KRUGMAN: I mean, my first best guess, my maximum likelihood estimates, to wear my academic hat, is it won't happen, not for years and years to come. No one is discussing the kinds of policy that might make it happen. We're waiting for the economy to heal itself, which if it's doing is doing very slowly.
AMANPOUR: Even in this situation, are there things that could be done to make people go back to work? Are there structural infrastructure work?
KRUGMAN: Well, look, if we -- there are potholes everywhere. If we actually -- you know, if there were any political willingness to just do sort of obviously needed infrastructure work, with borrowed money, then we would -- that would do a lot. But we're not going to do that.
And other than that, you know, Ben Bernanke might be able to pull a few more tricks out of his hat. And -- but it's really hard to see where this is going to come from.
AMANPOUR: So, George, if that happens and there are all these dramatic cuts and the economy doesn't improve, I mean, what does that do politically? Are people, do you think, going to blame the president come 2012? Are they going to blame the Republicans? What's going to happen?
WILL: I think they'll blame the president. It takes 2.5 percent growth annually to create enough jobs to account for the natural growth of the labor force. And the numbers we got this week...
WILL: ... the first quarter -- the first quarter growth of 1.9 percent was revised down to 0.4 percent, then came 1.3 percent. This is -- as we said, we're a third of way to a lost decade.
STEPHANOPOULOS: That's why this debate is so maddening. You listen to Mohamed El-Erian, and he's not alone there. On the one hand, he says, if you don't have these tremendous spending cuts, credible deficit reduction, we're going to get downgraded by the ratings agencies, that's going to be an economic disaster.
KRUGMAN: Can we say a word about the ratings agencies? Who are these guys, and why should they have this power?
STEPHANOPOULOS: They do.
KRUGMAN: And they've been wrong about everything. They were wrong about...
STEPHANOPOULOS: They were certainly wrong about the mortgage...
KRUGMAN: ... about the mortgage markets. They downgraded Japan in 2002. And -- and the result, after 19 years, is that you'd have made a lot of money if you bought Japanese bonds.
STEPHANOPOULOS: I completely agree with that, but then you turn it around, and Mohamed El-Erian says what -- on the other hand, if you make these spending cuts, the economy is going to be stuck in the -- stuck in the mud. I mean, this is a -- a paradox you just can't break.
WILL: It's not a paradox. It's a contradiction.
KRUGMAN: It's not. It's none of those. The textbook answer is spend now, cut later. Spend now and have -- have a long-term plan, work on something. The real problems for the U.S. budget are not actually even in the next decade. They're in what happens after 2020.
So if you could credibly promise to do reasonable things after 2020, while at the same time actually spending...
STEPHANOPOULOS: But that wouldn't be good enough for the ratings agencies...
KRUGMAN: But it's never going to -- it's never going to happen in the -- but that's -- it's politics. There's no economic mystery.