The McLaughlin Group

Host: John McLaughlin

Pat Buchanan, Author and Columnist;
Eleanor Clift, Newsweek;
Susan Ferrechio, Washington Examiner;
Mort Zuckerman, U.S. News & World Report

Taped: Friday, February 1, 2013
Broadcast: Weekend of February 2-3, 2013

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JOHN MCLAUGHLIN: Issue One: Contraction Blues.

The U.S. economy in the fourth quarter of last year, 2012, October-November-December, contracted by 0.1 percent, one tenth of 1 percent. It was the first contraction in three years, and it rattled financial markets.

Much of the slippage in gross domestic product, GDP, was due to what the U.S. Federal Reserve described as, quote, "weather-related disruptions and other transitory factors," unquote.

The central bank is keeping monetary policy on hold and says it will continue to buy long-term securities until there is a substantial improvement in the outlook for the labor market.

Also the cutback in Department of Defense outlays is likely to fuel concerns about the size of a slowdown and the full economic fallout of the large, quote-unquote, "sequester cuts" scheduled for a month from now, the start of March.
The president's press secretary said this about the sequester. Quote: "Across-the-board cuts to education, to research and development, would have -- repeat, would have -- damaging effects on our economy and our long-term economic prospects," unquote.

A growing number of analysts believe that the political will to stop the sequester is lacking. It will take effect at least temporarily, they believe. And that will pose a further risk to the economy in the first half to this year.
Question: The Fed is saying that the fourth quarter contraction, October-November-December of 2012, was due chiefly to, quote-unquote, "transitory factors." Is this true, or is the recovery stalling out? Pat Buchanan.

PAT BUCHANAN: I think basically it's true, John. The U.S. economy is out of the intensive care it was in in 2007-2008, but it's been walking the hospital halls ever since. The growth has been growing at an average of about 2 percent. Unemployment is where it was when Barack Obama took office. We're adding about 150,000 jobs a month.

But John, the real problem here is this slow growth is occurring when we've had five straight trillion-dollar deficits to pump it up. The Fed has put $3 trillion into the economy, and we get $85 billion a month in transfusions into the economy from the Fed, and we're still limping along like a mature and, quite frankly, modest economy.


ELEANOR CLIFT: Well, I think these numbers reflect the fact that government is shrinking and the Defense Department really pulled back in the last quarter of last year. And so it's a cautionary sign, if they do go ahead with the sequester. And it looks like both parties are kind of sleepwalking their way towards the sequester.

The Republicans don't want to give up anything on the revenue side. They'd rather take the hit in defense spending than give up any tax cuts. And the Democrats have protected Social Security and Pell grants and Medicaid. And so they're not going to cave first. And so if neither party blinks, the sequester will go ahead and we'll see further contraction in the economy.

But, you know, I'm not that gloomy. I take my cue from Mark Zandi, not Pat Buchanan. And --


MS. CLIFT: Mark Zandi is an accomplished economist, and he's saying in 2013 we're going to basically go along with sort of steady, modest growth.


MS. CLIFT: But the housing market is truly coming back, and 2014 looks like it's going to be --

MR. MCLAUGHLIN: Yeah, tell Mark Zandi that consumer confidence dropped from 58.6 percent -- to 58.6 percent. It's an 8.1 percent --

MS. CLIFT: Well, they just lost --

MR. MCLAUGHLIN: -- decline --

MS. CLIFT: -- their payroll tax cut. (Laughs.)

MR. MCLAUGHLIN: -- 8.1 percent decline, December to January. What do you think about this?

MS. CLIFT: They just lost their payroll tax cut. No wonder.

SUSAN FERRECHIO: I think you still look at the big picture here. And, you know, the job numbers that came out Friday were encouraging. But even, you know, business experts were looking at the big picture and seeing that the economy is still -- and job growth has been terribly sluggish. And it's been terribly sluggish for a really long time. We're still hovering around 8 percent unemployment. You know, when is this going to end? And no one sees it ending soon, and that is just -- that's bad news overall.

