>> He's the Nobel Prize-winning economist that the President loves to hate, this week on "Firing Line."

>> I don't want to be partisan, but you have to be.

>> Charlatans, cranks, and bad people are just a few of the ways Paul Krugman has described his ideological foes in columns he's been writing for The New York Times for more than two decades.

>> Everything that one party has said about fundamental economic policy for the past 15 years has been not true.

>> When Krugman predicted Donald Trump's election would lead to economic doom and possibly worse, Trump took notice.

>> This guy is demented.

He is.

He's a demented person.

And that's why the Times is failing.

>> What does Paul Krugman say now?

>> "Firing Line with Margaret Hoover" is made possible by... Additional funding is provided by... Corporate funding is provided by... >> Welcome to "Firing Line," Paul Krugman.

>> Hi, there.

>> You are a Nobel Prize winner in the field of economics, an academic, a columnist at The New York Times, and a bestselling author who has just published a new book, "Arguing with Zombies: Economics, Politics, and the Fight for a Better Future."

We're getting to "Zombies."

>> Okay.

>> Before we get to "Zombies," I have to ask you about President Trump, who tweeted just this week... >> It's amazing.

I mean, I'm getting to live, rent-free, in his head, which is a great thing, I guess.

Why he should be taking time out when he's on -- he's facing impeachment, why he's taking time out to go after me... >> Do you think it's a deflection technique?

I mean, it's clear that he -- He has not been a fan of yours since election night, when you predicted that his election would cause a massive economic downturn.

>> Yes.

Although, it was funny, 'cause I -- I reacted badly.

I retracted that call three days later, saying, "Look, you know, I'm motivated reasoning.

I would criticize that in other people.

And, in fact, the odds are, at least for a little while, we'll probably get a little bit of a boost because he'll be running bigger budget deficits," which is pretty much what happened.

>> You did retract that statement three days later in a column.

And I wonder how you think about the best practice for when you get it wrong.

>> First of all, admit it.

Never try to pretend that you are right when you are wrong.

And then ask yourself, "What made me get it wrong?"

>> What did make you get it wrong?

>> In that case, it was just I thought, politically, it was a total disaster.

And I fell into the temptation of thinking that that would lead, in the short run, to an economic disaster, as well.

So, you know, listen.

Always step back and ask, "Is this my emotions speaking, or is this my analysis speaking?"

In this case, there was nothing wrong with my analytical framework.

It was just my emotions that ran away with me.

>> The economy is doing pretty well at the moment.

Do you agree?

>> Yeah.

I mean, it's, uh...

There's a lot of stuff that we're not taking care of that we should be taking care of, but, look, a best estimate is that Trump has added about $300 billion at an annual rate to the budget deficit.

That's a big stimulus.

That's almost as big as the Obama stimulus at its peak.

So, sure, this is -- Now, that's actually surprisingly little bang for the buck if you consider the size of the budget deficit, but there's some bang for the buck.

That's a hell of a lot of bucks.

>> So the Trump economy hasn't been all bad?

>> No.

I mean, full employment is good.

I mean, that's what -- Those of us who were screaming for more stimulus back in the days when unemployment is 9% still think that some stimulus is good even now.

>> Okay, let's talk about "Zombies."

This is how you write.

Zombie ideas are, quote... >> That's right.

It is the most persistent universal zombie.

It's been wrong.

It was wrong for the Reagan tax cuts.

It was wrong for the Bush tax cuts.

It was wrong in Kansas.

It has turned out to be wrong for the Trump tax cuts.

And people still say it.

Treasury Secretary Mnuchin said it just the other day in Davos.

There are zero success stories for the doctrine, but it's still out there.

>> So why does the Dallas Fed say that most economists would agree that reducing taxes on labor and capital income is likely to increase economic activity?

>> Oh, that's a different -- very different proposition.

The zombie idea is that the disincentive effects of taxes are so large that cutting taxes will lead to this fountaining of economic growth that will actually mean that you collect more revenue.

Now, the idea that taxes have some incentive effect, that people work a little bit less hard, maybe, if they pay a high tax rate.

That's -- That ought to be true, although it's actually remarkably hard to find evidence.

>> So, in your book, you talk about your methodology.

