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THE MCLAUGHLIN GROUP HOST: JOHN MCLAUGHLIN PANEL: PATRICK BUCHANAN, MSNBC; ELEANOR CLIFT, NEWSWEEK; MONICA CROWLEY, SYNDICATED RADIO COMMENTATOR; CHRYSTIA FREELAND, FINANCIAL TIMES TAPED: FRIDAY, FEBRUARY 6, 2009 BROADCAST: WEEKEND OF FEBRUARY 7-8, 2009

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DR. MCLAUGHLIN: Issue One: Obama Stimulus.

PRESIDENT BARACK OBAMA: (From videotape.) A failure to act, and act now, will turn a crisis into a catastrophe.

DR. MCLAUGHLIN: This was President Obama's ominous warning to Senate Republicans and Democrats who think the cost of his stimulus package, now approaching $900 billion, is too high. Senate Republicans have been floating their own stimulus, which will come in at just under $500 billion. The final outcome and the political payoff remain TBD. Democrats and Republicans are on both sides of both infusions. Question: Obama said this to Democrats on Thursday night in Williamsburg. Quote: "I found this deficit when I showed up. I found this -- a national debt double-wrapped in a big bow waiting for me as I stepped into the Oval Office. We inherited a mess. It's our job to clean it up," unquote.

Is this a good strategy for getting this stimulus through Congress? Pat Buchanan.

MR. BUCHANAN: John, he shifted strategies. The initial strategy was "Let's get along with the Republicans, invite them to the Super Bowl," and now he's getting tough. He wants this package. And I think the idea is "If the Republicans don't go along, they don't go along. I want this package."

My guess is he's going to get it, John. But the problem with this whole thing is that it's going to be a Democratic bill. It's going to be the Pelosi-Reid-Obama bill. If this thing fails, given all the dead cats inside that legislation, this thing is going to come back and bite them and they will have a disaster on their hands in the 2010 election.

It is now -- people are now coalescing. Republicans are together. Democrats are coming together, with some of the Blue Dogs moving toward the Republicans. But we are in as bipartisan a time as we were under George W. Bush.

DR. MCLAUGHLIN: Eleanor.

MS. CLIFT: On the other hand, if it succeeds, Pat, then what? And it's got at least an equal chance of succeeding.

DR. MCLAUGHLIN: Really?

MS. CLIFT: Look, President Obama spent the last two weeks courting Republicans. He didn't get much in return. He began to get the feeling they were just playing him. So now he's reasserted the fact that he has won the election and that he's not going to rebalance the stimulus package to incorporate their tax cuts. And he's going to put it to the test. He's not going to get 80 votes. He'll be lucky to get his 60. But that's all he needs to pass.

But this is a public relations battle, really, over whether to frame the stimulus around a handful of programs that were ridiculed and that most of them had been taken out, or whether it would be framed as the lift that the economy needs.

DR. MCLAUGHLIN: I think --

MS. CLIFT: And Obama's going to start the sales job on Monday night in a press conference. DR. MCLAUGHLIN: I think the algebra, the trigonometry in this stimulus, has become so arid, so boring, that we ought to concentrate on what's in the stimulus as of now as a way of relieving the boredom.

MS. CLIFT: Hallelujah.

DR. MCLAUGHLIN: Okay, Native American stimulus.

SEN. BYRON DORGAN (D-ND): (From videotape.) Nowhere in this country is the need for infrastructure greater than on Indian reservations.

DR. MCLAUGHLIN: Three billion dollars of the Obama stimulus will go to Indian tribes, Native Americans like Chief Standing Bear and some of his forbears and his descendants, forced from their homeland and violently suppressed in their fight to be treated like human beings.

Roughly 3 million Native Americans registered in the U.S. Census -- 99 percent American Indian, 1 percent Alaska natives. Three hundred ten reservations of Indian country take up nearly 58 million acres of land, the size of Minnesota. The Native American experience has been a brutal one. They are more likely to experience cancer, diabetes, heart disease, HIV/AIDS and stroke. The $3 billion infusion goes to law enforcement, housing, infrastructure and education.

Native Americans are an increasingly powerful political force. They tend to lean Democratic and played a key role in the defeat of three-term Republican U.S. senator from Montana Conrad Burns in '06, giving current Democratic Senator Jon Tester his critical edge. In '02, American Indian votes delivered the South Dakota Senate race to its current senator, Ted Johnson, who defeated John Thune.

DR. MCLAUGHLIN: Did Thune get his seat back?

MR. BUCHANAN: Well, yeah, he got it -- took it away from Tom Daschle.

DR. MCLAUGHLIN: What year?

MR. BUCHANAN: 2002 -- no --

DR. MCLAUGHLIN: 2006.

MS. CLIFT: '04.

DR. MCLAUGHLIN: 2006, wasn't it?

MR. BUCHANAN: 2004.

MS. CLIFT: 2004.

DR. MCLAUGHLIN: Thune won it back. He won it from Daschle. MR. BUCHANAN: He won it in 2004 because --

MS. CLIFT: Daschle's been out for four years --

DR. MCLAUGHLIN: Question: Do we owe it to Native Americans to specifically earmark $3 billion funds for them in the stimulus bill? I ask you, Eleanor.

MS. CLIFT: I don't know that I would use the word "owe" necessarily, but I think this can be justified, particularly if you are a governor of one of the states where the Indian reservations are having difficulty. This is about spurring the economy. I think this is as justifiable as many of the other programs.

DR. MCLAUGHLIN: Well, in view of the fact that elections have turned on this --

MR. BUCHANAN: It's $1,000 --

DR. MCLAUGHLIN: -- do you think it's a true "Buy American" package?

MS. CROWLEY: (Laughs.)

