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

This Week - Sens. Lindsey Graham and Bernie Sanders.

"This Week with George Stephanopoulos" Nov. 29, 2009

STEPHANOPOULOS: Tuesday night, the president travels to West Point to announce his new strategy and more troops for Afghanistan. Now, the cadets are likely to be a receptive audience, but will the country rally behind President Obama? Will the new strategy work? And will Congress come up with the cash to pay for it? That's topic A for our roundtable today, and we're going to get to them in just a minute, but we begin with two key senators, Republican Lindsey Graham of South Carolina and independent Bernie Sanders of Vermont. Gentlemen, welcome, both.

SANDERS: Good to be with you.

GRAHAM: Good morning.

STEPHANOPOULOS: And Senator Sanders, let me begin with you. We've seen the details of this strategy leak out over the last several days. It sounds like President Obama is set to announce about 30,000 new U.S. troops for Afghanistan, supplemented by about 5,000 or 6,000 NATO forces, if they can get them. That appears to give General McChrystal most of what he asked for. Can you support it?

SANDERS: I have real concerns with that, George. You know, if I were to put Afghanistan into the context of what's happening in America today, and what's happening now is not only a $12 trillion national debt; we're in the midst of the worst economic recession since the Great Depression of the 1930s. The middle class is collapsing. The gap between the rich and the poor is growing wider.

Piece in the paper today, one out of four kids in this country are on food stamps. One out of eight Americans. And when we go Christmas shopping, we're going to be buying our products from China, who are lending us money to fight the war in Afghanistan. So I've got a real problem about expanding this war where the rest of the world is sitting around and saying, isn't it a nice thing that the taxpayers of the United States and the U.S. military are doing the work that the rest of the world should be doing?

So what I want to see is some real international cooperation, not just from Europe, but from Russia and from China, because what happens in Afghanistan impacts what happens in Pakistan. That is enormously important. The world should be involved. We should not be...

STEPHANOPOULOS: But you know the Russians are not going to be going back...

(CROSSTALK)

STEPHANOPOULOS: ... to Afghanistan. So does that mean you're not going to support this?

SANDERS: I have a real problem supporting 30,000 or 40,000 more troops and $100 billion more a year for that war on top of what we're spending in Iraq.

STEPHANOPOULOS: Senator Graham?

GRAHAM: Well, I'd like to hear the details from the president Tuesday, but I would support an increase in troops, for the reasons that Bernie just kind of indicated about Pakistan. The whole world is watching what we're doing there. The Iranians are threatening to withdraw from talks regarding their nuclear programs, and we'll be evaluated by some pretty tough characters in the world as to how we handle Afghanistan.

This is not just any place on the planet. This is the place where the Taliban took control after the Russians left, aligned themselves with Al Qaida, and attacked this nation and killed 3,000 Americans, and I hope the president will tell the world, our troops and anybody listening Tuesday, that will never happen again. With this new surge of forces, Taliban will never take back over Afghanistan. We're going to put measurements and benchmarks on the Afghan government, but we're going to have troops in Afghanistan to win the conflict. I hope he says that, without any uncertain terms.

STEPHANOPOULOS: Senator, how about this question of cost, as Senator Sanders raised? It looks like the cost is going to be about $1 million per year for each additional service member, and a lot of Democrats, like the chairman of the House Appropriations Committee, David Obey, talked to our Jon Karl this week, said we ought to pay for it. Take a listen.

(BEGIN VIDEO CLIP)

OBEY: If we have to pay for the health care bill, we should pay for the war as well.

JON KARL, ABC NEWS: How?

OBEY: By having a new war surtax. The problem in this country with this issue is that the only people who have been asked to sacrifice are military families.

(END VIDEO CLIP)

STEPHANOPOULOS: Does he have a point there, Senator Graham? If we're going to fight a war, shouldn't the American people pay for it?

GRAHAM: Well, I'd like to see an endeavor to see if we can cut current spending and find some dollars that we're spending today to pay for the war, and prioritize American spending. Where does our national security rate in terms of spending? Are there things that we can do in the stimulus package? Can we trim up the health care bill and other big-ticket items to pay for a war that we can't afford to lose?

So I welcome a debate about how to control government spending and pay for the war. I do want to let Bernie and anyone else listening know that from my point of view, the president is correct in assessing that Afghanistan is a war that must be won because the national security implications of what happens in Afghanistan will follow this country for decades, so I intend to support the president.

STEPHANOPOULOS: I want to -- I want to ask Senator Sanders to comment on this, but first, let me press you on that. You're against -- let me first get Senator Graham on one point there. So you are against the tax, but you are for cutting spending to pay for this, not increasing the deficit? Senator Graham?

GRAHAM: I think it would be a good exercise for the Congress to look at ways to trim up the spending, which has been out of control since the administration came into power, and prior towards this war, the way it should be. Our national security future depends on getting it right in Afghanistan, and there is no better use of taxpayer dollars than to defend America, in my view.

