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THE MCLAUGHLIN GROUP HOST: JOHN MCLAUGHLIN PANEL: RICH LOWRY, NATIONAL REVIEW; ELEANOR CLIFT, NEWSWEEK; MONICA CROWLEY, WASHINGTON TIMES; MORTIMER ZUCKERMAN, U.S. NEWS & WORLD REPORT TAPED: FRIDAY, JULY 2, 2010 BROADCAST: WEEKEND OF JULY 3-4, 2010

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MR. MCLAUGHLIN: Issue One: It's the Economy, Stupid.

TREASURY SECRETARY TIMOTHY GEITHNER: (From videotape.) I think the world understands now that the world growth in the future around the world can't depend on the United States as much as it did in the past.

MR. MCLAUGHLIN: If the world didn't get that message before this week, they got it now. Several key economic indicators now show that the tough times for the U.S. economy may not be over.

Item: U.S. consumer confidence down, falling by nearly 10 points from last month; big drop. Item: U.S. employment down. Weekly jobless claims rose by over 10,000.

Item: U.S. home sales down. Previously occupied homes sales fell to the lowest level on record.

Item: U.S. stock market down, now below 10,000.

Some analysts see the troubling news as an omen -- a double-dip recession; namely, a recession defined by a period without economic growth, followed by a period with economic growth, followed by a period without economic growth, a recession with a double dip or, even worse, another depression.

Question: Are we headed for a double-dip recession, or will it be a full-fledged depression, or neither, Rich?

MR. LOWRY: I don't think we're headed for a double dip, just because I think it's hard to do another dip when the Fed is so loose the way it is right now. And I think what's interesting about this, John, the economy over the last year, you average it out, growing 3 or 4 percent or so. Productivity is looking pretty good.

But what we have, I would argue, is a big government recovery. You have businesses battening down the hatches, afraid to hire and put people on the payrolls permanently because they know the cost of business is going to increase in the future because of taxes, because of Obamacare, because of a whole host of new regulations. Therefore, there's a great deal of fear and anxiety out there, and the job market won't recover until that disappears.

MR. MCLAUGHLIN: The unemployment rate dropped from 9.7 percent to 9.5 percent due to 652,000 people dropping out of the labor force because they can't find jobs and have stopped looking. So when you first see that figure, it's a little misleading.

Eleanor.

MS. CLIFT: Right. I mean, we have a recovery, but it's weak. We have an economy that's basically treading water, adding jobs much too slow. And I think the president -- the most memorable aspects of his economic program was the Cash for Clunkers and then the real- estate rebate. And, of course, that's now ended and the housing market is taking another tumble.

So I think the president has a big challenge on his hand convincing the voters that he's on the right track. And he's trying to set the fall elections up as a contrast between his policies and going back to the policies of the past, which clearly did not work, because if the election is a referendum on the president, there's too much dissatisfaction out there for the Democrats to hold their own in the fall. MR. MCLAUGHLIN: Fifteen million Americans are looking for work, Monica.

MS. CROWLEY: Yes. And over half of that number has been out of work for six months or more. This is long-term structural unemployment. It's a very serious problem, and also the most toxic political problem, especially for the president and for the Democrats.

When you think about the total number of unemployed -- that is, not just the 9.5 percent number, but when you think about all of the people who are working only part-time and want full-time work, when you think about all of those who have dropped out of even looking for full-time employment, that number is upward of 20 percent. These are staggering numbers, John.

And then you pair it with a lot of the other negative trends we're seeing -- housing sales plunging, manufacturing growth slowing, not just here but abroad -- that's really worrying when you're looking at global manufacturing declining, the demand really getting suppressed, especially in the Asian markets, China and Indonesia and so on. They're not manufacturing at the output that they once did.

Consumer confidence in the United States over the last week had a nearly 10-point drop. And they're constantly revising down the numbers of the GDP growth. And the programs that Eleanor pointed out -- the housing incentives, the Cash for Clunkers -- you could call GDP gross domestic prop-up, because when those incentives are taken away, you see that the economy falters again.

