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updated 7/11/2011 12:43:42 PM ET 2011-07-11T16:43:42

Guests: Ezra Klein, David Corn, Sue Herera, Alex Wagner, Jack Lew, Sherrod Brown, Todd Harris, Kirsten Gillibrand, Kathy Hochul, Jonathan Martin

CHRIS MATTHEWS, HOST:  Crisis coming.

Let‘s play HARDBALL.

Good evening.  I‘m Chris Matthews down in Washington. 

You know, there comes a time when you can see who the grownups are, those who have to drive the car, and who the kids in the back seat are, those who get to squirm and complain and distract the driver.

President Obama knows the danger lying ahead, and he‘s got to drive the car.  He knows that if we don‘t pass a debt ceiling increase, the United States government won‘t be able to pay its bills.  He knows that he needs that bill on his desk for action by August 2nd.  That means the Congress has to act by July 22nd, just about two weeks from now.  If we don‘t do it, if we let this slide, if we let the games go on and do it the sloppy way we‘ve done things over the years, we will find this country in fiscal hell.

The responsible countries of the world, those who pay their bills, will be watching the United States unable to get its act together, and they will have mixed feelings because something in the world will have changed.  The country that they looked up to, they will for the first time start to look down on.

So let me be nastier to those who deserve us being nasty to.  In the Bible, King Solomon had to decide who was the true mother between those two women claiming a child as their own.  He suggested cutting the baby in half.  Well, the woman who said that was OK with her exposed herself as the fraud.  And that‘s who the Republicans are in this debate.

So listen closely and take names of those politicians saying we don‘t have to meet this deadline, that we can just pay the interest or we can pull some other number, that we can cut the baby in half, in other words.  So pay attention and write down those names.  These are the false mothers, the bad actors who don‘t really care that this country loses something it‘s always had and now stands seriously to lose and may never really get back.

Let‘s begin with Senator Sherrod Brown, Democrat of Ohio.  Senator, there are people out there—I want to play you a couple of tapes right now—people who say we‘re not facing a deadline.  Senator Jim DeMint didn‘t seem worried this morning on “MORNING JOE” about going into default.  Here‘s what he said.  Let‘s listen.

(BEGIN VIDEO CLIP)

SEN. JIM DEMINT ®, SOUTH CAROLINA:  First of all, we‘re not going to default.  We may have to cut government programs, but we‘re going to pay our debt (SIC) as they come due.  We would eventually, if we never raise the debt ceiling, have to go back to 2003 spending levels.  But we will pay our debts.  And it‘s irresponsible for Secretary Geithner to suggest that we won‘t.  I mean, it would be disruptive.  I‘m not pretending that it wouldn‘t.  And you would have to begin to cut things that we don‘t want to cut.

(END VIDEO CLIP)

MATTHEWS:  Is this serious talk by him, Senator?

SEN. SHERROD BROWN (D), OHIO:  No, of course it‘s not.  I mean, to call Geithner, who agrees with 90-whatever percent of America‘s business community and academicians and everybody else who‘s looking at this—to call—to label him and them irresponsible is the height of both hypocrisy and irresponsibility.  And I‘m pretty amazed by this.

I was on the phone a couple hours ago with the CEO of one Ohio‘s largest corporations, and he said he‘s circulating a letter with other CEOs.  He wasn‘t more specific than that, but that he‘s sending out, I assume, to mostly to the Ohio Republicans.  There are a number of freshman Republicans in Ohio who have drawn this line and don‘t seem to acknowledge that this is as serious as it is.

And he says—he—this—he‘s basically saying, the CEO, that it is almost a hostage situation.  You start to mix metaphors, but you can‘t play chicken on this and not do damage to our reputation.  It‘s a stain on our national honor, damage to the dollar, internationally and long term, and hurt our economy in ways that we can‘t even yet very cogently measure.

So this is serious business.  And we‘re serious about this.  I wish

there were—I wish there were more on the other side that were as serious

--

MATTHEWS:  OK.

BROWN:  -- as this CEO is.

MATTHEWS:  Well, just to make it look as bad as possible, because I think it does look that way, here‘s Michele Bachmann on “Face the Nation” saying the same thing DeMint was saying—Let‘s not worry about this thing.  Here he is.

(BEGIN VIDEO CLIP)

REP. MICHELE BACHMANN (R-MN), PRESIDENTIAL CANDIDATE:  First of all, it isn‘t true that the government would default on its debt because, very simply, the Treasury secretary can pay the interest on the debt first, and then from there, we have to just prioritize our spending.

The interest on the debt isn‘t any more than 10 percent of what we‘re taking in.  In fact, it‘s less than that.  And so the Treasury secretary can very simply pay the interest on the debt first, then we‘re not in default.

(END VIDEO CLIP)

MATTHEWS:  You know, I worked on the Hill many years, as you know, Senator, and I respect so much what real politicians do for a living, which is try to find, in the end, the right solution for the country.  It seems like the Republican Party has been taken over by people who have other interests, ideological interests to the point that they‘re quite willing to see not just the risk of catastrophe, but wouldn‘t mind—maybe they wouldn‘t mind watching a bit of it.  And then they‘ll say it‘s because the Democrats overspent.

Are you confident that they‘ve got a good faith in this, that they really believe this nonsense that it doesn‘t matter if you met the United States‘ bills?

BROWN:  I‘m not confident about the two people you just put on the

air, but I am confident that John Boehner can find enough Republican

members of the House to act like adults and do the right thing.  You know,

I—I—but think back 20, 30 years ago, when—you know, when you first

well, however many years ago, when you first were—

MATTHEWS:  It was a long time ago.

(CROSSTALK)

BROWN:  Could you imagine leaders of any party or presidential candidates signing pledges on abortion, signing pledges on taxes, that they would only work in this very narrow scope of ideological inflexibility?  Of course not.  I mean, that‘s not really government.

And when Michele Bachmann says set priorities—I mean, she—

“prioritize,” I think is the term she said—maybe she‘s right.  That would mean, OK, you pay veterans‘ benefits, but you don‘t pay guards at federal prisons?  Or you pay Social Security, but you don‘t pay Medicaid?

