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updated 8/11/2011 5:01:58 PM ET 2011-08-11T21:01:58

Guests: David Corn, Brad Goode, Simon Hobbs, Eugene Robinson, Ron Reagan, Barney Frank, Steve Israel, John Heilemann, Ben Smith


CHRIS MATTHEWS, HOST: Deal done, market down.

Let`s play HARDBALL.

Good evening. I`m Chris Matthews out in Los Angeles.

Leading off tonight: Debtors` prison. If Tea Party Republicans can
get what they want by threatening to blow up the economy, what`s to stop
them from locking up the government again? They took the American economy
to the brink of disaster, and it worked for them. Everyone fell in line,
Republicans, President Obama all moved by the threat of economic chaos at
the hands of Tea Party ideologues.

The president today signed the deal into law averting disaster after
the Senate passed it 74 to 26. But for the Tea Party, if the end justifies
the means, what will they do for an encore? Do it again, of course. And
can President Obama stand up to them next time?

Then, Democrats gave away a lot in this deal, so how are they going to
sell this thing to their voters when they get home this August? We`re
going to talk to two members of the House, U.S. Congressman Steve Israel,
who backed the deal, and Congressman Barney Frank, who voted nay.

Plus, politics aside, let`s look at what this deal did to the economy.
Wow! The Dow fell 265 points today. It was down for the eighth day in a
row. A first rough reaction, and not a good one, to what Congress did.

President Obama says the deal will make things stronger, but if you
want to know what happens when you cut government spending during tough
times, take a look way back to 1937 during the New Deal. We know how that
story ends.

And the "Mittness protection program." Mitt Romney`s the Republican
frontrunner, the guy who says he can run a business and fix the economy,
but he`s been awfully quiet on this debt issue. Call him a debt dodger.

Finally, "Let Me Finish" tonight with the mugger and the victim who
got away this time.

Let`s begin with what the Tea Party will do next time around. MSNBC
political analyst David Corn is Washington bureau chief for "Mother Jones"
and Ron Reagan is a political commentator.

I want the gut reaction of both of you guys. How does your gut feel
after you saw the Senate vote (INAUDIBLE) with a three quarters vote today
after this whole thing is over with? My buddy, who I`ve come to respect so
much, David Corn, your gut? What does it say about this deal?

DAVID CORN, MSNBC POLITICAL ANALYST: My gut wasn`t happy, not because
of all the particulars, but because I feel like Obama -- President Obama
got pushed onto Republican territory and was fighting a deficit fight on a
-- on Republican terms regarding the economic narrative of our country,
that the issue is deficits, (INAUDIBLE) cut spending, and that`s what`s
wrong with the economy.

I think, ultimately, the deal may not be as bad as a lot of Democrats,
progressives fear it will be, and there are some things that the -- that I
think the White House won tactically. But I still feel like it reinforces
an overarching narrative that is not to the benefit of progressives, or
more importantly, to the economy overall.

That`s why you saw today the president come out and try to pivot very
quickly from this story, and I`m waiting to see if he can be successful in
that pivot.

MATTHEWS: Ron Reagan, your gut reaction to what we`ve just watched
here and covered every night here?

RON REAGAN, POLITICAL COMMENTATOR: Well, my guts are twisting a
little bit, too, here. Let`s just say that I disagree with the president`s
negotiating strategy. I don`t understand why he sits there for a month or
so saying, Look, bottom line is we have to have a balanced approach here.

And the public comes over to his point of view.

MATTHEWS: Yes.

REAGAN: Even Republicans, a majority of Republicans thought that
revenue and spending cuts should be part of any deal, and yet at the end of
the day, do we see any revenue in this bill? No. None at all. I score
this as clear win for the Tea Party at this point.

MATTHEWS: Well, I`ll tell you, the Israeli government says never give
in to hostage-taking. We did. Here was President Obama this afternoon
talking about what needs to be done and what needs to be on the table when
it comes to lowering the deficit. Here he is talking now, but talking
isn`t leadership. Let`s listen.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Since you can`t close
the deficit with just spending cuts, we`ll need a balanced approach where
everything`s on the table. Yes, that means making some adjustments to
protect health care programs like Medicare so they`re there for future
generations. It also means reforming our tax code so that the wealthiest
Americans and biggest corporations pay their fair share.

I`ve said it before. I will say it again. We can`t balance the
budget on the backs of the very people who have borne the biggest brunt of
this recession. Everyone`s going to have to chip in. That`s only fair.
That`s the principle I`ll be fighting for during the next phase of this
process.

(END VIDEO CLIP)

MATTHEWS: Oh! You know, I feel like Eliza Doolittle, "Words, words,
words," Henry Higgins talking again.

