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MR. MCLAUGHLIN: Issue one: Weekend from Hell: Taxes and the Market.

Money -- the IRS is yanking it right out of your wallet and stuffing it into Uncle Sam's coffers. And April 15th, the most dreaded day of the year, brings that horror home.

Of course, the real tax day is still three weeks away. It's on May 3rd, and it's called Tax Freedom Day. What does that mean? Well, let's suppose you wanted to pay all of your taxes up front, at the top of the year, get them out of the way, so to speak, so that the rest of the year would be tax-free. How long would it take for you to pay off all your taxes? Until May 3rd. That's right -- over four months of your year is owned by local, state, and federal governments. January, February, March, and April -- kiss them goodbye, as far as income is concerned; those earnings go to taxes.

And if you're lucky enough to be in the higher tax bracket, don't think there isn't a downside. Add May and June as well. Half of your earning year goes to taxes.

It's little wonder that Americans rightfully hate their taxes, and the federal government is taking more this year than any year since World War II. Over 20 percent of the economy, $1.7 trillion, goes to the IRS.

Here's the typical two-earner family making a gross of $69,000. Roughly 40 percent of that $69,000 goes to taxes -- federal, state, and local. Here's the breakdown:

Social Security and Medicare, 12.3 percent. Federal income tax, 8.7 percent. State sales and excise tax, 3.6 (percent). Indirect state taxes, fees and licenses, 3.6 (percent). Customs fees, inheritance tax, and other indirect federal taxes, 3.3 (percent). State income tax, 2.2 (percent). Property taxes, 2.2 (percent). Payroll and workers' compensation taxes, 1.4 (percent). Gas, telephone, alcohol, and other excise taxes, 1 percent. Total, 38.3 percent, $26,437. That leaves that family with gross earnings of $69,000 with a net $42,563.

This year April 15th falls on a Saturday, so the IRS is giving taxpayers until midnight of Monday, April 17th to file. So this is hell weekend, not only because taxes are coming due, but because the market crashes.

Question: Is there any relief in sight -- start with the market, please -- Lawrence Kudlow?

MR. KUDLOW: Well, the market's a very tough one, John. It's going through one of its periodic vicious corrections. The bears are coming out of the woodwork. They get it right about once every 10 or 15 years, and right now this is their day.

But with all respect, I don't think it's going to last. I think the market is overreacting and overcorrecting. I think the fundamental economic freedoms in this country are so sound, and the great technology-based revolution is so strong, that I believe wealth creation and the stock market will both rise once this thing has run its course.

MR. MCLAUGHLIN: A lot of generalities built into your answer. (Laughter.) Is that the best you can come up with?

MR. KUDLOW: (Laughs.) Well, I will say on you tax point, we are seeing a record rise in tax collections so far in fiscal 2000, over 12 percent growth in tax revenues, which is going to create probably -- get this -- a $230 billion budget surplus, well above government estimates. And yet -- and yet -- neither the Congress nor the president can see fit to turn those tax dollars back to the people who earned them in the first place.

And when people got their tax bills in this week before April 15th, I think it may well have had an impact on the stock market, certainly psychologically, and it might also have caused them to sell shares in order to pay off their tax bill.

MR. MCLAUGHLIN: I wonder whether that works the other way. Since most people are running in place as far as their income is concerned, vice their salaries, and their new assets are derived from the market, to a great extent, will the plunging of the market now create what many feel is long overdue -- a tax revolt?

MS. CLIFT: Maybe in your tax bracket, John, but not across the country. First of all --

MR. MCLAUGHLIN: Well, your portfolio, Eleanor, is doing quite well, I heard. (Laughter.)

MS. CLIFT: Well, thanks to you, John, and I appreciate that. But let's get to the subject at hand. This crash, or so-called "downturn," was caused by higher-than-normal, or higher-than-expected inflation numbers, so the good news may be that Alan Greenspan is not going to have to slow down the economy with interest rates because the stockholders have already done that.

Secondly, on whether Americans are overtaxed, the payroll tax is regressive and it -- that should be reduced. There's only one politician, and that's Senator Moynihan, who has ever had the courage to even talk about reducing that tax.

Thirdly, governments around the country are scrounging for money everywhere -- gambling, lotteries -- because they're not getting enough in tax revenues. So the notion that we're going to have massive tax cuts in this country is just foolish rhetoric.

