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THE MCLAUGHLIN GROUP HOST: JOHN MCLAUGHLIN PANEL PATRICK BUCHANAN, MSNBC; ELEANOR CLIFT, NEWSWEEK; MONICA CROWLEY, SYNDICATED RADIO COMMENTATOR; MORT ZUCKERMAN, U.S. NEWS & WORLD REPORT TAPED: FRIDAY, SEPTEMBER 12, 2008 BROADCAST: WEEKEND OF SEPTEMBER 13-14, 2008

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MR. MCLAUGHLIN: Issue One: Que Sarah, Sarah.

The Republican vice presidential candidate was cross-examined this week by ABC's Charlie Gibson.

(Begin videotaped segment.)

CHARLES GIBSON (ABC NEWS): With the NATO treaty, wouldn't we then have to go to war if Russia went into Georgia?

ALASKA GOVERNOR SARAH PALIN (REPUBLICAN VICE PRESIDENTIAL NOMINEE): Perhaps so. I mean, that is the agreement, when you are a NATO ally, is if another country is attacked, you're going to be expected to be called upon and help. MR. MCLAUGHLIN: Let's see whether Governor Palin got it right. The NATO treaty, Article V: "The parties agree that an armed attack against one or more of them in Europe or North America shall be considered an attack against them all, and consequently they agree that if such an armed attack occurs, each of them, in exercise of the right of individual or collective self-defense, will assist the party or parties attacked by taking such action as it deems necessary, including the use of armed force."

So Georgia as a member of NATO would enjoy NATO's defense protection by its 26 fellow members. So Palin gets it exactly right. Yes or no?

MR. BUCHANAN: Palin got the facts exactly right. If you bring Georgia into NATO, NATO is responsible for coming to their defense in the event of attack. I think it's an insane policy. It is McCain's policy she is uttering here. She's obviously been briefed. She's putting out that line. But the good news, John, is we're not going to fight in the North Caucasus because Europe, many European nations, will veto, as they have already, the entrance of Georgia into NATO, as they will veto the Ukraine's entrance into NATO.

What she is doing here, she's been briefed by the neocons around McCain and she is uttering the exact position they told her to take.

MR. MCLAUGHLIN: Eleanor.

MS. CLIFT: She got the facts literally correct, but she didn't get the atmospherics correct, and that is that I don't think the voters are eager now for another war party and that they want an engagement with Russia, which has nuclear weapons, over Georgia.

John McCain has said, "We're all Georgians now." I think if he put that to a vote, that might not pass if people understood the implication. So I think she did well enough in the interview with Charlie Gibson that if it were pass/fail, she would pass. But if it were graded on a curve, she would get a C, because she was uttering memorized sound bites with no fluidity in her thinking.

MR. MCLAUGHLIN: You mean, graded by Eleanor Clift.

MS. CROWLEY: Yes. (Laughs.)

MS. CLIFT: And I imagine other people of my ilk and persuasion.

MR. MCLAUGHLIN: But not Monica. Monica?

MS. CLIFT: No, of course not.

MS. CROWLEY: I think she did fine in her first interview in a national setting, without the cheering crowds and so on. And, look, on the question of NATO and Georgia and Russia, she indicated that she would support the entrance of Ukraine and Georgia into NATO, which, Pat's right, it is McCain's policy.

The question is, why do these countries want to join NATO? It's because Ukraine feels Russia breathing down its neck, and the Georgians still have Russian troops on the soil. So the question isn't whether or not the United States should be supporting these democracies, whether it's through NATO or not.

The question is, the problem is Russia. And that's why these states feel threatened. And she and John McCain will say, "Look, if we are the president and vice president, we will make sure that these democracies are supported, whether or not it's out of the technical framework of NATO."

MR. MCLAUGHLIN: Mort.

MR. ZUCKERMAN: Well, and the other thing that she said was that, "Look, we're not looking for another cold war with Russia." And I hope we aren't looking for another cold war with Russia. Certainly we're going to have problems with Russia because Russia has become much more belligerent, much more nationalistic and much more independent because of their oil revenues. But I don't think anybody, including McCain or Sarah Palin, is looking to have a cold war with Russia.

MR. MCLAUGHLIN: Okay -- holding Sarah's head under water.

(Begin videotaped segment.)

MR. GIBSON: Do you agree with the Bush doctrine?

GOV. PALIN: In what respect, Charlie?

MR. GIBSON: The Bush -- what do you interpret it to be?

GOV. PALIN: His world view?

MR. GIBSON: No, the Bush doctrine, enunciated September 2002, before the Iraq war.

GOV. PALIN: I believe that what President Bush has attempted to do is rid this world of Islamic extremism, terrorists who are hell- bent on destroying our nation. There have been blunders along the way, though. There have been mistakes made. And with new leadership -- and that's the beauty of American elections, of course, and democracy, is with new leadership comes opportunity to do things better.

MR. GIBSON: The Bush doctrine, as I understand it, is that we have the right of anticipatory self-defense, that we have the right to a preemptive strike against any other country that we think is going to attack us. Do you agree with that? GOV. PALIN: I agree that a president's job, when they swear in their oath to uphold our Constitution, their top priority is to defend the United States of America.

(End videotaped segment.)

MR. MCLAUGHLIN: Gibson is quoting from a 2002 doctrine, which is no longer the Bush doctrine. Four years later, what Charlie calls the Bush doctrine was superseded by this current strategic policy. Quote: "The U.S. will not resort to force in all cases to preempt emerging threats. Our preference is that non-military action succeed," unquote.

