'This Week' Transcript: McCain

And it's mysterious why the Democrats are responding in this way. It's no mystery about the Republicans. They don't care if the -- in November, for the midterms, the -- the Democrats are facing a really lousy economy. They figure that voters will take that out on the Democrats.

But it's more a mystery why Democrats are responding this way. They seem to be frightened of the voters and believe that voters are absolutely furious about the deficit. But, in fact, that doesn't show up in polls.

The vast majority of polls show Americans are more concerned about jobs. That's the number-one issue. Concern over the deficit is rising. But in most polls, voters rank concern about jobs over concern about the deficit.

TAPPER: Dan?

SENOR: Yes, I would say there -- there's a big question going on in Congress and across the country. Where does this end? I mean, what you and Paul are arguing for is not a -- a difference in strategy. You're arguing for a difference in degree, amount of spending. The strategy is the right strategy, is what you're basically saying, the administration strategy.

Now, there are two models that people are talking about, you hear members of Congress talking about. One is Greece. In 2012, the amount of debt that the U.S. government will accumulate will be bigger than our economy produces. That looks a lot like Greece or Japan, which has something like 200 percent of debt to GDP.

I mean, if you look at just the interest payments alone that the Japanese government pays, it accounts for 25 percent -- the interest on its own debt, 25 percent of its national budget. Now, its interest payment is 1 percent.

KRUGMAN: That is not right. We can't do this, Dan, right now, but that number is not...

SENOR: I will -- I will happily provide it for you.

KRUGMAN: That's -- that's just not right.

SENOR: But the point is, is that...

TAPPER: We'll bring in PolitiFact on that one.

SENOR: Exactly. You begin to get in a situation where the interest payments on the debt become unsustainable, the debt becomes unsustainable, and there's a lot of uncertainty. There's uncertainty now about the Bush -- the expiration of the Bush tax cuts, the impact that'll have on the economy, the impact on health care, the Obamacare spending, what impact that will have, possible cap and trade. And people are just sitting on the sidelines saying, "Where does this end?"

RAMOS: But the debate, I think -- the debate is right there. I mean, do we -- do we really need the government right now just more intervention, more stimulus, or are we going to go just to -- to cut the deficit? I think we -- we need both, but at this point, in order to just to have a recovery summer, as Vice President Biden promised, we need -- we need -- we need more government intervention.

KRUGMAN: The economics is really clear. You need to commit to doing something about the deficit once the economy has recovered. But cutting right now is -- doesn't even do very much for your budget position, because it makes the economy weaker, it means less revenues. It's really going to hurt. The -- the arithmetic of budget cuts now is just terrible.

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