MR. KUDLOW: John, can I make --

MR. MCLAUGHLIN: Well, hold on for one minute. I want to hear from these other two worthies.

MR. BLANKLEY: Yeah, well -


MR. BLANKLEY: Well, this "worthy" is not an economist, but I have some experience in politics.

MR. MCLAUGHLIN: Well, I think you're ahead.

MR. BLANKLEY: (Laughs.) Yeah. clearly, today. But look --

MR. MCLAUGHLIN: I mean the fact that you're not an economist.

MR. BLANKLEY: That helps to understand the market --

MR. MCLAUGHLIN: But you are a lawyer.

MR. BLANKLEY: I am a lawyer, unfortunately.

MR. MCLAUGHLIN: Okay, well, that kind of --

MR. BLANKLEY: Yeah, that cuts the other way. (Laughter.)

(Cross talk.)

MR. MCLAUGHLIN: (Inaudible.) Go ahead.

MR. BLANKLEY: Look, the fact that the markets are going down could have some political effects. One, as you suggest, it could strengthen demand for tax cuts. The Gallup Poll of just this week shows that 68 percent of Americans think that they're overtaxed. That number could not only go up, but the intensity could increase.

MR. MCLAUGHLIN: Who's that going to help? In the presidential election? It's pretty obvious.

MR. BLANKLEY: Oh -- oh, it's the Republicans.

MR. MCLAUGHLIN: It's going to help George Bush. He's the one who wants to cut taxes $487 billion, doesn't he?

MR. BLANKLEY: George Bush has to be living in hope, because if this crash continues with any kind of follow-up over the next period of time -- the whole premise of the Gore candidacy was "good times." If the public begins to believe the good times are behind us, then the political consequence of what we've seen today could very well be damaging to Gore.

Keep in mind that this economy -- this market started turning down the day that the Microsoft decision came in --

MR. KUDLOW: Right. Right.

MR. BLANKLEY: -- which the Clinton-Gore Justice Department started litigation of, so they precipitated what is now a continuing bear market, and may pay the political price.

MR. MCLAUGHLIN: And the irony is that this is going to turn around and bite the Democrats.

MR. O'DONNELL: But that Microsoft reaction was corrected very, very quickly by the market, because it was a crazy reaction. The Microsoft decision is actually good for every other stock except Microsoft, and the market realized that very quickly, so you're not going to be able to pin that on Bill Clinton, this turndown in the market.

MS. CLIFT: We've been on a --

MR. KUDLOW: But Lawrence -- but Lawrence, let me -- this --

MR. MCLAUGHLIN: Let me ask you -- hold on, please. Which is the worse phenomenon, the drop in the NASDAQ or the drop in the Dow?

MR. KUDLOW: Oh, I don't know. Lookit --

MR. MCLAUGHLIN: We're talking about 30 percent -- near 30 percent in the Dow.

MR. KUDLOW: You are, but also please bear in mind, because I -- you're talking to an optimist here; I don't really believe this doom and gloom scenario -- in the last five years, the NASDAQ is up over 300 percent, and the S&P is up over 200 percent. So from peak to trough, it looks worse than it is. Long-term investors have done rather well.

But I do want to respond to Lawrence's point. I think the issue in the NASDAQ and the Microsoft lawsuit is a different issue. What's bad for the goose could be worse for the gander. And that is why a lot of the big-cap technology stocks have been crashing down along with Microsoft. If this Justice Department, John, is going to have a full-fledged assault on technology companies who have large market shares --

MS. CLIFT: Oh, come on!


MR. KUDLOW: -- which redefine --

MR. MCLAUGHLIN: Let him finish! Let him finish!

MR. KUDLOW: -- which redefines antitrust law, that is one of the factors plaguing the stock market, because the economy cannot grow under those circumstances.

MR. MCLAUGHLIN: Okay. We've got to get out. We've got to get out. The -- well, do you want to burst in here with an insight?

MS. CLIFT: Yeah. Somebody need to burst his bubble! (Chuckles.)

MR. O'DONNELL: The Microsoft case was unique.

MS. CLIFT: Right.

MR. O'DONNELL: It should have had no effect on the market, other than on Microsoft stock. But --

MR. KUDLOW: But it did.

MR. O'DONNELL: Well, only for a day, and it recovered very, very quickly.

MR. KUDLOW: It's continuing.

