00:00: Unknown Speaker: and global economy. All eyes remain on efforts to avoid the fiscal cliff deadline on January 1st, when automatic spending cuts and tax increases are set to take hold. There is growing optimism on Capitol Hill that a deal could come soon. Yesterday President Obama said he would be willing to lower his revenue goal and start tax rate increases at $400,000 instead of $250,000 per household. Today House Speaker John Boehner said he had developed a backup plan to avert year-end tax increases if his negotiations with President Obama stalled. This all occurs amidst the backdrop over a domestic economy that is (INAUDIBLE) on the heels of better than anticipated housing and employment data. The global economy continues to remain fragile with the European debt crisis and China's growth forecast both in focus. Joining me now from Cambridge Massachusetts Ken Rogoff; he is a professor of public policy and economics at Harvard. He is the co-author of the bestselling book, "This Time is Different: Eight Centuries of Financial Folly". Many consider it to be the authoritative text on the impact of financial crises around the world. I am pleased to have Ken Rogoff back on this program. Welcome.
01:23: Ken Rogoff: Thank you, Charlie.
01:25: Charlie Rose: Let me start big, if I may. So I mean, how do you see as we enter a new year the global economy?
01:32: Ken Rogoff: Well, to state the obvious, everybody is growing more slowly than they would like to, if at all. Europe is basically flat, the U.S. is improving but it's not exactly galloping. And you know, we're entering probably a weak quarter where people are hoping it will be stronger over the course of the year. China is slowing some. And in general all of the emerging markets are slower than they were most of them. India has slowed dramatically, Brazil slowed. So yes, indeed it's a fragile situation. When the U.S. is one of the bright spots, you know, eking out maybe two percent growth, one percent growth this quarter, you know things aren't very good.
02:12: Charlie Rose: And do you expect to see, speaking of the United States, growth rate getting back up close to four percent?
02:16: Ken Rogoff: Well, you know, it's in the realm of possibility, but I think the trend growth rate, you know, is going to be more on the order of two and a half and I mean some days some quarters it will be worse than that, some quarters it will be better than that. There are many private forecasters calling for it to be three percent by year's end, I think we are doing pretty well if that happens.
02:40: Charlie Rose: If we get to three that's good?
02:42: Ken Rogoff: Yes. I think I would be pretty happy with getting to three; it's not going to solve our unemployment problems, any time soon. We really need four percent, five percent growth for a sustained period to really steam out of this, but it does help stabilize the situation and gives modest improvement.
03:00: Charlie Rose: Were you pleased to see the Fed focus on unemployment and jobs?
03:07: Ken Rogoff: Yes, absolutely. I mean, I think the Fed is in this difficult situation where it clearly needs to express its message more forcefully, because it's not just about, you know, how much quantitative easing it does, but about the message behind it. So I certainly have welcomed their change towards focusing on final output, on employment and inflation. I would have liked to see a little bit looser inflation targets because I think realistically they need to get inflation expectations up to help drive investment, but this is definitely a welcome change. I think we're still in an evolution. I think there is more to come.
03:50: Charlie Rose: Does this economy need a stimulus of some kind?
03:52: Ken Rogoff: Well you know --
03:57: Charlie Rose: Whether from the Fed or from the Congress?
04:01: Ken Rogoff: -- I don't think we can live on stimulus forever. Certainly withdrawing it at too rapid a rate in such a fragile economy makes no sense and the plan of sort of gradually tightening policy over a long period is the right one. But then the real problem is just that our system is so paralyzed. It isn't able to be creative. The private sector is creative but the government is just paralyzed. The tax system needs to be reformed. We need to have areas where we spend money like infrastructure and improving education. There are other areas where I think we need to rein in a bit on entitlements. And everyone wants to keep what they have and were in this very static situation in a changing world and it's not a healthy one.
04:46: Charlie Rose: Does it define negotiating tactic for the President to say I agree with on you on entitlements and this is what I will do and therefore you should agree with me on revenue and this is what you should do?
04:56: Ken Rogoff: You know I see the President's strategy -- the long-term strategy is really let's raise taxes on the wealthy, then let's do it again, then let's do it again.
05:03: Charlie Rose: Yes.
05:05: Ken Rogoff: And finally we can go to people and say you know what? This isn't enough we need to cut entitlements. We need to raise taxes on the middle class. We have to have the private sector do some things that the government sector is doing now. We have to have changes. But as long as there are this politically low-hanging fruit, it's really hard to move ahead more broadly. And the Republicans on the other hand, you know, are trying to say, well, we really have got to look at the longer term here. You've got to be kidding that you're not going to cut entitlements. The math just doesn't add up.
05:38: Charlie Rose: Is the debt the problem that there is some disagreement? Your colleague Paul Krugman writing in the column, every other column in "The New York Times" says it's not about the debt, it's not about the debt. Is it about the debt?
05:52: Ken Rogoff: Well, of course it's about the debt. I mean we have record public debt, private debt, internationally and it's not the only thing. I mean clearly we want to leave our children a good infrastructure. We want to leave them improving technology, a good education system, all of the things the earlier generations left us. But on the other hand, if you have a very large debt it creates all kinds of inner generational tensions, distributional tensions. And we are at a level where historically it's been problematic and I think it makes sense to gradually rein it in. I do not advocate anything radical. My co-author, Carmen Reinhardt --
06:32: Charlie Rose: Right.
06:34: Ken Rogoff: -- similarly does not advocate anything radical, but I don't think --
06:38: Charlie Rose: You mean radical meaning -- radical -- by radical you mean some austerity --
06:43: Ken Rogoff: Draconian.
06:44: Charlie Rose: -- yes, draconian austerity.
06:46: Ken Rogoff: Yes.
06:47: Charlie Rose: Yes.
06:49: Ken Rogoff: Draconian austerity. In fact I would welcome more infrastructure spending if it were well spent because you know certainly the United States needs that although I would like to see more private funding of infrastructure and have the private sector gradually take over some of the things on which the government has held a monopoly.
07:09: Charlie Rose: What's the appropriate percentage of GDP and debt?