MR. MCLAUGHLIN: What do you think, Mort?

MORT ZUCKERMAN: Well, I think the economy remains weak at very best. You have to -- as Pat was saying, you look at this economy in the context of the biggest fiscal stimulus we've ever had in our history, $25 billion a week in terms of deficit spending, trying to goose up the economy.

Secondly, $85 billion a month coming out of the Federal Reserve, the loosest monetary policy we've ever had. We can barely get the economy to grow. Here it's been going down. It was 2.4 percent last year, then 1.8 percent, if that, maybe even less, 1.8 percent this year, despite all of the stimulus. So the economy is continuing to slow. It's not even staying flat.

MR. MCLAUGHLIN: So you're saying that we're in for several quarters of low growth.

MR. ZUCKERMAN: Well, we don't know. We hope it is going to be several quarters of low growth. Anything can happen in an economy this fragile that could turn it into a recession and a contraction of GDP.

MR. MCLAUGHLIN: That would be a double-dip recession.

MR. ZUCKERMAN: That's right.
It would be.

MR. MCLAUGHLIN: Is that your prediction?

MR. ZUCKERMAN: No, I don't know. All I can say -- nobody knows.

MR. MCLAUGHLIN: I know you don't know. Where do you think the odds are?

MR. ZUCKERMAN: I think the economy is going to stay very weak. And if there is any single event -- the collapse of the Spanish banking system or what have you -- any single event will create such a lack of confidence in the economy that you'll have a big cutback.

MS. CLIFT: I'd just like to --

MR. MCLAUGHLIN: Do you think we should have confidence in what the Federal Reserve is saying, in view of what it said in 2007? Shall I review that history with you?

MR. ZUCKERMAN: You -- by all means.

MR. MCLAUGHLIN: Recently released Fed minutes show how wrong the entire Federal Reserve was in 2007 about the depth of the crisis. They thought it was only a blip in the subprime mortgage market. They could easily be wrong now, in which case we are actually entering a double-dip recession.

MR. ZUCKERMAN: That's right. There is -- I think there's at least a 50-50 chance that we're going to end up with a double-dip recession. That is, you'll have at least one quarter, maybe two quarters, of decline in GDP.

MS. CLIFT: I wish I had a nickel for every time you've projected a double-dip recession on this show over the last two years. It hasn't occurred.

MR. MCLAUGHLIN: Maybe it's keeping it away.

MS. CLIFT: It's not going to -- OK. All right. It's like carrying an umbrella when it rains -- when it's not raining. I got it. Thanks. (Laughs.)

MR. MCLAUGHLIN: Is what we are experiencing, as the Fed says, a contraction, or is it something longer lasting and more serious? Pat Buchanan, yes or no.

MR. BUCHANAN: I think there's a -- I mean, we're in something of a contraction. We just went through it. I think we're in a permanent period of growth at about 2 percent or something like that. The old dynamism we used to get after the Reagan -- the Carter recession and that, that has never come back.

MR. MCLAUGHLIN: What could goose the --

MR. BUCHANAN: It is --

MR. MCLAUGHLIN: What could goose the slow growth?

MR. BUCHANAN: There is nothing that can do it. The Fed is $85 billion a month, $3 trillion added --

MR. MCLAUGHLIN: (Inaudible.)
MR. BUCHANAN: -- $5 trillion -- I mean, five straight trillion- dollar deficits. And we're at 2 percent?

MS. CLIFT: I have a lot --

MR. BUCHANAN: Lord Keynes --

MR. MCLAUGHLIN: Plunging means into deeper depression.

MR. BUCHANAN: Where are you, Lord Keynes, now that we need you?


MR. BUCHANAN: (Laughs.)

MS. CLIFT: I have a lot more confidence in American ingenuity. I'm sure, before Silicon Valley erupted and before the Internet came on the scene, Pat had his gloom and doom then. Something will happen.

MR. BUCHANAN: Reagan --

MS. CLIFT: It might be in the energy field. (Laughs.)

