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THE MCLAUGHLIN GROUP


HOST: JOHN MCLAUGHLIN


JOINED BY: PATRICK BUCHANAN, ELEANOR CLIFT,


LARRY KUDLOW AND LAWRENCE O'DONNELL


TAPED FRIDAY, AUGUST 7, 1998


AIRED THE WEEKEND OF AUGUST 8-9, 1998


.STX


TRANSCRIPT BY: FEDERAL NEWS SERVICE


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ANNOUNCER: From the nation's capital, the McLaughlin Group, an unrehearsed program presenting inside opinions and forecasts on major issues of the day. GE is proud to support the McLaughlin Group. From medical systems to broadcasting -- GE: we bring good to life.


MR. MCLAUGHLIN: Issue one: Scandal and stocks.


GAIL DUDACK (Chief strategist for Warburg Dillon Read): (From videotape.) Foreign investors are very nervous about buying a stock market when the leader is in trouble or weak or having problems. And I think that what may have happened in July was not just weak second quarter earnings, but Clinton's problems.


MR. MCLAUGHLIN: As financial analysts look for causes of Tuesday's dramatic 300-point stock market plunge, they found: the Asian financial crisis; recent General Motors strike; the U.S. economic slowdown, including a lethargic gross domestic product, up only 1.4 percent this quarter compared to 5.5 percent last quarter; and a drop in the index of leading economic indicators in June, down for the second month in a row; and a farm economy that is soft.


And there is another factor, the Clinton-Lewinsky scandal, as noted at the top of this segment by Gail Dudack, chief strategist for Warburg Dillon Read, reinforced by other analysts, including Thomas Gallagher from Lehman Brothers.


THOMAS GALLAGHER (Lehman Brothers): (From videotape.) So the market in the near term is going to be subject to leaks, rumors, conjecture, Internet stories, you know, whatever else might be moving the market. So in the near term, the scandal is a source of added volatility for the market.


MR. MCLAUGHLIN: Question: To what extent is the Clinton-Lewinsky affair playing a role in the economic slowdown of this country? Pat Buchanan?


MR. BUCHANAN: It has no effect, I think, on the economic slowdown, John. I think that's been baked in the cake by the Asian crisis. The market slowdown, though, is due very much to the Asian crisis, the near collapse over their currencies, and the fact that profits in the United States of major corporations are being terribly squeezed. When the market was at 9300 the last time, we had Brother Kudlow here with his new paradigm.


MR. MCLAUGHLIN: How about his new suit?


MR. BUCHANAN: The whole idea was, I believe, the market was oversold because it was based on the belief that the economy was going to boom in 1998, and it clearly has not; it's flat. And I think the market's beginning to realize it's not going to boom.


MR. MCLAUGHLIN: Eleanor?


MS. CLIFT: You can't blame the market's gyrations on President Clinton. And this is the market catching up to reality. I mean, the stocks are overpriced, particularly the big blue chip corporate stocks. But the fact that the market comes back is because more than half of the American people are now invested in the market, mostly in mutual funds, and they don't turn tail the minute there is the first sign of trouble. They're sticking with the market and this is basically still a strong economy and a strong market.


MR. MCLAUGHLIN: You say more than half the American people?


MS. CLIFT: I believe that's right, yes.



MR. MCLAUGHLIN: I thought it was 100 million. Now it's over 130 million?


MR. KUDLOW: It's just about 120 million. Eleanor's very close to the truth.


MR. MCLAUGHLIN: Well, what do you think of Gail Dudack and her view, and Mr. Gallagher?


MR. KUDLOW: I prefer Eleanor's optimism to Dudack --


MS. CLIFT: Good.


MR. KUDLOW: -- because Dudack has been a bear for the last three or four years, and she's missed thousands of points on the indexes.


You know, corrections come and go. There's nothing unusual about this.


MR. MCLAUGHLIN: This is a normal dynamic of the market; correct?


