FULL 'This Week' Transcript for Nov.29, 2009

ROBERTS: We've had three.

WILL: This is our third that's coming up, because we had the one in February of 2008 that was bipartisan, Pelosi, Bush, stimulus didn't work. The second one didn't work. Now, the administration is saying...


ROBERTS: It did work.

WILL: But that is the administration's problem. They're saying the stimulus worked, but we need another one.

ROBERTS: But, I mean, Dan was citing the growth rate. That growth rate in the third quarter was because of the stimulus. I mean, the biggest problem that we're looking at now is without a stimulus, what happens to the economy? Is it all just temporary? And, you know, I mean, there are so many major economic problems still facing us, that aside from the jobs issue, that...

STEPHANOPOULOS: Well, let's pick one that could be -- end up being in conflict with what the House and the Democrats want to do on jobs, and that is the question of the deficit and debt. Interesting cover of Newsweek this week. Niall Ferguson from Harvard says how great powers fail, and he goes on and says, the beginning of a debt explosion. It ends with an inexorable reduction in the resources available for the army, navy and air force. If the United States doesn't come up soon with a credible plan to restore the federal budget to balance, he says, in the next five years, a debt crisis could lead to a major weakening of American power. And he cites you throughout the piece as somebody who's not paying enough attention, Paul Krugman, to the deficit.

KRUGMAN: You know, first thing to say is people are putting their money where their mouth is, which is the bond market. Things were fine. You know, the U.S. government is able to borrow long-term at 3.3 percent interest rate. So, obviously, you know, the market is not convinced.

Now, the market has been wrong. But, then if you do the arithmetic, these numbers look huge. The American economy is huge. The debt burden, even after five years, is going to be well below as a share of GDP well below levels that lots of industrial countries have reached in the past, including ourselves after World War II, when we were able to handle that just fine.


STEPHANOPOULOS: ... 100 percent.

KRUGMAN: We're not going to hit 100 percent until a decade from now. And countries have gone above 100 percent. I mean, if you actually ask about the interest cost, particularly inflation-adjusted interest cost, you know, we're now paying 1.2 percent real interest rate on federal debt. Even if you add 50 percent of GDP in debt, which I don't think is going to happen, that's still only a fraction of a percent of GDP in additional debt service costs.

WILL: But even unreasonably cheerful assumptions about economic growth and interest rates, we're apt to be spending in 10 years $700 billion a year servicing our debt.

KRUGMAN: That's in a $20 trillion economy. It doesn't sound as bad as it is.


ROBERTS: This has a political and policy implication. Excuse me, because what happens is, members of Congress will sit there and say, we can't do X because of the deficit. And so, there are huge implications.


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