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OLBERMANN: In a major speech on gas prices and energy policy today, Senator John McCain had good news and bad news. The good news is he knows exactly how to lower gas prices for consumers. The bad news is he knows how to do it for consumers living in the year 2024. Our third story tonight, the Lexington Project, McCain`s new name for his slate of energy proposals which he outlined and fleshed out today in Las Vegas, reversing his past opposition to off shore drilling, of course, and doubling the number of American nuclear plants to 200, with 45 new ones to be built by the year 2030, developing clean coal at the cost of two billion a year from now until 2024, without mentioning how or how to pay for it, setting cap and trade limits on green house gases, as well as tax credit for zero emission vehicles, and re-regulating trading of oil futures. Despite his past claims that new off shore drilling would help in the short term, part of McCain`s energy theme this week, it`s only short term if you`re talking about geological errors. McCain admitting now that ending the moratorium on new off-shore rigs would do nothing for motorists struggling tonight.

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MCCAIN: I don`t see an immediate relief. But I do see that exploitation of existing reserves, that may exist in the view of many experts, that do exist off our coast, is also a way that we need to provide relief, even though it may take some years. The fact that we are exploiting those reserves would have a psychological impact that I think is beneficial.

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OLBERMANN: McCain`s notion that poverty or economic distress might be pyschosematic, but a stretched dollar is a stretch of the imagination is not a new one for him. He said in April his gas tax holiday would give a psychological boost and in rejecting warnings of recession, said in January, quote, a lot of this is psychological. While Obama today reiterated his opposition to some of McCain`s plan, he called some of it commendable. The McCain camp nevertheless depicting Obama as rejecting all of McCain`s proposals, despite just days ago accusing Obama of copying McCain`s call for new regulations, not to mention Obama`s support for cap and trade, clean coal and nuclear power. Let`s turn now to "New York Times" columnist Paul Krugman, also an economist, of course, and author of "The Conscience of a Liberal." Mr. Krugman, thanks for your time tonight.

PAUL KRUGMAN, "THE NEW YORK TIMES": Hi, there.

OLBERMANN: McCain and the Lexington Project, just the name is a nod to the Manhattan project, and he also likes comparing it to the Apollo moon launch. As I recall, those were like government projects or did we get to the moon by giving corporate tax credits to somebody?

KRUGMAN: Well, I mean, he has some break there. It`s -- there`s a little bit of government price. It`s amazing -- little sad. There`s this grand name and then there`s a collection of mice that he has there. Nothing big, it`s a bunch of small tax breaks that might or might not make people change their behavior a little bit.

OLBERMANN: Drilling here is not going to lower prices, certainly not any more quickly than drilling in Iraq has lowered prices. Why is new and additional drilling in areas that were being held out for environmental reasons central to a McCain plan?

KRUGMAN: Yes, it`s mostly just for the psychological impact, as he would say. Look, there`s probably some oil out there. It would arrive 10, 15 years from now. It would have an infinitesimal effect on the world`s price of oil. We could debate whether it is a good idea, but it does nothing for the crisis we`re in. It`s trivial compared with things like energy conservation, alternative sources of energy. This was just to be able to say that he`s doing something, which he isn`t, actually.

OLBERMANN: And that raises that part of the answer in which he is suggesting that our problems are and the solutions are psychological in nature, or even psychosomatic as we interpreted this.

KRUGMAN: I`m not sure that`s what he is saying. Let me say, I think McCain has bought into the notion that there is a panic, that speculators are buying up energy resources and that`s what`s driving up the price, and if you do something that`s psychological, that says there`s going to be a gusher of oil coming off the continental shelf, then that would drive the prices down. The problem is that`s not right. It`s actually very strange for someone who supposedly believes in free markets to think that there is this psychological thing that speculators are driving it. Aren`t we supposed to believe that markets get things right? So he`s got this idea that if we can just do something, even if it`s basically irrelevant, is somehow going to make a big difference in the current situation. And this is not good policy.

OLBERMANN: I can`t decide in my own mind if this is more Norman Vincent Peal (ph), and the power of positive thinking, or it`s the Mighty Python sketch about the magician who puts up the housing apartment complexes by himself and the way they stay up as long as they stay up -- they don`t fall over as long as the tenants believe that they are actually standing.

KRUGMAN: Yes, and the trouble is, you know, oil is this black stuff that you kind of need to burn and belief won`t do it. This is the problem. I thought the stuff about McCain believing that speculators, evil speculators is the problem is the most amazing thing about all this. It`s not what you expect from a Republican, except a Republican who`s looking for something, anything to say.

OLBERMANN: There does seem to be an idea per day, and they don`t seem to have been rolled out in any kind of -- any kind of logical, illogical pattern. And if that strikes somebody who doesn`t know a thing about the subject, it must get you to pull your hair out.

KRUGMAN: It`s really strange. Look, there are no easy answers. The fact of the matter is if either candidate had an idea for bringing down gas prices now or even next year, they would go with it. But McCain is kind of -- you know, he wants to be saying something different, but he ends up sounding basically like Bush over again. If only you would let me drill some more stuff, open up some natural resources, forget about the environment, this will be good. And I have to say, you know, not my expertise but even politically I think it`s a bad idea. He`s making himself sound more like the guy that most Americans would really like to see the end of.

OLBERMANN: To McCain not versus Bush, but McCain versus Obama; Obama hits McCain for wanting tax payers dollars to subsidize nuclear plants, not wind, not solar. McCain hits Obama for relying on corn, on ethanol, not uranium. Are there real meaningful differences between these guys and what do we read into those differences, if they exist?

KRUGMAN: Well, Obama is proposing to spend really quite a lot of money by the standards of this thing. He`s proposing to spend 150 billion dollars over 10 years on clean energy. And that`s not a lot by comparison. That`s one year in Iraq. But it`s a lot by the standards of energy stuff. So, that`s a fairly big program. McCain is right to give Obama a hard time on ethanol. That`s not Obama`s finest moment. He was being a politician. This is one of those things. Ethanol`s a really bad idea. It`s about corn. It`s about Iowa being the first caucus. I like to say, if only the first caucuses were in New Jersey, we would have extravagant subsidies for diners, instead of for corn. This is a problem, not Obama`s best thing, but nuclear -- there is this notion on the right that nuclear is serious and wind is not. But the fact of the matter, given what we know, is wind is every bit as serious, and maybe more so, as an alternative to burning fossil fuels.

OLBERMANN: Drive from Los Angeles to Palm Springs some time and tell people there that wind is not a good answer. Paul Krugman of "the New York Times," a great pleasure, sir. Thanks for your time.

KRUGMAN: Thanks so much.

OLBERMANN: George W. Bush`s place in history; in San Francisco that place may well be at the George W. Bush Presidential Sewage Treatment Plant. After more than 5,000 responses, there is an early big leader in the bid to rename Bill O`Reilly`s new book, a big steaming lump of you know. Worst persons next on COUNTDOWN.

Originally broadcast, 6.25.08