The McLaughlin Group

Host: John McLaughlin

Pat Buchanan, Author and Columnist;
Eleanor Clift, The Daily Beast;
David Rennie, The Economist;
Mort Zuckerman, U.S. News & World Report

Taped: Friday, May 2, 2014
Broadcast: Weekend of May 3-4, 2014

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JOHN MCLAUGHLIN: Issue One: Angela Comes Calling.

German Chancellor Angela Merkel arrived at the White House on Friday at a time of unprecedented German power.

GERMAN CHANCELLOR ANGELA MERKEL: (Through interpreter, from videotape.) This is a very important issue. It will be very important for us to bring the negotiations very quickly to a close.

MR. MCLAUGHLIN: Since the economic crisis of 2009, five years ago, Germany has been the driving force of the European Union's economic policies, from the size, terms and timing of bailouts for weaker EU members to the breadth, depth and pace of European economic integration.
On the eastern front, Germany's caution in confronting Russia has controlled the pace of EU and American sanctions and tempered NATO's response in the frontline countries of Poland and the Baltics.

Close ties with China give Germany a foothold in Asia, and Beijing a line of influence through Berlin. In fact, the increase in trade between China and Germany, particularly in German exports to China, has exceeded all expectations. Germany is China's number one trade partner in the EU and the top foreign investment destination for German companies is China.

Based on this emerging economic symbiosis between China and Germany, quote, "a special relationship," unquote, is now emerging.

Item: China needs technology and Germany needs markets. Structural similarities and shared economic interests are key for this emerging special relationship.

Item: Germany's approach to China is mostly driven on the need of its exporters. Germany's foreign policy is based on the idea that economic exchange will lead to political and societal change in China.

Item: China sees Germany as the most useful country for its economic development. Germany is an attractive partner because of Germany's prominent role in the EU, but also because of increased German dependence on China.

Item: Nearly a quarter of EU imports from China go to Germany.

Item: During 2010, Germany's trade with China grew by 34 percent to $181 billion. China is now the second-largest market for German exports outside the EU.

Item: Chinese demand is especially high for German machinery and cars. China is the biggest market for the Mercedes S class. Chinese officials are driven around Beijing in them.

The confluence of these factors makes Germany one of the most influential, if not the pivotal foreign policy player on the world stage. Angela uber alles.

Question: Who calls the shots, Chancellor Angela Merkel or President Barack Obama? Pat Buchanan.

PAT BUCHANAN: President Obama in this crisis in Europe, John, is pushing, but he has a powerful restraining force in Angela Merkel, who not only speaks for Germany, the fourth-largest economy in the world, the dominant economy in Europe; she's a powerful restraining force.

However, Germany is something of a giant Switzerland. It is not a big military power. It is non-interventionist. It is anti- sanctions. It does not want a conflict over Ukraine or Crimea. And so Merkel, I think, is speaking for the Europeans, and she's been a tremendous restraining force. And the only way she's going to be brought around to support real serious sanctions on Russia is if Vladimir Putin makes a grave mistake, I think, and sends his army across that border, in which case Barack Obama will be calling the shots.


ELEANOR CLIFT: Well, in the press conference that Merkel and President Obama had on Friday, the president went through all the sectors of the economy where they would be -- he would be calling for sanctions. He left out oil and gas. And when Chancellor Merkel spoke, she pointed out that six of the 28 European Union countries are totally dependent on gas coming through the Ukraine.

So she clearly is going to put the brake on sanctions that are going to damage the economy. But the president doesn't want to throw the economy into a -- the world economy into a recession over this either.

MR. MCLAUGHLIN: Mmm hmm. (Acknowledging.)

MS. CLIFT: So I think there's some negotiation here. Merkel speaks Russian. Putin speaks German. They -- if there's any conversation going on here, it's between the two of them. So she's a critical player if they're going to be able to deescalate this crisis.

Germany is also the banker of the EU. And she also has longevity. She was in office when George W. Bush was in the White House. She is the most important player by far in this constellation of western players. And the president knows that, and he was very welcoming to her on Friday.


