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MR. MCLAUGHLIN: Issue one: Governor Bush, explain $37 million.


GOV. GEORGE W. BUSH (R-TX): (From videotape.) A wonderful personality. (Laughter.)


MR. MCLAUGHLIN: Some personality -- a $37 million personality.


This weekend Americans will celebrate the 222nd anniversary of the signing of the Declaration of Independence, the last 4th of July bash of the millennium. Traditions of the 4th -- fireworks, parades, patriotic speeches -- have a new entrant this year. George W. Bush kicked off his exploratory presidential campaign with Texas-sized fireworks, a $37 million war chest and climbing. Some say the figure will climb to 70 million by Election Day. Bush has blown away all rivals in the fund-raising arena. No candidate for president has raised this much cash, ever, with the election still a year and a half away.


GOV. BUSH: (From videotape.) I am humbled by the response. I'm, as you can imagine, amazed at the outpouring of support.


MR. MCLAUGHLIN: On this 4th of July, Bush also has produced his own Declaration of Independence -- independence from taxpayer dollars to pay for his political run. He'll opt out of the federal matching funds system, the mother's milk of most candidates. In that system, the federal government matches funds raised by hopefuls, so long as they agree to limit campaign spending overall in the primaries to under $34 million. Bush will no longer be so shackled.


As for the other hopefuls, their totals to date are, rounded out, Veep Gore, 19 million; Bradley, 12 million; McCain, 6 (million); Bauer, Quayle, Dole, Kasich, Forbes, 3 millionish each; Alexander, 2 (million); Buchanan and Smith, 1 (million).


Question: Is Bush now unstoppable, Arianna Huffington?


MS. HUFFINGTON: The only thing Bush has to fear now is Bush. He has to declare his independence from the corporate interests that are funding his campaign. He can do it. He can do it by attacking some parts of corporate welfare, which is very fiscally responsible. And he can do it because he doesn't have to beg for money; he's drowning in it. But he has to declare that independence. Otherwise, he'll be vulnerable to accusations that he's owned by lobbyists and corporate interests, and the American people are sick of that.


MR. MCLAUGHLIN: (To Mr. Kudlow.) She's talking about Wall Street. You're an authority there.


MR. KUDLOW: I don't see it that way, with all due respect. I think the special interests, so-called -- although it is a democracy, and they have a right to express their policy views -- I think they're chasing him.


I don't think he's chasing them.


MS. HUFFINGTON: That's right. That's why he can declare his independence.


MR. KUDLOW: And I think he's just galloping along on a bandwagon. What I want to know is, with his 37 million, is he investing it in big cap high technology mutual funds, because then he can have, you, know, 500 million pretty soon --


MR. MCLAUGHLIN: All right. Well then, what's the other plus of denying himself the matching funds? Shall I help you?


MS. CLIFT: Well, I want to say, we have so institutionalized the selling of government that the public accepts this. I mean, he may well get away with this without a backlash. If he avoids the spending limits, he can spend whatever he wants on through the primaries, and he doesn't have -- you know, he --




MS. CLIFT: And it also destroys the last stool of campaign finance reform.


MR. MCLAUGHLIN: I'll give you two benefits. One is he can compete with Forbes all the way.


MR. KUDLOW: Right.


MR. MCLAUGHLIN: Number two, since he has no ceiling, he can keep on getting more and more money, which drains it away from the other GOP candidates and renders them impotent, yes or no?


MR. BLANKLEY: Yes, I mean those are both correct statements, and other than Forbes, no one's going to have enough money to compete on a money basis with Bush. That doesn't mean that they can't conceivably compete. There's going to be a effort, I think, to rally conservatives behind Forbes right now. I don't know what it's going to amount to, but there's a -- there are memos going out to try to get all the conservatives behind the one guy who's got enough money to challenge Bush. I don't know that it makes it or not.


MR. MCLAUGHLIN: He's also going to have money for the post-primary run --


MR. KUDLOW: That's -- that's the key.


