This Week, January 25, 2009: The Roundtable with Paul Krugman, George Stephanopoulos, George Will, Sam Donaldson, Cokie Roberts, and Carly Fiorina

Watch this broadcast on Video: Part 1, Part 2, Part 3, Green Room (not transcribed)


GEORGE STEPHANOPOULOS (ABC NEWS): And with that, let's go straight to "The Roundtable." I am joined, as always, by George Will. Welcome to Carly Fiorina, the former chairwoman of Hewlett-Packard, welcome, and also John McCain's economic adviser during the presidential campaign. Sam Donaldson, welcome back. Paul Krugman of "The New York Times" and Princeton. And of course, Cokie Roberts. And we have a lot to time and a lot to talk about today. We'll get to the economy later on. But let's begin before the break with what I was talking to the Speaker about there near the end, George, the strange story out of the New York, Caroline Kennedy sure seemed to be, by all public accounts, the front-runner to get this appointment from Governor Paterson. 3:00 Wednesday afternoon, calls him up in the afternoon and says no thanks.

GEORGE WILL (ABC NEWS): Well, there may be stuff we don't know. But what we do know is I think she was done in by a perfect storm of five factors. First, the country just said good-bye to George W Bush, the inarticulate child of a famous father. They didn't want another one. Second, Barack Obama has in a sense raised the bar. Whatever you think of him and his policies, he's conspicuously educated and articulate. Third, her candidacy came right in the middle of Blagojevich storm. Fourth, there's a sense of entitlement to broaden the land. That is, automobile companies feel entitled. Financial services executives getting bailed out, feeling entitled to bonuses. All the rest. And the country's rebelling against that. And finally, the baby boomers are the only people obsessed with Kennedys. I mean, most living Americans have no knowledge of Jack or Robert Kennedy.

GEORGE STEPHANOPOULOS (ABC NEWS): So all that assumes, Cokie, I guess, that Governor Patterson was not going to pick her and that Caroline Kennedy internalized all of that analysis. But it is hard to know.

COKIE ROBERTS (ABC NEWS): It is hard to know. And from everything we do know, he was going to pick her. Or certainly, was very close to picking her. So something did happen. And I would add a female to this list that George has just laid out. Because the truth is, somebody who was an author and a public servant who had never held office, say, for instance, Michael Bloomberg had never held office, you know, and everybody thinks very highly of him. Pat Moynahan had never held office. I mean, you know, that kind of thing is viewed differently for a man than a woman. But I just don't think...

PAUL KRUGMAN (NEW YORK TIMES): They actually won elections.

COKIE ROBERTS (ABC NEWS): They did eventually and she would eventually as well, probably. But you know, I'm very interested to see with Kirsten Gillibrand who I think is a terrific choice. I think that she's very lucky she was appointed first because, you know, she's got little bitty kids. And everybody would be saying to her, who's going to take care of the children, a question never, ever, ever asked of a male candidate.

GEORGE STEPHANOPOULOS (ABC NEWS): So Carly, you broke through a big glass ceiling. And, you know, you saw the Speaker demur there when I asked her. Did you see any kind of sexism here in the treatment of Caroline Kennedy?

CARLY FIORINA (FORMER CEO): You know, I think the story of Caroline Kennedy may be more that an intensely private person concluded that politics is not the same as public service. And the glare can be very unforgiving as well as quite positive. But I think, if you just step back for a moment from the specific story of Caroline Kennedy and look at the numbers, whether they're the numbers on Capitol Hill or the numbers in American business, the reality is that while we've made huge progress, we haven't made enough. Only 16% of the senior officers and board members in America are women today. 20% of the office holders in the Capitol are women. So, we've gone a long way, but we haven't come far enough yet.

COKIE ROBERTS (ABC NEWS): 13 of the CEOs of Fortune 500 companies. You know, and this is in the context of white men, as we were just discussing beforehand, being 36% of the electorate in the last election. We're not talking about, you know, women trying to take numbers that are greater than their numbers.

