down nuclear warheads by a third, and really solidify relations between the two countries again. An extra 85 billion was thrown in to protect the nuclear programs.

MS. NANCY YOUSSEFSo it was a surprising diplomatic success for the administration late, and one that I know that the Pentagon welcomed, and also those who think that there should be formal agreements to protect nuclear weapons. Not so much out of worry about what those countries are going to do, but so that those programs aren't -- there isn't a proliferation going on in secrecy.

REHMAnd Charles Kupchan, let's go back to Afghanistan. American forces supposedly are going to begin withdrawing in July. Is this date going to stay on track, do you believe?

MR. CHARLES KUPCHANI think it will stay on track because I think Obama is committed to it politically, not necessarily because the conditions in Afghanistan will warrant it. I think that the review that came out at the end of 2010 showed that there has been some progress, but I would point to three areas where I think the glass is less than half full. One is that even though we've seen some progress in counter insurgency in Kandahar and Helmand, that is a drop in the bucket.

MR. CHARLES KUPCHANIt's a huge country. We don't have the forces to spread more widely. Second, the Afghan government itself isn't cohering. It's riddled with corruption. We don't see Karzai getting control. The silver lining is that that means that devolution to a more fragmented Afghanistan will probably take place, and that I think is the best that we can do, and then the third problem is Pakistan.

MR. CHARLES KUPCHANPakistan isn't clamping down on the Taliban. I don't think they will, for one reason, and that is their believing, probably correctly, that Obama is going to create a political compact in Afghanistan that ultimately includes the Taliban. That means that Pakistan has continued working with the Taliban because that's their ticket to influence in Kabul.

REHMAnd turning now to Europe, Eswar Prasad, what's happening there, especially economically?

MR. ESWAR PRASADEurope is beginning to come out of its slump. It had a very difficult 2009, and not so difficult 2010. But in many parts, the Eurozone did look like it was at risk at coming apart. But some of the economies, especially Germany, have started coming back to life, or (word?) back to life. But there are many trouble spots that remain.

MR. ESWAR PRASADMany of the periphery countries, Greece, Italy, Spain, Portugal, all remain under threat, and there is a pretty serious risk that if some of these economies follow Ireland down the tubes there could be serious risks that spread to the rest of Europe. Now, my sense is that the Eurozone is pretty much going to hold together. In fact we hast Estonia joining the Eurozone. It's the 17th country joining the Eurozone, and perhaps not at a very auspicious time.

MR. ESWAR PRASADBut I think the benefits from the Eurozone are still things that the periphery countries, including the emerging European countries, think are worth joining the Euro for, but they're going to have to go through a very difficult slog to get the sort of discipline they need to make the Eurozone work, and that will be the big challenge in 2011.

REHMWe kept hearing thoughts about Greece going back to the drachma and getting out of the Eurozone, getting out of the Euro completely. How likely is that to happen, David?

SANGERI think that it's less likely that Greece would get out, than that the stronger members of the EU would think about throwing out some of the weaker members. And I just came back from Europe last week, and I guess I was struck -- I was in Germany for much of the week, and I was struck by the fact that the debate in Germany today is why are we saving countries, mostly in southern Europe, that are not adhering to the kind of rules that were set when they signed up for membership in the European community.

SANGERAnd I think that as the year goes on, if this spreads particularly to Portugal, to Spain, Ireland obviously has had continued difficulties. I think that debate's only likely to heat up, and if anything, at a minimum I think what's going to happen now is that you're going to see this preoccupy the Eurozone.

SANGERAnd if President Obama was hoping to focus European attention on Afghanistan or nuclear disarmament, or any of the other major issues on his agenda, I think he's going to have a very difficult time capturing their attention.

PRASADI think David is absolutely right that the economic issues are going to dominate European politics and the entire economic and political scene for the next year or so. The big challenge for Europe is really to discipline those members that benefited a lot from being in the Eurozone, but weren't willing to accept the discipline that came with it. And in that sense, countries like Germany I think have a serious concern that it may not be easy to get the lagers to boost their productivity.

