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CHARLIE ROSE, HOST: Welcome to the broadcast. Tonight, Paul Krugman. He is professor of economics and international affairs at Princeton University. His latest book is called "The Conscience of a Liberal."

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PAUL KRUGMAN, PRINCETON UNIVERSITY: We have a chance, a real chance, for a new progressive era, a new New Deal, whatever you like. Something that would basically close the holes, the gaping holes in the U.S. safety net, just make this a more decent society. What I`m looking for in a candidate is somebody who is really going to do that. The Democratic candidates have been pretty -- certainly on health care, have been much more aggressive, much more in the direction I`d like them to go starting -- John Edwards has been taking~ the lead pushing them in that direction. Those are the things I`m looking for.

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CHARLIE ROSE: We continue this evening with Randall Robinson. His book is called "The Unbroken Agony."

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RANDALL ROBINSON, AUTHOR: What happened to Haiti has been done to Haiti by the United States. Whenever anybody rose, any leader in Haiti`s history, rose to help the poor, the U.S. has been unfailingly sympathetic to the interests of the rich. And so, when you start talking about Aristide, when he came in, had 34 high schools. When he was removed, there were 138 high schools. Nobody is suggesting that he was the perfect politician. I don`t think he was a politician at all. He was a man with a cause.

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CHARLIE ROSE: Krugman and Robinson, next.

CHARLIE ROSE: Paul Krugman is here. He is a professor of economics and international affairs at Princeton University. In 2000, he began writing a twice weekly op-ed column for "The New York Times." His new book is called "The Conscience of a Liberal." I am pleased to have him back at this table to talk about many things. Welcome back.

PAUL KRUGMAN: Hi there.

CHARLIE ROSE: All the presidential aspirants are out there. You can`t endorse one, forbidden by "The New York Times," because it might be misunderstood as an endorsement of the paper, whatever. Tell me, though, what you think we ought to be talking about in this presidential campaign in terms of foreign policy, in terms of economic policy, in terms of issues like health care, welfare, Social Security, entitlements of all kinds.

PAUL KRUGMAN: We have a chance, a real chance for a new progressive era. A new New Deal, whatever you like. Something that would basically close the holes, the gaping holes in the U.S. safety net. Just make this a more decent society. What I`m looking for in a candidate is somebody who is really going to do that. The Democratic candidates have been pretty -- certainly on health care, have been much more aggressive, much more in the direction I`d like them to go, starting -- John Edwards has been taking the lead in pushing them in that direction. Those are the things I`m looking for. I mean...

CHARLIE ROSE: That`s one thing. Health care is one thing. Tell me what would be -- I`ll come back to the idea of what we ought to be debating in the presidential campaign. Tell me what, in your judgment, for the best interest of the country and the beginning of a new era, would be the principal stands of a political candidate?

PAUL KRUGMAN: Well, health care....

CHARLIE ROSE: Set the bar for us.

PAUL KRUGMAN: Health care is the first thing, because it is something where we`re actually going backwards. You can see that the health care system is unraveling. And we know how to fix it. The question is whether we have somebody who has got the political will to really fix it. So health care is the prime domestic issue, because it`s right on the table.

CHARLIE ROSE: What is required to do, and therefore we can appreciate why the political will is so important.

PAUL KRUGMAN: OK. The crucial thing about health care is every other advanced country has universal health insurance. The United States is the only country that doesn`t manage to do that. And we have a system that is somehow 60 to 80 percent more expensive than those of other countries that have health care just as good as ours and don`t have any uninsured.

CHARLIE ROSE: No question that theirs is as good as ours, in terms of access to all kinds of new technologies and everything else?

PAUL KRUGMAN: And the best ones, the French system, German system, they are every bit as good as ours. Lots of studies show that.

CHARLIE ROSE: I`m familiar with the French system.

PAUL KRUGMAN: Yes. So you know, what we need to do is a system that gets rid of the crazy inefficiencies of ours as much as we can, and that establishes the basic right to health care. And that is doable. That is something that is, you know, it would actually -- if politics were not an issue, there would be no problem at all. Just Medicare for everybody. Harder to do as a real thing, but we can do that.

CHARLIE ROSE: Because of its cost?

PAUL KRUGMAN: Because it would require that people understand that they`re paying some extra taxes, but those taxes are replacing health care premiums. And because you have to pass the legislation to raise those taxes.

