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THE MCLAUGHLIN GROUP HOST: JOHN MCLAUGHLIN PANEL: PATRICK BUCHANAN, MSNBC; ELEANOR CLIFT, NEWSWEEK; MONICA CROWLEY, SYNDICATED RADIO COMMENTATOR; MORTIMER ZUCKERMAN, U.S. NEWS & WORLD REPORT TAPED: FRIDAY, FEBRUARY 27, 2009 BROADCAST: WEEKEND OF FEBRUARY 28-MARCH 1, 2009

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DR. MCLAUGHLIN: Issue One: Change or Overthrow?

PRESIDENT BARACK OBAMA: (From videotape.) There are times where you can afford to redecorate your house and there are times where you need to focus on rebuilding its foundation. Today we have to focus on foundations.

DR. MCLAUGHLIN: President Barack Obama this week unveiled the most expansive blueprint for government involvement in the U.S. economy ever. It is a 10-year budget outline that for year one calls for a $3.55 trillion outlay.

Republicans were less than happy about what they see as Obama's monster budget bill. HOUSE MINORITY LEADER JOHN BOEHNER (R-OH): (From videotape.) I think it's a job-killer, plain and simple. And it raises taxes on all Americans.

SENATOR JUDD GREGG (R-NH): (From videotape.) There is no fiscal restraint in this budget. There is no attempt to address the spending side of the ledger.

DR. MCLAUGHLIN: While the American people are tightening their belts, Washington seems to be taking its belt off. The Obama budget has been described as a major redistribution of wealth. Obama laid out a $637 billion tax proposal for taxes on the highest-income earners, like Buchanan. Obama's plan permits the Bush tax cuts for the wealthy, affecting those making more than $250,000, to expire. And those in the highest-earning bracket would go from paying 35 percent in income taxes to over 39 percent.

The plan also includes a tax credit increase for low-income and middle-income families, the credit rising from $800 to $1,000.

PRESIDENT OBAMA: (From videotape.) This is just the beginning of the cuts we're going to make. No part of my budget will be free from scrutiny or untouched by reform.

DR. MCLAUGHLIN: Question: Did Joe the Plumber have it right the first time, the real scoop, when he heard straight from Obama that his goal was, quote, "to spread the wealth around"? Pat Buchanan.

MR. BUCHANAN: He was dead-on, John. This is the greatest transfer of wealth and power in American history. The government spending is going to go up to 28 percent -- federal spending 28 percent of gross national product. Add state and local and you're going to hit 40 percent. We're not going down the road to socialism, my friend. We are there.

And John, you are never cutting this back. As Wordsworth said, "No winter shall abate this spring's increase." And it's a transfer of wealth also from the successful and the well-to-do basically to Barack Obama's constituency. It is really the New Deal to the third power. And I think there's going to be some resistance, but I don't see how he's going to be prevented from getting almost all he wants in this budget and next year's budget, and we are never going back.

DR. MCLAUGHLIN: Where's the money going to come from, Eleanor?

MS. CLIFT: First of all, the contrast between the well-to-do and Barack Obama's constituency -- Pat, news flash: He won the votes of people who make the most money in this country. This is a budget that restores the balance that was there at the end of the Reagan years. These are the tax rates that were prevalent when Ronald Reagan lost office. MR. BUCHANAN: No, no -- 28 percent. It was 28 percent.

MS. CLIFT: No, at the end of --

MR. ZUCKERMAN: Clinton had 39.6 percent at the top. He went exactly to where Clinton was.

MS. CLIFT: Right.

MR. BUCHANAN: And Bush had 35 and Reagan had 28.

MS. CLIFT: Well, I think there are some elements that are the same as the Reagan years, because I've heard that repeated many times over as I've listened to the airwaves and the two sides battling back and forth.

MR. BUCHANAN: Stop listening to NPR. (Laughs.)

MS. CLIFT: But either way, either way, I give you the Clinton reference. People did fine during the Clinton years. We have watched in this country the tippy top of wage-earners making $150,000 a year in tax cuts that they don't really need.

DR. MCLAUGHLIN: That's Buchanan. Buchanan, you're --

MS. CLIFT: And the lower and middle classes, chiefly, have lost ground. So this is an attempt --

DR. MCLAUGHLIN: Buchanan, you're tippy top.

MS. CLIFT: -- to address that --

MR. BUCHANAN: John, take a look at my portfolio. (Laughs.)

MS. CROWLEY: What Eleanor just expressed is what Barack Obama and the left believes, which is that achievement, success, hard work and sacrifice --

MS. CLIFT: That's not what I said.

MS. CROWLEY: -- should be punished by a great --

MS. CLIFT: That's not what I said.

DR. MCLAUGHLIN: Let her finish.

