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THE MCLAUGHLIN GROUP



HOST: JOHN MCLAUGHLIN



JOINED BY: ELEANOR CLIFT, TONY BLANKLEY,


CLARENCE PAGE AND LAWRENCE KUDLOW



TAPED: FRIDAY, MARCH 2, 2001


BROADCAST: WEEKEND OF MARCH 3-4, 2001



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THIS IS A RUSH TRANSCRIPT.


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MR. MCLAUGHLIN: Issue one: Show me the refund. What should the federal government do with its massive amounts of taxpayer money in the upcoming fiscal year beginning October 1, especially with a projected 10-year, $5.6 trillion surplus? That's the question addressed this week by President Bush before a televised joint session of Congress.



His conclusion?



PRESIDENT GEORGE W. BUSH: (From videotape.) The people of America have been overcharged. And on their behalf, I'm here asking for a refund. (Cheers, applause.)



Tax relief is right, and tax relief is urgent. The long economic expansion that began almost 10 years ago is faltering.



MR. MCLAUGHLIN: Question: How effective was Bush's address to the Congress in putting his tax cuts in motion? Lawrence Kudlow.



MR. KUDLOW: I think he was very effective. I think he delivered a terrific speech, and that was validated by, I mean, 80 percent polling on the speech itself. I think his tax cut presentation was pretty good, John, but I'd say it was a "B" and not an "A."



MR. MCLAUGHLIN: In substance?



MR. KUDLOW: The refund idea is a good idea. It's a clever idea. But in some ways, it's too clever by one. The polls on tax cuts are not nearly as high as I'd like to see them. They're really just a little bit above 50 percent. I don't think yet, I don't think yet President Bush has really sold the tax cut on economic growth lines. I don't think he's addressed the fact, or he's lost the strain of thought, that we are in a recession and we need some help. He's got to link tax cuts to growth. That's the issue.



MR. MCLAUGHLIN: Eleanor, are you a little surprised that Lawrence is taking this position on the polling, inasmuch as the polling is not consistent? Investors Business Daily had a very strong positive poll of the American people and their position on tax cuts; namely, they liked the idea.



MR. KUDLOW: Actually, John, the IBD poll was just slightly above 50 percent, almost identical to the Zogby poll. That's one of the things that interests me about this.



MR. MCLAUGHLIN: What about the 79 percent that we heard from CNN after the speech? And what about the likely voters and their being in favor of this?



MR. KUDLOW: I think people like Bush, and I think people liked his speech very much. But on this particular issue, it's trickier.



MR. MCLAUGHLIN: There's still a great deal of disharmony among the polls on this subject.



MS. CLIFT: There's a great deal of disharmony among the people, too. The country is clearly divided on this tax cut proposal. They don't think tax cuts are a high priority. And the Congress is divided. I thought President Bush did fine. He has a winning manner. He gave a good speech.



MR. MCLAUGHLIN: Don't go overboard, Eleanor. (Chuckles.)



MS. CLIFT: Winning manner, good speech. But he does not have, I don't believe, the strength of personality to compensate for the lack of seriousness in his numbers. He is asking us to take on faith that all this money is going to accumulate 10 years out, and he's going to spend it on a huge tax cut which could very well crowd out a lot of things the American people care about.



MR. MCLAUGHLIN: Was it mastery in motion?



MR. BLANKLEY: No, it wasn't quite mastery in motion. What he has is a Trumanesque quality that I think you can't watch him and not believe he believes what he's saying.



MR. MCLAUGHLIN: He dared us.



MR. BLANKLEY: And he's also got a light touch.



MR. MCLAUGHLIN: Mirthful! Mirthful!



MR. BLANKLEY: No -- (Laughter.)



MR. PAGE: (Inaudible) -- John. (Laughter.)



MR. BLANKLEY: This is going to put him in good stead as he starts presenting the case, and I think that, in fact, he's in great shape on the tax cut. Recognizing that Eleanor's not wrong in some of her analysis, but my sense is that this is going to pass handily in both the House and the Senate.



MR. MCLAUGHLIN: You think it's in the air, don't you?



MR. BLANKLEY: I think it's going to pass.



MR. MCLAUGHLIN: And you can tell by the way Gephardt's numbers have been going up. Now he's up to practically a trillion dollars. He started at about half that.