STEPHANOPOULOS: Senator Sanders?

SANDERS: Well, let's see. We spent perhaps $2 or $3 trillion in the war in Iraq that Bush got us into that we never should have been in, which we didn't pay. We sent that bill to our kids and our grandchildren. And what Senator Graham is now saying is, as I understand it, is hey, we can cut back on education so middle-class families can't afford to send their kids to college. We don't have to rebuild our infrastructure. We don't have to invest in sustainable energy, so we stop importing $350 billion a year of foreign oil. We don't have to do all that stuff. Let's just spend more money in Afghanistan, while Europe and the people of China and the people of Russia watch us do that work. I think that is a very poor set of national priorities.

STEPHANOPOULOS: So, Senator Sanders, if I hear you correctly, if you're against -- if you have a big problem with sending more troops, does that also mean that you're against this surtax that Congressman Obey is talking about in order to pay for the troops?

SANDERS: Look, we have a presence in Afghanistan now. No one is talking about bringing the troops home tomorrow. What we need is more international cooperation. We need an Afghan government that resonates with its people, that is not corrupt. But if you're going to have a presence there, you just can't pass the bill on, as we did in Iraq, to our kids and our grandchildren. I think that's wrong. I think that's immoral.

STEPHANOPOULOS: OK, let me turn to health care now. Senator Graham, there is a new study out by Jonathan Gruber of the Massachusetts Institute of Technology, based on Congressional Budget Office numbers, which shows that premiums for most Americans are actually going to go down under the Senate health care bill. So then, what you've got lined up now, according to Congressional Budget Office numbers, the deficit goes down over 10 years, costs get under control, and premiums will go down for most Americans. Why can't Republicans support that?

GRAHAM: Well, because I don't believe that's true. To make that happen, we're going to have to reduce Medicare spending by about $400 billion over a 10-year period to get the math right. We haven't reduced Medicare spending by 40 cents, so that's not going to happen. You have to increase taxes to get the revenue neutral. And when you look at the second 10 years, the deficit goes up to $2 trillion, because in the first 10 years, you collect taxes for four years before you pay out any benefits. And when you look at the 10 years to follow, that's when the spending goes up.

This whole idea of have we been spending enough and the Afghan war is the problem to me is ridiculous. We have been spending money on stimulus packages, growing the government in appropriations bills by double digits, now a $2 trillion spending package on health care too, and a half-trillion dollars in the second 10 years. We'll make premiums go up, because taxes go up to pay for it, and we'll never cut Medicare benefits to make it work, nor should we.

So I think the whole thing is a sham. And we've done nothing with the doctor fix. Are we going to let the $200 billion doctor fix go into effect over the next 10 years? The House just passed it without an offset. So when you look at it, it makes an Enron accountant blush the way they're trying to make these numbers work.

STEPHANOPOULOS: What's your answer, Senator Sanders?

SANDERS: I voted for the doctor fix. I don't think that Senator Graham did. Bottom line is...

(CROSSTALK)

SANDERS: ... we are the only country in the -- well, we are the only country in the industrialized world that does not guarantee health care to all of its people, and yet we end up spending almost twice as much per person as any other country on earth. We have 45,000 people in this country who are going to die this year because they don't have access to a doctor. Under Bush, the Republicans did virtually nothing about health care, except see 7 million more Americans lose their health insurance.

So of course, we've got to address the health care crisis. Every person in this country is entitled to health care in a comprehensive and cost-effective way.

STEPHANOPOULOS: The question is how, though, Senator Sanders. And last week, I had Senator Ben Nelson. There are still some big differences among Democrats on this bill. Senator Ben Nelson of Nebraska, and he drew a line in the sand. He said he would support a filibuster to block a final vote unless his conditions are met. Here is what he said.

(BEGIN VIDEO CLIP)

NELSON: If the public option is wrong, if the CLASS act is still in it, if there are a whole host of other items that are the same as they are right now, I wouldn't vote to get it off the floor.

(END VIDEO CLIP)

STEPHANOPOULOS: Now, sir, you are a strong supporter of the public option. Will you vote to prevent the bill from getting to a final vote and actually support a filibuster if the public option is not included?

SANDERS: Well, let me just say this, George. The reason I am a strong supporter of it, enhanced public option, is for two basic reasons. Number one, the American people, for all the right reasons, don't trust private insurance companies, because they understand the function of a private insurance company is not to provide health care, it's to make as much money as possible. Second of all, if we are going to control health care costs, we need strong cost containment, and one way -- not the best way, by the way, which would be a Medicare for all single-payer system -- but we're not going to have that -- but one way you control costs if by providing real competition to the private insurance companies by allowing as many people as possible to be in a strong public option. If you don't have that public option, I think you're not going to have the cost containment we need. I would be very reluctant to support legislation that did not have a strong public option.

STEPHANOPOULOS: Well, that's the final action. So will you prevent the bill from getting to a final vote? Will you support a filibuster if it's not included?

