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updated 8/11/2011 5:37:43 PM ET 2011-08-11T21:37:43

Guests: Chuck Todd, Veronica De La Cruz, Michael Steele, Alex Wagner, Steve Scalise, John Larson, Ron Reagan, Mark Penn

CHRIS MATTHEWS, HOST: Game on.
Let‘s play HARDBALL.
Good evening. I‘m Chris Matthews in Washington.
Leading off tonight: In about an hour, the House of Representatives will vote on Speaker John Boehner‘s debt ceiling plan. Even if it passes, to quote White House spokesman Jay Carney today, quote, “It ain‘t going anywhere in the Senate.”
Here‘s why. So far, the Democrats have given in on getting a clean debt ceiling raise. They‘ve given in on the size of spending cuts, given in on having any tax increase, even for the wealthy. And now Harry Reid says the bill will be voted down tonight in the Senate because it doesn‘t raise the debt ceiling through 2012. Still, it now looks like something will come out of tonight‘s votes that will resemble the final deal.
Also, holding the economy hostage. Are Republicans willing to see the U.S. default or lose its credit rating if they don‘t get everything they want? We‘ll talk to a Tea Partier about just how far they‘re willing to go.
Also, where‘s President Obama in all this? He‘s losing favor among his core supporters, we know, and Nate Silver says if his approval ratings don‘t improve, he‘ll be a 2-to-1 underdog next year.
And who‘s winning the message war? We‘re going to talk to Democratic
pollster Mark Penn. who guided, of course, Secretary Hillary Clinton in 19
or rather 2008 about how each side hopes to come out of this looking like the responsible party.

And “Let Me Finish” tonight with the question of just how far the Tea Party‘s willing to go to get its way.
We start with the debt ceiling crisis with the real expert on this, Chuck Todd, political director for NBC News, as well as chief White House correspondent. And also, Alex Wagner, who‘s a Huffington Post reporter and an MSNBC contributor. Thank you both for joining us.
Chuck, you first. The way I see it is the Senate acts tonight on the House bill, after the House bill passes, if it does, and we head in towards sort of a weekend effort to reconcile the two approaches. The president should have on his desk by Monday some kind of dealmaker. Your thoughts.
CHUCK TODD, NBC POLITICAL DIR./WHITE HOUSE CORRESPONDENT: That‘s if somehow Harry Reid and Mitch McConnell can come to an agreement on how the Boehner bill, assuming it does make it over—and all folks are planning on the assumption is that it will—that assuming they can come together in an agreement on amendments.
But there is one giant sticking point, and that is this idea for the second round of deficit reduction, if somehow, this joint committee fails to find the deficit reduction numbers in it, that automatically, before another debt ceiling vote happens, that you got to find another $1.8 trillion in cuts, putting us right back to where we were now.
The White House says it‘s a non-starter. Harry Reid says it‘s a non-starter. The question is, politically, how much hardball is Mitch McConnell going to play on this? And I have a feeling he‘s going to play pretty big hardball on this, to borrow a phrase, Chris, because—
MATTHEWS: Yes.
TODD: -- he‘s—it seems to me, he really has Boehner‘s back, not just having Boehner‘s back today, not just having Boehner‘s back tomorrow, but he‘s going to have Boehner‘s back.
The question is, can Harry Reid pry away seven or eight Republicans to work with him? Where does that happen? At this point, I don‘t think you‘re going to see any movement on a deal publicly, at the earliest, not until Sunday.
MATTHEWS: Is the real fear not that there‘s a second effort to cut spending a bit more, but that the second part of the spending cuts, which would come at the end of this year, the vote on that, would actually cut it to the bone? It would go after entitlements, after Medicare, after the things the Democrats treasure. Is that the big fear? Because I think Pelosi, the former speaker, now Democratic leader, was alluding to that, I believe, in her very strong statement against the Boehner plan tonight.
TODD: Well, that is one—that is one fear. I mean, you talk to Democrats familiar with the way these negotiations have gone, and they‘ll say, Look, this first $1.2 trillion—the first round of cuts that both Boehner and Reid have in their plans—they‘re almost identical. They‘re off a little bit on the Pentagon, but they‘re mostly identical. That has been the agreed upon amount of cuts over 10 years that everybody‘s agreed to, whether it was in the Biden talks, Boehner-Obama, Reid-McConnell, whatever version you want to come up with. Those cuts have remained the same.
The second round of cuts, Democrats have always said they would be for if it comes with significant movement on the revenue/tax issue. And if there is no movement on that issue, the Boehner bill says, Well, no, we‘re going for those cuts anyway, and that‘s why Democrats want to draw a line on that because, yes, it would be some real pain. Democrats are arguing, Fine, we want shared pain. And they‘re saying there‘s no shared pain on this.
MATTHEWS: Alex, let me get you in on this. Alex, it seems to me that there‘s a couple deal breakers here. First of all, Democrats are not going to agree to any balanced budget amendment to the Constitution on this sort of, you know, hostage situation they‘re in right now. They‘re not going to start changing the Constitution because they don‘t believe in it anyway.
ALEX WAGNER, MSNBC POLITICAL ANALYST: Right.
MATTHEWS: Secondly, it doesn‘t look like the Democrats—it doesn‘t look like Republicans are really going to accept any tax increase. So it really comes down to the spending measures, how high they are, and this second trigger, where there‘s going to be a second cut coming at the end of this year and the beginning of next year. What do you see is the pitfall of this whole deal this weekend?
WAGNER: Well, I mean, look, I—really—and you‘ve heard this from both sides, it‘s who‘s going to hang their hat on—it‘s the timing on this. It‘s huge. I mean, you also have to understand—is there appetite? I mean, the American public—are we going to drag them through this again in five or six months? There‘s talk about, you know, ruining Christmas and the GOP ruining Christmas by virtue of the fact that they want to sort of relitigate this in only a few months.
And then, of course, there‘s the ultimate question here, which is what are the credit rating agencies—credit rating agencies going to do? I mean, there—there—we still don‘t know whether, you know, a two-step program is going to avoid a downgrading of U.S. credit.