Here`s Senator McConnell, by the way, making clear what we`re facing
in this next round, the same thing we saw last round, that he and Speaker
Boehner were picking members of this super-committee that`s coming up whose
chances of OK-ing tax hikes for the next future are pretty low, as
McConnell puts it. Let`s listen to the guy laying down the law, Mitch
McConnell.

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: I can pretty certainly
say to the American people the chances of any kind of tax increase passing
with this, with the appointees that John Boehner and I are going to put in
there, are pretty low.

(END VIDEO CLIP)

MATTHEWS: Who do you believe there --

REAGAN: Exactly.

MATTHEWS: -- David Corn, the president or Mitch McConnell? Who do
you believe --

CORN: Well, I --

MATTHEWS: -- is going to get their way? Your thoughts, David.

CORN: Well, I do believe Republicans will block any discussion of
true revenue hikes in this super-duper what-do-you-know (ph) congressional
committee that`s being set up. But on the other hand, the president, if he
wants to have this fight again -- which, you know, we almost had last year
-- is in a position to say no to the Bush tax cuts, which will be expiring
next year, which will bring in a hunk, a chunk of revenue if they don`t go
through.

I mean, that`s -- you know, I believe the White House figures that at
the end of this debate, as Ron just mentioned, they have the public on
their side, particularly on this issue. A poll out today shows
overwhelming support for including revenues, including tax hikes on
millionaires and corporate jet owners --

MATTHEWS: Well, you just heard McConnell --

(CROSSTALK)

MATTHEWS: You`re not -- you`re not talking about the politicians at
work here. You`re talking about the public.

CORN: Well, I`m talking about -- well --

MATTHEWS: The politicians in Washington led by McConnell just said,
We are not --

CORN: Right.

MATTHEWS: -- going to permit a tax increase, period.

CORN: Well, now it`s up -- now it`s up to the president to make that
fight, if he believes what he said today, and I do believe he believes what
he said. So are we going to deal this way again --

MATTHEWS: OK, OK --

CORN: -- or will he fight for this?

MATTHEWS: OK, Ron --

(CROSSTALK)

REAGAN: Why wouldn`t he take that fight in the first place? Why
wouldn`t he fight that fight in the first place? And here`s how crazy it
gets. And why anybody would agree to this -- section 402 of this
legislation, it precludes -- or it guarantees, essentially, a filibuster or
amendments if the committee -- the committee of 12, with the 6 Republicans
who will never vote for revenue increases -- if they do somehow suggest
that some revenue ought to be in the package, that is then open for
filibuster and amendments.

But if it`s all spending cuts, then no, there can be no filibusters
and amendments. Who in their right mind would agree to something where
it`s one set of rules for one set of people and another set of rules for
us?

(CROSSTALK)

MATTHEWS: The guy who agreed to it was Mitch McConnell.

REAGAN: Yes!

MATTHEWS: And he got what he wants -- and he got exactly what he
wanted because he knows the tools. And here`s the problem you have. You
know, it seems to me that when Casey strikes -- takes two strikes and he
says, I`m going to hit the home run on the third strike, he didn`t do it in
the poem. Is he going to do it now? In "Casey at the Bat," David.

CORN: Well, at some point -- you know, the White House keeps saying,
This is not our fight. We need to get past this. They said that on the
government shutdown. They said this on the debt ceiling fight --

MATTHEWS: Just like mighty Casey.

CORN: -- just like mighty Casey. They took those two swings and they
didn`t hit the ball the way that Democrats wanted to see it hit, although
most Democrats do support this package, according to the latest polls. But
nevertheless, the president laid out a marker today --

MATTHEWS: OK --

CORN: -- when he said shared sacrifice in the past. And at some
point he`s going to have to stare down the Republicans.

MATTHEWS: OK, let`s talk it down. Let`s get away from words like
metaphors and fighting at all. There`s going to be a super-committee
report sometime -- well, November 23rd`s the deadline. It`s going to be --
it`s going to be a deadlock. The Republicans on the committee are all
going to vote to the last man and woman, no tax increases. The committee
report will come out with all spending cuts because there can`t be, by the
nature of the bipartisan deal, any package which gets bipartisan support
with tax increases because the bipartisan Republicans are, again -- Ron,
you pick it up here.

The president looks at the -- he looks at that big basted Thanksgiving
turkey being delivered to his table. It`s got all spending cuts on it. At
that point, he has to say, Go ahead and trigger the cuts in defense and
around the edges of Medicare, rather than doing this crap. I`m not doing
it again, because that`s his only option.

REAGAN: That will be --

MATTHEWS: At that point he says, Turn on the trigger. Go with the
trigger. Cut defense, drive Jon Kyl and the neocons crazy. And the
American Enterprises Institute will blow up that night, but so what? Maybe
that`s what he has to do to teach these guys a lesson.

