NEW YORK, Oct. 7, 2012 -- STEPHANOPOULOS: Hello again. Just 30 days now until the final vote, and after the most intense week yet of this campaign, Mitt Romney has momentum. National polls show him gaining ground, his crowds have picked up, and last night in Florida, Romney opened up, telling about his last visit with an old friend paralyzed in a tragic accident.
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ROMNEY: They pushed his wheelchair forward, and he came up, and I reached over, and put my arm on his shoulder, and I whispered into his ear. And I said, "Billy, I love you and God bless you." I got a call from a friend that he'd died the next day after that visit. It's rare that you get the chance to tell someone how much you love them when you still can.
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STEPHANOPOULOS: Can Romney keep gaining ground, or will President Obama maintain his advantage in those battleground states that matter most? We'll look at the race from all angles this morning, and we'll begin with the campaigns. Ed Gillespie for Mitt Romney, Robert Gibbs for Barack Obama, and Robert, let me begin with you. How much difference did Governor Romney make Wednesday night?
GIBBS: Well, look, George, Governor Romney had a masterful theatrical performance just this past week, but the underpinnings and foundations of that performance were fundamentally dishonest. Look, he walked away from the central tenet of his economic theory by saying he had no idea what the president was talking about. Ten minutes after the debate, even his own staff is walking back his answers on health care and preexisting conditions.
So, look, I don't want to take anything away from what I think, again, was a masterful, masterful performance by Governor Romney, but I don't think Governor Romney's positions have changed, and fundamentally, I don't think the campaign has changed.
STEPHANOPOULOS: Robert, what happened to the president on Wednesday night? You've seen all the reviews. I'm sure the president has seen the reviews by now as well. Let's look at that "New Yorker" cover right there. It shows the empty podium next to Mitt Romney. The basic line is, the president didn't show up on Wednesday night. And I just want to know, when did he know he was beat?
GIBBS: Well, look, George, I think the president understood that he hadn't performed up to his own expectations pretty quickly into – after he got off the stage that night. But look, George, I think what's interesting is not – I think it's who showed up on the Republican side. You know, a clone that looked a lot like Mitt Romney that had walked away from fundamentally every position that he'd taken.
You cannot cut taxes by $5 trillion, as he's doing, and simply say, oh, I don't have that tax cut. I'm not going to cut taxes for the wealthy, when the average high-income earner is going to get a $250,000 tax cut.
STEPHANOPOULOS: Let me stop you right there, because the Romney campaign has a new ad out just on that point. They say the president and his team are lying when they call it a $5 trillion tax cut.
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UM: President Obama continues to distort Mitt Romney's economic plan. The latest – not telling the truth about Mitt Romney's tax plan. The AP says doesn't add up. ABC News, mostly fiction. Even the Obama campaign admitted it wasn't true.
UNIDENTIFIED FEMALE: Well, OK, stipulated, it won't be near $5 trillion.
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STEPHANOPOULOS: So does the campaign now accept that the cuts will be less than $5 trillion?
GIBBS: No, absolutely not. If you're going to reduce the Bush tax rates by 20 percent, and the estate tax, and the AMT, change the corporate rate, and a whole host of other changes, that adds up to a reduction in revenue, $4.8 trillion. The question for Governor Romney is, what loopholes are you going to close? Supposedly, to make up for that revenue? And if you don't close $4.8 trillion in those loopholes, two things happen. Either the deficit goes up, or more likely, is the middle class is going to see their taxes go up and end up paying for his promises (ph).
STEPHANOPOULOS: But as you know, Robert, he's stating unequivocally that he will not push the tax cuts if they increase the deficit, and he will not push them if they force tax increases on the middle class.
GIBBS: Then he's got no economic theory. Then he's walked away from 18 months of what this whole campaign has been about. But George, we've seen this movie before, where people say, oh, don't worry, it's all going to get paid for, it's fine. When you ask them, what loopholes will you close specifically for wealthy earners to help pay for the $4.8 trillion in reduced revenue, there's no answer. I mean, let's be clear, Paul Ryan a week ago was asked about the math for this, and Paul Ryan said, look, the math takes too long. Well, Mitt Romney's solution is he just decided there wasn't math involved in this problem, and that's absolutely crazy. Look, the only thing he outlined that he would cut in the budget is Big Bird. He's taken the battle straight to Sesame Street, and let Wall Street run hogwild.
Again, it was a masterful theatrical performance. It was fundamentally dishonest for the American people. And let's be clear, if you're willing to say anything to get elected president, if you are willing to make up your positions and walk away from them, I think the American people have to understand, how can they trust you if you are elected president.
STEPHANOPOULOS: Let's look ahead to the vice presidential debate this week. Joe Biden coming up. He kind of stepped in it a little bit this week with the comment about the middle class being buried the last four years. Take a look.
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BIDEN: How they can justify – how they can justify raising taxes on the middle class that's been buried the last four years? How in Lord's name can they justify raising their taxes with these tax cuts?
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STEPHANOPOULOS: Two questions. Is there more pressure on the vice president now to be aggressive, coming off the president's debate? And are you worried about gaffes like that?
GIBBS: Well, I don't think that was a gaffe, George, because I think what the vice president was talking about is what he's talked about every day, which is a series of eight years of horrifically bad economic decisions—
STEPHANOPOULOS: He said they've been buried the last four years.