Now, there‘s a very strong likelihood that even if we get a sort of solution here that we can go to AA rating from a AAA rating. And what does that do to the markets? And moreover, what does that do for the White House and Congress?
MATTHEWS: OK. Let‘s take a look at Speaker Boehner. Here he is today, previewing the vote. This was early this afternoon, Speaker John Boehner. Let‘s listen.
(BEGIN VIDEO CLIP)
REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: When the House takes action today, the United States Senate will have no more excuses for inaction. The bill‘s not perfect. I‘ve never said it was perfect. Nobody in my caucus believes it‘s perfect. But what this bill reflects is a sincere, honest effort to end this crisis in a bipartisan way.
(END VIDEO CLIP)
MATTHEWS: Well, end this crisis and then have another one a few months from now. That‘s not quite consistent there.
Here‘s Senator Harry Reid, promising to kill the bill tonight that comes out of the House, should the Boehner bill actually get past the House and make it to the Senate. Let‘s listen.
(BEGIN VIDEO CLIP)
SEN. HARRY REID (D-NV), MAJORITY LEADER: As soon as the House completes its vote tonight or this afternoon, the Senate will move to take up that message that they sent to us. It will be defeated.
Our economy and the financial markets desperately need stability. Speaker Boehner‘s bill does not provide either. It does not provide stability and it certainly doesn‘t help our economy in any way. So I believe, Madam President, it‘s time for the Tea Party Republicans to stop resisting compromise. They must join Democrats and Republicans of good will to put the economy ahead of politics.
(END VIDEO CLIP)
MATTHEWS: You know, Chuck, I think there‘s a way out of this. Can‘t the Democrats buy their way—buy away this idea of a second vote at the end of the year or next year by giving them a bigger cut? It‘s something that Major Garrett wrote to say in one of his articles. It seems like if they want to buy their way out of this—
TODD: Yes.
MATTHEWS: -- they say, OK, we‘ll take bigger cuts now to pay off not having another vote later on in the year or next year.
TODD: Well, actually, I think the potential—the potential way that this comes together is on this idea of the trigger. Apologies for using this Congressspeak, but instead of it being the debt ceiling, agree to something much harsher, and a penalty that would be harsh for both sides, so maybe an agreed upon—if this joint committee fails to come up with tax reform and entitlement reform, across the board slashing on transportation, say, agriculture, Pentagon, in a really—in a way that would be automatic so that you couldn‘t have any control. You‘d have to say maybe it‘s across the board, you know, in some percentage across-the-board cut, so that there‘s a real penalty that both sides would share if the joint committee fails because that‘s what the White House is arguing.
They assume it‘s going to be created to fail. Republicans argue, No, no, no. They really want—you know, Boehner really wants tax reform. He wants this to work. That‘s where this would get—that‘s the negotiating room here. It‘s not up-front cuts, it‘s the trigger on that second round.
MATTHEWS: I see. Let‘s go back to Alex on that. It seems to me that looks very attractive. These across-the-board ideas are always very attractive because everybody figures, Well, all the appropriations will be cut by the same percentage.
WAGNER: Yes. Well, it‘s also—you know, it‘s the proverbial kicking of the can down the road. I think the fact that there are—we‘re even talking about triggers—I think Chuck made this point earlier on Twitter. It‘s evidenced that there‘s—that there‘s—there‘s the kind of an understanding that nothing‘s really going to happen.
You know, look, the thing that is most marked to me in all of this—and I—and I—it happened today in the White House press briefing. Someone asked Jay Carney—they said, What has the White House gotten out of this? And the only thing that he could come up with was, We‘re not going to default.
And I think if you look at the two packages that are on the table
here, they are remarkably similar. I think the good news is that means
there‘s going to be a deal. The bad news is, where—where do the chips -
what does that mean for Democrats when the chips fall down?

MATTHEWS: Yes, and I do wonder, Chuck, does the president feel that he‘s strong—he‘s been a strong leader in all this? Does he think so?
TODD: I think they would argue that, certainly, they look like the reasonable person in the room and on the message front, long term, and that they have a long view on this, that they can do that. Short term, they admit that, like everybody in Washington, they‘re all taking on water. But they feel like they‘ve made the point that they‘ve isolated the Republicans a little bit, made them look like they‘re too stubborn, that they won‘t compromise.
MATTHEWS: Yes.
TODD: But at the end of the day, you know, he‘s been there to stop them from themselves, right? He‘s been there at the end, Fine, I‘ll extend the Bush tax cuts. Fine, I‘ll sign this bill to prevent default. They‘ve counted on him to be there to not call their bluff. They‘ve yet to do that.
MATTHEWS: Yes. Thanks so much, Chuck Todd, as always. We‘ll be watching over the weekend. And Alex Wagner, thank you, as well.
Coming up: How far are Republicans willing to go, to let things fall, if they don‘t get everything they want? Are they willing to keep acting as if the ends justify any means, default, a credit downgrade, economic catastrophe? What‘s off the table here? We‘re going to talk to a Tea Partier about just how far Republicans will take their fight.
You‘re watching HARDBALL, only on MSNBC.
(COMMERCIAL BREAK)
MATTHEWS: Well, the stalemate over the debt is taking its toll on President Obama‘s standing in the polls. No surprise there. A new Pew poll shows the sizable lead he held over a generic Republican in the 2012 match-up has evaporated. Forty-one percent say they‘d like to see the president reelected. Forty percent say they‘d prefer a Republican candidate not mentioned. Back in May, President Obama had an 11-point lead over the not-mentioned Republican.
We‘ll have much more on how this fight is affecting the presidency later in the hour.
We‘ll be right back.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
DAVID PLOUFFE, WHITE HOUSE SENIOR ADVISER: We should stop talking about the Boehner bill as if it‘s some recipe for a solution here. It‘s dead on arrival. So what you‘re going to have to do is reconcile what‘s in Reid and Boehner, which is a lot of the things the president‘s talked about in terms of spending cuts he‘d willing to accept. And that‘s where the compromise is.
(END VIDEO CLIP)
MATTHEWS: Wow. Welcome back to HARDBALL. That was White House senior adviser David Plouffe talking about the Boehner bill on “THE DAILY RUNDOWN” this morning with Chuck Todd.
