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The McLaughlin Group Host: John McLaughlin Panel: Patrick Buchanan, MSNBC; Eleanor Clift, Newsweek; James Pethokoukis, Reuters; And Mortimer Zuckerman, U.S. News & World Report Taped: Friday, July 1, 2011 Broadcast: July 2-3, 2011

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JOHN MCLAUGHLIN: Issue One: Headwinds Ahead.

PRESIDENT BARACK OBAMA: (From videotape.) If the United States government, for the first time, cannot pay its bills, if it defaults, then the consequences for the U.S. economy will be significant and unpredictable. So all the headwinds that we're already experiencing in terms of the recovery will get worse.

MR. MCLAUGHLIN: This warning came from President Barack Obama on Wednesday. Congress has until August 2 to raise the U.S. debt ceiling. That's the outer maximum limit on the time that the White House and the Congress have to borrow money to keep the government going. If August 2 comes and goes without raising the $14.3 trillion debt ceiling, Mr. Obama says the nation will feel the hurt.

PRESIDENT OBAMA: (From videotape.) If capital markets suddenly decide, "You know what, the U.S. government doesn't pay its bills, so we're going to start pulling our money out," and the U.S. Treasury has to start to raise interest rates in order to attract more money to pay off our bills, that means higher interest rates for businesses. That means higher interest rates for consumers.

MR. MCLAUGHLIN: The International Monetary Fund, the IMF, with its new head, France's former finance minister, Christine Lagarde, says that financial markets would face a, quote-unquote, "severe shock" if the U.S. did not move quickly to increase its borrowing authority.

House Speaker John Boehner says the focus should be more on cutting our massive $14 trillion debt, not making a new borrowing deadline.

HOUSE SPEAKER JOHN BOEHNER (R-OH): (From videotape.) Nobody believes that the United States is going to walk away from its obligations. Dealing with this debt problem and this deficit problem is far more important than meeting some artificial date created by the Treasury secretary.

MR. MCLAUGHLIN: Question: Why has the debt ceiling caused a political impasse? Pat Buchanan.

MR. BUCHANAN: A couple of reasons. One is the Democrats really don't want to give up on their entitlement programs and take the cuts in things like Medicare. Secondly, and probably more important, the Republicans aren't going to give them a dime in tax hikes, John.

But I'll tell you who's going to win this. Boehner, you see, has more confidence. You see the president talking in panic. What the Republicans are going to do is they're going to wait till about July 20th and then they're going to take the Biden cuts, all the Biden cuts in social programs. They're going to tie them to the debt ceiling and pass them in the House and send them over to the Senate. So you've got your debt ceiling raised for one year with the Biden cuts.

I think the Democrats -- the president of the United States will have to sign that. The Republicans have an enormous weapon here, and they've got the whip hand by just sending over these debt-ceiling increases with cuts on them again and again and again. That's how it's going to play out.

MR. MCLAUGHLIN: Are you saying that then it's going to become part of the annual budget? MR. BUCHANAN: I think the debt-ceiling battle could -- it could be a six-month thing. It could be a one-year thing every year. Republicans have a weapon here, John, to force cuts in social spending year after year after year, if they play the game right.

MR. MCLAUGHLIN: But to move it across to the Senate, it's got to be in an instrument, a legal instrument, a congressional instrument.

MR. BUCHANAN: Sure. The House --

MR. MCLAUGHLIN: That is the budget.

MR. BUCHANAN: The House -- no, the House is going to pass the debt ceiling --

MR. MCLAUGHLIN: Within the budget.

MR. BUCHANAN: No, with these cuts on it, and just send it over there in July.

MR. MCLAUGHLIN: As a separate piece of legislation.

MR. BUCHANAN: Yeah, sure.

MR. MCLAUGHLIN: Eleanor.

ELEANOR CLIFT: This is like the Ryan plan on steroids; just do away with all the social programs.

MR. BUCHANAN: No, not all of them, Eleanor. (Laughs.)

MS. CLIFT: And they'll take the Republican Party with it if they try that strategy.

This is a typical Washington kabuki dance, with stakes that are considerably higher this time. And if you look at how it's going to play out, I think the speaker, because he's got a majority that was basically elected on refusal to raise the debt ceiling and cutting the deficit, he wants to have a vote that fails in the House and then he wants to go back to the White House and have the president give him something so that they can pass the debt ceiling.

