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THE MCLAUGHLIN GROUP HOST: JOHN MCLAUGHLIN PANEL: PATRICK BUCHANAN, MSNBC; ELEANOR CLIFT, NEWSWEEK; MONICA CROWLEY, WASHINGTON TIMES; MORTIMER ZUCKERMAN, U.S. NEWS & WORLD REPORT TAPED: FRIDAY, MARCH 5, 2010 BROADCAST: SUNDAY, MARCH 7, 2010

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MR. MCLAUGHLIN: Issue One: Reaganomics or Obamanomics?

PRESIDENT BARACK OBAMA: (From videotape.) The American people want to know if it's still possible for Washington to look out for their interests and their future. They're waiting for us to act. They're waiting for us to lead.

MR. MCLAUGHLIN: Like President Obama, President Ronald Reagan, whom President Obama singles out as, quote, "changing the trajectory of America," unquote, entered his first term during a steep recession. Like Reagan, Obama's initial popularity has plummeted in the face of high unemployment and economic malaise. And like Reagan, Obama's party faces steep losses in the coming midterm elections. But there's one major difference between President Reagan and President Obama. In Reagan's first year in office, he implemented a coherent, four-part program for economic recovery.

Part one: Curb double-digit inflation. Reagan appointed Paul Volcker, Federal Reserve chairman, with the mandate to kill inflation, even at the price of high interest rates.

Part two: Cut taxes to create jobs. Reagan pushed the Kemp-Roth tax-rate cuts for individuals and businesses to jump-start private- sector job creation.

Part three: Get the government off business's back. Reagan slashed thousands of federal regulations to take the burden off business and promote growth.

Part four: Freeze federal spending. Reagan reined in the federal budget through hiring freezes and cuts in discretionary spending.

Collectively, these measures, which were in place by the end of Reagan's first year, were dubbed Reaganomics. Over the following two years, they generated 7 million new private-sector jobs. Reagan spoke to the success of his program during his second inaugural address in 1985.

PRESIDENT RONALD REAGAN: (From videotape.) Four years ago, I spoke to you of a new beginning, and we have accomplished that. Tax rates have been reduced, inflation cut dramatically, and more people are employed than ever before in our history.

MR. MCLAUGHLIN: Question: President Obama last year produced a stimulus bill to relieve the economic crisis. It pumped $787 billion into the economy. This year, a $15 billion jobs bill was passed, thanks to Mr. Obama. Does this add up to a comprehensive economic recovery program, a la Reagan? Pat Buchanan.

MR. BUCHANAN: John, first, Carter appointed Volcker the first time.

MR. MCLAUGHLIN: But he was influenced to do so by Reagan.

MR. BUCHANAN: Reagan reappointed him. Second, Reagan did do some very heavy spending on national defense -- 600-ship Navy, cruise missiles, Pershing missiles, MX missiles, tanks and all that. But the difference between -- the main difference between Obama and President Reagan is Reagan bet the ranch, everything, on tax cuts -- tax cuts across the board for individuals, capital-gains tax cuts, corporate tax cuts. In other words, he bet on the private sector to rescue the American economy. And it worked. After a couple of years, it worked. Obama's $787 billion, enormous amounts of that went to state governments, local governments, make-work jobs, things like that. It was -- for some of us, it was the wrong prescription. It was 6 percent of GDP. But it was a mistake, I think, the way he structured it. But we're going to find out. One of them ran a conservative Keynesian policy, the other a liberal Keynesian policy.

MR. MCLAUGHLIN: Eleanor, do you agree with that?

MS. CLIFT: No. There's some revisionist thinking going on here. Reaganomics did not work, certainly not the first two years. When the midterm elections were held during Reagan's tenure, unemployment was at 10.8 percent.

Now, I will grant that with the force of his personality and the conviction and the confidence that he projected, he kept Americans believing in him. And that's where I think President Obama has failed. This president inherited an economic situation far worse than what Reagan had, because this was a meltdown of the financial system. And he has brought the economic back from the brink.