This substantially softens the 2002 language. Despite the error of the question, did Sarah bob and weave effectively and emerge unscathed? Eleanor Clift.

MS. CLIFT: Well, excuse me, John. Does that mean that the invasion of Iraq and the rationale behind it is no longer operable? And what is this new doctrine that you're repeating? Did the administration put out a white paper of some sort?

It seems to me what distinguishes the Bush administration was their rationale that if you felt the country were under imminent attack, that you could retaliate, which frankly has always been an unspoken, unwritten part of U.S. policy. The difference here is that the grounds for anticipating an imminent attack did not exist.

MR. MCLAUGHLIN: Two strategic policy statements have been made -- were made in 2006 --

MR. BUCHANAN: Yeah, this is --

MR. MCLAUGHLIN: -- both of which discouraged the use of anything like preemptive strike, and both of which are far more, what, dovish than the hawkish 2002 interpretation of --

MR. BUCHANAN: It has been succeeded; that's correct. Eleanor's correct; we went to Iraq under the old doctrine. There is a new doctrine. But she handled this very well. The reason was, this was not a question for which she was prepared to answer. Her natural response was -- and we didn't quite get to it -- is, "Certainly the president has a right to act in the case of imminent attack," like Russian missiles in Cuba becoming operable. Kennedy could have smashed them if he wanted to. So her instincts, in my judgment, are excellent.

MR. MCLAUGHLIN: Did she miss a beat?

MR. BUCHANAN: No, she didn't miss a beat on this. Where I'm concerned is they are programming her to come out with McCain's neocon policies, which I don't believe -- I agree with Eleanor -- they are not in the center of American politics. Americans don't want any more wars.

MR. MCLAUGHLIN: Monica.

MS. CROWLEY: Look, in one sense, it was a "gotcha" question, because, as you point out, the Bush doctrine has evolved over time. And the secondary version of it is a post-Iraq version of it. But to somehow suggest that we went into Iraq without the conditions in the second part of the Bush doctrine, which is diplomacy, lead time, going to the United Nations, giving a nation like Saddam Hussein's Iraq all of the benefit of the doubt before we went into war -- to somehow suggest that Bush didn't do that before going into war --

MS. CLIFT: Monica --

MS. CROWLEY: -- when we had 17 U.N. resolutions that Saddam Hussein cavalierly disregarded, and the Bush administration spent months and months and months trying to avert war --

MR. MCLAUGHLIN: Mort --

MS. CLIFT: Monica --

MR. MCLAUGHLIN: Hold on --

MS. CLIFT: -- what one line? There's a whole library of books that could fill you in on some of the details about how we went to war.

MS. CROWLEY: Eleanor -- and there was plenty of time built in to avert it.

MR. ZUCKERMAN: The Bush administration doesn't follow the Bush doctrine of 2002 even today. I don't know what this is such a great, you know, sort of conflict about. The fact is that we wouldn't go into Iran under these circumstances. We will not take anything off the table, which is as far as it goes. So I frankly think this was not a very fair question put to her, in my judgment.

MR. MCLAUGHLIN: Okay -- lipstick follies.

GOV. PALIN: (From videotape.) I was just your average hockey mom and signed up for the PTA. I love those hockey moms. You know, they say the difference between a hockey mom and a pit bull -- lipstick. MR. MCLAUGHLIN: Obama makes pit bulls into pigs.

SEN. BARACK OBAMA (D-IL, Democratic presidential nominee): (From videotape.) You know, you can put lipstick on a pig. (Laughter.) It's still a pig. You can wrap an old fish in a piece of paper called change; it's still going to stink.

MR. MCLAUGHLIN: Question: McCain's campaign said that Obama was calling Palin a pig. Is that the case? Monica.

MS. CROWLEY: Well, let's lose the diapers on this, okay? This man, Barack Obama, has said repeatedly that words matter. Everything that comes out of his mouth is very deliberate; it's very calculated.

Now, that said, this is an expression other politicians have used over time. But in this context, given the fact that Sarah Palin's lipstick comment became so famous, so fast, and so identified with her, that the idea that he could use it --

MS. CLIFT: Oh --

MR. MCLAUGHLIN: Let her finish, Eleanor.

MS. CROWLEY: -- and that there would be a different interpretation to it is absurd. Of course he knew what he was saying.

MR. MCLAUGHLIN: Eleanor.

MS. CLIFT: The whole previous part of the sound bite, which you neglected to play, he's talking about John McCain and the policies he's putting forward. Every fact-check group that's looked at this has said this was unfair. And, in fact, by the end of the week, it had --

MR. MCLAUGHLIN: What was unfair? Her stating it, or --

MS. CLIFT: That calling this some sort of sexist remark against Ms. Palin -- McCain --

MR. BUCHANAN: All this --

MS. CLIFT: Hold on. The McCain campaign is trying to call all criticism against her sexist. But on this one, they jumped the shark, or maybe they jumped the pig, because it is so patently ridiculous.

MR. BUCHANAN: Look, here's the problem. Obama, when he started talking, knew suddenly he was on difficult terrain, and he was affirmed in that by the hoots, jeers, shouts and standing laughter --

MR. MCLAUGHLIN: What's the point? MR. BUCHANAN: The point is, Obama knew that he had stepped into it after that. That's why he moved to the fish comment. And quite frankly, he's got to expect the McCainiacs to jump right on it and jam him after this. And it's rough hardball, but it's legitimate.