The president believes that the Republicans are so mouse-trapped politically that they're going to have to make a deal. And this is the posturing that's going on on both sides, and it's going to last several more weeks. But I would not sell short the guy who has the bully pulpit, especially when he knows how to use it, which he did very well this week, corporate jets et al.

MR. MCLAUGHLIN: Do you think you're going to get in trouble with the Japanese for characterizing the kabuki in terms of the debt ceiling? MR. BUCHANAN: (Laughs.)

MS. CLIFT: It's an elegant dance. It's not so elegant when it goes on with the Congress. But still --

MR. MCLAUGHLIN: Well, that's what I mean. We might be besmirching the kabuki.

James, what's up?

JAMES PETHOKOUKIS: I'm not ready for the kabuki question, but I am ready for the tax question. And there is no way the Republicans are going to agree to a tax increase. Any Republican who votes to raise taxes by any amount is going to face a tea party primary challenge.

This tax issue is an existential issue for the Republicans. They will not cave on it. If the president caves on it, if he signs a bill without taxes, guess what -- he's not going to get a primary challenge. He's fine. The Republicans cannot vote for tax increases, and they won't.

MR. MCLAUGHLIN: What's the upshot going to be?

MR. BUCHANAN: They're going to win.

MR. PETHOKOUKIS: I think it's going to either be similar to what Pat just said --

MR. MCLAUGHLIN: Oh?

MS. CLIFT: A tax increase is not always a tax increase. And I'll let Mort get to that. But taxes --

MR. PETHOKOUKIS: If you're paying more, it's a tax increase.

MR. MCLAUGHLIN: Why would the Democrats, who control the Senate, go the Pat route?

MR. BUCHANAN: They have to. The debt ceiling -- look at what the president said. Everything's going to collapse.

MR. MCLAUGHLIN: You mean they won't --

MR. BUCHANAN: They'll take Biden --

MR. MCLAUGHLIN: They don't want to be responsible over there for letting the government shut down. MR. BUCHANAN: Biden has already --

MR. MCLAUGHLIN: That means no checks go out for Social Security, et cetera.

MR. BUCHANAN: Biden has already agreed to these cuts, so they put them on the debt ceiling and sent them over and said, "Here's your cuts."

MR. PETHOKOUKIS: These are bipartisan cuts, effectively.

MORTIMER ZUCKERMAN: There is another factor here. The debt ceiling was put in place exactly to do what it's now doing, which is to constrain profligate spending by the Congress. The country understands it. The country understands that debt has consequences, because tens of millions of people have mortgages that exceed the value of their homes and they have credit-card lines that they can't pay back.

So they're just sick and tired of running these huge deficits, which do not seem to have worked in terms of at least reviving the economy. So the public support is just going to increasingly go to the Republicans. And somehow or other, the Democrats know that.

MR. MCLAUGHLIN: You heard the dire predictions made by President Obama if the ceiling is not raised. But if he let that go forward and the public sees that, isn't that going to kill his re-election? Do you follow me?

MR. ZUCKERMAN: No, I think --

MR. MCLAUGHLIN: If he were to let that go forward.

MR. ZUCKERMAN: You understand that that's the gamble that both sides are playing, because I'll guarantee right now they're sitting in the White House saying, "Boy, if we stop payments to Social Security recipients, the Republicans will be defeated."

MR. MCLAUGHLIN: He's gearing everything he does right now because he's in political mode for next year, 17 months from now.

MR. ZUCKERMAN: Absolutely.

MR. MCLAUGHLIN: He wants to win that re-election.

MR. ZUCKERMAN: Absolutely.

MR. MCLAUGHLIN: OK. If he would have let that kind of collapse occur, the government shuts down, the public would never forgive him and they'd get him out of office.

MR. ZUCKERMAN: It all depends -- MR. MCLAUGHLIN: And he knows that.

MR. ZUCKERMAN: It all depends whom they blame. Everybody's going to be playing the blame game --

(Cross talk.)

MR. MCLAUGHLIN: If you were calculating the odds of whether he's going to persist in this --

MR. BUCHANAN: John --

MR. MCLAUGHLIN: -- you would have to calculate --

MS. CLIFT: They're not --

MR. MCLAUGHLIN: -- that he's too smart a politician to know it. He can only persist up to a certain point.

MR. ZUCKERMAN: He's a smart politician --

MR. MCLAUGHLIN: And then he should yield in the interest of the public good. Correct?