The stimulus bill and the other programs -- health care, ushering in a new green economy -- they've been interpreted by his critics as all these individual government takeovers. He has failed in projecting a narrative of how he's trying to rebuild this country.

MR. MCLAUGHLIN: There you have it. With Reagan, it was not economics. It was personality. Do you agree with that?

MS. CROWLEY: No, I totally disagree with that. Look, you quoted then-candidate Obama, January of '08, saying that President Reagan changed the trajectory of America. He said he set us on a fundamentally different path. I think Obama sees himself in the Reagan model, only with a 180-degree different kind of political and economic philosophy, and that is that Reagan wanted to limit the size of government and to reduce the dependency that Americans had on the government.

Obama is the exact opposite. Obama seeks to expand government and also to increase the base of people dependent on it. And when you asked whether he has a coherent strategy, I do think he does, John. Economically, nothing he has done has worked -- the stimulus, the jobs bill; nothing has worked. But when you look at his rather coherent vision of expanding government, it does involve health care, this massive $2.5 trillion new entitlement, and also energy. Those are the two cornerstones, cap and trade and health care, because if he was able to get those things done, that would mean an expansion of government that could not be repealed. That kind of modern liberal project, that's what he's all about.

MR. MCLAUGHLIN: Was there a tax difference between the two?

MS. CROWLEY: Well, of course. Look, President Reagan, as Pat pointed out, he was all about tax cuts, putting money back -- MR. MCLAUGHLIN: Tax cuts, right.

MS. CROWLEY: -- into the hands of the American people so that they could grow jobs; the economy could prosper.

Barack Obama is all about government solutions and acquiring as much of your own private property through taxes and through grabbing more of your economic freedom to the government and having the government then control your life and control as many of the individual decisions --

MR. MCLAUGHLIN: And clandestine subsidies within his program.

MS. CROWLEY: Oh, there are subsidies all over the place, John.

MS. CLIFT: You know, this is like --

MR. ZUCKERMAN: Can I --

MS. CLIFT: I just want to say one thing. This is like --

MR. ZUCKERMAN: You always want to say one thing.

MS. CLIFT: -- this conversation here of just burying Obama and resurrecting Reagan --

MS. CROWLEY: We're talking about --

MR. MCLAUGHLIN: Let's --

MS. CLIFT: -- and forgetting what happened to the economy.

MR. ZUCKERMAN: Can I say -- do you mind if I say something?

MS. CLIFT: Go for it, Mort. (Laughs.)

MR. ZUCKERMAN: Thank you. The critical thing --

MR. MCLAUGHLIN: By the way, welcome.

MR. ZUCKERMAN: Thank you very much.

MR. MCLAUGHLIN: Glad to see that you came to your senses. The balloon deflated. (Laughter.) You handled it beautifully.

MR. ZUCKERMAN: Well, thank you very much. I really appreciate it. MR. BUCHANAN: It was a great campaign.

MR. MCLAUGHLIN: Mort is not going to run for the United States Senate.

MR. ZUCKERMAN: I'll get back to that at some other year. But for the moment, let me just talk about what Reagan did. Reagan supported Paul Volcker. Paul Volcker raised interest rates to 20 percent. It broke the back of inflation and started us on what is called the great moderation, which lasted for 25 years without inflation. It was a huge, huge impact and a huge thing. And that's why the unemployment rate went to 10.8 percent, because he was willing to do what it took to break the back of inflation. That took it --

MS. CLIFT: That under Carter.

MR. ZUCKERMAN: Just what was an extraordinary accomplishment that a president would back the head of the Federal Reserve to do that, okay?

MR. BUCHANAN: Right.

MR. ZUCKERMAN: He took the political heat. Now, he did have a program, without question, of limiting government, lowering taxes, which were much higher in relation to income even than they are today by far. So I think it did work. He had a different set of circumstances.

MR. BUCHANAN: Right.

MR. ZUCKERMAN: I think, if I may say, there are two problems that we have to deal with today. One is the financial system, which I believe Bernanke was the one who basically saved it through unique ways and original ways of getting liquidity into the financial system. It wasn't a perfect solution, but it was the best we had.

