SYNOPSIS:

GEORGE STEPHANOPOULOS, ABC NEWS (Off Camera): And we're back now with "Roundtable." I am joined as always by George Will. Welcome back to Claire Shipman from maternity leave, good to see you again.

CLAIRE SHIPMAN, ABC NEWS (Off Camera): Thank you, thank you.

GEORGE STEPHANOPOULOS (Off Camera): And Paul Krugman of "The New York Times." And since you're the economist on the panel, let's begin with the economy. I want to put up a chart that the Republican National Committee sent around this week. It says, "Economy Talk, All the Stats You Need to Know." And it points up a lot of things happening with the economy. Job growth in 48 states in the last year. Output at US factories has been rising for three months in a row. Congressional Budget Office this week says the deficit is less than was expected. And I guess I have two questions about this, number one, is it really all the stats we need to know? And secondly, why, if this news is so good, why isn't the president getting more credit? Can it really all be about gas prices?

PAUL KRUGMAN, "THE NEW YORK TIMES": This is, the administration is exactly where you don't want to be which is telling people you're doing great and people say, no we're not. And they're saying no, you just don't understand. You know, when it comes to how the economy is doing, the customer is always right.

GEORGE STEPHANOPOULOS (Off Camera): But those are real results, we are growing.

PAUL KRUGMAN: It's a limited selection. Right? You can look at lots of numbers. You know, if you actually work with economic numbers, you have less respect for them than people who don't. You know? There's a mix of numbers. Some of them are pretty good. The unemployment rate looks pretty good. A lot of other numbers don't look so, so great. Last month's job growth looked great by standards of recent years. If you looked at it by, compared with the Clinton years it would have ranked 69 out of 96 months, right. So these are not really very good numbers in a historical perspective. And the main thing is people don't feel good. And that's telling you, you know, if the numbers say they ought to be feeling better than they are, that says there's something wrong.

GEORGE STEPHANOPOULOS (Off Camera): But their housing, the value of their houses is skyrocketing and I understand, though, that gas prices do take a big chunk out of people's pocketbook.

GEORGE WILL, ABC NEWS (Off Camera): No, they don't.

GEORGE STEPHANOPOULOS (Off Camera): A lot of people it does, $700 a year is a lot of money to a lot of people.

GEORGE WILL (Off Camera): Gasoline today, cost of a gallon, in real, inflation adjusted dollars is less than it was in 1981, less than it was in 1935. The American people spend on energy, the portion of their consumer spending a third less today than they did in 1980. So the idea, I mean, what we see is headline after headline telling people something that's not true. Record gas prices. Then you go to the first paragraph or the fifth paragraph and it says in nominal dollars, which means disregard the headline.

CLAIRE SHIPMAN (Off Camera): But I, but I still think that it's hard for the president to get any credit for any sort of economic recovery when you look at $3 a gallon at the pump. People just don't feel it. And you add that to health care costs? I mean, this is a pinch for a lot of people, people are looking at taking shorter vacations, not driving, commuter costs.

GEORGE WILL (Off Camera): But they're driving more. The AAA says American people this summer are driving more. Believe their behavior.

PAUL KRUGMAN: But you know, the thing is, this is like a very regressive tax. The amount that you pay on gasoline doesn't depend very much on your income. So you see this and you look at overall, how big of a burden is it? But for a lot, you've got a lot of middle class, lower middle class families who are finding themselves spending an extra thousand dollars a year on gas.

GEORGE STEPHANOPOULOS (Off Camera): But is it the president's fault? Is there anything that anyone can do about it?

PAUL KRUGMAN: Probably not. I mean, this is one of these things he gets unfair credit when gas prices fall. But the point is, you know, it's in the context, if people were doing well on lots of other things. If there were lots of other, you know, if the average family had actually gotten a large share of those tax cuts then people might not be so upset about the gas prices.

CLAIRE SHIPMAN (Off Camera): You also have an expectations problem, because previous economic recoveries have felt different. They felt more robust. People remember the recovery of the '90s and this just doesn't feel the same way.

PAUL KRUGMAN: And the job growth in this recovery is the worst of any recovery since World War II.

GEORGE WILL (Off Camera): Four million jobs created since July 2003. We're now in almost certainly in the tenth consecutive quarter of growth over three percent. In the last nine quarters, the growth has averaged 4.1 percent. You do that for a generation for 18 years you double the size of the economy. Unemployment at five percent, it's twice that in France, and higher in Germany than it is in France.

PAUL KRUGMAN: But the fact is, it's not trickling down. That's what people are saying. They're saying, you know, tell me all these stats, but I feel lousy.

CLAIRE SHIPMAN (Off Camera): And they don't compare themselves with the French.