MS. CROWLEY: -- confiscation of their assets and their wealth by the government. This budget is a Vesuvian explosion of big government. We shouldn't be surprised. He expressed it to Joe the Plumber. The problem here is that built into this budget is a $1 trillion tax hike on everybody over the next 10 years. And with regard to this level of $250,000 as rich, the problem here is that most of those who fall into that category are small businesses and small business owners, and those small business owners generate between 60 and 80 percent of job growth in this country. So what he is doing is suffocating the engine that is really going to pull this economy out of the recession.

DR. MCLAUGHLIN: You're talking about Vesuvius the volcano.

MS. CROWLEY: Correct.

DR. MCLAUGHLIN: Where is it?

MS. CROWLEY: Pompeii. Correct?

DR. MCLAUGHLIN: Pompeii. There you are. Right, Buchanan?

MS. CROWLEY: Yes. (Laughs.)

MR. BUCHANAN: Italy, yeah. (Laughter.)

DR. MCLAUGHLIN: What are your thoughts, then, on the budget?

MR. ZUCKERMAN: I don't see this quite the same way, I have to say, as either Monica or Pat. I actually --

MS. CLIFT: Thank you, Mort. Thank you.

MR. ZUCKERMAN: Well, I actually welcome this. I do think that when the top 1 percent went from 10 percent of national income to 20 percent of national income, that was a bit too much. And what he's doing, he's raising the taxes marginally at the upper end. And it's entirely appropriate, as far as I'm concerned, because we have a lot of national expenditures that are absolutely possible only with and through the government, such as in education or in health care. So I'm actually totally in favor of this program.

I opposed the tax cuts in the first place that the Bush administration put in. I supported the tax cuts that Clinton put in where it went to a top of 39.6. A lot was accomplished with those funds. And I think we have a huge fiscal deficit for good reason now, and a lot of people are going to be having to address that. This is an absolutely fair way to do it, as far as I'm concerned.

DR. MCLAUGHLIN: You think most of the money is going to come from the energy sector. MR. ZUCKERMAN: Well, some of it will. But the energy sector got incredible tax breaks, and he's going to eliminate some of those tax breaks. And that is absolutely appropriate, as far as I'm concerned. It's entirely appropriate.

The marginal rate on income is going to go up from 35 to 39.6 percent. It is still the lowest by far of almost any industrial country. It is not intolerable. And it's only on future income. It is not a redistribution of existing wealth.

MR. BUCHANAN: John, that's a 40 percent federal rate; on top of that, New York, 8 percent state rate, 4 percent city rate; Social Security taxes, 3 percent; Medicare, property taxes, sales taxes. You are well over 50, 55, 60 percent of people's wealth being taken by government. When you do that -- let me tell you, I've got a small business. I don't know whether it can survive having the kind of taxes imposed on it. You're better off --

MS. CLIFT: What is your small business, yapping away on television networks?

MR. BUCHANAN: No, it's income from various sources, Eleanor. Try it sometime.

MS. CLIFT: Okay, I'm sorry. That's not in the --

DR. MCLAUGHLIN: All right, exit question.

MS. CLIFT: That's not in the same level as Joe the Plumber. So let's not masquerade --

DR. MCLAUGHLIN: Exit question: Obama has told us what he is reversing by making a hard left. Turn from the policies of the past 30 years. Where is he ultimately taking us? And how would you describe the government Obama is in the process of trying to create? This is an exit question.

MR. BUCHANAN: I would describe it -- look, he's got conservative rhetoric and leftist ideas. I think it is a deeply socialist regime where government not only takes 40 percent of the national wealth, but governs and rules and regulates the rest of --

DR. MCLAUGHLIN: Eleanor.

MS. CLIFT: The right does not control responsibility and accountability, and he has embraced all of those so-called conservatives ideas and advancing an agenda that really repairs all of the starvation of the investments that we need in this country in health and education --

MR. BUCHANAN: Starvation?

MS. CLIFT: -- and energy. Yes. DR. MCLAUGHLIN: What kind of government? What kind of government would you say he's creating?

MS. CLIFT: I would say it's more of an effort to save capitalism by making the country more of a social --

DR. MCLAUGHLIN: Managed capitalism? Would that work for you?

MS. CLIFT: -- more of a social democracy.

DR. MCLAUGHLIN: Social what?

MS. CLIFT: Democracy.

MR. BUCHANAN: Social democracy.

DR. MCLAUGHLIN: Social democracy.

MS. CROWLEY: You asked what kind of government he's creating. He has already spent, in the first 30 days of his presidency, more than FDR spent in an entire term. He is taking this government off the cliff toward socialism. The explosion of government programs that he wants to pay off -- remember, Mort, I love you dearly, but I've got to disagree with you. Government does not create wealth.

DR. MCLAUGHLIN: Do you want to call it --

MS. CROWLEY: The private sector creates wealth. And by liberating the private sector by reducing the tax burden, that's how you're going to create the growth we need.

DR. MCLAUGHLIN: Would you call it democratic socialism or socialistic democracy, or neither?

MS. CROWLEY: I would call it European democratic socialism --

MS. CLIFT: And what would you --

MS. CROWLEY: -- which has failed.

DR. MCLAUGHLIN: You hear that? That's not a bad definition.