(CROSSTALK)

REAGAN: Maybe that is what he has to do. Maybe that is what he has
to do. But you`re right, that`s what`s going to happen. It`ll all blow up
in his face because he`s -- you know, he`s cutting defense too much and
endangering Americans, yes.

MATTHEWS: Well, what`ll happen --

CORN: I think --

(CROSSTALK)

MATTHEWS: Yes. Go ahead.

CORN: No, no. And also what you`re -- the report may not even make
it out of the super-duper committee. If -- you know, if the Democrats hold
firm and say there has to be revenues and the Republicans say, No, only
cuts, you may have a deadlock, gridlock, which will lead to the same, you
know, effect. So the president may not even get a choice. He may just go
to the automatic doomsday machine from "Dr. Strangelove" and --

MATTHEWS: That`s what I`m talking about. It`s called the trigger.

CORN: That`s right. And then we`ll have these cuts which will be in
2013. Now they -- the White House believes that they protected their
priorities from these cuts, and they`ll be at defense, and on the Medicare
side, as you mentioned, on the providers` side, not on the beneficiaries`
side. And they -- I think they think they can live with these cuts and --

MATTHEWS: OK, you know what --

(CROSSTALK)

MATTHEWS: -- Clint Eastwood time and the president says, Feeling
lucky?

REAGAN: Yes, you feel --

MATTHEWS: Feeling lucky, Mitch? Go ahead, I`ll pull the trigger.
Feeling lucky --

(CROSSTALK)

CORN: And at the same time the president does have this -- this
leverage on the Bush tax cuts, if he wants to pull that trigger next year.

MATTHEWS: Well, these guys love to talk end of days. Maybe the
president`s figured out a little preview attraction --

(LAUGHTER)

MATTHEWS: -- a little preview of coming attractions of the coming
days. Maybe we`re going to see a doomsday device that`s going to get
triggered. December 23rd, it will go off. Maybe that`ll be the best
answer for this whole gang. Well, we`ll see. David Corn, thank you. It`s
better to fight than surrender. It looks like we`re going to see a
doomsday machine. David Corn, Ron Reagan, thanks for looking ahead.

REAGAN: Thanks, Chris.

MATTHEWS: Coming up: What will Democrats say to their constituents
back home about the deal already made in which they gave away the store,
got little in return? They turned over the wallet to the mugger. We got
two House members coming up, Congressman Steve Israel, who`s running the
campaign committee for the Democrats, and the brilliant Barney Frank, who
voted against it. We`re going to ask them both why they voted the way they
did.

You`re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Well, there`s not a lot of winners in this debt deal on the
liberal side of things, but here are a couple overall. First, Vice
President Joe Biden and Senate Republican leader Mitch McConnell. It was
Biden who made the White House`s last-ditch play over the weekend. He
called upon his 25-year connection with Senator McConnell and proved once
again how valuable he is to President Obama.

McConnell`s a winner, too, I guess you`d say, a grown-up who was
willing to cut the deal with the VP.

Finally, Senator Mark Warner, I think, comes out a winner, as well.
The Virginia Democrat burnished his centrist bona fides by leading the
"gang of six" in search of a way out of this debt crisis.

We`ll be right back.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL.

Democrats were split evenly, roughly, actually (ph), in the vote last
night, and now they all head home for the month to explain themselves. So
what kind of reception are they going to get when they go to the voters who
elected them?

We`re going to hear from two Democrats right now, who split each way
on the issue. Let`s start with someone who said nay to the deal,
Massachusetts Congressman Barney Frank. He`s ranking Democrat on Financial
Services.

Mr. Frank, I guess the question is, would you have voted against this
measure, would you have voted a nay, if your vote were decisive?

REP. BARNEY FRANK (D), MASSACHUSETTS: Yes. I thought long and hard
about it. It wasn`t something to play games on. I did vote, by the way --
I voted twice this year to raise the debt limit. I thought it was
important.

I also believe that if this had fallen, what you would have seen would
have been an immediate short-term extension. But here`s the dilemma -- and
I understand that. Are you ready to take the pain? Once you accept the
premise that you`re going to vote for anything to stave off the disaster,
then you give the people who have an interest in disaster even more
leverage than they already have.

It would have been a mistake to have said, You know what? These Tea
Party people are out to dismantle government, they`re out to reduce and
discredit the president and they don`t mind screwing up the economy, and to
stave that off, you will do anything they ask. Then you`re in big trouble.

So I think a line had to be drawn. I wanted to vote for this. I was
looking for reasons to vote for it, and as early as Monday morning before I
saw the specifics, I was inclined to vote for it. But when I read the
bill, I couldn`t do that.