You say, one, you stick with the easy stuff.

Two, you write in plain English.

Three, you're honest about dishonesty.

And, four, you say, "Don't be afraid to talk about motives."

>> Right.

>> Do you believe it's impossible to have good-faith arguments today?

>> It's not impossible, but it depends on what it's about and who you're arguing with.

So, there's a huge debate about quantitative easing in monetary policy.

And there are people -- there are reasonable people on both sides of that.

>> For the sake of the audience, do me a favor and define quantitative easing.

>> Okay.

Quantitative easing is when the Fed -- Federal Reserve -- instead of just doing its usual thing and buying short-term government debt to move interest rates, goes out there and buys longer-term stuff.

It buys mortgages guaranteed by federal agencies.

It buys long-term government debt in an attempt to get some extra traction.

It's something that the Fed did a huge amount of -- about $4 trillion worth of -- during the financial crisis.

Was it effective?

>> So your view is that it's too early to tell.

>> I'm a skeptic.

I'm not sure that the -- If you had pressed, I would say it wasn't very effective.

But perfectly reasonable people can make the other argument.

So that's a good-faith debate.

>> Would quantitative easing, in your view, have been more successful had there been more stimulus?

>> Well, the economy would have been more successful if there had been more stimulus.

I think quantitative easing didn't matter much one way or the other, but I could be wrong about that.

You know, that's a hard question and certainly not something to be writing about on the op-ed page of The New York Times, because the readers are not in a position to judge that debate.

>> You -- You did write about it in the columns of the -- in your columns.

>> Well, I wrote about it saying that the fears about it were greatly -- were all wrong.

>> Some of the fears were that it would create massive inflation.

>> That's right.

You know, it was a who's who list, an enormous number of people, mostly on the right, said, "Oh, this is going to lead to inflation."

>> And it didn't end up leading to the consumer price index inflation, although there has been some inflation in asset values.

>> Yeah, but that's not clear that that's related, and it's not clear that it's a problem.

>> I mean, there's an argument I've read, as I've followed this debate that quantitative easing may actually have exacerbated some of the income inequality disparities that we have, in the sense that it has kept interest rates so low that ordinary people don't have vehicles for growing their savings and growing their wealth in the way that they would have after after a decade of not having interest rates.

>> So this is a non-zombie idea.

So, zombie ideas, I think... >> I'm so flattered.

...that we know are false but that just keep on shambling along and eating people's brains.

And this is an idea that has a little bit to it, but less to it than people imagine.

And I think the problem is that people like you or me, we have an exaggerated notion of how much in the way of savings people have.

I mean, half the population lives mainly on Social Security and retirement.

A quarter of the population lives entirely on Social Security.

The idea that the interest that they earn on their bank accounts is an important thing, that's already an elite concern.

That's not a problem for the common populace.

>> So you're saying the average American doesn't have savings to put in a certificate of deposit, so it doesn't matter that interest rates are .03%.

>> That's right.

One thing I think being sort of in the economic elite, even the lower reaches of the economic elite, is that you have no idea how close to the edge most Americans live.

And so the interest that they get on their bank deposits is just not an important thing.

>> So bottom line, quantitative easing is not a zombie debate, it's an honest debate.

>> It's an honest debate.

And I can -- You know, Ben Bernanke disagrees with me.

He thinks it was much more effective than I do, and he could be right.

And I don't have any questions about his motives.

>> When will we know?

>> Never know.

>> Never?

>> No, because the trouble is, that history doesn't usually give you clean experiments.

Too many other things were going on at the same time.

So we'll probably never really know what it did.

>> So this other part about your methodology, where you say, "Don't be afraid to talk about motives," how does that play in?

>> I think it's important.

Now, you know, if if you're having a good-faith debate, fine.

Then let's just talk about the facts.

If you have people who keep on espousing views that are demonstrably wrong, that just have failed again and again, you're being un-- You're cheating your readers if you don't explain to them why these people are saying these things.

So, again, I mean, I like Mnuchin as a whipping boy.

What the hell?

But here we have -- Why would the Treasury secretary of the United States say something that is manifestly untrue about taxes?

Well, think about who he works for.

Think about who the campaign contributions for his party come from.

