>> this week our guest is robert samuelson, who writes columns for newsweek and "the washington post."

>> bob samuelson, one of the things about your habits as a reporter is that you never vote. >> years ago i decided not to vote because i thought that when you vote you make a psychological commitment to one side and against the other side, and i thought it better not to do that. i discovered a number of other journalists, including the former editor of "the washington post" had the same practice, and i assumed for roughly the same reasons, but my wife decides this as one of the dumbest things i do. and she has a long list. >> why? >> she thinks you ought to exercise your right as a citizen and she does not think that the privacy of a voting booth prejudices' you one way or the other, and she probably thinks, although we have not discussed at great length, that you have a

bias against certain parties and positions anyway. you write a column that is an opinion column, so what is the big deal. but i'm comfortable with it, and since i'm writing the column, that is what i do. >> when did you start the column? >> the column started in late 1976 when i went to work for "the national journal" magazine, a magazine published in washington that is intended for mainly lawyers, lobbyists, congressmen, senators, their staff people, academics, people who deal in policy and are interested in the details of policy. i was hired there in 1976 as their economics reporter, and part of that job description was writing a column. it started off as an every- other-week column, and then became weekly when "the washington post" asked to use

the column. i have been doing this since 1976, one way or another. >> i saw somebody saying why should i pay any attention to him because he does not have an economics degree. >> that is true, i do not have an economics degree and i think that is a strong point. if i can explain things to me, i can explain things to reader. i am not trying to impress economists, a relatively small group, and i'm trying to subject economic theories and arguments to the evidence and to practical common sense. so, although having an economics degree would be helpful in some ways, it is a burden in other ways because people who have economics degrees are often writing to fellow economists. that is definitely not who i am writing for. >> when did you get an interesting economics? >> i guess i was always

interested in little bit, but this was an accident. many people pause careers turn out to be partially by accident. i got out of college, where i was at harvard, and i wanted to go into journalism. this is the late 1960 pause when journalism was not high-tech professional career. i got a job at "washington post come out as a metro reporter, reporting about washington, the city and suburbs, whatever. i was hired in late 1968, and when i came down in early 1969 to take the job, the editor said we had an opening on our business staff. the business staff was fiber six people. "would you take it -- the business staff was five or six people. "would you take it?" i thought was a good idea to say yes. eve he had asked me to be a

sports reporter, i would have said i was unqualified and had no interest in doing it. but i had taken a couple of economics courses in college, and i said yes. one thing led to another. >> are there a number of guideposts you have when it comes to economics? when you sit down and decide i'm going to do a column on something, what is going on in your head at the time, for me, the reader? >> i really trying to do two things. i'm trying to set up -- to find something relevant and important, and something that might be interesting to the reader. i envision my reader as somebody of reasonable intelligence and reasonable curiosity but no specialization who is trying to understand how the economic world impacts his or her everyday life, and sort of explains what they see going on around them. so it is a news judgment i make

every week, and obviously it depends on some of the things that interest me and that i think are important. i have written over the years going back many years now about the nature of the federal budget and how it has been transformed into a vehicle for basically -- the largest part of the federal budget goes for paying for benefits for older americans, and i have written about that substantially. frequently. going back over many years. i think it is highly relevant, but it is not a subject that is often popular because i have said we need to reduce these benefits because we have an exploding population of old people, including me. i just turned 65. and it will not be easy for the country to afford all these benefits. one day, probably 10 to 12 years ago, a guy who did not like what i was writing came into the

office and said i have a solution to your problem. first we're going to line up all the old people and shoot them, and then we're going to line up you and shoot you. so you get a negative reaction every once in awhile. >> i have a friend who says, "this country is going down, and it is going down economically," and he has bought gold, gold ingots that he can put his hands on. what would you say to him? >> i'm not a gold bug and i have not purchased gold, but i have become more pessimistic about our future over the past 10 or 15 years, mainly because we have not addressed the problems that are quite obvious, including the burdens of an aging society that will play out through the federal budget. if you go back to the late 1970's and early 1980's, the american economy was in terrible shape. we had double-digit inflation,

