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updated 7/27/2011 6:11:43 PM ET 2011-07-27T22:11:43

Guests: Ezra Klein, Jay Carney, Jim VandeHei, Andrew Ross Sorkin, Mitchell Hirsh, Michael Scherer, Maria Cardona, Christina Bellantoni

CHRIS MATTHEWS, HOST: Right-wing dictatorship.
Let‘s play HARDBALL.
Good evening. I‘m Chris Matthews in Washington.
Leading off tonight: The Republicans on the verge of victory. No matter how the debt fight turns out, it looks as if the Tea Party has already won. Last night, President Obama argued that the wealthy should be asked to pay their fair share in taxes, but taxes aren‘t even in the Boehner plan and they aren‘t in the Reid plan. It‘s all spending cuts.
And there‘s serious talk about a short-term deal that Eric Cantor told the red hots today would force the president to debate entitlements, taxes and spending all over again in six months. What exactly has President Obama won in return?
Plus, watching the Obama/Boehner face-off last night, it was hard to believe what we were watching. The Republicans are on the brink of winning a battle in which the very rich will be asked to contribute nada, nothing, and everyone else will be asked to contribute everything. How did we get here?
Also, silence of the lambs. Where are the Republican candidates for president on this most critical Washington negotiation in years? There‘s Michele Bachmann, of course, who mindlessly doesn‘t want the debt ceiling increased under any circumstances. Other than that, where is everybody?
And we learned today that no group has been hit harder by the recession that continues than Latinos, who also may be the most important voting block for President Obama come next November. Can you hold them if things get worse?
Finally, “Let Me Finish” tonight with a way out of the debt showdown.
We start with the debt fight itself. Jay Carney is the White House press secretary, and he joins us right now. Jay, thank you so much for joining us. It seems to me that if you watched the fighting today, the state of play is Republicans under Boehner want to have a two-round fight. They want a second round during presidential election year next year. They want to have some kind of fight all over again over the debt ceiling next time. The president wants to have it all out—have it out now. Is that the difference?
JAY CARNEY, WHITE HOUSE PRESS SECRETARY Well, I think it‘s the difference, although I view it a little differently. The reason why we believe and the president believes so strongly that we have to extend the debt ceiling, increase our borrowing authority for a significant amount of time, is because it creates this cloud over the economy. It creates uncertainty.
And as any businessman will tell you, or businesswoman, you know, uncertainty is a drag on the economy. It forces businesses to make decisions that inhibit growth, inhibit job creation, and we simply can‘t have that.
And if you think this situation that we‘ve seen in these last several weeks has been chaotic and has cast doubt on whether or not the United States will for the first time in its history fail to live up to its obligations, imagine what it will be like in six or eight or ten months if we go through this again. The president thinks that‘s bad for the economy. It‘s not about politics, it‘s bad for the economy.
The American people overwhelmingly support his approach, which is a balanced approach. Democrats, independents, even Republicans by large majorities support the approach that he has put forward.
MATTHEWS: So if it comes down to it, sometime Sunday morning, at 4:00 o‘clock in the morning, and he‘s handed a bill that says, We have to go after this again with some kind of mechanism next year, six months from now, he will veto it.
CARNEY: Well, we have made clear, the president‘s made clear, the chief of staff, Bill Daley, has made clear—we issued a—what‘s called, you know, from your experience, a statement of administration of policy today that says that senior advisers recommend that the president to veto a bill of the specific bill that the speaker‘s put forward, should it get to his desk.
But that‘s a moot point because that bill will not get through the Senate. We believe—Senator Reid, the majority leader, said it will not pass the Senate. And so it‘s really irrelevant.
The fact is, we are in a stalemate. That‘s why the president went and spoke to the American people last night, to explain to them where we are and why we need to break that stalemate. We need to break the logjam—
MATTHEWS: OK—
CARNEY: -- and we need willingness on both sides to reach compromise. Accept that you‘re not going to get your maximalist position, and do it for the American people.
MATTHEWS: Well, right now, it looks like you‘ve lost on the issue of revenues. Not even the Democrats in the Senate are pushing for a revenue hike.
CARNEY: Oh, no, I disagree—I disagree with that, Chris.
MATTHEWS: Oh, you‘re still fighting that fight?
CARNEY: Look, the big, grand bargain is still on the table. That deal is there, if the speaker wants to return to the table and negotiate it. We came very close, the president and the speaker did, and that opportunity still exists.
Secondly, the helpful proposal that Senator Reid has put out does, while it does not include upfront the tough issues of entitlement reform or tax reform, it does create a committee that would look at those issues on a fast-track basis before the end of the year. Now, that‘s not optimal. We prefer a grand bargain that does it all at once.
But believe me, however this turns out, if we don‘t get those tough issues addressed—because those tough issues are essential if we‘re going to address our deficits and long-term debt—we‘re going to return to debate those tough issues because the public supports a balanced approach.
There‘s no way to do this—it‘s not the right way to do this if we don‘t ask sacrifice from everybody, not just one sector or a limited number of sectors of society.
MATTHEWS: Let‘s take a look at what the president said last night, Jay, for Americans to voice their support for a bipartisan deal. Let‘s listen.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The American people may have voted for divided government, but they didn‘t vote for a dysfunctional government. So I‘m asking you all to make your voice heard. If you want a balanced approach to reducing the deficit, let your member of Congress know. If you believe we can solve this problem through compromise, send that message.
(END VIDEO CLIP)
MATTHEWS: Is Boehner being pulled down by his right wing? Is that the White House view?
CARNEY: Well, look, we certainly believe—while we‘re not, probably, the best experts on House Republican politics, it‘s evident that there is a faction with the House Republican conference that is a basically no-compromise faction.
We don‘t think that‘s where the American people are. We believe that the president and the speaker came a long way towards reaching the kind of bipartisan compromise that could achieve significant deficit reduction in a balanced way, and we believe that that opportunity still exists if there‘s a willingness to accept that there‘ll be political pain associated with it. But not every Republican will vote for it, just like not every Democrat will vote for it.
