
English: 
ANNE GUMOWITZ.
THE BETSY AND JESSE FINK 
FOUNDATION.
THE HKH FOUNDATION.
BARBARA G. FLEISCHMAN.
AND BY OUR SOLE CORPORATE 
SPONSOR, MUTUAL OF AMERICA, 
DESIGNING CUSTOMIZED INDIVIDUAL 
AND GROUP RETIREMENT PRODUCTS.
THAT'S WHY WE'RE YOUR RETIREMENT
COMPANY.
>> WELCOME.
JUST BEFORE THE HOLIDAYS, WE 
ASKED YOU, OUR VIEWERS, TO 
RECOMMEND THE ONE BOOK YOU 
THOUGHT PRESIDENT OBAMA SHOULD 
READ AS HE PREPARES HIMSELF FOR 
HIS SECOND TERM IN OFFICE.
AS EVER, YOUR SUGGESTIONS WERE 
THOUGHTFUL, PROVOCATIVE AND 
ECLECTIC -- FROM BOOKS BY 
AUTHORS WHO HAVE APPEARED AS 
GUESTS ON THIS BROADCAST, TO 
WORKS BY THE LATE JOHN STEINBECK
AND A. A. MILNE, THE CREATOR OF 
WINNIE-THE-POOH.
YOU CAN SEE A LIST AT OUR 
WEBSITE, BILLMOYERS.COM.
MANY OF YOU ASKED FOR MY CHOICE,

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TOO.
THIS IS IT, PAUL KRUGMAN'S "END 
THIS DEPRESSION NOW!"
IT'S BOTH PRESCRIPTION AND 
WARNING.
OUR CURRENT OBSESSION WITH 
SLASHING THE DEFICIT AND 
AVOIDING THAT WELL-KNOWN AND 
WORN FISCAL CLIFF IS KILLING US,
KRUGMAN WRITES, GETTING IN THE 
WAY OF WHAT REALLY NEEDS TO BE 
DONE, WHICH IS DEDICATING 
GOVERNMENT TO CREATING JOBS AND 
GETTING US BACK TO FULL 
EMPLOYMENT.
HE BLAMES NOT ONLY CONGRESS BUT 
THE WHITE HOUSE.
PAUL KRUGMAN IS PROFESSOR OF 
ECONOMICS AND INTERNATIONAL 
AFFAIRS AT PRINCETON UNIVERSITY.
SINCE 1999, HE'S BEEN AN OP-ED 
COLUMNIST AT "THE NEW YORK 
TIMES" AND NOW ALSO WRITES A 
BLOG FOR THE PAPER TITLED "THE 
CONSCIENCE OF A LIBERAL."
ACCORDING TO THE SEARCH ENGINE 
TECHNORATI, IT'S THE MOST 
POPULAR BLOG BY AN INDIVIDUAL ON
THE INTERNET.
AUTHOR OR EDITOR OF SOME 
20 BOOKS AND MORE THAN 
200 PROFESSIONAL PAPERS, KRUGMAN
IS A THINKER SO ESTEEMED AND 
WIDELY KNOWN IN HIS FIELD HE'S 
BECOME AN ICON.
NOT ONLY HAS HE WON THE NOBEL 

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PRIZE IN ECONOMICS, HE'S ALSO 
THE SUBJECT OF THIS SONG BY THE 
BALLADEER 
LOUDON WAINWRIGHT III --
♪ I READ THE NEW YORK TIMES 
THAT'S WHERE I GET MY NEWS ♪
♪ PAUL KRUGMAN'S ON THE OP-ED 
PAGE THAT'S WHERE I GET ♪
♪ THE BLUES 'CAUSE PAUL ALWAYS 
TELLS IT LIKE IT IS WE GET ♪
♪ IT BLOW BY BLOW ♪
>> AS IF BEING IMMORTALIZED BY 
THE BLUES ISN'T ENOUGH, THERE 
WAS EVEN AN UNOFFICIAL CAMPAIGN 
AND PETITION IN THE LAST FEW 
DAYS URGING PRESIDENT OBAMA TO 
MAKE PAUL KRUGMAN THE NEXT 
SECRETARY OF THE TREASURY.
IT WAS AN HONOR, AS SHAKESPEARE 
WOULD SAY, THAT MR. KRUGMAN 
DREAMS NOT OF.
PAUL KRUGMAN, WELCOME.
>> HI THERE.
>> SO, LIKE 
WILLIAM TECUMSEH SHERMAN YOU 
REFUSE TO BE DRAFTED.
>> WELL, YOU KNOW, FORTUNATELY 
IT HASN'T COME TO THAT POINT.
BUT I THINK I PROBABLY WOULD.
>> BUT YOU REMEMBER WHAT 
GENERAL SHERMAN SAID WHEN THERE 
WAS A MOVEMENT TO RUN HIM FOR 
PRESIDENT, "I WILL NOT ACCEPT IF
NOMINATED AND WILL NOT SERVE IF 

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ELECTED."
THAT WAS THE SHERMAN LIKE 
STATEMENT YOU ISSUED.
>> THAT'S, WELL, I'M NOT QUITE 
UP TO SHERMAN'S STANDARDS AND I 
DON'T THINK I'M QUITE READY TO 
LAY WASTE TO GEORGIA EITHER.
BUT A GOOD, GOOD MAN I ADMIRE 
ACTUALLY.
>> BUT THE GRASSROOTS CAMPAIGN 
IN YOUR BEHALF, UNOFFICIAL, WAS 
SERIOUS.
I MEAN, OVER 235,000 PEOPLE 
SIGNED ON.
YOU BROKE THEIR HEARTS.
ANY REGRETS?
>> NO, BECAUSE I PROBABLY HAVE 
MORE INFLUENCE THAN I, DOING 
WHAT I DO NOW THAN I WOULD IF I 
WERE INSIDE TRYING TO, YOU KNOW,
DO THE COURT POWER GAMES THAT 
COME WITH ANY WHITE HOUSE, EVEN 
THE BEST, WHICH I DON'T THINK 
I'D BE ANY GOOD AT.
SO NO, THIS IS FINE.
AND WHAT THE PRESIDENT NEEDS 
RIGHT NOW IS HE NEEDS A 
HARDNOSED NEGOTIATOR.
AND RUMOR HAS IT THAT'S WHAT 
HE'S GOT, SO.
>> IN JACK LEW?
>> THAT'S RIGHT.
THE PRESIDENT CAN'T PASS MAJOR 
NEW LEGISLATION.
HE CAN'T FORMULATE MAJOR NEW 

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PROGRAMS RIGHT NOW.
WHAT HE HAS TO DO NOW IS BARGAIN
DOWN OR RIDE OVER THESE CRAZY 
PEOPLE IN THE REPUBLICAN PARTY.
AND WE WHAT WE NEED NOW IS NOT 
DEEP THINKING FROM THE TREASURY 
SECRETARY.
IF THE PRESIDENT WANTS DEEP 
THINKERS, HE CAN CALL 
JOE STIGLITZ, HE CAN CALL OTHER 
PEOPLE.
WHAT HE NEEDS FROM THE TREASURY 
SECRETARY IS SOMEBODY WHO'S 
GOING TO BE VERY EFFECTIVE AT 
DEALING WITH THESE WILD MEN AND 
MAKING SURE THAT NOTHING 
TERRIBLE HAPPENS.
>> I UNDERSTAND THAT JACK LEW 
HAS DEPRESSION ART ON HIS, THE 
WALL OF HIS OFFICE, ART DONE BY 
THE WORKS PROGRESS 
ADMINISTRATION.
WHICH WOULD BE A GOOD SIGN FOR 
SOMEONE LIKE YOU WHO BELIEVES 
THE DEPRESSION IS BACK.
>> THAT'S, I HAVE TO SAY, THE 
MOST REASSURING THING I'VE HEARD
ABOUT HIM.
WPA, YOU KNOW, THEY PRODUCED A 
LOT OF ART, WHICH I THINK IT'S 
ALMOST INCONCEIVABLE NOW.
BUT ALSO THE WPA WAS ONE OF THE 
REALLY GOOD MOMENTS IN AMERICAN 
POLICY.
IN A TIME OF ECONOMIC DISASTER, 
HIRING PEOPLE, GIVING THEM JOBS 
TO DO THINGS THAT ARE GOOD, MUCH
OF WHICH SURVIVES AND IS AN 
IMPORTANT PART OF OUR PHYSICAL 

English: 
PLANET TODAY.
THIS IS GREAT.
AND THE FACT THAT HE THINKS WELL
OF AND ADMIRES WHAT THE WPA DID,
THAT'S A VERY HOPEFUL SIGN.
>> WHAT COULD JACK LEW DO AS 
TREASURY SECRETARY THAT WOULD 
MAKE YOU THINK HE'S A KINDRED 
SPIRIT?
>> CAMPAIGN AGAINST THIS 
AUSTERITY OBSESSION.
WE'RE NOT GOING TO GET A BIG NEW
STIMULUS PACKAGE, MUCH AS I 
WOULD LIKE TO SEE IT.
NO, WE'RE NOT GOING TO GET IT 
THIS YEAR, ANYWAY.
BUT I'D LIKE TO SEE HIM SAYING 
WHEN SOMEBODY SAYS, "WELL, WE 
NEED TO SLASH HERE, WE NEED TO 
SLASH THERE."
AND HE WOULD SAY "WHY WOULD WE 
WANT TO BE DOING THAT NOW?
THAT'S ACTUALLY GOING TO HURT 
THE ECONOMY."
>> BUT HASN'T OUR ECONOMY 
CHANGED SO MUCH SINCE 
FRANKLIN ROOSEVELT SIMPLY PUT 
PEOPLE ON THE GOVERNMENT 
PAYROLL?
>> IT'S, ECONOMICS, THE 
UNDERLYING RULES CHANGE A LOT 
MORE SLOWLY THAN PEOPLE IMAGINE.
PEOPLE LOOK AND THEY SAY, "OH, 
YOU KNOW, BACK THEN THEY WERE 
TAKING OCEAN LINERS AND NOW WE 
FLY JET AIRPLANES."
OR, "BACK THEN WE DIDN'T HAVE A 
GLOBAL ECONOMY."
ACTUALLY, WE DID.
IT'S A LITTLE BIT FANCIER NOW.
BUT THE BASIC RULES ARE NOT ARE 
NOT MUCH CHANGED.
IT TAKES HUNDREDS OF YEARS FOR 

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THOSE TO CHANGE A WHOLE LOT.
AND THIS IS, I CAN PRETTY EASILY
ASSEMBLE A BUNCH OF HEADLINES 
FROM THE 1930S AND THEY WILL 
SOUND LIKE THEY'RE RIGHT OUT OF 
TODAY'S HEADLINES.
THIS IS THE SAME KIND OF ANIMAL 
THAT WE CONFRONTED IN THE '30S.
THIS IS DEPRESSION ECONOMICS.
AND THE NATURE OF THE SOLUTION 
IS NOT REALLY VERY DIFFERENT NOW
FROM WHAT IT WAS THEN.
>> WHAT DO YOU MEAN, DEPRESSION 
ECONOMICS?
>> WELL, TWO THINGS REALLY.
ONE IS, A RECESSION IS WHEN THE 
ECONOMY'S GOING DOWN.
A DEPRESSION IS WHEN THE ECONOMY
IS DOWN.
SO, YOU KNOW, THE U.S. ECONOMY 
WAS ACTUALLY EXPANDING THROUGH 
MOST OF THE 1930S, AFTER A 
TERRIBLE BIG SLUMP AT THE 
BEGINNING AND ANOTHER SLUMP 
LATER IN THE '30S.
AND THEN IT WAS EXPANDING IN 
BETWEEN.
BUT WE CALL THAT WHOLE EPISODE 
THE GREAT DEPRESSION BECAUSE IT 
WAS ALL A PERIOD OF HIGH 
UNEMPLOYMENT AND A LOT OF 
SUFFERING.
AND, OF COURSE, WE'RE IN THAT 
NOW.
IT'S NOT AS BAD AS THE GREAT 
DEPRESSION.
YOU KNOW, IT'S A GREAT 
RECOMMENDATION.
NOT AS BAD AS THE GREAT 
DEPRESSION.
IT'S TERRIBLE.
WE HAVE A PERSISTENTLY DEPRESSED
ECONOMY, PERSISTENT LACK OF 
JOBS.
SO IN THAT SENSE, IT'S A 
DEPRESSION.
AND THERE'S ALSO A MORE 