MR. BUCHANAN: John, who is --

MR. ZUCKERMAN: As a smart politician --

MR. BUCHANAN: John, if it collapsed --

MR. ZUCKERMAN: -- he would not have attacked the Republicans --

MR. BUCHANAN: If it collapsed --

MR. ZUCKERMAN: -- publicly this way. If you want to make a deal with the Republicans --

MR. BUCHANAN: John --

MS. CLIFT: It's going to be --

MR. ZUCKERMAN: -- you don't attack them --

MR. MCLAUGHLIN: OK --

MR. BUCHANAN: John, if it collapses --

MR. MCLAUGHLIN: Pat, hold on. SETWA -- something else to worry about -- procrastination.

PRESIDENT OBAMA: (From videotape.) There's no point in procrastinating. There's no point in putting it off. You know, we've got to get this done. Malia and Sasha generally finish their homework a day ahead of time. Malia's 13; Sasha's 10. It is impressive. They don't wait until the night before. They're not pulling all-nighters. They're 13 and 10. You know, Congress can do the same thing.

MR. MCLAUGHLIN: Congress should cancel its Fourth of July vacation until a debt-ceiling agreement is reached, says Mr. Obama.

The president says that he himself has been dutifully in Washington fulfilling his duty.

PRESIDENT OBAMA: (From videotape.) I've been here. I've been doing Afghanistan and bin Laden and the Greek crisis. You stay here. Let's get it done.

MR. MCLAUGHLIN: But Mr. Obama himself has spent considerable time outside the nation's capital. Quote: "Obama was in Brasilia on March 19 when he announced his authorization of," quote-unquote, "`limited military action in Libya.' For that matter, he has been away from Washington for a large part of his two and a half years as president. According to figures compiled at the end of 2010 by CBS reporter Mark Knoller, Obama's first 23 months in office saw 70 days on foreign trips and 58 days on vacation trips. He has gambled that it pays to present himself as a statesman, above the scramble of something disagreeable called Washington," unquote.

Question: With regard to Obama's leadership on domestic issues, what pattern emerges from his first term? Eleanor Clift.

MS. CLIFT: First of all, I don't think anyone thinks this president is not a hard worker. And he went after the Congress for what are ridiculous work schedules, where the House and the Senate take different breaks, so you can't deal with the Congress as a whole for half the time. And they work Tuesday to Thursday. So -- and I think most Americans have had it with the Congress. They're not blaming the president in this one.

MR. BUCHANAN: All right --

MS. CLIFT: This president's pattern is basically to come in at the last minute, when his supporters are thinking all is lost, and then he rises to the occasion. And he's done this now on this budget thing.

MR. BUCHANAN: John --

MS. CLIFT: They've been trying to get him into the act for months, and now --

MR. BUCHANAN: This is Mickey Mouse. MR. MCLAUGHLIN: OK, hold on, Pat.

President Obama's speech touched a nerve for many senators and caused soft-spoken senators like Kansas Republican Senator Pat Roberts to say this.

SENATOR PAT ROBERTS (R-KS): (From videotape.) So maybe if he'd just take a Valium and calm down and come on down and talk to us, why, it might be helpful.

MR. MCLAUGHLIN: Question: Is Senator Pat Roberts right? I ask you, Pat.

MR. BUCHANAN: Yeah. Look, the president engaged in a lot of partisan -- some of it was very funny; Sasha and Malia pulling an all- nighter.

MR. MCLAUGHLIN: Right.

MR. BUCHANAN: But it was -- he slams the Congress. He ticks these guys off. It accomplishes nothing. This is Mickey Mouse, John. You ask who's going to be blamed. Look at who said, "Look, the whole thing's going down." If somebody is Herbert Hoover here and it goes down, do you think it's going to be John Boehner that'll be blamed by history, or will it be Barack Obama, who's in charge of the country and the economy?

MS. CLIFT: Every poll --

MR. MCLAUGHLIN: James -- hold on. James, do you realize we've got the whole month of July to get through this before we get to the August 2nd deadline?

MR. PETHOKOUKIS: That's right.

MR. MCLAUGHLIN: What are we going to do with this matter? Are we going to continue to debate this every week? Do you think it's got that type of vitality in itself?

MR. PETHOKOUKIS: Look --

MR. MCLAUGHLIN: When is --

MR. PETHOKOUKIS: -- it's a pretty important issue.

MR. MCLAUGHLIN: -- the financial page of The New York Times going to put it with the shipping news? (Laughter.)