PRASADAnd this is going to be quite fairly tough reform in these countries, and we've already seen how attempts to create reforms in countries like Greece led to riots in the streets. So it's a very difficult political challenge as well for these countries to get their economics back on track.

REHMNot only Greece, but even Great Britain, Nancy.

YOUSSEFThat's right. We saw the pressure in Britain as well. I wanted, if I could, to go back to Afghanistan, because in a way, these economic issues come back to the -- it's funny how linked all this is. The wars in Iraq and Afghanistan are costing the United States $159 billion so far this year, and I think as we talk about economic issues in Europe, I think it will come up again in the United States.

YOUSSEFThere was hope that with the Republicans taking over in Congress, there would be less pressure on the Obama administration to tackle those issues. But I think you're starting to hear an American public that's growing wary of its own economic issues, and particularly on defense spending.

KUPCHANI would agree with what Nancy just said, and I would tie back to Europe in the following way. That Obama is going to be under pressure, I think, to reduce the American footprint abroad. Both because it's expensive, but also because Americans are growing tired -- they're growing weary. Who will Americans look to to pick up the slack? Well, our traditional partner, Europe.

KUPCHANAnd I agree with everything that David with Eswar have said, I would just add one point, and that is that this is as much about the political future of Europe as it is the economic future. Because we are seeing a renationalization of political life across Europe. Politics is drifting downward from Brussels back to the nation state, sapping the momentum toward union that has been generally there since the end of World War II.

KUPCHANGermany, for example, is now talking about German interests, not European interests. That's why many German voters are saying why should we bail out Greece? Why should we bail out Ireland? And if Germany becomes quote unquote "a normal country" rather than a country that defines its interests in European terms, then it calls into question whether Europe will cohere as the actor that the United States would like it to be on the global stage.

SANGERYou know, I agree with what Charles said that there a bit of a more isolation as to at least a retreating element to the new Congress, and you see that with some of the new members, many of whom don't sign on to the traditional Republican strong defense, remain engaged around the world agenda.

KUPCHANEspecially the Tea Party

SANGERParticularly the Tea Party. However, I think what's going to cut against that, is that while there certainly will be pressures to reduce in Europe where we will still have a large number of forces, certainly in the Middle East, where that debate will be centered on Afghanistan. I think there's going to be a counter-pressure to maintain or even increase our presence in Asia.

SANGERBecause, I think, as the competition with China heats up, as the concern grows among our allies in Asia, that China is beginning to define a region of its own influence. What the Chinese have said to me just last month, you know, sort of their version of the Monroe Doctrine, which established a U.S. interest around the Caribbean, I think that there'll be pressure on the U.S. to stay there.

REHMDavid Sanger of the New York Times. He's the author of the book titled, "The Inheritance: The World Obama Confronts, And The Challenges To American Power." Short break. We'll be right back.

REHMWe have four guests here in the studio today to talk about the challenges facing the United States and the Obama Administration. Charles Kupchan is at Georgetown University and the Council on Foreign Relations, author of the upcoming book, "The Global Turn: The West, the Rise of the Rest and the Next World." Eswar Prasad is at the Brookings Institution and Cornell University. He's author of "Emerging Markets: Resilience and Growth Amid Global Turmoil."

REHMDavid Sanger is with the New York Times. Nancy Youssef is with McClatchy News. Do join us, 800-433-8850. Send us your e-mail to drshow@wamu.org. You can join us on Facebook or send us a Tweet. Nancy Youssef, you're concerned about terrorism globally.

YOUSSEFYeah.

REHMAnd how with this turn toward nationalism each country might think of itself only rather than the global interest.

YOUSSEFYeah, I couldn't help thinking that as Charles was describing so beautifully what's happening in Europe, as a national security correspondent, will that lead to people treating terrorism, which is something that transcends borders, as an independent problem? That is, if I'm Spain, should I care about Germany's terrorism problem? Would that lead me to invest in a place like Afghanistan?

YOUSSEFAnd if it happens, in that case, it's, from what I can tell, something that would benefit terrorist organizations that are looking for places where they can exploit splits. So I'm curious if that push towards isolationism will reach into national security and if so, whether terrorist groups will try to exploit that.

REHMDavid Sanger.