But a lot of Tea Partiers have made it clear they are unwilling to compromise at all and plan to stick to their weapons, no matter what the economic consequences over the weekend.
Joining me right now to talk about this is Tea Party Caucus member U.S. Congressman Steve Scalise. Congressman Scalise, thank you so much for joining us. We‘re on the—as you are well aware, we‘re facing this vote tonight. Will you vote with the leadership?
REP. STEVE SCALISE ®, LOUISIANA: Right now, I‘m going to vote for the plan that actually starts cutting spending and putting us on a path to finally balance the budget. So yes, I‘ll be supporting this plan and pushing for even deeper cuts down the road, when we still have to face this spending problem that we have in Washington.
MATTHEWS: What made you decide to go with the Boehner plan, rather than sticking to the very hard line of some Tea Partiers, who said, basically, What we started with, we want now?
SCALISE: Well, I supported “cut, cap and balance,” and frankly, I still think that‘s the long-term solution. And we‘re going to live to fight another day on that bill.
But today, the plan we have before us is basically what the president‘s talking about, and that‘s still just threats and ultimatums and tax increases, versus this plan that Speaker Boehner brought I think that all of us acknowledge isn‘t the long-term solution, but it starts the process of solving the problem by cutting spending and saying we‘re going to have to face the reality that Washington can‘t keep spending money it doesn‘t have.
MATTHEWS: What percentage, do you think, of the U.S. economy should
be spent by the federal government? Give me a rough notion because your
party has used numbers for the balanced budget amendment and other
programs, like the cap measure—what do you want it to be? What—what
how much federal government should we have in terms of the dollar?

SCALISE: Sure, Chris. And I think somewhere around 18 percent would be a healthy number for our country and for the growth of our economy to create jobs. And obviously, that‘s something we‘ve been willing to negotiate on. We‘ve been willing to negotiate on the cuts, but you‘ve got have real cuts. We‘ve even been willing to negotiate on the kind of constitutional amendment and the way it should be structured. And yet both the president and the Senate liberals have refused to negotiate with us on any of those points.
MATTHEWS: That‘s about—
SCALISE: So I think if we‘re going to be reasonable, we put a lot of options on the table.
MATTHEWS: Yes. Look, I‘m with you. I‘m with you. I want to do it this way. I want to be reasonable. But you‘re talking about going down from 25 percent of the GDP down to around 18 percent. That‘s chopping off about a third of federal activity right now, a third of federal activity.
(CROSSTALK)
SCALISE: -- overnight. Nobody‘s suggested we have to do that overnight, Chris.
MATTHEWS: Well, overnight—even eventually, what are you going to get rid of?
SCALISE: We‘ve got to get there. At some point—
MATTHEWS: What would you get rid of?
(CROSSTALK)
SCALISE: We‘ve already laid out over $100 billion in cuts, and the president doesn‘t even agree with us on that.
MATTHEWS: OK.
SCALISE: So we‘ve got to find—we‘ve got to find some middle ground. But at some point, the president‘s got a responsibility to put a plan on the table.
MATTHEWS: No, but you do, too.
SCALISE: He disagrees with our plan—he disagrees with our plan.
We‘ve put a plan in writing and we sent it over, “cut, cap and balance.” Tonight, we‘re going to have another vote on a plan that starts addressing the problem.
MATTHEWS: Yes. OK. I‘ve watched this—
SCALISE: So if they want to sit on the sidelines—
MATTHEWS: I know.
SCALISE: You know, but we don‘t need somebody‘s going to be—
(CROSSTALK)
MATTHEWS: You‘re leading. Let me just ask you this. You know, all my life, people like less governing, except when it comes to them. I‘ve known people—my father, included, my parents—they‘re very conservative Republicans. But when Medicare came and they hit 65, they wanted to get it.
Who‘s willing to give up what they‘re getting right now in this country? The military pensions, veterans‘ pensions, Social Security, Medicare, Medicaid—all those things we have now people like, and there are middle class people that get them—
SCALISE: Sure.
MATTHEWS: -- who are entitled to them. What are you going to give up that‘s big to get—
SCALISE: Well, let‘s start with—
MATTHEWS: -- from 25 percent of the economy down to 18 percent, all the way down?
(CROSSTALK)
SCALISE: Let‘s start with the biggest thing, and that‘s Medicare. If you look at what “Obama care” did by taking $500 billion out of Medicare—
Medicare today, according to the president‘s own actuaries, is scheduled to go bankrupt in the next 12 years.
MATTHEWS: What are you going to deny people?
SCALISE: So doing nothing—doing nothing lets Medicare go bankrupt.
MATTHEWS: OK.
SCALISE: What we put on the table in our budget is a plan that actually says if you‘re 55 or older, nothing changes. It‘s there are for you, but it‘s not going bust. But if you‘re under 55, rather than letting it go bankrupt, we keep a plan in place that finally controls the costs while allowing people to have the same options that members of Congress have today. So that‘s a responsible plan that addresses the problem, as opposed to letting it go bankrupt under “Obama care.”
MATTHEWS: But again you‘re kicking the can down the road because you‘re saying only people 55 or younger. But those 55 or younger, the women especially will live to be 80-something. And you‘re going to tell a woman 85 years old, when she gets there, Oh, you don‘t get health care anymore. You got to go out and buy insurance. You go try to buy insurance when you‘re 85 years old, health insurance. You can‘t buy it.
SCALISE: No, Chris, it actually works—
MATTHEWS: You‘re not going to give some—
SCALISE: It works a lot like—
MATTHEWS: -- gift certificate to get it.
SCALISE: -- Medicare Part D. It works a lot like Medicare Part D. But ultimately, it—the status quo is it goes bankrupt. And so that 85-year-old, right now, if she lives another few years, there‘s going be no Medicare because it goes bankrupt under current law. So we‘re trying to say, Let‘s reform that to strengthen it and keep it there, but also make sure it doesn‘t bankrupt—
MATTHEWS: What else are you going to—
SCALISE: -- not only Medicare—
MATTHEWS: -- get rid of?
SCALISE: -- and the rest of the country.
