'This Week' Transcript: Madeleine Albright, Sen. Lindsey Graham, Sen. Kent Conrad and David Cote

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WILL: Secretary Gates doesn't want to buy any more C-17s. He wants to put a lid on F-22. There are lots of ways of...

(CROSSTALK)

KRUGMAN: Can I just get into magnitudes here, though? The cost of permanently extending just the upper-end Bush tax cuts, as opposed to only extending the middle-class tax cuts, the 75-year cost of that is just about identical to the 75-year accounting shortfall in Social Security. So we've got people who are saying, oh, Social Security, got to do something about it, but let's extend those tax cuts for rich people. This is showing how the priorities are all skewed (ph).

AMANPOUR: But what is going to happen? I mean, are you clear on where a compromise is going to be? It's got to be discussed before the end of the year, no?

KRUGMAN: No. Some years down the pike, we're going to get the real solution, which is going to be a combination of death panels and sales taxes. It's going to be that we're actually going to take Medicare under control, and we're going to have to get some additional revenue, probably from a VAT. But it's not going to happen now.

(CROSSTALK)

AMANPOUR: ... on the tax thing, for the Bush -- yes, the specific...

MARCUS: I think we know where this is coming out. It's not where it should come out, but I think because everybody agrees that we're going to extend the tax cuts for 98 percent of the people, and because the president doesn't have the votes to not extend the rest, what we're going to do is have some kind of extension for a few years, perhaps, and Senator Warner from Virginia has suggested this. Perhaps we could tweak those cuts to actually make them more attractive to business, more stimulative, more intelligent.

This is not my preference. I think that the conversation right now is deranged. We have in one room the deficit commission folks saying, "Look at this huge hole. Look at the tax increases and serious spending cuts that we need to do to fill it." And then outside the room, we're having a debate about whether we should add $4 trillion to the deficit long term or a mere $3.3 trillion. This is crazy.

WILL: All the tax cuts are going to be extended. They will not be decoupled. We'll have this argument two, maybe three years from now.

Notice what Paul referred to, the value-added tax. Some while ago, it was thought that this was kind of big bomb that the deficit commission would come in with, an entire new source of revenues. They did not notice that last April the Senate voted 83-13 on a resolution condemning the value-added tax. It will not happen.

AMANPOUR: Let's take it overseas. I mean, there is obviously in Britain a value-added tax. There's this debate going on right now in England, in France, Ireland, all over the place, and they're doing serious austerity. And people are asking, can their economies handle that?

What do you think is going to be the picture in -- in Britain over the next few years?

KAGAN: Well, it's going to be some very extreme austerity...

AMANPOUR: People are already on the streets.

KAGAN: Right. I mean, we'll see how -- I think that probably Cameron has enough of a -- of a -- of a majority in parliament to hang on, if he's tough. I mean, Sarkozy is fighting this battle right now in France. I think that they can probably hang on.

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