English: 
TECHNICAL MEANING. DEPRESSION 
ECONOMICS IS WHEN THE NORMAL 
THINGS YOU DO TO BOOST THE 
ECONOMY, HAVE THE FEDERAL 
RESERVE CUT INTEREST RATES A 
LITTLE BIT, ARE NO LONGER 
AVAILABLE OR EFFECTIVE.
IT'S A SITUATION WHERE THE 
NORMAL RULES OF WHAT YOU -- OF 
ECONOMIC POLICY, HAVE TO BE PUT 
ON HOLD, AND YOU REALLY NEED TO 
DO EXTRAORDINARY STUFF.
>> WELL, THE FED HAS KEPT THE 
INTEREST LATE VERY LOW.
AND IT HAS MADE A BIG 
DIFFERENCE, HAS IT?
>> I THINK IT ACTUALLY HAS.
IF THEY HADN'T KEPT THE INTEREST
RATE LOW, THINGS WOULD BE MUCH, 
MUCH WORSE.
MEANING --
>> MORE PEOPLE OUT TO WORK.
>> THAT'S RIGHT.
WE, YOU KNOW, THIS IS NOT AS BAD
AS THE GREAT DEPRESSION.
AGAIN, OUR FAMOUS LAST WORDS.
BUT PART OF THE REASON IS THAT 
THE FED DID LEARN SOMETHING FROM
THE 1930S.
IT'S LEARNED THAT RAISING 
INTEREST RATES TO STABILIZE THE 
PRICE OF GOLD IS A REALLY BAD 
IDEA IN TIMES LIKE THIS.
BUT THE TROUBLE IS THAT ZERO, 
WHICH IS AS LOW AS IT CAN GET, 
IS NOT LOW ENOUGH.
AND WE ACTUALLY KNOW PRETTY WELL
WHAT YOU NEED TO DO.
>> THE OTHER SIDE OF IT IS THAT 
PEOPLE HAVE BEEN TOLD SO LONG, 
"SAVE MONEY.
SAVE MONEY.
AMERICANS WERE NOT SAVING."
NOW IF THEY SAVE MONEY, THEY 
MAKE NO MONEY FROM THEIR 
SAVINGS.
>> THAT'S RIGHT.

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AND, ACTUALLY THE TRUTH IS RIGHT
NOW SAVING HURTS US.
IT'S BECAUSE WHAT, ANOTHER WAY, 
YET ANOTHER WAY TO THINK ABOUT 
DEPRESSION ECONOMICS, DEPRESSION
ECONOMICS IS A SITUATION WHERE 
THE TOTAL AMOUNT THAT PEOPLE 
WANT TO SAVE IS LESS THAN THE 
AMOUNT THAT BUSINESSES ARE 
WILLING TO INVEST.
YOU CAN THINK OF THAT AS BEING 
THE RESULT, A LOT OF IT IS 
BECAUSE OF THIS OVERHANG OF 
PERSONAL HOUSEHOLD DEBT FROM THE
PAST.
WE HAD A HOUSING BUBBLE THAT 
BURST, LEAVING US WITH TOO MUCH 
CONSTRUCTION.
WE HAVE A FINANCIAL SYSTEM 
THAT'S DISRUPTED.
BUT ALL OF THAT LEADS TO THE 
FACT THAT THERE'S, THE AMOUNT 
THAT BUSINESSES ARE WILLING TO 
INVEST IS LESS THAN THE AMOUNT 
THAT COLLECTIVELY WE ALL WANT TO
SAVE, INCLUDING CORPORATIONS 
THAT ARE TRYING TO RETAIN 
EARNINGS.
WHICH MEANS THAT WE'RE AWASH IN 
EXCESS SAVINGS.
AND IF YOU DECIDE TO SAVE MORE, 
IT'S NOT ACTUALLY GOING TO HELP 
SOCIETY.
I MEAN, THINGS ADD UP.
IF THERE'S A CRUCIAL, ONE 
CRUCIAL THING TO UNDERSTAND 
ABOUT ALL THIS IT IS THAT THE 
GLOBAL ECONOMY, MONEY MOVES 
AROUND IN A CIRCLE.
AND MY SPENDING IS YOUR INCOME, 
AND YOUR SPENDING IS MY INCOME.

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AND IF ALL OF US TRY TO SPEND 
LESS BECAUSE WE WANT TO SAVE 
MORE, WE DON'T SUCCEED.
ALL WE END UP DOING IS CREATING 
A GLOBAL DEPRESSION.
>> SO YOUR PRESCRIPTION IN THIS 
BOOK, AND THE BOOK IS AN 
ARGUMENT FOR THE PRESCRIPTION, 
IS THAT THE GOVERNMENT SHOULD 
SPEND MORE SO THAT PEOPLE CAN 
BUY MORE.
IN OTHER WORDS, CREATING DEMAND 
THAT WILL DRIVE THE ECONOMY.
THAT'S THE CHIEF ARGUMENT IN 
HERE.
>> THAT'S RIGHT.
THERE ARE SOME OTHER THINGS YOU 
CAN DO.
DEBT RELIEF, WHERE YOU CAN DO 
IT, WILL HELP BECAUSE IT WILL 
MAKE PEOPLE ABLE TO SPEND MORE.
THERE'RE SOME THINGS THAT THE, 
MAYBE THE FEDERAL RESERVE CAN 
DO, EVEN THOUGH INTEREST RATES 
ARE ZERO.
BUT THE CORE THING, THE THING 
THAT WE KNOW WORKS, THE THING 
THAT ALL THE EVIDENCE OF HISTORY
SAYS WORKS IN A SITUATION LIKE 
THIS IS THE PRIVATE SECTOR WON'T
SPEND, GOVERNMENT CAN STEP IN 
AND PROVIDE THE SPENDING THAT WE
NEED IN ORDER TO KEEP THIS 
ECONOMY AFLOAT.
>> AS YOU KNOW, THERE IS AN 
ARGUMENT ON THE OTHER SIDE THAT 
SAYS THAT ROOSEVELT, IN SPENDING
IN THE '30S, DID NOT REALLY 
BRING US OUT OF THE DEPRESSION.
IT WAS, AND YOU ACKNOWLEDGE THIS
IN THE BOOK, THE WAR, IN WHICH 
SO MUCH MONEY WAS SPENT, YOU 
COULDN'T HELP BUT PUT PEOPLE TO 

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WORK.
>> THAT'S RIGHT.
BUT THE FACT THAT IT WAS A WAR 
THAT FINALLY GOT THE U.S. 
GOVERNMENT TO SPEND ENOUGH IS 
NOT AN ARGUMENT AGAINST 
SPENDING.
IT'S AN ARGUMENT ABOUT POLITICS.
IT'S SAYING THAT THEN, AS NOW, 
LOTS OF PEOPLE WERE SAYING, "OH,
IT WOULD BE IRRESPONSIBLE TO 
SPEND," AND IT WASN'T UNTIL 
SOMETHING EXTERNAL CAME ALONG 
THAT THE POLITICAL RESTRAINTS 
WERE RELEASED.
AND THEN, WE DIDN'T, WE ACTUALLY
WERE, WE HAD RECOVERED FROM THE 
GREAT DEPRESSION BEFORE 
PEARL HARBOR, BECAUSE THE U.S. 
ECONOMY REALLY WENT TO WAR IN 
1940.
AND PRESTO.
I MEAN, LOTS OF PEOPLE SAID, 
"OH, SPENDING MORE CAN'T PRODUCE
RECOVERY."
AND THEN WE STARTED OUR MILITARY
BUILDUP BECAUSE WAR HAD BROKEN 
OUT IN EUROPE.
AND SUDDENLY, WE HAD RECOVERY.
I MADE IT AS A JOKE, BUT IF WE 
DISCOVERED A THREAT FROM SPACE 
ALIENS AND DECIDED THAT TO DEAL 
WITH THAT THREAT, WE NEEDED TO 
ACTUALLY, SOMEHOW OR OTHER WE 
NEEDED TO DO A LOT OF 
INFRASTRUCTURE SPENDING.
WE NEEDED TO BUILD ROADS AND 
HIGH-SPEED RAIL.
WE WOULD HAVE FULL EMPLOYMENT.
>> BY FULL EMPLOYMENT, YOU MEAN?
>> SOMETHING LIKE 5% 
UNEMPLOYMENT.

English: 
>> THERE ESSENTIALLY WILL ALWAYS
BE A CERTAIN NUMBER OF PEOPLE 
WHO ARE NOT WORKING FOR ONE 
REASON OR ANOTHER.
>> YEAH.
IT'S A DYNAMIC ECONOMY.
THERE'S ALWAYS GOING TO BE 
COMPANIES FAILING.
THERE'S ALWAYS GOING TO BE 
PEOPLE QUITTING A JOB AND TAKING
SOME TIME TO FIND A NEW ONE.
THERE'S A LOT OF FRICTION IN THE
ECONOMY.
SO THE FACT OF THE MATTER IS 
THAT NORMAL, A NORMALLY PRETTY 
FULL EMPLOYMENT ECONOMY IS STILL
GOING TO HAVE 5% MEASURED 
UNEMPLOYMENT.
THAT'S OKAY.
BUT THERE'S A WORLD OF 
DIFFERENCE BETWEEN THAT AND 
RIGHT NOW THE OFFICIAL NUMBER IS
IN THE HIGH SEVENS.
BUT A LOT OF MEASURES SUGGEST 
IT'S A LOT WORSE THAN THAT.
I MEAN, AND MOST IMPORTANT, WE 
HAVE 4 MILLION WHO'VE BEEN OUT 
OF WORK FOR MORE THAN A YEAR, 
WHICH IS UNPRECEDENTED SINCE THE
1930S.
>> YEAH, YOU WRITE THAT WE ARE 
IN A DEPRESSION THAT IS 
ESSENTIALLY GRATUITOUS.
WE DON'T NEED TO BE SUFFERING SO
MUCH PAIN AND DESTROYING SO MANY
LIVES.
>> GRATUITOUS IN THE SENSE THAT 
THERE'S NOTHING, THE ONLY 
OBSTACLES TO PUTTING PEOPLE TO 
WORK, TO HAVING THOSE LIVES 
RESTORED, TO PRODUCING HUNDREDS 

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OF BILLIONS, PROBABLY 
900 BILLION A YEAR OR SO OF 
EXTRA VALUABLE STUFF IN OUR 
ECONOMY, IS IN OUR MINDS.
IF I COULD SOMEHOW CONVINCE THE 
MEMBERS OF CONGRESS AND THE 
USUAL SUSPECTS THAT DEFICIT 
SPENDING, FOR THE TIME BEING, IS
OKAY, AND THAT WHAT WE REALLY 
NEED IS A BIG JOB CREATION 
PROGRAM.
AND LET'S WORRY ABOUT THE 
DEFICIT AFTER WE'VE HAD A SOLID 
RECOVERY, IT WOULD ALL BE OVER.
IT WOULD BE NO PROBLEM AT ALL, 
WHICH IS WHAT, THAT'S THE LESSON
OF 1940, 1941.
>> WHICH IS?
>> YOU CAN FIND ALL KINDS OF 
PEOPLE EXPLAINING WHAT WAS 
FUNDAMENTALLY WRONG WITH THE 
U.S. ECONOMY IN 1940, THAT 
TECHNOLOGY MAKES IT IMPOSSIBLE, 
WORKERS DON'T HAVE THE RIGHT 
SKILL.
THEN ALONG CAME A WAR IN EUROPE 
AND WE STARTED SPENDING.
ACTUALLY, AT THAT POINT, 
SPENDING A LOT ON INFRASTRUCTURE
BECAUSE WE WERE GETTING READY 
FOR A WAR.
AND ALL OF A SUDDEN --
>> BUILDING HARBORS, BUILDING 
ALL KINDS OF --
>> AND CAMPS, TRAINING CAMPS, 
THERE ARE A LOT --
>> TRAINING --
>> THE FIRST THING THAT HAPPENED
ACTUALLY WAS A LOT OF 
CONSTRUCTION SPENDING ON THE 
GIANT NEW CAMPS THAT THE ARMY 