MATTHEWS: What else you want to get rid of?
SCALISE: We‘ve laid out—we‘ve laid out a—first of all, if you look at the federal budget just in the last two years under President Obama, you‘ve seen departments grown by over 25 percent when families are cutting back. Families have been doing—
MATTHEWS: OK, that‘s generalized.
SCALISE: -- been doing without things because—
MATTHEWS: That‘s just general talk.
(CROSSTALK)
SCALISE: -- live within their means. No, we‘ve laid down specifics, though. We‘ve laid down—
MATTHEWS: You know, I—
(CROSSTALK)
MATTHEWS: There are people—what percentage does this country do you think spends on foreign aid, things like Welfare? Everybody says that‘s where all the money‘s going.
(CROSSTALK)
MATTHEWS: That‘s not where all the money‘s going.
SCALISE: No, you—look, there‘s money throughout this budget. And we have had actual votes on the floor. I vote—I have voted to cut a whole lot more than the $100 billion.
We have won some of those and we haven‘t won some of those. But at the same time, we‘re finally changing the debate here in Washington.
President Obama came in saying, we have got to just keep ramping up the
spending in Washington. And look where it got us. It‘s gotten with us 9.5
9.2 percent unemployment and now this $1.5 trillion deficit this year.

MATTHEWS: Well—
SCALISE: We have got to turn it around.
MATTHEWS: You know, this bed was on fire when he got in it. Let‘s be honest about it.
SCALISE: And both sides have blame, Chris.
(CROSSTALK)
MATTHEWS: Your guy Bush, Bush never vetoed a single spending bill.
(CROSSTALK)
MATTHEWS: And, by the way, Bush got a big tax cut, two big wars, a big tax cut, a prescription drugs bill that wasn‘t funded.
We had a guy on last night that showed that almost half the federal debt was caused by Bush over the eight years he was in the office. So that‘s serious business.
SCALISE: Yes, but President Obama loves blaming President Bush.
MATTHEWS: No, I just did it.
SCALISE: President Bush hasn‘t been in office for almost three years.
You like it, too.
(CROSSTALK)
MATTHEWS: You know why?
(CROSSTALK)
MATTHEWS: Well, if you don‘t want to blame the previous officeholder, why—
(CROSSTALK)
SCALISE: Who has been in office over the last two-and-a-half years?
Who doesn‘t want—who doesn‘t want to correct this problem?
(CROSSTALK)
SCALISE: I‘m willing to assess blame where it is. And it falls on both sides of the aisle.
MATTHEWS: That was a totally contradictory statement.
(CROSSTALK)
SCALISE: We have got to fix the problem today, Chris.
(CROSSTALK)
SCALISE: The president doesn‘t want to put a plan in place. We have got to fix this problem.
MATTHEWS: OK. OK.
SCALISE: And it‘s not going to be done by raising taxes. The problem is Washington spends too much money. You don‘t solve that problem by sending Washington—sending Washington more money and job-killing taxes. You start controlling spending --
MATTHEWS: OK.
SCALISE: -- getting us on a path to a balanced budget.
MATTHEWS: But I have never heard you guys more times—over and over and over again, you say we have a $14 trillion debt. Half of that was caused by Bush. You can‘t just walk away from that and say don‘t talk about Bush, when he left us with this debt. He left it with us.
SCALISE: Chris, who is here solving the problem?
MATTHEWS: OK. Thank you.
SCALISE: We‘re here solving the problem. And President Obama doesn‘t want to address it. He doesn‘t want to put a plan in writing. We have sent a plan to the Senate. We‘re going to send another one tonight. When are they going to start taking action and addressing the problem?
(CROSSTALK)
MATTHEWS: Well, the fact is, the president offered to cut Medicaid, Medicare, Social Security, and all kinds of things. All he wanted was to raise taxes on the rich, and you guys defend the rich.
SCALISE: No, all he does is plays class warfare and act like corporate jet owners and billionaires and millionaires solve the problem. He‘s unwilling to put a plan in writing. And I think a lot of people on both sides have criticized him for his failure of leadership there. And it‘s right—and it fits—if the shoe fits, wear it.
(CROSSTALK)
MATTHEWS: OK. OK.
Thank you, U.S. Congressman Steve Scalise of Louisiana. Sir, thanks for coming on.
SCALISE: Thanks, Chris.
MATTHEWS: Senator McConnell, Mitch McConnell, this morning said the only reason the Democrats don‘t want the Boehner plan is because of politics. Let‘s listen.
(BEGIN VIDEO CLIP)
SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: Democratic leaders and the president himself have endorsed every feature of this legislation, except one. And that‘s the fact that it doesn‘t allow the president to avoid another national debate about spending and debt until after the next presidential election.
Why would you want to do that? To make the president‘s reelection campaign a little easier is the answer.
(END VIDEO CLIP)
MATTHEWS: Well, here‘s Congressman John Larson. Thanks for joining us.
REP. JOHN LARSON (D), CONNECTICUT: Good to be here, Chris.
MATTHEWS: He‘s a leader of the—the chairman actually of the House Democratic Caucus. He‘s from Connecticut.
Sir, you just heard the diatribe. I just want to be fair about this. This national debt we have got right now, the $14 trillion, wasn‘t invented by President Obama. He inherited overwhelmingly most of it, especially the $7 trillion added up by Bush because of wars and because of prescription drugs and the rich—tax cuts for the rich.
And they walk away from that and blame it all on him. I don‘t know how they have any morality about this. But you just heard this guy with one million words make that point.
LARSON: I think we ought to mail everybody a copy of Eric Hoffer‘s “True Believer.”
What we have here is pure ideological theater. And what these guys are doing is a shame. The rest of the world is looking in. The world economy is teetering. Clearly, the national economy is in frail recovery.
And most importantly, Chris, household economies, people who want and are anxious about getting back to work and making sure they hold on to what they have look in at Washington that should be engaged at putting them back to work and solving the real problems that face us see nothing but ideological theater and pledges and true believers and disinformation, totally recreating history before us, having amnesia when it comes to how we got to this point.
