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 lighting to financial services, GE -- we bring good things to life."

MR. MCLAUGHLIN: Issue one -- breaking ranks.

SEN. JOSEPH LIEBERMAN (D-CT): (From videotape.) Such behavior is not just inappropriate; it is immoral, and it is harmful, for it sends a message of what is acceptable behavior to the larger American family, particularly to our children. This deception is particularly troubling because it was not just the reflexive, and, in many ways, understandable human act of concealment to protect himself and his family from what he called "the embarrassment of his own conduct" when he was confronted with it in the deposition in he Jones case, but rather it was the intentional and premeditated decision to do so.

MR. MCLAUGHLIN: Senator Lieberman concluded his speech by saying that it is, quote-unquote, "Premature to say whether censure, resignation or impeachment would be the right course," and that Congress should await the Starr report. But Lieberman did call for a Clinton public rebuke of some kind. Two other Democratic party leaders added their voices of conscience: Patrick Moynihan and Bob Kerrey.

SEN. DANIEL PATRICK MOYNIHAN (D-NY): (From videotape.) In the aftermath of the president's speech on August 17, I commented that it was not adequate. But it was not until just this moment that the full measure of that inadequacy was presented to us, in the context of the needs of the nation.

MR. MCLAUGHLIN: Dr. Moynihan then issued a warning to the White House that Democrats in Congress will not permit the forthcoming debate on the Starr report to become a partisan circus.

SEN. MOYNIHAN: (From videotape.) It will be for us to discharge our sworn duty --

MR. MCLAUGHLIN: Senator Kerrey then made impromptu remarks, echoing Lieberman and later supplemented with a formal statement from his office.

"The president said his answers in a sworn deposition denying the affair were legally accurate. I do not want my children to believe the only standard of truth to which they, much less a president of the United States, must aspire to (sic) legal accuracy.

I do not believe public leaders can condone the parsing of words into pieces so small they no longer convey plain meaning. The coinage of democracy is language, and I believe when we distort the meaning of words, we devalue the currency by which the commerce of democracy is conducted."

These senatorial chastisements prompted President Clinton in Dublin on Friday to issue a terse "I'm sorry."

PRESIDENT BILL CLINTON: (From videotape.) I've already said that I made a bad mistake, it was indefensible, and I'm sorry about it. And I'm very sorry about it. There's nothing else I could say.

MR. MCLAUGHLIN: Question: How much political jeopardy is Mr. Clinton now in, Patrick Buchanan?

MR. BUCHANAN: Well, he's in terrible jeopardy, John. These are three very, very respected senators. I thought Kerrey's statement was extremely powerful. So was Lieberman's. And what Lieberman has done is he's given the Democrats cover, but more important than that, he's provided them with an example of what they can say. And there are countless Democrats out there who are trying to figure out how to deal with this issue. So you could have defections and calls for resignation and condemnation of the president by all the members of the Democratic Party for the next two months.


MR. CARNEY: I agree with Pat Buchanan. I don't think that this president has been in anything like this much peril since he came into office. He -- what Joe Lieberman did is he wrapped up the body of Bill Clinton, hung it over the cliff, and then pulled it back in briefly. But he's basically given permission to every Democrat to walk up to that cliff's edge with him. And the moment that something worse comes out, I think the bottom could drop out on the president.

MR. MCLAUGHLIN: Larry Kudlow, what's the president's political jeopardy?

MR. KUDLOW: I think that the Lieberman speech and so forth, Kerrey and Moynihan, really is the beginning of the resignation process. And I think with all of the revelations now that Reno and the Justice Department is going to have special prosecutors -- I guess three new special prosecutors for various campaign finance abuses -- this puts the White House in an absolutely untenable position. It puts Clinton in a bad position and Gore in a bad position.

But I want to go back to the -- it's interesting to me -- the Democratic Party future. Lieberman is a New Democrat, a colleague of Clinton's or a former colleague of Clinton's. And if you look clearly at the keys to his speech, he talked about deception, mentioned it several times. He talked about accountability, mentioned it several times. And he talked about consequences. That's a very spiritual point, almost a biblical point. Mr. Clinton has refused from Day One to accept any consequences. And I think the Democratic Party, as a political party, is going to have to deal with this problem of consequences. And at the end of the day, I think there's no way but out for Mr. Clinton.