I mean, you know how this works. You know the kind of compromises the president is willing to make to achieve something significant here, and you know that that would exact political pain on his side. He‘s willing to do it because he thinks that‘s what the American people are insisting that Washington does.
You know, every time you go outside of this town, I‘m sure, and you talk to people, half the time, they‘re asking you, What‘s wrong with people in Washington? Why are they always yapping and not getting stuff down? Well, this is a perfect example of the dysfunction in Washington that tends to dominate. And in this case, the stakes are simply too high to let it pertain (ph).
MATTHEWS: So the White House position is—just to clear this up, Jay—is that if we don‘t have a deal by—in time for the president to write it into law and to release the funds with a debt ceiling increase by August 2nd—if we don‘t have that done on time, it‘s your position at the White House that that fault lies with the Republican Party, that the blame game is simple. You‘re setting it up this way. I heard the president speak last night. Many people believe what he said last night was, I may not be able to meet the deadline, and if I don‘t, I want you to know whose fault it was. I was for a grand deal. They were basically for scorched earth. It‘s their fault.
Is that the clear message you want too—
CARNEY: No. Look, I—
MATTHEWS: It‘s their fault—
CARNEY: I want to be clear.
MATTHEWS: Whose fault is it, then?
CARNEY: I want to be clear. The president believes, and I‘ve said numerous times again today, we believe that we will get a deal. We do not believe that the United States will default on its obligations for the first time in its history. We do not believe that we will forsake the gold standard, AAA rating, credit rating, that this country has held for so long, that has made it the safest investment around the world, because in the end, saner heads will prevail in Washington, and we will get this done.
MATTHEWS: OK. That surety that you‘ve just given me is based upon what deadline? When are you sure, since you‘re sure, the president is sure it will happen—when is he sure it will happen, or doesn‘t he know when it will happen?
CARNEY: Well—
MATTHEWS: Because you can‘t have it both ways. You can‘t be sure there will be a deal in time to deal with this, but not be able to tell me when that “in time” come. Is it this Friday?
CARNEY: Well, we—
MATTHEWS: Is it this Sunday morning?
CARNEY: We—
MATTHEWS: Is it Monday morning? When‘s the time limit?
CARNEY: Well, look, the time limit is the last moment when Congress can act, before we no longer have the borrowing authority—
MATTHEWS: When‘s that, Jay?
CARNEY: Well, you know, the deadline set by the Treasury Department, by the career analysts there, in terms of when we lose our borrowing authority is August 2nd. And we believe—
MATTHEWS: And when do you have to act—
(CROSSTALK)
CARNEY: -- before August 2nd, Congress will act and—and—
MATTHEWS: In other words—
CARNEY: -- do the right thing.
CARNEY: -- a bill that comes to the president‘s desk by the morning of August 2nd is in time.
CARNEY: As I understand it, that would be the case. I don‘t know if it‘s August 1st or August 2nd, depending on the hour of the day when this eventuality might come to pass. We don‘t think it will get to that. We think that, again—and we (INAUDIBLE) make no mistake, conversations continue, obviously, between leaders of both parties on Capitol Hill, between those leaders and members of the administration.
You know, we are seeking a way out of this impasse, that‘s balanced and can be supported by Democrats and Republicans and that can be signed by this president. We think that will happen. It‘s not pretty. As you know, this process in Washington is as ugly as making sausage can be sometimes. But in the end, there is no alternative to doing the right thing, which is why we think, in the end, the right thing will be done.
MATTHEWS: Well, I appreciate it, Jay, my friend. I‘ve known you a long time as a journalist on both sides of—
CARNEY: That‘s right.
MATTHEWS: -- this world we live in. But I have to tell you that I‘ve never seen anything like this. I‘ve never seen one party so clearly willing to take this country into serious trouble because of an inability to keep its right wing, in this case, ranks in line. And I do worry—
CARNEY: Well, if I could just—
MATTHEWS: You say the bell rings the morning or the day of August 2nd. I don‘t think they‘re willing to go any sooner than that because they want to push this to the very end. They don‘t want to help this country make it. I don‘t think they‘re on the same team as you guys. And I mean big picture-wise.
CARNEY: I think, in the end, we all root for America. We disagree significantly on a lot of policy issues, but in the end, all root for America. We all root for America—
MATTHEWS: Well—
CARNEY: -- America‘s economy. And that sentiment, I think, will reveal. I really believe that.
(CROSSTALK)
CARNEY: Chris, you‘ve been here—you were working with Speaker O‘Neill—
MATTHEWS: I read the paper Jay, and they don‘t talk like that. They don‘t talk like that. Those—that guy up in Scranton, that new Tea Party guy, Kelly (ph), sounds like he‘s in loonyland. Got a bill passed. That‘s all they have to do, the “cut, cap and balance” is good enough for them. They all go home now. They‘re living on their own planet.
CARNEY: And I believe that the very good people of Scranton, Pennsylvania—
MATTHEWS: OK. Thank you.
CARNEY: -- will be telling him and others—
MATTHEWS: Thank you.
CARNEY: -- about the right thing to do.
(CROSSTALK)
MATTHEWS: I guess you‘re keeping hope alive, Jay. Thank you, sir, for coming on HARDBALL.
CARNEY: Thank you.
MATTHEWS: Jim VandeHei‘s the executive editor of Politico. I only have a few minutes. I used up all that good time, Jay. I mean—let me ask you this. Is this true? Are we all on the same team here, or is there a real bandit operation going on in the right in the Republican House?
JIM VANDEHEI, POLITICO.COM: I don‘t know who‘s on whose team, but I will say there‘s deep division inside the Republican Party. There‘s a bloc led by Representative Jordan and other conservatives who campaigned on this, who won election in 2010 on this, who do not want to increase that debt limit unless they know absolutely that they‘re getting precisely what they want on capping federal spending.
There‘s others—John Boehner, Mitch McConnell, some of these presidential candidates, some of the chairmen—who feel very strongly that the last thing you can do is default, and they want some sort of deal. And that‘s why Speaker Boehner‘s been negotiating with the president on this.
So there is a deep divide. In essence, Republicans should be happy they‘re winning the debate. The end deal‘s going to be all about cutting spending, the precise issue they ran on in 2010. Unfortunately, they‘re not satisfied with the victory that they have to date.
