GEORGE STEPHANOPOULOS, ABC NEWS (Off Camera): Time now for the roundtable. Joining us, as always, George Will, Fareed Zakaria and our special guest today, Paul Krugman of "The New York Times." Welcome.
PAUL KRUGMAN, THE NEW YORK TIMES: Hi.
GEORGE STEPHANOPOULOS (Off Camera): George, let me begin with you. Mr. Chalabi was very optimistic about the prospects of bringing together a government in Iraq. He says that these anti-American Shiites are no problem, there is not going to be a theocracy, we're gonna bring everyone together.
GEORGE WILL, ABC NEWS (Off Camera): Well, good. All they need in Iraq right now are the two Cs, the constitution and a currency and it's really hard to get to either of those things. The good news is, George, that they had a parliamentary moment in Iraq. It lasted 37 years. The bad news is it ended in 1958, so there's not much . . .
GEORGE STEPHANOPOULOS (Off Camera): They had a monarchy there, as well.
GEORGE WILL (Off Camera): That's right. Not much living memory of this. They need a Washington, that is, someone who can symbolize the consensus of the country, they need a Madison to handle the factions in their country, but Madison was dealing in our Constitution with ethnic and sectarian factions the way they are there, and they need a Hamilton, someone who understands how to put together a national economy. Good luck.
FAREED ZAKARIA, ABC NEWS (Off Camera): I think the problem, aside from the fact that they don't have Washington, Madison and Hamilton is that what they do have is the only organized political force which is religion. What we forget is that Saddam Hussein's regime like most of the regimes in the Middle East is a failed secular regime that is to say for all the talk about ties with religious fundamentalists, in fact, this was a secular Socialist style regime, repressed and suppressed all dissent except for the mosque. So the only organized political force in this society is religion. I hope it doesn't end up being the pattern that every other Middle Eastern country has had which is because there is no other organized political opposition, religious fundamentalism becomes only one.
GEORGE STEPHANOPOULOS (Off Camera): And the question is how do you draw them in? I was talking to one of the Administration officials involved in this process earlier this week. They said the dilemma they face unless you buy in the Iranian backed Islamic militants, they're gonna resort to violence.
PAUL KRUGMAN: The thing that struck me is that there's this extended hiatus now. I mean, it's funny, we won and we hold a few buildings and the only effective law and order for most of Iraq now is local groups of armed men mostly as far as we can make out Islamic groups, so in practice they are almost already running the country and what, you know, by the time we get around to trying to form a government there, we may be faced with a fait accompli. That for all practical purposes, much of the country is run by Shiite religious groups.
GEORGE STEPHANOPOULOS (Off Camera): That may be but what the other goal of the United States in this whole effort was not only creating a transition to a free and democratic Iraq but also finding those weapons of mass destruction and disarming Iraq. I thought I noticed this week Secretary of Defense Rumsfeld trying to lower expectations about the prospects of finding them. He said we're not gonna find them, we're gonna rely on Iraqis to find them and Prime Minister Tony Blair is already coming under some pressure in Britain because they haven't found them.
FAREED ZAKARIA (Off Camera): Well, I suspect that what we'll discover about Saddam Hussein's Iraq is what we discovered about the Soviet Union which was that it was every bit as evil as we thought it was but a whole less competent, that is to say they'll be tales of horror and brutality and torture but this will turn out to be a little bit more of a tin pot operation, and so I think there will have been research on weapons of mass destruction. There will probably be some. I'm convinced there is some, otherwise why would he have foregone so much oil revenue?
GEORGE STEPHANOPOULOS (Off Camera): If that's all they find, Paul, will that matter?
PAUL KRUGMAN: I think it does but not for the reason people think. I mean, I think the American public rightly or wrongly probably doesn't care, the European public will be mad at us because the war was without the justification we claimed, but they're mad at us anyway. The real message is to regimes around the world that we don't like, many of them tyrannical, which will say, you know, this wasn't about what Saddam did, it wasn't bad behavior on his part. There is no behavior that will stop the Americans if they want to come. They made this thing up. And so, in effect what we're saying by failing to find the thing that we said was the reason for the war, we're giving the message to other regimes you can't appease the Americans.
GEORGE WILL (Off Camera): But we're going to find them. The fact is, as Paul Wolfowitz said, rarely, rarely if ever in history have the intelligence services not just ours but other countries been so united on the fact that they have the weapons of mass destruction. The German intelligence service said well, we stipulate that they're there, the Iraqis told us they had X number tons of VX and Sarin and all the rest. Now, the question is did they go out in the desert one night, dump the weapons, destroy them in a way that we can't find the evidence of and not tell us because they enjoyed the sanctions? I don't think so.