CHARLIE ROSE: John Edwards is talking about raising taxes at the top end in order to pay for health care.

PAUL KRUGMAN: That`s correct. This is the great favor -- the great favor that George Bush did us was to write -- to hide the cost of his tax cuts -- they all expire on the last day of 2010. So...

CHARLIE ROSE: Ten years after they were set.

PAUL KRUGMAN: That`s right. So in order -- so there is the -- you don`t actually have to pass a law raising taxes. You only have to just let the law expire, which is enough to pay for the kind of hybrid system that Edwards, private-public system that Edwards is pushing that has been now sort of imitated by...

CHARLIE ROSE: But there are no Democrats who say they`re prepared to not let it expire. No Democrats are going around talking about -- are they -- correct me if I`m wrong...

PAUL KRUGMAN: Oh, no, what, no, that`s right. They`re all talking about using at least some piece of the money that becomes available when these things expire for health care.

CHARLIE ROSE: And they`re all prepared to let these tax cuts expire or change them or what?

PAUL KRUGMAN: Yes. They`re all prepared to lot the top-end tax cuts expire, and then change the ones lower down. And that`s money. That`s a significant amount of money. It is enough to make universal health care doable.

CHARLIE ROSE: Are tax cuts for the middle class good?

PAUL KRUGMAN: It depends.

CHARLIE ROSE: Not the top end.

PAUL KRUGMAN: Right now, right now, I`d say no. Right now, because the fact is, we have huge unmet needs -- health care, other parts of the social safety net, just stronger support for families. Tax cuts for the middle class are certainly not as bad as tax cuts for the rich, but they`re not a priority right now.

CHARLIE ROSE: Do tax cuts generate more revenue, which drives growth in the economy?

PAUL KRUGMAN: No.

CHARLIE ROSE: That principle of economics is wrong?

PAUL KRUGMAN: It`s -- if we had, if we had a 91 percent tax rate at the top end, then we could talk. At the levels of taxes where we are right now, just not true. Clinton raised taxes in `93. It was followed by an astonishing seven-year boom. So, no, I mean, at the range where we are now -- to say that raising taxes back to what they were doing the roaring `90s would kill the economy, that`s crazy.

CHARLIE ROSE: You`re a deficit hawk.

PAUL KRUGMAN: I used to be a deficit hawk. I`m a former -- I`m...

(CROSSTALK)

CHARLIE ROSE: Clinton was a deficit hawk, and that`s what he did.

PAUL KRUGMAN: He was. And you know, this is where...

CHARLIE ROSE: Bob Rubin was.

PAUL KRUGMAN: Yes. And we`re all kind of chastened now, because what happened was that the deficit hawks did a great job. Brought down the deficit, the economy did fine.

CHARLIE ROSE: Created a surplus.

PAUL KRUGMAN: Created a surplus, which then George Bush took away and stole the whole results of it.

CHARLIE ROSE: But the Bush people argue that that process had already begun at the tail end of the Clinton administration.

PAUL KRUGMAN: Not -- no. You just look at the size of it. And it`s the tax cuts primarily.

CHARLIE ROSE: So the good times would have continued...

PAUL KRUGMAN: Oh...

(CROSSTALK)

PAUL KRUGMAN: ... recession -- would the recession -- look, they probably should have been -- this is a different issue. But the point was, Bush pushed for quasi-permanent tax cuts, except they expire at the end of 2010. That had nothing to do with fighting the recession. And you know, the point -- why are a lot of us who were deficit hawks -- I was a full Rubinite if you asked me in 1998. The reason I`m not now is because it turns out that virtue can serve as just a way to set the stage for the other guy`s vices.

CHARLIE ROSE: So there is something in your judgment now, an allowable, livable deficit? Fiscal deficit.

PAUL KRUGMAN: In a long run, I`d like to see it go away. But...

CHARLIE ROSE: You can live with it?

PAUL KRUGMAN: Put it this way. I`ve talked to a lot of people, not Rubin, but people who worked with Rubin, saying wouldn`t you be happier if you had not been quite so successful at getting the deficit down but had actually put in place some programs that would actually do some good for people, instead of paying down the debts so that George Bush could run it up again? And they all say yes.

CHARLIE ROSE: Rubin says that?

PAUL KRUGMAN: No, not Rubin. I haven`t talked to him. No. People -- it`s a lot of...

CHARLIE ROSE: Clinton doesn`t say yes either, does he?

