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The Rachel Maddow Show, Transcript 05/01/12

Guests: Steve Clemons, Paul Krugman

RACHEL MADDOW, MSNBC ANCHOR: Good evening. Thank you. Thanks to you at home for staying with us for the next hour, on what has turned out to be a surprising and historic day. This is one of those rare days where the daily schedule put out by the White House about the whereabouts of the president of the United States turned out to be a deliberate fabrication, because for security reasons the president today made an overseas trip under the veil of secrecy. It is always dramatic when this happens, but it is, of course, not precedented. In moderns, in fact, this is essentially standard operating procedure now for presidents visiting America`s various war zones. Shortly after the 2008 election in which Barack Obama was elected president -- so after the election but before the new president had been sworn in, in December of 2008, then still President George W. Bush took one of these surprise trips, unannounced trips to Baghdad. It was December 14th, 2008. That`s when this happened. (BEGIN VIDEO CLIP) (CROSS TALK) GEORGE W. BUSH, FORMER PRESIDENT OF THE UNITED STATES: Yes. Everybody calm down for a minute. First of all, thank you for apologizing on behalf of the Iraqi people. It doesn`t bother me. If you want the facts, it`s a size 10 shoe that he threw. (END VIDEO CLIP) MADDOW: Boy, if you were not surprised enough to find out that the president had, surprise, gone to Iraq unexpectedly, the president having a shoe hurled at him once he was in Iraq was definitely a surprise that day. When you look at the official transcript from this -- we actually posted a link to it on our blog tonight, so you can see it. When you go through the transcript of this event, when you get to the part where the guy throws the shoe at President Bush, it`s described in the transcript as, quote, "audience interruption." Understatement much? What President Bush was in Baghdad to do that day was to sign the Status of Forces Agreement between the United States and Iraqi governments, which essentially committed the United States to end our war in Iraq. It was an agreement that President Obama then followed through on. The last U.S. troops, of course, left Iraq in December. Today, in Afghanistan, it was not a status of forces agreement. It was called instead a strategic partnership agreement between the U.S. and the Afghan governments. But essentially the idea is the same. It`s to commit both of our countries to a plan by which the United States will end our war there. (BEGIN VIDEO CLIP) BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Today I signed a historic agreement between the United States and Afghanistan that defines a new kind of relationship between our countries, a future in which Afghans are responsible for the security of their nation and we build an equal partnership between two sovereign states, a future in which war ends and a new chapter begins. As we move forward, some people will ask why we need a firm timeline. The answer is clear. Our goal is not to build a country in America`s image or to eradicate every vestige of the Taliban. These objectives would require many more years, many more dollars, and most importantly, many more American lives. Our goal is to destroy al Qaeda. And we are on a path to do exactly that. Afghans want to assert their sovereignty and build a lasting peace. That requires a clear timeline to wind down the war. The agreement we signed today sends a clear message to the Afghan people: as you stand up, you will not stand alone. Within this framework, we`ll work with the Afghans to determine what support they need to accomplish two narrow security missions beyond 2014: counter terrorism and continued training. But we will not build permanent bases in this country. Nor will we be patrolling its cities and mountains. That will be the job of the Afghan people. I recognize that many Americans are tired of war. As president, nothing is more wrenching than signing a letter to the family of the fallen or looking into the eyes of a child who will grow up without a mother or father. I will not keep Americans in harm`s way a single day longer than is absolutely required for our national security. But we must finish the job we started in Afghanistan and end this war responsibly. (END VIDEO CLIP) MADDOW: That was President Obama speaking tonight live from Afghanistan about the strategic partnership agreement he just signed with Afghan President Hamid Karzai, to essentially spell out how America`s longest war, our war in Afghanistan ends. Unlike the end of the Iraq War agreement that Bush signed on shoe throwing Sunday back in 2008, the Afghanistan agreement promises continuing involvement in Afghanistan for another 10 years after the troops leave. That means training. That means some unspecified support. It means money. It is not supposed to mean American war fighting. But still, Afghanistan has pretty much been in a continuous state of warfare for more than 30 years now. If we are promising to stay involved through 2024, through 2024, frankly, that means there is a six-year-old alive somewhere in America today for whom this speech and this agreement today means that they will be spending the summer of 2024 in Kandahar. Contrast that with Iraq, where we have an embassy now, but other than that, pretty much bubkiss. The president`s secret trip to Afghanistan today, though, was not just to sign this agreement about the end of the war. The White House acknowledges that the president could have just as easily signed the agreement in Washington. There was no technical need to be there in person. But the other reason for