MR. O'DONNELL: What we're seeing this week is a totally different reaction --

MR. KUDLOW: It's continuing --

MS. CLIFT: Look --

MR. MCLAUGHLIN: Eleanor? Eleanor?

MS. CLIFT: -- Alan Greenspan was the one who talked about "irrational exuberance." Everybody knows that the technology stocks and the Internet stocks have been vastly overrated, and we've been riding in here for a correction. You can't pin it --

MR. MCLAUGHLIN: I got -- I want two -- I want to ask two quick --

MS. CLIFT: -- you can't pin it on Joel Klein at the Justice Department.

MR. BLANKLEY: Oh, by God, we -- (inaudible).

(Cross talk.)

MR. KUDLOW: Yeah, I could certainly pin part of it on Mr. Klein.

MR. MCLAUGHLIN: All right. Let's move away from Microsoft. I've got two quick questions for you. It used to be that the three indicators of -- major indicators of the macroeconomy and its strength or weakness were interest rates, inflation, and our unemployment.

Now we have the phenomenon of all of this investment by people of all ranks of life in the market. Is the market now an indicator of the health of the macroeconomy?

MR. KUDLOW: I think, John, the market has always been a good indicator. The market is telling you right now that because of Klein, because of Greenspan's speed limits to growth, because of other factors, the economy is going to be slowing down --

MR. MCLAUGHLIN: So it is -- it's another indicator?

MR. KUDLOW: It's big slowdown indicator.

MR. BLANKLEY: Let me --

MR. MCLAUGHLIN: Well, then this spells bad news, does it not?

MR. BLANKLEY: Let me --

MR. MCLAUGHLIN: It spells bad news as far as the Democrats in the upcoming election are concerned --

MR. KUDLOW: I think the politics --

MR. MCLAUGHLIN: -- because their strength is built largely on the economy.

MR. KUDLOW: I think --

MR. MCLAUGHLIN: Now we've got to move on.

MR. KUDLOW: I think --

MR. MCLAUGHLIN: I want to ask him one more question.

MR. KUDLOW: I think the --

MR. MCLAUGHLIN: What the odds of there being a recession before, let's say, November?

MR. KUDLOW: I think the odds are very low before November.

MR. MCLAUGHLIN: You told us 20 percent the last time you were here, which was long before -- considerably before what we've seen today.

MR. KUDLOW: I won't take it up more than 20 percent. But the politics here are, as Tony said, devastating for the Gore story. George Bush is a direct recipient of this. It's not the greatest way to do it, but the fact is it undercuts the prosperity argument.

MR. MCLAUGHLIN: I'll give you a free exit point. Quickly.

MS. CLIFT: Well, this is just way too premature. And the fact that you all are having this rain dance here, praying for some sort of further downturn in order to elect a Republican seems to me pretty bizarre, even from your self-interest! (Laughs.)

MR. KUDLOW: No, I don't want to do it that way. I don't want to do it that way.

MR. MCLAUGHLIN: Believe me, Eleanor, I am not praying for that kind of a rain dance.

MR. KUDLOW: No one wants to do it that way.

MR. BLANKLEY: I want to make a very quick point. The market used to be a leading indicator of the economy. Now it may be a current indicator because of all the people who own shares.

MR. O'DONNELL: John, even if you managed to provoke a recession today --

MS. CLIFT: (Laughs.)

MR. O'DONNELL: -- to try to elect a Republican president, the effects could not be felt before November anyway.

MR. KUDLOW: Oh, I don't know, I think it's instantaneous --

MR. BLANKLEY: But if people felt effects --

MR. MCLAUGHLIN: When we come back --

MR. KUDLOW: Eighty million people own stocks; it's an instantaneous reaction. But, John, the market is going to come back; I want to make that point.

MR. MCLAUGHLIN: When we come back: Bill behind bars? I beg your pardon.


MR. MCLAUGHLIN: Issue two: Elian end game. In the end game of the long custody battle over Elian Gonzalez, sometimes as surreal as a soap opera, more often as pitiful as a lost child in a mob, a new certainty is dawning: the many lives touched by this smiling six-year-old from Cuba will never be the same. Both personal and political fortunes have risen and fallen during the five-month-long Elian Gonzalez national roller coaster ride.

Question: Who are the political winners and who are the political losers in this saga? First, the political winners.

Eleanor Clift?

MS. CLIFT: Well, I'd say Florida Governor Jeb Bush, who stayed totally out of this issue and hasn't been damaged by it. President Bill Clinton, who let his attorney general take the heat. And I think --

MR. MCLAUGHLIN: Another loser?