MS. CLIFT: What would you have called the Bush years and the meltdown we saw at the end of the Bush years? Would that be failed capitalism?

DR. MCLAUGHLIN: Let Mort in. This is an exit question. We've got to get out.

MR. ZUCKERMAN: Government, as Reagan said, is part of the problem, not part of the solution. Right now government is part of the solution, in part because of what Eleanor is referring to. The fact is, unbridled, unregulated financial capitalism has nearly destroyed this economy, and indeed the world's economy. Something has to be done to change it.

Bush came in with a $226 billion surplus and leaves us with a $400 (billion) to $500 billion deficit and a collapsed financial world and a declining economy.

DR. MCLAUGHLIN: Can you believe this?

MR. ZUCKERMAN: Only the government -- only the government can --

DR. MCLAUGHLIN: Can you believe that he's saying that we've lived under laissez-faire capitalism? Can you believe that?

MR. BUCHANAN: Bush spent like crazy, and Obama's first deficit is four times as large as Bush's was.

MS. CLIFT: Well, that's because --

MR. ZUCKERMAN: But there's a reason for that. Look what he inherited.

MS. CLIFT: -- he counted the war spending that Bush hid.

DR. MCLAUGHLIN: Do you really think we live under laissez-faire capitalism?

MR. BUCHANAN: The trillion-dollar stimulus had nothing to do with it.

MR. ZUCKERMAN: I don't think it's --

DR. MCLAUGHLIN: We've got two conversations going on here --

MS. CLIFT: The trillion-dollar deficit is --

DR. MCLAUGHLIN: -- and there's one moderator. Let me in here. Go ahead.

MR. ZUCKERMAN: No, I don't think we lived under laissez-faire capitalism.

DR. MCLAUGHLIN: But you described it that way.

MR. ZUCKERMAN: We had a virtually unregulated financial world is what I said, and that is exactly the case. I mean, there were so many things that should have been done. And the risk that was accumulated by the financial world is unprecedented. They didn't appreciate it, and --

DR. MCLAUGHLIN: I think if you base it only on --

MR. BUCHANAN: Mort is right on that.

DR. MCLAUGHLIN: We've got to get out.

MR. BUCHANAN: Mort is dead right on that.

DR. MCLAUGHLIN: We've got to get out. If you base it only on this speech, I would say it sounds like a European social welfare state.

Issue Two: American Dream.

PRESIDENT OBAMA: (From videotape.) We have begun the essential work of keeping the American dream alive in our time, and that's why we're here today.

DR. MCLAUGHLIN: It's a tall order, Mr. President. Financial news this week includes stock market dropped to half of its 2007 value; unemployed jumped to 667,000; consumer confidence hit a record low. And more bad news for that bedrock American dream: Sales of existing homes have slid 10 percent.

So how are Americans coping? The 2009 MetLife study of the American dream says surprisingly well.

Item: Belt-tightening is in. Almost half of the consumers, 47 percent, say that they have all the possessions they need. Forty percent have buyer's remorse, in fact, for past purchases.

Item: The chase is off. In earlier MetLife surveys, people had felt that the American dream had become a constant lifestyle chase to acquire more, bigger, better. Now, for satisfaction, people are turning to personal relationships instead of consumerism.

Item: Fear is widespread, but optimism prevails. Across almost all income levels and all ethnic groups, Americans are worried. Two- thirds feel more stressed now than they did last year. Fifty-six percent fear losing their job. Fifty percent say they would be bankrupt within one month if that happened.

But there are bright spots. Young people, the generations X and Y, born between 1965 and 1991, between the ages of 18 and 44, are confident that they will achieve their own version of the American dream.

Question: Seventy-two percent of our economic growth is driven by consumer spending. What does it mean if consumers really change their habits and start saving instead of spending? Eleanor Clift. MS. CLIFT: I don't think there's any huge danger that we're going to radically change, but I think the kind of unbridled consumerism that we have sort of worshipped as the society, I think that may be over. What we're just trying to do, I think, is to rekindle the market for buying homes, for sending kids to college, and for people having their health care. And these are all the investments that the Obama budget is trying to make to basically start the engines of a recovery that will affect the vast middle class and not just the tippy top, Pat. (Laughter.)

DR. MCLAUGHLIN: Dancing around that tippy top. What about the impact on China if there is a constriction of consumer spending and Americans start to save?

MS. CROWLEY: Well, we're already seeing the effects of that, which is that the Chinese economy is faltering, as are most economies in the world. This is a global contagion here. Their market for exports, their biggest market, is the United States, and they're really feeling the impact of this as well.

But what you mentioned about American consumers saving instead of spending -- actually, we saw the first wave of that last year when President Bush was still in office and issued those first waves of tax rebates, $300 or $600 for a couple.

DR. MCLAUGHLIN: They saved it.

MS. CROWLEY: They saved it; that's right. And so for decades now we've been lectured by those in the know saying, "Americans need to save more and stop spending." Because Americans have lived so far beyond their means for so long, that's one of the major reasons why we're in this crisis.

