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MR. MCLAUGHLIN: Issue one: Rudy's Winter.

MAYOR RUDY GIULIANI (Mayor, New York City): (From videotape.) Donna and I lead, in many ways, independent and separate lives. It's been a very painful road. And I am hopeful that we'll be able to formalize that in an agreement that protects our children, gives them all the security and all the protection they deserve.

MR. MCLAUGHLIN: It's been a hellish two weeks for the mayor: diagnosed with cancer; accused of having an affair, by the New York media; separated from his wife of 16 years, whose vengeance was on full Shakespearean display.

DONNA HANOVER (actor, mother, spouse of Mayor Giuliani): (From videotape.) Today's turn of events brings me great sadness. I had hoped to keep this marriage together. For several years, it was difficult to participate in Rudy's public life because of his relationship with one staff member. Beginning last May, I made a major effort to bring us back together, and Rudy and I reestablished some of our personal intimacy through the fall. At that point he chose another path.

MR. MCLAUGHLIN: Republicans are fidgeting and fretting. They want to know whether the mayor will in fact make the run. Despite the avalanche of pain and embarrassment, Mr. Giuliani was holding his own.

(Begin videotape of press conference edited to show only the mayor's various responses.)

MAYOR GIULIANI: I am not going to answer anybody that's screaming. We are going to talk to each other civilly.

... Get out of here. Get lost.

... Get lost. That's a -- that's a -- that's a sneaky way of trying to invade somebody's personal life.

... Don't you guys have the slightest bit of decency?

... Shhh!

... Do you -- do you realize that you embarrass yourself doing this in the eyes of just about everybody? And what you are trying to do is a back-door way of trying to dredge this all up so you can write more salacious stuff.

Q -- the sleaze factor is --

... I don't ask you where you sleep.

... See, I don't accept the premise of the question, so I'm not going to answer it.

... Rumors of my demise are greatly exaggerated.

(End of video clips.)

MR. MCLAUGHLIN: Question: How does Rudy get the press off his back, Lawrence Kudlow?

MR. KUDLOW: Well, I think first of all, he has got to make a decision about whether he is in or out on the mayoral (sic) contest.

MR. MCLAUGHLIN: When is he going to do that?

MR. KUDLOW: He is saying to people that he is going to do it perhaps, you know, this weekend or early in the new week.

The second thing he has got to do is somehow button down this separation agreement with his wife, Donna Hanover. And I think then, of course, if it's a "go, go" in those two cases, he has got to get back on the issues for the mayoral campaign (sic) and do the best he can if he's determined to run.

MR. MCLAUGHLIN: He really doesn't hold the aces in determining what's going to happen to him, though. Who does?

MS. CLIFT: Well --

MR. MCLAUGHLIN: Donna Hanover, that's who. What is he going to do with Donna? (Laughter.) Is Donna going to go on the talk shows?

MS. CLIFT: She struck me as somebody who has made her statement, and it was enough, and it was pretty close to a political knockout. But this candidacy --

MR. MCLAUGHLIN: Well, she wants to be an actress. Maybe she wants exposure now.

MS. CLIFT: I wouldn't question her motives, John. I don't think you should go there.

But I think what Rudy Giuliani now has is a dysfunctional candidacy. It's not only the cancer, which is a serious illness that he's got to deal with. He's got to clean up the chaos in his personal life, and then he's got to decide whether he wants to put all his energies into running for the Senate against a woman, Hillary Clinton, who is totally single-minded about this race, and that's a lot to take on.

MR. BLANKLEY: Yeah, I think he's got a terrible problem because he can't get the press to stop covering these issues, because they're accomplished in his denials and the assertion of his estranged wife now.

MR. MCLAUGHLIN: What can he do with Donna? What's to be done with Donna? Why doesn't he -- what about using the Clintonian method and smear Donna?

MR. BLANKLEY: Well, he has --

MR. MCLAUGHLIN: What do you think of that?

MR. BLANKLEY: It's too late.

MR. O'DONNELL: He's doing exactly the opposite.

MR. BLANKLEY: It's too late for that. He is actually --

MR. MCLAUGHLIN: Well, I'm joking, first of all, in a rather gallows humor way.