MR. BLANKLEY: Yeah, and critically, see where President Bush went. He immediately went to Georgia to put pressure on Senator Cleland. He's going to end up picking up four, five, six Democratic senators and probably hold the Republican senators with a minor modification of the bill. It's going to pass.



MR. MCLAUGHLIN: Democrats are hitting hard the class warfare. That's their thrust. Is that going to go anywhere? Did it do anything for Gore, or is it self-defeating? It's dated, is it not?



MR. PAGE: Why is the only class warfare we're discussing a tax advantage for the wealthy here, John? (Laughs.) I mean -- no, the fact is that Bush benefited from low expectations, first of all. It was a masterful presentation. It was much better than most Americans saw during the debates and in his previous speeches. A very good sales job.



The Democrats did not come back as strong with their reply, but the one remark they made that is a strong one is that the numbers don't add up, and we do not know what the projected surplus is going to be.



MR. BLANKLEY: Yeah, but their -- but -- but -- but their numbers don't. Three times Gephardt and Daschle said that Bush was going to use all of the surplus up on the tax cut, and that, of course, is just completely --



MS. CLIFT: Well, and it's -- they actually -- actually --



MR. PAGE: And it depends on which is --



(Cross talk.)



MR. MCLAUGHLIN: Eleanor?



MS. CLIFT: Actually -- actually, they've got numbers that document that Bush can't --



MR. BLANKLEY: Five-point-six --



MS. CLIFT: Well, I don't think they're going to -- I don't think --



MR. BLANKLEY: Five-point-six trillion dollars they have left --



MS. CLIFT: Come on, Tony. I don't think --



MR. BLANKLEY: -- and the $2 trillion tax cut.



MR. MCLAUGHLIN: Are the -- are --



MS. CLIFT: Throwing the billions and the trillions around, we're not going to make sense of it on this show, but the point is --



(Cross talk.)



MS. CLIFT: Excuse me. Excuse me.



MR. BLANKLEY: Our audience, unlike Gephardt, understand the difference between a trillion and a billion.



MS. CLIFT: Excuse me! The House is ramming it through -- your old stomping grounds. You know about how to do that.



MS. CLIFT: And they're ramming it through without any public hearings, without a --



MR. BLANKLEY: They're calling it the blitzkrieg!



MS. CLIFT: -- without a budget in place, because they can't withstand the scrutiny, and they're hoping to put pressure in the guys in the Senate.



MR. KUDLOW: No, no, no. The numbers -- this is --



(Cross talk.)



MS. CLIFT: Fortunately, in the Senate they're going to go slow, just like they did when your guys were in power.



MR. MCLAUGHLIN: Excuse me! Excuse me!



MR. KUDLOW: You know, this is just the most --



MR. BLANKLEY: No, in fact, because the House is moving faster, the Senate's going to start moving faster, too.



MR. MCLAUGHLIN: Excuse me. Larry? Larry, quickly.



MR. KUDLOW: This numbers debate is just so flaccid and meaningless. It's nothing. That's not what's going to decide it. It never does. The problem right now, John, is a different problem. He's going to get a tax cut. The question is, what's the structure and content of the tax cut? What was reported out of the Ways and Means Committee last week was the worst, most diluted tax cut. The only retroactive rate is the very bottom rate going from 15 to 12. There will be no supply-side investment or capital formation growth effects, so they're doing some damage. It may prolong the slow-down, John, and defer the recovery, because people are going to wait till lower tax rates -- (inaudible).



MS. CLIFT: Nothing -- nothing -- nothing could please Kudlow. (Laughter.)



MR. MCLAUGHLIN: All right. Grade Bush, A to F. Two grades. First, substance; second, performance. Two letters, please, no commentary. I ask you, Lawrence.



MR. KUDLOW: Substance, I give it a B-plus overall. Presentation, I give it an A.



MR. MCLAUGHLIN: Eleanor?



MS. CLIFT: Substance, C-minus. Presentation, B-plus.



MR. MCLAUGHLIN: Tony?



MR. BLANKLEY: A-minus for both.



MR. MCLAUGHLIN: And I ask you.



MR. PAGE: I give him an A-minus on presentation, a very good job, but a C on the substance level.



