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THE MCLAUGHLIN GROUP HOST: JOHN MCLAUGHLIN PANEL: PATRICK BUCHANAN, MSNBC; ELEANOR CLIFT, NEWSWEEK; CHRIS STIREWALT, WASHINGTON EXAMINER; MORTIMER ZUCKERMAN, U.S. NEWS & WORLD REPORT TAPED: FRIDAY, JULY 16, 2010 BROADCAST: WEEKEND OF JULY 17-18, 2010

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MR. MCLAUGHLIN: Issue One: Crackdown.

PRESIDENT BARACK OBAMA: (From videotape.) I'm about to sign Wall Street reform into law, to protect consumers and lay the foundation for a stronger and safer financial system, one that is innovative, creative, competitive, and far less prone to panic and collapse.

MR. MCLAUGHLIN: The U.S. Senate this week approved a sweeping overhaul of the U.S. financial sector. The act introduces a raft of restrictions on banks to curb risks. It seals a mammoth legislative victory for President Barack Obama. Chris Dodd, Democratic chairman of the Senate Banking Committee, praises the landmark reform.

SEN. CHRIS DODD (D-CT): (From videotape.) This is a major undertaking, one that is historic in its proportions, that is an attempt to set in place the structure that will allow us to minimize the problems in the future.

MR. MCLAUGHLIN: Richard Shelby, the senior Republican on the Banking Committee, thinks differently.

SEN. RICHARD SHELBY (R-AL): (From videotape.) It creates vast new bureaucracies with little accountability and seriously, I believe, undermines the competitiveness of the American economy.

MR. MCLAUGHLIN: Question: Wall Street has been under a cloud of uncertainty for about three years. Does the Dodd-Frank financial overhaul dispel that cloud? Pat Buchanan.

MR. BUCHANAN: No, it doesn't, John. They didn't deal with Fannie and Freddie. They didn't deal really with too big to fail. They didn't really get the casinos out of the banks. They got an enormous number of new regulations. The thing is half the size of the King James Bible. It is confusing. Business is upset about it. You know, it's on core with Obamacare. It's on line with that, which is a gigantic increase in the power and control of government. And I don't think people believe it's going to do anything any different.

MR. MCLAUGHLIN: How many new regulations?

MR. BUCHANAN: Thousands.

MR. MCLAUGHLIN: Two hundred and forty-three. How big are they?

MR. BUCHANAN: How big are they?

MR. MCLAUGHLIN: Yes.

MR. BUCHANAN: They're big. (Laughs.)

MR. MCLAUGHLIN: Hundreds of -- some of them are hundreds of pages in length.

MR. BUCHANAN: It's 2,300 pages, 300,000 words.

MR. MCLAUGHLIN: Read the volume before you condemn it, will you?

MR. BUCHANAN: (Laughs.)

MR. MCLAUGHLIN: Eleanor.

MS. CLIFT: Hey, it's a big country. We need a lot of regulation. Look, you have the left saying this bill is a mouse masquerading as a lion, and you've got the right saying that it's crippling business. I think the president gets it just about right. He got what the political system could deliver. I wish it could have gone further, but it goes plenty far enough or Wall Street and business wouldn't be fighting it so hard.

I think the next step he has to do is to name Elizabeth Warren to head the consumer financial protection bureau, which is the newly created entity. She's the outspoken Harvard -- I think she's an American government professor.

MR. MCLAUGHLIN: That's a plus. That's a plus.

MS. CLIFT: That's a big plus. She is the voice of Main Street. She really does relate to the American people. She's broken through on television. So I think this is legislation that doesn't mean much. It's abstract now. But when it filters down -- it'll take a while -- I think it's a good thing for the consumer. And I think banks and Wall Street and business will learn to live with it. They can't have the unfettered free ride they had, which took us into this whole fiasco of the last couple of years.

MR. MCLAUGHLIN: I know Chris Stirewalt has just broken into television too.

MR. STIREWALT: (Laughs.)

MS. CLIFT: Okay. Well, welcome.