Do I think it's going to continue that way forever? No. We're Americans. We love our stuff. And eventually the economy will recover and we'll go back to that kind of consumerism.

DR. MCLAUGHLIN: If they reduce their consumer spending, where are they going to spend their money?

MR. ZUCKERMAN: They're going to save it, because they really fear for their jobs. They fear for their economic futures. They saved for any number of years out of the appreciation of their assets --

DR. MCLAUGHLIN: What about safety nets?

MR. ZUCKERMAN: -- their home and their stocks. Now those are plummeting, okay, so they're not --

DR. MCLAUGHLIN: Retirement funds, college education. MR. ZUCKERMAN: Right, everything. Well, they're going to save for their retirement. They're going to save for college education. They're going to --

DR. MCLAUGHLIN: Or pay off their bills.

MR. ZUCKERMAN: They're going to save for a rainy day. There are a lot of people who feel that their whole lifestyle is at risk, because the confidence in the economy has been shattered. The one number there that is the most important is that consumer confidence is the lowest it's been in 45 years. This is really a critical thing.

MS. CLIFT: And they're looking --

MR. ZUCKERMAN: And we always did save 5, 6, 7 percent of incomes until the last four or five years.

DR. MCLAUGHLIN: Exit question: Is conspicuous consumption dead, or will it make a comeback when credit markets revive? Pat Buchanan.

MR. BUCHANAN: It'll make a comeback among the super-rich, John. But the standard of living in the United States is going to continue to go down as long as we consume more than $800 billion worth of goods from abroad than we sell to abroad.

DR. MCLAUGHLIN: Eleanor, what do you think?

MS. CLIFT: I think the super-rich are even a little embarrassed about conspicuous consumption, and they may not go back to such obvious spending. But this isn't what we're talking about. We're talking about spending that gets people through the day. And that's what we don't have, and that's why people are so nervous.

DR. MCLAUGHLIN: Do you think it's gone, or do you think it's with us?

MS. CROWLEY: No, no, it's not gone. And even now, you see sort of bright lights in parts of the economy -- McDonald's, for example, Wal-Mart. So people are consuming, just not at the levels they once did.

DR. MCLAUGHLIN: Mort.

MR. ZUCKERMAN: Well, I mean, I think there will be consumption, but the conspicuous consumption now is absolutely out of style, and people are really going to be focused very carefully on how they spend, because they really are worried about their economic futures in the short term.

DR. MCLAUGHLIN: Consumer consumption is gone, and not just for the short term. It's impermanently dead. Issue Three: Mexican Standoff.

This shootout in broad daylight between federal agents and cartel members took place in the Mexican town of Reynosa, across the Rio Grande opposite McAllen, Texas, about 100 miles from the Gulf. Drug gangs have been more or less continually fighting Mexican police and military troops, and sometimes overpowering both. And, just across the border from El Paso, Texas, the Mexican government is sending thousands of troops to the city of Juarez. The blood-letting has caused more than 6,000 deaths last year and more than 1,000 this year, and the turf war has made its way far up north.

The U.S. Drug Enforcement Agency, the DEA, staged a major bust this week and disrupted a drug scheme that spanned more than half of the United States and a big chunk of Canada. Fifty-members of one of Mexico's largest cartels were arrested. The DEA seized cocaine, heroin, meth and marijuana -- about 50,000 pounds of drugs.

Within the past 22 months, inside our borders, U.S. officials have arrested over 755 drug cartel suspects.

ATTORNEY GENERAL ERIC HOLDER: (From videotape.) They are lucrative, they are violent, and they are operated with stunning planning and precision.

DR. MCLAUGHLIN: The potential for violent spillover has put state officials in the U.S. on high alert.

TEXAS GOVERNOR RICK PERRY (R): (From videotape.) Clearly the situation in Mexico is dire.

DR. MCLAUGHLIN: Governor Perry wants 1,000 U.S. military troops to man the Texas border. The state of lawlessness in Mexico could make it an ideal site for terrorists, as Afghanistan was for the Taliban and the al Qaeda. Terrorists flourish in lawless states. The U.S. is concerned that Mexico could become not only a failed state, but a lawless state.

Exit question: To prevent a failed and lawless state on our southern border, should the United States annex Mexico? This is not a serious question, but could it become a serious question?

MR. BUCHANAN: The question is whether we're going to merge with Mexico, frankly, because I think the border is going to disappear. The prediction, John, within 10 years --

DR. MCLAUGHLIN: Merge?

MR. BUCHANAN: -- within 10 years those 50,000 troops in Baghdad will be on the southwestern border of the United States.

DR. MCLAUGHLIN: Eleanor. MS. CLIFT: Pat has been employing scare tactics about Mexico for a long time, so don't get too --

DR. MCLAUGHLIN: He's tippy-topping that, isn't he? (Laughs.)