the president to make this trip to Afghanistan today is clearly because of today`s date. (BEGIN VIDEO CLIP) DAVID GREGORY, "MEET THE PRESS" MODERATOR: We can report the president will announce that Osama bin Laden is, in fact, dead, that Osama bin Laden is dead. That is the major development tonight, something the United States has sought to accomplish since the deadly attacks on 9/11. BRIAN WILLIAMS, NBC NEWS ANCHOR: I want to take a moment and show you this picture. We showed it briefly, but I want to go back here. This is across the street from the White House in Washington. CROWD: USA, USA, USA, USA. (SINGING) (END VIDEO CLIP) MADDOW: That was one year ago today. It`s not an accident that the president is marking the anniversary of the death of Osama bin Laden by being in Afghanistan. The 9/11 attacks on the United States were planned and directed and carried out by the al Qaeda organization that was headquartered in Afghanistan, that trained its membership in Afghanistan, that was given sanctuary by the Afghan government and that was led by Osama bin Laden. That is why within three and a half weeks of the 9/11 attacks, U.S. forces were on the ground in Afghanistan. By five weeks after that, the Taliban was gone from the Afghan capital of Kabul. And four weeks after that, a military operation in Tora Bora, in the mountains between Afghanistan and Pakistan was thought to have a chance of killing this man, killing Osama bin Laden. But bin Laden was allowed to escape from Tora Bora into Pakistan, into the wind, to escape also any real sense that the United States had a continuing bulls eye on him. (BEGIN VIDEO CLIP) BUSH: I don`t know where he is, nor do I -- you know, I just don`t spend that much time on him, to be honest with you. I truly am not that concerned about him. (END VIDEO CLIP) MADDOW: After losing bin Laden at Tora Bora, the Bush administration never again got a bead on him. George W. Bush`s former CIA director, Michael Hayden, told "Time Magazine" this week, quote, "I can only speak with authority through February 15th, 2009. But at that point, when people would ask, when is the last time you really knew where he was, my answer was Tora Bora in 2001." A little over a year after losing him at Tora Bora, the Bush administration had moved on in a big way. They had already started a whole new unrelated war in Iraq. The defining and radical assertion of the George W. Bush era was A, that the United States would now start preemptive unprovoked wars, and B, we would fight terrorism not just by fighting terrorists, not just by fighting terrorist groups, but by fighting the whole world, remaking the world in America`s image. You`re either with us or against us. We will topple unfriendly governments. We will stand up new governments. We will stand up whole new kinds of governments that have never before existed in areas where we are trying to install it. We will wage global war. They called it a global war on terror, a global war justified by 9/11. But as for the people who attacked us on 9/11. (BEGIN VIDEO CLIP) BUSH: I don`t know where he is, nor do I -- you know, I just don`t spend that much time on him, to be honest with you. (END VIDEO CLIP) MADDOW: When it came time for a new president after George W. Bush, the Democratic critique of that era`s neoconservative adventures, specifically the Barack Obama Democratic critique of that era`s neoconservative adventures, was that actually Osama bin Laden is important. The idea of a global war to remake the world in our image is folly. What we ought to wage instead is war against those who attacked us on 9/11. Al Qaeda specifically should be the target. Its leader, Osama bin Laden, really should be a priority for the United States. The president should spend some time thinking about Osama bin Laden. That was the sharp break proposed by the new president after George W. Bush. And honestly to the chagrin of many people who had been alarmed by the expansion of executive power in the George W. Bush administration, the Obama administration has not represented a significant break from that. The Obama administration radically, for example, expanded the use of assassination by drone. The number of drone strikes in Pakistan spiked in 2009, once President Obama took over from President Bush. And then in 2010. those already spiked numbers from 2009 doubled. This was not going to be a more pacifist approach under President Obama. President Obama, for another example, tripled the number of troops in Afghanistan. The Obama administration has not thrown less American weight around and it has not thrown it away in a less unilateral way in terms of executive authority. The Obama administration has just thrown American weight around in a much more specific direction. It was not a difference in aggression. It was a difference in focus. So for this president in particular, it makes sense that on the anniversary of Osama bin Laden`s death, he would put himself in Afghanistan, he would explicitly, with this trip there today tie the end of the war in Afghanistan to the killing of the head of al Qaeda. And because the news gods are numerologists, it is, of course, also perfect for us understanding the sharp and specific turn we have taken as a country on national security under this new president. It is just as much key to understanding that that today`s announcement about the end of the Afghanistan war is not just on the anniversary of Osama bin Laden`s death. This announcement today about the end of the Afghanistan war is also on the anniversary of this. (BEGIN VIDEO CLIP) UNIDENTIFIED MALE: This is an NBC News special report, a presidential address. Here is Tom Brokaw. TOM BROKAW, NBC NEWS ANCHOR: Good evening. Tonight