MS. CLIFT: Winner. I'm talking winners, they're two winners.

MR. MCLAUGHLIN: Oh, winner. Okay.

MS. CLIFT: And I think Fidel Castro looks like one of the rational people here, certainly compared to the Miami Cubans. I put him in as a winner as well.

MR. MCLAUGHLIN: Can you improve on that? (Laughter.) How about Janet Reno, is Janet Reno a winner or a loser?

MR. BLANKLEY: Well look, it's a little -- we haven't seen --

MR. MCLAUGHLIN: Did you hear my question?

MR. BLANKLEY: I did hear it, yes.

MR. MCLAUGHLIN: Are you warming up to an answer to it?

MR. BLANKLEY: I'm slowly warming up to an answer to it, yes. (Laughter.) I don't have that Cuban blood to warm me up quickly!

But look, I think Janet Reno is probably a loser, not a winner.

MR. MCLAUGHLIN: You mean because she went to Miami and she went back empty-handed?

MR. BLANKLEY: She's in a very hard position. She hasn't made decisive decisions. She did Waco last time, so she's going to be particularly careful, and she's going to be judged by her prior performance, which killed a lot of children, unfortunately. So I don't see her as a winner. I think Castro is the biggest winner.

MR. O'DONNELL: Tony's right, Castro is the biggest winner and the only winner, as he always is.

MR. MCLAUGHLIN: Is Al Gore a winner? Al Gore?

MR. O'DONNELL: In any conflict between the United States and Cuba, the political winner is always Castro because our Cuba policy is insane; it has been since the '60s. This is an outcome that we deserve.

MR. MCLAUGHLIN: Well, then if Fidel is the winner, William J. is a loser?

MR. O'DONNELL: William J. is irrelevant at this point in this game.

MR. KUDLOW: In general terms.

MR. O'DONNELL: He's a loser in the sense of every American president who has supported this demented Cuba policy has brought us inevitably to this day where we would have this ridiculous conflict, John.

MR. BLANKLEY: Oh, no I don't think so.

MR. MCLAUGHLIN: Is Al Gore a winner or a loser?

MR. KUDLOW: I think --

MR. MCLAUGHLIN: We have got to move on. Is Al Gore a winner or a lower?

MR. KUDLOW: Al Gore is a big loser. According --


MR. KUDLOW: -- listen, according to the Rasmussen poll, Gore has lost a slight lead in Florida. He is now six to eight points down in Florida after his flip-flop, whereupon he has now flip-flopped back over the flip-flop. So Gore is huge -- (loser ?).

MR. MCLAUGHLIN: No, you're saying that Gore in relation to Bush, is down about seven or eight points?

MR. KUDLOW: Yes. And he had a small lead --

MR. MCLAUGHLIN: He did. Correct.

MR. KUDLOW: -- in Florida. So he completely lost that.

And I just have to rebut Lawrence, just for a moment. Fidel Castro is going to wind up being the big loser because one of the side effects of this Elian case is it has refocused attention on Castro's Communism. And there will be changes in the policy. And any change in policy will be bad for Castro, who cannot hang on much longer.

MR. O'DONNELL: That's not what's going to happen. Look at China. Every single time we improve our relations with a dictatorship, the dictatorship loosens its reins on its people. That is the mistake we have made, uniquely in Cuba and nowhere else in the world.

MR. MCLAUGHLIN: What about Governor George Bush, Tony, any effect on him?

MR. BLANKLEY: No. He is pretty careful. He kept a very low profile on this. I agree with Eleanor. Those domestic politicians who have tended to keep out of it, have done relatively well.

MR. MCLAUGHLIN: The mayor of Miami-Dade Metro County -- his name is Alex Penelas -- a loser or a winner?

MS. CLIFT: A loser.

(Cross talk.)

MR. KUDLOW: I think he is a winner. (Laughter.)

MS. CLIFT: A loser. (Laughs.)

MR. BLANKLEY: A winner back home.

MR. MCLAUGHLIN: "A winner back home," where?

MR. BLANKLEY: In Florida; a loser in the media elite.

MR. MCLAUGHLIN: A big loser. Did he destroy any hopes, any aspirations of a national career?

MR. BLANKLEY: No. He is a very able politician. He's got a strong -- solid base.

