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THE MCLAUGHLIN GROUP HOST: JOHN MCLAUGHLIN PANEL: PATRICK BUCHANAN, MSNBC; ELEANOR CLIFT, NEWSWEEK; MONICA CROWLEY, WASHINGTON TIMES; JAY CARNEY, WASHINGTON EXAMINER TAPED: FRIDAY, SEPTEMBER 17, 2010 BROADCAST: WEEKEND OF SEPTEMBER 18-19, 2010

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MR. MCLAUGHLIN: Issue One: O'Donnell Express.

CHRISTINE O'DONNELL (Delaware Republican senatorial candidate): (From videotape.) Ladies and gentlemen, the people of Delaware have spoken. (Cheers, applause.) No more politics as usual.

MR. MCLAUGHLIN: Christine O'Donnell surged to victory in Tuesday's U.S. Senate Republican primary in Delaware. She now faces the general election 40 days from now. O'Donnell is single, 42 years old, with a background in public relations. Previously she sought the Republican nomination for U.S. Senate during the 2006 primary four years ago, and she lost. In 2008, two years ago, she gained the uncontested Republican nomination for the U.S. Senate in the general election, challenging sitting Senator Joe Biden. Biden won by 257,000 to O'Donnell's 140,000. Biden outspent O'Donnell, $4.9 million to O'Donnell's $116,000, nearly 32 times bigger than O'Donnell's budget.

Her opponent for the 2010 Republican primary for the U.S. Senate was Michael Castle, a nine-term Republican congressman and former two- term governor of Delaware.

MS. O'DONNELL: (From videotape.) Don't ever underestimate the power of we, the people.

MR. MCLAUGHLIN: Two months ago, she had no money, no campaign, and many believed no chance. With a 23 percent approval rating, she looked like a long shot against the household name of Michael Castle.

But the Palin endorsement led to a $600,000 pledge to the O'Donnell campaign by the tea party. Even after her victory last Tuesday, Republican leaders are still staying away from the nominee. The defeated Michael Castle refuses to endorse her candidacy. Also Castle's website on Wednesday described O'Donnell as, quote, "untrustworthy and unfit for office," end quote.

As we go into the home stretch to the general election, a new poll shows Democratic senatorial candidate Chris Coons leading his opponent, Republican candidate O'Donnell, 53 percent to O'Donnell's 42 percent.

Question. True or false: Christine O'Donnell has a better than fighting chance to beat her opponent, Chris Coons, seeking the United States Senate seat from Delaware this election.

MR. BUCHANAN: You are dead on, John. The day after her nomination, she got $1 million in. The tea party is on the line for her. DeMint is; Sarah Palin. They're all, I'm sure, going to be going in. Forces will be in there. It will be a great contest. There's no doubt she is down, but she's only down 10 points now. She got 35 percent against Joe Biden when he was running for president and senator.

MS. CROWLEY: Vice president.

MR. BUCHANAN: It can be done -- excuse me, vice president. It can be done, John, but it's going to go -- it's going to be a hard, uphill battle, but I think they can do it.

But let me say this. The neoconservatives and Karl Rove and Mike Castle are cutting their throats with what they are doing after this woman won her nomination.

MR. MCLAUGHLIN: What did Rove do? MR. BUCHANAN: They're all trashing her.

MR. MCLAUGHLIN: Why should Rove trash her?

MR. BUCHANAN: I don't know why he did. First off, I'll tell you why -- because it destroyed the grand plan where we give you the people you nominate. What the tea party is saying to these guys is "You don't tell us who our candidates are going to be. We will pick them, and we'll reject yours if we want to."

MR. MCLAUGHLIN: Eleanor, could O'Donnell self-destruct?

MS. CLIFT: Let's get a grip here.

MR. MCLAUGHLIN: (Laughs.)