MR. PETHOKOUKIS: This is an extremely important issue. The financial market will not let you forget about it. But, listen, despite the president's apocalypse talk, let's not forget that every month the U.S. government has about $200 billion coming in. There is plenty of money to cover debt payments -- MR. MCLAUGHLIN: Do you think --

MR. PETHOKOUKIS: -- Social Security, Medicare, unemployment insurance and --

MR. MCLAUGHLIN: No, wait a minute. Do you think he can squeeze the sponge in July to make all of that water go into his bucket for the re-election?

MR. ZUCKERMAN: If this goes on --

MR. MCLAUGHLIN: Do you think he can do that? We've got the whole month of July, and this is going to be returned to it again and again.

MR. ZUCKERMAN: If this goes on the page with the shipping news, it's going to be the page that deals with the shipping of the Titanic. I mean, this is a disaster for the United States, without question. And to play the kind of political game that he just played on it now, as Pat was saying, it's completely counterproductive. You can't attack the people on the other side of the table.

MR. MCLAUGHLIN: Do you think he thinks he can win his re- election on this issue, and if he does cave, he'll say -- he'll say that he's caving in the public interest?

MR. BUCHANAN: That's what he's going to do.

MR. MCLAUGHLIN: He'll get more mileage out of it.

MR. ZUCKERMAN: But if he does -- look, the country does not want one side to win or lose. Both parties have got to get together. The country wants bipartisanship on this thing. This is not bipartisanship.

MS. CLIFT: Excuse me --

MR. MCLAUGHLIN: The White House -- does he fundamentally --

MR. PETHOKOUKIS: The White House --

MR. MCLAUGHLIN: Does he fundamentally want a deal?

MS. CLIFT: Let's get another view here.

MR. PETHOKOUKIS: No, he does not.

MR. ZUCKERMAN: I don't know if he wants a deal.

MR. MCLAUGHLIN: He does not want a deal?

MS. CLIFT: Let's get -- MR. PETHOKOUKIS: If I can finish this -- the White House is --

MS. CLIFT: I --

MR. MCLAUGHLIN: Wait a minute.

I'm going to let you in next.

MS. CLIFT: Thank you.

MR. PETHOKOUKIS: The White House thinks they have a winning hand on this; that because of the tax issue, they can pound Republicans, saying, "You're not agreeing to this for these very minor taxes." And they're going to push it to the absolute limit, whether that's July 22nd, August 2nd, or whenever.

MR. MCLAUGHLIN: Eleanor.

MS. CLIFT: It's a free-for-all every day on Capitol Hill and on cable news assailing the president. He fights back and suddenly he's ruining bipartisanship?

MR. PETHOKOUKIS: What's his plan? What's his budget plan? We're still waiting to hear that.

MR. MCLAUGHLIN: All right, what --

MS. CLIFT: The escape hatch here is what the sainted Alan Greenspan said, and that is that incentives and tax breaks in the tax code are spending. And they're going to have to realize that.

MR. MCLAUGHLIN: Exit question.

MR. BUCHANAN: Well --

MR. PETHOKOUKIS: They're not --

MR. MCLAUGHLIN: Exit question --

MR. BUCHANAN: They're not going to do it.

MR. MCLAUGHLIN: The president is also keeping something else off page one by this debate. What is he keeping off page one? What is he?

MS. CLIFT: Not Michele Bachmann.

MR. PETHOKOUKIS: The poor economy, jobs -- MR. BUCHANAN: Afghanistan, Iraq and --

MR. MCLAUGHLIN: Afghanistan is off page one. Iraq is off page one.

MR. BUCHANAN: But let me tell you, John, in the end of July, this is going to be up this big on page one if there isn't a deal. He's got to take the Republican --

MR. MCLAUGHLIN: Is he --

MR. PETHOKOUKIS: There's going to be a countdown clock on every TV show.

MR. MCLAUGHLIN: Is he keeping the unemployment rate off page one --

MR. PETHOKOUKIS: That's what I just said.

MR. MCLAUGHLIN: -- which is going to come out next week?

MR. PETHOKOUKIS: I said that.

MR. BUCHANAN: If the unemployment rate comes out high, it'll be the lead story in the newspaper, John.

MR. MCLAUGHLIN: It will dominate this story that we just had?

MR. BUCHANAN: It'll dominate it for a couple of days and contribute to it.

MR. MCLAUGHLIN: I wonder.

MR. ZUCKERMAN: Look, the unemployment --

MR. MCLAUGHLIN: All right, let's get out. We've got to get out. I'll get to you in a minute.

