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MR. MCLAUGHLIN: Issue one: Recession? Don't worry, be happy.

(Music: Bobby McFerrin's "Don't Worry, Be Happy."

ALAN GREENSPAN (chairman of the Federal Reserve): (From videotape.) We had a very dramatic slowing down, and indeed we are probably very close to zero.

MR. MCLAUGHLIN: For the second time in just 30 days, the Federal Reserve Board cut interest rates -- this time, by half a point. New data from the Commerce Department shows an anemic 1.4 percent GDP growth in the fourth quarter of last year, the lowest in six years. This downturn is discouraging, and it is the latest in a welter of sour statistics.

Item: Consumers grow wary. Their confidence plummeted for the fourth month in a row, says the conference board.

Item: Factory orders slump. Durable goods business spending dropped 1.5 percent in last year's fourth quarter, a sharp reversal of the 7.7 percent increase in last year's third quarter.

Item: Inflation balloons for the year 2000, up 2.4 percent, the highest since 1993, thanks to high oil prices and natural gas costs.

With this admittedly disappointing news, the hand-wringing and the alarm-sounding and the specter-raising -- yes, the hysteria and even panic, mostly by the press that routinely runs in a pack -- is now in full gallop. The R word, "recession," is everywhere.

Well, in every cloud there is a silver lining.

Fact: The economy last year still grew at an annual rate of 5 percent, despite the weak fourth quarter. That means a $32 billion increase in the last quarter, up 1.5 percent, for an overall year 2000; a GDP of 9.4 trillion.

Fact: New homes sales skyrocket. In December of last year, the 13.4 percent increase was the biggest in seven years.

Fact: Pocketbooks fatten by almost $81 billion -- that's personal income, with disposable income -- by half a percent in last year's fourth quarter.

Fact: Consumer confidence okay, despite last year's four-month decline. Levels are still as strong as they were in 1996, when the current four-year spurt of best-ever economic growth since the 1960s commenced.

The Bush administration wants to give consumers another boost, with a $1.6 trillion across-the-board tax cut and retroactive to January 1st.

Okay, other breaking economic news: first, positive numbers. Job growth: non-farm payrolls up $268,000 last month. Also, a huge boost in the federal surplus estimate, now projected at -- get this -- $5.6 trillion over the next 10 years.

On the downside, even though more jobs were created in January, the unemployment rate rose by two-tenths, bringing it up to 4.2 points.

Question: Is the media playing a key role in driving this recession, do you think, Lawrence?

MR. KUDLOW: Well, let me just say that was a very fair and balanced presentation. And from it and my own personal studies, John, I'm not in the recession camp; I'm still in the soft landing camp.

But I think the media has hyped this thing, and I think the principal reason for that is that is that the business and financial media were completely freaked out by Alan Greenspan, who made one of the greatest flip-flop conversions in the history of the Damascus Road at the turn of the year, when he went from fighting inflation to suddenly fighting recession, with nearly unprecedented inter-meeting interest rate cuts, which then, as you pointed out, were followed by another big interest rate cut a few days ago. And I think Greenspan, who has probably more credibility than any government official should ever get, really caused the media to run hog wild down the road towards recession.

MR. MCLAUGHLIN: Eleanor, what role did the media have or is it having in this?

MS. CLIFT: Well, the media have been hit by some of these cutbacks. I mean, CNN has let people go. The Internet website pages of a lot of media outlets have really retrenched. And so anything --

MR. MCLAUGHLIN: Rupert Murdoch also?

MS. CLIFT: Sure. Well, when --

MR. MCLAUGHLIN: News Corp. has --

MS. CLIFT: Right. When anything hits you close to home, suddenly it seems a lot bigger than when it happens, you know, in the middle of the country, a little more distant.

But look --

MR. MCLAUGHLIN: Also, the -- also the --

MS. CLIFT: But wait a second.