MR. MCLAUGHLIN: Mort, what's the outlook?

MR. ZUCKERMAN: Well, if you define a recession as two quarterly declines in GDP, I think we will have that. There will be six and a half percent in GDP, which was what we had. It may be a half of 1 percent to one and a half percent. Nevertheless, what it has -- all of these numbers have to be seen not just in terms of how bad they are, but in the context of the fact that it's in the most stimulative monetary policy and fiscal policy we've ever had in the country.

We have the biggest deficit as a percentage of GDP, bigger than in the Great Depression, to stimulate the economy. We have the most stimulative monetary policy. Yet we're barely creating jobs. In fact, the only reason why there seems to be jobs created in the private sector the last several months is because there's something called the birth-death series, which is an extrapolation of jobs created by companies which may or may not have been created or may or may not have shut down. And that's the net figure. It's like 150,000 to 200,000 each month.

If you take that out -- and, by the way, I think those figures are going to be dramatically reduced down -- we're still not creating jobs in this economy. And that is devastating. And housing prices have not only gone down, but they've wiped out a huge amount of equity for the homeowners. It used to be the largest asset on the balance sheet of the average American family, and it's been dramatically reduced.

So I think we are looking at the most difficult time, with the very -- also there are going to be very few things that this administration can do. They will not be able to have another fiscal policy because the money that they raised, the $800 billion, didn't really provide anything like it was. They can't do very much more about monetary policy. So we're in real trouble in this economy.

MR. LOWRY: Well, they've done everything -- they've tried everything except for a real tax cut --

MS. CROWLEY: Right.

MR. LOWRY: -- except for a tax cut on business, which they're ideologically opposed to. Instead they've thrown all this money out the door and wasted it. If you add up all the stimuli from Bush to Obama, it's more than the Iraq and Afghan wars total.

MR. MCLAUGHLIN: What do you mean by ideologically opposed to?

MR. LOWRY: It's just the one stimulative step they --

MR. MCLAUGHLIN: Now, why are they opposed ideologically?

MR. LOWRY: Because they hate tax cuts, especially tax cuts on the, quote, "rich" and on business. And you look at the Reagan recovery, one year in, a couple of hundred thousand jobs a month created. In 1984 he hung a seven or an eight on the board for GDP growth, if I'm not mistaken, and that's because everyone knew inflation was going down, interest rates were going down, taxes were going down, and regulation was going down.

MS. CLIFT: Yeah, he --

MR. MCLAUGHLIN: Is he anti-business?

MR. LOWRY: Yes, he is.

MS. CLIFT: He was operating from a much higher tax base. And there are two camps. I'm in the camp that says we haven't had enough stimulus, that we have an economy without "umph." And we have all of the deficit talk, and that whole narrative has taken over. And I think that's crunching down the recovery.

I'm with Reagan on the deficit, and that is, the deficit is big enough to take care of itself.

MR. LOWRY: (Laughs.)

MR. MCLAUGHLIN: Okay. Let me --

MR. LOWRY: If the economy grows -- if the economy grows.

MS. CLIFT: Now is not the time for all the deficit talk.

MR. LOWRY: If the economy grows.

MS. CLIFT: You've got to get the economy growing first.

MR. MCLAUGHLIN: Please relinquish.

Okay, Immelt fireworks. The biggest fireworks on display this Independence weekend came out of Italy, perhaps. Jeffrey Immelt, General Electric's chief executive officer -- General Electric, by the way, being the biggest manufacturer in the entire planet -- he launched a broadside against the Chinese government before an audience of top Italian executives in Rome.

On China, quote, "I really worry about China. I am not sure that, in the end, they want any of us to win or any of us to be successful. They want to develop themselves," unquote.

