MR. MCLAUGHLIN: Issue one: Feds Ed. The landmark $26 billion Bush education reform bill was passed by the U.S. Senate this week by an astonishing 87-10 vote. It also passed overwhelmingly by the House last week. It now goes to the president for his signature, probably in January, thus fulfilling one of Mr. Bush's top goals for his first year in office.

This revolutionary law is the most ambitious since the watershed Elementary & Secondary Education Act of 1965, the linchpin of LBJ's Great Society program. The bill was written largely by the White House. It is, quote, "a breathtaking intrusion of the federal government on states' control of education," unquote. So says New York Times columnist Richard Rothstein.

For two years, policymakers have sought to force schools to be more accountable. And this new law seems to make every state a Texas type model. The Bush plan goals: One, poor and minority students helped to achieve higher grades; two, all children reading by grade 3; three, qualified teacher in every classroom; four, greater flexibility for school districts in spending federal aid.

The federal bill requires every student, grades three to eight, be tested in reading and mathematics. Schools that perform poorly will get extra aid, but if the failures are continued -- get this -- fed sanctions can be invoked, such as forced conversion to a charter school.

Question: Bush promised education reform in the campaign. Has he delivered? Lawrence Kudlow.

MR. KUDLOW: I think he's delivered very lightly on this, John. I think this bill, at the end of the day, started out with the best of intentions, but at the end, it's much more Ted Kennedy than George Bush and it's much more teachers' union than George Bush, because virtually everything you had on that screen has been so watered down that it is almost meaningless.

The supervisory testing and assessments are very light and airy/fairy. And, yes, public schools can be closed, but it takes years to close them. There's no vouchers. There's no real choice in this bill. And there's a doubling of federal spending. And I don't think it achieves what President Bush wanted and argued for during the campaign. And, no, you still have, in most of the urban areas of this country, 60 percent of the fourth graders cannot read, and the kids that are hurt the most are the African-American black kids. And I don't see this bill changing any of that.

MR. MCLAUGHLIN: Well, you've got accountability. You've got testing. You've goals. And you have disincentives against failure. And it doesn't interfere with the states' right question, because these states make out their own tests. Don't you think that's an excessively grim outlook on this?

MS. CLIFT: Yeah, I do. And this was the one issue that gave candidate Bush a claim to being something other than a Texas conservative. This was his compassionate conservatism that he cared about education. And here he is. Many people think he's the champion of conservatives. But with this bill, he has dramatically increased the federal role in education, which is anathema to conservatives, which is why Lawrence Kudlow doesn't like it.

MR. KUDLOW: And the --

MS. CLIFT: But there is money targeted for poor kids, which is largely thanks to Ted Kennedy, and that's a good thing. What I worry about is that the president has now imposed this system of annual testing, which has questionable results in Texas. Kids are going to be tested every year from grades three to eight. You have a lot of teachers complaining now; they've got to just teach to the test. I don't know that that's going to really be the answer.

MR. MCLAUGHLIN: Is this a conservative law? He says it's not a conservative law.

MR. BLANKLEY: No, it is a bipartisan law. This is the product of a --

MR. MCLAUGHLIN: Did the White House write it?

MR. BLANKLEY: The White House started with it. They made several concessions. Lawrence is approximately correct in pointing out the shortcomings. Having said that, it is still a big success for President Bush. The accountability and the testing was anathema to the liberals, and yet it's in the bill; it's the centerpiece of the bill.

On the other hand, vouchers is out, although they have some tutorials which will help children, but it doesn't give competition to the schools as a voucher system would. It is a classic compromise. It is, in fact, what people should expect when they ask for bipartisanship.

MR. MCLAUGHLIN: Bush wanted accountability. He's getting it -- the first time with the feds involved to bring federal leverage on school districts. I think it's a conservative law. Don't you?

MR. O'DONNELL: Well, it was opposed by liberals and conservatives among the 10 who voted against it; the conservatives because it was a huge intrusion of the federal government into education, and liberals opposed it because they said it doesn't provide any real tools for reform.