people thought that double-digit inflation could not be cured in any practical way. the inflation was destabilizing. we had four recessions between 1969 and 1982. the harshest recession led to an unemployment rate of 10.8%. people were very pessimistic about america's future because it seemed we could not control this phenomenon. i was not all the pessimistic because i thought that there were problems that were soluble with pain. in the beginning of the 1980's, paul volcker, then the chairman of the federal reserve board, but the country through an awful recession. this recession resulted in the unemployment reaching almost 11%, but it did purge the country of inflationary psychology. that was one of our problems, high inflation. the other economic problem we had at that time was that our management had become

overconfident and complacent and many of our companies were being mismanaged. that was a problem but also was salt more or less in the 1980's. beginning in the early 1980's, we had a 25-year boom essentially. in the course of that 25-year oom were the solving of these problems we were experiencing in the late 1970's. the problems we have now, it seems we are much more reluctant to address and find it much harder to address. it may be that the reagan- volcker alliance that crushed inflation was a happy accident for this country, that if we had other leaders at the time they would not have done that. i have argued that that is the case. but right now, for the last 20 years, we have not had political leaders who have been willing to address problems that were completely obvious and have been

written about extensively for narrow -- 4 narrow and understandable but misguided political reasons. >> the 21st of december, this reuters story came across my desk, and i want to read a couple of paragraphs and get your reaction to it. "the u.s. government fell deeper into the red in fiscal 2010 with that liability swelling more than $2 trillion as commitments on government debt and federal benefits rose, and the u.s. treasury report showed two things, corporate style accrued accounting -- showed the government's liabilities exceeded assets by $13.47

trillion. how can we do this? >> first, i think that is the wrong way to look at our problems, because it is extremely complicated, and the distinction between cash and accrual accounting, although it is a significant difference, it is a technical one. i prefer to look at things on a year-to-year basis and see what the trends are. we have a huge deficit and have now for the last two years, well over $1 trillion. most of that is of the understandable consequence of a really savage recession we are going through. but if you look at the projections that are made, the deficits are endless because the government basically has made more promises than it can keep at the existing level of taxes. social security, medicare, and medicaid, the first being an income transfer to people over 65, the second being health insurance for people over 65,

fully for medicare, almost fully for medicare and partially for medicaid -- those three programs already constitute 40% of the federal budget. if you look out over the next 20 years, 30 years, whatever you want, as the baby boom, my generation, retires, the number of people and the proportion of elderly, over 65, is roughly going to double. at the same time, we have not controlled health spending. when you put all that together, just maintaining the existing commitments of the federal government basically means that the budget has to expand on the order of 40% to 50% over the next couple of decades. that can only be met in a number of ways. one is you can raise taxes vary sharply, which we have a huge transfer of young people to older people, which i do not think his economic prudent or socially justified. or you can run these massive

deficits that at some point will be unsustainable. or you can engage in dramatic cuts of other government programs. all this has been known for decades, and we basically have ignored that problem. and continue to ignore it. and the amounts are in the trillions of dollars, and if we had decided to do what we could have done, in the beginning or middle of the 90's, or even the end of the 1980's, begun to reduce the benefits for wealthier retirees who really do not need some of these subsidies, and begin to reform health care in a way that reduces the sort of in exorable increases in spending, we would be in a lot better shape today than we are. >> based on the new house coming

in is republican, the senate less so but more so than it was last time, the president signed up for not increasing taxes, where would you guess would we be a year from now? >> my guess is that we will be basically -- i hope the economy improves in 2011, and the consensus among economists, which i am now 1, is that it will improve and that -- of which i am not one, is that it will improve. there will be some reduction in the deficit if that occurs, but in terms of dealing with these long-term problems, i do not see us making much progress. i hope i'm wrong but i have been disappointed too many times in the past. the democrats seem to think you can solve these problems by just taxing the richest 1% or 2% of