But Mr. Immelt's harshest words were left for President Obama. Immelt expressed concern that the president's financial regulatory reform plan would dampen a tepid U.S. economic recovery. Immelt went on to say that business did not like the U.S. president -- that's U.S. business -- and the president did not like U.S. business. On President Obama, quote: "People are in a really bad mood in the U.S. We are a pathetic exporter. We have to become an industrial powerhouse again. But you don't do this when government and entrepreneurs are not in sync," unquote.

What does he mean by that, Mort, not in sync?

MR. ZUCKERMAN: Well, there's no doubt but that there is a really hostile attitude between the business community writ large and this administration. There is a sense that this administration has been hostile to business, does demonize business, blames everything on business. That's not entirely fair, but that's neither here nor there.

In emotional terms, you go around the business community and you get a whole series of very, very, very hostile comments to the administration and to its policies. And it's not just its policies. There is a sense of attitudinal opposition to business. They really, really do not, as he says, like business. And this is widespread in the business community.

MR. MCLAUGHLIN: He's villainizing business?

MS. CLIFT: They're trying --

MR. ZUCKERMAN: Yes, he is.

MR. MCLAUGHLIN: Wasn't that part of his rhetorical?

MR. ZUCKERMAN: Yes, yes, he is.

MR. MCLAUGHLIN: Is that part of his arsenal?

MR. ZUCKERMAN: Absolutely.

MR. MCLAUGHLIN: Other presidents have done that.

MR. ZUCKERMAN: But, you know, not to the extent that he has. He seems to blame everything on business. Let's take the -- he blames the financial -- (inaudible) -- the recession. In fact, a good deal of it was caused by the Congress and what it did with Fannie Mae and Freddie Mac --

MS. CROWLEY: Right.

MR. ZUCKERMAN: -- causing the housing bubble to begin. So you ignore that, okay, and the business community is saying, "What is he doing?" he goes to Wall Street and he just demonizes everybody. He does the same thing with --

MR. MCLAUGHLIN: Would you call those cheap shots?

MR. ZUCKERMAN: I would call them inexpensive.

MR. LOWRY: (Laughs.)

MS. CLIFT: Well, this is such a loaded argument.

MR. LOWRY: Affordable. (Laughs.)

MS. CLIFT: First of all, the business community has never really liked Democratic presidents. Clinton was great for business, but they still had a very --

MR. MCLAUGHLIN: They liked --

MR. ZUCKERMAN: They liked Clinton a lot.

MR. MCLAUGHLIN: They liked Clinton. MS. CLIFT: Second of all, Wall Street took us to the brink of a depression here, and the president is trying to get some regulation and they're resisting. I think that's all very normal. I would look at what Immelt is saying about China, however. And GE is in a head- to-head fight with China about resources and a lot of things, and China is beating them to the punch in countries like Africa and other places.

So I think that's a fight where --

MR. ZUCKERMAN: That's not what it is.

MR. MCLAUGHLIN: Yeah.

MR. ZUCKERMAN: That's not what he's saying.

MS. CLIFT: And exports -- the fact that we're so bad on exports has to do with the problems they're having in Europe, and they can't afford to buy our things.

MR. ZUCKERMAN: What he --

MS. CLIFT: It's not necessarily Obama's fault.

MR. ZUCKERMAN: What he is also saying -- what Jeffrey Immelt is saying is that for them to do business in China is becoming very difficult, because the Chinese basically -- you have to do everything with the government in China when you want to do anything on any scale. And they're basically -- you know, they do want to do it themselves. They now have the capital to do it, and they want to develop themselves.

MR. MCLAUGHLIN: You know that earlier in the week China said that it's looking forward to doing a lot more business in the United States because the United States presents the best economic picture in the rest of the world.

MR. ZUCKERMAN: Yes. They're doing business --

MR. MCLAUGHLIN: So don't you think that's redemptive of China?

MR. ZUCKERMAN: No. They want to do business in the United States. The question is, will they let American businesses succeed in China? It's much more difficult for them to succeed in China.