MR. MCLAUGHLIN: Another star is born.

MS. CLIFT: All right.

MR. STIREWALT: I don't want to lead the financial regulatory reform body, though.

MS. CLIFT: Right.

MR. STIREWALT: I think it would be bad for everybody.

MS. CLIFT: She may need a deputy. (Laughs.)

MR. STIREWALT: That's right. That's right.

I think the problem is Wall Street will learn to live with it. They'll learn to profit from it. They'll make money from it. They will make money, and consumers will suffer from it. And as the restrictions come in and as it becomes more complicated and as this becomes another layer of burden, another complication to executing American financial life, people are going to find it's harder to get loans. People are going to find it's harder to get their businesses running. And in the meantime, we've got 252 rules or something outrageous that have to be promulgated and written, because Congress, in the end, really punted on this. They didn't write the rules. They left it for other people to deal with.

MS. CLIFT: Well, they never write the rules.

MR. MCLAUGHLIN: How long --

MS. CLIFT: That happens later.

MR. MCLAUGHLIN: How long will it take to implement this?

MR. STIREWALT: 2014, by the time everything really gets on line.

MR. MCLAUGHLIN: So it's about 18 months?

MR. STIREWALT: Well, it's into Obama's second term, just like so many other things that go on. It's into the second term of Obama.

MR. MCLAUGHLIN: So during that period, the credit's going to be held up. In other words --

MR. STIREWALT: The uncertainty continues to reign.

MR. MCLAUGHLIN: The uncertainty continues, so the banks are going to continue to withhold credit until this whole matter is straightened out. So is this going to delay the recovery?

MR. ZUCKERMAN: Look, I don't think the banks are withholding credit because of this. The banks are withholding credit to a lot of companies because they're very unsure about the economy, because they're under pressure to rebuild their cash and their equity after having suffered huge losses.

But the banks are all saying -- the Bank of America came out with this today and said it's going to cost billions of dollars in terms of additional costs for the banking system. I don't know if that's right or wrong. We don't know, because the regulations will not be out for several years. And that's what really will determine how this applies. We have to do something about the financial system. Whether or not they went overboard or not is hard really to tell, because it got caught up in the most extraordinary lobbying on all sides.

MR. MCLAUGHLIN: Let me get this straight. You don't think the banks are sitting on their cash, the way corporations are sitting on their cash?

MR. ZUCKERMAN: Yeah, I think the banks are sitting on their cash.

MR. MCLAUGHLIN: Well, does this give them further ammunition to continue sitting on their cash until we get this new regulatory scheme in place?

MR. ZUCKERMAN: To some extent, but not really. The banks really make money out of lending if they get the money back. What they're worried about -- and it's particularly affecting small businesses, okay; they're the ones that really have suffered greatly.

You look at what the banks have on their board. The big money that the banks have made -- and I mean the big money; they've made more money on this than on anything else -- is basically on derivatives and trading for their own account. They've lost money on their loans. They made household equity loans. They made loans to students. They made credit-card loans. I mean, this is where they've lost the money. So if you want them to go back to this business, right now they've been burned terribly on it, so they're very cautious.

MS. CLIFT: Yeah, but they --

MR. MCLAUGHLIN: Okay, let's hear from Bowles.

ERSKINE BOWLES (co-chairman, National Commission Fiscal Responsibility and Reform): It's a fact that, as a nation, we face the most predictable economic crisis in our history. This crisis that we just are going through now, many people didn't predict. This one is as clear as a bell. This debt is like a cancer. It is truly going to destroy the country from within.

MR. MCLAUGHLIN: The United States must get its debt under control. At the National Governors Association this past weekend, co- chairs of the U.S. national debt commission, Alan Simpson and Erskine Bowles, both told a cautionary tale about the dimension of the U.S. federal debt, which is about to surpass $14 trillion. That's $47,000 for every United States resident.