MR. MCLAUGHLIN: The answer is he gets an A and an A. (Laughter.) When we come back, the pardon story goes on and on and on.



(Announcements.)



MR. MCLAUGHLIN: Issue two: Yes, but where's the quid pro quo? No matter how hard everyone tries, we can't seem to close the zipper on Bill Clinton's presidency. The midnight pardons -- it's now the story that keeps going and going and going.



The chronicle. Item: Tony Rodham, Hillary's other brother, admits to successfully pushing pardons of a Tennessee couple with financial ties to Rodham over Justice Department objection.



Item: Roger Clinton, Bill's half-brother, unsuccessfully pushes pardons directly with the president for six friends, some of whom Roger met in jail.



Item: New York U.S. attorney Mary Jo White has convened a criminal grand jury investigating the circumstances surrounding Marc Rich's pardon. In that investigation, Denise Rich has met twice with federal prosecutors about a possible immunity deal.



Item: Get this. New York State tax officials are now seeking $137 million from Marc Rich in back taxes, penalties and accrued interest.



Item: Beth Dozoretz, Democrat fund-raiser and friend of Marc Rich's ex-wife Denise, takes the Fifth.



BETH DOZORETZ (DNC fund-raiser): (From videotape.) I respectfully decline to answer that question.



MR. MCLAUGHLIN: Question: What was the upshot of the hearing this week on the Clinton pardons? Eleanor Clift.



MS. CLIFT: One, no smoking gun. Two, I think we learned that there was more calculation behind the getting of the pardons and a lot of discussion about how to approach President Clinton. Thirdly, I think we learned about the frantic nature of the last hours in the White House and how Clinton clearly overrode his staff. He wanted to do something nice for these two women, clearly, and he wanted to do the pardons.



MR. KUDLOW: Really? Really? What did he have in mind?



MS. CLIFT: The phone call from the prime minister of Israel arrived at the last minute. And the fact that Eric --



MR. MCLAUGHLIN: And the king of Spain.



MS. CLIFT: And the king of Spain. And the fact that Eric Holder at the Justice Department, regretfully, didn't put up a red light, I think, paved the way. But proving that there was a quid pro quo in exchange for money for the library, I think, is a fool's errand.



MR. MCLAUGHLIN: Tony?



MR. BLANKLEY: Well, we're not to the end of the road yet. But we did learn that there was no good legal argument for Bush's -- for Clinton's decision, because all of his legal advisors argued against it. We also learned that his former counsel, now on the Clinton library board, was in there working with Clinton on --



MR. MCLAUGHLIN: Cheryl?



MR. BLANKLEY: Cheryl Mills. Was in there --



MR. MCLAUGHLIN: Cheryl Mills, whom we saw during the impeachment hearings.



MR. BLANKLEY: She used to be his White House counsel. She's now working on his board, on his library board. She's now in there working on --



MR. MCLAUGHLIN: The Rich pardon.



MR. BLANKLEY: -- on the Rich pardon at the same time that she knows about the fundraising that's come into the library.



MR. MCLAUGHLIN: And on the day before he left the presidency, the 19th of January.



MR. BLANKLEY: So we can see another piece of a potential connection.



MR. PAGE: Well, maybe my friend Tony, former prosecutor, can put together a "pro" between the "quid" and the "quo," but it's very doubtful that the U.S. attorney is going to be able to in this case. One thing we learned this week, John, like the old Washington saying goes, the scandal here is not what's illegal, the scandal is what's legal. The one legal argument that Bill Clinton has is that he has the pardon right, doesn't need to have a justification. And that includes for whatever favors or friendships that he knows on the side.



We meantime have record numbers of nonviolent drug criminals sitting in jail, several of which were much more deserving of pardon, didn't have a chance because they weren't giving any money --



MR. MCLAUGHLIN: Okay. Quickly.



MR. KUDLOW: One of the things we learned is that a whole lot of people have things to cover up. That's why they're not going to testify. So there's more on that score. The other thing is, Marc Rich is willing to pay the $500 million he owes the IRS and the New York IRS. And that's interesting, because we need that money to accelerate all the marginal tax rate reductions --



MR. BLANKLEY: I knew you were going to mention that.