MS. CLIFT: No, don't get too worried by what he said. Look, I would start by addressing the gun traffic. We have all the American gun sellers along the border furnishing the weapons to the cartels in Mexico. A good place to start would be to crack down on that gun traffic.

DR. MCLAUGHLIN: How about that?

MS. CROWLEY: President Obama has got a lot of national security challenges on his plate, but one that's been really overlooked is this. I mean, the United States cannot have this kind of instability right on the border here. And it's driven by the drug trafficking, which you're talking about.

What you didn't mention there is that that DEA bust netted about 775 suspects that they arrested for drug smuggling. Almost all of them were arrested in the United States. So it gets to a border security issue, an illegal immigration issue and a crime issue, based on the drugs.

DR. MCLAUGHLIN: Mort.

MR. ZUCKERMAN: Well, the real question is whether the Mexican government, including its army and its justice department and its police, have the capacity to resist these. If they don't, you're going to have a failed state on our border. And that, in fact -- it is not there yet.

And to his credit, President Calderon has really used the army now, because the police are so vulnerable to corruption, and so is the court system, to go after them. And we have to support them to a much greater degree. We're giving Mexico $400 million a year. We put $12 billion a month into Iraq.

DR. MCLAUGHLIN: A failed state is a lawless state. A lawless state is a breeding ground for al Qaeda and terrorists, as happened in Afghanistan. We can't afford that. And while I don't think it's a serious question as it was put, I think Buchanan's point on merge, some of that could possibly occur unless Calderon can get control of that situation.

Issue Four: Bobby's Debut.

LOUISIANA GOVERNOR BOBBY JINDAL (R): (From videotape.) Tonight we witnessed a great moment in the history of our republic, in the very chamber where Congress once voted to abolish slavery. Our first African-American president stepped forward to address the state of our Union. DR. MCLAUGHLIN: Governor of Louisiana Piyush Bobby Jindal delivered the Republican response to President Obama's speech this week. Jindal is 37 years of age, graduated from Brown University, BA, magna cum laude; was a Rhodes Scholar, MA (Ox-on ?); headed Louisiana Department of Health at age 24; served as U.S. congressman, 1st district, Louisiana, '04 to '08; now sitting governor, Louisiana, '08 to the present.

Governor Jindal says he shares a common bond with President Obama.

GOV. JINDAL: (From videotape.) Like the president's father, my own parents came to this country from a distant land. When they arrived in Baton Rouge, my mother was already four and a half months pregnant. I was what folks in the insurance industry now call a pre- existing condition.

DR. MCLAUGHLIN: Why was Jindal picked to give the Republican response? Why wasn't Jeb Bush or someone in that kind of echelon picked?

MR. ZUCKERMAN: Primarily because they had enough political intelligence not to want to follow Barack Obama speaking before a joint session of the Congress. I mean, it was a great opportunity for somebody --

DR. MCLAUGHLIN: You mean it was a bad move on Jindal's part to have appeared anywhere near Obama?

MR. ZUCKERMAN: As we say, you don't get a second chance to make a first impression. If this was his first national impression, it was a disaster. He was so uncomfortable and so unrelated to what was going on, it was really astounding. And to follow President Obama, in his most natural setting, you couldn't do a worse contrast.

DR. MCLAUGHLIN: Do you think it's a permanent wounding of him, meaning he's disabled?

MR. ZUCKERMAN: No, I think he's --

DR. MCLAUGHLIN: Or potentially, politically.

MR. ZUCKERMAN: No, I think he can get a career as an academic after his political career, which will end pretty soon, but no national standing unless there's another president from the Republican Party who appoints him.

DR. MCLAUGHLIN: What do you do to rehab Jindal, Pat?

MR. BUCHANAN: Well, I think what he'd have to do -- it's going to take a long time. That's the first dramatic impression, and frankly he came off something like a sophomore in high school at an elocution contest, and after Barack Obama at the top of his game in the greatest forum in the world.

And so I think what Bobby Jindal's got to do is -- the first impression was disastrous. The only thing he could do -- if he goes out to Iowa, he gets on more and more television and erases this image by a number of appearances --

DR. MCLAUGHLIN: Yeah, I'm a little surprised. You ran for president three times, didn't you --

MR. BUCHANAN: Yes.

MR. ZUCKERMAN: And you didn't change your image.

DR. MCLAUGHLIN: -- in this odd career of yours, right? You were tippy-topping there, weren't you?

MR. BUCHANAN: Right, right.

DR. MCLAUGHLIN: Okay. Now, he's got geography on his side. Why does he have it on his side? Can you tell me? He's from a red state.

MS. CROWLEY: Louisiana. He's from a red state, from pretty much the last bastion of conservative or Republican strength. Look, he's 37 years old. He's got plenty of time. Listen, if you went back and looked at all of Barack Obama's past tapes, you know, hosting a food show back in Chicago, you'd laugh up a storm. This guy has plenty of time to re-establish himself. And all these points about Jindal are style points. And, yes, style is very important in today's mass media society.