DAVID RENNIE: There's a fascinating difference in the way that people in America and people in Germany view how the Cold War ended. You know, Americans will tell you that President Reagan, you know, through peace through strength, brought about the collapse of the Soviet Union. The average German will tell you that the Soviet Union -- it was friendship and reaching out and sort of the -- (inaudible) -- of the diplomatic and peaceful friendship with the Soviet Union that allowed Germany to reunify, that allowed the western Germans and the eastern Germans to become one country.

So they have a completely different view. They don't think it was western military strength that brought the Soviet Union to an end. They think it was friendship and pacifism and diplomacy that brought the Cold War to a happy end. So it's a totally different view about Russia as a kind of friend who allowed Germany to reunify. That, as well as the trade relationship, means that Germans are just not up for a big confrontation with Vladimir Putin.

MR. MCLAUGHLIN: How interesting.


MORT ZUCKERMAN: Well, I share that view. I don't think the Germans have any interest in a major confrontation with the Soviet Union, with Putin in particular. And I think there's a real sense that Putin is a very, very smart, very tough-minded guy, and you just don't deal with him by going head to head with him. You've just got to find a way to negotiate with him. And he has at this point very little respect for the United States and for its leader. So the Germans are going to play a disproportionate role because of the lack of traction that the president has.

MR. BUCHANAN: John, if they cross that line -- if Putin crosses that line into eastern Ukraine, I think the United States will have to basically demand sector sanctions. And I think there could be a real crisis in the NATO alliance if that happens.


What do you think?

MR. RENNIE: Well, it should be said, Angela Merkel is not naive about Vladimir Putin. They have this very strange, very ugly relationship. We've had diplomats telling us -- (inaudible) -- Angela Merkel is frightened of big dogs. It goes back to her childhood. When Vladimir Putin discovered this, he made sure that his large, aggressive dog was in some of his meetings with her --

MR. BUCHANAN: (Laughs.)

MR. RENNIE: -- just to kind of set her back. And this got reported in the German press. She has no illusions about the kind of man he is. But she has these gigantic commercial interests and a public --


MR. RENNIE: -- (inaudible) -- confrontation.

MR. MCLAUGHLIN: Jim (sic/means John) Vinocur, former executive of the International Herald-Tribune, argues that Germany is turning against the West on Russia. Have we decided here that that's not the case?


MS. CLIFT: In the press conference this morning, the president basically said that Russia is bombarding -- Russian media is bombarding their public, and the media is going into Germany blaming the U.S. for basically the destabilization of Ukraine.

MR. RENNIE: And the German public --

MS. CLIFT: And he was urging --


MS. CLIFT: -- the German public to not listen to the propaganda.

MR. MCLAUGHLIN: Let's move it forward a little bit. OK, what about EU-U.S. trade?

On the Obama-Merkel agenda this week: The TTIP, the Transatlantic Trade and Investment Partnership, a proposed free-trade deal between the U.S. and the EU, of which Madam Merkel is a long-time advocate. The EU as a whole is already the U.S.'s number one market for exports. TTIP enthusiasts hope that passage will further open Euro-markets and eliminate tariffs.

But there are hurdles, including disputes over data privacy standards, the safety of genetically modified foods, and environmental standards.

Question: Are the trade talks going anywhere? What's the outlook for agreement this year? David Rennie.

MR. RENNIE: Well, the sad truth is the Europeans would like to know what are the prospects, and they're pretty worried by some of the stuff they hear from the American Congress in the context of free- trade deals with Japan. There was an idea that there was a kind of queue in this. A big Asian trade deal had to be finished before they turned to the transatlantic deal.

So the Europeans are not quite sure whether Congress is willing. They're also not sure whether Barack Obama is really willing to spend serious political capital when the labor unions, his traditional allies, are very unhappy about free trade. You've got the midterms in November. So Europeans, you know, even before they get to their real differences with America on trade, they're not sure how serious Obama is on it.

MR. BUCHANAN: The fundamental problem, John, in the United States, in the trade deal with Japan and with Europe, is the rise, if you will, of a measure of economic populism, which is largely centered now in the Democratic Party, which is the people feel that these trade deals are done for the benefit of transnational corporations, not for the average individual. And Congress is seeking -- some members feel that they're speaking for the American people when they say no to these trade deals, going all the way back to NAFTA.

