'This Week' Transcript: McCain

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)

KRUGMAN: ... went on FOX News to say, you know, if we don't balance the budget, we'll have a double-dip recession, which had all of his -- his own economists going, "Oh, my god. What did he say?" So he -- he has been giving mixed messages.

His -- his urge to split the difference between the sides, even when one side is actually certainly, from his own point of view, totally wrong, has certainly hindered. Would it have made a difference if he was stronger? I don't know. But he's certainly not been strong...

(CROSSTALK)

TAPPER: I want to -- I want to change topics. I'm sorry. We only have a few minutes, and President Obama this week did something else significant, which he gave his first speech on immigration reform. Jorge, I want to use some tape from an interview you did with then-Senator Obama in 2008.

(BEGIN VIDEO CLIP)

OBAMA: I cannot guarantee that it's going to be in the first 100 days. But what I can -- what I can...

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