07:14: Ken Rogoff: Well, appropriate, I mean we are at a level --
07:18: Charlie Rose: What -- what's --
07:21: Ken Rogoff: How about zero?
07:23: Charlie Rose: -- acceptable. What can we live with and what is manageable and sustainable and not an impediment to growth? How is that?
07:35: Ken Rogoff: No one knows for sure, but historically, when you start getting debt levels up at 90 percent and 100 percent of income you are in a very rarefied air. And those debt levels, historically, have been associated with lower growth; not falling off a cliff, not Greece, but lower growth on a sustained basis. You're talking about you know when you get debt up there, it can hold back your growth for decades. There are other things you can do to make up for it, you can have innovation you can have other improvements but it's definitely problematic. You know, you start getting up at levels twice where we are, then I think it gets really dangerous, nobody knows where in between you really fall off a cliff. I think it's hyperbole to say that the United States is going to become Greece --
08:23: Charlie Rose: Yes.
08:25: Ken Rogoff: -- but it's not hyperbole to compare us to Japan and wonder if we get stuck in this slow growth quagmire. Europe might be even more in danger of that.
08:31: Charlie Rose: OK. Let's stop right there. Do you think that we are at risk of getting stuck in the slow growth quagmire that Japan got stuck in - - the United States economy?
08:43: Ken Rogoff: Well, I would say we are in a mild version of it now. And you know we need to do improvements and reforms -- I don't think spending money is the solution. There are smart ways to spend it for sure, but I don't buy this idea that bigger Keynesian stimulus is going to solve our problems -- these fundamental problems with demographics, with slowing innovation, and other things we are experiencing. I think we need more fundamental reform and my colleagues like Paul Krugman and say, well you know, I hear that all the time but I really want to see - - I want to see stimulus now. And I think we have been doing this for a long time. We are doing it at seven percent of GDP at the moment and I think it's sensible to try to slowly rein it in.
09:27: Charlie Rose: So what's -- what should be the percentage of spending to GDP?
09:33: Ken Rogoff: OK. Well, clearly it depends -- are you paying for education?
09:38: Charlie Rose: Right.
09:41: Ken Rogoff: Are you paying for healthcare? You can't compare the United States and Europe because we privately buy a lot of things that they do publicly. You know, over time -- this may sound very theoretical but it's very important -- over time, the things the government provides, very service intensive, they're always going to keep getting more expensive. And I think we need to think about bringing the private sector in, into our infrastructure, maybe more into education, other areas where it brings in money, brings in innovation. I don't think we can live in a world where the government does everything that it does today. We need regulation; you can't just turn over things to the private sector. But you know, if we don't do that, then the costs are just going to rise inexorably. You can be a conservative and say I don't want a large government but it's going to grow anyway. You need to try to decide what the government has to provide versus what it tries to regulate. And you know we're actually on the pretty healthy side of that, compared to a place like France where government spending is more than half of GDP. But it's going to keep creeping up and I think we need to be creative and alert to that.
10:51: Charlie Rose: I want to talk about what's going on in Washington now between the President and the Speaker, but if we -- if they fail completely and we go over this fiscal cliff what are the repercussions?
11:04: Ken Rogoff: You know, I mean there is really a fair chance that they don't come to an agreement for whatever reason the House Republicans won't support it and we go into 2013. I don't think that, per se, would be the end of the world because I think there would be a hue and cry. It would get reined in after a few weeks and they'd settle on something. I would view this, Charlie, as a skirmish in a bigger war where you're growing entitlements, government services are getting more expensive. People are going to pay more and get less and I think it's a very, very difficult tension of how to deal with that and this is just a first stage of that or one of many stages. So I don't think they are going to settle everything. I do hope they come to an agreement. I certainly hope we don't see another debt ceiling fiasco --
11:58: Charlie Rose: Right.
11:59: Ken Rogoff: -- having the U.S. default on its debt, even technically would be pretty ugly.
12:05: Charlie Rose: What would be a reasonable agreement in your eyes?
12:09: Ken Rogoff: Well, I mean almost any agreement would be better than nothing at the moment.
12:14: Charlie Rose: Right.
12:16: Ken Rogoff: I am somewhat facetious.
12:18: Charlie Rose: OK but let's assume -- let's assume --
12:20: Ken Rogoff: But -- I would like to see some bigger problem tackled. First of all if everyone admits that you can't have an absolute. The Republicans say, OK, maybe taxes do have to go up some time; the President says, maybe entitlements do have to get cut. I think that's very important. I clearly -- there are areas of our tax system which are egregious in terms of their inequality implications, things like carried interest.
12:44: Charlie Rose: Right.
12:46: Ken Rogoff: But of course, you know, I would like to see a bigger plan. I would like to see reform that seems to be just a dream at the moment.
12:54: Charlie Rose: What would be reasonable for the President to agree to? If, in fact, you know, the rates are back to Clinton levels and it applies to people who make in a household more than $400,000?
13:06: Ken Rogoff: Well, I think he pretty clearly has to get something significant here. He campaigned on it, he is held fast; if he gives in on this completely what happens to the next disagreement, you know, you just can't fold your cards.
13:17: Charlie Rose: But that's on the rate -- that's on the rate side. What should he get -- that's on the rate side what should he get on the entitlement spending cuts?
13:24: Ken Rogoff: Well, I think there are obvious things like you know raising the age of Social Security.
13:30: Charlie Rose: That's good.
13:32: Ken Rogoff: Having people with very high incomes, you know, not receive -- get the same benefits from Medicare and Social Security. There are plenty of adjustments that could be made for the relatively small amount that they're talking about in the larger scheme of things here, you know, looking at the 10 and 20 year horizon they are talking about.
13:53: Charlie Rose: When you look at this financial crisis that we saw in 2008 and you look at historical data that you so brilliantly covered, when do we come it of this and how does this fit in terms of the data that you saw from previous crises?
14:10: Ken Rogoff: Well, it's been very on track to the average of post-war crises down to the fact that housing is picking up again. You know, typically after five or six years, housing prices stabilize and start to rise, but it takes a long time for employment to come back fully. This is something where, you know, it could -- it could certainly take another five or six years to feel normal and going at the pace we are going at it could take longer than that. But you know, I wouldn't necessarily say another crisis around the corner unless that we're in Europe or Japan.
