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THE MCLAUGHLIN GROUP

HOST: JOHN MCLAUGHLIN

JOINED BY: TONY BLANKLEY, PATRICK BUCHANAN, JAMES CARNEY AND ELEANOR CLIFT

TAPED: FRIDAY, DECEMBER 20, 2002 BROADCAST: WEEKEND OF DECEMBER 21-22, 2002

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MR. MCLAUGHLIN: Issue one: Lott's Lot.

"In the interest of pursuing the best possible agenda for the future of our country, I will not seek to remain
as majority leader of the United States Senate for the 108th Congress, effective January 6th, 2003. To all
those who offered me their friendship, support and prayers, I will be eternally grateful. I will continue to
serve the people of Mississippi in the United States Senate."

Question: Why did Lott take this step, Pat Buchanan?

MR. BUCHANAN: He took it because he can count, John. He was losing his entire base of support in the Senate. The White House had put forward Mr. Frist and was backing him. Trent Lott had been cut by the president of the United States, he had been hit by the secretary of State, and the president's brother hit him. I think he finally decided that there was no chance he was going to be reelected majority leader, so he decided to get out. And there are reports that the White House told him that "you do it on Friday or you don't get a soft landing in the Senate."

MR. MCLAUGHLIN: Eleanor?

MS. CLIFT: Well, Pat's right. The short answer is that Lott was getting calls from influential Republican
senators saying they wouldn't support him.

But the greater answer is that was a palace coup engineered by the White House, and it will add to the
allure of Karl Rove. Short of subpoenaing Rove's phone records, I don't think we're going to know exactly the role that he played. But clearly when Lott's problems began to unfold, the White House saw this as an opportunity to get rid of somebody they weren't particularly fond of and put in place a person who projects an entirely different image to the country. Frist is New South, new Republican politics, whereas Lott was old Confederacy.

And so this is positioning, I think, Bill Frist to be the heir apparent to the Bush administration. He's the candidate for 2008. And he's going to run a very different majority leadership. He's not going to go on television and talk about cloture for a half-hour. He's a -- he's going to market the new Republican Party.

MR. MCLAUGHLIN: Tony, do you agree with the foregoing from the two panelists?

MR. BLANKLEY: No, I don't. This started off because Senator Lott made an indefensible statement.
Predominantly, the conservative media and commentators then attacked him very hard. His failure at that point was to make a hash of his apologies.

That culminated over the week -- over the last weekend, when he let out that he might quit the Senate
entirely and thereby undercut the Republican majority, and he started putting out some racial quotes from
possible opponents. That turned badly against his own senators, who didn't like that. And then the next day
he went on Black Entertainment Television, where he switched his position, the traditional position, on
affirmative action. That undercut the remainder of his conservative base, and the fall was of his making.

Now it's certainly true that the White House, on -- when the president spoke on that Thursday, he could
have perhaps delayed the problem. Maybe he could have put it off -- I don't think so -- though certainly the
president didn't help him.

But I think the event -- from the opening statement at the birthday party right through the way he played
it, that he was the author of his own downfall.

MR. MCLAUGHLIN: Do you think that Lott would have made it if Bush had not uttered those words about 10
days ago?

MR. CARNEY: I think there's a very good chance Lott would have survived. I think that when the president
spoke so strongly against Senator Lott and then refused to throw him a lifeline of any kind, and then, while
Ari Fleischer maintained that the president didn't feel that the senator needed to resign his majority leader
position --

MR. MCLAUGHLIN: He didn't quite say that.

MR. CARNEY: He said he didn't need to.

MR. MCLAUGHLIN: He didn't need to resign.

MR. CARNEY: He didn't need to resign.

MR. MCLAUGHLIN: Now "resign" is an ambiguous word. It could have meant resign the Senate.

MR. CARNEY: Well, it means --

MR. MCLAUGHLIN: And the press, to my knowledge, did not clear that up.

MR. CARNEY: The disingenuousness of the White House's public presentation of their position on this is
unbearable to watch, truly, because this president, Karl Rove clearly wanted Lott out. They knew that the
statements he made and the fuss that was created because of it were damaging to the Republican Party
and damaging to Karl Rove's big dream of creating a permanent or lasting majority for the Republican Party.