SANDERS: We're going to -- well, I've got to see what ends up happening. I've got about 10 separate amendments. Other people have amendments. And I think, George, I'm not just speaking for myself. I'm speaking for other senators, I'm speaking for many members of the House, we're going to fight and demand a public option and a strong one at that.

s: OK, we're just about out of time. Senator Graham, before we go, I want to ask you both about chairman, Fed Chairman Ben Bernanke. He's got a hearing this week, his confirmation hearing to be reappointed as Fed chair, and Foreign Policy magazine has named him the world's top thinker for 2009. I know that both of you had pretty heated exchanges with the chairman over this past year. Senator Graham, you go first. Is this honor well deserved, and will you vote to confirm him to reappointment as Fed chair?

GRAHAM: I think he made some decisive decisions a couple of years ago. At the time, it kept the economy from going into a depression. But like any organization, he needs to have -- we need (ph) to have more transparency and accountability about how the books are being used. I think he's done a very good job, but the Fed needs to be looked at closely in terms of their balance sheet.

STEPHANOPOULOS: Senator Sanders?

SANDERS: No, I absolutely will not vote for Mr. Bernanke. He is part of the problem. He's the smartest guy in the world, why didn't he do anything to prevent us from sinking into this disaster that Wall Street caused and which he was a part of? No, I will not vote for Bernanke to stay on as chairman.

STEPHANOPOULOS: OK, gentlemen, thank you both very much for your time this morning. Hope you had a good Thanksgiving.

GRAHAM: Thank you.

SANDERS: Thank you.

STEPHANOPOULOS: We're going to go straight to the roundtable now.

STEPHANOPOULOS: And as our panelists take their seats, take a look at the last time a president went to the country to announce a major war escalation.

It was January 2007.

(BEGIN VIDEO CLIP)

PRESIDENT GEORGE W. BUSH: The situation in Iraq is unacceptable to the American people and it is unacceptable to me. So America will change our strategy to help the Iraqis carry out their campaign to put down sectarian violence and bring security to the people of Baghdad. This will require increasing American force levels.

America's commitment is not open-ended. If the Iraqi government does not follow through on its promises, it will lose the support of the American people.

(END VIDEO CLIP)

STEPHANOPOULOS: Substitute Afghanistan for Iraq, you're likely to hear many of those exact same sentences on Tuesday night when the president goes to West Point. Let's talk about it here on the roundtable. I'm joined as always by George Will; Dan Senor, fellow at the Council on Foreign Relations, also author of a new book called "Startup Nation: The Story of Israel's Economic Miracle" with Saul Singer. Matthew Dowd, welcome back. Paul Krugman from the New York Times and Princeton, and Cokie Roberts.

And George, we do know the outlines pretty well what President Obama is going to announce on Tuesday night. It looks like General McChrystal got most of what he wanted, probably 30,000 troops or so, some NATO troops. Clearly the president didn't take your advice. You were arguing for much more limited involvement.

WILL: Not for the first time.

(LAUGHTER)

WILL: For the second time in nine months, he's going to announce a new strategy for a war now in its ninth year. He says he's going to finish the job. His job on Tuesday night is to tell us what the job is that he's going to finish.

I think it's going to be -- you talked about the familiar rhetoric -- it's going to be the Bush program, which is, as he used to say, as the Iraqis stand up, we will stand down. He's going to say, as the Afghans stand up, we'll stand down. Meaning we're there to train them and get out.

Mr. Gibbs said at the White House, the press spokesman, we will not be there nine more years.

The problem is, the Afghans know that. And they know that the Taliban will be.

STEPHANOPOULOS: That is the problem. And let me bring Matthew Dowd in here on this question, because the president has got to speak to many different audiences on Tuesday night, and it seems on the one hand, he's going to be arguing to the Afghans, the Taliban and the Pakistanis, we are there to stay, while at the same time arguing to the American public, no, we're going to go.

DOWD: He has got a really difficult problem because he's got an international audience, as you say, that he's got to talk to, and also a domestic audience that's already flipped on him from where he was at the beginning of this presidency, when the majority of people supported what he was doing in Afghanistan. Now the majority of people oppose what he's doing in Afghanistan.

The interesting thing I find about this is that all of this thing that people said he's putting all of this thought and decisiveness, he basically -- it took him 94 days to reach the same decision George Bush would have done. Exact same decision George Bush would have done probably in two days, or three days, or a week.

(CROSSTALK)

ROBERTS: It took him a long time to come to the surge.

DOWD: No, to the realization that the military generals wanted to do this, and that's what I think is his biggest problem, is the American public has flipped on this, and now he's basically going to be advocating a Bush policy that failed in the last administration.

ROBERTS: I think, though, in the interim, between the time that McChrystal asked for this and Tuesday, that there's been a lot of heat. They have used this period to put a lot of heat on Karzai's government. And also that election, that peculiar election was going on in the middle of all this. And then when that got solved, as oddly as it got solved, they then were in there in full force to try to say, look, you know, you want us to do this, but for us to do this, you have to do -- you have to improve.