SAM DONALDSON (ABC NEWS): Thank you very much. Please try to continue to do it without us. I think we're essential. May I speak to this issue, in the short time Caroline Kennedy...

GEORGE STEPHANOPOULOS (ABC NEWS): Thank you for asking, Sam.

SAM DONALDSON (ABC NEWS): In the short time Caroline Kennedy was out auditioning for the job, yes, I think she demonstrated she's probably not ready for elective politics. But Governor Paterson, in bumbling his way down to a decision, which may be all right, left wounded along the way and shot himself in both feet at the end. And the worst thing...

GEORGE STEPHANOPOULOS (ABC NEWS): Offended every major political family in New York, the Cuomos, the Kennedy and...

SAM DONALDSON (ABC NEWS): Exactly. And the worse thing, trashing Caroline Kennedy. She did not deserve that. I mean, oh, a tax problem. A nanny problem. Something in the marriage. What's going on there?

GEORGE STEPHANOPOULOS (ABC NEWS): From a source close to Paterson.

SAM DONALDSON (ABC NEWS): If this man is going to run for election in two years in New York, good luck, Governor.

GEORGE STEPHANOPOULOS (ABC NEWS): And Paul, a lot of people look at all this. They look at what's happened with Governor Blagojevich, they look at this chaos in New York, they even say, you know, Ted Koffman in Delaware, a placeholder, for the Biden family and say let's do away with appointing.

PAUL KRUGMAN (NEW YORK TIMES): Yeah, this is a real problem. It creates an enormous possibility for bad decisions. People do not, in fact, take governors' races as seriously as they take presidential races. And so you may end up with a Blagojevich in office doing very, very strange things. And sure, this should be a much more serious process. It should, at minimum, include the legislature. This has gotten a little weird.

COKIE ROBERTS (ABC NEWS): And, of course, for the House, you have to be elected. I mean that was the point Speaker Pelosi was making. That for Gillibrand's seat, she doesn't know what's going to happen because there's going to have to be an election.

GEORGE STEPHANOPOULOS (ABC NEWS): That's exactly right. And we already see some ferment in New York. Congresswoman Carolyn McCarthy already signaling she may challenge Gillibrand in a two years.


REPRESENTATIVE CAROLYN MCCARTHY (DEMOCRAT): I mean, I understand that she is the NRA's poster child, and I think that does not fit New York State.

GEORGE STEPHANOPOULOS (ABC NEWS): Actually, George, it may not fit New York City, but Upstate New York it was a big asset?

GEORGE WILL (ABC NEWS): Exactly, that's the whole point. Remember, when Caroline Kennedy was running someone shouted at her when she was in Syracuse, "when were you last in Syracuse?" presuming she'd been there before, but that is a big part of the state. It's what, 46% of the vote is up there.

SAM DONALDSON (ABC NEWS): Yeah, but you notice with Gillibrand in accepting the nomination said she would work with Caroline on a bill about gun control. And she may give up her best friend Wayne LaPierre of the National Rifle Association when she represents the whole state, as Senator Schumer pointed out. You do change. So she may be someone in two years who runs on a far different platform.

PAUL KRUGMAN (NEW YORK TIMES): As a resident of greater New York, let me say, that there's upstate and there's upstate. Long Island is not upstate. The real Syracuse type upstate is a very small fraction of the state, which carries a disproportionate political weight. It's like the United States in miniature, where there are no farmers but those farmers who don't exist actually are still a very important voice.

GEORGE STEPHANOPOULOS (ABC NEWS): Okay, with that we got to take a quick break. When we come back, everyone is going to weigh in on the flurry of activity on President Obama's first week, plus his next economic challenge.

GEORGE STEPHANOPOULOS (ABC NEWS): And later, "The Sunday Funnies."

JAY LENO (THE TONIGHT SHOW): President Barack Obama signed an executive order calling for the closure of Guantanamo Bay within a year. Actually, you know how he can close it faster? Make it a bank, okay, it'll shut. Boom. Boom. It will be out of there.

ANNOUNCER: "This Week" with George Stephanopoulos brought to you by...