MR. MCLAUGHLIN: Well, I just want to add to that one quick point, and that is that there is an overmarket for journalists. I mean, people have been put out of work.

MS. CLIFT: Yeah, but --

MR. MCLAUGHLIN: So naturally, this is front and center.

MS. CLIFT: Yeah, but the people who have been put out of work are not exactly assembly line workers. They're for the most part highly educated, and they're skilled, and they're not going to have trouble finding another job. And unemployment is unlikely to go any higher than 5 percent this year.

But before we blame it on the media, the lead dog in the pack crying "Recession!" has been President Bush, who before he was inaugurated was using the word or warning of a possible recession.

(Cross talk.) Maybe he didn't actually use the word, but he is using the word now in private conversation.

MR. MCLAUGHLIN: Well, Eleanor, everybody knows that if there is a recession, it's a Clinton recession, right?

MS. CLIFT: Well, he's trying to apportion political blame. (Laughter.) And he's also trying to lay the groundwork for his tax cut, which is not the appropriate response.

MR. BLANKLEY: Look, I --


MR. BLANKLEY: Oddly, I'm going to defend big media, because I think they -- the fact that Greenspan has made the flip is news, and it's big news. The fact that President Bush and Vice President Cheney have talked about recession is newsworthy. And the fact is that when you start talking to a lot of money people around this country, a lot of them think -- now, some people don't, but a lot of them think this is going to be worse than is anticipated.

The energy crisis in California, which is already reaching out to the Western states because of the fungibility of electricity, is very likely to reach over to the rest of the country and have a depressing effect, to a certain extent, all across the country before that's fixed, because there is, in fact, a shortage of electricity and --

MR. MCLAUGHLIN: Yeah, Greenspan mentioned this himself; namely, the metasatasizing of the electricity slide.

MR. BLANKLEY: And the fact is that investment houses, in their proprietary polling on public attitudes, has shown a drop at least as deep as the public ones, and they're making investment decisions on that now. So it's becoming a fulfilling prophecy.

MR. MCLAUGHLIN: Ad sales have collapsed, and that has its impact, of course, on media first, last and always, perhaps. Do you understand me?


MR. MCLAUGHLIN: So I don't want to underestimate the role of the media, nor do I want to necessarily hype it. But I think it is driving this recession talk.

MR. FUND: I was just out in my native state of California. The media is creating a psychological depression based on the fact that every day you look at the media, at papers, and you see "electricity crisis."

There's another factor here. There are elements of the media, John, that in the discussion of political economy focus on the political and not the economy. Starting on January 20th, with the change of administration, there was a political, I think, incentive for some elements of the media to start talking about an economic downturn because there are some people who want to call it the "Clinton recession"; there are some people who want to call it a "Bush recession."

MR. KUDLOW: There is clearly -- look, there is clearly an economic downturn. I mean, we're going from 5 to 6 percent economic growth to 1-1/2 percent. And although 1-1/2 percent doesn't qualify as a technical recession, dropping 5 percentage points is felt throughout the country.

And I agree to some extent with the California electric crisis, which was brought on by Gray Davis and the legislature, which is now going to have a state takeover, which is the goofiest thing I've ever heard.

MR. MCLAUGHLIN: Question for you. Greenspan says zero or near zero. But zero is not negative territory.

MR. KUDLOW: No, that's technically correct. And again, we are in a technology economy, which will probably give us a very fast inventory correction without a recession.

But that said, don't ignore the stock market factor. When Eleanor talks about the media, the media owns stocks; they're part of the investor class either directly or through their pension funds.

MS. CLIFT: Yeah, but we have a --

MR. KUDLOW: And the stock market last year created a pall. It was a sinking stock market.

MS. CLIFT: The last really serious recession, 1982, 90 percent of people thought that they or somebody in their family was going to lose their job. I mean, that figure is not even 50 percent today.

MR. KUDLOW: We don't see that now.

MS. CLIFT: And we have a different work force today.

