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updated 11/16/2010 9:32:41 AM ET 2010-11-16T14:32:41

Guest Host: Michael Smerconish

Guests: John Culberson, Loretta Sanchez, Joan Walsh, Matt Kibbe, Chris Coons, Chris Cillizza, Kate Hanni, Frank Cilluffo

MICHAEL SMERCONISH, HOST:  The House is back in session.

That means it‘s time to play HARDBALL.

Good evening.  I‘m Michael Smerconish, in for Chris Matthews.  Leading off tonight: The battle of the lame duck Congress.  The first showdown after the Democrats‘ mid-term drubbing started today.  Republicans and Democrats are staking out their position on the Bush tax cuts.  And here‘s the big question.  Will President Obama and his party cave to Republican demands to extend tax relief for the rich, or will they try to push the Republicans back on their heels and make them defend giving more money to millionaires and billionaires while our deficit grows?  That‘s our top story tonight.

Plus, Sarah Palin‘s highly anticipated reality show debuted last night.  We‘ll decode all her messages and get at whether “Sarah Palin‘s Alaska” could lead to Sarah Palin‘s White House.

And we‘ll talk to the man who beat Christine O‘Donnell.  Delaware senator Chris Coons is making HARDBALL one of his first stops after being sworn in late this afternoon.

Also, what‘s more important, airport security or privacy?  Consumer and privacy rights advocates say those full image body scanners that act like X-rays are intrusive and unconstitutional.  But security officials say they‘re necessary to catch terrorists.  That‘s our hot debate.

And “Let Me Finish” tonight with some thoughts about what‘s changed and what hasn‘t in the 30 years since the release of the seminal Pink Floyd album “The Wall.”

Let‘s start, however, with the battle over the Bush tax cuts.  Congressman John Culberson is a Republican from Texas.  Congresswoman Loretta Sanchez is a California Democrat.

Congressman Culberson, here it is.  I‘m handing you the Sharpie.  I‘m asking you to draw a line in the sand.  At what level should those tax breaks end?

REP. JOHN CULBERSON ®, TEXAS:  Well, Michael, I think your—the premise of your question is misplaced because how can we compromise on letting people keep their own money?  We‘re talking about a vote to prevent the biggest tax increase in American history.  This is not a vote to preserve anybody‘s tax cut.  This is a vote to protect Americans‘ right to keep their own money.

We don‘t want anyone‘s taxes going up.  It‘s a terrible idea in a recession to increase taxes on anybody at any level.  So—but first and foremost, this isn‘t the government‘s money to compromise on how much we get to keep.  It‘s our money, and the government‘s got no right to it.  Liberals‘ presumption is all of our money belongs to the government, and I just fundamentally reject that premise to your question, Michael.

SMERCONISH:  I keep—I keep reading, Congressman, that it‘ll be a $700 billion loss over the span of a decade if, for those upper 2 percent, the tax cuts are, indeed, extended.  From your chuckle there, I take it you don‘t buy into that number.

CULBERSON:  No, because we, as fiscal conservatives, we as constitutional conservatives, Michael, understand, first of all, that the money in this country belongs to we, the people.  It doesn‘t belong to the government.  And the wealth that is created is created by we, the people, who invest it, save it, and use it to create jobs and grow the economy.

So your presumption is that we are, as a government, going to allow a certain segment of society to keep more of their own money?  I just reject the premise...

SMERCONISH:  But if I carry your logic to its conclusion—and listen, I‘d be thrilled if we could do this and sustain our military and our basic services.  If I carry your logic to its conclusion, I‘m keeping all the money in my pocket.  Surely, at some point, you know, the government has got to have a piece of it to keep the whole thing flowing.

Let me ask Congresswoman Sanchez if she will take my bait.  Where would you draw that line?

REP. LORETTA SANCHEZ (D), CALIFORNIA:  Well, first of all, I find it interesting that the Republicans campaigned on bringing down the deficit and yet they want to increase it by $700 billion.  The reality is that we need to pay down some of our debt, and one of the ways to do that is not to continue some of these tax cuts, in particular for the wealthy.

They would argue, and some people do, that the—that this will not -

that it will not help to create jobs.  Well, some of us have said, Listen, let‘s help the middle class and continue to keep tax cuts for them.  And let‘s make sure that the capital gains tax is at 15 percent, that we continue that.  And that will actually help people to decide to invest in businesses, to decide to put their money into play, to create jobs, et cetera.

But this whole idea that somehow, they ran on bringing down the debt -

the way you pay down the debt is you have to have money to do that.  You have to have a revenue source to pay down the debt.

SMERCONISH:  Congresswoman, are you prepared...

SANCHEZ:  And to do that...

SMERCONISH:  Are you prepared to compromise on the extension for those upper wage earners?  I ask that question because White House senior adviser David Axelrod on “MEET THE PRESS” seemed awfully hesitant to use the “C” word, “compromise.”  Let‘s all listen, and you can react first.

(BEGIN VIDEO CLIP)

DAVID AXELROD, WHITE HOUSE SENIOR ADVISER:  These taxes, the way the Bush tax cuts were designed, are going to expire on January 1st.  We want people to have the certainty of knowing that‘s not going to happen.  And Congress ought to—before they go on vacation, they ought to ensure that people have better vacations of their own by knowing that this matter...

DAVID GREGORY, HOST:  All right...

AXELROD:  ... has been taken care of.

GREGORY:  Bottom line...

AXELROD:  So we‘ll work hard to do that.

SMERCONISH:  Bottom line, he‘s open to compromise.  Is that fair?

AXELROD:  The bottom line is he wants to sit down and talk about this, but...

GREGORY:  Is he open to compromise?

AXELROD:  There‘s no—there‘s no bend on the permanent extension of tax cuts for the wealthiest Americans.

GREGORY:  He‘s open to compromise.