President Bush speaks to the nation from the aircraft carrier USS Abraham Lincoln, which has been at sea for almost 10 months, much of that time in the Persian Gulf. UNIDENTIFIED FEMALE: A victorious commander in chief thanking all men and women in uniform for a mission accomplished. (END VIDEO CLIP) MADDOW: That was nine years ago today. The previous president put on a flight suit, pretended to fly a jet onto the deck of an aircraft carrier that was parked off the coast of San Diego and standing under a banner that read "mission accomplished," he declared that in the battle of Iraq, the United States and our allies have prevailed. That was less than three months into what turned out to be an 8.5 year long war. What President George W. Bush was celebrating on that aircraft carrier nine years ago today was that we had successfully invaded Iraq. We had successfully started a second, simultaneously land war alongside the one he was still muddling through in Afghanistan, while he didn`t pay very much attention to Osama bin Laden. Now with another presidential election campaign under way, the new president, President Obama, is celebrating in his own way having decapitated al Qaeda and having signed the frame work for the second of George W. Bush`s wars that he is ending. Presumably, he is also celebrating his good fortune of running against a Republican opponent this year who chose as his spokesperson on these issues, on today of all days, this guy, Dan Senore. There he is in Iraq before. There he is here on today TV. The face of public relations for George W. Bush`s invasion of Iraq now the face of national security public relations for the Mitt Romney for president campaign. Joining us now is Steve Clemons from the New America Foundation. He writes at "The Washington Note" and at the "Atlantic Magazine," where Steve is Washington editor at large. Mr. Clemons, it`s great to see you. Thank you for being with us tonight. STEVE CLEMONS, "THE ATLANTIC": My pleasure, Rachel. MADDOW: Let me ask you, as somebody who has been not only been involved in the is as a general expert on national security and foreign policy issues, but somebody specifically involved in trying to come up with the way this war might end in the Afghan Study Group, what do you see as the significance of the president`s trip to Afghanistan today, him making this address to the nation, signing this agreement, and doing it on the anniversary of the bin Laden killing? How important is the anniversary here? CLEMONS: I think it`s hugely important. I think you framed it absolutely right before, that what the president has done is said that what we have spent so much treasure on, and frankly not only trillions of dollars already, but trillions of dollars of outlays in the future on something that was considered to be a strategic objective. We were attacked in the United States. Lots of resources were thrown at that. The president is fundamentally saying today that that conflict is coming to an end. He`s beginning to frame the end state of that. So tying this so directly to Osama bin Laden`s demise and the roll up of really the original core al Qaeda network is giving him a chance to basically tell Americans this war is over. You have to remember, as you`ve written in your own book, it`s really, really hard to end a war. Not many presidents survive wars they inherit, because it`s so hard to shut them down, because they become subject to criticism of being appeasers or weak in the face of challenges. So what Obama is doing is he is saying I was tough. I`m now showing strategic restraint. We`re going to draw this down and begin to redeploy America`s assets into other challenges. So it is a brave moment and it`s one that`s extremely important. I think it puts Obama in the history books because of how he is saying to cane John McCain, Lindsey Graham, Joe Lieberman, we`re not going to have a perpetual war where we constantly highlight the face and disaster that Osama bin Laden and his allies created, and use that to justify never end conflict and never ending growing military budgets. MADDOW: Steve, do you see -- I made this case a little bit in the introduction. I`m just curios as to whether or not you agree. I`m not -- I can`t assume that you do, but do you think that the Obama administration did have a qualitatively different type of focus of focused on bin Laden and on al Qaeda specifically? I was struck in John Brennan`s speech yesterday about drone warfare, the administration sort of coming more clean about using drones than they have in the past, that he talked consistently and specifically about al Qaeda, al Qaeda, al Qaeda. Not that this is tactic that we used against any kind of enemy and anywhere in the world, but that the United States reserves specific tactics against al Qaeda in a way that represents a real I guess -- a real focus. Is that different than the Bush administration? CLEMONS: Yes. I think what is really interesting is the frame you had of President Bush saying he didn`t spend much time speaking about him? Let`s take him at face value. Maybe that`s true. Maybe it`s not. But what President Obama has done -- and a lot of people don`t realize this -- is that every morning, he meets with John Brennan, his deputy national security advisor, Dennis McDonnough (ph), his national security advisor, Tom Donilon, Vice President Biden and his adviser, Tony Blanken (ph), as well as his chief of staff. And part of that every day meeting is focused on very laser like focus on where are we at in rolling up the al Qaeda network? Where are we at with our counter terrorism challenges? It`s a remarkable focus of the president of the United States on a daily basis that most Americans don`t