MR. MCLAUGHLIN: Welcome, Fred Bergsten. I have a question for you. When the Starr report finally appears, what effect will it have on the U.S. stock market?

MR. BERGSTEN: I think the bottom line from all this could be devastating for our own economy, the world economy, and the stock market. The reason is that we're very close to a global financial panic -- Russia, coming on top of Asia; it could spread to Latin America. We saw the tremendous hit in our stock market earlier this week. It's a global panic.

MR. MCLAUGHLIN: You're talking about transfer of power?

MR. BUCHANAN: To markets --

MR. MCLAUGHLIN: No, are you talking about transfer of power from Clinton to Gore?

MR. BERGSTEN: I'm talking about the likelihood that we will have an ineffectual presidency for the next two years.

MR. MCLAUGHLIN: You mean with Clinton in place?

MR. BERGSTEN: With Clinton in place, but hamstrung. I won't say, "Impotent," given the circumstances --


MR. BERGSTEN: -- but I'll say, "Ineffectual." And the reason that's significant is because only the U.S. can lead a world response to this global problem. Without an effective U.S. president, we're in trouble, and the markets will read that.

MR. MCLAUGHLIN: Okay. You've raised a point, and I want to follow that through -- and I'll get you, Pat -- and that is dissent on the subject of trauma that occurred between Lieberman and Moynihan on this last go-around. They do not concur on the subject of trauma. It is, according to Lieberman -- as we see here in his speech, it is -- what we will go through, if there is a transfer of power, will be trauma, and he warns against that. Let's see what he has to say.

SEN. JOSEPH LIEBERMAN (D-CT): (From videotape.) To conclude, whether we have crossed the high threshold our Constitution rightly sets for overturning the results of a popular election in our democracy and bringing on the national trauma of removing an incumbent president from office.

MR. MCLAUGHLIN: Dr. Moynihan sees no trauma with such a transfer of power. "Our system of government does not depend on one person being there until death does him in. We're not talking of Czar Alexander. We have a system of government in which persons move in and out of government. This is a crisis of the regime. It is not a constitutional crisis. The Constitution provides for this."

Do you think, Fred, getting back to you, that the surgery of transferring power, without there being a popular election in the United States, from Clinton to Gore would be less traumatic on the financial markets, on the world economy, than what you described earlier -- the preservation of Clinton in office?

MR. BERGSTEN: It could be less traumatic, but it would still be a prolonged period of uncertainty and therefore vacuum in international leadership. The issue is, if we were in calm times, it might be right to say, "No trauma." In these times, it could be exceedingly traumatic.

MR. MCLAUGHLIN: Which is the lesser of the two evils, retention of Clinton or transferring power?

MR. BERGSTEN: I actually think transferring power would probably be less traumatic --

MR. BUCHANAN: John, it depends on how --

MR. BERGSTEN: -- because it would have bigger payoff in the short run.

MR. BUCHANAN: It depends on how it is done. Clearly, if a president were severely ill and sick and stepped down, it would not be traumatic. Resignation would be less traumatic than impeachment.

On impeachment, I agree with Lieberman; you are overturning a presidential election. You are in effect beheading the king. What happened to Nixon poisoned American politics, I think, for the next 20 years. (Cross talk.)

MR. CARNEY: John, if I may --

MR. BUCHANAN: And I think impeachment is a very serious thing.


MR. CARNEY: When Nixon resigned and Ford came in, there actually was a period of positive feeling in America --


MR. CARNEY: -- that only disappeared when Ford pardoned Nixon. And I think that we would see that post- --

MR. BUCHANAN: That's resignation.

MR. CARNEY: -- with resignation, rather. But -- that's right; there is a distinction. We would see that if the president were to resign, because -- and I think the Democratic Party would feel a lot better about it.

MR. KUDLOW: But the key issue here -- well, two key points:

One is, Moynihan is closer to the truth. The impeachment process, if that's what we're going to go through, up to the point of resignation, is a remedial process. It is a crisis in the sense of a disturbance. But it is a constitutional remedy, and it is an orderly constitutional remedy.

Point number two: The people running economic policy for the last several years have really not been in the White House, they've been in the Congress. The policy is completely changed towards smaller government, towards budget balance, towards some tax cuts, and so forth and so on.

