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DAN HARRIS (ABC NEWS): We are, as we said at the top of the program, heading into a hectic and hugely consequential week in the debate over that massive stimulus bill. There is a lot on the line for the new president and for the entire American economy. We have with us tonight Nobel Prize winning economist Paul Krugman, and ABC News analyst George Will. Paul, let me start with you. The Republicans are saying that this stimulus bill is a tired old liberal wish list. You, however, are arguing that the bill is too small. Explain.

PAUL KRUGMAN (PRINCETON UNIVERSITY ECONOMIST): Yeah. I mean, we have a very, very serious economic crisis. This bill is supposed to prop up demands. Now, if we look at the scale of the problem, the Congressional Budget Office says that we're gonna have a hole in the economy, insufficient spending to the tune of $2.9 trillion over the next three years. And we've got a sort of $800 billion plan to cope with it. It's actually quite a bit on the low side.

DAN HARRIS (ABC NEWS): George, let me turn to you. Paul and others have said that Republicans are playing politics here, trying to score points and putting their political interests above the economic interest of the country. How do you respond to that?

GEORGE WILL (ABC NEWS): Well, they're playing politics in the sense that politics is about how we ought to live, what government can do, what government should do. That's politics and it's healthy and it's unavoidable. Some Republicans, I think, might go partway in agreeing with Paul. Paul says it's not large enough.

GEORGE WILL (ABC NEWS): Some Republicans might say the stimulative portion of this is not large enough. But there's a third component, and that is all the pent up demand for this and that democratic social policy from the last few years.

DAN HARRIS (ABC NEWS): Paul, what about that? We keep hearing from Republicans, primarily, that this bill has been larded up with social policy spending and pork.

PAUL KRUGMAN (PRINCETON UNIVERSITY ECONOMIST): You know, first of all, when you take all of the things, all of the things that Republicans have called pork, it adds up to about 2% of the bill. And a lot of it really isn't. This is about politics. I don't think there was any economic analysis behind what the Republicans are doing.

DAN HARRIS (ABC NEWS): George, let me let you weigh in on that.

GEORGE WILL (ABC NEWS): There may not have been economic analysis, as Paul understands it, but there is certainly history. For example, there's a great, lively debate going on in Washington now about how to interpret the lessons of the New Deal. And some Republicans remember Franklin Roosevelt's Treasury Secretary Morgenthau saying at the end of the 1930s, we've had the biggest spending gusher in the history of the country, and we still are mired in unemployment. It has not worked.

PAUL KRUGMAN (PRINCETON UNIVERSITY ECONOMIST): Well, can I just say, you know, we have, we don't have to go back to the '30s. I think that's, you know, that's an incredible thing, they're still out to get FDR. But, you know, we've just had eight years of Republicans pretty much getting everything they wanted in Washington. And it happens to be the worst eight years since the Great Depression. I find it kind of hard to understand how so many of the people on the Republican side can be so confident in their own economic judgment when having their own way for eight years led to this disaster.

DAN HARRIS (ABC NEWS): Where does this leave Barack Obama and his ability to work with the Congress going forward? He came into this debate saying, 'We're gonna work in a bipartisan way."

GEORGE WILL (ABC NEWS): This bill yet has to go to conference with the House. And if there are major concessions made to the House, they could lose some of this slender Republican support that they have.

DAN HARRIS (ABC NEWS): Paul, what do you think? Barack Obama came out at first and said, 'We're gonna do this in a bipartisan way." Now, he's playing a pretty tough...

PAUL KRUGMAN (PRINCETON UNIVERSITY ECONOMIST): Yeah.

DAN HARRIS (ABC NEWS): ... sharp-elbowed game, - railing against the Republicans.

PAUL KRUGMAN (PRINCETON UNIVERSITY ECONOMIST): Look, the modern Republican Party is a hard-line, conservative, very cohesive group of people. They just are not gonna go along with anything that deviates from that philosophy. You know, he did a tremendous amount of attempt at outreach and got zero for it. Absolutely nothing. And I hope he's learned his lesson from that.

DAN HARRIS (ABC NEWS): Paul Krugman and George Will, we thank you both. We appreciate it.

GRAPHICS: NEXT

DAN HARRIS (ABC NEWS): Coming up next here on the broadcast, we're gonna go deep into the Amazon jungle with members of an American evangelical missionary group who are being accused of destroying ancient Indian cultures.

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Originally broadcast, 2.8.09