MS. CLIFT: She won a closed Republican primary, 60,000 voters, a tenth of the state's population and a third of Republican voters. And she won by 53 to 46. And the Mike Castle voters -- and I don't think he's ever been called a neocon before; he's a very popular former governor. His voters said they could not vote for her in the general election. She is unlikely to win, which is not to say she must be taken seriously, because all the money is going to pour in from the tea-party patriots and various groups who want to see her succeed.

But I'm with Karl Rove on this one. He called her nutty. She is putting a face on the Republican Party that is very extreme, and she is shaping not only the midterm elections, but she is shaping the 2012 elections. And the way you can tell is Mitt "Man for All Seasons" Romney endorsed her immediately.

MR. MCLAUGHLIN: And gave her what?

MR. BUCHANAN: Five thousand dollars.

MR. MCLAUGHLIN: A $5,000 check. Right on, Mitt.

MS. CLIFT: Because he's pandering to the right. And so we're going to see them all do exactly what John McCain did --

MR. MCLAUGHLIN: Okay.

MS. CLIFT: -- to try to court the party's far right; fringe right, now.

MS. CROWLEY: Oh, fringe.

MR. MCLAUGHLIN: Let me give a little gloss on what you had to say.

MS. CLIFT: (Laughs.) Okay. MR. MCLAUGHLIN: This is not a rejection of your view. There are 282,000 registered Democrats in Delaware, okay? She's Republican. A combined 328,000 independents and Republicans.

MS. CROWLEY: Yep.

MR. MCLAUGHLIN: If she pulls the majority of independents and Republicans, she could beat Coons.

MS. CROWLEY: Absolutely. And when you look at quintessentially blue states that have already held general elections over the last year and a half, whether it's New Jersey, whether it's Massachusetts -- you've got a purple state, Virginia, that also voted -- they all voted in Republicans as governors; and in the U.S. Senate, Scott Brown. Why? Because these candidates are speaking directly to the immediately concerns of the American people. They want limited government. They want government to stop growing and stop spending. They want a lower tax burden and they want their individual freedom back. I can understand why the left would think that was a radical agenda, but that's where most of the American people are.

And it's completely within Christine O'Donnell's power to pull this off. It's got now the GOP establishment. And, by the way, the Republican establishment ought to be ashamed of themselves. They have disgraced themselves in their smear campaign against this woman. Now they are starting to close ranks.

But listen, the only reason you have a tea-party movement in America today -- which is now mainstream America; it's no longer a movement -- is because of the GOP establishment, because for years they went down the road of being Democrat Lite, big-spending, big- government programs; and not just the Republican base, but a lot of independents are fed up to here. We're a nation of Howard Beales. We're mad as hell. We're not going to take it anymore. And that's giving rise --

MR. MCLAUGHLIN: The Republicans --

MS. CROWLEY: -- to Christine O'Donnell, Scott Brown, Chris Christie, and all of these other Republicans who can now win in blue states.

MR. MCLAUGHLIN: What do you think of what she's saying? The Republicans became bloodless. They lost their allegiances. MR. CARNEY: Absolutely, yeah.

MR. MCLAUGHLIN: And they tried to mimic Democrats.

MR. CARNEY: Well --

MR. MCLAUGHLIN: And she's returning us to the fold.

MR. CARNEY: She is.

MR. BUCHANAN: That's exactly right.

MR. MCLAUGHLIN: She's returning the Republicans to the fold.

MR. CARNEY: That's largely true. And when you've got --

MR. BUCHANAN: (Inaudible.)

MR. MCLAUGHLIN: I'm an independent.

MR. CARNEY: The Democrats said that -- I mean, the -- sorry -- the establishment Republicans said Marco Rubio couldn't win in Florida, and they were wrong. They were saying Rand Paul couldn't win in Kentucky, and he's ahead in all the polls. They repeatedly said this, where they thought guys were too conservative and too detached from the establishment to win.

I will say this about O'Donnell, though. She does have a past record of problems where she might not have been telling the truth, problems with personal integrity. So she does have issues. It's not for her being too conservative or too outspoken.