However, if you actually listen to what Jindal had to say about limited government and cutting taxes, he's got a strong conservative message. And I think it's a big mistake for anybody --

MR. BUCHANAN: Well, look --

DR. MCLAUGHLIN: Eleanor. Go ahead, Eleanor.

MS. CLIFT: I don't fault him so much on style. I mean, he muffed a wonderful opportunity for a primetime audience, but he can probably recover from that. The problem is he didn't have anything new to say. Those were stale, warmed-over ideas.

And the notion that he would cite Katrina and the aftermath of Katrina as an example of American ingenuity, of people helping each other, that was such a storm that people could not recover without government help. And his state is receiving still, you know, billions of dollars of aid. So his intellectual rigor was not there. For a Rhodes Scholar, that was a pathetic presentation.

MR. BUCHANAN: He's got a terrible image to overcome, John. It's a terrible image he's left with the country to overcome. He's sort of a laughingstock. He's going to be on SNL Live, I'm sure. But this is very difficult to overcome. And you need more than just a conservative message these days, frankly. Reagan had the packaging. Sarah Palin has the packaging. That's vitally important. DR. MCLAUGHLIN: What will the unemployment rate be at the end of 2009? Forced prediction, Pat Buchanan.

MR. BUCHANAN: Nine-point-five percent.

DR. MCLAUGHLIN: Eleanor.

MS. CLIFT: Under double digits. The recovery will not start till next year.

DR. MCLAUGHLIN: Monica.

MS. CROWLEY: Nine percent.

DR. MCLAUGHLIN: Mort.

MR. ZUCKERMAN: Eleven and a half percent.

DR. MCLAUGHLIN: Eleven percent.

Bye-bye.

END.

Across almost all income levels and all ethnic groups, Americans are worried. Two- thirds feel more stressed now than they did last year. Fifty-six percent fear losing their job. Fifty percent say they would be bankrupt within one month if that happened.

But there are bright spots. Young people, the generations X and Y, born between 1965 and 1991, between the ages of 18 and 44, are confident that they will achieve their own version of the American dream.

Question: Seventy-two percent of our economic growth is driven by consumer spending. What does it mean if consumers really change their habits and start saving instead of spending? Eleanor Clift. MS. CLIFT: I don't think there's any huge danger that we're going to radically change, but I think the kind of unbridled consumerism that we have sort of worshipped as the society, I think that may be over. What we're just trying to do, I think, is to rekindle the market for buying homes, for sending kids to college, and for people having their health care. And these are all the investments that the Obama budget is trying to make to basically start the engines of a recovery that will affect the vast middle class and not just the tippy top, Pat. (Laughter.)

DR. MCLAUGHLIN: Dancing around that tippy top. What about the impact on China if there is a constriction of consumer spending and Americans start to save?

MS. CROWLEY: Well, we're already seeing the effects of that, which is that the Chinese economy is faltering, as are most economies in the world. This is a global contagion here. Their market for exports, their biggest market, is the United States, and they're really feeling the impact of this as well.

But what you mentioned about American consumers saving instead of spending -- actually, we saw the first wave of that last year when President Bush was still in office and issued those first waves of tax rebates, $300 or $600 for a couple.

DR. MCLAUGHLIN: They saved it.

MS. CROWLEY: They saved it; that's right. And so for decades now we've been lectured by those in the know saying, "Americans need to save more and stop spending." Because Americans have lived so far beyond their means for so long, that's one of the major reasons why we're in this crisis.

Do I think it's going to continue that way forever? No. We're Americans. We love our stuff. And eventually the economy will recover and we'll go back to that kind of consumerism.

DR. MCLAUGHLIN: If they reduce their consumer spending, where are they going to spend their money?

MR. ZUCKERMAN: They're going to save it, because they really fear for their jobs. They fear for their economic futures. They saved for any number of years out of the appreciation of their assets --

DR. MCLAUGHLIN: What about safety nets?

MR. ZUCKERMAN: -- their home and their stocks. Now those are plummeting, okay, so they're not --

DR. MCLAUGHLIN: Retirement funds, college education. MR. ZUCKERMAN: Right, everything. Well, they're going to save for their retirement. They're going to save for college education. They're going to --

DR. MCLAUGHLIN: Or pay off their bills.

MR. ZUCKERMAN: They're going to save for a rainy day. There are a lot of people who feel that their whole lifestyle is at risk, because the confidence in the economy has been shattered. The one number there that is the most important is that consumer confidence is the lowest it's been in 45 years. This is really a critical thing.

MS. CLIFT: And they're looking --

MR. ZUCKERMAN: And we always did save 5, 6, 7 percent of incomes until the last four or five years.

DR. MCLAUGHLIN: Exit question: Is conspicuous consumption dead, or will it make a comeback when credit markets revive? Pat Buchanan.

MR. BUCHANAN: It'll make a comeback among the super-rich, John. But the standard of living in the United States is going to continue to go down as long as we consume more than $800 billion worth of goods from abroad than we sell to abroad.