14:46: Charlie Rose: Did you see this crisis coming in 2007 and 2008?
14:49: Ken Rogoff: You mean did I short housing?
14:51: Charlie Rose: Whatever you might have done? Yes, yes, yes, yes. Get all of your sub primes out of your portfolio?
14:58: Ken Rogoff: I think it's fair to say that Carmen Reinhardt and I realized there would be a lot more crises over time when we started our project in 2002 --
15:08: Charlie Rose: Yes.
15:11: Ken Rogoff: In 2003. But as the crises began to unfold in 2007, we wrote a paper showing that looking at indicators like what was happening to housing prices, what was happening to the trade balance, and a number of other macro indicators, the U.S. was looking very, very vulnerable. But it's very hard to just say, you know, I know it's going to happen this minute, the nature of these things. You're watching it unfold before you, little decisions which are seemingly innocuous make a big difference. But I think the fact that something had to give with this bubble I think I had started writing about that in the early 2000s.
15:49: Charlie Rose: So my question is, how will we know when the next crisis is coming?
15:56: Ken Rogoff: Well, you know, certainly one indicator is looking at credit bubbles. There is a lot of evidence for that.
16:02: Charlie Rose: Yes.
16:04: Ken Rogoff: And I think central banks need to go back to looking a lot harder at what's happened to credit throughout the cycle. It's a -- it's an indicator that sort of got cast by the wayside with this focus on the money supply and credit is very important and you have to keep an eye on that and you know, that would certainly have been the number one thing, housing bubbles are another leading indicator and we are in no danger of that at the moment.
16:27: Charlie Rose: Right.
16:29: Ken Rogoff: But there are some indicators. And, you know, nothing is perfect like you went back to Paul Krugman saying well I don't think we have too much debt and maybe he is right, right now and but it's certainly the case that, you know, if you keep on the path we are on, eventually we will have too much debt. And it's hard to know exactly the timing.
16:47: Charlie Rose: Let me just go back to the plan in terms of the debate that's going on at the White House between the Speaker and the President. The latest plan from the President would raise $1.2 trillion in taxes in the next decade. And it would cut $1.22 trillion in spending. Doesn't the ratio have to be about like one for every $1 increase in revenue there's got to be a $3 cut in spending? Isn't that a more appropriate relationship?
17:15: Ken Rogoff: It certainly -- it certainly is the case that tax hikes hurt growth proportionately more in most cases and you know, there are exceptions, but I think I would be concerned about having it overly weighted toward tax hikes but there are other considers here.
17:33: Charlie Rose: But is one to one not the right relationship?
17:36: Ken Rogoff: There is no scientific number here. We are talking about a move along a bigger path that's going to get adjusted 20 times. And we did have the Bush tax cuts, which was certainly the proximate reason you know beyond the financial crisis that the whole thing became so unstable. It's -- it's the entitlements that you need to look at. That's where the numbers really go crazy when you start getting out eight and ten years out when the numbers blow up. That is the thing where people are really concerned. And the general principle is if you are facing that, you know, you want to try to adjust to it gradually because politically it's very difficult, but I don't think there is some magic number here.
18:19: Charlie Rose: OK.
18:21: Ken Rogoff: Both sides can legitimately hold out for whatever they want.
18:25: Charlie Rose: OK. But I am trying to get a fix on what -- what's reasonable when the contours of within we ought to expect and how do you measure reasonableness?
18:37: Ken Rogoff: Well, I really do think it's not so much the total revenue from tax cuts as the President needs and wants to raise taxes on the wealthy and probably should be looking at the ultra wealthy too, because that's just the first move towards raising it on everybody else. Our spending on goods and services just isn't that much. I mean, cutting defense right now saying we are pulling out of Afghanistan, we can cut defense. That seems awfully unlikely in a world where emerging markets are spending more and more on defense, where the issues are getting bigger. Our government's spending on goods and services just isn't that big; there isn't that much room to cut things. There are some. I think there is room to substitute, but it's really in the entitlements, medical care, and to much lesser extent Social Security, that's what you have to look at. And you know that's really -- if you get that straight, then the other things you can sort of tweak at the margin much more. And I would like to see more infrastructure spending. I would like to see spending on research and development, education. I mean, you have to keep, yo know, moving ahead with our country. You can't just stand still.
19:50: Charlie Rose: Could the President go to the country and say just what you just said and -- and find a willing within the economic community, the financial community, the markets -- the markets around the world, if he made that clearly a plan that we need to spend more and investment ideas and to contribute to the economic growth and yet at the same time we have to match that with the kind of entitlement cuts that are clearly necessary because as someone once said you know you go hunting where the ducks are?
20:19: Ken Rogoff: I think economists and markets would be thrilled to hear that, as long as it were tempered by saying you know we need to make sure we're not spending too much on the infrastructure.
20:30: Charlie Rose: Right.
20:32: Ken Rogoff: -- we are going to try to improve everything. I think people would be thrilled to hear it. The problem, is we have this paralysis that we start with at the beginning.
20:40: Charlie Rose: Right.
20:42: Ken Rogoff: This incredible political paralysis, you know. We see it with gun control laws, everything, and I think it is very hard to make this kind of rational approach. Look at the Simpson-Bowles, great idea and yet it got thrown out by both sides, their tax reform plan.
20:57: Charlie Rose: Yes so Simpson-Bowles would have been a perfect starting point as you see it.
21:02: Ken Rogoff: We would be in a lot better -- we would be in a lot better place today if we had adopted that because it shows sensible compromises. I mean it's not the ideal theoretical plan where we would be talking about a consumption tax, a gas tax, the energy tax, all kinds of things, but within the political reality, it was a very bold and sensible plan that impressed economists across the political spectrum. But you know, so far it hasn't really had much traction, even though of course the President says he supported it in the debates so did Governor Romney, but it's clear there's a lot of political opposition.
21:39: Charlie Rose: And clearly they did not fully support it when it was first announced?
21:45: Ken Rogoff: That is absolutely true.
21:48: Charlie Rose: As you look ahead to 2013, what will you be looking at? What economic indicators? Obviously the unemployment rate. What else?