STEPHANOPOULOS: And that is probably going to be what's most new in the president's strategy, Dan, on Tuesday. What else, as you look at it, because the president's going to have to argue that this is a brand new strategy, that he's gotten something for this. What else should we be looking for there?

SENOR: Whether or not he sets realistic expectations. The reality is, even with this troop deployment, summer of 2010 is going to look much worse in Afghanistan than summer of 2009. Casualties, American casualties will go way up. The reality is, the fighting season, the sort of kinetic fighting patterns by the Taliban are at their peak between March and November. So that means -- and by the way, they're doing a very slow timeline here. They're deploying about a brigade a quarter. I mean, the Iraq surge was a brigade a month. So you talk to the Iraqi commanders, they say one of the most powerful imports in the Iraq deployment was within five months, you had five brigades on the ground.

STEPHANOPOULOS: (inaudible) speed up this deployment.

SENOR: Well, they're talking about a brigade a quarter. So that means...

ROBERTS: Which is how many people?

SENOR: About 3,000 to 5,000 troops. So summer of 2010, we won't have that many more troops there. It will be a bitter fighting season. And the real comparison, actually, if the president wants to look at progress, will actually summer -- comparing summer of 2011 to summer of 2010.

But this is -- comes back to something that George said. This will require the president to really explain and educate and inform on Afghanistan, something he's not been prepared to do. He's really only given two major speeches on Afghanistan. In March, when he announced the first troop increase, and then this summer in front of the Veterans of Foreign Wars. He hasn't really talked about it.

STEPHANOPOULOS: He hasn't talked about it that much, but of course that is what he's going to be doing Tuesday, an expansive speech. He's going to have to define down his goals as well.

KRUGMAN: Yes, and that's, but, you know, if there's one thing that this president is good at is explaining things. That's what he ought to be able to do. And look, I mean, I feel a little bit sorry for him. This was inflicted upon him. This was -- he was left a legacy, as George says, of basically a failed war, a war that might have been won quite easily in 2001, 2002, if Bush hadn't had his eyes on Iraq instead. And now he has got to play catch-up. I'm sure he would prefer not to be doing this at all. He's kind of in a political box. What can you do?

ROBERTS: I don't think it was so much inflicted on him. After all, all through his campaign, he talked about Afghanistan as the war of necessity. I mean, he upped the ante. He really did.

(CROSSTALK)

ROBERTS: And I think that he, therefore, he has to deliver on Afghanistan. And I also think that one of the things that he can explain is that the difference that it will make for women and girls in Afghanistan if we leave is devastating.

(CROSSTALK)

STEPHANOPOULOS: I got to say, I bet that's one thing he's not going to do. He might give a glancing blow to it. I think he's going to try to say all we can do is stabilize that country. We can't create, as Secretary Gates has said, a Valhalla in Afghanistan.

ROBERTS: No, of course not. But people in this country were very excited when they saw those girls going to school for the first time in years, and all of that. And the sense that America was doing something good in the world, which we are all over the world, but a lot of people don't realize that. And the idea that those people would just be locked up again and repressed is something to make a case for.

DOWD: I actually think David Obey actually -- to go into the politics -- has put his finger on the...

STEPHANOPOULOS: The House Appropriations chairman.

DOWD: The House Appropriations chair, who basically came out and said, if you're going to do this, you need to find a way to pay for it. And I actually think he put his finger on the problem that we ended up with in Iraq and the problem that we have with Afghanistan for this president, which is we called for no sense of shared sacrifice by the country. And when we don't ask for a sense of shared sacrifice, whether it's somebody, you know, bringing (ph) rubber like they did in World War II...

(CROSSTALK)

DOWD: They are more likely to believe in the goal and they're more likely to flake earlier on. And I think he is probably not going to do this, but he would be certainly better off if he called the country to a sense of shared sacrifice on this.

WILL: We're also asking our allies in NATO to sacrifice, what, 5,000 troops. NATO's 60 years old. This is its first war. Never been to war before, and it's not really going to war now.

(CROSSTALK)

SENOR: I think this proposed tax increase is completely -- first of all, I don't think the Obama administration is going to get behind it. But when you think about the math here, Orszag, the OMB director, is projecting about $1 million per troop. So they're saying it's $30 billion annually if we do 30,000 troops.

(CROSSTALK)

SENOR: But the reality is, the congressional Democrats who we are talking about who are uneasy with this decision, would have probably accepted 10,000 or 20,000 troops. So you're not (inaudible) $30 billion more. We're probably talking about $10 or $15 or $20 billion more. That's about the size of our entire foreign aid budget. Could you imagine the precedence this will set? If every time we have a foreign policy issue, we're going to impose a surtax on it?