MR. BUCHANAN: It's $1,000 for every Indian in America, including all of those who aren't on reservations. It is ridiculous.

MS. CLIFT: It's not a handout.

MR. BUCHANAN: It is a vote-buying scheme.

DR. MCLAUGHLIN: Let him finish.

MR. BUCHANAN: It is Democratic politics. This is a pig-out of all pig-outs, John.

MS. FREELAND: With all due respect, John, it's a side issue. It's less than one-third of a percent of the overall stimulus package. But it does point to the big political mistake that President Obama has made with this package. He has tried to be too ambitious. He's tried to do everything with this bill, be all things to all people, be partisan, do infrastructure spending, reform health care, reform education.

What is becoming clear is that what he should have done is say, "We are on the brink of the Great Depression."

MS. CLIFT: I think he said that.

MS. FREELAND: The only way --

MS. CROWLEY: He has been saying it.

MS. CLIFT: He says that constantly.

MS. FREELAND: No, but the --

DR. MCLAUGHLIN: Let her finish. Let her finish.

MS. FREELAND: No, no, but Eleanor, he should have been clearer also in the crafting of the bill. And he said in his inaugural address, "I am not going to be cowed by those people who says it's dangerous to be too ambitious."

DR. MCLAUGHLIN: Well, the original --

MS. FREELAND: But he was. And what we've seen is two different things being mashed into this bill. We have the longer-term infrastructure --

DR. MCLAUGHLIN: Do you think he was also --

MS. FREELAND: -- and we have the shorter-term infrastructure.

MS. CLIFT: But it's the legislative process, and it's sausage- making, and it's not pretty.

MS. FREELAND: No, no, Eleanor, but --

DR. MCLAUGHLIN: Can we move on, please, to Monica? I want to ask --

MS. CROWLEY: The Native American earmark that you -- I want to know what page of the 732-page Senate bill you found that particular piece of pork on.

DR. MCLAUGHLIN: I pore over all of that to look for these gems.

MS. CROWLEY: Here is the problem. And Chrystia is right. This stimulus, so-called stimulus, is an incoherent mess because they have not done the short-term and targeted and temporary stuff that they said they were going to set out to do in an economic stimulus package. So what you have here -- I mean, if this bill were a country, it would be the 15th-largest country in the world, somewhere between Australia and Mexico. It is so full of pork, and that's why public support for this thing is dropping like a stone every day. So Obama has changed his tactics and has started more and more talking about the Great Depression, fear-mongering a little bit, talking about how we might never get out of this crisis.

MS. FREELAND: But it's not fear-mongering. It's the truth.

MS. CLIFT: Excuse me --

MR. BUCHANAN: John --

DR. MCLAUGHLIN: Let Pat in.

MR. BUCHANAN: Chrystia is exactly right except for one thing. I mean, her description of it is perfect, right on.

DR. MCLAUGHLIN: You mean, from high-mindedness on Obama's part.

MR. BUCHANAN: Except I disagree with this. It is not Obama's fault. This is the fault of Pelosi and the Democrats in the House, who ran with this thing and put all this stuff in there that I believe Obama would not like to see in there. And I agree with Chrystia; if he had gone with a straight --

DR. MCLAUGHLIN: Was he told to reward Democratic constituencies?

MR. BUCHANAN: If he had gone with a straight stimulus package --

DR. MCLAUGHLIN: Is that why he multiplied all this?

MR. BUCHANAN: If he had gone with a straight stimulus package, he would have gotten Republican as well as Democratic support. If you married tax cuts with infrastructure, he could have gotten a bill that got 80 votes.

DR. MCLAUGHLIN: Exit question --

MS. CLIFT: We have equal branches of government. And maybe they made a tactical mistake in trying to ram down their version through the House. But this is a lot about the Congress taking a measure of Barack Obama. And the Democrats have discovered it's not a well-oiled machine, and they're pushing for every angle they can get. And the Republicans aren't afraid of him. So now he's trying to reassert himself, and he's going to go to the American people and explain why you need a budget bill that's the eighth-largest country or however you put it.

MS. CROWLEY: Fifteenth. (Laughs.)

DR. MCLAUGHLIN: Exit question: President Obama -- MS. CLIFT: That's what the country needs at this point.

MS. CROWLEY: No, you don't.

MS. CLIFT: -- because we are really --

DR. MCLAUGHLIN: All right, let me in, please.

Let me in. Let me in. President Obama will hold a press conference on Monday night on the economic outlook. He'll probably talk about his stimulus bill. Is he in danger of overselling -- and I think you've already addressed this, curiously, and you may have pierced the center of the puzzle -- is he in danger of overselling this stimulus?

MR. BUCHANAN: First, John, I fear I am on "The View" here. (Laughter.) With regard to overselling the stimulus, I think Obama has been badly served. I think he wants a good bill.

DR. MCLAUGHLIN: What happens in nine months if we don't have a turnaround in the economy?

MR. BUCHANAN: John, it's not going to be in nine months; just what you pointed out, the Indian tribes and all that stuff. This bill is going to be a complete laughingstock unless and until -- Eleanor is right. If it works and the economy goes down and goes up, he will say there was junk in there but it was needed; we did the right thing.

DR. MCLAUGHLIN: He was rewarding Democratic constituencies, and he probably did that under pressure. And he knows that conceptually, as you pointed out, and pragmatically --

MR. BUCHANAN: He didn't put it in there.

DR. MCLAUGHLIN: -- it won't work.

MS. FREELAND: I don't think --

DR. MCLAUGHLIN: Go ahead. Go ahead.

MS. CLIFT: Excuse me. He is a Democrat. They did win the election. They control the Congress. So they do get a chance to get funding for some of the things that have been put off for eight years.