MR. BLANKLEY: In this Platonian world, you never know.


MR. BLANKLEY: The point is, the drumbeat is out amongst Republicans for him to step down now. He's tough enough; maybe he'll ignore the drumbeat. But everywhere you turn, conservative journals, Republican players in New York are saying, "Get out, because your campaign is damaged."

MR. O'DONNELL: The fact is, he's doing exactly the opposite of demonizing Donna.


MR. O'DONNELL: When he refers to her, it is in the utmost respectful terms you can --

MR. MCLAUGHLIN: As he did at that press conference.

MR. O'DONNELL: That's right.

And Donna has had her day. She did as much damage to him in that one shot as she could possibly do. If she tries to do more, sympathy will start to accrue to Rudy Giuliani. It will be -- here's this half of the marriage going out here and talking in a way that is completely unnecessary and is actually ultimately harmful only to herself.

MS. CLIFT: Well --

MR. MCLAUGHLIN: And if she stays with that, she could only play her cards to her own detriment.

MR. O'DONNELL: Yes. Remember --

(Cross talk.)

MR. MCLAUGHLIN: But I have a question. There are six months, almost a full six months, between now and November. While this is calamitous, it is not insuperable, would you not agree?

MR. KUDLOW: I completely agree. I think people should not rush to political judgment on this. Right now -- and I spoke to all the leading Republicans this past week -- right now, they believe that Rudy Giuliani is still going to be the Republican nominee for the Senate. The first deadline coming up, as you may know, is the end of May. May 30th is the Republican State Nominating Convention. The issue on that, which we haven't raised yet, which I think is Rudy's biggest hurdle, is his cancer treatment process. He's waited on that a couple of weeks. Many people thought he would start a few weeks ago, so now his number-one -- the degree to which the cancer has or has not taken hold and the length of any convalescent period -- we don't know any of that yet.

MR. MCLAUGHLIN: Let us assume that he drops out. Does that mean that Pataki is now the front runner for the Republicans?

MR. KUDLOW: I think he's the polling front-runner, and he might be the consensus front-runner.

MR. MCLAUGHLIN: Could he not mount a very effective candidacy?

MR. KUDLOW: He could, John, but he has indicated to everybody, high and low, that he won't run. And I want to put the name of Ted Forceman (sp) here, a wealthy financier, because of this key test --

MR. MCLAUGHLIN: He has no political experience.

MR. KUDLOW: Well, hang on, John. He has mounted, along with many others, a fabulous campaign for education reform and school choice. Education is the number one polling issue in New York state.

MR. BLANKLEY: Wait. Wait a second.

MR. MCLAUGHLIN: Is Rudy not lucky in one respect, that politicians are not measured against a higher standard, they're measured against the competition? And in this society, with Hillary and Bill and Newt and others, he's doing all right.

MR. O'DONNELL: He's measured against the new low standard. And remember, there's a very important thing here. There is one person involved in this campaign who knew all of these underlying facts for the last year, and that's Rudy Giuliani. He knew exactly what background was there for people to look into, he knew exactly what his current conduct was. And he said, "I'm going to set off on this campaign."

MS. CLIFT: Yeah. Excuse me, but --

MR. MCLAUGHLIN: He said what?

MR. O'DONNELL: He said, "I'm going to head into this campaign" knowing all of this --

MS. CLIFT: He didn't know he had cancer.

MR. BLANKLEY: He didn't know he had cancer.

MR. O'DONNELL: But cancer aside, on all this other --

MR. MCLAUGHLIN: We don't know that he didn't know he had cancer. We don't know that.

MR. KUDLOW: John, everything is --

MR. BLANKLEY: And he didn't know --

MS. CLIFT: Only on "The McLaughlin Group" can a cancer diagnosis, an extramarital affair, an ongoing relationship, and a scornful wife turn somehow into an asset. Look, this damages him if only because it's the only thing people are talking about. The New York press is not going to let go of this.

MR. MCLAUGHLIN: This is a very devout public prayer we're hearing from you.

MS. CLIFT: And Rudy Giuliani needs Upstate New York, and this race with Hillary Clinton is going to be --

MR. O'DONNELL: Eighty percent of New York says it doesn't matter. There's already been polls.