AXELROD:  He wants to sit down—we want to get this done.  The American people expect to get this done, and we are eager to sit down and talk about how to move forward.

(END VIDEO CLIP)

SMERCONISH:  Congresswoman Sanchez, are you open to compromise for the wealthiest of Americans?

SANCHEZ:  Well, I believe I just told you that I am for a 15 percent capital gains tax to continue.  So that would be part of it.  And why?  Because I understand...

SMERCONISH:  But how about on the 2 percent?  How about on those 2 percent over $250,000?

SANCHEZ:  Well, a lot of that capital gains tax is in people‘s hands, to move it, to be able to move it into places.  So that will occur for them.  They will not pay as much tax.  But to say that you‘re just going to give it on the regular income earned by them, I think that would be wrong because we‘re talking about $700 billion.

SMERCONISH:  Congressman Culberson, who are these 2 percent?  Because I hear Republicans say that they are small business people.  I hear Democrats say that they are millionaires and billionaires.  Are they small business people who are millionaires by virtue of their small businesses?  Define this group that we keep kicking around and talking about.

CULBERSON:  Well, the category that President Obama and the Democrats keep referring to are small business owners, primarily, the people who create jobs in this country.  But secondly, Michael, I think it‘s vital to point out—my colleague just said that that $700 billion we‘re talking about taking away from the government.  No, no, no.  That‘s $700 billion in tax increases that will happen January 1st unless this Congress votes to prevent it.  That‘s $700 billion additional that Americans will not have to spend or invest or save.

So it‘s vital that we—and if you want to look for $700 billion—conservatives look at this as—if you want to save the government money, you cut spending.

SANCHEZ:  Exactly!

CULBERSON:  We need to cut spending, and I can identify...

SANCHEZ:  Exactly!

CULBERSON:  Loretta, I can identify $700 billion for you -- $600 billion...

SANCHEZ:  And I can tell you...

CULBERSON:  ... right out of the gate.

SANCHEZ:  And I can tell you, at $8 billion a month, let‘s get out of Iraq and Afghanistan.  At $8 billion a month, let‘s get out of Iraq and Afghanistan!  I want to hear those words out of your mouth because that‘s what we‘re talking about here.

CULBERSON:  Loretta, I‘m committed to balancing this budget, getting us back on track towards a balanced budget.  Cutting taxes and cutting spending is the best way to grow this economy and allow individual Americans to keep and save—and spend more of their own money.  We need to cut spending first...

SANCHEZ:  A majority...

CULBERSON:  ... stop any tax increase from taking effect January 1st.

SMERCONISH:  Congressman—Congressman...

(CROSSTALK)

SMERCONISH:  Senator—Senator Schumer...

SANCHEZ:  A majority...

SMERCONISH:  If I can just ask this...

SANCHEZ:  A majority...

SMERCONISH:  ... Congresswoman?  Let me just ask about Senator Schumer‘s proposal today.  Congressman Culberson, Senator Schumer today put on the table this prospect of drawing the line at a million dollars, extending for income for below the million-dollar mark.  Is that something that you could live with?

CULBERSON:  Again, Michael, no constitutional conservative, no fiscal conservative is going to accept the premise that we‘re going to allow anyone‘s taxes to go up on January 1st in a recession.  And we‘re in a very deep and dangerous recession.  The country just decisively rejected liberal tax-and-spend policies of Nancy Pelosi and Barack Obama.  And we have a mandate from the country to cut spending, to cut taxes, to protect this economy...

SANCHEZ:  Michael...

CULBERSON:  ... and get the nation back on track towards a balanced budget, which is...

SANCHEZ:  Michael...

CULBERSON:  ... the best way to assure long-term prosperity.

SMERCONISH:  Go ahead, Congresswoman Sanchez.

SANCHEZ:  Michael, I would like some time, please.

SMERCONISH:  Go ahead.  Absolutely.

SANCHEZ:  First of all, you know, $700 billion—we have to find those cuts.  Like I said, $8 billion of that—a majority of Americans want to get out of Iraq and Afghanistan.  That would save us $8 billion a month.  Over a year, we could pay for what we‘re talking about here.

But no, my colleague wants it both ways.  He wants to spend—oh, he wants to spend on defense!  He wants to spend on Afghanistan!  He wants to put money in pockets of people who are halfway around the world!  And he wants to cut services to the poor here.  He wants to cut services to people that need pre-school.  He wants to cut services to people who have cancer and have no way to get well.  So he wants to have it both ways.

CULBERSON:  Loretta, I never said any...

SANCHEZ:  He wants to give the rich all kinds of money, but he—if he doesn‘t want to cut in all places—no, there‘s just particular places.  This is what America has to understand!

CULBERSON:  Loretta, you‘re...

SMERCONISH:  Go ahead, Congressman Culberson.  The floor is yours again.

CULBERSON:  I never said any of those things.  Loretta, you‘re undermining your own position.  I said that we, as constitutional conservatives, will first and foremost honor the Constitution, work to get this government back within the confines of the Constitution, as the Founders intended.  And to get the economy growing, Loretta, I said we have to dramatically cut spending.  We need to cut taxes.  And we need to make sure that no one‘s taxes increase on January 1st.

And let‘s be clear.  The biggest tax increase in American history is scheduled to take place automatically on January 1st.  And this liberal Congress—it‘s irresponsible for Speaker Pelosi to have allowed it to go this long...

SANCHEZ:  Oh, I‘m sorry...

CULBERSON:  ... for this president and this Congress to have injected this much...

SANCHEZ:  I have so...

CULBERSON:  ... uncertainty into...

SANCHEZ:  I have so got to disagree with you!

CULBERSON:  ... into the economy...

SANCHEZ:  So disagree with you!

CULBERSON:  Well...

SANCHEZ:  This economy...

