CBS Gives Krugman Platform to Bash Austerity, Call for More Spending

The full transcript of Charlie Rose and Gayle King's interview of Paul Krugman, which aired at the bottom of the 8 am Eastern hour of Monday's CBS This Morning:

CHARLIE ROSE: And there is New York Times columnist Paul Krugman. He is holding nothing back in his latest book. The title of the book is called, 'End This Depression Now!' The dedication reads, 'To the unemployed who deserve better.'

Paul Krugman, winner of the 2008 Nobel Prize for economics, is with us. Welcome.

PAUL KRUGMAN, AUTHOR, END THIS DEPRESSION NOW!: Hi there.

[CBS News Graphic: "It's The Economy: Nobel Prize Winner On What Needs To Be Done"]

ROSE: You- there's lots to talk about here. First of all, speak to the dedication. I mean, you think that American policymakers have failed the unemployed and have failed the economy.

KRUGMAN: We have. This is- there's enormous human damage being done to this economy and it's all unnecessary. We have the knowledge. We have the tools. If we could get our politicians to move and do the right thing, we could be out of this very fast.

ROSE: Okay. The right thing is?

KRUGMAN: The right thing is, actually, to spend more. Right now, you know, we have a long-term budget problem, but now is not the time to be slashing. Now is not the time to be laying off school teachers. Now is the time to be doing public works, to be rehiring those school teachers, to get this economy moving again.

ROSE: And the alternative is austerity- is saying we have to attack the debt first- the debt and deficit- and you are now arguing that if you look at what's happened in Europe, they have tried that and it has failed and made things worse.

KRUGMAN: Yes. You look at European countries that have done the austerity; they have mass unemployment- you know, 25 percent now in Spain- and they're not even making much progress on the deficit because the economy shrinks, revenues shrink, the long-term growth prospects fall off. So, no- austerity later; austerity when the economy has recovered, but not now-

ROSE: As you know-

GAYLE KING: But you also-

ROSE: Go ahead.

KING: But you also say, Paul, that we've been here before. In your book, you talk about what happened back in the 1930s. We've been here before, and why aren't we taking the lessons from that?

KRUGMAN: There's a lot of things going on here. There's ideology; there's interest groups; there's people who are afraid that if you say the government could do anything good ever, then it will, you know, take over the world. But that's the point. I think we need to say, look, this- if all the arguments people make about why we can't have a recovery now are the same arguments people were making in the '30s. And then, we started spending to get ready for World War II and, all of sudden, the Depression was over, and we could do that again. We could do it on a moment's notice.

[CBS News Graphic: "US Debt Clock.org: $15,692,402,582,134 [and rising]"]

ROSE: But here's the other point you make: Ben Bernanke is the man who understood the Depression; understood what happened to Japan; and he's now in charge of the Fed and he's a fellow former professor at Princeton. And you're now saying what? That he's wrong, wrong, wrong?

KRUGMAN: Well, funny thing is, I can quote Ben Bernanke as a professor about what the Japanese should have been doing when they did a dress rehearsal for our crisis and it applies perfectly to Ben Bernanke right now. Now, I think there's mixture. He's under political pressure from the right; he's probably been somewhat taken over-

ROSE: I thought the Fed was immune from political pressure.

KRUGMAN: Yeah, right, sure. (King laughs) But I'll say a little bit: he's been assimilated by the Borg; that is, you know, the Fed has an institute-

ROSE: The blog?

KRUGMAN: The Borg; the Borg, as on Star Trek. The Fed has an institutional culture that makes it reluctant to be adventurous, but he needs to remember this-

ROSE: What would you want the Fed to do now?

KRUGMAN: First of all, more of the stuff that it's done some of, but not enough of- of the quantitative easing. But it also needs to say, look, we're not that concerned about inflation. If- tell us, you know, five percent, six percent is a problem; but three percent, four percent is not, and we're willing- in fact, would like to see a little bit of inflation to get this economy moving- change the expectations, help us along in getting out of this slump.

KING: But you say that it could take seven years if we keep going the way we're going-

KRUGMAN: That's right. We're-

KING: And if we follow your advice, it would take-

KRUGMAN: Eighteen months, two years.

KING: So why aren't people listening to you, Paul Krugman? I love that President Obama, in 'Rolling Stone'- did you see that he called you one of the smartest economic reporters? Did you see that?

KRUGMAN: Yeah- I'm sorry to say, one of? (King laughs) No, but look, there's a lot of practices to overcome-

ROSE: Very good line, Paul.

