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MR. MCLAUGHLIN: Issue one: Defense or De-fense?

(Begin videotape segment.)

PRESIDENT GEORGE W. BUSH: You're among the first in the Army to hear me extend "hoo-ah."

MILITARY AUDIENCE: Hoo-ah! (Laughter, applause.)

PRESIDENT BUSH: I proudly do so -- (laughter) -- for there is no greater duty for the president and no higher honor than to serve as the commander in chief.

(End videotape segment.)

MR. MCLAUGHLIN: To strengthen the armed forces, to advance its technology, to rethink its strategy, to raise military pay by $5.7 billion -- these are among President Bush's ambitious goals for the Department of Defense.

But Bush is also playing defense because, although he announced the pay raise, he also says he will adhere to the Clinton defense budget dollar figure for FY 10-1-01 to 9-30-02, $310 billion.

There's a political problem to this number; to wit, it's in disturbing contrast to Bush's campaign rhetoric that Clinton-Gore neglected the military, and Bush would boost defense spending by $4.5 billion per year for 10 years, totalling $45 billion. And even that is not enough to replace aging equipment, analysts say. When you add needed new programs, like the Air Force's F-22 fighter jet, the Navy's Stealth DD21 destroyer, and MDS, the costly missile defense system, it starts to add up to real money.

So what's the price tag to rehabilitate the U.S. military? In new spending -- new spending -- $100 billion more per year, 20 times what Bush in the campaign projected the cost to be.

Question: Are the conservatives justified in thinking that the military lacks basic readiness, and is Colin Powell right; are we overcommitted militarily, Lawrence Kudlow?

MR. KUDLOW: Well, I think the conservatives are right. Look, the defense budget has dropped in the last 10 years from 6 percent of gross domestic product all the way down to 3 percent -- a 50 percent drop. If you adjust for inflation, the level of defense spending has fallen by slightly less than 10 percent. Those are big declines. So I think there are issues here.

But I also think that Donald Rumsfeld, who sent shivers down the spine of the Joint Chiefs, who knows the Pentagon game, and who is capable of managerial reforms, is the right guy to lead Bush's study. And I think following that, you're going to see the administration submit a significant budget supplemental to boost military spending later this year.

MR. MCLAUGHLIN: Eleanor, you understand Colin Powell's position; we have too many commitments, too many deployments and, therefore, we don't have the hardware to keep it up.

MS. CLIFT: Yeah.

MR. MCLAUGHLIN: That's not a bad position is it?

MS. CLIFT: Yeah, but ask him where he would pull back, and you're probably not going to get much of an answer. This has always been a phony issue. First of all, Bush campaigned on the notion that "help is on the way." In Washington they hear money. He only proposed, even then, a $45 billion increase. Al Gore had a hundred billion dollar increase in his budget. So I don't believe that Bush was ever sincere about this.

The problem he faces now is he's got to come up with the money to pay for that ambitious missile shield. He doesn't know where he's going to find that and fund the tax cut.

MR. KUDLOW: (Off mike) -- SDI.

MS. CLIFT: So this is a shell game right now. And maybe there is some good coming out of it, if they do do that basic reform, which will be led by Andrew Marshall, the head of the Strategic Planning in the Pentagon.

MR. MCLAUGHLIN: Under Don Rumsfeld.

MS. CLIFT: He's a 79-year-old guy who's been in the Pentagon for decades and nobody's ever paid a lot of attention to him. Now he's got a Rumsfeld connection, and maybe some of his ideas are good and worth hearing.

MR. MCLAUGHLIN: Right on! Let's keep those septuagenarians on the go!

MS. CLIFT: (Laughs.) Right!

MR. MCLAUGHLIN: Michelle Malkin, welcome.

MS. MALKIN: Thank you very much, John.

I have to agree with Eleanor that, you know, fiscal conservatives especially should not be surprised because Bush made clear all along during the campaign that his top priority was not the military, was not even the tax cut, it was education. And he -- unfortunately, we've got a guy in the White House now who would rather pour billions of dollars into a failed public school and bogus reading programs then shell out and immediately do pay raises. I mean one of the education spending components is $30 million for the Troops for Teachers program. Instead of doing $30 million to train troops to be teachers, why not give that $30 million immediately for a pay raise so that men and women in uniform don't have to choose another career?