MR. BUCHANAN: (Laughs.)

MR. MCLAUGHLIN: Let Susan in here.

MS. FERRECHIO: I feel like --

MR. MCLAUGHLIN: What do you think, and why?

MS. FERRECHIO: We're sort of creeping toward a decline, as Pat was saying. We're not in a double-dip recession. We're always so vulnerable. It would just take one big event to knock us into that double dip.

MR. BUCHANAN: A relapse -- relapse, John.

MS. FERRECHIO: And, you know, look at the real unemployment rate, which is supposedly around 11 percent if you were to use the numbers of people who really need a job, not just those who are really participating in the workforce.

MR. ZUCKERMAN: Way higher than 11 percent.

MS. FERRECHIO: Yeah. That's a real picture --

MR. ZUCKERMAN: Real numbers.

MS. FERRECHIO: -- of what's happening.

MR. MCLAUGHLIN: Where is consumer confidence?

MR. ZUCKERMAN: Consumer confidence has dropped. And one of the reasons it's dropped, by the way, is that there's been a huge evaporation of wealth for the average American family. Their single largest asset was their home equity. That's down 40 to 50 percent. Nobody's getting increases in wages. A lot of people are being let out. It's no wonder that people are uncomfortable.

MR. MCLAUGHLIN: Have payroll taxes gone up?



MR. ZUCKERMAN: Payroll taxes have gone up.

MR. MCLAUGHLIN: Have tax rates generally gone up?


MR. ZUCKERMAN: No, I don't think --

MR. BUCHANAN: Capital gains went up, John.

MS. CLIFT: Only for a couple of people. (Laughs.)

MS. FERRECHIO: Only for the so-called rich.

MR. MCLAUGHLIN: Have exports gone down?

MR. ZUCKERMAN: Exports are weak, but they have held up reasonably.

MR. BUCHANAN: But the trade --

MS. CLIFT: We're better off than Europe.

MR. BUCHANAN: The trade deficit --

MS. CLIFT: We're much better off than Europe.

MR. ZUCKERMAN: Yeah, but --

MS. FERRECHIO: Yeah, for now -- for now, I know.

MS. CLIFT: There's a worldwide slowdown. We're actually doing pretty damn well.

MR. MCLAUGHLIN: OK, what about the imbalance with China, trade imbalance?

MR. BUCHANAN: Trade balance -- imbalance will be an all-time
record last year, John, when the figures --

MR. ZUCKERMAN: That's right.

MR. BUCHANAN: -- come out in February.

MR. ZUCKERMAN: We are --

MR. MCLAUGHLIN: The answer is it's too close to call.

Issue Two: Heat Over Hagel.

Commander in Chief Barack Obama has nominated Charles "Chuck" Hagel for secretary of defense. Hagel testified before the Senate Armed Services Committee this week. Here's Senator John McCain grilling Hagel about Hagel's opposition to the surge in Iraq in 2007.

(Begin videotaped segment.)

SENATOR JOHN MCCAIN (R-AZ): Were you correct in your assessment?

FORMER SENATOR CHUCK HAGEL (R-NE, secretary of defense- designate): Well, I would defer to the judgment of history to --

SEN. MCCAIN: I think --

MR. HAGEL: -- sort that out. But I'll --

SEN. MCCAIN: The committee deserves your judgment as to whether you were right or wrong about the surge.

MR. HAGEL: I'll explain why I made those comments and believe --

SEN. MCCAIN: I want to know if you were right or wrong. That's a direct question. I expect a direct answer.

(End videotaped segment.)

MR. MCLAUGHLIN: Senator Hagel explained that he opposed the surge in Iraq because it cost nearly 1,200 American lives.

MR. HAGEL: (From videotape.) I saw the consequences and the suffering and the horror of war. So I did question a surge. I always asked the question, is this going to be worth the sacrifice? Because there will be sacrifice.

