'This Week' Transcript: McCain

TAPPER: Let me bring -- let me bring this out, because we -- I had this made. This is something that -- in February, the Obama administration was very excited. They brought out this icon, which shows all the jobs being lost, and then the stimulus passes, and how job losses and now job gains happen.

Now we have this. I think I'm doing this correctly. And, Paul, where -- where are we going from here? And how much does this really bad bar graph impact the stimulus politics?

KRUGMAN: Well, I mean, now, we know that that's -- last -- last month, the previous month wasn't as good as it looks and the current month isn't as bad as it looks...

TAPPER: Because of the census.

KRUGMAN: ... because of census jobs. So it's -- so what's actually happening is the private sector is continuing to add jobs, but slow, not enough to make a dent in the unemployment.

Yes, it -- this has been always the -- the track for stimulus. If you -- if you do a half-measure, which is what we did, in the face of this incredibly negative shock to the economy, the worst financial shock since the 1930s, then the odds were even -- in -- in advance, the odds were pretty good that you were going to end up with a situation where things were actually not all that good, even after the stimulus had gone into effect.

And then the argument -- the counterfactual that says, well, they would be much worse if we hadn't done this, although true, doesn't cut very much politically.

Plus, there's this worldwide panic. I mean, it's not just the United States. Everyone out there has been saying, oh, you know, we've got to move, because even though the arithmetic says that what we spend on stimulus now isn't really going to matter very much, the bond markets will turn on us.

And this is -- I've been calling it the attack of the invisible bond vigilantes, because everybody is afraid that the bond market is going to turn on us, and they -- they're doing that, even though the actual fact is that the bond markets are signaling a willingness to lend the U.S. government lots of money at very low interest rates, because they see the U.S. government as the only safe thing out there.

RAMOS: (inaudible) recovery without -- without jobs. I mean, we have created -- the private sector created 83,000 jobs. And just to keep pace with the new workers, we need 130,000 per month. So -- so we are in a really bad situation.

But are we going to be cutting deficits right now? I mean, is that -- is that the way to go?

KRUGMAN: I'm simply...

RAMOS: We -- we can go -- I'm sorry -- we can go the way of Greece or -- or I don't know if you've seen the (inaudible) coming from Puerto Rico, but they've been cutting the deficit, and then we have this violent repression of the police against students and demonstrators.

(CROSSTALK)

KRUGMAN: ... the countries -- the countries that actually have gone the fiscal austerity route...

TAPPER: Germany and Greece.

KRUGMAN: Well, Germany is only saying they're going to do it. They haven't done it yet. Greece is a -- Greece is a special case, because they really were massively irresponsible, you know, mega times (ph).

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