As Tony said, it is, at its heart, a testing bill. It's a bill that will impose all sorts of testing on students. You're supposed to test after you have done the educational reforms that will make better students and get you better results. This is about testing without doing anything to improve --

MR. MCLAUGHLIN: He says this is breaking the appetite of the unions. But don't you think accountability is the key here? That's the poison pill for the unions. We know teachers have to be good under this bill.

MR. O'DONNELL: We know that the public school system is currently in trouble. To test and nothing but test is a way for --


MR. BLANKLEY: They're not just testing. They're increasing spending by 40 percent, from $18 billion to $26 billion, which is a huge jump up. Now, whether that's enough -- it's a small percentage of the total budget --

MR. O'DONNELL: But we don't know what's going to happen. We have no evidence of what's going to --

MS. CLIFT: Yeah, and you have a lot of governors, particularly Republican governors, complaining because these tests are going to be very expensive to develop and administer, and they would rather use the money for --


MR. BLANKLEY: There is money going in as well.

MR. MCLAUGHLIN: Aren't you going to miss the philosophy, the psycho-babble that said that grades don't matter? This bill kills that philosophy. Grades matter.

MS. CLIFT: That philosophy was dead a long time ago. Did you miss the whole -- (inaudible)?

MR. MCLAUGHLIN: Exit question: How big a feather is this in Bush's cap? A, an eagle feather; B, a peacock feather, meaning color but no power; C, a turkey feather; D, a dove feather; and E, a pigeon feather. (Laughter.) Lawrence Kudlow.

MR. KUDLOW: I think I want peacock -- all color and no substance.

MR. MCLAUGHLIN: Not bad. Go ahead.

MS. CLIFT: It's not quite a peacock but it's not an eagle. Is there a bipartisan feather between an eagle and a peacock?

MR. MCLAUGHLIN: Yeah, there's something out there.

MS. CLIFT: Okay, I'll go for that.

MR. MCLAUGHLIN: An owl feather, maybe. What?

MR. BLANKLEY: Well, as the owner of peacocks, I question the proposition that the eagle feather is a more powerful bird than a peacock feather.

MR. MCLAUGHLIN: You may stand alone on that.

MR. BLANKLEY: I may very well. I'll stand with my peacocks.

MS. CLIFT: The peacocks are watching.

MR. BLANKLEY: I go for a hawk feather; not quite an eagle, but more substantial than your implications, and your negative implications, about a peacock.

MR. MCLAUGHLIN: I don't want to get too much into this, but how many peacocks do you have?


MR. MCLAUGHLIN: Four peacocks? Do they all do this routine, you know?

MR. BLANKLEY: The men. The peahens don't. Only the peacocks do.

MR. MCLAUGHLIN: Wow. You can get a free education as well as do this program.

MR. O'DONNELL: That's more peacocks than NBC. This will play well. This education bill will play well for President Bush. It will also play well for the Congress, but five years down the road will have made very little difference.

MR. MCLAUGHLIN: This is an eagle feather. Bush took on the NEA and he won. When we come back: Rum Punch. What's behind the popular infatuation with Donald Rumsfeld?


MR. MCLAUGHLIN: Issue Two: Falling Hard.

MARY BAIN PEARSON (ENRON SHAREHOLDER): (From videotape.) I'm just a pebble in the stream, a little bitty shareholder. I didn't lose millions. I didn't even lose a billion. But what I did lose seems like a billion to me.

MR. MCLAUGHLIN: Seventy-year-old Texas widow Mary Bain Pearson, testifying this week before a Senate committee, is one of the little people all over the country caught up in and battered by the debris of the $63 billion bankruptcy of the Enron Corporation of Houston.

The people who built Enron had it all -- money, success, power, and the hubris to go along. They had friends in high places. Founder and chairman Ken Lay is a top contributor to Republican political campaigns and a personal friend of the president's. Wendy Lee Gramm, wife of Texas Senator Phil Gramm and former chair of the federal Commodity Futures Trading Commission, joined Enron's board in 1993, five weeks after easing regulation on the kinds of energy contracts that made Enron rich.

