'This Week' Roundtable: Economic Outlook

WASHINGTON, May 15, 2011 -- (BEGIN VIDEO CLIP)

BOEHNER: We're not talking about billions here, we should be talking about cuts in trillions, if we're serious about addressing America's fiscal problems. With the exception of tax hikes, which in my opinion will destroy American jobs, everything is on the table.

(END VIDEO CLIP)

AMANPOUR: House Speaker John Boehner throwing down the gauntlet in negotiations over raising the federal debt ceiling. Here's that debt clock again. We have got a live picture there in New York and it waits for no one. Soon, the numbers will crash through the debt ceiling, exceeding the amount the U.S. is legally allowed to borrow. The stakes couldn't be higher, so what is the solution?

Joining me now, Doug Holtz-Eakin, who ran the Congressional Budget Office and served as John McCain's chief economic adviser in 2008. Nobel prize winning economist Paul Krugman of the New York Times. Sheila Bair, who is wrapping up her term as chairman of the Federal Deposit Insurance Corporation. And Roger Altman, a former deputy treasury secretary in the Clinton administration. Thank you all for being here.

This seems to be a never-ending conversation, but the limit we're now hitting up against. How is President Obama to respond to the call for trillions, not billions of dollars in cuts?

KRUGMAN: I think he cannot -- if he gives in on this, he's setting himself up for repeated blackmail. He's basically saying that I care about the economy more than the Republicans do, and therefore, every time they threaten to blow it up -- even though it will hurt all of us -- I am going to give in.

So I think Obama has got very, very little wiggle room, even though it's a terrible thing.

AMANPOUR: Lots of economists are saying the Republicans are playing with fire, that hitting the debt limit, exceeding it is not like shutting down the government. It could cause a real cascading economic crisis.

HOLTZ-EAKIN: I don't think there is any great desire to hit the debt limit. The key is to recognize the limit is a symptom and that the fundamental problem is the underlying condition of the U.S. budget. What you're seeing now are calls for, both from Speaker Boehner and from the Senate minority leader, Mitch McConnell, for real solutions to the real problems. It's not about the debt limit. It's making sure that in the short term you get cuts, in medium term you have an enforceable path, and that you take care of something in the long term. The entitlements have to be on the table.

AMANPOUR: So, we do keep hearing this now. There obviously seems to be the momentum for dealing with entitlements. But how? How does one deal with Medicare, Medicaid? We already saw Paul Ryan and his plan for Medicare. They seem to be running away from it now. So how does one deal with this in a way that's real, rather than just ideological, if that's possible?

BAIR: Right. Well, I'm a bank regulator, I'm not a budget expert, as some of these other gentlemen are, but we have been following this very closely because we are very concerned about the outcome and how it could impact the financial sector. But I've also worked in Washington a long time, and it seems to me that if the pain is evenly distributed and the general population feels that there's fairness in whatever ultimate outcome is agreed to, I hope, by the administration and the Congress, then I think it can politically, it can sell.

I do think that both sides have a point. Last November, I published