MATTHEWS: I`ve never seen anything -- I`m on the outside, Mr. Frank.
I`ve never seen anything like these people. They seem like they should be
standing out in front of the Capitol with placards yelling at you guys, not
claiming to be members of the United States government.

What are they like on the inside? Do they defend the right to vote
against everything that the government does? They`re not opposition, they
seem to be protesters.

FRANK: Well, there`s a little bit of hypocrisy. If you notice, some
of them are very upset that we`re going to end subsidies to airports in
their districts that can`t make it on their own. And when it comes to
subsidizing our Western European allies, some of them are on the right side
and want to cut it, but some of them don`t.

But by and large, it`s a combination. I think some of them, frankly,
there`s a lack of knowledge, ignorance in its most fundamental sense. They
don`t understand government. They`ve hated it. They do not realize that
there are things that we have to have done in a civilized society that we
can only do by pooling our resources.

And some of them have a hatred of President Obama that goes beyond
anything reasonable. And so ordinarily, people are deterred from taking
actions that are going to do damage to the country, but some of these
people, because they think he`ll get blamed for it, don`t mind seeing what
they think would be temporary damage.

And there are some of them who -- who are simply beyond any reason I
can think. There are some (INAUDIBLE) individuals you can find something
to work on. I`ve been able to work with some of them, frankly, on cutting
the military. I heard one of your prior guests talk about, Well, you`re
going to cut military spending and hurt America. No, what`s hurting
America is its wildly excessive military spending --

MATTHEWS: Yes.

FRANK: -- that`s been such a major cause of the deficit. And some of
them are OK on that.

MATTHEWS: Well, let me ask you about the hatred. Is it -- is it
ideological? Do they think he`s a socialist, a lefty like a Bernie
Sanders? Do they think he`s just far over to the side? Or is it tribal?
What is it?

FRANK: I think it`s more the former. I haven`t seen any racism in
it, although you never know what`s in the unconscious of people. But it
gets -- it went around the bend. Partly, I think, it`s people who thought
they were losing their America. Some of these are people who`ve seen an
America in which if you`re gay or lesbian, you`re not really demonized
anymore, in which women --

MATTHEWS: I get you.

FRANK: -- are freed to act as they ought to act, who see that people
are free to be religious or not religious. I think that`s a part of it.
And for some reason, it would seem to me in particular (ph) -- I can`t
fully understand it, Chris. The health care bill drove them wild.

MATTHEWS: Yes.

FRANK: I do not understand it. And there were these inaccurate
arguments that the health care bill -- I mean, frankly, many of us thought
the health care was too weak. But --

MATTHEWS: Yes, well, here`s what I don`t get. Why don`t they want
the average person to take some responsibility for their health care?
Nixon believed in employer mandates. What`s wrong with an individual
mandate? It seems to me a conservative idea, not a socialist idea. Why do
they hate making individuals be responsible, instead of throwing it onto
the cost of society and emergency rooms and all that?

FRANK: Well, Chris, I can only say I share your curiosity. I can
tell you this, listening to them talk about it does not elucidate any logic
behind the positions.

MATTHEWS: Let`s go back to the word about ignorance in (ph)
government. Do they accept their fiduciary -- I wish there was a simple
word. You`re on Financial Services. Is there a simpler word to explain
the responsibility you have as part of the U.S. government to pay its
bills? Do they accept that?

FRANK: No. Some of them, they don`t accept it on the moral sense.
Some of them say, well, this whole thing has been illegitimate.

I do not understand that. And some of them are simply, literally,
ignorant of the consequences of it. But, look, there are people there who
just have this conspiracy theory of the world. It`s -- it`s -- I do not,
again, cannot explain it.

You know, I -- look, I would love to be able to vote for tax cuts, and
make you popular. I -- but I never saw a tax cut put out fire.

MATTHEWS: Yes.

FRANK: Tax cuts aren`t going to build bridges.

You know, they say, well, we don`t want to leave these debts to our
children. Well, I don`t want to leave them highways that are going to
collapse or bad air, and I -- it is very puzzling to me. I -- but I will
tell you this, Chris.

Like I say, we have one good thing. And I voted against this,
because, incredibly to me, it said the wars in Afghanistan and Iraq were
not covered by any caps. They were open-ended. And there were not limits
on military spending.

But going forward, we will have this very important debate next year.
And I`m serious about this. The way this works -- and you talked about the
sequestration and then the Bush tax cuts expire.

MATTHEWS: Yes.

FRANK: Both of those are to come into being at the end of next year.
Here`s the debate we`re going to have.

I think these people underestimate the support Americans have for our
coming together to build roads and keep desperately poor people from
starvation and providing decent health research and doing a whole lot of
things that can only be done if we do them together.

