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KING: OK. I want to plug everybody's book again. Dave Ramsey's books include "The Total Money Makeover." Jean Chatzky, her latest is "Make Money, Not Excuses." The always delightful Barbara Corcoran, her new book is "Nextville: Amazing Places to Live The Rest of Your Life." And John Assaraf, who also has a Web site, ReadTheAnswer.com, and his book is "The Answer: Grow Any Business, Achieve Financial Freedom and Live an Extraordinary Life." It's co-written with Murray Smith. Can either of the men running for president fix the economy? We'll hear from Ben Stein and Paul Krugman think about the candidates and money, next.

(COMMERCIAL BREAK)

KING: Digging into the economy question, two of my favorite people, both in New York, Ben Stein, the conservative commentator, economist, attorney and actor, best selling co-author of "Yes, You Can Super Charge Your Portfolio." He's a columnist for "The New York Times" Sunday Business Section and honorary chairperson and spokesman for the National Retirement Planning Coalition. And Paul Krugman, "The New York Times" columnist. He's professor of economics and international affairs at Princeton University and the best selling author of "The Conscious of a Liberal." OK, guys, a CNN/Opinion Research poll says 78 percent of those surveyed say the United States' economic conditions is poor. Ben, do you agree?

BEN STEIN, CONSERVATIVE COMMENTATOR: I totally disagree. It is poor for a number of people, but 94.5 percent of the population are employed; 97.8 percent of the housing is not in foreclosure. There's just an incredible media storm saying things are bad. Yes, gasoline prices are way up, but they are still far cheaper than in other developed countries. I think it is largely a media mirage that is depressing people and making them feel terrible. That said, government policy has been very poor for a number of years now. There's no doubt about that.

KING: Paul, he says it is a myth and a government policy is still poor. What's your response?

PAUL KRUGMAN, "THE NEW YORK TIMES": Well, government policy is poor, that's for sure. But look, this is serious stuff. If you work it out, it turns out that Americans directly or indirectly consume 1,000 gallons of gasoline or other oil products every year per person. The price of petroleum is up 1.50 a gallon in the past year. That's a huge financial hit. It is hitting people directly through gas prices. It's hitting them indirectly through the cost of food and the cost of lots of things. People are, in fact, significantly worse off than they were a year ago. A lot of them are worse off than they were five years ago. I think people are entitled to say this is a poor economy. It is not just a myth. I think it is an insult to their intelligence to say it is just the media fooling them into thinking that.

STEIN: A great many people are also a lot better off than they were five years ago. In fact, an awful lot of people are in their homes for the first time. Obviously with the correction, some have lost their homes. But this is still an extremely prosperous society. And it is just fooling people and depressing them to tell them it isn't.

(CROSSTALK)

KRUGMAN: Ben, you are basically saying that basically because we are not a third world country -- we are not doing well by our own standards.

STEIN: We are doing well by most standards, but the gasoline problem is a price -- a problem -- price is problem for certain people. It's obviously not a problem for people in Princeton. But it is a problem for a lot of people. What could they do about it? There's nothing we can do about it at this point.

KRUGMAN: Except people are hurting. There are other things have that haven't come up on this show. Health insurance, a lot of people are either underinsured or not insured. It's a worsening situation. It's a real problem.

STEIN: That is a real problem. But a lot of those people are illegal aliens. A lot of those people never remotely had a hope of having health insurance.

KING: Is this campaign, Paul, going to clearly define the differences and the equating answers to these problems?

KRUGMAN: Well, I hope it will. You do have -- I think Ben would agree with me on this. We have a real difference between the candidates. We really one candidate who says what we need are more tax cuts, less government, more or less do what Bush did, only we'll do it right. The other candidate who saying, we need to make a change in direction. It is as clear a choice as we have had in any election in my lifetime. You know, people feel lousy about the economy. That's good news for Obama. It may not be entirely fair. McCain didn't do this. But, still, he's identified with the policies. It's a lousy economy, and Obama is saying let's do something different.

STEIN: McCain hasn't done anything wrong yet and Obama hasn't done anything right yet. The problems in the economy are problems caused by gigantic worldwide events, including gigantic worldwide speculation, caused by gigantic mistakes in credit policies, for none of which Bush is responsible, for none of which McCain is responsible. But on the other hand -- but what I would like to get to is this basic point; what's anyone going to do about these oil prices? There's really nothing to be done about them, except for individuals to conserve. In the long run, though, we do not do anybody favors by taxing the oil companies or taking away the taxes that Congress has voted for them.