MR. KUDLOW: I think that take is very much a part of this. Remember, John, the NASDAQ and the S&P 500 are still up 10, 12, 15 percent year over year. The bull trend is still intact.


I do want to raise a point that you didn't mention in your intro, and that is Alan Greenspan's dour testimony two weeks ago, where he threatened higher interest rates and he argued that the Congress should not cut taxes with the budget surpluses. Deflating expectations on both counts, I believe was the real trigger for this whole stock market correction.


MR. MCLAUGHLIN: Why didn't the sell-off begin then if that was the real trigger?


MR. KUDLOW: Actually, the sell-off started the day Greenspan gave his midterm report.


MR. MCLAUGHLIN: July the 17th or thereabouts?


MR. KUDLOW: And that started this thing. But, but, as of Friday, with the NASDAQ up hugely Thursday and Friday -- remember, John, the NASDAQ is the heart of the high-tech, new-paradigm economy, and its rebound forebodes a much brighter economic future than Brother Buchanan is suggesting.


MR. MCLAUGHLIN: I'm surprised you didn't mention the new Japanese prime minister, who is apparently not a particularly different kind of reformer that's needed, and that didn't help the market either.


MR. BUCHANAN: John?


MR. MCLAUGHLIN: The Japan situation was not even mentioned in the intro. Why? Except the Asian crisis.


MR. BUCHANAN: Asia is tanking --


MR. KUDLOW: Japan is cutting taxes --


MR. BUCHANAN: It is tanking right now. China --


MR. MCLAUGHLIN: Well let the --


MR. KUDLOW: Give some credit, give some credit where credit is due. They have announced a Reaganesque across-the-board individual and personal tax cut program. And I remember in the Reagan administration, you don't get these things done right over night. It's going to take four or five months before they can do it. But Japan is starting to move in the right direction, and Hong Kong is not going to devalue their currency.


MR. MCLAUGHLIN: Lawrence O'Donnell, do you see any negative role played by the Clinton-Lewinsky scandal in the downturn both of the market and in the overall economy?


MR. O'DONNELL: Absolutely no conceivable role in the economy. Only the slightest possible role in the market. The market has been discounting this for six months. They've known about this scandal for six months. It's nothing new.


MR. MCLAUGHLIN: Well I feel a lot better now. I mean, everybody on this panel feels that Bill Clinton has had nothing to do with this downturn.


Is the market going to rebound?


MR. O'DONNELL: It will rebound slightly, probably, the way things look right now. But the important thing is, this does look like a perfectly naturally curve downward at this particular time. The Greenspan thing was important. Probably more important and more specific is the fact that we do have gavel-to-gavel television coverage of the market. CNBC is probably most responsible for what happened this week by putting one analyst on who got bearish suddenly and there was a big drop.


MR. BUCHANAN: John, the key thing to watch is two things. China's currency, the yuan or the renminbi, and the Hong Kong dollar. The Asian markets have been tanking all week long, four and five percent a day. If they devalue those currencies, it will go to Latin America, it will go to Brazil, and it will go -- it will come down again!


MR. MCLAUGHLIN: You know, what amazes me is that you don't think that a looming constitutional crisis in this country, precipitated by the Clinton-Lewinsky affair, has had an effect on this market. All of the factors that we have mentioned here the market has taken into account.


MR. BUCHANAN: John, the market --


MR. MCLAUGHLIN: What is new -- what is new is the fact that Lewinsky has testified and that the president is going to testify.


MR. BUCHANAN: You were closer on the Japanese thing. The Japanese prime minister, there's no vote of confidence in him in the markets.


It is a contributory factor to the market, John. But our friend over here is dead right, it has nothing to do with the economy.


MR. MCLAUGHLIN: Who is our friend?


MR. BUCHANAN: Our gentleman Lawrence, over here. (Laughter.)


MR. MCLAUGHLIN: We have two Lawrences here. We have a Lawrence here and a Lawrence here. (Laughter.)


