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

SYNOPSIS:

ATTENDEE (TOWN HALL MEETING): Why do you continue to support a Nazi policy, as Obama has expressly supported this policy?

REPRESENTATIVE BARNEY FRANK (DEMOCRAT): I'm going to revert to my ethnic heritage and answer your question with a question. On what planet do you spend most of your time? My answer to you is, as I said before, it is a tribute to the First Amendment that this kind of vile, contemptible nonsense, is so freely propagated. Trying to have a conversation with you would be like trying to argue with a dining room table. I have no interest in doing it.

GEORGE STEPHANOPOULOS (ABC NEWS): Congressman Barney Frank letting loose at a town meeting this week in Massachusetts. A lot of emotion unleashed by this health care debate all across the country. We're going to talk about it now here on "The Roundtable." I'm joined again by George Will. Welcome back from vacation.

GEORGE WILL (ABC NEWS): Thank you.

GEORGE STEPHANOPOULOS (ABC NEWS): David Frum, of NewMajority.com.

DAVID FRUM (FORMER BUSH SPEECHWRITER): Thank you.

GEORGE STEPHANOPOULOS (ABC NEWS): Robert Reich from the "American Prospect" and UCal Berkeley, and Paul Krugman from "The New York Times" and Princeton. And let's start on where this health care debate stands right now, George. You just heard John McCain say basically it's time for a new start. Let's start all over again. The President should bring Republicans and Democrats into the oval office, write up a new bill.

GEORGE WILL (ABC NEWS): Well, Olympia Snowe, one of the Republicans, she's from Maine, that the administration's counting on to give them a patina, a bipartisan coloration on this, said the other day, what we've learned in the August tumult, is that a lot of Americans are happy with what they've got. Now actually we knew this long before that a large majority of Americans have health insurance and a large majority of that majority are satisfied with it. However, the President, therefore, is trying to get radical change, without the propellant of underlining, broad-based, and deep-seeded discontent. To compensate for that absence, he has been ubiquitous and often shrill. Ubiquitous to the point that he's kind of like elevator music in American life. He's everywhere all of the time. Shrill, in the sense that he has said I've been opposed by scare tactics and fear-mongering. But he says be afraid, be very of your insurance companies because they're dishonest. Be afraid of your pediatrician because he or she will to yank out the tonsils of your child for no reason other than a big fee. And be afraid of all doctors because they will cut off your limbs, rather than counsel you on cheap, good, sensible living.

GEORGE STEPHANOPOULOS (ABC NEWS): Rob and Paul are both waiting to get in here. Why don't you go first, Bob?

ROBERT REICH (THE AMERICAN PROSPECT): Well, first of all, I don't think the President's been shrill. In fact, if anything, maybe he hasn't been shrill enough. But let's be clear about what's at issue here. I mean for 70 years in this country, we have tried to deal and grapple with the subject of universal health care. As recently as 1980, it was 8% of the federal - the entire economy. And now, it's 16% of the economy. Something needs to be done. Americans are satisfied, George, with their doctors. But they're not satisfied paying huge amounts in co-payments, deductibles and premiums. So, now is the time to act.

GEORGE STEPHANOPOULOS (ABC NEWS): But let me go - let me pick up there. Because you both talk about where the American public is right now and I want to bring in one statistic from our poll this week showing what the insured think about the President's health care plan. Let's put that up right now.

GRAPHICS: THIS WEEK WITH GEORGE STEPHANOPOULOS

GRAPHICS: WHAT DO INSURED THINK

GEORGE STEPHANOPOULOS (ABC NEWS): Now by 40-14, they think their coverage is going to get worse. These are people who have health insurance. 41-19, they think their costs are gonna go up under the President's plan. 33-19, they think they're gonna lose some quality of care. So, Paul Krugman, let me get you to respond to that because that seems to be the core political problem for the President right now.