MR. MCLAUGHLIN: That was Hagel's emphasis on the cost factor. My question is, did his emphasis on the cost factor in military decisions serve as a dodge to Senator McCain's bullet, or did he mean this completely from the heart? And if he did mean it completely from the heart, isn't he exactly the man we want over at the Department of Defense? The cost factor.

MS. CLIFT: He was talking about the cost of lives.

MR. MCLAUGHLIN: That's correct.

MS. CLIFT: And I think in that exchange that you showed, John McCain indicated how personal the surge is for him. He wants us to forget what folly the invasion of Iraq is and just concentrate on what he considers the success of the surge.

MR. MCLAUGHLIN: How do you know that?

MS. CLIFT: And to browbeat --

MR. MCLAUGHLIN: Are you divining that about McCain --

MS. CLIFT: I'm --

MR. MCLAUGHLIN: -- or do you see evidence of that?

MS. CLIFT: I am listening to him. He wants it to be all about the surge. And Senator Hagel is correctly recalling what a disaster the invasion of Iraq was.

MR. BUCHANAN: Exactly.

MS. CLIFT: And he's not going to sit there and defend one element of the tactic, the surge, which allowed us --


MS. CLIFT: -- to get out with our head somewhat held high.

MR. BUCHANAN: The surge, John, saved the United States from a disastrous defeat in 2006. I supported the surge. But Hagel is right in this sense. The surge saved us from a defeat in a war we should have never fought. We went -- we attacked Iraq why? To deprive it of weapons it did not have. We invaded, occupied. The war was the disaster. The war was the worst blunder since Vietnam.

MR. MCLAUGHLIN: Was McCain really trying to find out how the judgment of this candidate to be secretary of defense works and has worked and whether he has the judgment to have this so important job where you're sending people in to lose their lives, potentially?

MS. FERRECHIO: You want the secretary of defense to want to defend our country. And that's what we were doing over in Iraq. And that's what the surge was about, too, ultimately. And it was deemed a success. And McCain said to Hagel, you're on the wrong side of history on this one. I think McCain is right on that point, regardless of whether we got into the war legitimately or not.

Hagel's overall problem, though, at that hearing wasn't just that exchange with McCain. By the end of the day, people had almost forgotten about that exchange with McCain --


MS. FERRECHIO: -- because he had stumbled and really floundered throughout that hearing over even basic questions about the military. At one point he did tell --

MR. MCLAUGHLIN: Like what?

MS. FERRECHIO: Well, our stance on containment in Iran. He also -- he didn't know basic questions.

MR. MCLAUGHLIN: What'd he say about that?

MS. FERRECHIO: He talked about it as though we weren't -- containment versus prevention.

MR. BUCHANAN: Yeah, whereas --

MS. FERRECHIO: Very important point on --

MR. BUCHANAN: -- for the nuclear weapon, our policy -- Obama's policy is --

MS. FERRECHIO: Is to prevent it --

MR. BUCHANAN: -- we'll prevent a nuclear weapon --

MS. FERRECHIO: -- and not just contain it.

MR. BUCHANAN: -- and we will not adopt a policy of containment.

MS. FERRECHIO: He didn't know this. At one point he said if I am nominated, if I am cleared through Congress and I become the next secretary of defense, I will learn and know a lot more about this. That's not what you want to hear from the upcoming secretary of defense.

MS. CLIFT: He came across as someone --

MS. FERRECHIO: You want them to know already before they get in. You want to have some sense of expertise about the job and some real desire for it. I didn't really sense that.

MR. MCLAUGHLIN: Well, can't he -- can't he be --

MS. FERRECHIO: Learn on the job? Sure.

MR. MCLAUGHLIN: No, I think his judgment is whether or not -
- not whether he has doctrinaire command of the data like Buchanan every week. What does that mean?

MS. CLIFT: (Laughs.)

MS. FERRECHIO: You want him to sound, you know -- you compare him to John Kerry's hearing days earlier; again, a Democrat, a liberal. He impressed the --

MR. MCLAUGHLIN: He's been sitting over those facts and figures --

MS. FERRECHIO: He was confirmed in hearing and on the floor in one day.