Go ahead.

MR. PETHOKOUKIS: There will be a countdown clock on every TV show on this debt ceiling.

MS. CLIFT: There will be a deal.

MR. MCLAUGHLIN: There will be a deal?

MS. CLIFT: There will be a deal. And neither side will be happy. Each side will give the other side something. They are grown politicians in the end, and --

MR. PETHOKOUKIS: Not if it's taxes. That's not going to be part of the deal. MS. CLIFT: -- they'll work it out.

MR. PETHOKOUKIS: Taxes will not be part of this deal.

MR. MCLAUGHLIN: Taxes will not be part of the deal.

MS. CLIFT: Revenues will be. (Laughs.)

MR. MCLAUGHLIN: What do you think?

MR. PETHOKOUKIS: Tax revenues -- if you want to grow the economy for more tax revenue, that's fine.

MS. CLIFT: Just semantics --

MR. MCLAUGHLIN: Let Mort in.

MR. PETHOKOUKIS: They'll distract them more.

MR. MCLAUGHLIN: Let Mort in.

MR. ZUCKERMAN: They'll find something, I think, to agree on finally. I don't know whether it'll be on August the 2nd or August the 5th. But I will say this. The unemployment rate is not off the front pages. Unemployment is the number one issue in 20 percent of American families. You have the biggest unemployment we've had since the Great Depression in real terms, OK? That is what's going to kill Obama's prospects if he doesn't do something about it. This --

MR. MCLAUGHLIN: I think the public mood will grow dark and they will say, "Yield and get compromise."

MR. ZUCKERMAN: Right. That's what the president is supposed to do.

MR. MCLAUGHLIN: That's what politics is built on -- compromise. Settle it. Settle it now. Otherwise it's self-defeating for both parties.

MR. ZUCKERMAN: I agree.

MR. MCLAUGHLIN: They'll both get smeared.

MR. ZUCKERMAN: I agree.

MR. MCLAUGHLIN: But one will get smeared more.

MR. BUCHANAN: John --

MR. MCLAUGHLIN: It remains to be seen which one that will be.

Issue Two: Obama's Bete Noire -- Corporate Jets. PRESIDENT OBAMA: (From videotape.) I think it would be hard for the Republicans to stand there and say that the tax break for corporate jets is sufficiently important. You'll still be able to ride on your corporate jet. You're just going to have to pay a little more.

Are they willing to compromise their kids' safety so that some corporate jet owner continues to get a tax break? If we choose to keep a tax break for corporate jet owners, that means we've got to stop funding certain grants for medical research.

The tax cuts I'm proposing we get rid of are tax breaks for millionaires and billionaires, tax breaks for oil companies and hedge- fund managers and corporate jet owners. I think it's only fair to ask an oil company or a corporate jet owner that has done so well to give up that tax break that no other business enjoys.

MR. MCLAUGHLIN: Question: Is this the rhetoric of a president trying to achieve a political consensus, or is this the rhetoric of a politician trying to score political points? I ask you, James Pethokoukis.

MR. PETHOKOUKIS: Let's just be clear that the president's last budget called for $10 trillion in new deficits. The corporate jets would equal .03 percent if he got that revenue. This is the beginning of what we're going to see over the next 17 months -- a class-warfare campaign to run against the Republicans; same old, same old -- "Party of the rich."

MR. MCLAUGHLIN: Yeah.

MR. PETHOKOUKIS: There we go. This is the opening shot.

MR. MCLAUGHLIN: To add to your point, just let me say that Lawrence O'Donnell's program on -- I think it was Wednesday night or Thursday night of this week -- had Alice Rivlin on. And he said, "What do you think of this corporate jets issue?" And she said, "I think it's too trivial to talk about."

MR. BUCHANAN: Right.

MR. MCLAUGHLIN: Trivial.

MS. CLIFT: It's symbolic. It's symbolic.

MR. MCLAUGHLIN: Alice Rivlin was the former director --

MS. CLIFT: It's symbolic.

MR. PETHOKOUKIS: If you want to get rid of these tax breaks, lower the tax rate -- MR. MCLAUGHLIN: What do you have to say about corporate jets, since you arrived in one here today?

MR. ZUCKERMAN: No, no. With all due respect, I arrived in a jet, but it's not a corporate jet. That makes -- that means it's not tax-deductible. But I'll explain that to you --

MR. MCLAUGHLIN: It's a personal jet.

MR. ZUCKERMAN: It's a personal jet, not a corporate jet.