(CROSSTALK)

KRUGMAN: This is a lot of money. And the point is, we should have been paying for these wars to begin with, right from the beginning. I mean, this was, if you want to talk firsts for Bush, this was the first time in American history that a president took us into a war and cut taxes. And it might actually -- it would be unpredictable and risky, but to actually say, no, we're going to pay for this, because we're in this for, you know, a serious commitment, it might actually...

(CROSSTALK)

SENOR: They said the Israelis and the Palestinians are not making enough progress on their peace process track, so we're going to say to them, we're not going to put more money into foreign aid, into the Palestinian Authority and Israel unless -- unless they get serious, and we will impose taxes on this country because this country views this as a high priority. You start to see where this goes if every time...

(CROSSTALK)

KRUGMAN: There's a big difference between foreign aid and a war. Wars are expensive. Iraq was supposed to be cheap. It's turned out to be at least $1 trillion, probably well more than that. So...

SENOR: But let's be honest what this is about. It's about a campaign against President Obama's troop surge. That's what it's about. It's not really about...

(CROSSTALK)

WILL: And there's going to be no surtax. I mean, we all agree on that. It's not going to happen, OK? So, everyone, relax.

(LAUGHTER)

DOWD: I agree there is not going to be a surtax, but I think this goes to a fundamental value that I think we've lost, which is that we can get things for nothing, that we can go to war and not have to pay for it, either by cutting the budget or doing something else. We have a war, we don't have a draft. All of these sorts of things, that we, think, oh, by the way, we can go fight the most important war in the history of our country, but we're not going to have a draft, we're not going to pay for it, we're not going to do anything that causes anybody to sacrifice.

SENOR: If Pelosi and Obey were being intellectually about this, they would wage a war against the president's surge policy Wednesday morning, as opposed to doing this via some proposed surtax.

ROBERTS: Well, also, a surtax is not the total sacrifice of the whole population. I mean, that's the really what you're talking about much more, Matt, is everybody getting in together.

(CROSSTALK)

DOWD: ... idea I think underlines the problem that we don't ask people. When we say these things are important, we don't ask the country to come together for them.

STEPHANOPOULOS: When this is all done, the president will probably, as we said, have about 30,000 more troops on top of the 68,000 to 70,000 there. Close to 100,000. 2012, when he's running for re-election, I am going to ask you all quickly, how many troops will be in Afghanistan?

WILL: Including NATO? 100,000.

SENOR: I agree. 100,000, and it will be amazing, because President Obama will be running for re-election having doubled our presence in Afghanistan and not actually meaningful reduced our presence in Iraq.

DOWD: It will be 100,000 troops. And his polling on Afghanistan will be 10 points lower, just as it was with Bush when he left Iraq, when he left the administration.

KRUGMAN: I don't have a view. I really don't have a view.

ROBERTS: I'll just say 100,000 too. I just don't see how you get around that.

STEPHANOPOULOS: I'm going disagree with all of you. I say it will come down to about 80,000. But we'll see. That is going to be one of the key questions he faces on re-election.

We're going to have more roundtable in a minute. Our Nobel Prize winner is going to weigh in on the economy. We're going to debate the president's trip to Copenhagen, and this climate change e-mail controversy. Plus, those White House party crashers. And again, we head to break with a bit of the best movie ever on party crashing.

(MUSIC)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

(UNKNOWN): Mr. And Mrs. Salahi.

(UNKNOWN): A pair of Washington socialites actually crashed President Obama's first state dinner.

(UNKNOWN): You can't allow anyone, uninvited, who has not gone through a security clearance, to be walking into the White House. The potential could be catastrophic.

(UNKNOWN): The Secret Service is acknowledging a huge security blunder.

(UNKNOWN): Folks who know them aren't as surprised. And just sort of roll their eyes and chuckle, and say, I can't believe this is the latest thing in this couple's, you know, rise to fame.

(END VIDEO CLIP)

STEPHANOPOULOS: And surprise, surprise, they're trying to sell their story now. We'll get to the Salahi party crashers in just a minute, but first, let me bring the roundtable back. George Will, Dan Senor, Matthew Dowd, Paul Krugman and Cokie Roberts.

And I want to begin, though, a lot of economic news this week, and since we have a Nobel Prize winner here, this Dubai sovereign wealth fund midweek says they want to reschedule their debt payments. Stock markets around the world start to drop, recover a little bit on Friday. What's going on here?

KRUGMAN: The question is, by itself, Dubai is not that big a deal. It's a fairly big, you know, if a bankruptcy in the end, it's a fairly big bankruptcy, but not a huge one. So it only matters to the extent that people see it as an omen or an indicator.

And the first reaction was, oh, my God, this is a sovereign government defaulting on its debt, and therefore everyone's at risk, because we're all running deficits, we've all got bigger debts than we did a couple of years ago. That has mostly faded out now.