MS. CLIFT: Well, Susan is right to the extent he came across as someone who has not played at this level of the game for the last several years. He's been teaching at Georgetown. But I think his overall posture on all these issues is right in line with the president's. And he's not going to be creating policy at the Defense Department. He's going to be carrying out. And his job was not to appear the smartest one in the room. It was to get nominated. He didn't give them any -- he didn't take the bait.


MS. CLIFT: He didn't give them a headline. He's going to get confirmed.

MR. MCLAUGHLIN: There was some --

MS. FERRECHIO: I disagree. I think he did give them a headline.

MR. MCLAUGHLIN: -- loose talk about -- well, I don't want to characterize it. I don't want to prejudice your judgment, as though I could do that. But there was some talk about Hagel being vagrantly or really anti-Semitic. What was that?

MR. ZUCKERMAN: I don't know about that. There is some --

MR. MCLAUGHLIN: Well, let me tell you about it. Bret Stephens of The Wall Street Journal -- I hope I've got that man right.


MR. BUCHANAN: You got that guy right.


MR. BUCHANAN: You got him right.

MR. MCLAUGHLIN: OK. He kind of suggested that by reason of what?

MR. ZUCKERMAN: I think there have been a whole host of statements by the incoming secretary of defense that were perceived as being, shall we say, hostile to Israel --


MR. ZUCKERMAN: -- and not supportive of Israel.

MR. MCLAUGHLIN: He was talking about AIPAC's activity in the United States Congress.

MR. ZUCKERMAN: Yes. That's one of the -- and they called it --

MR. MCLAUGHLIN: And he says the Jewish what? Lobby.

MR. ZUCKERMAN: That's right.

MR. MCLAUGHLIN: And that's supposed to be a bad way to characterize AIPAC?

MR. ZUCKERMAN: No, it isn't a bad way. But it was not meant in a positive way, the way he put it, because --

MR. MCLAUGHLIN: Now, let me --

MR. ZUCKERMAN: -- he said it prompted the Congress to do a lot of stupid things. And somebody challenged him and said show us what -- tell us what stupid things we did.

MR. MCLAUGHLIN: Well, let me tell you how he cleared this charge, if that's what it is, this rap.


MR. MCLAUGHLIN: Charles Schumer. Charles Schumer did what? He showed him around. He escorted him. And Charles Schumer and he met, Hagel met, before that happened.

MR. ZUCKERMAN: That's right.

MR. MCLAUGHLIN: Now, you know Charles Schumer.

MR. ZUCKERMAN: I do, very well.

MR. MCLAUGHLIN: Now, would Charles -- should Charles Schumer function as negating anything about the anti-Semitic business, and that rap -- and that probably phony rap?

MR. ZUCKERMAN: I don't --

MR. BUCHANAN: (Laughs.)

MR. ZUCKERMAN: Pat's already laughing because he knows that I've got a different --

MR. BUCHANAN: Look, he's not anti-Semitic, John.


MR. ZUCKERMAN: He's not --

MR. BUCHANAN: He's a critic of Israel and he's a critic of the Israeli lobby.

MR. MCLAUGHLIN: Why would Schumer escort him around --

MR. ZUCKERMAN: Schumer is the deputy leader of the Democrats in the Senate.


MR. ZUCKERMAN: This is his job, OK? And I certainly --

MR. MCLAUGHLIN: Oh, come, come, come, come. But someone who's applying for the job --

MS. CLIFT: Well, this is -- his endorsement matters.

MR. ZUCKERMAN: That's his job.

MS. CLIFT: His endorsement matters.

MR. MCLAUGHLIN: Do you want to tell me something we don't know about what Schumer thinks about Hagel?

MR. ZUCKERMAN: No, I don't -- I'm not -- I never talk to him.

MR. BUCHANAN: Schumer --


MR. ZUCKERMAN: I've never talked to Schumer about it.