Well, I am just appalled at the complacency on this panel with regard to a potential Constitutional --


MR. O'DONNELL: The market has great faith in a potential President Gore to carry out every initiative of the Clinton presidency.


MR. KUDLOW: There was, however, in fairness to this story, when the Lewinsky --


MR. MCLAUGHLIN: What story?


MR. KUDLOW: Your take on this Lewinsky-Clinton impact.


MR. MCLAUGHLIN: MY take!? What about GAIL'S take? What about GALLAGHER'S take? And other analysts down there.


MR. KUDLOW: I don't know about Gail's take. But I will --


MS. CLIFT: There's a lot of air time to fill on these shows.


MR. KUDLOW: -- I will say this. There is reported -- large institutions have reported foreign selling of U.S. stock. So there is some jitters about understanding the full dimension of this. But I'll say the biggest issue is when is Alan Greenspan going to stop the commodity deflation and lower interest rates? And he's going to drop rates, and that's going to trigger the next rebound in the market. It's not far away.


MR. MCLAUGHLIN: All right, let's nail it down. Exit question. Multiple choice. Name the dominant cause of this week's market sell-off. A, Asian flu; B, recession fear; C, Clinton-Lewinsky and a looming Constitutional crisis; D, Simple market dynamics, an expected correction; E, no dominant cause, all equal.


Pat Buchanan?


MR. BUCHANAN: Asian flu and its impact on American corporate profits.


MR. MCLAUGHLIN: Where in Asia? Let's nail it down.


MR. BUCHANAN: China and Japan, I've told you, John, are --


MR. MCLAUGHLIN: It's not China, Pat; it's Japan!


MR. BUCHANAN: They're the two big economies. If the yen goes down, the Chinese will devalue, Hong Kong goes.


MR. MCLAUGHLIN: Eleanor?


MR. BUCHANAN: Pat spends half his time watching that ticker go across the screen -- (laughter) -- hoping the economy's going to come down -- (laughter) -- because that will pave the way for a recession candidate by the name of -- and I don't have to say it. (Laughter.)


F. I say F, declining corporate profits. I added a letter. You didn't have a category.


MR. MCLAUGHLIN: Okay.


What do you say? What's the principal cause of the downturn in the market and, I guess, the downturn in the macroeconomics?


MR. KUDLOW: I'd say G. The Fed is too tight. We've had too much commodity deflation. They need to drop the Fed funds rate.


MR. MCLAUGHLIN: (Groans.)


MR. KUDLOW: Pat Buchanan's gold shares are going much further south. (Laughter.)


MR. BUCHANAN: (Inaudible.)


MR. KUDLOW: And by the way, stay invested, John, because this market is not over yet.


MR. BUCHANAN: Stay invested?


MR. KUDLOW: Don't short America.


MR. MCLAUGHLIN: For a year. But when Y2K comes along, I'm liquid.


What do you say?


MR. O'DONNELL: A little bit of Asian flu. Mostly just market dynamics, which now includes the CNBC factor.


MR. MCLAUGHLIN: The answer is, they're all equal. (Laughter.)


By the way, new online question of the week for McLaughlin.com: What kind of a role is the Clinton-Lewinsky affair playing in the U.S. economic slowdown? A, controlling; B, major; C, minor; D, none.


When we come back: Is the president so paralyzed by scandal that U.S. foreign policy is at a standstill?


(Announcements.)


MR. MCLAUGHLIN: Issue two: The Foreign Policy Leadership Gap.


SEN. JOSEPH LIEBERMAN (D-CT): (From videotape.) This episode is sorry, and it is sordid. And it has brought down not only our government and the head of our government, but the whole country.


MR. MCLAUGHLIN: Senator Lieberman's expression of disgust with the tawdry story of Bill Clinton's behavior reflects concern among lawmakers that the Clinton-Lewinsky scandal has anesthetized the U.S. presidency, not only in the economy and domestic politics, but -- more worrisome -- in international relations.