Co-chairman Alan Simpson, 18 years U.S. senator from Wyoming, noted for his genial and colorful wit, also warned against the growing immensity of the nation's public debt. ALAN SIMPSON (co-chair, National Commission on Fiscal Responsibility and Reform): (From videotape.) The rest of the federal government, including fighting two wars, homeland security, education, art, culture, you name it, the whole rest of -- veterans -- the whole rest of the discretionary budget is being financed by China and other countries.

MR. MCLAUGHLIN: Currently, China holds $920 billion of the U.S. debt. If the U.S. does not change its debt habits in the next 10 years, spending is expected to grow by some $2 trillion. That is $500 billion in Social Security, $500 billion in Medicare, $300 billion in Medicaid, and $650 (billion) to $700 billion in interest.

MR. BOWLES: (From videotape.) We can't grow our way out of this. We could have decades of double-digit growth and not grow our way out of this enormous debt problem. We can't tax our way out.

MR. MCLAUGHLIN: To combat the problem, the commission will have a plan by December 1 to cut the annual deficit by 3 percent within the next five years.

Question: Will the Bowles-Simpson national debt commission, just appointed by President Obama, make matters worse? Will it cause the current recession to turn into a 1930s Great Depression? Is that possible?

MR. BUCHANAN: We're going -- where we're headed, John, is for a real deadlock of democracy. These people are going to come in with their recommendations. The Democrats will have lost, say, 30 seats. They're not going to cut Social Security, Medicare, Medicaid, unemployment insurance, veterans. The Republicans aren't going to give them a dime in tax increases and they're not going to cut the budget for the arts.

What you're going to have is this deadlock of democracy where we've got 30 percent of the entire gross national product with three years running as a deficit. I think we're headed toward the cliff.

MS. CLIFT: Well, we have --

MR. MCLAUGHLIN: This makes it far worse.

MR. BUCHANAN: No, these guys are going to try. They're going to come up with something. But I think Congress is going to say, the Democrats and Republicans, "No way you're telling us what we're going to do."

MS. CLIFT: Well, their rhetoric, to some extent now, I think, is damaging, because it's this deficit-first mentality when the economy really does need juicing. And I think all this deficit talk is like an anchor. But they are right when they say the deficit is a cancer on the economy and has to be addressed. And Bill Clinton showed us that this cancer can be cured. Remember, he had a balanced budget. I'll bet you were talking about a deadlock of democracy then after -- MR. BUCHANAN: No, the Reagan tax cuts set the economy going there, Eleanor.

MS. CLIFT: -- the '94 election. And President Bush has just appointed --

MR. MCLAUGHLIN: Did you hear what he said?

MS. CLIFT: I'm listening to myself, actually. (Laughter.

)

MR. MCLAUGHLIN: Right on, Eleanor.

MS. CLIFT: President Obama has just appointed Jack Lew, who was Clinton's budget chief, and he engineered the surplus. So I don't think it's as desolate as you are foreseeing.

MR. MCLAUGHLIN: Mort.

MR. ZUCKERMAN: Look, I think the deficits represent the overhanging problem for the entire American economy. It could really crash the economy over a period of time, and not too long; well within a generation. And these are two guys, Alan Simpson and Erskine Bowles, who are two of the most respected and moderate people. They're centrists.

MR. MCLAUGHLIN: Level-headed.

MR. ZUCKERMAN: They're both widely respected within the political community. But it is -- as Pat says, it's a huge political problem. It is a great economic problem. And everybody hopes that they can kick it downfield so it won't explode during their term of office. But it is going to explode at some point or another.

We do not want to become Greece. We're not quite Greece, okay. But at this point, if we have a situation where countries refuse to buy our debt -- and it could happen very quickly -- we could crash the economy.

MR. MCLAUGHLIN: Have we exhausted this for you?

MR. STIREWALT: What's not exhausted is the American fear about the pending tax increases that are coming. And one of the things that's adding to the market uncertainty that you spoke of earlier -- and this is very real -- is the fact that, at the very least, the Bush tax cuts are going to be rolled back, and there will probably be additional taxes added. That locks up capital.