CULBERSON:  Loretta, it‘s November!

SMERCONISH:  Go ahead, Congresswoman.

SANCHEZ:  This economy—this economy became—happened because of George Bush and a Congress dominated by the Republicans in the early portion, the first six years of his administration.  You, the Republicans, were the ones that got us into this deficit and this debt position.  You were!  And you were also the ones that promised everybody a tax cut.  So what did you do?  You didn‘t make it permanent because that would cost too much money.  No, no!  You promised everybody...

CULBERSON:  Loretta...

SANCHEZ:  ... just a little piece here.  You get a little piece of that.  You get a little piece of that...

SMERCONISH:  Unfortunately, I have to call...

CULBERSON:  Loretta...

(CROSSTALK)

SANCHEZ:  ... and we don‘t have the money!

SMERCONISH:  Congressman Culberson...

(CROSSTALK)

SMERCONISH:  May I just say, as sort of the impartial observer, I‘m one who‘s been fearful of gridlock coming for the next two years, given the climate in Washington.  And all this segment is doing is reinforcing my concern that that‘s where we‘re headed.

CULBERSON:  No, not at all, Michael.  Not at all.  Not at all because you‘re...

SMERCONISH:  Well, take just 10 seconds, and then I‘ll give it to Congresswoman Sanchez.  Your 10 seconds.  Go ahead, sir.

CULBERSON:  The country just decisively rejected what Loretta Sanchez has just said.  The good common sense of the American people and their instinctive desire to control the size, cost, and power of the federal government and to keep the government out of our pockets and grow the economy by letting us keep our own money—the government—the country just endorsed that approach of the Republican Congress, and you will see the...

(CROSSTALK)

SMERCONISH:  Congresswoman, go ahead.  Your 10 seconds.  Go.

SANCHEZ:  It was the Republican-controlled Congress and George Bush in the White House that put this debt into place.  And now we, the Democrats, have been working to try to get this debt down in an economy that they wrecked because I‘ll remind you that before George Bush came in, we were running surpluses when he came in, and Clinton—under President Clinton, we had eight years of the best...

SMERCONISH:  Congresswoman, I‘m out of time.

SANCHEZ:  ... economy we have ever seen!

CULBERSON:  That‘s old news.

SMERCONISH:  Respectfully...

CULBERSON:  That‘s old news.

SMERCONISH:  I‘m out of time.  Thank you, Congressman John Culberson...

CULBERSON:  Thank you.

SMERCONISH:  ... Congresswoman Loretta Sanchez.

SANCHEZ:  Thank you.

SMERCONISH:  I appreciate the passion.

Coming up: Sarah Palin ran into some real mama grizzlies on the premiere episode of her new reality show.  Will “Sarah Palin‘s Alaska” lead to Sarah Palin the president?

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

SMERCONISH:  The House Ethics Committee is set to vote on the 13-count case against Congressman Charlie Rangel.  Rangel walked out of his own hearing today after being denied a delay so that he could find a new lawyer.  Rangel is accused of financial and fund-raising wrongdoing in violation of House rules, and his original legal team left the case just weeks before today‘s hearing.

HARDBALL returns after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SARAH PALIN (R-AK), FMR. GOV., FMR. VP NOMINEE:  Alaska, America‘s last frontier.

You can see Russia from here.  Almost!

(END VIDEO CLIP)

SMERCONISH:  Welcome back to HARDBALL.  That was Sarah Palin in her reality show debut on the TLC channel last night, “Sarah Palin‘s Alaska.”  It drew five million viewers, making it the biggest launch of a show in that channel‘s history.  So is this the new way to run for president?  Is Sarah Palin changing the way the political game is played?

Joan Walsh is editor-in-chief (SIC) of Salon.  Matt Kibbe is the president of FreedomWorks.

Joan, if Joe McGinniss has moved out next door, I want to move in because Alaska is the big winner.  I want to go vacation there.

JOAN WALSH, SALON.COM:  I know!  I do, too.  I mean, really, one of the things that is going to be compelling about this show is how gorgeous that state is and people are going to tune in to just see the scenery.  Five million viewers—Michael, that‘s extraordinary.  It‘s not necessarily a mandate.  I‘m sure there are a lot of people who do not like Sarah Palin who were kind of rubber-necking last night, so I don‘t think it‘s necessarily her voting base.  But it‘s an extraordinary way to get to launch a campaign.  I‘m sure the others...

SMERCONISH:  Is that how you see it?  Do you see this as the initiation of her 2012 aspirations?

WALSH:  I think they‘ve been initiated already.  I think she‘s playing

she‘s being very coy.  She‘s not telling us what she‘s doing.  But I think this is a dream of a rollout, and people are going to get to know her in this—it‘s a scripted way.  I‘m not going to call this reality TV.  We can talk more about it later.  There‘s so much about it that is just crafted perfectly for her.

SMERCONISH:  I read it—I read it entirely different.  Matt, I watched that show and I said, Why the heck would she ever leave that lifestyle?  She‘s making a lot of money.  She‘s got a lot of political power.  Look how she lives.  Matt, what did you read into it, if anything, last night?

MATT KIBBE, FREEDOMWORKS PRES.:  There is—that perspective makes a lot of sense to me because you get all of the up side of being a national political leader.  You get 10 million eyeballs.  Trust me, right now Mitt Romney is talking to his advisers, trying to figure out a way to get five million viewers to pay attention to his life story.  So she gets all of the up side without the down side of a declared candidate and all of the negative pressure that that brings.

SMERCONISH:  There‘s no way we can talk about Sarah Palin‘s new TV show without talking about “da bears.”

(LAUGHTER)

SMERCONISH:  Here‘s a clip from last night.

(BEGIN VIDEO CLIP)

PALIN:  Where there‘s salmon in Alaska, you‘re going to find the bear. 