MS. FREELAND: No, but the --

DR. MCLAUGHLIN: They have the privilege of --

MS. CLIFT: Excuse me. And he does need to do a better job explaining to the country. He's going to take all his gifts of oratory, and I think we will see that. DR. MCLAUGHLIN: They also have the right to be dumb. (Laughter.)

Go ahead.

MS. CROWLEY: Listen, a couple of weeks ago Obama said, "I'm not going to preside over a stimulus bill that has a single earmark in it." The Democrats in Congress -- Pat is right -- they have turned that into a laughingstock. And now he's out there trying to sell a hog farm for the ages in this bill. Everybody knows this is a real bad bill. The public doesn't support it. He's got a salesmanship job of epic proportions in front of him.

MS. FREELAND: I don't disagree with Eleanor that the Democrats won and the Democrats should be funding their longer-term programs. But what I think was the mistake possibly economically as well as politically is not to make a clear distinction and not to say, "We're going to try to do two things. We're going to do a big stimulus package, like a shot of adrenaline into the economy, and then in February, in March, say, "You know what? I'm a Democrat. I believe in government" --

DR. MCLAUGHLIN: He's in a --

MS. FREELAND: -- inaudible) -- "and this is my interest."

MS. CLIFT: I don't think --

DR. MCLAUGHLIN: Can I get in here, ladies?

MS. CLIFT: I don't think they would --

DR. MCLAUGHLIN: This is a terribly enigmatic situation, because at the end of nine months, if we're still in recession, he's going to regret too hard a sell on this.

Issue Two: Obama's Moment.

PRESIDENT OBAMA: (From videotape.) I think I messed up. I screwed up. This was a self-induced injury that I'm angry about.

I think this was a mistake. I think I screwed up. And I've got to own up to my mistake. I take responsibility for this mistake.

DR. MCLAUGHLIN: President Obama took full responsibility for the ill-fated Tom Daschle choice to head the Department of Health and Human Services. Daschle withdrew his nomination on Tuesday for presumptively not paying some $128,000 in taxes. Daschle did not pay $128,000 in taxes for a car and driver, principally, between 2005 and 2007. He paid the taxes last month and then explained his action on Monday night. FORMER SENATOR AND FORMER HHS SECRETARY-DESIGNATE TOM DASCHLE (D- SD): (From videotape.) My failure to recognize that the use of a car was income and not a gift from a good friend was a mistake. It was completely inadvertent.

DR. MCLAUGHLIN: Daschle withdrew his nomination less than a day later.

Question: In addition to the tax on the limousine and driver, Daschle also failed to report $83,000 in income or to pay any taxes, Social Security, Medicare and federal and state income tax on that income. Is Daschle incompetent when it comes to adding up his income, or is he a tax dodger? Monica Crowley.

MS. CROWLEY: (Laughs.) Well, now that we've gone through this Cabinet process with Obama, who would have thought that Hillary Clinton would have been the cleanest nominee? I think with Tom Daschle, you know, the numbers are so big in his case that -- and they were big in Tim Geithner's case as well -- that it makes it -- I mean, it's really straining credulity here that this was just, as they said, an innocent mistake. I think the problem for Daschle and the problem for Obama was that they let Geithner go through, with his tax evasion charges against him --

DR. MCLAUGHLIN: Thirty-two thousand.

MS. CROWLEY: -- about $32,000, and he's heading up the Treasury Department and the IRS. So there was a double standard here that I think Obama said, "Listen, I've got to cut my losses here. Geithner may have been too big to fail, but I want to perpetuate this image of transparency and accountability and a new era of responsibility, and I can't do that if I've a Cabinet full of tax cheats."

DR. MCLAUGHLIN: Eleanor.

MS. CLIFT: There's no evidence that Obama cut Daschle loose. He apparently withdrew on his own when he saw how this was taking off when The New York Times called for him to step down. He's been in Washington long enough to know that the end was near. But it's more than the car and the driver. And I think he can blame that on accountants and so forth. I mean, self-delusion in Washington is very high.

DR. MCLAUGHLIN: Wasn't that --

MS. CLIFT: But it's about lifting the curtain on the lifestyle of cashing in for public service. And it's basically what Obama campaigned against. And so he is better off without Daschle. But his ethics and the standards he has set are going to be tested every step along the way. And he's built himself a trap that he's going to have difficulty getting out of sometimes.

MR. BUCHANAN: John -- DR. MCLAUGHLIN: Well, there was a problem -- the best reporting of this was in The Wall Street Journal on Tuesday and Wednesday, where there was the -- apparently on Monday afternoon the committee told him they were going to put his tax records -- make them public.

MR. BUCHANAN: Right.

DR. MCLAUGHLIN: And then he had a problem with something called EduCap and flying around in planes, et cetera, which multiplied --

MR. BUCHANAN: All right, John --

DR. MCLAUGHLIN: -- multiplied the picture. Do you understand?

MR. BUCHANAN: All of that -- exactly. Look, first, Obama should not have apologized. Obama didn't do a thing wrong. Daschle should have come to him, or the vetters should have picked this up. It is not the responsibility of the president-elect, who's worried about the Middle East, to know whether Richardson's got a grand jury investigating him over there in New Mexico.

DR. MCLAUGHLIN: Maybe the vetting committee saw this and Obama said, "Let it go through, because I want Tom."

MR. BUCHANAN: If he'd done that -- okay, if he'd --

DR. MCLAUGHLIN: Tom can move the health legislation.

MR. BUCHANAN: Tom was the ideal choice. But the vetting committee did not come to Obama --

DR. MCLAUGHLIN: How do you know that?

MR. BUCHANAN: Because Obama would have then said, "He's out or he's in and we go to the wall for him."

DR. MCLAUGHLIN: He said he's in.