U.S. foreign policy has, quote, unquote, "come to a standstill," says Thomas Friedman, foreign affairs columnist for the New York Times. (Quoting further from one of Mr. Friedman's editorials.) "Look what's going on out there: Russia, with 20,000 nuclear weapons and an impoverished arms industry ready to sell anything to anyone, is teetering on the edge of collapse. Kosovo and Albania are imploding. China is considering devaluing its currency, in a move that could trigger a whole new downward economic spiral in Asia that would surely hurt the U.S. economy. Japan is stumbling around, lost. Saddam Hussein is preparing to rear his ugly head again. Iran is testing a long-range missile. The Arabs are moving closer to Iran, out of a feeling that the U.S. is too weak now to protect them from any Iranian meddling. The expansion of U.S. free trade, through the fast-track process, is frozen because the president is afraid to confront congressional Democrats on this issue, because they are his only core support. And the Arab-Israeli peace process is frozen, in part because the White House has completely wimped out from its vow to confront Israel's prime minister, Bibi Netanyahu, if he continues to reject the U.S. peace plan."


(Continuing to quote from another portion of the editorial.) "The press is now full of reports about infighting in the White House between aides who think the president should come clean with the grand jury and aides who think he shouldn't. Excuse me, but are these guys nuts? Do they really think there is any hope for salvaging the Clinton presidency with anything less than full disclosure? Do they really think America's national security interests can indefinitely tolerate a wounded president, constantly on the run from the press, courts, and Congress?"


(Quoting from first sentence of the concluding paragraph of the editorial.) "Mr. President, whatever your aides might say, your options are to tell the truth or resign."


Early Friday morning bombs exploded outside two U.S. embassies in Nairobi, Kenya, and Dar es Salaam, Tanzania. Over 1,000 casualties have been reported. President Clinton denounced these acts of terrorism as abhorrent, inhumane, and cowardly. Speaker Newt Gingrich says the U.S. Congress and the nation stand solidly behind the president.


Thomas Friedman's commentary, read just now, was published Tuesday. The Nairobi/Dar es Salaam bombings occurred Friday. Neither Friedman's piece nor anyone on this panel is proposing to correlate Friedman's point about the standstill in U.S. foreign policy with the bombing. But does the current paralysis in U.S. foreign policy have any bearing on the Africa bombings, Larry Kudlow?


MR. KUDLOW: Well, I don't know. I think we don't know enough about the African bombings.


But I don't feel as jilted or let down as Mr. Friedman, because I don't think Mr. Clinton ever had much of a foreign policy to begin with. I think the basic take here is, speak frequently, act indecisively, and leave your stick at home. And I don't think he ever commanded the respect around the world that we had during the 1980s, of the heyday of the Reagan position, or even the Bush position in the early '90s.


MR. MCLAUGHLIN: Lawrence Kudlow (sic)?


MR. O'DONNELL: The list of --


MR. MCLAUGHLIN: Or Lawrence O'Donnell. Pardon.


MR. O'DONNELL: The list of items in that column includes things that the president has very little strength to have any influence over at any time: Chinese currency --


MR. MCLAUGHLIN: You mean he holds a weak hand?


MR. O'DONNELL: Yeah. The only thing in there that is really important is fast track negotiating authority, which he couldn't get under any circumstances from this -- from the Democrats in the House of Representatives.


MR. MCLAUGHLIN: Well, he started awfully late. If he had started earlier and exhibited some energy --


MR. O'DONNELL: But the point is -- the point is --


MR. MCLAUGHLIN: You know the way that Congress can be lobbied, from your extensive experience.


MR. O'DONNELL: That's right, but he tried to get fast track and failed. He's only the president who's failed to get it --


MR. MCLAUGHLIN: And he tried very -- he tried very late.


MR. O'DONNELL: -- and he failed long before the Lewinsky scandal.


MS. CLIFT: Yeah --


MR. MCLAUGHLIN: Some say he tried too late and deliberately because he was protecting Gore's position with the unions.


