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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, OCTOBER 23, 2009 BROADCAST: WEEKEND OF OCTOBER 24-25, 2009

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DR. MCLAUGHLIN: Issue One: Bailout Payback.

PRESIDENT BARACK OBAMA: (From videotape.) He's taken an important step forward today in curbing the influence of executive compensation on Wall Street while still allowing these companies to succeed and prosper. But more work needs to be done.

DR. MCLAUGHLIN: That step the president is referring to was taken by Kenneth Feinberg, Mr. Obama's, quote-unquote, "special master for compensation." Feinberg is ordering the seven companies that received the most bailout money to slash the salaries of their top executives. A year ago, Wall Street came to Washington on bended knee, begging the federal government to save America's flagship financial institutions. And the U.S. Treasury ponied up $700 billion in cash for banks. Now the Obama administration wants payback, and Feinberg did the deed.

The president is demanding cuts, not in bank budgets but in executive pay. The seven companies and their bailouts: AIG, $180 billion in U.S. bailout funds; General Motors, $50 billion; Bank of America, $45 (billion); Citigroup, $45 (billion), Chrysler, $15 (billion); GMAC Loans, $13 (billion); Chrysler Financial, $1.5 billion; a total of $350 billion for the seven corporations.

Now the pain. The Obama administration is ordering these seven companies to cut the total compensation, salary and cash bonuses, of the 175 highest-paid executives by 50 percent. Why target these seven companies? Why stop there with the punishment, master Kenneth Feinberg?

KENNETH FEINBERG (White House special master for compensation): (From videotape.) My power is limited by statute and regulation to those seven companies.

DR. MCLAUGHLIN: Special master for compensation Kenneth Feinberg reports to the Treasury Department. At week's end, the Federal Reserve Board got into the Feinberg act. The Fed said that it is going to impose and enforce new guidelines on all banks, not just Feinberg's crackdown on the bailed-out seven.

You with that, Pat?

MR. BUCHANAN: Mmm-hmm. (Affirmative response.)

DR. MCLAUGHLIN: The question, Pat: Has Feinberg really cut the total compensation for these top bank executives, or is this political hype?

MR. BUCHANAN: I think it's a bit of both, John. But he is going to cut the compensation of these banks. He's the pay czar, incidentally, one of 38 czars. And he's going to hit these guys hard, and the reason is for populist reasons.

Obama couldn't stand the fact politically that these guys, after taking our tax dollars, trading a bit, scooping their profits way up, they start reaping the rewards again out of tax dollars. So I think people will say they're getting what they deserve. They deserve to be cut even more.

But there is this problem, John. We're going to create a two- tier system here, one of banks which the federal government goes after and cracks down on salaries and bonuses and dictates how they run things, and another, free banks, which are out there. And I'll tell you what's going to happen. The real talent in places like Bank of America is going to say, "There's no future here, and let's go over there where we've really got a free rein and we can really make the bucks."

So I think, in the long run, they're going to have damaged some of these banks and things they propose to save.

DR. MCLAUGHLIN: The cap is at $500,000. Is that the whole cap on all the compensation?

MS. CLIFT: No. They're still walking away with huge pension packages. They still have plenty of perks. Don't worry about them, John. They're still making more money perhaps even than you can imagine in a lifetime.

Look, there was a populist rebellion brewing on Main Street. They see these firms bailed out by the federal government while much of America is out of work, and they're handing each other bonuses. So I think this is an appropriate reining in of the seven companies -- car companies, banks -- that really did rely on the federal government. There are strings attached, understandably so.

The question is, can you extend this restraint further into corporate America? It's the honor system. There's no force of law. The Federal Reserve is charged with trying to see that banks remain solvent, and they're probably going to require more leveraging and that sort of thing. But this is not an onerous shutting down of free America so that you only have a handful of free institutions operating. This is a very modest step, considering the way that these companies drove us over the cliff.