English: 
WAS GOING NEED.
AND ALL OF A SUDDEN, ALL OF 
THOSE UNEMPLOYABLE WORKERS 
TURNED OUT TO BE EXTREMELY 
PRODUCTIVE, IF YOU GAVE THEM A 
JOB.
ALL OF THOSE, YOU KNOW, TOTAL 
INABILITY TO GET THE ECONOMY 
MOVING TURNED OUT TO BE TOTALLY 
EASY TO GET THE ECONOMY MOVING.
AND WE'RE BASICALLY IN THAT 
SITUATION RIGHT NOW.
ALL THE PRODUCTIVE CAPACITY IS 
THERE.
ALL THAT'S LACKING IS THE 
INTELLECTUAL CLARITY AND THE 
POLITICAL WILL.
>> YOU MAKE THIS SO CLEAR IN THE
BOOK, THAT'S WHY I RECOMMENDED 
THAT PRESIDENT OBAMA READ THIS 
BOOK AS THE ONE BOOK I WOULD 
LIKE TO SEE HIM READ BEFORE THE 
INAUGURATION NEXT WEEK.
IF HE READ IT, WHAT WOULD YOU 
HOPE HE WOULD FASTEN ON?
>> I WOULD HOPE THAT HE WOULD 
FASTEN ON THE NOTION, YOU KNOW, 
HE FACES REAL POLITICAL 
CONSTRAINT.
SO WE UNDERSTAND, HE CAN'T JUST 
PASS LEGISLATION.
BUT THAT THE MOST IMPORTANT 
THING, HIS POLICY PRIORITY RIGHT
NOW SHOULD BE DOING WHATEVER HE 
CAN TO AT LEAST MOVE IN THE 
DIRECTION OF THE KINDS OF 
POLICIES THAT WE WANT FOR FULL 
EMPLOYMENT, THAT WE NEED FOR 

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FULL EMPLOYMENT.
AND THAT THE OBSESSIONS OF 
WASHINGTON ABOUT A GRAND BARGAIN
ON THE DEFICIT ARE REALLY PRETTY
MUCH BESIDE THE POINT RIGHT NOW.
THAT, IF GIVEN A CHOICE BETWEEN 
DOING SOMETHING THAT WILL HELP 
THE ECONOMY IN THE NEXT TWO 
YEARS, AND SOMETHING THAT WILL 
ALLEGEDLY SETTLE OUR BUDGET 
PROBLEMS FOR ALL, YOU KNOW, FOR 
ALL TIME, WHICH IS WOULDN'T, 
THAT HE SHOULD GO FOR THE STUFF 
THAT WILL HELP THE ECONOMY NOW. 
THAT HE SHOULD NOT BEND ON THAT 
POINT.
>> I CAN IMAGINE THAT IF YOU 
WERE SITTING ACROSS THE TABLE 
WITH HIM, HE MIGHT REPLY, "LOOK,
KRUGMAN, WE'VE GOT A RECOVERY 
COMING ON.
JOBS ARE BEING CREATED MORE 
STEADILY THAN EVER.
MEASURED UNEMPLOYMENT IS 
FALLING.
HOUSEHOLDS ARE SHAKING OFF THEIR
BURDEN OF DEBT.
I CAN SEE LIGHT AT THE END OF 
THE TUNNEL.
I DON'T THINK THIS IS THE TIME 
TO DO WHAT YOU'RE SAYING."
>> I THINK HE MIGHT HAVE SAID 
THAT TWO, THREE YEARS AGO.
I DON'T THINK THAT PRESIDENT, 
YOU KNOW, WE HAPPEN TO HAVE A 
VERY INTELLIGENT MAN AS 
PRESIDENT.
HE'S FOR REAL.
AND HE DOES UNDERSTAND.
YOU CAN HAVE REAL DISCUSSIONS 
WITH HIM.
AND I THINK HE UNDERSTANDS THAT,

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ALTHOUGH THINGS HAVE IMPROVED 
SOME.
WE ACTUALLY HAVE HAD SOME 
PROGRESS ON THE ECONOMY IN THE 
PAST YEAR.
IT'S A GLACIAL PACE, COMPARED 
WITH THE WAY WE SHOULD BE.
YOU CAN DO THIS VARIOUS WAYS.
BUT IF YOU THINK ABOUT THE 
PLUNGE THAT WE TOOK AND YOU LOOK
AT MEASURES LIKE THE LABOR 
FORCE, A FRACTION OF PRIME AGE 
WORKERS EMPLOYED, WHATEVER, WE 
HAVE MAYBE MADE UP A QUARTER OF 
THE GROUND WE LOST IN THAT GREAT
PLUNGE IN 2008, 2009.
AND IT'LL TAKE YEARS AND YEARS 
TO GET BACK TO ANYTHING THAT 
LOOKS LIKE PROSPERITY AT THIS 
RATE.
>> WHAT MAKES THIS A DEPRESSION?
YOU KNOW, MY GENERATION 
REMEMBERS THE PHOTOGRAPHS OF 
THOSE LONG LINES OF PEOPLE 
LOOKING FOR JOBS, MEN AND WOMEN 
BOTH.
REMEMBERS THE SAD EYES, THE 
HUNGRY STOMACHS.
REMEMBERS THAT MEN WERE BECOMING
SO DESPERATE THEY WERE BECOMING 
MILITANT.
BUT TODAY, EVEN THOUGH YOU SAY 
THE SITUATION, IN TERMS OF 

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JOBLESSNESS, IS LIKE THE 1930S, 
YOU CAN'T OBVIOUSLY, YOU CAN'T 
TRANSPARENTLY LOOK AROUND AND 
SEE THE EVIDENCE OF A 
DEPRESSION.
>> THAT'S RIGHT.
IT'S, AND PARTLY THAT IT'S NOT 
AS BAD.
SO BY MODERN CONCEPTS THE GREAT 
DEPRESSION HAD UNEMPLOYMENT 
RATES THAT WERE AS HIGH AS 
20-SOMETHING PERCENT BY MODERN 
MEASURES.
AND EVEN IN 1937, WHEN THINGS 
HAD IMPROVED, BEFORE WE WENT 
INTO THE SECOND LEG OF THE GREAT
DEPRESSION, IT WAS STILL 
PROBABLY ABOUT A 9% UNEMPLOYMENT
RATE BY MODERN STANDARDS.
AND WE'VE GOT A SEVEN POINT 
SOMETHING, 8%, WHATEVER.
SO THINGS ARE NOT AS BAD.
BUT I THINK A LOT OF IT IS JUST 
THAT THE OPTICS HAVE CHANGED.
>> OPTICS?
>> THE OPTIC, THE MISERY IS 
THERE.
I MEAN, IS THERE ANYBODY, I 
GUESS IF YOU LIVE IN VERY 
RARIFIED CIRCLES YOU DON'T KNOW 
PEOPLE WHO ARE DESPERATE RIGHT 
NOW.
BUT I LIVE IN PRETTY RARIFIED 
CIRCLES AND I DO.
I KNOW, I HAVE RELATIVES, 
FRIENDS PEOPLE I KNOW WHO HAVE, 
MEN MY AGE WHO'VE LOST JOBS AND 
SEE NO PROSPECT OF GETTING 

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ANOTHER JOB AND ARE JUST 
DESPERATELY TRYING TO HANG IN 
THERE UNTIL THEY CAN COLLECT 
THEIR SOCIAL SECURITY AND GET ON
MEDICARE.
THERE ARE YOUNG PEOPLE WHOSE 
LIVES HAVE COLLAPSED.
YOU KNOW, THEY GRADUATE AND 
THERE'S NOTHING THERE.
>> YEAH, YOU MAKE A VERY 
POWERFUL POINT IN HERE OF THE 
IMPACT OF BEING OUT OF WORK NOW 
ON THE LIFETIME CAREER OF A 
YOUNG PERSON WHO HAS NO JOB AT 
THE MOMENT.
>> WE HAVE PRETTY GOOD EVIDENCE 
ON, YOU KNOW, HOW LONG DOES IT 
TAKE TO MAKE UP FOR THE FACT 
THAT YOU HAPPEN TO GRADUATE FROM
COLLEGE INTO A BAD LABOR MARKET.
AND THE ANSWER IS FOREVER.
YOU WILL NEVER RECOVER.
>> HOW SO, WHAT DO YOU MEAN?
>> YOU WILL NEVER GET, YOU'LL 
MISS YEARS GETTING ONTO THE 
CAREER LADDER.
BY THE TIME YOU GET A CHANCE TO 
GET A JOB THAT MAKES ANY SENSE, 
YOU KNOW, THAT MAKES ANY USE OF 
YOUR SKILLS, YOU WILL ALREADY BE
TARRED AS SOMEBODY, "WELL, 
YOU'RE 28-YEARS-OLD AND YOU 
HAVEN'T HELD A RESPONSIBLE 
POSITION?"
"WELL, YEAH, I COULDN'T BECAUSE 
THERE WERE NO JOBS."
IT JUST SHADOWS YOUR WHOLE LIFE.
AND IT'S VERY CLEAR IN THE 
EVIDENCE FROM PAST RECESSIONS, 
WHICH HAVE BEEN NOWHERE NEAR AS 
BAD AS THIS ONE.
THE OTHER THING I THINK I WANT 
TO SAY HERE IS THAT WE HAVE, IN 

English: 
SOME WAYS, MADE THINGS MORE 
CIVILIZED BUT ALSO MORE 
INVISIBLE.
SOMEBODY SAID THAT FOOD STAMPS 
ARE THE SOUP KITCHENS OF THE 
MODERN DEPRESSION.
THAT THERE'RE A LOT OF PEOPLE 
WHO WOULD BE STANDING IN LINE TO
GET THAT SOUP, WHO ARE INSTEAD, 
AND IT'S A GOOD THING, WHO ARE 
INSTEAD GETTING, I GUESS IT'S 
NOW CALLED SNAP, SUPPLEMENTARY 
NUTRITIONAL ASSISTANCE PROGRAM, 
BUT WHO ARE GETTING THOSE DEBIT 
CARDS, AND ARE GETTING ESSENTIAL
FOOD STUFFS.
AND THEY'RE AT THE GROCERY STORE
AND THEY LOOK LIKE ANYBODY ELSE.
BUT THE FACT OF THE MATTER IS 
THEY ARE STILL AS DESPERATE, 
THEY'RE GETTING BY DAY TO DAY 
WITH THE AID OF A TRICKLE OF 
GOVERNMENT AID, JUST LIKE THE 
PEOPLE WHO WERE ON, STANDING IN 
LINE AT THE SOUP KITCHENS IN THE
'30S, BUT THEY'RE NOT VISIBLE.
THEY, WE DON'T HAVE GUYS SELLING
APPLES IN STREET CORNERS PARTLY 
BECAUSE, YOU KNOW, THE CITY 
LICENSING WOULDN'T ALLOW THAT 
ANYMORE.
BUT WE DO HAVE, AGAIN, WE'VE GOT
FOUR MILLION PEOPLE WHO'VE BEEN 
OUT OF WORK FOR MORE THAN A 

Spanish: 
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English: 
YEAR.
THE U.S. SOCIAL SYSTEM IS NOT 
DESIGNED TO TAKE CARE OF 
SOMEBODY WHO'S BEEN OUT OF WORK.
WE HAVE UNEMPLOYMENT INSURANCE 
THAT'S INTENDED TO DEAL WITH 
SHORT SPELLS OF UNEMPLOYMENT.
SO THERE'S AN ENORMOUS AMOUNT OF
MISERY, BUT IT IS MOSTLY HIDDEN.
>> SO THAT'S WHY YOU REFER TO 
IT, EVEN THOUGH THE OPTICS HAVE 
CHANGED, AS A QUOTE "VAST, 
UNNECESSARY CATASTROPHE?"
>> YEAH.
THE AMOUNT OF DAMAGE THAT'S 
BEING DONE IS ENORMOUS.
THE AMOUNT OF SUFFERING OF 
PEOPLE IS ENORMOUS.
AND IF IT ISN'T OUT THERE, 
VISIBLE ON THE STREETS, IF IT'S 
DISPERSED ACROSS A SUBURBAN YOU 
KNOW, IF YOU SEE A HOUSE WITH A 
FOR SALE SIGN THAT'S BEEN 
SITTING THERE FOR A WHILE, YOU 
MAY NOT KNOW THE STORY ABOUT THE
FAMILY THAT WAS DRIVEN FROM ITS 
HOUSE BECAUSE THEY, ONE OR BOTH 
SPOUSES LOST JOBS AND COULDN'T 
FIND OTHERS.
OR, AND THEY WERE FORECLOSED ON.
BUT IT'S A REAL STORY, ALL THE 
SAME.
AND THERE'S LOTS OF THAT GOING 
AROUND.
AND NONE OF THIS NEEDS TO BE 
HAPPENING.