And if you dare raise it, oh, geez, there you go again raising George Bush. Let‘s get out of the blame game. Let‘s keep everybody at the table and let‘s solve the real issue, which is jobs in this country.
Let‘s put people at table and talk about what cuts have to be made strategically so that we can have job creation here, and what we have to do to incentivize people and to invest in the American people to put them back to work. I don‘t think it‘s that complicated.
But elections—and you have acknowledged this on your program—have consequences, and America is watching those consequences unfold. This is—it‘s a sad time. If you believe in this institution—you worked for Tip O‘Neill. You saw how he was able to get together with Ronald Reagan.
Imagine accommodating Ronald Reagan more than 18 times on the national debt. This shouldn‘t be an issue. This is about the full faith and credit of the American people.
MATTHEWS: Well, I know. But you just heard the other side and that guy come on, Scalise. He‘s a member of Congress. He got elected. He‘s authentic.
And he came on with a lot of words And made the simple point the president has to think up programs to cut. I said to him, name how you are going to get from 25 down to 18 percent of GDP, which I think is undoable. I think the government spending ought to be about 22 percent, if you look at the aging population. It‘s going grow a bit over time.
It‘s never going to be as small as it once was in Thomas Jefferson‘s time, but these guys say now it‘s the president‘s job. They‘re throwing it on his side.
LARSON: Yes.
MATTHEWS: Not only is the debt his problem, which they gave him, but now he‘s got to come up with all the Republican spending program cuts. They want him to list their cuts for them. I have never heard anything like this.
(CROSSTALK)
LARSON: If Obama came up with a cure for the common cold or cancer, as Carolyn Maloney said the other day, these guys would say no.
When Obama had everybody in the room—and let‘s talk about the real
driving of costs as you project short term and long term is the cost of
health care, why it had to be addressed. But you never hear them talking -
they‘re always talking about the benefits that are accrued to people.

As you pointed out, what person is going to give up those benefits?
And I would add, and why should they? When you look at these escalating
costs, where‘s the outcry for medical devices, pharmaceutical, insurance,
doctors, hospitals, and the trial bar to come up with the savings that we -
see a nation that—is spending close to 20 percent of its gross domestic product on health care.

Put America back to work. Address this issue. Don‘t go after the beneficiaries. Go after the true cost escalators. We should all be in a room engaged in that. That‘s what adults do. That‘s what Tip would have done. And in fact that is what Ronald Reagan would have done.
MATTHEWS: Yes, well, I agree with you. I agree with you about the lawyers, too. Throw them in the mix.
By the way, when people get sick and they get old, they have two requests. Give me what I can get and get somebody else to pay for it. And that‘s the way people are when they get old. And I understand completely that when somebody is 80 years old, they‘re not exactly out there swinging a pick. They can‘t pay for it. They need help.
Anyway, thank you, U.S. Congressman John Larson, chairman of the Democratic caucus. Thanks for helping tonight.
(CROSSTALK)
MATTHEWS: Up next, John McCain goes maverick on the Tea Party. he called them Hobbits. I don‘t think he meant it nicely. He lambasted Tea Party Senate candidates who lost Sharron Angle and Christine O‘Donnell. So the old John McCain is back. And that tiff is next in the “Sideshow.” He‘s the Straight Talk Express again.
You‘re watching HARDBALL, only on MSNBC.
(COMMERCIAL BREAK)
MATTHEWS: Wow. Back to HARDBALL. Now to the “Sideshow.”
First up, when was the last time you heard from failed Tea Party Senate candidates Sharron Angle and Christine O‘Donnell? Well, it happened yesterday, all thanks to comments made by the great John McCain on the U.S. Senate floor yesterday as he read a piece from “The Wall Street Journal.”
Let‘s listen to the senator.
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN ®, ARIZONA: The idea seems to be that if the House GOP refuses to raise the debt ceiling, a default crisis or gradual government shutdown will ensue and the public will turn en masse against Barack Obama. Then Democrats would have no choice but to pass a balanced budget amendment and reform entitlements and the Tea Party Hobbits could return to Middle Earth, having defeated Mordor.
This is the kind of crack political thinking that turned Sharron Angle and Christine O‘Donnell into GOP Senate nominees.
(END VIDEO CLIP)
MATTHEWS: Well, actually, he can substitute for me some night with that kind of talk.
Anyway, both men were ticked off at the reference—both women ticked
off at that reference and came back to McCain with interestingly crafted
statements. Angle attacked McCain‘s “Lord of the Rings” reference, saying
quote—“As in the fable, it is the Hobbits who are the heroes and save the land. This lord of the TARP”—that‘s McCain—“actually ought to read to the end of the story and join forces with the Tea Party, not criticize it.”

Wow. What world do they live in?
And Christine O‘Donnell, you know, she‘s not a witch, responded by saying: “It doesn‘t help me to attack to those conservatives—it‘s doesn‘t help him—who graciously gave him another chance to keep his Senate seat.”
Well, I remember history a little differently out in Arizona last you‘re. Really, I think what happened was, they had their own candidates out there, and the candidate‘s name was J.D. Hayworth, and McCain beat the Tea Party candidate.
Finally, Tea Party-backed Congressman Joe Walsh, ah, is being sued by his ex-wife for over $100,000 in unpaid child support. What a great conservative he is. The lawsuit said that Walsh failed to make child support payments despite loaning a total of $35,000 to his campaign.
Well, we know where his priorities are. Walsh‘s attorney said that six-figure amount is far too high and that his client has—quote—“had no more problems with child support than any other average guy.”
Don‘t you love that lawyer? He‘s no more of a deadbeat than any other guy who isn‘t paying child support.
Anyway, up next, this fight over the debt ceiling is not helping President Obama? He‘s losing support in key states apparently. And his base isn‘t as enthusiastic as they once were. Can he regain his political footing after this kerfuffle this weekend?
You‘re watching HARDBALL, only on MSNBC.
(COMMERCIAL BREAK)
VERONICA DE LA CRUZ, CNBC CORRESPONDENT: I‘m Veronica De La Cruz with your CNBC “Market Wrap.”