The second thought was, basically, this is not a country. First of all, the company is not a country. But basically, DubaiWorld is not -- is actually not a legal obligation of the Dubai government to back it. Everyone thought they would, but it's not their legal obligation. And secondly, Dubai itself is, you know, looked at economically is basically a highly leveraged investor and commercial real estate, right, which is -- and all highly leveraged investors in commercial real estate all around the world are in big trouble. So Dubai is just looking like some developer, somebody who put up a bunch of shopping malls...

STEPHANOPOULOS: But I think you hit on a key point. I think what worried everybody, Dan Senor, I know you've done some work there as well, is the idea all of a sudden that the government might not back up its own sovereign wealth fund.

SENOR: I agree with Paul. We have limited exposure, the U.S. has limited exposure. European banks have exposure. The U.S. banks have very little exposure.

I think the real problem here is you're looking at the cost to insure other sovereign debts from emerging market economies exploded over the weekend. Bulgaria, Hungary, Russia, Greece. I mean, what if one of these economies implodes? So you can argue -- you argue that Dubai is a glorified like shopping mall, and it's not a real country, or a real emirate. But the reality is, if you start having these emerging markets blow up left and right, at a time when there's already such insecurity that a little blip like this can cause panic...

STEPHANOPOULOS: And that's what we saw on Thursday.

WILL: Right. Paul used the magic words from 2010, that's commercial real estate. We have in the next two or three years about $1.5 trillion of commercial real estate loans (ph) that have to be refinanced. They are being refinanced on buildings that are worth 30 to 40 percent less than they were when the loans were taken out.

This week, we revised downward from 3.5 to 2.8 the growth in the third quarter. Wall Street Journal reports that one in four Americans with a mortgage are under water, that is their mortgage is bigger than the value of their house. So the signs out there are still ominous.

(CROSSTALK)

KRUGMAN: ... issue, I mean, sorry, just to say that the question was, whether Dubai triggers another wave of financial crisis? The answer is, almost surely not. The question is, is the economy OK? That's very different.

STEPHANOPOULOS: And there of course the number one indicator there is the one we have been focused on for so long, unemployment, above 10 percent. And, Cokie, as we wait for the president's jobs summit on Thursday, we're already seeing the House of Representatives say we want to vote on something this year...

ROBERTS: No, they're desperate...

STEPHANOPOULOS: ... about another $200 billion...

ROBERTS: They are desperate to have a jobs vote. And it's one of the reasons, it's one of the impetus behind the health care bill is to get it done so they can get a jobs bill, because, as you know, going into an election year with double-digit unemployment is obviously a terrible problem for the majority party.

But they don't really know exactly what to do. I mean, they have already extended unemployment. They've already extended tax credits for first-time home buyers. Now they're talking about trying to lean on lenders on mortgages, but their solution there is to try to make them feel shame. And it doesn't seem to be working for any of the -- Wall Street people don't seem to feel shame.

STEPHANOPOULOS: The president's going to push on them again tomorrow, on the banks.

DOWD: I think this is the president's political problem that he has, and I don't think this jobs summit is going to do anything to solve that problem. I actually think the American public thinks that the stimulus package that was passed eight months ago was supposed to be a jobs bill, and never actually created any jobs that the American public has seen. So, now, he's going to have a meeting, a summit, an event, he's going to have a meeting and say, oh, here's some stuff we're going to do. And I think the public sits there and is going to say, well, I don't have a job, my brother doesn't have a job, what have you been doing for nine months?

STEPHANOPOULOS: But, but (inaudible) the White House political problem there, is that they're arguing that it could have been worse...

(CROSSTALK)

DOWD: Nobody out there in America, will say oh, yes, we would have lost more jobs if you hadn't done that. All they're thinking about is...

(CROSSTALK)

STEPHANOPOULOS: So what would make a difference right now?

KRUGMAN: If you could get $300 billion...

(CROSSTALK)

KRUGMAN: If you could get some significant amount of money. It doesn't have to be as big as the first one. There are things you can do to create jobs more cheaply than the kinds of things they did before. You can have tax credits for businesses that hire more people. You can have direct employment programs, WPA type stuff, you know, short-term employment things that are quite cheap per job created, because they create poor-paying jobs, but it's better than nothing. You can provide another round of aid to state and local governments, which are going to be in desperate straits and are going to be really laying off a lot of people.

STEPHANOPOULOS: Prevent teacher layoffs.

KRUGMAN: So you can -- Economic Policy Institute has a plan that is going to be announced tomorrow that is a $400 billion thing. And it looks plausible. It could create quite a few jobs. It would make a big difference.

(CROSSTALK)

STEPHANOPOULOS: ... businesses wouldn't just (inaudible)?

KRUGMAN: There are some mixed evidence. But what we know is that -- and what everybody talks about is Germany, which basically has a system of subsidizing, subsidizing companies to keep workers on. Not to -- reduce their hours, but don't lay them off. Which has been spectacularly successful.

Germans have had as deep a recession as we have had, but with hardly any increase in unemployment. And that suggests that, yes, providing some financial incentives to keep workers on, to add more workers for those companies that are expanding, would work.