MR. KUDLOW: I agree.

MS. CLIFT: People don't expect to have a job and so we're cushioned more --

MR. KUDLOW: But people have a different definition of prosperity. It's no longer just whether they have a job --

MS. CLIFT: -- we're cushioned psychologically to go out and reinvent yourself and find another job.

MR. KUDLOW: I agree with that.

MS. CLIFT: So I think psychologically it's very different today.

MR. MCLAUGHLIN: I want to hear the point you just made again.

MR. KUDLOW: People now no longer view their economic well-being as just whether or not I have a job. It's their whole financial portfolio and how it's doing.

MR. MCLAUGHLIN: Right. Let's talk about the portfolio. How much has been invested by investors since 1991 in stocks and mutual bonds?

MR. KUDLOW: How much?

MR. MCLAUGHLIN: How much? Shall I tell you?

MR. KUDLOW: I can tell you --

MR. MCLAUGHLIN: One-point-four trillion dollars.

MR. KUDLOW: No, but the net -- the net worth --

MR. MCLAUGHLIN: What's the value today?

MR. KUDLOW: The value today is about $35 trillion. It's an extraordinary number.

MS. CLIFT: You know what is stunning, though --

MR. MCLAUGHLIN: Well, how much is unrealized profits in those portfolios?

MR. KUDLOW: About 20-some-odd trillion dollars. Even with last year's correction, people are still way, way ahead.

MR. BLANKLEY: But people sense, whether they're going down or up, and so even if they're up from 1991 or '92, they feel they're down from a year and a half ago, so --

MR. KUDLOW: But on the plus side --

MR. MCLAUGHLIN: Okay, we've got to get out.

MR. KUDLOW: On the plus side, John, the market had a terrific recovery in January. Greenspan's conversion is appropriate; he's now touting an easier Fed policy. And don't forget, Greenspan helped lay the economic groundwork for tax cuts. He helped Bush enormously. And right now there is a landslide --

MR. MCLAUGHLIN: Don't you think -- no one has mentioned anything --

MR. KUDLOW: There's a tax cut landslide going on in Washington, which is terrific.

MR. MCLAUGHLIN: No one is mentioning here about the diversification of our economy. Doesn't that help --

MR. FUND: Manufacturing has gone down from 26 percent of jobs to --

MR. MCLAUGHLIN: I know, but it --

MR. FUND: That makes it more flexible.

MR. MCLAUGHLIN: If the dot-com situation corrects itself, then that will help. And likewise, the manufacturing sector might come back, especially with our new Treasury secretary.

MS. CLIFT: Is this the McLaughlin money line?

MR. MCLAUGHLIN: Let's get out. Did -- What?

MS. CLIFT: Is this McLaughlin money line now? (Laughter).

MR. MCLAUGHLIN: No, this is -- (laughs).

MR. KUDLOW: This is big stuff. This is big stuff.

MR. MCLAUGHLIN: This is McLaughlin F-I-N. How's that?

Exit. Did Greenspan act in time -- two rate cuts in one month -- to avert a recession? Yes or no? A recession is two successive negative growth periods. Two or three -- two.

MR. KUDLOW: I don't think Fed policy can ever avert a recession. I think tax cuts will avert a recession, and the day the tax cut is signed, probably sometime in the late spring or early summer --


MR. KUDLOW: That's when the slowdown gives way to a new round of 4 percent growth.

MR. MCLAUGHLIN: If it is in the fall, that will be too late --

MR. KUDLOW: It's a bit late, yes.

MR. MCLAUGHLIN: -- even if it's retroactive to the first, correct? It's got to be in the late spring, at the latest, right?

(Cross talk.)

MR. KUDLOW: Yes, because people --

MR. BLANKLEY: Well, it depends how long the recession is as to whether it's too late.

MR. KUDLOW: No, no. This can cause a recession, the longer it's delayed, because people will wait, they will not make the investments until the lower tax rates kick in.