MS. CROWLEY: Well, look, there is no special sympathy for banks that need federal bailouts and these huge infusions of taxpayer money. But the problem here is that they're going after executive compensation two-fold -- one, for punishment for bad behavior; and two, to try to deter excessive risk-taking in the future. Wall Street will always find a way around and through these kinds of pay restrictions.

The problem here is about excessive risk-taking and whether or not we're going to see more of that continue in the future. Paul Volcker, who was the former head of the Fed and now advises President Obama, suggested that they separate that out; they separate out the riskiest trading activity from the taxpayer-protected institutions. The White House and Treasury said, "No, politically it's too hard to do that. So instead we're going to go after these executives and slash their pay," hoping to deter their risk-taking in the future. I don't think it's going to happen.

And I also think that in terms of the slippery slope, once you start going after institutions that took bailout money, now they're talking about regulating and going after executive compensation on financial institutions that were not bailed out by federal money. Barney Frank has talked about extending it even further into other industries. You start going down this slope where the government gets involved even more than they already are and it's very difficult to rein in.

DR. MCLAUGHLIN: What about that last point? This is like a virus. It'll go into the private sector, penetrate it and ruin it.

MR. ZUCKERMAN: It is -- you know, I can understand why there is this populist sentiment about these banks that received all of this money. But if you think it's smart to take $350 billion, as you point out, in federal funds and end up putting it in the lowest possible average of competency -- because all the really talented people are not stupid; they're going to leave and go to those firms where there are no pay restrictions.

DR. MCLAUGHLIN: And they've done that. Some of them have done it.

MR. ZUCKERMAN: A lot of them have done it. And the way they're doing it is frankly doing it differently. You should have said, "Here, you have a total salary package that you can give to your top executives. Allocate it any way you want in order to keep your best people.

So this, in my judgment, is going to be the exact opposite of what we as the public should want, because these are the people who are going to be able to manage the money, not mismanage the money, which is what we're left with.

DR. MCLAUGHLIN: Also stock can be given out --

MR. ZUCKERMAN: Yes.

DR. MCLAUGHLIN: -- and it can be put under the condition that you're getting this stock in addition to the $500,000, which would include, I believe, all of the bonuses and the salaries.

MR. BUCHANAN: But Mort's point is well taken. There are obviously -- in this 175, there are probably people who should have been fired, and there are probably people who are in their mid-30s or something, working their heads off. "We're going to bring this bank back. We're going to do this. We're going to fight and bring it back." And they're going to look at this and they say, "We've got no future here."

DR. MCLAUGHLIN: This economy --

MS. CLIFT: No --

DR. MCLAUGHLIN: Wait a minute. This economy thrives on a marketplace. This destroys the marketplace. There is no marketplace. The government tells you what to do. Isn't that the fundamental problem with it?

MS. CROWLEY: Yes.

MR. ZUCKERMAN: The most important marketplace is for managerial talent. And what they're doing is saying, "Hey, anybody who's got any real talent, as soon as they can, they've going to move out of here." That's exactly what you don't want to do when you're putting in hundreds of billions of dollars. And, by the way, the $350 billion is not all of it, because the feds have guaranteed a lot of the debt of these banks, and therefore you're probably talking about $750 (billion) to a trillion dollars. MS. CLIFT: It's a pretty sad commentary on America if we only have a handful of really talented people who can work for millions of dollars instead of many, many millions of dollars. I think there are enough people around in this country to be able to handle that.

MR. BUCHANAN: But Eleanor --

MS. CLIFT: And I'll quote Alan Greenspan, who went on Capitol Hill and he said --

MR. BUCHANAN: Gosh --

MS. CLIFT: Well, he steered this economy --

MR. BUCHANAN: He did it. (Laughs.)

MS. CLIFT: -- for a long time.

MR. BUCHANAN: And we know that.

MS. CLIFT: And a lot of people worshiped him. And he said he thought the markets would not do this if they would correct things. He said, "I was wrong."