ANNOUNCER: "This Week" with George Stephanopoulos from the Newseum in Washington, DC, will continue in a moment, after this from our ABC stations.



PRESIDENT BARACK OBAMA (UNITED STATES): Transparency and the rule of law will be the touchstones of this presidency. I'm instituting a pay freeze on the salaries of my senior White House staff. Guantanamo will be closed no later than one year from now. Interrogations taking place are going to have to abide by the Army Field Manual. We are experiencing an unprecedented perhaps, economic crisis that has to be dealt with and dealt with rapidly.

GEORGE STEPHANOPOULOS (ABC NEWS): President Obama taking action on his promise to change this country in his first three days of office. Let me reintroduce our "Roundtable." George Will, Carly Fiorina, Sam Donaldson, Paul Krugman and Cokie Roberts. And George, we really did see every single day. The first day, the president acting on transparency and openness in government. The second day, Guantanamo, wiping away the legal foundation of President Bush's war on terror. The third day, calling in bipartisan congressional leaders on the economy. Good start?

GEORGE WILL (ABC NEWS): At which point when he called them in, it began to fray a little bit which you'd expect. I think the most important question for a new president is when the country wakes up and sees him there, and sees him acting, doing - and presidents have an enormous scope for doing thing unilaterally. Do they think he belongs there? And I think at the end of the week, that's fine, that's a president.

COKIE ROBERTS (ABC NEWS): Yeah, I think it was a very good week. The bipartisan meetings are very important for him to have and to keep having. And he's going to go to the Hill this coming week and talk to the Republican Caucus and that's wise as well. But I actually think the closing of Guantanamo and the statements about terrorism are very, very important. Now, they happened at the same time that he was continuing to conduct air strikes in Pakistan so it's not like the war on terror is over.


COKIE ROBERTS (ABC NEWS): But, you know, I covered the terror trials in Greece after the military junta fell. And they were so horrible to learn about. And it was such a stain on the country's history. And I think this has been a stain on our history as well. And to get rid of this and to say to the rest of the world that this is not going to go on anymore I think is very, very important.

GEORGE STEPHANOPOULOS (ABC NEWS): But that raises a fascinating question. The president has made it pretty clear that he's reluctant to go through trials like you saw in Greece.

COKIE ROBERTS (ABC NEWS): Well, because that, as he says, it will have CIA officers looking over their shoulders and the war on terror does continue.

SAM DONALDSON (ABC NEWS): Nothing has changed, nothing has happened yet except the promise of something to happen. He's going to close Guantanamo in a year. Yes, maybe, if we can find places to put that. But it's the promise of things and it's the symbolism. He freezes the pay for the top people in the White House. Now, they're not making as much as the top people in Wall Street who got away with all those bonuses. But to the American public, that's very significant. And here's a guy also who could override the Secret Service and keep his blackberry.

GEORGE STEPHANOPOULOS (ABC NEWS): The most exclusive list in the country.

SAM DONALDSON (ABC NEWS): And all of who rebel against authority say, get in there. That a boy, Barack.

GEORGE STEPHANOPOULOS (ABC NEWS): And Carly, picking up on George's point about that maybe the action's starting to fray as he brings in the Republican members of Congress. What did you hear when you heard the president saying - bringing them in and saying I want to work with you. On the other hand, we also heard some reports inside the meeting when Congressman Cantor says, how about my tax cut plan, he does reminds him who won the big election.

CARLY FIORINA (FORMER CEO): Well, I think both are totally fair game. You know, I think it's the right thing for President Obama to bring the Republican leadership in. It is also the right thing for the Republican leadership to stick with their principles and to try and support the aspects of his plan which they can, but to suggest additional remedies which they think are more effective. I think that is the game. Let the games begin. But I hope and I believe actually that this spirit of bipartisanship that we've seen this week will continue for a few more weeks. We're seeing some fairly typical disagreements between Republicans and Democrats. I think that's all to the good.

GEORGE STEPHANOPOULOS (ABC NEWS): And the biggest complaint, and I brought this up with Speaker Pelosi, Paul, from the Republicans on the package is not only the tax cuts, but really that so much of this spending from their perspective just isn't going to get out into the economy very quickly and it's traditional pork barrel spending.