MR. MCLAUGHLIN: You mean -- so the lipstick on the pig was an extemporaneous remarks?

MR. BUCHANAN: Yeah, he wasn't calling her a pig, but he realized -- it's a gaffe.

MS. CLIFT: When John McCain called Hillary's health care plan putting lipstick on a pig, was that a sexist remark against Hillary Clinton?

MR. BUCHANAN: No, but that was --

MS. CLIFT: And what would you --

MS. CROWLEY: That was pre-Sarah Palin.

MS. CLIFT: What would you people have said if --

MS. CROWLEY: Pre-Sarah Palin, Eleanor.

MS. CLIFT: -- people had said -- if Hillary had said sexism? I mean, you're painting with way too broad a brush.

MR. MCLAUGHLIN: Mort.

MR. ZUCKERMAN: I have to agree with Monica here. You can't imagine that Barack Obama didn't realize the significance of that phrase.

MS. CLIFT: Oh, please.

MR. ZUCKERMAN: I'm not saying he was referring to --

MR. MCLAUGHLIN: So it was not extemporaneous, meaning he had thought it through.

MR. ZUCKERMAN: No, I'm just saying, when he used that phrase, it had to come into the context, as we know, that it was used before. I'm not saying it's sexist. It's just something he was trying --

MR. MCLAUGHLIN: What was it?

MR. ZUCKERMAN: He was trying to deride her comment and diminish her comment, because it was one of the most, you know, renowned and wonderful comments that she made in the speech she gave at the convention. MR. MCLAUGHLIN: Exit question --

MS. CLIFT: It's a cliche. It's a cliche.

MR. MCLAUGHLIN: Multiple choice --

MR. ZUCKERMAN: You can --

MR. MCLAUGHLIN: Is Obama's handling --

(Cross-talk.)

MR. MCLAUGHLIN: Is Obama's handling of the Sarah Palin challenge, A, ill-conceived; B, dangerous; C, backfiring; D, so far, so good; E, bull's eye winner? Pat.

MR. BUCHANAN: A, B and C -- big trouble. (Laughs.)

MR. MCLAUGHLIN: Big trouble?

MR. BUCHANAN: Sure. Get off it, fella. Go after McCain. Leave her alone.

MS. CLIFT: He is off of it. One word -- "Enough." But his strategy is a work in progress. (Laughs.)

MS. CROWLEY: It shows how threatened the Obama team is by Sarah Palin. They have no idea how to handle this new political phenomenon. They thought they'd have the monopoly on political phenomena with Barack Obama. That is no longer the case. And the fact that Obama is fighting this asymmetrical warfare by spending every day going after Sarah Palin -- I mean, what is Joe Biden there for?

MR. MCLAUGHLIN: Do you think he looks chauvinist?

MS. CROWLEY: Look, I think when he followed up the lipstick question with the old fish in newspaper, that was a slam at John McCain. I believe that those comments were deliberate, John.

MR. MCLAUGHLIN: Mort.

MR. ZUCKERMAN: I have to say, I think Sarah Palin is a very likable person, very, very attractive person, and you have to be very careful how you handle her. They have not understood how to handle her. The country, in my judgment, by and large, is not going to accept these sort of slights to her, and they've got to be very careful. And he should not be running against the vice presidential candidate on the other side.

MR. MCLAUGHLIN: Do you think --

MS. CLIFT: And he hasn't been. (Laughs.) MR. ZUCKERMAN: Oh, yes, he has, for 10 or 12 days. They've been obsessed with it.

MS. CLIFT: The media has been obsessed.

MR. MCLAUGHLIN: Do you think that she is as smart as he is?

MR. ZUCKERMAN: I don't -- who can measure that? I think she's a very intelligent woman.

MR. BUCHANAN: She's savvy.

MR. MCLAUGHLIN: Huh?

MR. BUCHANAN: She's a very savvy woman.

MR. ZUCKERMAN: She's very savvy, and --

MR. BUCHANAN: He's a smart guy. She's savvier than he is.

MR. ZUCKERMAN: And there's another thing about her. She's very authentic, and that really comes through.

MR. MCLAUGHLIN: You mean, she's smart and she's political.

MR. BUCHANAN: She's street-smart and she's authentic. And I think she's got street smarts that he does not really have.

MS. CLIFT: What matters --

MR. MCLAUGHLIN: Does she have something beyond that?

MS. CLIFT: What matters is --

MR. BUCHANAN: "Our governor is hot," as they say. "We may be cold in Alaska" --

MR. MCLAUGHLIN: No, I don't mean that.

MS. CLIFT: What matters is whether the impression of her takes hold over the next couple of weeks, whether she is ready to be president or if she is not ready. That's what --

(Cross-talk.)

MS. CLIFT: That's all that matters.

MR. ZUCKERMAN: No, that's the way you define it. I do not define it that way at all.

MR. MCLAUGHLIN: On a trust scale, who scores higher, Obama or -- MR. BUCHANAN: Oh, she does.

MR. MCLAUGHLIN: Why? Why do you trust her --

MR. BUCHANAN: She is a middle American woman. She doesn't just talk about it.

MS. CLIFT: She is a religious right-wing conservative. (Laughter.

) She has --

MR. BUCHANAN: She does believe in God. I agree. (Laughs.)