MR. BUCHANAN: All right, but let me ask you, Eleanor --

MS. CLIFT: You cannot have unfettered --

MR. BUCHANAN: Eleanor, let me ask you --

MS. CLIFT: Excuse me.

MR. ZUCKERMAN: It's a different point.

MS. CLIFT: You cannot have --

MR. ZUCKERMAN: That has nothing to do with this.

MS. CLIFT: You cannot have unfettered capitalism.

MR. BUCHANAN: Eleanor, you will leave --

MS. CLIFT: You have to have regulation. They're trying to --

MR. ZUCKERMAN: That's a different thing.

MS. CLIFT: Well, that's what we're talking about --

MR. ZUCKERMAN: No, it's not.

MS. CLIFT: -- is regulation. MR. ZUCKERMAN: He was talking about management's ability running all this money, not regulation in terms of --

MR. BUCHANAN: They will leave -- why wouldn't you leave --

MS. CLIFT: Why don't we put up --

MR. BUCHANAN: Hold it. Why wouldn't you leave --

MS. CLIFT: Why don't we put up the salaries of what these people make?

DR. MCLAUGHLIN: Hold on. Pat, go ahead.

MR. BUCHANAN: Why would you not leave General Motors when they're chopping the salaries and head straight over to Ford?

MS. CROWLEY: Right.

MR. ZUCKERMAN: Right. (Laughs.)

MS. CROWLEY: That's right.

MR. BUCHANAN: Why would you stay at General Motors?

MS. CROWLEY: You know, and on this point --

MR. ZUCKERMAN: It's already happening.

DR. MCLAUGHLIN: Let Monica in. Go ahead.

MS. CROWLEY: On your point about the marketplace and whether or not the free market even exists in this situation anymore --

DR. MCLAUGHLIN: Right.

MS. CROWLEY: -- if you were working at a non-bailed-out firm and your salary is kept intact and the government is not coming in to slash your salary, but the bailed-out firms, those executives are making half or 90 percent of what they made, well, then those firms have a cost advantage, because they're paying their executives less.

DR. MCLAUGHLIN: Right. Right.

MS. CROWLEY: So, therefore, the salaries of the folks in the non-bailed-out firms are going to be depressed as well.

DR. MCLAUGHLIN: Right. Then --

MS. CLIFT: We're not talking about minimum wage here.

DR. MCLAUGHLIN: What is the natural ultimate consequence of the destruction of the marketplace? MR. ZUCKERMAN: This is what it -- look, management is the key element and entrepreneurial ability is the key element in our economy. If you want to level it out and make us like Russia or England or whatever, good luck.

DR. MCLAUGHLIN: Was this designed to satisfy the public that wants people to hang?

MR. ZUCKERMAN: Yes.

DR. MCLAUGHLIN: Is that why --

MR. ZUCKERMAN: That's exactly -- it's a populist reaction. It's a political reaction.

DR. MCLAUGHLIN: It's feeding an ignoble instinct --

MR. ZUCKERMAN: Right.

DR. MCLAUGHLIN: -- that is self-destructive, even to the public.

MR. ZUCKERMAN: I agree with that.

DR. MCLAUGHLIN: Exit question: Are the pay caps sound policy or the pay caps populist appeasement? I ask you.

MR. BUCHANAN: It's 100 percent populist appeasement.

DR. MCLAUGHLIN: Eleanor.

MS. CLIFT: They are both. And the government is searching for a way to restructure risk, as Monica pointed out, so that these firms do not take us over the cliff once again.

MS. CROWLEY: Look, this is --

DR. MCLAUGHLIN: Can you -- don't you think that the president would have recognized what we're talking about here, what the ultimate evil payoff is to this?

MS. CROWLEY: I think he does understand it. The irony is he was on Wall Street this week doing a fund-raiser, and the people that he was slapping in the face were giving him millions of dollars -- (laughs) -- for Democratic campaign purposes.

I do think that this is populist retribution. I think that the unintended and the intended consequences of this are going to be very severe.

DR. MCLAUGHLIN: Is this throwing out the baby with the bath water?