PAUL KRUGMAN (NEW YORK TIMES): Well, yeah, a lot of it is, you know, one person's pork barrel is another person's necessary infrastructure investment. And there actually is a lot of necessary infrastructure investment. I think the thing that's particularly striking right now is that everybody's forecast calls for an extended slump in the economy. We're not looking at something - what people call a v-shaped recession.

GEORGE STEPHANOPOULOS (ABC NEWS): Through 2009 for sure?

PAUL KRUGMAN (NEW YORK TIMES): Oh, no, well beyond that. I mean when people say, well you know, some of this spending won't take place until 2011, the CBO's baseline forecast calls for 8% unemployment in 2011. So we're talking about a situation where the economy by all accounts...


PAUL KRUGMAN (NEW YORK TIMES): Yeah, because things are going down very rapidly. And there's very little sign that there's a spontaneous recovery in the pipeline. So we're looking at a situation where even if some of these projects are continuing to add spending 2 years out, even 2 1/2 or 3 years out, that's not such a bad thing. Because we're looking at a prolonged - we're looking at what people call an L-shaped recovery which is hardly any recovery at all.

SAM DONALDSON (ABC NEWS): The new head of the President's Council of Economic Advisers a few years ago studied recessions including our big depression. And wrote a paper saying that she couldn't find stimulus programs had really worked in any major sense. Now, but I think it's right...

PAUL KRUGMAN (NEW YORK TIMES): That's not quite right, actually. It's actually...

SAM DONALDSON (ABC NEWS): And I close enough for government work?

PAUL KRUGMAN (NEW YORK TIMES): No, actually. What she found was that monetary policy works better than fiscal policy.


PAUL KRUGMAN (NEW YORK TIMES): The problem is we don't have any monetary policy because interest rates are already at zero. So it's actually a paper which is very relevant to experience since the Great Depression but not to where we are right now.

GEORGE STEPHANOPOULOS (ABC NEWS): So we've never really faced this kind of a depression.

SAM DONALDSON (ABC NEWS): But she founds that the stimulus programs.

PAUL KRUGMAN (NEW YORK TIMES): Not since the 1930s.

SAM DONALDSON (ABC NEWS): But she found the stimulus programs, like the one Japan tried in the 90s, really didn't immediately pull things out.

CARLY FIORINA (FORMER CEO): I think one of the other problems we face right now is despite all the appropriate comparisons to the depression, the structure of the economy is very different today. Two-thirds of the purchasing power in this economy comes from consumers. Two-thirds of new jobs are produced by small business, not big business. So this is no longer an economy where it's big government, big business, and big labor. It's consumers and small business. And I think what troubles me about the stimulus package is we still have not gotten at the root of the problem which is, we have a credit crisis. Consumers and small businesses are not receiving credit. That's a problem. And we have a home foreclosure rate that is rising. We have to solve those problems.

COKIE ROBERTS (ABC NEWS): I think Obama was ready to sign on to the Republican plans on small business tax cuts because it is such a huge part of the economy, and in order to get people moving, you know, and buying, and all that, you've got to help small business.

GEORGE STEPHANOPOULOS (ABC NEWS): And he also has signed onto a provision that will allow businesses to write off their losses going back five years.


GEORGE WILL (ABC NEWS): Let me suggest with due respect to the professor here, economics is a science of single instances precisely because when you get these big events, they're apt to come in an economy that bears no resemblance to an economy we had the last time we had a big event. If indeed, employment goes up to 8% it will be 2 percentage points below what it was in the early 1980s.

COKIE ROBERTS (ABC NEWS): But of course it's already 10% in Michigan, and Rhode Island.

GEORGE WILL (ABC NEWS): A second axiom, and it's an old familiar one, if the only tool you have is a hammer, every problem looks like a nail. The only tool we have left is spending at this point. Because as Paul says, interest rates are zero. What do you do with that?