PAUL KRUGMAN (ABC NEWS): It shows that the fear tactics have been effective. And I think it's - you know, I feel like it's 2004 again, where saying what is undoubtedly true is shrill, as George would put it. I mean, this is true. Now you could say right now, most insured Americans are still okay with the care they've gotten. And of course they've been scared about what will happen. But, you know, this system is unraveling. One thing I think the President has not been very good at making - at getting across, actually I don't think he's done a very good job altogether on the salesmanship. But he has not gotten across the fact that this thing is coming apart. That premiums have, more or less, doubled in the past decade. And that more and more companies are dropping health coverage for their workers. And yes, you may feel you have decent insurance now. But there's a high risk that it won't be there five years from now.

GEORGE STEPHANOPOULOS (ABC NEWS): And David, if the President made that case, that could pose a problem for Republicans if they actually succeed in blocking any kind of reform.

DAVID FRUM (FORMER BUSH SPEECHWRITER): Look, in the beginning of the summer, before all of the frenzy, it was already true that by 2-1, Americans said, when asked, this is mostly something that will benefit other people and not me. And that's been the President's problem all along. He has - there is a problem. There's a financial problem, as Bob and Paul said. But the President is not offering a solution to that problem. He's offering a solution to a completely different problem, which he is not talking about. The problem, he says - what he thinks is the big problem, is the uninsured. And his answer to that is a state system of some kind. But that's not what he's...

GEORGE STEPHANOPOULOS (ABC NEWS): Well, a state component of a broader private system.

DAVID FRUM (FORMER BUSH SPEECHWRITER): But the problem is his solution and his identified problem, do not in any way connect.

PAUL KRUGMAN (ABC NEWS): But this is not - we know that the United States has the most privatized health insurance system in the world. We also know that we have, by far, the highest costs in the world. So, there's every reason to believe that a reform that makes us look more like Switzerland, as I put it last week that makes us look more like the systems that work elsewhere, would also open the door to cost-savings. So this is not wrong.

ROBERT REICH (THE AMERICAN PROSPECT): But could we be a little bit more optimistic about where we have come to the right now? I mea for the first time in 70 years, we actually have a consensus, with regard to no use of pre-existing conditions. No dropping, as John McCain said, of people because of their ill health. Also, there is a consensus that every employer has got to get in or at least pay something, if they are not already covering employees.

GEORGE STEPHANOPOULOS (ABC NEWS): Not quite a consensus. Not as much consensus on that.

ROBERT REICH (THE AMERICAN PROSPECT): But George, a lot of Republicans agree to this and that everybody's got to get in. And there are going to be some subsidies.

GEORGE STEPHANOPOULOS (ABC NEWS): Well should the Republicans agree to that kind of deal that John McCain indicated he might be for? Although it was hard to pin him down on it.

GEORGE WILL (ABC NEWS): Perhaps. That is, clearly portability I think is what worries most Americans because we have a dynamic economy usually, in which one in about nine or ten Americans changes jobs every year. Some people are worried about this understandably. Bob, look. Americans obviously want 2009 medicine at 1959 prices. The trouble is, 1959 medicine, it wasn't very good. You're right. The costs have gone up. But 50 years ago, the American people spent on 4 things. Food, shelter, health care and energy 53% of disposable income. 50 years later, they spend 55%, essentially the same. Now, the composition of that's changed. Much more on health care because health care is much more competent and expensive.

PAUL KRUGMAN (ABC NEWS): Now it's just, we are now at a point where the insurance premiums for typical, employer-based insurance, are on the order of one-quarter or more of the earnings of the average worker. This is a situation in which more and more companies are going to drop coverage, which is happening. We had a - you know, something unique happened during the period from 2003 to 2008, which is, that for the first time ever, health insurance coverage deteriorated during an economic recovery. This is not supposed to happen. This is a system that's coming apart at the seams. Once we get the numbers for what's been happening in this recession, it's going to be horrific.

DAVID FRUM (FORMER BUSH SPEECHWRITER): The Republicans should be for health insurance reform. I think John McCain is right at least in where he was going although he didn't take a full step there. The price for health insurance reform, should be a jettison - the Democrats jettison their attempt to nationalize the health care system or do anything - anything approaching it. And that is where I think the President has put us on the wrong track. I think the - what John McCain was pointing to, one of the last times Congress did something big. 1986. The tax reform that year. Essentially the Senate took that proposal away from the President. President Reagan had a proposal. It was not going anywhere in Congress. The Senate and Bob Packwood, in particular, took it away, rewrote it and produced something that was broadly acceptable and got a better result that the President himself accepted. That's what should happen now.