The other was the economy, because we were faced with a huge -- look, he introduces his program; the unemployment rate goes up, not down, okay, contrary to what he said. He said it was going to stop at 8 percent. We're now at, you know, roughly 10 percent. But that doesn't tell the real story. The real unemployment rate is close to between 17 (percent) and 20 percent, depending how you count it. And he has not addressed that issue.

MR. BUCHANAN: John --

MR. MCLAUGHLIN: Yeah.

MR. ZUCKERMAN: Instead he did introduce and (stored ?) all of his political capital with the health-care program.

MR. BUCHANAN: John, the fundamental -- MR. MCLAUGHLIN: I want to pick up the point of Ben Bernanke. Ben Bernanke's staying on, and he has the backing of President Obama. Is that correct?

MR. ZUCKERMAN: Yes.

MR. MCLAUGHLIN: And that's good news.

MR. ZUCKERMAN: Yes.

MR. MCLAUGHLIN: Quickly.

MR. BUCHANAN: The difference today, John, government is consuming something like 40 percent of the entire gross national product; the weight on the private sector far greater than it ever was in Reagan's years.

MR. MCLAUGHLIN: What's the percentage?

MR. BUCHANAN: It's almost 40 percent if you add them all up. Besides, let me say this.

MR. MCLAUGHLIN: We've got a 14 --

MR. BUCHANAN: Reagan's tax cuts did not take effect until 1983.

MR. MCLAUGHLIN: Exit question: Democrats take comfort from Ronald Reagan's example. They believe that if President Barack Obama stays the course, he'll rebound politically by 2012 as Reagan did. Is that hope realistic? Pat.

MR. BUCHANAN: Look, I hope it happens. But John, I genuinely believe the situation is so bad with this mammoth deficit, almost 40 percent of the damn budget, I think that the United States could very well face that big second collapse, just like 2008.

MR. MCLAUGHLIN: Eleanor.

MS. CLIFT: Unemployment went up from 7.4 percent when Reagan took office to 10.8 (percent) at the two-year mark. So by that measure, this president is doing better. I think he needs to do what President Reagan did and stick with the policies and the confidence in the policies, and the government deficit spending now is necessary to fill the hole that was created by the global meltdown.

MR. ZUCKERMAN: Yes.

MS. CROWLEY: Eleanor says --

MS. CLIFT: The long-term deficits are another matter, and I believe this president will address them -- MS. CROWLEY: Eleanor says --

MS. CLIFT: -- which is essential.

MR. MCLAUGHLIN: I'm going to have another conversation with her.

MS. CROWLEY: Okay, good. (Laughs.) Eleanor says, "Oh, he's going to do like Reagan and have the confidence in his policies." The problem is, his policies are all wrong and are having a counterproductive effect on the U.S. economy.

Look, if government spending really produced economic growth, Greece would be booming. And if deficit spending really produced economic growth, we would have the same situation. We don't. You have to unleash the private sector and individuals and small businesses to pull this recovery out from under the weight of, as Pat points out, the public sector.

MR. MCLAUGHLIN: Obama has not accomplished really what Reagan did in his first year, and he may have lost control of the ball. Do you believe that?

Number two, Reagan's plan was quite structured. It was a coherent and comprehensive plan. We've seen a lot of bits and pieces of Obama, but when is he going to give the country a comprehensive exit from the situation we're in?

MR. ZUCKERMAN: This I don't know, because I frankly think he's lost a lot of credibility on the issue of the economy. I do agree with what Eleanor said in this respect. The federal government had to make up some of the deficit in spending, because we had a collapse of housing.

MR. MCLAUGHLIN: Yes.

MR. ZUCKERMAN: We've gone from 1,600,000 housing units to 300,000 on an annualized basis of new construction. That's a huge drop. We've had a huge increase in unemployment. The federal government had to do something in that regard.

The problem, in my judgment, the stimulus program, A, was not large enough, in my judgment; and B, it was very badly structured, because it did go, as Pat said, to support a lot of, frankly, public- service unions. And that does not create jobs. It also gave tax benefits to people who were not going to create any jobs.