MR. BUCHANAN: John --

MR. MCLAUGHLIN: Do you think --

MR. CARNEY: And he knows he cannot do that without minority support, especially Hispanic support.

MR. BLANKLEY: But -- and inconsistent with the way George Bush has treated the race issue from the time
he was governor.

MR. CARNEY: Exactly.

MR. BLANKLEY: So this isn't simply manipulation --

MR. MCLAUGHLIN: Well, wait a minute. What do you mean by that?

MR. BLANKLEY: He has been reaching out to Hispanic and black -- minorities in Texas long before he was
president.

MR. CARNEY: I agree. I agree.

MR. BLANKLEY: And this is not just --

(Cross talk.)

MR. MCLAUGHLIN: Just a moment. Let Tony finish. Quickly!

MR. BLANKLEY: This is not just manipulative politics, this was a clash of convictions.

MR. MCLAUGHLIN: I want to ask --

MR. CARNEY: It was. So be honest about your convictions, and don't tell the public that you have – that you're not involved when you are.

MR. MCLAUGHLIN: Do you think -- or do you think, Eleanor -- that they also had to cut potential
hemorrhaging -- i.e., if Tom Edsall of the Washington Post has started to explore the backgrounds of other
Republicans, there might have been similar statements or similar --

MS. CLIFT: Let me -- every --

MR. MCLAUGHLIN: -- could he establish that we have other closet racists, so to speak?

MS. CLIFT: Sure. Every member of Congress on the Republican side -- and probably some on the Democratic
side -- were doing Lexis- Nexis searches to see if they had said anything in the past that might create a
problem.

MR. BUCHANAN: John --

MS. CLIFT: And -- excuse me -- and votes cast in the mid-80s on the Martin Luther King holiday were now
going to be looked at in a different light.

But President Bush is vulnerable on this issue, too. He went to Bob Jones University. He refused to take a
stand on whether the Confederate flag should fly over the South Carolina State House. But he knew --

MR. MCLAUGHLIN: Is that his only vulnerability?

MR. CARNEY: He also --

MR. MCLAUGHLIN: What about Willie Horton?

MS. CLIFT: Well, that's the Bush family.

MR. CARNEY: You can't visit the sins of the father on --

MR. MCLAUGHLIN: Well, are we sure that the son was not involved with Lee Atwater on that? Are we sure of
that?

MS. CLIFT: But it's the double game on race that politicians play.

MR. BUCHANAN: John, what you are doing is exactly what the Democrats are doing and what Eleanor is
doing: Somehow it's wrong to vote against Martin Luther King's birthday. McCain voted against it, Arizona
voted against it --

MR. MCLAUGHLIN: Nickles voted against it.

MR. BUCHANAN: New Hampshire voted against it.

As for, you know, Bush's 1990 Civil Rights Act, it was a quota bill. It was Teddy Kennedy's bill. The
Republicans are on the run. This is the problem. Democrats now know that they're scared and frightened,
and they're going to drive them on every issue.

But Tony has a point.

MS. CLIFT: Well --

MR. MCLAUGHLIN: Wait a minute.

MR. BUCHANAN: Tony has a point. Jack Kemp came out, who's his good amigo, his friend, said, "What you
got to do is you got to go over to a black group and apologize." What Trent Lott should have done is gotten
up and said, "Look, if somebody misconstrued this, I'm sorry, but I said nothing wrong; there's nothing in my
heart; I said nothing wrong." And he should have fought it. If the president stood with him, that would have
been over two weeks ago.

MR. MCLAUGHLIN: You think the president chummed the waters for the piranhas.

MR. BUCHANAN: The president was Pontius Pilate and pushed him.

MR. MCLAUGHLIN: Why? Why? Why?

MR. BUCHANAN: Because -- partly what Tony says -- Rove went to him and said, "Mr. President, we got to
get clean of this. It's a racial thing. We've never had this taint. Get rid of it."

MR. MCLAUGHLIN: Okay. There's more to the story, and that is that George Bush's direct and continuing
involvement was essential for political reasons. Here's why:

Item: The polls. Bush's pollsters say Bush must win 2 million more minority votes in 2004 than in 2000 just to
get reelected. The country's demographics are rapidly changing.