MS. CLIFT: Well, Obama doesn't have any political capital to spend on this on Capitol Hill. He just doesn't. And so Merkel in Washington is going to speak to the Chamber of Commerce, and apparently the White House is urging her to tell the business community to put their muscle behind this, because if it's going to happen, the pressure's going to have to come from elsewhere. They're not going to do what President Obama --

MR. BUCHANAN: The corporate elites --

MS. CLIFT: -- wants them to do.

MR. BUCHANAN: The corporate elites are the ones that want this deal on both sides.

MR. MCLAUGHLIN: Exit question: In terms of East-West relations, how would you best describe Angela Merkel? Pat Buchanan.

MR. BUCHANAN: She is pro -- she is the western individual who leads the West in trying to accommodate the East.


MS. CLIFT: Thank God she's on our side. (Laughs.)


MR. RENNIE: She doesn't want to call the shots, but she wants a veto. Germany always wants a veto on these things.

MR. ZUCKERMAN: Well, I think she's the most important player in Europe, as far as we are concerned. And I think her relationship with us is critical to all of the things that we want to do, but particularly in terms of international trade.

MR. MCLAUGHLIN: I agree with you.

Don't forget, the McLaughlin Group has its own website, and you can watch this program or earlier programs on the Web at any time from anywhere in the world on
I'm going to read my comfort card of the day. Despite the hoopla over online media, new research shows that TV is still king. It's where most people get their information about issues and candidates. TV outdraws online media three to one. And three fourths of U.S. adults say they talk politics every day. Music to my ears.


MS. CLIFT: (Laughs.



MR. MCLAUGHLIN: Issue Two: Anchors Aweigh.

PRESIDENT BARACK OBAMA: (From videotape.) Our goal is not to counter China. Our goal is not to contain China. Our goal is to make sure that international rules and norms are respected.

MR. MCLAUGHLIN: President Obama and Philippine President Benigno Aquino signed an accord this week that allows the U.S. military to visit ports, bases and airfields in the Philippines. Two decades ago, the Filipinos unceremoniously booted the United States out of their territory, causing the U.S. to lose its biggest overseas naval port at Subic Bay.

The new agreement allows America's military short-term access to Filipino bases at Manila's invitation for specified periods of time. It does not give the U.S. any permanent or long-term basing rights.

Why the turnabout? In 2012, China used its growing military might to grab the disputed Scarborough Shoal from the Philippines. China is currently engaged in a risky game of bluff with the Philippines over another disputed island, Second Thomas Shoals, in the Spratly Islands.

With a military that does not include a single jet fighter and a 32-ship navy to patrol 36,000 miles of coastline, the Philippines is manifestly incapable of defending its own territory. That's where Commander in Chief Obama comes in. The new pact means U.S. forces will rotate through the Philippines on naval patrols, military exercises and short-term deployments, hopefully thus deterring China from military adventurism, a la Crimea, in the South China Sea.

Question: Is the U.S.-Philippines defense pact the crowning achievement of President Obama's Asian summitry? I ask you, David.

MR. RENNIE: I think the truth is this is a good fix for some problems they've been having down there. But the Philippines military is so weak that America is not going to go out on a limb to stand between the Philippines and China.

I think the biggest deal actually involved Japan, some of the stuff that President Obama said in terms of extending his treaty obligations to some other islands that the Japanese and the Chinese are disputing. Japan has a really serious military and could have a serious fight with China. The Philippines is just totally --


MS. CLIFT: Yeah, this is --

MR. MCLAUGHLIN: Do you think -- hold on. Do you think that the Philippines going along with this idea is going to inspire other countries to do the same thing -- that is, to turn to the United States?


MR. RENNIE: They're already doing that. They're already doing that. But the Philippines is too weak to be a big, big player in --

MR. BUCHANAN: John, this is outrageous. Let me tell you, this is outrageous for this reason. At the end of the Cold War, the United States defended all these countries. They kicked us out of Subic Bay. They kicked us out of the famous Clark Field that the Japanese bombed at the time of Pearl Harbor. And now that they've got some problems, they say, OK, you Americans can come back and defend us because we can't defend ourselves.

