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MADDOW: The estimate of today`s government rescue plan for the economy, as John said, is $1 trillion, $1 trillion. A number so big, it used to be in the zillion, bazillion, kabillion (ph), category of words made up to sound too big to imagine. Should we be happy this plan is so ambitious because maybe then it`s big enough to work? Or might the economy totally, globally tank no matter the size of this rescue plan? Is this just the first trillion? With numbers this big, this diagnosis this dire, I am no longer worrying about my tax dollars, I`m worried about the country. This sometime feels like everything everyday rebounds (ph) to the election but this feels bigger than the election. Whether it is President Obama or McCain, will the new president be taking over a government that is a shell of its former self, helming an economy that is itself a shell of its former self? How much is our economy changed? How much is our country changed just in the past weeks? Here to try to Talk Me Down -- and I really hope he does -- is Paul Krugman, "New York Times" columnist, professor of economics at Woodrow Wilson School at Princeton. Paul, nice to see you. Thanks for joining us.

PAUL KRUGMAN, NEW YORK TIMES: Hi, there.

MADDOW: So, make your case. Should I be this freaked out or can you Talk Me Down here?

KRUGMAN: Gosh. You know, in the long run, it will work out. But, as the great economist, John Maynard Keynes said, "In the long run, we are all dead," this is pretty serious. I mean, this is -- it`s funny. I thought I was a little over the top but it turns that what Bernanke and Paulson told Congress was pretty much what I`ve been saying in my worst moments which is that unless we get a grip on this right now, it`s 1931. It`s the Great Depression all over again. This is an incredible financial crisis. The whole system is apparently within days of melting down. So, you know, assuming that it gets rescued here, then it`s only bad, but not terrible, but wow -- it`s really pretty bad.

MADDOW: What is a total meltdown look in terms that non-economists -- look like in terms that non-economists can understand and what can rescue us from total meltdown?

KRUGMAN: OK. The meltdown of the financial markets really would mean that nobody can get a loan, not even loans to, you know, operating. So, business sort of grinds to a halt because the cash -- nobody can do business entirely on cash. And you can`t have the lending and so, unemployment scoots up, business failures across the board, lots of people, even more people lose their houses. You know, 1932, sort of, after the banking crisis of the early Great Depression. That`s the picture except it`s, you know, it`s all kind of not banks of big buildings of marble, but it`s more virtual, it`s more 21st century, but still basically the same thing. What can advert it is if the taxpayer stands guarantee, so behind enough assets so business is able to keep functioning. And that`s essentially what we think is in the plan, although, you know, we don`t have any details yet about how this is going to work.

MADDOW: In the, I guess, in the broadest possible terms, is politics just ceased to matter? We`re not hearing, I know, certainly we`re hearing sniping on the campaign trail, John McCain blaming Barack Obama for what`s happened which is -

KRUGMAN: Right.

MADDOW: I think a spit-take moment for most of the country. But honestly, beyond that, it seems like what is being talked about to try to rescue the economy right now isn`t particularly partisan or isn`t particularly contentious, it just seems sort of desperate and unified.

KRUGMAN: That`s not entirely true.

MADDOW: OK.

KRUGMAN: I mean, I think, there is now bipartisan agreement except for a sort of rump true believer Republicans, that we need a gigantic rescue plan. So, that much politics has just ended. You know, but the details -- what happens to stockholder and financial firms that get a lot of their assets bought out? What happens to the -- what happens to the company where even if there`s an asset buyout by the Feds, it`s still not solved -- the company. How do we keep it a going concern, do we keep it a going concern? Those are real issues. If you listen closely to what Chuck Schumer is saying, it`s not the same as what Hank Paulson used to be saying and there`s going to be, I think, there probably is, right now, behind closed doors, a fight about those details. So, there is -- it`s not like we`ve agreed on everything. But the big thing, yes. Politics, you know, it`s just amazing. And my first reaction on hearing this was, you know, Economic Czar Paulson has seized control of the means of production. All the political divides have broken down.

MADDOW: As Jon Alter just said, we are all socialists now, right?

KRUGMAN: Incredible.

MADDOW: Paul Krugman, "New York Times" columnist, you have absolutely not succeeded in Talking Me Down.

KRUGMAN: Right.

MADDOW: But thank you for coming on to help us explain it tonight, appreciate it.

KRUGMAN: Thanks so much.

MADDOW: So, it wasn`t such a good week for John McCain on the whole "talking about the economy" thing. It also wasn`t such a good week for John McCain on any front, even foreign policy. He wants to rattle- sabers against Spain. Then, there was a whole inventing the BlackBerry thing and he wants to fire the SEC chairman, even though he can`t. And he wants to have the FEC chairman resign even though the FEC is just minding its own business. We`re going to be looking back at John McCain`s less than stellar week, in just a moment. And it turns out that reports of the demise of troopergate may have been greatly exaggerated. One man very close to the investigation says Republicans` efforts to push the investigation off until after the election may not have succeeded after all. He`ll be joining us live from Alaska, next.

Originally broadcast, 9.19.08