MR. MCLAUGHLIN: Are you aware of any poll data on the debt, just the debt, the size of the national debt we're talking about here and what impact it has -- MR. STIREWALT: Hugely significant.

MR. MCLAUGHLIN: -- on Joe the plumber?

MR. STIREWALT: Well, hugely significant is this. Normally when you poll what people are interested in, debt and deficit hang way down at the bottom --

MR. MCLAUGHLIN: Still? Still?

MR. STIREWALT: No. Now it's number two behind jobs.

MR. MCLAUGHLIN: Really?

MR. STIREWALT: That is an earthquake.

MR. BUCHANAN: John, the --

MR. MCLAUGHLIN: It's an earthquake that is going to overtake them.

MR. ZUCKERMAN: Let me --

MS. CLIFT: We're talking about --

MR. MCLAUGHLIN: Let me give you the exit question.

MR. ZUCKERMAN: John, wait a minute. I've got to say something.

MR. MCLAUGHLIN: We've got to get out. Then Mort can have the final say.

Exit question: Is America in danger of the current debt crisis becoming a sovereign debt crisis, as Mort mentioned, like the one that is now hitting Greece? Yes or no.

MR. BUCHANAN: Not only yes, but it's a lot sooner than the 10 years Mort's talking about. Niall Ferguson's talking about two years. It could be imminent. The Greek thing hit -- bam.

MR. MCLAUGHLIN: Niall Ferguson is a columnist and --

MR. BUCHANAN: British historian. British historian.

MS. CLIFT: We're going around the horn. We're going around the horn. No, because we can print money and Greece can't. (Laughter.) And the Bush tax cuts are for the people at the upper end of the income scale, not the middle.

MR. ZUCKERMAN: Can I --

MR. MCLAUGHLIN: And the Greeks are -- they're not ahead of us. We can print. MR. STIREWALT: California will be Greece.

MR. MCLAUGHLIN: Let him in. Let him in.

MR. ZUCKERMAN: Can I say one thing?

MR. STIREWALT: California will be Greece.

MS. CLIFT: The U.S. won't be.

MR. ZUCKERMAN: Look, there's one thing that is going on in this country that goes to your point. A lot of people have now found they have mortgages that exceed the value of their homes and credit-card lines that they can't pay. They suddenly realize debt is really important. It hasn't been an issue for a long time. Now everybody knows it's a serious issue. And it is going to be an issue that will have much more political traction, in fact, because everybody knows we are way --

MR. MCLAUGHLIN: Is it another Greece?

MR. BUCHANAN: John --

MR. MCLAUGHLIN: Is it another Greece?

MR. ZUCKERMAN: No, it is not another Greece at this point.

MR. BUCHANAN: That's what's driving the tea party. It's what's driving the tea party.

MR. ZUCKERMAN: That's right.

MR. BUCHANAN: "Get deficits."

MR. MCLAUGHLIN: Well, they're not going to bring us to Greece, are they?

MR. BUCHANAN: They're going to bring you a Republican House, maybe. (Laughter.)

MS. CLIFT: They're not going to give up their benefits either.

MR. MCLAUGHLIN: The answer is not Greece, but very serious.

Issue Two: Moving America Forward Again.

PRESIDENT OBAMA: (From videotape.) Despite uncertain world events and the resulting ups and downs in the market, we are moving America forward again.

MR. MCLAUGHLIN: Well, Mr. President, a growing number of Americans don't seem to share your optimism. CBS polls released this past week show this. Item: Obama overall job approval. Eighteen months ago, the new president gained 69 percent approval; today, 43 percent, a 26 percent plunge.

Item: Handling the economy. The president has spent too little time addressing the nation's economy -- 52 percent.

The president has spent the right amount of time -- 33 percent. The president has spent too much time -- 8 percent.

Item: The $787 billion Obama stimulus. The stimulus has had no effect on the economy -- 56 percent. The stimulus has helped -- 23 percent. The stimulus has hurt -- 13 percent.