MR. BUCHANAN: John, John, I don't agree with Clinton's foreign policy; it's neo-Wilsonian. But by his own standards, I think he is not succeeding, not only on fast track. He has failed on IMF so far. He has failed on U.N. dues. He does have a Middle East peace agreement, which is collapsing completely because he will not stand up to Bibi Netanyahu. In the Gulf, there's no doubt that Saddam Hussein is trying to break out of the sanctions and break away from any kind of American control of him. And in Kosovo, the Americans' threats have turned out to be a complete bluff, and the war's going on.


MR. MCLAUGHLIN: What's your larger point?


MR. BUCHANAN: The larger point is Clinton's foreign policy is in paralysis. No one respects the United States as the great, mighty superpower which it is.


MR. MCLAUGHLIN: Is the Lewinsky-Clinton affair making it worse?


MR. BUCHANAN: It is making it worse certainly, I think, with regard to Iraq.


MS. CLIFT: Well, I think Tom Friedman has a provocative analysis, and I have a lot of respect for him, but that's way overdone. I mean, his expectations for what a U.S. president does are just wildly out of proportion to what a U.S. president actually can do.


Now with Iraq, there are some legitimate questions that can be asked. When the president brought up the military buildup in January, people said he was covering up his domestic problems. Now he's not ordering a military buildup, and they're saying he can't do it because he's paralyzed. The truth is, the military buildup didn't work very well. So the truth is a lot more mundane than trying to pin it on some "affair" between the president and a young woman.


MR. KUDLOW: But I think that one of the problems haunting the whole Clinton approach is his failure to rebuild the American military budget and to create a missile defense system. And I think this becomes clear (sic) and clearer as there is more rogue adventurism around the world and even our alleged friends do not really take us seriously anymore.


MS. CLIFT: There's money in the budget for a missile defense.


MR. MCLAUGHLIN: By the way, one other foreign entanglement in which we are playing no role as far as resolution is concerned is the nuclear standoff between India and Pakistan, which becomes especially bothersome because of the skirmishing that's going on between India and -- about Kashmir, India and Pakistan, as we go along.


MS. CLIFT: Well, but that's not true --


MR. MCLAUGHLIN: But I want to talk about Monica this week in broad connection with what we're talking about here, that is, the condition of the presidency. Monica gave her testimony. Did you learn anything new? I would ask you, Eleanor.


MS. CLIFT: No. This is the same proffer she offered her previous attorney -- through her previous attorney: that she would acknowledge some sort of sexual relationship; she wouldn't accuse the president of directly lying or implicate him in an obstruction of justice. Without that, Ken Starr doesn't have a case that passes the laugh test in this country.


MR. BUCHANAN: Well -- oh, wait a minute. The laugh test is going to be applied to Mr. Clinton. There's not only --


MR. MCLAUGHLIN: What does that mean?


MR. BUCHANAN: Well, it means -- (chuckles) -- look, this story -- his story is inherently non-credible.


MS. CLIFT: (Inaudible due to cross talk) -- sex.


MR. BUCHANAN: Every -- you laugh when you hear it.


Now listen --


MS. CLIFT: Did you hear it?


MR. MCLAUGHLIN: Well, what are you talking about?


MR. BUCHANAN: I'm talking about Monica --


MR. MCLAUGHLIN: The fact that he is going to give testimony a week from Monday?


MR. BUCHANAN: I'm talking about --


MR. MCLAUGHLIN: Just a moment! A week from Monday?


MR. BUCHANAN: I'm talking about your question --


MR. MCLAUGHLIN: Excuse me! A week from Monday he's going to give testimony.


MR. BUCHANAN: Right. Okay.


MR. MCLAUGHLIN: Are you trying to tell me that he should not give testimony a week from Monday?


MR. BUCHANAN: What I'll tell you is I don't believe Clinton told the truth in his deposition. If he did not tell the truth, he ought not to testify, for two reasons.


MR. MCLAUGHLIN: What do you mean, he ought not testify?


MR. BUCHANAN: Because one of --


MR. MCLAUGHLIN: How can he get out of testifying now?