I mean, I guess that‘s right—you pay some bills, you don‘t pay others.  But this is the United States of America.  We have obligations that we—we‘ve got a social compact on Medicare and Social Security and paying our bills over time.  And we stand as a beacon to the world.  But if we play these games and play them much longer, it really is going to be a stain on our national honor.  It‘s going to affect our long-term standing in the economic world, if not the political world, internationally.

MATTHEWS:  Well, let‘s talk about America.  You and I agree this country is special in history.  It‘s a blessed country because of so many things an American can do that other people can‘t do.  You can become an American, for example, when you come here.  It‘s so hard to do that in other countries.

But question that we are now at the edge.  And I‘ve been reading the papers, as you have, about Greece, and I worry about Ireland and I worry about those other countries like Portugal.

The world press, Senator, as you know, is going to be watching this drumbeat the next couple weeks.  Are you concerned that the world press and the world markets, money markets, are going to be saying, Wait a minute, is the United States really going to do this?  Are they really going to suspend payments?

Tell us about that, that this isn‘t just us deciding it here, it‘s how the world reacts to the United States faltering for the first time in its history in paying its bills.

BROWN:  Yes, that‘s exactly right.  And this isn‘t—this isn‘t the continuing resolution in terms of coming close to a government shutdown. 

And some number of right-wing Republicans that have no respect for the

institution of government and don‘t believe it ever does anything positive

and it‘s pretty hard to explain that, but they don‘t—they really thought that, Well, if the government shut down for a couple weeks, the people would see—the public would see it really doesn‘t matter.

You can go right up to the edge on a government shutdown.  There is damage.  There is cost, but nothing long-term terrible happening.  But you go right up to the edge on the debt ceiling, and you have potential—and nobody knows quite what it is precisely in every case, but you have potential cataclysmic results.

And we have no business getting to that point.  That‘s why those CEOs are starting to weigh in.  We‘re seeing the business community all over the country saying to Republicans, You‘ve got to be kidding.  Be a little more flexible.  You know, Work out an arrangement, work out a deal.  We want to cut spending, too, but let‘s do this in a way that works for our country, not works for this very narrow “gotcha” political agenda they—

MATTHEWS:  OK—

(CROSSTALK)

MATTHEWS:  Thank you so much for coming on at this time.

BROWN:  Glad to be with you.

MATTHEWS:  We‘re approaching a crisis.  Thank you, Senator Sherrod Brown of Ohio.

Let‘s bring in “The Washington Post‘s” Ezra Klein, who‘s also an MSNBC political analyst.  You know, it‘s interesting.  I was talking about the old days.  I‘ve never seen either political party play terrorist with this regard.  The debt ceiling, the limit—it‘s always been sacrosanct.  Party leaders like John Boehner or Tip O‘Neill or Newt Gingrich, even, people who recognize leadership and responsibility, get the job done.

Here he is—the debt ceiling was raised seven times during the Bush years, starting in June of 2002.  It was passed—raised every year except for 2005.  And in 2008, it was increased twice.  It‘s always gotten the job done.

Ezra, the Republican Party today is not the Republican Party of even a couple years ago.  It seems to me it is overrun now by people who are abolitionists.  They‘re willing to abolish government and they‘re willing to bring it down if they have to, and they don‘t really give a darn, or damn, about the consequences!

EZRA KLEIN, “WASHINGTON POST,” MSNBC POLITICAL ANALYST:  It‘s definitely a different Republican Party.  But the thing that keeps coming to my mind when I heard them talk about it is they really haven‘t thought it through.  The federal government pays 80 million checks in a month, 80 million.  We go through the debt ceiling, and according to the bipartisan policy center, 45 percent of our debts will not be—or our obligations will not be able to be paid.

Who is it exactly who is supposed to make the decisions of which of those obligations they are?  If it‘s the Treasury Department—and they‘ve never had to do this before—you‘re looking at the Republican Party, a small-government, anti-executive branch Republican Party, making the largest transfer of power to the executive branch in recent memory, possibly in all memory.

It‘s a staggering change in the way we run our finances as a country.

MATTHEWS:  But the whole macroeconomic reality is—help me on this, Ezra—when the country puts out the word we‘re not paying our bills, or we‘re going to act like we‘re in bankruptcy, chapter 11, and we‘re going to pick out a few people we‘re going to pay, that‘s bankruptcy.

KLEIN:  That‘s bankruptcy, and it also—it reverberates throughout the entire economy.  So you have 80 million checks going out.  That is a lot of businesses who contract with the federal government.  So they suddenly don‘t know if they‘re going to be the ones who are paid.  They begin hoarding money.  They begin laying off people in anticipation of not being able to cover their bills that month.

You have seniors, you have folks who are low income, who rely on government transfers in order to pay their rent, to eat food.  They begin hoarding money.  They beginning reining in their spending in anticipation of not knowing what‘s going to happen the next month.

You now have an economy that‘s already in a very deep downturn, that is already climbing too slowly out of a deep recession and financial crisis, in which a large number of businesses and a larger number of individuals have suddenly stopped spending because they‘re terrified because of all the new uncertainty.

And then that reverberates out to coffee shops that serve people, to the businesses that contract with those businesses.  So we‘re not just talking about the federal government here.

MATTHEWS:  OK—

KLEIN:  We are talking about the real economy.  It will suffer if we blow through this limit.

MATTHEWS:  OK.  Ezra, you‘re an expert.  You‘re also—you know how the blogosphere works.  You know how the left talks.  And I appreciate their position and agree with it a lot, but here‘s my concern.

If the president buckles, if he agrees to just spending cuts the Republican way, with no revenue increase, even plugging up loopholes, he will be chastised, and maybe appropriately so, fully perhaps, for giving in.  If, however, he lets this country go into default, he will be attacked by everybody in the world, left, right and center, for having blown it.  Does he have a real third alternative?