Item: Recession time frame. Americans predict two or more years -- 75 percent.

Item: Afghanistan war status. Two months ago, 49 percent of Americans believed the Afghanistan war was going somewhat badly or very badly. Today, 62 percent say the Afghanistan war is going somewhat badly or very badly.

Question: Is the election of President Obama now causing America to experience buyer's remorse? Mort.

MR. ZUCKERMAN: Well, I think, in one of the CBS polls, 62 percent of the country think it's going in the wrong direction. The support for Obama has plummeted from wherever it was at the beginning -- I mean, it's the largest single drop in the shortest period of time for any president that we know about.

So I think there's a very real concern in the country about Obama as president of the United States. And it's not just his policies. I think there is a sense that he has not been the kind of leader that everybody expected, and certainly not been the unifier of the country. In fact, he's been a divisive figure in terms of the way he's done it.

MR. MCLAUGHLIN: Well, --

MR. ZUCKERMAN: So his public support is dropping dramatically.

MR. MCLAUGHLIN: Let's get back into drama, and that's obviously politics. Head-to-head polls against Obama -- head-to-head polls, Obama against the 2012 GOP challengers, this is what you've got. Obama versus Mitt Romney; Obama defeated. Obama versus Mike Huckabee; Obama defeated. Obama against Newt Gingrich; Obama defeated.

Now, get this. Obama versus Sarah Palin -- your favorite, Eleanor -- dead heat. Dead heat. MS. CLIFT: You know, John, it's a long way to 2012. The Democrats who are going to take the brunt this November are the House Democrats. And the president came into office -- the improbability of him winning the election, I think, got people thinking he could transform all of the problems.

There is a Bloomberg poll that shows people blame President Bush far more than they do President Obama for all of the existing problems, but they are impatient. And he has -- this president has had some extraordinary legislative achievements, but it will take months, if not years, for the person on the street to feel that. And it's the economic --

MR. BUCHANAN: John --

MS. CLIFT: It's the unemployment rate that is pulling this president down. He -- in popularity, he is about where sainted President Reagan was at the same point in his first term.

MR. MCLAUGHLIN: Right.

MR. BUCHANAN: Good luck. (Laughs.)

MS. CLIFT: And he uses --

MR. BUCHANAN: If you think this is Reagan, good luck. (Laughs.)

MS. CLIFT: I said he used the slogan "Stay the course," and --

MR. BUCHANAN: John, what happened is the Obama --

MS. CLIFT: -- it worked well for Reagan.

MR. MCLAUGHLIN: Wait a minute.

MS. CLIFT: And I bet it'll work well for Obama.

MR. MCLAUGHLIN: Are you clarifying that you don't think President Obama bears any reflections of Ronald Reagan?

MR. BUCHANAN: What Obama's terrible mistake and the Democrats made, John, in 2006-2008 were repudiations of neoconservatism. The Obama people thought it was an embrace of Democratic liberalism, big- government liberalism. It wasn't. Eighty percent of the country is moderate or conservative, 20 percent liberal. He's embraced the liberal dogma. He's made it the party of government going when the country is anti-government.

MR. MCLAUGHLIN: Chris.

MS. CLIFT: He -- MR. MCLAUGHLIN: Let Chris in.

MS. CLIFT: He brought the economy back from the brink.

MR. STIREWALT: But isn't there --

MR. MCLAUGHLIN: Hold on, Eleanor.

MS. CLIFT: How else would he have done it?

MR. STIREWALT: But wait. Isn't there a fair question to ask about when the president has 39 percent approval with independent voters? Isn't there a problem that goes beyond jobs? Don't you think that we've reached a point where people are making a decision that Obama is actually liberal, not a uniter, not sort of the shamanistic healer that he ran as, that his team still believes he is?

Look, when he gets in the soup, you know what they do? "Go talk." That's what they say is "Go talk."

MR. MCLAUGHLIN: You mean, the independents are most likely the transpolitical figures. They think beyond politics.

MR. STIREWALT: I call them the governing third.