MR. MCLAUGHLIN: You understand? And he's going to keep the heat on Gore.


MR. KUDLOW: See, that's the key. Bush and his people have learned from Bob Dole's mistakes of 1995 and '96. So that's why they're going guns out to get as much money as they can, and it's a very effective strategy. And what's so interesting to me is Bush is increasingly sounding like Forbes. He's talking about personal tax rate cuts, he's talking about personal retirement accounts and Social Security --


MR. MCLAUGHLIN: Are you getting uncomfortable?


(Cross talk.)


MR. MCLAUGHLIN: Are you getting uncomfortable?


MR. KUDLOW: He's talking -- he's talking about no taxation through the Internet when it goes to Silicon Valley. So I think it's very interesting.


MS. CLIFT: Wait, then, let's point out --


(Cross talk.)




MS. HUFFINGTON: He's not sounding at all like Forbes, and if he begins to sound like Forbes, he's going to completely miss out on the big idea of compassionate conservatism. That's his greatest strength.


MR. KUDLOW: Well, I may --


MS. HUFFINGTON: That's what he needs to flesh out. But this way -- but you know what, Larry? This campaign --


MR. KUDLOW: On the economy. What I'm talking about is the tax issues. He's sounding more like --


MS. HUFFINGTON: This campaign is not --


(Cross talk.)


MR. MCLAUGHLIN: Can I break in here?


MS. HUFFINGTON: It's not going to be about the economy. This campaign is going to be about big ideas and that's what he's --


MR. MCLAUGHLIN: He's pulling so much --


(Cross talk.)


MR. KUDLOW: The primaries, from the fund-raising aspect, is about tax policy, Arianna --


MR. MCLAUGHLIN: Excuse me!


MR. KUDLOW: This is the Republican Party.


MR. MCLAUGHLIN: Excuse me! Excuse me, he's pulling so much money, I think, because people see him as electable. Am I right or wrong?


MS. HUFFINGTON: He's got that --


MR. BLANKLEY: But more than that, I think that a lot of Republicans around the country like the idea of having him represent them as the face of the party. They're tired of the faces of the past, and so they're -- because I -- now, I was talking to a finance, state finance chairperson. The money just flowed. It didn't have to be extracted.


MR. MCLAUGHLIN: What are his two Achilles' heels? He's got two; one on each leg.


MS. CLIFT: Well, he doesn't know much about anything, and he's --


MR. MCLAUGHLIN: Like what? Like what?


MS. CLIFT: -- particularly foreign policy. He doesn't even --


MR. MCLAUGHLIN: Like what?


MS. CLIFT: Well, he can't even get the names of countries straight.


MR. BLANKLEY: Neither could Reagan. It didn't stop him from being a great president, though.


MS. CLIFT: Well, I'm sorry, I'm not ready to put George W. Bush in the Reagan camp --


(Cross talk.)


MS. CLIFT: And Reagan has created -- Reagan. Bush has created an ambiguity around the issues.


MR. MCLAUGHLIN: Yeah, you're talking about the fact that he --


MS. CLIFT: That he is not going to be able to sustain for a year and a half, and when he starts getting specific, people are going to make up their own minds -- (cross talk) -- and the right -- (inaudible) -- are not pleased --


MR. MCLAUGHLIN: Okay, okay. See, she's talking about -- she's confused --


(Cross talk.)


MR. MCLAUGHLIN: He confused Slovakia with Slovenia, and he called Kosovars "Kosovoeans."


MS. HUFFINGTON: Yeah, that's not the big problem. The big problem for him is going to be if he feels he has to defend his father's foreign policy, especially when it comes to China. He needs to --


MR. BLANKLEY: He's already not defending it; he's already not defending his father's policy.


MS. HUFFINGTON: But he needs to make it very clear that --


MR. MCLAUGHLIN: I have another question for you, Tony. What's his other big problem? Shall I give you his name?


