Santa Claus is confirmed to be real and he makes an appearance at D.C. Follies to hear everyone's Christmas wishes. Reagan attends a meeting of the defense department to learn about a new "A" bomb the size of an audio cassette, and then mistakenly gives Fred the cassette as a Christmas present. Gerald Ford then tries to disarm the bomb. The three ex-presidents play three ex-wise men and the D.C. Follies gang does a little caroling to the tune of "Christmas Day."