So this is -- You have -- You cannot explain the persistence of this zombie faith in tax cuts without asking who it benefits and how the benefits to a handful of wealthy people affect political positions.

>> So you go so far as to believe that you understand the motives of Steve Mnuchin for saying that, that it's because he has wealthy donors and they don't want those policies to affect them.

>> Yeah.

Now, peop-- most people are pretty good at convincing themselves that they're being honest even when they're not, right?

Even when it's actually motivated.

But if you want to ask what's driving this, that's what it's about.

>> I read your column this week, and, you know, one of the ways you approach these arguments is that you lay out an argument that's very sound, but then you have this throwaway line.

It's something to the effect of "Republicans don't want to admit that government can do anything effectively, because if they did, then maybe they'd realize it could help with healthcare, too."

Right?

And it was in a context of "Republicans have no interest in doing something for the greater good," right?

Do you think that undermines your ability to engage and win the argument?

>> No, I don't think so, because you need to be careful about what I'm saying.

I'm not saying that every one, every person who says "I am a Republican" is part of this.

But I think it's fair to say that almost every, if not every, Republican member of Congress is in this position.

One of the funny things you discover on a number of issues, rank-and-file Republicans often have much more nuanced views than what you hear from the party, and the views that are more nuanced and closer to the truth, the less politically aware they are, because they don't know what the party line is.

But it's the organized party that has completely forsaken any interest in the truth.

>> Do you think that that Trump era has made you more of a partisan?

>> That's a very good question.

You know...

I think I saw this happening well in advance with the polarization of the parties and the asymmetry of the polarization.

Republicans have moved to the right in a way the Democrats have not moved to the left.

They have moved to the left but not to the same extent.

That's something that's been documented by a lot of academics.

Fundamentally, I'm a professor at heart.

And so I just saw Trump as the culmination of this.

I'm not sure that Trump has made me any more partisan or cynical than I was already.

I actually find it a little bit harder to write during the Trump era than I did during the presidency of George W. Bush, because there's just such an overwhelming cascade of outrage that it's actually hard to talk about the policy issues.

People are -- I look at the most -- >> Do you think you contribute to that, though?

Do you think you're swept up in that?

>> I try not to be.

I actually -- If you look at what's being written in The New York Times, you'll probably find that I'm writing a lot less about Trump than many of my colleagues on the op-ed page.

Much more about policy, much more about the broader issues.

By the way, the readers are not necessarily -- The readers want more raw outrage.

>> Do you feel yourself having to pull back from that just because the readers want it?

>> Well, I feel that I need to do a little bit of counterprogramming.

>> Yeah.

>> I need to -- >> You have a responsibility... >> I have a responsibility to broaden the debate, push a few issues, to get beyond just the "Trump is a terrible person" thing and say, "Okay.

But let's talk about policy."

It's not necessarily what the readers want.

If you look at what the most popular paper -- stuff in The New York Times, it's actually kind of funny these days.

It's kind of impeachment, how to boil a perfect egg, impeachment, grilling with mayonnaise, impeachment, right?

And it's a little bit hard to be talking about fiscal policy.

>> But let's talk about fiscal policy -- and monetary policy, for that matter.

Ideas that are influencing the current debates.

Can you just define for us quickly, how do you define monetary policy and fiscal policy?

>> Okay.

Monetary policy is, the Federal Reserve basically changing the money supply, the amount of stuff in circulation, which it does by buying and selling U.S. government debt, but it doesn't involve spending money on anything.

It doesn't involve cutting people's taxes or raising them.

>> Which is fiscal policy.

>> And fiscal policy is when the government goes out there and decides to build a high-speed rail link or or a new tunnel under the Hudson or -- or cut your taxes or raise your taxes, whatever.

So it's taxing and spending.

>> John Maynard Keynes, the economist who influenced Franklin Delano Roosevelt in the Great Depression and influenced the economists and the thinkers around that time that federal spending would help us get through an economic depression, he influenced you.

>> Very much.

Keynes was the greatest economist of the past century, by far.

>> Then I'd like to get your reaction to another Nobel laureate who was on this program in its original incarnation with William F. Buckley Jr.

The program ran from 1966 to 1999, and in 1968, Milton Friedman was on this program talking explicitly about Keynes.