Spanish: 
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English: 
>> AND YOU ARGUE THAT THIS COULD
ACTUALLY BE SOLVED IN TWO YEARS?
>> THAT'S RIGHT.
AND THAT'S NOT A NUMBER PLUCKED 
OUT OF THIN AIR.
THAT'S A GUESS AT HOW LONG IT 
WOULD TAKE TO GET A SERIOUS 
SPENDING PROGRAM GOING.
AND WE COULD ACTUALLY MAKE A LOT
OF DIFFERENCE IN IT EVEN QUICKER
THAN THAT BECAUSE THE FACT OF 
THE MATTER IS, FAR FROM HAVING 
EFFECTIVE JOB CREATION PROGRAM, 
WE'VE ACTUALLY BEEN PULLING 
BACK.
WE'VE SEEN STATE AND LOCAL 
GOVERNMENTS LAY OFF HUNDREDS OF 
THOUSANDS OF SCHOOL TEACHERS.
WE'VE SEEN PUBLIC INVESTMENT IN 
BASIC STUFF LIKE ROAD REPAIR CUT
WAY BACK.
IF WE JUST WENT BACK TO NORMAL 
RATES OF FILLING POTHOLES AND 
NORMAL RATES OF EMPLOYMENT OF 
SCHOOL TEACHERS, THAT COULD BE 
DONE IN MONTHS.
>> YOU WONDER WHY, GIVEN THE 
SUFFERING, CONGRESS AND THE 
WHITE HOUSE HAVEN'T ACTED.
>> WELL, THERE ARE I THINK TWO, 
TWO LEVELS OF OPPOSITION.
AND ONE OF THEM IS JUST RAW 
POLITICS.
WE HAVE A POWERFUL POLITICAL 
MOVEMENT IN THIS COUNTRY THAT 
HAS A LONGSTANDING GOAL OF 

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English: 
ROLLING BACK ALL OF THE SOCIAL 
PROGRAMS, ALL THE SAFETY NET 
THAT WE'VE CREATED.
THEY WANT SMALLER GOVERNMENT.
THEY WANT REDUCED PUBLIC 
SERVICES.
EVEN THE IDEA OF PUBLIC SCHOOLS 
IS VERY MUCH UNDER ATTACK.
THEY WANT IT ALL TO BE SWITCHED 
TO A SYSTEM OF VOUCHERS.
AND THEY SEE THIS, YOU AND I SEE
A DISASTER, THEY SEE AN 
OPPORTUNITY.
HERE WE HAVE CASH STRAPPED STATE
AND LOCAL GOVERNMENT.
GOOD.
FORCED TO CUT BACK IN 
GOVERNMENT.
THEY DON'T WANT TO DO ANYTHING 
THAT WILL MAKE IT EASIER FOR 
THEM TO, FOR GOVERNMENT AS WE 
KNOW IT TO CONTINUE.
THAT MOVEMENT CONTROLS ONE 
POLITICAL PARTY.
AND THAT POLITICAL PARTY 
CONTROLS ONE HOUSE OF CONGRESS.
AND THAT IS ENOUGH TO STAND IN 
THE WAY OF A LOT OF THINGS WE 
OUGHT TO BE DOING.
THEN THERE'S THE SECOND LEVEL, 
WHICH IS THIS ODD COALESCENCE 
OF, I PICKED UP THE PHRASE FROM 
OTHER PEOPLE.
ACTUALLY, FROM THE BLOGGER 
DUNCAN BLACK.
"VERY SERIOUS PEOPLE," CAPITAL 

English: 
V, CAPITAL S, CAPITAL P.
>> YOU'RE ALWAYS WRITING THAT 
THESE VERY SERIOUS PEOPLE.
WHO ARE THEY?
>> YEAH.
THE NOTION THAT SOMEONE, WELL, 
YOU CAN LOOK ARE YOUR RANDOM SET
OF, YOU KNOW ERSKINE BOWLES AND 
ALAN SIMPSON WOULD BE THE 
QUINTESSENTIAL VERY SERIOUS 
PEOPLE.
THE EDITORIAL, PRACTICALLY THE 
WHOLE OP-ED PAGE, NOT ALL OF 
THEM, BUT MOST OF "THE 
WASHINGTON POST."
PEOPLE FOR WHOM THIS, IT'S 
AXIOMATIC THAT THE BUDGET 
DEFICIT IS THE MOST IMPORTANT 
PROBLEM.
AND THAT WHAT WE REALLY, REALLY 
NEED TO DO RIGHT NOW AT A TIME 
OF MASS UNEMPLOYMENT IS WORRY 
ABOUT THE DEBT TO GDP RATIO TEN 
YEARS FROM NOW.
AND IT'S A VERY HARD THING TO 
CRACK, PARTLY BECAUSE IT'S NOT 
ACTUALLY A RATIONAL ARGUMENT.
YOU VERY RARELY, VERY RARELY SEE
ON THE SUNDAY TALK SHOWS, PEOPLE
ASKING, "WHY EXACTLY ARE YOU SO 
CONCERNED ABOUT THE DEFICIT 
RIGHT NOW?"
THAT'S SORT OF A GIVEN.
THAT'S A STARTING POINT.
EVERYBODY SERIOUS UNDERSTANDS 
THAT, EXCEPT THAT IF YOU ASK 
THEM WHY EXACTLY, THEY CAN'T 

Spanish: 
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English: 
GIVE YOU A VERY GOOD ANSWER.
>> WHAT IS THE ANSWER?
>> IT'S PARTLY THAT THIS IS, IT 
SOUNDS SERIOUS.
NEVER YOU KNOW, NEVER 
UNDERESTIMATE THE IMPORTANCE OF 
JUST PLAIN WHAT COMES ACROSS.
START SO IT'S PARTLY JUST IT 
SOUNDS SERIOUS, IT'S THE KIND OF
THING THAT PEOPLE WHO WEAR GOOD 
SUITS ARE LIKELY TO TALK ABOUT.
PARTLY IT IS ACTUALLY, OF 
COURSE, A DELIBERATE PRESSURE 
CAMPAIGN.
>> FOR EXAMPLE, PETE PETERSON, 
NIXON'S SECRETARY OF THE 
COMMERCE, BILLIONAIRE SEVERAL 
TIMES OVER HAS SET UP THIS "FIX 
THE DEBT" CAMPAIGN AND IS SAID 
TO BE PUTTING HALF A BILLION 
DOLLARS INTO TRYING TO INFLUENCE
THE PUBLIC.
>> YEAH, ACTUALLY IT'S NOT JUST 
"FIX THE DEBT," THAT'S JUST THE 
LATEST INCARNATION.
THERE'S ALSO THE COMMITTEE FOR A
RESPONSIBLE FEDERAL BUDGET, 
THERE'S THE NEWSPAPER "THE 
FISCAL TIMES," THERE'S SEVERAL 
OTHERS.
IT'S A WHOLE PORTFOLIO.
THEY ALL ARE PETERSON FOUNDATION

Spanish: 
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MONEY AT THE ROOTS, BUT THEY'RE 
ALL OUT THERE.
AND YEAH, SERIOUS ATTEMPTS TO 
INFLUENCE PUBLIC DEBATE ARE NOT,
BY AND LARGE, A VERY LAVISHLY 
FUNDED ENTERPRISE.
>> BUT IN THIS CASE?
>> BUT IN THIS CASE, YOU'VE GOT 
SO HALF A BILLION DOLLARS, 
$500 MILLION OF SPENDING WITH 
ONE AGENDA IS GOING TO HAVE A 
HUGE IMPACT.
YOU KNOW, POLICY INTELLECTUALS, 
BY AND LARGE COME CHEAP.
A FEW HUNDRED THOUSAND IN 
CONSULTING CONTRACTS COULD DO A 
LOT THERE.
>> DO YOU THINK SOME OF THEM ARE
SERIOUS ABOUT THE DEBT LEADING 
TO A LOSS OF CONFIDENCE ON THE 
PART OF INVESTORS IN FOREIGN 
GOVERNMENTS?
I MEAN, EVEN THREE YEARS AGO 
BARACK OBAMA EXPRESSED CONCERN 
ABOUT THE LONG TERM DEBT AND THE
CONFIDENCE OF PEOPLE IN THE U.S.
GOVERNMENT.
TAKE A LISTEN.
>> THERE MAY BE SOME TAX 
PROVISIONS THAT CAN ENCOURAGE 
BUSINESSES TO HIRE SOONER RATHER

English: 
THAN SITTING ON THE SIDELINES.
SO WE'RE TAKING A LOOK AT THOSE.
I THINK IT IS IMPORTANT, THOUGH,
TO RECOGNIZE THAT IF WE KEEP ON 
ADDING TO THE DEBT, EVEN IN THE 
MIDST OF THIS RECOVERY, THAT AT 
SOME POINT, PEOPLE COULD LOSE 
CONFIDENCE IN THE US ECONOMY IN 
A WAY THAT COULD ACTUALLY LEAD 
TO A DOUBLE-DIP RECESSION.
>> I REMEMBER THAT WELL.
AND AT THE TIME IT WAS GOING ON,
I DO OCCASIONALLY FIND MYSELF IN
MEETINGS WITH VERY SERIOUS 
PEOPLE MYSELF.
I GUESS I AM PERSONALLY ONE NOW 
AND THEN.
THERE WAS THIS WIDESPREAD VIEW 
AMONG PEOPLE, AND NOT ALL OF IT 
VENAL, NOT ALL OF IT 
SELF-INTERESTED, THAT SOMEHOW 
THINGS WERE HANGING BY A THREAD.
THAT ANY DAY NOW WE COULD HAVE A
RUN ON U.S. GOVERNMENT DEBT, 
WHICH WAS WRONG.
BUT, OKAY, I CAN SEE HOW PEOPLE 
COULD FOR A WHILE HAVE BELIEVED 
THAT.
BUT A LOT OF TIME HAS GONE BY 
SINCE THEN.
AND I HOPE THAT AT LEAST SOME 
PEOPLE HAVE LEARNED BETTER.
BUT IT'S AMAZING HOW LITTLE THE 
CONTINUED FAILURE OF THESE 
WARNINGS TO ACTUALLY BE 

