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updated 8/20/2010 11:53:13 AM ET 2010-08-20T15:53:13

Guest Host: Michael Smerconish, Richard Engel, Mark Halperin, Jane Wells, David Ignatius, Irshad Manji, Errol Louis, Jay Newton-Small, Harry Shearer

MICHAEL SMERCONISH, GUEST HOST:  Losing my religion.

Let‘s play HARDBALL.

Good evening.  I‘m Michael Smerconish in New York, for Chris Matthews. 

Leading off tonight: Coming home.  After seven years and over 4,400 casualties, the last American combat troops are out of Iraq.  Operation Iraqi Freedom is over.  And now the last 50,000 U.S. troops that remain in the country are there in an advisory and training role.

NBC‘s Richard Engel was embedded with the last combat brigade to leave Iraq, and he‘ll join us from Kuwait at the top of the show.

Then a stunning poll number -- 18 percent of all Americans, nearly 1 in 5, say that President Obama is a Muslim.  That includes 31 percent, nearly a third, of all Republicans.  Why have the misconceptions about President Obama‘s religion lingered this long?  And why were they growing even before the mosque controversy?  And should the president himself do more to shake them?

And what did Sarah Palin mean when she suggested radio talk show host “Dr. Laura” shouldn‘t retreat but should reload?  Dr. Laura‘s quitting her radio program after being—after repeatedly using the “N” word, and now Palin is suggesting that she‘s being muzzled by her critics and her constitutional rights are being trampled.

Plus, a new documentary by actor Harry Shearer investigates whether the destruction in New Orleans caused by Hurricane Katrina was made worse by the Army Corps of Engineers.  The man once known as Derek Smalls (ph), Harry Shearer, joins us tonight.

And finally, I‘ll have some thoughts about an American hero who helped save the Capitol on 9/11 and why he‘s not getting a fair shake from the country that owes him so much.

We begin with the dramatic end of combat operations in Iraq.  Last night, NBC‘s chief foreign correspondent, Richard Engel, was embedded with the last combat brigade to leave Iraq.

(BEGIN VIDEOTAPE)

RICHARD ENGEL, NBC CORRESPONDENT:  Right now, we are with the last American combat troops, and they are in the process of leaving this country right now.  We‘re traveling at about 45 miles an hour.  But as soon as all 440 of these soldiers are into Kuwait, the combat mission in Iraq, Operation Iraqi Freedom, will be over.

I think we‘re coming right up to the Kuwaiti border now.

UNIDENTIFIED MALE:  Yes, it is.

ENGEL:  OK.  The soldiers—you can pan behind me.  They are unloading their weapons as we speak.  And we are coming to a halt.  You can see the lights of a border crossing point.

So we are approaching the lights, the towers at the border right now.  It looks like we are crossing into Kuwait.  I‘ve seen the flashes of some cameras, so there are other journalists there.  There are—if you look to the left, there are some soldiers waving this convoy in.

Maybe, Crick (ph), can you see over the machine gun?  We are entering through a gate.  There‘s another camera.  There‘s another soldier saluting, but a very small reception, relatively speaking.

So we are now in Kuwait.  We are at the—we‘re in the border area.

How do you feel right now?

UNIDENTIFIED MALE:  It‘s a good feeling.  I was 17 when I watched, you know, 3rd ID cross from Kuwait into Iraq.

ENGEL:  Seventeen years old.

UNIDENTIFIED MALE:  Seventeen years old, a junior in high school.

ENGEL:  This war has really not just defined your military experience, it‘s bracketed your life.

UNIDENTIFIED MALE:  Yes.  In some way, it‘s part of my young life. 

You know, I joined the military knowing I would most likely deploy to Iraq.  And to actually be part of that last unit coming out is a huge amount of pride for me.

ENGEL:  Soldiers are now—they‘ve opened the hatch.  They‘re out of harm‘s way, and we are now just waiting for the rest of the convoy to come this way.

(END VIDEOTAPE)

SMERCONISH:  Richard Engel joins us now from Camp Virginia from Kuwait.  Richard, let me begin by saying I was mesmerized by your coverage last night, and indeed, over a period of years.  You own this story.  Congratulations.  Can you tell us the back story?  It was a broadcast coup, and obviously, it had to be a long time in the planning.

ENGEL:  Yes, we are still with the soldiers from the 4-2 Stryker brigade.  And it wasn‘t as complicated as you might think.  We simply asked the U.S. military and we said we wanted to be part of this last convey.  They told us roughly when it would be.  They didn‘t tell us exactly.  We organized an embed and we signed up for it.  The military officials say they offered this to many different media outlets, and they simply didn‘t have that many takers.

SMERCONISH:  The joy of the soldiers has been obvious from your interviews.  What are you able to say about the attitudes of the Iraqis?  What is their perception of what has just transpired?

ENGEL:  Iraqis are very nervous.  Now, American troops haven‘t been patrolling parts of downtown Baghdad for a long time, so it‘s not that these soldiers from the 4-2 Stryker brigade have just been taken off of downtown Baghdad and suddenly brought to Kuwait.  They were already effectively on a training mission with the Iraqi army, working with the Iraqi police.  Now, however, Iraqis do see these images, and they‘re worried, what will it mean.  Americans are changing the mission here.  The combat mission is over.  What will that mean for the future in a downtown Baghdad neighborhood?