know about, hasn`t been much written about. But it has been part of the really big sea change from the Bush administration. You have to remember that one of the real problems we`ve had with al Qaeda is that it basically metastasized around the world. It was given that opportunity in part because the Bush/Cheney administration took its eye off the ball and began to focus resources and attention on Iraq, as you said, allowed bin Laden to escape, but more than that, basically let all the trails go dry. I remember talking to senior CIA and Department of Defense officials during the Bush administration who often asked me the question do I really think he`s still alive. So there was at least a period of time -- I don`t think the Bush administration ever fully stopped looking. We should make that clear. But I don`t think the resources were there. I think Barack Obama came along and, while I was opposed to the surge in Afghanistan and thought it would be detrimental and create a lot of blowback and what not, at the same time, he doubled down, realizing he had to get al Qaeda. I`ll never forget a senior White House official, right after President Obama`s inauguration, said to me because of my concern about Afghanistan, Steve, there is no way out for us in Afghanistan. And John McCain will ultimately win if we don`t get bin Laden. There is no narrative for us to leave Afghanistan unless bin Laden is shut down and captured or killed. MADDOW: Once we get him, we know exactly how we will leave. That seemed clear today as the sort of -- the closing clause of that sentence. Steve Clemons of the New America Foundation, publisher of "The Washington Note," Washington editor at large for "the Atlantic Magazine." Steve, thank you very much for joining us tonight. I really appreciate it. CLEMONS: Thanks so much, Rachel. MADDOW: Nobel Prize winning economist Paul Krugman is here tonight for the interview which I`m really looking forward to. That`s still ahead. Stay with us. (COMMERCIAL BREAK) (BEGIN VIDEO CLIP) SEN. JOHN MCCAIN (R), ARIZONA: Any president of the United States, given that information, would have done the same thing. But I give great credit to the president. The point is, though, do you use that in political campaigns to attack your opponent? Mitt Romney would have done the exact same thing. I am confident. Any leader would have. So to say that Mitt Romney wouldn`t have, I mean, is politicizing what -- an event that all Americans applauded enormously. (END VIDEO CLIP) MADDOW: In the 2004 election, there was an October surprise right before we all voted. Remember that? Four days before the election -- the election was November 2nd and four days before that, on October 29th, 2004, Osama bin Laden released a tape threatening the United States, just as Americans were going to the polls to vote for either George W. Bush or John Kerry. Asked for comment at the time, Senator John McCain said about that tape -- he said about Osama bin Laden threatening the United States, quote, "I think it`s very helpful to President Bush. It focuses America`s attention on the war on terrorism." That`s very helpful. Thank you Mr. bin Laden. Your threats to the United States have helped focus Americans on electing George W. Bush instead of John Kerry. See, it`s OK to say something like that if you are a Republican. That was the same election, 2004, in which Vice President Dick Cheney declared that a vote for the Democratic candidate for president that year, a vote for John Kerry, would be a vote for the United States to be attacked by al Qaeda again. (BEGIN VIDEO CLIP) DICK CHENEY, FORMER VICE PRESIDENT OF THE UNITED STATES: It`s absolutely essential that eight weeks from today, on November 2nd, we make the right choice. Because if we make the wrong choice, then the danger is that we`ll get hit again, that we will be hit in way that will be devastating from the standpoint of the United States. (END VIDEO CLIP) MADDOW: Is that politicizing national security, to say if you vote for a Democrat, you`re voting for al Qaeda to attack America? Is that politicizing national security or is that OK if you`re a Republican? In the next election in 2008, when John McCain himself was the Republican party`s candidate for president, you might remember that the Republican convention featured a long 9/11 tribute video. (BEGIN VIDEO CLIP) UNIDENTIFIED MALE: It is a war we never chose to fight and for too long we`ve looked the other way. But the enemy is wrong. This is a war America will win. We`ll have a president who knows how. (END VIDEO CLIP) MADDOW: As opposed to the Democrat, who clearly doesn`t even want to win, let alone know how. One of John McCain`s central arguments for why he should have been elected instead of Barack Obama in 2008 is that he said -- in 2008, he said that he, John McCain, had a secret plan to kill bin Laden. (END VIDEO CLIP) WOLF BLITZER, CNN ANCHOR: You`re president of the United States. You vowed that you will capture Osama bin Laden and bring him to justice. We know that President Bush since 9/11 has been doing the best he can. What would you do differently? MCCAIN: I`m not going to telegraph a lot of the things that I`m going to do because then it might compromise our ability to do so. But look, I know the area. I`ve been there. I know wars. I know how to win wars. I know how to improve our capability so that we will capture bin Laden or put it this way, bring it to justice. I know how to do it. (END VIDEO CLIP) MADDOW: John McCain campaigned for president on the basis of his secret plan that he knew how to kill Osama bin Laden and Barack Obama didn`t. Then in real life, Barack Obama actually did kill Osama bin Laden, and now John McCain says it is very unseemly to