Here is the choice America is going to have. We can raise taxes on
income above $250,000. And what we`re saying is, for every $1,000 you make
over $250, we want to tax you $30 more. If you make half a million
dollars, you will pay another $7,500. I do not believe that will deter
anybody from doing anything that is economically productive.

MATTHEWS: Yes.

FRANK: And if we`re going to save these people $30 on $1,000, then
we`re going to have to cut environment cleanup and we`re going to not have
as many cops and firefighters on the streets. That will be the debate next
year. Either we let sequestration take effect with all of its damage,
including to the military, where I would welcome those cuts. But others
would --

(CROSSTALK)

MATTHEWS: I wish you were writing -- Congressman, I wish you could
call the White House speechwriters with that basic formulation.

Anyway, thank you.

I mean, I mean it, because I don`t think he has spelled it out in
those terms.

(CROSSTALK)

FRANK: Chris, with your help, that`s the way we will put it to
people.

Now, you better -- can I congratulate you on one thing?

MATTHEWS: What`s that?

(CROSSTALK)

FRANK: -- probably your parochial school education. You pronounced
"bona fides" better than anybody.

(LAUGHTER)

FRANK: So, I hope people will learn the lesson of a good Latin
education.

MATTHEWS: OK.

In that narrow way, I accept your greatness -- accomplishment.

FRANK: OK.

MATTHEWS: Anyway, thank you, Congressman Barney Frank of
Massachusetts.

Coming up -- or now, Congressman Steve Israel or New York. He chairs
the Democratic Congressional Campaign -- Campaign Committee. He voted for
the deal.

Now, Congressman Israel, I have often talked to you. Let`s get to the
bottom line here. You guys want to protect Medicare as an issue. Do you
still have it?

REP. STEVE ISRAEL (D), NEW YORK: Oh, absolutely we have it.

Look, these Republicans were willing to take this economy to the
brink, push it over the cliff, or pull it from the cliff in a relentless
pursuit of the end of Medicare. We stopped them from doing that.

We will have this argument again in November and December with this
super panel, this super bicameral, bipartisan panel.

(CROSSTALK)

MATTHEWS: Well, what happens when the trigger gets triggered? When
the trigger gets triggered -- because there`s not going to be a deal,
because Mitch McConnell has made clear there won`t be a deal. There`s
going to be no revenue increase, so there can`t be a deal.

If these triggers go into effect in late December, they do go around
the edges of Medicare. Did you write the law or did the members of the --
Joe Biden write it carefully enough, so that you will still have that issue
of protecting Medicare?

ISRAEL: Chris, every time we remind voters in Bucks County,
Pennsylvania, or the suburbs of Chicago or the suburbs of New York, those
independent moderate voters, every time we remind them who`s willing to
protect Medicare and who`s willing to end it, we win the debate.

I have no problem with this debate continuing into the next election
year, because the contrasts are stark. We`re going to continue to remind
the American people that with a Republican House majority, they started 20
years ago. You know this, Chris -- 20 years ago, they said they want
Medicare to wither on a vine.

MATTHEWS: I remember that.

ISRAEL: They tried to do it in the Ryan budget.

MATTHEWS: That was Newt.

ISRAEL: They tried to do it last night. We`re going to keep
reminding people who`s fighting for who in this debate.

MATTHEWS: Let`s take a look at this new poll. "Washington Post"/Pew
Research Center polled Americans this past weekend, and asked them to
describe the debt negotiations in one word.

Here are the top 10 answers. The bigger the word -- you can see it
there visually. Ridiculous. Disgusting. Stupid. Frustrating. Poor.
Terrible. Disappointing, childish, messy, and joke.

Ridiculous, it bombs right across that screen there. How do you
defend the votes of most of the Democrats for this debt deal when it`s
called ridiculous?

ISRAEL: Well, first of all, I would say all of the above, and all of
the above because you had a group of people, 87 Tea Party people, who
continued to go too far, who walked out of negotiations every several days,
who every time we got close to the goal moved the goalposts further and
further to the right.

Now, was it a great deal? No, but it`s a done deal. And now we get
to go into August. These members of Congress are going home. These
Republican members of Congress are going back to their districts and we are
holding them accountable every single day.

MATTHEWS: Who`s happier? You`re watching -- we watch television.
Most of what goes on, on the Hill -- not most. I shouldn`t say that at
all.

What goes on, on the floor is transparent. I saw a lot of happy faces
on the Republican side. Boehner looks like he`s relieved. You guys, on
the other hand, look like you`re hanging heads, you`re bowed down. I don`t
see the physical manifestation of a happy Democratic Party. Am I missing
something?

ISRAEL: Well, who could be happy when you are in a negotiation with
people who said that they are willing to destroy the economy of this
country and the pull it over the cliff?

Now, they may think that they were happy on the floor, but they`re
going home to their districts and we are giving them an accountability
August.