And mostly, they‘re worried about their own government.  More than five months after the national elections, there still isn‘t a consensus government in Iraq.  The government that‘s in place can‘t provide basic services.  So as they watch these images on television and they see American troops leaving the country, crossing into Kuwait, those concerns particularly about their own political system certainly come to the forefront.

SMERCONISH:  Something else I was wondering as I was watching your coverage last night.  I don‘t know that there‘s a protocol for this size and scope of a troop withdrawal, but is there a reason why it was done by convoy as—and I understanding getting the machinery out, but as opposed to flying the troops out of Iraq?  Was that a security consideration?

ENGEL:  Both—soldiers are flying and are driving out.  And soldiers particularly from this Stryker brigade have been flying out from Baghdad.  This familiar convoy decided to drive out.  And I think there was symbolism involved.  I think they wanted to give some sort of closure for the unit, for the American combat mission.

And I think there was an idea to try and slow the process down.  The U.S. military could have left and ended this combat mission a lot sooner.  But by driving, they would give the Iraqi government, Iraqi politicians a little bit more time to continue their negotiations.  So I think it had a symbolic effect.  And it also—it didn‘t end up working, but giving the Iraqis a few more days, at least, to try to hammer out a government—that part didn‘t work.  The drive out was a success.  It went by peacefully.  There was not a single shot fired at these the troops as they left—as they left Iraq and entered here into Kuwait.

SMERCONISH:  Richard, stay with us, if you‘re able to do so.  We want to bring in “The Washington Post‘s” David Ignatius.  David, thank you for being here.  What is it that we‘re leaving behind?

DAVID IGNATIUS, “WASHINGTON POST”:  Well, we don‘t know yet.  As Richard said, we‘re waiting for the Iraqis to form a new government five months after the election.  The U.S. had hoped during this period in which we still had combat troops there, we could exert some leverage and get them to closure.  It hasn‘t happened.  I had a long conversation today with an Iraqi friend who‘s part of this government, and he said that for the moment, there really is a deadlock.

The American view in Washington within the administration is the Iraqis are going to have to learn how to sort out their own problems.  They‘re going to have to find a way to find a government.  They‘re going to have to deal with the serious security problems that still exist.

I was struck during Richard‘s wonderful reporting, the hundreds of journalists who went in with the U.S. troops in March of 2003 and how few people there are to see this exit seven years later.

SMERCONISH:  It seemed—it seemed  a rather muted response from the administration.  Or am I wrong?

IGNATIUS:  I think the administration is happy that they‘ve delivered

on their promise to get U.S. combat troops out.  I think this

administration has been uncertain how strong a role it wants to play now in

Iraq.  We‘ve spent so many billions of dollars, so many lives.  And I think

my own feeling is we—we have interests there.  We ought to have a way we can be helpful to the government.  Sometimes we ought to push them to get things done.  The administration some weeks does that, other weeks doesn‘t.  And I think they‘re still sorting out what their policy towards this new Iraq‘s going to be.

SMERCONISH:  Well, I think that begs the question.  And I‘ll ask David Ignatius, and then include Richard Engel, as well.  Under what circumstances would we go back?  Heaven forbid it should take a turn for the worse, David.  Under what circumstances do you think the administration has identified a return?

IGNATIUS:  I don‘t think they‘ve made that decision, Michael.  The nightmare would be that with U.S. combat troops gone, Iraq will slip back toward the kind of sectarian violence that‘s called by its true name, towards the civil war situation that existed in 2006 and 2007.  The U.S. is prepared to see some more bloodshed there and say the Iraqi army has to deal with it, the Iraqi police have to deal with it.  But at some level, that—that bloodshed and disorder could become so grave that the U.S., solely on humanitarian grounds, would have to ask, What can we do to stop this?  I don‘t think the administration has anything like an answer yet.

SMERCONISH:  To Richard Engel in Kuwait.  Richard, what thoughts might you have on that subject, as to the circumstances by which we‘d be drawn back in?

ENGEL:  Well, it is something that American commanders in Iraq—I‘m so used to saying “here,” meaning Iraq—but U.S. troops—U.S.  commanders in Baghdad certainly don‘t want to do.  If there was an attack like there was just a few days ago, when at least 60 people were killed in downtown Baghdad, U.S. troops didn‘t respond to that.  They worked with their Iraqi partners.  They shared information.  But they didn‘t leave their bases and respond to that.  So I think we‘ll see that kind of thing certainly going forward if there are bombings in Baghdad, if there are incidents along that scale of magnitude.

If there is a total catastrophe and a civil war-like situation is developing again, then it would be a very awkward situation for American troops that are there operating as trainers.  How can there be massacres going on just a few miles off bases and American troops are sitting there?

What Americans would like to do is stay on their bases and just give as much support to the Iraqis, as much intelligence, as much drone support as possible.  But if the wheels really come off the bus, they would be in a very difficult position not to act.

SMERCONISH:  I have Secretary—General Colin Powell‘s words running through my head relative to Pottery Barn, “If you break it, you own it.”  Richard, do we still own it?

ENGEL:  We are trying to hand it over right now.  And Iraq—the logic that is being prevalent now in the United States seems to be, We‘ve done the mission and it‘s now the Iraqis‘ responsibility, that these U.S.  troops have done all that they can do.  And they have been—they have done everything that they were asked to do.  They toppled a dictator.  They came back and stopped a civil war.  And now they left just recently with a very honorable exit, nothing—not a single shot fired at their convoy as they left.  The argument is the U.S. has done all that it can and it‘s up to the Iraqis.