SANGERYou know, I think another way to ask Nancy's very good question is what happened to the old George Bush argument from nearly ten years ago in the days after 9/11, That we had to go into areas like Afghanistan to keep the threat there from coming to the homeland. Which in the end was the core argument and is essentially President Obama's core argument as well. And it's now come under some strain, because we've been in Afghanistan for nine years, it's come under strain because we have growing commitments in places like Yemen and Somalia. Very small numbers, but certainly significant threats.

SANGERAnd the major question that arises out of this is, does the United States need to be in any place where terrorist groups could organize, train and launch attacks on either the U.S. or its allies? And if not, how do you begin to differentiate among those?

REHMCharles Kupchan, you talked about Pakistan. What is the U.S. government -- what does the U.S. government need to do to secure Pakistan as an ally in this ongoing war in Afghanistan?

KUPCHANPakistan is a very, very tough nut to crack and it just got tougher over the weekend because one of the main parties in the governing coalition has stepped out. We don't know whether the government will fall, whether the coalition will come back together, but it means that the hopes of some in Washington, the hopes of those in India that a robust civilian government will be able to wrest control from the Pakistan military and the Pakistan security forces. That's unlikely to come into being. And unfortunately to the degree there is a functioning national institution in Pakistan, it's the army and the ISI, the intelligence unit.

KUPCHANAnd so I think that the U.S. for the foreseeable future doesn't have much option but to work with any institution in Pakistan that's functioning. But as we were discussing earlier, it puts the U.S. in a very hard place because the Pakistanis are generally going to keep intact their alliance with the Taliban because that's their way of getting influence in Afghanistan. That means they're not gonna crack down on the militants that we would like them to. And I think the Obama Administration's going to have a very tough time trying to walk the fine line.

REHMAnd what about that fine line with trying to negotiate between Afghanistan and the Taliban, Eswar?

PRASADSo it's going to be very difficult, I think, when one thinks about U.S. leverage in these issues. And that is, I think, ultimately the unifying theme among the topics we have been discussing today, whether the U.S. really has significant leverage. It is true that we are pouring a fair amount of money into countries like Afghanistan and Iraq. As David pointed out, we are trying to use U.S. money to prevent China from expanding its sphere of influence in Asia. But ultimately I think the U.S. is beginning to lose some of its influence because it's not seen as the largest economy at some level. It is the largest economy but not as the most dynamic economy.

PRASADAnd in a sense when you start looking at a country like Afghanistan, the amount of leverage that the U.S. has with its money is really limited because you're coming up against domestic political constraints. And of course we've been hearing a lot of stories about corruption. We've been hearing about the difficulties of governance there. And getting all of this sorted out is really a major task that the U.S. cannot do just by pouring more money in there. And going back to Nancy's concerns, I think this is what could lead the American public to start questioning much more seriously what our role in Afghanistan and Iraq is.

PRASADBecause even if we do pour money in there, even if we do get some more political stability, it's not obvious this is going to lead to the sort of states that we want that are going to support U.S. interests. In fact, this is, again, another team in much of Asia, we are pouring money into countries like Pakistan, Afghanistan and Iraq and it's not obvious that this is buying us many brownie points.

REHMAnd isn't it interesting, David, that in this last election Afghanistan virtually did not come up?

SANGERYeah, it's astounding. And I think we discussed this a few weeks ago on one of the News Roundups and I've been pondering since why it is this was the case. Obviously with unemployment at these levels, with economic stress here, when you're electing a congress that really has very little to do with foreign policy, other than through the budget, that, I think, explains it.

SANGERBut I would not confuse that with the thought of what might happen in the 2012 cycle when I suspect Afghanistan will be a significant issue, probably a bigger issue within the Republican Party between those who have long complained that the president's commitment was lukewarm. That would be sort of John McCain's Republican party, and those who are coming into the congress now and are asking all these questions about why we are engaged.

YOUSSEFI think the fundamental challenge of Afghanistan is ultimately how do you prove a negative? How do you prove that U.S. involvement in that country is the reason there hasn't been an attack? And I think that's, in addition to the points David raised, the reason that it's not coming up as an election issue when you've got domestic politics so much at the forefront.