Lawsuits, bankruptcy proceedings, congressional investigations and likely criminal charges over the next few months will shed more light on the details of the massive implosion, and reveal the depth of financial chicanery and deceit.

An insider present for the 1990s glory days of Enron's explosive expansion describes Enron's leaders and the off-the-books deals used to lure investors. Quote: "It was like crack," the insider said. The appetite grew by what it fed upon. The deals got bigger and riskier as the stakes and stock prices rose. Like a gang of crackheads, they pushed their luck too far. The stock, worth $90 a share last year, is now worth pennies.

Insiders sold early enough to bank almost $600 million, says the Wall Street Journal. But thousands of Enron workers and retirees lost much or all of their stock-laden retirement accounts and millions of other Americans lost billions of dollars from pensions and mutual funds.

MR. MCLAUGHLIN: Question: What's the lesson of Enron's downfall? Lawrence Kudlow.

MR. KUDLOW: Well, the lesson is, some big companies can fail, contrary to what you might hear in Washington. And the second lesson is this company in particular made a lot of mistakes with respect to the management of their balance sheet, of their off-balance sheet, which is a whole new area that no one can figure out. I don't think they were forthcoming on a lot of information.

But I will say this for them, John. They morphed themselves from a traditional energy company to an energy trading company and then a commodities trading company, taking advantage of the deregulation laws set up in Washington. And they ran smack into a deflationary wave of energy and commodity prices that was caused by the Fed. So they had to contend with that.

Having said that, they made enormous mistakes. There may well be fraud and willful chicanery. And so this thing is going to go on. And they damaged a lot of people, both investors and employees. So I'm not defending them --

MR. MCLAUGHLIN: Does it --

MR. KUDLOW: -- but I'm saying don't throw the deregulatory baby out with the bath water.

MR. MCLAUGHLIN: Does it remind you of the S&L crisis, where you had deregulation, you had political influence and you had lax oversight?

MR. O'DONNELL: Lax oversight is the key. You have dereliction of duty here by the accounting firm that was supposed to be auditing Enron. It is outrageous --

MR. KUDLOW: I agree.

MR. O'DONNELL: -- what they allowed.

MR. KUDLOW: I agree.

MR. O'DONNELL: They go in there not as accountants. They go in there like criminal defense attorneys.

MR. MCLAUGHLIN: And it's --

MR. O'DONNELL: Arthur Andersen. It's absolutely outrageous. They cannot be trusted. Do not believe them when they tell you your company is okay.

MR. BLANKLEY: Let me make a point. This is a real problem for accounting firms. As the technologies and processes of business have been changing, it's very hard sometimes for even the best accountants in the world to be able to act sufficiently as a detective to find out, because I agree with you, the public needs to be wary. But the accounting --

MR. O'DONNELL: These are the worst accountants in the world. They proved themselves.

MR. BLANKLEY: No, no, I mean, all the major firms have similar kinds of problems with being as reliable --

MR. O'DONNELL: Because they want to keep the big customers.

MR. BLANKLEY: Not only because of that.

MR. MCLAUGHLIN: All right, quickly.

MR. BLANKLEY: Only because of that; because the techniques are very difficult to track down now.

MS. CLIFT: Yeah, but this is also the Republican strategy to insulate the White House and themselves from this scandal to say that this is the fault -- this is an accounting problem. And so far the media is playing along, putting the story on the business pages. This is a corporation that thought it was too big to fail, that had lots of friends in high places. And so far the administration is dodging a big bullet here. I'll bet Karl Rove isn't taking Ken Lay's phone calls anymore. But you're going to start looking at the web of influence that allowed Enron to get as big as it did and to hide these deals.

MR. KUDLOW: There's no evidence. This is a --

MS. CLIFT: There is a web of influence here.

MR. KUDLOW: -- management problem, for heaven's sake. There's no wit of evidence of any political collusion whatever.