KLEIN:  The third alternative is the consequences.  So what happened in ‘95, as I understand, and you would probably know more about this than I do, is eventually, Robert Rubin, then secretary of the Treasury, said, Listen, if we don‘t stop this now, if we don‘t come to a deal, we are going to stop sending out Social Security checks.  And that got people real interested real quick.

What I take the current negotiations over the debt ceiling to be is both parties preparing for the aftermath, preparing for real consequences either from the market or from the people and the businesses that work with the federal government when the federal government begins shutting down.

I think that the Obama administration is doing a good job putting themselves in the middle, though at the cost, maybe, of a worse deal.  While the Republicans, because they‘ve been convincing one another the debt ceiling really isn‘t all that big of a deal, have made themselves look pretty intransigent.

So right now, the White House‘s big hope—and I don‘t think it‘s completely misplaced—is that if we do go to doomsday on this that the people who get blamed, like in ‘95, are going to be the Republicans.  And with that type of—

MATTHEWS:  Yes, but that‘s option two.  That‘s default.  I‘ve given you two options—

KLEIN:  Well, it‘s not default—

(CROSSTALK)

KLEIN:  -- sending out the checks.

(CROSSTALK)

KLEIN:  If we don‘t—if we don‘t send out the checks—if we keep sending out the checks, it‘s not default.  We didn‘t default in ‘95.  We just got really near to it.

MATTHEWS:  Well, what happens if it gets to default?  I mean, I‘m saying, does the president then say, OK, I‘ll agree to the Republican plan?  Or do the—what‘s the third option here besides default and defeat?  How does he force his point of view, which is a reasonable balance, two or three to one spending cuts to revenue hikes?

KLEIN:  I have no idea.  And I should say that they‘re far even beyond that.  They‘re talking four or five to one spending cuts to—

MATTHEWS:  Well, how do we get there, then?

(CROSSTALK)

KLEIN:  I—he can‘t.  On his own, he simply cannot.  We live in a—we live in a country with a Constitution.  The Congress has ultimate power over this.  A lot of people think he could potentially ignore them just by asserting constitutional authority to keep the debt of the U.S. honored, but that is really dependent on the Supreme Court.  And it‘s a very, very tough—

MATTHEWS:  OK—

(CROSSTALK)

MATTHEWS:  Am I right that it depends on one man, that John Boehner, the speaker of the House, is going to have to deliver the votes he can, and Nancy Pelosi and Steny Hoyer are going to have to help him in the end?

KLEIN:  That‘s absolutely right.

MATTHEWS:  That‘s what I think, too.  It‘s going to have to be the smartest and it‘s going to have to be the grownups.  Anyway, thank you, Ezra Klein, for joining us and trying to get to the heart of this crisis coming.

Coming up: Republicans are still in search of a candidate, believe it or not.  It‘s getting late.  We‘re moving through July of the year before.  They haven‘t figure out who they want to run.  They‘re not thrilled with Romney, and he keeps flip-flopping, by the way, on the key issues of the economy.  They‘re waiting for someone like Rick Perry, there on the right.  He looks good to some of them.  Can he be the guy that unites the right and the far right?  Does any Republican have the right stuff?  They‘re still looking.

You‘re watching HARDBALL.

(COMMERCIAL BREAK)

MATTHEWS:  Former president Bill Clinton‘s been blasting the Republican effort to push new requirements on Americans wanting to simply vote.  He compares it to Jim Crow.  Republicans in several states, however, are trying to restrict voter registration, making it harder for young people, African-Americans and Latinos to simply vote.

Clinton specifically called out Florida governor Rick Scott—not my favorite guy out there—who moved to overturn state policy that allowed ex-felons to vote once they‘ve finished probation.  He doesn‘t want them to ever vote.  Clinton said Scott changed the policy because most of those voters were African-Americans or Hispanics, groups that tend to vote for Democratic candidates.

We‘ll be right back.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  Does any Republican candidate have the right stuff?  Now, that‘s a great question.  I think Newt‘s broke, of course.  Pawlenty‘s invisible.  Romney can‘t seem to decide which Romney he is today.

Take a look at a new poll, however, up in New Hampshire, likely Republican voters in the primary.  Mitt Romney does lead, still at 35, followed by Michele Bachmann coming up but only to 12, Ron Paul and Rudy at 7 percent, Rick Perry, the new kid on the block, at 4.  Tim Pawlenty getting nowhere at 3.

For more on the GOP race, let‘s turn to a real, live Republican consultant who wins races, Todd Harris—I‘m being nice tonight—

(LAUGHTER)

MATTHEWS:  -- and David Corn—I‘m always nice to you—who writes for “Mother Jones” and is an MSNBC political analyst.

You know, I‘m going to ask you a question.  I don‘t know whether you can answer it honestly or not.  Is this thing jelling the way it usually does?  It seems to me the way elections are within the year-and-a-half from the actual election, or less than that now, you know pretty much who the field is.  Do you know who the field is?

TODD HARRIS, REPUBLICAN STRATEGIST:  Yes.  Of course—I mean—

(CROSSTALK)

HARRIS:  Well, I think that—

MATTHEWS:  Who‘s running for president has a good chance of winning on your side?

HARRIS:  I think that Romney has a very good chance.  I think that Pawlenty has a very good chance.

MATTHEWS:  (INAUDIBLE)

HARRIS:  Yes.  Sure.  I mean, there‘s a lot that‘s going to have to break his way, but if Pawlenty were our nominee, I think he would give—

MATTHEWS:  All right, who else?

HARRIS:  -- Obama a run for the money.  Look, I think—I think, you know, you‘ll probably laugh at this, but I think Rick Perry has—

MATTHEWS:  I‘m not laughing.

HARRIS:  -- a good chance of—if he—look, he‘s a hell of a politician.

MATTHEWS:  I‘m crying on the inside!

(LAUGHTER)

HARRIS:  He‘s a hell of a politician.

MATTHEWS:  Is he going to run as president of the Texas republic or president of the United States?

(LAUGHTER)

MATTHEWS:  I mean, his latest comments on secession lead me to believe he may not really be part of the union.