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VINDICATED BY ANYTHING HAS -- 
HOW LITTLE OF THAT'S ACTUALLY 
AFFECTED THE DEBATE.
AND THERE'S A SPECIAL ISSUE 
HERE, WHICH I'VE ACTUALLY TRIED 
TO GET ACROSS NOW, AND I FIND 
THAT I GET RESISTANCE EVEN FROM 
PEOPLE WHO ARE, I WOULD'VE HOPED
WERE MORE FLEXIBLE.
IT'S EVEN VERY HARD TO TELL THE 
STORY ABOUT HOW THIS LOSS OF 
CONFIDENCE IS SUPPOSED TO WORK.
I MEAN, IT'S THE UNITED STATES 
IS NOT LIKE A EUROPEAN COUNTRY 
THAT DOESN'T HAVE ITS OWN 
CURRENCY.
THE U.S. GOVERNMENT CANNOT RUN 
OUT OF CASH UNLESS CONGRESS 
PREVENTS IT, YOU KNOW CREATES AN
ENTIRELY SELF-INFLICTED SHORTAGE
THROUGH THE DEBT CEILING.
HOW IS IT EXACTLY THAT WE'RE 
SUPPOSED TO HAVE THIS CRISIS 
THAT LEADS TO A DOUBLE DIP 
RECESSION?
IT REALLY DOESN'T EVEN MAKE 
SENSE AS A STORY.
AND YET IT IS ONE OF THOSE 
THINGS THAT PEOPLE SAY AND BY 
AND LARGE, ARE NOT CONTRADICTED 
ON.
>> WE KEEP HEARING FROM THE 
RIGHT THAT WE'RE HERE ON THE 
PATH TO BECOMING GREECE, AND YOU

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English: 
SAY THAT THAT'S IMPOSSIBLE?
>> YEAH.
WE, EVEN IF, SUPPOSE THAT PEOPLE
DECIDED, INVESTORS DECIDED THEY 
DON'T LIKE U.S.
GOVERNMENT DEBT, IT CAN'T CAUSE 
A FUNDING CRISIS BECAUSE THE 
U.S. GOVERNMENT PRINTS MONEY.
IT'S EVEN HARD TO SEE HOW IT CAN
DRIVE UP INTEREST RATES BECAUSE 
THE FED SETS INTEREST RATES AT 
THE SHORT END, AND WHY EXACTLY 
WOULD THE LONG RUN RATES GO UP 
IF YOU DON'T EXPECT THE FED TO 
RAISE RATES?
IT COULD LEAD TO A WEAKENING OF 
THE U.S. DOLLAR AGAINST OTHER 
CURRENCIES.
BUT THAT'S ACTUALLY A GOOD 
THING.
THAT WOULD MAKE U.S. EXPORTS 
MORE COMPETITIVE.
THAT WOULD ACTUALLY BOOST OUR 
ECONOMY.
SO IT'S, ACTUALLY IMPOSSIBLE TO 
TELL THAT STORY, AS FAR AS I CAN
TELL.
AND YET, IT'S NOT, AGAIN WE'RE 
MOSTLY NOT IN THE REALM OF 
RATIONAL DISCOURSE HERE.
IT'S ONE OF THOSE THINGS WHERE 
PEOPLE SAY IT, THEY HEAR OTHER 
PEOPLE SAYING IT.
AND THEY DON'T ACTUALLY TRY TO 
WORK IT THROUGH.
AND IT PLAYS A BIG ROLE, I'M 
SORRY, IN INFLUENCING OUR PUBLIC
DISCUSSION.
INTERESTINGLY, PEOPLE WHO 
ACTUALLY HAVE MONEY ON THE LINE,
THAT IS PEOPLE WHO ARE BUYING 

English: 
BONDS, JUST KEEP ON DRIVING U.S.
INTEREST RATES EVER LOWER.
SO ACTUAL INVESTORS DON'T CARE 
ABOUT THIS STUFF.
BUT OUR POLITICAL CLASS DOES.
>> WHY DON'T THEY CARE?
>> BECAUSE FIRST OF ALL, BECAUSE
I THINK AT SOME LEVEL INVESTORS 
UNDERSTAND WHAT I'M SAYING.
THAT IT'S VERY DIFFICULT TO SEE 
ANY REASON WHY THE FED WOULD 
RAISE SHORT TERM RATES, WHICH IS
CONTROLS FOR YEARS TO COME.
AND IN THAT CASE, LONG TERM DEBT
EVEN AT A PRETTY LOW INTEREST 
RATE IS A REASONABLE INVESTMENT.
HARD TO SEE HOW A FINANCIAL 
CRISIS ACTUALLY DEVELOPS AGAINST
THE UNITED STATES, U.S. 
GOVERNMENT, WHICH IS IN THIS YOU
KNOW, HAS ALL THE LUXURY OF 
PRINTING ITS OWN CURRENCY.
AND INVESTMENTS ARE ALWAYS ABOUT
COMPARED TO WHAT, RIGHT?
IF YOU IF YOU SAY, "WELL, THE 
U.S. IS A DANGEROUS PLACE TO 
INVEST," I DON'T THINK IT IS, 
BUT PARTICULARLY WHERE IS THE 
SAFE PLACE THAT PEOPLE ARE GOING
TO INVEST?
YOU KNOW, WHAT IS THIS OTHER 
ASSET THAT THEY'RE GOING TO BUY?
AND IT DOESN'T REALLY EXIST.
>> YOU SAY WE'RE IN A LIQUIDITY 

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TRAP.
I DON'T UNDERSTAND THAT.
>> BASICALLY, A LIQUIDITY TRAP 
IS WE'RE, BACK UP FOR A SECOND.
HOW DO WE NORMALLY DEAL WITH A 
RECESSION?
HOW DO WE DEAL WITH A GARDEN 
VARIETY RECESSION LIKE THE 
2001 AFTER THE DOT COM BUBBLE 
BURST, OR 1991?
THE ANSWER IS THAT BASICALLY THE
FED, THE FEDERAL RESERVE GOES 
OUT THERE AND PRINTS MONEY.
OR STRICTLY SPEAKING CREDITS 
BANKS, YOU KNOW, CREDIT BANKS 
WITH THAT EXTRA RESERVES AND 
BUYS TREASURY BILLS.
AND THAT NORMALLY STARTS A CHAIN
OF EVENTS WHERE, OKAY, THE BANKS
HAVE GOT EXTRA RESERVES, THEY 
LEND THEM OUT.
THEY, THAT DRIVES DOWN INTEREST 
RATES, LEADS TO A WHOLE SERIES 
OF EVENTS, WHICH ENDS UP WITH 
THE ECONOMY PICKING UP SOME 
STEAM.
AND WHAT THE FED IS DOING IN 
THAT CASE, IT'S SUPPLYING EXTRA 
LIQUIDITY TO THE SYSTEM.
>> BUT NOW WE'RE IN A SITUATION,
WE'RE AWASH IN LIQUIDITY.
WE'VE ALREADY GOT, I MEAN, 
INTEREST RATES ARE ZERO.
AND SO ANYBODY YOU SAY, "WELL, 
WE'RE GOING TO GIVE YOU SOME 
MORE CASH AND YOU'RE GOING TO GO

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English: 
LEND IT OUT," AND BANKS, 
EVERYBODY'S GOING TO SAY, "WELL,
WHY WOULD I WANT TO DO THAT?
I MEAN, INTEREST RATES ARE ZERO.
IT'S, THERE'S NO PARTICULAR 
INCENTIVE FOR ME NOT TO JUST SIT
ON THIS CASH."
SO YOU POUR THIS EXTRA LIQUIDITY
INTO THE ECONOMY AND IT JUST 
SITS THERE.
AND THAT'S THE LIQUIDITY TRAP.
IT'S A SITUATION IN WHICH THE 
ORDINARY MONETARY POLICY THING 
DOESN'T WORK.
A SIDE CONSEQUENCE OF THAT IS IT
ALSO MEANS THAT IF THE 
GOVERNMENT GOES OUT AND BORROWS 
MORE, IT'S NOT GOING TO DRIVE UP
INTEREST RATES BECAUSE THERE'S 
ALL THIS CASH SITTING OUT THERE 
LOOKING FOR A PLACE TO GO.
SO THE RULES CHANGE.
AND LIQUIDITY TRAPS ARE REALLY 
RARE.
I MEAN, WE HAD ONE IN THE 1930S 
AND WE'VE HAD ANOTHER ONE SINCE 
2008.
AND ASIDE FROM THAT, WE HAD ONE 
IN JAPAN IN THE 1990S, AND 
THAT'S ABOUT IT.
BUT WHEN THEY HAPPEN, BOY, THEY 
CHANGE ALL THE RULES.
YOU FIND YOURSELF IN A DIFFERENT
UNIVERSE FOR ECONOMICS.
>> AND THEY'RE NOT PUTTING 
PEOPLE TO WORK.
>> THAT'S RIGHT.
A LIQUIDITY TRAP IS A SITUATION 
WHERE THE ECONOMY CAN STAY 

Spanish: 
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English: 
DEPRESSED AND THERE'S NO 
NATURAL, CERTAINLY NO FAST 
NATURAL ROUTE TO RECOVERY.
>> SO WHY WOULD YOU BE CALLING 
FOR MORE SPENDING, GIVEN THAT 
REALITY?
>> OH, BUT THAT'S THE POINT, 
THEN THE EQUATION, WHAT WE'RE 
LOOKING FOR ALWAYS, THE PROBLEM.
BASICALLY ALL RECESSIONS ARE A 
PROBLEM OF NOT ENOUGH SPENDING 
IN THE ECONOMY.
THERE ARE A FEW EXCEPTIONS, 
BASICALLY, WHAT WE CALL A 
RECESSION IS, A CASE WHERE 
THERE'S NOT ENOUGH SPENDING, AND
SO THERE'S NOT ENOUGH JOBS.
NORMALLY, HOWEVER, YOU CAN DEAL 
WITH THAT IN A VERY NARROW 
TECHNOCRATIC FASHION, WHICH IS 
THAT THE FEDERAL RESERVE CUTS 
INTEREST RATES AND STUFF 
HAPPENS.
NOW THAT DOESN'T WORK BECAUSE 
WE'RE IN A LIQUIDITY TRAP.
AND SO, THIS IS WHERE YOU SAY, 
"OKAY, WE NEED SOMETHING ELSE 
THAT'S GOING TO WORK, AND IT'S 
VERY HARD TO COME UP WITH 
ANYTHING THAT IS CLEARLY 
EFFECTIVE, OTHER THAN HAVING THE
GOVERNMENT GO OUT AND SPEND THE 
MONEY THAT THE PRIVATE SECTOR 
WON'T."
AND THIS IS WHY IT, YOU KNOW, 
THIS IS, MONETARY POLICY IS THE 
ASPIRIN OF CONOMIC AILMENTS.
TAKE A COUPLE WHENEVER YOU'RE 
FEELING THAT YOU HAVE A 
HEADACHE.
NOW WE HAD THE OVER THE COUNTER 
REMEDY DOESN'T WORK AND WE NEED 

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English: 
THE, THE HEAVY DUTY PRESCRIPTION
MEDICINE, AND THAT'S WHAT I'M 
ARGUING FOR.
>> INTERESTING YOU SAY THAT 
BECAUSE I TRIED TO CONDENSE TO 
ONE SENTENCE THE MESSAGE AND 
ARGUMENT OF YOUR BOOK.
AND I WROTE DOWN, "THE ANSWER IS
SIMPLE.
INCREASE SPENDING AND BOOST 
CONSUMPTION BECAUSE THE 
FUNDAMENTAL PROBLEM AT THE ROOT 
OF THIS CRISIS IS A LACK OF 
DEMAND."
>> THAT'S IT.
NOW YOU CAN SAY THAT ALL 
CRISES', OR MOST CRISES' ANYWAY,
MOST RECESSIONS ARE A LACK OF 
DEMAND.
BUT THIS IS AN INTRACTABLE LACK 
OF DEMAND.
AND SO, WE, WE NEED WE NEED 
GOVERNMENT ACTION OF A TYPE THAT
MOST, AT ANY POINT DURING THE 
PAST 70 YEARS, EXCEPT THIS ONE, 
I WOULD HAVE SAID, "NO, LET'S 
LEAVE IT UP TO MY FORMER 
COLLEAGUE, BEN BERNANKE."
BUT HE CAN'T DO THE JOB RIGHT 
NOW.
AND SO, WE NEED THE GOVERNMENT.
>> AND IF THE PRESIDENT WERE 
SITTING ACROSS THE TABLE FROM 
YOU AND ASKING, "WHERE WOULD YOU
SPEND THIS MONEY, PAUL?"
WHAT WOULD YOUR ANSWER BE?
>> RIGHT NOW IT'S EASY BECAUSE 
RIGHT NOW WE CAN DO IT VERY 