the population, the republicans think you can ignore spending and simply enact an endless number of tax cuts and somehow pay for them by cutting other spending. but this is -- the spending for the elderly is the major part of the federal budget. the three programs i mentioned earlier are twice the size of the defense budget, for example. so if you do not attack that problem, you are ignoring the basic mismatch that exists in our federal accounts, and in the role of government as people conceived it. right now there is tremendous public support for cutting the deficit. there's also a large majorities that oppose doing the things that would over the long term really begin to reduce the deficit. i looked at a recent poll, and roughly 60% of the public opposes both increase in the eligibility age is for social security and increasing medicare

premium for wealthier retirees. if you are against those things, you're basically against doing very much about the federal budget. >> i have your book that you wrote in 2008, the new version in paperback, called "the great inflation and its aftermath." the reason i hold up is to ask you -- we keep hearing that we are going to get inflation back. that is the way that possibly we get out of some of this mess. what will happen that will increase inflation? >> first of all, right now i do not think inflation is a big threat. it conceivably might become a threat in the years to come, but what would happen is basically the federal reserve would keep pumping money into the economy, regardless of how much prices when up. it would ignore the problem. i do not think that is going to happen. i do not think the public expect it to happen. if the public began to think

that the federal reserve had lost all committed to keeping inflation down, i think it would become self-fulfilling. in writing that book, one of the conclusions i came to is that it is extremely important what the public -- and by public i mean ordinary consumers, ordinary taxpayers, business executives, labor union leaders, the whole gamut -- what people think the government is going to do. once people became convinced in the late 1960's and early 1970's that the government did not care very much about containing inflation, you got a kind of built-in wage price spiral, the higher prices would produce higher wages cannot higher wages would produce higher prices, and the thing just fed on itself. and the government was unwilling to take, until the early 1980's, the punishment of a recession deep enough and severe enough to convince people that the

government, the federal reserve and the rest of the government, really was determined to stop inflation and would stop it almost at any social cost. i think that lesson has now sunk in. even though the fed has kept interest rates very low, people do not expect inflation to increase, and therefore the business practices and wage practices are quite restrained. businesses do not raise prices and do not feel they can, and workers are not hungry for jobs and do not push for big wage increases. but if the psychology changed, then you could see a reversal of this. the one thing we have absolutely learned over the last 30 years is that economists and other sages of the economy are not good at predicting what actually happens. so i do not pretend to have a

crystal ball to tell you what will happen in two, three, five years. >> how often do you write? at once a week. i do a to -- >> once a week. i do my column, but then i do this book and i have done to the bureau of the books before that. >> how do you tend to get reaction? >> i get some email reaction, but i do not get as much reaction as you would think. over the years, i'm not flooded with emails the next day after a column, and i get some calls from people who either agree or disagree, and i still get some letters through the old- fashioned mail. but i'm not inundated. i have to say i'm one of the few last columnists who does not print his email at the end of the column. if you want to get in touch with me, you ought to have to go through a little bit of trouble.

this is not a constitutional right, so i do not print my e- mail at the end of the column. if i did, i am sure i would get a lot more emails. >> when did you make that decision? >> it is a decision by did not make. my editors have encouraged me to do this, but to me it is like voting -- not voting. it is the way i am. people can comment on the columns, and there are typically, after a column runs in the post, there are typically hundreds of comments. i do not look at them all the time, but when i do, i see a lot of the comments had nothing to do with my column, or they are very strident. but sometimes somebody picks up something and starts to run with it and somebody else responds to it or whatever, and frankly i do not care to be inundated with those kinds of the mill's every day, nor do i care to engage in

the kind of fear of having an e- mail to which comments might be sent in which people would get an automatic reply that mr. samuelson received so many emails that he cannot possibly respond to them all. so if somebody really wants to get in touch with me, they can find my e-mail by searching the net, and that is fine. but i do not given a free ride. >> how many words approximately is each column? >> when i started writing for "the national bujournal," it was about 1100 or 1200 words. over the years it has constantly shrugged. it is slightly different in " news we" and the post. in "the post," it is 700. in "newsweek" id is 700 or 800.