WILL: It's an old axiom in Washington, the title of legislation is like the title of a Marx Brothers movie. Tells you nothing about what's in it. "Duck Soup," "Horse Feathers."

We will have a legislation that will try -- and this will be a challenge -- to not use the S world, stimulus. Because we've had -- and I keep saying this, and...

(CROSSTALK)

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...

(CROSSTALK)

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.

(CROSSTALK)

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.

(CROSSTALK)

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.

(CROSSTALK)

KRUGMAN: The Times had a front-page story about the debt bomb. And it had a chart which was meant to be very scary, and it showed that on current projections, by 2019, the share of the economy that is spent on debt service will be up to the levels not seen since the first George Bush was president.

SENOR: The Republicans in Congress are not going to evaluate this based on it's just a jobs stimulus. Even if it were to be proposed as (inaudible), they're going to say, look, we spent $160 billion on AIG, we spent $400 billion on saving the GACs (ph), Freddie and Fannie. We spent $3 trillion in Treasury and Fed support and guarantees, on top of that the stimulus. I mean, at some point, the notion...

KRUGMAN: Republicans are going to vote against anything.

SENOR: But I think you're going to see even a lot of Democrats, too. I mean, these numbers are going to become astonishing.

(CROSSTALK)

ROBERTS: The fact that we had Ron Paul's amendment pass in the House of Representatives in committee this week tells you that there's a huge upset in both parties with the financial institutions, with the Fed, with everything that's going on economically.

(CROSSTALK)

DOWD: Politically in the end, politically in the end, the deficit doesn't matter, if the economy is growing and jobs are being created. It matters when the economy is bad. So if the deficit continues to grow and the economy stays bad, Republicans and the American public can say, we've messed up. The government isn't doing what it should (ph). Look at the deficit. Look at this. This is the problem. So if the economy started to grow and we had a deficit, then I think politically, he's fine with that.

(CROSSTALK)

KRUGMAN: Important political fact, which is that whatever you would do with the deficit, the public won't notice. In 1996, a majority of Republicans thought that the deficit had increased under Clinton, even though we had in fact...

ROBERTS: Balanced the budget.

KRUGMAN: ... been on an incredible run. So no, I mean, the deficit doesn't matter. The economy matters. And that's why somehow or other, Obama has got to get jobs being created.

STEPHANOPOULOS: And meanwhile, he is also going to be dealing with health care, right now on the floor of the Senate. He announced this week to Copenhagen to deal with climate change. And it comes at a time when the politics seem to be changing a little bit in this.

Let me show our latest ABC News/Washington Post poll. It shows whether people believe global warming is occurring. That number is going down. July 2008, 80 percent of the public; down to 72 percent now. And there's been a sort of a real partisanship. Look at Republicans, 74 percent believed global warming was occurring back in 2008. Now, a 20-point drop to 54 percent.

George, there has been a partinizing of this issue, and let me turn to one more complication we've had over the last week. This Climate Research Institute at East Anglia University, someone hacked into their e-mail account and showed a bunch of emails between scientists, which opponents of climate change legislation said proves that they are rigging the science and trying to hide information that runs counter to their theories.

WILL: It raises the question of -- we're being asked to wage trillions of dollars and substantially curtail freedom on climate models that are imperfect and unproven. And the consensus far from being as solid as they say it is, and the debate as over as they say it is. The e-mails indicate people are very nervous about suppressing criticism, gaming the peer review process for scholarly works and all the rest. One of the e-mails said it is a travesty, his word, it is a travesty that we cannot explain the fact that global warming has stopped. Well, they shouldn't be embarrassed about that. It's a complicated business, and that's why we shouldn't be (inaudible).

KRUGMAN: All those e-mails -- people have never seen what academic discussion looks like. There's not a single smoking gun in there. There's nothing in there. And the travesty is that people are not able to explain why the fact that 1988 was a very warm year doesn't actually mean that global warming has stopped. I mean, that's loose wording. Right? Everything is about -- we're really in the same situation as if there was one extremely warm day in April. And then people are saying, well, you see, May is cooler than April, there's no trend here. And that's what -- the travesty is how hard it has been to explain...

WILL: One of the emails, Paul, said he wished he could delete, get rid of the medieval warming period. That lasted 600 years...

KRUGMAN: It's not -- read -- this has all been explained. What he meant is they want to put a start on it. We have an end to it, we don't have a start on it. There's a lot of loose use of language when you're just talking among each other. And what (inaudible) really meant, deleting would be meant that, you know, we don't know when this thing started, because we don't have very good data back then. There weren't any weather stations. And that's what the context was.

DOWD: The interesting thing about this is, which goes back to our previous discussion is, and having done a lot of this polling during the Bush administration, which is when you give people a choice between improving the economy and jobs, and improving the environment, at times of economic prosperity, the numbers for improving environment go above jobs. At a time when there is a recession or at a time when there's a difficult in the economy, people say let's focus on this, let's not focus on the climate. The best route to passing climate change legislation is creating jobs and then (inaudible).