22:00: Ken Rogoff: Well, I mean, I'm fascinated to watch what's happening in Europe, where right now, Europe is quiet and all the action is in the United States. My European friends, policy friends are thrilled that they are not on TV in the United States, that everybody is worried about the fiscal cliff. But Europe is still a mess, I mean Governor, of the Central Bank Governor Mario Draghi sort of said let there be money and that's provided liquidity and protection but it hasn't provided, you know, the fundamental change in Europe. That still, you know, is simmering beneath the surface. I think in the United States, this immediate political shenanigan will get cleaned up, the fiscal cliff. But what I worry is that we won't see a big reform and that's really you know what I -- what I would like to see. We can look across to China also, there is a change in leadership. Their economy is stabilized but you talk about bubbles, there is a lot of signs of them in China. And you can say that, you know, it is nothing, they will still grow but there -- there are plenty of concerns around the world. I am hopeful the United States will stabilize, housing will continue to strengthen, employment will stabilize, but I don't expect galloping growth.
23:11: Charlie Rose: Ken thank you so much, it's a pleasure to have you on the program this evening.
23:15: Ken Rogoff: Thank you, Charlie.
23:17: Charlie Rose: Ken Rogoff from Harvard. Back in a moment. Stay with us. "Promised Land" is a new movie by Gus Van Sant, it follows a salesman for natural gas company, that goes to a small town in pursuit of its natural resources. The film focuses on values, community and American identity. Here is the trailer.
23:41: Unidentified Male: You guys have closed more towns than the team behind you by triple digits. How do you do that?
23:51: Matt Damon: I grew up in a large farming community, tractor pulls, cow chipping, we had a Caterpillar plant, my junior year they closed it down and that whole farming town fantasy was just shattered. I am telling you the only way to have to get back.
24:01: Unidentified Male: I am happy to announce we will bring natural gas to McKinley.
24:06: Frances Mcdormand: I can't believe this. It's right outside of the city. It looks like Kentucky.
24:12: Matt Damon: Two hours outside of any city looks like Kentucky. Are you the owner of this place?
24:16: Unidentified Female: No.
24:19: Matt Damon: Well how come you are doing all the work? You sign this lease it gives us the right to drill on your land.
24:24: Unidentified Male: There is a whole lot of money down there.
24:26: Matt Damon: That is true.
24:28: Frances Mcdormand: There is no reason your town shouldn't have state of the art high school.
24:32: Unidentified Male: What kind of money are you talking about?
24:34: Matt Damon: You could be a millionaire.
24:35: Frances Mcdormand: I thought it would harder, it's too easy.
24:37: Matt Damon: Did you say anything about an environmental presence here?
24:41: Unidentified Female: No let me guess, 40, married, marketing --
24:44: Matt Damon: 38, stripper/waitress but born to be a singer.
24:47: Unidentified Female: I'm a teacher.
24:49: Matt Damon: No, no I was talking about me.
24:51: Unidentified Male: Hi, everybody. I am here because my farm is gone, the land just turned brown and it died. It happened to one of us, it can happen to all of us.
24:59: Matt Damon: The town is going to put it to a vote in three weeks.
25:03: Unidentified Male: What the hell happened? You were supposed to get in an get out.
25:08: John Krasinski: I know ever everything about your company. I know what you do. Do you think you have what it takes?
25:16: Matt Damon: To beat you, yes.
25:18: John Krasinski: Hey there she is. Are you ready to go?
25:22: Unidentified Female: Yes.
25:25: Matt Damon: This town, this life is dying. You all see it coming and you just don't get out of the way.
25:30: John Krasinski: We are not fighting for land, Steve. We are fighting for people. You're never going to get what you came here to take from me. I don't think we'll expect but you're going to try.
25:41: Unidentified Male: You are a good man, Steve. I just wish you weren't doing this.
25:46: Matt Damon: We're a $9 billion company; you know what we are capable of.
25:52: John Krasinski: Do you?
25:54: Charlie Rose: Joining me now is the director, Gus Van Sant and the movie's co-writers and stars, John Krasinski and Matt Damon, I am pleased to have them here at this table to talk about this movie. Tell me how it began.
26:05: John Krasinski: I had the idea about two years ago to do a movie about American identity.
26:10: Charlie Rose: Yes.
26:13: John Krasinski: And my dad grew up in a small steel mill town just outside of Pittsburgh. And the way he talked about his growing up, his dad had three jobs and he didn't have a lot. And so as an ignorant eight-year-old I remember saying so you're childhood was awful?
26:25: Charlie Rose: And he would say --
26:27: John Krasinski: No, it was fantastic. We had family, friends and community and the belief that tomorrow would be a better day and I felt like as a country we've moved so far away from that. So I wanted to tell the story about these communities being affected rather than all though the noise that I think we made for the people being elected. And so fracking became a perfect backdrop to the -- to the issue of these people going through a really complicated decision. And I brought that idea to Matt and he was looking to direct at the time and so we were off and running.
26:48: Charlie Rose: And you donned your writing cap too?
26:50: Matt Damon: Yes, I was going to -- I was interested in directing it and it seemed like the exact type of thing that I wanted to direct the first time that I tried. And -- and so we started writing and we didn't, you know, I mean you never know how these things are going to go. But we -- we started to make a lot of progress really, really quickly. And we were -- we were moonlighting because he was doing his show, "The Office" and I was making a movie in LA. And he would show up at breakfast time on Saturday mornings and we would write all day Saturday and then all day Sunday. And then we would go off to our jobs and revise during the week we would make notes on, you know, scribble in the margins and then come back and meet on Saturday morning and we would keep going. And it really started to come together quickly and it got really exciting. And I had forgotten that feeling. I mean I hadn't Gus and I and Casey Affleck wrote a movie called "Jerry" that we did, 11 or 12 years ago but we really improvised a lot of it. I don't think we ever had a whole kind of screenplay document, but -- so this was the first time since "Good Will Hunting".
27:51: Charlie Rose: Wait, you've lost me for a second here. You are looking for something to direct, he comes with an idea, and the two of you write it and you are set to direct it. So why is Gus Van Sant here?