>> how do you check your own riding? when you lay down a lot of figures, it does anybody say this is garbage, this is completely incomprehensible? >> well, before it is published, for years i have had a very good friend of mine who is an editor and reporter of the "los angeles times" edit my columns before they even go to "the post" or 2 "newsweek." and joel, being very smart, having covered the economy at the "l.a. times, and at "the national journal," where we both worked as well, he has a substantive background and is a good writer. he is an expert at grammar. when things are not clear, he tells me. and when he thinks i'm saying

something -- his political views are different than mine, and when he thinks i'm saying something that is really off the range, he tries to rein me in. then i go either to the "newsweek" editor's or the editors at "the washington post" writers group that syndicates the column, and they are very good, too. particularly editors at the writers' group, when i say stupid things are things that are unclear, they say let's clarify this. they do what editors are supposed to do. i have always regarded editors as my friends. what every rider wants to hear is "this is the most brilliant thing that has ever been written, it is completely clear, you do not have a word out of place," but unfortunately that is not the reality. i regard editors as protecting against myself, so i listen to them. >> those joel do this for free? >> no, i make a payment to him.

he objected to my making it when we entered this arrangement, and my impression is that he gives it to charity. he is a very good friend of mine, and i value his guidance. >> i have a column here from december 13, the headline "the flight from risk." i will read the first paragraph. >> well, it was obvious in the aftermath of the financial crisis that americans of all

sorts, beginning with wall street types and ceo's, but down to ordinary consumers, had underrated the risk that they were undertaking. so this is in some ways a very natural reaction to this financial climate that we had, that the people who borrow a lot are running off their debts and saving more, and corporations are building up huge cash awards because during the crisis they were cut off were feared they would be cut off from normal sources of financing. so this is the kind of normal reaction. but it is also to some extent one explanation as to why we are having such a weak recovery, because businesses do not want to undertake risk, they do not want to hire people if they do not feel there is an absolute need to hire them. as i pointed out in the column, half the hiring that has occurred over the last year has

been through temporary job services. companies are taking -- even when companies are taking more people on, they do not make a permanent commitment to that. ordinary americans also are cutting back, and they are reluctant to take on new debt and they are trying to build up their savings because their cash reserves and their wealth have been depleted by the decline in the stock market and housing values. my theory is that this is going to linger and that we will have a much more cautious, risk- averse economy going through the next few years to a decade or so, because this traumatic event will leave such a large scar on our collective psyche. that would, on average, contribute to a kind of slower- growing, more sluggish economy that has more difficulty meeting the obligations that people

expect, from jobs to public services and new products and the rising living standards. >> as you look out over the landscape of people that you cover and that you write about, who has done the best job, from your perspective, over the past two years? if you had to name one person who has made some important decisions that you liked? >> you are talking about -- and that anybody in the government, dr. >> anybody in the government, leaders? >> if you wanted to talk about one person, i would pick out ben bernanke, because he stepped down in the fall of 2008 and provided the backstop to these financial markets there were collapsing. financial institutions that were used to borrowing, some sources that were not able to borrow,

banks were not lending, the commercial paper market, a source of short-term credit for businesses and for financial institutions, was freezing up. ben bernanke and the federal reserve stepped in and created an array of very complicated liquidity institutions inside the fed that provides -- that is it we substituted for private credit, so that the collapse of these markets was arrested, and the hysteria and panic that people were feeling at the time was basically stopped in the economy stabilized. but i would say that a lot of people -- now, go back a little bit before that and you say that bernanke and the federal reserve did not anticipate this crisis and they conceivably might have prevented it if they had anticipated it earlier, so this is kind of a double-edged sword. if they had better policies earlier, they might have avoided it. you could say the same thing

about henry paulson, the treasury secretary. although his reputation is not as high as bernanke's, during the crisis he reacted decisively to help stabilize the economy and financial markets. i think when president obama came in, they continued to broaden these policies. so i think the credit for stabilizing the economy belongs not just to one person but to run a ray of people in both parties, but they all made -- but to an array of people in both parties, but they all made mistakes and nobody was perfect. under other circumstances, things might have got much worse. >> who do you think has been wrong? >> everybody has been wrong. did somebody create a single sin that led to everything else? i do not think so. >> if you listen to the talk shows --