KRUGMAN: Gosh.

KING: You have said, Ben, that the rich are not paying their fair share in taxes.

STEIN: I could not agree more. I think Mr. Obama has it dead right. There should be higher taxes for the rich. There should be higher taxes for the rich in just about every category. By rich, I mean really rich, like five million a year and up. That's a lot of money that is being taken in by those people. But unequivocally, it is wrong that those people pay so little tax.

KING: On here have agreement, Paul?

KRUGMAN: Sure, but we need more money than that. I say let's go back to taxes the way they were in the 1990s, which was not -- you may remember was a pretty good time. That would give us a lot more money to do things we need to do. It's not just enough to -- I'm all for soaking a little bit more in the super, super rich, but that's not enough; 250k-plus, which is what Obama is saying, that seems reasonable to me.

STEIN: With all due respect, Dr. Paul, those are not very rich people. In New York, 250,000 doesn't make you rich. In L.A., San Francisco, Chicago, those people are not rich. Why not just really put it to people who are extremely rich? They can afford it. They will still be rich. They will still have their planes and yachts.

KRUGMAN: Not enough money.

KING: One at a time. Paul, go ahead.

KRUGMAN: It is amazing that Ben is arguing we can really sock it to a few rich people, which I wish I believed was enough. Anyway, look, the point is we really have an enormous difference between two candidates. I don't think -- let's put it this way, if it is a debate about the economy, I think it is pretty clear who will win it. Rightly or not, people are not happy with this economy. McCain looks like the same.

KING: Let's take a break and we'll get Ben's reaction. We'll quote from a Paul column right after this.

(COMMERCIAL BREAK)

KING: Chad Myers, our weather expert, our man about severe weather, with a quickie of what's going on now, Chad.

MYERS: Larry, still 13 tornado warnings, one just south of Salina, Kansas, but that should slide south of Salina. And then back up here toward Lincoln and Omaha, those purple boxes, those are all tornado warnings still on the ground right now, although right now we are getting fewer and fewer on the ground reports. You know what that means, Larry? It means it's getting dark and you can't see them. Those are more dangerous than those you can see coming and can get out of the way. So, as night comes, it's going to be another night across the Midwest. Plus, they don't need that rain at all in Iowa. More flooding going to be occurring too, especially through downtown Des Moines -- Larry.

KING: That's Chad Myers, always atop the scene. All right, Paul Krugman, earlier this month, you concluded a column in "The New York Times" saying, "while expensive gas and food are inflicting real harm on American families, they aren't setting a 70's style inflationary spiral. The only thing we have to fear on that front is inflation fear itself, which could lead to policies that make a bad economic situation worse." Would you explain? What do you see in inflation fear? What policies do you worry that fear would precipitate?

KRUGMAN: I'm worried that Ben Bernanke is going to hike up interest rates. I'm not worried, because I think sees things the way I do. But I am afraid the Fed is going to hike up interest rates because they are afraid of inflation, because they are seeing the price of oil and they are saying, oh my god; it is going be the 1970s all over again, and throw the economy into a much deeper recession than it is already in. I think that's unjustified. This inflation is very real. My god, you can see it at prices in the gas station. But it is not filtering through to the rest of the economy. It is oil and food. It is not hitting the rest. This is not a wage/price spiral. We have the prices, but not the wages, which means it doesn't feed on itself. So don't raise interest rates. Leave things be.

KING: Ben?

STEIN: I'm sorry to make for so little drama, but I think that's completely correct. Don't raise interest rates or also don't bash the oil companies. Also, the top 300,000 wealthy people in this country have more income than the bottom 200 million. I think we can get plenty of tax revenue out of them.

KING: Are you guys -- Paul, are you optimistic or pessimistic?

KRUGMAN: I'm somewhere in between. I'm modestly pessimistic. We don't seem to be going over a cliff. There was a real fear that we might and it could still happen, but it doesn't seem like things are falling apart. It is not 1930. It doesn't even look like 2001, to be honest. It is not falling as fast. But I think we probably have several years of a sluggish economy, a worsening job market -- that advice that we had from the earlier panel to go out and buy houses, I beg to disagree. I think house prices have a long wall to fall, still. It will be an extended siege, not a catastrophe. But it is a fairly grim economy for quite a while to come.