PAUL KRUGMAN (NEW YORK TIMES): Yeah, in fact, look, the reason, it does not at this point look like we're going to hit the unemployment rates of the early 1980s. Although some estimates - you know, Mark Zandi says that we will. But the difference was that interest rates were high in the early 1980s. In the early 1980s, we had a recession which was induced because the Fed raised interest rates and squeezed housing. And when the Fed brought interest rates back down again...

GEORGE WILL (ABC NEWS): Induced deliberately in effect.

PAUL KRUGMAN (NEW YORK TIMES): That's right. And housing came springing back because it had been squeezed by those - squoze by those high interest rates. We're nothing like that. No, we're in a situation where none of the things that worked 25 years ago have any prospect of working, which is why we're talking about...

SAM DONALDSON (ABC NEWS): So here's what we need to do, Cokie.

COKIE ROBERTS (ABC NEWS): You know, that's the other problem.

SAM DONALDSON (ABC NEWS): Consumers, I think, you're right, consumers are not spending. Some of them don't have any money. So, yes, infrastructure, job creation. But the other side is induce the consumer to spend. I'm for trickle up. Give them a tax credit for buying a new car, for buying a refrigerator, for buying an HP computer. If you give them the tax credit for spending, let them spend. Once again, trickle up.

PAUL KRUGMAN (NEW YORK TIMES): Historically consumers saved about 8% of their income. In recent years, that's been zero. In some ways, we want to see consumers spending less, right, so this is not the problem. We don't want to just have a, you know, return to the spending ways of 2006, that's not where we want to go.

SAM DONALDSON (ABC NEWS): You don't want them to spend?

PAUL KRUGMAN (NEW YORK TIMES): And we have been under investing in infrastructure. We have been doing too little. You know, we have bridges falling down.

CARLY FIORINA (FORMER CEO): Grass on the Mall might not qualify.

SAM DONALDSON (ABC NEWS): The construction worker that you put to work building a new bridge, he's going to have a job now. What do you want him to do with his money?

PAUL KRUGMAN (NEW YORK TIMES): No, you want him to spend. But we want people to spend out of income they're actually earning.


PAUL KRUGMAN (NEW YORK TIMES): So the first thing is to actually go out there and create some income.

GEORGE STEPHANOPOULOS (ABC NEWS): Which is probably why...

SAM DONALDSON (ABC NEWS): And then give them an incentive to spend by giving them a tax break.

CARLY FIORINA (FORMER CEO): But none of this solves the credit crisis. So we still are left with the fundamental driving force of this global recession which is we have frozen credit.

COKIE ROBERTS (ABC NEWS): And the first TARP was supposed to do that by getting the bad assets out of these banks and that didn't happen.

GEORGE STEPHANOPOULOS (ABC NEWS): Thank you for giving me my segue. Because this is the next big decision that President Obama is facing. It's coming at him like a freight train. Right now likely to be made in the next week or ten days and we talked a little bit to Speaker Pelosi about it. But, Paul, I want to bring you in here because this is the financial crisis. The credit crisis. The banks are still frozen. The banks still failing. Some estimates that this could take $1 trillion or $2 trillion. And I just wonder if you could put on your professor hat for a second and just frame the scale of the problem and the options before the president right now?

PAUL KRUGMAN (NEW YORK TIMES): The ultimate problem, the core of it is that we have a borderline insolvent financial system. Nobody is really sure whether it's a little bit above the line or a little below the line but it's pretty close. And that's because we have huge amounts of dubious assets in there. So if you take a narrow definition, stuff that's highly likely to go belly up, it's $1.4 trillion of stuff. If you take a broad definition, which includes stuff like auto loans, includes stuff like other kinds of - commercial real estate which is actually looking worse by the minute here, you get up to something like more than $5 trillion of dubious assets. Now, we're suffering a lot, I think, from a bad metaphor. Whoever came up with toxic waste should be buried in some.


PAUL KRUGMAN (NEW YORK TIMES): Because I actually see people write, in all due seriousness, these bad assets infect the rest of the balance sheet which is not true. It's not like having those assets there nearby causes, you know, disease to spread. It's that banks are holding a bunch of stuff that may not be worth much. And what people want to know is, you know, is the bank solvent or not.