KRUGMAN: And- no, Obama is a smart guy, and I think- I actually know that a lot of people around him actually share my views- not perhaps 100 percent- but they face political opposition. But also, they face a lack of boldness- a lack of audacity, you might say-

KING: Yeah, yeah. That's what you say-

KRUGMAN: And what really we need here is audacity.

ROSE: But then, who's failing there? If a lot of people around the President share your views, then who doesn't share your views around the President who has more influence than you or the people around him who agree with you?

KRUGMAN: Well, I think his political team actually let him down. They kept on talking about what-

ROSE: You think the political team is deciding economic policy for the President?

KRUGMAN: Of course- they're certainly putting limits on what can be done. Look, last fall, the political team apparently was very dubious. He announced a policy that wasn't as bold as what I want, but bolder than people expected. The political team is very dubious. They say, people get nervous because it will [cost] too much money, and it turned out it was a political winner. So I think the political team has been wrong on this.

ROSE: Do you believe Romney has a better idea?

KRUGMAN: No. I mean, what Romney is saying- let's do exactly what we did under the Bush administration, and this time, hope for different results. He's saying, let's do exactly what they're doing in Ireland, which has led to 15 percent unemployment and 30 percent youth unemployment, and that will lead to great results here. Now, Romney is- I mean, he's going to make Herbert Hoover look good by comparison.

KING: So are you optimistic? You- I'm curious- first, Paul, if you're optimistic; and number two, in your book he says,  Charlie, that if you have a choice between despair and hope, you always choose hope because nothing lasts forever except for red wine-

KRUGMAN: Red wine on a white couch-

KING: I'm curious about how you know that, number one. I'm curious, how do you know that, Paul?

KRUGMAN: There have been incidents. (Rose laughs)

KING: Okay, there have been incidents. So are you optimistic as we sit here today?

KRUGMAN: I think I'm- lets put it this way. There- things are never over. We fumbled this, but-

KING: It's not too late?

KRUGMAN: It's never too late. I've learned a lot, and I've been a columnist now for a long time, and no story is ever over. And the things you think are politically impossible right now can suddenly turn into being politically inevitable a year from now. So, the thing is to keep on hammering on this-

ROSE: What might be politically inevitable a year from now?

KRUGMAN: That we actually do something about unemployment; that we actually take a look and say, hey, you know, this is not tolerable-

[CBS News Graphic: "Unemployment Rate: Jan 2009: 7.8%; March 2012: 8.2%; Source: Bureau of Labor Statistics"]

ROSE: But do you think that anything is going to change in terms of stimulating the economy in the next two years?

KRUGMAN: It's a lot- the- right now, with the actual-

ROSE: They couldn't even do that, Paul, when the President came in, in terms of stimulating to the level that you wanted to, and- when the President had a majority in both houses.

KRUGMAN: Well, but the thing is, a lot of water's under the bridge, and we have a lot of lessons out there. You look at what's happening in Europe and you say, we just learned that austerity is not the answer. And, in a lot of ways technically, it's also easier, because the big problem now is not to have a new stimulus, but simply to reverse those cuts at the state level.

ROSE: Quickly, does what happens in Europe-and is continuing to happen, especially looking at Spain- threaten the United States economy?

KRUGMAN: Some; not as much as people think, because we mostly sell to ourselves. Even now, we don't sell that much to Europe. But it's certainly not good. I would like to see prosperity in Europe for a lot of reasons, including the benefits to us.

KING: I have a feeling, Paul Krugman, they might take your call if you called up the White House and said, hey, guys, I've got an idea.

KRUGMAN: I talk to them sometimes.

KING: Okay. (laughs) Of course, you do.

ROSE: To the President?

KRUGMAN: Sometimes.

ROSE: All right. And to Ben Bernanke?

KRUGMAN: Not for a long time-

KING: Yeah, I was wondering. (Rose laughs)

KRUGMAN: Maybe not ever again.

KING: Yeah, I'm thinking Ben may not be taking your call-

ROSE: Really?

KRUGMAN: Who knows- I don't know. He's probably not too happy.

KING: I'm thinking he's a little annoyed with you right now.

KRUGMAN: It's an intervention on his behalf-

KING: Just a guess-

ROSE: An intervention?

KRUGMAN: Yes-

ROSE: The chairman of the Fed needs an intervention?

KRUGMAN: On policy, yes.
                                   
ROSE: (laughs) Paul Krugman, thank you. 'End This Depression Now!' is for sale.

— Matthew Balan is a news analyst at the Media Research Center. You can follow him on Twitter here.