MR. BLANKLEY: Give me his name, yes.


MR. MCLAUGHLIN: Patrick Buchanan.


MR. BLANKLEY: I don't --


MR. MCLAUGHLIN: Patrick Buchanan, if he joins a third party, he could siphon off five to 10 percent of largely Bush's votes.


MR. KUDLOW: No way!


MR. BLANKLEY: My sense is that although there is a potential Reform vote out there, if Bush runs a good campaign, he'll win even with a third-party candidate.


MR. MCLAUGHLIN: He could also pick up $13 million if he joined the Reform Party.


Why do you pooh-pooh it?


MR. KUDLOW: Because Pat, although I like him personally and I actually agree with him on his pro-life issue, on everything else, Pat is yesterday's man. He's angry, he's scowling, he's skeptical, he's isolationist in a global economy. He doesn't understand the new technology age. He invested in cash and gold in the midst of a stock market rally.


MR. MCLAUGHLIN: Do you know his trade position is the favored position in the polls of the people of the United States?


MR. KUDLOW: Oh, I don't --


MR. MCLAUGHLIN: All right, we've got to get out. Exit --


MR. KUDLOW: When push comes to shove, protectionism is dead.


MS. CLIFT: The leadership of the right wing is in a more compromising mood than ever, and Pat Buchanan is a lone man if he tries to go out there on this own. And he says this every --


MR. BLANKLEY: Look -- yeah, look --


MS. CLIFT: Wait a second!


MR. BLANKLEY: The Reform vote is a --


MS. CLIFT: Let me finish, please!


He says this every four years --


MR. BLANKLEY: The Reform vote is a different vote than the Buchanan vote.


MS. CLIFT: -- and every four years he ends up saying "I'm a true Republican." He will do it.


MR. MCLAUGHLIN: What's your point?


MR. BLANKLEY: The Reform vote, which is out there, is a different vote than the Buchanan vote. It's not a populace right-wing vote or a populace left vote, it's a true, clean government vote. And I think there's something out there, but I don't think that Pat can represent it.


MR. MCLAUGHLIN: You mean the alliance could never take place between Buchanan and Reform Party? You may be right.


Exit: Will foreign policy be Bush's Achilles' heel?


MS. HUFFINGTON: It certainly was over Kosovo. He was terrible on Kosovo. He never took a leadership position on it.




MS. HUFFINGTON: But it doesn't have to be.


MR. MCLAUGHLIN: You mean a crash course might clear everything up?


MS. HUFFINGTON: Not only a crash course, but following his own instincts and not trying to play it safe.


MS. CLIFT: Lack of experience will make the voters at least look at Gore and Bradley as men who are the more rational choice than an outsider from Texas.


MR. MCLAUGHLIN: She's saying insufficient substance to him. What do you think?


MR. BLANKLEY: Foreign policy is not an issue in presidential campaigns. It won't be in this one. Unless Bush wants to put it there, it's no problem for him.


MR. KUDLOW: Yeah, foreign policy is not his Achilles' heel. This race is going to be about who can maintain this fabulous prosperity into the next century. And as I said before, George W. is sounding more like a supply-sider, like Kemp and Forbes, and it's going to really help him.


MR. MCLAUGHLIN: He's got a transient -- he has a transient Achilles' heel, but it is just that; it's not a chronic heel, and it is foreign policy.


When we come back: Why is Clinton so angry at Gore? Or is Clinton faking it?




MR. MCLAUGHLIN: Issue two: Shakespeare or Kabuki?


VICE PRESIDENT AL GORE: (Various clips from videotape.) And I want to ask you now, every single one of you, to join me in supporting him and standing by his side. I give to you the president of the United States of America, William Jefferson Clinton!! (Cheers, applause.)


... to a man I believe will be regarded in the history books as one of our greatest presidents.