MR. BUCHANAN: Schumer is convinced he is not anti-Semitic.

MR. MCLAUGHLIN: I still don't think Schumer would have escorted --

MR. BUCHANAN: Cut it out.

MR. MCLAUGHLIN: -- him the way he did --

MR. BUCHANAN: Exactly.

MR. MCLAUGHLIN: -- especially the pleasantries that obviously --

MR. BUCHANAN: He doesn't believe --

MR. ZUCKERMAN: No, I'm really shocked, shocked, shocked to find out --


MR. ZUCKERMAN: -- that kind of language by people who aren't totally sincere.

MR. BUCHANAN: John, Schumer does not believe the man is anti- Semitic.


MR. BUCHANAN: He is a critic of Israel. He's been a critic of the Israeli lobby. And he used the wrong term when he called it the Jewish lobby.


MR. MCLAUGHLIN: There is no doubt -- I'm settling this for the group -- that --

MR. BUCHANAN: Chuck Schumer.

MR. MCLAUGHLIN: -- Chuck Schumer -- not Chuck Schumer. (Laughs.)

MR. BUCHANAN: Chuck Hagel.

MR. MCLAUGHLIN: Chuck Hagel -- (laughs) --

MR. BUCHANAN: (Laughs.)

MR. MCLAUGHLIN: -- Chuck Hagel will be confirmed by the United States Senate.

MR. ZUCKERMAN: Absolutely.


MR. ZUCKERMAN: No doubt.

MR. MCLAUGHLIN: We're all in agreement on that.

MR. BUCHANAN: I would --


MR. BUCHANAN: I would say --


MR. BUCHANAN: -- 70 percent yes.

MR. MCLAUGHLIN: Wait a minute. Wait a minute. Wait a minute.

MS. FERRECHIO: I think there is a doubt, because they need five Republicans to clear --

MR. BUCHANAN: I don't think they'll filibuster.

MS. FERRECHIO: Well, if someone filibusters --

MR. BUCHANAN: But I think the Democrats --

MS. FERRECHIO: It's been suggested by a couple of members that --

MR. BUCHANAN: He had a rough hearing, John. I like him.

MS. FERRECHIO: -- they might filibuster.

MR. MCLAUGHLIN: He had a rough hearing. There are a lot of rough hearings.

MS. FERRECHIO: It's not 100 percent. It's not 100 percent.

MR. MCLAUGHLIN: He's teaching at Georgetown. He's not preparing for the hearing.

MR. BUCHANAN: He did not do as well as I hoped he did. And I'm a Schumer guy.

MS. FERRECHIO: It's not 100 percent.

MR. BUCHANAN: Excuse me. I'm a Hagel guy. (Laughs.)

MS. FERRECHIO: You know, OK --

MR. MCLAUGHLIN: This is getting a little boring now.

Issue Three: Updating Immigration.

SENATOR CHARLES SCHUMER (D-NY): (From videotape.) The politics on this issue have been turned upside down. For the first time ever, there's more political risk in opposing immigration reform than in supporting it.

MR. MCLAUGHLIN: There was a mighty political push this week for changing U.S. immigration law, with a bipartisan group of senators dubbed the gang of eight on Monday proposing a major overhaul. Along with Democrat Chuck Schumer, New York, the Senate plan is backed by Democrats Robert Menendez, New Jersey, Dick Durbin, Illinois, Michael Bennet, Colorado, Republicans John McCain, Arizona, Marco Rubio, Florida, Lindsey Graham, South Carolina, Jeff Flake, Arizona.

Some details: First, beef up border security -- more agents, more drones. Two, entry-exit system to track visas of temporary visitors to make sure they exit. Then, for the 11 million illegal immigrants already here, a change to get, quote-unquote, "probationary legal status." That's if they come forward and successfully, one, pass background checks; two, pay fines and owe taxes; three, learn English and U.S. civics.