DR. MCLAUGHLIN: Eleanor, what do you think?

MS. CLIFT: I think the super-rich are even a little embarrassed about conspicuous consumption, and they may not go back to such obvious spending. But this isn't what we're talking about. We're talking about spending that gets people through the day. And that's what we don't have, and that's why people are so nervous.

DR. MCLAUGHLIN: Do you think it's gone, or do you think it's with us?

MS. CROWLEY: No, no, it's not gone. And even now, you see sort of bright lights in parts of the economy -- McDonald's, for example, Wal-Mart. So people are consuming, just not at the levels they once did.

DR. MCLAUGHLIN: Mort.

MR. ZUCKERMAN: Well, I mean, I think there will be consumption, but the conspicuous consumption now is absolutely out of style, and people are really going to be focused very carefully on how they spend, because they really are worried about their economic futures in the short term.

DR. MCLAUGHLIN: Consumer consumption is gone, and not just for the short term. It's impermanently dead. Issue Three: Mexican Standoff.

This shootout in broad daylight between federal agents and cartel members took place in the Mexican town of Reynosa, across the Rio Grande opposite McAllen, Texas, about 100 miles from the Gulf. Drug gangs have been more or less continually fighting Mexican police and military troops, and sometimes overpowering both. And, just across the border from El Paso, Texas, the Mexican government is sending thousands of troops to the city of Juarez. The blood-letting has caused more than 6,000 deaths last year and more than 1,000 this year, and the turf war has made its way far up north.

The U.S. Drug Enforcement Agency, the DEA, staged a major bust this week and disrupted a drug scheme that spanned more than half of the United States and a big chunk of Canada. Fifty-members of one of Mexico's largest cartels were arrested. The DEA seized cocaine, heroin, meth and marijuana -- about 50,000 pounds of drugs.

Within the past 22 months, inside our borders, U.S. officials have arrested over 755 drug cartel suspects.

ATTORNEY GENERAL ERIC HOLDER: (From videotape.) They are lucrative, they are violent, and they are operated with stunning planning and precision.

DR. MCLAUGHLIN: The potential for violent spillover has put state officials in the U.S. on high alert.

TEXAS GOVERNOR RICK PERRY (R): (From videotape.) Clearly the situation in Mexico is dire.

DR. MCLAUGHLIN: Governor Perry wants 1,000 U.S. military troops to man the Texas border. The state of lawlessness in Mexico could make it an ideal site for terrorists, as Afghanistan was for the Taliban and the al Qaeda. Terrorists flourish in lawless states. The U.S. is concerned that Mexico could become not only a failed state, but a lawless state.

Exit question: To prevent a failed and lawless state on our southern border, should the United States annex Mexico? This is not a serious question, but could it become a serious question?

MR. BUCHANAN: The question is whether we're going to merge with Mexico, frankly, because I think the border is going to disappear. The prediction, John, within 10 years --

DR. MCLAUGHLIN: Merge?

MR. BUCHANAN: -- within 10 years those 50,000 troops in Baghdad will be on the southwestern border of the United States.

DR. MCLAUGHLIN: Eleanor. MS. CLIFT: Pat has been employing scare tactics about Mexico for a long time, so don't get too --

DR. MCLAUGHLIN: He's tippy-topping that, isn't he? (Laughs.)

MS. CLIFT: No, don't get too worried by what he said. Look, I would start by addressing the gun traffic. We have all the American gun sellers along the border furnishing the weapons to the cartels in Mexico. A good place to start would be to crack down on that gun traffic.

DR. MCLAUGHLIN: How about that?

MS. CROWLEY: President Obama has got a lot of national security challenges on his plate, but one that's been really overlooked is this. I mean, the United States cannot have this kind of instability right on the border here. And it's driven by the drug trafficking, which you're talking about.

What you didn't mention there is that that DEA bust netted about 775 suspects that they arrested for drug smuggling. Almost all of them were arrested in the United States. So it gets to a border security issue, an illegal immigration issue and a crime issue, based on the drugs.

DR. MCLAUGHLIN: Mort.

MR. ZUCKERMAN: Well, the real question is whether the Mexican government, including its army and its justice department and its police, have the capacity to resist these. If they don't, you're going to have a failed state on our border. And that, in fact -- it is not there yet.

And to his credit, President Calderon has really used the army now, because the police are so vulnerable to corruption, and so is the court system, to go after them. And we have to support them to a much greater degree. We're giving Mexico $400 million a year. We put $12 billion a month into Iraq.

DR. MCLAUGHLIN: A failed state is a lawless state. A lawless state is a breeding ground for al Qaeda and terrorists, as happened in Afghanistan. We can't afford that. And while I don't think it's a serious question as it was put, I think Buchanan's point on merge, some of that could possibly occur unless Calderon can get control of that situation.

Issue Four: Bobby's Debut.