Spanish: 
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English: 
QUICKLY SIMPLY BY RESTORING THE 
SPENDING CUTS THAT HAVE ALREADY 
HAPPENED.
IF YOU GAVE ME UNLIMITED CARTE 
BLANCHE IN TERMS OF SPENDING, I 
WOULD WANT TO GO BEYOND THAT.
I'D WANT TO TALK ABOUT AND 
PRETTY STRAIGHTFORWARD THINGS, 
EVEN SO.
WE HAVE YOU KNOW, FIX THE SEWER 
LINES.
I MEAN, WE HAVE, WE HAVE A LOT 
OF, A LOT OF BASIC 
INFRASTRUCTURE NEEDS THAT ARE 
WORTH DOING IN ANY CASE.
BUT RIGHT NOW YOU CAN GET A 
QUICK BOOST JUST BY REHIRING 
THOSE SCHOOL TEACHERS AND 
FILLING THOSE POTHOLES.
WE ARE SOMETHING LIKE 
$300 BILLION A YEAR SHORT OF THE
SPENDING THAT WE SHOULD BE 
UNDERTAKING JUST FOR THE NORMAL 
BUSINESS OF GOVERNMENT.
AND THAT EXTRA $300 BILLION A 
YEAR WOULD BE A REALLY BIG DEAL 
FOR THE ECONOMY IF WE COULD DO 
IT RIGHT NOW.
>> WOULD IT BRING US TO WHAT YOU
CALL FULL EMPLOYMENT?
>> PROBABLY NOT.
PROBABLY BRING US DOWN TO AN 
UNEMPLOYMENT RATE THAT WAS MORE 
IN THE 6% TO 6.5%.
>> HOW MUCH WOULD IT ADD TO THE 
LONG TERM DEFICIT?
>> ACTUALLY, NOTHING TO THE LONG
TERM DEFICIT, OR ALMOST NOTHING 
BECAUSE THIS WOULD NOT BE A 
PERMANENT SET OF MEASURES.

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THIS WOULD BE SOMETHING WE'D DO 
NOW.
IT WOULD ADD HEADLINE SUPPOSE WE
SPEND $300 BILLION A YEAR RIGHT 
NOW, ADDITIONAL.
THAT'S NOT $300 BILLION A YEAR 
IN EXTRA DEBT BECAUSE IT'S, THE 
ECONOMY WILL BE STRONGER, WHICH 
MEANS MORE REVENUE, WHICH MEANS 
LESS SPENDING ON UNEMPLOYMENT 
BENEFITS.
SO IT'S PROBABLY UNDER 
$200 BILLION A YEAR IN IMMEDIATE
BORROWING.
AND THERE'S A LOT OF REASON TO 
THINK THAT WOULD ACTUALLY, 
HAVING A STRONGER ECONOMY NOW 
WOULD ACTUALLY STRENGTHEN THE 
ECONOMY IN THE LONG RUN AS WELL.
OR PUT IT THIS WAY, THE OTHER 
WAY, THAT HAVING A REALLY WEAK 
ECONOMY NOW IS DAMAGING OUR 
FUTURE AND NOT JUST OUR PRESENT.
THINK ABOUT ALL COLLEGE 
GRADUATES WHO WILL NEVER GET THE
JOB THEY ALL SHOULD GET.
THAT'S NOT JUST HARM FOR THEM, 
THAT'S A FUTURE ECONOMY THAT IS 
WEAKER THAN IT SHOULD'VE BEEN 
BECAUSE IT'S WASTING A LOT OF 
OUR TALENT.
AND THERE'S A PRETTY GOOD CASE, 
ACTUALLY A PRETTY STRONG CASE, 
THAT IF YOU THINK ABOUT THE LONG
RUN FISCAL IMPACT, SPENDING MORE
RIGHT NOW IS ACTUALLY POSITIVE 
EVEN IN TERMS OF THE LONG RUN 
BUDGET SITUATION BECAUSE A 
STRONGER FUTURE ECONOMY WILL 

English: 
MEAN STRONGER REVENUE DOWN THE 
PIKE.
AND THE DEBT WE INCUR RIGHT NOW,
WELL, YOU KNOW, THE INTEREST 
RATE ON U.S. LONG TERM DEBT IS 
UNDER 2%.
INFLATION PROTECTED U.S. LONG 
TERM DEBT HAS A NEGATIVE 
INTEREST RATE.
THERE'S ALMOST NO, THERE'S EVEN,
ON PURELY FISCAL TERMS, IT'S 
ARGUABLE THAT WE SHOULD BE 
SPENDING MORE JUST TO STRENGTHEN
OUR LONG RUN BUDGESIT POTION.
>> IS THERE A LIMIT TO HOW MUCH 
WE CAN KEEP BORROWING?
>> THERE MAY BE, ALTHOUGH ALL 
THAT WE KNOW, ALL OF THE 
EVIDENCE SAYS IT'S A LOT FURTHER
AWAY THAN CONVENTIONAL WISDOM 
HAS IT.
I MEAN, LIKE A LOT OF PEOPLE, 
INCLUDING BEN BERNANKE, I GOT 
INTO ALL OF THESE THINGS BY 
LOOKING AT JAPAN IN THE '90S.
AND JAPAN FAMOUSLY HAS RUN 
DEFICITS YEAR AFTER YEAR.
AND IT HAS A LEVEL OF DEBT THAT 
IS ABOUT TWICE WHAT WE'VE GOT AS
A SHARE OF GDP.
AND PEOPLE HAVE BEEN PREDICTING 

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FINANCIAL CATASTROPHE FOR JAPAN 
YEAR AFTER YEAR FOR TEN YEARS OR
MORE.
THEY'VE HAD DOWNGRADES.
THEIR DEBT WAS DOWNGRADED IN 
2002 BY THE MAJOR RATING 
AGENCIES.
AND EVERYBODY WHO BELIEVED THOSE
WARNINGS AND EVERYBODY -- HAS 
LOST A LOT OF MONEY.
SO IT TURNS OUT THAT IF YOU'RE 
AN ADVANCED COUNTRY WITH ITS OWN
CURRENCY AND A REASONABLY STABLE
GOVERNMENT, YOU HAVE A LOT OF 
RUNNING ROOM ON THESE THINGS.
SO AM I WORRIED?
YEAH, I MEAN, I AM WORRIED ABOUT
THE U.S. FISCAL SITUATION 
20 YEARS FROM NOW.
WE DO HAVE A PROBLEM OF HEALTH 
CARE COSTS AND SO ON.
BUT, YOU KNOW, I'M WORRIED ABOUT
A LOT OF OTHER THINGS 20 YEARS 
AS WELL.
I'M NOT SURE THAT EVEN IF YOU 
TAKE THAT LONG TERM PERSPECTIVE,
THAT THE BUDGET SHOULD BE AT THE
TOP OF YOUR LIST OF THINGS TO BE
AFRAID OF.
I'M A LOT MORE AFRAID, ACTUALLY,
OF THE GREAT -- THE ENTIRE 
SOUTHWEST OF THE UNITED STATES 
TURNING INTO A DUSTBOWL BECAUSE 
OF CLIMATE CHANGE, RIGHT?
SO SURE, BY ALL MEANS, LET'S 
THINK ABOUT IT.
BUT IT SHOULD NOT BE DOMINATING 
OUR POLICY DISCUSSION NOW.

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>> AS YOU KNOW, WE'RE HEADING 
TOWARD ANOTHER KNOCKDOWN, DRAG 
OUT, SHOOT IT OUT AT THE O.K. 
CORRAL FIGHT OVER RAISING THE 
DEBT CEILING IN A FEW WEEKS.
PRESIDENT OBAMA HAS ALREADY SAID
HE WILL NOT NEGOTIATE ON RAISING
THE DEBT CEILING.
HERE'S WHAT HE SAID.
>> I WILL NOT HAVE ANOTHER 
DEBATE WITH THIS CONGRESS OVER 
WHETHER OR NOT THEY SHOULD PAY 
THE BILLS THAT THEY'VE ALREADY 
RACKED UP THROUGH THE LAWS THAT 
THEY PASSED.
LET ME REPEAT.
WE CAN'T NOT PAY BILLS THAT 
WE'VE ALREADY INCURRED.
>> AND HERE'S THE RESPONSE HE 
GOT THE NEXT DAY FROM REPUBLICAN
SENATOR PAT TOOMEY OF 
PENNSYLVANIA.
>> OUR OPPORTUNITY HERE IS ON 
THE DEBT CEILING.
THE PRESIDENT'S MADE IT VERY 
CLEAR; HE DOESN'T EVEN WANT TO 
HAVE A DISCUSSION ABOUT IT, 
BECAUSE HE KNOWS THIS IS WHERE 
WE HAVE LEVERAGE.
WE REPUBLICANS NEED TO BE 
WILLING TO TOLERATE A TEMPORARY 
PARTIAL GOVERNMENT SHUTDOWN, 
WHICH IS WHAT THAT COULD MEAN, 
AND INSIST THAT WE GET OFF THE 
ROAD TO GREECE, BECAUSE THAT'S 
THE ROAD WE'RE ON RIGHT NOW.
WE ONLY CAN SOLVE THIS PROBLEM 
BY GETTING SPENDING UNDER 
CONTROL AND RESTRUCTURING THE 
ENTITLEMENT PROGRAMS.
THERE IS NO TAX SOLUTION TO 
THIS.
IT'S A SPENDING SOLUTION.
AND IF THIS PRESIDENT DOESN'T 
WANT TO GO THERE, WE'RE GOING TO

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HAVE TO FORCE IT AND WE'RE GOING
TO HAVE TO FORCE IT OVER THE 
DEBT CEILING.
>> THIS IS A GUY WALKING INTO A 
CROWDED ROOM AND SAYING, "I HAVE
A BOMB STRAPPED TO MY CHEST, AND
IF YOU DON'T GIVE ME WHAT I 
WANT, I'M GOING TO BLOW UP 
EVERYBODY, INCLUDING MYSELF."
AND IS THAT A CREDIBLE THREAT?
WELL, THERE'RE SOME PRETTY CRAZY
PEOPLE THERE.
AND IT MIGHT BE THAT THEY'RE 
WILLING TO DO IT.
BUT BY THE SAME TOKEN, OBAMA 
CANNOT GET INTO THIS BECAUSE 
THEN YOU HAVE GOVERNMENT IN THE 
HANDS OF -- NEVER MIND THE 
CONSTITUTION, THE GOVERNMENT IS 
RUN BY WHOEVER IS MOST WILLING 
TO WREAK HAVOC WITH OUR WHOLE 
SYSTEM OF -- WITH THE NATION.
WE CANNOT ALLOW OURSELVES TO BE 
BLACKMAILED INTO SPENDING CUTS, 
PARTLY BECAUSE BLACKMAIL SHOULD 
NOT BE PART OF HOW THE U.S. 
OPERATES, AND PARTLY BECAUSE 
SPENDING CUTS WOULD BE 
DISASTROUS RIGHT NOW.
SO OBAMA'S RIGHT TO SAY HE 
DOESN'T NEGOTIATE.
I'D LIKE TO KNOW EXACTLY WHAT HE
WILL DO IF IT TURNS OUT THAT 
THERE IS NOT A QUORUM OF SANE 
PEOPLE IN THE REPUBLICAN PARTY.
>> IF YOU WERE SECRETARY OF THE 
TREASURY, WHAT WOULD YOU 
RECOMMEND HE DO?