Alaska is home to more than 98 percent of the nation‘s grizzly population.  So again, you have to remember you‘re in their territory.  These are hungry and huge animals.  You‘ve got to be on guard.

I‘m looking around to Todd, going, Are you feeling what I‘m feeling, Todd?  Are you thinking that we better get the heck out of here because that bear could leap into the boat.  It could think that we are its lunch, instead of those little tiny salmon underfoot.

I think we made the right decision.  We pulled anchor and we got out of there.

(END VIDEO CLIP)

SMERCONISH:  Joan Walsh, the Alaska Wildlife Alliance says they got too close to the bears.  What, if anything, did you make of that particular sequence?

WALSH:  I don‘t know!  I mean, I would have hoped that somebody like Sarah Palin would know how close to get to bears, so it‘s a little bit alarming.  But I saw it more as—you know, it‘s just this homage to mama grizzlies.  And it‘s perfectly—again, perfectly scripted to fit with her political campaign.  You know, everything—everything was made to order on this show last night, and I think it‘ll serve her very well.

SMERCONISH:  She certainly comes across as likable...

WALSH:  She does.

SMERCONISH:  ... a good mom, all-American.  I mean, there‘s—there‘s

really, there‘s no negative that you could associate with that program. 

But Matt Kibbe, I saw in the Saturday “New York Times” an analysis about how Mitt Romney et al, already out there raising money on a state-by-state basis because that way, they fly beneath the radar for the 2012 presidential race.  And Sarah Palin is noticeably absent.

So, to go back to Joan‘s initial thought and premise, is this her new strategy of rolling out a presidential aspiration, to use Twitter, to use Facebook, and to have a reality program while going on book tour, instead of spending all of her time in those first primary states? 

KIBBE:  Well, it‘s not unlike what Barack Obama did, when he did an end run around the Democratic establishment to raise money and to build grassroots online.  So, she could potentially do that. 

But, again, she‘s been most effective as an outsider.  And I think you‘re going to see a very competitive full field of candidates in the Republican primary, and she will be just one of those in that very full field. 

SMERCONISH:  I referenced earlier their neighbor, Joe McGinniss, who moved next door to write a book about the Palins.  That came up in last night‘s show as well.  Let‘s listen and watch. 

(BEGIN VIDEO CLIP, “SARAH PALIN‘S ALASKA”)

SARAH PALIN ®, FORMER ALASKA GOVERNOR:  Our behavior certainly has changed this summer because of this new neighbor. 

TODD PALIN, HUSBAND OF SARAH PALIN:  He‘s probably over there. 

S. PALIN:  Should we look?

(CROSSTALK)

S.             PALIN:  You need to drill out a little tiny hole there, a peephole, and let me look through and see where he is. 

T.            PALIN:  Our summer fun has been kind of taken away from us because of a new neighbor next door who‘s writing a hit piece on my wife.  I mean, life‘s about being productive, but these people want to seek and destroy. 

S. PALIN:  He doesn‘t need to be seeing what I‘m writing and reading, right? 

T.            PALIN:  Yes. 

S. PALIN:  Todd and his buddies got out there and built a 14-foot fence.  And I was very thankful for that.  By the way, I thought that was a good example.  What we just did, others could look at and say, oh, this is what we need to do to secure our nation‘s border. 

(END VIDEO CLIP)

SMERCONISH:  Well, Joan, there‘s Sarah Palin weighing in on a political issue of the day. 

WALSH:  Yes. 

SMERCONISH:  Is it all coded?  I mean, did we just uncover something that we‘re going to hear a lot more of in the next episode? 

(LAUGHTER)

WALSH:  Oh, man, you‘re giving her a lot of credit to say that‘s even coded.  It‘s kind of a punchline.  It‘s like a lifeline. 

But watching that, Michael, it‘s just so funny, because she‘s got all the conventions too of screwball comedies.  This could be “I Love Lucy.”  There‘s an annoying neighbor.  They‘re going to mess with him.  Todd‘s going to drill a hole.  It just brings in so many conventions of silly, silly TV shows. 

And you could argue—somebody could argue that it diminishes her stature, but she likes her stature exactly where it is.  She‘s really—she‘s playing to her strengths.  She‘s on a TV channel that‘s known for crazy, zany TV, family shows like “19 and Counting” and “Jon & Kate Plus 8.”

And now we have got the interesting, eccentric little Palins, and she‘s playing it up.  I don‘t see a downside for her.  It‘s entirely possible she doesn‘t run.  I don‘t want to say that that is a foregone conclusion.  But this—if she does want to run, I think this is an excellent way to do it. 

She‘s staying away from “The New York Times.”  She‘s staying away from MSNBC, obviously.  And she‘s reaching her audience with these folksy little glimpses of her family. 

SMERCONISH:  Matt Kibbe, does it evidence a lack of gravitas, to quote Karl Rove, the fact that she‘s appearing in a reality television series? 

(LAUGHTER)

KIBBE:  I don‘t think so. 

This is an era where the commander in chief goes on “The View” to get his message out.  He goes on to the Jon Stewart show.  So, the world is changing.  And these old establishment media formats don‘t really make sense anymore. 

So I think it‘s a little unfair to hit her with that, because that‘s how politics is done today. 

WALSH:  I agree.

SMERCONISH:  I have to tell you, I don‘t know that it‘s going to change many views, but I liked it.  Frankly, I want to tune in and watch again and book the family vacation in McGinniss‘ place. 

(LAUGHTER)

SMERCONISH:  Joan Walsh, thank you very much. 

Matt Kibbe, appreciate your time as well.

WALSH:  Thank you. 

KIBBE:  Thank you. 

SMERCONISH:  Up next: big Bill on the big screen.  We will tell you what movie sequel you can catch former President Bill Clinton in.  That‘s next in the “Sideshow.” 