campaign on something like that. Obama a announced a year ago that Osama bin Laden had been killed. There were with spontaneous celebrations outside the White House and elsewhere. I was at the White House that night. I remember seeing people climbing the lamp posts and the trees outside the White House fence. The crowd grew bigger and bigger as the night wore on. It started off as essentially the people who could get there the fastest. It was the fleet of foot at first, sort of a college aged crowd when I first arrived at the White House, there on the street, right between the White House fence and Lafayette Park. By the time I left, it was everybody. It was families with kids and baby strollers out in the middle of the night. It was older people. It was diverse. The street just kept filling up. It was one of those things that you really remember being part of. For the first time today, we are experiencing the anniversary of the killing of bin Laden. This is a day that we will mark now as a country. This is a new day that we will mark every year on our national calendar. We will still mark the anniversary of being attacked on 9/11, of course, but we will also mark this day, when the head of al Qaeda, who attacked us on 9/11, was killed by American forces. Because this is an election year, Republicans have decided this year to say they are outraged by this. You heard Senator John McCain there a moment ago. Mitt Romney also proclaimed himself disappointed today. He said, quote, "I think it was very disappointing for the president to try and make this a political item." How dare you commemorate this anniversary of killing bin Laden. How dare you seek campaign advantage, political credit, political acknowledgement of the anniversary of killing Osama bin Laden. That`s what Mr. Romney said this morning on a TV morning show. Then this afternoon,. Mr. Romney spent the afternoon with Rudy Giuliani, who was the mayor of New York City at the time of the 9/11 attacks. Together they visited New York City firefighters at a Lower Manhattan fire house today, on the anniversary of the killing of Osama bin Laden. That was Mitt Romney`s political campaign event today, him on the campaign trail with Rudy Giuliani surrounded by cameras commemorating the anniversary of the killing of Osama bin Laden. See, President Obama doing that is very disappointing, but if you are a Republican, it`s -- it`s OK. (COMMERCIAL BREAK) MADDOW: Mitt Romney is the presumptive Republican nominee for president. Does that mean that Mitt Romney is the leader of the Republican party now? You would think so, but when other Republicans talk about him, that is really not the way it comes out. (BEGIN VIDEO CLIP) GROVER NORQUIST, AMERICANS FOR TAX REFORM PRESIDENT: We are not auditioning for fearless leader. We don`t need a president to tell us what direction to go. We know what direction we want to go. We want the Paul Ryan budget, which cuts spending six trillion dollars. The leadership now for the modern conservative movement for the next 20 years will be coming out of the House and the Senate. So focus on electing the most conservative Republican who can win in each House seat and the most conservative Republican who can win in each Senate seat, and then pick a Republican with enough working digits to handle a pen to become president of the United States. (END VIDEO CLIP) MADDOW: So Mitt Romney is the Republican nominee for president because he has enough working digits to handle a pen. The real leader of the Republican party, though, is this guy, Mr. P90X. He`s the congressman who writes the Republican party`s budgets in the House, Paul Ryan of Wisconsin, Paul Ryan of The Paul Ryan Kill Medicare budget fame. The Beltway is in love with Paul Ryan. But Paul Ryan`s nemesis, the person who calls him a garden variety GOP extremist, the chief debunker of Paul Ryan mania in our commentariot is Paul Krugman, the Nobel Prize winning economist. And Paul Krugman is here tonight for the Interview, next. (COMMERCIAL BREAK) MADDOW: Paul Krugman`s new book contain a scary idea right in the title. Mr. Krugman`s new book is called "End This Depression Now." Yes, that is depression, as in Great Depression, as in people can call what we are slogging through an economic downturn, a tough time, a slow of despond. You can call it a recession. You can even call it the Great Recession, which I probably did about 500 times last year. Paul Krugman in his new book says this is not just a recession. This is a depression. We are used to thinking of depressions in terms of things collapsing, in terms of the economy falling off a cliff. This graph, for instance, shows what happened to the economy in broad strokes terms in the Great Depression. That hollowed plunge is no place to be. And neither is this hallowed out plunge. This is what happened to our economy in the downturn formerly known a s the Great Recession, the falling off a cliff again. So that`s a depression. It`s defined in the most colloquial of terms by things falling down. But you can also find something that goes up around the time of great economic calamity. Right around the time that so much is falling down in a depression, this one thing in our economic stats starts going up. That one thing is the distance that you have to stretch between the average poor American and the average rich one, like this. This chart was included in a report by the U.S. Congress in 2010. We`ve added a couple of red circles to make it easier to see on TV. But the point here is the same. The distance between rich and poor in this country goes way up around the Wall Street crash of 1929 and the Great Depression. And again, the distance between rich and poor in this country goes up