This Week, October 18, 2009: The Roundtable with Paul Krugman, George Stephanopoulos, Jake Tapper, George Will, E.J. Dionne, and Peggy Noonan

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

SYNOPSIS:

GEORGE STEPHANOPOULOS (ABC NEWS): We're going to straight to "The Roundtable". So as our panelists take their seats, take a look at how "Saturday Night Live" handled the toughness question.

COMEDIAN ("SATURDAY NIGHT LIVE"): So, are you going to get angry with them?

COMEDIAN ("SATURDAY NIGHT LIVE"): Now, Katie, no, you know I don't get angry.

COMEDIAN ("SATURDAY NIGHT LIVE"): It's not that we don't want health care to fail. We don't. We just want you to fail.

COMEDIAN ("SATURDAY NIGHT LIVE"): Oh, my god, what happened?

COMEDIAN ("SATURDAY NIGHT LIVE"): You make him angry, he turns, he turns into the rock Obama.

GEORGE STEPHANOPOULOS (ABC NEWS): And with that, let me bring in "The Roundtable". I am joined, as always, by George Will, Peggy Noonan of the "Wall Street Journal", our Chief White House Correspondent Jake Tapper, EJ Dionne of the "Washington Post", and Paul Krugman of "The New York Times". And George, you just - you heard David Axelrod deal with this question which really has picked up here in Washington and around the country. Does the President have to do more to demonstrate toughness?

GEORGE WILL (ABC NEWS): I hope not because, we have a record on this. And that is when Jack Kennedy, President Kennedy in his first year, went to Vienna and was treated badly by Kristov, he came back and told James Reston of "The New York Times".

GEORGE STEPHANOPOULOS (ABC NEWS): Kristov cleaned his clock.

GEORGE WILL (ABC NEWS): He was rude to him and dismissive, contemptuous. Kennedy was shaken and came back and told Scotty Reston, he had to find somewhere to be tough and he picked Vietnam. Now the danger is that this narrative about him not being tough enough occurs in the midst of A, the argument about Afghanistan, where to prove your tough, you might want to escalate. And B, when he has to make a decision about the public option, one thing he could do jettison the public option, offend his left and make himself look moderate. But how can he offend his left on the public option and escalate in Vietnam - in Afghanistan?

GEORGE STEPHANOPOULOS (ABC NEWS): So the question is, how does he show his toughness? It does appear to be, EJ, most of this pushing to be tougher is coming from liberal Democrats, particularly in the House.

EJ DIONNE (WASHINGTON POST): Actually it's coming from two places. It's also coming form neoconservatives and others who say he needs to be tough on foreign policy. And let's take it there first. I mean the notion that he speaks softly but sends in the drones. I mean if you look at what he's done in foreign policy, he's gone after al Qaeda in Pakistan, in Indonesia, in Somalia, he went after those pirates. That wasn't actually an easy decision. We forget about that.

GEORGE STEPHANOPOULOS (ABC NEWS): It could have gone...

EJ DIONNE (WASHINGTON POST): And it takes a lot more toughness to say to your generals, no, or tell me why you really want to do this than it does to go along with the generals. So I think on that front, it's wrong. Yes, on domestic policy, you could say he could get tougher on Wall Street. He let a lot of the attacks on health care go in the summertime and that hurt him. But I don't think that's about toughness. That was strategy and tactics. LBJ, they say be like LBJ. He had 295 House Democrats, 68 Senate Democrats. He could afford...

GEORGE STEPHANOPOULOS (ABC NEWS): It was very different.

EJ DIONNE (WASHINGTON POST): It was a lot easier for him.

GEORGE STEPHANOPOULOS (ABC NEWS): Peggy then Paul.

PEGGY NOONAN (WALL STREET JOURNAL): I think it's an old cliche in Washington that a leader, a president, must be both feared and revered. I think this president's problems don't have to do with his personality and fearsomeness, I think it has to do with policy issues. I think the Democrats who are talking about his weakness are not able to see that the President has made some policy judgments that are problematic. I think they, they just sort of don't see it and the President's weakness has to do with policy judgments. If his political judgment were more respected, I think he'd be in a better position. But it's not that people don't fear him.

PAUL KRUGMAN (NEW YORK TIMES): Two things, first, I think a lot of people are basically just complaining that he's a Democrat. You know this, it's - you know, Will Rogers, more than 70 years ago, said I am not a member of any organized political party, I'm a Democrat. I mean Democratic presidents can't lead the same way Republicans can.