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

SMERCONISH:  Welcome back to HARDBALL.  Now for the “Sideshow.” 

First up:  Bill Clinton feels your pain.  This past Saturday, in Bangkok, the former president reportedly taped a cameo for the upcoming comedy “Hangover 2.”  Clinton, who‘s said to play himself in the movie, was already in Thailand for a speech on clean energy.  The movie hits theaters in May of next year. 

Next:  I am Spartacus.  That‘s the rallying cry on Twitter in support of a British citizen who was arrested for one of his tweets.  Now, in January, Paul Chambers posted a flippant Twitter message threatening to blow-up England‘s Robin Hood Airport if it didn‘t reopen in time for his flight.  Even though airport officials deemed the threat to be non-credible, the message was passed to police, who then charged Chambers with being a menace. 

Last week, a judge refused to overturn Chambers‘ conviction and ordered him to pay roughly $4,800 in fines.  Chambers‘ supporters, they are now re-tweeting his own facetious bomb threat under the hashtag “I am Spartacus,” which has fast become the number-one Twitter topic in all of Britain.

And, finally, in one school, failure is no longer an option.  “The Washington Post” reports that Virginia‘s West Potomac High School has gotten rid of the F from its grading scale, reporting it with an I for incomplete.  Students will only receive failing grades if they don‘t finish required course work in the coming months. 

The change is intended to push students to focus on learning, instead of accepting a failing grade.  Critics, however, argue that the new scale gives kids unrealistic expectations about the real world. 

For what it‘s worth, I‘m inclined to agree. 

And now for tonight‘s “Big Number.” 

The USDA came out with a figure today that may surprise you.  It turns out 17.4 million American households have difficulty providing enough food, about 15 percent, overall, a big reason why food stamps and school lunch programs are so important amid the recession -- 17.4 million American homes, that‘s tonight‘s big, bad number. 

Up next:  The newest United States senator, Senator Chris Coons of Delaware, was sworn in late today.  And what‘s his first move as a U.S.  senator?  To come to HARDBALL, of course.  Senator Coons joins us next. 

You‘re watching HARDBALL, only on MSNBC. 

(COMMERCIAL BREAK)

MELISSA FRANCIS, CNBC CORRESPONDENT:  I‘m Melissa Francis with your CNBC “Market Wrap.”

Stocks giving up gains in the last hour of trading to finish mixed, the Dow adding nine points, the S&P giving up a point-and-a-half and the Nasdaq slipping four points.  The market spent most of the day in the green on solid retail sales and a busy M&A Monday, retail sales climbing 1.2 percent in the traditionally slow month of October.  That‘s better than expected and their biggest gain in seven months. 

On the M&A scene, you have got Caterpillar putting down more than $8.5 billion for mining equipment maker Bucyrus.  Coal miner Massey Energy shares are higher on rumor steel giant ArcelorMittal may be interested in buying it. 

And will America invest in the new GM?  Underwriters are expected to raise the IPO price from between $26 and $29 to $32 and $33 a share, based on strong demand.  It‘s expected to price on Wednesday and begin trading on Thursday.

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

HARDBALL. 

SMERCONISH:  Welcome back to HARDBALL. 

Late today, Vice President Biden presided over the swearing-in of two new U.S. senators who beat Tea Party candidates two weeks ago, West Virginia‘s Joe Manchin, Delaware‘s Chris Coons.

Senator Coons join us now. 

Senator, thank you for being on HARDBALL. 

SEN. CHRIS COONS (D), DELAWARE:  Thanks for a chance to be on with you, Michael.

SMERCONISH:  I‘m going to talk plenty of substance, but let me ask you, what‘s the coolest part so far?  I see you got the double secret probation pin that you‘re already wearing.  Did they paddle you yet? 

COONS:  No paddling, Michael, no. 

I would say the coolest thing was being able to be here with my whole extended family, my wife, our three kids, my parents, step-parents, in-laws, cousins, nieces, nephews. 

The vice president took us all on a behind-the-scenes tour and took some pictures with us after the swearing-in.  And we just got to talk as a family.  That‘s probably the best part of the day. 

SMERCONISH:  Did the vice president have any particular advice that you‘re willing to share? 

COONS:  He encouraged me strongly to come home every night, if I possibly can.  Delaware‘s fairly close to our Capitol. 

I have three young kids, 11-year-old twin boys and a 9-year-old girl.  And my wife and I want to keep our family in Delaware, and I want to stay as connected to Delaware as I possibly can.  So, his strong advice to me was to come home every night, if you possibly can. 

SMERCONISH:  Don‘t know if you ever saw Robert Redford in “The Candidate,” but there‘s this great scene at the end of the movie.

You have.  OK.  Well, you know the line, then.  “What do we do now?”

So, to you, I say, what do you do now? 

COONS:  Well, the message I got from Delaware across the entire campaign was simple, was consistent, and was clear.  That‘s that they wanted to hire someone in this election who would go to Washington and focus on getting us back on track, creating jobs, strengthening manufacturing and competitiveness. 

They want me to tackle the deficit and the debt, and they want me to try and find bipartisan solutions.  I had a great day, most of it spent with the 16 senators other than Governor Manchin.  The other 14 will be sworn in, in January. 

And we had sort of an orientation, a new senator session.  I had some good conversations.  I‘m cautiously optimistic that the other freshman senators who are coming in also got that same message. 

SMERCONISH:  Senator Coons, it would seem as if the extension or contemplated extension of the Bush tax cuts are the hottest potato that will fall in your lap during this lame-duck session of Congress.  How do you see that issue? 

COONS:  Well, as I said in the campaign, and I have repeated today, my view is that we ought to extend tax relief to the middle class, to the 98 percent of Americans who earn in their income less than a quarter-million a year. 