MATTHEWS: Well, these guys on the right are still insisting on a balanced budget amendment to the Constitution as part of the—they want to begin the changing of our Constitution. And by the way, they say they love the Founding Fathers, but they want to correct them here. They want to do something new that they never thought of, apparently, back in the 18th century. They want to correct those guys back then. And they want to do it under this emergency situation. So obviously, they‘re still holding out for drastic structural change in this country.
VANDEHEI: They are. I mean, I want a hell of a lot of things in life, too. There‘s some things you just can‘t get. They don‘t have the votes in the Senate, period, so they‘re not going to get the constitutional amendment that they desire.
So the question, can you find a middle ground? Can Speaker Boehner find a place where they get big enough cuts to satisfy conservatives? That‘s a big question right now. Even this plan that John Boehner has on the table, you have conservatives saying they‘re not going to vote for it, that there are not enough Republican votes to pass it.
MATTHEWS: Yes.
VANDEHEI: You have outside conservative groups saying that they‘re going to punish members who do end up voting for it, which scares a lot of Republicans that could be subject to difficult primary races. So it‘s still, again, a deep division.
The question is, can they pull it together? I think they do. I don‘t think either—not a single leader in the Republican or Democratic Party or in the White House that wants to default. So they will get a deal. It might be—
MATTHEWS: No, it‘s not the leaders.
VANDEHEI: -- a short-term deal, but they‘ll eventually get a deal.
MATTHEWS: But John—
(CROSSTALK)
MATTHEWS: But Boehner—Boehner is reading—but Boehner‘s reading speeches written by the far right. The other night, last night, on international television, in effect, he came out and said they had a bipartisan passage of a bill, the “cut, cap and balance.”
VANDEHEI: Right.
MATTHEWS: It wasn‘t bipartisan. I was a partisan bill with five Democrats aboard.
VANDEHEI: He‘s not—he‘s on the first—
MATTHEWS: He‘s using their talking points!
VANDEHEI: He‘s not the first politician to claim bipartisan support -
-

MATTHEWS: Well, why are they—
VANDEHEI: -- if they get a couple—
MATTHEWS: -- talking like that, this malarkey? Why are they talking like that?
VANDEHEI: Because everybody‘s posturing. Everybody wants to be seen like they‘re the ones who are the adults at the table—
MATTHEWS: Yes.
VANDEHEI: -- the balanced approach, which is the line that the White House likes to use. I mean, Republicans do have an authentic concern, in that they‘re still looking for details from the White House on what that plan might actually be. There was a big—it seemed like a big fight inside the press room today between Jay Carney, who you just had on, and reporters, who just wanted details. He seemed offended that they wanted to do their job—
MATTHEWS: I know.
VANDEHEI: -- and get details on what the White House actually wanted.
MATTHEWS: Well, he gave me a detail—
(CROSSTALK)
MATTHEWS: Well, I got some news out of it. He said August 2nd is August 2nd. No more of this, We got do it by July 22nd to get the ball rolling. No more last Friday. Now it‘s next Tuesday.
VANDEHEI: Right.
MATTHEWS: And all of a sudden, they‘re saying this can go right down to the wire, which sounds to me like nothing‘s going to get done until Tuesday morning now, once that deadline‘s clear. Right?
VANDEHEI: It seems to me inconceivable that anything gets done before the weekend or Monday because it doesn‘t look like the Boehner plan that‘s on the table can make it through the Senate.
MATTHEWS: Yes.
VANDEHEI: So once it‘s defeated in the Senate, even on a fast-track legislative process, which it will be, there‘s going to have to be a compromise. That compromise can‘t even happen until Thursday or Friday. Once you get into the voting process, you‘re looking at the weekend.
It‘s going to be Monday. The clock‘s going to be ticking.
MATTHEWS: Yes.
VANDEHEI: There‘s going to be the potential of default. I still think, at the end of the day, at the very least, they get a short-term extension so they can work out a deal.
MATTHEWS: OK. Thank you.
VANDEHEI: They‘re not that far apart. It‘s all about cutting spending now.
MATTHEWS: OK. It looks likes Tuesday. Anyway, thank you very much, Jim VandeHei—
VANDEHEI: Take care. Be good.
MATTHEWS: -- for Seeing it through.
Anyway, coming up: Republicans are on the verge of winning a major ideological fight. It seems they‘re winning. No revenues, all spending cuts, the way they want it, where the rich are going to be asked to contribute nothing and everyone else is going to pick up the slack.
Wait‘ll you hear the numbers coming up here. If you‘re already angry about this, wait‘ll you hear the numbers coming up we‘ve got about what really happens to those top 400 richest people in country. They don‘t really pay taxes like the middle class. Wait‘ll you hear the numbers.
You‘re watching HARDBALL, only on MSNBC.
(COMMERCIAL BREAK)
MATTHEWS: Well, how‘s this for screwball audacity? Republican congressman Steve King of Iowa is suggesting that President Obama would be impeached if the crisis people like him created pushes the country into default. Congressman King tweeted that the president would be impeached if he blocked debt payments after a default caused by the Republicans. It‘s like the kid who kills his parents asking for sympathy as an orphan. Anyway, the congressman supports the “cut, cap and balance” plan, of course, which the Senate voted down last week.
We‘ll be right back.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
MATTHEWS: Welcome back to HARDBALL. Here are two things to consider seriously as this debt ceiling debate plays out. One, catch this, the very wealthy are paying a much smaller share of their income in taxes right now than they did a decade ago. And two, those same wealthy American are not being asked to contribute anything to this deal. Anything. The entire debate centers, as you‘ve heard so far on this program, on how much the middle class and the poor are going to have to kick in. How did we get to this point?
Well, joining us right now is the co-host of CNBC‘s “Squawk Box,” “The New York Times” columnist, the great writer, Andrew Ross Sorkin, who wrote “Too Big to Fail,” and “Washington Post” columnist and MSNBC (SIC) Ezra Klein, who in his column was brilliant today.
So let‘s talk about two guys who know what they‘re talking about.