MR. MCLAUGHLIN: What are you talking about, her personal integrity?

MR. CARNEY: Talk about whether she graduated from Princeton while she only took --

MR. MCLAUGHLIN: She went to Fairleigh Dickinson, didn't she?

MS. CLIFT: I don't think it's Princeton. It's Fairleigh Dickinson.

MR. CARNEY: Sorry -- Fairleigh Dickinson.

MS. CROWLEY: Yeah, but she did claim that she --

MR. CARNEY: She audited a course.

MS. CLIFT: But you can't lump her in with Chris Christie and Scott Brown in terms of her experience. MS. CROWLEY: I'm talking about the trend.

MS. CLIFT: And what are these individual freedoms that she's going to get back for us and this big collective "they" that you use? She won a small portion of an electorate.

MR. MCLAUGHLIN: Well, there are --

MS. CLIFT: And she's traveling now on the hopes and dreams --

MR. BUCHANAN: John --

MR. MCLAUGHLIN: Well, we haven't said anything about the weaknesses of Coons, who declared himself to be a Marxist in 1985.

MR. BUCHANAN: But, look, John --

MS. CROWLEY: Right on, John.

MR. BUCHANAN: John, the real thing is --

MR. MCLAUGHLIN: Remember that? You know, there are --

MS. CLIFT: He's an elected official.

MR. MCLAUGHLIN: Coon is not a -- he raised -- he's a county official right now.

MR. BUCHANAN: Right.

MS. CLIFT: Right.

MR. MCLAUGHLIN: And he's in a position of authority. And he raised the budget over there 28 percent.

MS. CROWLEY: Right.

MR. MCLAUGHLIN: And that's what it cost --

MS. CLIFT: He's an elected --

MR. BUCHANAN: The key thing, John --

MS. CLIFT: He's an elected official --

MR. MCLAUGHLIN: He raised the taxes 28 percent.

MS. CLIFT: -- with a -- (inaudible) -- record.

MR. BUCHANAN: The Republican establishment --

MS. CLIFT: Since when is this the O'Donnell campaign election -- MR. MCLAUGHLIN: Well, we were just looking at the political data.

MS. CLIFT: A fair discussion.

MR. BUCHANAN: The point of this is, look, what has taken place -- and Toomey's another one. What's taken place here is the tea-party people have said to the establishment, "We will nominate our own." This has an impact on 2012, John. If I were to pick right now who would be the nominee of the Republican Party, Sarah Palin would win Iowa in a walk as of right now, and she'd probably win South Carolina. That doesn't mean she's going to win it 11 or 12 months from now.

MS. CLIFT: Right.

MR. BUCHANAN: But these folks are on fire and they're taking this party over.

MS. CLIFT: And remember Barry Goldwater. You can enthuse a portion of the electorate. That doesn't mean you're going to --

MR. BUCHANAN: That was a wonderful campaign.

MR. MCLAUGHLIN: Exit question --

MS. CLIFT: -- (inaudible) -- taking over the party. They're not taking over the country.

MR. MCLAUGHLIN: Exit question: Will Christine O'Donnell win the election? Yes or no.

MR. BUCHANAN: I think O'Donnell wins it. I really do.

MR. MCLAUGHLIN: O'Donnell wins?

MR. BUCHANAN: I think she does.

MR. MCLAUGHLIN: Eleanor.

MS. CLIFT: O'Donnell doesn't win, no.

MR. MCLAUGHLIN: O'Donnell loses.

MS. CLIFT: Yes. I'm with Karl Rove again on this one. MR. BUCHANAN: (Laughs.)

MR. MCLAUGHLIN: (Laughs.)

MS. CLIFT: Mike Castle would have handed that seat to the Republicans. He is an elegant public servant. This woman does not --

MR. MCLAUGHLIN: Rove is either a heretic or schismatic. Which is he?

