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WOLFFE: Please. Thank you.

OLBERMANN: But wait, there is more. Governor Jindal`s Hurricane Katrina anecdote that likely did not happen, only one apparent misstep in last night`s Republican response. Remember his claim that volcano monitoring program are wasteful government spending? The U.S. Geological Survey is saying that an active volcano in Alaska, the Redoubt Volcano, which last erupted in 1989, has been threatening to erupt since late January. Scientists can`t pinpoint exactly when it`s going to blow because of a GPS network has not been put in place in there due to lack of funds. In 1980, the eruption of Mount St. Helens in the shadow of Portland, Oregon, killed 57 Americans and darkened the sky for months. The economic substance of Governor Jindal`s plan to fix the economy in turmoil (ph), the same old Republican song and dance about tax cuts and more tax cuts and more tax cuts after that. Let`s turn to Nobel Prize-winning economist Paul Krugman, also, of course, columnist for the "New York Times," and an economics professor at Princeton. Doctor Krugman, good evening.

PAUL KRUGMAN, PRINCETON UNIVERSITY: Good evening.

OLBERMANN: All right. To the Republican response last night, its absolute best argument that what he is doing -- what Obama is doing is wrong and they can do better. What did you take away from that?

KRUGMAN: I don`t think there was much of an argument there. I mean, it really has, you know, I said it was Beavis and Butthead. They find things that sound silly if you don`t actually know anything. So, volcano monitoring -- why would you want to monitor a volcano? Because it might erupt and kill a lot of people. But they are basically reduced to just picking out a few things, or, in some cases, just making thing up -- you know, the salt marsh mouse thing on the stimulus, and say, "This is stupid. See, government is stupid. Cut taxes." It`s not much of an argument.

OLBERMANN: And the train, he brought in the big train last night, the magnetic levitation train that`s running from Disneyland to some casino on the strip in Vegas. That`s another one that isn`t ...

KRUGMAN: Right.

OLBERMANN: ... based in reality, correct?

KRUGMAN: Yes, that`s right. There is $8 billion in the stimulus for high speed rail transit. One of the things that somebody somewhere wants to talk about, but is not in the bill was high speed trains from L.A. to Las Vegas, which is not actually stupid, actually, that`s a pretty busy corridor. But anyway, it`s not in the bill. And, you know, he talks about magnetic levitation because, I guess, he or his speechwriter thought that sounded funny. It`s actually -- it`s high tech. It`s something that the United States is going to want to use eventually. We are actually kind of falling behind other countries on that technology.

OLBERMANN: And he did not mention that one of those other train corridors under consideration would run right through John Boehner`s district in Ohio by the way. But to the ...

KRUGMAN: Yes, right.

OLBERMANN: ... to TARP and the president last night, he said it`s going to be administered differently going forward. Does that mean -- is that code for nationalization of the banks eventually sooner or later?

KRUGMAN: Not if you listen to what Ben Bernanke said in his congressional testimony, not if you looked at the interview that Tim Geithner, the treasury secretary, just did. I`ve got a bad feeling about this, as do a number of people. I was just reading testimony from Adam Posen, who`s our leading expert on Japan. He said, you know, we are -- we`re moving right in the track of the Japanese during the 1990s, propping up zombie banks, just not doing resolution. There`s a -- I was very happy with the president`s speech. The actual implementation on financial policy looks like the kind of failure of nerve.

OLBERMANN: Are you seeing a coordinated strategy in this on how to handle the economic crisis? Is there a grand plan at this point?

KRUGMAN: There is -- no. I mean, there is good stuff. The stimulus is good, it should be bigger, but it`s good. On the banks, I really can`t see. There really seems to be, we are going to put in some more money, we`re going to, you know, say stern things to the bankers about how they should behave better, but if there is a strategy there, it`s continuing to be a mystery to me and to everybody I talk to.

OLBERMANN: Of all the mysteries of economics to us laymen, the idea that confidence is actually a tangible thing, that it is important for a president to, in fact, talk the economy up to the people who make the economy happen. Is it -- is it true, is it measurable and did he do it last night?

KRUGMAN: Well, you know, it`s -- we could ask people. There are confidence indices, which were supposed to measure it. And look, it matters, but, you know, you can`t be created out of thin air. It is true that if you have -- you could have good fundamentals. You can actually have a good plan but if you do a lousy job of selling it, panic can destroy it. This is why FDR with his "The Fear Itself" speech mattered, because he actually had a plan to get the banks, bank holiday, all that, but he also needed to calm people down, which he did. But confidence by itself won`t rescue you if you haven`t got the fundamentals straight. If you really have banks that are deeply under water and you don`t have an effective plan to fix them, then confidence is not enough. So, that was a very encouraging speech. It sounded like a president who knows what he`s talking about. But we need some more substance on the actual plans.

OLBERMANN: And the premise of -- as it has been the premise for presidents since at least Lincoln saw the Civil War as an opportunity to restructure the nation in some finer form -- the idea of restructuring the economy in finer form, is it, indeed, an opportunity?

KRUGMAN: Oh, sure. I think, in some ways, some of the things, people saying we are never going to get health care reform given the trouble in the economy. Actually, the troubles in the economy highlight the need for a guarantee of healthcare for every American. And that was the really good news. Today, by the way, it appears that Obama really is going to put substantial funds behind universal health care. So, this is good.

OLBERMANN: The Nobel Prize-winning economist Paul Krugman -- as always, a little bit of education. Thank you, sir.

KRUGMAN: Thank you.

OLBERMANN: Another economic question: Why would a major investment firm announce retention awards for its brokers based on how much money they generated in 2008? Because retention awards are euphemisms for 2008 bonuses deferred until 2010, so one bailed out firm can claim it is not using bailout money for bonuses. And the identity of that bailed out investment house? Oh, come on, I have to save something for after the commercial.

Originally broadcast, 2.25.09