Let‘s take a look—do you want to lead me through this, Andrew, about the
I‘ll start this off.

ANDREW ROSS SORKIN, FINANCIAL COLUMNIST AND REPORTER, “THE NEW YORK
TIMES”: Right.
MATTHEWS: “MORNING JOE” economist analyst Steve Rattner helped put together the following charts, which show just how much less, as a percentage of income, the richest Americans are paying now, as compared to, say, 15 years ago.
SORKIN: Right.
MATTHEWS: According to the IRS, the 400 wealthiest Americans were paying taxes at a rate of about 18 percent under President Bush in 2008. Back in 1993, under Clinton, those individuals were paying rates at about 29.4 percent. That‘s a drop of percent—of 10 percent points in 15 years.
Well, what do we make of this now, how they‘re better off? If you look at that, it seems to me 18 percent is down about what poor people pay and a much lower percent than middle-class people, Andrew.
SORKIN: Right.
So, here‘s what—here‘s what happened. The rate has clearly gone down. It‘s in large part actually a function of investment income. So, when you think of actually the top 400 individuals in the country and where they‘re making their money, a lot of it is investments. They‘re paying capital gains on that. So they‘re only paying 15 percent. They‘re not paying the higher 35 percent, or what Obama would like to be closer to 40 percent or in the 39 percent range.
So that‘s why you are seeing those numbers where they are. The proposal that is on the table obviously today has almost no cuts in it. And the proposals that were on the table over the weekend had very few real revenue enhancements, except to go after some of the private equity and hedge fund guys who are also paying that 15 percent, some of the oil folks who are also paying in that range.
MATTHEWS: Right.
SORKIN: So the real issue is, how do you get some sense of fairness?
I was struck last night by the president‘s remarks when he actually invoked President Reagan and his comments to say, you know, if we‘re going to—if we‘re going to cut on all of these other people, we have to have some shared sacrifice. And I thought that was actually—it resonated, at least with me.
MATTHEWS: You know, it‘s amazing. Your average—those 400 top Americans in the wealthy category make an average income of $270 million a year. So, their wealth well is beyond that.
And a wealthy person once said to me, guys—I want to get to you now, Ezra—I don‘t like any more earned income. I want to make money in capital gains, because that‘s how I really make money.
Ezra, your thoughts about this total inequity that we start this with? And, well, here‘s another graph. It shows how much the wealthiest are paying in comparison with other Americans. And there you see that. As I said a moment ago, the very wealthy are paying about 18 percent, which is about what the people who are really not well-off at all are paying.
The middle class, many people who make $75,000 a year, are paying a higher percentage. So the old joke about the high-paid secretary is paying at a higher rate, Ezra, than the CEO is true.
EZRA KLEIN, MSNBC CONTRIBUTOR: There are two things going on here.
And they‘re connected, but not the same.
So, there is fairness, which is how much the rich are paying even in normal times. And then there is actually the deficit issue, which is part of, but has a lot to do with what‘s happened the last couple of years.
When it comes to what the rich are paying, it has to do with Reagan had very, very big structural tax cuts. Clinton had smaller tax increases. And then George W. Bush had in ‘01 and ‘03 bigger tax cuts. So of course we‘re at very low rates. We have had 20 or 30 years now that have mostly been about tax cuts, and particularly tax cuts for higher-income folks.
Then the financial crisis devastated revenues in this country. They dropped by about five percentage points of GDP. They‘re now at their lowest level since the 1950s. When you put that together and then you hear the Republicans saying we have a spending problem, not a taxing problem, I mean, as a simple matter of fact, that isn‘t true. If you look at our deficit and if you look at what our revenues going forward, we have—
MATTHEWS: Why does it sell? Why do you hear that being played on as almost banjo music by the right? I hear it over and over and over. The troubadours of the right, the less, the most benighted of them all have learned that song.
Andrew, your thoughts here.
(CROSSTALK)
MATTHEWS: Why do you keep saying that over and over again? We‘re not taxed enough. It‘s not that we‘re not taxed enough. It‘s that we spend too much.
SORKIN: It‘s always—it‘s always—I don‘t know if you have the chart. But there‘s a great chart—
MATTHEWS: Here it is.
SORKIN: -- that Steve put out this morning --
(CROSSTALK)
MATTHEWS: Let me show it. I got it.
SORKIN: -- that shows that actually revenue has gone down at the same time as the cuts. So you can actually see it. It‘s almost in parallel.
It‘s an unfair argument and it‘s been an unfair argument that the Republicans have used for a very long time.
MATTHEWS: Well, we have got it right here. Here‘s the graph. It shows just how much spending, how much spending increased from 2000 to 2010, while revenues from taxes decreased sharply.
(CROSSTALK)
MATTHEWS: Right. So, we‘re down to—it‘s about 24 percent of GDP going to spending right now, and about 14 percent to 15 percent, just below 15 percent, for revenues.
(CROSSTALK)
KLEIN: It‘s an unfair argument. It‘s an inaccurate accurate.
But one thing that is true is, it‘s not a dumb argument. One thing we know about the sort of starve the beast policy, where you don‘t allow taxes to rise, it doesn‘t cut the deficit. We have seen that over and over again.
It actually tends to increase the deficit, because people think that spending doesn‘t have any cost. But what it can do over a long period of time is cut programs, because if Republicans are never willing to let taxes to rise at all, over time, program spending is going to have to come down to somewhat meet that.
So if you have a period like you have now, where taxes have been devastated due to both tax cuts and due to the financial crisis and now we‘re going to have the baby boomers retire, and you could have more expenses in the tax code, and then you don‘t allow taxes to rise, eventually you end up having to implement something like the Ryan budget by stealth, simply because you have no choice.
You can do a lot in this country just by not letting taxes rise, even if you never take the next step and say what the policies you will have to do to meet that low level of revenues will be.
(CROSSTALK)
MATTHEWS: Gentlemen, let me ask you a question. I want you to be philosophical.
A lot of people who watch this show every night think about this a lot. So I want to ask you, now that we have two guys who know what they‘re talking about here, for the benefit of everybody watching now, why doesn‘t the American people—we don‘t we have a big debate about what percentage of our economy we want the federal government to spend and are we willing to pay for it, some sort of big picture discussion?