MS. CROWLEY: I'm not sure. But I hope --

MR. MCLAUGHLIN: Both.

MS. CROWLEY: -- that the left continues to dismiss the tea-party movement and all of these candidates -- Rand Paul, Marco Rubio, Christine O'Donnell --

MS. CLIFT: Ms. O'Donnell with the others.

MS. CROWLEY: -- because the power -- the power of this movement is beyond belief now. And like I said, it's mainstream America. And you know how you know it's really powerful? It's because the left continues to try to smear these candidates and dismiss them out of hand and call them extremists when the Democratic Party has been hijacked and taking the country over --

(Cross talk.)

MR. MCLAUGHLIN: All right, that's -- you're predicting it's a win for her.

(Cross talk.)

MR. MCLAUGHLIN: All right, hold on, Eleanor.

(Cross talk.)

MR. MCLAUGHLIN: Let Eleanor in.

MS. CLIFT: I was asked for my opinion. I am not smearing a candidate. That is my opinion.

MR. CARNEY: O'Donnell has the odds against her. She can win. If I had to bet --

MR. MCLAUGHLIN: Now, come on. Will she or won't she?

MR. CARNEY: If I had to bet even odds, I would say no. But conservatives are no worse off for having lost Mike Castle.

MR. BUCHANAN: Exactly. Neither is the country. MS. CROWLEY: Right on.

MS. CLIFT: What did Mike Castle do that was so --

MR. BUCHANAN: Why should we accept --

(Cross talk.)

MS. CLIFT: Pro-choice. Okay, then that's the issue.

MR. CARNEY: He voted against Bush's tax cuts.

MS. CLIFT: All right, this is the cultural revolution --

MR. CARNEY: And he voted against the Bush tax cuts.

MS. CLIFT: -- raising its head.

MS. CROWLEY: He voted for cap and trade.

MR. BUCHANAN: Has he been gracious? Has he been a gracious man at all --

MR. MCLAUGHLIN: Why did she pull everything off her website?

MR. BUCHANAN: -- right after he got beat?

MS. CLIFT: He's been a gracious, accomplished public servant.

MR. MCLAUGHLIN: Can you answer that, Pat?

MR. BUCHANAN: What?

MR. MCLAUGHLIN: Why did she pull everything off her website?

MS. CROWLEY: She's starting --

MR. BUCHANAN: Everything off her website?

MR. MCLAUGHLIN: Yeah, she pulled it all off.

MS. CLIFT: She ridiculed him and told him he should put on his man pants. (Laughter.)

MS. CROWLEY: Yeah, and she was right.

MR. BUCHANAN: Maybe he should have. (Laughs.)

MS. CROWLEY: Right.

MR. MCLAUGHLIN: (Laughs.) Who said that?

MS. CROWLEY: Christine O'Donnell. MS. CLIFT: Mama grizzlies are allowed to insult people.

MS. CROWLEY: Oh, come on. It's --

MR. BUCHANAN: If that's the worst thing, for heaven's sakes.

MR. MCLAUGHLIN: So you're saying yes, she can win, or yes, she will win?

MR. CARNEY: I think --

MR. MCLAUGHLIN: Yes or no as you see it now?

MS. CLIFT: He said no. He just said no.

MR. CARNEY: I think she loses by about three or four points.

MR. MCLAUGHLIN: You do?

MR. CARNEY: You know, you're putting me on the spot. That's what I said. Again, I'm not that upset. As a conservative, I'm not that upset getting Coons instead of Castle.

MS. CLIFT: And that's analysis. It's not a smear. (Laughs.)

MR. MCLAUGHLIN: I think that's going to win, because I think what Coons brings to the table is not going to do that much for him.

Issue Two: Tax Cuts.

Nine years ago, June 2001, just four months after taking office, the Bush-Cheney administration introduced sweeping revisions of the U.S. income-tax rates. Congress approved these cuts on May 26th, 2001. The new law cut the income taxes for all Americans in all tax brackets 15 to 10, 28 to 25, 31 to 28, 36 to 33, and 39.6 to 35 percent.

