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updated 7/22/2010 10:55:01 AM ET 2010-07-22T14:55:01

Guests: Bertha Coombs, Wade Henderson, Errol Louis, James Peterson, Joan Walsh, John Heilemann, Ed Rendell

CHRIS MATTHEWS, HOST:  This is Chris Matthews with HARDBALL.  Let‘s go right now to the secretary of agriculture, Tom Vilsack.

TOM VILSACK, SECRETARY OF AGRICULTURE:  -- and we have to make sure that we think before we act.  I did not think before I acted, and for that reason, this poor woman has gone through a very difficult time.

QUESTION:  (INAUDIBLE) vetting process (INAUDIBLE) before you make a decision like this?

VILSACK:  Well—

QUESTION:  (INAUDIBLE) any other plans (INAUDIBLE) might examine (INAUDIBLE) information before you make a decision?

VILSACK:  We—sure.  We went through a process today of reviewing precisely as best we could what took place.  And there will be changes.  One thing is there needs to be a more deliberative process, obviously, and I need to do a better job of reaching out to get input before a decision of this magnitude‘s made.

That is a very serious lesson I learned.  I—I was very sensitive and remain sensitive to the Civil Rights issues involving this department.  Again, when you‘re dealing with tens of thousands of claims—tens of thousands of claims—it—it is something that needs to be resolved that hasn‘t been resolved and must be resolved.

And so we‘ve done two things.  We‘ve made a concerted effort to try to resolve these cases.  And we‘ve also begun a process of looking at our entire operation from an outside consultant to take a look and see whether or not there are any other things that we‘re doing or shouldn‘t be doing that would potentially lead to claims in the future because we want to put a stop to this.

This is a great agency, a lot of hard-working people who care deeply.  Shirley is one of them.  And they‘re proud of this agency.  And this is part of our history that we need to close the chapter on.  And that was foremost in my mind when I made a very hasty decision which I deeply regret.

QUESTION:  Mr. Secretary, Ed O‘Keefe (ph) of “The Washington Post”—

(CROSSTALK)

VILSACK:  Ed, go ahead.

QUESTION:  Well, yes, and that was my question.  Can you elaborate a little more?  And had you met Ms. Sherrod previous to today‘s conversation?  And if she‘s so qualified, so uniquely qualified, why was she not given a more senior position previously, when you were, you know, hiring new officials with the new administration?

VILSACK:  Ed, first of all, I may very well have visited with her or met her in the context of a larger group meeting of rural development directors.  I—

QUESTION:  You don‘t recall a specific time meeting her previously?

VILSACK:  No.  No, no.  And I don‘t know for certain whether or not the rural development job was one that she specifically sought.  I know that she was recommended for that job.  But given her life experiences, as we begin the process of more aggressively doing advocacy and outreach, this is a person who, because of these experiences, having been discriminated against and being a claimant, having gone through that process, having gone through the process that she described in great detail in her speech, having gone through the last couple of days, she‘s uniquely positioned to be able to identify with a number of different people who might intersect with this agency in an effort to try to make sure that we don‘t continue to make the same mistakes we made in the past.

QUESTION:  Would she be a senior adviser or an undersecretary or (INAUDIBLE)

VILSACK:  I don‘t really want to go into detail.  I‘m happy to do this after she‘s had an opportunity to think about this.  I want to honor my commitment to her and our conversation today to give her a chance to think about this.  I just simply want everyone to know that I value that experience and I think there is a way in which, despite the difficulties that I have put her through, there is an opportunity here for us, for me personally to learn, obviously, but for the department to be strengthened.

And at the end of the day, I think that‘s what the people of this country would want.  They want to do right by this woman, but they also want to make sure that this doesn‘t happen again, which is the learning process.  And if there is a way of strengthening the department, then that‘s my responsibility to explore it.  And I‘m hopeful that—that she sees it that way.

QUESTION:  Secretary Vilsack, Kate Bolduan with CNN one more time. 

Have you spoken to President Obama about this?

VILSACK:  No.  Alan (ph)?

QUESTION:  Secretary Vilsack (INAUDIBLE) that you would be discussing about with her—Alan Bierder (ph) from Bloomberg News—is this a position that had been looked at previous to this incident, or would this be a new position created in part as a result of the incident?

VILSACK:  It—it‘s a position that needs to be filled.

QUESTION:  Secretary—

VILSACK:  Wait a minute.  Phil, did you want to ask a question?  I‘m just—

QUESTION:  Yes.  Just to be clear, when you saw the transcript—I

presume the staff provided you with a transcript of the initial video clip

were you aware that it was a partial transcript?  Did they make you aware of it?  And did you ask to see more of it?

VILSACK:  I had not been aware of it.  And I talked with Shirley about the fact that she had e-mailed the office the Thursday prior to this—to this video become an issue.  I did not receive the e-mail because it was not addressed properly to me.  In other words, the e-mail address was—there was a problem with the e-mail address, so it never came to my attention.

QUESTION:  (INAUDIBLE) she reached out to you the Thursday before?

VILSACK:  She had received some indication of this clip being available, and she—she, in an effort to try to respond, sent an e-mail to me which I did not get.  It was not addressed properly.  It was also sent to the deputy secretary‘s attention.  We did not discover it until after the fact, after this all came up.  And that‘s one of the—that‘s one of the issues that we‘re going to address in terms of this review.

QUESTION:  Secretary, you‘re taking very deeply personal responsibility—

VILSACK:  Yes.

QUESTION:  -- for this today.

VILSACK:  Yes.

QUESTION:  Does that absolve—I mean, Barack Obama, President Obama, is your boss.  Are you absolving the White House of any responsibility here in this situation?