MS. CLIFT: This is --

MR. BUCHANAN: I think there's an enormous amount of ingratitude on the part of the Filipinos, given the role we've played for the last century.

MS. CLIFT: This isn't about gratitude or ingratitude. This is about U.S. interests. And the Pentagon wish list is that they can have access to bases around the world where they don't have to operate them and run them but where they can make improvements so that they receive American jets.
The mantra at the Pentagon is bases, not places. And this is the whole strategy with friendly countries that they have this kind of access. So this is actually the best thing that came out of this trip. It's very important. And it is the kind of the futuristic strategy of the Pentagon that doesn't have the kind of money it once had to actually run bases around the world and where we're not welcome to run bases. This is a very good arrangement.

MR. MCLAUGHLIN: Yeah, well, despite President Obama's denials, the U.S. policy is one of de facto containment of China. Do you agree with that?

MR. ZUCKERMAN: Well, to some extent, of course it is. But we also have to ask at what point, what do we think we're really containing here? I mean, China is not, in my judgment, an aggressive military power. They're an aggressive economic power. That is where, it seems to me, the major, you know, sort of conflict or contrast is going to be emerging over time.

MS. CLIFT: Yeah, the bases are a backup, basically.

MR. BUCHANAN: I disagree with that.

MS. CLIFT: It's an economic power where we --

MR. BUCHANAN: I think they're very aggressive in the East China Sea, in the South China Sea. And I think ultimately they want to drive the United States Navy out of the western Pacific to the second, third chain of --

MR. MCLAUGHLIN: To resolve this -- to resolve this and move on, despite Obama's denials, the U.S. policy is one of de facto containment to China. The U.S. policy is to encourage China to pursue its territorial disputes in an international legal forum instead of through military force. You got it?

MS. CLIFT: The U.S. strategy is not to turn all of Asia over to China but to have a presence there --

MR. RENNIE: It's a hedge. It's a hedge.

MS. CLIFT: -- an economic presence and a military presence.

MR. MCLAUGHLIN: Exit question: Did President Obama's Asian trip succeed with its primary objective, namely, to reassure nervous U.S. allies that Washington can be counted on in a crisis? Yes or no.

MR. BUCHANAN: To a degree, yes.



MR. ZUCKERMAN: To a very limited degree, yes.

MR. MCLAUGHLIN: No, to an extensive degree.

Issue Three: World Stage Weary?

Just as the U.S. is embroiled in a dispute with Russia over Ukraine, a new Wall Street Journal/NBC News poll reveals that Americans may be wearying of the world stage. A majority, 47 percent, say that the United States should be less active in world affairs, as compared to 19 percent more active. Thirty percent believe the current level of activity is about right.

The 47 percent who want the U.S. to be less active is a new majority, as compared to earlier years, when similar questions were asked by these pollsters.

Only 14 percent of Americans wanted a less active role in 2001, 13 years ago. And 32 percent said the same in 1997, 17 years ago.

A similar poll done by the Pew Research Center last year showed a record number of Americans said that the U.S. should, quote-unquote, "mind its own business internationally," unquote -- 53 percent. In 1964, 50 years ago, how many Americans said we should mind our own business internationally? Only 20 percent.

Question: Is America becoming isolationist, Pat Buchanan?

MR. BUCHANAN: No, I would not say so, John. Most Americans want to maintain diplomatic economic ties with every country in the world. They like the fact we're negotiating with Iran. But what they are is they're anti-interventionist, anti going into these unnecessary wars like Iraq and Afghanistan and Libya. They're all fed up with that.

They don't want to fight in Ukraine. They don't want to fight in Crimea. And you saw last summer, John, when Obama was going to attack Syria, air and missile strikes, because of their chemical weapons, the American people rose up as one to stop it cold, and they did.

The elites, John, in Washington, D.C. of both parties are deeply interventionist. But the American people are antiwar and anti- interventionist, but not isolationist.

MS. CLIFT: If you consider the Obama administration part of the elites, I don't see that as deeply interventionist. He's basically kept us out of a lot of wars that, if John McCain had won in 2008 --

MR. BUCHANAN: Good for him.