KING: Ben, you up or down on this?

STEIN: Slow growth, but we are not in a recession. We are unequivocally not in a recession. There's no doubt about that. We won't even know that for six months, but we're not in a recession. But slow growth for a while. We'll get through it. It is a very rich country.

KING: Are you a supporter of McCain, Ben?

STEIN: Absolutely, but I'm not allowed to politic, but I will certainly vote for him.

KING: What about the charge that the economy is his weakest point?

STEIN: I think it is probably true.

KRUGMAN: There's not a lot of justice in this. Let me say, I think it would be justified to be very critical of him on economic policy. But he'll end up probably losing in large part because of gas prices, which is not his doing. But that's the way things work.

KING: Paul, you are saying gas prices can decide an election?

KRUGMAN: Oh, sure. They decided the 1980 election, right? It definitely can do that.

STEIN: Mr. Nixon always thought it was gasoline prices more than any discoveries during Watergate that forced him out of office. He had the disclosures about Watergate and the rising gas prices at the same time. He always thought politically the gasoline prices were hurting him more.

KING: Paul, as a supporter of Obama, are you concerned by a lack of experience?

KRUGMAN: You know, as a "Times" columnist, I am not allowed to do endorsements. In principal, you don't even know which party I prefer.

KING: You wrote a book called the "Conscious of a Liberal." I can assume.

KRUGMAN: I'm all for those liberal Republicans, both of them. Look, Obama doesn't have a whole lot of -- he's young, but he has a very, very able team of advisers. He's got a really deep bench of good economists. On economic policy, I'm quite happy that he's going to be getting very, very good advice.

STEIN: I wish McCain would avail himself of some extremely good Republican economist. He doesn't seem to be doing it yet. It's not too late for him to do it.

KING: Why wouldn't he, Ben?

STEIN: I don't know why he isn't doing it. He has this very lovely woman, Carly Fiorina, a lovely, charming woman, who used to be head of HP, seemingly as his economic adviser. I'm not aware of any credentials she has as an economist. There are some extremely intelligent Republican economists he should be using. I don't know why he isn't. I just don't know why.

KING: Paul, why is the economy -- We could put ten economists, all trained at the same university, and get ten opinions.

KRUGMAN: I don't think that's true right now. I think you could probably -- you can always find somebody. Remember, there's no licensing requirement on who gets to say they're an economist. Look, we had a huge housing bubble that burst. That brought financial problems in its wake, which were even bigger than people expected, because it turned out there was more irresponsibility. We have this oil thing, which, as earlier panelists said, or as your reporter said, the Chinese are starting to drive and eat meat. All those things are hitting us more or less at the same time. It is not a mystery. I have to say, I'm a little surprised that it hasn't been worse. The economy is not doing well, but it is holding up better than you might have feared under all those blows that are hitting it.

KING: Ben, do you think the coming debates might decide things?

STEIN: I think it will have a lot to do with it. I hope Mr. McCain can wrap himself up. When I compare his style and his level of intensity and his level enthusiasm with Mr Obama's, it scares me to death. Surely, he can pull himself together a little better. I like him a lot. I'm also not supposed to endorse anyone, and I won't. But surely he can do better than he's doing and I hope he will.

KING: That's not his strong suit.

STEIN: His strong suit, I think, is his character. Here is a man who endured year after year after year of torture and confinement for his country, went on to serve his country nobly and without any kind of real, serious ethical blemish for many years in the Congress. He's a maverick, a straight shooter, I would just like to see him pull himself together and campaign a little more enthusiastically and get some good advice. Following the Bush tax policies is not the right way to go.

KING: Thank you both very much. We'll be calling on you a lot, Ben Stein and Paul Krugman. There's still time to cast your quick vote: Is the high price of gas causing you financial hardship? Go to CNN.com/larryking. Tell us. While you're there, check out our video highlights, transcripts, text alerts and more. We also have our special Alicia Keys guest commentary on AIDS in Africa. Psychic kids will be here tomorrow. It will be a great show. And Steve Carell on Friday night. Time now for Campbell Brown and "AC 360."

Originally broadcast, 6.11.08