>> brown: from iraq, margaret warner updates a violent week as the u.s. combat mission winds down. >> woodruff: betty ann bowser returns to new orleans to find out how three families are coping five years after katrina. >> i think we've done a great job considering all the odds that were against us. >> brown: and mark shields and david brooks offer their weekly analysis. >> woodruff: that's all ahead on tonight's newshour. major funding for the pbs newshour has been provided by: and with the ongoing support of these institutions and foundations. and... this program was made possible by the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you. >> brown: there were new signs today of a continuing and prolonged economic slowdown, even as federal reserve chairman ben bernanke said the central bank was prepared to take further measures. under increasing pressure to respond to fears about the economy's fragile state, chairman bernanke delivered a much-anticipated speech today at the fed's annual conference in jackson hole, wyoming. he said he continues to believe there will be "some pickup" in growth next year, but that "growth recently appears somewhat less vigorous than expected." bernanke stopped short of committing to any immediate moves, but raised the possibility that the fed would make substantial purchases of securities and government bonds to lower long-term rates and boost lending. his remarks came shortly after more bad economic news, as the commerce department announced that gross domestic product expanded at a 1.6% annual rate last quarter, less than the 2.4% pace it had previously estimated. and that followed evidence this week that housing could be falling into a second slump, as new home sales fell 12.4% in july to the lowest level in nearly a half-century. chairmen bernanke also spoke of the high unemployment rate, saying it: "poses risks to the sustainability of the recovery itself through its effects on households' incomes and confidence." despite the gloom, wall street today seemed to focus on the fed's willingness to act. the dow jones industrial average gained 165 points to close at 10,151. the nasdaq rose just under 35 points to close above 2,153. for the week, though, the dow lost six-tenths of a percent; the nasdaq fell 1.2%. we get two assessments now of the economy and the fed's response to it: paul krugman is an economist at princeton university and a columnist for "the new york times." douglas holtz-eakin is a former director of the congressional budget office and, most paul krugman, i'll start with you. you wrote in your column today, this isn't a recovery in any way that matters. so did you sense today that benn bernanke agrees and is tacking the right steps? >> well, he may agree, but he's not taking the right steps. i mean there was no sense of urgency in his talk. yes, he said we'll do something if the situation warrants. but here we are, you know, this is, we're now 32 monthss into the slump. unemployment is disastrously high. growth, the economy needs to grow about two and a half percent annual rate just to keep unemployment from rising. it's not doing that. what would it take to justify action. so you know t was a good signal that he is saying you know, the fed is kind of sort of willing to do something maybe which is better than previous statements. but if this isn't the situation that warrants action now, what would be that kind of situation? do we have to have a whole great depression to get the fed moving. >> brown: what did you hear from the fed today? >> well there was a little bit in there from everybody. he said we recognize the economy's struggling. and thus tried to make sure people didn't think the fed was out of touch. he told those who were worried about the economy going down in double dip that they had things they could do and he outlined them. then at the end he told the people worried about inflation, believe it or not, look we're not promptsing higher inflation. united states is not going on the record for that. i thought was a talk carefully designed to appeal to lots of audiences. >> brown: carefully designed but what about the state of the economy that paul krugman sees in dire straits needing more. >> the economy is not in good shape. i think about that. there ought to be great agreements. but the key is that the fed has done all it can do. it did a tremendous job in propping up the economy during the crisis. it is now badly extended. the key is now that we have an economy that is growing. it's been growing for about a year but it is growing too slowly. we ought to rethink this not as a crisis sort of stimulus issue but one where we have to concentrate on long-term growth and do you will at things to make the economy grow faster. >> brown: that gets to the none of the argument, paul krugman. what should the fed do. what do you want to see it do? >> i think it should be throwing everything including the kitchen sink at the problem. i mean doug is saying that the fed has done all it can do. s this's not what the fed says. the fed says it has ammunition. it continues to have the ability to act. so we should take them at their word and see them actually act. they could do purchases of long-term bonds. they can raise their inflation target which, you know, ben bernanke when he was a princeton economics professor advocated for japan when it was in a similar situation. >> brown: explain, to the audience what that means and what impact it would have. >> sure. the fed has... it has in its mind and more or less publicly an idea what it wants the inflation rate to be over the next five years. that's believed to be about 2%. if the fed were to make it known that look, we actually think it should be 3% that would at least give some incentive for people, corporations that are sitting on piles of cash, to say you know that cash will be less. we should spend more. make it a little bit more attractive for people deciding we have a good investment project but they're not really sure whether they should borrow for it. it will make them think t will be easier to service that debt. it's something that can move decisions at the margin. there is a whole list of things that the fed can do. they are all uncertain because we are in unchartered territory. we haven't been in this kind of situation where short-term interest rates, which the fed really controls directly are basically zero. we haven't been in this situation since the 1930s. but that's not a reason not to act. and yet the fed is sort of saying well, you know, things are uncertain. maybe things will improve. and this may not