MR. MCLAUGHLIN: Do you care to describe the jet?

MR. ZUCKERMAN: Well, it's enough for two people, maybe even enough for four people. And when you were on it, John, we had caviar, just to maintain your lifestyle.

But having said that, OK, I agree. You do not go public in this way if you want to make a deal with the other side. It is exactly the wrong way to do it. It is the wrong -- it's bad politics, OK? These are trivial items. They do not address the major problems facing this country in terms -- fiscal policy.

MR. MCLAUGHLIN: Why is he doing it?

MR. ZUCKERMAN: And this --

MR. MCLAUGHLIN: Why did he mention it six times, corporate jets?

MR. ZUCKERMAN: Because it's an easy way -- it's populist politics. I think it's going to arouse the country. By the way, he raises taxes on everybody earning above $250,000, including a lot of small businesses. But setting aside that he just calls them millionaires and billionaires, it's easy for him to say that. It is ridiculous --

MR. MCLAUGHLIN: Is the fundamental problem --

MR. ZUCKERMAN: -- for the president of the United States to run politics that way.

MR. MCLAUGHLIN: Is this a Huey Long tactic, soak the rich?

MR. ZUCKERMAN: Yes.

MR. MCLAUGHLIN: Does this breed class warfare?

MR. ZUCKERMAN: Well, it creates --

MS. CLIFT: Can we get another view?

MR. ZUCKERMAN: -- class antagonism, that's for sure. MS. CLIFT: Can we --

MR. ZUCKERMAN: And it's politics. It's lousy politics.

MR. MCLAUGHLIN: In point of fact, is he failing to recognize that the wealthy and the ones who travel in jets, they have meetings aboard the jets --

MR. BUCHANAN: Hey, John --

MR. MCLAUGHLIN: -- before they go to their clients?

MR. BUCHANAN: John -- John --

MS. CLIFT: They don't have to get --

MR. MCLAUGHLIN: Is he also describing what it's like to wait around in airports today --

MR. BUCHANAN: Hey, John --

MR. MCLAUGHLIN: -- to include the screening that we saw talked about on NBC this week?

MR. ZUCKERMAN: Right.

MR. BUCHANAN: I'll tell you what he's missing, John. He's missing the people --

MS. CLIFT: If he wants -- excuse me --

MR. BUCHANAN: -- the workers that build these things.

MS. CLIFT: Excuse me --

MR. MCLAUGHLIN: Wait a minute. Eleanor -- let Eleanor in.

MR. PETHOKOUKIS: The yacht tax.

MS. CLIFT: We should get another view here. When the corporate jet caucus is done convening --

MR. ZUCKERMAN: Oh, that's nice.

MR. MCLAUGHLIN: (Laughs.)

MS. CLIFT: It is a symbolic issue. Do you remember the $400 toilet seats that the Pentagon had to defend some years ago?

MR. MCLAUGHLIN: I do.

MS. CLIFT: This is the kind of thing that people understand. And when you look at the tax code, it is riddled with tax breaks for special interests --

MR. PETHOKOUKIS: Do you remember the yacht tax that killed the yacht industry?

MS. CLIFT: -- for oil and --

MR. PETHOKOUKIS: Do you remember the yacht tax? It put thousands out of work. It's the exact same thing.

MS. CLIFT: Corporate jet owners --

MR. BUCHANAN: John --

MR. MCLAUGHLIN: Let Pat in. Let Pat in.

MR. PETHOKOUKIS: It's ultimately the workers who are going to get hurt.

MR. BUCHANAN: John --

MS. CLIFT: Corporate jet people --

MR. BUCHANAN: Hold it, Eleanor. Hold it. This is complete demagoguery --

MS. CLIFT: You tell me --

MR. BUCHANAN: This is demagoguery, and I'll tell you why.

MS. CLIFT: Quit telling me to hold it. I stopped talking several minutes ago.

MR. BUCHANAN: This is demagoguery, and I'll tell you why.

MR. MCLAUGHLIN: Why?

MR. BUCHANAN: There are workers out there that build these planes. There are pilots that fly them. There are guys that service them. Mort may fly around in one. I was down there at that boat factory when they had the luxury tax. They used to build eight a month, and now they were building one. They moved them to Mexico. MR. MCLAUGHLIN: You mean the big yachts.

MR. BUCHANAN: I mean the big yachts, the working guys that build them.