VILSACK:  You know, it‘s not—it‘s not my place to absolve anybody from anything, other than to accept responsibility for what I did, and I‘m accepting that responsibility with deep regret.  This is a good woman.  She‘s been put through hell.  And I could have done and should have done a better job.

I want to learn from that experience.  I want the agency and department to learn from that experience.  And I want us to be stronger for it.  I want to renew the commitment of this department to a new era in Civil Rights.  I want to close the chapter on a very difficult period in Civil Rights.  So I accept responsibility.  And I—I don‘t think—the buck stops with me, as it should.

QUESTION:  (INAUDIBLE) you decided to fire Ms. Sherrod and then you notified a liaison at the White House, or someone did?  And can you describe what their reaction then was to that news?

VILSACK:  I requested her resignation about the same time sort of things crossed in time.  I‘m not certain in what period of time the White House was contacted, but as these calls were being made, the White House, through the liaison‘s office, was aware.  But the decision to do what was done was done by me.  It was my decision, and it was communicated.

And one of the lessons learned here is that this type of decision, first and foremost, should have been communicated by me.  It should have been done in a much more personal way.  It should have been done with far more thought and it should have been done in far less haste.  And all of those are my responsibility, and I accept that responsibility.  And I asked for Shirley‘s forgiveness, and she was gracious enough to extend it to me.  And for that I am thankful.

UNIDENTIFIED FEMALE:  That‘s it, folks (INAUDIBLE)

MATTHEWS:  We just saw Tom Vilsack, the secretary of agriculture, take full personal responsibility for the sacking of Shirley Sherrod, the agricultural employee down in Georgia.  What a moment that was for us all.

Let‘s go to Wade Henderson.  He‘s with the Leadership Conference on Civil and Human Rights.  Wade, thank you very much for joining us.  I don‘t know about you, but I was surprised at the dignity of this guy taking the bullet for this.  He said he did it.  He was wrong.  He apologized.  It‘s all his fault.

WADE HENDERSON, LEADERSHIP CONF. ON CIVIL & HUMAN RIGHTS :  It was an incredible moment, Chris, in American history.  I mean, for the first time, you‘ve seen a secretary, in this instance, secretary of the Department of Agriculture, making a very personal apology to an employee whom we all agree has been deeply aggrieved.  Tom Vilsack is an incredibly honorable individual, and what he did this afternoon showed great courage, tremendous dignity and a sense of personal responsibility that‘s rare in any public official.

I think he should be commended for both his concern about disavowing racism on the part of his department, but more importantly, recognizing that an injustice has occurred and taking steps, personal steps, to correct it.  I thought it was an extraordinary moment, and I‘m really honored to have watched Tom Vilsack address this important issue.

MATTHEWS:  Did you catch—I don‘t want to be rash in my judgment, but I caught an admission there that there is an institutional or systemic, as we‘ve always called it, problem in that department, and perhaps in American life still, whereby a black person, a black woman in this case, is quickly and rashly misjudged.

HENDERSON:  Well, I think Tom Vilsack acknowledged what many of us have come to accept about the Department of Agriculture, and indeed, what a federal court through its findings of discrimination against the department, particularly on behalf of African-American farmers, but also, as Secretary Vilsack said, on behalf of Latino farmers, women farmers and native American farmers and others, Asian-American farmers.

I think that the secretary has acknowledged a reality in American life, which is that discrimination has occurred, that racial bias indeed is deeply ingrained in American history, and that in this instance, a department that he now heads has a long and established history of violating the rights of other Americans with regard to their race and with regard to the equal protection of the law.

It takes great courage for any secretary to make that acknowledgement, but it takes even more courage for a secretary to acknowledge his personal involvement in making a mistake and in proposing his solution, a remedy to that problem.  And for me, that was an important statement, an important admission, and one that I think we should lift up and commend.

MATTHEWS:  Let‘s go back over this.  There was a “To Kill a Mockingbird” aspect to this story, where you had—and in that—of course, that great story by Harper Lee, an historic woman blaming a black man for a crime that didn‘t even exist.  There was no crime in that case.  In this case, you have a right-wing blogger who decided to smear a public official, and that got on Fox—the Fox Web site.  No surprise there.

HENDERSON:  Yes.

MATTHEWS:  And that chain reaction led to the Department of Agriculture, up the chain of command to Tom Vilsack, who now admits that he told this woman to resign.  Based on that fact alone, what does that tell you about American life, where a right-wing blogger with no editorial control, no editorial judgment or ethics, is able to smear somebody, have a major television network put that on their Web site within minutes, throw it out there without any editorial judgment or ethics at all, perhaps even a motive, a negative motive, smear this black woman, and then have an administration led by an African-American, somewhere down the chain of command, apparently now at the cabinet level, sack her because of what was decided by a right-wing blogger?  What do you make of that state of affairs?

HENDERSON:  Chris, I have to say, first, your historic analogy between this incident and “To Kill a Mockingbird” is directly on point.  Again, I think Harper Lee exposed a deep fissure in American society, the willingness to assume the worst of a black defendant, or in this instance, an African-American employee who was accused of racial bigotry, when in truth, the story that she told was precisely the opposite.

It was a story of personal redemption.  It was a story of racial reconciliation.  It was a story that should make us all proud to be Americans, having overcome a deep problem in American life regarding race and having moved beyond that in a way that reflects the kind of democracy we hope to achieve in the 21st century.

I think it‘s especially tragic that in this instance, a right-wing blogger in the case of Andrew Breitbart, choosing to establish a moral equivalency, if you will, between the NAACP because of its criticism of the Tea Party movement and trying to establish that the NAACP should be hoisted on its own petard because it was willing to tolerate racism within its own ranks.