>> i do not. >> if you listen to the top shows, they point their fingers to the other side. if you listen to who is right and wrong, conservatives say president obama is a socialist and all that. if you listen to the left, they will say it is george bush's fault and all that. fault and the's rich, and all that? when did you shake your head? >> in the book, i argue that the rise of double-digit inflation and the fall of double-digit inflation was really one of the major if not the major economic event of the last half-century. here is what happened, in my view. at the beginning of the 1980's, reagan and volcker crushed the inflationary psychology. how? by putting the economy into the

device of a terrible recession, by raising the price of credit, by tightening credit, and i basically creating unemployment and excess capacity that brought down wage increases and brought down price increases because workers needed jobs and companies could not sell at the higher prices. and continuing that policy long enough to basically send out the message that the federal reserve was no longer in the business of accommodating a wage price spiral. >> did they know at the time there was going to be higher unemployment? >> absolutely. it went higher than they thought it was going to go, but this was a deliberately engineered recession to get rid of inflation. what that it was triggered 25 years of prosperity. the stock market went from less than -- the dow jones industrial average was under 1000 in 1982. it went to over 10,000 by the end of the 1990's. you had only two very short

recessions during this whole period, the recession of 1990 -1991, and the highest unemployment rate during the whole period was 7.8%. in the early 1980's, if you wanted to buy a house, you were talking about interest rates of 14%, up 15%, 16%. so you had huge increases in jobs, essentially a stabilize the economy. although people complained about the economy, it was much better than it had been in the previous 15 or 20 years. my view is that this adduced enormous -- this induced an enormous amount of confidence and complacency across the political spectrum, across the spectrum of economists and regulators. so the dubious financial practices of subprime lending,

lending to people on the assumption that their housing prices would continue to go up so that loans were safe even if people had reasonably low incomes because mortgages would always be refinanced at lower interest-rate as housing prices went up, and owners require more equity -- the stock market, even despite modest declines, would go up and people would get wealthier. so people borrow more, households had creasing wealth over this period. so you had a classic boom and bust cycle. the boom created enormous amount of complacency, and people started doing things that in retrospect were just dumb. in some cases they were unethical, in other cases they were illegal. but the context and the climate in which this occurred was not one in which all the blame belongs to republicans or all the blame belongs to democrats. president clinton was president during a large part of this sort

of extended boom. george bush was president during a large part of this extended boom. economic officials in the clinton administration basically backed the policies that helped create this boom, and the same policies were basically followed in the bush administration. so this was a crisis that has deep historic roots, but you have to follow the history of what happened as opposed to simply engaging in this kind of partisan screaming match that has become the standard explanation for what happened and why. it is not that everything that people say on both sides of the ideological divide is mistaken. they are factually correct, but they overlook the context and the climate in which all of these things occurred. >> what about the fannie mae /freddie mac has story? number one, we do not know much about them anymore.

you do not see much coverage -- you never see what is going on inside. >> what fannie mae and freddie mac did was part of the boom, and again, they assumed that the mortgage climate was less risky than it turned out today. i do not think they would have follow the policies that they did under different circumstances. these institutions were created by congress to promote home ownership and promote the housing industry. they were extremely thinly capitalized, meaning they had very small capital bases for trillions of dollars of lending. the assumption was that their losses were going to be minimal. they helped power the housing bubble, but they were not the only force powering the housing bubble. the same practices were followed in the private sector as well. so the argument that now people are having, which is that it was all fannie and freddie's

fault or all the private- sector's fault, in my view is a false dichotomy. they both were subject to the same kind of intellectual and financial influences and they both did more or less the same thing. >> so go back to my friend who says it is all going down. you do not think so? >> i am much more pessimistic about the future now than i was 25 years ago. >> what do you think is the worst that can happen? >> the worst that can happen is that the united states would default on its debt, which i do not think will happen but 10 years ago it was inconceivable. it is not inconceivable anymore. united states will simply say we cannot afford to pay 100% on the bonds that we have borrowed, and we cannot afford to pay interest rates that we have undertaken to pay. and the people who borrowed from us will have to take a haircut. they will have to receive 90 cents on the dollar instead of