MR. MCLAUGHLIN: And 39 percent. That's almost what? What is it, Buchanan?

MR. BUCHANAN: Almost 40 percent of the country. (Laughs.)

MR. STIREWALT: That's Bush country.

MR. MCLAUGHLIN: I knew I could get a question for you to answer.

Exit question: What do you call a president who sticks to his own predetermined change agenda at a time of economic crisis and at a time of record postwar joblessness? What do you call that?

MR. BUCHANAN: One of two things. He could be stubborn or he could be principled.

MR. MCLAUGHLIN: Eleanor.

MS. CLIFT: I would take both. And I think this president has two agendas. He has the one he campaigned on, which is health care, education and energy independence, which he is delivering on. And he has the one that he was handed, which was a huge financial mess. And he used government to pull us out of that hole, just as FDR did. And the other side, the Republican Party --

MR. BUCHANAN: You're in great shape, Eleanor. (Laughs.)

MR. MCLAUGHLIN: You know what you call -- MS. CLIFT: I don't think that's laughable. The Republican Party has been committed to his failure ever since he took office.

MR. MCLAUGHLIN: You know what you call a person who fulfills that description? An ideologue.

Is he an ideologue?

MS. CLIFT: He's not an ideologue. He's pragmatic. He's very pragmatic; too pragmatic for a lot of liberals.

MR. STIREWALT: He has a pragmatic belief, I believe, in himself. I think he has a pragmatic belief in --

MR. MCLAUGHLIN: What's his ideology?

MR. STIREWALT: Him.

MS. CLIFT: What does that mean, a pragmatic belief in yourself?

MR. MCLAUGHLIN: What's his ideology?

MR. STIREWALT: In himself, that he can do whatever he can.

MR. BUCHANAN: Hyde Park liberal.

MR. STIREWALT: Yeah. Well, he's got that going too.

MR. BUCHANAN: Hyde Park liberal, John.

MS. CLIFT: Well, I would --

MR. MCLAUGHLIN: What's his ideology, political ideology?

MR. STIREWALT: Him. Him. Him first.

MR. MCLAUGHLIN: Him first?

MR. STIREWALT: That he can solve the problems, that he can do the things, that he is the --

MR. MCLAUGHLIN: Is he hearing that rap from his own party members?

MR. STIREWALT: Yes. Not from Democrats outside the White House, but now inside the White House --

MS. CLIFT: That is nonsense. MR. MCLAUGHLIN: Wait. Let him finish.

MR. STIREWALT: -- they're still high on 2008 inside the White House. They're not thinking critically because they think that he can make anything happen.

MR. MCLAUGHLIN: Obama takes care of Obama, first, last and always -- (inaudible).

MR. STIREWALT: Ask Nancy Pelosi.

MR. MCLAUGHLIN: Do you agree with that?

MR. ZUCKERMAN: Let me just -- to a degree, I do.

MR. MCLAUGHLIN: He's very self-involved in that way.

MR. ZUCKERMAN: He thought -- I mean, at one point we thought, you know, he could, you know, walk on water, right? Now he's barely treading water. He's lost so much support in the country. And in part, his rhetoric, by the way -- he's so overexposed that it has not the effect that it once used to have.

So I think he's in very, very difficult political shape. And nobody, nobody is going to survive the kind of economic turmoil we're in. You can't say he inherited it. At some point he owns the presidency. He owns the problem. They look to him to solve it. He tried to solve it with the stimulus program. It was a crappy program and it didn't solve it.

MR. MCLAUGHLIN: This is the danger of ignoring the political --

MS. CLIFT: Actually --

MR. ZUCKERMAN: You know what I would call him?

MR. MCLAUGHLIN: -- the larger politics out there.

MR. ZUCKERMAN: You know what I would call him, somebody who does that? A one-term president.

MR. MCLAUGHLIN: Issue Three: Loose Lips Sinks Gibbs.

On November 2nd, four months from now, 105 days from next Tuesday, Americans go to the polls for the midterm elections. Democrats, beware.