HARRIS:  Let me say this about Rick Perry.  A lot of people, especially in the 202 and 212 area codes, like to make fun of him.  As someone who has worked on a campaign against Rick Perry, I can tell you he‘s formidable.

MATTHEWS:  OK, let‘s take a look.  “The New York Times” reporting, quote, “In recent years, Mr. Perry has broken politically with Mr. Bush”—that‘s George W. Bush—“questioning his credentials as a fiscal conservative, accusing him of being a big government binge—on a big binge—and playing down some of Mr. Bush‘s accomplishments in Texas in light of his own.  While Mr. Perry‘s public statements exposed a long-simmering rivalry that‘s been little known outside the political fraternity but underscores the rightward drift of the Republican Party since Mr. Bush was president.”

Is he to the right of George W. Bush? 

HARRIS:  Oh, sure, yes, I think so. 

You are not going to hear Rick Perry talk about compassionate conservatism.  I doubt that you will hear him talk about No Child Left Behind and put a lot of emphasis on education. 

MATTHEWS:  Yes. 

MATTHEWS:  So he switched from being a Democrat to all the way over to the right.  He just went right past the Bushes. 

(CROSSTALK)

MATTHEWS:  The direction he‘s heading in and the speed he‘s taking, he could end up all the way over.

(CROSSTALK)

CORN:  He overshot the moon.  He‘s all the way out to Pluto here.

MATTHEWS:  OK.  So, is he a credible presidential candidate?  You can imagine him as president of the United States?

HARRIS:  Look, he‘s governor—

MATTHEWS:  I‘m just asking. 

HARRIS:  Absolutely. 

MATTHEWS:  OK.  Let me ask you this.

(CROSSTALK)

MATTHEWS:  OK.  Let‘s go.  Do you think the Democrats would like to run against Rick Perry, rather than Romney or rather than Bachmann?

CORN:  I think he‘s more unpredictable, and I think he could put together a good campaign.

But then again, he could come across as a buffoonish, Swaggering Texan.  And if you look at the polls, Americans still blame, if asked the question, George W. Bush for the economic hole we‘re in, so any candidate that comes along that reminds people of George W. Bush comes with a tremendous liability, even if George W. Bush doesn‘t like him. 

And to come up and say, I‘m not compassionate, I don‘t care about education, I want to be a hard-liner on immigration, I have no real economic macro-plan here is still not going to win well, although he does look good in cowboy boots. 

HARRIS:  Well, of course that will not be his message. 

(CROSSTALK)

MATTHEWS:  Let me just say about him I don‘t get him. 

(CROSSTALK)

MATTHEWS:  There‘s something about him that doesn‘t ring as authentic.  It just seems on the one hand very fancy and big city and all that.  He dresses well, looks good, but the other part of me is this hee-haw far right-winger.  It doesn‘t seem to be cohesive.

CORN:  Well, it‘s pandering.

HARRIS:  The best job creation record of any governor in the country. 

MATTHEWS:  OK.

(CROSSTALK)

MATTHEWS:  Let‘s have some fun.  Newt Gingrich, this guy, he has got a million dollars in debt.

This morning, at an off-camera event, by the way, the White House senior adviser, David Plouffe, had this to say about Romney, basically called Romney a world-class political contortionist for distorting the president‘s handling of the economy.

Not surprisingly, Romney‘s campaign spokesperson hit back this afternoon, saying—quote—“We understand the difficulty of working for a president who is challenging Herbert Hoover‘s place as the greatest job terminator in U.S. history.  Mr. Plouffe has our deepest sympathies.  If he‘d like his candidate to discuss real issues, Mitt Romney will debate President Obama any time.”

And talk about swagger, David Corn. 

CORN:  Well, these guys are—Mitt Romney is trying to take his mind off the primary and go right ahead to the general.  And when Obama—

(CROSSTALK)

MATTHEWS:  Well, that‘s smart. 

CORN:  It is smart, if he can win the primary.

When Obama travels, what does Mitt Romney do?  He gets to the city before, and does an event.  He does an event Obama leaves. 

MATTHEWS:  OK. 

CORN:  So, he‘s not attacking his Republicans.  He‘s trying to direct fire.

But he‘s saying a lot of things about Obama‘s economic record that is not true and he has had to sort of moderate them and turn them on and off the last few days. 

(CROSSTALK)

MATTHEWS:  Well, calling him Herbert Hoover, do you think that‘s fair?  I think he‘s been off and on about whether the president has made the economy—

(CROSSTALK)

HARRIS:  Sure. 

(CROSSTALK)

CORN:  Bush lost the jobs, not Barack Obama. 

HARRIS:  Look, Barack Obama‘s favorable numbers in terms of his performance on the economy, he is underwater on this.  I am struck by the level of both naivete and arrogance on the left at people who just scoff at the notion that Barack Obama could be even remotely vulnerable somehow. 

MATTHEWS:  No, but Herbert Hoover is pretty harsh words, isn‘t it?

(CROSSTALK)

MATTHEWS:  You‘re comfortable with it? 

HARRIS:  Yes.  Yes. 

(CROSSTALK)

CORN:  Todd, you‘re creating a straw man. 

(CROSSTALK)

HARRIS:  No, no. 

(CROSSTALK)

CORN:  Listen, any time you have unemployment at 9 percent, 10 percent, whoever the incumbent is, is going to be in trouble.  There‘s nobody who denies that. 

(CROSSTALK)

MATTHEWS:  Well, it was 25 percent under Hoover.  Let‘s get that straight. 

CORN:  But when Mitt Romney says the economy is worse under Barack Obama than it was at the end of the Bush years, that‘s simply not true.  We‘re not hemorrhaging the ways they are.

Now, you can make the case that maybe Barack Obama should have created more jobs and done better, but what Mitt Romney‘s—how he‘s describing it is just inaccurate. 

(CROSSTALK)

HARRIS:  Well, OK.  If the Obama wants their message to be the economy, it is not as bad as you think it is, that‘s probably not a winning formula. 

(CROSSTALK)

MATTHEWS:  We‘re into games here.

Let me ask you this about your candidate, strongest candidate. 