I think that fear of an accusation being labeled both against the NAACP, and in this instance, the Department of Agriculture stampeded perhaps both organizations to accept too quickly a responsibility to speak out and to purge an employee of—suspected of racial misconduct without engaging in the due diligence necessary to establish that fact.  When one examines the—

MATTHEWS:  Let‘s—let‘s—

HENDERSON:  Go ahead.

MATTHEWS:  Let‘s talk about this administration—

HENDERSON:  Yes.

MATTHEWS:  -- the first African-American president—

HENDERSON:  Yes.

MATTHEWS:  -- who I think made most Americans very proud by the very fact he was elected.  And I don‘t want to give away that moment, which was so prideful for our country, that breakthrough, for instance (ph), Jim Crow and all we‘ve been through in hundreds of years in this country.

HENDERSON:  Absolutely.

MATTHEWS:  And my question is from the White House point of view.  You know, to go back to another historic parallel which you and I are familiar with, Jackie Robinson went into the major leagues—

HENDERSON:  Sure.

MATTHEWS:  -- as the first African-American player.  Years and years and years of evidence that black players could be as good or better than a lot of white players.  And that‘s been proven again and again.  It wasn‘t about quality of performance, it was about race.

But he was told when he went in the league—and Branch Rickey (ph) was his manager at the Dodgers—take the Heat.  Take all the assaults.  Take all the yelling, even from the Phillies‘ dugout, the awful racist remarks coming from other players.  Take it for three years because that‘s why I‘ve picked you.  You‘ve got the temperament.

Has this president leaned over too far in accepting the crap coming from the right wing, rather than rebuke it, because he doesn‘t want to get into a fight that will then justify the bad guys who always say we can‘t get along among the races?  Then they win their argument because whenever there‘s a dispute, the racists win.

HENDERSON:  Absolutely.

MATTHEWS:  They make their point.  The racists can‘t live together.

HENDERSON:  Well, Chris, again, I think you‘re absolutely on point.  I mean, again, as the first African-American president, Barack Obama has been under a virtual perpetual assault from political opponents who have attempted to use race in both a subtle and sometimes a very overt way to undermine his credibility and his integrity as the leader of all Americans.  And I think Barack Obama is especially sensitive to accusations that he sometimes favors the interests of African-Americans, which, of course, is not true.  I think he treats African-Americans almost like any other constituency within his party and within the country.

But secondly, he is especially sensitive to accusations that somehow he has less than fully forthright in his dealings on issues of race.  I think that hypersensitivity sometimes works to his disadvantage because there is a real fear that unless he establishes a distance between himself and any of the accusations made against him, he is somehow buying into the rhetoric that has been fomented (ph) by those who are his critics.

I think in this instance, while Secretary Vilsack takes full responsibility for the decision, the climate in which that decision was made has to be taken into context, both as with the NAACP that had made accusations—

MATTHEWS:  OK—

HENDERSON:  -- against the Tea Party movement.  You‘re seeing it now.  And so no, I would agree with you, Chris.  I think that there is a tendency to be overly sensitive, and sometimes that works to his disadvantage politically.

MATTHEWS:  Sir, it‘s great to have your fine mind and heart on the show tonight.  It‘s great.  It‘s so lucky and fortunate we have you at this moment coming out of that Vilsack press conference.  Thank you, Wade Henderson, of the Leadership Conference.

Let‘s turn now to Errol Louis, a columnist for “The New York Daily News” and a radio host for WWRL.  Boy, I got to tell you, this is America.  This is America 2010, isn‘t it?  Aren‘t we right there?

ERROL LOUIS, “NEW YORK DAILY NEWS”:  Absolutely.

MATTHEWS:  In our country.

LOUIS:  Absolutely.  Absolutely.  And in fact, to see the footage of the Spooners, the couple that Shirley Sherrod helped, to hear her speech in its entirety—you know, I actually met Shirley Sherrod.  It was a long time ago, back in the 1990s.  I used to go down to these conferences at her organization, the Federation of Southern Cooperatives.  I mean, just salt of the earth people.  And everybody‘s kind of grappling in good faith, including Secretary Vilsack.  You got to give him a lot of credit for that, as well.

And yes, that‘s America.  We‘re grappling our way through.  And this, in fact, for the first time in a while sounds like the conversation on race that the president told us we would be in for.

MATTHEWS:  Well, let me ask you the question I brought up with Wade Henderson, the question, again going back to “To Kill a Mockingbird,” this rash judgment of white people of black people.  It hasn‘t gone away.  This woman was judged in a matter of minutes based upon a right-wing diatribe, a fixed piece of tape thrown on the air, a right-wing—to a large extent, right-wing point view network, Fox, jumping on it, putting it on their Web site.  All of a sudden, this administration, led by an African-American, is so scared or whatever, somewhere down the line, the word got through their electric system, their nervous system, We better act and sack her fast.

LOUIS:  Well, I‘ll—there are a lot of people down in your town, Chris, who get wired into this—the story of the day, the media of the moment, and—and that connection has got to be broken.  I mean, just like Vilsack was made to ask questions, I‘d love to see the equivalent press conference for the producers that decided to put this thing on Fox and who gave it credence.

I mean, I‘d really like to hear some honest talk from people about, What were you thinking?  I mean, there‘s nothing in our business that says you condense a 43-minute speech down to—

MATTHEWS:  Right.

LOUIS:  -- you know, two minutes, from somebody with an obvious ideological agenda, and then throw it out there and put his interpretation on it.  That‘s just bad practice.  That‘s bad business.  And I—you know, there should be a lot of red faces over there.  I‘m waiting to hear from Fox the equivalent of Secretary Vilsack‘s statement.

MATTHEWS:  You‘re being sarcastic!  You‘re being sarcastic.

