Transcript: Axelrod

WILL: That's right, and it persists. That's the problem, is that once the country decides that there's a disconnect between what -- what the stock market does and what the job market does, it seems to me you're going to have great difficulties. And the -- the administration -- I'm not sure what's left in its quiver to throw at this problem.

I am the only one of the six of us -- I'm about to get $250 from the government as part of this super entitlement. I'm entitled...

STEPHANOPOULOS: That's the -- the Social Security.

WILL: ... to a cost-of-living adjustment to Social Security. You're entitled to that when the cost of living goes up, and you're entitled to this entitlement when you're not entitled to it. It's the ultimate expression of our culture.

STEPHANOPOULOS: And that -- and that, Paul, I think the president believed that there's no way he could get health care through if he didn't do that. But on -- on the economic question, Alan Greenspan has said several times that this run-up in the Dow in and of itself is an economic good, that it's going to create a feedback loop that will start to really feed in to the economy, but we're not really seeing it yet.

KRUGMAN: Well, you know, actually the economy, if you measure it by stuff produced, is growing. It's probably growing at 3 percent to 4 percent annual rate. So if you're look at industrial production, it's growing at a more than 5 percent annual rate. What's not growing is jobs.

So we actually are seeing, you know, by -- by the standard of, is GDP going up? The recession is over. The economy's growing. So there is a disconnect between even the real economy and the job market. It -- the stock market will help.

STEPHANOPOULOS: What's...

(CROSSTALK)

KRUGMAN: We're not that sure. You know, we're -- partly, it looks as if businesses are really being reluctant to hire because they don't trust the recovery, little bit like all of us. They don't really trust the recovery.

But there is -- unemployment is higher than it should be, given the state of GDP, given the state of industrial production, so something is a little bit funny here. All that the White House can hope for is that, whatever the mystery factor is, it goes away in -- in the next year or so.

But, look, I mean, this is not the worst situation we've seen. We stepped back a couple of feet from the edge of the abyss. But we've got to see that job growth. And the -- the White House has got to do something to make it happen.

STEPHANOPOULOS: And it seemed pretty clear, E.J., that David Axelrod was signaling that the White House was prepared to do more, even if it meant another short-term increase in the deficit.

DIONNE: Yes, they're going to do a second -- depending on how you count them -- or a third stimulus, and they're not going to call it that. They may even do it piecemeal.

They face -- this is a case where their political interests and their economic interests coincide. They do not want to be going into next year's election in November with unemployment where it is now or going up, and so they need to do something about it.

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