Romney, is he the front-runner? 

HARRIS:  Oh, sure. 

MATTHEWS:  Is Romney beatable? 

HARRIS:  Sure. 

MATTHEWS:  Can he be beaten on the left? 

HARRIS:  In the Republican primary? 

MATTHEWS:  Yes.  Can Huntsman beat him? 

HARRIS:  I think that would be tough to do. 

MATTHEWS:  You think Huntsman could beat him on the left?

CORN:  I think Huntsman has to get above 5 percent in New Hampshire first. 

MATTHEWS:  OK.

Can he be beaten on the right by somebody like Rick Perry, who goes to his right, or someone like that, or Bachmann, Michele Bachmann?  Can they beat him on the right?  Is he too left for your party, Romney? 

HARRIS:  No.  No. 

(CROSSTALK)

HARRIS:  He‘s winning in the polls. 

(CROSSTALK)

MATTHEWS:  Well, those polls are based on name I.D. right now.

Michele Bachmann, can she knock him off in New Hampshire? 

HARRIS:  I think that would be tough to do in New Hampshire. 

CORN:  But she could win in Iowa and South Carolina.

MATTHEWS:  If she wins in Iowa, could she knock him off in New Hampshire as the second hit?

HARRIS:  If she wins in Iowa, she could be formidable in New Hampshire. 

MATTHEWS:  Who‘s the favorite in Iowa? 

HARRIS:  Right now, it‘s Bachmann. 

MATTHEWS:  So, you‘re saying, dynamically, without admitting it arithmetically, she is now able to beat him in Iowa and therefore will have a good chance of beating him in New Hampshire.

HARRIS:  She‘s not really competing with Romney in Iowa.  But—

MATTHEWS:  She‘s going to beat him? 

HARRIS:  Well, probably. 

MATTHEWS:  Yes. 

What you‘re saying is that the party in Iowa is to the right of Romney. 

CORN:  Well, yes. 

HARRIS:  Well, the 100,000 people who show up to the caucus, yes, are very—

(CROSSTALK)

MATTHEWS:  So you‘re disdaining Iowa in those words? 

HARRIS:  I love Iowa.  I love Iowa. 

MATTHEWS:  OK.  All right. 

It looks to me like the party is open to the left.  It‘s open to the right. 

CORN:  Oh, certainly.

MATTHEWS:  The Republicans may swing to the right of Romney.  If he has any danger is, he‘s already a general election candidate, but he still has to sweat it out being right enough for the primaries. 

CORN:  And if you look at his history of flip-flops, it‘s hard for I think voters, Republican primary voters, to know where he really stands. 

With Michele Bachmann and Rick Perry, you don‘t have to guess.  And so the Tea Party Republicans, who want a Tea Party Republican candidate, will have a choice with Michele Bachmann and Rick Perry to—

(CROSSTALK)

CORN:  Romney has a hard time appealing to -- 

(CROSSTALK)

MATTHEWS:  I have to get it straight, the record here.  A couple days ago, he wasn‘t sure whether he made the economy worse than he—he got it when he was handed it by George W. Bush.  And now he‘s Herbert Hoover? 

Excuse me.  Herbert Hoover created the Great Depression on his watch.  He didn‘t just inherit it from somebody else.  This guy, Obama, the worst thing you can say about him is he inherited the worst economic situation in America and hasn‘t been able to fix it. 

HARRIS:  And made it worse.

CORN:  It‘s not worse than when he got it, Todd. 

(CROSSTALK)

HARRIS:  We‘re trillions, trillions more into debt.

(CROSSTALK)

MATTHEWS:  Just keep throwing language around—

(CROSSTALK)

MATTHEWS:  Thank you, Todd Harris. 

Thank you, David Corn. 

(CROSSTALK)

HARRIS:  On this show, there‘s never hyperbole and rhetoric.

MATTHEWS:  That‘s a big word for this show.

(LAUGHTER)

MATTHEWS:  Up next—

(CROSSTALK)

MATTHEWS:  -- David Duke, the former Klan leader, he‘s back.  I don‘t know how many face-lifts he‘s had, but he‘s back.  There he is.  He‘s had a lot of them.  He‘s now back.  He‘s got his sights on bigger things. He‘s running for the White House again.  He got about 1 percent last time.  He‘s running, by the way, in the Republican Party, I believe. 

You‘re watching HARDBALL, only on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  Back to HARDBALL. 

First up: David Duke, well, back in the mix now, apparently.  You remember him.  He was the white supremacist who ran for governor of Virginia years ago.  Well, The Daily Beast reports that Duke is now launching a tour of 25 states to explore a potential possible presidential bid. 

This would be Duke‘s third White House run.  His first or last bid in 1992 earned him approximately 1 percent of the Republican primary vote nationwide.  Hmm.  I‘m sure the Republicans are glad to see him come. 

Next up, where is the loyalty?  Utah Congressman Jason Chaffetz, a one-time chief of staff to Jon Huntsman, has passed over his former boss and endorsed Mitt Romney for president.  His reasoning?  Romney is—quote -- “uniquely positioned” to beat President Obama.  Chaffetz admitted the conversation with Huntsman, his old boss, when he broke the news was a little awkward. 

Speaking of awkward, it was just personal, apparently, up in New Jersey.  Last week, Republican Governor Chris Christie used his line-item veto to strike funding for certain health and social programs.  Well, the reaction from Democratic State Senate President Stephen Sweeney: “I wanted to punch him in his head.  You know who he reminds me you have?  Mr. Potter from ‘It‘s a Wonderful Life,‘ the mean old bastard who screws everybody.”

That‘s what Senator Sweeney called him.  The kicker, Sweeney and Christie are actually longtime bipartisan allies.  The governor‘s office put out a statement yesterday saying that, while Sweeney‘s comments were inappropriate and disrespectful, Christie stands ready to work with him going forward. 

Hmm.

Up next:  After last year‘s elections, the number of women in Congress, believe it or not, dropped a little bit for the first time in 30 years.  Whatever the reason, New York‘s rising senator—rising star, rather, Kirsten Gillibrand, wants to reverse that trend.  She joins us next here on HARDBALL.