GEORGE STEPHANOPOULOS (ABC NEWS): And until that's gone, the banks won't lend. So what can the government...

PAUL KRUGMAN (NEW YORK TIMES): It's not until it's gone. Until the banks have enough solid assets that people are assured that they're sound as banks.

SAM DONALDSON (ABC NEWS): And they have capitalization credits to meet. And they're keeping a lot of this money. We say, well they're not lending to shore up their balance sheets so they can meet standards for staying in business.

CARLY FIORINA (FORMER CEO): But I also do think, you know, I happen to differ with Speaker Pelosi when she says, well if the American taxpayer puts money into these institutions they should get equity in return.


CARLY FIORINA (FORMER CEO): I think perhaps a more important principle would be that when the American taxpayer puts money into these institutions there should be some conditions attached to that money. And one of the conditions attached to that money ought to be that it has to flow into the economy to help solve the problem. That that American taxpayer was designed to solve in the first place.

GEORGE STEPHANOPOULOS (ABC NEWS): So if you get money from the government you have to lend it out.

CARLY FIORINA (FORMER CEO): If we get money you got to lend it out. You cannot us it to simply...

PAUL KRUGMAN (NEW YORK TIMES): But that's so very difficult.

COKIE ROBERTS (ABC NEWS): Well, it's all difficult.

CARLY FIORINA (FORMER CEO): Well, why does the...

COKIE ROBERTS (ABC NEWS): That's the problem.

CARLY FIORINA (FORMER CEO): Giving the taxpayer equity in banks.

PAUL KRUGMAN (NEW YORK TIMES): Now you're saying that the government is going to run the bank but without owning it, which is very strange.

CARLY FIORINA (FORMER CEO): See, I hear that a lot. But I don't think it means that at all. You're not running the bank by attaching conditions to the American taxpayer money.

SAM DONALDSON (ABC NEWS): Well the taxpayer has got to get the money back some way.

COKIE ROBERTS (ABC NEWS): We attach conditions to all kinds of things that we give money for.

CARLY FIORINA (FORMER CEO): Well that's right. They can get it back by having it flow into the economy.

GEORGE WILL (ABC NEWS): During his hearings, the next treasury secretary, Mr Geithner said we have to begin to look at unwinding the intervention in the economy. He's going to come up against the Democratic Party, many members of whom which don't want to unwind this. This has been their objective for 30 years which is to permeate corporate decisions with what they consider the public interest, which to the rest of us is politics.

GEORGE STEPHANOPOULOS (ABC NEWS): But I don't believe they want to be on the hook for these trillions of dollars of taxpayer assets.

PAUL KRUGMAN (NEW YORK TIMES): Yeah. Who are we speaking about here?

GEORGE WILL (ABC NEWS): Barney Frank, who's already...

PAUL KRUGMAN (NEW YORK TIMES): He talks about regulating it the way we always regulated banks. He's never talked about having...

GEORGE WILL (ABC NEWS): We shall see. We shall see. They've never had the opportunity that they now have to exercise political control over investment decisions...

SAM DONALDSON (ABC NEWS): By the way, the president says Geithner is uniquely qualified. I don't think he should be confirmed. He didn't make a simple mistake. That's quite clear. When put on notice by the IRS when they went back and did two years...

GEORGE STEPHANOPOULOS (ABC NEWS): This is over his failure to pay two years.

SAM DONALDSON (ABC NEWS): That's right, put on notice that there were self-employment taxes to pay. He did not go back to the two years that they hadn't audited and said well, now that I realize it.

GEORGE STEPHANOPOULOS (ABC NEWS): He says that his accountant at the time told him the statute of limitations had ran out. But it didn't relieve him of the obligation.

SAM DONALDSON (ABC NEWS): All right, does that relieve him of the moral and ethical responsibility? No.

GEORGE STEPHANOPOULOS (ABC NEWS): He said in the end, no.

PAUL KRUGMAN (NEW YORK TIMES): You're both right. I mean this was really bad stuff. But he is uniquely qualified. I actually do know the field of people.