MR. KUDLOW: -- which the Congress is not doing. And if we accelerate the whole --



MR. MCLAUGHLIN: Okay. Okay.



MR. KUDLOW: -- (inaudible word) -- then the stock market and the economy will take off.



MR. MCLAUGHLIN: Okay, a different kind of currency for a Clinton payoff? Get this: The National Enquirer reports this week that Denise Rich had a, quote, unquote, "love affair" with former President Clinton, leading to the notorious pardon of Mr. Rich's -- Ms. Rich's ex-husband, Marc Rich. Denise Rich visited the White House scores of times over the past 18 (sic) years, says the Enquirer. Quote, "It was common knowledge among staff that Clinton and Rich had a much closer relationship than just friends. They know of a sexual relationship," unquote.



Now, what about Hillary? Well, says the Enquirer, she knows all about the affair through a Secret Service informant. Quote, "Hillary did not see Denise as a threat to her. Someone like Monica Lewinsky was a threat because she was young and gabbed so much," unquote.



Ms. Rich's spokesman, Howard Rubenstein, told the Enquirer early in the week, quote, "Denise has said she did not sleep with the president," unquote. But on Friday, another spokesman for Ms. Rich directly went beyond what Rubenstein said. Quote, "Ms. Rich adamantly denies she had a sexual relationship with President Clinton," unquote.



Question: Tony, you said on this program that the payoff for the Clinton pardon need not have been in cash; it could have been a different currency. Is the Enquirer account what you were referring to?



MR. BLANKLEY: Well, without wanting to contradict without knowing the lady in question, if the allegation is correct, yes, that was the other piece that I was thinking of. (Laughter.)



MS. CLIFT: Well, I must say, I didn't know we were on the set of "As the World Turns." (Laughter.) But, you know, fortunately this is a talk show, and innuendo goes. It doesn't go in a courtroom, and I don't see any relevance here.



MR. PAGE: Well, it's not even --



MS. CLIFT: And I don't see any point in probing any further except to have a little fun doing it.



MR. PAGE: Yeah. Right. It's not even a question of courts.



MR. KUDLOW: Look, well, you were just talking about exchanges and red lights and stuff just a few moments ago. (Laughter.)



MS. CLIFT: I said --



MR. KUDLOW: I want you to expand on that.



MR. MCLAUGHLIN: You know, before --



MS. CLIFT: I said that Clinton clearly wanted to grant this pardon because people he cared about were asking him for it, including his former counsel, Jack Quinn. That's all I was saying.



MR. KUDLOW: (Inaudible) -- clarify.



MR. MCLAUGHLIN: Well, before we dismiss the Enquirer out of hand, bear in mind that it produced the Jesse Jackson story --



MR. PAGE: Right.



MR. KUDLOW: Yes, yes.



MR. MCLAUGHLIN: -- and it produced the Hugh Rodham story.



MR. PAGE: Right, correct.



MR. KUDLOW: Yes, yes.



MR. MCLAUGHLIN: And the mainstream press is taking another look at checkbook journalism, is it not?



MR. PAGE: And believe me -- oh, well, of -- well, if you mean reconsidering using it, I'd say it is not. However, John, you know, this Enquirer story reminded me of the classic cop-out headline, "Amazing if true." (Laughs.)



MS. CLIFT: Right.



MR. PAGE: I mean, it was a great read, but it was so thinly sourced --



MS. CLIFT: Right.



MR. BLANKLEY: Yeah.



MR. PAGE: -- you can't even compare it to the Jesse Jackson story or the Hugh Rodham story.



MR. MCLAUGHLIN: Exit question --



MR. KUDLOW: But the Enquirer has developed credibility in some recent issues.



MR. PAGE: But not on this story, though, Larry. You read the story too. It's a great read, but it's a soap opera.



MR. MCLAUGHLIN: All right. We've got to get out. We've got to get out. Exit --



MR. KUDLOW: (Off mike) -- time, Clarence, because Eleanor's red lights are still flashing. So give it a little bit of time.



MR. MCLAUGHLIN: Exit question for the entire issue, based on what we have learned to date: A, was there likely a quid pro quo in the one or more Clinton presidential pardons? B, if so, will sufficient evidence beyond a reasonable doubt ever be found to prove that quid pro quo?



Lawrence, A.