You‘re watching it, only on MSNBC.  

(COMMERCIAL BREAK)

SUE HERERA, CNBC CORRESPONDENT:  I‘m Sue Herera with your CNBC “Market Wrap.”

Another thin trading session resulting in modest gains.  The Dow Jones industrials climbing 56 points.  The S&P 500 added just one point.  And the Nasdaq‘s eight-point gain marks its seventh winning session in a row. 

Investors shrugging off a weaker-than-expected economic reports.  The pace of service sector growth slowed just a bit in June, but it still racked up its 19th consecutive month of expansion.  And the number of planned layoffs rose for the second month in a row.  But the pace of downsizing overall is at the lowest it‘s been in more than a decade. 

And mortgage applications fell last week, while purchase applications rose, indicating a slowdown in refinancing activity.

In stocks, the transportation sector looked strong after Con-way said that it was restoring some employee benefits because the economy has actually improved. 

And Microsoft gained on words that its new—word its new acquisition Skype will be used for a new video chat feature on Facebook. 

And that‘s it from CNBC.  We are first in business worldwide—and now back to HARDBALL and Chris. 

(BEGIN VIDEO CLIP, 2008)

SEN. HILLARY RODHAM CLINTON (D), NEW YORK:  As we gather here today in this historic, magnificent building, the 50th woman to leave this Earth is orbiting overhead.  If we can blast 50 women into space, we will someday launch a woman into the White House. 

(CHEERING AND APPLAUSE)

CLINTON:  Although we weren‘t able to shatter that highest, hardest glass ceiling this time, thanks to you, it‘s got about 18 million cracks in it. 

(CHEERING AND APPLAUSE)

(END VIDEO CLIP)

MATTHEWS:  Well, that was quite a moment.  That was Senator Hillary Clinton, of course, conceding basically the presidential primary fight with Barack Obama back in ‘08.

But the number of women in politics is in fact stagnating across the states, even dropping statistically, with the percentage of women in the United States Congress dipping, albeit very slightly, for the first time in more than 30 years. 

At the state level, you see a real drop.  It‘s far more evident.  The number of women in elected executive positions, like governor, lieutenant governor and the cabinet posts, has declined steadily over the past decade, after rising for 30 years. 

Senator Kirsten Gillibrand, Democrat of New York, wants to think about this.  In fact, she wants to do something about it, as does Democratic Congresswoman Kathy Hochul, who won that special election we all watched up in New York to represent a district that had been a Republican stronghold. 

Well, both of you are pathfinders in different ways, Senator and Congresswoman, so I want to start with the senator. 

It seems to—well, it‘s very hard to figure this thing out, because it seemed like there was a projection there, a projectile.  It was moving in one direction.  And you‘re saying it‘s leveled off and you want to do something about it.

SEN. KIRSTEN GILLIBRAND (D), NEW YORK:  Absolutely, Chris. 

And what I want to do is get more women off the sidelines, to get them engaged, so they‘re voting more, so they‘re running for office more, because the reality is, is that decisions are being made every day in Washington about issues that they fundamentally care about, whether it‘s Social Security or Medicare or national security.

These are issues where, if their voices were heard, I think the decisions that would be reached would be better decisions. 

MATTHEWS:  Do you think when you ran for office—you will run again and again—and I think you have a great future—everybody knows that, Senator.  Do you think that there‘s a glass ceiling at the Senate or gubernatorial level?

Is it still—is there any advantage of running for governor of New York, for example, not against Andrew, who is doing so great, but in general terms now, is there still a glass ceiling? 

GILLIBRAND:  Well, the reality is, is that not enough women are running for office. 

What you mentioned, this decline, the first time in 30 years that the percentage of women in the House of Representatives went down, is a terrible statistic.  And so I think we need a call to action for women to engage and to run and be part of these debates. 

And for—for one of the most important reasons is the economy.  You know, women are graduating from college and from advanced degrees more than 50 percent of men—than men.  And so the reality is if we‘re going to out-innovate, outcompete and really create this economic growth that we‘re looking for, we need women.  Women will be part of that. 

And so I want women to be part of this debate because we still don‘t have equal pay in this country.  Women earn 78 cents on the dollar.  Issues of affordable child care are highly relevant.  And so we want to get women as part of this debate, because that‘s how we‘re going to create a growing economy. 

MATTHEWS:  Well, just to put the edge in your argument for the people watching, here are the participants in tomorrow‘s White House debt ceiling meeting.  You will notice seven men and one woman. 

Congresswoman, there‘s never been a stronger speaker, I think, since Sam Rayburn than the speaker—just recently was speaker.  That‘s Nancy Pelosi.  So you have one strong leader in the Congress. 

What‘s going on in terms of those meetings, when you only have one woman in the room? 

GILLIBRAND:  Well, a woman‘s voice in the room is very important. 

And that really just highlights the problem, having 17 percent women in Congress is just frankly not enough.  And when women are part of the debate, the difference in the discussions, in the negotiations—women often are better consensus builders, they often are able to bring different arguments to the table and they‘re able to reach resolutions sometimes more easily.

MATTHEWS:  You mean Congresswoman Bachmann is a consensus builder?

GILLIBRAND:  Not all women.  But many women.

MATTHEWS:  Just kidding.

Let me go to Congresswoman Hochul, on the same question.  You‘ve got the Democratic leader in the House, Nancy Pelosi, but apart from her, that‘s the only female voice really in that big room tomorrow at the White House.

REP. KATHY HOCHUL (D), NEW YORK:  I have a problem with that as well, Chris.  And I‘m joining with the senator to do what we can to get more women really on the Farm Team.  We just came off a big softball game, so we‘re kind of in the mood of thinking sports analogies.

But we need more women willing to step up, even at the local levels of government.  I came from a town board, for example, and I went to county clerk and I rose up to this position.  So, there‘s many paths to Congress, but the bottom line is we got to make it easier, let women know that their voices will be heard when they get here.  I feel very respected, that people are listening to me as I speak on the floor and make my points on behalf of my district.