Item: The Supreme Court. In its first case revisiting the landmark 1978 Bakke decision, the Supreme Court
will rule this year on a lower federal court's decision upholding the University of Michigan Law School's use of
race as a decisive factor in college admissions. The White House has until January the 16th to file a
high-court brief in that Michigan case. The administration is split, with the Justice Department's solicitor
general, Ted Olson, wanting to weigh in against Michigan's affirmative action admissions policy. Opposing
Olson and favoring a "stay out of this one" posture are White House counsel Alberto Gonzales and political
adviser Karl Rove.

So the Lott fiasco, centered on race, including Lott's stated conversion in favor of affirmative action, has made it politically risky for Mr. Bush to oppose affirmative action even though it is Republican dogma to so
oppose.

Can the White House get by with remaining silent on the issue of Michigan University Law School admissions
policy and the ruling of the federal court? Does Ted Olson have to file a brief against affirmative action? And
is the president damned if he does and damned if he doesn't? If he doesn't do it, he alienates his
conservatives even more bitterly than they are now. If he does do it, then he is losing the minority votes
which the poll says he needs 2 million of in order to win the next election.

MR. CARNEY: I think he has some room to maneuver with his conservative supporters. They're very happy
with President Bush. He's very popular with the Republican base, and even the Republican moderates. And I
think he can afford not to weigh in on this decision, because the Supreme Court may rule with him anyway
without an amicus brief.

MR. MCLAUGHLIN; Do you agree with that, or do you think Olson --

MR. BUCHANAN: The president is as strong as mustard with the conservatives right now. He's given them
war, which a lot of them really like. He hasn't given them much else, to be honest. But if he does go into the
tank on affirmative action, even some of the "neocons," who were quick to stab Mr. Lott right in the back --
they're fighting over who stabbed him first -- they will really go up the wall, because this is an issue that
some of those folks do care about.

MR. BLANKLEY: Let me --

MS. CLIFT: Yeah. They --

MR. MCLAUGHLIN: I want to hear from you.

MR. BLANKLEY: I think Pat is right. I don't think he can afford to ignore -- I don't think he will ignore -- the
convictions of the base of the party, conservative base. I think he's probably going to take a mid-way path.
He's going to oppose the specific way in which Michigan enforces the law, but he's not going to stay out
and he's not going to come out in favor of affirmative action. If he came out in favor of affirmative action or
against it in total, that creates the bigger problem for him.

MR. MCLAUGHLIN: Eleanor, before I turn to you, I want to refresh the viewers with what happened on
December the 12th when George Bush gave a speech, what he exactly said that played a significant role,
perhaps the determining role, some would say here, including Buchanan, I think all of us, that if he had not
said this, then Lott would still be there.

PRESIDENT GEORGE W. BUSH: (From videotape.) Recent comments by Senator Lott do not reflect the spirit
of our country. (Applause.) He has apologized, and rightly so. Every day our nation was segregated was a
day that America was unfaithful to our founding ideals.

MR. MCLAUGHLIN: Now, on Friday, the president put out a press release saying this: "I respect the very
difficult decision Trent made on behalf of the American people. Trent is a valued friend and a man I respect.
I am pleased Trent will continue to serve our nation in the Senate, and I look forward to working with Trent
on our agenda."

MR. BUCHANAN: (Laughs.) That's a bouquet from the godfather at the funeral. (Laughter.)

MS. CLIFT: Right. The president showed Trent Lott the door, and he did that pretty early on.

And -- but Pat is right; the Republicans are on the run on this issue. And conservatives are chastened by
the way the race issue ignited in this country, and so you --

MR. BLANKLEY: We conservatives aren't chastened. We were the ones doing the chastening, for goodness'
sake!

MS. CLIFT: I think you are. (Laughter.)

MR. MCLAUGHLIN: Do you have a comment on this?

MR. CARNEY: Well, look, I think the president clearly -- I mean, that's more just outrageous
disingenuousness from the White House. I mean, not only is none of it true; it wasn't even true before this
happened with Trent Lott. The White House was never particularly fond of Trent Lott. George W. Bush and
Trent Lott were not close friends.

MR. MCLAUGHLIN: Why? Why?

MR. CARNEY: I think Bush and Karl Rove saw Lott as a problem, somebody who wasn't always working in
tandem with them. They did see, I think, that he was not the best possible face for the Republican Party in
the Senate. And I think in some ways it's been a blessing for them, to get Bill Frist up there.

