'This Week' Transcript: McCain

But look at Ireland, which has been a good soldier in this crisis, has done everything it was supposed to, savage cuts. Their deficit has hardly gone down, because their economy has shrunk so much that the revenues have collapsed. They have mass unemployment. It's -- it's -- it's a mess. And the -- and the markets aren't even rewarding them.

They're -- you know, the -- the cost of insuring against an Irish default has gone up, not down, after the austerity. So there's this -- you know, while we actually have some evidence of -- of how this works, and it works terribly.

TAPPER: Cynthia?

TUCKER: Well, I think that President Obama deserves some of the blame for the politics on this, not the policy. He does want more stimulus, and that's absolutely the right approach, I think. But the public is clearly confused about the difference between short-term deficits and long-term deficits.

The -- our problem will become enormous in about 2015 or 2020, but the very worst way to go about cutting the deficits is to let people stay unemployed. If they're jobless, they can't pay taxes. If they can't pay taxes, the deficit gets worse.

And I think that the president could have done a much better job of explaining that. I think he still could, but he sent mixed messages. He has a deficit reduction commission. He's talked about cutting or freezing federal agencies. And people get confused by that, and they think that problems are immediate.

SENOR: He didn't send a mixed message. He actually was very clear. If the Congress didn't pass the stimulus, unemployment would rise about 8 percent. If they passed the stimulus, it would stay below 8 percent. His problem is being held accountable to what he said would occur if his bill -- if his stimulus package was passed.

And now he's saying, well, it could have been this -- unemployment could have been 13 percent, 14 percent or 15 percent, what he said in Wisconsin last week. The reality is, you may be right that the crushing effects of the debt burden won't be felt for some time, but it is having an effect on investors and lenders and employers today.

People know this -- this debt and deficit burden is unsustainable without major tax increases in the future. Major tax increases and the uncertainty that's associated with them makes it very hard for the private-sector economy to engage. And that's who's on the sidelines right now.

KRUGMAN: I just want to say, that's a -- there is not a hint of what you're saying in the data, not a hint that the debt burden is what's discouraging -- businesses aren't investing because they have massive excess capacity.

But let -- let me say, on the politics, there's an interesting contrast between Obama 18 months in and Ronald Reagan 18 months in. Eighteen months into the Reagan administration, things were terrible. The bottom was falling out of the economy. The unemployment rate had risen much more drastically. And in Reagan's case, it was a recession that started on his watch, as opposed to -- to the Obama case.

Reagan was absolutely, completely defending his philosophy, didn't -- gave no ground whatsoever in his public statements, in his speeches during 1982. Obama's been trimming the whole way, saying, oh, yes, well, we'll going to -- we're going to freeze discretionary spending...

TAPPER: And non-security discretionary.

(CROSSTALK)

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