MS. CLIFT: -- is going to be as close, as close on this -- as this race appears today. This matters. It's not a positive!

MR. KUDLOW: John? John?

MR. MCLAUGHLIN: Wait a minute.

MR. KUDLOW: If John Zogby has polled on this repeatedly, but Zogby does not find that these personal issues resonate --

MR. MCLAUGHLIN: Even with Republicans, who tend to link character to public performance, more so than Democrats, like Eleanor?

MR. KUDLOW: Republicans personally, will. Social conservatives do. But because of the dislike of Mrs. Clinton, Rudy is -- still has a shot at this thing.

MR. MCLAUGHLIN: And Rudy is much stronger, you would say, than Pataki would be or could become?

MR. BLANKLEY: No. No. No, no.

MR. MCLAUGHLIN: I want to hear from you.

MR. BLANKLEY: Look, look, look. Pataki, at this point, is the strongest possible candidate in the Republican field.

MR. MCLAUGHLIN: At this point.

MR. BLANKLEY: He probably won't run, but he's the strongest candidate.

MR. O'DONNELL: He won't. He has said he won't every day.

MR. MCLAUGHLIN: Assuming that Rudy's situation stabilizes, as far as his personal life is concerned, who would be the stronger of the two candidates? Pataki?




MR. BLANKLEY: Because I don't think he's got any of Giuliani's problems regarding the wife. Plus, he doesn't have the distraction --

MR. MCLAUGHLIN: I ask you --

MR. BLANKLEY: -- the distraction and the lack of focus that's going to come from having to deal with his cancer --

MR. MCLAUGHLIN: I think Rudy's record in New York is just -- New York City, is unbeatable.

MR. KUDLOW: And I want to respond to Eleanor. Despite your, you know, greatest fantasies here, Mrs. Clinton's polling numbers cannot get through the 40 percent barrier, and she's not picking up, it doesn't seem, in Upstate New York.

MR. MCLAUGHLIN: We've got to get out.

MS. CLIFT: You know, it's your poll numbers versus mine.


MS. CLIFT: And Rudy Giuliani, despite having done this great job in New York, has under 30 percent polling in the City of New York, and he's not doing well Upstate. He left 400 Republican women waiting while he went to a Yankee's game. That's not good! (Laughs.)

MR. MCLAUGHLIN: Oh, I didn't see that in Zogby's poll. I think he's doing all right.

Exit. On a probability scale of zero to 10, zero meaning zero probability, no chance whatsoever, 10 meaning metaphysical certitude, how likely is it that Rudy will run? Will run?




MS. CLIFT: Three.




MR. O'DONNELL: I think it's a seven that he will run, and that he will announce on Tuesday when Mrs. Clinton is accepting the Democratic nomination.


MR. O'DONNELL: He will steal her thunder.

MR. MCLAUGHLIN: You are close, but no cigar. If I can use that word.

MR. KUDLOW: You can.

MR. MCLAUGHLIN: The answer is 10.


MR. MCLAUGHLIN: Rudy's going for it.

When we come back, Bush and McCain finally make up. Who got the better deal?


MR. MCLAUGHLIN: Issue two: Political potpourri item: Together at last.

(Begin videotaped segment.)

SEN. JOHN MCCAIN (R-AZ): I endorse Governor Bush.

REPORTER: (Off mike.)


SEN. MCCAIN: I endorse -- I endorse Governor Bush. I endorse Governor Bush. I endorse Governor Bush. (Laughter.) I endorse Governor Bush. I endorse Governor Bush. (Laughter.)

GOV. GEORGE W. BUSH (R-TX): I love you, man. (Chuckles.)

(End of videotaped sequence.)

(Song, "Together at Last," is played over footage of Senator McCain and Governor Bush.)

MR. MCLAUGHLIN: It may not be a match made in heaven, but Tuesday's Bush-McCain marriage of convenience was necessary for both. Bush needs the 4-1/2 million McCain voters who turned out in force during the primaries. McCain needs to return to the Republican fold to springboard into a presidential rerun down the line.

Question: Who got the better of this deal, Bush or McCain? Tony Blankley.