MR. MCLAUGHLIN: Do you think that Immelt is injudicious, not in being quoted, but injudicious in making that remark about China? Is it exaggerated?

MR. ZUCKERMAN: No, I don't know that it's exaggerated. I don't think it is. He doesn't exaggerate. He's not that kind of a guy. MR. MCLAUGHLIN: Do you think China's -- well, every country is interested in its own interest.

MR. ZUCKERMAN: I'm not arguing. But when you do business in a country, okay, and you have to deal with the government, you want to have a business arrangement that both sides make money on.

MR. MCLAUGHLIN: Have you experienced that?

MR. ZUCKERMAN: No, I don't do business in China.

MS. CROWLEY: John, what is --

MS. CLIFT: GE has walked back his argument.

MR. ZUCKERMAN: Of course he has.

MS. CLIFT: And we had the same problems with Japan.

MR. LOWRY: You could ask me that same question, John. National Review doesn't do business in China either. (Laughs.)

MR. MCLAUGHLIN: I'm going to draw some wisdom from over here.

MR. LOWRY: I don't want to offend her Chinese subscribers, though.

MS. CROWLEY: What is amazing about Immelt's comments is that some of these previously supportive folks in the business community of President Obama and the Democrats, like Jeffrey Immelt, like the chairman of the Business Roundtable, it's now starting to dawn on them that this administration is increasingly hostile to job creation and investment.

This massive government intervention that we have seen over the last year and a half has worked the free market. It has suffocated the private sector and it's stifling any shred of an economic recovery we had gotten going.

MS. CLIFT: That's an ideological argument. That's an ideological argument.

MS. CROWLEY: And it's true. And it is true.

MR. LOWRY: If you look at the --

MR. MCLAUGHLIN: What also is stunning about Immelt is the total reversal of his position. Until now, Immelt has advocated doing business with China and GE has invested $20 billion in a research center in China and does $5.3 billion worth of business in China.

MR. LOWRY: They sponsored the Olympics. MR. ZUCKERMAN: Everybody wants to do business in China. It's one of the most extraordinary markets. Remember what they tried to do with Google.

MR. MCLAUGHLIN: Why is he knocking China?

MR. ZUCKERMAN: Well, because I'm sure he's having difficulty trying to expand their business in China. And I think they're going to look for other places to invest because it's become so difficult.

MR. MCLAUGHLIN: His statement that China doesn't want foreign companies to be a winner is stunning.

MR. ZUCKERMAN: Yes, it is.

MR. MCLAUGHLIN: You agree with that.

MR. ZUCKERMAN: Absolutely.

MS. CROWLEY: Well, but it's not a shocker.

MR. MCLAUGHLIN: Exit question --

MS. CLIFT: It's sour grapes, I think.

MR. MCLAUGHLIN: Will Immelt -- what?

MS. CLIFT: I think it's a tough competitor. China is a tough competitor. I wish -- I think he wishes he probably didn't say that.

MS. CROWLEY: And, look, it's not --

MR. MCLAUGHLIN: Don't forget, Obama is very friendly with China.

MS. CROWLEY: Well, but it's not a shocker here, John.

MS. CLIFT: Well, I think friendly is --

(Cross talk.)

MR. MCLAUGHLIN: Maybe Obama has --

MR. ZUCKERMAN: It's not just --

MR. MCLAUGHLIN: Maybe he has drunk the Kool-Aid.

MR. ZUCKERMAN: John, it's not just GE.

MR. MCLAUGHLIN: Will Immelt's criticism of China be echoed by other CEOs?

MR. LOWRY: Not in public. MR. ZUCKERMAN: Right.

MR. LOWRY: It is already in private.

But he's going to walk it back and no one's going to say anything --

MR. MCLAUGHLIN: He will walk it back?

MR. ZUCKERMAN: He already has.

MR. MCLAUGHLIN: It's on the front page of the Financial Times.

MR. LOWRY: Absolutely.