MS. CLIFT: He made his trajectory to a national career --

MR. BLANKLEY (?): (Inaudible) -- it's a little bit more difficult.

MS. CLIFT: -- a lot longer than it might have been.

MR. BLANKLEY: But he is a very able guy.

MS. CLIFT: And in fact if this --

MR. MCLAUGHLIN: You mean that he made a mistake?

MS. CLIFT: Yes. And if this situation turns violent, he bears some of the responsibility.

MR. KUDLOW: I don't think so. I want to take a second opinion. I think the mayor had done very well: He defended freedom, he defended Elian, he is on the right side of history. I also think, John, though you are going to disagree with me, that the Cuban Americans in Miami brought great glory and blessing --

MS. CLIFT: Uh --

MR. KUDLOW: -- to their position for defending freedom and for defending this young child, who should never be forced to go back to that horrible place.

MS. CLIFT: Frankly, if they keep their defiance to a civil protest --

MR. BLANKLEY: Which they already have.

MS. CLIFT: -- okay.

MR. BLANKLEY: Which they already have.

MS. CLIFT: But they are defying the law. They are exploiting --

MR. BLANKLEY: They are not defying --

MS. CLIFT: -- Tony, I get a chance to --

MR. BLANKLEY: They are not defying --

MS. CLIFT: -- speak. Please?

MR. MCLAUGHLIN: Let her finish, Tony.

MR. BLANKLEY: They are not defying the law.

MS. CLIFT: Tony, please. They are defying the law.

MR. BLANKLEY: They're not defying the law.

MS. CLIFT: Several times.

MR. BLANKLEY: They are not!

MS. CLIFT: And secondly --

MR. BLANKLEY: They are not defying the law.

MS. CLIFT: -- they have exploited that child in a way that is absolutely shameless. That video they released looks like something Fidel Castro would have done in a communist country, the way they paraded that child out there and had him mouth these sayings. And they should ashamed of themselves --

MR. MCLAUGHLIN: A reckless disregard for Elian's emotional relationship to his father.

MS. CLIFT: Absolutely.


MS. CLIFT: Absolutely.

MR. MCLAUGHLIN: They are scofflaws, are they not?

MR. BLANKLEY: They are not. They --

MR. MCLAUGHLIN: They are scofflaws! Of course, they are.

MR. BLANKLEY: Cite one law --

MR. MCLAUGHLIN: Don't they influence --

MS. CLIFT: They are behaving as though they are living --

MR. BLANKLEY: -- cite one law that they have broken.

MS. CLIFT: -- in a country apart from the one we are living in, and they could ignore the laws at will.

MR. BLANKLEY: It is wrong to accuse a whole community of breaking the law when nobody in the community in Miami has broken the law.

MR. MCLAUGHLIN: And -- and it's all --

MR. BLANKLEY: People here in Washington wander around saying they broke the law, and they haven't done it!

MR. KUDLOW: And it's also wrong --

MR. BLANKLEY: They've obeyed every single law.

MR. KUDLOW: It's also wrong for President Clinton to let his attorney General twist in the wind. You know, Janet Reno is one of the reasons Bill Clinton is still in the White House --

MR. MCLAUGHLIN: Issue Three!


(Cross talk.)

MR. KUDLOW: -- and he offered her no support at all.

MR. MCLAUGHLIN: Eleanor, issue three: "Begging your pardon." It is an open investigation. There is a principle to be vindicated, and that principle is that no person is above the law, even the president of the United States. So declared this week Independent Counsel Robert W. Ray, successor to Kenneth Starr. Ray has the authority to indict President Clinton on perjury and/or obstruction of justice in the Monica Lewinsky/Kathleen Willey scandals.

That's after the president leaves office on January 20th, 2001, nine months from now. Ray has added six new prosecutorial lawyers to his staff and one new investigator, all of whom will replace the ones who have left the staff. The new hires will focus on whether Clinton's behavior warrants criminal prosecution.

PRESIDENT BILL CLINTON: (From videotape in background.) I did not have sexual relations with that woman --

MR. MCLAUGHLIN: Specifically for Mr. Clinton's statements to a grand jury and in a deposition about Ms. Lewinsky. Clinton has already been rebuked at the civil level. Arkansas Federal Judge Susan Webber Wright found Clinton in contempt if court and fined the president $90,000 last year for giving false testimony in the Paula Jones sexual harassment lawsuit, the case that led to the Lewinsky prosecution.