YOUSSEFAnd meanwhile, a strategy that sort of depends for you to believe in is to have faith in something that fundamentally you cannot prove. I also wanted to address this idea of corruption. We talk about it a lot and the problems of Hamid Karzai. We certainly saw them played out throughout 2010 and there's no reason to believe that anything less will happen in 2011.

YOUSSEFBut I just want to offer this caveat. I think it becomes dangerous when we personify this war in terms of the people because the system the United States has set up presents problems. I compare it to if the United States were set up such that Obama could name all 50 governors and every county commissioner there would be corruption. That's not to absolve Hamid Karzai and his government of responsibility but it gets to Eswar's point. It's not just about throwing money at the problem but creating a sound structure. And right now in Afghanistan that doesn't exist, and that is something that'll continue to haunt the administration's efforts in 2011.

REHMCharles, let's turn to Iraq and the fact that the U.S. mission there is going to end this year. What could that mean for not only the Obama Administration, but the region as a whole?

KUPCHANI don't think we're out of the woods yet in Iraq. The government seems to be coming together but there is still regular violence. But I do think that on balance the situation there has gone about as well as Americans could've hoped and that the Obama Administration is sticking to its schedule for a gradual drawdown of the U.S. presence there. And I think that's all for the good for Americans, it's good for Iraq. But it ties into the discussion that we were just having with David and Nancy about domestic politics here. And I think that one of the reasons that Afghanistan didn't come up as directly in the campaign as one would expect is that I think there's a change in the American mind that's taking place.

KUPCHANThere's a sense that the war in Afghanistan, for example, 60 percent or more of the American public says it's not worth fighting. And now there is a -- you know, people are looking at the numbers. But how many bad guys are there left in Afghanistan? Well, American Intelligence is saying about 100. You mean we've got 150,000 troops going after 100 bad guys? We're spending 100 billion a year on a country...

SANGERCourse it depends on how you define your bad guys.

KUPCHANWell...

SANGERIt's 100 to 150 Al-Qaida...

KUPCHANRight. The guys who we're focused on, the far enemy that is...

SANGERRight.

KUPCHAN...were coming after us here if they weren't able to go after us in Afghanistan. We spent 100 billion in Afghanistan. The GDPF Afghanistan is 14 billion. So I think Americans are starting to say, something's wrong about this story. And that's why I think the trend lines in Iraq, the trend lines in Afghanistan are going to be the same. And that is it's time for the United States to stop thinking it can be the imperial fixer of last resort.

REHMAnd Eswar, I want to go back to your concerns about China, that you want to finish the year at a record high against the dollar. What does that mean for China?

PRASADIt actually doesn't mean a great deal. It's true it was a record high, but since the Chinese announced in June of 2010 that they would love the yen to appreciate in value against the dollar, it's risen a whole lot of -- three-and-a-half percentage points. Very, very little relative, many people think, it should appreciate relative to the dollar. Now the big issue is what happens to the bilateral relations between U.S. and China in terms of the trade deficit? And a lot of it is going to be defined essentially by what happen in the U.S.

PRASADIf the U.S. economy doesn't pick up, if unemployment stays so high, then there will be the temptation to look for culprits. And, of course, the culprits are plenty here. But if the trade deficit with China continues to expand, and almost certainly it will as the U.S. economy picks up, I think there'll be more and more attention focused on the yen.

PRASADNow the problem is that the Chinese are equally focused on the employment issue because they've had tremendous growth over the last decade, but very little employment growth. And they need the exports for the employment growth, so they're not willing to let their currency appreciate because they would lose competitiveness. So I think ultimately this issue is going to be framed by what happens to jobs both in China and the U.S.

REHMAnd what happens -- Japan's prime minister is now pushing for this transpacific free trade agreement. What would this actually do?

PRASADWell, right now, there is a great deal of resistance in Japan to this pan (sic) pacific free trade agreement, largely because the powerful lobbyists, especially the rice farmers in Japan, are very much against the concessions that'll have to be made. Especially in terms of agriculture in order to push this free trade area. But overall, it certainly makes sense for trade barriers within Asia to be broken down.