MS. CLIFT: She has solidified --

MR. MCLAUGHLIN: Quickly. Quickly.

MS. CLIFT: She has solidified the Republican base and she has intrigued many people, men and women, in the middle.

MS. CROWLEY: Eleanor --

MS. CLIFT: Now we'll see if they still like her after they learn more of what she's about. It is an open question.

MS. CROWLEY: Eleanor's argument right here -- Eleanor's argument is the third wave of attack against Sarah Palin. They tried the sexism. They tried the classism. Those things didn't work. And now they're trying to paint her into a religious nut, which is grossly unfair.

MS. CLIFT: I didn't say she's a nut.

(Cross-talk.)

MR. MCLAUGHLIN: A, B, C, D or E. We've got to get out.

(Cross-talk.)

MS. CLIFT: That's what I said. Don't put words in my mouth.

MR. ZUCKERMAN: I think they have mishandled her to date.

MR. MCLAUGHLIN: You do?

MR. ZUCKERMAN: Yeah, for sure.

MR. BUCHANAN: A, B and C.

MR. ZUCKERMAN: They've built her up. They've built her up. MR. MCLAUGHLIN: The answer is A, B and C.

Issue Two: The Dark Moment.

WOMAN: (From videotape.) The darkest moment for me was when I realized I was going to have to sleep in my car for the first night on a street, and I couldn't decide which street that I was going to feel safe on.

MR. MCLAUGHLIN: The dark moment: Home foreclosures, as of today, 1.25 million, all now in foreclosure; unemployment, 6.1 percent, a five-year high; jobless claims up 15,000 over the past week, now 440,000 total; inflation, 5.6 percent, the highest in 17 years, since '91, when George H.W. Bush was president; Consumer Price Index, the CPI, 5.5 percent, also the highest in 17 years; banks, 10 closed this year alone, 117 banks on the watch list, maybe another 200 variously vulnerable; Fannie Mae and Freddie Mac now exclusively U.S. government guarantors of $5 trillion of U.S. home loans through a, quote-unquote, "conservatorship," under the Federal Housing Finance Agency. And on one indicator, the sun shines through -- GDP, still up 3.3 percent annual rate.

Question: What is fueling the gross domestic product, GDP, uptick? And does that 3.3 percent uptick mean that we are not yet in a recession? Mort.

MR. ZUCKERMAN: No, that uptick really represents, in large part, the federal tax rebates that were handed out at that point, a lot of which was spent, and therefore seemed to have lifted the economy. But the economy is very weak and it's sliding. Unemployment is much worse than those numbers.

The core of the problem is, at that piece indicates, the collapse of housing prices, which is the first time this has happened in 70 years. It's the largest single asset on the balance sheet of the average American family. They've lost 15 to 20 percent, at least. That represents $4 (trillion) to $5 trillion in losses, compared to $130 (billion), $140 billion tax rebates. So that has not yet been worked through.

The financial consequences of it are also disastrous. Fannie Mae and Freddie Mac, as you know, the two big housing agencies that represent literally 6,000 billion dollars, $6 trillion, this is half the debt of the United States. It's 40 percent of the GDP of the United States in those two companies, and those two companies were on death's door.

And if they had collapsed, you would have had thousands of banks in this country collapse since they had paper from Fannie Mae that was more than their net worth, and thousands of banks in Europe that would have collapsed. And Europe -- you would have had a run on the dollar. You would have had a collapse of the housing market. They had to rescue them. MR. MCLAUGHLIN: Mort, don't hold back. Tell us how bad it really is.

MR. ZUCKERMAN: Well, it is bad. I mean, we came -- we averted a major systemic crisis in this country by saving those things.

MS. CLIFT: Right. Now you've got --

MR. ZUCKERMAN: And we're not out of the woods yet.

MS. CLIFT: Now you've got Lehman Brothers bellying up to the bar for their bailout. You've got the auto companies lining up. And what about all the Republican rhetoric I've heard for 15 years? "Just get government regulation, get it out of the marketplace; the markets can perform just fine." I'd like to hear you have to eat some of that rhetoric for the last 15 years.

MR. ZUCKERMAN: Well, I don't --

MS. CLIFT: Maybe not from you personally, but all that getting the government out --

MR. ZUCKERMAN: (Inaudible.) All I can say is there is a time --

MR. MCLAUGHLIN: Eat away, Mort.

MS. CLIFT: Now we have room for government.

MR. ZUCKERMAN: You have to set aside ideology in order to prevent the economy from collapsing, whatever the ideology.

MR. BUCHANAN: John, you --

MR. MCLAUGHLIN: Let Pat in.

MR. BUCHANAN: You had to nationalize Fannie and Freddie; there's no question about it.

MR. ZUCKERMAN: For sure.

MR. BUCHANAN: The economy is not in as bad a shape as it was in 1980, but Mort is right. The underlying financial crisis here of these banks and all these houses with rotten paper, this could go crashing down. If it does, the Fed will have to bail them out. Inflation will surge. You will have stagflation. And I'll tell you, you then will be looking at something approaching the Great Depression.

MR. MCLAUGHLIN: Exit question -- you can get on this, Monica, with your other thought -- is this the beginning of a long period of American economic decline? Yes or no, Pat Buchanan. MR. BUCHANAN: America is in relative economic decline compared to the rest of the world.

MR. MCLAUGHLIN: Long?