PAUL KRUGMAN: I don`t know. I haven`t tried it on Clinton. But you know, the general perception is that in the end, it was all for nothing. All of that paydown of debt just went to make it possible for George Bush to go off and have a party for his rich friends.

CHARLIE ROSE: But the surplus was a good idea, and they could have done a lot of good things with it. George Bush just decided that the money belonged to the people and they wanted to give it back to them.

PAUL KRUGMAN: But you know, you have to live with -- well, not people. His people, right? The haves and the have-mores. No, it`s, you know...

CHARLIE ROSE: But that was the idea. I mean, the rhetoric and the whole thing...

PAUL KRUGMAN: Yes, and right now, there are also -- there are some things -- again, I`m sorry, I keep coming back to health care, but it really is the core. Health care seemed to be sort of doing OK in the `90s. That was a brief intermission. It`s now the crisis that we had at the beginning of the `90s is back.

CHARLIE ROSE: And employers can no longer afford to pay.

PAUL KRUGMAN: Which means that right now, doing something to shore up the health care system so that middle-class families are not more and more thrown off the roles takes priority.

CHARLIE ROSE: What`s the difference between what Mrs. Clinton is saying she wants to do now and what she said she wanted to do during the first term of her husband`s administration?

PAUL KRUGMAN: There is actually less difference than some of the stories would have you. You know, the Clinton plan in `93 was slandered no end. There was actually a fair bit of choice in it. But they...

CHARLIE ROSE: That was mainly because, A, insurance companies launched a huge media campaign, but also she had received a lot of criticism for the way they went about it.

PAUL KRUGMAN: Right. Right. And leaving all that, but I think the main thing is that the Clintons did have two things in mind in `93. And they were -- they wanted universal health care, but they were also all caught up in the idea of HMOs, and so they were selling the HMOs as the great solution. And they weren`t actually going to force you into HMOs, but they sounded enough like that. And now we`ve learned a lot -- and this time, you know, Clinton 2007, which is essentially Edwards 2007, is...

CHARLIE ROSE: So Clinton and Edwards are on the same space?

PAUL KRUGMAN: Yes.

CHARLIE ROSE: And where is Obama in...?

PAUL KRUGMAN: Close. They are...

CHARLIE ROSE: So it`s almost like Iraq. They`re all at the same place.

PAUL KRUGMAN: At this point, yes.

CHARLIE ROSE: On Iraq and on health care, the top three Democratic candidates are at the same place, essentially.

PAUL KRUGMAN: Yes.

CHARLIE ROSE: Give a little here, give a little there, but it`s essentially the same place.

PAUL KRUGMAN: Yes. The sequence has kind of been, Edwards gets out in front, and then the others quickly move up to match him. And you know, good. It`s all good stuff. The question in the election is going to be, you know, who do you think is most likely to really follow through on that? But it`s all the same stuff.

CHARLIE ROSE: Why do you think Edwards is the first person to come out of the gate with all these proposals?

PAUL KRUGMAN: He seems to be a much more serious -- I shouldn`t say that. But he`s decided to make the more committed -- he made the decision that he was really going to run a serious, progressive, populist campaign. And of course he has less to lose, to be honest.

CHARLIE ROSE: And nowhere to go either.

PAUL KRUGMAN: Right. So he has...

CHARLIE ROSE: The center was not going to be his.

PAUL KRUGMAN: Right. So he`s been taking these positions. And look, whatever the reasons, he`s laid these things out. And...

CHARLIE ROSE: They`re well thought out.

PAUL KRUGMAN: They`re well thought out. And it turns out that the other Democrats have sort of seen him test the waters, discover that the country is much more receptive to that sort of thing than they thought, and then they follow.

CHARLIE ROSE: All right, so just to understand where you -- because the book is called "The Conscience of a Liberal," and you`re hoping for a new era of liberalism to take root now, because the country is upset with the management of the Republicans, and especially in the executive branch and especially because of the war.

PAUL KRUGMAN: Well, this is part of it. I think it`s actually much deeper reason. I actually think that the -- we were heading for this new progressive era, and we were sidetracked by it -- from it by 9/11 and Bush`s exploitation of...

CHARLIE ROSE: One year into his term.

PAUL KRUGMAN: Right. But that, in fact, in fact, the 2002-2004 elections now look like aberrations. The country was actually moving in the direction I want it to move. And the reason for that is -- core issue of the book -- is that race is central to how the conservative movement got where it is in America today, and race is losing its sting. We`re becoming a better country.