MR. MCLAUGHLIN: Now when Trent was in the water up to his neck and he was struggling to stay alive and
he practically begged for a lifeline from the White House -- instead of that, they remained perfectly silent.
They gave him nothing.

MR. BLANKLEY: Look, let me --

(Cross talk.)

MR. MCLAUGHLIN: They let him drown, right?

MR. BLANKLEY: Let me make a point here. I think there's a lot of cynicism going around this table.
Laughter.) In fact, Bush said the right thing --

MR. MCLAUGHLIN: Cynicism? Here?!

MR. BLANKLEY: Here.

MS. CLIFT: My goodness! (Inaudible.) (Laughter continues.)

MR. MCLAUGHLIN: Are you saying that the president didn't pull the pin out of the guillotine with that -- the
knife coming down and the head rolling down the chute?

MR. BLANKLEY: The president, as leader of the country and as leader of the party, should have said exactly
what he said on that Thursday. Now whether or not it was good politics --

MR. MCLAUGHLIN: By name? We went through that last week.

MR. BUCHANAN: No --

MR. BLANKLEY: Yeah, it --

MR. MCLAUGHLIN: Did you ever see any kind of a criticism like that -- of a sitting president to his majority leader?

MR. BLANKLEY: The fact is --

MS. CLIFT: (Laughs.)

MR. BUCHANAN: No. He's decapitated the majority leader of the Senate. And incidentally, the senators didn't
do a thing to save their guy. They let it happen, and now Rove is picking their leader. There are going to be
recriminations here, John. And I cannot believe the United States Senate is so wimpish, they're going to allow the White House to tell them who their leader --

MR. MCLAUGHLIN: Do you think --

MS. CLIFT: But there will be recriminations within the cloakroom on Capitol Hill. These are not recriminations
that are going to leak out --

(Cross talk.)

MR. BUCHANAN: (Inaudible) -- the majority in the Senate.

MR. MCLAUGHLIN: I want to hear from Eleanor. Quickly!

MS. CLIFT: I just said the recriminations are going to be in a very small group. Basically, the conservatives
are chastened. They're not going to demand too much from this White House. They're not going to pick
fights.

MR. BLANKLEY: You wait and see. You wait and see.

MS. CLIFT: Mr. Pickering is dead as a court --

(Cross talk.)

MR. MCLAUGHLIN: We've got to get a quick round on a couple of things. What's Lott's political future? Will
he survive?

MR. BUCHANAN: Chairman of the Energy Committee.

MR. MCLAUGHLIN: Chairman of the Energy -- and he can cut out a niche, the way Bobby Byrd did when Bobby Byrd surrendered the majority to George Mitchell?

MR. BUCHANAN: I think he's got to stay in. He's got to stay in and win some kind of redemption in the next
four years.

MR. MCLAUGHLIN: So he's okay. Lott's going to be okay.

MR. BUCHANAN: I don't think he --

MR. MCLAUGHLIN: Can we comment at all on the successor to Lott? The presumptive successor is Bill Frist.

MR. BUCHANAN: Frist is in --

MR. MCLAUGHLIN: Do you want to speak --

MS. CLIFT: Okay, Frist has a wonderful image, but health care is going to be a big issue this year, and he's
got plenty of conflicts of interest, with his family-owned business in Tennessee. They've just been involved in big case involving Medicare billing fraud. (Cross talk.)

MR. MCLAUGHLIN: Is he -- another question: Is he in tune with the president on the subject of fetal
research?

MS. CLIFT: He was the architect of the position -- well, the --

MR. MCLAUGHLIN: Of the president's position?

MS. CLIFT: -- of the president's position.

MR. BLANKLEY: The compromise position.

MS. CLIFT: That's right.

MR. MCLAUGHLIN: Okay. What do you think of Frist as a majority leader?

MR. BLANKLEY: Well, first let me answer your first question. I think Lott has a reasonable chance of running
for governor in Mississippi, flipping with Haley Barbour, who might then go to the Senate -- (inaudible) -- of
the future.

MR. MCLAUGHLIN: Yes. Quickly!

MR. BLANKLEY: I think Frist is a superb leader. He's a surgeon. He goes to Africa to save lives --

MR. MCLAUGHLIN: Well, he's not going to be operating on people up there. (Laughter.)

What do you have --

MR. BLANKLEY: And the idea that the liberals are going to be able to smear him because his father happened
to found a great hospital chain, I think, is laughable.