MR. BUCHANAN: Yes, long -- long.

MR. MCLAUGHLIN: Decade?

MR. BUCHANAN: It'll be longer than that. I think it's a long, long decline.

MR. MCLAUGHLIN: Wow.

MS. CLIFT: We need to regain the edge with competitiveness and with innovation and research and development, and we can do it. But it's not looking so great for the imminent future.

MS. CROWLEY: Yeah, I think we're seeing the beginnings of these real serious structural problems --

MR. MCLAUGHLIN: Decade?

MS. CROWLEY: -- that are cascading through the housing markets, the credit markets.

MR. MCLAUGHLIN: Ten years?

MR. ZUCKERMAN: No, no.

MR. MCLAUGHLIN: No, no? Less?

MR. ZUCKERMAN: We're going to be in a two- or three-year slowdown. I don't think we're in for a long-term decline. We can do a lot to change that. We're still the most innovative, the most productive economy by far in the world. And if you want to compare it to Russia, Russia's wages are one-seventh. The same thing is true of China. All these other countries have problems. We can cure our problems very easily with good leadership.

MR. MCLAUGHLIN: Thank you, Mort. We've been saved.

Issue Three: From Russia With Love -- Not.

The temperature of the Russia-U.S. relationship is plunging. Two months ago, Russia moved armored vehicles and troops into the nation of Georgia on Russia's south border. Georgia provoked the Russian action by sending tanks into South Ossetia, a disputed enclave on Russia's underbelly. Georgia agreed to a cease-fire and withdrew. Russia pressed on and marched along Georgia's key artery. Today Russia remains in Georgia at up to half its earlier strength. President Bush has called on Russia to leave Georgia and act like the superpower that it is.

PRESIDENT GEORGE W. BUSH: (From videotape.) To begin restoring its place in the world, Russia must keep its word and act to end this crisis.

MR. MCLAUGHLIN: Late last week, Vice President Dick Cheney flew to Georgia itself. In the capital city, Tbilisi, Cheney issued a warning.

VICE PRESIDENT DICK CHENEY: (From videotape.) Russia's actions have cast grave doubt on Russia's intentions and on its reliability as an international partner, not just in Georgia but across this region, and indeed, throughout the international system.

MR. MCLAUGHLIN: Question: Does the international community share Cheney's view that Russia was in the wrong? Monica Crowley.

MS. CROWLEY: Well, I think it depends what part of the international community you're talking about. In large part, the West and Eastern Europe, they do agree with the president and the vice president that the Russians violated the sovereignty of Georgia. Now, even though the Russian troops are withdrawing from Georgia, they maintain a presence in Abkhazia and South Ossetia, meaning that the Russians have now dismembered a sovereign, democratic, pro-western state with impunity.

MS. CLIFT: Well, in your set-up, you point out that Georgia did provoke this.

MR. MCLAUGHLIN: Good set-up, huh?

MS. CLIFT: Yes, it was a good set-up.

MR. MCLAUGHLIN: Thank you.

MS. CLIFT: And these are little enclaves of primarily Russian- speaking people, and their loyalty is to Russia. And there are these little ethnic enclaves throughout that region. With Chechnya, President Bush looked the other way and let the Russians just run wild in that particular area.

So I think this is something we really don't need to get in the middle of. And Vice President Cheney likes a muscular foreign policy, and talking tough has been a signature of Republican campaigns. And creating more fears about a newly resurgent Russia --

MR. MCLAUGHLIN: Fear-mongering.

MS. CLIFT: -- is now back in the news. MR. MCLAUGHLIN: Buchanan does a lot of that.

Okay -- the blame game.

Russia's president, Dimitry Medvedev, says, "Don't blame us. Blame Georgia and its backer, the U.S."

RUSSIAN PRESIDENT DIMITRY MEDVEDEV: (From videotape.) It is trying to restore its military capability and is actively supported in that by some of our partners; foremost, the United States.

MR. MCLAUGHLIN: Question: Cheney went to -- Vice President Cheney -- Vice President Cheney went to Georgia and gave $1 billion in U.S. taxpayer funds to Georgia's President Saakashvili to rebuild both his economy and his military. Will Russia see this, inevitably, as a billion dollars -- a reward to Saakashvili for starting a war with Russia?

MR. BUCHANAN: In a way, he will. As long as we keep it to humanitarian aid, I think we're okay, John.

Look, Saakashvili is an idiot. He refused to accept our advice. He went in there. The Russians were lying in wait for this clown. He bombed his own city. He used bunker busters. And the Russians came in and kicked his butt. South Ossetia will be part of North Ossetia. Abkhazia may be independent.

But notice, the Russians did not go to Tbilisi. They did get out. They did follow the French. They've lost enormous amounts of money. They do not want a cold war with the West, but they want us to get out of their space and get out of their face. And that is exactly what we ought to do. It would be insane to bring Ukraine and Georgia into NATO.

MR. MCLAUGHLIN: By the way, South Ossetia is attached by boundary to North Ossetia, and North Ossetia is part of Russia. Pat says South Ossetia will probably inevitably be joined to North Ossetia.

MR. BUCHANAN: Sure. It's only 70,000 people.

MR. MCLAUGHLIN: Go ahead.