CHARLIE ROSE: Give me an example of that.

PAUL KRUGMAN: OK. Well, give you two examples. One is just look at who the voters are now. We`re becoming a less white country. The Latino and to some extent the Asian vote is becoming more important. And those voters...

CHARLIE ROSE: And the (inaudible) -- African-American community is becoming more of a diverse community.

PAUL KRUGMAN: Right, but the fact of the matter is that the hard-core base that voted for Reagan when he talked about welfare queens driving Cadillacs...

(CROSSTALK)

CHARLIE ROSE: But the Southern strategy began with Richard Nixon.

PAUL KRUGMAN: Of course. Well, it actually began -- it actually began in some ways with Reagan in the `60s. But, sure, it`s got...

CHARLIE ROSE: You mean as he was running around the country making speeches.

PAUL KRUGMAN: Yes, and as he ran for governor of California.

CHARLIE ROSE: California, right.

PAUL KRUGMAN: So it`s actually -- yes, one of the big things...

CHARLIE ROSE: You remember where he launched his campaign from?

PAUL KRUGMAN: In 1980?

CHARLIE ROSE: Yes.

PAUL KRUGMAN: Oh, yeah. Philadelphia, Mississippi. Went to the place where the civil rights workers were murdered and gave a speech on states` rights. Reagan -- one of the stories we tell ourselves about Reagan as this great pure conservative -- up until he reached the presidency, his career was largely based on tacit race-baiting. I mean, it`s one of those things...

CHARLIE ROSE: No, it wasn`t. It wasn`t. It was based more on anti- communism than anything else.

PAUL KRUGMAN: Well, OK. If you want, there was some of that. But there was a lot...

CHARLIE ROSE: I agree, I`m not suggesting there wasn`t some racism in terms of the rhetoric, or at least the symbols, the symbols...

PAUL KRUGMAN: He had passion on two things, communism and welfare cheats. And he didn`t have to say what color the welfare cheats were. It just always got through.

CHARLIE ROSE: But that was also an economic philosophy he had about, you know, let`s help the people who have -- who can create jobs and all that kind of stuff. He believed in that. Whether he believed it in for multiple reasons or not. Don`t you agree? That was part of his economic philosophy.

PAUL KRUGMAN: Yes. But supply-side, tax cuts...

(CROSSTALK)

CHARLIE ROSE: And the government should get out of the way and let America do its...

PAUL KRUGMAN: He just didn`t believe in poverty. He had this thing where all those people that John F. Kennedy told you were hungry, they were just all on a diet. No, terrible, terrible stuff. But the -- OK, we`ve changed. And the other thing is just, look, I think the most interesting things are the attitudinal polls, the ones that don`t bear directly on political issues, but just kind of on your state of mind. You go back -- I think it`s 1978 -- and ask people, "do you approve of interracial marriage?" The majority said no. I mean, we had only about I think it was something like 36 percent of the public believed that interracial marriage was OK in 1978. Now it`s 77 percent. People really have decided, hey, you know, it doesn`t matter. So we are really a different country. We`re not the country in which Ronald Reagan was elected president. We`re from my point of view a better country.

CHARLIE ROSE: OK, but let me just understand what you`re saying. You`re saying race is the key.

PAUL KRUGMAN: Yes.

CHARLIE ROSE: And you believe that the worst example of racism is what?

PAUL KRUGMAN: It`s not a single thing. It`s not -- let me say, the conservatism in America is not about racism. I don`t actually think that Reagan was a racist. I`m actually quite sure that George Bush is not. But it`s something that...

CHARLIE ROSE: But you`re sure that Ronald Reagan wasn`t either?

PAUL KRUGMAN: Yes, but it was something that they used. The agenda was always tax cuts at the top end and diminish the size of the welfare state. But the way they won elections -- and the way I learned this, I spent a lot of time with political scientists, reading and talking with them. And when you`re trying to understand the voting patterns, it`s kind of embarrassing. The whole political story of the U.S. these past 30 years boils down to just five words: Southern whites started voting Republican. End of story.

CHARLIE ROSE: It`s more race than economic?

PAUL KRUGMAN: No, at the core, what the party wants is...

CHARLIE ROSE: (inaudible), that`s why I`m trying to get at...