... I felt that what the president did, particularly as a father, I felt that it was inexcusable. But by the good grace and common sense of the American people, we got through it. And for me, the worst of it was that we lost a lot of time. That's what angered me. And I feel an extra sense of urgency now to make up for that lost time.


MR. MCLAUGHLIN: If Bush has a problem with Buchanan, think about Gore's problem with Clinton. Loyal to a fault, Al Gore, in his presidential campaign kickoff, started with a swift boot to boss Bill Clinton's backside. Gore attacked Clinton's morals. Most pundits agree Gore needs to separate himself from Clinton, whose 55 percent unfavorable rating puts major drag on Gore's candidacy. Worse still -- get this -- a new Pew poll shows that when rating national calamities over the past 100 years, Clinton's lack of ethics rates in the public mind today as exactly equal in calamity to the Vietnam war, in which 50,000 Americans lost their lives. That may explain why Gore's campaign strategists believe that if Gore cannot cut the Clinton umbilical, the fledgling Gore candidacy will be strangled by it.


This week, Clinton's attack dogs were turned loose on Gore. Clinton press secretary and spin doctor, Joe Lockhart, snarled at Gore's strategy of separation from Clinton. Lockhart was followed by a snide attack from James Carville, Clinton's Rottweiler, as Dick Morris calls him. Morris believes a livid Clinton sicced Carville on Gore to warn Gore against further trespasses. Why is Clinton so mad? Because neither Clinton nor Hillary can stand the idea that Gore will get their limelight. So says Morris.


Question: So, which is it with the Clinton-Gore split, Shakespeare or Kabuki? Do you understand what I'm talking about?


MR. BLANKLEY: I understand exactly what you're talking about.


MR. MCLAUGHLIN: Do you think that Clinton is faking it, in collaboration with Gore, in order to enhance the distance that Gore appears to be putting between himself and Clinton? Got it?


MR. BLANKLEY: Yeah. I got it the first time, yeah. I don't think it's either. I think it's Moliere. It's a French farce. (Laughter.) I do think they're sincere in their irritation at each other, but it doesn't rise to the level of a Shakespearean tragedy. I think it's sort of pathetic to see that Clinton is so desirous of limelight that he can't let go.


MR. MCLAUGHLIN: Well, that means you believe the Morris proposition; right?


MR. BLANKLEY: Yes, I do this time.


MS. CLIFT: This is "Much Ado About Nothing." There isn't a White House reporter --


MR. BLANKLEY (?): That's next year. (Laughter.)


MS. CLIFT: -- there isn't a White House reporter who can't get jealous aides in either or both camps to say critical things. But the notion --


MR. MCLAUGHLIN: But this is a deluge from them.


MS. CLIFT: Excuse me. But the notion that Clinton is angry at Gore because of Clinton's betrayal is nonsense. And the notion that Gore is angry at Clinton -- Gore owes Clinton big time. This is a team effort to --


MS. HUFFINGTON: The giveaway that it is true that Clinton is angry is his categorical denial. He denied it by saying: In all honesty, I have never had an angry feeling in my heart or my mind. If anybody believes that --


MR. MCLAUGHLIN: You bring up a good point, and this goes to it now. The Clinton-Gore rift stories came up at a press conference Thursday.


"Sir, are these rift stories true?"


PRESIDENT BILL CLINTON (From videotape.) I honestly do not know what the source of the stories are, but they are not in my heart or my mind. You know, I want him to get out there, and if he disagrees with a decision that I make as president during the next year and a half, then of course he will have to say so. And I will take no offense at that.


MR. MCLAUGHLIN: Now get that weasel wording, okay? He says during the next year he'll take no offense at it. Fine. Everything from here on up, now. Do you follow me? (Soft laughter.)


And he doesn't have the stories in his heart. Well, naturally. That -- you can't have stories in your heart. That's cartilage and blood in your heart.


MR. BLANKLEY: Maybe on his lips, right? (Laughter.)


MR. MCLAUGHLIN: On his lips. What do you want to say?