MR. KUDLOW: Yes.



MR. MCLAUGHLIN: And B?



MR. KUDLOW: Doubtful.



MR. MCLAUGHLIN: Yet.



MS. CLIFT: No, no.



MR. MCLAUGHLIN: No, no?



MR. BLANKLEY: Yes, and they may get somebody on a gratuity charge, which is sort of a lesser offense than bribery.



MR. PAGE: Clinton makes mistakes, but not that big of a mistake to let there be a pro between the quid and the quo here.



What was your first question? (Laughs.)



MR. MCLAUGHLIN: The first question was, was there likely a quid pro quo, but it -- and the second question is, can it be proven?



MR. PAGE: There was likely friendships and close relationships, but --



MR. MCLAUGHLIN: What's the answer, yes or no? No quid pro quo?



MR. PAGE: -- no bribery, no bribery.



MR. MCLAUGHLIN: The answer is yes, there is likely a quid pro quo. B, it will never be proven.



Issue three: On the road to Syria.



A recent Mideast fact-finding tour took the host of this program to Cairo, Sharm el-Sheikh, Beirut, and Damascus. Here are the main points of the Damascus, Syria, report:



One, President Bashar al-Assad is opening his country up incrementally in the Syrian way -- no opening of floodgate. Stability is uppermost to the Syrians. But no question, the political air in Damascus is freer than I have felt in years.



Bashar al-Assad is the 35-year-old son of Hafez al-Assad, the former president and the feared autocrat of Syria for 30 years.



Bashar is an ophthalmologist who trained in London, became enamored of the Internet, and brought it to Syria. He was groomed for the presidency by his father, who died last June. Inaugurated in July, eight months ago, Bashar first shut down the infamous Mezze prison and pardoned some 600 political prisoners. He has permitted public criticism of his government during these months, so long as the ideas are not those of foreign troublemakers. Quote, "Within these limits, everything is permissible," he says.



Over the past two weeks, however, there has been a tentative pullback in this permissiveness, but a sharp crackdown on open discussion is not expected.



Two, riveted focus on economic reform. Syria is poor. You only have to walk in downtown Damascus and see how people are dressed to know that. The per-capita income is hardly more than $1,000 a year. In Lebanon it is five times that; Turkey, seven times.



Syrian banks are state-owned and operated. Bashar is eager to privatize them and to create a stock exchange. Taxation and immigration reform is under way.



Three, resistances. Vested interests, economic elite, political establishment, security apparatus -- they are all deeply rooted after 30 years of Assad Sr.'s command economy and command society.



The good news is that before his father died, Assad Sr. retired up to a dozen of his key old guard and with his son installed reformers and young technocrats who share Bashar's values and his direction.



Four, Syria signed a $1 billion free trade pact a month ago with its former archenemy Iraq, Saddam Hussein. Syria needs Iraqi commerce, as does Jordan and Turkey and Egypt, all of whom have their own trade contracts with Saddam Hussein -- Egypt, 2 billion; Jordan, 1.5 billion; Turkey, 1 billion. Even Saudi Arabia, which sees Iraq as an unpredictable neighbor, potentially dangerous, has almost $350 million worth of trade with Saddam.



Five, Saddam now sells oil to Syria, discounted 50 to 60 percent -- not for cash, but in exchange for Syrian goods -- food, clothing, medicine. That's the way the Jordanians and Turks trade with Iraq right now, and they do so with U.S.-U.N. approval. Currently, Bashar is believed to market Saddam's oil to the Syrians and sells Syrian oil on the foreign market at OPEC prices, all of which is probably what Bashar was really telling Colin Powell when they met earlier this week.



Six, beguiling Bashar -- low-key but genial, bright but not flashy, very popular with young King Abdullah in Jordan, with President Mubarak in Egypt, with the Saudis, with the Emirates' officialdom, whom he visited. And he's especially close with Rafik Hariri, the billionaire prime minister of Lebanon and Lebanon's president, Emile Lahud. These relations have strengthened his status at home.