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>> I'M FOR WHATEVER GIMMICK 
WORKS.
SO THE MOST DIGNIFIED IS TO SAY,
"LOOK, THIS IS RIDICULOUS.
YOU ARE GIVING THE PRESIDENT -- 
EFFECTIVELY CONGRESS IS GIVING 
THE PRESIDENT INCONSISTENT 
INSTRUCTIONS.
IT'S PASSED BILLS MANDATING 
SPENDING.
IT'S PASSED BILLS THAT GIVE US 
INADEQUATE REVENUE TO COVER THAT
SPENDING WHICH REQUIRES THAT WE 
BORROW.
AND THEN YOU'RE SAYING, 'I CAN'T
BORROW.'
WELL, YOU KNOW.
AND MY READING OF THE 
CONSTITUTION IS I HAVE TO OBEY 
THE DUE LEGISLATIVE PROCESS AND 
GO AHEAD AND DO THIS BORROWING 
TO MEET THE BILLS THAT WE'VE 
ALREADY INCURRED, AS THE 
PRESIDENT SAID."
THAT'S SORT OF WHAT PEOPLE ARE 
CALLING THE FOURTEENTH AMENDMENT
SOLUTION, THAT BASICALLY IT'S 
UNCONSTITUTIONAL TO GIVE INTO 
THIS DEBT LIMIT THING.
I GUESS THAT'S YOUR BEST 
SOLUTION.
THEY DON'T THINK THAT THAT'S 
WORKABLE THEN YOU GO FOR 
ANYTHING AT HAND.
AND THERE IS THIS WONDERFUL BIT 
ABOUT THE PLATINUM COIN.
>> I DON'T UNDERSTAND THAT.
>> IN A 1997 ACT AMENDED IN 
2000 WHICH COVERS ISSUANCE OF 
COINS AND STUFF LIKE THAT.

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THERE'S ONE CLAUSE THAT SAYS 
THAT THE SECRETARY OF THE 
TREASURY SHALL HAVE THE RIGHT TO
MINT AND ISSUE PLATINUM COINS IN
ANY DENOMINATION THAT HE SO 
CHOOSES. CLEARLY, THE INTENT WAS
COMMEMORATIVE COINS.
YOU'RE GOING TO STRIKE A COIN TO
COMMEMORATE WHATEVER, MOTHER'S 
DAY.
BUT IT DOESN'T SAY THAT.
AND AS FAR AS LEGAL SCHOLARS 
HAVE BEEN ABLE TO MAKE OUT, 
THERE'S NO REASON WHY THE 
SECRETARY OF THE TREASURY CAN'T 
ORDER THE MINTING OF A COIN THAT
SAYS THIS COIN IS WORTH 
$1 TRILLION, WHICH NEED BEAR NO 
RELATIONSHIP TO THE ACTUAL VALUE
OF THE PLATINUM IN IT.
IT HAS TO BE PLATINUM, HOWEVER.
AND WALK THAT COIN OVER TO THE 
FEDERAL RESERVE.
DEPOSIT IT IN AND HAVE THE 
FEDERAL RESERVE CREATE A BANK 
ACCOUNT FOR THE FEDERAL 
GOVERNMENT BASED ON THAT COIN OF
WHATEVER.
IT COULD BE ONE COIN FOR 
$1 TRILLION, IT COULD BE A 
THOUSAND COINS OF A BILLION 
EACH, WHATEVER.
AND THEN THE GOVERNMENT CAN PAY 
ITS BILLS BY DRAWING ON THAT 
BANK ACCOUNT.
AND IT'S CRAZY, IT'S AN 

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ACCOUNTING GIMMICK, BUT THEN 
THIS WHOLE THING IS CRAZY. AND 
IF THAT LETS YOU BYPASS THIS 
NONSENSE ABOUT THE DEBT LIMIT, 
FINE.
THERE ARE OTHER ROUTES.
I MEAN, IT'S POSSIBLE THE 
GOVERNMENT COULD ISSUE COUPONS 
THAT LOOK LIKE DEBT AND FUNCTION
LIKE DEBT, BUT SAYS, "NO, 
THEY'RE NOT DEBT."
THEY COULD SAY, "THIS -- WE HAVE
NO LEGAL OBLIGATION TO PAY THIS.
WE ARE, IN FACT, GOING TO PAY 
IT, BUT WE HAVE NO LEGAL 
OBLIGATION TO PAY IT."
THAT'S ANOTHER ALTERNATIVE.
THEY COULD--
>> THIS IS WHAT YOU'D CALL--
>> I'D CALL IT MORAL OBLIGATION 
COUPONS.
>> MORAL OBLIGATION BECAUSE THE 
GOVERNMENT IS MORALLY OBLIGATED 
TO PAY THAT AT SOME POINT, 
RIGHT?
THAT'S WHAT--
>> THAT'S RIGHT.
>> YOU MEAN BY THAT?
>> YEAH.
SO, BUT IT'S A MORAL OBLIGATION.
WE CAN SAY IT'S NOT A LEGAL 
OBLIGATION SO THAT -- YOU KNOW, 
ALL OF THIS IS OF COURSE, THIS 
IS ALL WORD GAMES.
BUT THEN THAT'S NOT TO PLAY 
GAMES WOULD BE IRRESPONSIBLE AT 
THIS POINT.
>> SO YOU WOULD ENCOURAGE, IF 
YOU WERE SECRETARY OF THE 
TREASURY, THE PRESIDENT TO CALL 
THE REPUBLICAN BLUFF?
>> YES.
I THINK, NOW, I THINK YOU 
PROBABLY DON'T COMMIT TO DOING 
THAT UNTIL WE ACTUALLY HIT THE 
LIMIT.
YOU SAY WHAT THE PRESIDENT IS 
NOW SAYING.
THERE IS NO ALTERNATIVE BUT FOR 

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CONGRESS TO DO THE RESPONSIBLE 
THING AND RAISE THIS DEBT LIMIT.
BUT YOU DON'T RULE OUT THESE 
ALTERNATIVES AND YOU MAKE SURE 
THAT THE REPUBLICANS KNOW YOU 
HAVEN'T RULED IT OUT SO THAT IT 
STANDS READY, AND IN FACT IT'S 
WHAT YOU DO.
HOSTAGE NEGOTIATIONS, YOU HAVE 
TO -- YOU HAVE TO HAVE SOME 
CREDIBLE ALTERNATIVE TO GIVING 
INTO THE HOSTAGE TAKERS DEMANDS,
AND THAT'S WHERE WE ARE RIGHT 
NOW.
>> YOU'VE CONFESSED BEFORE TO AN
OCCASIONAL SINKING FEELING THAT 
YOU CAN COUNT ON PRESIDENT OBAMA
TO WIMP OUT.
AND THAT'S YOUR TERM, "TO WIMP 
OUT" WHEN IT MATTERS.
>> YEAH.
THE 2011 DEBT CEILING FIGHT WAS 
DEEPLY DISHEARTENING BECAUSE HE 
SHOULD NOT HAVE NEGOTIATED ON 
THE DEBT CEILING AT ALL.
SAME ARGUMENT AS NOW.
THIS IS NOT HOW YOU DO IT.
IT IS NOT A LEGITIMATE TACTIC OF
POLITICS TO THREATEN TO DESTROY 
THE COUNTRY IF YOU DON'T GET 
WHAT YOU WANT.
AND PEOPLE WHO MAKE THAT DEMAND 

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HAVE NO STANDING.
YOU SHOULD NOT GIVE THEM 
ANYTHING.
BUT HE DID.
HE ACTUALLY DID, IN FACT, MAKE 
SOME SIGNIFICANT CONCESSIONS ON 
SPENDING, IN ORDER TO GET A RISE
IN THE DEBT LIMIT.
HE BLINKED A LITTLE BIT ON THE 
FISCAL CLIFF.
NOT AS BADLY AS SOME OF US 
FEARED, BUT HE DID NOT, IN FACT,
HOLD OUT FOR THE FULL REVENUE 
PACKAGE.
AND SO, SOME OF US ARE WORRIED.
NOW, I HAVE TO SAY, I MEAN, I'M 
READING MY OWN STAGE DIRECTIONS 
HERE.
PEOPLE LIKE ME ARE, IN PART, 
GOING AFTER HIM, WARNING ABOUT 
THE WIMPING OUT THING IN ORDER 
TO TURN THAT INTO A SELF-DENYING
PROPHESY.
THAT THE IDEA IS TO MAKE A 
SITUATION WHERE THE PRESIDENT 
WILL BE AWARE WHAT PEOPLE WILL 
SAY ABOUT HIM IF HE DOES GIVE IN
HERE SO IT DOESN'T HAPPEN.
>> MORE THAN MANY ECONOMISTS I 
READ, YOU KEEP POLITICS AT 
CENTER STAGE IN WRITING ABOUT 
THE ECONOMY.
THOSE ARE TWO DIFFERENT 
NARRATIVES IN ONE SENSE.
AND YET, YOU INTERTWINE THEM AS 

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YOU KEEP WRITING AND ANALYZING 
OUR SITUATION TODAY.
WHY IS THAT?
>> I THINK WE'VE REACHED A 
MOMENT IN OUR HISTORY WHERE THE 
EXTREME NATURE OF OUR POLITICS 
AND THE EXTREME NATURE OF THE 
ECONOMIC SITUATION HAS 
CONVERGED.
YOU KNOW, HERE WE ARE, ON ONE 
SIDE WE HAVE A 
ONCE-IN-THREE-GENERATIONS 
ECONOMIC CRISIS.
RIGHT, THIS IS -- STARTING IN 
2008, WE'VE BEEN EXPERIENCING 
THE CRISIS THAT HAS HAUNTED THE 
NIGHTMARES OF MACRO ECONOMISTS 
SINCE THE 1930S.
AND HERE IT IS AGAIN.
AND THIS IS AS DRAMATIC AS IT 
GETS.
IT'S A SITUATION WHERE YOU 
REALLY HAVE TO THROW OUT THE 
BUSINESS AS USUAL.
AND ON THE OTHER SIDE, YOU HAVE 
THIS EXTREME POLITICAL 
SITUATION, WHERE A RADICAL 

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MOVEMENT HAS TAKEN OVER ONE OF 
OUR TWO GREAT POLITICAL PARTIES.
AND DOES NOT -- DOES NOT 
PRACTICE POLITICS AS USUAL.
ANYONE WHO TALKS ABOUT, "WELL, 
WE SHOULD MAKE DEALS THE WAY WE 
USED TO.
WHAT ABOUT THE TAX REFORM OF 
1986?
WHY CAN'T WE DO THAT AGAIN?"
AND THE ANSWER IS, WELL, THAT 
MIGHT MAKE SENSE TO YOU IF 
YOU'VE BEEN IN A BUDDHIST 
MONASTERY FOR THE PAST 20 YEARS.
BUT THAT'S NOT TODAY'S 
REPUBLICAN PARTY.
YOU CAN'T MAKE THAT KIND OF DEAL
WITH THEM.
AND SO, HOW CAN YOU WRITE ABOUT 
THE ECONOMICS?
IF YOU WRITE ABOUT ECONOMICS 
RIGHT NOW AND IMPLICITLY ADOPT 
THE PERSPECTIVE, "WELL, LET'S 
GET REASONABLE PEOPLE TOGETHER 
IN WASHINGTON AND REACH A 
SOLUTION HERE," YOU KNOW, YOU'RE
PAYING NO ATTENTION TO REALITY.
AND, OF COURSE, IF YOU TALK 
ABOUT THE POLITICS WITHOUT 
TALKING ABOUT THE ECONOMICS, 
YOU'RE ALSO MISSING EVERYTHING.
SO HOW COULD I NOT BE WRITING 
ABOUT BOTH?
>> YOU BEGIN ONE CHAPTER OF YOUR
BOOK WITH A QUOTE FROM YOUR 
INTELLECTUAL MENTOR, 
JOHN MAYNARD KEYNES, WHO WRITES 
IN HIS MASTERPIECE "THE GENERAL 
THEORY OF EMPLOYMENT, INTEREST 
AND MONEY," "THE OUTSTANDING 
FAULTS OF THE ECONOMIC SOCIETY 
IN WHICH WE LIVE --" AND THIS 

