SYNOPSIS:

SANTORUM: I'm not fully on board, but, look, I believe we have to document workers. And one thing I also believe is we can't do amnesty.

DOBBS: You need to come back so we can do some more talking. Now we got something to talk about, Senator.

SANTORUM: All right, Lou.

DOBBS: Senator Rick Santorum, thanks for being here.

SANTORUM: Thank you.

DOBBS: Next, a critic of President Bush says Social Security is a problem much smaller than the president wants you to believe.

DOBBS: My guest has been one of the most vocal critics of President Bush and his plan to reform Social Security. Paul Krugman is columnist for "The New York Times," professor of economics in international affairs at Princeton. And it's good to have you with us.

PAUL KRUGMAN, PROFESSOR OF ECONOMICS: Good to be on.

DOBBS: A crisis, we have to get it fixed. Why don't you buy that?

KRUGMAN: Mild long-run shortfall. You know, any number that you do on Social Security, it ends up being three times or five times as big for the tax cuts. You know, leave aside Medicare, but just the tax cuts. CBO estimate of the Social Security shortfall over 75 years is 0.4 percent of GDP. The tax cuts, the Bush tax cuts, are 2 percent. Why is this the crisis? And the really important thing is the privatization -- whatever they're calling it now, the latest euphemism...

DOBBS: "Personalization."

KRUGMAN: Right. You can get your benefit cuts in any color you want, right? But they don't address the problem. I mean, whatever the problem you think is -- there was a briefing by a senior administration official yesterday, a background briefing, in which he conceded, well, actually, the privatization is net neutral in its effect on the long-run budget. Now, I would say actually net negative, but he conceded that this has nothing to do with the problem.

DOBBS: It buffaloes me completely. And you're the economics professor. You tell me how you fix a problem without raising taxes, or cutting benefits, or extending the age at which you're eligible.

KRUGMAN: My version of this is you can, you know, private accounts will solve whatever you think the problem is if they go along with big benefit cuts, which is like saying that you can kill sheep with witchcraft as long as you also feed them arsenic. I mean, it's really -- it's completely irrelevant. They're using this as a blind, and they themselves admit it, when you push them hard on it.

DOBBS: All right. You're the hard analyst, the economic expert. You tell me. Is Social Security in need of reform in the next five years?

KRUGMAN: No. I mean, given what's been happening -- remember, if you look over the last seven years, the date of Trust Fund exhaustion has been receding about two years a year.

DOBBS: Right.

KRUGMAN: So the prudent thing would actually be to say, well, let's look at it. Let's think about some plans, but let's see if those estimates keep on improving.

DOBBS: And the idea that we would be able to put private accounts in, which would effectively -- everyone talks about 4 percent, but let's talk about it in other terms, because the total money, we're talking about pulling a third of the money out of the system itself.

KRUGMAN: Right. You're building up enormous debt. And what they say is, well, OK, it doesn't matter, because we're going to make it up in lower benefit payments. But that savings is 50 years away.

DOBBS: Because we're going to make it up in what?

KRUGMAN: Lower benefit payments.

DOBBS: Ah.

KRUGMAN: But that savings -- you know, what -- you're taking on cold, hard debts. You're taking on bonds issued to the bank of Japan, the reserve bank of China, and you're saying it doesn't matter, because whoever is running the United States in 2050 is going to spend less money on Social Security.

DOBBS: Isn't this constant with the entire, sort of, faith-based economics that's abroad, not only in Washington and the Bush administration, but in academia, too. Because we have economists saying these huge trade deficits, and $4 trillion in external debt, and $8 trillion national debt, they don't matter.

KRUGMAN: It's harder...

DOBBS: There is a whole "it doesn't matter" crowd now that sort of grabbed the center of economic thought.

KRUGMAN: If you showed me our numbers, as shares of GDP, and didn't tell me what the country was, I'd say, "Argentina." That's what we look like.

DOBBS: Absolutely. And a host of reasons to be concerned.

KRUGMAN: Yes.

DOBBS: Social Security not preeminent in your judgment at all?

KRUGMAN: Fifth or so on my list of priorities of things to worry about. Way down there.

DOBBS: Come back soon, we'll get through to numbers one through four.

KRUGMAN: OK. Have a good time.

DOBBS: Paul Krugman. Good to have you with us. Still ahead, we'll have the results for you of tonight's poll and a preview of what's ahead tomorrow. Stay with us. Now the results of our poll tonight. Ninety-four percent of you do not believe that President Bush will succeed in revamping Social Security, or, if you prefer, reforming Social Security. Six percent of you say he will. We'll see. Thanks for being with us tonight. Please join us here tomorrow, when I'll be talking with one Democrat who will pay a key role in the president's push for Social Security reform.

Originally broadcast, 2.3.05