OK. The aging of our population requires more spending on health care for people over 65. Do we want to meet that commitment or not? Or do we want to meet a portion of it? Do we want to help with education at the federal level? Do we want to do real infrastructure spending? Do we want to cut down our overseas military operations?
When are we going to make—
(CROSSTALK)
MATTHEWS: A household makes those decisions every day. Republicans like to say the household, the household.
The average household decides, can we afford to buy new shoes for the kids? Can we afford to go to the movies this week? What kind of a vacation can we take? Can we travel, or do we have to stay in the neighborhood? People make these decisions. Why doesn‘t the federal government decide what it‘s going to spend money on and then decide it‘s going to pay for it?
Those—Andrew, you first. Why not a rational thought here?
SORKIN: Chris, here‘s the fundamental problem.
To have that honest conversation, which is the conversation we need to have, while we need to raise revenue, and that means raising taxes, perhaps on the wealthiest, unfortunately, in the end, you‘re probably going to have to raise taxes on everybody.
And by the way, those cuts that you have to make are going to be deep and they are going to be painful, and that conversation unto itself is a painful conversation, ultimately to truly have. It‘s a conversation we think we want to have but when you actually get—when you‘re sitting around the table and having it, it‘s a very difficult one, because the answers aren‘t so happy.
(CROSSTALK)
MATTHEWS: Well, I grew up with parents who had that conversation every weekend. And that‘s how we lived. And that‘s got to where we got today.
Middle-class parents From aspiring cultures make those decisions all the time.
Ezra, your thoughts. I don‘t know why can‘t we as a country .
(CROSSTALK)
MATTHEWS: You don‘t get steak. You don‘t go to nightclubs. You don‘t go on expensive vacations. You give the kids educations. Your thoughts, last thought.
KLEIN: It‘s a tough conversation to have. But our political system is not well-equipped in any case to have it.
We tend to firefight. We‘re so gridlocked.
MATTHEWS: I know.
KLEIN: We have so much trouble doing anything affirmative that isn‘t forced by a crisis, so we spend all of our time dealing with these crises that we could have prevented in advance, like the debt ceiling. There‘s no reason we have to be having a crisis over the debt ceiling now.
MATTHEWS: I agree. Well said. Well said.
KLEIN: But they don‘t do the thing where, having prevented a crisis, they then have a decent conversation about the future.
(CROSSTALK)
MATTHEWS: Got to go.
Ezra, I read your column. You‘re great.
Thank you, Andrew Ross Sorkin, so much.
SORKIN: Thank you.
MATTHEWS: “Too Big to Fail.” I hope you look at the federal government that way some day.
Up next, if you watched John Boehner last night, his criticism of President Obama might have sounded familiar, like Obama. Boehner basically took every jab the Democrats made about the Republicans and turned it back at them, not very original, but it‘s part of the rhythm of what we‘re in to right now.
That‘s in the “Sideshow.” You‘re watching HARDBALL, only on MSNBC.
(COMMERCIAL BREAK)
MATTHEWS: Back to HARDBALL. Now for the “Sideshow” tonight.
As the debt ceiling debate continues to consume both Congress and the White House, you may have started to notice something about the Republican rhetoric. Their accusations against President Obama sound remarkably similar to what the president himself has said, accurately, about the Republicans.
Here‘s President Obama last week on the GOP‘s complete unwillingness to budge during negotiations.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I think that, you know, one of the questions that the Republican Party‘s going have to ask itself is, can they say yes to anything?
(END VIDEO CLIP)
MATTHEWS: And here‘s Speaker Boehner last night.
(BEGIN VIDEO CLIP)
REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: Unfortunately, the president would not take yes for an answer. Even when we thought we might be close on an agreement, the president‘s demands changed.
(END VIDEO CLIP)
MATTHEWS: That was no fluke. Here‘s what the president had to say about both parties getting too caught up in political warfare, when they should be focused on solving the debt ceiling crisis itself.
(BEGIN VIDEO CLIP)
OBAMA: Neither party in this town is blameless. Both have talked this problem to death without doing enough about it. And that‘s what drives people nuts about Washington. Too often, it‘s a place more concerned with playing politics and serving special interests than resolving real problems or focusing on what you‘re facing in your own lives.
(END VIDEO CLIP)
MATTHEWS: And here‘s Speaker Boehner on FOX this weekend sounding like he‘s reading from the president‘s playbook.
(BEGIN VIDEO CLIP)
BOEHNER: I know the president is worried about his next election, but, my God, shouldn‘t we be worried about the country?
(END VIDEO CLIP)
MATTHEWS: And, lastly, how about when it comes from walking away when the negotiations become too tough to swallow? Here‘s how President Obama characterized the breakdown in communication with the Republican leader.
(BEGIN VIDEO CLIP)
OBAMA: I have been left at the altar now a couple of times.
(END VIDEO CLIP)
MATTHEWS: And once again, the tables were turned.
(BEGIN VIDEO CLIP)
BOEHNER: It‘s the president who walked away from his agreement and demanded more money.
(END VIDEO CLIP)
MATTHEWS: It‘s a pretty transparent strategy by the Republicans, I got to say.
And now for the “Big Number.” This—and this one is pretty telling. President Obama mentioned the word compromise six times last night, half-a-dozen times in the speech last night, the word compromise. How many times did Boehner use it? Well, he mentioned a compromise a grand total of zero times. He doesn‘t like that word, compromise. It offends his people. Ooh, compromise, bad. That‘s tonight‘s nonexistent “Big Number,” zero.
Think about it. They can‘t say the word compromise.
Up next, why aren‘t we hearing anything about the debt ceiling fight from the Republicans who want to be president? Where‘s the leadership? Other than Michele Bachmann, it‘s the silence of the lambs. That‘s ahead.
You‘re watching HARDBALL, only on MSNBC.
(COMMERCIAL BREAK)
BRIAN SULLIVAN, CNBC CORRESPONDENT: I‘m Brian Sullivan with your CNBC “Market Wrap.”