MR. BLANKLEY: Look, this is a false drama that's been created by the media. Obviously, he was going to endorse him. It doesn't matter that much. I think they -- the two of them danced pretty nicely together. They did what they had to do. McCain had to keep a little distance while still doing the endorsement.

But the real story is that Bradley is nowhere to be seen campaigning for Gore.

MR. MCLAUGHLIN: I don't know what it did for McCain. Do you think it did anything for McCain?

MR. O'DONNELL: It showed --

MR. MCLAUGHLIN: Bush is running. McCain's not running. So what does it do for him?

MR. O'DONNELL: McCain definitely needed to show within the party that he can be a good soldier. He did that that day.

But the real benefit of the day goes to Bush. He needed that endorsement very badly.

MS. CLIFT: I think the benefit of the day goes to John McCain. It was George Bush who looked like the supplicant. McCain keeps the door open for a run in 2004.

MR. O'DONNELL: He's lost nothing --

MR. MCLAUGHLIN: When are we going to see a moment like this between these two gentlemen again? We've had our Kodak moment. We won't see any more of this anymore, will we? The two of them?

MR. KUDLOW: Oh, I reckon you're exactly right. But I want to say I think Bush comes out ahead in looking at the public, because Bush's demeanor was very serious. And Bush did not pander or cater to McCain on any issues. This was not the old Nixon-Rockefeller Fifth Avenue compact of 1960 that cost Nixon conservative support.


MS. CLIFT: Well --

MR. KUDLOW: Bush held his own.

MR. MCLAUGHLIN: Don't you all think that the McCain voters are not going to march over to Bush simply because McCain says, "March"? How can Bush get the McCain voters? I ask you.

MR. O'DONNELL: Well, he's getting them right now. He -- independents -- Bush is polling ahead of Gore with independents right now. And interestingly, Bush is polling more Democrats for him than Gore's --

MR. BLANKLEY: Than Gore is for Republicans.

MR. MCLAUGHLIN: The only way that the McCain voters will go to Bush is that if Bush delivers himself of relentless attacks, negative attacks, against Gore. Am I right or wrong?

MR. BLANKLEY: If Bush does? No, I think McCain will be the one who will do the attacks on Gore.

MR. MCLAUGHLIN: The surrogate will?

MR. BLANKLEY: And I will predict --

MR. MCLAUGHLIN: McCain does that very well, by the way, on Gore. He really hits Gore.

MR. KUDLOW: McCain hits Gore like a drum.

MR. BLANKLEY: I will predict that you'll see McCain and Bush together again.


MR. KUDLOW: And look at Bush's numbers. Bush is running numbers now. He's running 8, 9 percent ahead of Gore. He's made California a horse race.


MR. KUDLOW: He's about to make New York State a horse race.

MR. MCLAUGHLIN: But there are shoals ahead.

MS. CLIFT: Dream on.

MR. MCLAUGHLIN: Sailor beware.

MR. MCLAUGHLIN: Item: Catholics resurrect Bush. Church and state met this week for a funeral, to pay homage to John Cardinal O'Connor, archbishop of New York. In his eulogy, Bernard Cardinal Law praised the cardinal's virtues and, at length, his anti-abortion convictions.

CARDINAL LAW: (From videotape.) What a great legacy he has left us in his constant reminder that the church must always be unambiguously pro-life. (Applause.)

MR. MCLAUGHLIN: The congregation stood for a two-minute ovation, forcing the sheepish pro-abortion Clinton and Al Gore, ever-mindful of the Catholic vote, to stand as well. But it isn't working for Gore. Catholics now choose Bush 46 to 42 percent. Among white Catholics, the spread is even greater. Within that group, Gore led Bush 49 to 41 percent, an eight-point margin, back in March. Today, two months later, Bush has reversed that and now leads Gore by 11 points, 49 to 38 percent.

Question: What is driving Catholics towards Bush? I ask you, Lawrence O'Donnell.

MR. O'DONNELL: The same thing that's driving the rest of the population. I think, and I've talked to pollsters who also hold this, that Catholics are no longer an interesting polling group to separate out because they match the general public almost identically on almost everything you poll on. They're no longer an interesting subgroup.

MR. MCLAUGHLIN: Could it be that instead of attracting the Catholics, the Catholics are somehow repelled by Gore in any respect? What about his social doctrines? What about gay rights?