Stocks slumping at the close ahead of tonight‘s debt ceiling vote in Congress. The Dow Jones industrials falling 62 points, the S&P 500 giving up four, but the Nasdaq tacked on about a point-and-a-half. Encouraging earnings, a slew of analyst upgrades and some upbeat economic reports not enough to offset concerns about the U.S. deficit and debt ceiling.
ExxonMobil fell after delivering a 41 percent jump in earnings. That still fell short of estimates. DuPont Chemical finished flat despite better-than-expected earnings and an improved outlook. Sprint Nextel plunged nearly 16 percent on a wider-than-expected loss and more subscriber defections than predicted. But Starbucks shares are soaring after-hours based on stronger-than-expected top- and bottom-line results.
And in economic news, weekly jobless claims fell below the key 400,000 level for the first time since early April.
I‘m Veronica De La Cruz—and now back to HARDBALL.
MATTHEWS: Back to HARDBALL. What a night it is.
The House of Representatives is expected to vote on John Boehner‘s big budget bill tonight, which could be the basis of a deal. But a Democratic aide tell NBC News that the vote is delayed right now—no word when the vote will take place. And the best guess, knowing that, is that Boehner doesn‘t have the votes, the 216 he needs, given the attendance there tonight to pass the bill and send it to the Senate. MSNBC will, of course, bring you the vote when it happens. We may even give you the speeches right before the vote.
In this debt ceiling fight, President Obama has angered some core supporters, progressives and other Democrats, by being too willing to compromise. But among independent voters, that‘s a selling point.
So, how has President Obama fared in this fight?
Michael Steele is here, not exactly as a judge, but as a commentator, former chair of course of the Republican National Committee and an MSNBC contributor. And Ron Reagan‘s here, the youthful, the forever youthful Ron Reagan, dressed in youthful attire, as always, wearing the threads of youth, holding fast to the 20ish boyish looks that he‘s always had.
(LAUGHTER)
RON REAGAN, POLITICAL COMMENTATOR: Someone has to.
MATTHEWS: Here he is today.
MICHAEL STEELE, FORMER CHAIRMAN, REPUBLICAN NATIONAL COMMITTEE: Hey,
man, how do I do that?
(CROSSTALK)
MATTHEWS: You just dress like that. That‘s the trick.
(CROSSTALK)
REAGAN: I will send you a memo, Michael.
STEELE: Thank you, buddy.
MATTHEWS: You dress like a CEO, and he dresses like not.
(LAUGHTER)
MATTHEWS: Anyway, Pollster.com, which is an average of national polls, has Obama, the president‘s approval rating trending downward right now. It‘s not a good week for him, 50.5. He‘s got a greater than 50 percent negative, his disapproval. And it‘s 44 percent at approval.
I‘m going to give you the first attempt here, Michael.
This is not a good time. But, you know, I keep thinking of him, he‘s almost like a bank guard, one of these older—overage guys standing in uniform ready when the guys come in and say, we want all the money now. Put it in our bags.
STEELE: Right. Right.
MATTHEWS: The Tea Parties have said, give us all the money. And they‘re overloaded with arms because they‘re bring down the government, blow up the bank.
STEELE: Right.
MATTHEWS: And what‘s he supposed to do? What is he supposed to do to be—quote—“strong”?
(CROSSTALK)
STEELE: As opposed to, what has he done?
And I think what he‘s done is that, as we have seen in some of these comedies, he‘s fumbled the gun out of his holster.
MATTHEWS: OK.
STEELE: He‘s fumbled in his steps towards the bank robbers to grab them, to apprehend them.
MATTHEWS: What would you have done?
STEELE: I think the president diminished himself --
(CROSSTALK)
MATTHEWS: What would you have done?
STEELE: I think I would have—coming off of 2010, where he—in that little interregnum where he got a good many things done --
MATTHEWS: When he gave Bush his tax cuts, when he gave you guys all you wanted?
(CROSSTALK)
STEELE: Well, look, he did. He took the position, and that was the position. He came out strong. He pulled the caucus that he needed behind him to get it done. So, the same thing—
MATTHEWS: But he gave way to your side.
(CROSSTALK)
STEELE: Well, the same thing—well—well, if he‘s talking about being the adult and the pragmatist and the grownup, then he showed that there. Why hasn‘t he necessarily shown that—
(CROSSTALK)
MATTHEWS: OK. OK.
Ron, the problem is, the demands of the right were so extreme this time. They want a balanced budget amendment. They want no revenues. They want just big cuts in programs Democrats spent years creating. They want it all their way.
Your thoughts?
REAGAN: Well, I think that it‘s possible the clock is on Mr. Obama‘s side at this point. I mean, if we get to 11:59 on Monday, there‘s still no good deal—a deal that, a bill he signed, I think, maybe even before that point, he demands that a clean debt ceiling increase be given to him. That he will veto any other legislation. He simply won‘t have it. Give me a clean bill through next year and I‘ll sign it and nothing else.
And then the onus is back on the House because they‘re the ones who have to come up with this bill, this legislation in the first place. They‘re trying to put all the blame on him, but it‘s really with them.
MATTHEWS: Will that work, Michael, if f they pass a bill tonight, a big bill?
STEELE: Right.
MATTHEWS: More moderate than the bill that goes to the Senate, without demands—well, it‘s got all the demands, but it‘s going to be a softer approach. Can they be pushed into that corner that Ron‘s talking about if they pass this one tonight?
STEELE: I think Ron makes an excellent point. That is a real practical reality that exists out there and an option for the president. But the problem with that is that it cuts both ways, because as we‘ve seen from some of the recent polls, the president is trending now about 31 percent for re-election among independents. So, he‘s taken a hit here.
And the question is how do people proceed that given all that‘s happened over the last two, three week, everybody‘s got mud on them at this point? Does he have more mud or less mud? And so, the question, the strategy for them is to sign, if you get to the point that Ron just described, pulling that trigger what comes on the other side if the House says no?
MATTHEWS: You know, Ron, you know, last night, we‘re supposed to have the budget director on, Jack Lew. I‘ve known forever. I worked with him back in Tip O‘Neill days and he called me later to apologize because he couldn‘t do the show because he was meeting with the vice president.