LOUIS:  Well—

MATTHEWS:  You expect shame on their part?  Let me ask you this.  Don‘t you think that word we were given today, that vocabulary word from Michele Bachmann today, that she says she‘s going to be a “receptacle” for Tea Party thinking—receptacle?

(LAUGHTER)

MATTHEWS:  That‘s what Fox has become.  These networks put on whatever that‘s out there.  They are a receptacle, a trash can, for whatever is thrown into the right-wing trash can.  They grab it up like a receptacle.  What a perfect word!  Thank you, Michele Bachmann!

(CROSSTALK)

LOUIS:  Maybe that‘s it.  But you know and I know that there are folks over there, Chris, who are low-level producers who are just trying—trying to do their job the best way that they can—

MATTHEWS:  Oh, you‘re kidding me.

LOUIS:  -- and who maybe they‘re are getting orders from on high.  No, I mean, I‘d like to figure out what‘s going on in there.  Who is giving the orders to do something like this.

MATTHEWS:  OK.

LOUIS:  It‘s got to be somebody—

(CROSSTALK)

MATTHEWS:  -- a long time—it took us a while to find out what‘s going on here and to find out that actually, this woman—I‘m not saying she‘s saintly.  I‘m saying she‘s human, trying to overcome what we all grew up with, race in this country, and trying to learn about her own beliefs and how they should be shaken down from on high, so that she can make the right judgment as a cooperative person and then working in the federal government, and giving that as a lecture—we‘re watching it right now in this picture—trying to tell her fellow African-Americans, you know, it‘s not all about race.  Sometimes, it‘s about poverty.  Sometimes, it‘s about common brotherhood. 

LOUIS:  Sure. 

MATTHEWS:  We have got to look around and see similar situations beyond the thing we grew up with.

And then she gets belted by the right wing for telling this story of how she was redeemed, how she found reconciliation with her fellow man.  And it‘s unbelievable that they would take the best thing in our society and turn it into this rotten business we have been going through for the last couple of days. 

Let‘s take a listen here.  Here is Breitbart himself talking about his motivation. 

(LAUGHTER)

MATTHEWS:  I don‘t know why we‘re even listening.

(LAUGHTER)

MATTHEWS:  On NBC.  Let‘s listen.  Here it is. 

(BEGIN VIDEO CLIP)

ANDREW BREITBART, PUBLISHER, BREITBART.COM:  So, my motivation was to say, I have evidence that shows, based upon your standard of people in the audience behaving racist, we have an NAACP-sanctioned event in which the speaker is talking in a racist narrative in which the audience, when she refers to a white farmer—when she refers a white farmer to a white lawyer to send it to one of your own kind, and when she talks about not giving him the full weight of what she can do with her position, the audience cheers. 

(END VIDEO CLIP)

MATTHEWS:  Well, that‘s—that‘s Breitbart making his best losing argument there. 

Here he is again.  Here‘s the clip, by the way, he posted again. 

Let‘s—let‘s take a look at it right now.  Let‘s listen. 

(BEGIN VIDEO CLIP)

SHIRLEY SHERROD, FORMER USDA OFFICIAL:  The first time I was faced with having to help a white farmer save his farm, he—he took a long time talking, but he was trying to show me that he was superior to me.  I knew what he was doing, but he had come to me for help. 

What he didn‘t know is, while he was taking all that time trying to show me he was superior to me, was I was trying to decide just how much help I was going to give him. 

(LAUGHTER)

(END VIDEO CLIP)

MATTHEWS:  Errol Louis, stick with us. 

We are going to bring in right now Bucknell University Professor James Peterson, who specializes in media, popular culture and African-American cultural studies, and Cynthia Tucker, Pulitzer Prize-winning columnist for “The Atlanta Journal-Constitution.”

Professor Peterson, let me ask you first about this whole question of the way the media—forget the media question for a second.  Let‘s go to the White House on down.  There apparently was a—some kind of collaboration, discussion between a White House liaison with the Ag Department.  Somewhere in that symbiosis, the decision was made by Secretary Vilsack to sack this woman, to sack Cheryl—Shirley Sherrod. 

What do you make of—what do you think it tells us about the way they made this decision in the last day or so? 

JAMES PETERSON, PROFESSOR, BUCKNELL UNIVERSITY:   Well, it tells us that race has quietly become a political football here. 

I mean, I don‘t know if the Obama administration is scared.  I think they think they are playing it smart.  If you look at the other stories within their circumference, the Black Panther Party story, think about Skip Gates from last year, I mean, there are all these racially charged stories that detract from their political agenda. 

And, so, yes, they considered this kind of a collateral damage move and they moved very, very swiftly.  It‘s extremely unfortunate, but we have to also understand that this administration is particularly vulnerable to the kind of political play that involves race, because Barack Obama is black.

And so there are political operatives out there who genuinely believe that, not only can they polarize the American communities based upon race, but they can also use race as wedge issues for certain voting opportunities in the fall. 

MATTHEWS:  Let me go to Cynthia Tucker. 

Following that line of argument from Professor Peterson, is it possible to assume here—or reasonable—that people around the president during these last hours, as this has gone to fruition now with the Secretary Vilsack apology and him taking the bullet for this, that along the way people around the president were saying, let‘s not have another Henry Louis Gates situation, where the president took sides with blacks against whites? 

Is that what was going on here, a fear that that would—which didn‘t help him politically—would happen again here? 

CYNTHIA TUCKER, EDITORIAL PAGE EDITOR, “THE ATLANTA-JOURNAL

CONSTITUTION”:  Chris, I think that it is reasonable to think about Skip Gates, but it‘s also reasonable to think about the successes that these right-wing activists have had so far with racially charged issues. 

It‘s not just Skip Gates.  It‘s Van Jones—

PETERSON:  Mm-hmm. 

