Rodriguez’s discussion with Krugman was preceded by a fawning report by correspondent Dean Reynolds on Obama’s economic plan: "Well, the incoming administration is making it abundantly clear that it plans an active multi-billion dollar approach to kick-starting the economy. As one top economic adviser to Barack Obama put it, the era of dithering is over." Reynolds continued by declaring: "...with the actions taken so far to stem the tide proving to be totally ineffective, the incoming administration is setting the table for a long struggle to make things right."
Reynolds also looked at Obama’s economic team: "Leading the effort to get things headed in a new direction will be Timothy Geithner, current president of the Federal Reserve Bank of New York...And working with him will be a former treasury secretary, Lawrence Summers." Later, Krugman gave a glowing endorsement of both men: "They're both terrific -- terrifically smart, terrifically forceful guys...it's great to have the best people on board. That's the one thing that's really encouraging right now."
Near the end of his report, Reynolds made Great Depression comparisons: "Congress will be presented an ambitious plan costing hundreds of billions of dollars to create over the next two years more than 2 million new jobs. Including public works employment similar to the New Deal of Franklin Roosevelt." Krugman made similar comparisons: "...it's not depression, but it's depression economics. We're having the kinds of problems that we had during the 1930s and that's why we're talking about a new WPA. We're talking about having to take some of the solutions that we thought we didn't ever have to use again, but here we are."
Here is the full transcript of the segment:
7:00AM TEASE:
HARRY SMITH: Breaking news. Another day, another bailout. This time, the federal government comes to the rescue of banking giant Citigroup.
MARK ZANDI: Citigroup is too big to fail. It's a large global financial institution. If it were to fail it would take the rest of the financial system, what's left of it, with it.
SMITH: Yet another hurdle for the president-elect and his economic team, set to be unveiled today.
7:01AM TEASE:
MAGGIE RODRIGUEZ: Also coming up this morning, we'll talk economy. We're awaiting a news conference from President-elect Obama. He will announce his economic team today. We could also have an announcement about a potential bailout for Citigroup. This morning we'll talk about how the markets may react to both of these huge developments.
7:04AM SEGMENT:
HARRY SMITH: President-elect Barack Obama is expected to announce his economic team later today. CBS News correspondent Dean Reynolds is in Chicago with more on that. Good morning, Dean.
DEAN REYNOLDS: Good morning, Harry. Well, the incoming administration is making it abundantly clear that it plans an active multi-billion dollar approach to kick-starting the economy. As one top economic adviser to Barack Obama put it, the era of dithering is over. With the stock market wobbling, with more than a million job losses this year alone, and with the actions taken so far to stem the tide proving to be totally ineffective, the incoming administration is setting the table for a long struggle to make things right.
AUSTAN GOOLSBEE: This is as big an economic crisis as we've faced in 75 years.
DAVID AXELROD: We've lost 1.3 million jobs already this year. The -- the unemployment claims last month were the highest in 16 years. And it looks like it could get worse before it gets better.
REYNOLDS: Leading the effort to get things headed in a new direction will be Timothy Geithner, current president of the Federal Reserve Bank of New York. 47 Years old, Geithner will be announced today as the new treasury secretary. And working with him will be a former treasury secretary, Lawrence Summers held the job under Bill Clinton. And, today, will be introduced as the chairman of the National Economic Council.
LARRY SUMMERS: I would hope that next year, we will start to see a turn.
REYNOLDS: But, first, Congress will be presented an ambitious plan costing hundreds of billions of dollars to create over the next two years more than 2 million new jobs. Including public works employment similar to the New Deal of Franklin Roosevelt. Bridge and road building, School repairs and alternative energy projects, as the president-elect explained over the weekend.
BARACK OBAMA: But it will be a two-year nationwide effort to jump-start job creation in America and lay the foundation for a strong and growing economy.
REYNOLDS: The hope is that the Congress will take up this plan shortly after taking office in January and there's a consensus forming that the new president will have no time to waste. Harry?
SMITH: Dean Reynolds, live in Chicago this morning, thanks so much. Maggie.
MAGGIE RODRIGUEZ: Thanks a lot, Harry. Joining us right now is Paul Krugman, a professor of economics at Princeton University a columnist for the New York Times and author of 'The Return of Depression Economics and the Crisis of 2008.' Good morning to you, Paul.
PAUL KRUGMAN: Good morning.
RODRIGUEZ: That's a pretty dire headline.
KRUGMAN: Well, you know, it's not depression, but it's depression economics. We're having the kinds of problems that we had during the 1930s and that's why we're talking about a new WPA. We're talking about having to take some of the solutions that we thought we didn't ever have to use again, but here we are.
RODRIGUEZ: Like-
KRUGMAN: Pretty dire stuff.
RODRIGUEZ: Like bailing out Citigroup, one of the largest and once strongest financial institutions in this country. Do you think that this bailout is well structured? Are the taxpayers getting a fair deal here?
KRUGMAN: First read on it, no. It's -- most of the people who've looked at it, you know, in the small hours of this morning, have said this is a lot of taxpayer risk in return for not much. It looks like a very sweet deal for Citigroup management, very sweet deal for Citigroup shareholders, to the extent they have anything left. Not very good for the taxpayer. This was not good.
RODRIGUEZ: Okay, so other bailouts have done nothing to boost consumer confidence. This one, you say, is not well structured. Why do it?
KRUGMAN: Well, you know, things could be worse. You know, that's been the moral of this crisis, things can always be worse and they've been getting worse. But if Citigroup had not been bailed out, then the whole financial system could collapse. If we hadn't had these other bailouts, things could be much worse even than they are. So it's what hasn't happened, not what has, that's the justification. So we had to do this, but we should've done it better.
RODRIGUEZ: We have a man who's been working closely with Hank Paulson on these bailouts, coming in as the new treasury secretary, Tim Geithner. We also have Lawrence Summers to head the economic council. We heard their resumes individually and they're very good. Do you think they'll make a good team, though?
KRUGMAN: That's going to be interesting. They're both terrific -- terrifically smart, terrifically forceful guys. You wonder a little bit about how it's going to work with two terrifically smart, terrifically forceful guys. Geithner was Summer's protegee, now they're going to be, sort of, holding equal status. It' s going to be interesting to see how the dynamics of that works out. But look, it's great to have the best people on board. That's the one thing that's really encouraging right now.
RODRIGUEZ: What about the $500 billion economic stimulus plan that President-elect Obama is planning? Do you think it's realistic to get that done in two years?
KRUGMAN: I hope it can get done faster. My -- the back of my envelope says we need $600 billion next year alone, so I'm actually worried that this plan may be too small. I mean this is an enormous crisis, you've got to hit it with an enormous stimulus to buck the economy up. I'm still worrying that they're going to be a little bit short, because you just have to put all your notions of what is prudent aside. Being cautious is actually a very foolish thing right now.
RODRIGUEZ: Alright, Paul Krugman, thank you so much for your insight.
KRUGMAN: Thanks so much.