GEORGE STEPHANOPOULOS (ABC NEWS): Isn't he getting to the - isn't David getting to the heart of the issue there? It now is pretty clear if you look at the votes in the House and the Senate, while there are significant pluralities of Democrats for the public option, a majority of Democrats, you can't get it through either one. Why not give up the public option?

ROBERT REICH (THE AMERICAN PROSPECT): But George, here is the problem, in terms of negotiating, a president needs to have a very strong base behind him in order to give him maximum negotiating strength with the other side. Also, a president cannot engage in preemptive negotiating.

DAVID FRUM (FORMER BUSH SPEECHWRITER): George Bush used to always say that.

ROBERT REICH (THE AMERICAN PROSPECT): That is - well simply giving in before he gets anything back from the other side. And unfortunately, on both of these counts, the White House is not doing it in a way that actually pushes the ball forward.

PAUL KRUGMAN (ABC NEWS): And can I say something about bipartisanship? There's this notion that we ought to have bipartisanship. What people usually mean by that is you ought to get the centrists. We ought to get, let's say, the middle 20 senators to agree on something. The middle 20 senators are now all Democrats. The Republican Party is now a rump on the right which, thanks to the arcane rules of the Senate, has the ability to stop things.

GEORGE STEPHANOPOULOS (ABC NEWS): But that gets to the problem. And that not quite 20 but middle 10 Democrats in the Senate, are not for the public option.

PAUL KRUGMAN (ABC NEWS): Well, you know, but the public option, again, this is something that there's a question, whether they're for it or whether - are they willing to actually vote against cloture to stop this really quite modest but helpful piece of the reform being in there. Right? I mean they actually have no intellectual link...

GEORGE STEPHANOPOULOS (ABC NEWS): Right now is yes.

PAUL KRUGMAN (ABC NEWS): Well, but, you know, they have no intellectual basis to stand on. Right? There is - the argument against the public option is sheer nonsense. We know that. It's nothing except the insurance lobby.

DAVID FRUM (FORMER BUSH SPEECHWRITER): This generation of liberals when you read their health writing again and again, point to the Nixon administration and say President Nixon administration had a proposal that was actually pretty good. But we proposed it because it wasn't left wing enough. And if we only had it to do all over again, we will never make that mistake again. And now, they have it to do all over again. And they're making that mistake again.

ROBERT REICH (THE AMERICAN PROSPECT): But the public option is such a modest, such a modest - it's not even intrusive.

DAVID FRUM (FORMER BUSH SPEECHWRITER): Then, why not give it up?

ROBERT REICH (THE AMERICAN PROSPECT): It is an option. Now at the end of the day...

DAVID FRUM (FORMER BUSH SPEECHWRITER): If it's not important to you but it is important to conservatives, why not give it up?

ROBERT REICH (THE AMERICAN PROSPECT): Wait a minute, wait a minute, wait a minute, at the end of the day, at the end of the day the question is, is it essential? And the answer is probably no. But it is crucial to making the system work much, much better to containing costs.

GEORGE WILL (ABC NEWS): We've been talking here for about five minutes. And the subject of cost, which is tiresome and depressing, has not come up.

ROBERT REICH (THE AMERICAN PROSPECT): I just mentioned it.

GEORGE WILL (ABC NEWS): Now, when we began this debate a few months ago, the costs were going to be paid primarily by two things. One, the proceeds from selling under cap and trade, the permits to emit carbon and, "B," Medicare cuts. "B," is never going to happen. And we've given away what should have been sold, or so we say, the rights to emit carbon. Where are we going to pay for this?

PAUL KRUGMAN (ABC NEWS): Medicare stuff, I think, will, in fact, happen if anything passes. I want to - you want to think about the utter, utter hypocrisy of the Republicans on this. We just heard John McCain. And early on in your conversation he said basically Sarah Palin was right in saying death panels because the Democrats want Medicare to take into account the actual medical effectiveness in things...

GEORGE STEPHANOPOULOS (ABC NEWS): Not supporting the policy.