MR. MCLAUGHLIN: Don't you think the Rumsfeld review of the entire Pentagon and all of its apparatus -- the hardware, the deployment, et cetera -- buys time for the president? Does not it also get into strategic assumptions; namely, what is the threat? We have to know what the threat is before we are going to spend the kind of money, especially that some analysts say is $100 billion on top of what Bush is willing to go along with.

I'm asking you.

MS. MALKIN: Well, that may be true. But, you know, one of the strongest --

MR. MCLAUGHLIN: What is the threat? What's the threat?

MS. MALKIN: Well, one of the strongest statements that Bush made in the presidential debates was that he is opposed to nation building. And, you know, why are we waiting? We don't need to be sending reservists to Kosovo to deliver mail. Get them out now.

MR. MCLAUGHLIN: What do you have to say on this issue?

MR. WARREN: First of all, I thought, due to persistent criticisms of your political bias, the show had moved to Harlem. Weren't you moving to Harlem?

MR. MCLAUGHLIN: No, but we have a distinguished member of our political fraternity who is moving there.

MR. WARREN: We still spend more money on defense than the next seven or eight countries combined, I think it's critical to know. And even though there clearly are problems with spare parts and some overtaxed units, I think the point you're bringing up about figuring out exactly what we want to do in the post-Cold-War world, particularly the world where there are going to be a lot of humanitarian crises, is key.

But also, here is a way to save billions, trying to look at the grotesque overcapacity of Pentagon facilities around the country and around the world. Why can't you deal with that? Why won't Rumsfeld be able ultimately to deal with that? Because of congressional turf wars.

MR. MCLAUGHLIN: He may. I want to know this: How much can America scale back and still remain a superpower?

MR. WARREN: We still have more than the next seven or eight combined.

MR. KUDLOW: But we've scaled back enough. Again, when you look at these budget numbers, now that's not the only way to measure military strength or readiness, but the budget numbers have really plummeted in the last decade. And we are not like just another country, Jim; we are the world's leader, in this and everything else. So I want to come back to the Rumsfeld factor. He knows the game. He's a tough manager. And I think Bush is right to go slow, have the review, seek some reforms. We might even find --

MR. WARREN: But Larry -- Larry --

MR. KUDLOW: -- we might even find some of the excess capacity that the liberals like Jim want to have in there.

MR. WARREN: I'll stipulate that Rumsfeld is both the richest guy in that Cabinet, and maybe --

MR. KUDLOW: Well, that's great.

MR. WARREN: -- the smartest guy. Will he have the nerve --


MR. WARREN: -- to take on the business of overcapacity?

MR. KUDLOW: Yes. But that's not --

MR. WARREN: Is he going to appoint another base commission to get rid of some of this stuff?

MR. KUDLOW: But that's not the key issue. The key issue is a missile defense, and the key issue is readiness, and the key issue is the next generation of technology.

MS. CLIFT: No, the key issue isn't --

MR. KUDLOW: So there is going to be -- wait a minute, one last point. There is going to be a budget supplemental later this year on expanded military spending. That's why help is --

MR. WARREN: As there was with Reagan, as there was with every Republican president.

MR. KUDLOW: That's why help is on the way.

MS. CLIFT: If there is --

MR. MCLAUGHLIN: Wait a minute. Wait a minute. I want to --

MR. KUDLOW: God bless Reagan for making those defense increases to win the Cold War, Jim.

MR. WARREN: (Inaudible.)

MR. MCLAUGHLIN: Do you want to make another point along the lines of Bush is wasting money now, or misspending money now, that could be pumped into the Pentagon?

MS. MALKIN: It's a matter of priorities. Yes, we're going to have the review, yes, we're going to have a budget supplemental bill, but why wasn't it first? I mean, there's a symbolic element here of sending a message to those troops, those men and women that Bush talked about who are on food stamps. They're still waiting, while all of this money is being spent. It's not bad --

MR. : But the pay raise.