MR. BUCHANAN: Well, then he didn't go to the wall for him.

MS. FREELAND: Pat, don't you think it was good for Obama to apologize? I thought that was the one moment in this whole episode --

MR. BUCHANAN: The president of the United States should not apologize --

MS. FREELAND: It was good for -- MR. BUCHANAN: -- for what he doesn't do wrong.

MS. FREELAND: No, I think that was the moment when he really redeemed himself.

MS. CLIFT: I agree.

MS. FREELAND: And he said, "I am actually holding myself to these new standards."

DR. MCLAUGHLIN: That was part of the deal.

MS. FREELAND: I think people really appreciated it.

MR. BUCHANAN: You're talking like a liberal.

MS. CLIFT: No --

MS. FREELAND: That's not a crime, actually. Nowadays that's kind of trendy, actually, to be responsible for your actions. I thought conservatives believed in being --

MR. BUCHANAN: He didn't do it.

MS. FREELAND: I thought conservatives believed in being responsible for their actions too, Pat.

MS. CLIFT: The buck --

DR. MCLAUGHLIN: Daschle revealed this --

MS. CLIFT: The buck stops in the Oval Office.

MS. FREELAND: The buck stops in the Oval Office.

MS. CLIFT: And after eight years of a president who couldn't even -- given lots of time to think, couldn't come up with a single mistake he'd made, I think this was refreshing.

DR. MCLAUGHLIN: Oh, this is so naive, really naive. Of course Obama knew about it, and the deal was Daschle said, you know, "I don't want to be embarrassed," and Obama says, "Go forward, and I'll take the rap if anything happens." And he said nothing negative about him, and that's what happened on Tuesday.

MR. BUCHANAN: Well, if he did that --

DR. MCLAUGHLIN: He did this on Monday night because the committee went to him.

MR. BUCHANAN: If he did that -- DR. MCLAUGHLIN: It was all in The Wall Street Journal.

MR. BUCHANAN: If he did that, he's a weak leader.

MS. FREELAND: He did it on Tuesday because of The New York Times.

DR. MCLAUGHLIN: Okay, another ill-fated choice. During his transition, President Obama created a new Cabinet-level post. He named it chief performance officer. Obama's choice for the post: Nancy Killefer, a senior director at the consulting firm, McKenzie & Company, and former chief operating officer for the Department of the Treasury.

NANCY KILLEFER (former chief performance officer-designate): (From videotape.) I know from my experience bringing about change in the private and public sectors that government has the capacity to deliver services more efficiently and effectively. I have seen it done.

DR. MCLAUGHLIN: On Tuesday, Killefer withdrew her nomination, also because of a tax issue, roughly $1,000 in unpaid taxes for a household worker.

Question: Does the $1,000 in unpaid taxes for a household worker merit the loss of a person with the experience and talent of Nancy Killefer, or is this over-exactitude? Chrystia.

MS. FREELAND: I think that if Nancy Killefer and her problem had been the first tax issue to come to light, she would have been absolutely fine. It's not that visible an office. And as you point out, John, it's not that huge an offense.

DR. MCLAUGHLIN: Well, it's a new office.

MS. FREELAND: No, but the problem is that this came after Geithner. It came after Daschle. It also seems very inconsistent with the actual job.

MR. BUCHANAN: She's also the government --

MS. CLIFT: Government performance.

MR. BUCHANAN: Her job is the effectiveness in government.

MS. FREELAND: Her job is to be -- yeah.

MR. BUCHANAN: And they had a lien on her house. She didn't know that?

DR. MCLAUGHLIN: Who had the lien on her house?

MR. BUCHANAN: The D.C. government had a lien on her house for the taxes. (Laughs. )

DR. MCLAUGHLIN: For unpaid taxes?

MR. BUCHANAN: Yes.

DR. MCLAUGHLIN: Hers or her husband's?

MR. BUCHANAN: Hers. It was on their house.

MS. FREELAND: And there is inconsistency with the job. And I think the other thing is, what she may have been conscious of is what we've seen in the past is actually, for whatever cultural or social reason --

DR. MCLAUGHLIN: Do you think --

MS. FREELAND: Hang on, John. Hang on, John -- there is a double standard when it comes to men and women. And female appointees who have issues with domestic help have really been assassinated in the past.

MR. BUCHANAN: (Laughs.)

MS. FREELAND: And she may not have wanted that.

DR. MCLAUGHLIN: You lived under --

MS. CLIFT: Well, the --

DR. MCLAUGHLIN: Wait a minute. You lived under the D.C. government, right?

MR. BUCHANAN: Yeah.

DR. MCLAUGHLIN: Who's to say that the lien was an accurate lien with the D.C. government, as you know. Have you ever tried to get a motor vehicle license down there?

MR. BUCHANAN: John, I got a water bill from the D.C. government that was as large as the Mayflower Hotel. MS. CLIFT: I live in the District.

DR. MCLAUGHLIN: Issue Three: Bye-bye, Payouts.

PRESIDENT OBAMA: (From videotape.) For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis isn't just bad taste; it's bad strategy. And I will not tolerate it as president.

DR. MCLAUGHLIN: Question: What are the merits, civil and political, of imposing limits on compensation of certain top CEOs whose companies have received U.S. bailout funds? I ask you, Chrystia.

MS. FREELAND: I think it's a really good idea. This is not -- we have to be really clear, it's not --

DR. MCLAUGHLIN: You are so high-minded.

MS. FREELAND: -- it's not being imposed across the board. It's only being imposed on those banks in the future that need extraordinary government assistance; effectively, companies that need to be bailed out by the government. And I think the people running these companies need to realize --

MS. CROWLEY: Actually, that's not --

MS. FREELAND: -- that they are not masters of the universe. They become civil servants. When you need $25 billion or $100 billion from Uncle Sam --

DR. MCLAUGHLIN: We've got 30 seconds.