And I‘m willing to compromise and to talk about further extensions of the income tax cuts.  But I think we ought to prioritize those further tax cuts, whether it‘s in research and development, in green energy and manufacturing or otherwise, that have the best chance of creating jobs in the next two to three years. 

Every extension of a tax cut or a tax credit in the short run, at least, will further add to our deficit and our debt.  And while the extension of the Bush income tax cuts may be one hot potato, the second is the commission on debt and deficit.  We have a very real and serious problem with our deficit and our debt, and I think we need to balance those two responsibly. 

SMERCONISH:  Give me a gut-check, if you would, now that you have referenced it, on Simpson-Bowles and what reaction you had, understanding that that‘s not yet a matter ripe for consideration in the Senate.  But what was your gut-check on the proposals they put forth on the deficit and the debt? 

COONS:  Well, I just got sworn in today.  I have had a chance to look at them just briefly. 

My impression, frankly, Michael, is that all options have to stay on the table, that we have to be willing to consider a whole range of very difficult choices, from cutting programs to raising revenue. 

Obviously, the best way to get out of this deficit position is to grow our economy, to get people back to work, so that they‘re earning more and they‘re able to pay for the federal government services that all of us value. 

But if we don‘t make hard choices—and I think that deficit and debt commission early proposal points us in the direction of many of those hard choices—then we won‘t make real progress in tackling the deficit, which I think, right after job creation, is one of the top priorities for our country.

SMERCONISH:  Senator, congratulations, big day for you. 

COONS:  Thank you.  It‘s been a great day and I look forward to serving the people of Delaware and our country. 

SMERCONISH:  All right. 

Let‘s go now to “The Washington Post”‘s Chris Cillizza, who is an MSNBC political analyst. 

Hey, Chris, you would know better than I, but it seems like there are competing orientations for the first time that I can recall from a distance. 

(LAUGHTER)

CHRIS CILLIZZA, MSNBC POLITICAL ANALYST:  Yes. 

SMERCONISH:  What‘s that climate like?  What‘s going on? 

CILLIZZA:  Well, I would say, I thought it—well, last week, Michael, we had this fascinating thing where you had members of the kind of Tea Party national movement saying to—to—having their supporters call newly elected Republican members of Congress and Republican members of Congress who are currently sitting and saying, make sure they come to the Tea Party event. 

Gosh, we don‘t—don‘t see that happen barely every.  I would say it shows what we—what we know.  There is a divide within the Republican Party.  This is not new. 

Mitch McConnell, the Senate minority leader, caving on earmark reform to Jim DeMint and the Tea Party Caucus, that is a fascinating development.  It‘s probably not terribly interesting to lots of people who follow politics closely, but, Michael, you and I, look, that is a stunning statement that shows you how much power/fear the Tea Party has put into these incumbent Republican senators over the last year-and-a-half or two in these primaries, just—just absolutely telling, as we—we start thinking about what the 112th Congress is going to look like. 

SMERCONISH:  Another Tea Party victor is senator-elect Rand Paul.  I want you to hear what he had to say with Bob Schieffer on CBS‘ “Face the Nation.”

CILLIZZA:  Sure. 

(BEGIN VIDEO CLIP, “FACE THE NATION”)

BOB SCHIEFFER, HOST, “FACE THE NATION”:  David Axelrod, one of the president‘s senior advisers, says that the president has called nearly every newly elected Republican in the Congress and all of the newly elected senators in—what—what did he say to you? 

RAND PAUL ®, KENTUCKY SENATOR-ELECT:  He hasn‘t gotten through to me yet, but I would love to speak to the president. 

SCHIEFFER:  Oh, he didn‘t call you? 

PAUL:  No.  We haven‘t—well, we haven‘t gotten—I haven‘t heard that I have gotten a phone call.  But I think I would hear about that if the president calls.  But I would love to speak with the president and show him that people coming from the Tea Party can work with people from the other side of the aisle.

(END VIDEO CLIP)

SMERCONISH:  It brings to my mind, Chris, this looming Thursday night social commitment at the White House for—for some of the leadership. 

(LAUGHTER)

SMERCONISH:  What—what do you expect to go down? 

CILLIZZA:  Well, look, I think it‘s in the best interests of both sides, frankly, Michael, to—to put on a happy face here. 

Look, the president needs to show, I—I think, that he‘s not—it‘s not just rhetoric, that he—he—it‘s not just that he thinks his policies didn‘t sell well, that he wants to reach out.  I think both parties want to show that they can govern. 

Remember, the Republican Party didn‘t really win this election.  The Democratic Party lost it.  You have historically low approval numbers for the Republican Party.  This was a binary choice election.  People didn‘t like “A” so they voted for “B.”

I think John Boehner is well aware of that.  He, I think, wants to use the lame duck, stand on principle, compromise where possible, and show that this isn‘t just about campaigning, it‘s about governing.  I think the president wants the same thing.

And my guess is they find a little bit of common ground.  I don‘t think it‘s going to be on tax cuts.  Frankly, you know, I don‘t think either are going to give way.  I think we‘re going to see a compromise somewhere in the middle.  But I think we‘ll find some common ground here, whether that bodes anything for the Congress that convenes in January, when Democrats are in control—excuse me, when Republicans are in control of the House, I don‘t know if we know that yet.

MICHAEL SMERCONISH, GUEST HOST:  One more, if I may.

CILLIZZA:  Sure.

SMERCONISH:  On the Republican side of the aisle, do you see resolution?  Do you see agreement relative to earmarks?

CILLIZZA:  I do.  Look, I think Mitch McConnell, coming out after saying that he didn‘t think this would really do anything, that it wouldn‘t really cut the debt, that this wasn‘t about spending, it was—you know, that it‘s an infinitesimal part of the overall budget, to come out and say, look, I criticized Democrats for not listening to the will of the people over the last two years.  I‘m not going to make the same mistake.  I‘m going to be for earmark reform—it‘s striking to me.