MS. CLIFT: You really believe --

MR. MCLAUGHLIN: Don't you think this is more Joe the Plumber stuff, when he said he really wants to spread --

MR. BUCHANAN: I think it's small --

MR. MCLAUGHLIN: The president said to Joe the Plumber, "I have to spread the wealth around."

MR. BUCHANAN: It's small-bore demagoguery.

MR. MCLAUGHLIN: "I've got to spread the wealth around." You've got to take the wealth from the rich, right?

MR. BUCHANAN: Small-bore demagoguery.

MR. ZUCKERMAN: I favor higher taxes on the wealthy.

MS. CLIFT: Poor rich.

MR. MCLAUGHLIN: Wait a minute.

MR. ZUCKERMAN: I favor higher taxes on the wealthy, without question, as a part of this package. But if he can't get it, for exactly the reasons that Pat describes, it's ridiculous to sit there and just beat them over the head --

MR. MCLAUGHLIN: One thing we don't want --

MR. ZUCKERMAN: -- when it's not going to go anywhere.

MR. MCLAUGHLIN: For people like you, we want you to invest. We want you to invest in new properties. We want you to take risks.

MR. ZUCKERMAN: Yes.

MR. MCLAUGHLIN: And if you go down the drain --

MR. BUCHANAN: (Inaudible.)

MR. MCLAUGHLIN: -- maybe you can support it; maybe you can't. Some of you can. But the ones who take the risk are the ones who have the money. And they do take the risk because there are all kinds of projects fortunately springing up --

MR. ZUCKERMAN: Not -- MR. MCLAUGHLIN: -- that give jobs.

Issue Three: What So Proudly We Hailed.

The U.S. flag's colors and pattern are mimicked on walking shorts, bathing suits, bikinis, even thongs. The Supreme Court decision, Texas versus Johnson, 22 years ago affirmed that even if you burn the flag or pour acid on the flag or defecate on the flag, it is not a misdemeanor and certainly not a felony, therefore. It is an application of the First Amendment's guarantee of freedom of expression.

The court says, quote, "We do not consecrate the flag by punishing its desecration," unquote. Since that high court decision, Congress attempted to pass a constitutional amendment to ban flag desecration. The last effort was in 2006, a cliffhanger. Fifty-two Republicans and 14 Democrats voted for the amendment. But the 66 votes was one short of the necessary two-thirds majority.

Some observers believe that if Republicans gain back the Senate in 2012, they could attempt a new effort to pass a constitutional amendment against desecration of the flag. Twenty-one Democratic Senate seats are up in 2012. That's compared to only 10 Republican seats. So the Republicans will have the control necessary.

Question: Why the political wavering on an amendment prohibiting the desecration of the flag? James.

MR. PETHOKOUKIS: Well, we have one political party that thinks that this issue violates the Constitution. It's a party built and funded by lawyers, ACLU. They think it violates civil liberties. So they're going to stick to their guns, and they will not vote for it. And if it came before President Obama, I'm sure he would not sign it.

MS. CLIFT: First of all --

MR. MCLAUGHLIN: Are you in favor of an amendment to the Constitution that would prohibit the desecration of the U.S. flag?

MR. PETHOKOUKIS: I'd have to see the exact language.

MR. MCLAUGHLIN: Why?

MR. PETHOKOUKIS: Because I read things before I sign them.

MR. MCLAUGHLIN: (Laughs.)

MS. CLIFT: And in the end, you're sensible, because the right to burn the flag is actually part of the freedoms that we enjoy. And people are not going around burning the flag, because it's pointless. So -- MR. PETHOKOUKIS: I will say, if I saw someone burning it, I think I would take it away from them. I wouldn't let it happen in front of me.

MS. CLIFT: It's an argument made by patriotic scoundrels, basically just trying to score points.

MR. BUCHANAN: (Laughs.)

MS. CLIFT: It's silly.

MR. MCLAUGHLIN: Compare the --

MR. BUCHANAN: No, I'll tell you one reason, John, is Scalia, I believe, who I've got enormous respect for, has a very expansive view of the First Amendment. And I believe he was in on that decision that said that the flag can be burned and that this is a form of expression.

MR. MCLAUGHLIN: Without punishment it can be burned.

MR. BUCHANAN: Well, yeah. But here's the thing.

MR. ZUCKERMAN: Free speech.

MR. BUCHANAN: Free speech; yeah, under freedom of speech and freedom of expression.

MR. MCLAUGHLIN: That's correct.