PAUL KRUGMAN: No, what -- the core or what they want, what Reagan wanted, what Bush wants is economics. But the way they win elections has been through race, very different. In fact, in general, I think if you want to have a picture of American politics, it`s the conservatives run elections based on stuff, tacit racism, values, and then when they`re actually in power, what they`re interested in is economics. So the 2004 election -- Bush runs, you know, he`s going to defend the country against gay married terrorists....

CHARLIE ROSE: But I`m asking, is it race or is it much more lifestyle issues, whether it`s abortion or gay marriage? And those seem to be the issues that they were using, in a sense, to drive a wedge among centrists in the country.

PAUL KRUGMAN: When I`ve looked at, and what the political scientists have looked at, what they find is that once you take account of the essential -- essentially the switch of certain whites in the backlash against the civil rights movement, all the values stuff pretty much boils away. There`s not much left over it. Even things that look like -- evangelicals starting to vote Republican -- a lot of that is just because Southern whites were starting to vote Republican. And there really isn`t very much left over after you take into account the race factor.

CHARLIE ROSE: John Edwards thinks he`ll do well in the South. I mean, he constantly says that. I mean, that`s the way, when you ask him about Mrs. Clinton, he always says, well, I think -- he won`t criticize her, but he thinks I`ll do better, or someone like me will do better in the South, because I know the South and the South knows me. Yet his positions are to the left of her.

PAUL KRUGMAN: It`s a remarkable thing. You look at polls right now, and people think that she`s the left most of the Democratic candidates, and he`s the right most. And the reverse is true.

CHARLIE ROSE: I am not sure polls say that, but I mean, I hear you...

PAUL KRUGMAN: No, they have really seen that, yes. And it`s a remarkable thing. But it`s -- all right. I have no idea. At a certain point, my ability to prognosticate elections is no better than anyone else`s.

CHARLIE ROSE: I`m not asking you to do that. What I am asking you to say is to talk about liberalism and what it means today and what it means to you, and why you don`t -- I don`t see any of those Democrats, including John Edwards, says I`m standing here before America and all of you Democrats saying I`m a very proud liberal, and what`s wrong with America is there is not enough liberals and not enough liberalism. That`s not what they say.

PAUL KRUGMAN: Sure.

CHARLIE ROSE: Suggesting what to you?

PAUL KRUGMAN: That the campaign against the word liberal has been very successful. You ask people "are you a liberal?" And twice as many people say they`re conservative as liberal. Ask them about do they think that the government should guarantee health insurance to everybody? And by a 2-1 margin, they say yes. Ask them...

CHARLIE ROSE: When you say, "do they favor socialized medicine?" they all say no.

PAUL KRUGMAN: Right, but you know...

CHARLIE ROSE: Why not? Because the health care would go to -- you know...

(CROSSTALK)

PAUL KRUGMAN: Well, the famous -- the guy who chased down Senator John Breaux in the airport and said "Senator Breaux, don`t let the government gets its hands on Medicare."

(LAUGHTER)

CHARLIE ROSE: That`s great.

PAUL KRUGMAN: Yeah. Right.

CHARLIE ROSE: That`s a -- Medicare -- a program that works.

PAUL KRUGMAN: Medicare works beautifully.

CHARLIE ROSE: Yes, exactly.

PAUL KRUGMAN: If you ask people "Is Medicare socialized medicine?" they`d probably say no. And of course, nobody is proposing more than that.

CHARLIE ROSE: In other words, if a candidate came along and said "what I want for all citizens is what those citizens who get Medicare get?"

PAUL KRUGMAN: Well, it`s not -- yes, I mean, there are people -- John Conyers has a bill, which is actually I think called the Medicare For All Act...

CHARLIE ROSE: You like that?

PAUL KRUGMAN: You know, if I thought it could pass, I would like it very much. It`s a very, very good bill. But I`m willing to -- I want to get this thing in place. Not perfect, but workable. So I`ll go...

CHARLIE ROSE: So there`s political realism in your political philosophy.

PAUL KRUGMAN: Oh, very much so. Very much so. You know, so, liberalism. Liberalism as I see it is about being basically about believing that we should have a shared society. Believing that we shouldn`t have great extremes of wealth and poverty, that we should all be on the same material boat, that we should have a society in which there`s enough equality of access to the political process, so that we`re all in it. You know, it`s a moderate sort of thing.

CHARLIE ROSE: What is interesting -- and I don`t quite understand this, and I want you to help me understand this. I don`t think most people care how much money Bill Gates has or Warren Buffett, or whoever else is on the richest list. They don`t care about that. What they care about is how well they are doing or not doing, and if in fact they don`t feel like they`re getting a fair break.