around the end of the Bush administration financial crisis, our generation`s plunge off the cliff. So correlated with depressions, huge growth in the gap between rich and poor, income inequality. Why is this so? Why do you have spikes in income inequality around economic catastrophes? We`re going to ask Paul Krugman that in just a moment. But first, one more idea to put on the table, my personal chart of the day, my epiphany chart of the day. It turns out that as income inequality has gone up -- income inequality is the blue line here. As income inequality rises, huh, look at that. At the same time, Congress gets more polarized. That`s the red line. Congress becomes more partisan, less likely to compromise, less willing and/or able to get anything done. This chart belongs to the very smart people at VoteView.com. I thank them, because for me, this chart explains an awful lot about what`s happening in our current politics. It explains we can`t get anything done to fix the economy. Income inequality creates its own political weather. Or as Paul Krugman says in his new book, "the gravitational political pull of the rich become stronger when the rich are richer. Since 1980, the Republican party has moved right in tandem with the rising incomes of the elite. And political compromise has become almost impossible." So maybe the reason Republicans in Congress will not fix the economy and therefore Congress can`t fix the economy is because they think that fixing the economy would not help the richest people in the country, and that`s who`s interests they feel they must serve. Bong. Joining us now for the interview is Mr. Epiphany himself, Paul Krugman, Nobel Prize winning economist and Princeton professor of economics and international affairs. He`s, of course, a columnist for the "New York Times." And his eagerly anticipated new book is called "End This Depression Now." Dr. Krugman, thank you for being her. PAUL KRUGMAN, "THE NEW YORK TIMES": Hi there. Good to be on. MADDOW: I`m glad to be able to ask you this question. Why is income inequality, a big gap between the rich and the poor, correlated with economic catastrophe? KRUGMAN: Two things I think going on. One is that when the economy is bad, it`s the people with the least power who can`t protect themselves. So the most vulnerable get hurt. That`s why the gap between rich and poor widens when catastrophe hits. But the other thing is that a polarized political system, a system in which one party has been pulled way off to the right, is not able to cope with the difficulties of the economy. They -- you sort of ask why -- we know how to fix this. That`s the theme of my book, that we know how to fix this, but we`ve managed -- a lot of us have managed -- a lot of important people have managed to forget. Why have they managed to forget? Because admitting that the government can fix a depression is also admitting that the government can do good things. If you admit that the government can do things, then you might think maybe we have to tax rich people to pay for those good things. So this kind of anti-government, hard line, markets are Gods, the rich have the answers, has left us a psychologically, intellectually incapacitated in the face of this depression that we`re in. MADDOW: The thing that is palpable in the book, it frankly does not surprise me that there was an exclamation book at the end of the title of your book. As I watch -- read your writing every day, read your blog and read your columns, you can sense your increasing frustration that it`s not that there are people in power who disagree with you on economic arguments, but that economic arguments are now bad arguments, that people who are right and who have been proven right still are not allowed to win the argument. KRUGMAN: It`s been an amazing thing. If you believe in basic Keynesian -- the basic story I`ve been telling, you would have been right about a whole lot of things. If you believed, let`s say, "The Wall Street Journal" editorial page and you had actually invested on that basis, you would have lost enormous amounts of money. We`ve been told deficits will drive interest rates sky high, printing money to try and fight the recession is going to lead to runaway inflation, none of which has happened. Austerity, cutting spending is good because it will increase confidence. Take a look at Spain and Ireland and Portugal. We`ve had an overwhelming vindication of the ideas that say that this is the time for governments to spend. This is the time not to cut back. The urgent priority is jobs. Deficits should wait. Yet that`s an argument that nobody wants to hear in power because it`s inconvenient for -- for inner circles. I have to say, in the end, it`s inconvenient for the one percent or the 0.1 percent. MADDOW: Do you think that there is -- in terms of the point of that graph that I showed in the introduction, do you think it is that people who have more literal capital accrue more political capital automatically, that you end up getting listened to more because you have more money to spend on politicians? KRUGMAN: It`s a mixture of things. Yes, it`s the power of money. It`s worse in both crude ways and subtle ways. There`s the revolving door, politicians thinking about what are they going to do after they leave office. That`s a huge incentive. There`s campaign contributions. Then there`s just the -- I`ve been in meetings where you have the guys from Wall Street. The guys from Wall Street are impressive. They are smart. They`re funny. They`re rich. They have great tailors. And they tend to get treated seriously, even if they have just destroyed the world. They tend to have a weight that bearded college professors don`t in these discussions. So