MR. ZUCKERMAN: I mean, I think it -- yes, I think it is, by the way. But the public's reaction is perfectly natural. They don't want to bail out the very people who got us into all this trouble and they don't want to pay them well. But now they're going to -- what happens is all the good people, the talented people, are going to bail out from these companies.

MS. CLIFT: They're not working for minimum wage. These are salaries that are excessive beyond the imagination. MR. ZUCKERMAN: That is not the issue.

MS. CLIFT: That is the issue.

DR. MCLAUGHLIN: So you want government to step in and correct it.

MS. CLIFT: And there are perks, and there are perks that are beyond imagination as well that are being reined back, and rightfully so.

DR. MCLAUGHLIN: My view is it's bad news.

Issue Two: Hillary, Stay With It.

SECRETARY OF STATE HILLARY CLINTON: (From videotape.) No. No. I'm looking forward to retirement at some point.

DR. MCLAUGHLIN: Hillary, forget retirement. Don't stop thinking about tomorrow. The newest poll on you says that a consensus of Americans think of you favorably -- 65 percent. That's five points more than Obama. So says the CNN poll. The Gallup poll on you from two weeks ago also says that a consensus of Americans think of you favorably -- 62 percent. That's six points more than Obama.

Fifteen months ago, Hillary Clinton conceded the race for the presidency after 15 months of campaigning against Obama for the Democratic nomination. She lost. Now she's on the Obama team as secretary of State.

Question: Does Hillary's growing popularity reflect Obama's declining popularity? Eleanor Clift.

MS. CLIFT: No, John. The president is in the eye of the storm, dealing with a lot of problems. Hillary Clinton has the luxury, probably for the first time in her public life, to be operating mostly under the radar and doing good work. And people don't have anything to dislike her about right now. So her poll ratings are high, as they should be, and she is doing a good job.

That doesn't mean that she's going to challenge the president in 2012. To me, that is almost unthinkable. I think Obama would have to totally crater for a sitting secretary of State to challenge the president of her own party. I remember when Ted Kennedy challenged Jimmy Carter. Inflation was double digits and our hostages had been taken in Iran. And Kennedy, as popular as he was and is among Democrats, could not wrest the nomination from Jimmy Carter.

MR. BUCHANAN: John, Hillary is popular.

MS. CLIFT: So it would be a fool's errand. MR. BUCHANAN: She is not powerful. She is not Foster Dulles. She is not Acheson. She is not Henry Kissinger.

MS. CLIFT: Yet. (Laughs.)

MR. BUCHANAN: She has rivals -- wait a minute. She's got rivals in the vice president. She's got a rival in Kerry. She's got these czars over there for Af-Pak, Holbrooke. She's got Mitchell on the account, the Israeli account. She's got Dennis Ross for Iran. Her power is all dissipated.

But she is popular. I think she's done, in small areas, good things. But she's not the major or even a very, very prominent figure. The Pentagon is taking power away from State.

DR. MCLAUGHLIN: You could not be more wrong. (Laughter.) And you ought to read two pages written by John Heilman in the current issue of New York Magazine.

MR. BUCHANAN: That's New York Magazine. (Laughs.)

DR. MCLAUGHLIN: He'll set you straight. He will also indicate how smoothly, what shall I say, almost unseen that Hillary has taken over the job. She's done her homework. She hasn't tried to assume center stage. She hasn't tried to eclipse Obama in any way. In fact, okay, Hillary full of grace.

In Zurich two weeks ago, Turkey and Armenia signed an historic agreement aimed at ending a century of hostility that dates back to the 1915 Armenian genocide, which killed 1.5 million Armenians. A last-minute snag threatened to void the deal. Clinton was on site in Zurich. On her limo cell phone, she spoke four times with the Turks and three times with the Armenians, keeping the deal on track. She then raced through Zurich's streets to bring the Turks and Armenians face to face for hours of negotiations. In the end, the accord was signed and saved.