PRASADIn fact, there has been a significant breaking down of trade barriers already, but more simply because in a defacto sense China has become so important to the region that everybody is trading with China. So I think this can bring a lot of benefits to the region but I don't think it's going to have that much momentum in the year ahead.

REHMEswar Prasad. He's at the Brookings Institution and Cornell University. You're listening to "The Diane Rehm Show." And, David, you wanted to add to that.

SANGERWell, I was the Times correspondent and bureau chief in Japan in the late '80s and early '90s. And at that time there was discussion of a free trade agreement between Japan and the U.S. And it's interesting because the opposition then was mostly here in the U.S. from the auto makers and so forth. And Eswar's got it just right. Now I think while there certainly would be opposition in the U.S. to any trade agreement but certainly one with Japan, the bigger obstacles are in Japan itself.

SANGERAnd what that tells you is this is really much more about both of us trying to figure out the future with China. And the Chinese do not have the kind of classic trade barriers --there are some but not the classic trade barriers we are accustomed to. It has been much more in the realm of making it difficult to do business, stealing intellectual property, which is something you hear from almost every major American company and corporate executives who's working there, and then of course these currency issues. They are not issues that are necessarily resolved by trade agreements.

REHMAnd Charles Kupchan, to what extent can diplomacy be a value here?

KUPCHANWell, I think diplomacy sets the tone in which these economic relationships rise and fall. So for example, both David and Eswar were just talking about the value of the yen in trade agreements. A lot depends on the nature of the dialogue between the United States and China, between Beijing and Washington. If that is a troubled dialogue, if there is increasing tension over offshore islands that Japan and China are fighting about, or China's claim that it has quote unquote "core interests" in the South China Sea, then it makes it much more difficult for Washington and Beijing to compromise with each other on economic issues. And so the diplomacy really sets the backdrop. Will there be a positive environment in which we can deal with the trade issues?

KUPCHANAnd then, just one other thought to the conversation. I think it speaks volumes that it's Japan that is pushing the free trade agenda. Because I think moving forward we will not see the United States be the country that is in the driver's seat when it comes to trade liberalization, as it has been since World War II.

REHMAnd what about the Wikileaks and their affect on everything we've been talking about, David?

SANGERWell, Diane, as somebody wrote some of the Wikileaks stories in the Times, though as we've discussed in the past we also redacted a fair bit of sensitive material involving sources and so forth, I think that what strikes me is that two months out the effects of the Wikileaks are probably less than what many people predicted. You know, the Middle Eastern powers, Saudi Arabia included, have gone back to talking to the United States because it's in their fundamental interests to go do so. Were they happy that it came out that the king said that the U.S. should cut off the head of the snake, speaking of Iran? I'm sure that the Saudi's could've gone through 2010 without that. But I don't think in the end it has managed to freeze diplomacy in that area or many others in the way that many predicted.

YOUSSEFAbsolutely. What I think is interesting internally is what this will do for the U.S. sharing of information within the U.S. government. Because the way these documents came out -- the state department cables came out was because the military had access to them as part of this effort to get as much information downrange as possible. The thinking was, I don't want to be responsible for withholding information that could save a soldier's life. And so information as much as possible has trickled down. And now a PFC Private First Class is suspected of downloading those documents at times while pretending to listen to Lady Gaga, and distributing these to Wikileaks.

YOUSSEFAnd the danger I think going forward in 2011 is that rather than leading to a smarter sharing of information that it leads to less information sharing altogether. We're already seeing that. The state department's pulled those documents off the defense department's site.

REHMNancy Youssef. She's Pentagon correspondent for McClatchy newspapers. When we come back we'll open the phones, take your calls, read your e-mail. I look forward to hearing from you.

REHMAnd it's time to open the phones. Let's go first to Fort Lauderdale, Fla. Good morning, Barbara, thanks for joining us.

BARBARAGood morning. I'm in my car, so I have a million thoughts. But my main thought is when the guests on your show -- and I've been listening to you for forever and will not quit, but the American public are not getting weary. They are weary. And they're beyond weary. And I'm kind of tired of hearing speakers or people being interviewed acting like we're not beyond the point of return. This is an issue that hasn't gone away and we're beyond weary. So short of attending a Glenn Beck rally or Jon Stewart rally, I'd like it to be known that I am a proponent a Jon Stewart's ideas. Our country is our family, our family. So why is our government not taking care of its own family members and why are we continually making up excuses as to why billions of dollars are being spent outside of our country?