MS. CLIFT: -- we might be in. I totally -- I hoped you'd agree with that. But after two wars that the American people perceive we lost, and an economy that has tanked, and pouring money into Iraq, which has now plunged back into civil war, and into Afghanistan, which may be better, but it's not a trillion dollars better, and all these young men and women coming home and there are no jobs for them --

MR. MCLAUGHLIN: Mmm hmm. (Acknowledging.)

MS. CLIFT: -- can you blame the American people for saying let's pay attention to home here for a while?

MR. BUCHANAN: (Inaudible.)

MS. CLIFT: Right.

MR. MCLAUGHLIN: Let Mort in.


MR. ZUCKERMAN: Well, listen, I do think, if you try and take the temperature of the American public today, they are much more concerned with what is going on in this country, because we've had an unbelievably weak economy for many, many years. We have a huge unemployment, a huge underemployment. It is only natural that we're going to focus on what's happening here.

But do I think that the United States wants to withdraw from its role in the world? I do not.

MS. CLIFT: No, but isolation sentiment is going to play a role in the 2016 campaign.

MR. MCLAUGHLIN: Don't you think that the -- what shall I say? -- the curtain going up in a bigger way on China is changing America all the time as far as its isolation -- former isolationism is concerned?

MR. RENNIE: I think you can see -- and it's fascinating -- (inaudible) -- that Americans have said for years that China already has a larger economy than America. That's not true. It doesn't yet. So the American public is deeply pessimistic about America's ability to control the 21st century.

I must admit -- I'm probably -- you know, The Economist is probably one of the elites that Pat Buchanan doesn't like. We would like the president to take leadership, to explain to the American people that it's still in America's interest to have a global world order based on rule of law, based on free trade, all the things that benefit America.

MR. BUCHANAN: You do that and --

MR. RENNIE: And if America pulls back --

MR. BUCHANAN: If we do that, we'll wind up like David's
empire, the British empire, John.

MR. MCLAUGHLIN: Issue Four: Blame the Polar Vortex.

The polar vortex has taken the blame for a wicked winter, a wet spring, record seasonal allergies, and now -- get this -- a sputtering economy. The Commerce Department reported this week that growth of gross domestic product in the first quarter of 2014 was a negligible 0.1 percent, the lowest rate of growth since 2012.

The reason: A downturn in exports and business spending and record cold weather in January and February. Economists had predicted a growth rate 10 times higher.

On Friday, the Labor Department reported that the economy added 288,000 jobs in April. The unemployment rate now stands at 6.3 percent.

Mort, do you want to sort this out?

MR. ZUCKERMAN: Well, in the first place --

MR. MCLAUGHLIN: Bear in mind that your stats may be challenged. Is the economy still on the mend, or is it at the recovery -- is the recovery at risk of sputtering out?

MR. ZUCKERMAN: Well, the recovery has been weak, and it's still at risk. But the question is how much risk. What you're seeing now with the unemployment rate is that the only reason the unemployment rate is that low is not because we're creating that many jobs but because a lot of people have left the labor force.

And all of the decline in the unemployment rate comes from the decline in the number of people who are looking for jobs. So there's been a real dropout of people in the unemployment -- in the job market. So what is happening --

MR. MCLAUGHLIN: They've stopped looking for work.

MR. ZUCKERMAN: Yes. What is happening now in terms of the economy, this month, because we've had three weak months in a row, there are a lot of additional construction jobs. There's a lot of additional jobs that come in that sort of back up. It's going to be at least another three to six months before we find out whether this economy is coming out of what is clearly, in some ways, a recession.

MS. CLIFT: Yeah, this is a good jobs number this month. If they can sustain that for the next couple of months, maybe it finally won't sputter out. We've seen this pattern in past years where people got their hopes up -- little green shoots and all that -- and then, you know, August comes and it peters out.

MR. BUCHANAN: But, John, 800,000 people dropped out of the labor force --

MR. ZUCKERMAN: Labor force.

MR. BUCHANAN: The labor force of the United States of America has been dramatically shrinking. And this is a very, very serious problem if you've got -- supposed to have a growing, dynamic economy. And frankly, I don't know anybody who's addressed this particular problem or explained what's happened.

MS. CLIFT: Actually, some of that is people retiring. It's people going to graduate school.

I mean, there are demographic changes that are impacting it.