Okay, fast forward to New Year's Day, January 1, 2011, next year, three months from now. The tax cuts are set to expire under a sunset provision as the original 2001 legislation dictated. President Obama does not want the sunset. He wants to keep the Bush-Cheney tax cuts in place, except for two brackets -- the brackets for the monied class of society. PRESIDENT BARACK OBAMA: (From videotape.) The wealthiest Americans, who disproportionately benefited not only from tax cuts from the Bush administration, but also disproportionately benefited when it comes to corporate profits and where the gains in productivity were going, they are going to give up a little bit more.

MR. MCLAUGHLIN: Just this week, Senate Republican leader Mitch McConnell introduced a bill that would keep in place Bush-Cheney tax policy. Republicans in the Senate have vowed to block any change by President Obama on the tax brackets now in force for the big earners and big investors, currently paying 33 percent and 35 percent, which Obama wants to put back to 36 percent and 39.6 percent.

Question: Are the Democrats going to increase taxes on the high earners during a recession?

MS. CROWLEY: No, they will not, despite the fact that President Obama has driven a stake in the ground, Nancy Pelosi has driven a stake in the ground, saying no, they are very averse to raising taxes on -- or letting all of the Bush tax cuts expire.

There are enough Democrats now -- by my last count, five Democratic senators. You've got 31 House Democrats who have written to the House leadership saying, "Please don't allow all of the Bush tax cuts to expire" -- I mean, extend them. So now you have the debate happening on the Democratic side, because honest Democrats, or at least those who are very fearful for their political lives, will tell you that you cannot raise taxes --

MR. MCLAUGHLIN: Yeah.

MS. CROWLEY: -- in the middle of a recession and expect job creation and economic growth.

MR. MCLAUGHLIN: Okay, Eleanor.

MS. CLIFT: These tax cuts were set to sunset because we can't afford them beyond a certain point. If you were looking at it strictly from a deficit-cutting viewpoint, you would let them all lapse, as they were designed to do. But the president, I think, is successfully rebranding them as the Obama middle-class tax cuts.

MS. CROWLEY: (Laughs.) Very funny.

MS. CLIFT: I don't think that's funny. And I don't --

MS. CROWLEY: Well, then --

MS. CLIFT: Excuse me. Excuse me.

MS. CROWLEY: It's an acknowledgement -- MS. CLIFT: And I don't think the House --

MS. CROWLEY: -- that Bush was right.

MS. CLIFT: And I don't think --

MS. CROWLEY: Right?

MS. CLIFT: And I don't think the House leader, John Boehner, is silly either, and he recognizes there is power in this issue.

MS. CROWLEY: Well, come on.

MR. MCLAUGHLIN: Okay --

MS. CLIFT: It is the one issue that the Democrats have a majority of the people --

MR. BUCHANAN: Boehner --

MS. CLIFT: -- with them.

MR. MCLAUGHLIN: Let's find out what Boehner says. Here's Boehner on the tax cuts.

HOUSE MINORITY LEADER JOHN BOEHNER (R-OH): (From videotape.) If the only option I have is to vote for some of those tax reductions, I'll vote for them. But I've been making the point now for months that we need to extend all the current rates for all Americans if we want to get our economy going again and we want to get jobs in America.

MR. BUCHANAN: Tactical mistake, a real big one. He gave away the fall-back position of the Republicans. Obviously, if you come down to a dead end and you get nothing or some tax cuts, you would take some. But that was a mistake, John. What the Republicans --

MR. MCLAUGHLIN: Why was it a mistake? I don't get it.

MR. BUCHANAN: Because a lot of Democrats will say --

MR. CARNEY: He was making his final offer up front.

MR. BUCHANAN: If Boehner can take the tax hikes for the rich, the Democrats are saying, "We've got cover behind John Boehner." But now the Republicans are back on all or nothing at all.