there`s a pull of power of wealth which you need to actively lean against. And you try to convince politicians with good hearts that that guy may sound impressive and look impressive, but fundamentally he is not on your side. MADDOW: Do you see the arguments on the right changing in character? I was struck, having read your book to prep for talking to you today, and then seeing the "New York Times Magazine" posting this profile of Mitt Romney`s old boss at Bain Capital, who has a new book coming out that argues -- and I`m quoting -- that "having a small elite with vast wealth is good for the poor and middle class." KRUGMAN: Yes. MADDOW: That used to be what people like I would accuse people of believing. It`s now the overt argument. KRUGMAN: You`re watching the hereditary principle starting to make a comeback. You know, I`ve seen that a little bit from Mitt Romney. We used to think it was all about equal chance at the starting line. Now it`s well, of course, people who -- people should have the right to pass advantages on to their children. So no, we`re -- this way to the 14th century. We`re really trying to get back to the old values of hereditary wealth and power. Of course. And it`s -- we`ve moved to a level of shamelessness in many of these things. The other thing to say is if you look at past economic debates, Milton Friedman would be on the left side of the political spectrum right now, right? He favored stronger aid to the poor. He favored really active policies to fight depressions. And he would now be considered an inflationary socialist in current debate. MADDOW: In terms of what you think we can do to end this depression now, you argue for the primacy housing, that housing was not only the cause of -- one of the causes of where we ended up, but it is the thing that we have to tackle in order to get ourselves back. KRUGMAN: It`s one of the things. I actually think first thing that - - it`s kind of important. Three years ago the question, where do we spend? How do we stimulate the economy was actually somewhat hard? You had to find the right projects. Now all you have to do is reverse the terrible things we have been doing these past three years. We`ve had massive layoffs of government employees at the state and local level because they`re not receiving the aid they need from Washington. We`ve laid off 300,000 school teachers, 600,000 government employees in total, when we should have, just to keep up with population growth, added 700,000. Right there, you have 1.3 million people you can put to work with no need to do anything adventurous or innovative, just get back on track. Right there, just by doing that, we can probably get the unemployment rate below seven percent. So the -- now that`s the start. You also have this overhang of bad debt from the housing crisis which we have not tackled properly. It would help if the Fed was doing more. But it -- there`s a bunch of things, but the core of it is actually right now is the time to be spending on useful stuff. It`s easy. We could do this if we had the political will and the intellectual clarity, 18 months from now we could be very solidly on the road to recovery. MADDOW: And that`s the recipe herein. Paul Krugman, the new book is called "End This Depression New." It`s just out. Thank you so much for coming in to talk to me about it. KRUGMAN: Thank you. MADDOW: I appreciate it. Good luck with this. Right after this show on THE LAST WORD, Alec Baldwin -- yes, that Alec Baldwin -- joins Lawrence live. I`m going to have to talk to him about borrowing the haircut for this weekend. But here, coming up, not the best new thing in the world today, but something pretty fricking close. Stay with us. (COMMERCIAL BREAK) MADDOW: Back on March 24th of this year, then presidential candidate Rick Santorum won Louisiana. He won the Louisiana state Republican primary. Rick Santorum won with 49 percent of the vote. Mitt Romney got 27 percent. Newt Gingrich 16 percent. Ron Paul six percent. The great state of Louisiana will send 46 delegates to the Republican convention in Tampa this summer. But even though Ron Paul came in dead last in Louisiana, even though he came in fourth out of four in Louisiana, when Louisiana sends its delegates to the convention in Tampa this summer, Louisiana will retroactively become a dead heat between him and Mitt Romney. It is looking like right now, maybe 19 delegates for Mitt Romney and 17 for Ron Paul. Rick Santorum who is now out of the race will still having the remaining 10 that he got that March night. But Ron Paul supporters overwhelmingly dominated the Louisiana caucuses this past weekend. Almost three quarters of the Republicans elected at the caucuses in Louisiana say they support Ron Paul for president. Also this weekend, there was chaos at the Republican caucuses in the great state of Massachusetts. Less than half of Mitt Romney`s delegates were elected to represent him at the convention. Voters instead chose Ron Paul delegates. They even rejected Mr. Romney`s former lieutenant governor from his time as governor of the state. She lost as delegate, so Ron Paul delegates could win. Also this weekend, Ron Paul supporters in the great state of Alaska quite literally took over the state party`s convention. A Ron Paul guy won the state party chairmanship. The Paul supporters were so fired up in Alaska, they were just so loud that Senator Lisa Murkowski, who is a Mitt Romney supporter -- hear that -- could not deliver her planned speech in the room. Neither could her guest, Wyoming Senator John Barrasso. The crowd is chanting "Ron Paul, Ron Paul, Ron Paul," and nobody else is getting a word in edgewise. As a result of all this, a Ron Paul supporter won the election for