PAUL KRUGMAN: I think if there, the point, I mean, we'll find something. I find it hard to believe we won't find something. We've defined weapons of mass destruction way down. We've defined it to be stuff that's really not much more dangerous than explosives.
GEORGE WILL (Off Camera): Although wait a minute.
PAUL KRUGMAN: But, but the point, the point is that this clearly isn't the big threat that we claimed. And also we also have to bear in mind that most of the world will think when we finally find them, will think that we planted them.
ANNOUNCER (Off Camera): Well, that's what I was gonna ask about. Does how we find them matter? The United States is sending in a team right now. A lot of Labour MPs in Britain are saying, no, no, we must bring the UN and Hans Blix back in.
FAREED ZAKARIA (Off Camera): I would be in favor of having more international authorities involved in it. Again, this is a sort of knee-jerk Administration response to anything that involves multilateralism. It seems to me you would clearly make it more difficult for people to believe the sort of insane conspiracy theories if you were to have internationals over there.
GEORGE WILL (Off Camera): But again we have Iraq's word for it that they had tons of weapons, bullets, VX.
ANNOUNCER (Off Camera): Yeah, the question is what happened to them?
GEORGE WILL (Off Camera): Exactly.
FAREED ZAKARIA (Off Camera): Were they so degraded to be useless, were they in some way whittled away? If we can have somebody like a Hans Blix who is suddenly the darling of the Europeans say, look, this stuff was real, it was found, this couldn't have been planted by Americans, it would make a difference.
GEORGE STEPHANOPOULOS (Off Camera): Another question is who is next? We saw the discussion earlier on Syria but I want to turn to a different rogue state, North Korea. Talks are scheduled to begin between the North Koreans, the United States and China this week and on Friday, Fareed, there was a very strange series of statements from the North Koreans. One in Korean that said essentially they had begun reprocessing plutonium and one in English that said no they were about to, or it might have been vice versa. But they had two different statements.
FAREED ZAKARIA (Off Camera): Well, they clearly were trying to send a signal that we're still on track to go nuclear. But more than the lack of clarity on the North Korean side I still think we haven't decided, Washington hasn't decided what its policy for North Korea is. The Administration is deeply divided and for awhile there was this hope that somehow Iraq would provide a miraculous victory in North Korea and last week you remember shameful media coverage. You had people jumping up jubilantly saying you know, in fact because of Iraq North Korea blinked. Well, it turns out that's not true at all. What happened was we had proposed five country talks. They proposed two country talks. What we compromised on was three country talks in which, by the way, the Chinese, the host, will play no role.
PAUL KRUGMAN: I thought that was hilarious. I thought. . .
FAREED ZAKARIA (Off Camera): So, well, I mean, but the point is we still haven't figured out once we get to these talks what are we going to say to the North Koreans?
GEORGE STEPHANOPOULOS (Off Camera): I didn't know nuclear weapons could be hilarious, but go to.
PAUL KRUGMAN: No, what was funny about this was that when they had three country talks in which the Chinese wouldn't actually participate and it was like the North Koreans are thinking, oh, those Westerners, they are obsessed with saving face, so we'll provide them with the illusion of three country talks but it's only two country talks, but that's okay because all they care about is appearances.
FAREED ZAKARIA (Off Camera): If anyone compromised, it was us.
PAUL KRUGMAN: No, it was pretty funny.
GEORGE WILL (Off Camera): I don't think it's happened yet, George, in introducing this topic said there will be talks between the United States and North Korea and China. Well, if that's how it is going to be perceived it won't happen I predict.
GEORGE STEPHANOPOULOS (Off Camera): They are also going to have . . .
PAUL KRUGMAN: We are obsessed with saving face.
GEORGE WILL (Off Camera): No, we're obsessed with having this allegedly unilateralist regime is obsessed with have a multilateral approach to this.
GEORGE STEPHANOPOULOS (Off Camera): Looks like we're also gonna need a peacekeeper to solve this problem between the House and Senate Republicans over the Bush tax cut and, Paul Krugman, I was struck in this, it was all lost in the war, but it seems like Republican moderates are back and that they actually are going to hold firm this time on the $350 billion tax cut.
