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Paul Krugman Talks to Bill Moyers About How to Speed Recovery -- And Why He Doesn't Want to Run the Treasury

"I probably have more influence doing what I do now than I would if I were inside trying to do the court power games that come with any White House...," Krugman said on "Moyers & Company."

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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.

BILL MOYERS: Which is?

PAUL KRUGMAN: 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--

BILL MOYERS: Building harbors, building all kinds of--

PAUL KRUGMAN: And camps, training camps, there are a lot--

BILL MOYERS: --training--

PAUL KRUGMAN: The first thing that happened actually was a lot of construction spending on the giant new camps that the Army 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.

BILL MOYERS: 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?

PAUL KRUGMAN: 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 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.

BILL MOYERS: 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."

PAUL KRUGMAN: 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, 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.

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