Second, Ray's office is also investigating whether Clinton gave false statements about his relationship with former White House volunteer Kathleen Willey, who described in vivid detail on television, in March of 1998, how the president had groped her.

Third, also under investigation in the Lewinsky-Willey matters, obstruction of justice by Mr. Clinton and conspiracy to do so. So much for the bill of particulars. There's one person, Vice President Al Gore, who could pull Clinton out of hot water, if needed, and assuming that Gore wins the presidency. President Clinton, would you accept or would you request a Gore pardon?

PRESIDENT CLINTON: (From videotape.) The answer is no, I don't have any interest in that. I don't want one, and I am prepared to stand before any bar of justice I have to stand before.

MR. MCLAUGHLIN: Question: Assuming that Governor Bush is elected president and assuming that President Clinton is indicted by the special independent counsel, Robert Ray, will President Bush pardon President Clinton? I ask you, Tony Blankley.

MR. BLANKLEY: Well, I'm not absolutely certain about this -- (laughter) -- but my hunch would be that after such an indictment, Bush might, as an act of magnanimity --

MR. MCLAUGHLIN: Compassion. Compassion.

MR. BLANKLEY: -- and compassion.

MR. MCLAUGHLIN: He's a compassionate --

MR. BLANKLEY: At the beginning of a presidency, he might want to bring the country together, rather than separate it, so it might make good sense, the law having been vindicated by the indictment -- a pardon, to then bring the country together.

MR. O'DONNELL: He might want to wait until and if there is a conviction -- that would satisfy his right-wing base -- and then issue a pardon.

MS. CLIFT: Well --

MR. KUDLOW: But I think a careful reading of Mr. Clinton's statements on the issue of pardoning shows a non-denial denial. It has a real Nixonesque feel to it -- "I am not a crook."

And you know what else? The Gallup Poll reports this week that George W. Bush runs ahead of Al Gore on the key issue of ethics and morality, 67-23. This whole issue clobbers the Gore campaign every time it comes up.

MS. CLIFT: Well, if the Republicans think that Robert Ray continuing to prosecute this case is a good thing for them, I think they're a little off-base. This is an out-of-control prosecutor, and if he continues to prosecute a case that's been adjudicated in the Congress, where the president has already been cited in court, it is totally vindictive. This isn't a question of somebody being above the law, it's a question of singling --

MR. MCLAUGHLIN: What about Judge Webber Wright?

MR. O'DONNELL: But he's not going to do anything until after the election.

MS. CLIFT: Well, she behaved appropriately, but that's enough. He's gotten hit twice. You don't need this man to continue --

MR. MCLAUGHLIN: Well, that was a civil case. This is now a criminal --


MS. CLIFT: This is out of control, and most people in the country believe that.

MR. O'DONNELL: But the prosecutor is not going to do anything until after the election.

MR. MCLAUGHLIN: (Laughs.) Do you think he should be above the law? Is that what you're saying?

MS. CLIFT: It's not a question of being above the law. He's not able to be treated like any other ordinary person would be treated.

MR. MCLAUGHLIN: We'll be right back.

MS. CLIFT: Nobody else would take this case this far. (Chuckles.)

MR. MCLAUGHLIN: We'll be right back with predictions.


MR. MCLAUGHLIN: Predictions. Quickly. Lawrence?

MR. KUDLOW: I think this stock market episode is going to slow down the Fed, and I think we're going to see a market revival in the second half of this year.

MR. MCLAUGHLIN: Very comforting.

MS. CLIFT: In the continuing saga to show he's a different kind of Republican, George Bush will celebrate or commemorate Tax Day with single mothers and working people in Arkansas.


MS. CLIFT: (Chuckles.)

MR. MCLAUGHLIN: Mr. Clinton's home turf.


MR. BLANKLEY: Republicans will not be able to hit their spending targets that they've set for themselves this week and will spend more than they currently claim they want to.

MR. O'DONNELL: Governor Bush will try to organize a bipartisan meeting of congressional supporters of Social Security reform, and Al Gore will desperately try to stop any Democrats from attending.

MR. MCLAUGHLIN: Last November Taiwan gave the White House a list of weapons it needs to defend itself. President Clinton will deny most of the weapons on Taiwan's list, saying that the volume of weapons is unwarranted and provocative.

A quick second exit question, mandatory: Will Robert Ray indict President Clinton, yes or no?