Iraqi people see it very differently.  They saw the invasion, and they think that the Americans brought in these politicians because most of the Iraqi politicians were living in exile.  They arrived with the Americans.  So they associate the two together.  They say the greatest superpower in the world had a responsibility to bring more power, to help us sort through our political situation, to—and now they feel, Well, they‘re dumping it in our laps.

Perhaps that is the right thing that is being done, and that Iraqis with these problems in their laps will react to them.  But Iraqis certainly look both to the United States and to their government as partly responsible for what has happened to them, both good and bad.

SMERCONISH:  Richard, thanks for a fine job.  David Ignatius, I appreciate very much your being on the program tonight.

IGNATIUS:  Thanks.

SMERCONISH:  Coming up: Why is the number of Americans who believe President Obama to be a Muslim on the rise?  And what, if anything, should the White House do about it?  That‘s next.

And you‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

SMERCONISH:  We‘ve seen a few polls from my home state of Pennsylvania, Chris‘s home state of Pennsylvania, showing Republican Senate candidate Pat Toomey with a larger lead over Democrat Joe Sestak.  But Sestak‘s camp released their own internal poll showing Toomey‘s lead is just 2 points.  As NBC‘s political unit points out, it‘s never a good thing to be trailing in your own internal poll, but it‘s clear that Democrats want to show the Senate race in Pennsylvania is still winnable for them.

We‘ll be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE:  I‘ve got to ask you a question.  I do not believe in—I can‘t trust Obama.  I have read about him, and he‘s not—he‘s not—he‘s a—he‘s an Arab.  He is not—no?

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE:  No.  No, ma‘am.  No, ma‘am.  He‘s a—he‘s a—he‘s a decent family man, citizen, that I just happen to have disagreements with on fundamental issues.  And that‘s what this campaign is all about.  He‘s not.  Thank you.

(APPLAUSE)

(END VIDEO CLIP)

SMERCONISH:  Wow.  That was an unforgettable moment from the campaign trail in 2008, a moment where John McCain beat back misinformation about Barack Obama.  Well, new polls show that the country‘s beliefs about the president are shifting.  A Pew Research Center poll finds that just 34 percent of the country think President Obama is a Christian, 18 percent say he‘s a Muslim, 43 percent say they don‘t know.  You can see that‘s a big change from March of ‘09.  Among Republicans, just 27 percent say President Obama is a Christian, a 20-point drop from March of ‘09, 31 percent say he‘s a Muslim, a 14 percent spike from March of ‘09.

Today, a White House spokesperson put out a statement responding to this.  Jen Psaki said, quote, “The poll‘s findings are not surprising, given the scope of the issues we are focused on.  The president‘s strong Christian faith is what guides him through these challenges, but he doesn‘t wear it on his sleeve.”

So why are these numbers changing, and is it a problem for the president?  “Time” magazine‘s Mark Halperin is MSNBC‘s senior political analyst.  Mark, why would these numbers be on the rise?

MARK HALPERIN, “TIME,” MSNBC POLITICAL ANALYST:  Well, Michael, this is a great political story, make no mistake, but it‘s, I think, so unfortunate for the United States and for our relationships around the world.  Those numbers on the rise show a degree of ignorance that I think can only be based on the prejudice that we‘re seeing in this country, seemingly also on the rise, against Muslim Americans.

I think President Obama during the campaign did not go all out in wearing his religion on his sleeve, but certainly was more identified with his Christian faith as a candidate than he has been in the White House.  And I think that combined with some of the swirl of anti-Muslim feeling and some of the attacks that have come against the United States have created a really bad confluence.

SMERCONISH:  Here‘s something that interests me and I know will interest Mark Halperin, as well.  When you ask those who mistakenly believe the president is a Muslim, Well, where are you getting the information, 60 percent of them say the media.  What media are they talking about?

HALPERIN:  Well, in all likelihood, the new media.  Look, you don‘t need to sample much talk radio or go on too many Web sites without seeing a lot of misinformation, not just about the president but about Americans of Muslim faith and Muslims around the world.

In the latest issue of “Time” magazine, just out now, we‘ve got a cover story by my colleague, Bobby Ghosh, that talks about the misinformation, the distrust about the faith.  And again, I think it is a dangerous cocktail that some of the hostility, the misinformation, the ignorance that comes from various sources is being mapped onto the political leader who needs to lead us out of this problem.

SMERCONISH:  Speaking of the world of talk radio, here‘s Rush Limbaugh today reacting to the poll numbers.  Let‘s listen.

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST:  “Washington Post‘ -- I mean, there‘s panic out there!  Poll shows more Americans think Obama is a Muslim, spreading of falsehoods is to blame.  “Washington Post” leaves out the fact in this—in their story 1 in 10 Democrats think that Imam Obama is a Muslim -- 1 in 10 Democrats.  On page 2 of the “Washington Post” poll, 61 percent oppose the—the Ham-mosque—

(END VIDEO CLIP)

SMERCONISH:  He makes a point.  I mean, 1 in 10 Democrats do have that view, and then, of course, tongue in cheek, he talks about the president and uses his name in vain, and so forth.  You wonder if that fosters it, as well.

HALPERIN:  Yes, I don‘t wonder.  I know. 

I mean, Rush Limbaugh is playing a dangerous game, as are many talk radio hosts and many other communicators, in spreading disinformation, in a cute way in this case, but in a way -- 

SMERCONISH:  Well, Mark, can I say, relative to spreading false information, here in my hand, I have got Snopes.com, their research only on those Internet urban legends about President Obama.  And it‘s like six pages long, crazy stuff. 