MS. CLIFT: Do the rest of us get to answer that question? (Laughter.) Monetary policy is a much more efficient tool for correcting a recession --

MR. KUDLOW: No, it's not. No, it's not.

MS. CLIFT: Greenspan does not want to be blamed for a second Bush recession. He's certainly doing the best he can. I think he's doing the right thing.

MR. MCLAUGHLIN: Yes, and don't forget there are two vacancies on that board and a possible third, and you can be sure that Greenspan knows that, and you can be sure that Greenspan remembers that George Bush Senior thinks that the reason why he didn't win the '82 election -- the '92 election -- is partially because Greenspan didn't move fast enough.

MR. BLANKLEY: The answer -- the answer is no, because he should have acted earlier, but it would have looked political if he had done it before the election, so he had to wait till after the election and he waited too long.

MR. KUDLOW: Well, it looked pretty political when he finally did it. I mean, let's be fair.


MR. FUND: Just-in-time delivery. I think the Bush administration and the Greenspan Fed are going to work in very good sync. If we get a tax cut, all of this will be averted.

MR. MCLAUGHLIN: I think it'll be averted. I think there could be one quarter down, but not the second.

Okay, George Bush has been in office all of two weeks. Last week, we asked what kind of a report card do the opening days of George W. Bush's presidency get? Excellent, 74 percent. Good, 11. Okay, 6. Lacking, 4. Flunking, 5 percent.

When we come back, all 50 Republican senators voted to confirm John Ashcroft as attorney general. Eight Democrats joined them. Why did those Democrats join? Was it because they put principle over party?


MR. MCLAUGHLIN: Issue two: Ashcroft unleashed!

PRESIDENT PRO TEMPORE OF THE SENATE: (From videotape.) The Senate gives its advice and consent to the nomination of John Ashcroft of Missouri to be the attorney general.

MR. MCLAUGHLIN: George W. Bush has his Cabinet. The president's most controversial Cabinet nominee, John Ashcroft, cleared the Senate Thursday. The vote -- 58 to 42. Eight Democrats, out of 50, voted yes to Ashcroft's nomination. Russ Feingold, from Wisconsin, was the first to cross the aisle in the Senate Judiciary Committee vote Tuesday. In the full Senate vote Thursday, the eight breakaways were: Breaux, Byrd, Conrad, Dodd, Dorgan, Feingold, Miller, Nelson. The most surprising and dramatic crossover, considering his close ties to Edward Kennedy, was Chris Dodd of Connecticut.

SEN. CHRIS DODD (D-CT): (From videotape.) Mr. President, I do not expect that John Ashcroft will change his views as attorney general, but I have every right to expect, based on his commitment to God Almighty before the Judiciary Committee, that he will keep his word to uphold the laws of this land, even those, Mr. President, with which he profoundly disagrees.

Now, Mr. President, I would like to have the complete and total assurance that he would do that, but I cannot honestly conclude that he would not. Thus, it compels me to give him the benefit of the doubt because he has taken that oath fervently before God Almighty and members of the Senate Judiciary Committee.

MR. MCLAUGHLIN: Question: Why did eight Democratic stalwarts, 16 percent of their body, vote yes to confirm John Ashcroft as attorney general? Was it because they put principle over party?

Tony Blankley.

MR. BLANKLEY: They had different reasons. Senator Dodd, because his father had been censured by the Senate many years ago, he felt his father had been scandalized, so he is particularly sensitive to anyone having their personal reputation ruined, so he had that particular reason. All of the senators who are up for reelection voted no. The senators in states with large black populations voted no. So you find moderate senators, senators in white-populated states, like Nebraska, going yes.

MR. FUND: Whereas everyone who is running for president in 2004, to a man and woman, all -- all voted against John Ashcroft. The ayatollahs of the liberal special interest communities have their fund-raising now.