MR. ZUCKERMAN: Look, Russia is not looking for a cold war, in my judgment. Their stock market has dropped over 40 percent this year. They are very worried about their economy. This is really still the driving force in that government. And what they do is they frankly create an enemy. If you watch Russian television, you would think the United States is about to attack them. They absolutely present us as their enemy. And they need that, somehow or other, to establish more cohesion within the government. I don't think this is going anywhere beyond where it is. Putin has already said, "We're not looking for a cold war. We don't understand why there's been such a reaction." So I suspect things will calm down.

MR. MCLAUGHLIN: Predictions. Pat.

MR. BUCHANAN: At the December NATO meeting, the Europeans will reject NATO membership for Ukraine or Georgia.

MR. MCLAUGHLIN: Eleanor.

MS. CLIFT: Given the nature of the campaign that McCain is running, the 527s that were dormant on the Democratic side will soon be up and running.

MS. CROWLEY: By Thanksgiving, oil will be down to about $75 a barrel, which will alleviate some inflationary pressure.

MR. MCLAUGHLIN: Mort.

MR. ZUCKERMAN: The next leader of the Kadima Party will be Tzipi Livni, the foreign minister. And she'll surprise everybody by being able to continue the coalition and stay in power.

MR. MCLAUGHLIN: She's conservative.

MR. ZUCKERMAN: She is conservative -- not -- yeah, she is conservative.

MR. MCLAUGHLIN: She can do what Nixon did with China.

MR. BUCHANAN: She's not Sarah Palin. (Laughs.)

MR. MCLAUGHLIN: Is that true? She can do what Nixon did in China in that particular situation.

I predict that Sarah Palin's big press push this weekend will be seen, in hindsight, as having more minuses than pluses. In romance, as well as in politics, slow introductions are usually better than fast ones.

Bye-bye.

END.

y careful how you handle her. They have not understood how to handle her. The country, in my judgment, by and large, is not going to accept these sort of slights to her, and they've got to be very careful. And he should not be running against the vice presidential candidate on the other side.

MR. MCLAUGHLIN: Do you think --

MS. CLIFT: And he hasn't been. (Laughs.) MR. ZUCKERMAN: Oh, yes, he has, for 10 or 12 days. They've been obsessed with it.

MS. CLIFT: The media has been obsessed.

MR. MCLAUGHLIN: Do you think that she is as smart as he is?

MR. ZUCKERMAN: I don't -- who can measure that? I think she's a very intelligent woman.

MR. BUCHANAN: She's savvy.

MR. MCLAUGHLIN: Huh?

MR. BUCHANAN: She's a very savvy woman.

MR. ZUCKERMAN: She's very savvy, and --

MR. BUCHANAN: He's a smart guy. She's savvier than he is.

MR. ZUCKERMAN: And there's another thing about her. She's very authentic, and that really comes through.

MR. MCLAUGHLIN: You mean, she's smart and she's political.

MR. BUCHANAN: She's street-smart and she's authentic. And I think she's got street smarts that he does not really have.

MS. CLIFT: What matters --

MR. MCLAUGHLIN: Does she have something beyond that?

MS. CLIFT: What matters is --

MR. BUCHANAN: "Our governor is hot," as they say. "We may be cold in Alaska" --

MR. MCLAUGHLIN: No, I don't mean that.

MS. CLIFT: What matters is whether the impression of her takes hold over the next couple of weeks, whether she is ready to be president or if she is not ready. That's what --

(Cross-talk.)

MS. CLIFT: That's all that matters.

MR. ZUCKERMAN: No, that's the way you define it. I do not define it that way at all.

MR. MCLAUGHLIN: On a trust scale, who scores higher, Obama or -- MR. BUCHANAN: Oh, she does.

MR. MCLAUGHLIN: Why? Why do you trust her --

MR. BUCHANAN: She is a middle American woman. She doesn't just talk about it.

MS. CLIFT: She is a religious right-wing conservative. (Laughter.

) She has --

MR. BUCHANAN: She does believe in God. I agree. (Laughs.)

MS. CLIFT: She has solidified --

MR. MCLAUGHLIN: Quickly. Quickly.

MS. CLIFT: She has solidified the Republican base and she has intrigued many people, men and women, in the middle.

MS. CROWLEY: Eleanor --

MS. CLIFT: Now we'll see if they still like her after they learn more of what she's about. It is an open question.

MS. CROWLEY: Eleanor's argument right here -- Eleanor's argument is the third wave of attack against Sarah Palin. They tried the sexism. They tried the classism. Those things didn't work. And now they're trying to paint her into a religious nut, which is grossly unfair.

MS. CLIFT: I didn't say she's a nut.

(Cross-talk.)

MR. MCLAUGHLIN: A, B, C, D or E. We've got to get out.

(Cross-talk.)

MS. CLIFT: That's what I said. Don't put words in my mouth.

MR. ZUCKERMAN: I think they have mishandled her to date.

MR. MCLAUGHLIN: You do?

MR. ZUCKERMAN: Yeah, for sure.

MR. BUCHANAN: A, B and C.

MR. ZUCKERMAN: They've built her up. They've built her up. MR. MCLAUGHLIN: The answer is A, B and C.

Issue Two: The Dark Moment.

WOMAN: (From videotape.) The darkest moment for me was when I realized I was going to have to sleep in my car for the first night on a street, and I couldn't decide which street that I was going to feel safe on.