GIBBS: Well, we've been digging out from what was an avalanche of bad economic decisions over the past eight years during the Bush administration. What Mitt Romney and Paul Ryan want to do is take us back to that exact same failed economic theory, top-down tax cuts, eviscerating the investments we know we need to grow our economy from the middle out, rather than from the top down. Look, I know Vice President Biden. I know he's looking forward to having a spirited exchange about ideas. I simply hope this – I hope what Paul Ryan does is something fundamentally different than what Mitt Romney does, and that is I hope he comes with just a modicum of truth and willing to defend their policies, rather than to admit somehow they don't exist.
STEPHANOPOULOS: And finally, will we see a different game from President Obama in the next debate?
GIBBS: Well, again, I think now that Barack Obama has had the opportunity to meet both Mitt Romneys, I don't doubt that he'll make some adjustments. I know he's looking forward to the next debate.
STEPHANOPOULOS: Robert Gibbs, thanks very much for your time this morning.
GIBBS: George, thanks for having me.
STEPHANOPOULOS: Let's hear from the Romney camp right now. Ed Gillespie joining us this morning. Ed, thanks for getting up this morning. You heard Robert right there, masterful, theatrical, fundamentally dishonest. I guess his basic point now about Governor Romney on his tax plan is either that he's not telling the truth about the scale of the tax plan or abandoning his economic theory. Which one is it?
GILLESPIE: Well, the problem they have is that the debate's performance on Wednesday evening was not a matter of style, it was a matter of substance. And Governor Romney laid out a plan for turning this economy around, getting things moving again. He had a fact-based critique of President Obama's failed policies that the president was unable to respond to. And today and since then, the Obama campaign, they remind me a little bit of a 7-year-old losing a checker game, and then instead of being frustrated at the outcome, they sweep the board off the table.
The fact is that if President Obama's re-elected, as Governor Romney pointed out, we'll have continued chronically high unemployment. We're going to have continued massive debt instead of moving toward a balanced budget. We've had this week the fourth trillion dollar deficit under this president. Health care premiums are going to continue to rise. Up to 20 million Americans will lose their employer-based health insurance under Obamacare, and they'll raid $716 billion from Medicare.
Governor Romney has a different approach that would move the country in the right direction, and that's what they're frustrated about, George.
STEPHANOPOULOS: Let's talk about that approach, let's get to the bottom of this $5 trillion disagreement. Governor Romney is now saying he will not increase the deficit with his tax cut. He is saying he will not increase taxes on the middle class, so is he saying that if he cannot come up with enough loopholes and deductions, closing the deductions to pay for the tax cuts, which amount to about $5 trillion, that he will scale them back?
GILLESPIE: What he has said, George, he that is going to cut tax rates across the board by 20 percent and offset those cuts with eliminating deductions and loopholes for the upper-income families but protecting them for middle-class families.
STEPHANOPOULOS: But there aren't enough deductions to pay for that.
GILLESPIE: You can pay for it. There are six studies that say you can do that. You can broaden the base and lower the rates, that would foster economic growth. And we've done that in the past. There's one study that says that you can -- that uses the word assume or assumption 68 times by a liberal think tank and that's what Gibbs and others point to.
STEPHANOPOULOS: Let me just pin you down on the fallout. If it does turn out that the deductions do not make up for the cost of the tax cuts, does Governor Romney say he will scale back the tax cuts?
GILLESPIE: What he has said is it's going to be -- he's not going to increase the deficit in bringing down the rates and broadening the base...
STEPHANOPOULOS: So he will scale back the tax cuts?
GILLESPIE: We saw that done, by the way, as you know when Tip O'Neill was speaker of the house and Ronald Reagan was president of the United States and they worked together on a very important and significant tax reform. We believe that it's time for that again and that you can do that working across the aisle. Obviously Governor Romney, if he becomes president, would hope to have Republican majorities in the House and the Senate, but you would have to work across the aisle and we believe it can be done and there are six studies that show that you can.
STEPHANOPOULOS: But the promise then that takes precedence, because I do want to move on, is the one about not increasing the deficit. You also heard Robert Gibbs there talk about Big Bird and the targeting of Big Bird by Governor Romney.
You know, coming out of that, PBS cited polls showing that it's the most trusted public institution and it only takes about 0.01 percent of the federal budget. You now seeing Big Bird show up at Mitt Romney rallies. Was it a mistake to target him?
GILLESPIE: George, it wasn't a targeting, it was just pointing to one example. As you know Governor Romney would move us toward a balanced budget with a 5 percent cut in non-security discretionary spending and he would eliminate a number of programs and consolidate a number of others. I think with Jim Lehrer there from PBS he made the point in a joking reference. But it's an important point. Look, if you have to borrow money from China to pay for these programs is it worth it? That's the test that should be applied if we're going to impose this debt on future generations.
And Big Bird, I can tell you, as the father of three children, grown now, but any father who has gone to a toy store knows that Big Bird is a pretty commercially successful entity. And whether or not we should be subsidizing it and you can cite, oh it's not that big a percentage of the budget, that's true, but every penny that you look and raise as a potential cut seems to be sacred with this administration and you can't cut it. And they demagogue it.
And I think the American people understand this is a big election and a big choice.
STEPHANOPOULOS: Let's talk...
GILLESPIE: And have to make some tough decisions. And you have to find some things where it's not worth borrowing money and imposing debt on future generations. Big Bird would be pretty successful, I suspect, without a government federal subsidy and all that debt.
STEPHANOPOULOS: Let's talk about Friday's jobs numbers. It raised some suspicions among Governor Romney's allies on Friday morning. Jack Welch, the former chairman of GE put out a tweet saying unbelievable jobs numbers. These Chicago guys will do anything. Can't debate so change numbers.