MR. MCLAUGHLIN: In that connection, let's take a look at the last-minute "no" votes on the part of the senators who were thought to have been considering voting yes, the Democrats, for Ashcroft. Carper, Cleland, Edwards, by reason of a religious tie, meaning that he is religious like Ashcroft; Landrieu, and Lieberman. Did anyone realize that they had been leaning in favor of voting for Ashcroft? And if so, why did they change their minds?

MS. CLIFT: First of all, senatorial prerogatives. This man is somebody they've worked with, and so he really did get the extra benefit of the doubt.

MR. FUND: And he was a straight shooter in the Senate. He was.

MS. CLIFT: Well, I don't think he was a straight shooter in the Senate. And I think each one of those would have had their separate reasons for finally turning around.

But I would like to look at the Republicans. All 50 voted lockstep. They said that they were going to vote for him even before the hearing. I would look for Susan Collins to have trouble when she's up in two years. Maine is a very progressive state; they're not going to like her vote for Ashcroft.

MR. MCLAUGHLIN: Why did she vote for him?

MS. CLIFT: Lincoln Chafee --


MS. CLIFT: Because she is -- party loyalty.

MR. KUDLOW: Good discipline. Good discipline.

MR. FUND: No, no, no.

MS. CLIFT: There was party discipline. There wasn't a single Republican who went off the reservation.

MR. MCLAUGHLIN: Let me point out that there is a virtue in the unity exhibited by the Republicans. In unity there is strength. Just as in the Senate vote for the non-impeachment of Bill Clinton, the Democrats stood together, and that's where they got their strength. Finally the Republicans are wising up.

MR. KUDLOW: But John, John, there's another key point here. George Bush won so many of those fly-over states, the so-called red states. Many of the Democrats who went for Ashcroft came from states like the Dakotas, like Nebraska, that had huge Bush margins. And some of those on the fence who voted no are going to come back and vote yes on the Bush tax cut precisely for that reason. Bush has much greater political strength than people realize.

MR. MCLAUGHLIN: You know, there's a larger point to what you say. This Ashcroft appointment helps those Democrats that you're talking about vote yes on the tax cut.

MR. KUDLOW: Right. Right.

MR. MCLAUGHLIN: It also helps Bush.

MR. KUDLOW: Right.

MR. MCLAUGHLIN: It gives him a lot of leverage with right-wing Republicans because, hey, he's taken care of them, and that gives him the cushion.

MR. KUDLOW: Right.

MR. MCLAUGHLIN: He's given them a personnel win. Now he can deal -- he can deal and he can compromise without worrying about his hard right.

MR. FUND: But John, I think --

MR. MCLAUGHLIN: Exit question. Why did the Ashcroft nomination -- or whom did it bruise the more? Did it bruise Bush the more or the Democrats?

I ask you.

MR. KUDLOW: John, I think it bruised Ashcroft the most of all, and I think it's going to really curtail his social policy-making in the Justice Department, at least for the first year or two.


MS. CLIFT: I think both sides got what they wanted. As you point out, Bush proved that he would stick by somebody who is very important to the right wing of his party, and the Democrats have a demon that they can fund-raise around and they have exposed the conservative side of Bush. While he presents a moderate face, you can always say, "Hey, there's Ashcroft."

MR. MCLAUGHLIN: Yeah. Ashcroft will help the union fund-raising. He will also help the environmentalist fund-raising. There's a lot of sides to this.


MR. BLANKLEY: Yeah, the Democrats weren't bruised at all by this. This was entirely useful, for the reasons you stated. I don't think Ashcroft or Bush, in the end result, were bruised that much. I don't think Ashcroft gave that much away. And, you know, he made a few concessionary sounds, but he'll be able to backpedal from them if he wants to. So I don't think there was much harm either way.

MR. MCLAUGHLIN: Who was bruised the more? Was it Bush or was it the Democrats?