MS. MALKIN: -- (inaudible) -- education.

MR. MCLAUGHLIN: Exit question. Will Bush succeed in reforming the Pentagon? Please be quick.

Lawrence Kudlow?

MR. KUDLOW: It's not about reform. Yes, he'll get a little reform. It's about beefing up. It's creating a missile defense system and creating readiness. That's what the Pentagon is all about; it's not only about reforms.

MR. MCLAUGHLIN: Do you think he'll be successful in reforming the Pentagon?

MS. CLIFT: Modest reforms. But the key question is, if you want to go with this missile shield, you have to decide what the threat is, and they haven't decided that. The 10 top threats to this country are not answered by missile defense. They're not even in the -- they've got to enter the 21st century and face the real threats that exist, not the ones that are in the minds of --

MR. KUDLOW: That's a very naive view.

MR. MCLAUGHLIN: Why hasn't anyone here mentioned Condoleezza Rice and Colin Powell? Do you think that they're going to sit idly by and become -- or at least have the feeling of toothlessness while the Pentagon emerges into this giant dinosaur led by Rumsfeld with his powerful personality?

Does that figure in your thinking at all?

MS. MALKIN: Well, yes. I mean, eventually there's going to be reform; it's just a matter of why wasn't it a priority. Yes, we'll get informational warfare technology, it will be acquired.

MR. MCLAUGHLIN: And they want the big stick to be on the side of diplomacy, don't they?

MR. WARREN: In the political gamesmanship, Rumsfeld, with his former protege, Dick Cheney, I think will run roughshod over everybody else, including Condoleezza Rice and the Office of Management and Budget, which will be in way over its head. They'll get what they want.

MR. MCLAUGHLIN: Do you know how many people Condoleezza Rice has working for her? Four. Do you know what the platoons of people that are working for Rumsfeld -- Cheney, to some extent, and Powell -- are?

MR. KUDLOW: Oh, I'm sure it's huge.

MR. MCLAUGHLIN: Is she going to be able to referee this contest?

MR. KUDLOW: Condoleezza Rice has the force of her considerable intelligence. But Donald Rumsfeld is one of the smartest, toughest, savviest guys, and he is going to be in the driver's seat.

MR. WARREN: Except when it comes to the missile defense shield, except with that, Larry. He's wasting all of that money.

MR. MCLAUGHLIN: (Laughs.) Why don't you try reading Rumsfeld's report before you -- (inaudible) -- against it?

MR. KUDLOW: That's right.

MR. WARREN: I did read his report and gratuitous attack on the CIA.

MR. KUDLOW: The Rumsfeld Commission report was a stroke of genius, which is going to eventually be the guiding light to reduce armaments over time.

MR. MCLAUGHLIN: And it got him the job.

MR. WARREN: A stroke of political genius, you're correct.

MS. CLIFT: Is this the Rumsfeld Group or the McLaughlin Group? Certainly there's another issue we could talk about. (Laughs.)

MR. MCLAUGHLIN: The answer to my question as to whether or not Bush will succeed in reforming the Pentagon is: It's too close to call.

When we come back, Paul O'Neill, secretary of the Treasury. What makes O'Neill tick?


MR. MCLAUGHLIN: Issue two: The aluminum man.

PAUL O'NEILL (Secretary of Treasury): (From videotape.) And the president said this is the Goldilocks tax return program. It's just the right amount; we don't want less and we don't want more. And so I'm hoping we can work with the Congress and get the president's bill passed.

MR. MCLAUGHLIN: Paul O'Neill, Bush's newly appointed secretary of the Treasury is pushing hard for Bush's $1.6 trillion tax cut. Who is this new guardian of our nation's wealth?

Born, St. Louis; 65 years of age. Wife, Nancy; four children. Fresno State College, B.S.; Indiana University, Masters in public administration. Nixon and Ford administrations, Office of Management and Budget, various positions, including deputy director, 10 years. International Paper, vice president and president, 10 years. Aluminum Company of America, Alcoa, chairman and CEO, 12 years.