Then she flew to London, Dublin and Belfast to fortify the Northern Ireland peace agreement, then on to Moscow to lean on the Russians to restimulate Iran's dovish posture on the threshold of the Vienna nuclear attacks, and those appear to have worked also.

Question: If Obama continues to hemorrhage support, does Hillary have the political sangfroid to resign her post and run against him for the Democratic nomination in 2012? Monica.

MS. CROWLEY: I predicted several weeks ago in my column in the Washington Times that she would do exactly that. She's not going to be a sitting secretary of State. She will resign her post over some critical national-security issue, whether it's Iran getting the bomb; perhaps it relates directly to Israel. She will resign her post if she sees that the economy does not improve in time for Obama really to ride the crest of economic growth and if Obama's poll numbers continue to tank. And I would say they would have to be below 45 for her to entertain this.

But Hillary Clinton's ambitions to be president have not dissipated. When she was asked this week whether or not she'd run again, she laughed and bought herself a couple of seconds before she could collect her answer. I think that both Clintons are positioning themselves for another run, and not in 2016, when she'll be too old, but 2012. And she can put together a coalition even without African- Americans and wrestle that nomination away from him, because the difference between --

MR. BUCHANAN: This is absurd.

MS. CLIFT: Dream on. Dream on.

MR. BUCHANAN: This is absurd.

DR. MCLAUGHLIN: Wait, wait, wait. Eleanor, I'm going to address this to you, because I want to make sure we understand where Obama is right now. What I have here is that he has lost support faster during his first year in office than any other president in the history of Gallup's tracking of presidential approval ratings. Gallup has his third-quarter average of 53 percent versus above 60 percent in the first and second quarter. Obama has dropped 9 percent in his job approval.

That's the most for any president at a comparable time since 1953.

Doesn't that explain why Hillary might be running for president?

MS. CLIFT: No. First of all, Obama started --

MR. ZUCKERMAN: No. I think that --

DR. MCLAUGHLIN: I want to hear from --

MS. CLIFT: He started at an artificially high level, and so he had further to fall. Secondly, he's likely going to get a health-care bill. He's going to sign a financial-services regulatory bill that the mainstream will like.

DR. MCLAUGHLIN: Will he get the public option? We talk about that coming back.

MS. CLIFT: He will get a modified public option, an opt-in or opt-out phase. So he's going to look better. But the main thing is people are worried about troops in Afghanistan and they're worried about unemployment. And if unemployment is coming down, it doesn't have to be 7 percent --

MR. BUCHANAN: John --

DR. MCLAUGHLIN: Do you agree with Eleanor that this is a cause but it is not in any way lethal?

MR. BUCHANAN: John, this is the most absurd scenario I have ever heard in my life that the secretary of State could stand down, challenge the president in the primaries, defeat him.

MS. CROWLEY: You don't know the Clintons, Pat. (Laughs.)

MR. BUCHANAN: You would split the Democratic Party in half.

DR. MCLAUGHLIN: I heard you say the same thing about Obama himself when he was running for the election.

MR. BUCHANAN: You will elect -- DR. MCLAUGHLIN: "It's the most absurd thing ever."

MR. BUCHANAN: You will elect a Republican in a second. Hillary Clinton is not brain-dead. She is smart.

MS. CROWLEY: Look --

DR. MCLAUGHLIN: I want to let Mort in.

MS. CLIFT: She's a loyal Democrat too. (Laughs.)

DR. MCLAUGHLIN: Mort, by the way, you're quoted in the same magazine.

MR. ZUCKERMAN: Yes, I am. But let me just say this. Hillary Clinton is not stupid politically. And, by the way, neither is her husband. There is no way that they'd have -- I agree with Pat -- no way that they would have a chance to run again.

But the real issue in terms of where the politics are going to be next year and in three years is what's going to happen to the economy, and particularly to employment. And on that ground, Obama is in real trouble. It doesn't mean that Hillary could run. There's no way she could run under those circumstances.