MR. BUCHANAN: But, however, I do think this. All the constitutional amendment would do, I think, is say that the states may outlaw the burning of the flag. I can't believe that the federal Constitution would outlaw that and have federal agents running around the country trying to stop it.

MR. MCLAUGHLIN: Now --

MR. BUCHANAN: I would --

MR. MCLAUGHLIN: -- are the states --

MR. BUCHANAN: I disagreed with Scalia in the decision, but I think the amendment could pass.

MR. MCLAUGHLIN: There's no question the states do have that power if the states chose to do it. MR. BUCHANAN: Not now. Not now.

MR. MCLAUGHLIN: They could not?

MR. BUCHANAN: No. It's Scalia and the decision --

MR. MCLAUGHLIN: For the individual state.

MR. ZUCKERMAN: That's right.

MR. MCLAUGHLIN: If Missouri wanted to say --

MR. BUCHANAN: Well, you can burn the flag and it's protected political expression.

MR. MCLAUGHLIN: No, the other way. You cannot desecrate the flag.

MR. BUCHANAN: No, no, no. You can desecrate it now because of the decision --

MR. MCLAUGHLIN: I understand. I'm saying that the state could have an amendment to prevent that desecration.

MR. BUCHANAN: If the amendment passes, the states could pass a law; correct.

MR. MCLAUGHLIN: And the states are empowered to do so if they so wish.

MR. BUCHANAN: If the amendment passes.

MR. MCLAUGHLIN: If the amendment passes.

MR. ZUCKERMAN: Not now; only if the amendment passes.

MR. BUCHANAN: Right.

MR. MCLAUGHLIN: So therefore, you're in favor of the amendment passing.

MR. ZUCKERMAN: No, I'm not.

MR. MCLAUGHLIN: You're not?

MR. ZUCKERMAN: No, I'm not.

MR. BUCHANAN: I am.

MR. MCLAUGHLIN: You don't want the power of the states to do that. MR. BUCHANAN: I'm one of the scoundrels, John.

MS. CLIFT: Right.

MR. BUCHANAN: I'm a patriotic scoundrel. I'm in favor of it. (Laughs.)

MR. MCLAUGHLIN: What about the Afghans? Do you remember when the Afghans and the gentleman over here burned the Quran to the reaction of Americans to the burning of the flag?

MR. BUCHANAN: The pastor in Florida.

MR. MCLAUGHLIN: What do the cultural differences signify? Comparing the Afghans and how -- the effect on that of them in burning the Quran?

MR. BUCHANAN: That's religious --

MR. MCLAUGHLIN: They went crazy.

MR. BUCHANAN: That's religious, and it's much more powerful. This is a political symbol and a symbol of the country. And while it does cause a reaction in the United States, it's nothing like people running around killing people for it.

MR. MCLAUGHLIN: And you realize that our national anthem focuses on the flag? "Oh, say" --

MR. BUCHANAN: So does our Pledge of Allegiance.

MR. MCLAUGHLIN: So does the Pledge of Allegiance.

MR. BUCHANAN: Right.

MR. MCLAUGHLIN: So what does that mean, that we have great respect for it, but we respect the liberty of the American to do it under freedom of speech --

MR. PETHOKOUKIS: We don't worship the flag.

MR. MCLAUGHLIN: -- more than we do -- it's the insignia of the nation.

Forced prediction: We will have a new secretary of the Treasury by November 1.

MR. BUCHANAN: Yes, we will.

MS. CLIFT: What's more interesting is who comes next. I hope he's more populist than the current --

MR. MCLAUGHLIN: A new one. A new one? MS. CLIFT: -- secretary. Yes.

MR. PETHOKOUKIS: We will, but he won't be a banker.

MR. MCLAUGHLIN: He won't be a banker.

MR. PETHOKOUKIS: Will not be from Wall Street.

MR. MCLAUGHLIN: Will he own a private jet?

MR. ZUCKERMAN: Yes, but it'll be earlier than that date.

MR. MCLAUGHLIN: Earlier than that. Do you know who it's going to be?

MR. ZUCKERMAN: No, but I --

MR. MCLAUGHLIN: Will it be the head of JPMorgan?

MR. ZUCKERMAN: No, it will not, absolutely not.

MS. CLIFT: No.

MR. MCLAUGHLIN: Absolutely not.

MR. PETHOKOUKIS: It will not be Jamie Dimon.

MR. MCLAUGHLIN: We will have a new secretary of the Treasury by November 1.

Happy Independence Day. Bye-bye.

END.