I get sent this sort of thing every day, not only by kooks, but by people that I know who want to know, well, what do you think now about this?

HALPERIN:  Yes. 

SMERCONISH:  I have never seen such a campaign of disinformation nor so many people who are willing to believe it. 

Here‘s my substantive question for you.  Now I want to go back to that fabulous book “Game Change.”  OK?  Put that had on.  If you were advising the Obama White House, would you say, go to church, Mr. President? 

HALPERIN:  Well, look, go back to “Game Change.”  There‘s a couple of very relevant things.

First of all, during the campaign, the Obama people, when they did focus groups, and they did a lot of them, they would hear it all the time.  Obama is a Muslim.  Obama is not a Christian.  Obama has ties to terrorists.  They heard that constantly and it was one of their biggest fears.

He didn‘t visit a mosque.  He didn‘t do anything to try to—and he did his best to show his Christian faith enough to try to convince people what the truth was. 

The other thing you see in “Game Change” is the president didn‘t go to church a lot.  Part of the reason he had trouble defending himself against the controversy with Reverend Wright was the reason he missed most of those controversial sermons and he says all those controversial sermons is because he didn‘t go to church all that much after his two kids were born. 

SMERCONISH:  But, if he goes now, then you will have the skeptics and critics say, oh, look at this, he‘s going to church just to try and convince us he‘s a Christian. 

Hey, Mark Halperin, thank you. 

HALPERIN:  OK.

SMERCONISH:  You know I always enjoy when you‘re here.

HALPERIN:  Thanks, Michael.

SMERCONISH:  Irshad Manji is a professor of leadership at New York University‘s School of Public Service, also author of “The Trouble With Islam Today: A Muslim‘s Call for Reform in Her Faith.”

Is the country Islamophobic?

IRSHAD MANJI, AUTHOR, “THE TROUBLE WITH ISLAM TODAY”:  I don‘t think so, Michael.  And I will tell you why I say that.

Three years ago, when the country was in far better economic straits than we are now, the Pew Research Center came out with the first ever comprehensive study of Muslim-Americans.  And in that survey, they found that 73 percent of Muslim-Americans say that they have never experienced an act of discrimination on U.S. soil -- 73 percent. 

We couldn‘t even come close to those numbers in parts of Europe.  This country is not inherently Islamophobic.  But notice how I started off my answer to you?  In better economic times, we had much more openness, much more tolerance, much more inclusion. 

SMERCONISH:  Right. 

MANJI:  History shows every society, not just America, but including America, becomes more insular and intolerant when living standards fall. 

(CROSSTALK)

SMERCONISH:  Professor, I thought—you may think this is nuts.  I thought the reason why that fellow at—the stewardess at JetBlue got so much support from the American people is because they are angry about the economy.  And it was sort of a hell yes kind of a moment. 

MANJI:  Yes.  Sure. 

SMERCONISH:  Let me show you some data that I think we need to throw into the mix here -- 61 percent think a Muslim should be able to—only 61 percent—should be able to run for president -- 65 percent think a Muslim should be able to be on the Supreme Court -- 71 percent think the mosque near Ground Zero insults the 9/11 victims -- 61 percent oppose the construction.

And asked whether most U.S. Muslims are patriotic, 55 percent say yes;

25 percent say no; 21 percent had no answer or said they didn‘t know. 

Some pretty stunning numbers in there. 

MANJI:  Well, I love the fact that you think that they are stunning numbers, because what that means is, Michael, that you, like many more Americans, have higher expectations of this country. 

And that really gets to what it is that Muslims around the world tell me they love about America.  With my book, I have been traveling right across the globe for the last number of years.  And I am always amazed and heartened when young Muslims say to me, Irshad, is there any way you can bring me to the United States so I could live there and study there? 

And I often say to them, really?  But what about Gitmo and what about the Patriot Act?  And over and over, these young Muslims say to me, that‘s unjust, but it‘s an exception.  We know that‘s not what America is about. 

(CROSSTALK)

SMERCONISH:  Professor, speaking of expectations, allow me to get your counsel on this.

MANJI:  Yes. 

SMERCONISH:  Moderate Islam.  Does moderate Islam in the United States bear some culpability for the data that we‘re discussing by not speaking out more often?

MANJI:  It‘s a brilliant insight on your part, Michael. 

And I would argue that, yes, these numbers, in my view, are as much a reflection of the intellectual and moral bankruptcy of moderate Muslims as they are indicative of anything else.  And the reason I say that is that once again over and over moderate Muslims themselves have failed to be clear with the American people about who is a terrorist and who is not. 

It‘s always about U.S. foreign policy that produces terrorists, rather than we Muslims taking responsibility for ourselves as well.  I firmly believe that most Americans—not all, but most Americans—are fair-minded enough that if they hear moral clarify from moderate Muslims, these numbers, in terms of the prejudices that we‘re hearing, would lower significantly. 

SMERCONISH:  Professor Manji, thank you so much for being on the program.  We appreciate it. 

MANJI:  Thanks for having me.

Up next:  Charlie Crist celebrates the fact that his days as a Republican are a thing of the past.  Check out “Sideshow,” because that‘s next. 

You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

SMERCONISH:  Welcome back to HARDBALL.  And now to the “Sideshow.” 