MR. BUCHANAN: -- one of two things is going to happen. Either he's going to commit perjury again, or he's going to admit to perjury. And neither of them is the proper course.


MR. MCLAUGHLIN: Pat, if you were counseling him, would you tell him to try to get out of that testimony at this late date?


MR. BUCHANAN: You know what I would tell him? I'd say: "Mr. President, if you did not tell the truth in your deposition, do not go before the grand jury. Let them take this subpoena to the Supreme Court, even defy it in the Supreme Court, and have the battle over the right of the president of the United States not to be hauled into a grand jury.


MR. MCLAUGHLIN: Would you support him in that?


MR. BUCHANAN: I would support him.


MR. MCLAUGHLIN: You would?


MR. BUCHANAN: Sure.


MS. CLIFT: Well, I don't think -- (inaudible) -- support. (Laughs.)


MR. MCLAUGHLIN: What do you think of that -- wait a minute. I want to (hear) --


MR. O'DONNELL: That battle is still an open possibility because he might just refuse to --


MR. MCLAUGHLIN: On what grounds, Lawrence --


MR. O'DONNELL: On his own grounds. He doesn't have to take the Fifth Amendment. You can ask him a question. And he'll just say, "No, I won't answer it," and you'll have to go the Supreme Court to get him ordered to answer it, and that's an open question.


MR. MCLAUGHLIN: Is that being -- that's very interesting -- is that being contemplated now?


MR. O'DONNELL: I would think it should be.


MR. KUDLOW: This is a disaster.


MR. MCLAUGHLIN: You -- do you know more than we know? (Laughter.)


MR. O'DONNELL: I do not know more than (you ?). We never know more than you do, John. (Laughter.)


MR. KUDLOW: I think this is a disaster scenario for Clinton, even more than the current situation he is in, because --


MR. MCLAUGHLIN: What do you mean, not to testify?


MR. KUDLOW: Not to testify --


MR. MCLAUGHLIN: Well, you want him to go to testify. What is he going to say?


MR. KUDLOW: He is just going to have to deal with the truth and get honest one way or another.


MR. MCLAUGHLIN: This is "mea culpa" time?


MR. KUDLOW: Well, if it be, it be. I don't know the facts. But here's a second take; you asked about foreign-policy influence. I say, his domestic policy influence is bottoming out and falling --


MS. CLIFT: You know --


MR. MCLAUGHLIN: Eleanor?


MS. CLIFT: -- 73 --


MR. MCLAUGHLIN: Wait a minute.


MR. KUDLOW: -- and he is completely now being "lame ducked," and (there's ?) --


MS. CLIFT: Yeah, seven -- (laughs) --


MR. KUDLOW: -- going to move ahead of him on policy. Mr. Clinton has lost his influence.


MS. CLIFT: You know, I don't know what world you live in, but you know, he has a very high job-approval rating, the country is running well --


MR. KUDLOW: Oh, that mantra, Eleanor, I think misses the point.


MS. CLIFT: The people have (word inaudible) -- it's not a mantra -- it's where the people are.


MR. KUDLOW: His personal ratings are so low --


MS. CLIFT: Seventy-three percent give -- excuse me, it's my turn --


MR. KUDLOW: -- it's not credible anymore.


MS. CLIFT: -- 73 percent of the American people think that he probably lied; 20-some-odd think that he ought to be impeached or go. And most people bring a measure of common sense to this. They feel these are questions that have should (sic) never been asked. And if one is forced to answer them, the truth is not necessarily expected. (Chuckles.)


MR. KUDLOW: All I am saying is he is being "lame ducked" in terms of his domestic policy.


MS. CLIFT: Let the man do his job!


MR. BUCHANAN: John, in terms of --


MS. CLIFT: Public morality and private behavior -- (inaudible) -- separate.


MR. BUCHANAN: -- in terms of foreign policy, though, Clinton's problem is the Cold War is over. The United States is the only financial, military, economic superpower. But people don't pay attention to America anymore because they don't have to.