These temporarily legal citizens can then apply for full citizenship. There are also new fines and penalties against employers who knowingly hire illegal workers.
Five years ago, in 2007, Republicans defeated a similar plan. But John McCain says this time may be different. The Hispanic vote is needed, and Republicans don't have it.

SEN. MCCAIN: (From videotape.) If you look at the Democrats of this country and the rising Hispanic population, we're not going to win races. Times have changed. Americans have changed. Elections have changed. And I'm not saying it's going to be easy and I'm not saying we're going to succeed this time. But I think the chances are better than they've ever been.

MR. MCLAUGHLIN: President Obama is also determined to see major immigration reform.

PRESIDENT BARACK OBAMA: (From videotape.) We need Congress to act on a comprehensive approach that finally deals with the 11 million undocumented immigrants who are in the country right now.

MR. MCLAUGHLIN: Question: How likely is it that immigration reform will pass this year? We have one question and one answer each. Pat Buchanan.

MR. BUCHANAN: The path to citizenship, in my judgment, is going to fail. It will certainly be stopped in the House. And I think Marco Rubio, who's gotten himself out front on it, will be badly damaged, because I think there's going to be a rising populist reaction to this proposal.

MR. MCLAUGHLIN: Will the legislation pass?

MR. BUCHANAN: No, the path to citizenship will not.


MS. CLIFT: It'll pass the Senate probably with 70-plus votes, and then the House is problematical for the very reasons that Pat just outlined. Republicans don't like giving the undocumented immigrants a path to citizenship. And if they block that, the Democrats have a hell of an issue going into 2014 midterm elections.

MR. MCLAUGHLIN: Eleanor, I never thought you'd use that language --

MS. CLIFT: (Laughs.)

MR. MCLAUGHLIN: -- in public that way.

MS. CLIFT: H-E-L-L-U-V-A. (Laughs.)


MS. FERRECHIO: Only a weakened version of what we just saw can get through because of the amnesty issue. It's an amnesty issue, and it just isn't going to work. Maybe it'll sell in the Senate. Even there, there may be some problems. But you get it over to the House and you get a big faction of folks there that just aren't going to tolerate that kind of thing. I know. I've talked to them.

MR. MCLAUGHLIN: Yeah. You remember that, how Rubio gave a terrific speech. And he never once had to use the word amnesty.

MS. FERRECHIO: No, they don't like to use that word.

MR. MCLAUGHLIN: We don't like to use that word.

MS. FERRECHIO: But we'll start hearing about it.

MR. MCLAUGHLIN: And we don't have to use that word.

MS. CLIFT: It isn't amnesty.

MR. MCLAUGHLIN: I'm not --

MS. FERRECHIO: It is amnesty (to some ?), though.

(Cross talk.)

MR. MCLAUGHLIN: (That is not ?) a punishing remark as far as you're concerned.

MS. FERRECHIO: It's amnesty to people who -- it's amnesty to people --

MR. BUCHANAN: It is amnesty.

MS. FERRECHIO: -- who will be voting on it in the House, many of them.

MR. MCLAUGHLIN: You don't have to use that designation.

MS. CLIFT: (Inaudible) -- definition of amnesty.

MR. BUCHANAN: Yes, I do.


MR. ZUCKERMAN: I believe the bill will pass both the Senate and the House, particularly with Pat Buchanan's support.

MR. BUCHANAN: (Laughs.)

MR. MCLAUGHLIN: I agree with that, and I agree that Rubio has not been hurt at all. In fact, he could be a rising star.

Issue Four: Egypt on the Edge.

State of emergency. That's what Egypt's president, Mohamed Morsi, announced this week, plus a curfew to curtail violent protests that have raged in several Egyptian cities. At least 54 people have died.

Another warning came from the country's army chief, Abdel Fattah al-Sisi, that Egypt's political strife is pushing the country to the, quote-unquote, "collapse of the state," particularly the near-anarchy in three cities along the Suez Canal. And in Cairo, a mob ransacked the historic five-star Intercontinental Hotel.