MS. CROWLEY: Actually, that's not totally true, because on Friday, Financial Week reported that Barney Frank, who is the chairman of the House Financial Services Committee, said that now he's going to expand those executive compensation limits onto all of the financial institutions, whether or not they've taken government money, and perhaps to all American companies. We have started down a very --

MS. FREELAND: He can't just do that, Monica.

MS. CROWLEY: Excuse me. We have started down a very slippery slope. Once you let the vampire of the federal government in to the private sector -- (laughter) -- it is very hard to get that vampire out.

MS. FREELAND: Monica, you let the vampire out --

MS. CROWLEY: I know.

DR. MCLAUGHLIN: Wait a minute. Are you saying the federal government -- MS. CROWLEY: And I opposed those bailouts to begin with.

MR. BUCHANAN: The banks --

DR. MCLAUGHLIN: You think the federal government is blood- sucking?

MS. CROWLEY: Yes. (Laughs.)

MR. BUCHANAN: Look, Monica, the banks took the kings' money.

MS. CLIFT: Right. Exactly.

MR. BUCHANAN: You sing the kings' tune.

MS. CROWLEY: This is what I mean about the vampires.

MR. BUCHANAN: Barney is not going to be able to deal with any company that hasn't accepted bailout money.

DR. MCLAUGHLIN: All right, rate Obama's first two weeks in the presidency, quickly.

MR. BUCHANAN: I'll give him a B-.

MS. CLIFT: I'll give him a B. Rookie mistakes.

MS. CROWLEY: C-.

DR. MCLAUGHLIN: C-.

MS. CROWLEY: Disastrous.

MS. FREELAND: B.

DR. MCLAUGHLIN: B-.

Issue Four: California Catastrophe.

CALIFORNIA GOVERNOR ARNOLD SCHWARZENEGGER (R): (From videotape.) The $42 billion deficit is a rock upon our chest that we cannot breathe until we get it off. The truth is that California is in a state of emergency.

DR. MCLAUGHLIN: A $42 billion debt projected for June 2010, about a year and a half from now, leaves California, the world's eighth-largest economy, in moving collapse. The state is withholding income tax refunds, meaning no relief for 2.7 million Californians. In addition, all California state employees must currently take unpaid leave on two Fridays of each month. The state is also unable to pay $3.5 billion in bills to various state businesses. The situation is so bad that California's credit rating is the lowest of any state in the Union. It will be difficult, if not impossible, for California to borrow any money.

DAN WALTERS (Sacramento Bee): (From videotape.) Pray for California, because we don't know what's going to happen over the next few weeks. This could be really kind of the real Armageddon.

DR. MCLAUGHLIN: Question: Is commentator Walters sensationalizing, or is the California crisis just that bad? I ask you, Monica.

MS. CROWLEY: It really is bad. I mean, you mentioned the debt, and now California is holding back on all the tax rebates. They're taking state workers and putting them in furlough, unpaid vacation time so that they're not coming to work and they don't have to pay.

This is a very serious crisis for the state of California. And what affects California then has a ripple effect, not through just the West, but also through the rest of the country. And so many people are actually leaving California. Part of its big tax revenue base is leaving California like it's fleeing New York, and it's feeding into the crisis.

MS. CLIFT: Yeah, but we are not insulated from California's problems. California is a trend-setter, and this is a negative trend. And all the governors and many of the mayors have been in Washington pleading for this stimulus, the Economic Recovery Act, to go through, because a big chunk of the money goes to the states and the municipalities -- another reason why Congress should act and heed the new president.

DR. MCLAUGHLIN: What about mandated cuts that are still in effect in those states that she's talking about that are in recession?

MR. BUCHANAN: Well, and I think they ought to be made, John. But, listen, California is becoming a Third World country in the sense that one-third of all the illegal aliens that come into the country go to California. The taxpayers and, frankly, white folks for the first time --

MS. CLIFT: We call it diversity, Pat -- diversity.

MR. BUCHANAN: Okay, it's diversity.

MS. CLIFT: The country is becoming diversified too.

MR. BUCHANAN: Yeah, taxpayers are coming over the mountains. And California, John, in my judgment, will have to be bailed out by the United States forever.

DR. MCLAUGHLIN: Really? MR. BUCHANAN: Forever --

DR. MCLAUGHLIN: Really?

MR. BUCHANAN: -- just as some countries need IMF loans and World Bank loans forever.

DR. MCLAUGHLIN: You mean, it's too big to fail.

MR. BUCHANAN: No, I think the California -- it used to have 130 percent of national income, each individual. It is now below 100 percent and falling.

DR. MCLAUGHLIN: Did something comparable happen in New York City in the '70s?

MS. FREELAND: Absolutely.

DR. MCLAUGHLIN: What happened?

MS. FREELAND: You had the huge debt crisis and you had the recovery, and then you had the recent boom years.

DR. MCLAUGHLIN: There was a bailout. There was a bailout.

MS. FREELAND: There was, and there was a restructuring of the debt. I mean, Eleanor makes an important point, though, that California is not an isolated example right now. A lot of states are suffering these problems. And in some ways, California's problems -- California is the epicenter of the subprime crisis.

DR. MCLAUGHLIN: Okay, more California woes. President Obama has named Steven Chu as his secretary of Energy. This week Chu warned that current trends in climate change could make California uninhabitable. Quote: "We're looking at a scenario where there's no more agriculture in California. I don't actually see how they can keep their cities going," unquote.

Radical climate change is also to blame for arguably California's worst nightmare: Fire.

GOV. SCHWARZENEGGER: (From videotape.) We don't have a fire season anymore. It starts in the beginning of the year and goes all year round. So this creates, of course, big challenges.