So I thought it was very badly structured. And now we're suffering from it, and now he's lost the credibility with the Congress and with the public -- that is, Obama has -- to do anything significant. The jobs bill here, which is $15 billion, was originally $85 billion. MR. BUCHANAN: You've got a trillion dollars --

MR. MCLAUGHLIN: Quickly.

MR. BUCHANAN: -- trillion dollars sitting out there that the Fed has put out there. It's all this toxic paper. I'll tell you, we are not out of the woods when it comes to a sudden explosion of inflation.

MS. CLIFT: No, we're not --

MR. BUCHANAN: If this economy starts moving -- I'll tell you, if this economy starts moving, he's going to have to pull that money out.

MS. CLIFT: I think this president's policies are sound. I think there are glimmers of hope there. The numbers are moving in the right direction. I think getting jobs back is a huge mountain that's not going to be climbed, certainly not by November, if ever.

And what has surprised me the most about this president is for someone who ran on an overarching vision and who had the message discipline to convey that vision, that he has not been able to connect the dots of the various programs that he has put in place, and he has allowed his critics to portray them as government takeover when government involvement was essential during this period.

MS. CROWLEY: That's exactly what it is, and that's the whole agenda.

MR. MCLAUGHLIN: He had spread himself too big a canvas. It's still too big a canvas. He's got to get out of the health thing. He's trying to do that. He set a date.

MS. CLIFT: No, he's not getting out of it. He's got to get it to pass.

MR. MCLAUGHLIN: And then he wandered this week into yet another field.

Issue Two: Democrats' Angst.

TIM KAINE (Democratic National Committee chairman): (From videotape.) We're going to do a lot better than people think.

HOUSE SPEAKER NANCY PELOSI (D-CA): (From videotape.) He's not fully prepared to face the American people with the integrity of what we have put forth and with the political power to go with it to win those elections.

MR. MCLAUGHLIN: The House speaker and the chair of the Democratic National Committee are predicting that the 2010 elections will go to the Democrats. Others think the opposite. They think the Democrats are singing in the rain; in fact, worse. Democrats are facing a bloodbath that will include the party's majorities in both the Senate and the House. And that negative forecast was made before this week's Democratic setback in New York. Congressman Charles Rangel announced that he was stepping down from his chairmanship of the extremely powerful Ways & Means Committee.

REP. CHARLES RANGEL (D-NY): (From videotape.) In order to avoid my colleagues having to defend me during their elections, I have this morning sent a letter to Speaker Pelosi asking her to grant me a leave of absence.

MR. MCLAUGHLIN: Rangel has served over 40 years, representing Harlem in New York. He was admonished by the House for accepting trips to the Caribbean by corporate donors, a violation of the ethics rules.

Were there other reasons why Charlie Rangel resigned?

MS. CLIFT: Well, he got essentially a wrist slap from the Ethics Committee, based on one narrow charge. But the Ethics Committee was investigating a lot of other things, and Democrats did not want to go into the November elections having to defend him.

And, you know, Charlie Rangel is a -- I would even say a beloved figure on Capitol Hill, and he's a very good legislator. But he maybe overstayed his time. They rewrote the rules. He's kind of on the wrong side of those rules. So I think stepping down was the right thing for him to do, and I doubt he'll ever get his chairmanship back.

MS. CROWLEY: There's a tragic irony here, too, because Charlie Rangel's predecessor, Adam Clayton Powell, was actually forced out on very similar kinds of ethics violations. And 40 years ago, Charlie Rangel, a young whippersnapper out of Harlem, a hard-charging guy, said he was going to come in and help clean up the institution.

Look, I think the Democrats are starting to create a cornucopia of corruption narrative here, where you don't just have Charlie Rangel, but now you have Congressman Eric Massa, who is probably set to resign early next week on a possible sexual-harassment allegation. You have Congressman Gregory Meeks, who's being looked at for allegations that he misused charity money he helped raise for Hurricane Katrina victims.

And the problem is just like with the Republicans in '06. Once you have a pattern that starts to be ingrained in the public consciousness, then you've got a problem.