PAUL KRUGMAN (ABC NEWS): Right. And then later in the same conversation, he said, we have a terrible problem with entitlements with Medicare. We really need to do something to cut Medicare spending. And what possible way - you know, we should cut Medicare spending without any regard for the medical effectiveness of what it's paying for? So, this is, you know, we have the Republicans standing fully against any sort of rational control of costs.

ROBERT REICH (THE AMERICAN PROSPECT): The Republicans are also against competition. I mean, having a public plan that competes with private insurers is not taking business away from the private insurers. In other words there is a...

DAVID FRUM (FORMER BUSH SPEECHWRITER): That is the point of it.

ROBERT REICH (THE AMERICAN PROSPECT): There's a fundamental contradiction at the core of the Republican critique, which is, either the public plan is like the post office. And it's going to be totally ineffective. Or it's going to be so effective, that it drains business away from the private insurance.

DAVID FRUM (FORMER BUSH SPEECHWRITER): Nobody wants to have to compete with their regulator. The post office does not have power over its competition. And the post office is now an independent corporation. It's not an arm of the government anymore. But this talk of competition really means that you're going to have - be having the same entity, or very close to it, making rules and also applying the rules to its competition. It's not a competitor. And when you say that the President wants to focus on the inefficient part of Medicare, I mean, he's made it very clear what he's coming after are the Medicare advantage programs. And that is...

GEORGE STEPHANOPOULOS (ABC NEWS): Explain what they are quickly.

DAVID FRUM (FORMER BUSH SPEECHWRITER): For one-fifth of American seniors, you have an option of having a Medicare program organized by or run by a private insurance company. They - now there are some problems with this, that the private insurance companies pick the healthiest seniors. But it offers what seniors experience as a superior alternative.

PAUL KRUGMAN (ABC NEWS): But there's a history there...

DAVID FRUM (FORMER BUSH SPEECHWRITER): The statistics may not match up. But that's how seniors experience it. And the President wants to take it away from them.

PAUL KRUGMAN (ABC NEWS): In the '90s, Medicare advantage was a flat fee per recipient and so, the insurance companies cherry-picked the healthy people. In the late '90s, they started risk-adjusting the payments. So that if you picked only healthy people, you only got - you know, you got less. At that point, Medicare advantage started fading out. Turned out that in a head to head competition, level playing field, Medicare, the insurance companies could not actually match the public program. They in 2003, they increased the payments. So the federal government now spends 14% more per recipient on Medicare advantage than on straight Medicare. And now, it's expanding. So this - it makes total sense. Why would a Republican support subsidizing excess payments, something that purely inflates the cost of Medicare? Yeah, it provides some extra benefits. But I thought that's what they were supposed to be against.

ROBERT REICH (THE AMERICAN PROSPECT): There's a larger question here and that is whether Medicare and also this punitive public option, are going to have an opportunity to negotiate, to use their bargaining leverage to get drug prices down. This is a critical part of cost control over the long term. And, George, for people who are concerned about cost control, for the Republicans who are saying we've got to control costs, it seems to me that this is absolutely essential, using this bargaining leverage.

GEORGE WILL (ABC NEWS): First of all, do drugs cost too much? I don't know if they cost too much. We're told that pharmaceutical companies make obscene profits. I hope so. Because it sometimes takes a billion dollars to get a drug from conception, through research, development, through the regulatory process and on the market. And if you subtracted all the profits of the pharmaceutical company from our health care bill, it would shrink from 10% to 8% of our health care.

GEORGE STEPHANOPOULOS (ABC NEWS): Let me pull this out to a broader discussion of the economy right now. Because that - the condition of the economy will probably do more to affect President Obama's political position than whether he can get health care through than anything else right now. And, Paul, we heard the Fed Chair Ben Bernanke, come out on Friday and say that the economy is leveling off. The prospects for growth are pretty good in the near term.

PAUL KRUGMAN (ABC NEWS): We've got a problem with terminology. Because we usually say either the economy's in recession, or the economy's recovering. Either you're in hell or you're in heaven. Actually, the trouble is we're actually in purgatory. We're actually in the situation almost for sure, GDP is growing. Almost for sure, the business cycle dating committee will eventually decide that the recession ended this summer. But almost surely also, we're still losing jobs. The unemployment rate is going to continue to rise. So we're in that infamous jobless recovery state. It's not - it's a lot better.