MR. O'DONNELL: No. Catholics are slightly more pro-choice than the general population, so there's nothing in that.

MR. MCLAUGHLIN: What about things like Gore's current wish to have all gun owners register with the police, almost in the same category as sex offenders? What about that? Catholics don't like that, do they, the blue collars?

MR. O'DONNELL: I think almost none of the Gore platform has made its way into the public mind. This is just the reactions from two individuals.


MS. CLIFT: First of all, this race is going to see-saw a lot over the next couple of months. I wouldn't read a lot into this. And secondly, the notion that they all stood up at the phrase "pro-life," the Catholic Church in that sense, I think, was embracing life in its fullest, including opposition to the death penalty, which made it easier for some of those Democrats to stand.

MR. MCLAUGHLIN: We've got to get out.

MR. KUDLOW: I respectfully don't agree with that. But let me just say, one of the things helping Bush with Catholics and everybody else is his very sensible pro-choice reforms on education and health care. He wants to reform those without using the government --

MR. MCLAUGHLIN: Well stated. Do you have something to comment here?

MR. BLANKLEY: One point. The Congress -- the Republican Congress has chosen a Catholic to be the chaplain, after a lot of confusion.

MR. MCLAUGHLIN: Well, through our good work on this set. Am I right or wrong?

MR. BLANKLEY: I think you did the Lord's work on that on that one.

MR. MCLAUGHLIN: We did indeed. (Laughter.)

Exit: Who won the week, Bush or Gore; one word?

MR. KUDLOW: Oh, Bush.

MS. CLIFT: A wash.

MR. BLANKLEY: Bush. Yep.

MR. : Yeah.


MR. MCLAUGHLIN: Answer Bush.

Issue three: What's all the fuss "a-boot"?

(Clip begins in progress) -- rage everywhere north of the border, a television commercial for Molson Canadian beer that never mentions beer but has a clear message for Americans: Namely, Canadians are sick and tired of being ignored and stereotyped by their southern neighbors.

(Begin advertising clip.)

ACTOR (male): Hey, I am not a lumberjack or a fur trader. And I don't live in an igloo or eat blubber or own a dog sled. And I don't know Jimmy, Sally or Susie from Canada, although I am certain they are really, really nice.

I have a prime minister, not a president. (Cheers, applause.) I speak English and French, not American. And I pronounce it about, not "a-boot." (Applause, cheers.) I can proudly sew my country's flag on my backpack. I believe in peacekeeping, not policing; diversity, not assimilation; and that the beaver is a truly proud and noble animal.

A "toque" is a hat; a Chesterfield is a couch -- (begins screaming). And it is pronounced "Zed" -- not "Z" -- "Zed." Canada is the second largest land mass, the first nation in hockey and the best -- (cheers) -- part of North America. (Cheers, applause.) My name is Joe. I am Canadian! (Applause, cheers.)

ANNOUNCER: Thank you.

(End of advertising clip.)

MR. MCLAUGHLIN: (In progress) -- what's Canada's problem, I ask you, Tony?

MR. BLANKLEY: Well, Canada is suffering from being too close to America and now picking up the French disease of resenting the dominance of American culture. And so now they are just having to make themselves feel good. It's really a defense mechanism because of an inferiority complex.

MR. MCLAUGHLIN: Do you think they miss the grandeur of the empire and they feel that history has bypassed them?

MR. BLANKLEY: Well, I am not sure it ever passed them.

MS. CLIFT: Well --

MR. BLANKLEY: I mean, it's always --

MR. MCLAUGHLIN: Is that the way they feel, though?

MR. BLANKLEY: I don't know.

MS. CLIFT: Yeah. That was a wonderfully humorous spot. I mean, I could laugh at that. I am not insulted in the least. And if they want to revel in their differences, I say go for it -- (inaudible) -- across the border.

MR. O'DONNELL: This war was started -- this war was started by South Park -- by Matt Stone and Trey Parker, the geniuses who created "South Park."

MR. MCLAUGHLIN: Who are they?

MR. O'DONNELL: They created "South Park," the TV series and the movie in which we go to war with Canada.

MR. BLANKLEY (?): It's Molson.