MR. FUND: We won't know until we find out what kind of a job John Ashcroft does. We are ignoring the fact that Janet Reno left a mess at the Justice Department. If John Ashcroft cleans that up, I don't think it's going to redound to the benefit of the Democrats in 2002.

MR. KUDLOW: The Democrats hurt themselves a lot with the Christian right.

MR. MCLAUGHLIN: I think the Democrats were bruised the more. They tried to burn Ashcroft at the stake. Instead of that, they came off looking intolerant and obstructionist.

MR. FUND: Religious profiling.


Issue three. Officers, but no gentlemen.

REP. ERNEST ISTOOK (R-OK): (From videotape.) We appropriated the money that they asked for. Now they're saying, oh, we're actually wanting three times that amount, but we're not even going to bother to come back to you to ask for it.

MR. MCLAUGHLIN: That's Ernest Istook, a chairman of a U.S. House major appropriations panel, talking about ex-President Clinton's ultra-swank, ultra-pricey New York City office space.

Clinton has requisitioned an entire floor -- 8,300 square feet -- in Manhattan's Carnegie Hall Tower, 57th and 7th Avenue. The building features spectacular views and, quote, unquote, "white glove service." the annual rent for this space is some -- get this -- $700,000, making it more expensive than the office space of all other four living ex-presidents combined. And it's all taxpayer funded.

MR. MCLAUGHLIN: (In progress) -- diagonally across the street. Question. We're talking about that location. What does Clinton's choice of office space in New York tell you, John Fund?

MR. FUND: Wretched excess. A fitting coda for the Clinton years. He could have lowered the rent by half just by going down 12 floors. Instead, he wanted that penthouse view and sticks the taxpayers for it.

MR. MCLAUGHLIN: What's going to happen, do you think, at these various inspections of this, including Istook? And I guess is the GAO involved?

MR. BLANKLEY: Well, I think -- GAO is investigating some aspects of Clinton's exit. I think -- I assume that for the remainder of this fiscal year, the Appropriation Committee cannot block it. They can block it in the next fiscal year, and my guess is they will.

MR. MCLAUGHLIN: You know, all of this together, all of this embarrassing news to the Clintons coming together, how do you evaluate it, on an exit question, blemish scale of zero to 10, zero meaning no blemishes, smooth as a model's cheek, 10 meaning irreparably blemished, the phantom of the opera -- How blemished are the Clintons, do you think? You know, with the --

MR. KUDLOW: The whole -- the whole deal?

MR. MCLAUGHLIN: The whole schmear; $190,000, the pardon to Rich, et cetera.

MR. KUDLOW: Oh, I think 8.5.


MR. KUDLOW: Absolutely. This one's going to stick and be remembered.

MR. MCLAUGHLIN: What do you think?

MS. CLIFT: I'd say it's a four in this short-attention-media-span world. Look, this is a middle-aged guy who's going to play a major role in public and political life for a long time to come. Guys, you'd better get over it. (Chuckles.)

MR. MCLAUGHLIN: What do you think?

MR. BLANKLEY: In show business, you want to have a strong finish, because that's what people remember.


MR. BLANKLEY: People are going to remember this. Journalists, historians are going to remember it. The first cut of history that's going to be written is going to be much more negative because of this. I make it about an eight and a half or a nine.


MR. KUDLOW: You go, Tony.

MR. MCLAUGHLIN: What do you think?

MR. FUND: Combined with Terry McAuliffe running the Democratic National Committee, there will be more pratfalls and scandals to come.


MR. FUND: Oh, I think the blemishment is going to go up to complete disfigurement by the time we're finished with -- (laughter) --

MS. CLIFT: This is the Wall Street Journal editorial page talking --

MR. MCLAUGHLIN: I will take the average of all of those numbers.

We'll be right back.


MR. MCLAUGHLIN: Predictions. Lawrence?

MR. KUDLOW: Capital gains tax cut will be part of the package.


MS. CLIFT: Bush won't get his education plan out of committee for another six or eight weeks.