DR. MCLAUGHLIN: Your timetables have to be turned upside down. The acceleration in today's society is invading all areas, including politics. Why don't you get accustomed to that and reflect it in the Daily News and in your other massive billion publications?

MR. BUCHANAN: Hillary would not get a single African-American vote.

MR. ZUCKERMAN: You know, if you had read them all, you would realize that we're ahead of the curve, not behind the curve.

DR. MCLAUGHLIN: There is an acceleration going on in every respect --

MR. ZUCKERMAN: There may be --

DR. MCLAUGHLIN: -- including the laws of politics.

MR. BUCHANAN: John, she would not get a single African-American vote if she did that. She'd get --

DR. MCLAUGHLIN: Oh, who knows? Who knows?

MR. BUCHANAN: If they're doing that to Obama?

DR. MCLAUGHLIN: I've talked to African-Americans who are displeased with this president. MR. ZUCKERMAN: No way. I agree with Pat. Have you?

MS. CLIFT: (Inaudible.)

MS. CROWLEY: Yes.

DR. MCLAUGHLIN: Wait a minute. Let her in.

MS. CROWLEY: Pardon me. On the point about the African- Americans, that is true. However, if you look at what is happening to the African-American governor of New York State, David Paterson, blacks are fleeing from him, and they want to back Andrew Cuomo --

DR. MCLAUGHLIN: Right.

MS. CROWLEY: -- who is white.

DR. MCLAUGHLIN: Issue Three: What Rules? Answer: The Bomb.

SEN. JOHN KERRY (D-MA): (From videotape.) Pakistan is frankly the center of our strategic focus, and in many ways more important than Afghanistan.

DR. MCLAUGHLIN: Pakistan rules. Senate Foreign Relations Committee chairman, and 2004 chosen candidate of the Democratic Party to be U.S. president, John Kerry reflects what is the prevailing wisdom of the Pentagon and the State Department. Pakistan is the focus, not Afghanistan. The reason: The nuclear bomb. Afghanistan has no bomb. Pakistan has 60 bombs. One of those Pakistan bombs could end up in al Qaeda's arsenal if the focus is taken off Pakistan. That's the thought -- not nice.

STEPHEN BIDDLE (Council on Foreign Relations): (From videotape.) Pakistan is a country in which we obviously have national-security interests at stake. Should Pakistan collapse and risk the security of its nuclear arsenal, American security would be directly a threat.

DR. MCLAUGHLIN: Pakistan itself knows this. In a 4,500-square- mile region of Pakistan -- larger than Delaware, smaller than Connecticut -- Pakistan has deployed 30,000 soldiers to take on 12,000 fighters made up of al Qaeda, the Taliban and other militants. Waziristan is a mountainous area and has become a haven for jihadist fighters.

Question: Over the past 18 days, there have been seven attacks by militants against major government or security installations in Pakistan. What accounts for the escalation? I ask you, Pat.

MR. BUCHANAN: A number of things, John. First, it's retaliation for the American drone strikes that are killing their own people. But more than that, it is anticipatory for this Pakistani 30,000-troop invasion of South Waziristan. They're making the Pakistani government, Pakistani military pay a price for this. They attacked the major army base, which would be like our Fort Benning; went in, killed a number of people.

What we're getting here, John, is an all-out war in which the fate of Pakistan is going to be decided. And, you know, when Obama puts troops or doesn't put troops into Afghanistan, one of the major considerations is if Afghanistan collapses, that becomes the sanctuary for the Taliban, al Qaeda and everyone else, and it becomes the war of Pakistan.

DR. MCLAUGHLIN: What should be the level of our review of what's going on in Pakistan and our commitment to Pakistan?

MR. ZUCKERMAN: Well, we have a major commitment to Pakistan, for the reasons that Pat just outlined, because they have a substantial -- people don't even know how many nuclear weapons they have. But the one thing we do know is the last thing we want to have are radical regimes in charge of that kind of nuclear weaponry. And Pakistan is very vulnerable, for all kinds of reasons. But the last thing in the world that we want to do is to make them even more vulnerable.

