'This Week' Transcript: Pelosi and Gates

WILL: Well, the recovery is now more than a year old, and we know two things about it. It's unusually weak for a recovery after a severe downturn, and, B, starting weak, it's getting weaker, for two reasons.

First of all, the stimulus is running out. Paul's right about this. Cash for Clunkers has come and gone. The homebuyer's tax credit for purchasing new -- particularly new homes, come and gone.

Second, the growth so far has been largely driven by inventories, businesses rebuilding their inventories in anticipation of the consumer -- 70 percent of business activity in a normal time -- coming back to the malls. The trouble is, the consumer in his native perversity has begun to save. The savings rate is now 6.2 percent.

So what you have is what I think Keynes called the paradox of thrift.

KRUGMAN: Exactly.

WILL: It's a virtue until it isn't a virtue.

BRAZILE: Well, I'm not the resident economist on the panel, clearly, but what's happening, Christiane, is that we're not creating jobs. The economy is -- is -- is not creating enough jobs. Unemployment remains high. The Democrats will have to campaign on the promise that the policies that they've put forward thus far has averted the Great Depression 2.0.

And going forward, this is a choice between going back to the past, going back to Bush-onomics, or going forward with a path toward economic growth, which brings us back to the Bush tax cuts and -- and whether or not the -- the Congress will -- will just let them expire in January or let some of them stay on the table.

AMANPOUR: Well, you heard what I asked Speaker Pelosi, and she said she hoped that this would come to a resolution before the -- before the midterms. Is that likely?

BRAZILE: Well, I don't think so. I mean, look, Congress on the House side, they're away for six weeks. They're going out. They're going to campaign on what they've accomplished.

But I think when they return, they're going to have to turn back toward the budget, turn toward the economy, and once again convince the voters out there that they've done something to provide economic growth for the future.

KRUGMAN: Just wanted to say, George, it's exactly what I would have done in describing it. The forces for growth are fading out. We're not looking good going forward. This is very difficult. It's very hard for an administration in power to run on the campaign slogan, "It could have been worse," and that is essentially -- and it's true. It actually could have been a lot worse, but -- but that doesn't sell very well.


WILL: Lest it be thought that Paul and I agree on something, let me...

AMANPOUR: Well, you might. Maybe this is a rarity today.

WILL: No, this is not the case, because Paul thinks the government is dangerously frugal at this point, and I do not think so. I side with people like Kenneth Rogoff at Harvard who say there is time for austerity, and this is it.

KRUGMAN: Well, you know, we can...

AMANPOUR: That's happening in Europe, as you know...


KRUGMAN: That's -- yes, I think Ken Rogoff is doing some damage here with some pretty bad statistics. But...

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