MR. BERGSTEN: No, no, but you did -- you shouldn't use that to deal with --

MR. KUDLOW: Let me finish this point --

MR. MCLAUGHLIN: No, let him interrupt you.

MR. BERGSTEN: You can't take that approach, though, to dealing with a global financial crisis --

MR. KUDLOW: Oh, yes, you --

MR. BERGSTEN: The Congress can't do it. The Congress moves slowly. You must have effective presidential leadership --


MR. BERGSTEN: With Nixon -- when Nixon went through his agony, we got the world oil shock, whose repercussions --

MR. BUCHANAN: That was because of the war --

(Cross talk.)

MR. KUDLOW: That was unrelated. It was well before that --

MR. BERGSTEN: No, no, it was -- (inaudible due to cross talk) -- related --

MR. MCLAUGHLIN: You're relating the Arab oil embargo to Nixon's problem?

MR. BERGSTEN: The inability of the United States to respond effectively, to lead a response to the oil shock, which went all the way to '74 --

MR. BUCHANAN: Back to the point, back to the point --

MR. BERGSTEN: -- which went all the way to '74, we lived with it for two decades.

MR. BUCHANAN: Back to the point --

MR. MCLAUGHLIN: All right. Before you go back to the point, what do you think of his last statement?

It's usually the other way around. The Arab oil embargo helped precipitate Nixon's fall.

(Cross talk.)

MR. BUCHANAN: No. Look, that whole thing was around the time that the Russians were moving ships through the Dardanelles with nuclear weapons on them, and the whole thing came as a result of that war situation.

John, the point is that impeachment is a political process, and for Clinton partisans -- if they're 50 percent of the country or 40 percent of the country -- it partakes of a political coup d'etat for them. That's why resignation is better.

(Cross talk.)

MR. CARNEY: I think, John, we will not get to impeachment, because even this president, whom everybody says will go kicking and screaming, if it comes to that, if the shoe drops, I think that even this president would resign before facing the drawn-out process.

MR. MCLAUGHLIN: Having worked in the Nixon administration and seen that shift in power, and having listened to Professor Moynihan, Senator Moynihan, I'm pretty much with him on this. I think we greatly exaggerate the major surgery that does occur.

But I can understand Fred's point that in these circumstances -- but note that Fred said the lesser of the two evils is to transfer the power surgically and fast, because the trauma of keeping him in office, I think you're saying, is worse than the trauma of the transfer.


MR. BERGSTEN: It's the process of either resignation or impeachment or long-lasting uncertainty leaving a leadership vacuum that in this circumstance is so critical.

MR. MCLAUGHLIN: Impeachment would be brutal. It would go on for six months. It would tie up the entire Senate in a trial process. It's totally unrealistic. It will never come to that. I don't think anyone realizes the pressure that can be brought upon a president if the tide completely turns against him.

MR. BUCHANAN: John, you don't realize --

MR. KUDLOW: Can I get in here?

MR. MCLAUGHLIN: I want to hear from you.

MR. KUDLOW: There has been, for the last couple of years, a transfer of power from the executive branch back to the congressional branch. The congressional branch, which is run by the Republicans -- and they're going to pick up 20 to 40 seats in the House and five more in the Senate because of this -- is more free market, it is more pro-growth, it is more inclined to tax cuts, it is more inclined to Social Security reform, and it's more inclined to a different kind of IMF tradition --

MR. BUCHANAN: John, John, look at political reality --

(Cross talk.)


MR. KUDLOW: And the point I want to make is the stock market may come to welcome this transfer of power to the Republican Congress.

MR. BUCHANAN: Look to political --

MR. MCLAUGHLIN: You mean a Republican major win in November is going to be good for business?

MR. KUDLOW: Bullish as heck is what's going to happen.

MR. MCLAUGHLIN: (Laughs.) Pat?

MR. BUCHANAN: Look to political reality. If Bill Clinton resigns, he personally loses all chance for redemption, he's immediately the target of a the grand jury, he is indicted, and he will not be pardoned.

MR. MCLAUGHLIN: Well, what's his way out?