REHMCharles Kupchan.

KUPCHANI think in the post 9/11 environment there was a largess for the defense budget and for wars abroad. That is understandable because the country was faced with an extreme vulnerability. I agree with the caller that we seem to be passing through an inflection point where average Americans are starting to question this. Partly because they're...

REHMNot just starting. She is...

KUPCHANRight.

REHM...saying we have been questioning.

KUPCHANAnd I would agree with that. I don't that we have arrived at a new stable equilibrium. I think that we are engaging in a national debate where Americans are saying it's now time to focus more on our garden and less time on other people's gardens. But I don't think that the solution is to radically swing to the isolationistic stream. We need to find a middle road between reducing our expenditures and our footprint, but at the same time dealing with threats abroad.

REHMAnd at the same time we have a comment from Facebook. Patricia says, "One thing to fix all, pull troops out of the near and middle east solves our financial problems and foreign issues all in one." David Sanger.

SANGERBoy, I wish it did. Let's take the number that Nancy mentioned before about 159 billion for operations in Afghanistan and Iraq together last year. Let's say that we took all of that money out and put it back into programs in the United States. Certainly it would be politically popular thing to do. And certainly there's a lot you could do in the United States for $159 billion. But one of the things you could not do is solve the size of our budget deficits. In fact, it would be a relatively small contribution to our budget deficits. In fact, all the foreign aid that the United States provides is a tiny portion. And so when you hear people get on television and say, just cut out the foreign aid and our commitments abroad and these problems are over. They're not even close to over at that moment.

SANGERAnd then you have to ask the question, okay, so what's this debate like when, God forbid, there is another attack and the morning after we say, well, it came out of that same tribal area between Pakistan and Afghanistan. And then the question begins, what could we have done if anything to prevent it from happening? And then you have to ask the question, would you wanted to have been the one who just cut the budget down to zero to pull all of our intelligence forces, troops and everyone else out of that region?

REHMEswar.

PRASADI think David has it right that the real concern is about the amount of debt being built up in the U.S. It is a large and scary number, the amount about a net debt level of about 65 percent of GDP, that's about two-thirds of our annual GDP. And that number is projected to rise by another 20 percent points in the next five years. And this is excluding all the problems...

REHMUnless -- unless...

PRASADUnless we have political leaders who find the courage to do what it really takes. And it's true that at the margin one could find (unintelligible) broadly would certainly help, but at a cost of losing much of our leverage and influence, especially if you're seen as cutting and running from a project that we have poured a lot of money into already. But the big issues that the Democrats and Republicans are not willing to tackle it, of course issues like Social Security, Medicare and defense, and those are the largest chunks of the budget. And if you're not willing to tackle entitlement spending, we're really not going to make much progress.

PRASADI think what happened recently with the compromise on the budget shows the Democrats and Republicans are willing to come together when it comes to measures that blow the budget. And of course right now it may be somewhat warranted because the economy's still in a slump. But whether we will have leaders who have the courage really to take the measures that over the medium term will start bringing the deficit and debt down to sustainable levels is the real question. And right now neither in the U.S. nor anywhere else do we see this courage really being there among our leaders.

REHMLet's go now to Cincinnati, Ohio. Good morning, Michael.

MICHAELGood morning. I have a comment about Ivory Coast. It's very concerning to me. I think that third world countries' illegitimate leaders are sensing a weakness in the U.S. and United Nations presence around the world, and are going to continually challenge (unintelligible) at the United Nations' power. They don't want another war on their hands. And we're gonna see a continued flare up of these leaders who are by (unintelligible) taking advantage of the current situations.

YOUSSEFIt is disconcerting indeed. This appears to be the first major international crisis of 2011. Elections were held in late November and the incumbent refuses to hand over power.

REHMLaurent Gbagbo.

YOUSSEFWell done. (laugh)

REHMYeah.