Today, we had a moderate sell-off that accelerated towards the close. The Dow fell 91 points led by industrials like 3M. The S&P was off five and the Nasdaq gave up two.
More upbeat earnings taking a backseat to headlines about the debt ceiling. What else? Ford, 3M, and UPS all moving down despite reporting solid earnings. Investors clearly growing more concerned about the overall pace of recovery. UPS‘ CEO said that growth in America could slow in the second half of the year.
Apparently food is still hot, though, Domino‘s Pizza rising surging 5 percent on rising profits that were boosted in part by a successful international expansion. Meantime, AK Steel and U.S. Steel both missed expectations on slumping steel prices, as well as higher materials costs. There‘s inflation for you.
One big winner of the day, it was RadioShack—yes, RadioShack. It soared after dumping a partnership with T-Mobile in favor of Verizon Wireless. And right now, Amazon.com shares are hot after better-than-expected sales and profits were delivered after the closing bell.
And there were a little bit of signs of stabilization in the housing market. New home sales fell in June, but overall prices are rising some as supplies and inventories dwindle.
That‘s it from CNBC, first in business worldwide—now back to
HARDBALL.
(BEGIN VIDEO CLIP, CAMPAIGN AD)
REP. MICHELE BACHMANN (R-MN), PRESIDENTIAL CANDIDATE: I will not vote to increase the debt ceiling. It goes completely contrary to common sense and how I grew up in Iowa.
We have to deal with the economic reality. And I have the will and I have the courage to see this through.
I‘m Michele Bachmann, and I approve this message.
(END VIDEO CLIP)
MATTHEWS: I love the xylophone tinkle in the background.
Anyway, welcome to HARDBALL.
When it comes to the debt crisis, we know where the Tea Party stands. That was Michele Bachmann, who is leader of the Tea Party in the House, as you saw in her campaign ad.
But what about the other Republicans running in 2012? Why haven‘t we heard from them? It‘s a great question.
And Michael Scherer writes for the “TIME” magazine, the famous “TIME” magazine.
(LAUGHTER)
MATTHEWS: And Michael Hirsh writes for “The National Journal” with a definite article.
I have to say “the” “TIME” magazine.
Thank you, gentlemen.
(LAUGHTER)
MATTHEWS: Let‘s take a look at Romney. Here‘s his tweet. He‘s been criticized by some for not saying much in how he would handle the debt ceiling. Well, today he tweeted, not an appropriate method, I don‘t think, for talking about this issue.
But—quote—“This is historic failure”—“a historic failure of leadership from Barack Obama. Not even Senator Reid is still talking about tax increases.”
So, there‘s the kind of thing you hear from a businessman on the commuter train after two drinks coming from this guy, who doesn‘t drink. It‘s not very thoughtful. “I‘m against taxes.”
Is that the best, Michael Scherer, that you can get out of this guy who wants to be president of the United States?
MICHAEL SCHERER, “TIME”: He wants to be president of the United States by campaigning without being a candidate. He‘s done everything he can over the last six months to stay out of the limelight, to keep himself away.
And whenever he does open his mouth, all he says is, Barack Obama is awful.
MATTHEWS: What‘s the—is this in—in sports, in the old UNC days, we called that the four-corner office. You basically didn‘t—you hold the ball. And in football and other sports, it‘s just controlling the ball.
Is that what he‘s going to do, no—no—no attempts to score?
SCHERER: That‘s what he‘s doing right now. He‘s going to try and do it as long as he can. If Rick Perry gets in, I think the calculation changes.
MATTHEWS: He is going to have to fight for it.
SCHERER: Yes.
MATTHEWS: Your thoughts, Michael Hirsh? Why is a presidential candidate who has been called the front-runner, at least by his own team, acting so much the front-runner, he won‘t talk? We want leadership.
MICHAEL HIRSH, “THE NATIONAL JOURNAL”: Because he is the front-runner and probably, you know—almost the only electable candidate.
MATTHEWS: But don‘t leaders have to lead?
HIRSH: Yes, eventually they do, if they‘re not being challenged directly.
MATTHEWS: Regardless. Well, let you respond to this, Michael Hirsh, here‘s Mitt Romney when he‘s asked how he‘d solve the country‘s deficit problems.
Here he was, and his answer. Let‘s listen to it.
(BEGIN VIDEO CLIP)
MITT ROMNEY ®, PRESIDENTIAL CANDIDATE: The answer for the country is for the president to cut federal spending, to cap federal spending and to put in place a balanced budget amendment. It‘s with my view the president‘s power to say, to his leadership and to the House and the Senate, I will cut spending, I will cap the amount of spending. I‘ll pursue a balanced budget amendment. And if the president would do those things, this whole deficit issue disappears.
(END VIDEO CLIP)
MATTHEWS: But that was nitwit talk. All he was doing was parroting the House Republican bill. He didn‘t have anything to say there. That‘s never going to get passed --
HIRSH: On July 14th.
MATTHEWS: All he‘s doing is parroting.
SCHERER: And here‘s something that‘s not being talked about right now, President Obama—even though he may be losing the policy fight right now—is winning the center of the country.
MATTHEWS: You believe that?
SCHERER: I do. I think there‘s a poll out saying 56 percent agreed with him. The compromise talk, you know, Jay Carney on early, he said it 49 times, in the briefing today, compromise, compromise, compromise, that‘s speaking to independents in Midwestern states, and that‘s where these Republicans will have to sort of start running.
MATTHEWS: Let‘s try Pawlenty. Bachmann is far out. She‘s not even bound for a debt ceiling under any circumstance. She wants the house to come down. Guess she just doesn‘t care, and Romney is playing it safer as a front runner.
Here‘s Pawlenty who‘s somewhere in the middle between these two, trying to get heard. Here he is, Pawlenty, earlier in this month on whether he‘d raised the debt ceiling. Let‘s listen to the former governor of Minnesota.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: Under any circumstances you would not raise the debt ceiling without sufficient spending cuts.
TIM PAWLENTY ®, PRESIDENTIAL CANDIDATE: They‘ve already gone through the debt ceiling. They went through in May. So, I‘m saying I wish they would raise it, but if they‘re going to raise it, at least get some structural reform and improvement so we‘re on a better trajectory going forward.