TUCKER:  -- an environmentalist—environmental activist who was very good at his job, I understand, who they managed to get fired. 

It was ACORN that they managed to effectively ruin and put out of business.  So, given the fact that these right-wing activists have had some success so far in essentially smearing the president by the actions of others, yes, I think it is reasonable to conclude that the White House has grown much too sensitive to this kind of thing. 

But what they haven‘t understood is, if you give in to a bully, you will keep being bullied.  Breitbart and his ilk, FOX News, are never going to be satisfied. 

PETERSON:  That‘s right. 

TUCKER:  They are now hammering about the New Black Panthers, an extremely minor case.  Thinking conservatives, like Abigail Thernstrom, have said, it‘s small potatoes.  It‘s very minor.  Forget about it.

But they won‘t let it go, because they have had other successes in—in scaring this White House.  So, I think, if you look at that pattern, I think that, you know, the White House is thinking, OK, they got us again.  We have got to get rid of her as quickly as possible. 

PETERSON:  Yes.  It‘s an unfortunate situation. 

MATTHEWS:  Well, Professor Peterson, let‘s go back into history.  We saw how an issue like Willie Horton, which was obviously a serious matter, of course, but it became almost a national fixation back in the ‘88 campaign and did a lot to destroy Michael Dukakis‘ campaign.

PETERSON:  It did.

MATTHEWS:  So, these sort of anecdotal, what do you call them, morality plays, if you will, become the only American story for weeks at a time.

PETERSON:  Well, the thing is, is that there are a lot of people—we have to—we can‘t just blame it all on FOX, because there are a lot of people who respond to this kind of race-baiting.

And that‘s kind of what we have seen in this situation.  Now, the history here is extremely ironic, when you think about the history of slavery, you think about the retraction of reparations with 40 acres and a mule, you think about the allocation of resources through the G.I. Bill, allocation of resources through mortgage and lending, all the ways in which black folk have been discriminated against with respect to land over the course of time.

Those are the things that weighed heavily on Mrs. Sherrod‘s mind when she was trying to make this decision, so think about the history and that irony, right?  And then it‘s flipped instantly in this media sound bite moment where essentially we get her trying to use this as an anecdote to talk about transcendence, and people from the right and other folk want to use this as a way to continue to polarize America along the lines of race. 

MATTHEWS:  OK. 

PETERSON:  There‘s political value in that for some folk on the right and for some folk in the political world. 

MATTHEWS:  Errol Louis, thanks for sticking is with us.  We have got to go right now.  Errol Louis, thank you, sir.  Good luck with the column.

James Peterson, Cynthia Tucker, as always. 

Still ahead this hour: Michele Bachmann‘s Tea Party Caucus on Capitol Hill.  Well, that‘s the—I think that‘s the Mad Hatter‘s Tea Party.  She says she wants the caucus be a receptacle, the word of the day, the receptacle on the right for all the great ideas they have got. 

You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

MATTHEWS:  Still ahead on HARDBALL:  Congresswoman Michele Bachmann‘s Tea Party Caucus meets for the first time on Capitol Hill today.  Bachmann says the caucus, all Republicans and a lot of birthers, exist to listen to the concerns of Tea Party movement people, to be a receptacle—that‘s her word—for their ideas. 

You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

BERTHA COOMBS, CNBC CORRESPONDENT:  I‘m Bertha Coombs with your CNBC “Market Wrap.”

Stocks skidding today on some market-moving comments from Fed Chief Ben Bernanke, the Dow Jones industrials falling 109 points, the S&P 500 shedding 14, while the Nasdaq finished more than 35 points lower. 

Investors a bit shaken up after Federal Reserve Chairman Ben Bernanke told Congress the economic outlook remains—quote—“unusually uncertain.”  You can read Bernanke‘s full testimony to the Senate Banking Committee, with analysis, at CNBC.com. 

Meantime, earnings season is in full swing—eBay numbers coming out just after the closing bell.  After-hour investors are shrugging off a weak third-quarter outlook, focusing instead on the solid 26 percent jump in earnings. 

And wireless chip set-maker Qualcomm beating expectations on earnings and on sales, shares moving higher after-hours there as well.  But Starbucks shares are skidding in extended trading, despite solid earnings and revenue and a dividend hike.  Investors were focused instead on a weak full-year outlook. 

That‘s it from CNBC.  We‘re first in business worldwide—now back to

HARDBALL. 

(BEGIN VIDEO CLIP)

REP. MICHELE BACHMANN ®, MINNESOTA:  We decided to form a Tea Party Caucus for one very important purpose: to listen to the concerns of the Tea Party. 

(END VIDEO CLIP)

MATTHEWS:  Welcome back to HARDBALL. 

That‘s, of course, the inimitable U.S. Congresswoman Michele Bachmann announcing the formation of the Tea Party Caucus today.  Then she went on to say what the Tea Party Caucus will and will not stand for.  Here she is laying down its principles.  Let‘s listen. 

(BEGIN VIDEO CLIP)

BACHMANN:  I am not the head of the Tea Party, nor are any of these members of Congress the head of the Tea Party movement.  The people are the head of the Tea Party movement in all of their forms. 

(APPLAUSE)

BACHMANN:  We are also not here to vouch for the Tea Party or to vouch for any Tea Party organizations or to vouch for any individual people or actions or billboards or signs or anything of the Tea Party.  We are here to listen and to be a receptacle. 

(END VIDEO CLIP)

MATTHEWS:  Wow.  What will the formation of a Tea Party movement—caucus, actually, in this case—mean for the Republican Party and for Democrats running against caucus members? 

Joan Walsh is editor of Salon.com, and John Heilemann is national political correspondent for “New York” magazine. 