MR. KUDLOW: No, I mean, he's, you know -- Clinton was angry, but he'll get over it. The tip-off here is that Clinton is now attacking Bradley, because Bradley is making a run at Gore, with respect to money and lining up supporters, not the least of which are professional athletes.


And other point is, the Bradley factor is going to be the biggest determinant in this race. If Bill Bradley goes out for tax reform and a strong dollar and turns out to be a New Democrat, he could beat Gore.


MR. MCLAUGHLIN: A question arising from that: Who has the momentum, Bradley or Gore?


MS. HUFFINGTON: Bradley. Gore has no momentum. He cannot get the momentum. He's a man of the past, running the '96 campaign. That does not belong in the year 2000.


MS. CLIFT: Gore --


MR. MCLAUGHLIN: You mean that Gore is dead meat?


MS. HUFFINGTON: Absolutely.


MR. MCLAUGHLIN: Is he dead meat?


MS. HUFFINGTON: Dead meat. Completely.


MR. MCLAUGHLIN: (To Mr. Blankley.) Do you believe that?


MR. BLANKLEY: No, no. He -- Bradley has momentum, but he needs a lot of momentum for a long time to catch up with where Gore is. We'll know by the middle of March whether -- if Bradley hasn't been put away by the middle of March --


MS. HUFFINGTON: You can smell the fear.


MS. CLIFT: Well --


MR. MCLAUGHLIN: Eleanor, why don't you say that Dukakis was ahead of Bush by 18 points, okay?


MS. CLIFT: Right.


MR. MCLAUGHLIN: And Bush won.


MS. CLIFT: Well, yeah, I mean, in a way, lots of things are going to happen. Bradley could win the New Hampshire primary. But if Gore maintains enough of a lead in money --


MR. MCLAUGHLIN: Give me a one-word answer.


MS. CLIFT: -- Bradley might not be able to capitalize on that --


MR. MCLAUGHLIN: We've got to get out right away. Exit: Will Gore press forward with criticism of Clinton's immorality? One word. Yes or no?


MS. HUFFINGTON: Yes, he will.




MS. CLIFT: He's made his point.


MR. MCLAUGHLIN: Yes or no?


MR. BLANKLEY: Yes, he will.


MR. MCLAUGHLIN: Yes or no?


MR. KUDLOW: Sporadically.


MR. MCLAUGHLIN: Yes, he will have to.


Issue three: Medicating the masses.


PRESIDENT BILL CLINTON: (From videotape.) My plan will offer an affordable prescription drug benefit to all Medicare recipients, with additional help to those with lower incomes.


MR. MCLAUGHLIN: That's Clinton trying to "drug" the electorate. Just kidding.


This week the president proposed a Medicare prescription drug program:


One, individual cost: For an additional $24 a month to their premiums, starting in the year 2002, Medicare recipients will pay half price for prescription drugs.


Two, taxpayer cost: A cool $118 billion -- and that's a rock-bottom minimum -- over a 10-year period, from 2002 to 2012.


Three, which beneficiaries: All 39 million persons on Medicare get the prescription coverage, including the 26 million who already have it from private plans.


Four, how funded: The 118 billion comes from the budget surplus, a gargantuan $1 trillion by 2015, the president tells us, having consulted with his astrologer -- just kidding -- enough to wipe out the national debt.


PRESIDENT CLINTON: (From videotape.) If you look at this chart, you will see that we have now cut up Washington's credit cards. Now we can pay off the debt. By 2015 this country can be entirely out of debt.


MR. MCLAUGHLIN: Question: What do you think of that last statement?


MR. KUDLOW: I think it's just absolutely the goofiest thing in the world. It makes no economic sense, and it's a big smoke screen to try to stop the Republicans from across-the-board tax cuts. And guess what? He's going to fail, because there are going to be across-the-board tax cuts. The GOP's gone back on the Laffer curve.


MS. CLIFT: (Laughs.)