The Pakistani foreign minister came out with a blistering critique of the possibility that the United States may reduce its commitments or not fulfill the commitments they thought were going to be made in Afghanistan, because that's what's going to undermine confidence in them. And what will happen is then the Taliban will use Afghanistan as a base from which to attack Pakistan.

DR. MCLAUGHLIN: Benazir Bhutto was assassinated a couple of years ago, and her husband is now running Afghanistan (sic/means Pakistan).

MR. ZUCKERMAN: Right.

DR. MCLAUGHLIN: Have you met him?

MR. ZUCKERMAN: I have met him, yes.

DR. MCLAUGHLIN: Are you impressed by him?

MR. ZUCKERMAN: Well, I'm going to put it this way. I have a Pakistani friend who's a journalist. He used to be known, when he was in Pakistan, as Mr. Ten Percent. And I said, "Is he still being called Mr. Ten Percent?" which is a degree of graft. He said, "No, he's now called Mr. Thirty Percent." So the man is totally corrupt. And he's not stupid, but he's totally corrupt. And that is a part of the problem.

MS. CLIFT: Well, his name --

MR. ZUCKERMAN: There isn't an honorable government there.

DR. MCLAUGHLIN: All right, one minute, Eleanor.

Has the army shifted any of their allegiance away from defending themselves against the Taliban in favor of the Taliban? That was around about six months ago. Is that real?

MR. ZUCKERMAN: I don't really think so.

DR. MCLAUGHLIN: Eleanor.

MS. CLIFT: The president --

MR. ZUCKERMAN: I think, by and large, they are still loyal to Pakistan and to the president.

One of the mistakes that we made after they exploded an atomic bomb, we stopped training their senior officers in American command schools and we lost a little bit of that contact. We've changed that now. DR. MCLAUGHLIN: Do you think --

MS. CLIFT: Well, the president of --

DR. MCLAUGHLIN: -- that Obama wants to wait until -- on his Afghanistan decision -- and he deserves a break in that regard, because he wants to see a little bit more about what our relationship ought to be with Pakistan.

MS. CLIFT: The president of Pakistan has a name. It's President Zardari. And he has been a strong ally for this country, much stronger than Musharraf. And he's paying a price for that, because all of these leaders can't afford to look like they're handmaidens of the U.S.

And, you know, secondly, the administration, in the review of what to do about Afghanistan, Newsweek reported that the vice president asked the question, "What is the budget for Afghanistan? What is the budget for Pakistan?" Afghanistan was $65 billion and Pakistan was $3 billion. And Pakistan has a nuclear bomb. Our strategic interests there are far greater. So what's wrong with this picture?

DR. MCLAUGHLIN: Predictions. Pat.

MR. BUCHANAN: John, there's a big battle in the 23rd district of New York, maybe more important than any other race this fall. And the conservative candidate may win it. His name is Hoffman. The Republican candidate will run third.

DR. MCLAUGHLIN: Fascinating.

Eleanor.

MS. CLIFT: Republicans will continue to push the scenario that Hillary will challenge Obama, because it raises lots of money and it makes Obama look weak. I say keep your eye on Sarah Palin. I think she's going to run in 2012. And, boy, I'd like that. (Laughs.)

MS. CROWLEY: It could be a woman's year in 2012. I don't disagree with Eleanor on that.

The Chinese posted a nearly 9 percent growth rate for the third quarter. So the Chinese government is going to rein in their stimulus spending and start focusing on potential inflation.

DR. MCLAUGHLIN: Mort.

MR. ZUCKERMAN: Well, the Federal Reserve is going to maintain the lowest level of interest rates they possibly can all through next year, because the unemployment rate is going to go up. And everybody is very concerned that the economy might go down another double dip. DR. MCLAUGHLIN: Currently there are 27 members in the European Union. I predict that by December 2010, next year, there will be two new members, Ukraine and Iceland. Take it to the bank.



END.