MR. BUCHANAN: What -- that's why Bill Clinton will hold on a lot longer than folks think, and a lot longer than Richard Nixon. He doesn't have Nixon's sense of shame --

MR. MCLAUGHLIN: What about a deal?

MR. BUCHANAN: I think if he does resign, he ought to go in to Starr and they ought to give him a deal where he tells everything and they do an Agnew deal.

MR. MCLAUGHLIN: We're talking jail here.

MR. BUCHANAN: No, no. We're talking an Agnew deal.

MR. MCLAUGHLIN: No, we're talking a -- if there's no Agnew deal, we're talking potentially jail.

MR. BUCHANAN: You're talking indictment and prosecution right here in D.C. or moving it down to Arlington.

MR. MCLAUGHLIN: How about a pardon?

MR. CARNEY: I think this is all way too premature, John.

MR. MCLAUGHLIN: No pardon from Al Gore?

MR. KUDLOW: But the problem is this: Where is Gore? Where --

MR. MCLAUGHLIN: Where is Al Gore? Has anybody seen him? Has there been a sighting of Al Gore? (Laughter.)

MR. KUDLOW: But look at Gore's position. Gore is faced with an independent prosecutor on his campaign finance phone calls. The independent prosecutor that's going to look into the Harold Ickes stuff is also going to embrace Al Gore. Gore will be so weakened right now that this argues even more, I think, for the theory that Congress is going to be running policies, both domestically and internationally.

MR. BUCHANAN: But they -- those guys can't run anything, can they?

MR. MCLAUGHLIN: I have a question for Carney.

MR. CARNEY: Right.

MR. MCLAUGHLIN: The question for Carney is: Why did Lieberman utter these words now, if you feel that there is something else besides his stated reason, before the appearance of the Starr report?

MR. CARNEY: I think that that was actually one major criticism that's legitimate. Lieberman was, I think, grandstanding a bit.

MR. MCLAUGHLIN: Why did he do it? Grandstanding?

MR. CARNEY: I think there was an element of that. I don't -- I think he could have waited and he should have waited for the report.

MR. MCLAUGHLIN: Can I help you with another explanation?

MR. CARNEY: Go ahead. Let's hear it.

MR. MCLAUGHLIN: The Democrats on the Hill have been home, and they have been hearing so much about Clinton that they're freaking out and they're realizing the intensity --

MR. CARNEY: That's true.

MR. MCLAUGHLIN: -- and they go to Lieberman, and they say, "We've got to start the process now." And that leads to my exit question --

MR. BUCHANAN: Well, he should not have done that --


MR. BUCHANAN: When the president --

MR. CARNEY: Was out of the country.

MR. BUCHANAN: -- was in Ireland and out of the country. That's the mistake he made. You don't do that to the president of the United States when he's abroad; I don't care what the problem is.

MR. MCLAUGHLIN: Well, why does he want -- if he wants to stay ahead of the Starr report -- and why does he, by the way?

MR. CARNEY: He shouldn't, necessarily. I think that this -- while what he said was --

MR. MCLAUGHLIN: Other than to respond to the demand of the Democrats who were freaking out?

MR. KUDLOW: Or to respond to the left wing of the Democratic Party, which was starting to mount some kind of pro-Clinton counterattack. You know, there's a lot at stake here inside the heart and soul of the Democrats.

MR. MCLAUGHLIN: All right, I want to get out -- we've got to get out on this exit question. Let's try this: Is Larry right when he says that the Lieberman speech of Thursday was the beginning of the resignation process which they see inevitably coming?

MR. BUCHANAN: I think that it's the beginning of the rock slide of defections and denunciations by Democrats. But again, you've got to look at Bill Clinton as the one in control of this. I don't see him resigning as of right now.

MR. MCLAUGHLIN: Do you think that the time has come when they feel it's necessary for him to go, and we've got to start the process? That's his question.

MR. BUCHANAN: It's -- the time is -- they're doing the Jim Buckley thing, John. Remember that, when we were in the Nixon White House?


MR. BUCHANAN: Take your flag and move it over to another hill and say, "That is no longer basically our leader."


MR. CARNEY: John, it is the beginning only if the polls go south, because this president will -- nobody is going to remove or force a president to resign who is at 60 or 65 percent. The polls will tell everything.