SAM DONALDSON (ABC NEWS): The only guy, Paul? The only man? The only person?

PAUL KRUGMAN (NEW YORK TIMES): There's a very limited set of people who have the experience and shared political philosophy with the president.

SAM DONALDSON (ABC NEWS): Could Larry Summers do it?

PAUL KRUGMAN (NEW YORK TIMES): There are issues that would lead you to...



PAUL KRUGMAN (NEW YORK TIMES): Oh, he could do it.


PAUL KRUGMAN (NEW YORK TIMES): But there was a reason.

COKIE ROBERTS (ABC NEWS): But he wouldn't get confirmed.


SAM DONALDSON (ABC NEWS): Yes, he would.

COKIE ROBERTS (ABC NEWS): You know, George, I actually think that the place the Democrats are eager to get in is not so much on corporate governance. But it is on these other things. On infrastructure. On expanding health care. The State Children's Health Insurance Program has been expanded now. I think those are the places where they've been itching to get in there. And I think that this economic crisis gives them a great opportunity. And I think you will see programs established that will be around long after this crisis is over.

CARLY FIORINA (FORMER CEO): I do think that business people also have some opportunity to act here. And I've written on this subject. But, you know I think...

GEORGE STEPHANOPOULOS (ABC NEWS): What do you mean by act? In which way?

CARLY FIORINA (FORMER CEO): Well, what I mean is that business has a role in restoring confidence in the capitalist system as well. I think boards ought to put CEO up for shareholder vote. I think CEOs and boards who come to Washington and ask for American taxpayer money should also tender their resignations because they've clearly made some poor decisions. I think there are some things that business ought to be stepping forward and doing without the press of political pressure.

GEORGE STEPHANOPOULOS (ABC NEWS): Should they be stepping forward? I've been told that some are considering coming to Washington this week to meet with the president, and express their support for this stimulus package.

CARLY FIORINA (FORMER CEO): Well, I think everyone agrees. Paul is absolutely right. Everyone agrees across the spectrum that there is stimulus required to get the economy going.

COKIE ROBERTS (ABC NEWS): And that the only player big enough is the government?

CARLY FIORINA (FORMER CEO): Yes, but I think there are fundamental disagreements around that core principle. What is the role of tax cuts? Is all the stimulus really simulative to the economy in creating of jobs, or is some of it just plain old-fashioned pork? And does or does not the stimulus package really address the core problem? Most would say no, which is we don't have credit flowing.


GEORGE WILL (ABC NEWS): It is possible, likely, I guess, that on Monday when McDonald's announces its last quarter results, they're going to show a considerable improvement. What's that tell us? It's a small sign of a big phenomenon. Which is people change their behavior.


GEORGE WILL (ABC NEWS): Eating, not at expensive places, shopping more wisely. And over time, that's the market sorting this out, as it will do.

COKIE ROBERTS (ABC NEWS): But the market has been asking the American taxpayer to help it sort it out and that's why we do get to say something about it.

PAUL KRUGMAN (NEW YORK TIMES): And this is the kind of economy in which privately sensible decisions lead to publicly bad outcomes.

GEORGE WILL (ABC NEWS): The paradox of thrift?

PAUL KRUGMAN (NEW YORK TIMES): This is the paradox of thrift, the paradox of de-leveraging. There are a whole set of things where if everybody decides to save more, everybody ends up poor and they end up saving less. And this is the kind of economy you don't want to just say, look, people are behaving sensibly. Indeed they are.

GEORGE WILL (ABC NEWS): Let's explain what the paradox of thrift is and correct me if I'm wrong.


GEORGE WILL (ABC NEWS): It is that thrift is a normally a virtue, except when you really need...

COKIE ROBERTS (ABC NEWS): People to spend money.

GEORGE STEPHANOPOULOS (ABC NEWS): Which is probably right now. And you guys are going to have to continue this in the green room. The paradox of thrift coming up in the green room. You can join in later on Coming up here, "The Sunday Funnies."

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Originally broadcast, 1.25.09