Steve Forbes follows up and says Welch is right.
Does Governor Romney put any stock in those theories? Does he have any suspicions at all about the BLS numbers?
GILLESPIE: George, the numbers themselves are very damning. When you look at it, we had fewer jobs created in September than were created in August, fewer jobs created in August than were created in July.
Our unemployment rate has come down because for -- since President Obama took office for every new job created more than six workers have left the labor force. If labor force participation was what it was when the president took office, unemployment would be around 10.7%. These jobs that were added in September were largely part-time jobs. So we still have 23 million American, that number has not changed at all, would are either unemployed or out of work entirely or are underemployed working or out of the workforce entirely or underemployed working part time instead of full time or not in a job commensurate with their skills. Half of the college students coming out of, you know, with degrees today are unable to find a job.
This economy is not doing well. And the fact that you have a White House celebrating an unemployment rate of 7.8% with 23 million Americans out of work or unemployed or underemployed tells you a lot about the failure of this administration's policies, George.
STEPHANOPOULOS: Final question, bottom line, did Governor Romney do what he need to do on Wednesday to take control of this race?
GILLESPIE: Well, I think there were certainly a shift in the dynamic. People saw the real Mitt Romney. I think that's why you saw the reviews. I know, George, that you thought it was a tie but most other objective viewers felt Governor Romney did do a very good job in making the case for his policies and that President Obama was unable to defend his past policies nor put forward a vision for future policies in the way Governor Romney did.
But the most important thing is nearly 70 million Americans saw the real Mitt Romney, not what they've been seeing in 30-second attack ads or in 12-second snippets on the evening news. They got to see and take a measure of him and I think they saw someone not only who could be president by virtue of his experience in being a leader with being able to reach across the aisle as governor of Massachusetts but someone with a plan to get this economy moving again, which the president clearly does not.
STEPHANOPOULOS: Actually, Ed, that's not what I said. You ought to look at the whole quote, but thanks for coming in.
GILLESPIE: You bet. Thank you.
STEPHANOPOULOS: We'll right back with our powerhouse roundtable in just 60 seconds.
STEPHANOPOULOS: Back now with the roundtable. George Will is off but we are joined by Peggy Noonan of "The Wall Street Journal," Nobel prize winning economist Paul Krugman of "The New York Times," ABC's Jon Karl and my favorite political odd married couple, Mary Matalin and James Carville.
And Peggy, let me begin with you. I want to focus on the debate right now, you could not have been tougher on President Obama's performance in your column yesterday.
PEGGY NOONAN, WALL STREET JOURNAL: Yeah, I thought the president barely showed. I thought "The New Yorker" cover -- the now famous "New Yorker" cover in which they had a candidate Romney at a podium looking at the empty chair where Mr. Obama would have been, captured it all. I am very curious about what the heck happened. Was it a strategic mistake on the part of the Obama campaign to play it a certain way and it didn't work or were there other factors involved? To me it is a mystery and one of those delicious things that will probably be answered in the big books about 2012 but, yes, the president was bad, Romney was good.
STEPHANOPOULOS: You want to jump right in here.
PAUL KRUGMAN, NEW YORK TIMES: This is classic Obama. He really, really wants to be the president of national unity. He's always wanted to be the reconciliation candidate and his instincts always in confrontations is to not go for the jugular but to go for the capillaries. He doesn't -- did the same thing in 2008. People forget just how weak his campaign was through August of 2008 when he just was refusing to make the obvious case against McCain and then he toughened up but also...
STEPHANOPOULOS: In the debate he toughed up in 2008.
KRUGMAN: Because he needs to be -- have his head against the wall.
So this was classic. This was him - this was the real Obama who does not like -- he really wants to be a president of the whole nation. And he somehow has a hard time wrapping his mind around the necessity to take a tougher line.
JAMES CARVILLE, DEMOCRATIC STRATEGIST: Well, I said on CNN I said I didn't want to come to this conclusion but sitting watching I have to come to it. He just didn't want to be there.
STEPHANOPOULOS: So it wasn't strategy?
CARVILLE: I don't think it was. We'll know the next debate. I mean he's obviously either got to be different or it's going to be pretty bad but just looked like to me he really didn't want to be there. His mind wasn't on it. He didn't want to engage. He just wanted to get through the 90 minutes. And I'm sure he's a very competitive guy. I hope -- knock on wood - we're going to see a different President Obama at Hofstra.
NOONAN: How can a president feel that way? I don't want to be there during a debate for the presidency?
CARVILLE: You know, Reagan got lost on the Pacific Coast -- I don't know. The answer is I don't know but that was the impression that I got.
JON KARL, ABC NEWS: President Obama going into that debate, winning ahead in every single battleground state. I mean he was -- looked to me like a guy running out the clock. He was ahead. Obviously there was a strategic decision not to bring up Bain Capital, not to bring up the 47 percent.
STEPHANOPOULOS: They actually disagree. They say that he was prepared for all of that. What I was more surprised, Mary, was sort of picking up on the points of blurring the differences thatPaul is making when Social Security came up, President Obama says he, well, Mitt Romney and I basically agree on Social Security.
MARY MATALIN, REPUBLICAN STRATEGIST: Can I state the obvious here since we all have theories, the obvious is he didn't bring his game because he doesn't have a game. They have now blamed his performance on everything from strategic, he's a unifier. That's belied by his campaign calling Mitt Romney everything from a liar to a tax thief to a felon to a murderer to a dog abuser to a misogynist. This is one of the most negative campaigns in history. They blame Jim Lehrer. They blame...