>> Now, I've always regarded it as a great tragedy that Keynes died when he did, because one of his great capacities was flexibility.

>> Yes.

>> He could shift as times changed.

Had Keynes been alive, what is called Keynesian economics would never have been carried to the extremes, that is had he lived beyond 1946.

Keynesian economics would never have been carried to the extremes that it was carried.

You know, Keynes was a -- he was a -- he was a great economist.

We mustn't -- It seems to me you must avoid the denigrating the man because some of his disciples carried some of his arguments much too far.

Yet I think that, had he lived longer, he would have led a retreat.

>> So the generation of people who have -- who studied economics between, let's say, 1940 and 1952, 3-4-5, were more or less -- took it as received doctrine, that the way to prevent excesses in economic cycles was through the manipulation of fiscal policy.

And you say that, increasingly, they have not become convinced that it is not fiscal but monetary policy that is crucial.

>> Milton Friedman was a great economist, but, you know, we know a lot more than we did when he was on "Firing Line" all those years ago.

>> It is true.

And the study of monetary policy has advanced far beyond what we knew in 1968.

>> And what we learned is that, actually, under depression conditions, under conditions when interest rates have dropped to just about zero, Keynes was right and Friedman was wrong.

>> Why?

>> Well, Friedman thought that the Great Depression could have been prevented if only the Fed had printed enough money.

But the main point was that we came to 2008, where we had kind of a replay, another severe downturn, and we had Ben Bernanke at the Fed.

>> Who had, by the way, Friedman and Keynes and The Great Depression as his major focus of his study when he was at Princeton.

>> And Ben Bernanke engineered a very expansionary monetary policy, the kind of thing that Friedman said could have prevented the Great Depression.

And even so, the unemployment rate went to almost 10%, and within a couple of years, people at the Fed were saying, "We could really use some help from fiscal policy here."

So, in fact, we got to run this experiment a second time, and it turned out vindicating the Keynesian position.

>> Well, 10% unemployment is a lot better than 25% unemployment which is what you had in the Great Depression.

>> But the big difference was that we had -- I would say was that we had a much bigger government so that even though we had a very limited, deliberate stimulus, we had a huge amount of what economists call automatic stabilizers.

You know, your job might have disappeared, but Medicaid money was still flowing.

Medicare money was still flowing.

>> There was already a safety net.

>> Safety net was still in place, and taxes went down.

So if you look at what happened to the U.S. economy, the mere existence of a pretty big federal government provided a pretty strong cushion under the economy.

>> I want to play a few things that you've said over the years, which can also be found in your new book.

>> Okay.

>> The right's denunciation of AOC's "insane" policy ideas serves as a very good reminder of who is actually insane.

>> I stand by every one of those remarks.

>> So, Republicans are bad people?

That's the one -- I mean, that's one of them that stands out.

>> Yeah, professional Republicans, right?

An ordinary person on the street, somebody I might meet over lunch who declares herself a Republican can perfectly well be a perfectly nice person.

But to be a serving Republican member of Congress right now, to be backing the Trump administration with all of the information that you have, to be refusing to hold it to account, yeah, that makes you a bad person.

>> And is there any way to engage in an arena of ideas when you've demonized your opponents in that way?

>> Well, is it demonizing if they already actually are demons?

I mean, that's -- >> Well, I think you're proving my point right there.

>> But that's -- The trouble is that you cannot -- This is, in a way, the whole point.

The reason I talk about arguing with zombies is that zombie ideas about fiscal policy, about climate change, about a whole range of issues -- healthcare policy -- have completely taken over official Republican discourse.

>> That doesn't mean that every Republican in America is like that, but it means that everybody who is serving -- >> Very generous of you to distinguish people who identify with the Republican Party and the people who they elect to serve them.

>> Yeah, no, I have -- I have people that I've had long-term, good relations with in the economics profession who still call themselves Republicans.

But either they dissociate themselves from what the modern Republican Party is actually doing or they're just kind of oblivious.

They still imagine that they're -- that this is the Republican Party of Dwight Eisenhower, and it isn't.

>> Given the escalation in partisanship that you've described, do you think through whether there is an opportunity in your column to heal the country?