MR. ZUCKERMAN: He already has. He has walked it back. His colleagues have walked it back.

MR. MCLAUGHLIN: Eleanor.

MS. CLIFT: They're saying he was quoted out of context. I mean, China is a tough competitor. But their emergence on the world stage has been anticipated for a long time, and they're really coming into their own.

MR. MCLAUGHLIN: Well, the Financial Times is above quoting out of context, Eleanor. We know that.

MS. CROWLEY: They stand by their story here on his comments. Look, it's not a big shocker that the Chinese communists are in direct free-market competition now with the American capitalists. And GE better step up its game if it wants to compete with the Chinese products and technology.

MR. MCLAUGHLIN: Mort, will other CEOs get on board?

MR. ZUCKERMAN: No. As Rich --

MR. MCLAUGHLIN: Not publicly.

MR. ZUCKERMAN: As Rich says, they're not going to say it publicly, because it'll make it more difficult for them to do business in China than it already is. But within China -- I'm not talking about where else they compete --

MR. MCLAUGHLIN: Is Immelt in the Roundtable, Business Roundtable? MR. ZUCKERMAN: Oh, yeah, sure.

MR. MCLAUGHLIN: Does he hold an office in there?

MR. ZUCKERMAN: No, not that I don't know. But he's obviously a key player.

MR. MCLAUGHLIN: Other CEOs feel that way but they will be --

MS. CLIFT: Judicious.

MR. MCLAUGHLIN: -- more careful about where they say it.

MR. LOWRY: Discreet.

MR. MCLAUGHLIN: Issue Two: Obama Gate-Way.

PRESIDENT OBAMA: (From videotape.) We face the prospect that different rules for immigration will apply in different parts of the country, a patchwork of local immigration rules, where we all know one clear national standard is needed.

MR. MCLAUGHLIN: In his first major address on the topic of immigration, President Obama this week called for passage of a comprehensive reform bill, the legislation co-authored by Democratic Senator Charles Schumer and Republican Lindsey Graham. It will require new Social Security cards using fingerprints or retinal scans for all citizens and for all legal immigrants. A new system for temporary workers will be created, and the process for legal immigration streamlined.

The proposed legislation would establish conditions for citizenship for the estimated 11 million illegal aliens already in the country. This is very touchy. Undocumented workers must admit to breaking the law. They must pay a one-time penalty and any taxes due. They must pass background checks, and they must show English-language proficiency.

Republicans like Congressman Lamar Smith of Texas were quick to give counter-arguments to the Obama gateway. Quote: "We could cut unemployment in half by reclaiming the jobs taken by illegal workers. President Obama is on the wrong side of the American people on immigration. The president should support policies that help citizens and legal immigrants find the jobs they need and deserve rather than fail to enforce immigration laws," unquote.

Neither the House or Senate leadership expects a vote on immigration reform this year. In pushing for legislation now, Mr. Obama is said to be trying to capitalize on the Hispanic backlash against Arizona's new statute that authorizes state and local police to enforce federal immigration laws. The Obama objective is to mobilize Hispanic voters to turn out in November, especially in key races like Senator Harry Reid versus Sharron Angle in Nevada. Question: Is immigration a winning wedge issue for the Democrats? I'll try you on this, Rich.

MR. LOWRY: Absolutely not. I mean, you're right, the speech was all about politics. And what he's looking at is his numbers among African-Americans and whites have been steady over the last year, but he's been dipping over the course of the last six months with Latinos. So he's trying to make up that deficit.

I think it's a ridiculous speech. The idea we're going to have a patchwork in America with different laws, that's not the case. You're just going to have certain states that actually enforce the laws. And call me old-fashioned, but I think the president of the United States should be in favor of enforcing our laws.

MS. CLIFT: Immigration is a federal issue and it should be appropriately handled with uniform laws. Look, the president has lost 20 points among Hispanics because they thought that he was going to address this in his first term, and now time is running out. So this was a speech that said, "Message: I care."