MR. MCLAUGHLIN: Do you think that the Congress should pass the president's ideas on prescription drug enhancement for seniors?


MR. KUDLOW: Absolutely not.


MR. MCLAUGHLIN: Not just seniors, for Medicare --


MR. KUDLOW: Look, 70 percent of the Medicare recipients are already on insured plans which provide them with drugs. So they've got to downsize this to make it into a safety net instead of a big power play. In fact, Clinton's entire Medicare plan, which is another $800 billion, is designed to use the budget surpluses for government's purposes and not let the taxpayers have them --


MR. MCLAUGHLIN: Will Congress pass the prescription drug recommendations of the president?


MR. BLANKLEY: It won't be exactly the president's, but the Republicans are planning to support some subsidy of prescription drugs.


There's a bigger issue. I don't know -- very quickly, the problem with the Clinton proposal is that he's going to fund the cost of the prescription drugs by reducing the costs of Medicare by competition with HMOs at the same time he's attacking them with the Patients Bill of Rights, which is going to raise the costs of HMOs.


MR. MCLAUGHLIN: Yeah, the --


MS. HUFFINGTON: But that's -- (inaudible due to cross talk) --


MR. MCLAUGHLIN: And the other problem is that he's rejected out of hand the Breaux commission report, which says the entire --


MR. KUDLOW: That's the key.


MR. MCLAUGHLIN: -- an entire restructuring of Medicare is necessary.


MR. KUDLOW: That's the key. Right. That's the key.


MR. MCLAUGHLIN: This was not --


MS. HUFFINGTON: And the -- (inaudible due to cross talk) --


(Cross talk.)


MR. KUDLOW: The Breaux report was an attempt to move towards free-market competition, and Clinton absolutely squashed it, which tells you it's a big government steal of the surpluses, and that's the Achilles' heel of the Gore campaign, because he's going to be left with that.


MR. MCLAUGHLIN: Okay. Okay. Okay, interest rate hike.


MR. MCLAUGHLIN: (From videotape of June 11th program.) The Federal Reserve Board will raise interest rates by one-quarter percentage point when it meets next June 30th.


MR. MCLAUGHLIN: That was a long three weeks ago. So it was no surprise that the Federal Reserve Board did in fact hike interest rates a quarter percent last Wednesday, from 4.75 to 5 percent.


Because of the McLaughlin early-warning signal, the market rose 155 points after the Fed announcement.


Question: Did Greenspan act imprudently in raising interest rates, Larry?


MR. KUDLOW: I thought it was unnecessary, but it did no harm. He made an anti-inflation signal, but he ignored --


MR. MCLAUGHLIN: Is it the first of many?


MR. KUDLOW: I don't think so. There is no inflation with a strong dollar and a slumping gold price. And I wish Alan hadn't done it, but it did no harm to the market.


MR. MCLAUGHLIN: Arianna, do you have thoughts?


MS. HUFFINGTON: He also gave a very clear signal that he does not intend to raise them again, and that was very important for what's happened to the market since then.


MR. KUDLOW: I mean, you're at record highs now on the averages for the major stock markets, and guess what? I think the markets are going still higher. This great high-technology boom, John --


MR. MCLAUGHLIN: Is there an Asian rebound going on?


MR. KUDLOW: There's a minor incipient Asian rebound.


MR. MCLAUGHLIN: Is there full employment?


MR. KUDLOW: There's full employment in the United States -- no, I think we can get the unemployment rate down to about 3-1/2 percent.


MR. MCLAUGHLIN: Is -- are the labor costs going to go up?


MR. KUDLOW: Labor costs are going -- wages are going up, but productivity is skyrocketing, so the work force is earning its increase --


MR. MCLAUGHLIN: Are health cares going -- is health care going to go up for two reasons, one, Medicare --


MR. : Yes --


MS. CLIFT: Yes, Medicare --


MR. MCLAUGHLIN: -- and two, the unionization of doctors? Is that going to drive it up?