By the way, Joan, I recognized one of the people from the Tea Party movement standing behind the congresswoman.  She was in our—our special on the rise of the new right. 

Let me ask you this.  Do you like the word receptacle?  That was my favorite word used unusually today. 

(LAUGHTER)

MATTHEWS:  It‘s not really an intellectual word.  It‘s a trash can, a receptacle. 

JOAN WALSH, EDITOR IN CHIEF, SALON.COM:  It‘s a trash can. 

MATTHEWS:  And she‘s saying that her caucus will be a trash can for all right-wing ideas.  I mean, does that go from Second Amendment remedies, when you don‘t like what Congress does?  Does that mean getting rid of the progressive income tax, getting rid of popular election of senators?  Is it all going into the receptacle of her caucus?

(CROSSTALK)

WALSH:  Put—put Social Security in the receptacle, too, Chris. 

They don‘t like that either. 

No, I‘m really happy that the Tea Party Caucus is out there.  There is the irony, of course, that this is an anti-tax, anti-government group using our tax dollars to form a government associate.  Whatever.  They can—they can have their party. 

What I found really interesting is all the things that she tells us it‘s not going to do, and the reason she‘s saying that is, if they set themselves up, and they had to repudiate, or refudiate, as Sarah Palin would say, all the crazy—

(LAUGHTER)

WALSH:  -- Tea Party ideas and billboards, et cetera, coming out, they would be there all day, and they would be very busy, and they would be very sad and unhappy.

So, they have got a Tea Party Caucus, but it doesn‘t speak for the Tea Party or talk about anything the Tea Party believes.  OK.  Fine. 

MATTHEWS:  Well, John, they can‘t—I was going to say that they—they would be responsible, as Joan said, for ripping down the racist signs at every one of the Tea Party events -- 

WALSH:  Yes. 

MATTHEWS:  -- that you practically see them at. 

But here we have a membership which now includes one, two, three, four, five U.S. congresspeople who have just joined the Tea Party Caucus who are already birthers.  There they are.  They are already people that don‘t think this guy is an American.  They think he‘s an illegal alien.  Of course they are going to join the Tea Party Caucus.  I would assume that they are charter members because of what they believe already. 

The guy ain‘t an American.  Of course they disagree with him. 

JOHN HEILEMANN, “NEW YORK”:  Yes, that‘s the governing council.

MATTHEWS:  John Heilemann. 

HEILEMANN:  That‘s the governing council there, Chris, that you just saw. 

(LAUGHTER)

HEILEMANN:  You know, but, look, to be fair, it‘s an interesting thing.  You have got this Tea Party, which a lot of us—I think there are obviously parts of the Tea Party that are very extreme.  There are other people who are aligned with the Tea Party or sympathetic to it who are—who are a standard part of the American electorate.  They are radically alienated from government. 

They are people who voted, for instance, for Ross Perot back in 1992.  Those people aren‘t crazy.  So, it‘s—it‘s an interesting thing, because you have got now a Republican Party in Congress that wants the energy of the Tea Party behind it, but doesn‘t want to be associated with its craziest elements.

And so you have seen a split.  Some of the leaders on the House side, the Republican House side, are not joining the Tea Party.  You have people like John Boehner.  And so you have got—it‘s weird to have this diffuse movement suddenly institutionalized.  Which part of the Tea Party does it stand for? 

WALSH:  Right. 

HEILEMANN:  And what—I mean, how does the party manage now that it has a formal structure, in some sense, on Capitol Hill?  How does it manage the risks and the rewards inherent there? 

MATTHEWS:  Well, the crazy thing here, it seems to me, Joan, is that one thing the Tea Partiers in their midst believe in that government is bad, that government is the enemy.  Every time you hear them talk, they talk about the government as if it‘s some monster that has nothing to do with elected officialdom. 

Now you have elected people, elected in a democratic process, who have gone out there and gotten elected, done it the right way, saying there‘s something wrong with the government that they are in. 

This is the thing you can‘t—how can you be a Tea Partier, ready to burn the ships and burn the tea and throw it back into Boston Harbor, and, at the same time be part of the London government?  I mean, that‘s the craziness.  You can‘t be a Tea Partier and be part of the government.  You can‘t, I don‘t think.

WALSH:  It is—yes, I don‘t think so either, but they think so.  And, you know, it‘s a free country, so let them believe their—let them have their contradictions, Chris.  The thing that I think is important, you know, really great—

MATTHEWS:  Are they just pathetic opportunists?  Are they just pathetic opportunists?  I think Michele Bachmann—

WALSH:  Yes, I think they are.

MATTHEWS:  -- faced a tough reelection.  Is she any different than Harry Reid or anybody else in a tough situation, see and go to your deepest base and try to make the most of it?

WALSH:  Well, she‘s going to her deepest base.  You know, I would also say, I‘m going to give her this much credit.  I think she believes some of this crazy stuff—so I don‘t think she‘s only being an opportunist.  I really think she believes it and I think she‘s a little bit dangerous because she believes it—that she thinks a lot of us are un-American and that there should be an investigation into our beliefs, et cetera.

But I believe she holds her ideas sincerely.  They are very bad ideas.  And when the American electorate gets really exposed to the full spectrum of ideas, this will be a very tough thing for Republicans to get over.

MATTHEWS:  John Heilemann, where is there going to fit in terms of what you write about all the time—when you write your long pieces, books, for example?  Where is this development today that the fact that you now have an institutionalized Tea Party, you have people wearing British red coat costumes basically, people from the inside joining the outside?  What‘s this going to do to where the Republican Party—these are all Republicans—will they be able to nominate a non-Tea Party for president against Barack Obama in 2012?