Seven, Bashar's secret weapon: Asma Akhras, his 25-year-old wife of two months, married New Year's Day. (Screen displays photograph of Asma Akhras.) No pictures have hitherto been seen by the public of Bashar's bride. Well, here's yet another scoop for you:



Asma speaks five languages -- English, Arabic, German, French, Italian. Daughter of a Syrian cardiologist in London's upper-crust Harley Street medical sector. Queen's College, computer science major, then on to J.P. Morgan, London division, as an economist, which brought her often to the U.S. and the Middle East. Possibly a future Queen Noor of Syria, center-piecing her husband and her nation to the skeptical West.



Eight. So, will Bashar last? Or is he a transition figure? The betting throughout the region among Arabs and non-Arab is that he will make it.



Question: We have young Assad in Syria; young Abdullah, king of Jordan; young Mohammed V, king of Morocco; and young Bush in Washington. What do we make of these hereditary ascensions to power, this primogeniture? Anybody got a thought on that?



How about you?



MR. BLANKLEY: I think, other than Bush, which is not quite primogeniture, this is the typical pattern in the Middle East Although they have secular governments sometimes or they don't have official kings, nonetheless, the power is passed down.



However, I think the point to remember about him is that he believes -- he's been going around the Middle East calling the Israelis a "paper tiger" and he needs to understand that that's a very dangerous idea to be putting around.



MR. MCLAUGHLIN: What do you conclude from this -- it was a pretty good report, didn't you think?



MR. PAGE: Excellent report, John. Take me along next time.



MR. MCLAUGHLIN: Thank you very much. We're going to have you back more often.



MR. PAGE: (Laughs.) Thank you. Thank you.



MR. MCLAUGHLIN: And we're going to put Asma in that chair over there. Do you know Asma?



MR. PAGE: Okay, young Asma. (Laughter.)



You do have all these young leaders, John; you've still got old Saddam Hussein over there, who has become our Fidel Castro in that region, you might say. And we can't deal with Syria till we deal with that question of official relations with Iraq and the Iraqi oil that is coming through that country.



MR. MCLAUGHLIN: Did you see, there was one rather interesting point to be derived from the overview that I gave, and that is that Jordan and Turkey and Syria depend upon Saddam Hussein. So in relieving the burden of Saddam Hussein, we're also relieving the burden on Jordan and Syria, poor nations, very poor, and Turkey. Is Turkey suffering now?



MR. KUDLOW: Yes, Turkey is suffering now. Turkey is suffering because of bad currency policy.



But I want to go back to the Syria story. Look, you're right in this respect, free market economics and liberalization can help the whole Middle East, I agree fully. I wish it would be more, but there isn't more; that's the problem. There's no democracy, there's no real freedom, there's no real values going on in any of these countries.



A lot of Americans have been charmed by the Syrians. You know, Kissinger used to always go see Assad. Warren Christopher used to always see Assad -- to no end. They're still financing the Hezbollah.



And -- and the Wall Street Journal/Heritage Foundation survey of all the countries in the world rated Syria 135 out of about 160. They have high tax rates --



MR. MCLAUGHLIN: Now, one clarification. Syria is --



MR. KUDLOW: -- they have high tariffs, John. They have not followed through yet on your promises.



MS. CLIFT: Well, they're not --



MR. MCLAUGHLIN: Syria is not underwriting the Hezbollah. The Hezbollah come through Syria from Iran. Syria is not interfering with that, and that's a whole other story, and I'll report on that. This has been a very successful report, I think you will agree. (Laughter.) You're going to get another report from Beirut, and I will explain to you the rest of the story.



We have to get out, Eleanor. Save your remarks for your prediction.



MS. CLIFT: Next week. (Laughs.)



(Laughter.)



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



(Announcements.)



MR. MCLAUGHLIN: Will there be a tax cut, when the hubbub is over, and will it be a trillion or over a trillion?



MR. KUDLOW: It will be over a trillion, but I hope they accelerate to get some growth effect.



MS. CLIFT: Just barely over a trillion -- 1.2



MR. MCLAUGHLIN: One-point-two.



MR. BLANKLEY: Oh, it will be about 1.6.



MR. MCLAUGHLIN: One-point-six.



MR. BLANKLEY: Yeah.



MR. PAGE: They're just going to make a trillion; right there.



MR. MCLAUGHLIN: Larry Lindsey told me today that it would be above 1.6 when you get the two tax cuts, that is the marginal rates and the others together. But I'll say 1.5.



Bye-bye.



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