GEORGE STEPHANOPOULOS (ABC NEWS): So, to borrow a phrase from Alan Greenspan, is the stock market showing irrational exuberance by popping up 50% in the last four months?

PAUL KRUGMAN (ABC NEWS): Well, remember how far down it was. It's still way down from where it was. So I'm not sure that the stock market is wrong. But the point is that, that what we have now is a whole lot better than seeing, you know, the end of the world six months down the pike. But it's not good enough. It's not remotely enough.

ROBERT REICH (THE AMERICAN PROSPECT): You know, George the - you know, anybody who says that we are out of the woods or even moving out of the woods, has got to be lost at sea. I mean, there's no evidence that this economy is doing much better. The best that can be said is we're getting worse more slowly. And that is small consolation to people who are losing their jobs.

GEORGE STEPHANOPOULOS (ABC NEWS): Is starting to grow, actually?

ROBERT REICH (THE AMERICAN PROSPECT): Well, no, no. The biggest problem for the administration in 2010m and you put your finger on it a moment ago, is that we're going to be in double-digit unemployment, very likely, in 2010. And the administration, and I would say also Republicans who are incumbents, have got to show the public that they are actively taking some...

GEORGE STEPHANOPOULOS (ABC NEWS): And then here's the problem. The biggest problem is actually it's a double dine. Double-digit unemployment, George Will. But also, we just learned this week, a $9 trillion deficit over the next ten years.

GEORGE WILL (ABC NEWS): Yes, a $2 trillion oops on the people who keep the books. Part of the problem surely, Bob, is that the American people, in their native perversity, have lapsed into the virtue of thrift which is to say, five years ago, we almost had a negative savings rate in this country. Now people, chastened by excesses, we have something like a 5.2% savings rate. Well that takes out of consumption, about $400 billion. So the thrift at this point may be a nuisance.

ROBERT REICH (THE AMERICAN PROSPECT): So you're in favor of an even larger stimulus?

GEORGE WILL (ABC NEWS): Well, I notice that the stimulus, which has sent out what about 10% on what's been voted on this. That most of the stimulus spending will be not this year, not next year, but in 2011. And in the so-called shovel-ready infrastructure, less than $1 billion has been spent already. A rounding error on the automobile bailout has been spent on the so-called saving infrastructure programs.

PAUL KRUGMAN (ABC NEWS): Those numbers aren't right. But okay.

DAVID FRUM (FORMER BUSH SPEECHWRITER): No, they're going to spend about half of the stimulus in the 12 months leading up to the November 2010 congressional elections. I'm sure that is totally coincidental. I'm sure that is driven entirely by economic considerations. But it sure does look funny.

GEORGE STEPHANOPOULOS (ABC NEWS): Meanwhile, with all this talk of the economy and health care, "The New York Times" this morning, brings up a comparison, I assumed was going to be made eventually. Barack Obama and Lyndon Johnson. As we talk about all this. As he has his domestic agenda, facing this war in Afghanistan. And the President addressed it this week at the VFW, the war in Afghanistan.

GRAPHICS: THIS WEEK WITH GEORGE STEPHANOPOULOS

PRESIDENT BARACK OBAMA (UNITED STATES): The insurgency in Afghanistan didn't just happen overnight. And we won't defeat it overnight. This will not be quick, nor easy. But we must never forget this is not a war of choice. This is a war of necessity.

GEORGE STEPHANOPOULOS (ABC NEWS): Yet, as I brought up with Senator McCain, George, and I want to bring you in after I show you the poll numbers.

GRAPHICS: THIS WEEK WITH GEORGE STEPHANOPOULOS

GRAPHICS: AFGHANISTAN WAR

GEORGE STEPHANOPOULOS (ABC NEWS): For the first time, this month, a majority of Americans now say, you see the lines crossed, that the war in Afghanistan is not worth fighting. And when you ask the question about more troops, going back to January, 34% of Americans thought there should be more troops. Now, it's down to 24%. Waiting. There we go. And then the number who think the troop number should be increased, has actually increased a lot. So, we're seeing now a real flip in where Americans are. But about 2-1, they don't want more troops.