GEORGE STEPHANOPOULOS (ABC NEWS): And they let the process work its way through.

PAUL KRUGMAN (NEW YORK TIMES): Right. And so there's some of that. Now, this complaint, this is a weird time to be holding this narrative forth, right? I mean in the spring, when they were going easy on the banks, when they were sort of low balling the stimulus, that's the time when you could have said well, you know, he's not being tough. But right now he's about to get the health care reform. He's about to get the biggest change in our system since Medicare. That's not the mark of a president who's showing himself insufficiently tough. Sure, he doesn't swagger, he doesn't say I'm going to get, I'm going to get Osama bin Laden dead or alive and eight years later neither. You know, this is - he's not talking tough but he's actually getting stuff done now which is what matters.

GEORGE STEPHANOPOULOS (ABC NEWS): Jake, David Axelrod kept his cool under the question. He just sort of brushed it off. But this, this is a narrative that kind of irritates the White House. Do they think they have to do anything about it?

JAKE TAPPER (ABC NEWS): No, I don't think so. What you hear from them, when you ask them about this narrative, is yeah, we've heard this before. Is he tough enough to beat Hillary Clinton, is he tough enough to beat John McCain? I think they think that they've proved - I think imperially they proved that he was able to do both of those things. I will point out, in addition to the pirates, there are a number of people associated with the car manufacturer restructuring, both Rick Waggoner who was deposed and a lot of the people who own stock and bonds in those car companies who would say that this White House was perhaps bullying. That said there are a number of Democrats on Capitol Hill who want the President, if not to be tougher, to at least be clearer about what he wants. Now that the five bills have passed committee, they want President Obama to say this is what I want and this is not what I want. They are calling out for that sort of leadership.

GEORGE STEPHANOPOULOS (ABC NEWS): And, and it's pretty clear David Axelrod at least in public is not prepared to do that yet even though Rahm Emmanuel is in all of the meetings in both the House and the Senate. I want to come back and talk about that and the economy. And we might even get a little balloon boy after this break.

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

COMMERCIAL BREAK

GEORGE STEPHANOPOULOS (ABC NEWS): And we will be right back with "The Roundtable" and "The Sunday Funnies".

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

COMMERCIAL BREAK

REPORTER (MALE): We're about to hit 10,000. You could - I mean do you hear the...

REPORTER (MALE): Here we go.

REPORTER (MALE) (CONTINUED): Here we go.

REPORTER (MALE): Put your hats on guys.

REPORTER (MALE): Put your hat on now.

REPORTER (FOX NEWS): The 10k is back.

REPORTER (MSNBC): A blockbuster day on Wall Street. The Dow back above 10,000.

REPORTER (BLOOMBERG): The Dow Jones Industrial average hit 10,000 this afternoon.

REPORTER (MALE): It is a milestone.

REPORTER (FEMALE): It's really one of the most remarkable rallies we have ever seen on Wall Street.

REPORTER (MALE): It's an amazing snapback.

REPORTER (MALE): When you see people beating raised forecast that's good news.

GEORGE STEPHANOPOULOS (ABC NEWS): Now it doesn't last long. The Dow slipped back to 9,995 on the final day, but still a huge gap between Wall Street and Main Street. Want to talk about that now on "The Roundtable" with George Will, Peggy Noonan of the "Wall Street Journal", Jake Tapper, Chief White House Correspondent, EJ Dionne of the "Washington Post", Paul Krugman of "The New York Times". And George, we did see something pretty remarkable this week that 10,000 barrier blown through again. Not the kind of celebrations you saw like we had back in 1999, but, a remarkable comeback for the Dow in the face of persistent long-term high unemployment.

GEORGE WILL (ABC NEWS): That's right, and it persists. That's the problem is that once the country decides that there's a disconnect between what the stock market does and what the job market does, it seems to me you're going to have great difficulties. And the administration, I'm not sure what's left in it's quiver to throw at this problem. I am the only one of the six of us, I'm about to get $200 from the government as part of the super entitlement.

GEORGE STEPHANOPOULOS (ABC NEWS): That's the Social Security...

GEORGE WILL (ABC NEWS): I'm entitled - a cost of living adjustment to social security. You're entitled to that when the cost of living goes up. And you're entitled to this entitlement when you're not entitled to it. It's the ultimate expression of our culture.