MR. BLANKLEY: Absolutely.


MS. HUFFINGTON: John, you know --


MR. MCLAUGHLIN: All of these are inflationary pressures.


MR. KUDLOW: No, no --


MR. MCLAUGHLIN: Therefore, you should be more than kind of dismissive about what the Fed did. You should congratulate him.


MR. KUDLOW: John, you've been telling me for years --


MS. HUFFINGTON: Yeah, because John, what the Fed wants from the marriage --


MR. KUDLOW: -- that inflation is just around the corner. It's -- what's around the corner is continued prosperity.




MS. HUFFINGTON: The one thing that all this talk that Larry is indulging in and the Medicare proposals are ignoring is that one of the greatest health crises is when it comes to children. Millions of uninsured children. The president is not addressing that because that's not where the votes are. I think it's time that children organized to become --


MR. MCLAUGHLIN: Well, even a bigger problem --


MS. HUFFINGTON: -- America's future voters.


MR. BLANKLEY: John, that's not -- that's not the problem.


(Cross talk.)


MR. MCLAUGHLIN: Even a bigger problem is the total number of medically uninsured with 100,000 coming on, what, every day?


MR. BLANKLEY: Yes, and going up -- and going up. The more pressure --


MS. HUFFINGTON: In fact -- (inaudible) -- a much huger problem.


MR. KUDLOW: The more pressure we put on the HMOs to -- they're forcing them to raise their costs -- the less people will have coverage.


MR. MCLAUGHLIN: We'll be right back with predictions.




MR. MCLAUGHLIN: Okay, predictions. Arianna?


MS. HUFFINGTON: The AIDS activists who have been following Gore from rally to rally will go all the way to the convention unless he changes the policy that blocks the production of AIDS drugs in South Africa in the middle of an unprecedented epidemic.




MS. CLIFT: Republicans are terrified of being labeled a do-nothing Congress. There'll be a deal on prescription drugs.


MR. MCLAUGHLIN: Tony just told us that. Right, Tony? Tony.


MR. BLANKLEY: Yes. John Kasich; it's up and out for him. Either he makes it to the national ticket or he does not run for reelection to Congress.




MR. KUDLOW: Do nothing is bullish, except the Republican Congress is going to support and pass the first broad-based income tax rate cut since Ronald Reagan's in 1986. It's going on the Laffer curve, and it's going to herald a new era.


MR. MCLAUGHLIN: No targeted tax cut?


MS. CLIFT: What era is that, Larry?


MR. KUDLOW: We're going to end the targeted tax cuts. They're going broad-based, and it's a terrific --


MR. MCLAUGHLIN: What kind of a number are you talking about?


MR. KUDLOW: It'll be at least 10 percent, and it may phase in to be larger than 10 percent.


MR. MCLAUGHLIN: That's 10 percent of your current marginal rate?


MR. KUDLOW: That is correct. And they also will include capital gains and inheritance taxes and an expansion of IRAs, and it's just a fabulous policy.


MS. CLIFT: Larry --


MS. HUFFINGTON: (Off mike.)


MR. MCLAUGHLIN: What makes you so sure?


MS. CLIFT: Bob Dole didn't win the election, Larry! (Laughs.)


MR. KUDLOW: Bob Dole had no credibility on the issue.


MR. MCLAUGHLIN: Do you agree with Larry, yes or no?




MR. MCLAUGHLIN: A across-the-board cut?


MR. BLANKLEY: (Nods his head.)


MS. HUFFINGTON: (Off mike.)


MR. MCLAUGHLIN: I don't think so. Targeted tax cuts. The current reports about gross propaganda perpetrated by the Pentagon and Brussels regarding the Kosovo War will soar as new instances of U.S.-NATO disinformation surface.


Next week: U.S. interventionism run amok, from the Balkans to your bathroom. Bye bye!






MR. MCLAUGHLIN: Issue four: Cuba libre.


