President Obama and the GOP face off on the sequester

>>> i am prepared, eager, and anxious to do a big deal , do a big package that ends this governance by crisis where every two weeks or every two months or every six months we are threatening this hard-won recovery.

>> the latest crisis faced in washington is the sequester, a package of drastic spending cuts, which congress seems to have forgotten they actually voted for. congress now dreads the sequester they voted for. president obama has offered john boehner a way out of sequester hell, a package that involves less dramatic spending cuts and elimination through the reduction of tax loopholes.

>> they recognize that the sequester is a bad idea, but what they suggested is that the only way to replace it now is for us to cut social security , cut medicare, and not close a single loophole, not raise any additional revenue from the wealthiest americans or corporations that have a lot of lawyers and accountants who are able to maneuver and manage and work and game the system. and i have to tell you, if that's an argument that they want to have before the court of public opinion, that is an argument i'm more than willing to engage in.

>> joining me now is noble prize winning economist paul krugman . he's a professor of economics at princeton university and author of the book, "end this depression now" which is now available in paperback. professor krugman, you know what i do, i take notes. i'm going to be over here taking notes. i want to get your reaction to what the president said today about his eagerness for a big deal with republicans and what are the possibilities there?

>> well, okay. i believe there is no possibility.

>> exactly what i thought.

>> and i hope that that is his plan, to sound reasonable and say, i'm ready --

>> he's done that in the past.

>> that's right.

>> done that thing, hey, i'm ready to do business, knowing that the nuts wouldn't do business.

>> well, here's a question. sometimes in 2011 i'm afraid he was actually sincere and he had us all terrified. but right now i do believe, i hope but i believe it's political posturing, that this is his way of saying, i'm a grownup. the reality is that we should do nothing. the best thing to do right now is to kick the can down the road. we should not be having any spending cuts right now. close loop tax loopholes, fine, if we can do it. but the sequester is not serving any loophole purpose.

>> with these cuts written into law, what happens -- if we do nothing, then we are going to have these spending cuts.

>> so it's not a good thing. now, there is -- it's kind of important to make the distinction. the debt ceiling was scary as hell. we didn't know what would happen. if the united states stopped honoring its debts even for a day, who knew what would happen to the world financial system . this time if it goes moont, it's not the end of the world but it's big. this is a substantial spending cut in a depressed economy. this is exactly the wrong time to have fiscal austerity of any kind and the defense spending cuts are job destroyers, just like anything else. so not -- this is not what we want to see happen. if it all goes through, it's a pretty significant -- it's enough to push us is certainly into rising unemployment, possibly even back into recession.

>> i want to listen to something that john boehner said about how we have handled deficits over the years. let's listen to this.

>> at some point, washington has to deal with its spending problem. now, i've watched them kick this can down the road 22 years that i've been here. i've had enough of it. it's time to act.

>> that is -- i'm trying to think of a word other than lie. kick the can down the road? we had a big tax increase in 1993 with president clinton along with big spending cuts.

>> right.

>> it was a deficit reduction package that worked. they continued to do more deficit reducing package with newt gingrich on the spending side throughout the decade and we're on our way to a surplus.

>> that's right. i've been calling it the undecade, the 1990s has been written out of their record. they would have you believe that it was always the way it was under reagan and then bush.

>> why don't they just say, leave off the clinton tax increase, which helped a lot, and just claim they did it for spending cuts?

>> because if they do, if they admit that something nice happened in the '90s, they have to say, what happened after 2000 . because by making it everybody's fault, everybody is to blame, they make it nobody is to blame which means they themselves is not to blame. a lot of sen tur rift have adopted this theory, too. the fact of the matter is, there are distinct periods of responsibility and irresponsibility.

>> there is this constant lie that you hear and it's taken as conventional wisdom. reagan went along with the tax increases in exchange for the spending cuts but we never got the spending cuts. yes, we did.

>> yes.

>> and we did indeed legislate half spending cuts in that bill. clinton did. half of it was taxation and half was real spending cuts.

>> if you go back to when congress agrees to spending cuts, they actually happen. if you look under reagan , domestic discretionary spending was squeezed a lot. it's not as if nothing happened. there are a lot of things that the u.s. government was doing in the 1980 that it was no longer doing in 1990 . this is all -- it's all a story. it's about social security . we did a big social security reform package that included spending cuts by raising the retirement age back in 1985 . so this notion -- it's a mythical history where nothing works except basically destroying the major safety net programs and it serves a purpose but it's not true.

>> the -- back when the president took office and the economy was clearly in crisis and something had to be done, they went for a stimulus package and there were two main themes about the stimulus package . one was, we have to do this. the other was an attack that was filled with junk. the third was, this doesn't work at all. there was one voice, exactly one voice out there saying, it's not enough. you have to do more. you were ridiculed for saying that. the president actually singled you out, i remember, in a press conference by name, saying i don't agree with him. have you gotten any apologies from the people who were absolutely wrong?

>> no. i wasn't alone but i was certainly the only person --

>> you were on the microphone.

>> that's right. and -- no. look, i've been in this business now for quite a while and nobody ever admits that they were wrong about anything. that's just the way the world works. i it sure looks right. i wish i hadn't been right. this was a once in three generation crisis and we met it it with a program that was better than no program but way inadequate. that was obvious in january 2009 .

>> don't we have enough evidence now in this era of austerity and other countries to say to the president and others in washington , okay, here is how the austerity programs have worked.

>> yes.

>> elsewhere. that shows us what we should do?

>> yeah. sometimes i say what we've been doing is performing unethical experiments on human beings and every place that austerity has been applied, there has been a slump. some places worse than others. whether it's ireland, greece, britain, it has had the adverse impact that people like me said it would. now, i think the white house does actually get this. at least the people in the white house who talk to me get it. they have made a decision, right or wrong, that the president is not going to use his bully bull pit to change their minds about macroeconomics. boy have we gotten this totally wrong. we've lost all of the lessons of history and we did it all wrong in this crisis.

>> and it actually isn't that hard. the history on this is not that complex to have a reasonable mastery of it for political purposes.

>> no. this is econ 101 stuff.

>> yeah.

>> it's been amazing, though. people -- policy -- people with what i sometimes call very serious people -- i stole that phrase -- they believe what they want to believe. so they threw out all of the lessons of history, everything in the textbooks to believe in this stuff that cutting deficits is expansionary and how the deficit isn't an imminent threat even though the government can borrow at 2% interest rate and the result is if they didn't done that, we would more or less employment right now.

>> paul krugman , i would love to talk to you all night but i have to go to commercial so this program stays solvent. thank you very much, paul.

>> thank you.

>>> coming up in the rewrite, we will see a moving speech by a member of the british parliament in favor of legalizing same-sex marriage in the house of commons . and oscar wilde is also in tonight's rewrite. i wish my