GEORGE STEPHANOPOULOS (ABC NEWS): Now, Paul, I think the President believed that there's no way he could get health care through if he didn't do that. But on, on the economic question, Alan Greenspan has said several times that this run-up in the Dow in and of itself is an economic - or that it's going to create a feedback that will start to really feed into the economy. But we're not really seeing it yet.

PAUL KRUGMAN (NEW YORK TIMES): Well, you know, actually the economy, if you measure it by stuff produced is growing. It's probably growing 3% or 4% annual rate. So if you're look at industrial production it's growing at a more than 5% annual rate. What's not growing is jobs. So, we actually are seeing, you know, by the standard of, is GDP going up? The recession is over the economy's growing. So there's a disconnect between even the real economy and the job market. It's - the stock market will help.

GEORGE STEPHANOPOULOS (ABC NEWS): What's the reason for that?

PAUL KRUGMAN (NEW YORK TIMES): We're not dead sure. You know, we're - partly it looks as if businesses are really being reluctant to hire because they don't trust the recovery. A little bit like all of us, they don't really trust the recovery. But there is - unemployment is higher than it should be given the state of GDP, given the state of industrial production. So, something is a little bit funny here. All that the White House can hope for is that whatever the mystery factor is it goes away in, in the next year or so. But look, I mean, this is not the worst situation we have seen. We stepped back from a couple of feet from the edge of the abyss. But we got to see that job growth and the, the White House has got to do something to make it happen.

GEORGE STEPHANOPOULOS (ABC NEWS): And it seemed pretty clear, EJ, that David Axelrod was signaling that the White House was prepared to do more, even if it meant another short term increase in the deficit.

EJ DIONNE (WASHINGTON POST): Yeah, they were going to do a second, depending on how you count them, or a third stimulus and they're not going to call it that. They may even do it piecemeal. They face - this is a case where their political interests and their economic interests coincide. They do not want to be going into next year's election in November with unemployment where it is now or going up, and so they need to do something about it. And substantively it's very bad for the country. It has long-term effects to have that much - that many people in the country unemployed over the long term. And you've got a problem where a lot of employers have people on short hours. So they're going to put those people on full time before they take on new employees. So they've got to do something.

PEGGY NOONAN (WALL STREET JOURNAL): It almost looks like to me, hitting 10,000 this week, as if New York or Wall Street has its own reality based on its own forecasts and America has a wholly different reality. It seemed to me there was a greater detachment between the country and, and Wall Street this week. We can all guess about what's behind the 10,000, but it could not be more serious, that unemployment is expected by everybody, not just at this - on this table, but everybody to either stay high or go up. That would give everybody in the America the jits. But beyond that, I think the biggest think giving everybody the jits and a sense of uncertainty and a sense that they don't want to hire or expand is this sense of debts and deficits, this sense that their country - people understand the moment their nation is in, they have a sense of a trajectory and they're not happy about it.

GEORGE STEPHANOPOULOS (ABC NEWS): But that's what creates the dilemma. That is precisely - I couldn't agree with you more with the politics of that.

PEGGY NOONAN (WALL STREET JOURNAL): Yeah.

GEORGE STEPHANOPOULOS (ABC NEWS): I think the country is very angry about it. Yet, when you look at the economics, not only Paul Krugman, but Fed Chairman Ben Bernanke say, the biggest mistake people made during the depression was to worry about the deficits too soon.

PAUL KRUGMAN (NEW YORK TIMES): Let me say something. There's something that - there was I think a little bit of bad reporting. When we got that $1.4 trillion deficit number, that was terrible. But it was actually $400 billion below what people were forecasting just a few months ago. The deficits are - the surprises on the deficit are actually...

GEORGE STEPHANOPOULOS (ABC NEWS): It's hard to believe when you've got the world record deficit.

PAUL KRUGMAN (NEW YORK TIMES): ...on the downside. I know. I know but the fact of the matter is...

PEGGY NOONAN (WALL STREET JOURNAL): Three times bigger than ever.

PAUL KRUGMAN (NEW YORK TIMES): ...that the - that if we were sort of, you know, dealing with, relaxed with the prospect of a $1.8 trillion deficit a few months ago. We should not be panicking, pulling back on stimulus, pulling back on support for the economy when the actual deficit comes in $400 billion less that you were thinking it would.

GEORGE STEPHANOPOULOS (ABC NEWS): And Jake, do you agree the White House is not going to be cowed by this? That they are prepared to put much more on the table?