MATTHEWS: OK.

ISRAEL: We are going to ask them to defend the indefensible and
they`re not going to able to do it. I wouldn`t want to be them. I don`t
know what the weather service is saying about the temperature in August.
But I promise you, for these Republicans, it`s going to be very, very hot.

MATTHEWS: I hope we can get a hold of you throughout August, because
I want to hear a regular reading from you, sir, because you chair the
Democratic committee, how this is playing out there, because we`re going to
be watching the Tea Party action. I want to hear from the other side, too.

Thank you, Steve Israel, chairman of the DCCC.

ISRAEL: Thanks.

MATTHEWS: Up next, we have heard all sorts of analogies during the
course of this debt ceiling fight, metaphors up the kazoo, from eating
peas, to Jell-O, to riding on trains, to the worst of all, "Sophie`s
Choice." Creativity at the time of crisis. Let`s check out the metaphor
magazine.

You`re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Back to HARDBALL. Now to the "Sideshow."

First up, over the course of the debate over the ceiling -- of the
debate, we have heard several off-the-wall comparisons, metaphors relating
to the turmoil that we have just seen in this debate.

Let`s take a look back now at some of the more creative moments of the
showdown.

(BEGIN VIDEO CLIP)

OBAMA: We might as well do it now. Pull off the Band-Aid. Eat our
peas.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: Sometimes it`s good
to back away from the trees and take a look at the forest. I came back
against -- away from the tree to take a look at forest.

Dealing with the White House is like dealing with a bowl of Jell-O.

JAY CARNEY, WHITE HOUSE PRESS SECRETARY: Several trains have left the
station. It`s a decision about which train we`ll be riding when we get to
the next station.

It`s a "Sophie`s Choice," right? Who do you save? Who do you pay?

Our objection is to any proposal that puts us through this three-ring
circus again.

(END VIDEO CLIP)

MATTHEWS: Wow. It`s hard to keep up.

But let`s try and agree on the metaphor. If it is a Band-Aid, is it a
case of pulling one off or putting one on?

Next: GOP candidate Michele Bachmann had to opt out of an appearance
in Iowa yesterday in order to rush to Washington and vote nay on the debt
ceiling agreement. But rather than disappoint a group of supporters who
had gathered outside a pizza shop to hear her speak, she called into the
event through a P.A. system. Though she did not take questions from the
attendees, she did conduct an interesting kind of poll herself.

Let`s listen.

(BEGIN VIDEO CLIP)

REP. MICHELE BACHMANN (R-MN), PRESIDENTIAL CANDIDATE: And let me ask
you this question. Raise your hands. Do you want me to vote no on raising
the debt ceiling? Raise your hands. Very good. They will tell me the
results. I can`t see it.

(END VIDEO CLIP)

MATTHEWS: Wow. So how did she see how many hands went up? I guess
Sarah Palin says she can see Russia from Alaska. Here`s Michele Bachmann
saying she can see all the way to Iowa from Washington, D.C.

Well, despite Michele Bachmann`s attempts, the vote did pass. And
it`s time for Congress and the Senate to head home for the annual summer
recess. Harry Reid, for one is glad to be heading back to Nevada after a
less-than-tranquil couple of months.

What does he miss the most by staying in Washington? Let`s listen.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MAJORITY LEADER: I have been here for a long
time. I have a home in Nevada that I haven`t seen in months. My
pomegranate trees are, I`m told, blossoming, and got some pomegranates on
them. I have some fig trees and roses and stuff that I just haven`t seen.

(END VIDEO CLIP)

MATTHEWS: Wow, Searchlight, Nevada, it sounds pretty exciting, what,
with all the pomegranates and figs and rose bushes blossoming.

Up next: Politics aside, what will this deal do to the economy? The
president says it makes us stronger, but history says otherwise. That`s
ahead.

You`re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

BRAD GOODE, CNBC CORRESPONDENT: I`m Brad Goode with your CNBC "Market
Wrap."

It was not a pretty day for the bulls on Wall Street, the Dow Jones
industrial plunging 265 points, its eighth straight losing session. The
S&P skidding 32 points, now in negative territory for the year, and the
Nasdaq tumbling 75 points.

More signs of weakness in the U.S. economy and investors cashing out
of stocks. The dollar fell against the soaring Swiss franc, but rose
against every other major currency. And gold prices soared to another
record high, boosted by word that the Bank of Korea had made its first gold
purchase in more than a decade.

American consumers cut their spending in June for the first time in
nearly two years, and incomes rose by the smallest amount since September.

Some weaker-than-expected earnings didn`t help as well. Farming giant
Archer Daniels Midland fell 6 percent after missing forecasts. And
retailer Coach tumbled too after reporting that shrinking margins were
cutting into profits.