KARL: It was the altitude.
MATALIN: The altitude, OK. He has no game.
The only way the truth that this president likes to cite all the time he has inherited the worst economy in history would be if he gets re-elected this is the worst recovery in the history of this country and his notion that it takes a long time to get out is belied also by history.
KRUGMAN: Not true. Just in the measure of the recovery it's way better than Bush's recovery. The actual growth since the bottom is a lot better. So were supposed to talk about that later but this is not true. You can argue with the unemployment rate is high because it was a hell of a recession but this is not, in fact -- that's not the way to do it.
MATALIN: Professor -- Dr. Krugman, can I ask you something about history? Has there ever been this not be true in history that the deeper -- the deeper the recession, the steeper and stronger the recovery. There is no such thing as a deep recession with a moderate recovery.
KRUGMAN: Every financial crisis, financial -- post financial crisis economies look like this. We look like a post-financial crisis economy. We look exactly like a standard post-financial crisis recovery -- look all through. Look at Sweden in the '90s, look at Japan, we're doing a little bit better than the average track on these things, but, no, I'm bitterly critical of Obama's performance in that debate, but this is the not the way to criticize him.
STEPHANOPOULOS: Why didn't he, though, bring up a lot of the points, for example, on the auto bailout where there actually has been progress thanks to a decision the president made.
CARVILLE: You know, I don't know the answer to that. And if it's something -- but I think we're going to see a different President Obama in the next one. I don't know why he did that.
You know, sometimes in life, you just have a bad night. Anybody that follows sports knows that. Sometimes it's the most logical explanation is the real one. He just had a bad night.
KRUGMAN: He would say things like in the '90s we had good job growth but in recent years we haven't. He somehow couldn't bring himself initially to say under Clinton we had great job growth and under Bush we had lousy. That's just him, his natural instinct to to blur the partisan differences. But I think that will change in the next debate.
KARL: You are definitely going to see a different Barack Obama in the next debate. I mean they have signaled he is going to go right at Romney. This is going to be an entirely different...
STEPHANOPOULOS: I think that's right. The question -- one of the other questions coming out of this Peggy Noonan, will we see a different kind of moderation? This was a brand-new format where Jim Lehrer said he basically wanted to get out of the way and that he says against a lot of critics that he was effective in doing that.
Do you agree.
NOONAN: I completely agree. I thought Jim Lehrer was absolutely great. And it was a relief. I didn't even know in advance that this agreement had been made, that the way the moderator would moderate would be a little more laid back. This is what it was. Jim Lehrer is old school and a pro. He didn't think it was all about him. He didn't think it was about getting the camera on him. He didn't think it was about him being the anchor with the whip, do you know what I mean?
He would ask a question and he would let these two guys either challenge each other or not, either lean back or lean forward, either take issue or not. He left it up to them. That was great because they are the ones running for president, not the critics.
MATALIN: The critics were liberals because they know Obama cannot perform under those circumstances where he has to think on his feet, where he has to make sense of this recovery which is the worst in history, which continues to result in no job growth whatsoever, that's the reality people are living.
KRUGMAN: But can -- I don't want to skip by without talking about the facts issue, because Romney...
STEPHANOPOULOS: We have plenty of time coming up.
KRUGMAN: I don't know whether to blame Lehrer or blame the president but it was kind of amazing because Romney was not only saying things that are not true, he was saying things that his own campaign had previously said weren't true. The one that got me was not the stuff about taxes but the thing about covering people with pre-existing conditions which his plan does not, which he has said that before and his campaign has walked it back in the past and there he was right again saying, well, my plan covers people with pre-existing conditions which is displaying a kind of contempt to the public...
STEPHANOPOULOS: So you think it's the moderator's job to call him on that...
KRUGMAN: No, I'm not sure whose job it is, but it is -- there's a contempt for the whole process. There's a contempt for us people, because he's thinking the news media will not cover me on this, as long as they say it forcefully they'll say I won, which is more of the ways...
MATALIN: Oh, you're going to say the press is against Obama now?
KRUGMAN: The press just doesn't know how to handle flat out untruths.
CARVILLE: Look, they asked one time Lee Trevino, great golfer, who was having trouble with putting and they asked him if he thought he needed a new putter and he famously said, no, it's not the arrow it's the Indian. OK. It's not Jim Lehrer. President Obama was sitting right there. He would have confronted Governor Romney on any number of issues and drawn the distinction.
KRUGMAN: But isn't our job, at least partly, to actually never mind that the quality of the theatrical performance but to ask about, were there untruths spoken in that debate and there were a lot.
KARL: To be clear, I mean, President Obama also was loose with the facts.
KRUGMAN: They were minor fudges.
KARL: He said he had a $4 trillion plan to cut the deficit. He said health care premiums were rising at the slowest rate in 50 years neither of those was true.
KRUGMAN: Those are minor compared with...
STEPHANOPOULOS: And you know what, let's dig into those when we come back. When we get to take a quick break right now. A lot more roundtable including previewing the VP debate. Last time it inspired "Saturday Night Live."
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TINA FEY, WRITER/ACTRESS: With Barack Obama you're going to paying higher taxes, but not with me and my fellow maverick. We are not afraid to get mavericky in there and ruffle some feathers and not got to allow that and also to the great Ronald Reagan.