Coming from industry, O'Neill is the first Treasury secretary since Jimmy Carter's administration not to have Wall Street experience. His old economy background puts industrialist O'Neill on good terms with labor groups, whom he has bargained with for decades.

"He's an industrialist who has maintained a strong industrial base in the United States. I think this is far better than having another bond trader in that job. I negotiated with Paul for years. He's very tough but fair, and we've always been able to get a fair, decent contract," so says President George Becker of the Steelworkers Union.

Question: For someone who wanted tax hikes in '91 and '93, and someone who is so praised by big union labor, as we just saw, can O'Neill be trusted by conservatives to carry Bush's battle for tax cuts faithfully and tenaciously? I ask you, Eleanor Clift.

MS. CLIFT: He's not a true believer. He's not a conventional Republican. He's certainly not a conventional conservative, and in his confirmation hearings he made conservatives nervous because he basically assessed a tax cut in neutral economic terms, and the Bushies felt that he didn't show sufficient enthusiasm.

So I think the Bush people themselves are nervous about him. I suspect he's going to toe the line because if he doesn't, he's probably out of a job.

MR. MCLAUGHLIN: Is it a strength or a weakness for a Treasury secretary to lack strong ideological roots? I ask you, Michelle Malkin.

MS. MALKIN: Well, I think the caution is warranted. I mean, you've got someone who embraced higher taxes, energy taxes, the Bush tax increase -- not as a matter of youthful indiscretion, but more of middle-age indiscretion. And, you know, you have somebody who has been lukewarm about the estate tax repeal and supportive of Fannie Mae and Freddie Mac, which are, you know, these government-backed financial lending giants that are cesspools of corporate welfare and political cronyism.

Yes, to be charitable, caution is advised.

MS. CLIFT: I must say --

MR. MCLAUGHLIN: You know, you know, you know -- you don't have to be a pure supply-sider to be in that job. I know you've never met a tax increase that you could possibly swallow, but --

MS. CLIFT: I must say, Michelle --

MR. WARREN: Well, Michelle -- Michelle --

MR. MCLAUGHLIN: But you know that circumstances can change. For example, this is not an era of deficits, as it was then.

MR. KUDLOW: That's right.

MR. MCLAUGHLIN: This is an era of surpluses. So one can see this -- ideological man change his mind, can't you? Don't you agree with that?

MR. WARREN: He's been refreshingly candid, particularly in admitting what he doesn't know; also in saying, "I totally disagree." You know, "You can't strong-arm the Japanese and we should lay off most other countries in forcing some of our views on them," something which infuriates the European Union in some ways. He is not as sophisticated as some, such as Rubin, when it comes to the financial markets, and he's not a big supply-sider, which raises the question, Larry, Why in the world are you in philosophical bed with him already? Is he returning your calls that quickly? Is that it? (Laughter.)

MR. MCLAUGHLIN: He's a source.

MR. KUDLOW: Well, that's very important. He has good taste. But I --

MR. MCLAUGHLIN: Is he a source?

MR. KUDLOW: I support him strongly. I would never divulge a source, John, not even to you. But look, here's a guy who, first of all, is talking about dynamic scoring with economic growth benefits to the lower marginal tax rates. Secondly, he is a dedicated tax reformer who wants to abolish the corporate tax, who says the personal tax code is unfit for an advanced society; and finally, he has launched personally an attack on the class-warfare liberals who want to have tax cuts for the low end but not the upper end. He has called them the "flathead crowd" of income-levelers who want to restore socialism. So O'Neill is a lot tougher than you think.

MR. MCLAUGHLIN: Why is the answer corporate tax when you know and I know that the way to jumpstart the economy is not on the consumer side, it's on the business side, true or false?

MR. KUDLOW: It's -- no, wait a minute. On the upper-end side, the entrepreneurs and the upper-end people, those are capitalists who will supply the seedcorn for new jobs. That's the personal tax rate. However, I agree that a deficiency in the Bush plan was the absence of a capital gains tax cut or a corporate tax rate cut, but you know what --

MR. MCLAUGHLIN: You don't think it is hard --

MR. KUDLOW: -- those --

MR. MCLAUGHLIN: -- if the "Aluminum Man" has a heart, you don't think that in his heart that he really wants corporate tax cuts?