MR. MCLAUGHLIN: The dark moment: Home foreclosures, as of today, 1.25 million, all now in foreclosure; unemployment, 6.1 percent, a five-year high; jobless claims up 15,000 over the past week, now 440,000 total; inflation, 5.6 percent, the highest in 17 years, since '91, when George H.W. Bush was president; Consumer Price Index, the CPI, 5.5 percent, also the highest in 17 years; banks, 10 closed this year alone, 117 banks on the watch list, maybe another 200 variously vulnerable; Fannie Mae and Freddie Mac now exclusively U.S. government guarantors of $5 trillion of U.S. home loans through a, quote-unquote, "conservatorship," under the Federal Housing Finance Agency. And on one indicator, the sun shines through -- GDP, still up 3.3 percent annual rate.

Question: What is fueling the gross domestic product, GDP, uptick? And does that 3.3 percent uptick mean that we are not yet in a recession? Mort.

MR. ZUCKERMAN: No, that uptick really represents, in large part, the federal tax rebates that were handed out at that point, a lot of which was spent, and therefore seemed to have lifted the economy. But the economy is very weak and it's sliding. Unemployment is much worse than those numbers.

The core of the problem is, at that piece indicates, the collapse of housing prices, which is the first time this has happened in 70 years. It's the largest single asset on the balance sheet of the average American family. They've lost 15 to 20 percent, at least. That represents $4 (trillion) to $5 trillion in losses, compared to $130 (billion), $140 billion tax rebates. So that has not yet been worked through.

The financial consequences of it are also disastrous. Fannie Mae and Freddie Mac, as you know, the two big housing agencies that represent literally 6,000 billion dollars, $6 trillion, this is half the debt of the United States. It's 40 percent of the GDP of the United States in those two companies, and those two companies were on death's door.

And if they had collapsed, you would have had thousands of banks in this country collapse since they had paper from Fannie Mae that was more than their net worth, and thousands of banks in Europe that would have collapsed. And Europe -- you would have had a run on the dollar. You would have had a collapse of the housing market. They had to rescue them. MR. MCLAUGHLIN: Mort, don't hold back. Tell us how bad it really is.

MR. ZUCKERMAN: Well, it is bad. I mean, we came -- we averted a major systemic crisis in this country by saving those things.

MS. CLIFT: Right. Now you've got --

MR. ZUCKERMAN: And we're not out of the woods yet.

MS. CLIFT: Now you've got Lehman Brothers bellying up to the bar for their bailout. You've got the auto companies lining up. And what about all the Republican rhetoric I've heard for 15 years? "Just get government regulation, get it out of the marketplace; the markets can perform just fine." I'd like to hear you have to eat some of that rhetoric for the last 15 years.

MR. ZUCKERMAN: Well, I don't --

MS. CLIFT: Maybe not from you personally, but all that getting the government out --

MR. ZUCKERMAN: (Inaudible.) All I can say is there is a time --

MR. MCLAUGHLIN: Eat away, Mort.

MS. CLIFT: Now we have room for government.

MR. ZUCKERMAN: You have to set aside ideology in order to prevent the economy from collapsing, whatever the ideology.

MR. BUCHANAN: John, you --

MR. MCLAUGHLIN: Let Pat in.

MR. BUCHANAN: You had to nationalize Fannie and Freddie; there's no question about it.

MR. ZUCKERMAN: For sure.

MR. BUCHANAN: The economy is not in as bad a shape as it was in 1980, but Mort is right. The underlying financial crisis here of these banks and all these houses with rotten paper, this could go crashing down. If it does, the Fed will have to bail them out. Inflation will surge. You will have stagflation. And I'll tell you, you then will be looking at something approaching the Great Depression.

MR. MCLAUGHLIN: Exit question -- you can get on this, Monica, with your other thought -- is this the beginning of a long period of American economic decline? Yes or no, Pat Buchanan. MR. BUCHANAN: America is in relative economic decline compared to the rest of the world.

MR. MCLAUGHLIN: Long?

MR. BUCHANAN: Yes, long -- long.

MR. MCLAUGHLIN: Decade?

MR. BUCHANAN: It'll be longer than that. I think it's a long, long decline.

MR. MCLAUGHLIN: Wow.

MS. CLIFT: We need to regain the edge with competitiveness and with innovation and research and development, and we can do it. But it's not looking so great for the imminent future.

MS. CROWLEY: Yeah, I think we're seeing the beginnings of these real serious structural problems --

MR. MCLAUGHLIN: Decade?

MS. CROWLEY: -- that are cascading through the housing markets, the credit markets.

MR. MCLAUGHLIN: Ten years?

MR. ZUCKERMAN: No, no.

MR. MCLAUGHLIN: No, no? Less?

MR. ZUCKERMAN: We're going to be in a two- or three-year slowdown. I don't think we're in for a long-term decline. We can do a lot to change that. We're still the most innovative, the most productive economy by far in the world. And if you want to compare it to Russia, Russia's wages are one-seventh. The same thing is true of China. All these other countries have problems. We can cure our problems very easily with good leadership.

MR. MCLAUGHLIN: Thank you, Mort. We've been saved.

Issue Three: From Russia With Love -- Not.

The temperature of the Russia-U.S. relationship is plunging. Two months ago, Russia moved armored vehicles and troops into the nation of Georgia on Russia's south border. Georgia provoked the Russian action by sending tanks into South Ossetia, a disputed enclave on Russia's underbelly. Georgia agreed to a cease-fire and withdrew. Russia pressed on and marched along Georgia's key artery. Today Russia remains in Georgia at up to half its earlier strength. President Bush has called on Russia to leave Georgia and act like the superpower that it is.