receiving four% interest -- and instead of receiving four% interest, they would receive 2% interest. to the extent you can imagine them, they would be horrendous. people would lose faith in the dollar, up dollar assets, and the dollar might go into decline. banks and financial that held treasury securities as part of their capital curtail their lending and there would be a chain reaction that would make the financial crisis of 2008 look like child's play. that is one of the worst things you can expect might happen. but there are other things that conceivably might happen. we have a global economy, a global supply chain, and not all the countries that are parts of the supply chains are all that friendly with each other. you sort of ask yourself what would happen if we start to come

in conflict with some of these countries, and there are a lot of things you could imagine happening that would destabilize the world and pose a threat to future prosperity. i have to say, in those circumstances, i am not sure that your friend's gold bars would do him much good. >> why? >> because i'm not sure you would have a working market. that people would be willing to give him other things for that goal. >> why is it that everybody, if haveare in business, you to pay your debts, and in your own family you have to pay your debts and all that, and why is it that the government keeps spending? >> well, it is not that the government does not pay its debt. the government, when a 10-year treasury bond comes due, and it

is $10,000 or whatever, the government pays $10,000, and it pays interest. the difference is that the government has, until now, limited access to the credit markets. if the government says people need to borrow, people will lend to the government because it is a good credit risk because the entire wealth and income of the united states ultimately stands behind the u.s. treasury bonds. >> let me ask a different way. >> if you ask -- the fact that that is true makes it easier for the government to spend beyond its means. it makes it easier for the government to spend more than it is willing to tax. so politically that is quite advantageous. now generations of politicians going back to the 1960's have been willing to do this because it is politically very appealing to spend a lot more than you tax people. up until the 1960's, there was a

custom in this country that in good times you balance the budget. in the 1960's, we broke that taboo. in the kennedy-johnson years, we broke that taboo. once it has broken, it has been impossible to restore it. that was a self restraint that was built on custom and habit. not that you balance the budget every year, but outside of war times and economic depressions and severe recessions, the government made an effort to tax as much as it was going to spend. we got out of that habit and we do not do it anymore. >> you have watched this town for years. how many years have you lived here? >> since 1969. >> the republicans are saying they're going to come back to town and cut. do you expect that, and will it make a difference? >> well, i will believed it when i see it. and if they do not go after spending for older americans -- social security, medicare, and

medicaid -- it is essentially a fraud. because you cannot bring in the budget under control unless you deal with that issue. that is the bulk -- that is the largest chunk of spending. if we try to compensate for the increase in spending that is going to occur, by the retiring of the baby boom, and uncontrolled health-care costs by cutting other programs, we will really savage a lot of these other programs that are very important, including national defence. i do not think we should do that, and i think as a practical matter it will be very difficult. we cannot get at the problem of the budget without getting at the problem of the welfare state. like europe, we have a welfare state. we transfer income to people who we think deserve it. >> we have watched great britain. we went over to london and talk to a lot of people over there

and try to compare the two countries, and you see lots of people on the streets with all the cutting. there's not a lot of cutting here at all. do you see a lot of cutting? >> they have made substantial cuts in future spending to bring down the amount of spending as a share of their economy, of their gdp, their economy. even after they do that, their government spending will be higher as a share of their economy than our government spending. the european tradition is to have a larger role for government and americans feel comfortable with. but we have not done anything like what they are attempting to do, and i think we will need to do something. what they have done is they have gone to basic premises. they have said that some spending is just not justified and we are not going to do it anymore. those are the kinds of questions we need to ask. how much should the government -- that is to say, taxpayers --