But, you know, he went through something quite real which is they have made tremendous offers, Medicare, Medicaid, Social Security, all kinds of very painful cut proposals. If the Republicans would just give some revenues so that they could go home to their people and say, look, we got a decent deal here—the right would not give them even that. They wouldn‘t say yes to --
(CROSSTALK)
REAGAN: And the question is—the question is—and President Obama how he looks and who comes off better than who in this.
You know, the American public I think can now see what the dynamic here is. They‘re asking themselves—because, remember, this is a phony crisis. This isn‘t really a crisis. They could raise the debt ceiling today. They could have done it six months ago. They can do it at 11:59 on Monday. It could happen in five minutes. It‘s not hard.
So, you have to ask yourself the question, who is ginning up this phony crisis? And the answer is not Barack Obama.
MATTHEWS: Respond to that.
STEELE: Oh, absolutely. The answer is Harry Reid, because last year when Harry Reid had a chance --
REAGAN: It‘s Harry Reid now. Harry Reid?
STEELE: Listen to my point. When Harry Reid—
REAGAN: OK.
STEELE: -- when the Senate did not address raising the debt limit at the end of last year Harry Reid said, no, after the election, we‘ll leave that to the Republicans to handle that next year. He passed the buck at that moment. He did not take the leadership responsibility --
REAGAN: And who dropped it, then?
STEELE: You guys, look, Ron—you know, you can cut this any way you want, bro. The bottom line, Democrats controlled the Senate and the House and the White House up until election night, up until January when the new Republican --
REAGAN: Where are we today? Who controls the House now? And where does the legislation originate?
(CROSSTALK)
STEELE: And (b), he refused to extend the debt limit when he had an opportunity to do it. So, you know, don‘t --
REAGAN: You can try blaming other people all you want. But I think the American people know better.
STEELE: Don‘t step away from the facts and the reality of how we got here.
MATTHEWS: You know, I think the public needs to be re-educated constantly of this because it is something that we hadn‘t had to pay attention. Debt ceiling has never been newsworthy.
The only reason this debt ceiling is newsworthy, as Ron said, because the conservatives wanted to make it an issue. But the problem is, it‘s not appropriation. All this money was formally appropriated by the House.
STEELE: Absolutely.
MATTHEWS: Formally approved by a signature of the president and then you go back and say, well, we pay the bills or not. This is all your questioning. Not whether you‘ll spend the money. Are you going to pay to pay the bills? Nobody‘s given back of these services?
STEELE: But the only—
MATTHEWS: Isn‘t that true?
STEELE: Well, it‘s true. But—
MATTHEWS: And then you created a crisis to this extent. The crisis was already brewing. You were right before going back to the Bush administration, particularly in the second term, with a lot of the spending that took place there, you pile on top of that, TARP, a bunch of other programs.
When Obama came in, it was $10 trillion worth of debt. Today, we‘re looking at $14 trillion worth of debt. And you had a group of individuals who were elected last year who watched that precipitous climb and --
MATTHEWS: But Bush tax cuts had taken effect of the last three years. You can‘t say he came‘s in with $10 trillion and ended up with $14 trillion.
(CROSSTALK)
STEELE: The Bush tax cuts was in place since 2002.
MATTHEWS: They have been in effect for the last two years.
STEELE: And he‘s just extended them. So, what does that say about future spending?
MATTHEWS: I can‘t keep up your point. If you talk fast I can‘t keep up with you. The fact of the matter is that these tax cuts have cost the federal government treasury money. That‘s why the debt‘s going up.
STEELE: What‘s cost the --
(CROSSTALK)
MATTHEWS: Excuse me. When Bush left us, I‘m glad he did, w., I‘m glad he finished these eight years, but he left behind continuing two wars, continuing Bush tax cuts, unfunded prescription drugs and spending that he approved. All of that continued to grow.
STEELE: When you cut taxes and you continue to spend what is that?
MATTHEWS: The president‘s problem is he got in the bed had it was already on fire. That‘s a hard --
STEELE: You can excuse Obama all you want to.
MATTHEWS: I‘m not excusing him. Maybe he shouldn‘t have gotten in the bed.
REAGAN: Who‘s excusing Bush in this? Michael, if—you‘re excusing Obama. What about Bush? What about what got us here?
(CROSSTALK)
MATTHEWS: We got to leave that.
Michael Steele, thank you, as always. Ron Reagan, thank you.
Up next, damage control. Let‘s take a look at what both sides are doing to come out of this fight looking like grown-ups. We‘re going to talk PR now.
This is HARDBALL, only on MSNBC. To put the spin on this, we got Mark
our guest is coming in. I know a lot of Marks. We‘ll be right back, only on MSNBC.

(COMMERCIAL BREAK)
MATTHEWS: Sarah Palin is back in the news, believe it or not, prompting yet another round of the “will she or won‘t she” game? Palin is set to give the keynote speech at a Tea Party of America event in Iowa over Labor Day. Palin has said all along that she‘d make a decision about running for president by the end of this summer. And if she‘s serious about running, which so far she doesn‘t seem to be, she probably can‘t wait much longer to get in the race than this September.
We‘ll be right back.
(COMMERCIAL BREAK)
MATTHEWS: Welcome back to HARDBALL.”
When all is said and done it‘s often all about the message, who broke through and won the war of public opinion.
We got Mark Penn, especially here. He‘s a Democratic strategist and former White House advisor in the Clinton administration.
Well, it was too easy reducing unemployment when you had reduced the
employment. How you sell this baby if you‘re the president and you had to
buckle to only cuts in domestic programs that you treasure as a Democrat,
no increase of taxes even for the very wealthy, and just put up with this -
playing in the other guy‘s sand box now for weeks now? How do you win on that one?

MARK PENN, DEMOCRATIC STRATEGIST: Well, it‘s a mess right now. I mean, there‘s no question—when you look at the president‘s numbers, they have been sinking. So, he‘s got to come out with a win here—and a win for him frankly is a deal in which the budget‘s cut and which taxes are not part of it, and which he gets it out of the election season.
If he does that, then the deficit issue is behind them until the election can go on to what‘s right and wrong for the country.
MATTHEWS: Why knowing that, and they are listening right now, would Republicans like Boehner and advisors like you ever go along with a deal to put this behind them?