HEILEMANN:  Well, I think that everything depends on what happens in November, Chris.  I mean, if the Republicans take control of the House and possibly even take control of the Senate, although that‘s a much dimmer prospect.  If one or both of those things happen and the Tea Party—the energy that the Tea Party has provided to the Republican Party is seen as a large part of the reason why that happens, they are going to be in the driver‘s seat going forward to 2012, and it‘s going to be very hard for any Republican to get nominated in the party without appealing to that constituency.

If, on the other hand, Democrats do better than a lot of people currently expect and hold both houses of Congress, I think there‘s a chance the Tea Party is just smashed by that and the Republican establishment looks and says, hey, this is bad for us.  It‘s alienating the middle of the American electorate and they move quickly to distance themselves from the Tea Party and a more Republican Party that looks a lot more like what we all remember the Republican Party looking like a decade or two ago, starts to become ascended and the establishment retakes control headed into the next presidential election.

MATTHEWS:  Well, this party, if the Tea Party takes over and the mad hatters start writing the platform, Joan, it‘s going to be kind of odd.  I mean, I‘m older than you.  I can remember when the Republican senators basically passed the civil rights bill back in ‘64 --

WALSH:  That‘s right.

MATTHEWS:  -- led by Everett Dirksen.  They were all moderates.  They were all reasonable people.  They believed in civil rights.

Can you imagine this crowd meeting and passing a civil rights bill?

WALSH:  No.  They would not do that.  They would not.

But, you know, John is right about this.  There‘s going to be an empirical test.  It‘s not going to be perfect.  There will be, you know, eccentricities to it, but there‘s going to be a test in November and I‘m of the opinion that the Democrats will do better, at least partly because these people scare independents.

That poll, Stan Greenberg‘s poll show that if they polled the non-Tea Partiers, what do you think about the Tea Party: 56 percent said they are way too extreme and only 17 percent—

MATTHEWS:  Yes.

WALSH:  -- said they shared their values.  So, they drive away independents when, you know, the game—part of the game is going to be about, you know, getting the independents.  They‘re not—this is not going to help them get the independents.

MATTHEWS:  John, the only thing I can remember is history, and I remember it—people say this isn‘t going to happen, but I remember in 1964 out here in the Cow Palace, out here in California, in San Francisco, where moderate Republicans were booted out of the room, people like Nelson Rockefeller, the behavior by that crazy Republican Party who even eventually nominated a guy who wasn‘t crazy but appealed to the crazies, Barry Goldwater, really happens.

I can see the Tea Party people, the ones we‘re looking at now, led by Bachmann, storming into Tampa in 2012 and demanding a platform which calls for Second Amendment remedies, right to carry political events, the whole works.

HEILEMANN:  Look, I—Chris, I can see that, too, and you‘re right.  I mean, history—the history of the way political parties evolve, they tend to swing to an extreme.  There are people on the conservative side who would say the Democrats swung to an extreme in the mid-1980s when they put Walter Mondale on the ticket, that the party was way too liberal.

But the parties tend to swing to an extreme.  They suffered a huge devastating electoral loss and then they come back to their senses and start to move back towards the middle.  You can see this happening.  Like I say, if the Republicans win the House and if they win also with the Senate especially, you can imagine heading into this 2012 election someone like Sarah Palin or someone who‘s be able to appeal to Sarah Palin‘s voters, and it‘s noticeable.

You know, one of the things that happened today was that someone you might never have expected to align with this caucus, Mike Pence, someone who wants to run for president.

WALSH:  Mike Pence—very sad.

HEILEMANN:  Mike Pence said he wants to be part of this Tea Party Caucus.

WALSH:  Very sad.

HEILMANN:  That is a guy positioning himself for 2012 --

MATTHEWS:  Yes.

HEILEMANN:  -- in the view that the Tea Party might be in the driver‘s seat, and have you to have these people to get the Republican nomination.  But I think you‘re exactly right.  That‘s a fast way to lose 49 states in 2012.

MATTHEWS:  Yes.

WALSH:  Chris, I just have to say one thing—

MATTHEWS:  Joan—

WALSH:  I love John.

MATTHEWS:  Sure.  Go ahead.

WALSH:  Walter Mondale is not an extremist.  So, if we‘re putting Walter Mondale out as a radical, come on, let‘s be right about history.

(CROSSTALK)

MATTHEWS:  By the way, in the fall—in the fall, the nuts fall from the tree, so look out, November.

Thank you, Joan Walsh.  Thank you, John Heilemann.

Up next: the White House has a couple big wins to brag about lately.  They‘re winning on Wall Street reform.  They‘re going to get unemployment extensions.

And we‘ll get to see how these victories are playing on Main Street with Pennsylvania Governor Ed Rendell.

This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Well, here‘s a glimmer of good news for the Democrats heading into the November mid-terms: The Democratic Congressional Campaign Committee entered the month of June with twice as much money in the bank as its Republican counterpart.  Both parties raised 9 million in June but the DCCC still had $34 million in the bank as opposed to just $17 million in the Republican bank.  That means the Democratic committee should be able to invest more cash in more close races across the country this fall.

HARDBALL will be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  Because of this law, the American people will never again be asked to foot the bill for Wall Street‘s mistakes.  There will be no more tax-funded bailouts, period.

(APPLAUSE)

(END VIDEO CLIP)

MATTHEWS:  Welcome back to HARDBALL.

Today, President Obama signed Wall Street reform into law and tomorrow, he‘s expected to sign a bill extending unemployment benefits.  How will this play in November?

Joining us right now is Pennsylvania governor, Ed Rendell.  He‘s the former chair of the Democratic National Committee.

Governor Rendell, it‘s great to have you on.

I want to ask you a couple of tough questions.  You‘re going to balance the budget in Pennsylvania.  You need the federal government to play ball with you.  First question of the politics: Why is the Republican Party taking the position that they want to protect Wall Street but not the unemployed?  Politics here.