GEORGE WILL (ABC NEWS): But our strategy is troop-intensive, that is, it is to clear, hold and build. Build means nation building. There was a story in the paper this morning, Afghans coming up to marines in Helmand Province. There are 11,000 marines in a province the size of West Virginia. And they're saying, we want you to fix our irrigation systems. That's not what the Marine Corps does. The Marine Corps isn't a nation-building outfit. Clear, hold, build. They can't hold it because they can't stay there. And when they leave, the Taliban comes back. Therefore, what's the point in clearing? I think the American people are right about this.

ROBERT REICH (THE AMERICAN PROSPECT): I don't think the American people have focused on Afghanistan at all. I mean, health care and the economy dominate the agenda which is good for Obama. I mean he has some time because they haven't focused. What worries me is that you have here in Afghanistan all of the elements of a potential, political and real disaster in terms of an escalation. There were, what, 20,000 troops 3 years ago. Now, 60,000 troops. And McChrystal wants to go up to 70,000 or 80,000.

GEORGE STEPHANOPOULOS (ABC NEWS): We don't know exactly how many he wants.

ROBERT REICH (THE AMERICAN PROSPECT): And you have a civil war. And you have a corrupt administration. And you have a lack of clarity about what exactly it is we are doing here. Where have we seen this before?

DAVID FRUM (FORMER BUSH SPEECHWRITER): And the Americans are arriving as all of the allies are leaving. There's a terrible sickness which is those are not - those numbers don't represent a net increase, as big in the allied presence because the Canadians and the Dutch and the others are going. And meanwhile, the Afghan police and army projects have been pretty much failures. The army - they're in fact, starting all over again. There's beginning to be some progress there. Here's what the Johnson peril really does hold. That what we saw from George Bush, was when a president wants to turn around a bad war, it requires almost all of his time and all of his energy. The President has the same number of hours in his day as everybody else. And he has to, he has to sleep sometimes. They sleep less and less, unfortunately. If the President is giving an hour a day to Afghanistan, that is going to be a big difference, as opposed to giving four hours or five hours. It signals to everybody what is important. It signals to everybody, what must succeed if nothing else does.

GEORGE STEPHANOPOULOS (ABC NEWS): But is he on the right course intensifying this effort?

DAVID FRUM (FORMER BUSH SPEECHWRITER): He, is going to - he is - as John McCain said, he's doing the middle option. I fear he's also like Johnson, that when you saw what happened in Iraq, by the culmination of the surge, the United States had achieved that fabled 1/30 ratio, of troops to population both Americans plus Iraqis. In Afghanistan, we are so far away from that. And the Afghan army is in its infancy.

PAUL KRUGMAN (ABC NEWS): The only thing I'll say is politically I think it matters a whole lot less. This is not LBJ. This is not 500,000 American troops who are drafted. This is not your son, your neighbor's son, being sent off to the war. This is not every college student terrified about that letter arriving, saying, greetings from the President of the United States. So although this could work out badly. I'm nervous about it. I don't think it has all that much political relevance. And the polls, you know, first I'd like to ask how many of those people who don't approve of the war, do approve of the war, where is Afghanistan on the map?

ROBERT REICH (THE AMERICAN PROSPECT): Politically, I think the problem here is that Democrats are not behind the President. The base is not behind the President right now on health care. Republicans are behind the President on Afghanistan.

GEORGE STEPHANOPOULOS (ABC NEWS): Some are.

ROBERT REICH (THE AMERICAN PROSPECT): Some are. But this is a political problem.

GEORGE STEPHANOPOULOS (ABC NEWS): Ten seconds.

GEORGE WILL (ABC NEWS): The President says this is a war of necessity, not of choice. If it's a necessity that is because we dare not have a failed state in Afghanistan that becomes a camp for al Qaeda. The same argument would have us in and fighting and nation building in the Yemen and Somalia.

GEORGE STEPHANOPOULOS (ABC NEWS): Debate it more in "The Roundtable" in "The Green Room." You can catch that later on ABCNews.com.

GEORGE STEPHANOPOULOS (ABC NEWS): Coming up here, "The Sunday Funnies."

Originally broadcast, 8.23.09