DR. MCLAUGHLIN: Is California a harbinger of things to come nationally? Pat Buchanan.

MR. BUCHANAN: I think it is.

DR. MCLAUGHLIN: Really? MR. BUCHANAN: Well, sure it is. I think the California -- again, John, it has an enormous population of Mexican folks who have moved in who are very poor, not too well-educated, and an enormous burden on the state. And taxpayers are leaving.

DR. MCLAUGHLIN: If we keep piling up our debt in the trillions of dollars, are we going to have a credit rating similar to California's? Namely, no one will touch it; we can't get credit.

MS. CLIFT: No, because economic help is on the way. But, look, climate change is -- we're seeing the effects of climate change, not only in California but throughout the country. But the flip side of that is there is an economic future in green jobs, in renovating the country along green lines, in stem cell research in California. So California can come back and lead the way in a number of fields, just as they did with Silicon Valley in the past.

DR. MCLAUGHLIN: Predictions. Pat.

MR. BUCHANAN: The dramatic winner in Israeli elections will be an ethnic cleanser named Avigdor Lieberman.

DR. MCLAUGHLIN: Interesting.

Eleanor.

MS. CLIFT: The House will pretty much rubber-stamp anything Obama wants. He's got to pay more attention to the Senate.

DR. MCLAUGHLIN: Monica.

MS. CROWLEY: Within the next few months, gold will hit a high of 1,500 bucks per ounce.

DR. MCLAUGHLIN: Chrystia.

MS. FREELAND: The U.S. government will be forced to effectively nationalize some of the country's big banks.

DR. MCLAUGHLIN: Cyprus has been split into Greek and Turkey parts for over half a century. It will be reunited before the 4th of July this year. Turkey will then join the EU.

Bye-bye.

END.

hat Obama cut Daschle loose. He apparently withdrew on his own when he saw how this was taking off when The New York Times called for him to step down. He's been in Washington long enough to know that the end was near. But it's more than the car and the driver. And I think he can blame that on accountants and so forth. I mean, self-delusion in Washington is very high.

DR. MCLAUGHLIN: Wasn't that --

MS. CLIFT: But it's about lifting the curtain on the lifestyle of cashing in for public service. And it's basically what Obama campaigned against. And so he is better off without Daschle. But his ethics and the standards he has set are going to be tested every step along the way. And he's built himself a trap that he's going to have difficulty getting out of sometimes.

MR. BUCHANAN: John -- DR. MCLAUGHLIN: Well, there was a problem -- the best reporting of this was in The Wall Street Journal on Tuesday and Wednesday, where there was the -- apparently on Monday afternoon the committee told him they were going to put his tax records -- make them public.

MR. BUCHANAN: Right.

DR. MCLAUGHLIN: And then he had a problem with something called EduCap and flying around in planes, et cetera, which multiplied --

MR. BUCHANAN: All right, John --

DR. MCLAUGHLIN: -- multiplied the picture. Do you understand?

MR. BUCHANAN: All of that -- exactly. Look, first, Obama should not have apologized. Obama didn't do a thing wrong. Daschle should have come to him, or the vetters should have picked this up. It is not the responsibility of the president-elect, who's worried about the Middle East, to know whether Richardson's got a grand jury investigating him over there in New Mexico.

DR. MCLAUGHLIN: Maybe the vetting committee saw this and Obama said, "Let it go through, because I want Tom."

MR. BUCHANAN: If he'd done that -- okay, if he'd --

DR. MCLAUGHLIN: Tom can move the health legislation.

MR. BUCHANAN: Tom was the ideal choice. But the vetting committee did not come to Obama --

DR. MCLAUGHLIN: How do you know that?

MR. BUCHANAN: Because Obama would have then said, "He's out or he's in and we go to the wall for him."

DR. MCLAUGHLIN: He said he's in.

MR. BUCHANAN: Well, then he didn't go to the wall for him.

MS. FREELAND: Pat, don't you think it was good for Obama to apologize? I thought that was the one moment in this whole episode --

MR. BUCHANAN: The president of the United States should not apologize --

MS. FREELAND: It was good for -- MR. BUCHANAN: -- for what he doesn't do wrong.

MS. FREELAND: No, I think that was the moment when he really redeemed himself.

MS. CLIFT: I agree.

MS. FREELAND: And he said, "I am actually holding myself to these new standards."

DR. MCLAUGHLIN: That was part of the deal.

MS. FREELAND: I think people really appreciated it.

MR. BUCHANAN: You're talking like a liberal.

MS. CLIFT: No --

MS. FREELAND: That's not a crime, actually. Nowadays that's kind of trendy, actually, to be responsible for your actions. I thought conservatives believed in being --

MR. BUCHANAN: He didn't do it.

MS. FREELAND: I thought conservatives believed in being responsible for their actions too, Pat.

MS. CLIFT: The buck --

DR. MCLAUGHLIN: Daschle revealed this --

MS. CLIFT: The buck stops in the Oval Office.

MS. FREELAND: The buck stops in the Oval Office.

MS. CLIFT: And after eight years of a president who couldn't even -- given lots of time to think, couldn't come up with a single mistake he'd made, I think this was refreshing.

DR. MCLAUGHLIN: Oh, this is so naive, really naive. Of course Obama knew about it, and the deal was Daschle said, you know, "I don't want to be embarrassed," and Obama says, "Go forward, and I'll take the rap if anything happens." And he said nothing negative about him, and that's what happened on Tuesday.

MR. BUCHANAN: Well, if he did that --

DR. MCLAUGHLIN: He did this on Monday night because the committee went to him.

MR. BUCHANAN: If he did that -- DR. MCLAUGHLIN: It was all in The Wall Street Journal.