MR. MCLAUGHLIN: Who has the trade surplus, Canada or the United States?

First of all, do you want to point out, or do I have to tell you, that our biggest trading partner is Canada --


MR. MCLAUGHLIN: -- and Canada's biggest trading partner is the United States.

MR. KUDLOW: Yes. And Molson's notwithstanding, people in business and investments in Canada love the United States, so much so that they are finally forcing the politicians to adopt Reagan-style tax cuts. And in our lifetime, the Canadian dollar will become extinct, and they will adopt the U.S. dollar. Canada is, after all, the 13th Federal Reserve district.

MR. MCLAUGHLIN: Do you know what the Canadian dollar is coming in at now?


MR. MCLAUGHLIN: Vis-a-vis what?

MR. KUDLOW: It's less than 70 cents now.

MR. MCLAUGHLIN: Sixty-seven cents.


MR. MCLAUGHLIN: What was it 1970, Lawrence? Let's see how good you really are.

MR. KUDLOW: It got as high as about $1.30 or $1.40 --

MR. MCLAUGHLIN: I don't think it got that high, not in 1970; it was 99 cents, so it's lost one-third of its value. And Canada's smarting over that. Are they also smarting over their health plan, which is free, but there are no services? You can't find the services. They come here for their surgery, and --

MR. KUDLOW: And there's a lot of brain drain. There's been a brain drain for years.

MS. CLIFT: Only the people who have elective surgery and don't want to wait. But they get their basics taken care of.

MR. BLANKLEY: They want to have the surgery before they die.

MS. CLIFT: I wouldn't condemn their health system. I think it's pretty good for a lot of people.

(Cross talk.)

MR. MCLAUGHLIN: I expected you to say that, inasmuch as you supported Hillary's health plan so vigorously.

MR. KUDLOW: The thing was overthrown in Ontario. Ontario's such an interesting place because that's where the tax cut reforms came. Canada's had a brain drain. They've all come to the United States. Sensible Canadian politicians and reformers are now going to emulate the American market model.

MR. MCLAUGHLIN: The kid is right. It's the second-largest land mass in the world, bigger than the United States, second only to Russia. And furthermore, they've got a $30 million trade surplus with the United States. What are they whining about?

MR. KUDLOW: They shouldn't whine, but they should --

MR. MCLAUGHLIN: Exit. Name one area in which Canadians clearly excel over Americans. Lawrence?

MR. KUDLOW: They have more snow than we do.

MS. CLIFT: Fluency in French.

MR. BLANKLEY: Glaciers.

MR. O'DONNELL: Live television comedy. "Saturday Night Live" was created by Loren Michaels, a Canadian.


MS. CLIFT: Good.

MR. MCLAUGHLIN: And they do a better job in learning history, and they do a better job at geography. And they also whine a lot more than we do.

We'll be right back with predictions.


MR. MCLAUGHLIN: Predictions. Lawrence Kudlow?

MR. KUDLOW: John, with the decline of inflation in the last number and the cooling off of retail sales, Federal Reserve tightening, which has spooked the market and you, is going to be much less than folks think. . I expect a quarter-point at the next meeting. And the whole tightening cycle will be over in the next month.

MR. MCLAUGHLIN: That's Tuesday.

MR. KUDLOW: Yes, sir.

MR. MCLAUGHLIN: So that means I ought to play the market on Monday on the strength of your control over the market with your incisive prediction; right?

MR. KUDLOW: It's a good time to start accumulating shares for --

MR. MCLAUGHLIN: Should I buy Microsoft?

MR. KUDLOW: -- the long run.

MR. MCLAUGHLIN: Should I buy Microsoft?

MR. KUDLOW: Big cap technology stocks look great to me.


MS. CLIFT: Thanks for all that free advice.


MS. CLIFT: Okay. Congress will pass a bipartisan prescription drug plan well before the elections.


MR. BLANKLEY: The Republicans in Congress will pass the marriage penalty tax cut and send it to the president's desk before August.

MR. MCLAUGHLIN: What about the death tax? Are they going to do anything with that? Is that another prediction you want --

MR. BLANKLEY: Not before August.

MR. O'DONNELL: This summer, official budget projections will show that we are taking in about $40 billion more than we expected this year, for a much bigger surplus than --

MR. MCLAUGHLIN: So that's going to help George Bush's projections.