ROBERT GIBBS (White House press secretary): (From videotape.) I think there's no doubt there are enough seats in play that could cause Republicans to gain control. There's no doubt about that. MR. MCLAUGHLIN: Well, Mr. Gibbs, you're in hot water now, especially with the Democrats. Democrat Speaker of the House Nancy Pelosi acerbically commented about the press secretary this week. "How could Gibbs know what is going on in our district? We have made our disagreement known to the White House," unquote.

The backlash from Speaker Pelosi left Secretary Gibbs scrambling to clarify his words and his views.

MR. GIBBS: (From videotape.) I have not spoken with the speaker. There are a whole host of issues that will be worked on in the next couple of weeks that will highlight the choices that voters will have. And I think -- I think in that choice, we are going to do very well. And as I have said throughout this, I think we will retain the House and the Senate.

MR. MCLAUGHLIN: Question: Was this a gaffe on Gibbs' part, or were his comments calculated? Chris.

MR. STIREWALT: I think he meant to say it because I think he doesn't know what his job is. I think he meant to say this because he thinks he's a senior adviser to the president, and he thinks that he's managing expectations for the fall election.

But remember, the only thing the Democrats have going for them when they're trying to raise money and trying to get everything done this year is the belief that they will hold on to the majorities. That's the only way they can get the dough. And for Gibbs to say this -- so this is an intentional statement that ends up being a real gaffe.

MR. MCLAUGHLIN: Gibbs also said, in the same context, "We've got to bring the issues to the people." So this was a notification of the Democrats that "We could lose the election." That's what he was trying to do.

MR. BUCHANAN: No, I think that --

MR. MCLAUGHLIN: Am I right or wrong?

MR. BUCHANAN: You're right to this extent. That was something he dropped out of there. And after he dropped that, he said, "We're trying to alert the party to the real serious problem." (Laughs.)

MR. MCLAUGHLIN: There was an odious smell.

MR. BUCHANAN: That was the line to clean it up.

MR. MCLAUGHLIN: Right.

MR. BUCHANAN: That was damage control.

MR. MCLAUGHLIN: Right. MS. CLIFT: I wouldn't overthink this. He said what's obvious, what everybody else in Washington has been saying. And he did send a message to the public that this is not an election where you just want to register your disapproval, that you're going to make a real choice, and what you get if you toss the Democrats out --

MR. MCLAUGHLIN: Do you think --

MS. CLIFT: -- and vote the Republicans in. And it's also revved up the fundraising on the party of Democrats, frankly.

MR. MCLAUGHLIN: Oh, really?

MS. CLIFT: Yes. Within --

MR. MCLAUGHLIN: You mean, now we've got a sinking ship on our hands.

MS. CLIFT: No. Within the Democratic caucus, the leadership PACs, the people with safe seats, they now see the danger of losing their committee chairmanships.

MR. MCLAUGHLIN: You can read it the other way, that the money's going to dry up --

MS. CLIFT: I don't see it as inevitable.

MR. MCLAUGHLIN: -- because it's a lost cause.

MS. CLIFT: No.

MR. MCLAUGHLIN: You've got the president's press secretary saying it.

MS. CLIFT: Nothing is a lost cause this many days before the election. Things can change.

MR. MCLAUGHLIN: Mort, what do you make of Gibbs?

MR. ZUCKERMAN: Well, I find him a fairly effective and attractive press secretary. But more than anything else, he's very close to Obama. He comes from the good old days of the very small group around Obama. So he really has access and really knows what the president is thinking, and that's what you want in a press secretary.

MR. MCLAUGHLIN: Why did he bring forward "Rolling Stone" and present that to the press and make that a big deal?

MR. ZUCKERMAN: Well, I don't know, because actually, when you read the article, I have to say, you read it in context, it didn't seem to be quite the kind of issue -- MR. MCLAUGHLIN: And McChrystal's remarks were all within rank.