MR. CARNEY: Yeah --

MR. MCLAUGHLIN: All right. Can you add anything to the Frist encomiums on this panel?

MR. CARNEY: I think that the White House created a dream out of a nightmare here. Frist is somebody they
always wanted at the top of the Senate. Now they've got it, and they're hoping that this will all be ancient
history come next year.

MR. MCLAUGHLIN: All right. And here is the telling exit question: Did Bush score tangible points with
African-American voters with his handling of Lott, meaning will he win more black votes in 2004 as a result of
his role in ousting Lott? Pat Buchanan.

MR. BUCHANAN: No. But what he did is, he avoided real damage if Lott had been majority leader in 2004. I
don't think he's going to get anything for this, but he avoided injury.

MR. MCLAUGHLIN: Well, where are you on this issue?

MR. BUCHANAN: Well, I'd -- look, there's no --

MR. MCLAUGHLIN: Do you justify the president's actions?

MR. BUCHANAN: No, look, there's no doubt that Trent Lott was damaged beyond repair by these two weeks.


MR. MCLAUGHLIN: But he would have survived if the president had thrown him even a thin lifeline.

MR. BUCHANAN: But the problem, even if - if he'd done that 10 days ago, yeah, but now he's damaged
goods. There's no doubt about it, John.

MR. MCLAUGHLIN: Well, did the president play it right or not?

MR. BUCHANAN: In doing what he did? No, he did not. He should -- his fingerprints shouldn't have been on
the gun, you know.

MR. MCLAUGHLIN: So on the other hand --

MR. BUCHANAN: His DNA is all over Lott's --

MR. MCLAUGHLIN: Then he has Lott in power -- then he has Lott where Lott would be, and that's -- that
would cause irrevocable damage to the president. (Cross talk.)

MR. BUCHANAN: He could have counted --

MR. CARNEY: It's the reality of politics --

MS. CLIFT: This was an immaculate execution, because the White House did keep its distance.

But this is not about winning more black votes. It's about assuring suburban women in particular that this is
not a racist party.

MR. BLANKLEY: Well, I mean, Eleanor's right in that tactical level. No, I don't -- Republicans haven't
accomplished much reaching out to African-Americans.

MR. MCLAUGHLIN: Whom did he reach with his action?

MR. BLANKLEY: Suburban, moderate white people --

MR. MCLAUGHLIN: Right.

MR. BLANKLEY: I understand that. But it was the right thing to do, and he's not going to pick up many votes
in the short term on it.

MR. MCLAUGHLIN: All right. Just another high-minded action of the president of the United States.

What do you think?

MR. CARNEY: Well, I think it was damage control, John.

MS. CLIFT: Yeah.

MR. CARNEY: But I think it does create the opportunity in the future to try to expand his minority vote.

MR. MCLAUGHLIN: The answer is, he didn't get any black votes out of this, but he did collect quite a few --
or solidified quite a few independents and the white soccer moms -- or the soccer moms. (Laughter.)

When we come back: Why do almost 90 percent of blacks in Congress take a position against George Bush
on Iraq?

(Announcements.)

MR. MCLAUGHLIN: Issue two: Blacks' Iraq dissent.

DELEGATE ELEANOR HOLMES NORTON (D-DC): (From videotape.) Who will fight Mr. Bush's preemptive wars?
Today we have a volunteer army whose race and class composition speaks to the absence of equal
opportunity in civilian society. The middle and upper-middle classes, for the most part, no longer serve and
will not be on the front lines. African Americans are 25 percent of the U.S. Army today, Hispanics are 9
percent, an army more than one-third made of people of color. Already the American people have pulled
Bush back. They would surely pull harder if the average son or the average daughter were subject to service
today. Preemptive war is a doctrine that could only survive -- if it does -- when those who would be ground
troops have had other opportunities preempted.

MR. MCLAUGHLIN: Question: Does Eleanor Holmes Norton, delegate- at-large for Washington, D.C., in the
U.S. House of Representatives, have a legitimate grievance? Eleanor Clift.

MS. CLIFT: I think she's right in the sense that if we had a universal draft, I think people would be much
more intimately involved in whether this country is going to go to war or not. There seems to be a
disconnect in terms of the emotional involvement over potential war. But, you know, the military is truly
integrated, and that's a good thing. But I think it's sad that the elites who make the decisions about war do
not have children serving. There is only one U.S. senator, Senator Johnson of South Dakota, whose son has
actively served.