PENN: Well because there are two things here. In political reality, the Republicans in Congress also gain by having a deal. If you go back to what happened in ‘96, President Clinton got reelected, but so do the Republicans in Congress. If those two make a deal, those are going to --
MATTHEWS: Yes. But don‘t they benefit from this constant interruption of Obama‘s messaging by every couple of months going back and fighting over the debt, which is a Republican issue?
PENN: Well, yes, but there‘s a real debt here. And just like when Gingrich decided to shut down the government, the Republicans paid a terrible price. So, the Republican can thrash all they want, but if they cross the trip wire—
MATTHEWS: But they haven‘t yet.
PENN: Yes, but they are very close.
MATTHEWS: Suppose they time it. Suppose, they make noise, noise, noise. Beat their drums, beat their drums for weeks, as they have, and magically cut a deal Monday.
PENN: Well, again, any deal that gets cut before the deadline the president is still a winner, as the president did.
MATTHEWS: OK.
PENN: Right? If there‘s no deal, then both of these people --
MATTHEWS: OK. Let me test you because you‘ve been an advisor to Clintons, and Hillary as well as Bill. Let me ask you this—Secretary Clinton as well. Suppose you are advising the president and you‘re sitting next to him, he is confronted Monday night. Do I sign a bill that forces this issue to come back in a few months, do you sign that?
PENN: Yes.
MATTHEWS: You accept it—even though it is another fight in a couple of months.
PENN: You‘ll accept it because you don‘t want this thing to go to a debt crisis. You‘re president of United States. You can‘t pay the bills for the United States. You say this is wrong what the Republicans are doing, but you can‘t let the country be held hostage. You sign it, you‘re done with it. Move on to the next issue.
MATTHEWS: So, you don‘t come out and say, I want a clean bill or nothing.
PENN: No, because you‘re going to say we‘re going to have a budget fight. October 1, the budget runs out.
MATTHEWS: Yes. I think you‘re right. I think you know what they‘re thinking.
Have you noticed this that there are advisors put out the word, not the president, that he would veto a bill that didn‘t have—didn‘t have the second requirement in it.
PENN: That‘s right.
MATTHEWS: He doesn‘t have want to have to --
PENN: They are threatening the Republicans. Every side until the final deadline tries to get everything they can.
MATTHEWS: You wrote something really smart in your memos, I just came across it. You say basically Obama made—the president made a big mistake by saying, I‘ll agree to cut Medicare and you guys agree to raise taxes on the rich.
PENN: Yes.
MATTHEWS: Why is that wrong?
PENN: That‘s a losing message.
MATTHEWS: Because everybody has been making that case.
PENN: Look—he said I‘ll cut Medicare—which frankly he is supposed to defend Medicare, Medicaid, Medicare, education and the environment. That‘s what he‘s got to depend. And he‘ll do it if they raise taxes on the wealthy.
So, he didn‘t get the independent voters he wanted because he came off as a tax raiser instead of deficit container. So, it was a mistake to mix his message that way—and the poll numbers show it. Now, he‘s changed the message, it‘s a little late.
MATTHEWS: Why is every Democrat in the country singing the chorus though for weeks now? Maybe I‘ve been part of that chorus at times, saying we need to raise revenues? You says that‘s a loser.
PENN: Well, what he should do is tax reform. But don‘t do tax reform
--

(CROSSTALK)
MATTHEWS: OK. You know the president has been singing this song. He‘s been saying let‘s get people with corporate jets, let‘s get hedge funds. You say in your memo they are all Democrat—
PENN: No, he was --
MATTHEWS: - a very rich arm?
PENN: When he was talking about corporate jets and stuff, he was on to something. Then he went back to the Bush tax cuts. Then he went back to income tax. He got off his message.
The whole thing got mixed up and he started to lose point.
MATTHEWS: OK. Thank you. I don‘t know why they don‘t say millionaires. Millionaires above, you can tax more.
PENN: Do tax reform.
MATTHEWS: I don‘t know. Mark Penn, thanks. Please come back. We‘ll have more time next time when we can.
When we return, “Let Me Finish” with the M..O. of the Tea Party, that the ends justified the means, that they think so. How far are they willing to go? Think about it. If anything goes to get your way, what‘s next?
You‘re watching HARDBALL, only on MSNBC.
(COMMERCIAL BREAK)
MATTHEWS: “Let Me Finish” tonight with a simple thought about what we‘re watching here.
The first people to bow to the demands of those threatening to blow up the economy were the Republicans in the House, the leaders. The leaders did what the followers told them to do. Meet their demands. Hold up the country to get their way.
Those followers didn‘t win the Senate or the presidency, just the House—but by using the House, they are able to hold up the entire United States government.
They threaten to blow things up economically and it worked. They said they were going to do that just to get their way. Not by persuasion. Not by politics. Not by democratic government, but by threatening the destruction of the country‘s finances.
Right, so what‘s next, the power grid? Will they next time threaten to close down the country‘s electricity and communications systems? That might really work well. That‘s the kind of threat that would really get some action.
Hey, we are talking about the ends justifying the means, aren‘t we? If getting their way on taxes and spending issues justifies drifting this country right up to edge of financial catastrophe, if that‘s okie-dokie, what about a more frightening weapon?
Yes, the wild ones won this round and won in a new way by scaring with us a shut down. Us, by the way, did you hear that word? Us.
They threaten to hold up the country, to rob of its wealth, in historic terms, in order to get what they wanted—a spike in interest rates, and a plunge in bond ratings would rob this country of uncountable billions and that is precisely what they jammed us with.
I will not forget those who did it. I think the country would be well also advised to do the same because they will try do it again, just as bank robbers do—the bigger the heist, the bigger the appetite.
The only question is whether certain voters out there think this is the way they want things done. If they do—listen closely here—they‘re the trouble. They, the voters, are the danger.
It‘s not what they want. Listen here again, it‘s the weapon they use it get it. They threaten to blow up our own country‘s economy to get certain things done. Think about it.
That‘s HARDBALL for now. Thanks for being with us.
More politics ahead with Al Sharpton.


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