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STEPHANOPOULOS: And later "This Week's" other big debate.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: American foreign policy has been to go into the Middle East and try to buy friends. Does that ever work.
BILL O'REILLY, FOX NEWS: Yeah, we can buy friends.
JON STEWART, THE DAILY SHOW: I think it works.
(END VIDEO CLIP)
STEPHANOPOULOS: Bill O'Reilly live in our no-spin zone.
STEPHANOPOULOS: And there is lots more roundtable coming up after this from our ABC Stations.
(BEGIN VIDEO CLIP)
SARAH PALIN, FORMER GOVERNOR OF ALASKA: Nice to meet you. Thank you. Hey, can I call you Joe?
BIDEN: John McCain has been dead wrong. I love him, as my mother would say, God love him but he's been dead wrong on the fundamental issues relating to the conduct of war.
PALIN: I would like more opportunity for this. I would like to be able to answer these tough questions without the filter even of the mainstream media kind of telling viewers what they've just heard.
BIDEN: No one in the United States Senate has been a better friend to Israel than Joe Biden.
PALIN: I may not answer the questions the way that either the moderator or you want to hear, but I'm going to talk straight to the American people and let them know my track record, also.
(END VIDEO CLIP)
STEPHANOPOULOS: That was four years ago. Next VP debate is Thursday night. We're here on the roundtable will preview that in just a little bit. I am joined again by Peggy Noonan, Paul Krugman, Jon Karl, Mary Matalin and James Carville. And let's talk about the other big news of the week, those unemployment numbers that came out Friday. I got to say, Peggy, I was surprised first thing Friday morning at GMA, the numbers come out. The first tweet you get is from Jack Welch raising a question about them. Ed Gillespie didn't bite, but what is that about?
NOONAN: Oh, it's about widespread skepticism towards the actions and efforts of the U.S. government to begin with. Second, I don't think anybody in America looks at the number, whether it's 8.2, 8.4, 7.7, and thinks that's a real reflection of reality. Everybody in America thinks they're not counting the number of people who stopped looking, the number of people who are underemployed. At that point, the 7.8 number almost becomes academic. Nobody has faith.
KRUGMAN: Look, we know it's a lousy labor market out there. It's not what you want to have. However, it is an improving labor market, and not because of one month's numbers, but one month, the whole thing, Jack Welch probably coming from the corporate world, he doesn't quite understand how it is to fudge government numbers.
But the -- if you look over the past year, which is what you should do, you should not look at the numbers which bounce, there's a clear improvement. It's clear that adjusted for the changing and for the aging of the population, the number of people with jobs this year, the relative population is rising. It's clear that payroll growth has exceeded population growth. So this is an economy that is slowly on the mend, and in a way the aberration was not this last month's number, but the previous two months' numbers, where the unemployment rate didn't fall even though the underlying situation was improving.
STEPHANOPOULOS: You know, you brought up the trend over the last year, and I want to come to you in a second, Jon. But first, let's put up this chart we have showing that trend across several presidencies of the last year of an incumbent running for president, and it does show, Mary Matalin, that President Obama's improvement in the unemployment rate in an election year is in the green zone, in the zone where presidents get re-elected.
MATALIN: Here is the real world, as Peggy alluded to. Real median incomes have fallen twice as much under the Obama recovery as they did in the Bush recession. At this point in time, under Ronald Reagan's policies, which Governor Reagan has a 21st century application of, growth and jobs were growing at five times the rate they are.
Let's just look at last year. The states where 17 governors, Republican governors instituted conservative reforms, those states are growing their economy and creating jobs at twice the rate the national one. This is about policies. We know they've worked. There is no recovery in the history of any recessions or depressions that have been as slow and as poor as this one and the revisions upwards --
MATALIN: Yes, it is, Dr. Krugman. It's completely, totally true.
KRUGMAN: I'm sorry, but it just isn't true.
MATALIN: I don't make up numbers.
KRUGMAN: Well, but just look at them, then. Because the fact of the matter is, this is actually a fairly typical slow post-financial crisis recovery, which is picking up speed. So although it's terrible -- and I've been bitterly critical of policymakers in general for not doing more -- the fact of the matter is we are clearly now in the upswing, where you can see the beginnings of a turnaround.
KARL: The challenge for Romney is that, look, it's not just the unemployment number here. Consumer confidence has been up for six weeks in a row. You've got the stock market is up. You have housing prices are up. There's a sense that things are still bad, but getting better, especially, George, in the battleground states. You have got the governor of Florida going around talking about the recovery in Florida.
MATALIN: You've got Republicans --
KARL: Yes, but how do you run against the economy when you have Republican governors--
MATALIN: You say what I just said. The policies implemented by Republicans are growing the economy.
CARVILLE: You have -- you have a situation where Welch put this out. Now, here's a party that a large number of them believe in creationism, deny global warming, think that Obama was not born in the United States, believe that tax cuts raise revenues. So --
CARVILLE: It's not surprising they're going to believe somehow or another to be --
CARVILLE: This is economic birtherism. That's what it is.
NOONAN: You have to keep your eyes just for a second on the fundamentals. One of the reasons people don't think things are getting better economically is not only because they have eyes, but because they know our fundamentals are bad, the spending is terrible, the tax structure isn't competitive. They're looking down the road and seeing --
MATALIN: The health care premiums have gone up.
NOONAN: -- has not moved to make this any better. They are thinking maybe change would be a good job in order to get growth.