MR. MCLAUGHLIN: He had to take care of the straying Republicans who want to vote with the Democrats on this issue.

MR. BUCHANAN: There aren't any. MR. CARNEY: Well, there aren't any. That's one thing Boehner has done well and Mitch McConnell has done it well in the Senate is keeping these people in line. The people straying, as Monica was pointing out, are the Democrats. And what I want to know is if we're talking about letting the Bush tax cuts expire, why aren't we talking about letting the Bush spending hikes expire? He increased spending by 55 percent.

MR. MCLAUGHLIN: Right.

MR. CARNEY: If we're worried about deficits, there's got to be -- you think every dime that Bush increased spending was worth it? Is that what you're saying? All of Bush's spending increases --

MS. CLIFT: You could go out and make that case, but that isn't what the politicians are talking about. What they're talking about is holding the middle-class tax cuts hostage --

MR. BUCHANAN: It's class warfare.

MS. CLIFT: -- to getting --

MR. BUCHANAN: Class warfare, Eleanor.

MS. CLIFT: Class warfare is when we burn down your houses, Pat. This is not class warfare.

MR. BUCHANAN: (Laughs.)

MS. CLIFT: This is reality.

MR. BUCHANAN: That's getting threatening, Eleanor. (Laughs.)

MS. CLIFT: The tiny little majority has done very well, and they're going to do just fine under the rates that were in place when President Clinton was in office.

MR. MCLAUGHLIN: Who is Peter Orszag?

MS. CLIFT: He's the former budget director.

MR. MCLAUGHLIN: You know that he's opposed to this action by Obama.

MS. CLIFT: He suggested a compromise of extending all the tax cuts for two years and letting them all --

MR. MCLAUGHLIN: He's saying that this will stall the momentum of the recovery now going on. MR. BUCHANAN: Exactly. Orszag's going to get -- Orszag's right, John.

MS. CLIFT: The tax cuts did not generate jobs. They were in place for eight years under Bush.

MS. CROWLEY: No --

MS. CLIFT: And Bush was a lost decade. He had a net decrease in jobs. You cannot say that that created jobs.

MS. CROWLEY: That's wrong. That's wrong. After --

(Cross talk.)

MR. MCLAUGHLIN: All right, let her in.

MS. CROWLEY: After the Bush tax cuts, you had 53 consecutive months of job creation and economic growth. That's why Obama's trying to rebrand it as Obama tax cuts, because they all know that, in fact, Bush was right, and they worked.

MS. CLIFT: I don't --

MS. CROWLEY: You can't raise taxes on the higher end because you're talking about --

MS. CLIFT: Bush was right -- (inaudible). (Laughs.)

MS. CROWLEY: John, you're talking about raising them on small businesses, small-business profits, capital gains and dividends. And what you're talking about there are the engine that creates 70 percent of all new job growth.

MR. MCLAUGHLIN: Do you understand that all of these actions are geared to the election about five weeks from now?

MR. CARNEY: I think --

MR. MCLAUGHLIN: And now who does he want to galvanize by this action?

MR. CARNEY: I think a lot of these actions are geared towards the election two years from now. I think Obama is covering his back.

MR. MCLAUGHLIN: Well, let's talk about this year. He wants the turnout of the liberal Democrats, who are somewhat disaffected --

MR. CARNEY: I think there's better --

MR. MCLAUGHLIN: -- and they love this kind of thing, raising the taxes on the wealthy. MR. CARNEY: But I think that all the Democrats are seeing polls in their district about these, and at least the public doesn't take Eleanor's view, where they don't -- even if you're not in the upper brackets. I'm not in the upper brackets and I don't want these taxes.

MR. MCLAUGHLIN: Let Pat in.

MR. BUCHANAN: This could go to a lame-duck session. A lot of these guys want to get home in a week or two. They might say, "We didn't get this thing done," and then the clock is ticking. All these taxes go back into effect January 1 and you get both houses of Congress back. Defeated Democrats will then vote with Obama because that's the only way they'll get jobs.