It was a very good speech. He laid out all the elements that have to be put in place. And he very clearly said it cannot pass without Republican votes. And he's not going to get any Republican votes, and so he's got to put this to the electorate -- it's political, yes -- so that people know the contrast between his view of this issue and the other side.

MR. LOWRY: He might get some Republican votes.

(Cross talk.)

MR. ZUCKERMAN: Wait a minute. In the Washington Post --

MR. LOWRY: He might get some. It's just that he lost --

MS. CLIFT: Not before November.

MR. LOWRY: There were 14 Democrats that voted against it last year.

MR. ZUCKERMAN: In the Washington Post/ABC poll, 58 percent of the country were against this kind of immigration. I happen to support it. I agree with what he was saying on immigration. But I think politically it is not going to be a help to him except with -- except to get out the Latino community to vote.

MS. CLIFT: And that's important.

MR. MCLAUGHLIN: Yeah, that's reinforced by the polling on Arizona. Are we going to see new Arizonas? MS. CROWLEY: Yes. In fact, 20 states now have pending legislation in their state legislatures almost identical to what Arizona did.

MR. MCLAUGHLIN: Is he trying to stay ahead with that with this speech?

MS. CROWLEY: Look, Obama is not interested in immigration reform.

He is interested in a political fight because this is an election year. And you know how he's fundamentally unserious about this, because when he had a 60-vote filibuster-proof majority in the Senate last year and huge majorities in the House, he didn't take it on.

MR. ZUCKERMAN: That's --

MS. CLIFT: Go, Mort.

MS. CROWLEY: A couple of months ago -- pardon me. A couple of months ago --

MS. CLIFT: I said, "Go, Mort."

MS. CROWLEY: -- in the State of the Union address --

MR. MCLAUGHLIN: Let her finish.

MS. CROWLEY: I'm in the middle of my point, please.

MS. CLIFT: Go, Mort.

MS. CROWLEY: In the State of the Union address --

MR. MCLAUGHLIN: Quickly.

MS. CROWLEY: In his State of the Union address a couple of months ago --

MR. MCLAUGHLIN: Yeah.

MS. CROWLEY: -- 8,000 words, he spent 38 of them on comprehensive illegal immigration reform. So this tells you this is strictly a political move.

(Cross talk.)

MS. CLIFT: Let Mort in.

MR. MCLAUGHLIN: Let me put this question in.

MS. CLIFT: Let Mort in, please. MR. ZUCKERMAN: I just want to say one thing.

MS. CLIFT: Thank you.

MR. MCLAUGHLIN: Quickly.

MR. ZUCKERMAN: Even when he was in the Senate, he was working very hard for immigration reform. And I know the bills he was working on. He was working very closely with Teddy Kennedy on it. So he --

MS. CROWLEY: Why didn't he bring it up last year --

MR. ZUCKERMAN: Whatever his political priorities were --

MS. CROWLEY: -- when he had all of the advantages, Mort?

MR. ZUCKERMAN: -- he had to deal with the economy.

MR. MCLAUGHLIN: Obama is --

MR. ZUCKERMAN: So I don't think that's a fair statement.

MR. MCLAUGHLIN: He realizes that four months from now there's an election.

MR. ZUCKERMAN: Yes.

MR. MCLAUGHLIN: And he wants to win back the Latino vote, and he also wants to get the Democrats in line behind him because --

MR. LOWRY: But it's a loser --

MR. MCLAUGHLIN: -- the Democrats will sit on their hands --

MR. LOWRY: It's a loser with the broader electorate.

MR. ZUCKERMAN: That I agree with.

MR. LOWRY: That's where it's a miscalculation.

MR. MCLAUGHLIN: What's that again?

MR. LOWRY: It's a loser with the broader electorate. The Arizona law is popular --

MS. CROWLEY: Very.

MR. LOWRY: -- because it makes sense to people to enforce the laws. And it's not illegal for a state to enforce a federal immigration law. There's legal guidance existing now that says that.