KRUGMAN: But that's an imaginary public you're talking about. Polls actually show that on the economy, it is now dead even, despite the lousy absolute state of the economy, people think that Obama --
NOONAN: You know as well as I do that spending continues to be huge, that our tax system isn't competitive, and everybody out there worries about that.
KARL: I'm going to say one thing about this whole conspiracy theory. I went down to BLS, I talked to the woman in her cubicle who actually wrote the announcement, 7.8 percent. There is not a single political employee in the entire BLS right now, not one. I mean, this is crazy town to think that it was --
KRUGMAN: When you say people don't trust government, this is the most trustworthy. There are inherent problems of economic data, which are all science faction, but these are honestly constructed science fiction.
KARL: Most people don't understand -- you do, obviously -- how this is actually done. This is a survey of 60,000 households. George, it's a survey, it has a margin of error.
STEPHANOPOULOS: About 400,000 jobs, it could be.
KARL: The margin is 0.2 percent. So you could have 8 percent unemployment.
KRUGMAN: There is the survey of employers and a survey of households, and they're telling the same story. They are telling the story of an economy that is slowly on the mend, slowly, but slowly on the mend.
MATALIN: It's a belly crawl. It's a belly crawl. You like to talk about your data, professor. Here's political data. 80 percent or three-quarters of seniors, women, men and independents think that the Obama policies did not help either their personal situation or the economy. Majorities of women, men, independents and seniors and small business believe that the Obama policies have hurt the economy. This is about policies. It is -- you want me to read your data. I'm saying read our data.
KRUGMAN: The reality -- the point is that in boasting about the unemployment number, the Obama people are making too much out of one month's number, which everybody does, but there's a fundamental truth, which is that things are getting better. Not as fast as they should by a long shot. But maybe a quarter of the way back from the damage that was done by the financial crisis, but we are making our way back.
STEPHANOPOULOS: So when you look at both events, let me ask all of you to weigh in on this, how much did the race change this week?
CARVILLE: I think it changed -- I think Romney helped himself, but I think this was a clarifying event, because now the Republicans are enthusiastic about Romney. They are wildly enthusiastic about Ryan, and the winner of this race is going to have real legitimacy. This is not going to be a thing where they say, well, he really didn't represent our cause. Now that -- if the president wins re-election, then you're going to see the sort of policies along the Clinton line, when it comes to tax on top earners. You're going to see the health care bill stay in place. You're going to see regulation of Wall Street stay in place. You're going to see these things happen.
If by the same token, if Romney wins, he'll have the authority of an election behind him, so I think this gives the next president a real boost when he gets in there.
NOONAN: I think one of the key things about the debate is it's changed -- we will look back on it as an historic moment in this election. It upended things. This is what it upended. Barack Obama was supposed to be the sort of moderate centrist fellow, who looked at Mitt Romney, this extreme, strange fellow. By the time that debate was over, Mitt Romney seemed a completely moderate, centrist figure, who showed up as Mitt Romney the governor, not as Mitt Romney the candidate.
KRUGMAN: Except that everything he used to claim his centrism wasn't true, so this is a question, does that start to take its toll over the next few months.
NOONAN: I just think that is unjust. I mean, to say the very least --
KRUGMAN: When you say my covers pre-existing conditions when it doesn't and when your own campaign has admitted in the past that it doesn't, what do you say? That's amazing.
MATALIN: You have Mitt characterized -- and you have lied about every position and every particular of the Ryan plan on Medicare from the efficiency of Medicare administration to calling it a voucher plan, so you're hardly...
KRUGMAN: It is a voucher plan.
MATALIN: You are hardly credible on calling somebody else a liar. Here's what else...
KRUGMAN: Well, if you're going to make this not about that -- but, no, the fact of the matter, Ijust think that pre-existing condition thing was a defining moment. It was saying this guy believes not only he can say something that isn't true, but something that his own complain has admitted isn't true.And he can say it in front of 70 million people. That's amazing.
MATALIN: The other thing this upended was Governor Romney effectively shut down the legions of strawmen that the Obama campaign has erected against him and Mitt Romney, the real Mitt Romney is, what was belied all the stereotypes and demonic mischaracterizations of him, these $300 million of attack ads.
So people got to see, as Ed said, the real Mitt Romney and they liked his positions. They support all those positions. And they like him as a person, which is what he needed to do at the convention and the debate.
NOONAN: And also Mitt Romney also nailed the president on not working well with the other party and made the point that he can work well with the other party as he did in Massachusetts.
KARL: Yeah, he set the record for vetoes in Massachusetts.
MATAIN: Democratic legislation without veto a few things.
CARVILLE: The choice is going to be, do you go back to the Clinton tax rates on people that are earn over $250,000? Do you keep the health care bill in place or repeal it? Do you keep Wall Street regulation in place or do you repeal it? Do you have a foreign policy that leads with diplomacy, not war or foreign policy that leads with war, not diplomacy. That's going to be the consequence of this election. It may not be like everybody wants it but the new president is going to come in with real authority here now.
KARL: Getting back to your question, George, this static...
CARVILLE: ...about Romney/Ryan now.
KARL: This is it's a new race after that debate. Imagine if Romney had come in and had a terrible performance, you have what happened before and then you had the jobs number on Friday, it would have effectively been over. This is now a real race, Republican fund-raising has picked up dramatically this week. Look at the crowds he had just yesterday in Florida.
He is a new candidate. He is somebody now be has enthusiasm.
STEPHANOPOULUS: He definitely got back in the game, but of course we're all going to be watching where the polls are in those battleground states, especially Ohio.