PAUL KRUGMAN: And that`s of course...

CHARLIE ROSE: That`s the issue. Are they getting a fair break? And that`s why John Edwards campaigned four years ago, resonated in the primaries, because he created this very good campaign set speech calling the two Americas.

PAUL KRUGMAN: And there`s not a lot of envy. I don`t have a lot of envy, and I don`t think many people do. But people do, if you ask...

CHARLIE ROSE: Fairness.

PAUL KRUGMAN: Fairness.

CHARLIE ROSE: And equal opportunity to...

PAUL KRUGMAN: And to a certain extent, equal opportunity depends on having not too great a disparity in income, or at least having the basics available to everybody. And we don`t have that in this country.

CHARLIE ROSE: If you could write the tax code, at what rate would you tax people who made income of more than $1 million a year?

PAUL KRUGMAN: Oh, you know, I would probably -- I don`t want to pin myself down too much.

CHARLIE ROSE: I know you don`t.

PAUL KRUGMAN: We had....

CHARLIE ROSE: What`s wrong with -- why not? I mean, you want to look at the numbers, you haven`t looked at the numbers?

PAUL KRUGMAN: No. We had a 50 percent top rate in the Reagan years.

CHARLIE ROSE: OK, so what`s wrong with 80 percent?

PAUL KRUGMAN: You know, at 80 percent, people start to do weird things to avoid taxes.

CHARLIE ROSE: Why don`t they do it at 60 percent?

PAUL KRUGMAN: Because it`s not worth as much. I mean, the fact of the matter is if you look at...

CHARLIE ROSE: When do they start doing weird things, at 70?

PAUL KRUGMAN: No, they increase. People do it -- look, we had a very successful economy with a 50 percent top rate. Britain has a 50 percent top rate. Doesn`t seem to be a problem.

CHARLIE ROSE: So 50 percent top rate is OK with you and you think that would be good?

PAUL KRUGMAN: Yes. I mean, I don`t think we`re going to get that. So I`ll be happy if we can just get....

CHARLIE ROSE: What is the top rate right now?

PAUL KRUGMAN: It`s 35.

CHARLIE ROSE: The capital gains is at what now?

PAUL KRUGMAN: It`s at 15.

CHARLIE ROSE: Used to be at 30.

PAUL KRUGMAN: Yes, 28 for most of the Clinton boom.

CHARLIE ROSE: What would you like to see it at?

PAUL KRUGMAN: I`d like to -- well, I`d actually like to see capital gains taxed as ordinary income. So for...

CHARLIE ROSE: No capital gains tax?

PAUL KRUGMAN: No, taxed as...

CHARLIE ROSE: Just capital gains taxed at the same rate, so there would be no advantage for....

PAUL KRUGMAN: Having your income show up as capital gains. Now, all right. This is not going to happen. But I would certainly be very happy to see the rate go back to 28 percent, as it was again during...

CHARLIE ROSE: But you would prefer to see it taxed as ordinary income. In essence, that`s just doing away with the capital gains tax.

PAUL KRUGMAN: Doing away with the separation between capital gains...

CHARLIE ROSE: And ordinary income. You are basically saying, I don`t want capital gains -- I don`t want any break for capital.

PAUL KRUGMAN: Yes. I mean, that`s not going to happen, but it`s, you know, I`m a practical guy.

CHARLIE ROSE: I want to see where you are out there.

PAUL KRUGMAN: Look, I look at exotic societies like Canada and I see a place...

(LAUGHTER)

CHARLIE ROSE: Single payer system.

PAUL KRUGMAN: Single payer system. It`s actually called Medicare. And I see things that I wish we could do here. And I don`t expect us to get there anytime soon, but I`d like to see us move in that direction.

CHARLIE ROSE: OK. But so is there a legal problem about race that is sustaining racism in America?

PAUL KRUGMAN: No. The funny thing is -- it`s a really funny thing -- which is that actually, although there`s a lot of evidence that people are still voting based on race, it`s actually not clear that the racists get anything out of it. That`s what is so odd about it. At this point, it`s almost purely symbolic. So it`s not -- we don`t have -- we don`t have legal discrimination.

CHARLIE ROSE: I`m from North Carolina. Can I just tell you -- I grew up in North Carolina. It is -- from the time that I was going to school in a small town in North Carolina, to today, I mean the change is extraordinary.