MR. KUDLOW: Yes, I believe he will.

MR. MCLAUGHLIN: Yes or no?


MR. MCLAUGHLIN: Yes or no?


MR. MCLAUGHLIN: Yes or no?

MR. O'DONNELL: No, he will not.

MR. MCLAUGHLIN: The answer is yes.

MR. O'DONNELL: (Laughs.)

MR. MCLAUGHLIN: Next week: The "veepstakes." Who will Bush and Gore pick as their running mates? Happy Passover! Bye-bye!





MR. MCLAUGHLIN: Issue four: Compassionate once again.

GOV. GEORGE W. BUSH (R-TX): (From videotape.) The meeting was a wide-ranging discussion on issues. I'm a better person for the meeting. I enjoyed it.

MR. MCLAUGHLIN: Governor Bush met on Thursday for an hour with a dozen gay Republicans selected by his campaign. The goal was not to change his mind, it was to start a conversation. So said Steve Gunderson, gay former Republican congressman from Wisconsin.

Bush has been portraying himself as a compassionate conservative, a different kind of Republican, to enlarge his appeal. In that light, the gay meeting and its press coverage could yield political gain.

But former presidential candidate Gary Bauer warned that Bush's political base might be alienated by the shift and that Bush might drive conservatives to Pat Buchanan. "I don't think it does broaden the base when you take that approach. That's the approach that we tried in the last two presidential elections. We end up shooting ourselves in the foot," said Bauer.

Gays, by the way, usually vote Democratic by margins at least two-to-one.

Question: Is Bush wasting valuable resources trying to court the gay vote, Lawrence O'Donnell?

MR. O'DONNELL: It's not so much a matter of courting the gay vote and winning it, but just moving himself in a little bit more human direction. And this was a very smart move on his part. Any criticism he gets at this point from Gary Bauer on this is very helpful.

MR. MCLAUGHLIN: Will his meeting -- Bush's meeting with the Log Cabin Republicans get the Log Cabin Republicans off his -- Bush's -- back?

MR. O'DONNELL: It will neutralize that problem. That can be made to go away.

What's interesting is he had a conversation with these Republicans about possibly having a gay Republican speak at the convention, like Representative Jim Kolbe of Arizona --

MR. MCLAUGHLIN: What do you think of that idea?

MR. O'DONNELL: Well, Gary Bauer says that that's awful, and the next they should do is have a transvestite speak.

MR. MCLAUGHLIN: What do you think of the idea?

MR. O'DONNELL: It's a very good idea. And no one --

MR. MCLAUGHLIN: Do you want the Republicans to have a massive walkout of delegates at the convention? Do you think that's going to photograph well?

MR. O'DONNELL: It's not a question of what plays --

MR. MCLAUGHLIN: You'd probably like that for your Democratic friends.

MR. O'DONNELL: It's not a -- a convention is never a matter of what plays in the room, it's what plays to the nation.

MS. CLIFT: What I would --

MR. KUDLOW: But John --

MR. MCLAUGHLIN: That's an interesting point.

MR. KUDLOW: If I could just counter, I was with him until the very end there. Two quick points:

One is, the Log Cabin Republicans are strong supply-siders. They want lower tax rates. (Laughter.) I think that's an overlooked issue in this whole drama.

And the second point is, George W. Bush is creating a large, open, big tent, and that's a good thing, and he deserves credit for it. And Gary Bauer is absolutely dead wrong. Bauer endorsed John McCain, who is going down the same road as Bush. And Bauer's a hypocrite for this cheap shot.

MS. CLIFT: I would wager that the Republicans have already had a gay speaker at their -- one of their conventions. Maybe they didn't know it. And George Bush is airing out that Republican tent. He's doing exactly the right thing. And he's sending the message quite affirmatively that he's a different kind of Republican. I don't know how real it is, but rhetorically speaking, he is.

MR. MCLAUGHLIN: Do you think this meeting by Bush with these supportive gays will now legitimize the role of gays inside the GOP?

MR. BLANKLEY: Well, I think it's got a way to go. I think this is a first step, but there is some --

MR. MCLAUGHLIN: Is it a giant step?

MR. BLANKLEY: No, it's a medium step. And there's a fair amount of resistance --

MR. MCLAUGHLIN: Do you -- don't you know that it had been the practice within Republican ranks to operate on the language of -- or the thought, the concept, of "don't ask, don't tell," as far as gays are concerned?