MR. KUDLOW: But --

MR. MCLAUGHLIN: You've already spoken to this. I'll give you 10 seconds.

MR. KUDLOW: The quick counterpoint is, Clinton has completely lost control of the process, and what you're seeing now is inside the Democratic Party the moderate/conservative wing is trying to regain control of the process, to cover their own rear ends, and to salvage something out of the November elections.

MR. MCLAUGHLIN: As a gloss on Carney, I would say that the three protective shields around Clinton have all collapsed. Number one, Janet Reno is no longer stonewalling. Number two, the Democrats have broken ranks. What's the third?

MR. CARNEY: It's the polls.

MR. MCLAUGHLIN: The economy! The economy!

MR. CARNEY: Well --

MR. BUCHANAN: The global economy.

MR. MCLAUGHLIN: Am I right or wrong? They've all collapsed.

MR. CARNEY: The U.S. economy has not collapsed.

(Cross talk.)

MR. MCLAUGHLIN: What do you say to that?

MR. BERGSTEN: That's exactly the risk. But I don't think he'll resign. Bill Clinton is the Comeback Kid. I, therefore, fear a prolonged vacuum, a period of weak or absent leadership, which is going to make the economic situation much worse.

MR. MCLAUGHLIN: How is he going to come back? Is he going to go into the 25th Amendment routine, where he writes a letter to Al Gore --

MR. BUCHANAN: No. He's looking for --

MR. CARNEY: (Chuckles.)

MR. MCLAUGHLIN: -- and the Cabinet and the Congress and says, "I am temporarily incapacitated, I want to take six months off, go to a monastery or Hazelden," take care of his problem, and then write a letter, and they admit him back?

MR. BUCHANAN: He's looking --

MR. MCLAUGHLIN: That won't work, will it?

MR. CARNEY: Certainly not.

MR. BUCHANAN: He's looking for a deus ex --


MR. BUCHANAN: A deus ex machina, celestial intervention, something big happening where he can stand up and be president.

MR. BERGSTEN: Well, or my argument, he can say, rightly, the world economy's in turmoil, it's in peril, we need strong leadership, let's call a halt on this internal debate. It wouldn't work, but he could try it.

MR. MCLAUGHLIN: The answer is, the engine is now on the resignation track.

When we come back: Russia meltdown, Asian contagion, and the U.S. market rock and roll.


MR. MCLAUGHLIN: Issue two: Russian Meltdown.

Would you top-line that for us, Jay Carney? Now you've been over in Russia. You spent many years there, correct, for Time magazine?

MR. CARNEY: Three years. That's right.

MR. MCLAUGHLIN: By the way, thanks for sitting in, in Eleanor's chair. You fit right in.

MR. CARNEY: Oh, right!

MR. MCLAUGHLIN: Maybe it's the hair.

MR. CARNEY: (Chuckling.) I'm not sure she'd agree, John.


MR. CARNEY: This is -- Russia is in a meltdown. It's a crisis situation.

I do think, however, that it is not -- when people say it's the worst it's been in Russia since World War II, I think that people forget a lot of -- some very -- a lot of the bad things that happened and the fact, primarily, that Russia was an enemy of the United States, and that's the worst possible thing. So before we go overboard and panic, I think that calm heads have to prevail and begin to try to work out a way to resuscitate the economy in that country.

MR. MCLAUGHLIN: Hey, Jay, since you know so much about Russia, who lost Russia?

MR. CARNEY: I think this administration did. And I think -- but I think -- I think --

MR. MCLAUGHLIN: This administration lost Russia?

MR. CARNEY: With the Bush administration. There was an opening in '91, '92, and '93 -- maybe '92 and '93, the last year of Bush, first year of Clinton, when something very big could have been done, and we wimped out.

MR. MCLAUGHLIN: Do you think they're obsessed with a personality cult -- both administrations -- and that prevented them from moving Russia in the direction of what happened in Poland? Would you speak to that -- what happened in Poland? Do you remember the cold-turkey snap commitment to reform?


MR. MCLAUGHLIN: And apparently it has worked, correct?

MR. BERGSTEN: The big bang. I think there's a lot to that.

I think there was a chance for a Marshall Plan for Russia. I think it was more toward the end of the Bush administration, though you might have been able to do it as late as '93. I think in historical terms, that was the big error.