MR. CARNEY: (Inaudible) -- Obama's re-election will be putting the government --

MS. CLIFT: It would be going into the teeth of polls that show that the majority of the American people do not want to create another giant deficit by rewarding people who really don't need them --

MR. MCLAUGHLIN: What are the --

MS. CLIFT: -- combined with the appointment of Elizabeth Warren, who's going to put a face on Obamanomics.

MR. MCLAUGHLIN: Don't you think the American people hate class warfare, and this is an example of it?

MR. CARNEY: I think they do.

MR. MCLAUGHLIN: Is this an example? Is it also an undermining of the capitalistic system, the market economy?

MS. CLIFT: The American people are worried about the deficit, and it balloons the deficit if you reward people --

MR. MCLAUGHLIN: Exit question --

MS. CLIFT: -- who really don't need it.

MR. MCLAUGHLIN: Exit question: With the midterm elections a mere six and a half weeks away, is it smart politics or is it dumb politics to make the Bush-Cheney tax cuts permanent?

MR. BUCHANAN: It is smart politics, John, and I think it is going to happen. And the people that can tell you that are the Democrats whose lives are at stake.

MR. MCLAUGHLIN: You mean, he doesn't have the Democratic --

MR. BUCHANAN: The very fact that -- MR. MCLAUGHLIN: -- (inaudible) -- in the Congress to pass it.

MR. CARNEY: Correct.

MR. BUCHANAN: The very fact that Democrats --

MS. CLIFT: Smart politics to frame it as holding middle-class tax cuts hostage to reward the rich.

MS. CROWLEY: It is smart politics and smart economics. Remember, nobody ever got a job from a poor man. They got a job from a rich man. And in order for the wealthiest and small businesses to create the jobs that we need, you've got to give them the certainty and you've got to give them the economic --

MR. CARNEY: And I think --

MR. MCLAUGHLIN: And do you see this as breeding class warfare?

MR. CARNEY: I think that there's --

MR. MCLAUGHLIN: Yes or no?

MR. CARNEY: Yes. And I think there's good class warfare the Republicans can do in return, which is the Democrats are standing behind the bailouts.

MR. MCLAUGHLIN: You mean, fight fire with fire.

MR. CARNEY: Well, yeah, and say we want to keep taxes low. The Democrats are standing behind the bailouts. Go after the bailouts and don't go after their tax rates.

(Cross talk.)

MR. MCLAUGHLIN: I think it's bad politics, because I think you should stay away from anything that has any taint of class warfare.

Issue Three: Homegrown Terrorists.

TOM KEAN (9/11 commission chairman): (From videotape.) The strategy has changed. It's much more difficult for al Qaeda to maybe have a great big attack like 9/11, so they're plotting smaller attacks and they're using non-traditional people to try to do them. So the best non-traditional people they can get, frankly, are American citizens.

MR. MCLAUGHLIN: Terrorism at home. That's where the real threat is within our borders, some say. Homegrown terrorists are actively plotting terrorist attacks while they continue to live within our ranks, in our midst. The trend is on the rise. The infamous Muslim cleric of the Fort Hood shooting, Anwar al-Awlaki, who has been explicitly designated for assassination by President Obama, says this. Quote: "Jihad is becoming as American as apple pie," unquote.

Here are the homegrown terrorist numbers. All of the following actions were perpetrated by homegrown terrorists last year: Two outright terrorist attacks in the U.S., five foiled attacks, four American citizens conspiring to go abroad to learn how to become terrorists, all joining the 43 U.S. citizens convicted of terrorist crimes outside our borders.

This data tells us that homegrown terrorism is less a matter of crazed loners than it is of American citizens living the poisonous ideology of Islamic extremists in al Qaeda in our midst. Yet the Obama administration does not identify terrorist organizations who recruit U.S. homegrown terrorists such as al Qaeda as, quote-unquote, "Islamic."