Let's look ahead a little bit to the vice presidential debate. Both Vice President Biden and Paul Ryan setting expectations this week.
(BEGIN VIDEO CLIP)
PAUL RYAN, (R) VICE PRESIDENTIAL NOMINEE: You're not going to rattle Joe Biden. Joe Biden has been on the national stage. He ran for president twice, he's the sitting vice president. What I hope to achieve is to give people an alternative.
JOE BIDEN, VICE PRESIDENT OF THE UNITED STATES: I just want to make sure that when I say these things that I don't have the congressman saying, no, no, I don't have that position or that's not the governor's position and so it's mainly getting the factual predicates for everything.
(END VIDEO CLIP)
STEPHANOPOULUS: Now, this debate is going to cover a lot of topics including foreign policy on Thursday night, but, James, it is clear from talking to both Ed Gillespie and Robert Gibbs this morning they're going to continue to zero in on this whole issue of the Romney tax cuts. Is it $5 trillion or not? What is Governor Romney proposing?
CARVILLE: As they should. As they should. But what Romney proposed cut tax rates to 20 percent for everybody, that's $4.8 trillion over ten years. What they're saying is how are you going to pay for this? He says, with unspecified -- going to do away with unspecified deductions...
KRUGMAN: Big Bird.
CARVILLE: They really should hone in on that.
As Paul pointed out, Paul Ryan's plan just calls for cuts, doesn't say what the sort of cuts are. That's a legitimate thing in an election. What could be more legitimate than that? Nothing.
KRUGMAN: Still the fact of the matter is that Ryan -- despite, you know, however well he manages to put it across, however aggressively, Romney is calling for huge tax cuts for the rich -- which he says he's going to make up for by eliminating deductions, but actually you can't. The arithmetic doesn't work. And he's refused to say anything. I mean, this is amazing. You're saying I'm going to raise $5 trillion revenue but I'm not going to tell you how to offset those direct tax cuts.
KARL: Some ideas out there. Like you said, he max cap deductions at $17,000.
KRUGMAN: Yes, but he hasn't actually committed himself to anything.
KARL: He hasn't put in a plan.
KRUGMAN: No plan at all. It's amazing. $5 trillion.
MATALIN: The only that can sustain Paul, is Professor Krugman's argument is to cheery-pick data. He does not look at even the most recent study by Harvard researchers, your sort of colleagues.
KRUGMAN: That was a study that say you can do it as long as you include people with incomes between $100,000 and $250,000 as part of the rich.
MATALIN: I didn't finish my point, which was our the biggest impediment to our economy is entitlements and Medicare. And the Ryan plan -- and we're not just talking about a tax reform, we're talking about regulatory reform that costs $10,000 per employee that is a drag on the economy andwe're talking about fixing Medicare, reforming Medicare which the Harvard guy said had Ryan's plan been in place would have reduced spending on Medicare 9 percent in one year.
KRUGMAN: The Harvard guy is Martin Feldstein, former chairman of Ronald Reagan's council...
MATALIN: I'm talking about the American Medical Association report.
KRUGMAN: This is -- well, look, you know, Romney has not given...
NOONAN: I don't understand why it's not clear to say we want to lower the rate, widen the base, we will work at -- this is a grown-up thing -- I will have a legislature. I have a senate...
KRUGMAN: But, Peggy...
NOONAN: We will work this out.
Ronald Reagan did this reform, tax reform in '86. It was a negotiation.
KRUGMAN: People have forgotten about the '82. Ronald Reagan signed on to one of the largest -- one of the largest tax increases...
NOONAN: Tax reform, that was a tax...
KRUGMAN: But that's why -- that's what kept the deficit from exploding.
NOONAN: I'm talking about tax reform which has to be worked out at a table like this.
KRUGMAN: But you have to have some notion of what you're willing to do first.
KARL: The issue here is that, you know, Romney has not put any of the details out. I mean, that is true. He's thrown some ideas. He said he's going to balance the budget in seven to ten years while doing tax reform, while increasing defense spending, not touching Medicare, I mean there's a lot of things that don't add up, but because Romney has not given the details doesn't give the president the right to make them up for him. I mean, he is not going to have a $5 trillion net tax cut, but maybe he is. But that's not his plan.
KRUGMAN: But I think what they're saying there is a $5 trillion tax cut to be offset by mystery meat. You know, and that's a correct statement.
KARL: Or -- there's a $5 trillion tax cut.
KRUGMAN: Well, but we don't know what it is he's going to do, but what he proposed is a $5 trillion tax cut plus he says, trust me, I'll do something different. That is not a very good way to run for president.
CARVILLE: What can be more legitimate in saying you're proposing $5 trillion in a reduction in revenue. How are you going to pay for this? And he says, well, I'm not going to tell you, I'm just going let the congress do it. And so you say, no, these are the things that you have to get rid of. You going to get rid of the child deduction, you're going to get rid of the home mortgage deduction, you're going to get rid of...
NOONAN: Yes. And we're going to have -- he said it. You just don't listen to...
KRUGMAN: We also going to rely on voodoo. On the end of the story is voodoo...
MATALIN: You don't want him to be more specific so that you can rouse people against this or this or this or this. And keep anything good or healthful from happening with regard to cutting...
CARVILLE: I think you need to tell the truth, I do. You're right. And when he...
STEPHANOPOULUS: I want to have all of you back after the next debate, because we obviously have a lot more to talk about. That was a fantastic roundtable. Thank you all for you at home that want to weigh in Jon Karl is going to answer your questions on Twitter @jonkarl. Just use the hashtag #thisweek.