Remember, this is the same Mitch McConnell who endorsed a guy named Trey Grayson, the secretary of state in a primary and watched Trey Grayson lose 60/40 in that primary.  So, he‘s been on the wrong side of the Tea Party movement in his own state.  I think he recognizes the power of it, as do I think a lot of those incumbents, Democrat and Republican.

Politicians—Michael, you know, politicians are a reactive species.  They look around.  They see what‘s happening.  And they react to it.

This is a recognition that the earmark reform that we‘re going to see go through on the Senate side tomorrow is a recognition that the Tea Party is here and they have real power within the halls of Congress.  And that is not something to be underestimated as we move forward.

SMERCONISH:  I can‘t recall a lame-duck session with this much interest and this much at stake.  Chris Cillizza, thank you so much for laying out the issues.

CILLIZA:  Thank you, Michael.

SMERCONISH:  Up next, if you‘re flying anywhere this holiday season, you‘ll probably come across the new airport body scanners.  Now, the TSA says they‘re safe, they‘re efficient and necessary in the fight against terrorists.  Critics say they‘re an invasion of privacy.  Who‘s right?  Our debate is straight ahead.

And tonight, at 10:00 Eastern on MSNBC, join Lawrence O‘Donnell and Maria Teresa Kumar for “Beyond Borderlines,” an in-depth look at how to fix the illegal immigration problem in this country.

This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

SMERCONISH:  The Democrats have been facing questions about whether there‘d be a spot in leadership for Congressman Jim Clyburn.  Clyburn, you‘ll recall, is the current majority whip, that means the number three position in leadership.  But when the Democrats become the minority party, there‘s only two slots in leadership, leader and whip.

So, over the weekend, the Democrats came up with a solution.  They‘ve created a whole new position for Clyburn, assistant leader, so he‘ll stay in leadership along with Nancy Pelosi and Steny Hoyer.

HARDBALL will be right back.

(COMMERCIAL BREAK)

SMERCONISH:  Welcome back to HARDBALL.

With the holiday season fast approaching, some travelers are objecting to new airport security screening techniques that involve full-body X-rays and more intense pat downs.

Here‘s Homeland Security Secretary Janet Napolitano today.

(BEGIN VIDEO CLIP)

JANET NAPOLITANO, HOMELAND SECURITY SECRETARY:  The goal here—you know, we‘re not doing this just to do it.  We‘re doing it because we need to keep powders and gels and liquids off of planes that are unauthorized, just as we need to keep metals off of planes.  And this is being done in recognizing that we all have a collective role in our security.  And we all know, and can recognize, that there are threats and risks that have been articulated by those who seek to harm the United States, particularly in the aviation environment.

(END VIDEO CLIP)

SMERCONISH:  Kate Hanni is the executive director of FlyersRights.org, and former Bush White House homeland security adviser, Frank Cilluffo, is the director of the Homeland Security Policy Institute at George Washington University.

Kate, you know I applauded all of your work on behalf of passengers who are stranded on tarmacs.  This time, you‘re going to have to convince me.  Lay it out.

KATE HANNI, FLYERSRIGHTS.ORG:  Well, let me tell you, first of all, security is tantamount to the flying experience.  We are not saying there should not be tight security.

We are saying that these particular security measures appear to have gone too far and the public doesn‘t trust that it‘s actually making them safer.  They feel intruded.  They feel their privacy is invaded.

And personally, I don‘t believe that the scanners would detect the type of bomb that Abdulmutallab had in his underpants.  There‘s no evidence that they would.  They certainly won‘t go within one-tenth inch of skin, which means that they‘ll never get a cavity bomb.  They‘ll never get anything under a slab of flesh or a breast or, you know, between the cheeks.

So, I mean, I hate to be so blunt, but the truth is, these scanners have many limitations that make them not a very effective way of finding explosives.  And they do violate the privacy, especially, you know, certain people feel that way.  And the pat downs have become so intrusive that many people are just going to refuse to fly.  And maybe that is the answer.  Maybe people should just refuse to fly.

SMERCONISH:  Frank, Kate‘s organization sent out a letter to Secretary Napolitano and LaHood, et cetera.  They said, you know, these sort of measures should require an extreme justification.  When I read it, I said to myself, well, blowing up aircraft, commercial aircraft in the United States would seem to be such a justification.

How do you see it?

FRANK CILLUFFO, HOMELAND SECURITY POLICY INSTITUTE, GWO:  I agree with you, Michael.  And to Kate‘s point, I think there are legitimate privacy concerns.  And it is quite intrusive.

But the same concerns that an individual passenger has is multiplied by many orders of magnitude for the passenger‘s right to safety as well.  I mean, there are no silver bullets here.  The scanners themselves are not going to be the only solution, but as part of a layered defense, front loaded with good intelligence, underpinned with technology and a seasoned and trained workforce, it is part of this system‘s approach to be able to detect PETN and other means of terrorism.

I mean, the aviation sector has long been a terrorist target, as far back as 1948.  And we just need go back less than a year ago with Abdulmutallab and his attempt to use PETN to take down an airliner.  So, it‘s a legitimate concern—

SMERCONISH:  Kate is not convinced, as you heard, that this mechanism would—this screening process would have caught him.

HANNI:  No, I‘m not.

CILLUFFO:  If they were inside his body cavity, I think she‘s got some legitimate concerns there.  I‘m not exactly sure what technology, if any, could do that.  But if it‘s on his body, I think it would have, in fact, detected the PETN.

SMERCONISH:  Kate Hanni, what alternative can you offer us, if any?

HANNI:  Well, I can offer you several.  Canines are the best detection methods for explosives.  I have spoken to a number of experts in the area of detection and they all believe that right now, canines are actually the best method of detection.