(END VIDEO CLIP)
MATTHEWS: Wow. Structural reform, better trajectory, that will get elected president.
Here‘s what Pawlenty said in a statement released last night. “Let me be clear, I will not vote to raise the debt limit. The Congress and president should not raise the debt limit.” Well, there he is back to her position. So, there he is fighting for the far right with Bachmann. We can see his strategy. She says how I grew up in Iowa—all these references to Iowa, right?
SCHERER: Common sense. But he‘s stuck in the Ames straw poll right now. That‘s all he cares about. And that‘s on the plank of the party.
MATTHEWS: And he has to win that?
SCHERER: He‘s saying things that sounds like it pleases the plank of the party, not committing and he can‘t back track.
MATTHEWS: He‘s all reach out right now.
(CROSSTALK)
SCHERER: That‘s right.
HIRSH: He‘s worried about the base that it appears for the moment Bachmann, you know, has captured in the polls. And that‘s what he‘s got to worry about right now. So, he needed to say something clear and needed to fight this growing reputation that Pawlenty has for, you know, not taking off, not lighting a fire with anyone.
MATTHEWS: I love (INAUDIBLE) -- every time I see a picture of this guy, he‘s in the background.
Let me ask you this—it looks the race has come down on the Republican side to three heads, Bachmann on the far right, Rick Perry, the governor of Texas, probably coming in somewhere where she is politically, and Mitt Romney, who will be what he has to be politically.
SCHERER: Right.
MATTHEWS: Is that it?
SCHERER: There‘s still plenty of time for things to move --
MATTHEWS: But those are three people?
SCHERER: Right now they are. Yes. I think that‘s right.
(CROSSTALK)
MATTHEWS: Those three.
HIRSH: Pawlenty‘s not taking off. Huntsman is too new.
MATTHEWS: So, you have three people. Bachmann who will probably—I don‘t know, anything can happen in this country. Probably not elected proceed. She‘s probably not a good bet for a general election candidacy.
Rick Perry is an unknown factor. He‘s never even talked about running for president. All of a sudden seems to be talked into running for president. Not that he really felt he should be president.
And Romney, who is wanting to be president since he was a kid, probably.
SCHERER: Right.
HIRSH: Yes. And interestingly --
MATTHEWS: So what‘s new, pussycat? It seems like this a pretty boring set of candidates with nothing to say.
HIRSH: It is. Although, interestingly, Jon Huntsman—
MATTHEWS: Who everybody in the press likes.
HIRSH: Likes him and he seemed to reach for the middle, suggesting that he would support the Boehner plan, which, of course, for far right, you know, Tea Party types, still talking.
MATTHEWS: Is that Republican Party that we‘re looking at right now, this guy, he‘s alternative, he looks great. He has some experience in business and certainly as a governor. Incredibly popular out in Utah. This guy is running for a Republican Party that hasn‘t existed in 30, 40 years. It‘s a pre-Reagan party.
HIRSH: It does seem so. Yes.
MATTHEWS: So, who‘s really—what‘s he doing?
HIRSH: Exactly the same that party that Obama in his speech was trying to appeal to invoking Ronald Reagan, rather unsuccessfully, I would say.
SCHERER: Since January, the race in the Republican Party has been Romney and who could be the un-Romney? Rick Perry mixes it up because he‘s going to come in with conservative credentials, come in with the evangelicals behind him. And he could displace Huntsman—
MATTHEWS: I still think people think that the former mayor of Wasilla might jump in this thing at the last minute.
Anyway, thank you, guys. You think she might?
SCHERER: I‘m not betting on it.
HIRSH: Fifty-fifty.
MATTHEWS: See? It‘s interesting, especially Joe McGinnis book makes big noise.
Anyway, thank you, Michael Hirsh. Thank you, Michael Scherer.
Up next, Latinos—we haven‘t talked about them lately. But listen to this: their critical, of course, to President Obama‘s reelection. Well, they are among the hardest hit people during this recession that continues. So, can the president hold on them if things don‘t get better? Will he lose them if they get worse?
This is HARDBALL on MSNBC.
(COMMERCIAL BREAK)
MATTHEWS: Wow. Another U.S. congressman has resigned over a sex scandal. Oregon Democrat David Wu says he‘ll step down after an 18-year-old woman accused him of unwanted sexual advances. Wu says his resignation is effective upon resolution of the debt ceiling debate. He‘s leaving much earlier than he wanted to.
Within days of the woman‘s allegations, by the way, Democratic leaders call for the ethics committee to investigate. Wu‘s latest scandal comes after several aides resigned earlier in this year after a bizarre incident in which he sent a picture of himself, there it is, dressed in a tiger costume.
We‘ll be right back.
(COMMERCIAL BREAK)
MATTHEWS: Welcome back to HARDBALL.
We learned today, a lot of people knew earlier, that the Hispanic
community, a key voting bloc for President Obama in 2008, has been hit the
hardest in this brutal recession. From 2005 to 2009 -- look at the chart -
the median net worth of Hispanic households dropped a stunning 66 percent. That‘s a two-thirds drop in their worth.

Black households dropped more than half, 53 percent, almost at badly.
And white households, just 16 percent.
So, how will this economic hit affect the Hispanic come 2012?
Maria Cardona is a Democratic strategist who‘s headed up the Hispanic outreach for Hillary Clinton‘s presidential campaign and Christina Bellantoni is associate politics editor at “C.Q.”—that‘s “Congressional Quarterly,” -- ‘Roll Call,” and leads their 2012 coverage.
So, we‘ve got great coverage here ourselves. I want to start with Maria, then Christina.
Give me a sense of how Hispanics, their economic life is different.
Their vulnerability is different to an economic downturn.
MARIA CARDONA, DEMOCRATIC STRATEGIST: Their economic vulnerable is absolutely different. This is a community that for the last of couple years, as you have said, has been hit in this recession unlike any other community that we have seen.
Most of it has been because the majority of Latinos, big communities of Latinos, big communities of Latinos live in Nevada, live in Florida, live in California—three states that have seen the mortgage crisis the worst in this country.