MR. MCLAUGHLIN: Right. The economic and political elites do not, as a rule, run the same risk as the rest of
the country. That's her point.

Now, I don't want to hang too much on Eleanor Holmes Norton, so I want to quote here Charlie Rangel on
Iraq, speaking for the Black Caucus, 32 members out of 37, who voted against empowering the president to
go to war militarily: "It is most disappointing that people who are least familiar with the horrors of war -- and
least likely to be touched by it -- are the most willing to put our young people at risk. I have said it before
and I will say it again, that the great majority of the foot soldiers who will be put in harm's way are from
poor and lower middle class families -- whites, blacks, Hispanics -- not the children of millionaires and
members of Congress.

"As a combat soldier in Korea, I was among those who saw the military as an economic opportunity; a high
school dropout with no better options than the paycheck I could receive by enlisting. The U.S. Constitution
makes absolutely clear the power of the Congress to declare war. I see no reason to tamper with that
authority."

Your impressions on Rangel and the Black Caucus and Eleanor Holmes Norton? Pat.

MR. BUCHANAN: He's got a point about the elites, the very high elites. But look, your pilots and officers are
middle-class guys, and working-class white guys make up the vast majority of the combat units that are
going to do the fighting.

MR. MCLAUGHLIN: Eleanor?

MS. CLIFT: Well, old men always send young men off to war, but I think that the divide is made worse by
the fact that we have now a generation serving in political office that has not experienced war. And that's a
new experience since World War II.

MR. BLANKLEY: Eleanor Holmes Norton ought to talk to some of the black men I've talked to in the last six
months in the military, who are every bit as full-throatedly supportive, and ready, willing and able to do their duty as anybody of any other age. But I don't think --

MR. MCLAUGHLIN: Excuse me.

MR. BLANKLEY; I don't think she represents --

MR. MCLAUGHLIN: Excuse me.

MR. BLANKLEY: -- has any familiarity with what the men in uniform and the women in uniform think.

MR. MCLAUGHLIN: Excuse me. How do you explain the fact that almost 90 percent of the Black Caucus feel
exactly as Rangel and Norton?

MR. BLANKLEY: Because they're out of contact even with the Democratic Party. But Harold Ford --

MR. MCLAUGHLIN: Ah. Oh, they don't represent the people.

MR. BLANKLEY: You bet they don't. Harold Ford, however, who is the --

MS. CLIFT: But Tony does.

(Cross-talk.)

MR. BLANKLEY: -- rising star of the Black Caucus, voted with the president.

MR. CARNEY: Look. It's a volunteer Army. The reality of -- the economic reality of who serves is one that
--

MR. MCLAUGHLIN: As she said.

MR. CARNEY: But I do not believe it is predominantly a racial issue. I think the Congressional Black Caucus
voted overwhelmingly against the president because it is the most liberal element of the Democratic Caucus,
and the most liberal element voted against the president.

MR. MCLAUGHLIN: One small point. The combat troops in the United States Army are all dominantly, of
course, white, but she's factoring in the administrative, supply and combat troops. You are all correct. It's
an extremely thorny issue.

We'll be right back with predictions.

(Announcements.)

MR. MCLAUGHLIN: Predictions, Pat.

MR. BUCHANAN: Year 2003 could see two wars: the United States entering of Iraq, taking over Baghdad;
and also a major confrontation with North Korea.

MR. MCLAUGHLIN: Eleanor?

MS. CLIFT: Trent Lott will not run again when his term is up, but he won't go back to Mississippi, either. He'll be another lobbyist in Washington.

MR. MCLAUGHLIN: Tony?

MR. BLANKLEY: The biggest domestic policy fight next year will be between the president and the
congressional Republicans over spending.

MR. MCLAUGHLIN: Jay?

MR. CARNEY: The Senate minority leader, Tom Daschle, will not run for president.

MR. MCLAUGHLIN: He will not?

MR. CARNEY: He will not.

MR. MCLAUGHLIN: Unfortunately, during this holiday season, retail sales will stay flat and the economy will
not get a boost.

Next week, the 21st Annual Year-end McLaughlin Group Awards.

