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SYNOPSIS:

DIANE SAWYER (ABC NEWS): And with those families in mind, we're gonna try to get some answers about specifically now, what is going to happen and when? Joining us live from Princeton, New Jersey, 2008 Nobel Prize winner in Economics, ABC News consultant and 'New York Times" columnist, Paul Krugman.

GRAPHICS: WHEN WILL AMERICANS SEE RESULTS?

DIANE SAWYER (ABC NEWS): Paul, thanks very much for joining us. I'm gonna get the calendar out, as I said.

PROFESSOR PAUL KRUGMAN (2008 NOBEL PRIZE WINNER): Okay.

DIANE SAWYER (ABC NEWS): Now, is it still true that the first thing that's gonna happen in March is that first, $150 billion is gonna go out to the states to prevent layoffs among policemen, firemen, teachers?

GRAPHICS: AID TO STATES

GRAPHICS: MARCH 2009

GRAPHICS: $150 BILLION TO STATES

GRAPHICS: 700,000 JOB PER YEAR

PROFESSOR PAUL KRUGMAN (2008 NOBEL PRIZE WINNER): Yes. And those, you know, those positive effects are already happening. States, which were planning really savage cutbacks in their employment and their, and their construction projects and so on, are cutting back the cutbacks. And so, we're, we're seeing the, the job losses, though they're still gonna happen, aren't gonna be as bad as they were. And states are already taking that into account. So, - the stimulus started working even before it began.

DIANE SAWYER (ABC NEWS): And we saw that number 700,000 up there. Is that the number of jobs that will be prevented from being unemployed?

PROFESSOR PAUL KRUGMAN (2008 NOBEL PRIZE WINNER): Well, that's a, from the state and local aid, that's a, a rough estimate. You know, it's, it's economics. That's 700,000 plus or minus 500. But it's, but it's, it's a rough estimate of, of what it will do. It's a big thing. We're talking about, you know, huge job cuts, which are gonna be made less huge. And it's a big deal for the economy.

DIANE SAWYER (ABC NEWS): Okay, back to the calendar now. The next thing, creating jobs, this huge stimulus package so designed to create, as we know, roadside repairs, school repairs, green jobs, $180 billion.

GRAPHICS: SHOVEL-READY PROJECTS

GRAPHICS: JUNE 2009

GRAPHICS: $180 BILLION FOR ROADS, SCHOOLS, MASS TRANSIT

DIANE SAWYER (ABC NEWS): When will that money come down? Who is going to be hiring? Where do you turn?

PROFESSOR PAUL KRUGMAN (2008 NOBEL PRIZE WINNER): It's gonna be all over the place. It's gonna be lots of smaller construction projects, repair projects. It won't really start until the summer. And the peak won't come 'til much later than that. The thing about infrastructure is it takes time. It can take years. They've gone for stuff that's shovel-ready, stuff that can start fairly quickly. But even so, that's gonna be a lot slower in its impact than the, the aid to the states.

DIANE SAWYER (ABC NEWS): So, are you saying we should contact local governments first if you want to get a shot at those jobs?

PROFESSOR PAUL KRUGMAN (2008 NOBEL PRIZE WINNER): Mostly, yeah. I mean, it's not gonna be, most of it is not big federal projects. Most of it is repairing schools, repairing bridges. It's gonna be things that are gonna be taking place at a relatively local level.

GRAPHICS: NEW TAX BREAKS

GRAPHICS: $13 MORE PER WEEK

DIANE SAWYER (ABC NEWS): Again, watch for June on that front. Also in June, the individual taxpayers will get this $13 a week in their paychecks, part of the stimulus package. Doesn't sound like much?

PROFESSOR PAUL KRUGMAN (2008 NOBEL PRIZE WINNER): No, but there's a lot of people in America. You know, basically, everybody's gonna be getting a small but persistent tax break. So, add it all up, and it ends up being a pretty significant thing, probably not as big as the other two things we talked about, as the state aid or the infrastructure, but it's gonna help.

DIANE SAWYER (ABC NEWS): And as we've been reporting, every week, another 20,000 people have been losing their jobs. For those who already lost their jobs, when will they see an increase in - is it the average $300 a week in unemployment?

PROFESSOR PAUL KRUGMAN (2008 NOBEL PRIZE WINNER): Well, and by the way, it's, it's every day another 20,000 people are losing their jobs. It's, it's worse than even you said. And so, we're gonna see a lot of unemployment benefits would have been expiring, but they're gonna continue. And, and so, in April, people who would have been in trouble, losing their benefits, will get it.

GRAPHICS: NEW UNEMPLOYMENT INSURANCE

GRAPHICS: $25 MORE PER WEEK

GRAPHICS: MORE WORKERS ELIGIBLE

PROFESSOR PAUL KRUGMAN (2008 NOBEL PRIZE WINNER): And I'm not quite sure how quickly the extra on the paycheck, on the unemployment checks comes, but it is gonna come fairly quickly. And again, that's another small boost, but affecting a lot of people.

DIANE SAWYER (ABC NEWS): $25 on top of, as we said, an average of $300. And again, yes. $300 a week, 20,000 jobs a day.

PROFESSOR PAUL KRUGMAN (2008 NOBEL PRIZE WINNER): Yeah.

DIANE SAWYER (ABC NEWS): That's why you won the Nobel Prize and I didn't.

PROFESSOR PAUL KRUGMAN (2008 NOBEL PRIZE WINNER): All right. No, it's, it's pretty awesome. I mean - yeah.

DIANE SAWYER (ABC NEWS): Okay. Thanks so much, Paul.

PROFESSOR PAUL KRUGMAN (2008 NOBEL PRIZE WINNER): Thanks a lot.

DIANE SAWYER (ABC NEWS): Now, Chris Cuomo has the other major headlines. Chris?

Originally broadcast, 2.17.09