ROBERTS: But the difference between that kind of polling and what George just showed in our ABC poll is that -- is that people are not agreeing on the facts. It's not a question of asking about the legislation.

(CROSSTALK)

DOWD: If they want to go to a different position, they have a tendency to then doubt...

STEPHANOPOULOS: Well, that's what might be happening here, is people who are opposed to cap-and-trade are changing their minds on global warming.

(CROSSTALK)

SENOR: In June of this year, the House voted, close vote on cap-and-trade, 219:212 votes. One out of five congressional Democrats voted against the cap-and-trade bill. If that vote were held today, against the backdrop of this news, plus even worse economic numbers to Matt's point, I guarantee you...

(CROSSTALK)

(UNKNOWN): Nancy Pelosi was very clever to get that in her pocket when she could.

ROBERTS: But for the president to then be going to Copenhagen with all of this going on, becomes somewhat problematic for him, I think.

WILL: But what I was going to say there is that the United States pledges to reduce its carbon emissions 83 percent below the 2005. That will not even be seriously attempted, and here is why. That would mean we would have total carbon emissions equal to the United States in 1910, when there were 92 million Americans. Furthermore, our per-capita carbon emissions in 2050, when he says this is going to happen, when there's going to be 420 million Americans, would be on a per-capita basis what we had in 1875.

STEPHANOPOULOS: (inaudible) credibility problem as well. I mean, I think the issue is, I think the president had to go to Copenhagen. It was the only way to get the Indians and the Chinese to go as well. But, Paul, as he goes, he'll be making a commitment that he can't necessarily keep unless the Senate follows through.

(CROSSTALK)

KRUGMAN: Everyone understands that. And I just want to say, I'm surprised, George, that you lack faith in the power of the marketplace. All this cap-and-trade is about is putting a price on carbon emission, and people will do amazing things given a market incentive.

WILL: Speaking of the marketplace, the biggest industry in the world right now may be fighting climate change. There are billions, trillions of dollars on the table, and when you say, well, they are academics and they are scientists and they talk in funny ways -- academics are human beings, and the enormous incentive to get on the bandwagon on global warming, the financial incentive, the market driving this, is huge.

KRUGMAN: There is tremendously more money in being a skeptic than there is in being a supporter. It's so much easier, come on. You got the energy industry's behind it. There are 20 times as many believers as there are skeptics in the scientific community. They get almost equal time in the media.

(CROSSTALK)

WILL: Is there a larger venture capital firm in this country than the Energy Department of this government, which right now is sending out billions and billions of dollars in speculation on green energy?

ROBERTS: But I think that's something that the American people want. I mean, we want green jobs. We don't want to see those polar bears on those ice floes without any ice around them. All of that. I think, coming up with ways to have the energy that we use without causing global warming and polluting the air is something that is something desirable.

(CROSSTALK)

DOWD: I agree, the public wants that. But if Uncle Joe doesn't have a job, they say let's -- don't worry about the polar bears right now.

(LAUGHTER)

STEPHANOPOULOS: We have just about a minute left. And just quickly on this pretty crazy story at the Indian state dinner. A couple was able to crash the gates. And, George, at first, you know, you laugh at it, how can they possibly do this? You know these guys are going to go sell the story. But it's a pretty serious security breach.

WILL: At the end of the day, it's not funny. There is an old axiom that applies elsewhere but not in Washington, that when there's no penalty for failure, failure proliferates. This was a failure of security of major proportions. And let's see whose job is lost.

ROBERTS: I feel sorry for the Secret Service. Look, you know, you're in this situation, that at a White House gate. It's raining. People are pushing in. And they're all somebody fancy. And you're more likely to get in trouble if you hold them up and question them and have them be, you know, all uppity with you.

STEPHANOPOULOS: But that may be why that person -- the Secret Service should not have been unaccompanied at the gate by someone with the actual list.

KRUGMAN: (inaudible). And this president receives I believe a record number of death threats. Let's just say, this -- we don't know how seriously to take it, but you should not be taking any -- cutting any corners on protecting this president.

DOWD: To me, it's a bigger commentary on society. When basically people now seek fame for fame and celebrity sake, but they're not going to, like, invent a vaccine, they're not going to, like, run a mile in under four minutes. They want fame, have a Bravo television camera come, and the whole thing is now about gaining celebrity, not doing something substantive and getting celebrity after.

SENOR: I would say this is probably not the administration's fault. And I agree with you, also, that the Secret Service is probably going to get a bum rap here. But to the extent that there's a big discussion going on right now, people starting to question the competence of this administration, certainly on the heels of this China trip, that people are raising big questions about the competence, how this Afghan review strategy was run -- this is not the administration's fault, but ...

(CROSSTALK)

STEPHANOPOULOS: You guys can discuss this in the green room.

END

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