MS. CLIFT: I think lots of people are paying attention to --


MR. BUCHANAN: What if they don't have any worries?


MR. MCLAUGHLIN: You mean, there is a loss of --


MS. CLIFT: -- you're an isolationist, Pat! (Laughs.)


MR. MCLAUGHLIN: -- a diminution in his stature, a diminution of his stature?


MR. BUCHANAN: No, the country's still the greatest in the world, by why should Pakistan and India pay attention to the United States?


MR. MCLAUGHLIN: Is this because of the current weakness of the president?


MR. BUCHANAN: It's only in part. We're not defending everybody anymore.


MS. CLIFT: Yeah, but let's remember that --


MR. MCLAUGHLIN: All right. We have got to move on. Issue three --


MS. CLIFT: -- Pat Buchanan is an isolationist -- (laughter) --and everything he says plays into his theory. (Laughter.) Okay? (Laughs.)


MR. MCLAUGHLIN: Issue three: Reno in contempt.


REP. DAN BURTON (Chairman, House Government Reform and Oversight Committee): (From videotape.) Our purpose has never been to hold the attorney general in contempt. Our purpose has been to get the information that the committee needs and to which it is entitled.


MR. MCLAUGHLIN: The information to which Chairman Burton refers are two lengthy memos, one from Louis Freeh, director of the Federal Bureau of Investigation, and the other from Charles LaBella, who is leaving as head of the Justice Department's fund-raising investigation. In those memos, LaBella joined Freeh in concluding that Reno has no choice but to appoint a special prosecutor to investigate alleged criminal fund-raising in the 1996 Clinton-Gore campaign.


CHARLES LABELLA (Justice Department Investigator): (From videotape.) I made the recommendation based on every fact and issue and legal argument that was fairly presented to me in the context of my job as the supervising attorney of the task force.


MR. MCLAUGHLIN: The attorney general has refused to turn over the two memos to Burton's committee, even in a fully edited state, to protect the investigation.


Louis Freeh made clear at the hearing that the government group under investigation is high level and incontrovertibly targeted by the independent counsel statute. Under questioning, Freeh named two figures included in that group.


(Begin videotape segment.)


REP. BURTON: I don't know if you're going to want to answer this, but does that include the president and the vice president?


LOUIS FREEH (Director, FBI): Yes, sir.


(End videotape segment.)


MR. MCLAUGHLIN: On Thursday, Chairman Burton proved how serious this matter was when his committee voted 24 to 19 to hold General Reno in contempt of Congress, the first time in U.S. history Congress has done so.


ATTY GENERAL JANET RENO: (From videotape) I will make my decision and I will explain it. But to ask for a document I am reviewing, while I have still not made a decision, is a form of political tampering that no prosecutor in America can accept.


MR. MCLAUGHLIN: The next steps. The contempt citation goes to the full U.S. House of Representatives. If the House votes yes, Reno goes before a federal judge who may sentence her to one year in prison.


Question: Will Reno appoint a special prosecutor?


Pat?


MR. BUCHANAN: On the last day, yes, she will appoint the special prosecutor.


MR. MCLAUGHLIN: Eleanor?


MS. CLIFT: The House will never vote on that contempt. That's political bunk. But she may appoint a special prosecutor, yes.


MR. KUDLOW: Yes, she's going to appoint and --


MR. MCLAUGHLIN: That's a yes for you.


MR. KUDLOW: Yes, she's going to appoint a special prosecutor, and she's more independent than some people think.


MR. MCLAUGHLIN: Lawrence?


MR. O'DONNELL: No, she will not.


MR. MCLAUGHLIN: The answer is yes, she will.


We'll be right back with predictions.


(Announcements.)


MR. MCLAUGHLIN: Predictions.


Pat?


MR. BUCHANAN: "Monica-gate" means a minor Republican landslide in November.


MR. MCLAUGHLIN: Forty seats?


Eleanor?