Critics of Mr. Obama say that he is overly focused on trying to moderate the enemy than expose it. Some say Obama gave the Christmas Day bomber -- a homegrown terrorist, by the way -- the velvet-glove treatment instead of the iron fist. He granted Abdulmutallab his Miranda rights and a civil trial, all lawyered up.

SEN. JOHN MCCAIN (R-AZ): (From videotape.) Any chance of finding out Osama bin Laden's connection with this bombing vanished when the decision was made to give this individual civil -- a trial in civil court, which then gave him his Miranda rights and he was lawyered up. He was cooperating until he got a lawyer.

MR. MCLAUGHLIN: What's the real bad news in this report? You read the report?

MS. CROWLEY: I did read the report; a couple of things.

MR. MCLAUGHLIN: This is the Kean-Hamilton report.

MS. CROWLEY: Kean-Hamilton report, the 9/11 commission members.

MR. MCLAUGHLIN: Was it long? Was it long?

MS. CROWLEY: Yeah, it was.

MR. MCLAUGHLIN: Was it academic? MS. CROWLEY: Very academic, but very incisive. And there are a couple of really frightening points in this. First of all, they're saying that we are making a fatal assumption here in just assuming that all Muslims are assimilating into the United States. Most do; many do not. We've seen Major Nidal Malik Hasan, the Fort Hood shooter, and others.

Secondly, it says that al Qaeda and other extremist groups are recruiting American citizens at a much higher rate to carry out jihad in the United States. And if they can't get American citizens, they're recruiting Muslims in the United States to go down the citizenship path, become citizens, and then carry out attacks.

And the other part of this equation that they point out is that we have no strategy. We have no federal bureaucracy, no agency, no organization here in the United States, even after all these years after 9/11 and all of these attacks, to deal with homegrown terror.

MR. MCLAUGHLIN: There's no central accountability.

MS. CROWLEY: Right.

MR. MCLAUGHLIN: The NDI. What's that, National Defense Institute?

MS. CROWLEY: Yeah.

MR. MCLAUGHLIN: The FBI doesn't have it.

MS. CROWLEY: Right.

MR. MCLAUGHLIN: The CIA doesn't have it.

MS. CROWLEY: The NSA doesn't have it.

MR. MCLAUGHLIN: The DHS. What's DHS?

MS. CROWLEY: Department of Homeland Security.

MR. MCLAUGHLIN: They don't. None of those agencies have it. No agency has been assigned with being accountable for this particular homegrown terrorist threat. What do you think about that?

MR. CARNEY: Well, the whole history of our intelligence is saying sometimes it's too centralized and we need to decentralize it, and sometimes it's too decentralized. So I don't -- I do not think that that's an easy question to answer.

MR. MCLAUGHLIN: I have a question for Eleanor. Do you think that President Obama is staying away from characterizing this phenomenon as Islamic? MS. CLIFT: Well, first of all, he is making the point, as his predecessor did, George W. Bush, that we are not at war with the Islamic religion. We are not at war with Muslims. And I think that our law-enforcement people are very much aware that we have homegrown terrorists. We had Somali young men --

MR. MCLAUGHLIN: Right. Quickly.

MS. CLIFT: -- recruited out in the West. But I think this report makes the point that we're like Europe. We've got these homegrown rebels, if you will, and that the likelihood -- the inevitability, probably, of another attack, small-scale attack, is out there.

MR. MCLAUGHLIN: Zero to 10, Republicans take over the Senate. Pat.

MR. BUCHANAN: Three.

MR. MCLAUGHLIN: Eleanor.

MS. CLIFT: Three.

MS. CROWLEY: Six-point-five.

MR. MCLAUGHLIN: Wow.

MR. CARNEY: Two.

MR. MCLAUGHLIN: Answer: Four.

Bye-bye.

END.