MR. KUDLOW: Yes, I think -- I think --

MR. MCLAUGHLIN: But he won't carry the water on it?

MR. KUDLOW: The Bush position is they've put their personal tax cut on the table. They want to accelerate it to January 1st. That is exactly the right medicine. But if Congress can come up with a capital gains tax relief program, they will accept it.

MR. MCLAUGHLIN: Exit question.

MR. KUDLOW: And that -- and O'Neill has inferred and implied that for day one.

MR. MCLAUGHLIN: Exit question: Is O'Neill the right pick for Treasury secretary for these times, yes or no? Lawrence, quickly, one word.

MR. KUDLOW: Yes. A CEO -- former CEO is exactly the right salesperson on Capitol Hill.

MR. MCLAUGHLIN: Yes or no.

MS. CLIFT: Yes, if anybody is willing to put a break on runaway tax cuts and corporate bennies --

MR. KUDLOW: Oh my god. Oh my god.

MS. CLIFT: -- it may be Mr. O'Neill.


MR. KUDLOW: A tax cutting feeding frenzy, Eleanor.


MS. CLIFT: That's right.

MR. KUDLOW: A feeding frenzy.

MR. MCLAUGHLIN: Is he particularly well-suited -- excuse me, is he particularly well-suited for these time?

MS. MALKIN: We shall see. Any Republican official, Bush official endorsed by the New York Times deserves skepticism. (Laughter.)

MR. MCLAUGHLIN: It's a tricky economy in times of enormous transition. If you ever needed a pragmatists, don't you think it's now, someone who is not wed, as you are perhaps, to certain ideological commitments? You understand?

MS. MALKIN: Skepticism is advised.

MR. MCLAUGHLIN: What do you think?

MR. WARREN: Despite his having breakfast with and answering the phonecalls of Lawrence Kudlow -- (laughter) -- I think he may be a pragmatic winner in the long run, maybe a little bit along the lines of James Baker back during the Bush years.

MR. MCLAUGHLIN: He's ideally suited because he's open to all possibilities. And one thing we know about our economy, particularly now, is that nothing is constant.

Issue three: Wait for the midnight hour.


("Midnight Hour" is played.)

Bill Clinton's presidency ended not only with midnight pardons but also with midnight regulations, last-minute executive orders or rules rushed through before Congress had a chance to look them over. Once these rules are printed in the Federal Register, they carry the force of law.

In Clinton's case, his last-minute stratagems can be best described not as midnight regulations but more as a midnight raid: 8,000 pages worth of new rules, more numerous, more sweeping than the midnight regs of any other president.

Now, it falls on the new president G.W. Bush, to be the Hercules who will clean out the Augean Stables. Bush's first step, stop the presses. He so directed the Government Printing Office, which puts out the Federal Register. And President Bush did it on the same day he took office, January 20th, right after he took his oath. x x x oath.

He wants his own appointees to check out Clinton's last-minute regulations.

Clinton's rules, many of them, may be hard to undo, but not impossible. The 1996 Congressional Review Act could be the bulldozer to bury these 11th-hour Clinton memorabilia, including:

One, the ban on road construction, even road reconstruction, on 60 million acres of National Forests in 38 states, leaving one-third of America's forests inaccessible to tourists, to developers of any stripe. Recall that the 12 Western states now have 63 percent, almost two-thirds of their land, owned by the federal government -- 684 million acres.

Two, seven huge new national land grabs authorized; call them National Monuments, covering nearly one million acres in five states.

Three, unreasonable and punitive regulations for diesel-powered trucks and buses. An emissions plan so costly that many refineries will not be financially able to comply. That will mean a drastic drop in fuel production and higher fuel prices, critics say.

Michelle, what do you think of the midnight regulations of Bill Clinton?

MS. MALKIN: I think that what we've seen is a craven abuse of the executive order. And what it's done is already invited a reform plan, which I think has legs, by Colorado Representative Bob Schaffer. And what he wants to do is impose a 30-day reporting requirement for last-minute White House executive orders. I mean, we have a waiting period on handgun purchases, why not a waiting period on executive orders?