JAKE TAPPER (ABC NEWS): Yeah, they're talking about tax credits for job creation. But they have a problem coming up at the end of the month, the state job numbers created from the stimulus package, the $143 billion that's been spent. Those actual numbers, auditable jobs, those numbers will come out and they will be much less than the 1 million jobs the administration says have been created. Of course they're using, using different ways of calculating this.

PAUL KRUGMAN (NEW YORK TIMES): Apples and oranges.

JAKE TAPPER (ABC NEWS): I know. But I'm just saying, perception wise, the administration's talking about jobs directly created and indirectly created. You know, the people that make the pavement that the workers who are directly paid by the stimulus pave with, et cetera, the people who give them sandwiches. But the state jobs numbers are going to be much lower. And they know that they have a problem here because $134 billion, even though that's ahead of schedule, that money, because this stimulus was to go out, throughout the two years, and not just one big chunk, they know that there is an impatience among the American people and even among Democrats on Capitol Hill that want more jobs more quickly.

GEORGE STEPHANOPOULOS (ABC NEWS): But they can't, George. They're not going to come out with huge new proposals. I think EJ is right. They're going to go for piecemeal proposals. After the expected, they hope, passage of the health care. Are you as confident as Paul is that this is done for this year, this is going to get done, health care reform?

GEORGE WILL (ABC NEWS): No, I am not. I'm very puzzled by the argument about how we're going to pay for this which seems to be the big problems right now. This is a government that right now is borrowing 43 cents of every dollar it spends. We're going to pay for this the way we pay for everything. We're going to borrow the money from the Chinese.

GEORGE STEPHANOPOULOS (ABC NEWS): The President says we're not. He says if it increases the deficit he's not going to sign it.

GEORGE WILL (ABC NEWS): I know. But sentences that begin the President says are not as impressive as they used to be. They're going to - they're supposed to pay for this by taxing the Cadillac plans, the rich insurance plans. They're not going to do that, or at least they're going to scale it back a great deal. They're going to increase access to Medicare. They're going to increase access to Medicaid. What's going on now is the Baucus bill is being melded with the Dodd bill. And all of the melding moves it to the left. It makes it more expensive.

GEORGE STEPHANOPOULOS (ABC NEWS): But what...

EJ DIONNE (WASHINGTON POST): Moving it to the left does not automatically make it more expensive. In fact, what a lot of the progressives want to do is to figure out how to hold down the costs by holding down what you pay out to the insurance company. Secondly, if they weren't paying for this, this would be a whole lot easier. It was a lot easier to pass the prescription drug benefit under President Bush because they never paid for that, adding $800 billion to the deficit. One of the big problems they're having is to figure out who is going to pay for it. So you got the fight about the Cadillac plans or do you do it by taxing the rich or various other proposals. So they are paying for this thing.

GEORGE STEPHANOPOULOS (ABC NEWS): The fight about the Cadillac plans, it's true. But I think in some ways that's the most important fight right now. $200 billion, it not only helps gets your deficit number, but it also is probably one of the bigger - biggest drivers of actually controlling costs over the long term. Yet, Paul Krugman, it is clear that when you've got every single major union and 178 House Democrats saying they're not go for it that it's not gonna pass.

PAUL KRUGMAN (NEW YORK TIMES): So they'll adjust it. It'll - you, you raise the threshold at which that tax cuts...

GEORGE STEPHANOPOULOS (ABC NEWS): So it doesn't hit the middle class.

PAUL KRUGMAN (NEW YORK TIMES): And that actually exempts - that exempts a lot of people while not cutting the amount of money you raise that much. That's one of those things were, you know, you just look at the way it works. And you know, $200 billion is not really a lot of money over ten years. Right, you know, $200 billion here and $200 billion there and soon you're talking about real money. But $200 billion is actually relatively speaking pocket change. There's lots of way to raise that much money. I don't think this is an obstacle.

GEORGE STEPHANOPOULOS (ABC NEWS): Wait a second. I mean you say there's lots of ways to raise that much money. We've been sitting here for six months, throwing out ideas.

PAUL KRUGMAN (NEW YORK TIMES): Because we know that somebody's going to pay it and the argument is about who, and it's not really an argument about whether, it's an argument about who pays it.

GEORGE WILL (ABC NEWS): Yes, and we know the answer to that, it's our children. Because at the end of the day we're going to borrow it from the Chinese.

PAUL KRUGMAN (NEW YORK TIMES): No.