MS. CLIFT: Well, Congress --

MR. MCLAUGHLIN: Can I get back to the big question here?

MS. CLIFT: Henry Waxman is on the government Oversight Committee. They were about ready to take Dick Cheney to court over his refusal to reveal the fact that he met with Ken Lay and what they talked about. And Ken Lay --


MS. CLIFT: -- helped formulate the energy policy of this country.

MR. KUDLOW: (Inaudible) -- or anyone else.

MR. MCLAUGHLIN: Excuse me.

MS. CLIFT: Why the secrecy?

MR. MCLAUGHLIN: I want to get back to the basic question. Should natural monopolies be regulated? This monopoly sector should not have been deregulated --

MR. KUDLOW: Yes, it should.

MR. MCLAUGHLIN: -- just as we have returned regulation to the thrift industry.

MR. KUDLOW: Oh, stop. Oh, for heaven's sake.

MR. MCLAUGHLIN: Will you quiet down?

MR. KUDLOW: John --

MR. MCLAUGHLIN: Yes or no? What do you think?

MS. CLIFT: I think there needs to be more regulation and oversight, clearly.

MR. KUDLOW: Well, there's a shocker.

MS. CLIFT: This is a runaway -- well, and you're opposed to it. There's a shock, too.

MR. MCLAUGHLIN: The second lesson is that the Securities & Exchange Commission has to be extremely careful with these balance sheets.

MS. CLIFT: And don't let the top dogs sell off their stock while everybody else takes the fall.

MR. MCLAUGHLIN: Why did everyone miss the danger signs? The financial press went to sleep. Fortune Magazine pronounced this one of the best-run companies of this past decade.

MR. BLANKLEY: Let me --

MS. CLIFT: They were mesmerized by its power.


MS. CLIFT: And access.

MR. BLANKLEY: While we don't know yet, if it turns out that the senior executives were committing crimes of fraud, it's a lot harder to track down fraudulent criminality than it is normal business practices. So it's not -- I don't want to see it go to a Soviet form of regulation --

MS. CLIFT: There's no danger of that.

MR. BLANKLEY: -- simply because you have one perhaps criminal executive.

MR. MCLAUGHLIN: Lawrence, before you go back to your economical esoterica, let's take a look at this gentleman and what he has to say about his experience.

CHARLES PRESTWOOD (ENRON SHAREHOLDER): (From videotape.) And I had all of my savings, everything in Enron stock. I lost $1.3 million. All we could do was sit there and watch it melt down.

MR. MCLAUGHLIN: Is there any hope for him recovering --


MR. MCLAUGHLIN: -- in any way, shape or form?

MR. KUDLOW: I doubt it very much. I think it's --

MR. MCLAUGHLIN: Does he deserve it, or was he trying to play the speculative dot-com bubble in this new sector?

MR. KUDLOW: Apparently, John -- and I say apparently, because no one knows for sure -- but apparently Enron's 401(k) program was a matching program; i.e., the employee bought Enron stock and Enron gave him 50 percent. But they had 20 other choices on the investment menu. So the Enron employees were as caught up with the euphoria about the company as just about everybody else. So unfortunately it is tragic, but when you make an investment in the free-market, capitalist system, John, you can win and you can lose. And it happens all the time.

MS. CLIFT: Yeah, but --

MR. MCLAUGHLIN: But those 401(k)ers, they made their investment on partial information.

MR. KUDLOW: I agree. I agree.

MR. MCLAUGHLIN: I mean, where does our sympathy end? I didn't mean to be cruel to that man. I can imagine what he is going through.

MR. KUDLOW: The culpability --

MR. MCLAUGHLIN: At the same time, there are a lot of people who want to get easy money and they don't do their research.

MS. CLIFT: When the air started going out of the bubble at Enron, how come the top executives knew enough to dump their stock and nobody else could?

MR. MCLAUGHLIN: Six hundred million dollars they got out.

MR. KUDLOW: I actually agree with this point, and I think the culpability here exists with an inadequate, to put it mildly, information flow where not only did they hide stuff --

MS. CLIFT: Information flow.