MR. O'DONNELL: It is going to help Bush more than anyone else.

MR. MCLAUGHLIN: Okay. I predict an astounding election win. For some seven decades, Mexico has been ruled by one political party, the PRI. I predict that this year, on July 2nd, the winning party will be PAN, the National Action Party, led by Vicente Fox.

Next week: Rudy's choice. To run or not to run?

Happy Mother's Day. Bye-bye!





MR. MCLAUGHLIN: Issue four: There are lies, damned lies, and statistics.

ERIC HOLDER (U.S. deputy attorney general): (From videotape.) Well, crime is down for the eighth consecutive year in a row. That's the longest period of continuous crime declines that we've ever seen in our nation's history.

MR. MCLAUGHLIN: The good news on crime that Deputy Attorney General Eric Holder is announcing comes from the FBI. In 1999 serious nationwide crime dropped 7 percent. That's in keeping with an eight-year decline in serious crimes -- homicide, arson, assault, car theft, rape, and robbery, all on the decrease since 1992. Every region experienced a downturn -- down 10 percent in the West, 8 percent in the Midwest, 7 percent in the Northeast, 4 percent in the South. That's the good news.

Here's the bad:

Despite the nationwide overall crime drop, several major cities, including New York and Denver, report an increase in their homicide rates, a possible indicator that the so-called decline in crime is leveling off.

Besides that, critics say the FBI data is faulty.

One, no uniform crime classification. Police reports, the reports the FBI compiles to draw its conclusions, use varying criteria and statistical methods to assess crime. Some serious offenses are downgraded or under-reported.

Two, silent victims. Research shows that over half of all violent crimes are not even reported to the police.

Question: What explains the drop in the great national crime wave that began in the 1960s? I ask you, Eleanor Clift.

MS. CLIFT: Well, I think there are a number of reasons. First of all, we've locked a lot of people up. There are 2 million people in jail, twice the number a decade ago. I think community policing has helped. The good economy has helped. And there are fewer teenagers. So some of these trends are leveling off, and there are going to be more teenagers coming up, and I think we need to think about other ways to combat crime, other than just locking people up.

MR. MCLAUGHLIN: The three strikes laws have taken away a lot of the recidivism and just prevented a lot of crimes, correct?

MR. KUDLOW: Yes. I mean, look, prosperity is really vital. I mean, more people working -- you've got basically full employment -- and also welfare reform was a huge factor, which also has added into the workforce thing.

But don't forget, I think cultural values have turned much more conservative. Traditional values are taking over -- personal responsibility, stronger work ethic. And think family breakup is on the decline. And all of these things are feeding into a lower crime rate.

MR. MCLAUGHLIN: How about capitalism? Is that back in now?

MR. KUDLOW: When you --

MR. MCLAUGHLIN: I notice that suit you're wearing is remarkably well --

MR. KUDLOW: Well, when you let capitalism take a rip, John, and remove those government barriers, prosperity goes up and crime goes down.

MR. MCLAUGHLIN: Here's what I think we could do to reduce crime further, and that is to get the police to carry out arrest warrants. In California, Tony, where you used to be what? Attorney general?

MR. BLANKLEY: Deputy attorney general.

MR. MCLAUGHLIN: Deputy attorney general. There are 2.5 million outstanding arrest warrants, including some 2,600 murders. In D.C. and the Baltimore area, there are 138,000 outstanding arrest warrants. Why don't the police get those people and enforce the law? And that would have an effect on reduction of crime from guns.

MR. BLANKLEY: Well, I mean, I'm not familiar with any city police department that thinks they know where the criminal is and doesn't get them. A lot of these are cases that are simply unsolved, and they may have the warrants there, but they can't find --

MR. MCLAUGHLIN: In that order of magnitude, 2-1/2 million in California?

MR. BLANKLEY: I'd want to see the analysis of those numbers.

MR. O'DONNELL: Yeah, demographics --

MS. CLIFT: Maybe we have to send Tony back to the job! (Laughs.)

MR. BLANKLEY: No! Please, no! (Laughter.)

MR. O'DONNELL: Demographics is everything in crime statistics.