(Cross talk.) MR. MCLAUGHLIN: How does Arizona or any state overcome what the Constitution says --

MR. LOWRY: No, no, no, no, no.

MR. MCLAUGHLIN: -- that immigration --

MR. LOWRY: John, no, no, no. You're misunderstanding.

MR. MCLAUGHLIN: -- in the province of the federal government?

MR. LOWRY: You're misunderstanding. They're not overturning federal law. They're enforcing federal law.

MR. MCLAUGHLIN: Issue Three: Secret Agent Man.

DAVID WEISS (espionage expert): (From videotape.) Well, the Cold War ended, yes, 19 years ago, but the KGB never stopped working. And they never will stop working.

MR. MCLAUGHLIN: That was made vividly clear this week when the FBI busted a Russian spy ring. The feds arrested 10 people in connection with the plot. Six of the spies posed as married couples living in New Jersey, New York and Massachusetts. Three more operatives lived just outside the nation's capital, Washington, D.C. And one was a New York real-estate entrepreneur, Anna Chapman.

ANNA CHAPMAN (alleged Russian spy): (From videotape.) Even though my company was much smaller than any investment banker can imagine, it was far more challenging.

MR. MCLAUGHLIN: So what was the mission of the Russian spies?

PETER ERNST (former CIA officer): (From videotape.) Just regular networking. It sounds like they were assigned initially to do that with the aim of gleaning what we would call political intelligence.

MR. MCLAUGHLIN: What political intelligence? Information on nuclear weapons, U.S. arms-control positions, Iran, White House rumors, CIA leadership turnover, the last presidential election, Congress and the political parties.

The spies didn't steal state secrets, but they could have heard them. They didn't sabotage facilities, and they were supposedly forbidden by Russian intelligence from pursuing classified material. The spies were charged with, quote, "conspiring to act as foreign agents without notifying the attorney general," unquote, and, quote, "conspiracy to commit money laundering," unquote.

Now at least one of the operatives has admitted working for Russian intelligence and stood fast, refusing to give his name.

Do we have U.S. counterparts in Russia?

MS. CLIFT: I would hope so.

MS. CROWLEY: Sure, we do.

MS. CLIFT: (Laughs.) Yes.

MS. CROWLEY: I love this story. This story is so 20th century, right? It's so Cold War. And some of these at least female spies look like desperate housewives. They were sent out to leafy suburbia. And I'm not sure what kind of nuclear-weapon secrets they were going to glean in Montclair, New Jersey. However --

MR. MCLAUGHLIN: Bar conversations.

MS. CROWLEY: Bar conversations. Well, again, in Montclair, New Jersey, I'm not sure you're getting the Iranian diplomatic negotiations secrets.

MR. MCLAUGHLIN: What did they bury in Montclair?

MS. CROWLEY: I don't know.

MR. MCLAUGHLIN: Or Connecticut? Was it Connecticut?

MS. CROWLEY: For decades, since the advent of the Cold War --

MR. MCLAUGHLIN: Money. U.S. money.

MS. CROWLEY: -- and definitely after the Cold War. Look, it's not a surprise here that enemies spy on each other. Friends spy on each other.

MR. ZUCKERMAN: But this one is almost laughable.

MS. CROWLEY: Yeah. MR. ZUCKERMAN: I mean, the only serious thing that came out of it is that it provided a couple of front pages for the New York Daily News. Other than that, I don't think it accomplished anything.

MS. CLIFT: Yeah, they were --

MR. MCLAUGHLIN: Let me follow up on that. Do you think this is going to be a setback in the thaw in relations between Russia and the U.S.?

MR. ZUCKERMAN: Well, we'll find out. If the Russians expel a whole group of Americans, which they typically do after we uncover one of their spy rings, then you'll know they're trying to do the tit-for- tat game. But I suspect they will not do this, because they want to --

MR. MCLAUGHLIN: Did you see the video on Putin regarding this?