GEORGE STEPHANOPOULOS (Off Camera): Compare themselves with the way they were a year ago. A lot of people are doing better, some are doing worse. Let's change topics. John Roberts, 38,000 of his documents, his memos when he wrote in the White House as an assistant counsel under Ronald Reagan were released. Reporters all over Washington were trying to comb through them very, very quickly on Thursday and Friday. We've learned a few things about John Roberts. We know for a fact he is no fan of Michael Jackson. Two memos saying the president shouldn't meet with him, shouldn't give him a letter of support in any way, shape or form. But we're also learning some more serious things about him, Claire.

CLAIRE SHIPMAN (Off Camera): Well, I think we are. First of all, conservatives can breathe a sigh of relief. He's not a closet liberal. I think he's unlikely on the bench to move away from his orthodox conservative nature, which was quite clear in all of these documents. I think we've learned he's also a man of considerable wit, as you've pointed out. He seems to like the sound of his own wit, which, which would lead me to believe that some of his more seemingly surprising statements, for example the one that got so much press, leaving it up to judges to decide, whether it was really in the interest of the common good for homemakers to become lawyers.

GEORGE STEPHANOPOULOS (Off Camera): He said that was a joke about lawyers.

CLAIRE SHIPMAN (Off Camera): Yes, I think, I really think it probably was a joke about lawyers.

GEORGE WILL (Off Camera): He married one.

CLAIRE SHIPMAN (Off Camera): He married one. But I was also struck by the tone of some of those memos from the 1980s in the debate about women, not so much the debate about the remedies. You might or might not believe in any of those remedies being bandied about.

GEORGE STEPHANOPOULOS (Off Camera): Like comparable worth, or the Equal Rights Amendment.

CLAIRE SHIPMAN (Off Camera): But the suggestion that there really wasn't even an issue, the purported gender gap. I think most women my age and older would believe that there was something there.

GEORGE WILL (Off Camera): Well, the papers were a tour of vanished issues, comparable worth, for example. In the late '80s and early '90s, there was this little flurry of interest in comparable worth. That's not equal pay for equal work, not this truck driver, that truck driver. That was the idea to have some kind of bureaucracy that would decide that driving a truck is comparable to driving a typewriter, as the technology then was. It was a recipe for the most extraordinary intrusion of government into the daily lives of Americans. He was against it. He is a conservative. The news is out.

CLAIRE SHIPMAN (Off Camera): Absolutely.

GEORGE STEPHANOPOULOS (Off Camera): And Democrats do seem to believe, Paul Krugman, that they found an issue here. Just, Patrick Leahy, who had been pretty down the middle before these documents came out released a statement where he said, "These writings show that he's deeply tinged with the ideology of a the far right wing of his party, in influential White House and Department of Justice positions John Roberts expressed his views, that were among the most radical being offered by a cadre intent on reversing decades of policies on civil rights, voting rights, women's rights, privacy and access to justice." Do you think they're gonna be able to push this debate?

PAUL KRUGMAN: I don't think they're gonna be able to block him but I think they can take some, you know they can extract a little pain which is what you expect an opposition party to do. I mean, what they've managed to do now is establish that, no, this not a, you know, really careful jurist, impeccable. He's a good lawyer, everybody admits that. But he's also a movement conservative, and always was. And so they're going to at least be able to make it clear that this was a strongly ideological choice. That this is, you know, that this is not a gesture to the center, it's actually in fact a gesture to the right. And that's, you know, they're setting themselves up for future fights.

GEORGE STEPHANOPOULOS (Off Camera): You know, we also saw something else about him. What really struck me in addition to his ideological views, is this guy is a lawyer with a capital L. You know, there were White House speech writers who have a memo or a speech, they want to call Pete Rose a slugger. He bangs out a page-long memo saying no, no, no, no, no, he's not a slugger, he actually is a singles hitter, and his slugging percentage is under .500. This just reminded me of the divides in the White House, there is always this huge divide between the lawyers and everyone else and they drive everyone crazy.

CLAIRE SHIPMAN (Off Camera): Careful, careful. Well, and even a memo on whether the president should meet with a Girl Scout, a little "huckster," who wanted to sell him cookies. I mean, he wanted to weigh in on everything.

GEORGE WILL (Off Camera): And clearly huckster in that case. Being funny, but be careful in Washington when you're funny, but he was being funny.

GEORGE STEPHANOPOULOS (Off Camera): Let's move on to the other big debate of the week, Cindy Sheehan. And you know, we're trying to figure out the Cindy Sheehan effect. I mean, clearly, it's August, and there's been a lot of attention on a protester who'd actually been protesting for the last year. But going to Crawford, going to the feds in Crawford, seems to have crystallized the debate for a lot of people. George Will, I was interested to see Senator Allen kind of backtrack on his recommendation that President Bush should have met with her. He seems to be pushing back now.