EJ DIONNE (WASHINGTON POST): You know, what the problem is, is that it's perfectly - just to go back to the economy, it's extremely rational to run big deficits when we need the stimulus from the government. What they can't do is to say, look we're going to do that now and then we're going to pay for it later and here are some tax proposals that will kick in down the road. And politically right now, it's poisonous to say, we're going to spend money now and have tax increases later but that is how we're going to do it in the end, even though I don't think they're going to say so.

GEORGE STEPHANOPOULOS (ABC NEWS): Meanwhile, Peggy, Olympia Snowe became the most powerful Republican in Washington at least for a weekend. And what's your sense, you know, she stayed in the game throughout all these negotiations. Most Republicans were betting she would vote no. But in the end, she decided to keep her seat at the table. Is this something where if the bill starts to move in the direction of the House Democrats, does she succumb to this feeling that David Axelrod was talking about, we just got to pass something, or do you think she'll have the strength and be - is she willing to then switch her vote and go no?

PEGGY NOONAN (WALL STREET JOURNAL): Well she said when history calls, history calls. You know, which, which is one of those sort of - yes. But also has a sort of portentous sound. I guess everybody will be focused on her now and wondering if, as the Baucus plan - bill becomes the Baucus - the final votable bill, what she will do. I think the great insight this week from anybody in Congress about the health care plan, as it exists now, is Congressman Paul Ryan's simple statement.

GEORGE STEPHANOPOULOS (ABC NEWS): Republican of Illinois.

PEGGY NOONAN (WALL STREET JOURNAL): Republican of Illinois.

GEORGE WILL (ABC NEWS): Wisconsin.

GEORGE STEPHANOPOULOS (ABC NEWS): Wisconsin, sorry.

PEGGY NOONAN (WALL STREET JOURNAL): Wisconsin, sorry. House banking. Who said, look, they're going to pass this thing. It's going to be cut down, it's going to be CBO-neutral and then they're going to add on everything they cut. It's going to cost a lot of money.

GEORGE STEPHANOPOULOS (ABC NEWS): Well and that is - we're seeing this, this week with this Medicare. That was part of the 1997 budget balancing act.

JAKE TAPPER (ABC NEWS): $247 billion in Medicare to repair the fact that doctors now get - are paid accordingly to regular inflation and not health care inflation. $247 billion that is separated from this health care bill so that the health care bill is under $1 trillion. And now you could argue this is a fix that would happen whether or not there was a health care bill. But at the same time it's impossible to argue that this $247 million going to doctors is not part of health care reform. It is.

GEORGE WILL (ABC NEWS): How do you say a quarter of a trillion dollars in Chinese? Because I hate to keep harping on this...

JAKE TAPPER (ABC NEWS): I'll teach you mandarin.

PAUL KRUGMAN (NEW YORK TIMES): I will say that at the margin this money is not coming from the Chinese. We're actually borrowing a lot less from the Chinese than we were. So that's an easy line. I've used it myself.

GEORGE WILL (ABC NEWS): Less in real terms.

PAUL KRUGMAN (NEW YORK TIMES): But it's not actually a good story.

GEORGE WILL (ABC NEWS): Less in real terms or...

PAUL KRUGMAN (NEW YORK TIMES): Less in real terms, less all around. And because, basically, our borrowing needs as a country have dropped despite those federal deficits.

GEORGE STEPHANOPOULOS (ABC NEWS): But how about the broader criticism, because again that this - I think this Medicare issue is, is telling. That was the way that members of Congress said they achieved a balanced budget back in 1997. And for a time we actually had a surplus before the Bush tax cuts. But every single year for the last four, it has been - and it makes people skeptical of the savings that are promised in this bill.

PAUL KRUGMAN (NEW YORK TIMES): Well, sure, but, you know, the point is, though, this is, this is actually what health care reform is ultimately supposed to bring you around to being able to address. And I know that it's a long road. But what we know from international experience, remember, we have - we're the only country that doesn't - among the advanced world that does not have universal coverage. We also have, by far the highest costs. All of the evidence suggests that the route to effective cost control runs through universal health care. That once you make it a national responsibility that everybody's going to be covered, once you no longer have the safety valve of dealing with runaway health care costs by just throwing more people into the abyss, then you actually come to confront the health care costs. So I don't think you want to think of this as an argument against health care reform. You want to think of this as an argument for it.