MR. BLANKLEY: Bush tax cut will go in one piece, not broken up.


MR. FUND: Career lawyers at Justice are lining up to tell John Ashcroft the real story of what happened the last eight years.

MR. MCLAUGHLIN: Ariel Sharon wins on Tuesday by a margin of nine points. Bye-bye!






MR. MCLAUGHLIN: Issue four: A new Washington culture?

PRESIDENT BUSH: (From videotape.) Men and women can be good without faith, but faith is a force of goodness. Men and women can be compassionate without faith, but faith often inspires compassion. Human beings can love without faith, but faith is a great teacher of love.... Our country from its beginnings has recognized the contribution of faith. We do not impose any religion; we welcome all religions. We do not prescribe prayer; we welcome prayer. This is the tradition of our nation, and it will be the standard of my administration.

MR. MCLAUGHLIN: (From videotape.) President Bush has dropped a love bomb on Washington. With Bush personally, that love, as he has noted, is rooted in his faith or religion and that faith is the engine of his outlook, his commitment and his conduct- indeed of his existence it seems. For Bush, conventional political systems of rewards and punishments are out. Love thy neighbor is in, even love thine enemies. So Bush is no ordinary run-of-the-mill politician.

MR. MCLAUGHLIN: Question: Is this Bush "love bomb" real, or is it a dud?

I ask you, Eleanor.

MS. CLIFT: Look, he's a person of faith, and I think that's genuine. But he is reaching out because he has to make political alliances. This is realpolitik. And, you know, all of those nice words will only last so long when they have to begin cutting deals; these wonderful, loving words are not going to go very far.

MR. MCLAUGHLIN: He called Jesse Jackson on the occasion of Jackson's own announcement of his child out of marriage.

MR. FUND: Yes. And I think he will be viewed charitably for that, because I think Jackson is going to start to implode on financial and other matters.

MR. MCLAUGHLIN: He called in the Congressional Black Caucus this week, when Corrine Brown had said of him, "We will never get over this. I personally will take this to my grave." Meaning, of course, the election.

MR. BLANKLEY: Yeah, I think you see it too narrowly when you see this simply as some sort of political maneuver. This country is becoming community-oriented, more religious; less individualistic and less secular.

MR. MCLAUGHLIN: What's the proof of that?

MR. BLANKLEY: Oh, I mean the trends in church attendance, you know, in the rise in communitarianism. There's no doubt that this country is reacting to the cultural excesses of the past and is turning more religious. And government inevitably is going to respond to that. And this opening he has on his faith-based initiative is part of that. It's inevitable, and it's going to be very popular.

MR. MCLAUGHLIN: Did you see the way he recruited his adversary, Joe Lieberman, into supporting that?

MR. BLANKLEY: Yes, absolutely.

MR. MCLAUGHLIN: He also disarms his adversaries with these chummy nicknames. What do you make of that? Spencer -- who I am thinking of?

MS. CLIFT: George Miller.

MR. MCLAUGHLIN: George Miller. He calls him, "Big George" and most recently "el Grande Jorge."

MS. CLIFT: Right.

MR. KUDLOW: George W. Bush is a friendly -- he's not a hierarchical person, he's not a formal person, he's an informal person.

But I just want to comment, the religiosity, the faith, is part of Bush's own personal transformation. What is going to matter most in terms of affecting the whole country is what he said, this will set the standards. He will live up to this, unlike some of his predecessors.

MR. MCLAUGHLIN: He even invited the Kennedy clan to see a movie, "Thirteen Days."

MR. FUND: This is not even realpolitik, this is "smartpolitik."

MR. MCLAUGHLIN: Okay, do you think it's possible that the culture of Washington, which is quite blood-letting and nasty, rewards and punishments, could change?

MR. FUND: If he also succeeds on a legislative program, and like Ronald Reagan, shows that he has clout and can punish people.

MR. MCLAUGHLIN: Out of time! Let's go!