MR. MCLAUGHLIN: Hey, Pat, what do you think about the IMF $18 billion bailout? Is that the way for Russia to go -- IMF reforms? Do you think IMF reforms are really killing Russia, and it's totally unrealistic, because there's nothing there to receive it?

MR. BUCHANAN: Michael -- Michel --

MR. MCLAUGHLIN: -- and where it goes is into the oligarchy?

MR. BUCHANAN: Michel Camdessus of the IMF is the Jim McDougal of global finance.


MR. BUCHANAN: He gave the Russians $5 billion and said, "Don't devalue, don't default." They burned through it in three weeks and then devalued and defaulted. That money's probably in Swiss banks.

These guys are simply bailing out Western bankers and investors with our money.

MR. MCLAUGHLIN: Larry, I am told that your view is, as much as you hate to say it, that those with the best economic formula for Russia today are the Communists, and by that I understand you to mean that what Russia needs is neo-statism, nationalization of the banks, strict wage and price controls. Is that your view? (Laughter.)

MR. KUDLOW: No, certainly not. But I --

MR. MCLAUGHLIN: It is not?

MR. KUDLOW: It is not my view. But I will --

MR. MCLAUGHLIN: You want to pump in more IMF funding?

MR. KUDLOW: No, there's another out. But I just want to note that in some respects, the Communists' blockage in the Duma was correct, because they were opposed to the IMF austerity plan. I don't support them in any other way, but it just so happens, although their motives were different --

MR. MCLAUGHLIN: Would you favor wage and price controls over there?

MR. KUDLOW: Absolutely not. There's a way out of this, and it may be happening, because Jay makes a great point that it's not quite as bad as folks are reporting in the West.

MR. MCLAUGHLIN: This is the way out --

MR. KUDLOW: Not only is there still a good chance that free elections will survive this, hopefully, but Dominic Cavallo, the former Argentine finance minister, is in Moscow right now, advising the Chernomyrdin government to dollarize the Russian economy, as he did in Argentina, to make the useless ruble convertible to the dollar, so more dollars circulate in Russia than rubles circulate, and then to set up a currency board for monetary discipline, which would then create trust and credibility in the global market.

MR. MCLAUGHLIN: Do you know --

MR. KUDLOW: This is an essential first step for Russian recovery.

MR. MCLAUGHLIN: Well put, Larry.

Do you know, Fred, a man by the name of Larry Reimer, who is -- R-E-I-M-E-R, Paris, OECD, Chamber -- American Chamber of Commerce?

MR. BERGSTEN: I'm afraid not.

MR. MCLAUGHLIN: The OECD Committee on the American Chamber of Commerce?

MR. BERGSTEN: Well, I know --

MR. MCLAUGHLIN: He wrote an interesting letter to the International Herald Tribune, which I saw on my way back from Germany. And he said that what Russia needs is really neo-statism as I described it, that the school of thought that recommends chunks of huge --

MR. BERGSTEN: Tranches.

MR. MCLAUGHLIN: -- tranches of IMF money is ridiculous. Do you share that? Do you share that view?

MR. BERGSTEN: No. I think Russia needs neither a return to statism nor Larry's currency board, which tries to wave a wand and put everything right. It needs a fiscal policy, and it doesn't have one.

(Cross talk.)

MR. MCLAUGHLIN: Pat, I've got a quick question. You remember Pinochet in Chile, correct? Pinochet in Chile.



MR. BUCHANAN: He brought in the Chicago boys and Milton Friedman, and put them to work --

MR. MCLAUGHLIN: Do you think that what Russia needs is a Pinochet, without the blood?



MR. BUCHANAN: I think you're exactly right. I think they need a strong central figure who can take the heat for it and take that country --


(Cross talk, chorus of noes from panelists.)

MR. MCLAUGHLIN: Would that get into the Russian psyche? Who is that man? Who is that man?

MR. CARNEY: There is no man.

MR. MCLAUGHLIN: Aleksander Lebed, right?

(Cross talk.)

MR. CARNEY: He could win. But John --

MR. KUDLOW: There must be free elections, John.


MR. KUDLOW: If Russia loses its freedom, they lose everything.

MR. BUCHANAN: Well -- well, come on!