And coming in just 60 seconds I go one-on-one with Bill O'Reilly. There he is.
(BEGIN VIDEO CLIP)
BILL O'REILLY, FOX NEWS: The problem with the discourse situation in America is capitalism. Listen to me and follow closely. You can make a lot of money by being an assassin, a lot of money. And it doesn't matter right wing or left wing, all right. You go in and you're a hater: radio, cable, in print, whatever, you get paid.
(END VIDEO CLIP)
STEPHANOPOULUS: And live now fresh off his rumble in the air conditioned auditorium with Jon Stewart, Bill O'Reilly, thanks for coming in this morning.
O'REILLY: George, I'm still asleep though, Stephanopoulos. So take it easy on me.
STEPANOPOULUS: I doubt that.
But let's pick up on what you were saying right there talking about political assassins, that's kind of dangerous territory for anyone in political television. Who are you calling out?
O'REILLY: I'm not going to name them, but if you don't know them then you're not living in the USA. I mean they're all over the place. And they just attack people personally for money and that's just the way it is.
STEPANOPOULUS: There was also a lot of hate flowing on Twitter last night about the technical glitches in the rumble. I'm sure you have seen some. What can you guys do about that? A lot wanted to see the debate and couldn't tune in.
O'REILLY: Yeah, that's -- we solved that problem. Everybody is going to get to see it. And it's $4.95. If you want your money back, it's going to charity anyway but we'll do it. It crashed, the server crashed. We had so many people coming in. But anybody who wants to see it now can see it. And that means you didn't have to sign up -- you can sign up now. And it's worth seeing. I mean, it's a battle between socialism and capitalism. And it's funny and lively, so check it out on rumble2012.com.
STEPHANOPOULOS: You guys were not afraid to go at it. It also seems like you kind of like each other a lot, as well. Let's talk about the other debate this week. You just heard the roundtable here. Could have used you in the middle of all these guys, strong opinions about how much changed this week. What's your bet?
O'REILLY: Well, look, the problem that your panelists -- the problem with this is, that they're all micro -- oh, he did this. Look, the election is about philosophy. Just like Stewart and I were debating last night, it's about direction of the country. Are we going into the western European, quasi-socialism, or are we going to get back to robust capitalism? What are we going to do here? All right, the micro is important, but it's not the dominant theme, which direction do you want America to go in?
STEPHANOPOULOS: It sounds to me then like you agree with James Carville on that point, that this is a big election, a clarifying election, and whoever wins will have a mandate for quite different approaches.
O'REILLY: Absolutely. You know, Carville is right for the first time in his life, this is huge. Because we have a lot of Americans who are saying, you know what, I want stuff. I want stuff from Stephanopoulos, he makes a lot of money, give me stuff. Whereas I was raised in my town of you make your own way. And, of course, we want safety nets for people who are hurt. Of course. Every American fair-minded wants that, but it's a philosophy of life that's in play here.
STEPHANOPOULOS: OK, so you and Carville agree. We've achieved something this morning. Also, you're --
O'REILLY: Don't spread that around, though.
STEPHANOPOULOS: You just said it on national television. Also, you got a brand-new book out, "Killing Kennedy," along with your co-writer Martin Dugard, the historian. I know you say you're not a professional historian, but after working on this book, what is your bottom line about the assassination?
O'REILLY: If you want to know how John F. Kennedy governed and how he was killed, I mean in micro detail, "Killing Kennedy" is the book for you. It's a no-spin book, no BS. This is who the man was, this is how he governed in the most difficult times in his administration, and this is how he died. And we just lay it out. And the things that we don't know -- and there are some -- we tell the reader, we cannot get to the bottom of this. But the book sold 200,000 copies in its first three days of release, it's a monster, and I just hope everybody checks it out.
STEPHANOPOULOS: Bill O'Reilly, congratulations on that. Thanks for coming in this morning. All of you at home can check out an excerpt of Bill's new book, "Killing Kennedy," on our website, abcnews.com/thisweek.
Three moments from "This Week" history. What year was it?
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: There's no police presence down here. They will not enter the area.
(END VIDEO CLIP)
STEPHANOPOULOS: The Rodney King riots in L.A.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: People were appalled at the jury verdict, asking how could they be not guilty? We saw them beating Rodney King.
(END VIDEO CLIP)
STEPHANOPOULOS: Charles and Diana split.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: It is announced from Buckingham Palace that with regret, the prince and princess of Wales have decided to separate.
(END VIDEO CLIP)
STEPHANOPOULOS: And Dan Quayle made that infamous mistake.
(BEGIN VIDEO CLIP)
DAN QUAYLE: You're right phonetically, but there you go.
(END VIDEO CLIP)
STEPHANOPOULOS: Was it in 1990, 1991 or 1992? We'll be right back with the answer.
STEPHANOPOULOS: So what year was it, when did we see a royal divorce and race riots in L.A.? 20 years ago, 1992.
And now we honor our fellow Americans who serve and sacrifice. This week, the Pentagon released the names of seven soldiers and Marines killed in Afghanistan.
We'll be right back.
STEPHANOPOULOS: And that is all for us today. Thanks for sharing part of your Sunday with us. Check out "World News with David Muir tonight," and tune in Thursday for one-on-one, the candidates debate. Joe Biden and Paul Ryan face off at 9:00, 8:00 Pacific. I'll see you tomorrow on "GMA."