look like a crisis to the fed but to the very large number of people who are unemployed, to the near-record number of people who have been unemployed for more than six months. and more than a year. this is a crisis. i'm amazed that there is no greater sense of urgency. >> brown: respond to that. >> the first thing the fed is going to say an i think probably, is look, we'll hold on to am o things in reserve in case the economy actually goes down again and then we will act. i that i appropriate. let's look at this economy. we're not in unchartered territory. lots of economies have gone through financial crises and what is characteristic of them? they grow slowly coming out of them. you don't get a v shape recovery. you grind out over a long period. the u.s. is doing that. it has a household secretary their is very weak. had a lot of debt going in. houses aren't worth what they used to be, portfolios aren't worth what they are used to be it is to the going to spend its way out this he are to the going to power us out. governments are in the same shape. a lot of problems with long-term federal budget. states are in bad shape. there is one healthy part of the economy. it's the business sector. they've got cash. they've got the capacity. and instead of scaring them into spending it as raising inflation target might do, we ought to give them some positive incentives. and the business community has been very vocal about how they feel this administration has been anti-business and it's hurting them. >> brown: but you earlier said you didn't think the fed even had much in the way that it could do. now is that the argument or is it that they can do certain things as they suggested today, but those might pose new risks. >> i think they can do more things. they said it clarely in the speech. paul is right about that. but we ought to hold on to those in case the economy actually begins to go into a recession again. >> we have been growing for a year. and it's important to think about this problem correctly. and i think the administration has misdiagnosed it. this is a growth problem. the united states has been growing for a year. it's growing too slowly. so we need to throw everything at taking the long-term budget deficit off the table. control spending so businesses aren't worried about higher taxes, higher interest rates or both. get some trade agreementsment don't just talk about it, do it so we can sell to other customers. keep taxes low on, you know, savings and investments. these are important issues for business. and they have a long list of gripes about the policy agenda with this administration that is not imaginary, it's real. and it's hurting their ability to drive this economy. >> brown: paul krugman, come back. >> it's imaginary, doug. this is something that is paid up it is their lobbyists who have that long list of problems. but when you look at surveys of businesss who are asked why are you not investing, why are you not hiring, they say it's lack of demand. the economy is not strong enough for them to start hiring. we need to do something to make this economy stronger. not five years from now, not ten years from now, but now. we need to prop this up. yes, it's true that the aftermath of financial crises is usually a long period of poor economic performance. but that's not something to just accept. we're supposed to do something different. when japan had a somewhat similar situation in the 1990s after its bubble burst, american economists, american officials were caustic about the unwillingness of the japanese to take strong action to deal with their problem. the way they were just sitting there. and now we're doing the same thing. we are turning japanese. our economic policy. this is not something we should be accepting. this s it's very easy for comfortable people like all of us, right, in this discussion to say well, you know, these things take time. not necessarily. and we should be trying to do better, not just sitting and accepting this prolonged period when productive workers, men and women who want to work can't find jobs. >> brown: you also wrote today about the politics. i mean the other thing that one could look to and often have in the past with the stimulus from the government. you see the politics as taking that off the table right now? >> unfortunately, i think so. i think that the economic case for doing more fiscal stimulus is very, very strong. the markets are not worried about u.s. debt. they will willing to lend at low-interest rates to the federal government but relistically given the way the u.s. political testimony works, your chance of getting 60 senator force another major stimulus is something less than zero. so i'm, you know, i would be all for it but i don't think it can happen. >> brown: what do you see on that? >> i do not think anyone should be complacent. i absolutely agree about this. this a situation where we need to do things differently and actually grow faster. stimulus will not be the solution. this is no longer an economies that's falling and needs the government to step in and prop it up. it's growing. it's just not growing very well well. have to think of it as a growth problem and to do what japan did which is spend a lot and raise taxes, exactly the mix you are hearing the administration talk about is to become japanment we can't go that route. so take the tax increases off the table. don't rely on government spending. let the private sector drive this thing. and it's not imaginatio imagination-- imaginary to look at things the administration wants credit for, increased emphasis on clean technologies. increased health it, those aren't stimulus. those are costly changes in the american economy. they're trying to do in the name of stimulus, that's not helpful. >> brown: douglas holtz-eakin and paul krugman, thank you both very much. >> thanks a lot. >> woodruff: still to come on the newshour: the humanitarian crisis in pakistan; margaret warner in iraq; the people of new orleans, five years on; and mark shields and david brooks. but first, the other news of the day. here's hari sreenivasan in our newsroom. >> sreenivasan: an american prisoner jailed for illegally trespassing in north korea is back in the united states. former president jimmy carter negotiated his release in pyongyang, and the two departed there earlier today. aijalon mali gomes was greeted by his family and friends on the tarmac in boston. gomes had been teaching english in south korea before crossing into the north last january for unknown reasons. homemade bombs killed three u.s. troops in afghanistan today. the