YOUSSEFAnd his successor is being protected by UN forces in the Gulf Hotel there. The irony was that the elections, they were designed to mollify tensions that were created from the civil war in the Ivory Coast from 2002 to 2007 I believe. And so it's interesting. The UN isn't going to be the one to solve this. The US isn't going to solve this. It's other African nations that are gonna have to come through. We saw today Kenya's prime -- Kenyan official go to the Ivory Coast in an effort to try to solve this because it's clear that despite calls from the United States and the United Nations that the elections were proper and that the winner should be allowed to take over. It's not something that the United States or the western world can solve. It's gonna have to come from neighboring African nations. And we're starting to see that effort begin to avoid a civil war, which would of course destabilize the region.

REHMAll right. To Louisville, Ky., good morning, Jay.

JAYGood morning, Diane. Happy New Year.

REHMHappy New Year. Thank you.

JAYI wanted to talk about something that always seems to be the third or fourth rail of American politics and nobody ever seems to wanna discuss it. It just gets dismissed immediately. I have to call it climate flux instead climate change. You know, it's supposed to be a national security issue and we always listen to our generals and our chief of staff and all those people up there in the Pentagon. And they say it's one of the major issues of the 21st century. And yet we continue to ignore what the other countries are doing, the major countries like China, Japan, Europe. You know, all over the world they're putting a lot of money into things that are going to address this issue in the next 100, 200 years.

JAYAnd yet we continue to bury our heads in the Appalachian co fields and down in the Gulf. You know, we continue to pollute our planet, tear everything down. And the American people just don't seem to care until gas gets to be $4 a gallon or $5 a gallon. And then they all go crazy. In the meantime their kids get sick, can't swim in certain areas.

REHMYeah.

JAYThey can't drink the water.

REHMRight.

JAYI'm just curious if your panel has any comment on any of those issues.

REHMJay, thanks for calling in. As we watch these extraordinary weather and climate changes, Australia flooding, California flooding...

YOUSSEFPakistan.

REHM...Pakistan, the Midwest inundated with snow. Eswar.

PRASADWell, I'm certainly no climate expert and I wouldn't know if these large fluctuations in climate issues that we see are really due to climate change. But what I can say from an economic perspective is clearly that our policies are not sensible ones in some respect. The caller talked about $4 gas. It would make a lot more sense if we increase the tax on gas, kept the money in the U.S. for U.S. programs rather than keeping the taxes low, sending a lot of this money abroad and consuming more and polluting the environment more. So I think there is a lot that can be done with economic policy.

PRASADAnd here I worry that what happened in the midterm elections with the Republicans gaining much more swing in Congress is going to roll back some of the environmental actions that the Obama administration had put in place in the first half of its term. And the rollback of many of these issues, especially the sort of money going towards innovating in clean energy is now being supplanted by China, which is supporting a lot of money into taking the lead into various types of clean energy technologies. And innovation is one area where the U.S. economy really has an advantage and we're at risk of losing that in what I think is a very important area.

REHMCharles.

KUPCHANYeah, I wanted to relate Jay's question to the broader discussion we've been having 'cause I think it goes to a fundamental question. And it relates to your first hour. And that is, is the United States going to have the political wear with all to tackle climate change, Afghanistan, the rise of China, currency fluctuations? Or is 2011, 2012 going to be a period of such political bile that we are unable to forge a working consensus on the problems that face us? In many ways, I think that is the core question for this coming year 'cause if the politics are right, then we could probably get Iran, Afghanistan, North Korea right. If the politics are wrong and we are stuck with stalemate, then even small problems are gonna be very difficult.

REHMAnd, David, we haven't even talked about Iran and what the U.S. is attempting to do there or not.

SANGERWell, there are sort of three major elements to the U.S. policy. One of them is very visible. It's the sanctions policy that I mentioned at the very opening of the show, which has been I think surprisingly effective in terms of making a crimp on the Iranian leadership, and to some degree the Iranian economy. This is probably a far more effective set of sanctions than any that we've seen in the past ten years. That said, there's no indication that it's forcing the Iranian leadership to give up their nuclear ambitions, ambitions that they deny having. And if anything, it might speed up those if they believe they're being isolated by the west.