MR. MCLAUGHLIN: Oh, you idealists, really! Dream on!

MR. KUDLOW: That is the turning point.


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


MR. MCLAUGHLIN: Predictions, Pat?

MR. BUCHANAN: The global financial crisis hits Brazil and Venezuela next, and hard.

MR. MCLAUGHLIN: That means Canada on one side and Latin America on the other, and there we are in the middle.


MR. CARNEY: No shutdown this fall. Trent Lott, Newt Gingrich pull it all together in a CR to end out the budget season.


MR. KUDLOW: The Republican wave is starting, and in Wisconsin Congressman Mark Neumann has an excellent chance to defeat Democrat incumbent Russ Feingold.


MR. BERGSTEN: Congress will be spooked by the financial crisis; they'll pass the IMF legislation within the next month. They might even pass new trade legislation to give the U.S. some leadership.

MR. MCLAUGHLIN: Dan Quayle will seek the presidency and prove to be a much more formidable candidate than the press has hitherto acknowledged.

Happy Labor Day! Bye bye!





MR. MCLAUGHLIN: Issue three: the cult of Diana.

DAVID STARKEY (historian): (From videotape.) What is left of Diana a year later, is, frankly, very little. For a handful of people, the true believers, perhaps 10, 15 percent of the Brit population, there is a myth.

MR. MCLAUGHLIN: British historian David Starkey's tart comments have sparked anger among the Diana "true believers," who feel strongly that the death of the Princess of Wales has had a profound impact on the country and the world.

This week marks the one year anniversary of Diana's tragic death, and the so-called cult of Diana has been battling with its heretics: media and clergy members who have called into question Diana's legacy with warnings of "false idol worship" and a closer scrutiny of the princess' imperfections. But the words of Dr. Starkey certainly seem to be borne out by the atmosphere in England, with one poll reporting that 94 percent of Brits had no special plans to commemorate the anniversary.

And this seeming dimming of Diana is in contrast to the brightening public image of the royal family. In the immediate aftermath of Diana's death the monarchy was criticized as cold and out of touch. But they've loosened up. Get this: In front of a McDonald's two months ago the queen made an impromptu visit with the common folk. And Prince Charles, whose image had always suffered in comparison to the glamorous Diana, is now seen in a more sympathetic light: the single dad, keeping a watchful eye over his motherless sons. Charles, by the way, introduced William to Camilla Parker-Bowles. Charles also has met with Diana's mother, Frances Shand-Kydd. Charles' polls are up, too.

Question: Does Diana's death represent one of those pivotal moments in world history, or is it just another in a series of generic tragedies? I ask you -- who wants this? (Laughter.)

MR. BUCHANAN: I'll take this one.

MR. MCLAUGHLIN: You want it, Pat?

MR. BUCHANAN: Yeah. (Laughter.)

MR. MCLAUGHLIN: Do it. You're a royalist, aren't you? (Laughter.)

MR. BUCHANAN: Yeah, I am the royalist. (Laughs.)


I think that for a small group, as was mentioned, of the British people, it is really a very important event. But for the rest of us, I think, they went through this just for a period of time, and it's gone.

There's something of the Evita Peron here. You remember when she died, John?


MR. BUCHANAN: There was talk of desire for canonization, of all the rest of it, a tremendous mood thing. And it faded away, and I think this is going to fade away, too.

MR. MCLAUGHLIN: You know, I visited Eva Peron's grave in Buenos Aires.

MR. BUCHANAN: Shrine, huh?

MR. MCLAUGHLIN: Shrine. Quite chaste, actually.

I want to -- I have a question for you.


MR. MCLAUGHLIN: How damaging is the revelation that the queen inquired about whether Diana wore royal jewels on the night of the crash?

MR. CARNEY: Well, it can't help a queen who is, as you just said, only beginning to recover from a low point in the estimation her subjects hold her in after the way she --

MR. MCLAUGHLIN: Did you want to make another quick point before we retire?

MR. CARNEY: That's it. (Laughs.)

MR. MCLAUGHLIN: That's it?

Did you want to make a five-second point?

MR. BERGSTEN: The pound sterling is strong. (Laughter.) I don't think the death has affected the outcome. (Laughter.) It's an underrated economy. They're doing very well. (Laughs.)