MR. BUCHANAN: If he did that, he's a weak leader.

MS. FREELAND: He did it on Tuesday because of The New York Times.

DR. MCLAUGHLIN: Okay, another ill-fated choice. During his transition, President Obama created a new Cabinet-level post. He named it chief performance officer. Obama's choice for the post: Nancy Killefer, a senior director at the consulting firm, McKenzie & Company, and former chief operating officer for the Department of the Treasury.

NANCY KILLEFER (former chief performance officer-designate): (From videotape.) I know from my experience bringing about change in the private and public sectors that government has the capacity to deliver services more efficiently and effectively. I have seen it done.

DR. MCLAUGHLIN: On Tuesday, Killefer withdrew her nomination, also because of a tax issue, roughly $1,000 in unpaid taxes for a household worker.

Question: Does the $1,000 in unpaid taxes for a household worker merit the loss of a person with the experience and talent of Nancy Killefer, or is this over-exactitude? Chrystia.

MS. FREELAND: I think that if Nancy Killefer and her problem had been the first tax issue to come to light, she would have been absolutely fine. It's not that visible an office. And as you point out, John, it's not that huge an offense.

DR. MCLAUGHLIN: Well, it's a new office.

MS. FREELAND: No, but the problem is that this came after Geithner. It came after Daschle. It also seems very inconsistent with the actual job.

MR. BUCHANAN: She's also the government --

MS. CLIFT: Government performance.

MR. BUCHANAN: Her job is the effectiveness in government.

MS. FREELAND: Her job is to be -- yeah.

MR. BUCHANAN: And they had a lien on her house. She didn't know that?

DR. MCLAUGHLIN: Who had the lien on her house?

MR. BUCHANAN: The D.C. government had a lien on her house for the taxes. (Laughs. )

DR. MCLAUGHLIN: For unpaid taxes?

MR. BUCHANAN: Yes.

DR. MCLAUGHLIN: Hers or her husband's?

MR. BUCHANAN: Hers. It was on their house.

MS. FREELAND: And there is inconsistency with the job. And I think the other thing is, what she may have been conscious of is what we've seen in the past is actually, for whatever cultural or social reason --

DR. MCLAUGHLIN: Do you think --

MS. FREELAND: Hang on, John. Hang on, John -- there is a double standard when it comes to men and women. And female appointees who have issues with domestic help have really been assassinated in the past.

MR. BUCHANAN: (Laughs.)

MS. FREELAND: And she may not have wanted that.

DR. MCLAUGHLIN: You lived under --

MS. CLIFT: Well, the --

DR. MCLAUGHLIN: Wait a minute. You lived under the D.C. government, right?

MR. BUCHANAN: Yeah.

DR. MCLAUGHLIN: Who's to say that the lien was an accurate lien with the D.C. government, as you know. Have you ever tried to get a motor vehicle license down there?

MR. BUCHANAN: John, I got a water bill from the D.C. government that was as large as the Mayflower Hotel. MS. CLIFT: I live in the District.

DR. MCLAUGHLIN: Issue Three: Bye-bye, Payouts.

PRESIDENT OBAMA: (From videotape.) For top executives to award themselves these kinds of compensation packages in the midst of this economic crisis isn't just bad taste; it's bad strategy. And I will not tolerate it as president.

DR. MCLAUGHLIN: Question: What are the merits, civil and political, of imposing limits on compensation of certain top CEOs whose companies have received U.S. bailout funds? I ask you, Chrystia.

MS. FREELAND: I think it's a really good idea. This is not -- we have to be really clear, it's not --

DR. MCLAUGHLIN: You are so high-minded.

MS. FREELAND: -- it's not being imposed across the board. It's only being imposed on those banks in the future that need extraordinary government assistance; effectively, companies that need to be bailed out by the government. And I think the people running these companies need to realize --

MS. CROWLEY: Actually, that's not --

MS. FREELAND: -- that they are not masters of the universe. They become civil servants. When you need $25 billion or $100 billion from Uncle Sam --

DR. MCLAUGHLIN: We've got 30 seconds.

MS. CROWLEY: Actually, that's not totally true, because on Friday, Financial Week reported that Barney Frank, who is the chairman of the House Financial Services Committee, said that now he's going to expand those executive compensation limits onto all of the financial institutions, whether or not they've taken government money, and perhaps to all American companies. We have started down a very --

MS. FREELAND: He can't just do that, Monica.

MS. CROWLEY: Excuse me. We have started down a very slippery slope. Once you let the vampire of the federal government in to the private sector -- (laughter) -- it is very hard to get that vampire out.

MS. FREELAND: Monica, you let the vampire out --

MS. CROWLEY: I know.

DR. MCLAUGHLIN: Wait a minute. Are you saying the federal government -- MS. CROWLEY: And I opposed those bailouts to begin with.

MR. BUCHANAN: The banks --

DR. MCLAUGHLIN: You think the federal government is blood- sucking?

MS. CROWLEY: Yes. (Laughs.)

MR. BUCHANAN: Look, Monica, the banks took the kings' money.

MS. CLIFT: Right. Exactly.

MR. BUCHANAN: You sing the kings' tune.

MS. CROWLEY: This is what I mean about the vampires.

MR. BUCHANAN: Barney is not going to be able to deal with any company that hasn't accepted bailout money.

DR. MCLAUGHLIN: All right, rate Obama's first two weeks in the presidency, quickly.

MR. BUCHANAN: I'll give him a B-.

MS. CLIFT: I'll give him a B. Rookie mistakes.

MS. CROWLEY: C-.

DR. MCLAUGHLIN: C-.

MS. CROWLEY: Disastrous.

MS. FREELAND: B.

DR. MCLAUGHLIN: B-.