attacks were in the south and the east, but no more details were given by nato. 35 americans have been killed in afghanistan so far this month, as fighting there has escalated. nato announced today a joint force has wrapped up a week long offensive northeast of kabul, killing about 40 taliban fighters and capturing key operatives. the first video of 33 men trapped in a mine in chile shows them healthy and in good spirits. they've been trapped underground since the mine collapsed august 5. the footage was shot by a tiny camera lowered down through a small emergency shaft. we have a report narrated by rohit kachroo of independent television news. >> reporter: it is cramped and dark, and the only light comes from their mining helmets. but there's little about their spirit to indicate the depth of their ordeal. ♪ they sing the national anthem; then, some of the men they take the chance to send a message home. "i am here, my mother," says one man; "i am okay, my friends," says another. then, with similar optimism, each one speaks into the camera as they stand shirtless in the heat. they play dominoes to help stimulate their minds. along with food and medicine, a video camera was sent through the bore hole to take us through the keyhole of their underground home. and it shows how a mini- community with daily routines has formed. they've divided the space into separate areas-- one to eat, one to sleep, another to wash, and another for leisure activities. they have a daily meeting and there's daily prayer. they keep busy by cleaning and sorting their provisions. and as well as dominos and cards, they're encouraged to sing and make videos for their families submariners arrived near the mine today. life in "the deep" is the nearest thing to the underground shelter. and the men have been told that those with waists of more than 35 inches won't be able to squeeze out of the escape tunnel. they appear to have coped well for 22 days. but there may be a hundred days more underground. >> sreenivasan: chile's state- owned mining company is drilling the escape tunnel, and the chilean government is footing the bill for the rescue efforts. the company that owns the mine has said it can't afford to pay its miners and may go bankrupt. mexican president felipe calderon said today a state prosecutor investigating the massacre of 72 migrants is missing. the graves were discovered on tuesday, and the prime suspect is the zetas drug cartel. the prosecutor and a police officer involved in the initial investigation disappeared on wednesday. also, the u.s. state department told its diplomats in monterrey, mexico, to remove their children from the area. two weeks ago, there was a shoot-out in front of an american school there, and kidnapping threats are on the rise. the u.s. birth rate has dropped to its lowest level in a century. the national center for health statistics estimated 4,136,000 children were born in 2009. that's down nearly 3% from 2008. researchers said the economic crisis may be partly to blame, prompting people to delay having children. those are some of the day's major stories. now, back to judy. >> woodruff: we turn next to the catastrophe in pakistan, where flooding is spreading further south. the united nations estimated another one million people have been displaced. in the north where the devastation began, survivors cling to life in desperate conditions. special correspondent jeffrey kaye is there and filed this report. >> reporter: on july 29, a village died. over the course of an hour, flood waters engulfed the village of zareenabad. just about all of its 11,000 residents escaped to higher ground, but three people died and dozens are unaccounted for. now, below the foothills, along a windy strip of land, sharing space with the local graveyard, is a settlement called, in pashtun, keem-abasty new-cally, which translates as "new village of tents." >> we have provided 370 tents >> reporter: najeeb ullah, project director of a pakistani aid group called idea, says as many as 6,000 people are now refugees in their own neighborhood, camped out on land that sits between a hillside and their flooded village. supported by care, the international relief organization, the villagers have received tents and cooking utensils. water is delivered by trucks. but this is a public health nightmare. people get enough food for about one meal a day. waterborne diseases and skin infections are on the rise. one reason is the absence so far of sanitary facilities. right now, there are no toilets. for how many people? >> 5,000 to 6,000. >> reporter: 5,000 to 6,000 people without toilets. >> yeah, without toilet. in kyber pahtunkwhwa province in the north, where floods first began health workers are confronting a variety of immediate medical concerns. dr. guido sabatinelli, an epidemiologist, is with the u.n. world health organization, which is helping to fund the medical assistance. >> the water they use for washing themselves, or they don't wash. they go days without washing. look at this children. this is scabies. look at that. >> reporter: and how serious is this? >> this is a very heavy infection. >> reporter: and spreads? >> and spreads all over the body, of course, and of course it spreads inside the community, because also this is contagious. this is a family-- probably all the family has the same. so this is just the child, but the mother, the father, all the other children, they are in the same condition. >> reporter: health dangers are compounded when the tents are pitched, as they often are, close to standing pools of water. what does that mean in terms of the health risks? >> very soon, we will have, if they are not already present, mosquitoes. i can check. yes, look at that. this is a anopheles. this is a larva. malaria will occur, of course. in pakistan every year, there are one million cases of malaria. we are expecting to have five times as much, five million cases, and we are preparing for that. >> reporter: not only do the smallest insects pose big risks, so too does living in proximity to livestock. in poor rural areas, large animalare substantial investments, often the only precious property salvaged from the floods. by living next to animals, people risk contracting infections from their animals. pakistan's widespread devastation is straining the country's already inadequate medical system. not only have the floods increased the need for services, they have damaged or destroyed about 500 health facilities, according to the u.n. as a result, the government has turned many schools and colleges into shelters and clinics. amon