MS. CLIFT: If the Republicans go for impeachment hearings, they risk a backlash. Monica has no effect on the races.


MR. MCLAUGHLIN: Larry Kudlow?


MR. KUDLOW: Missouri Senator John Ashcroft, a very interesting dark-horse candidate for president, is coming out with a super flat-tax reform, 28 percent top bracket tax-cut plan.


MR. MCLAUGHLIN: Lawrence O'Donnell?


MR. O'DONNELL: There will be a small tax bill this year, with no capital gains cut.


MR. MCLAUGHLIN: The $18 billion authorization for the International Monetary Fund will pass the U.S. Congress before November. Bye-bye!


®FC¯END OF REGULAR SEGMENT


PBS SEGMENT FOLLOWS


®FL¯


PBS SEGMENT


MR. MCLAUGHLIN: Issue four: Madcap Madeleine.


Remember when secretaries of state were stiff, boring, and pin-striped? Well, our current diplomat in chief, Madeleine Albright, has shattered the stereotype. Here's Madeleine doing the Macarena in the sanctimonious precincts of the U.N. Security Council. Madeleine likes new hats. She likes to shop. She girl-talks with Hillary. She loosens up Russian foreign ministers, like Yevgeni Primakov. She holds hands with Senator Jesse Helms.


And her vocabulary can be salty. Back in '96 Secretary Albright, then U.N. Ambassador Albright, said this when Cuban fighter pilots killed three Cuban Americans flying two small Cessna planes:


AMB. MADELEINE ALBRIGHT: (From videotape.) Frankly, this is not cojones, this is cowardice.


MR. MCLAUGHLIN: And in New Zealand last week, Madeleine drew back the veil on Xena, protector of the powerless on the campy action-adventure TV series. Madeleine says Xena guides her destiny: "I've never been to New Zealand before, but one of my role models, Xena, the warrior princess, comes from here."


"Protector of the powerless," et cetera, is the Washington Post gloss on Xena.


Question: Is Albright's behavior acceptable for the office of secretary of state, Lawrence O'Donnell?


MR. O'DONNELL: Completely acceptable. She's breaking the paralysis of foreign policy. Our foreign policy now is fun. It's let's dance in the United Nations, and let's talk about TV shows. (Laughter.) No, there's no problem.


MR. MCLAUGHLIN: Well, what kind of a mark is Albright making on the annals of foreign policy/diplomacy in this country?


MR. O'DONNELL: She is a foreign policy star. The leaders of foreign countries want to see her. They wanted to see her before she ever danced in the U.N. She's done nothing to diminish her own stature at all by any of these things.


MR. MCLAUGHLIN: Don't you think it mirrors that of Bush, Pat?


MR. BUCHANAN: Listen, this is ridiculous. I think she has an absolute zero as a record in foreign policy. I think a lot of this nonsense that goes on is beneath the dignity of the office. Some of us --


MR. MCLAUGHLIN: What are you talking -- oh, what's she's doing here?


MR. BUCHANAN: When you see a president walk in, I like to someone like Ronald Reagan. Frankly, Bill Clinton looks like a president. She does not behave like a person of great dignity --


MS. CLIFT: Well, wait a second!


MR. BUCHANAN: -- representing the greatest nation on Earth.


MS. CLIFT: Who says that a --


MR. BUCHANAN: This is the country from the -- "The Mouse That Roared"-type country.


MS. CLIFT: Who says that a secretary of state has to be a gray man in a gray suit? I mean, she has won a lot of confidence from foreign leaders around the world?


(Cross talk, laughter.)


MR. MCLAUGHLIN: Can you help me out?


MS. CLIFT: She has a broad background in policy and politics. And if she weren't born in Czechoslovakia, she'd be being talked about as a presidential candidate, Pat.


MR. BUCHANAN: For what party, huh?


MR. O'DONNELL: Nelson Mandela, the most revered leader in the world, is singing and dancing at every other function he goes to. He's up on the stage every day doing this stuff.


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