subsidize the retirement of people who are reasonably well off to begin with? when should they do it? should they do it at 62, 65, when life expectancy has increased dramatically since the 1930's when social security was enacted, and even dramatically since 1965 when medicare was enacted? at 65, you can expect to live another 25 years. the average person over 65 now receives from the government through social security and medicare, about $25,000 a year. >> when you say social security and medicare, you have doctors saying that if they cut us like they are planning to, that they will stop taking medicare patients. >> i think sooner or later that will happen, but i do not think it is about to happen right now because first i do not think

they will be cut. secondly, i think most doctors, not all doctors, the doctors that i have been familiar with, feel and ethical obligation towards their patients. it's not just a monetary transaction relationship that they have, so i think that they will try to make accommodations. they may spend less time with medicare patients and may make it more difficult to get appointments for them, but i do not think they will stop seeing them. but the fact that they are complaining points out that our health care system is really quite dysfunctional now. spending goes up year in and year out, and it is not clear we are getting more, better health care as a result of the spending. one of the reasons that the system is out of control as it is, it is basically too balkanized. you have doctors that are

specialists that recommend to their patients that they have this procedure or this therapy, and there is very little coordination between different specialties. you do not have the kind of networks that would be much more sensible from an economic point of view and also probably from a health-care point of view. >> where do you fit in the spectrum between the canne keynesian and milton friedman follower? >> i have learned a lot from studying both schools, and i would say i'm kind of a pragmatist. i think friedman was clearly right about inflation, that inflation in the united states and almost everywhere where it has reached high levels is created by the government printing too much money, creating too much money in the ways that it does. once that was accepted in the united states, intellectually

accepted and politically embraced in the late 1970's, early 1980's, we got a handle on it. he was wrong in -- he postulated that you could have a kind of mechanical increase in the money supply every year and that that was the best rule to follow. that is a tactical matter, but that turned out not to be the case. but friedman was fundamentally right about the nature of inflation and how to convert it. the keynesians are certainly right about the 1930's and the initial diagnosis of our current recession, and that is to say that the fundamental problem was absence of demand, and the need to create enough demand somehow to make sure that the economy does not go into kind of a vicious downward spiral. on the other hand, i do not think they paid as nearly -- nearly as much attention as they

should to the microeconomics of white businesses create jobs and why they hire, and they have -- of why businesses create jobs and why they hire, and they have not paid enough attention to reducing uncertainty so that a business facing a practical decision, do i hire another person or 10 people, why they do so verses not doing so. i think health care reform that obama pushed through congress has not been helpful in providing the economy because it has created an enormous amount of uncertainty for employers. it is unbelievably complicated, and if you were a small or medium-sized businessman trying to figure out what you have to do under this law, it is immensely complicated. there are certain thresholds. if you're below 50 employees, you do not have to meet certain requirements. if you are above 50 employees, you do. if you look at this and say if you are a company with 48

employees, will you expand 55? probably not because the cost of hiring those extra six or seven employees, you looked -- you will take on a lot of more obligations under the law. i look at a lot of the evidence, and i hope that people are using it to explain what is happening. i ask myself, is this -- >> go back to your column for a minute. who do you have in mind when you are writing? >> i have in mind someone i consider of reasonable intelligence and reasonable curiosity who is not a specialist in the things i write about, and i am writing to that person. i do not want that person to be put off by jargon. i do not want that person to be put off by my riding a sense or a paragraph that assumes a great deal of knowledge about things.

i have been laboring under the belief or perhaps the illusion that you can perhaps say things that are not just simple minded by writing to a general audience, and you can say things that will also appeal to somebody who is reasonably knowledgeable and sophisticated by clear writing and a kind of intelligent marshaling of the evidence. but i have deliberately tried to keep this column accessible to a mass audience, and it is not targeted to an audience of businessmen or corporate executives or economists or bankers or people who are sort of steeped in economics and finance. that is not the audience. i hope it appeals to people like that, but i do not aim it at them exclusively. >> take this recent tax bill, or whatever you want to call it. what were you thinking in the middle of all of that? here you have president obama