SANGERSo there's a second part of the president's strategy. And that is a very active covert program. You've seen all kinds of hints, everything from the computer virus called Stuxnet to attacks and assassinations of Iranian scientists. We don't know whether these are part of the U.S. programs, part of the Israeli program, part of internal opposition, but certainly the Iranians have run into a lot of difficulties they did not expect. And then there's the third element which is supporting the opposition in Iran. And so far the results there had been very limited. This may be the most fascinating test of President Obama's engagement policy.

REHMAnd there's one other thing. There was news this morning or over the weekend about relationships between Ahmadinejad and the Ayatollah. Little friction going on there. What's happening, Nancy?

YOUSSEFWell, there's always been that kind of friction there. I mean, we prop up Ahmadinejad as this key figure in Iran and he isn't really. I mean, he...

REHMBut he certainly wants to be.

YOUSSEFHe wants to be, but those are two different things. And that's important that there is tensions between the Ayatollah and Ahmadinejad. And remember, his power was already fragile as it was. The election, there was a lot of opposition, a lot of questioning as to the election results. So it further destabilizes an already fragile regime.

REHMNancy Youssef, she's Pentagon correspondent for McClatchy Newspapers. You're listening to "The Diane Rehm Show." And let's go now to Grape Vine, Texas. Good morning, Iram, you're on the air.

IRAMHi. I know time is precious, so I'll try to be quick. Your guests are not providing much of a context as an Iranian born who have spent most of my life in the states, but, you know, I was born overseas. I have ties. For instance, your guest from Washington Post, I've heard him on Charlie Rose, on...

REHMWe have no one from the Washington Post here in this hour.

IRAMWell, Washington Times.

REHMNo, sorry, New York Times.

IRAMOkay. Well, one of the big ones. I don't read papers much.

REHMOkay. All right.

IRAMMy apologies. I'm trying to be quick here. For instance, he should have been telling us the context of what Iranians are complaining that, for instance, Obama reached out to them (unintelligible) you know, theft in closing our glove with these WikiLeak or that Saudi Arabia funded the Iraq war that killed like three percent of the Iranian in the '80s for which they have received zero dollar restitution. These context needs to come out. Just keep saying head of the snake, it's nonsense. And your female guest, I forgot her name, I apologize, Ahmadinejad might not be a, you know, power figure, nonetheless he's the representative of the government. It's like for us to say that we should've been talking to Chaney as opposed to George W. during this administration.

REHMAll right. Thanks for your call. Nancy.

YOUSSEFWell, I mean, you can still be the head of government, be a weak head of government, and I would -- and I would contend that losing a fractured relationship with the Ayatollah represents that, so...

REHMYou know, it's difficult in a given program to provide the full context of any story. What we are trying to do here, Iram, is to look forward and to think about the implications of what's already taken place and how that may affect the U.S. government going forward. How effective a leader do you believe Barack Obama to be in international affairs, David Sanger?

SANGERYou know, I think his past month and a half raised his profile an awful lot in that regard. And think about what happened. He went through this defeat in the domestic election. Immediately went on to a fairly successful trip to India and another fairly successful trip to NATO in which he got the NATO countries all on the same page about roughly how long we're going to be in Afghanistan. He came back and got the START Treaty. He got don't ask, don't tell. You know, all through nobody would've guessed that on election eve. And so I think he starts the year with a little more leverage than I would have expected that he would've say at the beginning of November.

REHMNancy.

YOUSSEFI do think 2011 will be a real measure of his ability as a war president, in the sense that 2011 will decide whether -- what Afghanistan looks like. That's when the clock will really be ticking and the draw down will start in Iraq. How is he leaving Iraq? Is the United States safer because of it?

REHMNancy Youssef of McClatchy Newspapers, David Sanger of The New York Times, Eswar Prasad of Brookings and Cornell University, Charles Kupchan of the Council on Foreign Relations and Georgetown University. Thank you all so much. Happy New Year.

YOUSSEFHappy New Year.

KUPCHANHappy New Year.

SANGERThank you, Diane.

REHMThank you. And thanks for listening all. I'm Diane Rehm.