MR. RENNIE: It's not --

MS. CLIFT: But overall -- yeah, but overall we can't be happy with the way things are going.

MR. RENNIE: The politics of this --

MR. ZUCKERMAN: (Inaudible.)

MR. RENNIE: -- are also fascinating. When you ask the American public in polls, is the recession still going on, even if economists technically say the recession's been over for a while, the American public is convinced that we're still in a nasty recession. And politicians who talk about a recovery get punished.

I mean, we've seen fascinating studies. The Democrats have their own focus groups -- never talk about a recovery; it drives American voters insane with rage, because they feel that their life is very, very tough.

MR. BUCHANAN: And the real -- growth in real wages for Americans stopped flat in 1974, and it really has not gone up since then. So you're talking about -- the American economy is not the dynamic thing it was in the first half of the 20th century.

MR. RENNIE: You're talking about the whole (rich West ?).

MR. MCLAUGHLIN: Well, before we reach for the cyanide, Pat, hearing your moribund outlook on all of this, there's a strong rebound in economic growth, so a 3.5 percent annual rate in the current April- to-June quarter, and growth should reach nearly 3 percent for the full year, from 1.9 percent in 2013. That's expected.

MR. BUCHANAN: I doubt that. I doubt you're going to get 3 percent if the first quarter you got zero.

MR. MCLAUGHLIN: Do you doubt that too?

MR. ZUCKERMAN: I don't believe those numbers at all, the ones that you -- that's a very optimistic interpretation of what's going on in the economy.

MR. MCLAUGHLIN: Let's try and build on that fragmentary optimism that we seem to have some hold on here.

MR. BUCHANAN: You'd have to --

MR. MCLAUGHLIN: Can we cling to the raft for a minute?

MR. BUCHANAN: John, you'd have to grow 4 percent the second, third and fourth quarter to get a 3 percent growth after a zero first quarter.

MR. MCLAUGHLIN: Wait. We don't want Mort to leave here --

MS. CLIFT: The weather was horrible the first three months. It brought the country almost to a standstill. So let's give --

MR. MCLAUGHLIN: Listen to this.

MS. CLIFT: Let's give the numbers a little slack here.

MR. MCLAUGHLIN: Americans earned a bit more and confidence has improved. Manufacturing activity accelerated in April for a third straight month. Businesses are also investing more in machinery and equipment.

MR. ZUCKERMAN: Well, I have to bring out the difference between an optimist and a pessimist, where an optimist, when it comes to the economy, thinks this is the best of all possible worlds, and a pessimist fears he may be right.
I'm in the pessimistic school. That is the most optimistic interpretation that you can give to the rest of this year. We'll see whether it happens, because it's unprecedented, and therefore unpredictable. But right now I'm much closer to Pat than I am to your --

MR. MCLAUGHLIN: What do you think of this, Mort? The average hourly pay was unchanged at $24.31.

MS. CLIFT: Well --

MR. ZUCKERMAN: Yeah. I mean, exactly. Look --

MS. CLIFT: We can't even raise the minimum wage in this country --

MR. ZUCKERMAN: -- we don't have --

MR. MCLAUGHLIN: Wait a minute. You're gagging there a little. Are you all right?

MR. ZUCKERMAN: If -- (laughs) -- if you take out this quarter, look at the last number of years. The economy has grown at 2.1 percent. That is the lowest -- and the predictions of the Congressional Budget Office is that it doesn't increase for the next five years.

MR. MCLAUGHLIN: Predictions. Pat.

MR. BUCHANAN: Marine Le Pen's National Front will crush Hollande's socialists in the parliamentary elections in Europe May 22nd to 25th.


MS. CLIFT: The secrecy around the drug cocktail used to execute people on death row -- the secrecy will be lifted, and a lot of people will be embarrassed.


MR. RENNIE: Things are going to get much worse in Ukraine.


MR. ZUCKERMAN: I was just going to say that. Putin is going to continue his special-ops operations in Ukraine until it gets to be a major crisis.

MR. MCLAUGHLIN: I predict that six months after the November elections, Congress will move to ban the sale of guns to people with mental disorders. The National Rifle Association will be silent on the matter, thus showing tacit acquiescence.


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