But there‘s too few women who want to step up.  And part of it, it is a brutal process.  You look at the election I just came through, and you got to really have tough skin to put up with this.  But the end game is so important.  We need to convince women that we‘re here to support you, step up to the plate and you‘ll have the resources you need, just as Senator Gillibrand was so helpful to me and my race.

MATTHEWS:  Does it bother you or concern you, Senator, that the top—once Hillary Clinton retires, she has talked about retiring at the Department of State at the end of next year, that will be the only woman in the top four cabinet positions historically, A.G., attorney general, State, Treasury and Defense.  We might have no women in the top positions in this administration if it gets to the second term.

Does that concern you?

GILLIBRAND:  Well, you know, our president is very committed to women.  I can tell you, the first bill he signed was the Lily Ledbetter Fair Pay Act, to give women more resources and information to be able to get equal pay.  And he‘s been a champion on issues nominating two women to the Supreme Court as his two nominees is unbelievably important.

So, I think we have a lot of talent in the cabinet who are women, which is fantastic, but we need more women.  And that‘s the whole point of this—that women have to be interested in being part of the governing body.  We still only have a handful of women governors.  We only have a handful of women on corporate boards as CEOs.

MATTHEWS:  Yes.

GILLIBRAND:  Not enough women on “Fortune” 500 board.

Again, when women are part of the decision-making, the decisions are often better.  And one example I like to use is when Speaker Pelosi became a speaker, she put five women on the armed services committee.  And it changed the nature of debate.

And I remember one hearing in particular where we were talking about military readiness and Gabby Giffords was on that committee with me and she wanted to talk personnel.  And she said, you know, I have a doctor on my base in my district who tells me 70 percent of men and women who are going back into combat are not ready to go back in, because they haven‘t had the dwell time.

And so, while our male colleagues are often talking about how many aircrafts we‘re going to buy and the equipment, sometimes, the women bring in a different perspective.

And so, when you have both perspectives, talking about military readiness in terms of how the personnel are doing, how the men and women are faring, but also the equipment, that is a far more complete picture of what it takes to have a strong armed services.

MATTHEWS:  OK.  This is the beginning of the conversation, not the end.

Thank you very much, Senator Kirsten Gillibrand of New York and U.S.

Congressman Kathy Hochul of New York state.

Up next, when President Obama took on the Twitter-verse—the Twitter-verse today—that‘s a new phrase—was it really the Democrat‘s first step in trying to own social media going into 2012?  Well, they better own it.

This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  President Obama has reversed a long-standing military policy.  He‘s announced he will now begin sending condolence letters to the families of service members who committed suicide.  In announcing the policy change, the president said troops who have taken their own lives didn‘t do so because they were weak, but that they didn‘t get the help they needed.  And he said he‘s changed the policy as a way of honoring the service of men and women in uniform.

Boy, this is a sad story.  We‘ll be right back.

(COMMERCIAL BREAK)

MATTHEWS:  Well, all big things are happening now.

We‘re back.

President Obama held a town hall today, taking questions online from Twitter.  Even House Speaker John Boehner got in the act.  He took the opportunity to throw out a few questions himself.

This is from the speaker of the House—here‘s one, “Will you take job-destroying tax hikes off the table?”  Well, old wine and new barrels there.  Anyway, the speaker even re-tweeted another one from the AFL-CIO in this case, where are the jobs?

And here‘s another one from Boehner‘s office: “After embarking on a record spending binge that‘s left us deeper in debt, where are the jobs?”  Well, that tweet by the speaker got a response from the president at the town hall.

Let‘s listen.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  This is a slightly skewed question.  But what he‘s right about is that we have not seen fast enough job growth relative to the need.  I mean, we lost, as I said, 4 million jobs before I took office, before I was sworn in.  About 4 million jobs were lost in the few months right after I took office, before our economic policies had a chance to take any effect.  We haven‘t gotten the kind of cooperation that I‘d like to see on some of those ideas and initiatives, but I‘m just going to keep on trying.  And eventually, I‘m sure the speaker will see the light.

(END VIDEO CLIP)

MATTHEWS:  OK, Jonathan Martin is “Politico” senior political reporter, a top reporter in this city, and “The Huffington Post‘s” Alex Wagner.  She‘s an MSNBC political analyst.

Both of you—let me start with Alex, because she‘s here.

This Twitter nation thing and the president at least receiving tweets

you know, a couple years ago, this would be considered bizarre.  But tell me why he has to do it.  When his staff went to him and said, you should do this—what do you think they said to him?

           

ALEX WAGNER, THE HUFFINGTON POST:  Well, this is a huge push towards the youth vote.  I mean, this is something that the president has sort of long held close to his heart.  Look, he did “The Daily Show with Jon Stewart.”   He‘s done—he basically has Mark Zuckerberg on call.  I think there‘s a red phone to the Facebook H.Q.

Twitter is another reiteration of sort of digital 21st century.  And Obama knows that the youth live there.

And for 2012, the youth were a critical vote in the last election.

MATTHEWS:  In the 2008 election.

WAGNER:  Exactly.

MATTHEWS:  They were not so helpful last time.

I want Jonathan to get in here with these numbers because you‘re the expert on this.

Jonathan, look at this 2008 -- 18 percent of voters were between 18 and 29.  Boy, that hefty portion helped get this guy elected.  They voted for President Obama 66 percent to 32 percent for McCain.

JONATHAN MARTIN, POLITICO.COM:  Right.

MATTHEWS:  In 2010, however, different story, both in the percentage of voters.  Just 12 percent of the voters were between 18 and 29.  So, they didn‘t really lift their end.  And they voted for Democrats only 55-42.

So, a very narrow vote relatively speaking compared to 2008, Jonathan.  They didn‘t really show up—which doesn‘t surprise me.  It‘s not a presidential year.

But the big challenge obviously is to get those numbers jacked up again to 2012 where you can have at least the same participation.  Will Twitter help?