MR. KUDLOW: -- but they also created these off-balance sheet entities, John, which --

MR. MCLAUGHLIN: Exit question: Will any Enron insiders go to jail? Yes or no. Quickly, one word.

MR. KUDLOW: It is possible.

MR. MCLAUGHLIN: It is possible?

MS. CLIFT: Likely.

MR. MCLAUGHLIN: Yes or no?

MS. CLIFT: Likely.




MR. O'DONNELL: I hope so.

MR. MCLAUGHLIN: That's a yes, and there are three yeses. Second question: Was the decision by Phil Gramm to retire from the United States (Senate) prompted by the Enron fiasco?

MR. KUDLOW: Absolutely not, because Wendy Gramm was merely a member of the auditors' committee, and they knew as little as the rest of the world knew.

MR. MCLAUGHLIN: Okay. Yes or no?

MS. CLIFT: We don't know what Wendy Gramm knew and when she knew it. But Phil Gramm, in his role on the Hill, had oversight capability. There is speculation --

MR. MCLAUGHLIN: Did Phil Gramm --

MS. CLIFT: -- but no evidence.

MR. MCLAUGHLIN: -- see a locomotive coming down the highway?

MR. BLANKLEY: Phil Gramm announced that he was leaving a long time ago. He had been talking about leaving long, long before that, long before there was any Enron story. No.


MR. O'DONNELL: No, he was tired of the Senate. It was time to go.

MR. MCLAUGHLIN: The answer is no. That's not the reason why he's retiring at all.

Issue Three: Rum Punch.

DEFENSE SECRETARY DONALD RUMSFELD: (From videotape.) The president's policy is dead or alive. And, you know, I have my preference. (Laughter, applause.) But that's not a government position. That's a personal position.

MR. MCLAUGHLIN: Donald Rumsfeld, U.S. secretary of Defense, tells it like it is, and America loves it. "Rummy's" straight talk and Cheshire-cat smile have taken the world by storm.

VICE PRESIDENT DICK CHENEY: (From videotape.) There's a lot of good-natured ribbing that Don has to suffer these days, but he seems to enjoy it. He's thrived on it. The latest report I heard was a rumor that his afternoon Pentagon briefing is taking audience share away from the afternoon soap operas.

MR. MCLAUGHLIN: The 69-year-old's face is everywhere -- televised briefings, major newspapers, magazines covers, and the ultimate salute -- a skit on "Saturday Night Live."

(Excerpt from "Saturday Night Live" skit.)

MR. MCLAUGHLIN: Mr. Rumsfeld is no stranger to the political limelight. He first ran for Congress in 1962, joined the Nixon administration and later became President Ford's chief of staff, a job he passed on to now-Vice President Dick Cheney. Mr. Rumsfeld was Secretary of Defense before. In 1975, he was the youngest to hold the position. Today, he's just a year away from becoming the oldest, but he can still lay it on the line.

SEC. RUMSFELD: (From videotape.) You will receive only honest, direct answers from me, and they'll either be that I know and I'll answer you, or I don't know, or I know and I won't answer you. And that'll be it.

MR. MCLAUGHLIN: Question: What's behind the infatuation with Donald Rumsfeld? I ask you, Eleanor.

MS. CLIFT: Because he says what he thinks and he doesn't pussy-foot around. And the reason he's successful now, as a war Defense secretary, is the same reason he was unsuccessful before 9/11. He was trying to reshape the military and he went to Capitol Hill and told them what they should do. He went to the generals and told them what they should do. And he didn't do any schmoozing. He was a failure then.

MR. MCLAUGHLIN: He called it a war.

MS. CLIFT: People thought he was going to leave. Now he's a huge success and is actually refashioning the military as he goes along.

MR. MCLAUGHLIN: Straight talk. He called it a war. He says, "We're out there to kill our adversaries." Remember that?

MR. O'DONNELL: He reeks of competence, and that is a new sensation for the public, to watch a federal official in the center of the biggest crisis the country has ever faced, reeking of competence. Everyone knows he's in control, knows he knows how to do his job.