state Republican party chairman. He beat out the guy backed by the current Alaska chairman, whose had the job for over decade. Alaska`s going to end up sending six Ron Paul delegates to the Republican National Convention in Tampa. We have seen this Ron Paul plot before. Do you remember the Iowa Republican caucuses this year? First, they said that Mitt Romney won it. But then it turned out that no, that wasn`t right. Then they tried to say it was a tie. Then Rick Santorum was declared the winner. But then it turned out none of it actually mattered in a practical sense because the Iowa caucuses did not allocate a single delegate. A state Republican party committee does that, a state Republican party committee picks the delegates who go to the Republican convention. Last month, Ron Paul supporters took over that committee, guaranteeing Ron Paul at least half -- at least half of Iowa`s 28 delegates. So in the end, forget all that nonsense, Ron Paul won Iowa. And by the way, a Ron Paul supporter now chairs the Iowa Republican party as well. Ron Paul supporters have used state party rules and conventions and processes to victories large and small that will have a practical affect on the Republican party, if not the nominating process for president this year, maybe the convention itself. Ron Paul`s strategy hasn`t been to convert nonbelievers or to swing Romney delegates over to his side. The Ron Paul strategy has been to get his own supporters inside, to get them inside the process. And we cannot say we didn`t see this coming. (BEGIN VIDEO CLIP) UNIDENTIFIED MALE: How do you from the outside make positive change as you`re not the party`s nominee and as president -- being on outside. REP. RON PAUL (R), PRESIDENTIAL CANDIDATE: Have the outside become the inside. We don`t win over the insiders by becoming like an insider. We win the inside over by making the outsiders become more appropriate. (END VIDEO CLIP) MADDOW: Making the outsiders become more appropriate, like making them take over the state parties. In addition to those coups this weekend and before in Louisiana and in Massachusetts and in Alaska and in Iowa, Ron Paul has won more than half of the delegates in Minnesota and in Washington State. So yes, Ron Paul won Minnesota and Washington State. He`s got his eyes on Maine, on Missouri and Nevada as well. He is scheduled to speak at the Nevada Republican State Convention this weekend. If Ron Paul wins a majority of delegates in five states, his name will officially be entered in nomination at the Republican National Convention in Tampa. And there will be a lot of Republican Ron Paul delegates there to cheer or do something when that happens. And then what? Republicans fight it out like gladiators at the coliseum? I love this stuff. (COMMERCIAL BREAK) MADDOW: Back in February, a reporter for Politico.com was covering a speech President Obama gave in Wisconsin at the Masterlock factor in Milwaukee. The "Politico" reporter assumed that the flag behind the president at the event was a union flag, as in Local 1848. But it was actually the Wisconsin State Flag. Wisconsin entered the union, as in the United States, not as in a trade union, in 1848. "Politico" had reported this scandal of the president speaking before a union flag in Wisconsin. But they were wrong. They issued a correction. The president may be a socialist, Marxist, Commie, pinko, union stooge Kenyan whatever, but standing near a flag with Wisconsin and 1848 on it is not proof of that. Mistakes happen. "Politico" was embarrassed. They ran the correction, story over. But now something similar is happening. (BEGIN VIDEO CLIP) OBAMA: I believe America is on the way up. Thank you, God bless you. God bless the United States of America. (END VIDEO CLIP) MADDOW: That`s the end of a seven-minute Obama campaign video unveiled yesterday. It appeared to be maybe the birth of a new campaign slogan, Forward. It took less than a day to uncover the sinister origins of that. Here is Michael Walsh of "The National Review" tying the slogan "Forward" to the name of the newspaper of Germany`s Social Democratic Party. That`s social as in socialist. Walsh goes on to say, "if you don`t think David Axelrod doesn`t know this, you really ought to think again." "Washington Times" blogger Victor Morton notes that Forward has a long and rich association with European Marxism. His source, Wikipedia, specifically a page called "Forward, generic name of socialist publications," which is currently being considered for deletion at Wikipedia. You should check out its recent edit history. It`s really fun. The British newspaper "The Daily Mail" had this: "Mao, Lennon and a century of Marxist Radicals, the Controversial Origins of Obama`s New Campaign Slogan, Forward," along with handy side by side pictures of President Obama and Chairman Mao. So that is happening. Applying Occum`s Razor to this story, I would like to put one thing that anti-Communist fear mongering laves out of the analysis of the Forward slogan, which clearly comes from some godless pinko movement from the 1930s bent on the destruction everything awesome and free and American. Forward is also the motto of the great state of Wisconsin. It is actually on the flag. That union flag has the communist motto on it. And hey look, wait, there it is on the official Wisconsin state quarter, with a cow and an ear of corn and a wheel of cheese. You thinking what I`m thinking? Yeah, that cow looks like a Commie to me. You know what I have heard? I heard that Trotsky loved cheese. What is next, Comrade Obama, e pluribus Unum, out of many one? Sounds a little collective. David Axelrod knows it too, I bet. END THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED. END