Say this for Charlie Crist.  He knows which way the wind blows.  Remember, it was just April when he left the Republican Party to run as an independent.  Watch Crist yesterday address a Democratic-leaning crowd in Florida. 

(BEGIN VIDEO CLIP)

GOV. CHARLIE CRIST (I), FLORIDA:  And I have got to tell you that I‘m so honored to have this support in this race.  It‘s not the easiest thing to do, for an elected official of one party to come out and support an independent.  I used to be a Republican, but—

(LAUGHTER)

CRIST:  Yes, thank God, right, used to be. 

(END VIDEO CLIP)

SMERCONISH:  “Thank God, used to be.”

Well, Crist‘s strategy looks to be working, at least for now.  A new Quinnipiac poll shows that he has a solid lead over Republican Marco Rubio, 39 percent to 32 percent.

Next up: a not-so-picture-perfect endorsement.  Alabama mayoral candidate Dorothy Davidson put out this campaign flier of her with University of Alabama football coach Nick Saban, saying that she had won his endorsement.  But take a closer look at that photo.  Does it look a little bit odd, like maybe it has been Photoshopped in some way? 

Turns out that it was.  “The Birmingham News” uncovered this photo on the left.  The real image of Saban used in that flyer was taken three years ago with his wife.  Davidson‘s campaign manager has admitted to faking the endorsement and the photo, saying that he acted alone in misleading Davidson and the rest of the campaign. 

And, finally, as reported by “The Wall Street Journal,” the law of unintended consequences.  Frito-Lay just came out with a new SunChips bag that‘s 100 percent biodegradable.  The hitch, the new bag is much noisier.  And here‘s the proof.  Ruffles.  SunChips.  No surprise then that 30,000 Facebook users have joined the group, “Sorry, but I can‘t hear you over this SunChips bags.”

Amid the backlash, Frito-Lay has attached signs to store shelves that read: “Yes, the bag is loud.  That‘s what change sounds like.”

Well said. 

And now for tonight‘s HARDBALL “Big Number.” 

Bill Clinton, our youngest former president, celebrates his birthday today.  How old is he?  Sixty-four.  Bill Clinton, 64 years young today—tonight‘s not-so-“Big Number.” 

And now a programming note.  Be sure to watch “The Today Show” tomorrow morning for Meredith Vieira‘s interview with “Sideshow” all-star Rod Blagojevich.  It‘s Blago‘s first sit-down interview since his corruption trial, which ended in a one-count conviction this past Tuesday. 

Up next:  Radio talk show host Dr. Laura Schlessinger is quitting her radio gig after criticism for using the N-word on the air.  And now Sarah Palin has come to her defense, suggesting her constitutional rights are being violated and encouraging her not to retreat, but to reload. 

That‘s ahead.  You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

JANE WELLS, CNBC CORRESPONDENT:  I‘m Jane Wells with your CNBC “Market Wrap.”

Stocking getting to their lowest level in a month.  The Dow plunging 144 points.  The S&P 500 slipping 18.  And the Nasdaq tumbling nearly 37. 

The jobs market may actually be going from bad to worse, new claims rising by 12,000 last week for jobless benefits, their highest level in nine months, one analyst saying the recovery has—quote—“hit a wall” in August. 

On the earnings front, computer giants Dell and HP reporting after the closing bell.  Dell beat on earnings, but falling gross margins are pulling the stock lower in after-hours trading.  HP earnings, however, coming in slightly better than expected. 

Sears shares, though, plunging more than 9 percent after reporting a wider-than-expected quarterly loss.  Staples suffering the effects of a weak earnings reports and a forecast predicting a—quote—“slow, steady slog toward recovery.”

OK, some bright spots.  Antivirus-maker McAfee soared 57 percent on the stock market today after announcing it will be bought by Intel.

And earnings from retailer The Gap just coming in better than expected, and shares are up after hours. 

That‘s it from CNBC, first in business worldwide—now back to

HARDBALL. 

SMERCONISH:  Welcome back to HARDBALL. 

Sarah Palin has now come to the defense of Dr. Laura Schlessinger. 

Dr. Laura, who hosts a radio talk show, made these comments last week. 

(BEGIN AUDIO CLIP)

CALLER:  Is it OK to say that word?  Is it ever OK to say that word?

DR. LAURA SCHLESSINGER, RADIO TALK SHOW HOST:  It‘s—it depends how it‘s said.  Black guys talking to each other seem to think it‘s OK.

CALLER:  But you‘re not black.  They‘re not black.  My husband is white.

SCHLESSINGER:  Oh, I see.  So, a word is restricted to race.  Got it. 

Can‘t do much about that.

CALLER:  I can‘t believe someone like you is on the radio spewing out the (EXPLETIVE DELETED) word, and I hope everybody heard it.

SCHLESSINGER:  I didn‘t spew out the (EXPLETIVE DELETED) word.

CALLER:  (EXPLETIVE DELETED) (EXPLETIVE DELETED) (EXPLETIVE DELETED)

SCHLESSINGER:  Right.  I said that‘s what you hear. 

CALLER:  Everybody heard it. 

SCHLESSINGER:  Yes, they did.

CALLER:  I hope everybody heard it. 

(CROSSTALK)

SCHLESSINGER:  They did.  And I will say it again. 

(CROSSTALK)

SCHLESSINGER:  (EXPLETIVE DELETED) (EXPLETIVE DELETED) (EXPLETIVE

DELETED) is what you hear on HB—

CALLER:  So, what makes it—

(CROSSTALK)

SCHLESSINGER:  Why don‘t you let me finish a sentence? 