MR. MCLAUGHLIN: Yeah.

MR. BUCHANAN: Then you've got Blago's trial coming up maybe in June.

MR. MCLAUGHLIN: Blago is? MR. BUCHANAN: And we may not have a governor of New York by week's end. You can never tell. Mr. David Paterson has had some real problems, John. I don't think we've gotten to the culture-of- corruption type thing that hit the Republicans in 2006, but we are advancing on it, quite frankly.

MR. MCLAUGHLIN: Well, then you have Congressman Massa.

MR. ZUCKERMAN: Well, I think there is just an enormous sense in the country of really dismay, even disgust, over the way our American politics are carried on. I'm just astonished at the response that a lot of people are getting to just find a way to change the system there.

And there's just a complete disgust and dismay and contempt for it. And nobody knows how to get it under control.

MR. MCLAUGHLIN: Why is Delahunt resigning in Massachusetts?

MS. CLIFT: I think he's just burned out.

MR. BUCHANAN: He's had enough.

MR. ZUCKERMAN: Yeah.

MS. CLIFT: I mean, he's an admired figure. I don't think there's any even hint of any problems with his resignation. He's just had enough. A lot of people have had enough. But Nancy Pelosi promised to have the most ethical Congress. And you can't make her responsible for the governor in New York or the governor in Illinois.

MS. CROWLEY: No, but she's got members --

MS. CLIFT: And I want to remind you that Tom DeLay was indicted and the Jack Abramoff scandal was a lobbying scandal that touched a lot of members of Congress.

MR. MCLAUGHLIN: All right, now, it's being reported --

MS. CLIFT: So these are isolated individual instances.

MR. ZUCKERMAN: Let me say one thing. I've got to say one thing.

MR. MCLAUGHLIN: Quickly, quickly.

MR. ZUCKERMAN: The sense of political corruption in the way the health bill was managed is what disgusted the -- it's not just personal corruption; it's political corruption.

MR. BUCHANAN: Buying and selling votes.

MS. CROWLEY: You know, and you can't excuse bad behavior by citing other bad behavior. The American people aren't going to take that. And based on what Mort just said, I think he's right. And that helps to explain the huge anti-incumbency feeling in America. MR. MCLAUGHLIN: Congressman Massa --

MS. CROWLEY: Democrats are going to bear the brunt of it, but it's --

MR. MCLAUGHLIN: Congressman Massa is resigning on Monday, it appears. Will that stop the bleeding?

MR. ZUCKERMAN: No.

MR. BUCHANAN: No.

MS. CROWLEY: No, I think it -- again, if this kind of drip, drip, drip --

MS. CLIFT: He's a one-term congressman that nobody's heard of.

MS. CROWLEY: If the drip, drip, drip continues for the Democrats --

MR. BUCHANAN: John, the country wants to be rid -- John, the country wants to be rid of the entire Congress of the United States. Its approval rating is somewhere between 11 and 18 percent. Democrats control both houses, and therefore they're the ones that are going to take the brunt of this anti-incumbent feeling, because it's anti- Democratic as of now.

MS. CLIFT: Well, hope springs eternal.

MR. BUCHANAN: (Laughs.)

MS. CLIFT: They'll pass health care, and the insurance companies won't be able to toss you off --

MR. BUCHANAN: And they will --

MR. MCLAUGHLIN: Exit question --

MR. BUCHANAN: People will love Obama.

MR. MCLAUGHLIN: So where do you come down on this? Are the Democrats in deep --

MR. BUCHANAN: Deep kimchi. (Laughter.)

MS. CROWLEY: Deep poop? (Laughter.)

MR. MCLAUGHLIN: Are they singing in the rain? Is it raining on them cats and dogs?

MR. BUCHANAN: I think any honest Democrat is expecting a real bloody wipeout this fall. The only question is whether they lose one or both houses. MR. ZUCKERMAN: Right. I agree with that.

MS. CLIFT: Well, President Reagan lost 26 seats in the House. He didn't lose any seats in the Senate. That was a very good midterm.

MR. BUCHANAN: He's on Mount Rushmore. (Laughs.)