It's been two years since the Arab spring swept Hosni Mubarak from power. The new president, Mohamed Morsi, wrested power from the military five months ago. Morsi is an Islamist who is aligned with the Muslim Brotherhood. He is accused of rushing a vote on an Islamist-backed constitution in December.

Adding to the unrest is Egypt's weak economy. Egypt's credit rating was downgraded from a B+ to a B this week by the global rating agency Fitch, which cited instability.
The urgency of Egypt's climate brought leaders of all political stripes on Thursday to a rare meeting. Included in the talks were representatives from the Muslim Brotherhood, the ultraconservative Salafis, and secular and liberal factions, including Mohamed ElBaradei and his National Liberation Front.

The group issued a statement calling for a national dialogue, one that, quote, "all the components of the Egyptian society participate without any exclusion," unquote, as, quote, "the only means to resolve any problem or disagreement," unquote.

Question: Has Egyptian President Morsi overplayed his hand? Mort Zuckerman.

MR. ZUCKERMAN: Well, he's certainly at the borderline of overplaying his hand. He's losing a lot of support. The country is in terrible shape economically. The even more extreme zealots in that country are now opposed to him. He has lost the center. He's got real problems in maintaining his position.

I don't think the Egyptian army has yet sort of made clear where they're going to come out in all of this, because that is going to be the determining factor and force in who comes out ahead.

And he will only survive if the army stays with him.


MR. BUCHANAN: That's exactly right, John. But Morsi --

MR. MCLAUGHLIN: Who's right? Mort's right?

MR. BUCHANAN: Yeah. The Muslim Brotherhood is really losing support. And the Salafis, the hard left -- the hard-right guys --

MR. MCLAUGHLIN: What's that again? Salafi?

MR. BUCHANAN: The Salafi Muslims are getting together with the Tahrir Square gang, but it's an unnatural alliance. And the military guys said, look, we are in real danger of having a collapse of the state. And that's why I agree the United States should maintain its lines to the Egyptian military; send them the jets, because they may wind up as the guys on top in the primary country in the Arab world.


MS. CLIFT: The government --

MR. MCLAUGHLIN: What about the role that Egypt played in the breakout of the Palestinians in --

MR. BUCHANAN: The Gaza war? They played a positive role.

MR. MCLAUGHLIN: -- in Gaza and Morsi's role there? Eleanor, do you want to address that?

MS. CLIFT: Well, I think Morsi has had some good moments on the international stage. But he has frozen out the secular minority in Egypt. And they, combined with the Salafis, the far-right Islamists, are making his rule rather untenable. I mean, they're losing civil order in the country. The army is still alive and well, and basically they are the governing authority.

MR. MCLAUGHLIN: We send Israel about $2 billion --


MR. MCLAUGHLIN: -- Egypt $2 billion a year. We're also giving them -- apparently giving them F-16, the beautiful bomber -- beautiful bombers to Morsi. Do you think that's a good idea?

MS. FERRECHIO: We need to stay allied with Egypt, I think. We need to -- rather than just leave this vacuum where more radical folks can step in. We want to keep the connection. We want to keep Israel an ally.

MR. MCLAUGHLIN: So you think Morsi is a good guy.

MS. CLIFT: Keep Egypt an ally.

MR. ZUCKERMAN: No, no, no, no, no.

MS. FERRECHIO: I mean Egypt.

MR. ZUCKERMAN: When they send those jets to the Egyptian army, they understand that the army is the basis of American support in that country.

MR. MCLAUGHLIN: Forced prediction: The Keystone pipeline will be approved by President Obama. Yes or no?

MR. BUCHANAN: Yes. They solved the Nebraska problem.

MS. CLIFT: Right. I agree. The State Department will give the go-ahead.


MR. ZUCKERMAN: Yes, absolutely.

MR. MCLAUGHLIN: Yes, and it's a big deal.

The McLaughlin Group joins me in remembering and saluting Ed Koch, former mayor of New York and occasional guest panelist on the Group. Our thoughts and prayers are with his loved ones. May Ed rest in peace.


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