Transcript: Axelrod

TAPPER: ... $247 billion in Medicare to -- to repair the fact that doctors now get -- are paid according to regular inflation and not health care inflation, $247 billion. That is separated from this health care bill so that the health care bill is under $1 trillion. And now, you could argue this is a fix that would happen whether or not there was a health care bill. But at the same time, it's -- it's impossible to argue that this $247 million going to doctors is not part of health care reform. It is.

WILL: How do you say "a quarter of a trillion dollars" in Chinese?

(CROSSTALK)

KRUGMAN: I will say that, at the margin -- at the margin, this money is not coming from the Chinese. We're actually borrowing a lot less from the Chinese when -- when we were. So that's -- that's an easy line. I've used it myself.

WILL: That's in real terms?

KRUGMAN: But it's not actually a good story here now.

WILL: That's in real terms? Or that's...

(CROSSTALK)

KRUGMAN: That's in real terms, that's all around, and because, basically, our borrowing needs as a country have dropped, despite those federal deficits.

STEPHANOPOULOS: But how about the broader criticism? Because, again, that -- I think this Medicare issue is -- is -- is telling. That was the way that members of Congress said they achieved a balanced budget back in 1997. And for a time, we actually had a surplus before the Bush tax cuts. But every single year for the last four, it has been undone, and it makes people skeptical of the savings that are promised in this bill.

KRUGMAN: Well, sure. But, you know, the point is, though, that this is -- this is actually what health care reform is ultimately supposed to bring you around to being able to address. And I know that's a long road.

But what we know from international experience -- remember, we have -- we're the only country that doesn't, among the advanced world, that does not have universal coverage. We also have, by far, the highest costs.

All the evidence suggests that the root to effective cost control runs through universal health care, that once you make it a national responsibility that everybody's going to be covered, once you no longer have the safety valve of dealing with runaway health care costs by just throwing more people into the abyss, then you actually come to confront the health care costs.

So I don't think you want to think of this as an argument against health care reform. You want to think of this as an argument for it.

STEPHANOPOULOS: To do it right. Let's -- let's turn to the politics now. We've got three special elections, three big ones coming up this year. We've got the governors races in New Jersey and Virginia, also a special House race up in northwestern New York.

And -- and I want to show the Democratic candidate for governor in Virginia, Creigh Deeds, a big ally of President Obama. Virginia went for President Obama last year, but he is not highlighting his ties in his campaign ads.

(BEGIN VIDEO CLIP)

DEEDS: Frankly, a lot of what's going on in Washington has made it very tough, and we had a very tough August, because people were just uncomfortable with the spending. They were uncomfortable with a lot of what was -- a lot of the noise that was coming out of Washington, D.C.

(END VIDEO CLIP)

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