MS. CLIFT: If the Democrats can contain the damage to that, it'll be a very good year.

MR. ZUCKERMAN: Right now there are 100 seats in the House that the Democrats are in real trouble on. And there are many seats in the Senate. I'll tell you, if they get -- if the Republicans and the independents in New York get a decent candidate, they'll carry New York and about eight or nine other states. So I think they'll definitely lose the House --

MR. MCLAUGHLIN: Quickly.

MR. ZUCKERMAN: -- and they very well may lose the Senate.

MS. CROWLEY: There are three big things mitigating against the Democrats this year: Number one, the anti-incumbency wave; number two, the economy, which still looks pretty grim; and number three, the Democrats seem intent on flying this health-care kamikaze mission.

MR. MCLAUGHLIN: Mitigating? You mean exacerbating.

MS. CROWLEY: Exacerbating, I'm sorry. Yes, exacerbating the Democrats' problems. (Laughs.)

MR. MCLAUGHLIN: I can see how you could confuse those words.

MS. CLIFT: Health care is mitigating. (Laughs.)

MR. MCLAUGHLIN: Quickly.

MR. BUCHANAN: You've already spoken.

MR. ZUCKERMAN: I think the Democrats are in the deepest trouble they've been in in decades, and I don't see how they get out of it, in part and mostly because you're going to have a terrible jobs number for the rest of the year and a major --

MR. MCLAUGHLIN: I think --

MR. ZUCKERMAN: Well, this is going to be my prediction. Housing prices are going to continue to decline.

MR. MCLAUGHLIN: They're not singing in the rain. They're singing in a hurricane. If they were drinking, this would be a hurricane party. Issue Three: California Screamin'.

CALIFORNIA GOVERNOR ARNOLD SCHWARZENEGGER (R): (From videotape.) No matter what you do, you cannot turn around from one day to the next the world economy. The world economy has fallen -- the whole world. If you read newspapers from Germany, it's the same story as reading a newspaper from California.

MR. MCLAUGHLIN: You may be right, Governor. The economic meltdown is a world issue. But that doesn't mean that we should take our eye off your state, does it? California is struggling with massive deficits. The state is looking at a budget gap for this year of -- get this -- $20 billion.

That's not only bad news for the state; it's bad news for the United States. The California economy is the eighth-largest economy in the world, larger than Russia or Spain or Brazil or Canada and five others -- an economy that totals $2 trillion. If California can't balance its books, that could start a domino effect where other states will default as well. So says JPMorgan CEO Jamie Dimon, who calls a California default a, quote-unquote, "contagion."

Question: Can California bring down the American economy? Monica.

MS. CROWLEY: Well, it certainly can have a huge detrimental effect on the U.S. economy. It's a huge part of the U.S. economy. But, look, I mean, what we have seen over the past couple of years is California really sinking deep into the abyss. And, in fact, last year they papered over the budget deficit with all of these different gimmicks that are all expiring this year. And so now they've got to come up with a new way to try to plug that $20 billion hole.

The other part of this is, over the last couple of decades --

MR. MCLAUGHLIN: But they have the money.

MS. CROWLEY: They don't have the money.

MR. ZUCKERMAN: They don't have the money.

MR. MCLAUGHLIN: I thought they did have the money.

MS. CROWLEY: And the problem here is that, over the last couple of decades, California, with a heavy tax and regulatory burden, has driven a lot of very high revenue sources out of the state, from individuals to small businesses to big businesses. MR. BUCHANAN: John, California is --

MR. MCLAUGHLIN: I have it right here that California has the money to pay its bonds. What about that?

MR. BUCHANAN: No, it does not. And if California -- it's not going to default on its bonds, but if it did, it would have really a domino effect on other weak states; their bonds would be very tough to sell, and you'd raise interest rates.

California's problem is this, John. It's on a treadmill downwards. Each year its budget is out of balance. They have to chop spending. You see these demonstrations out at the campuses. They're going to have to keep it up year after year after year. More and more, excuse me, illegal aliens come into the state who drain off money. And people -- taxpayers are leaving the state, businesses leaving the state. I don't know how they pull out of it, John.