Issue Four: California Catastrophe.

CALIFORNIA GOVERNOR ARNOLD SCHWARZENEGGER (R): (From videotape.) The $42 billion deficit is a rock upon our chest that we cannot breathe until we get it off. The truth is that California is in a state of emergency.

DR. MCLAUGHLIN: A $42 billion debt projected for June 2010, about a year and a half from now, leaves California, the world's eighth-largest economy, in moving collapse. The state is withholding income tax refunds, meaning no relief for 2.7 million Californians. In addition, all California state employees must currently take unpaid leave on two Fridays of each month. The state is also unable to pay $3.5 billion in bills to various state businesses. The situation is so bad that California's credit rating is the lowest of any state in the Union. It will be difficult, if not impossible, for California to borrow any money.

DAN WALTERS (Sacramento Bee): (From videotape.) Pray for California, because we don't know what's going to happen over the next few weeks. This could be really kind of the real Armageddon.

DR. MCLAUGHLIN: Question: Is commentator Walters sensationalizing, or is the California crisis just that bad? I ask you, Monica.

MS. CROWLEY: It really is bad. I mean, you mentioned the debt, and now California is holding back on all the tax rebates. They're taking state workers and putting them in furlough, unpaid vacation time so that they're not coming to work and they don't have to pay.

This is a very serious crisis for the state of California. And what affects California then has a ripple effect, not through just the West, but also through the rest of the country. And so many people are actually leaving California. Part of its big tax revenue base is leaving California like it's fleeing New York, and it's feeding into the crisis.

MS. CLIFT: Yeah, but we are not insulated from California's problems. California is a trend-setter, and this is a negative trend. And all the governors and many of the mayors have been in Washington pleading for this stimulus, the Economic Recovery Act, to go through, because a big chunk of the money goes to the states and the municipalities -- another reason why Congress should act and heed the new president.

DR. MCLAUGHLIN: What about mandated cuts that are still in effect in those states that she's talking about that are in recession?

MR. BUCHANAN: Well, and I think they ought to be made, John. But, listen, California is becoming a Third World country in the sense that one-third of all the illegal aliens that come into the country go to California. The taxpayers and, frankly, white folks for the first time --

MS. CLIFT: We call it diversity, Pat -- diversity.

MR. BUCHANAN: Okay, it's diversity.

MS. CLIFT: The country is becoming diversified too.

MR. BUCHANAN: Yeah, taxpayers are coming over the mountains. And California, John, in my judgment, will have to be bailed out by the United States forever.

DR. MCLAUGHLIN: Really? MR. BUCHANAN: Forever --

DR. MCLAUGHLIN: Really?

MR. BUCHANAN: -- just as some countries need IMF loans and World Bank loans forever.

DR. MCLAUGHLIN: You mean, it's too big to fail.

MR. BUCHANAN: No, I think the California -- it used to have 130 percent of national income, each individual. It is now below 100 percent and falling.

DR. MCLAUGHLIN: Did something comparable happen in New York City in the '70s?

MS. FREELAND: Absolutely.

DR. MCLAUGHLIN: What happened?

MS. FREELAND: You had the huge debt crisis and you had the recovery, and then you had the recent boom years.

DR. MCLAUGHLIN: There was a bailout. There was a bailout.

MS. FREELAND: There was, and there was a restructuring of the debt. I mean, Eleanor makes an important point, though, that California is not an isolated example right now. A lot of states are suffering these problems. And in some ways, California's problems -- California is the epicenter of the subprime crisis.

DR. MCLAUGHLIN: Okay, more California woes. President Obama has named Steven Chu as his secretary of Energy. This week Chu warned that current trends in climate change could make California uninhabitable. Quote: "We're looking at a scenario where there's no more agriculture in California. I don't actually see how they can keep their cities going," unquote.

Radical climate change is also to blame for arguably California's worst nightmare: Fire.

GOV. SCHWARZENEGGER: (From videotape.) We don't have a fire season anymore. It starts in the beginning of the year and goes all year round. So this creates, of course, big challenges.

DR. MCLAUGHLIN: Is California a harbinger of things to come nationally? Pat Buchanan.

MR. BUCHANAN: I think it is.

DR. MCLAUGHLIN: Really? MR. BUCHANAN: Well, sure it is. I think the California -- again, John, it has an enormous population of Mexican folks who have moved in who are very poor, not too well-educated, and an enormous burden on the state. And taxpayers are leaving.

DR. MCLAUGHLIN: If we keep piling up our debt in the trillions of dollars, are we going to have a credit rating similar to California's? Namely, no one will touch it; we can't get credit.

MS. CLIFT: No, because economic help is on the way. But, look, climate change is -- we're seeing the effects of climate change, not only in California but throughout the country. But the flip side of that is there is an economic future in green jobs, in renovating the country along green lines, in stem cell research in California. So California can come back and lead the way in a number of fields, just as they did with Silicon Valley in the past.

DR. MCLAUGHLIN: Predictions. Pat.

MR. BUCHANAN: The dramatic winner in Israeli elections will be an ethnic cleanser named Avigdor Lieberman.

DR. MCLAUGHLIN: Interesting.

Eleanor.

MS. CLIFT: The House will pretty much rubber-stamp anything Obama wants. He's got to pay more attention to the Senate.

DR. MCLAUGHLIN: Monica.

MS. CROWLEY: Within the next few months, gold will hit a high of 1,500 bucks per ounce.

DR. MCLAUGHLIN: Chrystia.

MS. FREELAND: The U.S. government will be forced to effectively nationalize some of the country's big banks.

DR. MCLAUGHLIN: Cyprus has been split into Greek and Turkey parts for over half a century. It will be reunited before the 4th of July this year. Turkey will then join the EU.

Bye-bye.

END.