GEORGE WILL (Off Camera): Well, how would that meeting have gone? I've got here some of the collective thoughts. The president is a "lying bastard," a "murderous liar," an "evil maniac," a "filth spewer," "Fuhrer," "biggest terrorist in the world who is committing blatant genocide in Iraq and waging nuclear war in Iraq," she says. Now, having said that, what, do you sit down and say, cream in your coffee? I mean, how do you begin the conversation from that? But this was a two-week embarrassment to the president. It is full of danger for the Democratic Party. She was adopted by moveon.org. Moveon.org is central to the Democratic Party, it's becoming the tone-setter of the Democratic Party. If the Democrats who were very close to, celebrated Michael Moore in 2004, and paid a price for that, I believe, believe that this is acceptable discourse, they'll pay a price again.

GEORGE STEPHANOPOULOS (Off Camera): Full of danger to Democrats?

PAUL KRUGMAN: Look, the White House has done very well with a narrative about George Bush as, you know, firm defender of the country, standing strong against terrorism. But there's always been this other narrative out there, that this is a rich guy who sends other people's children off to die and never makes a sacrifice himself and in fact gives lots of tax breaks to his rich friends. And you know, this is not about Cindy Sheehan. This is about what happens to the Bush narrative. And it's clearly, let's talk about who is really feeling threatened here. It's driving the right crazy. I got to give you the money quote from Rush Limbaugh. He said, "I'm leery, ladies and gentlemen, of even having to express sympathy. Oh, she lost her son, well, yes, yes, yes, but, you know, we all lose things." This is showing, you know, this is really bringing out the ugliness of a lot of the pro-war backers and their ability to exploit the, you know, to exploit the sympathy of Americans for the troops. You know, the good stuff. And they're in danger of losing it. And it's not about Cindy Sheehan. It's a story about Bush.

CLAIRE SHIPMAN (Off Camera): I think that this White House tends to react cautiously. They don't like surprises, the president doesn't like surprises, it's not surprising he wouldn't meet with Cindy Sheehan. And I would say most of the time ...

GEORGE STEPHANOPOULOS (Off Camera): You mean, a second time with Cindy Sheehan.

CLAIRE SHIPMAN (Off Camera): A second time. Exactly. Most of the time that strategy works for the White House. There are occasions when it can make him seem out of touch. And I think this may be one of them. Despite George's list, I think almost every mother could understand, every parent, having some of those feelings, saying irrational things if you lose a child.

GEORGE STEPHANOPOULOS (Off Camera): And Cindy Sheehan, it's still a close debate in the country, but she seems to have struck a chord with the broader public. I mean, she comes into, she hasn't created this public opinion. But she comes out in an environment where the American public is increasingly divided over Iraq, increasingly sour of it, and I was struck, you know, by all of our guests today, it now seems to me like we're starting to see divides within the parties over Iraq. You know, you have the debate over a deadline. You have the debate over getting out or staying the course. I mean, Senator Hagel certainly sounds like he's coming close to saying we should have a withdrawal. And this comes against the backdrop, of this, some elements of new realism in the administration. I was talking to a senior administration official earlier in week who said, let's face it, and this person is involved in Iraq policy, Iraq is going to be ugly the day that President Bush leaves office. If that is true, which is the best political position for the parties right now?

GEORGE WILL (Off Camera): The political position is to throw dust in the air. That's essentially what Mr. Hagel did. Saying this is terrible, but you pressed him on what do you do about it. Everyone agrees it's terrible, all sensible people believe we can't leave a failed state. The interesting thing, George, is we trained for this. About five years ago, I met with General Kurlak, commandant of the marine corps. And I said, what are you training marines for? He answered in one word, he said "Chechnya." Urban ethic sectarian warfare. We've been training for this a long time. We still don't know how to do it.

PAUL KRUGMAN: But the fact is that, there are two possibilities now. We either leave a failed state or we leave an Islamic republic, that is basically an ally of Iran. So, you know, no matter how, there are no good outcomes now. And Chuck Hagel, as you can see, he's somebody who has seen war, he's a realist, he's struggling with this. I mean in terms of certainly any of the announced objectives, we've already lost this war. But he doesn't know how to say that, and he doesn't know how we end it.

GEORGE STEPHANOPOULOS (Off Camera): And that's where we're going to have to end it today. I'm sorry. Thank you all very much. Up next, Kinky Friedman.

Originally broadcast, 8.21.05