GEORGE STEPHANOPOULOS (ABC NEWS): To do it right. Let's turn to the politics now. We're got three special elections, three big ones coming up this year. We've got the governor races in New Jersey and Virginia, also a special House race up in northwester New York. And I want to show the Democratic candidate for governor in Virginia, Creigh Deeds, a big ally of President Obama. Virginia went for President Obama last year, but he is not highlighting his ties in his campaign ads.

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CREIGH DEEDS (DEMOCRAT): Frankly a lot of what's going on in Washington has made it very tough in the - we had a very tough August because people were just uncomfortable with the spending. They were uncomfortable with a lot of what was going - a lot of noise that was coming out of Washington, DC.

GEORGE STEPHANOPOULOS (ABC NEWS): This is the race, George, the Democrats most likely to lose. There's been a Democratic governor. But the Republican, Bob McConnell, pretty - has a pretty healthy lead right now.

GEORGE WILL (ABC NEWS): Republicans expect to win that. Republicans believe that Congressman Cassell of Delaware, who has decided to leave his single seat, he runs it large in Delaware and run for the Senate, that he would not have done that if things hadn't shifted dramatically in the Republicans' favor. One measure which is this, in the generic ballot do you prefer Republican or Democrat, it's now dead even between the two parties and among Independents, Republicans are up 9%.

GEORGE STEPHANOPOULOS (ABC NEWS): And that is a big change, EJ.

EJ DIONNE (WASHINGTON POST): Well the big problem for Deeds - he has two problems. One is that during the summer, Democratic numbers in Virginia really dropped sharply, just generic support, identification with the Democratic Party. That hurt him. He also, you know, spent everything in the primary and really wasn't present in the summer. He reorganized his campaign. And he's got a problem vis--vis Obama which is that he is counting on some conservative Democrats in his southwestern part of the state. He doesn't want to get too close to him. But he needs Obama to turn out young people and African Americans. But to go George's point about Mike Cassell, Republicans have a real problem, because to win some of these seats, such as Delaware, they need moderate candidates like Mike Cassell. But look at that race in upstate New York.

GEORGE STEPHANOPOULOS (ABC NEWS): The House race.

EJ DIONNE (WASHINGTON POST): The special election for the House where the Republicans nominated a moderate Republican and then the conservative party in New York State put up a right-wing candidate supported by the tea baggers. That right-wing candidate is cutting into the moderate's votes and the Democrat is ahead in a district that is very Republican. That's a real challenge long-term for the Republicans, can they nominate moderates.

GEORGE STEPHANOPOULOS (ABC NEWS): Peggy, EJ, he brings up an important point. Stan Grayberg and James Carvill did a study done this week of the Republican base of voters. And one of the things they found is this hard-core part of the base is in a world unto its own right now. The tea bag movement and you know, they're sort of driven by the idea that President Obama and the Democrats have a secret plan to impose socialism on the country.

PEGGY NOONAN (WALL STREET JOURNAL): Well, I don't know about that. You know, in the case of New York, the conservative, who is making real inroads and threatening the official Republican nominee, that conservative's voting record has more in common with the fellow who just left that office than the Republican's does. I can't help but think that a lot of this stuff is exaggerated in terms of calling it tea baggers and all of that stuff. Look, this country saw this summer an awakening, if you will, an August awakening of people at town halls coming forward, Republicans and Independents and some Democrats saying wait a second, we're not liking the way they're doing it right now in Washington. That is creating I think something of a wave that perhaps, if Virginia and New Jersey seem to be going Republican, may lead to something serious in 2010. I mean, EJ, there were 49 congressmen who were up to re-election in 2010, who are Democrats who came from districts that McCain won. So that shows you in a way how delegate things are for them.

GEORGE STEPHANOPOULOS (ABC NEWS): And it goes up to 82 if you add McCain and Bush and..

PEGGY NOONAN (WALL STREET JOURNAL): Absolutely.

EJ DIONNE (WASHINGTON POST): The Republicans from Obama...

JAKE TAPPER (ABC NEWS): But Virginia's a bad bellwether though. Because it, since 1973, it always switches party. I mean George W Bush could not have been more popular in November 2001 and the Democrat won the governor's office.

GEORGE STEPHANOPOULOS (ABC NEWS): I think that's a good point. I think the bigger concern for the White House, and for Democrats is looking at this wave that Charlie Cooke, probably the best political analyst of the House races has said could be coming. And Paul that all does comes back to this whole question of unemployment, it's hard to imagine Democrats not facing a wave if you're looking at unemployment topping 10% next summer.