LOUISIANA GOVERNOR BOBBY JINDAL (R): (From videotape.) Tonight we witnessed a great moment in the history of our republic, in the very chamber where Congress once voted to abolish slavery. Our first African-American president stepped forward to address the state of our Union. DR. MCLAUGHLIN: Governor of Louisiana Piyush Bobby Jindal delivered the Republican response to President Obama's speech this week. Jindal is 37 years of age, graduated from Brown University, BA, magna cum laude; was a Rhodes Scholar, MA (Ox-on ?); headed Louisiana Department of Health at age 24; served as U.S. congressman, 1st district, Louisiana, '04 to '08; now sitting governor, Louisiana, '08 to the present.

Governor Jindal says he shares a common bond with President Obama.

GOV. JINDAL: (From videotape.) Like the president's father, my own parents came to this country from a distant land. When they arrived in Baton Rouge, my mother was already four and a half months pregnant. I was what folks in the insurance industry now call a pre- existing condition.

DR. MCLAUGHLIN: Why was Jindal picked to give the Republican response? Why wasn't Jeb Bush or someone in that kind of echelon picked?

MR. ZUCKERMAN: Primarily because they had enough political intelligence not to want to follow Barack Obama speaking before a joint session of the Congress. I mean, it was a great opportunity for somebody --

DR. MCLAUGHLIN: You mean it was a bad move on Jindal's part to have appeared anywhere near Obama?

MR. ZUCKERMAN: As we say, you don't get a second chance to make a first impression. If this was his first national impression, it was a disaster. He was so uncomfortable and so unrelated to what was going on, it was really astounding. And to follow President Obama, in his most natural setting, you couldn't do a worse contrast.

DR. MCLAUGHLIN: Do you think it's a permanent wounding of him, meaning he's disabled?

MR. ZUCKERMAN: No, I think he's --

DR. MCLAUGHLIN: Or potentially, politically.

MR. ZUCKERMAN: No, I think he can get a career as an academic after his political career, which will end pretty soon, but no national standing unless there's another president from the Republican Party who appoints him.

DR. MCLAUGHLIN: What do you do to rehab Jindal, Pat?

MR. BUCHANAN: Well, I think what he'd have to do -- it's going to take a long time. That's the first dramatic impression, and frankly he came off something like a sophomore in high school at an elocution contest, and after Barack Obama at the top of his game in the greatest forum in the world.

And so I think what Bobby Jindal's got to do is -- the first impression was disastrous. The only thing he could do -- if he goes out to Iowa, he gets on more and more television and erases this image by a number of appearances --

DR. MCLAUGHLIN: Yeah, I'm a little surprised. You ran for president three times, didn't you --

MR. BUCHANAN: Yes.

MR. ZUCKERMAN: And you didn't change your image.

DR. MCLAUGHLIN: -- in this odd career of yours, right? You were tippy-topping there, weren't you?

MR. BUCHANAN: Right, right.

DR. MCLAUGHLIN: Okay. Now, he's got geography on his side. Why does he have it on his side? Can you tell me? He's from a red state.

MS. CROWLEY: Louisiana. He's from a red state, from pretty much the last bastion of conservative or Republican strength. Look, he's 37 years old. He's got plenty of time. Listen, if you went back and looked at all of Barack Obama's past tapes, you know, hosting a food show back in Chicago, you'd laugh up a storm. This guy has plenty of time to re-establish himself. And all these points about Jindal are style points. And, yes, style is very important in today's mass media society.

However, if you actually listen to what Jindal had to say about limited government and cutting taxes, he's got a strong conservative message. And I think it's a big mistake for anybody --

MR. BUCHANAN: Well, look --

DR. MCLAUGHLIN: Eleanor. Go ahead, Eleanor.

MS. CLIFT: I don't fault him so much on style. I mean, he muffed a wonderful opportunity for a primetime audience, but he can probably recover from that. The problem is he didn't have anything new to say. Those were stale, warmed-over ideas.

And the notion that he would cite Katrina and the aftermath of Katrina as an example of American ingenuity, of people helping each other, that was such a storm that people could not recover without government help. And his state is receiving still, you know, billions of dollars of aid. So his intellectual rigor was not there. For a Rhodes Scholar, that was a pathetic presentation.

MR. BUCHANAN: He's got a terrible image to overcome, John. It's a terrible image he's left with the country to overcome. He's sort of a laughingstock. He's going to be on SNL Live, I'm sure. But this is very difficult to overcome. And you need more than just a conservative message these days, frankly. Reagan had the packaging. Sarah Palin has the packaging. That's vitally important. DR. MCLAUGHLIN: What will the unemployment rate be at the end of 2009? Forced prediction, Pat Buchanan.

MR. BUCHANAN: Nine-point-five percent.

DR. MCLAUGHLIN: Eleanor.

MS. CLIFT: Under double digits. The recovery will not start till next year.

DR. MCLAUGHLIN: Monica.

MS. CROWLEY: Nine percent.

DR. MCLAUGHLIN: Mort.

MR. ZUCKERMAN: Eleven and a half percent.

DR. MCLAUGHLIN: Eleven percent.

Bye-bye.

END.