MR. ZUCKERMAN: Yes, right.

MS. CLIFT: Right.

MR. MCLAUGHLIN: He kind of laughed it off.

MR. ZUCKERMAN: They're trying to diminish it, and they should. I mean, this is nonsense.

MR. MCLAUGHLIN: Did these spies have diplomatic cover in the form of the U.S. embassy or the U.N. mission of Russia in New York? Do you follow me?

MR. ZUCKERMAN: Yes. Not to my knowledge.

MR. MCLAUGHLIN: I think there was coordination there. Wasn't there?

MR. ZUCKERMAN: No. That's not. They would never do it through the embassy or through the U.N. mission. They would have a separate channel to deal with the KGB.

MS. CLIFT: Right. And it was --

(Cross talk.)

MR. LOWRY: This was not official cover.

MS. CLIFT: And they were pointedly not accused of espionage. And frankly, when you read about what they were after and what they may have gotten, you could get it from reading the Daily News or browsing the Internet. I want to give The New York Times credit for the greatest quote. They talked to a teenage neighbor of the suburban couple in Montclair, and the young teenager said, "She can't be a spy. Look what she did with the hydrangeas." (Laughter.) She kept a lovely yard. (Laughs.)

MR. LOWRY: Now, look, it's true, a couple of these people --

MR. MCLAUGHLIN: Are you minifying this too?

MR. LOWRY: No, not as much as my colleagues. Look, I think a couple of these people obviously would have been best suited to report your Facebook status back to Moscow. But I think what the deeper game is, you try to get close to people who might be insiders or might be important and you see if they have any vulnerabilities, sexual peccadilloes, financial troubles. And then you're in a position to extort something from them if it matters.

MR. MCLAUGHLIN: Do you think it --

MR. LOWRY: It shouldn't be totally dismissed. This is not something --

MR. MCLAUGHLIN: Do you think the Obama administration is trying to minify it?

MR. LOWRY: Of course. Of course.

MR. MCLAUGHLIN: Why?

MR. LOWRY: He could have brought it up over the burgers --

MR. MCLAUGHLIN: Because the FBI looks dumb?

MR. LOWRY: No, because they're all about --

MR. ZUCKERMAN: It's one of the few --

MR. MCLAUGHLIN: Huh?

MR. LOWRY: They're all about resetting, and they don't want to -- there's a willful blindness there. They don't acknowledge --

MR. MCLAUGHLIN: The resetting of the U.S.-Russian relationship.

MR. LOWRY: The resetting is more important than any Russian misconduct.

MR. MCLAUGHLIN: You share that view?

MR. LOWRY: I just said it. (Laughs.)

MR. MCLAUGHLIN: That is your view. MR. LOWRY: I share my own view, yes, sir.

MR. MCLAUGHLIN: Okay.

MS. CROWLEY: The Russians did something interesting, too, to Mort's point about we'll see if they expel a bunch of Americans now. They did something they never did in the Cold War when we exposed some of their spies, which is that they actually acknowledged that they were Russian citizens. They said at least a couple of these people are, in fact, Russian citizens.

MR. MCLAUGHLIN: One other national spy ring will be exposed in the United States before Thanksgiving. Yes or no?

MR. LOWRY: Just to be safe, I'm going to say yes.

MS. CLIFT: And then they'll be on a reality show.

MR. LOWRY: (Laughs.)

MR. MCLAUGHLIN: Yes, they will. Yes?

MS. CROWLEY: Yes. But for whom is the question.

MR. MCLAUGHLIN: Yes?

MR. ZUCKERMAN: No. No.

MR. LOWRY: (Laughs.)

MR. MCLAUGHLIN: The answer is yes. Sorry, Mort.

We bid farewell to West Virginia Senator Robert Byrd, 51 years in the United States Senate, a steadfast lawmaker and a noble statesman.

Happy Fourth of July Weekend. Bye-bye.

END.