PAUL KRUGMAN: We'll see about that. But I think we have reached a point where someone like Olympia Snowe has to be saying to herself, you know, this is crazy. We have the Bush Administration is projecting budget deficits every year for the next 50 years and that those are overoptimistic projections. We really, you know, we're no longer in a situation where there's any plausible route towards fiscal sanity given the existing taxes. And here we are proposing more permanent tax cuts. Now, you know, they probably find ways to rationalize it but we have reached a point of outrage, a point of, oh, my God, how are we going to handle this thing? And may, you know, there are a few people who will still say, you know, what will this look like in ten years if we do this?
GEORGE STEPHANOPOULOS (Off Camera): So you think they're gonna hold firm?
PAUL KRUGMAN: I haven't the faintest idea. My impression has been, you know, every time you thought that somebody was going to hold firm, actually what I predict is though they'll fudge the accounting. We'll have, just the same way they did in 2001, that it will be a tax package that says $350 billion but in reality it is full of funny stuff so that it's actually really $600 billion.
GEORGE WILL (Off Camera): Well, first of all, I'm out of the business of ten-year projections and I'd recommend the government get out of it also, but beyond that Bush wants $550 billion. They say, well, $350 billion. That's a $200 billion difference spread over ten years, it's $20 billion a year, in an $11 trillion economy, it's a rounding error, it's ridiculous to think that . . .
GEORGE STEPHANOPOULOS (Off Camera): But you could make that, you know, the whole tax cut.
GEORGE WILL (Off Camera): Yes, as a matter of fact, but the idea that the Administration has it right when it says that 400 and some thousand jobs will be created in the next year and a half if you get this extra $200 billion of tax cut is just absurd.
FAREED ZAKARIA (Off Camera): Well, I mean, I was just going to say all of it will be dwarfed it seems to me by the downward pressure of psychology, uncertainty, the economy still remains as sluggish as it is. If you take interest rate sensitive items that is to say cars and houses out of this economy, it's pretty much still in recession.
GEORGE WILL (Off Camera): Two points. Two points we keep saying, the sluggish economy. In spite of all the shocks it's endured, it grew at 2.4 percent last year. Compound that over 30 years the size of the economy doubles. That's not chopped liver. The European Union would love to have it, second, last year . . .
FAREED ZAKARIA (Off Camera): Unemployment is going up every week, George, as you see.
GEORGE WILL (Off Camera): Still at 5.8 percent.
FAREED ZAKARIA (Off Camera): That's a meaningless number.
GEORGE WILL (Off Camera): It's the number we deal with.
GEORGE STEPHANOPOULOS (Off Camera): Why is it meaningless?
PAUL KRUGMAN: Because for reasons we don't understand a very large number of people are dropping out of the labor force. The right number to look at is job growth which has been negative. You know, we've lost 2.2 million jobs since early 2001. Almost 500,000 of those in the last two months. You know, you may say GDP is growing. The guy who lost his job six months ago and can't find another one doesn't care what GDP is doing. He cares what's happening to the job market and the job market is steadily deteriorating. Mysteriously, that's not showing up in the measured unemployment brief but you look at what happening and you discover that's not because jobs are growing, it's because more and more people are dropping out of the, are saying when they're asked have you been looking for a job in the last two weeks, they say no, I can't find one.
GEORGE WILL (Off Camera): If you're gonna, if you're gonna stipulate that the numbers coming from the government are meaningless then we have trouble . . .
PAUL KRUGMAN: No, we look at the battery of numbers. And sometimes one of them is probably a reliable indicator.
GEORGE WILL (Off Camera): Let me give you a, let me give you a number 'cause this goes with what Fareed was talking about, what needs stimulated. Last year alone, one year, Americans put $150 billion in their pockets to refinancing their mortgages. Now, that dwarfs what we're talking about in terms of the year on year tax cut.
FAREED ZAKARIA (Off Camera): But there is a limit to refinancing. Interest rates are moving into Japanese levels.
PAUL KRUGMAN: But that's, but that, that in a way, that's the indictment of the tax cut, right? We're talking about these tax cuts which are $350, $550 billion but at least in the Administration proposal more than 80 percent of that comes after 2004 so these are, whatever the tax cut is about it's not about stimulating the economy, okay, I think it's about, I think it's about scoring. Winning a game.
GEORGE WILL (Off Camera): But Paul, that insulates, that insulates it from the, the accusation that it's merely about reelecting the President because clearly this isn't going to kick in and change life for the second quarter of next year.
GEORGE STEPHANOPOULOS: (Off Camera) And that is the last word this week. Thank you all. We'll be right back with George Will.
Originally broadcast, 4.20.03