28:00: Matt Damon: Well, basically --
28:03: Charlie Rose: Was he a grip or something in this movie?
28:05: Matt Damon: No. I realized -- I realized at the eleventh hour, literally the eleventh hour, it was December 15th of last year that I was not going to be able to direct it, because my schedule had been all kind of turned around by a movie running late and I had been away from my kids and I just -- I had a very hard phone call with John where I said, you know, because we are producing the thing and --
28:28: Charlie Rose: What is a hard phone call?
28:31: Matt Damon: I just got over it yesterday. Yes. Well, because it was -- not only was it I am not -- because we wanted the movie to come out this year, you know, topicality and we need to start if that was going to happen and so not only were we going into the holiday. I mean as John said to me on the phone, you know, it is December 15th, it is the evening of December 15th he said we can't even get our agent on the phone right now let alone a director. He said couldn't you have told me this a month ago because we are producing this thing and I said, I didn't - - I really didn't know a month ago, and --
29:06: John Krasinski: And on top of all of that we had financing because of Matt so he was like, "Also I just lost our financing." So I said, "Hey, I don't know what binge drinking is but we need to figure out what it is tonight."
29:15: Charlie Rose: And so the phone rings in your house. GUS VAN SANT, DIRECTOR/
29:19: Screenwriter: It wasn't December 15th. It was December 16th, the next morning.
29:24: Matt Damon: Next morning, because I was going to Florida with my wife and kid for the holiday and to hide from John and I e-mailed --
29:31: Charlie Rose: Knowing that there may be a warrant for your arrest.
29:36: Matt Damon: Yes. I just needed to get out of New York. I e-mailed Gus the whole -- I said, look, this is this thing and here is what has been going on and I was going to direct it and I'm really proud of it and we wrote it together. And I think it is really good. And we were on the plane and he e-mailed right back, you know, send a script.
29:52: Charlie Rose: Send a script.
29:55: Matt Damon: And so it was at that Alec Baldwin moment when they are telling you to turn the phone off and I'm going, man, I am trying to forward the script and the flight attendant is looking at me, I'm going this is not "Words with Friends". This is important, this is my life. And I got it off to Gus and shut the phone off and by the time we landed in Florida two hours, two and a half hours later, Gus had read it and committed to directing it.
30:16: Charlie Rose: What kind of guy is that?
30:17: Matt Damon: That's a friend.
30:18: Charlie Rose: That's a friend.
30:20: Matt Damon: It was by the time I landed, yes -- two and a half, maybe?
30:24: Gus Van Sant: I sort of heard about the project and thought you know what? It is crazy, I don't know if there were other projects too. There was one that Ben was going to star in, there was -- I was reading a project that Matt was going to direct and I thought, well, if they ever run into trouble maybe they will call and ask me to direct. I don't know why I thought that.
30:42: Matt Damon: That's sneaky, man.
30:46: John Krasinski: I'd never do that.
30:48: Matt Damon: You told me and I knew you would.
30:50: Charlie Rose: No one would get in trouble.
30:52: Gus Van Sant: You always think like maybe, yes, something will happen and they will need my help, basically. I mean --
30:57: Matt Damon: I will need a director.
30:58: Charlie Rose: So, in fact, he did. So delayed --
31:03: Gus Van Sant: That's what I was -- you know, the e-mail --
31:05: Charlie Rose: So what did you like about it?
31:06: Gus Van Sant: The script?
31:08: Charlie Rose: Yes.
31:09: Gus Van Sant: Well I liked the setting. I was learning stuff because I had never heard of hydraulic fracking before.
31:14: Charlie Rose: So explain to us what hydraulic fracking is; it is central to the story.
31:16: Gus Van Sant: It is freeing up natural gas from the shale which is, there is a huge shale deposit running from Ohio to Maine. It is a very, very large deposit. It is going way deep into the ground, two miles deep. And with water and chemicals loosening up the shale, pulverize it --
31:34: Matt Damon: Fracture it, yes.
31:36: Gus Van Sant: -- fracture it and it lets the gas go up and they capture it and try --
31:43: Matt Damon: It's the controversial new, you know --
31:45: Charlie Rose: I know. But at the same time some people believe it is a savior for America's economic --
31:53: Matt Damon: Absolutely, which is why it was perfect for us because the stakes are so incredibly high and so you want to put that pressure on which is the real pressure that's being put on these communities, high stakes poker that is a great place to set a story like this about,
32:09: Ok: What's your story?
32:12: John Krasinski: Yes, exactly. Oh, what is the story? The story is Matt's character, Steve, comes into this small town and what we find out at the beginning of the movie is that Steve's character is from a small town himself and actually had industry in that town, a Caterpillar plant which shut down and just hollowed out the entire town financially and otherwise. So he knows what these people are going through and how much they need financial help. So he believes he is doing the right thing by going into these towns and offering them money to lease -- to drill on the land. And so then the town basically turns out to be a little more savvy and decide that that is not necessarily what they want, and then the debate begins. And my character is named Dustin. He's an environmentalist who comes in to help the town sort of fight against what Matt's character is doing.
32:54: Charlie Rose: One, you have to be accurate about fracking here, right?
33:00: Matt Damon: Yes.
33:02: Charlie Rose: You want to make sure that you get it right so you won't be vulnerable to the idea that this story is not --
33:07: Matt Damon: Yes, so there was a lot of research, Ian Urbina wrote a really great series for the "New York Times" called "Drilling Down" --
33:12: Charlie Rose: Right.
33:14: Matt Damon: -- and it was really phenomenal and so we used that and there are some books that have been written. There are a ton of articles I mean and, you know, no shortage of information.
33:24: Charlie Rose: So what do you have -- with all of that, what do you want? I mean you want to entertain people, you want them to see interesting characters and interesting relationships and big ideas. What do you want them to come away with?
33:37: John Krasinski: Honestly, I think the best compliment Matt and I could have is that it starts a conversation that, you know, beyond even the issue of fracking or whatever issue is in the vernacular right now. It is, to us it is the decision of communities gathering together and realizing that they have a voice and a responsibility to sort of unite and engage in these issues that are happening each day and deciding for themselves whether or not they want it. The debate at the end of the movie is whether or not decision makers are manipulating situations to get people to vote one way or the other, rather than allowing the people themselves to decide.