CALLER:  OK. 

SCHLESSINGER:  Don‘t take things out of context.  Don‘t NAACP me. 

Take the—

(CROSSTALK)

SCHLESSINGER:  Leave them in context.

CALLER:  I know what the N-word means.

(END AUDIO CLIP)

SMERCONISH:  Schlessinger apologized, saying that using that language was wrong and, in a TV appearance, announced that she was quitting her radio show and why. 

(BEGIN VIDEO CLIP, “LARRY KING LIVE”) 

SCHLESSINGER:  My contract is up for my radio show at the end of the year, and I have made the decision not to do radio anymore. 

I want to regain my First Amendment rights.  I want to be able to say what‘s on my mind and in my heart and what I think is helpful and useful without somebody getting angry, some special interest group deciding this is a time to silence a voice of dissent. 

(END VIDEO CLIP)

SMERCONISH:  And now Sarah Palin has weighed in via Twitter in support of Dr. Laura. 

She tweets: “Dr. Laura, don‘t retreat.  Reload.  Steps aside because her First Amendment rights cease to exist, thanks to activists trying to silence.  Isn‘t American.  Not fair,” and then tweets, “Dr. Laura, even more powerful and effective without the shackles.  So, watch out, constitutional obstructionists and be thankful for her voice, America.”

Jay Newton-Small is Washington correspondent for “TIME” magazine. 

Errol Louis is a columnist for “The New York Times.” 

Jay, is she—and by she, I mean Governor Palin—crazy like a fox?  Because this may seem abhorrent on the surface, that she would embrace someone who used the N-word 11 times in the midst of a radio broadcast.  But does it not drum up certain support among the hard-core base in the GOP? 

JAY NEWTON-SMALL, WASHINGTON CORRESPONDENT, “TIME”:  Absolutely. 

And, look, Dr. Laura is very popular with this base within the GOP.  A lot of people are very upset that she decided to retire, that she would no longer be on the air.  So, in that sense, it definitely speaks to that base of people and which I think are also—tend to be Sarah Palin supporters. 

And it stirs up controversy.  And I think Palin also can sort of empathize with her.  I think she feels that she‘s also been this conservative woman who has been piled on by the mainstream media and has fought back successfully and in the same sense is encouraging Dr. Laura to fight back when she feels -- 

(CROSSTALK)

SMERCONISH:  I know you have had a lot of exposure to her.  Does she think before she tweets? 

NEWTON-SMALL:  You know, I couldn‘t tell you whether she thinks before she tweets.  But I can definitely say she does it herself. 

And, like, when I interviewed her last year in Alaska, or we—she came to the TIME 100 dinner with me earlier this year, she‘s—she‘s very hands-on.  She does everything herself.  She called me directly.  She e-mailed me directly about the arrangements.  She doesn‘t really go through staff.

So, I think what you see on Twitter and what you see on Facebook is very much her out there, and spelling mistakes and made-up words and everything, like refudiate, which she sort of coined a couple of weeks ago. 

But, and then she—sometimes, she fixes those spelling mistakes.  People, you know, say there‘s this mistake here or there, but I definitely think it‘s her out there doing it. 

SMERCONISH:  Errol Louis, I‘m not sure if I upgraded or downgraded you by saying you were with “The Times.”

(LAUGHTER)

SMERCONISH:  You‘re with “The Daily News,” my friend.  Thank you for being here.

ERROL LOUIS, “DAILY NEWS”:  Yes.  Absolutely.

SMERCONISH:  You know, what‘s interesting to me, the politics of this.  Ever since the president weighed in on the mosque and then Harry Reid weighed in on the mosque, it is now licensed for all candidates to be asked about the mosque.

Is Sarah Palin‘s involvement now with Dr. Laura going to cause this, do you think, to be an issue?  Where somebody running for Congress gets asked, hey, what did you make of Dr. Laura‘s use of the N-word?

LOUIS:  Oh, sure.  Look, I think there‘s a whole lot of distraction going on.  You know, on the day when new jobless claims—shows a disturbing upward tick that we should be talking about any of this stuff in some ways unfortunate.  That seems to be the strategy, though, of the GOP, that they want to talk about some of these hot button cultural issues, get their base talking, see if they can round them up in time for the November 2nd election.

I mean, I do think, however, that both Sarah Palin and Dr. Laura could use a refresher course in the First Amendment.  You know, I mean, they‘re using it in wildly inaccurate fashions.

SMERCONISH:  Well, how so?  Because Dr. Laura says she wants to go reclaim her First Amendment right?

LOUIS:  Michael, you know, I do a radio show in the morning here in New York.  I‘m a big fan of yours.  You know that we who are blessed to have that kind of a platform.

Dr. Laura was on in 200 markets plus satellite radio.  To say that her rights were being abridged because somebody spoke up and said they didn‘t like her spewing what has been rightly called the most offensive word in the English language is ridiculous.  I mean, her rights were not taken away in any way, shape, or form.  And, by the way, the First Amendment refers to government censorship, not her listeners complaining about something stupid that she said, you know?

I mean—and then for Sarah Palin to play along with it, somebody who held an important office, a governor‘s office, and ran for high office in national government, is also very unfortunate.

But, you know, I mean, they‘re pushing hot button cultural issues forward.  They‘re not really trying to educate.  And that in part I think is why Dr. Laura‘s radio career has come to an end.