PAUL KRUGMAN (NEW YORK TIMES): A couple of things, first, the generic congressional ballot, we actually - political scientists have looked into what can you infer from that at this point in the election cycle? And the answer is nothing. It has no predictive value. What does have some predictive value are two things. The popularity of the President and if you want to look at that...

GEORGE STEPHANOPOULOS (ABC NEWS): Still above 50 now.

PAUL KRUGMAN (NEW YORK TIMES): Yeah. And if you look at Obama's numbers now, they look like Bush at this point in 2003. Not like Clinton at this point in 1993. So actually, Obama is not remotely in the position that Clinton was in, very unlikely to lose the Congress. The other thing is the state of the economy. And yeah, if the unemployment rate is still rising as we go into late 2010, then we got a problem.

GEORGE STEPHANOPOULOS (ABC NEWS): But see actually you just brought up an important point. The absolute number may not be, EJ, what's most important, it could be the trend...

PAUL KRUGMAN (NEW YORK TIMES): The trend, if it's falling.

GEORGE STEPHANOPOULOS (ABC NEWS): ...as we move from the summer to the...

PAUL KRUGMAN (NEW YORK TIMES): If it's falling, then, then the Democrats are in fine shape.

EJ DIONNE (WASHINGTON POST): But you're looking - you can look at '94, which was a Republican sweep. You can also look at 1982. Unemployment hit 10% about a week and a half, two weeks before the 1982 election. The Republicans lost ground but they held. They lost 26 seats in the House. And I think there is a good that if this is a bad night for the Democrats, it will be more like '82 was for the Republicans than like '94 was for Bill Clinton.

GEORGE STEPHANOPOULOS (ABC NEWS): I think that's probably right. We just have a couple of minutes left. And I, I can't leave without talking for a second about this issue that gripped the - and I shouldn't say issue, the story that gripped the nation on Thursday afternoon watching that flying saucer...

PEGGY NOONAN (WALL STREET JOURNAL): Oh yes, you could.

GRAPHICS: THIS WEEK WITH GEORGE STEPHANOPOULOS

GEORGE STEPHANOPOULOS (ABC NEWS): Well I want to bring it to you. But we just saw - when we saw this, this, you know, the, the flying saucer go off, the family all across morning television the day. Now we're hearing that they're likely to have charges pressed against the family for perpetuating a hoax.

GEORGE STEPHANOPOULOS (ABC NEWS): And Peggy, I was just wondering what your thoughts were and what you think this says about the country, about the media. Did we pay too much attention or could we have helped it?

JAKE TAPPER (ABC NEWS): We're all living a nightmare out of...

PAUL KRUGMAN (NEW YORK TIMES): And inflation is still a danger.

PEGGY NOONAN (WALL STREET JOURNAL): Oh.

JAKE TAPPER (ABC NEWS): That's...

PEGGY NOONAN (WALL STREET JOURNAL): It is a rich and varied nation. We have many interesting individualists living here. I think the disturbing thing we saw, probably, was interesting parenting styles with regard to the poor little kid who seems to have been problematic within his family and got sick on live TV.

JAKE TAPPER (ABC NEWS): Falcon.

GEORGE STEPHANOPOULOS (ABC NEWS): And he got sick on live TV. George Will, and Diane Sawyer actually had to tell the parents, do you want to go take care of your kid?

GEORGE WILL (ABC NEWS): First things first. We walk into this studio every Sunday morning past a big inscription on the wall outside from Richard Nixon that says the American people believe anything until they've seen on television. That just has to be code, don't believe what you see on television and we'll be all set.

EJ DIONNE (WASHINGTON POST): You know, I like the idea of moving from car chases to balloon chases. But as soon as you exploited the kid, you said, oh my god, you took this delightful story and turned it into a terrible story.

PEGGY NOONAN (WALL STREET JOURNAL): Yes.

PAUL KRUGMAN (NEW YORK TIMES): No further comments.

GEORGE STEPHANOPOULOS (ABC NEWS): He's going to say inflation is still a danger. You guys go on to the green room. You can all check it out later on ABCNews.com.

GEORGE STEPHANOPOULOS (ABC NEWS): (Voiceover) And you can get political updates all week long by getting our daily newsletter which is also on ABCNews.com. Coming up here, "The Sunday Funnies".

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Originally broadcast, 10.18.09