34:07: Charlie Rose: Let me guess what the answer is.
34:09: Matt Damon: It is a pro community, pro democracy, you know, message if there is anything. But there is a vote at the end of the movie and we don't tell the outcome because that is not the issue. The issue is that the community has to engage, you know, to a man to basically take control and responsibility for the things that are happening.
34:28: Charlie Rose: You said this. You want this movie to be an exploration of the modern American identity.
34:34: John Krasinski: Yes. Absolutely. I hope I said that, it sounded good.
34:38: Charlie Rose: I made it up. No, you did say that.
34:42: John Krasinski: But I really do. I think that, you know, I don't know, maybe I have a wild theory that there is this idea of the short game versus the long game and I feel like 50 years ago the idea of the long game was the priority and the idea of the short game was not necessarily something we were willing to delve into and I feel like that flipped a little bit nowadays and so who we are, where we are and what we are willing to do to get to the next place is really interesting thing that I really wanted to explore.
35:05: Matt Damon: Jeff Sach's book, "The Price of Civilization" --
35:07: Charlie Rose: Yes, indeed.
35:09: Matt Damon: -- he talks about that. And really well, you know, he talks about the kind of the long-term issues versus short-term and how our politicians aren't incentivized to engage on any of these long-term issues because they score points on the short-term ones. And now we are finally butting up against a time where that's really going to be a problem for us. And so we were looking at that book while we were doing it, you know, reading it. So I think a lot of people have been thinking about these kind of things and this is just the kind of filmic expression of it, I guess.
35:33: Charlie Rose: I want to show a couple of scenes here so that we get this in. One you've seen the trailer but here's a clip in which Steve, Matt, and Sue -- Frances McDormand try to bribe Dustin, John, to stay out of their way. Here it is.
35:48: John Krasinski: See, I know everything about your company. I know what you do. I know how to beat it.
35:54: Matt Damon: You know how to beat -- by telling both sides of the story and speaking straight?
35:59: Frances Mcdormand: You have to understand he is in way over his head on this one. He's already signed more than enough leases to start development in this town. It is too late.
36:11: John Krasinski: I really wouldn't underestimate these people.
36:16: Frances Mcdormand: I don't. I know what you think what you are doing is right, and I really admire that commitment, but your presence here only confuses people. But we appreciate what you are doing and we would like to make a donation to your organization. Your cooperation is valuable to us.
36:38: Charlie Rose: How was it for you getting back to writing, in the sense of being able to do this thing?
36:46: Matt Damon: I forgot how much fun --
36:48: Charlie Rose: Put words in your own mouth.
36:50: Matt Damon: I really forgot how much -- because the great thing about "Good Will Hunting" is it really changed the way I got to work on movies after that, you know. I was really invited into the creative fold by every director I worked with after that because they knew I was a writer. And so I felt like that part of myself was being met, you know, that itch was being scratched because, you know, film making is problem solving and sometimes that means a little dialogue change here or a little structural change there, you know. And you are a part of that decision making process. But I forgot what it was like to just start from, you know, from the open laptop and that was just really fun. I just -- you know, my wife said to me in the middle of the whole thing. She said, no matter what happens if you never make this movie, you know, I haven't seen you this happy, you know. At least you remembered how much fun it is to write.
37:38: Charlie Rose: I assume that what you most want to do is be a film maker where you touch bases on all of those kinds of things --
37:43: Matt Damon: They all overlap.
37:45: Charlie Rose: -- not an actor, not a writer but a filmmaker.
37:47: Matt Damon: I feel like all the jobs overlap and as long as you are not working with people who have precious -- you know, really have these egos, you know, that you're really all there to help each other. And your job is really to just give the director as many of your ideas as you can. And it is really the director who decides. It is a dictatorship, it is a benevolent dictatorship.
38:05: Charlie Rose: Is that why you like it?
38:07: Gus Van Sant: Probably yes. I mean the control is kind of good.
38:10: Matt Damon: Complete though.
38:13: Charlie Rose: They own it in the editing room, that's why it is complete in part, isn't it? It's more than that it is -- for an actor to do or not
38:21: Matt Damon: Yes. Or where the camera is pointed or how --
38:24: Charlie Rose: It is what you can do when you pull it all together there and the music and everything else.
38:29: Matt Damon: There is nothing arbitrary in any shot.
38:33: Charlie Rose: I have been talking to people about the question of who is the greatest from a musical standpoint who is the greatest rock and roll band. I've also asked this question, is Ben, has he become a better director than he is actor with no qualms about he is a good actor?
38:47: Matt Damon: I don't think that the people have seen what he can really do as an actor. I don't think he has had the chance to work with the great level of directors that I have been working with for the last 15 years. And I don't think, and I hope that he gets that now. Like he is like he is such a better actor. I think he is a team player, and so I think what could happen to him sometimes is if you didn't have a great director he wants to make sure the story is getting told, so he can fall into indicating a little bit, right? Because he is just trying to help the story get told but when you trust the director like Gus or with himself the performances are fantastic because he knows exactly how the story is going to be told. So he doesn't ever have to do anything that doesn't come completely naturally to him.
39:27: Charlie Rose: Do you think an actor can get the best out of himself if he is directing and having written the script as well?
39:33: Gus Van Sant: I think it can happen. It is hard, though.
39:36: Charlie Rose: It is really hard.
39:38: Gus Van Sant: And I think he did -- Ben did a great job with "Argo".
39:41: Charlie Rose: In "Argo", yes.
39:42: Gus Van Sant: I thought it was fantastic.
39:43: Charlie Rose: I did too. Did it surprise you?
39:46: Matt Damon: Not at all. I know he's --
39:48: Charlie Rose: I know --
39:51: Matt Damon: No, I'm very happy.
39:52: Charlie Rose: You could have said, "It surprised me only in that I had as I admired and respected him and knew how good he was it was even better.
39:57: Matt Damon: Yes. I mean it made me happy to watch it surprise other people.
40:01: Charlie Rose: Yes, exactly.