>> I don't think... We are not having a good-faith argument on most issues.

And -- >> Aside from the political debates, though, can people who are informing the ideas of the debates that then feed these policymakers, their ideas for legislation, can people like you and your counterparts not have good-faith debates?

>> Oh, we certainly can.

But is anybody in an actual position of power listening?

There are many, many Republican, or at least formerly Republican, economists who could be advising this administration on policy, could be advising Congress on policy?

None of them are -- They're all on the sidelines.

They're not wanted.

>> What I hear you saying is, there's no way to debate and engage in ideas in a Trump era with Republicans in Washington right now.

>> That's right.

Republicans in Washington are essentially lost to any kind of honest debate.

I wish that weren't true.

I wish there was a way to reach out, but there hasn't been, and there hasn't been for a long time.

Probably not, I think, since John McCain passed away, right?

There has been nobody you could talk to.

>> And you don't think there's anyone behind closed doors that you can engage with?

The part that strikes me -- right?

-- is that it's washing your hands of an entire caste of people.

>> Well, you know, if there is a Republican senator, let's say, who privately believes that climate change is an existential threat, then the fact that he's not saying that is itself an enormous abdication of responsibility.

So I don't really care whether that's what he actually says behind closed doors.

If he's not -- doesn't have the courage to say it in public, then he's not doing anybody any good.

>> Are you saying that there is not a single Republican senator that believes climate change is an existential threat?

>> Oh, I don't know that.

There may well be.

For all I know, there may be 30 or 40 of them who believe that it is, but not one of them willing to say it.

>> Lindsey Graham has said it.

Marco Rubio has said it.

One's from a state that actually is facing climate change right now in a very dramatic and drastic way, Florida.

>> But when pre-- when push comes to shove, when you talk about doing anything about it, they're always against it.

>> Lamar Alexander, Lisa Murkowski also believe in climate change.

They say it's an existential threat.

>> But they're not doing anything, so... You know, where -- You know, it may be that if the political winds shifted, they would sort of come out of the closet and reveal themselves as being reasonable people, and I'd like to hope that would happen, but the only way that's gonna happen is if Republicans lose really badly in an election.

>> You've been writing very positively about Elizabeth Warren.

>> Yeah.

>> Is she you preferred policy prescription to the time?

>> I mean, I'm a progressive.

She's very progressive.

I'm also somebody who likes well-thought-out plans, and she has very well-thought-out plans.

And she happens to be the only one of the Democratic presidential candidates I know personally, and I like her.

But whether she's actually the best choice for nominee, I have no idea.

I don't think we know a whole lot about electability.

In terms of policy, I think it makes almost no difference which person the Democrats nominate, because in practice, whether it's Joe Biden or Bernie Sanders or Elizabeth Warren or anybody you name -- Mike Bloomberg -- what you're gonna get is a moderate expansion of the social safety net, some increase in taxes on high incomes, and it's probably gonna be about the same set of policies in practice, whoever it is.

>> There are sort of mainstream Democrats, maybe more moderate Democrats, who think that Joe Biden is more electable.

Because they're frankly worried about a $33 trillion single-payer healthcare option.

>> I am not worried at all about the size of the bill for everything that Bernie Sanders is promising, because it isn't gonna happen.

The reality is -- >> If it were realistic, would you worry?

>> It's big enough that we would need to have a lot of additional taxes to pay for it.

And that's true, regardless of your economic doctrine.

We're talking about a whole lot of spending.

You know, if you're gonna propose a Denmark-style welfare state for the United States, you're probably gonna have to have Denmark-style taxes, as well.

And so...

But on the other hand, Denmark -- Two things -- first, it's not gonna happen.

Secondly, Denmark is not exactly a hellhole, so I'm okay with it, regardless.

I'm not worried about the programs of any of the Democrats.

I worry about electability all the time.

But, actually, I'm also aware that I don't know anything.

>> With that, Paul Krugman, thank you for coming to "Firing Line."

>> Well, thank you.

>> Good luck with your book, and thank you for being here.

I appreciate it.

>> "Firing Line with Margaret Hoover" is made possible by... Additional funding is provided by... Corporate funding is provided by... >> You're watching PBS.