Happy Holidays! Bye-bye.

END REGULAR SEGMENT

PBS SEGMENT

MR. MCLAUGHLIN: Issue three: McDonald's gets fried.

MIKE ROBERTS (McDonald's USA president): (From videotape.) It's a very competitive marketplace.
America's tastes and lifestyles and behaviors are changing.

MR. MCLAUGHLIN: The big change that McDonald's USA president is talking about is change in profits. For
the first time in its publicly traded history, McDonald's announced a fourth-quarter loss of up to six cents per
stock share. This followed the bad news of last month, when McDonald's said it was closing 175 restaurants
worldwide and cutting 600 corporate jobs.

The glitter is dimming on the golden arches of this hamburger chain and American icon that revolutionized
the restaurant business almost a half-century ago -- fast service, affordable meals, spartan establishments.
Here's McDonald's full menu of woes:

Item: Competitors' bite. Other fast food outlets -- Wendy's, Subway, Taco Bell, Burger King, Arby's -- have
carved out higher- quality-market niches. In a fast-food survey last year, McDonald's ranked last in overall
quality.

Item: Market saturation. Like an artery clogged with cholesterol, America is clogged with fast-food
restaurants; 13,000 McDonald's in the U.S. alone, 30,000 worldwide.

Item: Evolving diets. More customers opt today for fruits and veggies over burgers and fries. Even though
McDonald's now offers salads, the restaurant has yet to be customer-perceived as a healthy choice.

Item: Lawsuit target. In 1992, a woman successfully sued McDonald's over a cup of coffee that she claimed
scalded her leg. Now, a group of fat teenagers are suing the company, claiming they didn't know that
continuously eating so-called "happy meals" -- that's McDonald's lingo -- would make them fat.

So, fierce competition, market saturation, healthier diets, and obese plaintiffs. The slow fade-out for Mickey
D's.

Question: Has the American fad with fast food run its course? And is it coming to an end? Jay?

MR. CARNEY: No, of course not. There is an evolution in taste that's going on, and the competition that
you talked about.

I just have to say that the lawsuit over obesity is just appallingly absurd.

MR. MCLAUGHLIN: You don't see --

MR. CARNEY: I mean, you should not win a lawsuit based on your own stupidity.

MR. MCLAUGHLIN: You don't see lawyers, sharpies coming out into the scene and bringing --

MR. CARNEY: They are.

MR. MCLAUGHLIN: -- bringing a suit against marketing of fast food operations on the basis of it causing bad
health and obesity in our young?

MR. CARNEY: It's a free country, John.

MR. MCLAUGHLIN: Can't you see laws being debated in Congress?

MR. CARNEY: I hope not.

MR. MCLAUGHLIN: Can't you see taxation?

MR. CARNEY: And if there's a -- and if there's a judge who entertains that case and doesn't throw it out,
he or she is a fool.

MR. MCLAUGHLIN: Will the fast food chains have to flee to Mongolia to sell their products -- (laughter) -- as
tobacco has done? Go abroad to save it. Is that what's going to happen?

MR. CARNEY: They already have.

MR. BLANKLEY: Jay says, and I completely agree, obviously it's a ludicrous thing that a person should be
able to sue for that.

MR. MCLAUGHLIN: Well, it's a sign of the times of what lies ahead.

MR. BLANKLEY: But the fact is that smoking also is known to be bad for people. People knew it 50 years ago
that smoking was bad, and they've been winning these lawsuits. So ludicrous as they are, there is a danger.
Now I remember when the smoking suits started and how many people started joking about, "Next, they'll be
suing McDonald's." Now they are.

MR. MCLAUGHLIN: Will the fast food chains have to retreat to Native Indian reservations in order to sell their products to be free of federal taxes? (Laughter.)

MR. CARNEY: No, no, no.

MR. BUCHANAN: Well, that would be discrimination against Native Americans, John.

MR. MCLAUGHLIN: (Laughs.)

MR. BUCHANAN: Listen, one of their big problems is frankly the Burger King Whoppers and the Shoney's and
some of these others are better burgers. I traveled the country in 2000.

MR. MCLAUGHLIN: Yeah, and the same price that McDonald's charges.

MR. BUCHANAN: The Whoppers cannot be beaten.

MR. MCLAUGHLIN: And no more pricey than McDonald's.

END