SMERCONISH:  Jay Newton-Small, let me ask you a question about Governor Sarah Palin.  Is she forgiving or is she forgettable?  Because Ben Smith reported at “Politico” today something that had been said by Dr.  Laura about Governor Palin at the time that she was selected by John McCain.  And she said, quote, “I‘m stunned—couldn‘t the Republican Party find one competent female with adult children to run for vice president with McCain?  I realize his advisors probably didn‘t want a mature woman as the Democrats keep harping on his age.  But really,” listen to this now, “what kind of role model is a woman whose fifth child was recently born with a serious issue, Down syndrome, and then goes back to the job of governor within days of the birth?”

Do you think that Sarah Palin was aware of that when she decided to weigh in in support of Dr. Laura?

NEWTON-SMALL:  I‘m not really sure whether she was aware of that or not.  I haven‘t spoken to her about it.  But I can say that, you know, if she got mad about every single Republican out there, every single conservative that called her unqualified or said that she, you know, shouldn‘t have been picked as vice president, then she wouldn‘t be talking to a lot of people.

(LAUGHTER)

SMERCONISH:  Yes, but to call into question the whole parenting thing.

Hey, Errol Louis, one quick final issue.  I‘m disappointed in Dr.  Laura for having uttered the N-word one time, much less 11 times because there was a great conversation taking place about this double-standard where some can use that word and she pointed to HBO.  And I always watch those comedy shows.  And I‘m shocked by some of the routines.  But that got lost in translation.

LOUIS:  But a lot got lost and it‘s a shame because the caller was fascinating.  I mean, if you and I got into a party to an interracial marriage who wanted to talk about it intelligently and honestly—

SMERCONISH:  I love it.

LOUIS:  -- it‘s pretty rare.

SMERCONISH:  Yes.

LOUIS:  And you‘re supposed to listen, not talk over them and insult them the way she did.

SMERCONISH:  Well, I appreciate you being here.  Thank you, Jay Newton-Small, and, Errol Louis.

Up next: were the devastating floods in New Orleans after Hurricane Katrina made worse by the U.S. Army Corps of Engineers?  That‘s the question raised by Harry Shearer‘s new documentary, “The Big Uneasy.”  And Harry joins us next.

This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

SMERCONISH:  Hey, quick, name the person who leads the Republican Party?  Michael Steele, Sarah Palin, Rush Limbaugh.  How about Mississippi Governor Haley Barbour?  He‘s the chairman of the Republican Governors Association and as “Politico” reports today, he has more money to spend on the midterms than any other Republican around, 40 million bucks.  “Politico” goes on to say that, privately, many Republicans consider Barbour the de facto party chairman and that he‘s warming to a presidential run of his own in 2012.

HARDBALL will be right back.

(COMMERCIAL BREAK)

SMERCONISH:  We‘re back.

It‘s been five years since Hurricane Katrina devastated New Orleans. 

There‘s a new documentary coming out and it‘s called “The Big Uneasy.”

And here‘s the trailer:

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  Welcome to New Orleans.

UNIDENTIFIED MALE:  We all know what happened to New Orleans on August 29th, 2005.

UNIDENTIFIED FEMALE:  The U.S. Army Corps of Engineers, (INAUDIBLE). 

This was a humongous storm.

UNIDENTIFIED MALE:  This was a cover up.

UNIDENTIFIED MALE:  Some day, there‘s going to be a catastrophic flooding.  They never heeded this advice.

UNIDENTIFIED MALE:  Congress sent a clear message.  Don‘t mess with the Corps.

UNIDENTIFIED MALE:  Now, they‘re building a wall to prevent what they say didn‘t happen.

UNIDENTIFIED MALE:  People didn‘t have to die.

(END VIDEO CLIP)

SMERCONISH:  We‘re joined now by the director of “The Big Uneasy,” Harry Shearer.

Harry, “Derek Smalls” and “Spinal Tap” forever changed the way I look at rock.  I have a feeling that “The Big Uneasy” is going to forever change the way we look at Katrina.

HARRY SHEARER, DIRECTOR, “THE BIG UNEASY”:  I should hope so, Michael.

First of all, what you said in the last segment that Hurricane Katrina devastated New Orleans, the starting point for this project was when Dr.  Ray Seed of U.C.-Berkeley said, if the hurricane protection system had been working as designed, the worst that Katrina would have inflicted on New Orleans would have been wet ankles.

And I needed to find out what he meant by that, what his team meant by that, what the other team that investigated the disaster meant by that.  And that‘s really the story of this film.  It was not really a natural disaster.

(CROSSTALK)

SMERCONISH:  You were watching the president, as I understand it.  You were overseas and he delivered a speech and said it was—it was not only the result of a natural disaster and that piqued your curiosity.

SHEARER:  Yes.  What we know in New Orleans that happened in Mississippi on the Gulf Coast was a natural disaster.  They had a one-day hurricane event.

What happened in New Orleans was more than 50 breeches in a system that was built over a period of more than four decades and never completed under congressional mandate after Hurricane Betsy built by the Army Corps of Engineers to prevent this sort of thing from happening.  And we know that it didn‘t.  As a matter of fact, Hurricane Betsy, which is a big hurricane as well, flooded 20 percent of the city.

This thing, because of the more than 50 failures in the system around the city, flooded 80 percent of the city.  So, we, federal taxpayers, didn‘t get what we bought.