PRESIDENT GEORGE W. BUSH: (From videotape.) To begin restoring its place in the world, Russia must keep its word and act to end this crisis.

MR. MCLAUGHLIN: Late last week, Vice President Dick Cheney flew to Georgia itself. In the capital city, Tbilisi, Cheney issued a warning.

VICE PRESIDENT DICK CHENEY: (From videotape.) Russia's actions have cast grave doubt on Russia's intentions and on its reliability as an international partner, not just in Georgia but across this region, and indeed, throughout the international system.

MR. MCLAUGHLIN: Question: Does the international community share Cheney's view that Russia was in the wrong? Monica Crowley.

MS. CROWLEY: Well, I think it depends what part of the international community you're talking about. In large part, the West and Eastern Europe, they do agree with the president and the vice president that the Russians violated the sovereignty of Georgia. Now, even though the Russian troops are withdrawing from Georgia, they maintain a presence in Abkhazia and South Ossetia, meaning that the Russians have now dismembered a sovereign, democratic, pro-western state with impunity.

MS. CLIFT: Well, in your set-up, you point out that Georgia did provoke this.

MR. MCLAUGHLIN: Good set-up, huh?

MS. CLIFT: Yes, it was a good set-up.

MR. MCLAUGHLIN: Thank you.

MS. CLIFT: And these are little enclaves of primarily Russian- speaking people, and their loyalty is to Russia. And there are these little ethnic enclaves throughout that region. With Chechnya, President Bush looked the other way and let the Russians just run wild in that particular area.

So I think this is something we really don't need to get in the middle of. And Vice President Cheney likes a muscular foreign policy, and talking tough has been a signature of Republican campaigns. And creating more fears about a newly resurgent Russia --

MR. MCLAUGHLIN: Fear-mongering.

MS. CLIFT: -- is now back in the news. MR. MCLAUGHLIN: Buchanan does a lot of that.

Okay -- the blame game.

Russia's president, Dimitry Medvedev, says, "Don't blame us. Blame Georgia and its backer, the U.S."

RUSSIAN PRESIDENT DIMITRY MEDVEDEV: (From videotape.) It is trying to restore its military capability and is actively supported in that by some of our partners; foremost, the United States.

MR. MCLAUGHLIN: Question: Cheney went to -- Vice President Cheney -- Vice President Cheney went to Georgia and gave $1 billion in U.S. taxpayer funds to Georgia's President Saakashvili to rebuild both his economy and his military. Will Russia see this, inevitably, as a billion dollars -- a reward to Saakashvili for starting a war with Russia?

MR. BUCHANAN: In a way, he will. As long as we keep it to humanitarian aid, I think we're okay, John.

Look, Saakashvili is an idiot. He refused to accept our advice. He went in there. The Russians were lying in wait for this clown. He bombed his own city. He used bunker busters. And the Russians came in and kicked his butt. South Ossetia will be part of North Ossetia. Abkhazia may be independent.

But notice, the Russians did not go to Tbilisi. They did get out. They did follow the French. They've lost enormous amounts of money. They do not want a cold war with the West, but they want us to get out of their space and get out of their face. And that is exactly what we ought to do. It would be insane to bring Ukraine and Georgia into NATO.

MR. MCLAUGHLIN: By the way, South Ossetia is attached by boundary to North Ossetia, and North Ossetia is part of Russia. Pat says South Ossetia will probably inevitably be joined to North Ossetia.

MR. BUCHANAN: Sure. It's only 70,000 people.

MR. MCLAUGHLIN: Go ahead.

MR. ZUCKERMAN: Look, Russia is not looking for a cold war, in my judgment. Their stock market has dropped over 40 percent this year. They are very worried about their economy. This is really still the driving force in that government. And what they do is they frankly create an enemy. If you watch Russian television, you would think the United States is about to attack them. They absolutely present us as their enemy. And they need that, somehow or other, to establish more cohesion within the government. I don't think this is going anywhere beyond where it is. Putin has already said, "We're not looking for a cold war. We don't understand why there's been such a reaction." So I suspect things will calm down.

MR. MCLAUGHLIN: Predictions. Pat.

MR. BUCHANAN: At the December NATO meeting, the Europeans will reject NATO membership for Ukraine or Georgia.

MR. MCLAUGHLIN: Eleanor.

MS. CLIFT: Given the nature of the campaign that McCain is running, the 527s that were dormant on the Democratic side will soon be up and running.

MS. CROWLEY: By Thanksgiving, oil will be down to about $75 a barrel, which will alleviate some inflationary pressure.

MR. MCLAUGHLIN: Mort.

MR. ZUCKERMAN: The next leader of the Kadima Party will be Tzipi Livni, the foreign minister. And she'll surprise everybody by being able to continue the coalition and stay in power.

MR. MCLAUGHLIN: She's conservative.

MR. ZUCKERMAN: She is conservative -- not -- yeah, she is conservative.

MR. MCLAUGHLIN: She can do what Nixon did with China.

MR. BUCHANAN: She's not Sarah Palin. (Laughs.)

MR. MCLAUGHLIN: Is that true? She can do what Nixon did in China in that particular situation.

I predict that Sarah Palin's big press push this weekend will be seen, in hindsight, as having more minuses than pluses. In romance, as well as in politics, slow introductions are usually better than fast ones.

Bye-bye.

END.