MS. CLIFT: Oh, that will really turn things around! (Laughs.)

MR. MCLAUGHLIN: Do you think -- do you think --

MS. MALKIN: I know the pardon part of it is unconstitutional. But with regard to --

MR. MCLAUGHLIN: Which one of these do you think can be overturned? Would it be the diesel fuel? Would it be the roadless areas? Would it be the National Monuments?

MR. KUDLOW: They're all going to be overturned.

MS. MALKIN: Yeah, they all are.

MR. KUDLOW: They are going to be overturned.

MS. MALKIN: But I think the diesel one has the best chance of passing.

MR. MCLAUGHLIN: The diesel one? And the second-best one is the roadless areas?

(Cross talk.)

MR. KUDLOW: The land grab is going to be overturned for the very simple reason that the nation has an energy crisis, a shortage of energy. You know, you can't run the high-tech wired economy without energy. So that is going to be rolled back.


MS. CLIFT: Excuse me! These are monuments. They're not going to be drilling in the monuments, Larry.

MR. MCLAUGHLIN: Why did Clinton do it?

MR. KUDLOW: No, the land around the monuments which Clinton took to close this off.

MS. CLIFT: Why did Clinton do it? He left -- excuse me. He left some nice little landmines behind, and if George W. Bush wants to put political capital on the line --

MR. KUDLOW: Yes. But --

MR. MCLAUGHLIN: Wait a minute.

MS. CLIFT: -- saying we want more emissions and undoing health and safety regulations, he's going to be in big trouble.

MR. MCLAUGHLIN: Yes, but there is a --

MS. CLIFT: The automotive industry favors emission controls.

MR. MCLAUGHLIN: There is a sensible center there between environmentalists and developers. And if George Bush can seize that, he will have sportsmen, he will have hunters, he will have ranchers, he will have miners --

MR. KUDLOW: Drillers.

MR. MCLAUGHLIN: -- he will have loggers --

MR. KUDLOW: Drillers.

MR. MCLAUGHLIN: -- and he will have the West behind him.

MR. KUDLOW: Drillers.

MS. CLIFT: Drillers, that's right!

MR. MCLAUGHLIN: We'll be right back.


MR. MCLAUGHLIN: President Bush wants immediate help for seniors who are poor to have prescription drugs. It's called Immediate Helping Hand. It's widely disputed in the Congress. Will it pass?

MR. KUDLOW: Yes, I believe it will.

MR. MCLAUGHLIN: Well it, Eleanor?

MS. CLIFT: No, because Republican governors don't want it. They would have to build big bureaucracies, and they're afraid they'd get stuck holding the bill.


MS. MALKIN: No, that's right. But also, you know, the larger point is that Medicare reform isn't going to pass.

MR. MCLAUGHLIN: So you don't think either one will pass --

MS. MALKIN: Right.

MR. MCLAUGHLIN: -- this year.

MR. WARREN: No. Bush wants to send the money to the states. Half the states don't even have existing programs to deal with prescription drugs.

MR. MCLAUGHLIN: The answer is yes, Bush's plan will pass because the political cost of denying it passage is too high.




MR. MCLAUGHLIN: Issue four: Illegals no more.

REP. LUIS GUTIERREZ (D-IL): (From videotape.) The bill would reward people who are in this country who are working and have been here for five years, who have followed the law, who have followed the rules, who have been contributing to our society and to our economy; and would say, "You know, we're going to give you the dignity that should come along with your responsibilities that you've fulfilled and with your contributions to our economy."

MR. MCLAUGHLIN: That's Luis Gutierrez, head of the Immigration Task Force of Congress' Hispanic Caucus, calling for the legalization of undocumented aliens. The Gutierrez amnesty would cover an estimated 5 million aliens who have been living illegally in the United States for at least five years. The number of all illegal aliens in the country totals some 11 million.

Gutierrez contends that since these individuals have contributed to the U.S. economy for five-plus years, they should be allowed to remain in the country, illegal or not. The legislation has staunch opponents both in Congress and outside, including Dan Stein, the executive director of FAIR, the Federation for American Immigration Reform. Stein says amnesty is simply a way for Democrats to add to their ranks.