MARTIN:  Of course, it will, because this is the way a lot of young voters now get their news and information.  They don‘t go the driveway everyday and grab the morning paper.  They are on their BlackBerrys and their iPhones and their iPads and lap tops.  And they are on Facebook and Twitter and on their e-mail.  And that‘s how they communicate now.

And not just they get news but how they get information from friends and relatives and everything else.  So, he is going to voters where they live.

But, Chris, this is new in that sense.  But this move is also very old and another important way.  As long as I can remember, every president has tried to go around the filter, as Bush liked to call it.  (INAUDIBLE) to call it.  Go around the filter of the mainstream media.

Bill Clinton did it by going on Arsenio Hall and Larry King.  George W. Bush did it by, you know, talking to regional reporters oftentimes.  And now, President Obama is doing itself by going to Facebook, by doing a Twitter town hall.  This is a way of avoiding, you know, the traditional East Room press conference talking to the press corps.

MATTHEWS:  So, he doesn‘t have to fight his way to the public.  He doesn‘t have to even defend himself.  He just broadcasts.

Now, here‘s my question.  I love the metaphor.  I go to the end of my driveway in the morning.  I‘m lucky to have a drive way.  I walk into the end of my drive way, and pick up four or five newspapers every morning.

MARTIN:  Right.

WAGNER:  Yes.

MATTHEWS:  And I do read them at about 7:00 in the morning and I go through them.

Your age, let‘s get generational here, Alex.  How do you receive the president‘s tweets?  Suppose you are a moderate liberal Democratic or liberal Democrat, or lefty, or independent, how do you—how does the president reach you?  How does that work?

WAGNER:  Well, look, I mean, I think part of the problem and some of the criticism that was lobbied against the president today was that there wasn‘t enough back and forth between the Twitter-verse and the president.  And if he really wanted to embrace this medium, there would have been a more robust style (ph).

MARTIN:  Right.

MATTHEWS:  How would he do it in Upstate New York?

WAGNER:  There are a couple of things going on though, Chris.  Like,

you know, the medium is a one thing, but the message is another.  And the

one of

MATTHEWS:  By the message was old as -- 

(CROSSTALK)

WAGNER:  Exactly.

MATTHEWS:  This old argument about jobs and stuff is exactly what everybody is arguing about.

WAGNER:  And Speaker Boehner seeing the light.  I mean, I think to a certain degree, the reason that Obama had the youth vote so firmly in his corner in 2008 is because he represented so much hope and it was kind of unvarnished belief in the future.  Four years later, you know, it‘s been a messy legislative four years.

MATTHEWS:  So, you said content matters?

WAGNER:  Yes.  And, look, the youth unemployment rate is double that of the nation.  I mean, I think there‘s a lot of disenfranchisement among the youth population that may prevent them from showing up.

MATTHEWS:  Let me go back to Jonathan with that.

(INAUDIBLE) three years ago, we had a president that wasn‘t very academic and not very inspiring to young people, went to college.  And certainly, we add war that was very old and tired.  Those issues now are not going to be so helpful.  We have an Iraq war which is still there., the Afghan war, which has been beefed up, and we have an unemployment situation which is particularly tough people in their 20s.

So, what gives Twitter?

MARTIN:  Well, not just, Chris, but a lot of the appeal about President Obama in ‘08 was he was new and fresh and offered a lot of Americans a chance to make history.

MATTHEWS:  Sure.

MARTIN:  And, you know, that happened.  And how do you make history twice?  Well, the answer is, you don‘t.  So, he has to find a way to fire off that base once again.

I think, ultimately, his message, if the economy doesn‘t improve is going to be the other guys are going to make it worse.  Look at what their policy or views are.

MATTHEWS:  And I think you‘re right.  In the next four years, John, you‘re a key.  You‘ve said it.  I just want to end on that note.  It‘s brilliant.  It‘s about the next four years.  It‘s not the blame game.

Who do you have confidence in that can lead the country out of situation we are in now?  He or the Republican economy?

Thank you so much, Jonathan Martin.  And thank you, Alex Wagner, for tutoring me rather crudely.

MARTIN:  By choice.

MATTHEWS:  When we return, let me finish—yes, well said—we‘re going to have a birthday tribute to former first lady, Nancy Reagan, for the reason I think she was a moderating force on that man next to her.

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  “Let Me Finish” with a birthday tribute to an American who made a difference.  Her name is Nancy Reagan.  She was our country‘s first lady during the 1980s and supported one of the major American presidents in our country‘s history.

Now, what I have to say about Ronald Reagan is not what many conservatives would say, but it is—I would argue—extremely important.  He saw the opportunity to end the Cold War and took it.  He had the sound human judgment to know when he came across someone different in Moscow, a man Mikhail Gorbachev, who was ready to do what had to be done, open up that system and let the chips fall where they may and the crazed competition weaponry that had put both countries at each other, poised to shoot after every nuclear weapon in their arsenal.

Ronald Reagan, whatever else, saw the horror and ultimate stupidity of mutually assured destruction and took the historic steps to call it off.  He and Gorbachev did that.  And it might not have happened had two lesser people been there, people without an historic sense, people who didn‘t see something higher involved here, and simply literally sticking to their guns.

Nancy Reagan, I am convinced by all my hunches, played a huge role in all of this.  This decision to make the decision, this readiness to take on history and change it, to make the deal that ended the longest and scariest war in our history, the Cold War.

Since she lost her husband, Mrs. Reagan has been as of bit as good working for the positive role that science can play in human history, working for stem cell research and for government support for it.  She is taking some heat but she‘s kept on coming.

I don‘t know all what went on between the Reagans when he was president, but instinct and experience teaches me that it was Nancy Reagan who provided the moderating influence, who kept her husband from a harsh direction on social issues, who wanted her own tolerance, even accepting views.  I believe that.  And on this issue, I‘m the one sticking to my guns.

So, again—Happy Birthday, Nancy.  I once called you a hot chick on TV.  Well, here it goes again.  Happy Birthday, you hot chick.

That‘s HARDBALL for now.  Thanks for being with us.  More politics ahead with Cenk Uygur.

           

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