That`s it from CNBC, first in business worldwide -- now back to
HARDBALL.

MATTHEWS: Welcome back to HARDBALL.

And as you just heard, I guess, in the news today, the Dow took a
beating today, perhaps a sign that the markets don`t like the debt deal.
Perhaps? What, are we kidding? So is there any chance that a deal that
focuses on debt and not job creation is going to help the economy in the
long run or even the short run?

Joining me right now to talk about this is CNBC`s Simon Hobbs, who is
great as this --

(LAUGHTER)

MATTHEWS: -- and MSNBC political analyst Eugene Robinson, who
understands the politics.

I`m setting you both up, gentlemen.

And all I can ask, a simple question. The Dow Jones down 265 points
today. Were there any winners in this whole kerfuffle, Simon, you first,
except gold? Gold went up, which tells me nobody trusts anything except
bullion.

(LAUGHTER)

SIMON HOBBS, CNBC CORRESPONDENT: Let me frame it this way, Chris.
And it`s really important. We`re in the middle of a major breakdown on
world markets.

It`s not about just today. We have fallen now for eight straight
sessions. We have lost on the Dow Jones industrial average 858 points in
eight sessions, 6.7 percent, because we believe that the world is slowing
down and that America, possibly, possibly, could tick back into recession.
So that is the backdrop.

And in the meantime, perhaps ironically, people are stampeding into
bonds, sending the interest rates down. If you ask me specifically about
the debt ceiling and what we have accomplished in Washington, I would say
to you that world markets most definitely have dodged a bullet, but it was
a bullet from a game of Russian roulette that was wholly, wholly of
Washington, D.C.`s making.

MATTHEWS: Politically, give me your damage assessment, Gene.

EUGENE ROBINSON, MSNBC POLITICAL ANALYST: I have said all along,
Chris, this was a negative-sum game, not a zero-sum game.

And the question was who was going to lose worst. So Dems lost worse
than ours, but -- but we all lose, given the weakness of the economy. I
think it`s the underlying weakness of the economy and the threat of a
double-dip recession that we`re seeing reflected in the poor performance of
the markets.

MATTHEWS: Yes.

The only two guys that looked good in this, two people, I should say,
that looked good in this were Biden and McConnell, because they were at
least driving the ambulance the last day.

(LAUGHTER)

MATTHEWS: They showed up with the ambulance. And I`m not a big fan
of McConnell, but I got to tell you, I think, together, they managed to
avoid that disaster.

Let me put together what I have heard you believe, Simon, and so we
can cut to the chase tonight. The idea that we`re going to cut spending
dramatically is absurd. It`s not going to happen politically. The idea
we`re going to increase spending dramatically is not going to happen.

(CROSSTALK)

MATTHEWS: So, basically, there`s stasis.

(CROSSTALK)

MATTHEWS: So let me just cut to the chase.

HOBBS: Yes.

MATTHEWS: Can we shift -- if were you the Chinese government, a
command society, running this country right now -- forget elections, forget
politics, interest groups -- and just wouldn`t it be smart to shift a lot
of the money that is going to entitlements, the maintenance of people, a
little tough love here, shift it into job production for the good of
everybody?

Is that the right godlike thing to do or not?

HOBBS: That would be an ideal sort of thing to do. But I don`t think
in your godlike world, that`s ultimately what`s going to happen.

Look, you can`t escape -- so much of the economy has been destroyed.
You cannot escape the fact that if you`re looking to try and get long-term
structural control, say, by the end of the decade, you -- whether you like
it or not, Chris, you have to cut entitlements and you have to have revenue
increases and tax increases. And the question is how you balance them out.

You can`t have one or the other. And somehow, you have to bring
together the two sides of this ideological argument. The problem is, the
checks and balances that are set up by the founding fathers -- and I am a
guest in your country, and I`m very pleased to be here -- but the checks
and balances --

(LAUGHTER)

HOBBS: -- don`t seem to bring the two sides of that argument together.

You know, it was politics. It was fine, when you didn`t have to make
difficult, hard decisions --

MATTHEWS: I know. I know. I know.

HOBBS: -- in the `50s and the `60s.

But to deal with this deficit problem, you have got to bring the two
sides together --

MATTHEWS: OK.

HOBBS: -- or at least in the elections swing to one side or the other.

MATTHEWS: Gene -- I will show you the problem with that. Gene is a
progressive.

Gene, would you go along with that? As an analyst, do you think the
country should have a grand going together, of much higher revenues, much
tough love on the entitlements side? Would you go along with a deal like
that?

ROBINSON: There`s got to be entitlement reform and there`s got to be
more revenue. I mean, those two things have to happen. It depends how you
do entitlement reform, as whether it would make me personally happy. But
you could come up with ways to do it that I think progressives would
certainly go along with and, in fact, there are progressive members of
Congress who have come on the show and offered ideas about Social Security,
for example, or Medicare.