DANIEL STEIN (Executive director, Federation for American Immigration Reform): (From videotape.) These folks are registering eight-to-one Democrat, for the obvious reason that people who are working so close to the poverty line are going to be more receptive, at least for a generation, to the Democrats' message.

MR. MCLAUGHLIN: The last mass amnesty was in 1986, when Ronald Reagan amnestied 2.7 million five-year-plus resident aliens.

Question: Does amnesty undermine the rule of law? Michelle Malkin?

MS. MALKIN: Obviously. It was bad when Reagan did it, it would be bad if Bush did it. You know, I've got dozens of relatives in the Philippines who have been waiting for years, patiently in line, going through the bureaucracy, to get their shot at the American dream. And what kind of message does it send, to all those people around the world who are waiting in line, to go ahead and amnesticize hordes of people who came here illegally?

MR. MCLAUGHLIN: You mean the illegals jump ahead of the legal, patient ones.

MS. MALKIN: Of course they do. And, you know, we have to think about our immigration policy. Do we want to be rewarding people who engage in illegal behavior to get here, or do we want the kind of people who are law-abiding?

MR. MCLAUGHLIN: All right. Let's get one thing straight, now. Is being an illegal alien a criminal act?

MS. MALKIN: Coming here to this country illegally is -- yes!

MR. MCLAUGHLIN: It's a criminal act?

MS. MALKIN: It's illegal!

MR. MCLAUGHLIN: Do you want to speak to this?

MS. CLIFT: Well, we share a common border with Mexico. We need their workers. President Bush has met with --

MR. MCLAUGHLIN: Is this the capitalistic side of Eleanor?

MS. CLIFT: It's humanistic.

MR. KUDLOW: This is Eleanor as supply-sider.

MS. CLIFT: It's humanistic.

MR. KUDLOW: She's a supply-sider.

MS. CLIFT: It is humanistic and capitalistic --

MR. KUDLOW: Right.

MS. CLIFT: -- and it's recognizing the reality. And President Bush is receptive to this.

MS. MALKIN: Well, then give them --

MS. CLIFT: I think the congress- -- the congress- --

MS. MALKIN: You can get them the visas, but don't make them U.S. citizens.

MS. CLIFT: -- excuse me -- the congressman's bill --

MR. MCLAUGHLIN: What is that again?

MS. MALKIN: Give the guest workers visas, but don't make them U.S. citizens.

MS. CLIFT: The congressman's bill is unlikely to go through, because most Republicans, unfortunately, feel like Michelle does. But we will have expanded guest worker privileges, and we're going to try to ease some of the tensions, so people don't kill themselves trying get here.

MR. MCLAUGHLIN: Is this a political ploy to make Bush or even the Republicans in the Congress look anti-Hispanic, since Gutierrez knows how well Bush has done with Hispanics in Texas?

MR. WARREN: No. Gutierrez, who has been a kind of very inconsistent and a basically cloutless congressman from the city of Chicago, has been very aggressive and very eloquent on this issue, but that's about it. And John --

MR. KUDLOW: And the --

MR. WARREN: -- I have to wonder, John, who these days puts the new shingles on your house, who drives the cab that you're in, who picks the lemons that you eat?

MR. MCLAUGHLIN: What's your point? What's your point?

MR. WARREN: My point is that there's once again because -- you know, creeping bad economic times, a little flirtation with American xenophobia. I think we should be proud that so many people want to come in this country and live the American dream.

MR. MCLAUGHLIN: What -- well, if that's the way you feel, then you approve of Vicente Fox's idea --

MR. KUDLOW: Yes, yes, open up the borders.

MR. MCLAUGHLIN: -- of letting them across the border, no visas, no green cards?

MR. WARREN: Yes, open up those borders very much like the Europeans are doing.

MR. KUDLOW: Look, if Jim was more literate in economics, he would have a simpler take, and that is --

MR. MCLAUGHLIN: What would it be?

MR. KUDLOW: -- the immigrants have contributed enormously to the American prosperity of the last 20 years.