MR. MCLAUGHLIN: And he's also reeking of something else. What is it?

MR. O'DONNELL: He's a great advertisement for experience, both in and out of government.

MR. MCLAUGHLIN: What else does he reek with? Success. And success has the power of pheromones. Yes or no? I appeal to you on that because I know you can speak with authority. What about you? Don't you want to take note of the fact that the Washington press just loves to build someone up, as they're doing with him, and then start yapping at his ankles, biting his ankles and then cutting him off at the knees? Is that going to happen to him?

MR. BLANKLEY: That is usually the progression. But I'm not completely sure it's going to happen this time, because he's doing a couple of interesting things. Along with being competent and experienced and knowledgeable, he's also showing his personality. He's not hiding behind an empty suit. And the personality happens to be very appealing. And I don't think the media goes after competent people who are appealing. If he were unpleasant, they'd go after him.

MR. MCLAUGHLIN: Doesn't he have to be careful of the forked tongues in this community and the Orwellian balderdash?

MR. BLANKLEY: Everybody in this town has got to be careful. I mean, the innocent and the guilty are both smart.

MR. MCLAUGHLIN: How long will the fascination with Rumsfeld last? Quickly.

MR. KUDLOW: As long as he's in office. And don't forget, before 9/11, when he was trying to reform the military, he kept warning that the terrorist war was our number one enemy. He was the precursor. He had prescience, John.

MR. MCLAUGHLIN: Okay, I got the point. How long will it last?

MS. CLIFT: It'll last as long as we're succeeding in Afghanistan. I'm not sure it will last if they go into Iraq.

MR. MCLAUGHLIN: Will it last after the war is over, effectively over? The answer is no, right?

MR. BLANKLEY: I disagree.

MR. MCLAUGHLIN: The pheromones will wither.

MR. BLANKLEY: I think that he may be able to bring this to bear, these qualities and this appeal to bear on the reform process.


MR. O'DONNELL: I think he's earned enough credibility to ride out the rest of his time in office.

MR. MCLAUGHLIN: The answer is, once the war is over, the interest will wane and so will the infatuation.

We'll be right back with predictions.


MR. MCLAUGHLIN: Predictions. Lawrence.

MR. KUDLOW: As recovery takes hold, the Federal Reserve stops easing.


MS. CLIFT: Senate Democrats and the White House will try to out-do each other to extend unemployment benefits for the unemployed because they're worried about the fallout from the recession, when they come back next year.

MR. MCLAUGHLIN: Yeah, they're worried about the election next year.

MR. BLANKLEY: President Bush and the Republicans will have a new post-secondary education initiative next year.

MR. O'DONNELL: The testing regime in the Bush education bill will not be fully implemented on schedule.

MR. MCLAUGHLIN: A McDonald's will open in Kabul before August 2002. Merry Christmas. Bye bye.

(End of regular program.)

(Begin PBS segment.)

MR. MCLAUGHLIN: Issue four: Poll curios. Here are a couple of sidebar polling issues that have surfaced in the past week or so. First, "Which is the bigger problem facing the U.S. today: Terrorism or the economy?" Answer -- get this -- 49 percent terrorism, but get this, 47 percent the economy; a virtual tie. What does this poll tell you? Lawrence O'Donnell.

MR. O'DONNELL: Well, the economy will continue to move up in that poll and terrorism down, as long as there is no other terrorism event in the United States. And so President Bush has to watch that and worry about that in exactly the same way that his father did not when he was conducting the Gulf War.

MR. MCLAUGHLIN: What are the implications for Bush?


MR. MCLAUGHLIN: For Bush himself and his own strategy and in his own scheduling.

MR. BLANKLEY: Well, I think he needs to appear to stay above politics while, in fact, playing a little bit of a political game, and the point being that the terrorism issue -- to keep that going, he's got to not seem like he's in politics.