And then prescreening, we have biometric data capability with Global Entry, which is being used internationally, which would allow you or I or anyone else to be prescreened—kind of like they did with Fly Clear, where you give them your fingerprints, you give them your retinol scans, they do a very thorough background check for about six weeks and once you are proved, you are a secure traveler.  And then you don‘t have to go through the body scanners or the pat-downs unless you present a threat at the point of entry of security or when you go through the metal detector.  You would still go through the metal detector and have your bags scanned, but you‘d be able to not have the extra intrusive methods of screening that are being offered now to 100 percent of the flying public.

SMERCONISH:  Frank Cilluffo, how do you feel about that alternative?

CILLUFFO:  It‘s not 100 percent and not 100 percent are going through these detectors.

But to her point, I actually think with respect to pilots and those who‘ve given up and ceded some of their personal information, that they should look to other means to be able to quickly screen those, but that‘s not the vast major of the flying public.  We‘ve got a huge system here.

And canines, I‘m the biggest proponent for using dogs, and I‘m also a big proponent for putting in and inserting in some uncertainty into our system so the adversary can‘t simply game the system and find work-arounds -- because that‘s what we‘ve had here, is a bit of a cat and mouse.

If you go back to the early ‘80s, hostage-taking was the terrorist tactic of choice, and then you had two very successful counterterrorism raids in Entebbe and Mogadishu, the Israelis and the Germans.  And overnight, you saw the use of bombs on planes.  Then once we enhanced our capabilities there, you saw 9/11, where they used the planes themselves as missiles.

So, we can‘t think about it as a static environment, it‘s a dynamic environment and we should bring all of the technologies that can be brought to bear.  Keeping in mind, there are privacy considerations, and if we can get better alternatives, all—I‘m all for those.

SMERCONISH:  Kate Hanni, I have just a minute left with you both.  Please tell me that on the busiest travel day of the year, you‘re not initiating a boycott that‘s going to slow everybody down.

HANNI:  We‘re not part of that boycott.  We have nothing to do with opt-out day.  It wasn‘t our idea.  We don‘t know the folks that generated it—although, 70 percent of our members are boycotting the use of the scanners over the entire holiday period by choice.  They didn‘t want the scanners before either.

SMERCONISH:  I appreciate it.  Hey, in a word—

CILLUFFO:  Michael, one quick point.

SMERCONISH:  Go ahead, Frank.  Final word.

CILLUFFO:  Just one quick point, if you go back to—immediately following the Abdulmutallab incident last Christmas, 75 percent of the flying public was supportive of these scanners.  So, within a year—the threat hasn‘t subsided but I think that perception of the threat may have.  So, no easy answers here.  It‘s complex.

SMERCONISH:  Listen, I‘d go through virtually anything that gets me to the gate faster and if I could keep my shoes on, I‘d be a happy guy.

HANNI:  Look, you know, there‘s one more thing—

CILLUFFO:  I‘m with you there.

HANNI:  -- the cargo in the belly in the aircraft is not being screened either.  The U.S. Postal Service first-class mail that weighs less than one pound is not being screened.  So, you‘re screening the passengers to a degree that‘s very intrusive and yet they‘re getting on planes that aren‘t, in their opinion, secure.  I think—

SMERCONISH:  No doubt.  On that, I think we could all agree—

CILLUFFO:  Agree with you there, Kate.

SMERCONISH:  That‘s got to be sorted out.

HANNI:  Thank you.

SMERCONISH:  Thank you, both, very, very much.  Thank you, Kate Hanni and Frank Cilluffo.

Now, when we return, a reminder about how much has changed in the 30 years since Pink Floyd‘s milestone record “The Wall.”

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

SMERCONISH:  Let me finish tonight with a throwback.

I saw Roger Waters perform “The Wall” last week for the second time in 30 years.  The first time, I was a high school senior who trekked in a van from Philadelphia, out to Long Island, to see what “The New York Times‘” John Rockwell then said, was the most lavish stage show in the history of rock and roll.  It was a hot ticket and I was especially anxious to go, given that three years prior, my parents had denied me permission to go see the Floyd tour in support of the album “Animals.”

Years later, it wasn‘t my parents for whom I needed permission.  I left the house a week ago tonight only after the conclusion of family dinner with my wife and our three sons.  What was a van three decades ago was now a sedan in which I picked up a buddy who also scored a pass on the home front.  On the way to the show, we both commented that it be fine with us if there were no encore because we each had to work early the next morning.

Now, back in 1980, I distinctly remember a guy circling the parking lot with the sign that said “Will Pay $100 For Any Ticket.”  That was an unheard of sum at the time.  My ticket for that show had a face value of $15.  Last week, I passed on a concert t-shirt for $45.

In 1980, we stood for most of the show, mesmerized by Pink Floyd‘s construction of a 35-foot-tall, 240-foot-wide wall across the width of the arena.  This time, the audience of 20,000 middle-aged white guys largely stayed in our seats unless we spill our $7 beers or throw our backs out and our lighters were long gone.  This time, we showed our appreciation by flicking our iPhones and BlackBerrys.

So much had changed between my two live exposures to the third most popular album ever in the United States, Carter, Reagan, Bush, Clinton, Bush, Obama, cell phones, iPods, the Internet, terrorism, wives, kids, deaths, divorces, just about the only constant has been the music.  Speaking of which, in each performance of “The Wall,” Roger Waters was letter perfect and faithful to the way that those songs were recorded.  On both occasions, he played the epic double album in sequence which is, of course, a large part of the appeal.

Set against an amazing stage show, hearing music played exactly as you once heard it in your bedroom, while reading liner notes created a time warp worthy of adventure.  For two hours, it didn‘t matter if it were 1980 or 2010.

The tour continues through next summer.  See it if you get the chance.

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

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

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

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