MR. : (From videotape.) I remember the images of people trying to cross the Berlin Wall, and we're acting like the Gestapo or the Stasi in keeping them from coming to freedom. They've been suffering for 40 years. For Christ's sake, enough is enough.


MR. MCLAUGHLIN: Water cannons and pepper spray. That's what welcomed six Cuban refugees to the United States this week. After three days at sea in a 14-foot rowboat, the Cubans were within 150 yards of Florida. If they could make it to shore, they would be free.


But, under Clinton administration policy, Cubans who are physically on the U.S. soil are granted asylum. Cubans picked up at sea are deported. Coast Guard literalists who think that one and a half football fields from shore means still "at sea" blocked the row boat and tried to seize the boaters, but the Cubans would not surrender. They jumped out of the boat and swam for shore, dodging the Coast Guard boats and their jet skis. Two of them made it to the beach, but the Coast Guard pulled the other four from the water.


Floridians, who watched the drama unfold live on television, launched massive protest marches demanding asylum for the Cubans. The Feds caved. Happily, this Independence Day, all six of the refugees, after processing, will be permitted to enjoy life, liberty and the pursuit of happiness in the United States of America.


Question: Many members of Congress are blaming this incident on Clinton's so-called "wet foot" policy of granting asylum to refugees on land and reporting refugees picked up at sea -- deporting them, rather. Is it fair to blame the president for this, do you think, Arianna Huffington?


MS. HUFFINGTON: Well, this is a very terrible (cliff ?). I mean, to be fighting a humanitarian war while you are using such inhumanitarian means to stop people from coming to this country. And at the same time, it's really his whole policy on Cuba that needs to be questioned. Why are we still having an embargo on Cuba when we don't have one on China? I mean, what is different between those two? It's a bankrupt country. The Pentagon has said that Cuba is no threat to America. We have not managed to destabilize Castro. Why are we going on?


MR. MCLAUGHLIN: Can you make the case that there would be more freedom in Cuba if we had economic relations with Cuba, as is our policy towards China?


MR. KUDLOW: Oh, absolutely. And I'm thrilled to hear Arianna to put her free-trade cap on. She's got the story right. We should trade with them. And that's --


MR. MCLAUGHLIN: Did she ever have it off?


MR. KUDLOW: Sometimes she has these odd ideas that economics don't matter in politics.


MS. HUFFINGTON: He doesn't like me attacking corporate welfare. (Laughter.)

MR. KUDLOW: But on this one she's dead on.


MR. MCLAUGHLIN: Oh, you mean the compassion doctrine that Arianna --


MR. KUDLOW: But she doesn't seem to think tax cuts are --


MS. HUFFINGTON: Yeah, the compassion doctrine doesn't agree with him.


MR. MCLAUGHLIN: Get back to Cuba.


MR. KUDLOW: Listen Cuba --


MR. MCLAUGHLIN: Cuba, by the way, is going to use the euro in trading with special countries to resist the tyranny of the United States.


MR. KUDLOW: It's typical of the stupidity of Castro, because the euro is sinking out of sight. He should use king dollar. He should open -- actually, he should just resign. HE should jump into the ocean.


MR. MCLAUGHLIN: Your thoughts.


MR. BLANKLEY: Yeah. I think Arianna's half right. I mean, it's a heartless policy to not let these people -- make people seeking freedom get to shore. On the other hand, the fact that we don't use it as a policy against China because it wouldn't have an effect doesn't mean you shouldn't use it against Cuba, a smaller economy, if it could have an effect.


MR. MCLAUGHLIN: You want to keep the embargo?




MR. MCLAUGHLIN: Or it's out of date.


MS. CLIFT: Politicians in both parties are pandering to the Cuban-American population in Florida. Whoever is elected next president ought to have the guts to end the embargo.


MR. MCLAUGHLIN: The one thing that Clinton can do to enhance his legacy, to save his legacy, is lift that embargo.