40:04: Matt Damon: I mean you know, I am obviously a huge believer, I bought the stock at its very lowest.
40:08: Charlie Rose: You got in at the bottom.
40:10: Matt Damon: And when we were on Amtrak together coming down here for auditions I was a big believer. So I am not surprised at all. I am immensely happy for him, he put up with a lot of stuff for a number of years and he is certainly out of actor jail now. He's going to get I think whatever part he wants now.
40:26: Charlie Rose: Yes. He actually, what is admirable about him and I am not sure whether he would be thrilled or unhappy about the fact that we're talking about him when we're talking about this movie but -- and probably happy because of the respect you two have for each other. But at the same time I mean there is a sense of admiration about how he came back from the kind of criticism that he was getting that was overwhelming.
40:47: Matt Damon: It was really mean. It was very hard, as his friend to watch it because people had such the wrong perception of who he really is. And so it is nice to not have to defend him anymore.
40:58: Charlie Rose: What concerned you when -- when you were putting together this story? What was it that you worried about that I have to get right or else we are not going to where I want us to be?
41:09: John Krasinski: You know it's interesting. I think probably the thing we were most concerned about at least in the beginning stages was being able to explain the idea of fracking and how it affects different people and sort of how that idea of eating your vegetables before the main entree and at least getting people to eat their vegetables during it in a way that you didn't realize you were doing it. So you could explain the thing that people would get it, without feeling like they were getting hit over the head with it.
41:34: Charlie Rose: Here is a scene in which Steve and Dustin run into each other at a bar. Take a look at this.
41:42: John Krasinski: Do you like your job, Steve? Do you love what you do?
41:48: Matt Damon: Yes. On days like this, yes, I do. Thanks, Jeff. Hey, get my friend a beer as well. One of those fancy imported ones.
41:59: Unidentified Male: Sure.
42:01: Matt Damon: Maybe like a granola bar to go with it.
42:03: John Krasinski: You know what it takes, Steve?
42:06: Matt Damon: Huh?
42:07: John Krasinski: Did you have what it takes?
42:09: Matt Damon: Oh, to beat you? Yes. Absolutely.
42:14: John Krasinski: Well, you just might.
42:16: Matt Damon: Hey, man. I will drink to that.
42:18: John Krasinski: OK. Hey, there she is. Ready to go?
42:22: Unidentified Female: Yes.
42:24: John Krasinski: All right. Hey, Steve thanks again for the beer, that was really sweet. I'll take it to go.
42:30: Matt Damon: I hope you guys have a great night. Thanks, Jess.
42:33: Unidentified Female: I am really looking forward to the fair tomorrow. It should be fun.
42:39: Matt Damon: Yes.
42:42: Charlie Rose: If he says this movie is about a modern day American identity, what do you say it is about?
42:47: Gus Van Sant: I always think of it as a kind of movie that I was used to seeing in the sixties where it is sort of a story about corporate shenanigans or corporate manipulation.
42:59: Charlie Rose: Does it remind you of any of those movies?
43:01: Gus Van Sant: One is "Mirage", with Gregory Peck. I remember that one.
43:06: Charlie Rose: Yes.
43:09: Gus Van Sant: Which the story occurred during the blackout of '65 or '64, which is a great movie. Where the corporate heads are afraid that their scientist is going to give his formula that would allow free power to the whole world. And they want to control that, and the executive like leans out the window to grab the formula which is already burning because Gregory Peck lit it on fire and falls to his death.
43:34: Charlie Rose: Yes. What is the conflict for Steve? Inner conflict?
43:41: Matt Damon: Yes. I mean, the second act is he starts to get fracked, basically, and through his kind of dealings with these people. He has this great (INAUDIBLE) movies the protagonist with that streak of self-loathing and, you know, he comes from this place he considers himself a realist. He does know that the industry is necessary, in order to keep this way of life alive. He is alternately irate about the stubbornness of the people, the stubbornness his grandfather had and he's angry at himself for not having that same stubbornness, you know, somewhere in him. And so there's a lot going on, there is that speech, the FU you money speech that he gives --
44:24: Charlie Rose: Right, right, right.
44:26: Matt Damon: -- and --
44:28: Charlie Rose: Did you write that or did John write that?
44:30: Matt Damon: He wrote most of that. Right, you did.
44:32: John Krasinski: I have a lot of anger it sounds like.
44:35: Charlie Rose: You wrote this at his apartment --
44:36: John Krasinski: Yes, he was hanging out in the house in California actually at the time which was very convenient. We always went to his house. He wins by default with four little girls. So we went over there and I don't know how we got work done between putting on "The Little Mermaid" 17 times and lunch and bath time but we did. We got a lot of work done.
44:53: Matt Damon: Kids climbing all over.
44:55: Charlie Rose: But is it easy to write with a writing partner?
44:58: Matt Damon: Yes. No, it's the only way I can write. I mean I just I'd give up it's just me by myself.
45:03: Charlie Rose: Really.
45:04: Matt Damon: I do. You know, unless there's --
45:07: Charlie Rose: Different people have different voices as you well know.
45:11: Matt Damon: Yes, but what really -- I mean John and I -- like looking back at the script I would be hard pressed to say who wrote what line, because the lines get constantly refined. You know, and it is like a process of improvisation and talking back and forth and trying to make each other laugh. And it just, you know, we would spend a day and then suddenly during the week I would be looking at what we had done and I'd say this is really good like I am really happy with this. And then we would continue grinding and grinding and grinding and the script really -- I mean I don't know how many drafts we did, we did, you know, 20 -- 25 drafts, but we just kept kind of grinding, grinding away on it.
45:45: Charlie Rose: There are two things I want you to see, I want you to see this and we have a memory here. This is when Matt is on the show in December 2011, and was making a comparison between you and another actor, here it is.
45:59: Matt Damon: George is -- it is incredible actually what he has done with, you know, kind of coming from ER -- from, you know, being the handsome guy on ER and he was just smart enough to know if I just get my foot in the door I can, you know, if you look at where his career is now versus where it was 15 years ago. It is remarkable what he has done but it is because he is unbelievably talented and he so much more talented than people even realize. I just started working with John and it was very easy and fluid and it reminded me of writing with Ben. It was very fast and easy and he's just - - John Krasinski is like George in the sense that right now he is known for being on this
46:40: Tv Show: Right.