MATTHEWS: So the value of their prime property, their house, has dropped.
CARDONA: Exactly. And for Latinos, as you may know, Chris, their home has always been probably the biggest definition of the American Dream in this country.
MATTHEWS: And some of them overreached?
CARDONA: Well, you know, yes, I mean, we can talk for hours to --
MATTHEWS: Yes, we know what happened.
CARDONA: -- to what the cause was. But then that goes to the politics of it, right? So, you always vote your pocketbook. And what I think is going to be the reality is that Latinos are going to take a look at this president, going to take a look at Democrats, take a look at Republicans, they will take a look at the policies and really see which policies were the ones that were put in place—
MATTHEWS: OK. Can I make a partisan comment?
CARDONA: -- that helps the Latino community here.
MATTHEWS: The destruction of our housing industry does not begin under President Obama.
CARDONA: That‘s right.
MATTHEWS: That was the burning bed he got into.
CARDONA: No question about that, and Latinos understand that.
MATTHEWS: Well, that‘s some points.
Let me go to Christina Bellantoni, the sophistication of voters goes with their bad circumstances generally. You pay more attention when you‘ve got more at stake.
Your thoughts about the possibility of President Obama not getting as good a vote in ‘12 as he got in ‘08 among the Latino community.
CHRISTINA BELLANTONI, CQ ROLL CALL: Obama campaign team is very aware that Latino voters are important to winning in 2012. That‘s part of their strategy. You‘ve seen a lot of growth in areas, you know, that you just mentioned on Nevada, Arizona as well, and Florida, these are big states with booming Latino populations.
And I just got a statistics that 50,000 Latinos turn 18 every month in this country. That means they‘re eligible to vote. And they are very well aware of that.
But the issue that the Obama campaign is sort of looking at is that if the president continues to talk about immigration policy, and he‘s got this sort of friendlier policy, and particularly pushing the DREAM Act that he says he wants passed, even though it‘s not going to become reality before the election, he can bank on Republicans trying to demonize immigrants. That‘s what the campaign believes. It has happened over the years. And I think the president believes he will be better alternative for them.
MATTHEWS: Are they as stupid as the campaign run by Sharron Angle out in Nevada where she‘s basically showing a bunch of like a cowboy movie, of comancheros or something, coming to kill the white people?
BELLANTONI: Yes.
MATTHEWS: Are they stupid—you‘re saying they‘re stupid enough to run those ads?
CARDONA: Yes, they not only are, like you said, stupid that way. They really don‘t understand I think the importance of the community in this country. They have people like Jeb Bush and Karl Rove talking to them behind the scenes, because Jeb Bush and Karl Rove are nervous that they will never see the White House if they continue on this path.
The reality of it is, the path through the White House leads through Latino communities, the GOP has no clue how to navigate that. And they will never seen inside La Casa Blanca, Chris, if they don‘t change.
MATTHEWS: Well, let me without getting to Casa Blanca, I love it, I love (INAUDIBLE), all different ways, let me go back to Christina—this question about the immigration bill. I‘m skeptic that either side really wants a resolution to that. They want the politics. Is that fair?
BELLANTONI: Oh, absolutely. I mean, you really saw that play out in 2005 and 2006. You know, you had a comprehensive immigration reform bill that President Bush supported and that a lot of Republicans risked their neck for and it completely backfired on them. That is one reason that Republicans lost the House in 2006.
It wasn‘t just a Democratic wave. It was Republicans turning against Republicans.
MATTHEWS: I know. There are about three people that I trust on that, one of them is lost, Ted Kennedy. But I think Lindsey Graham is good on that. And I think Chuck Schumer is good on that.
There are some people that really want a real immigration bill that could pass.
CARDONA: I agree with that. I completely agree with that.
MATTHEWS: Thank you, guys.
Maria Cardona, please come back and keep us updated—Christina Bellantoni.
When we return, “Let Me Finish” with a way out of the debt ceiling.
Wow, a way out of the standoff, at least. You‘re watching HARDBALL.
(COMMERCIAL BREAK)
MATTHEWS: “Let Me Finish” tonight with this dreadful, dispiriting, debasing, dueling diatribe over the debt. Both sides now have the other side pegged. That‘s why the Spanish don‘t allow the fighting bull to be fought a second time. He now knows what the matador knows as well as the matador knows him. You no longer here the “oles,” by the way, shouting from the stands, no longer the heads of the crowd to turn to catch each of the charges of the bull. It‘s gotten, dare I say it, dull out there.
It isn‘t, of course—not if you count the stakes and not if you get past the rivalry out in the arena to the world at large. The world at large has a lot riding on this—a lot more than a political election. The world at large meaning, America, this country, is ready to go down a notch over this contest among politicians.
I know why it‘s important to raise revenues as well as cut spending.
We tax 15 percent of the economy and spend 25 percent, only a hard partisan
can‘t see the need to bring up revenue and bring down spending to something
like 20 percent of the economy, perhaps tending a bit above that level to
account for an aging population running up health cost, not even counting
the need to do something about education in this country and infrastructure
both which are deteriorating.

I know also why it‘s important to do this debt quickly, as the president has been urging. On both counts, the revenue issue and the timing issue, I‘m with him.
What I don‘t understand is why it‘s so important to avoid another debate in 2012, say six months from now, that would permit a second step in the hiking of the debt ceiling. So, if that‘s the only run, the president may have to sign onto the deal.
Where the Republicans have to give way and do so immediately is on this balanced budget amendment to the Constitution. This is no time to be debating something like this, now with the clock ticking.
They also have to give way on the right-wing auxiliary, you know, the freshmen elected in the Tea Party excitement of last September, to vote on a dead hike now. They can choose between Congresswoman Bachmann‘s wild version of politics and reason, but they have to do it fast. If she‘s ready to risk letting this country take a dive and enjoy the thrill of a wild dance on the political right, they better decide whether to join her or not.
And if they give and the president gives on a second step on this debt ceiling hike, we could have a deal. And if not, we won‘t.
And that‘s HARDBALL for now. Thanks for being with us.
More politics ahead with Al Sharpton.

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