'This Week' Transcript: Stephanie Cutter and Eric Fehrnstrom

KRUGMAN: Yeah, this is real government spending, so it's federal, state and local combined, deflated, you know, adjusted for population growth and inflation, and it is plunging. It's plunging mostly because of cutbacks at the state and local level, because the aid that they were receiving in the stimulus has run out, but also because unemployment benefits have been expiring because Congress won't -- you know, Republicans in Congress won't extend them.

So in effect -- and, by the way, if you extend that chart backwards, there's been nothing like this since the demobilization after the Korean War. We're actually practicing government austerity on a scale that we haven't seen in 60 years. It's not the president's policy. In effect, we've already got the policies that Republicans say they will impose if they take the election, and yet, of course, it may lead to the defeat of this president.

STEPHANOPOULOS: And that's the point Stephanie was making, so bringing it back to you, what would Governor Romney do right now -- not in the future -- right now, to get the economy moving again?

FEHRNSTROM: Well, it's not just, as Paul says, tax policy. That's part of it, of course, but it's also spending policy, it's regulatory policy. It's confronting China on their unfair trade practices. It's -- it's a whole -- it's labor policy, George.

The governor has laid out very detailed plans. People can go to mittromney.com and learn about them for themselves. But I think what we really have here...

(CROSSTALK)

KRUGMAN: ... detailed plans, and there is nothing there. There is not...

(CROSSTALK)

FEHRNSTROM: What we -- what we -- what we really have here is a deficit in leadership. And this president came into office without any prior experience running anything. He never even ran a corner store. And I think it shows in the way that he's handling the economy.

STEPHANOPOULOS: Can the president do anything now?

CUTTER: He could get Congress to act. You know, the proposals that we've put forward that have been sitting there for nine months, you know, independent estimates have put those proposals at a million jobs. So there are a million jobs sitting on that table in Congress right now that they could -- they could move on. They need to get off their hands and stop rooting for failure. That's really what's going on right now. And we can impact the economy. Just as Paul was saying, this policy of austerity, because of the refusal of Republicans to act, can change. We can give states the aid that they need to protect those teachers' jobs. We can put construction workers back to work by rebuilding our roads, bridges, and highways. We can cut taxes...

WILL: How about the -- how about the Keystone pipeline? You don't need Congress to do that.

CUTTER: That's a fraction of the jobs that could be created by these proposals.

WILL: But pretty important to those that get those jobs.

CUTTER: And we -- and we have, you know, extended the Keystone pipeline at different points in the country. It's currently under review. But that's a fraction of the jobs that we're talking about here. We're talking about a million jobs.

KRUGMAN: Can I just say, on the Reagan thing, if public-sector employment had continued to expand the way it did during Reagan's first term, instead of falling by about 600,000 as it has, right there we'd have something like 1.4 million people working in this country.

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