GOV. ED RENDELL (D), PENNSYLVANIA:  Chris, I think it‘s a huge mistake.  I think if the Democrats do better in the fall than expected, and I think they will, it will be because the Republican mistakes—three big mistakes.

So many of them speaking out against the president‘s agreement with BP.  It looks like they‘re protecting big oil.

Voting almost unanimously against financial reform.  Looks like they‘re protecting big Wall Street companies.

And coming out almost uniformly against extending unemployment benefits—looking like they‘re insensitive to ordinary working people.

Three big mistakes—I think if we pound those mistakes and also talk about some of the achievements of the administration, I think this can be a different outcome than people expect.

But one thing the Democrat have to do and the president has to do is get a good jobs bill right in front of the Senate and the House.  And if they don‘t want to vote for it, then hang it around their necks because you‘ve seen the polls—Americans, by 70 percent to 28 percent, care more about jobs in the economy than even taking care of the deficit.

MATTHEWS:  And you‘d be good on the infrastructure issue, too.  The kind of jobs I want to see, real jobs.

Let me ask you about this Medicaid—

RENDELL:  Real jobs that pay real salaries.

MATTHEWS:  What‘s this problem government—just try balancing the budgets in Harrisburg and elsewhere across the country, what‘s this problem with things like Medicaid?

RENDELL:  Well, the problem is that because of the recession, a lot of people are driven into Medicaid programs.  For example, this year in Pennsylvania, this current fiscal year that we‘re in, we‘re going to add 61,000 people.  In recognition of that, the president‘s stimulus plan gave us extra Medicaid money, adjusted the formula.  That ends six months into this year.

We‘ve asked the president and the Senate and the House to extend it for another six months to give us breathing space.  For Pennsylvania, that means $850 million.  If we have to make $850 million in cuts on top of $3 billion worth of cuts that we‘ve made, it would mean laying off somewhere between 10,000 and 20,000 people, Chris—a disaster—especially when Pennsylvania has done so well.  In the last four months, we‘ve created over 60,000 private sector jobs.

MATTHEWS:  What do you make of this politics campaign?  And you‘re not running this year, but there‘s some real nasty politics going on.  We read it in “The New York Times” today.  I‘m sure you saw it.  These people—these right-wing or neo-cons, whatever they are, running these ads against the Democratic candidate for the Senate, the former admiral, Joe Sestak, calling him anti-Israeli, anti-Israel.

What is—what kind of politics—I never saw anything in his record along that line?

RENDELL:  No, Joe got involved with one Arab-American group and people said that they were connected to Hezbollah or something.  That‘s a group that I‘ve spent with and I‘ve worked with and they‘re very positive in what they do in Pennsylvania.

Look, Joe Sestak is a friend of Israel, and most importantly, Joe Sestak wants a strong United States to defend freedom all around this country.  Joe‘s got a fine record on that.  I think he‘s going to win.

And the reason he‘s going to win is Pat Toomey I think is associated with Wall Street and the Club for Growth, as you know, came right out of the bowels of Wall Street, out of Bear Stearns and Lehman Brothers and all the places that caused us all this trouble in this country.

MATTHEWS:  OK.  Thanks so much, Ed Rendell.  Good luck with eradicate (INAUDIBLE).  It sounds like it‘s a real problem up in Pennsylvania.

When we return, let me finish with some thoughts about Ronald Reagan and Tip O‘Neil—two men who disagreed about big things but could agree to make this government work.

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Let me finish tonight with a political story of my own from when I was in the business.  Last time I spoke at Ronald Reagan Presidential Library, I talked about the old time relationship between two politicians, Reagan and Speaker Tip O‘Neill, and how they carried on their rivalry which involved some pretty big stuff.

Reagan was a conservative Republican who came to the presidency with two goals: to cut size of government by first cutting taxes, second, to defeat the Soviet Union relying ultimately on our country‘s dynamic, decisive edged in innovative technology.

Tip O‘Neill, my boss, thought the prime purpose of government was to help the people in this country who couldn‘t help themselves—the old, the poor, the disabled, the young person who wanted to go to college but couldn‘t an afford it.  That‘s what kind of politician he was, an unapologetic liberal.  And he didn‘t trust the historic U.S. involvement in the Third World and in those poor countries.  He remembered how United Fruit had exploited Latin America.

So, here you had two guys one destined to be—in the words of Barack Obama, one of the truly transformative American presidents—who managed to bring the Cold War to an end and one of the great refusing to quit New Deal Democrats.  And yet, through a half dozen years of disputing the proper role of government, they managed to maintain a civil relationship, even a cordial one as President Reagan reminded me when I met him on the evening of his State of the Union Address, quote, this is him to me: “The speaker says we‘re all friends after 6:00.”  And they were—to a surprising extent, without ever giving up the grand argument that separated them.

Always being able to talk, my friend and colleague in the speaker‘s office, the late Kirk O‘Donnell used to say: always be able to talk—because they did.  They reached compromise on a number of vital issues, including Social Security reform.  There he is signing the bill.

I‘m convinced that the truly great political figures and both of these men left office with personal high rating numbers.  Tip O‘Neill had a 67 percent job approval rating in the Harris Poll, know how to fight and still show a measure of regard for the other guy.

As Jack Kennedy once said, “Civility is not a sign of weakness.”

I want to thank my good friend, Nancy Reagan, for inviting me out to the beautiful Ronald Reagan Presidential Library to tell the great, old Reagan-O‘Neill story the best way I could.

That‘s HARDBALL for now.  Thanks for being with us.

Right now, it‘s time for “THE ED SHOW” with Ed Schultz.

           

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