46:43: Matt Damon: -- and he is great on that. And but the perception of him, if -- I would bet my house on the perception of him in ten years being very different than it is right now.
46:52: Charlie Rose: One more clip here. This is from a movie you made called "Good Will Hunting". Remember that?
46:57: Matt Damon: I remember that.
46:59: Charlie Rose: Do you remember it well?
47:00: Gus Van Sant: 15 years ago.
47:02: Matt Damon: It was 15 years ago.
47:04: Charlie Rose: There is a scene. Take a look at this. 15 years ago in which Matt defends his friend Ben Affleck who was flirting with Minnie Driver. Here it is.
47:12: Unidentified Male: Who is that?
47:14: Matt Damon: Hang on. You are a first year grad student. You just got finished reading something I can't even explain. You need to convince her that until next month when you get to James (INAUDIBLE) and you're going to be talking about how the economies of Virginia and Pennsylvania were entrepreneurial and capitalist way back in 1740. That's going to last until next year. You're going to be in here regurgitating Gordon Wood (ph) talking about, you know, the pre-revolutionary Utopia and the capital forming effects of military mobilization.
47:38: Unidentified Male: As a matter of fact, I won't, because Wood drastically estimates the impact of social --
47:43: Matt Damon: Wood drastically estimates the impact to social distinctions predicated upon wealth, especially inherited wealth. You got that from Vegas, working at (INAUDIBLE) page 98, right? Yes, I read that too. Were you going to plagiarize the whole thing for us or do you have any thoughts of your own on this matter? Or is that your thing? You come into a bar, you read some obscure passage and then pretend -- pawn it off as your own, as your own idea just to impress some girls and embarrass my friend? See, the sad thing about a guy like you is in 50 years you're going to start doing some thinking on your own and you're going to come up with the fact that there are two certainties in life. One, don't do that, and, two, you dropped $150,000 on an education you could have got for $1.50 in late charges at the public library.
48:29: Unidentified Male: Yes, but I will have a degree and you will be serving my kid fries at a drive through on our way to a skiing trip.
48:37: Matt Damon: That may be. But at least I won't be unoriginal. Weird.
48:42: Charlie Rose: Yes. How many years? 15 years ago.
48:48: Matt Damon: 15 years ago, yes. 15 years ago, but it feels like, you know, yesterday and then on one hand and 50 years ago on the other, you know.
48:55: Charlie Rose: And so what is the partnership here? What is the thing that -- is there a fourth?
49:00: Matt Damon: Yes, we did "Jerry", which was the tiny film Gus took out a mortgage on his house to fund that and then there was -- I did a cameo in "Finding Forester" and then this one.
49:11: Charlie Rose: So what is it when an actor finds a director or a director finds an actor that somehow the combination, the collaboration is better than two plus two?
49:22: Gus Van Sant: I am not sure. I think the success of "Good Will Hunting" sort of elevated everyone into like this great place. We always remember it. So it is easy to come back to.
49:34: Charlie Rose: But is that one of those films, I mean I was listening to the dialogue which was sort of had that kind of, you know, rapid fire smart talk. Is that what propelled it? I mean you had that kind of script? Everything rode on that?
49:49: Gus Van Sant: I think it was also honed dialogue that Ben and I had worked on for years and years.
49:55: Matt Damon: I mean from the time we started writing until the time it came out, it was five years. So we worked a lot, I mean, really.
50:03: Gus Van Sant: And "Promised Land" had the same -- I mean it was very similar. It was like very, very --
50:10: Matt Damon: The standard way of thinking is you do scenes that don't go more than two pages, it is about a page a minute so a script is about 120 pages, two hours. But you generally don't want to do scenes that are longer than two pages, and "Promised Land" is built --
50:22: Charlie Rose: You don't want to do that longer than two --
50:24: Matt Damon: Two pages. Generally scenes last about two pages. But "Good Will Hunting" as well with this, there are a lot of five, six page scenes just because, I don't know, maybe you know, I overwrite things or, you know. But so I think one of the reasons the dialogue often goes really fast is that's me going like let's go, let's go, let's go. This scene is four pages too long.
50:46: Charlie Rose: Yes.
50:48: Matt Damon: But also it is a reflection of the intelligence of the characters and it is fun to watch characters who are moving, whose minds are going quickly.
50:55: Charlie Rose: Yes, it is. I mean it's the kind of writing that you pick from the best people. You see it in the best movies somehow. Like Aaron Sorkin and people like that have that rapid fire delivery that makes the difference. When you guys finish that, did you know, have any idea what impact it would have?
51:13: Matt Damon: When we finished "Good Will Hunting"?
51:15: Charlie Rose: Yes. Did you know it was so good that look, something good is going to come out of it?
51:21: Matt Damon: We didn't really have much to compare it to. We knew we really liked it. We knew that each scene felt like it had gone exactly the way we wanted it to go which is how I felt with this one, too. At the end of every day we'd go home. We'd get on the phone. Gus would upload the footage to a Web site where we could all get on our computers and look at what we shot. And we'd look at it and go that is exactly what we intended or in a lot of cases it was even better. I was lucky because I had prepared this as a director, so this gave me the chance to, you know -- and obviously I never told Gus what I was going to do with a shot here, but I got to see what Gus did and all the choices that he made that were exactly like I was going to make them and then cases where he did things that were different that were just brilliant that I hadn't thought of.
52:02: Charlie Rose: Congratulations.
52:04: Matt Damon: Thank you.
52:06: Charlie Rose: Great to have you here.
52:08: John Krasinski: Thank you so much, good to be here.
52:09: Charlie Rose: Hope to see you again, my friend.
52:12: Gus Van Sant: Good to see you.
52:14: Charlie Rose: "Promised Land" opens in select cities on Friday, December 28th, and then nationwide on Friday, January 4th -- the day before my birthday. Much success.
52:21: Matt Damon: Thank you so much.
52:24: Gus Van Sant: Thank you, Charlie.
52:25: Charlie Rose: Thank you for joining us.