MR. MCLAUGHLIN: Can you afford to stay above politics in reality? If he doesn't transfer his popularity to members of Congress, he'll lose the Congress. You know that better than I do.

MR. BLANKLEY: I don't it's a question of transferring. I think he can shape domestic policy issues, depending on how aggressively he plays the issues and how he campaigns may help fund-raising.

MR. MCLAUGHLIN: I'm getting at the State of the Union address. In the State of the Union address, must he use that platform to talk economics as well as war?

MR. KUDLOW: Well, absolutely. And he has.

MR. MCLAUGHLIN: How much? How much? What percentage?

MR. KUDLOW: A good deal.

MR. MCLAUGHLIN: As much as he does war?

MR. KUDLOW: No, not as much as he does war, but I think --

MR. BLANKLEY: Twenty percent.

MR. MCLAUGHLIN: Twenty percent? Oh, it's going to be more than 20 percent. Much more.

MR. KUDLOW: A third.

MR. MCLAUGHLIN: You're underestimating. Another polling disclosure: "If bin Laden is captured or killed and his terrorist network in Afghanistan destroyed, should the U.S. use military force in other countries harboring terrorists?" Get this -- this will give you a lot of comfort with your war-lobby friends, Kudlow -- 67 percent, keep the war going; 30 percent, stop the military action, bring our boys home. What do you say about that?

MS. CLIFT: Well, that's true in this country. I think that the president -- (inaudible) -- has the public behind him. But that's not true around the world. And as soon as they expand the war, the coalition is going to fall apart. I think that's --

MR. KUDLOW: There was no coalition. There was no coalition.

MR. MCLAUGHLIN: The fact that the war is going extremely well -- no upheaval around the world, Taliban humiliated, very effective --

MS. CLIFT: Well, yes, but wait a second.

MR. MCLAUGHLIN: If that were to fail, then you would see those numbers change, would you not?

MS. CLIFT: You can read it that way. You can also read it that we don't necessarily know whether we have the leadership of al Qaeda. A lot of them have melted back into the society to regroup again. So I wouldn't --

MR. MCLAUGHLIN: Okay, the economy. "Do you approve of the way President Bush is handling the economy or do you disapprove of the way the president is handling the economy?" Answer: Approve, 63 percent; disapprove, 25 percent. Question -- I ask you -- what does that tell you, Tony? And let me remind you that registered Democrats number 25 percent of the population, which is that figure, which tells you that Bush now has Republicans and independents.

MR. BLANKLEY: Absolutely. Not only that, but there's another poll out going around that shows that 58 percent of the public thinks that Congress is not doing enough on the economy. So this means that Bush has very substantial leverage --

MR. KUDLOW: And --

MR. BLANKLEY: -- over Democrats on these economic issues --

MR. MCLAUGHLIN: Which means --

MR. BLANKLEY: -- where we just had Daschle -- (inaudible) -- the president on that issue.

MR. MCLAUGHLIN: Which means the class warfare act that we've just been hearing --

MR. KUDLOW: That's the key point. Tom Daschle is reprising Al Gore by attacking business, and it's a losing proposition. Another poll shows that Americans favor tax cuts for business by two to one over unemployment compensation.

MR. MCLAUGHLIN: Okay, Bush coattails -- this is for you, Eleanor. "Who would you prefer in control of Congress after the 2002 election?" Answer: Republicans 42 percent, Democrats 40 percent; a virtual tie. What does that poll tell you, Eleanor?

MS. CLIFT: It tells you that each side is going to be jockeying for position over the coming year, and the Democrats are going to have to draw some bright lines about the economy where they, contrary to all of the crying about how class warfare doesn't work, the Democrats still do better on domestic issues with the public and they have to show they're a separate party from the Republicans.

MR. KUDLOW: Businesses create jobs.

MR. MCLAUGHLIN: That's your answer to the question of whether Bush can stay above politics. The answer is no. It's too close. And the reason why he's that close is because he stayed out of politics.

MR. BLANKLEY: He's most effective for the Republican Party when he seems to stay above the fray.

(End of PBS segment.)