MR. ZUCKERMAN: Yeah. Well, I don't want to answer that, but --

MR. MCLAUGHLIN: I mean, you know, it wasn't as though he was broadcasting to the hillside of the press.

MR. ZUCKERMAN: But I do think -- and there were other journalists who were there to whom McChrystal was really complaining in part. What they had to do in that case was to protect Obama. There was a certain disparagement of Obama as a commander in chief and as a decider.

MR. MCLAUGHLIN: Do you think -- you don't think this was payback time on the part of Obama, meaning that McChrystal had said to "60 Minutes" that he had not talked -- he had talked to McChrystal on the phone but he had never met with him, even though he was in charge of Afghanistan? Do you remember that?

MR. BUCHANAN: Yeah, I remember that. But here's what this was. Obama was being portrayed as someone who's weak. He couldn't stand up. And now the general had insulted him. I think they made a mistake with McChrystal, because I agree with you. I don't think it was all that --

MR. MCLAUGHLIN: You think --

MR. BUCHANAN: Well, I think what he should have said, "General, keep your mouth shut. No more interviews."

MR. MCLAUGHLIN: Was it a bag job on the part of the president? "Get him out of there."

MR. BUCHANAN: I think the president acted out of weakness here --

MS. CLIFT: No.

MR. BUCHANAN: -- because he wanted to appear strong.

MS. CLIFT: McChrystal --

MR. MCLAUGHLIN: And they brought "Rolling Stone" forward.

MR. BUCHANAN: Yeah. And then they used it --

MR. MCLAUGHLIN: They helped feed this --

MR. BUCHANAN: They used it to fire the guy, and now they've got General Petraeus. They can't fire him.

MS. CLIFT: General -- MR. MCLAUGHLIN: Was that overly suspicious of them?

MR. STIREWALT: Here's what I think. I think they have a tendency to outsmart themselves. I think they have a tendency to get too cute and take things for granted. I think that with the McChrystal thing, floating it around there, bringing "Rolling Stone" out, talking about it, winking about it, is just like talking about the seats that they're going to lose.

MR. MCLAUGHLIN: So we get McChrystal out of the act and Petraeus in. We can count on Petraeus.

MR. STIREWALT: Right. It was too cute.

MS. CLIFT: They traded up by getting Petraeus. And by getting word out there that the Democrats really are in trouble, maybe they're going to wake up their base.

MR. MCLAUGHLIN: Predictions. Pat.

MR. BUCHANAN: After the Democratic defeat in November, there'll be a push to put Hillary Rodham Clinton on the ticket in 2012.

MR. MCLAUGHLIN: Really?

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

MR. MCLAUGHLIN: Wow.

MS. CLIFT: And she may trade places with Joe Biden, and Joe Biden may be the next secretary of State.

MR. BUCHANAN: Exactly.

MR. MCLAUGHLIN: Huh? Wow..

MS. CLIFT: (Laughs.)

MR. MCLAUGHLIN: This is unbelievable.

MR. STIREWALT: It's big. This is bigger --

MR. BUCHANAN: Put that on your prompter, John.

MR. MCLAUGHLIN: These are big predictions. (Laughter.)

Go ahead.

MR. STIREWALT: My prediction is British Prime Minister --

MR. ZUCKERMAN: Cameron. MR. BUCHANAN: Cameron.

MR. STIREWALT: -- David Cameron, when he comes to Washington, is going to make it hard on Obama, because he needs a little operational space in Britain over all the BP bashing.

MR. MCLAUGHLIN: Yes.

MR. STIREWALT: So he's going to be hard on Obama when he comes to call.

MR. MCLAUGHLIN: Who's going to win that?

MR. STIREWALT: Well, they'll both win it in their respective home markets.

MR. MCLAUGHLIN: Mort.

MR. ZUCKERMAN: I predict that the Democrats will lose at least 40 seats in the House in the coming election, more than the 30 seats that was suggested before.

MR. MCLAUGHLIN: I predict that before July 4th of next year, 2011, that a major regulatory action will be imposed on the Internet.

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Bye-bye.

END.