English: 
WAS THE ‘20S AND '30S, "ARE ITS 
FAILURE TO PROVIDE FOR FULL 
EMPLOYMENT.
AND ITS ARBITRARY AND 
INEQUITABLE DISTRIBUTION OF 
WEALTH AND INCOMES."
WELL, WE DON'T HAVE FULL 
EMPLOYMENT TODAY AND WE HAVE 
GROSS INEQUALITY IN INCOME.
SO WHICH IS FAILING US, 
CAPITALISM OR DEMOCRACY OR BOTH?
>> I GUESS I HAVE A -- HERE'S 
WHERE I GUESS I AM AN OPTIMIST, 
WHICH IS THAT I BELIEVE THAT YOU
CAN FIX BOTH CAPITALISM AND 
DEMOCRACY.
NOT TO PRODUCE A UTOPIA, BUT TO 
PRODUCE A WORKABLE SOLUTION.
AND THE REASON I BELIEVE THAT IS
WE DID THAT FOR A PRETTY LONG 
STRETCH.
WESTERN ECONOMIES IN 1933 AND 
WESTERN SOCIETIES IN 1933 WERE 
IN A PRETTY HORRIBLE STATE.
MASS UNEMPLOYMENT, GROSS 

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INEQUALITY, COLLAPSE OF 
DEMOCRACY IN A NUMBER OF PLACES.
AND IN THE END, BY THE TIME 
1950 HAD ROLLED AROUND, WE HAD 
MANAGED TO CREATE A MORE 
EQUITABLE, NOT TOTALLY EQUAL, 
BUT A MORE EQUITABLE SOCIETY, 
WITH REASONABLY FULL EMPLOYMENT.
AND THAT SOLUTION LASTED FOR 
HALF A CENTURY, WHICH IS ALL YOU
CAN EVER EXPECT IN HUMAN 
AFFAIRS.
NOTHING IS PERMANENT.
SO I DO BELIEVE THAT WE CAN DO 
THAT AGAIN.
SO IT'S NOT THAT WE HAVE TO 
DITCH CAPITALISM.
I THINK A MARKET ECONOMY IS -- 
THIS IS PROBABLY CHURCHILL, 
RIGHT, IT'S THE WORST SOLUTION 
EXCEPT FOR ALL THE OTHERS.
AND DEMOCRACY IS THE WORST 
SYSTEM, EXCEPT FOR ALL THE 
OTHERS.
BUT IT'S GOING TO TAKE SOME 
WORK.
IT'S NOT -- THE IDEA THAT YOU 
CAN JUST LET MARKETS RIP AND 
THAT YOU DON'T NEED TO WORRY 
ABOUT THE STATE OF YOUR 
DEMOCRACY, THAT'S WRONG.
BUT I'M ACTUALLY, IN A WAY, A 
CONSERVATIVE ON THESE THINGS.
BUT A CONSERVATIVE, NOT -- WHAT 
WE NOW CALL CONSERVATIVES ARE 
ACTUALLY RADICALS WHO WANT TO 
TEAR DOWN THE STRUCTURE THAT WE 
BUILT, STARTING WITH FDR.
AND I WANT TO REBUILD SOMETHING 
LIKE THAT, A MODERNIZED, A 
21ST-CENTURY VERSION OF THAT 

English: 
SYSTEM.
BUT IT'S NOT OUT OF REACH.
IT'S NOT SOMETHING THAT CAN'T BE
DONE.
>> PAUL KRUGMAN, "END THIS 
DEPRESSION NOW."
THANK YOU VERY MUCH FOR THIS 
CONVERSATION.
>> THANK YOU.
>> THERE'S A CHAPTER CALLED "THE
SECOND GILDED AGE" IN 
PAUL KRUGMAN'S BOOK WHERE HE 
DESCRIBES THE EXTRAORDINARY RISE
IN WEALTH AND POWER OF THE VERY 
RICH DURING THIS ERA OF 
UNREGULATED GREED.
SINCE RONALD REAGAN'S ELECTION 
IN 1980, THE TOP 1% OF AMERICANS
HAVE SEEN THEIR INCOMES INCREASE
BY 275%. BUT AFTER ACCOUNTING 
FOR INFLATION, THE TYPICAL 
HOURLY WAGE FOR A WORKER HAS 
INCREASED JUST $1.23 CENTS.
BIG MONEY, AS KRUGMAN WRITES IN 
THIS BOOK, BUYS BIG INFLUENCE.
AND THAT'S WHY THE FINANCIERS OF

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WALL STREET NEVER TRULY 
EXPERIENCE REGIME CHANGE -- 
BECAUSE THEIR CASH BRINGS BOTH 
PARTIES TO HEEL.
SO, THE POLICIES THAT GOT US 
WHERE WE ARE TODAY -- IN THIS 
BIG DITCH OF CHRONIC 
DEPRESSION -- HAVE DONE LITTLE 
FOR MOST, BUT HAVE BEEN VERY 
GOOD TO A FEW AT THE TOP.
BUT THOSE AT THE TOP ARE NOT 
SATISFIED WITH HAVING ONLY MOST 
OF IT -- THEY WANT IT ALL.
AND IF HE WERE WRITING HIS BOOK 
TODAY, KRUGMAN COULD FIND PLENTY
OF EVIDENCE IN THE DEAL THAT 
SUPPOSEDLY KEPT US FROM GOING 
OVER THE FISCAL CLIFF.
BEHIND CLOSED DOORS, CONGRESS 
LARDED IT WITH CORPORATE TAX 
BREAKS WORTH TENS OF BILLIONS OF
DOLLARS -- EVERYTHING FROM TAX 
CREDITS FOR NASCAR RACING AND 
THE RAILROADS TO SUBSIDIES FOR 
HOLLYWOOD.
REBATES FOR THE RUM INDUSTRY AND
LOOPHOLES FOR OFF-SHORE 
FINANCING THAT COULD HELP GIANT 
MULTINATIONALS LIKE GENERAL 
ELECTRIC AVOID BILLIONS OF 
DOLLARS IN CORPORATE INCOME 
TAXES.
WRITING IN "THE WASHINGTON 
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SAYS MANY OF THESE EXPENSIVE 
GIVEAWAYS WERE "SPAWNED BY A WEB
OF LOBBYISTS, DONORS AND 
STAFFERS SURROUNDING DEMOCRATIC 
SEN. MAX BAUCUS OF MONTANA" 
CHAIRMAN OF THE SENATE FINANCE 
COMMITTEE.
AS WE KNOW FROM THE OBAMACARE 
FIGHT, BAUCUS IS A CONNOISSEUR 
OF REVOLVING DOOR CORRUPTION.
"PICK ANY ONE OF THE 
SPECIAL-INTEREST TAX BREAKS 
EXTENDED BY THE CLIFF DEAL," 
CARNEY WROTE, "AND YOU'RE LIKELY
TO FIND A FORMER BAUCUS AIDE WHO
LOBBIED FOR IT ON BEHALF OF A 
LARGE CORPORATION OR INDUSTRY 
ORGANIZATION."
EVEN THE PRO-BUSINESS "WALL 
STREET JOURNAL" WAS APPALLED.
THEY CALLED IT A "CRONY 
CAPITALIST BLOWOUT."
CEO'S AND LOBBYISTS WERE 
TRIPPING OVER THEMSELVES AS THEY
TRAIPSED UP AND DOWN 
PENNSYLVANIA AVENUE BETWEEN 
CONGRESS AND THE WHITE HOUSE, 
PRIVATELY PROTECTING THEIR 
INTERESTS AS THEY PUBLICLY URGE 
AUSTERITY ON EVERYONE ELSE.
HERE'S LLOYD BLANKFEIN, CEO AND 
CHAIR OF THE GLOBAL INVESTMENT 
GIANT GOLDMAN SACHS, WHEN ASKED 
BY CBS NEWS' SCOTT PELLEY ABOUT 
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DEFICIT.
>> YOU'RE GOING TO HAVE TO 
UNDOUBTEDLY DO SOMETHING TO 
LOWER PEOPLE'S EXPECTATIONS THE 
ENTITLEMENTS AND WHAT PEOPLE 
THINK THAT THEY'RE GOING TO GET,
BECAUSE IT'S NOT GOING TO 
THEY'RE NOT GOING TO GET IT.
>> SOCIAL SECURITY, MEDICARE, 
MEDICAID?
>> SOME THINGS.
AND YOU KNOW, YOU CAN GO BACK 
AND YOU CAN LOOK AT HISTORY OF 
THESE THINGS, AND SOCIAL 
SECURITY WASN'T DEVISED TO BE A 
SYSTEM THAT SUPPORTED YOU FOR A 
30-YEAR RETIREMENT AFTER A 
25-YEAR CAREER.
ENTITLEMENTS HAVE TO BE SLOWED 
DOWN AND CONTAINED.
>> BECAUSE WE CAN'T AFFORD THEM 
GOING FORWARD?
>> BECAUSE WE CAN'T AFFORD THEM.
>> AH, YES, BUT GOLDMAN MAKES 
SURE THEIR ENTITLEMENTS AREN'T 
TOUCHED.
HERE'S THE STORY. AFTER 9/11, 
CONGRESS CREATED TAX-EXEMPT 
LIBERTY ZONE BONDS TO HELP SMALL
BUSINESSES REBUILD NEAR GROUND 
ZERO.
TURNS OUT GOLDMAN'S FRIENDS IN 
HIGH PLACES CONSIDER IT A SMALL 
BUSINESS, TOO, ALTHOUGH IT MADE 
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LAST YEAR.
AS THE FISCAL CLIFF FIASCO WAS 
PLAYING OUT OVER NEW YEAR'S EVE,
FASTER THAN THE BALL DROPPED IN 
TIMES SQUARE, A DEAL WAS STRUCK 
IN WASHINGTON THAT WILL EXTEND 
THE SUBSIDIES FOR GOLDMAN'S 
FANCY NEW HEADQUARTERS IN LOWER 
MANHATTAN.
IN THEIR 43 STORIES OF GLASS AND
STEEL, AND A FOOTPRINT TWO CITY 
BLOCKS LONG, GOLDMAN SACHS 
REIGNS SUPREME, THANKS TO A 
SYSTEM RIGGED BY AND FOR THE 
POWERFUL RICH.
AND THEN THIS.
JUST HOURS BEFORE THE FISCAL 
CLIFF DEAL'S HIGHER INDIVIDUAL 
TAX RATES KICKED IN, GOLDMAN 
HANDED LLOYD BLANKFEIN AND HIS 
TOP LIEUTENANTS "A TOTAL OF 
$65 MILLION IN RESTRICTED 
STOCK," BONUSES AWARDED A MONTH 
EARLIER THAN USUAL SO THEY COULD
ALL BEAT THE COMING TAX HIKE 
FROM WHICH THEY HAVE BEEN SPARED
FOR MORE THAN 10 LUCRATIVE 
YEARS.
IT WILL NOT SURPRISE YOU, I AM 
SURE, TO LEARN THAT 
"CORPORATIONS ANNOUNCED MORE 

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SPECIAL DIVIDENDS LAST MONTH 
THAN IN ANY OTHER DECEMBER SINCE
AT LEAST 1955."
DOING EVERYTHING THEY CAN TO 
AVOID HELPING PAY OFF THE DEBT 
THEIR CEOS HAVE BEEN URGING 
CONGRESS TO CUT.
AS FOR WORKING PEOPLE, TOUGH 
LUCK.
BECAUSE THE FISCAL CLIFF DEAL 
ENDS THE CUT IN PAYROLL TAXES, 
THE AVERAGE WORKER THIS YEAR 
WILL TAKE HOME ABOUT A THOUSAND 
DOLLARS LESS.
♪ HEY WHEN PAUL GETS REALLY 
BUMMED OUT THAT'S WHEN I ♪
♪ GET SCARED BUT WHEN PAUL SAYS 
THERE'S A GLINT OF HOME ♪
♪ I FEEL WE'VE ALL BEEN SPARED ♪
>> THAT'S IS FOR THIS WEEK.
AT OUR WEBSITE BILLMOYERS.COM 
YOU CAN FIND MUCH MORE ON MONEY 
IN POLITICS.
INCLUDING AN ILLUSTRATED GUIDE 
COMPARING THE GILDED AGE OF THE 
19TH CENTURY TO OUR GILDED AGE 
TODAY.
PLUTOCRATS, THEN AND NOW.
THAT'S AT BILLMOYERS.COM.
I'LL SEE YOU THERE AND I'LL SEE 
YOU HERE, NEXT TIME.

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