MS. CLIFT: Well, they have a dysfunctional government. They have put all of these initiatives on the ballots. Many of them have put the legislature into a straitjacket. You can't raise money anywhere without 67 votes, I think.

MR. ZUCKERMAN: Two-thirds.

MS. CLIFT: Two-thirds, exactly. And it's very difficult to govern there. And I think Arnold Schwarzenegger, his approval rating is now quite low. He's tried to do some good things, but he's been hamstrung. And we have to -- you really do have to ask whether the government that is in place there can function.

MR. MCLAUGHLIN: Okay, which economic crisis will have the more serious impact, California's $20 billion budget deficit and its impact on the United States, or Greece's $300 billion budget deficit and its impact on the European Community, the EC?

DAVID BUCKNER (Columbia University): (From videotape.) Well, California is worse because of the United States. It is our Greece. The problem is while Greece can separate itself from the EC, California can't.

MR. MCLAUGHLIN: Question: Is Buckner right or is he wrong, Mort?

MR. ZUCKERMAN: No, he's wrong, in part because what California is going through is what virtually every state and local community in America is going through. And we are looking at $250 (billion) to $300 billion budget deficit across the country for these communities. It's very countercyclical.

Everybody's going to have to struggle how to meet this. It's going to be a depressant on the entire national economy. And we are in very serious trouble, because there's no way that the federal government can bail them out. Greece can be bailed out and will be bailed out by Germany and so many others.

MR. BUCHANAN: The problem with Greece is that it's not only Greece. If Greece goes, they're after Spain. They're after Portugal.

MR. ZUCKERMAN: Right, Portugal.

MR. BUCHANAN: They're after Italy.

MR. ZUCKERMAN: Italy.

MS. CROWLEY: Italy, right.

MR. BUCHANAN: The so-called PIGS. And all of them will start down. I'll tell you, what it's going to do, John, it could break apart not the European Union but the European Monetary Union, because Greece will have to get out from under it, get rid of that and go back to their local currency, basically --

MS. CROWLEY: Yeah, cripple the Euro.

MR. BUCHANAN: -- and then inflate to get out of it.

MS. CROWLEY: Right, cripple the Euro.

MR. MCLAUGHLIN: California is the victim of the global downturn. Yes or no?

MS. CROWLEY: No. Well, to some degree.

MR. MCLAUGHLIN: It depends on trade with Asian countries.

MS. CROWLEY: To some extent, but that's not the real reason why California is in so much trouble. And we have a couple of states, including Indiana, under Mitch Daniels' leadership, actually having a budget surplus.

MR. MCLAUGHLIN: It trades heavily with China and Asia.

MR. ZUCKERMAN: Yeah, Arnold Schwarzenegger says that his budget director is on a suicide watch. (Laughter.)

MR. MCLAUGHLIN: I want to know about the impact of the global trade -- of global trade on the global crisis.

MR. ZUCKERMAN: It has had some effect on California, without a question.

MR. MCLAUGHLIN: More so than on other states in the Union.

MR. ZUCKERMAN: Yes, because they're a big importer from Asia in particular, and exporter. So it's a big part of their economy. MR. MCLAUGHLIN: Is Arnold Schwarzenegger's political career over?

MR. ZUCKERMAN: Yes.

MR. MCLAUGHLIN: It is?

MR. ZUCKERMAN: Yes, absolutely.

MR. MCLAUGHLIN: Forced prediction: Will Iran be subject to crippling sanctions by the U.N.? Yes or no?

MR. BUCHANAN: No way, crippling sanctions, and maybe not even any sanctions.

MR. MCLAUGHLIN: Eleanor.

MS. CLIFT: I think the Obama administration is pushing hard on that, so I'll give it a yes.

MS. CROWLEY: I'll say no. Russia, China, Turkey, Brazil and Lebanon all oppose it.

MR. ZUCKERMAN: Much tougher sanctions, but not crippling sanctions.

MR. MCLAUGHLIN: Not crippling sanctions but face-saving sanctions.

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