SMERCONISH:  Harry, here‘s another clip from the movie.  Let‘s all watch.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  The guys from Berkeley also were having problems and then the Corps of Engineers started to erect fences around the site.  The Berkeley fellows were blocked from 17th Street, and the attorney general sent one of these lead attorneys down with bolt cutters.  He was going to cut the locks and he was going to declare it a crime scene and then the Corps of Engineers wouldn‘t have access anymore.

(END VIDEO CLIP)

SMERCONISH:  What‘s the bigger story there, Harry?

SHEARER:  Well, the Corps of Engineers makes very reassuring statements.  They‘re making very reassuring statements right now.  They made a series of them before in the years up to 2005.

When things fail, when their projects don‘t work as advertised, they take a very defensive attitude towards their critics and one of the stories of the film is the negative career consequences for the people who spoken up and told the truth about the Corps and the lack of negative career consequences for people in the Corps who did this to a major American city.

SMERCONISH:  Should so many people be living below sea level?

SHEARER:  More than—well, half of New Orleans is at or above sea level.  So, half the city by that definition is OK.

Jon Barry, the author of “Rising Tide,” points out that every river delta port city in the world is built at or below sea level.  So, by that standard, New Orleans is doing better than most of them.

SMERCONISH:  Here‘s—

SHEARER:  That‘s not the problem.

SMERCONISH:  Here‘s another clip from “The Big Uneasy.”

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  We know that Katrina was about a one-in-30 to one-in-40-year storm.

UNIDENTIFIED MALE:  In fact, New Orleans proper likely experience only category one or category two conditions.

UNIDENTIFIED MALE:  This is contrary to the U.S. Army Corps of Engineers who are trying to claim that Katrina was a—

UNIDENTIFIED MALE:  One in 496 probability of occurrence.

UNIDENTIFIED MALE:  The Army corps of generals came out in their green suits and immediately said that—

UNIDENTIFIED MALE:  That was a big storm.

UNIDENTIFIED MALE:  The reason they‘re doing that is to cover their behinds.

(END VIDEO CLIP)

SMERCONISH:  So, what‘s the answer to that issue?  Who‘s got the right answer?

SHEARER:  Well, you know, part of it is: why the Corps operates the way they do?  We go into some detail on that in the movie.  There‘s a—the Corps acts the way it does because Congress likes it that way.

There are people in New Orleans who invited the Dutch, and the Dutch have 700 years of experience in dealing with below sea level conditions near a lot of water.  They have a lot of help to offer.  So far, we haven‘t taken their advice.  They say don‘t fight a war with water.  You don‘t win a war.  Learn to live with it, because in the 21st century with climate change, we‘re going to have a lot more challenges dealing with living with water.

SMERCONISH:  Take our final minute, Harry Shearer, and talk to me about a mockumentary versus a documentary because now, you‘re experienced in both.

SHEARER:  I‘ve crossed the line.  Well, we have a lot more fun making mockumentaries.  I can tell you that for sure, although I had a wonderful crew, almost all of it from New Orleans.  So, it was—it was a wonderful experience working with these people who really know.  The people in this movie are the expert on the subject and it was exciting to be able to try to tell the story in a complete and hopefully comprehensible manner to correct what the American people have been told about this disaster five years ago.

SMERCONISH:  August 30 release, correct?

SHEARER:  One night only nationwide, theaters everywhere, one night only fifth anniversary of the flood.  We‘d love to see everybody there.

SMERCONISH:  “The Big Uneasy,” August 30 release.  Harry Shearer, the comedian, the mockumentary and documentary filmmaker—thank you so much for being on HARDBALL.

SHEARER:  Thank you, Michael.

SMERCONISH:  Appreciate your time.

When we return: I‘ll have some thoughts about an American hero who helped prevent an attack on a U.S. capital on September 11th and why he deserves better than what he‘s getting.

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

SMERCONISH:  Welcome back.

Joint Terrorism Task Force agent Jose Melendez-Perez is an American hero who arguably prevented an attack on the nation‘s capital on September 11th and today, he finished another day in political purgatory.

What accounts for me saying he was a hero?  Well, on August 4th of 2001, he was an immigration inspector conducting secondary screenings at the Orlando International Airport when he prevented the would-be 20th hijacker, Mohammed al-Qahtani, from gaining admittance to the United States.  And because he rejected Qahtani, United Flight 93 had four, not five, terrorists aboard—a fact that several members of the 9/11 Commission say helped insure that that flight did not reach its intended target the nation‘s capital.

But, today, Jose sat idle in a Customs and Border Patrol office in Orlando, forced to report to a building where he does nothing of consequence, awaiting the outcome of an investigation he knows little about.

And here‘s why: on the night of April 16 of this year, Jose‘s personal car was in the shop for repairs.  He was driving his official government-issued vehicle.  This apparently violated department policy.  Sometime during the night of Sunday, April 18, into Monday the 19th, the car was broken into and Jose‘s firearm was stolen.

He told me that the theft of the firearm and not the use of the government vehicle seems to be the focus of a local CBP investigation of which he is the subject.  Jose said it‘s highly unusual for someone to be removed from his position during an investigation like this, which is administrative and not criminal.  He recognizes that he made a mistake three-plus months ago and so do I.

But Jose Melendez-Perez deserves a resolution.  This is a man whose instincts and street smarts arguably saved a strike against the nation‘s capital on September 11th.  But today, he arrived at a federal building in Florida and sat in front of a computer, biding his time and waiting his fate.

That‘s no way to treat a hero of the war against terrorists, especially when the war is yet to be won.  The man‘s case requires resolution.

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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