PAUL KRUGMAN: It`s awesome.

CHARLIE ROSE: It`s awesome. You know, in every way.

PAUL KRUGMAN: Look, can I give you a really tacky example...

CHARLIE ROSE: I`m sure there are pockets of badness -- I don`t see them myself, but I mean, there`s change.

PAUL KRUGMAN: Look, yes. I mean, tacky example, but there`s a show called "Heroes," right? It`s, at least in the first season, one of the players on it, there was a couple, a white woman, a black man. I`m old enough to think, you know, you couldn`t have done that on TV. I was a little bit startled and I realized, hey, you know, it`s OK, we`re not that country anymore. So we have changed. And the truth is, Bush won the 2000 election, or whatever it is he actually did in 2000, only by pretending to be pretty moderate, almost a liberal guy. He won 2002 and 2004 by defending us against gay married terrorists. You know, but really, we`re not that country anymore. And that`s good. That means that we are I think prepared to, if you like, finish the work of the New Deal.

CHARLIE ROSE: We need to finish the work of the New Deal.

PAUL KRUGMAN: Yes.

CHARLIE ROSE: What was left to finish?

PAUL KRUGMAN: Health care.

CHARLIE ROSE: Health care.

PAUL KRUGMAN: Health care above all, and just the social, you know, broader...

CHARLIE ROSE: Did welfare reform go far enough for you?

PAUL KRUGMAN: I want a bigger earned income tax credit. I think the biggest problem that we have right now is actually the working poor. And we`re not doing enough to help them.

CHARLIE ROSE: Was Bill Clinton a liberal?

PAUL KRUGMAN: Oh, gosh. Probably when he came in. Probably -- see, I think of liberal as a set of values. Liberal was a set -- and he has a liberal set of values.

CHARLIE ROSE: OK. But you test that set of values in terms of political positions you take. Do you not?

PAUL KRUGMAN: Well, I like to draw a distinction...

CHARLIE ROSE: Otherwise, it`s a cop-out. Otherwise, it`s a cop-out. You can say to yourself, "I`m in favor of all good things for all men and women." But when push comes to shove and it makes an economic sacrifice for you or otherwise, if you just say it`s values -- and I don`t care how you vote, I don`t care about anything except you tell me where your heart is and where your values exactly are -- that`s a cop-out. And you know it.

PAUL KRUGMAN: Well, here is my distinction anyways between progressive, I think of as being the political arm of liberalism. Progressive is what you try to do. And was Bill Clinton a progressive? Not much of one after the first couple of years. Now, you could say he couldn`t have been, because he had such a hostile Congress, but there was not a lot of progressive legislation, except for S-CHIP, the children`s program, that took place in the last six years of the Clinton administration. But that`s -- I don`t necessarily blame him. We didn`t really have a strong progressive movement. Now we do.

CHARLIE ROSE: OK. Where did it come from?

PAUL KRUGMAN: I think we can give some thanks to George Bush.

CHARLIE ROSE: Mostly thanks -- if Bill Clinton did not have a strong progressive tradition and we do have one now, it has to be something that happened after he left?

PAUL KRUGMAN: It`s also true that the growing income inequality has finally caught people`s attention. The disintegration of the employer- based health care system has caught people`s attention. And I think we just sort of -- you can just see it kind of gel. But sure, George Bush, I think, you know, the Europeans tell me that they ought to have a statue in front of the European Commission, the European Union. They ought to have a statue of Joseph Stalin, who made it possible. And when we have my new New Deal, maybe we should have a statue of George Bush.

CHARLIE ROSE: Trade.

PAUL KRUGMAN: OK. Wow. That`s -- I was afraid you were going to ask me about that, right? I`m a big free trader, but not for the reasons that people would say. If you ask me if the United States turned somewhat protectionist, would that have devastating effects on the U.S. economy? The answer is, no, it would not. It would have devastating effects on the economy of Bangladesh, a devastating effect on the economy of Paraguay. You know, the open trading system is really important for the poor countries. Are there problems? Does it cause some problems in the United States? Yes, though not as much as people think.

CHARLIE ROSE: So you, on the basic issue of trade, you are basically saying I`m for free trade because I think it`s in the best interest of people in poor countries.

PAUL KRUGMAN: That`s right. And I know that`s a very difficult...

CHARLIE ROSE: And it`s not where this word is attached to now.