saying definitely we were going to give a tax increase to the rich, over $250,000 then you had the republicans who said we have got to cut this budget. and then depending on how you look at it, there is and $850 billion price tag on all this -- and is that true, by the way? >> it is true, but it is misleading. it is misleading because they agreed on most of the things that were in that package. they agreed on extending the bush tax cuts for people under $250,000. i think they fundamentally agree on doing something on unemployment insurance, although republicans said they would not do it unless they got certain other things. so the ad-ons that were not expected, that did not

accomplish the sort of consensus there really already existed, the 2% payroll tax holiday and somewhat larger estate tax exemption than had been considered, that people thought would be part of the consensus. that added perhaps $200 billion. my own view is that they simply should have stuck with the status quo. they should have extended all of the bush tax cuts a couple of years because this was not a time to mess around the recovery, which is quite fragile. essentially for political reasons. they should have made bipartisan pledged that they would overhaul the tax system and reduce all rates by broadening the tax base. the burden on wealthier people, even while they were reducing tax rates, they could have got

rid of some of the tax deductions that exist now. i personally do not think that they should have gone with the 2% payroll tax holiday because the deficit is already very high, and i think symbolically it indicates a lack of seriousness in dealing with it, despite all the rhetoric, that both republicans and democrats were going to get serious about the deficit and then they go out and increase it by $200 billion. i do not think it was necessary. but i didn't actually write about that issue because everybody else was writing about it. i felt i really didn't have much to add. the arguments have been aired on both sides, and i wrote the columns that you saw there, what about the increase in risk aversion, people becoming much more cautious, and the other one about the state of government

finances. and the problems there. again, going back to your original question, when i write, i try to write on something that will help my readers understand. so i try to stay away from things that everybody else's writing about, or if i am writing about that, i try to find some slightly different angle that i hope will inform people. >> here is one from november 27 -- november 22. you pretty much what everybody

in that process. do people think you are on one side or the other? >> you know, yes i do. a lot of liberals think i'm conservative. some conservatives think i'm liberal. there are a number of people -- when i say people, these are people that i come across to e- mail me or whatever. some people say i really don't know what your politics are. i try to be sensible. i try to judge things by what actually happens as opposed to assuming that all the good guys on one side and all the bad guys are on the other. >> what would you advise somebody who are tired about the rhetoric on both sides, they're

both sides of -- their tired of both sides playing politics all the time. how did you test any thesis somebody has? what kind of guidelines can you give us as we are reading what to think about when somebody announces here is what i am going to do for you? >> i guess over the years people should be skeptical. i don't regard myself as a kind of a player here. i don't regard myself as marshaling are lobbying for this or that. >> let me read more.

>> that is the problem. the problem is, to simplify it only slightly, our political leaders tell their bases and even -- what they think they want to hear. >> isn't this going to kill us, though? >> i have come to the sad conclusion that what is going to make us face up to these problems is some sort of crisis or forced action as opposed to political leaders doing what they should do, leaving us out

of it in dealing with problems that are obvious. what is sad about this is there are a lot of social problems that we have for which there are not obvious solutions. people have been talking for decades about reforming inner- city schools. it is a very difficult thing to do, so we have not really done so. this is an issue for which there are obvious things you can do. you can cut benefits and raise taxes, and that is basically -- that is what the argument should be about. >> we are out of time, but i have to do this again. you are not related to paul samuelson. how many times have you been asked that question? >> several hundred, maybe several thousand. i met him once in an airport very briefly, and he had a "newsweek" column that i now write in the 1960's an 1970's. when i got it, he wrote me a

very nice letter which was one or two lines. the last line was, "someone cannot be allson bad." he had a very good sense of humor, and obviously he wasn't giant among economists. -- he was a giant among economists. >> the book will be out in paperback, 2010. "the great inflation and its aftermath," robert samuelson. thank you. >> thank you for having me on. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2010] >> for free transcripts, visit

us at today.org. -- at q&a.org. >> next, live, your calls and comments on "washington journal." live at 1:00 p.m., a debate between the candidates for republican national committee chairman. >> tonight on "the communicator's," how the federal government's technology policies directly affect high-tech companies, including taxes, broadbent, and -- with rey ramsey. >> this morning, a political round table with politico's round table with politico's glenn thrush and lisa mascaro