PAUL KRUGMAN: Well, you know, ....

CHARLIE ROSE: Edwards, Clinton, Obama.

PAUL KRUGMAN: So am I going to be...

CHARLIE ROSE: Biden.

PAUL KRUGMAN: So am I going to go out all in the attack against the candidate who is mildly protectionist? No.

CHARLIE ROSE: Because you have George Bush`s position on trade.

PAUL KRUGMAN: I have what he says, not what he does. But yes.

CHARLIE ROSE: (inaudible) his position on immigration? Don`t you?

PAUL KRUGMAN: The only thing I actually hate -- I hate the idea of a permanent guest worker program. The idea of having a permanently disenfranchised class of (inaudible) in this country...

CHARLIE ROSE: Let me come back to this, last point, because you do have, you know, on "Meet the Press" on Sunday, Tim did a very terrific job with having Bill Cosby and what`s his name from Harvard, the professor who has written a book together with him. And they wrote a terrific book. I mean, they wrote a book and basically saying, you know, a couple of things. One is that with respect to African-Americans, we really do have to deal with the issue of broken families and really do have to deal with the issue - and this is Bill Cosby, you know, and respect ...

PAUL KRUGMAN: Yeah.

CHARLIE ROSE: ... and all that kind of stuff.

PAUL KRUGMAN: By all means.

CHARLIE ROSE: Alvin Poussaint is who it was.

PAUL KRUGMAN: But that`s no reason not to have health care for all the kids and good schools.

CHARLIE ROSE: And, you know, all right, but I`m just asking you, where is the racism today? What is -- how do we get at it? What`s the battle that ought to be fought?

PAUL KRUGMAN: You know, we can have an argument tonight about how much active racism is a reason for the problems of African-Americans in the United States today. I think it`s significant, but much less than it was. And these other problems are very large. I`m mostly concerned with racism as a way that -- as something that has been used to distract middle-class Americans from what`s actually in their interests. I think it`s a political strategy issue, not ...

CHARLIE ROSE: Yeah.

PAUL KRUGMAN: You know, more than anything else.

CHARLIE ROSE: I don`t -- I wonder, and I don`t know the answer to this, whether it`s as a powerful political factor as you say it is. And I don`t know.

PAUL KRUGMAN: I don`t think it is as much as it was 20 years ago.

CHARLIE ROSE: That`s my point. Yes.

PAUL KRUGMAN: Yes. No, that`s why I`m -- this is a very upbeat book at the end, because I think we have actually turned -- we`re becoming a country that`s much better. And I think the chance for the kinds of policies I want, the chance for the kind of policies I want is much greater than it was.

CHARLIE ROSE: Do you like the bully pulpit that your column gives you and the opportunity to engage and just write what you think and sort of tweak some timid souls out there?

PAUL KRUGMAN: It`s a very mixed thing. I mean -- oh, there`s not a day I don`t think to myself, my life would be a lot more comfortable if I had never been offered this job.

CHARLIE ROSE: Really?

PAUL KRUGMAN: I ought to be a solid, middle-aged professor.

CHARLIE ROSE: Why do I have trouble believing that?

PAUL KRUGMAN: No, it was -- look, it was really, really .

CHARLIE ROSE: Because obviously you can call up Arthur tomorrow and say, thank you very much. It`s been fun.

PAUL KRUGMAN: Oh, yeah. (inaudible) an obligation, right? But there was a period, look, 2002-2003, it was very unpleasant to be a Bush critic. It was just very ...

CHARLIE ROSE: You clearly were out there. You really were.

PAUL KRUGMAN: Yes. So ...

CHARLIE ROSE: I mean, you came on this table, you and Jeffrey Sachs and lots of other people came to this table and said this is -- this is madness. But now I`m happy. Happier, anyway. Paul Krugman. The book is called "The Conscience of a Liberal." Randall Robinson is here. He has a new book. It is the "Unbroken Agony: Haiti From Revolution to the Kidnapping of a President." It tells a history of that troubled nation. He describes what happened in February 2004 to a democratically elected president, Jean-Bertrand Aristide. Cornel West calls Robinson a towering freedom fighter in the world of ideas and action. And Robinson founded Trans-Africa and successfully pushed for sanctions against South Africa`s apartheid regime in 1984. I am pleased to have him back at any table, and especially this one. Welcome.

RANDALL ROBINSON: Thank you.

Originally broadcast, 12.26.07