MATTHEWS: It ain`t so freakin` complicated. We have 25 percent of
our GDP, Simon and Gene, going to government spending and 15 percent being
paid. It`s a 10 percent differential. It` got to be closed. Close it.
Here`s the problem to --

HOBBS: Chris, we were there. We were getting there. When Obama was
locked in the room with House Speaker Boehner on their own, they were
delivering towards $4 trillion of revenue enhancements, of cuts along the
line. We were getting there.

It`s only when Boehner brought it back to the party, to the Tea Party
in particular, that it fell apart. So, there were wise men in there trying
to do those deals.

MATTHEWS: Let`s take a look what the president says about when
Congress returns from recess, he says it has to concentrate on one thing,
jobs. Let`s listen and see if we believe. Let`s listen to the president.

(BEGIN VIDEO CLIP)

OBAMA: We need to begin by extending tax cuts for middle class
families so you have more money in your paychecks next year. If you`ve got
more money in your paycheck, you`re more likely to spend it. And that
means small businesses and medium size businesses and large businesses will
all have more customers. That means that they`ll be in a better position
to hire.

(END VIDEO CLIP)

MATTHEWS: What do you make of that, Gene? I`m getting what, what is
it, whiplash here trying to keep track of this. He wants revenues to go
up, now he wants revenues to come down, distinguishing between the middle
class and trying to get taxes for the rich. Doesn`t he have to get a
consistent message here, create jobs, do something, at least force the
Republicans to say no to something?

ROBINSON: Yes. This is -- this is the attempt by the administration
to pivot away from debt ceiling on to the jobs issue, which everybody knows
is what people want to hear about. The problem is, what are you going to
say about jobs? I mean, they have several measure that they want to talk
about. They want to talk about exports and trade and incentives for small
businesses.

You know, in the end, is any of this enough to have a discernible,
measurable effect on the job situation, when you`re coming off a recession
in which you lost 9 million jobs. That`s a lot of jobs, and at this rate,
it`s going to take many, many years to get them back.

MATTHEWS: Let me ask Simon. As macroeconomist, is there, in fact, a
set of tools available? Fiscal policies seems dead, we`ve got a $1.7 debt
-- deficit, rather, current deficit. He doesn`t have much wiggle room
there. Money policy, monetary policy for the Fed seems to have been
exhausted with Q2, whatever it is. There`s nothing.

Is there anything left he can do as president between now and the end
of the year to get the economy rolling?

HOBBS: That begs the question, can a president create jobs? The
situation -- the situation is really, really rough. The economy basically
almost stalled in the first half of the year and now the consumer is
retrenching. You have to create demand in the economy for the businesses -
-

MATTHEWS: How?

HOBBS: -- for the businesses to start recruiting people and bring the
unemployment down.

I don`t know how do you it. I think it`s structural. If you look at
the saving rate amongst ordinary people, they are rebuilding their balance
sheet. We`ve got the housing market that continues to fall. This is big,
big stuff.

I don`t have the answer to that but I know nothing else that`s on the
table at the moment appears to be working and as you`ve said -- I mean, at
least with the spending cuts you only start getting $21 billion in spending
cuts next year and twice that in 2013. At least for now, they are not
ramping up the spending cuts.

And I suppose, in fairness to the Republicans, they would say,
equally, at least now, we are not raising taxes -- which would also be
quite bad in this environment. But I cannot stress to you how dangerous
the situation now is in this economy.

But if you -- if you see this play out on the television night after
night, look at the polls on what ordinary Americans were saying to you last
-- that you spoke about just before the break. Do you think they`re going
to go out and buy that extra car, or take that extra holiday or ramp up
their credit card? Of course, they`re not.

And in the middle of this, with these games that were played on
Capitol Hill, what have people done? They`ve taken money out of the money
markets so that corporations would find it more difficult to borrow.
They`ve taken it to the sidelines. They may not put it back in.

And corporate treasurers are holding cash. They are not spending in
the economy. They are not going out and creating jobs.

We are in this revolving fear circle that we need somehow to break out
of, and at least you can have some vision and some leadership from somebody
to pull us out.

MATTHEWS: I agree. By the way, I spent many days thinking, should I
call my adviser and say, take it all in cash. I worry just like everybody
else.

(CROSSTALK)

MATTHEWS: I have no confidence.

Thank you very much, Simon Hobbs. Thank you, Gene, you`re the best of
the political area, somewhat less complicated area.

Anyway, up next, where`s Mitt Romney? Nowhere. He`s a debt dodger.
He`s supposed to be the candidate of business, you know, the job creator.
And he`s been hiding out for weeks.

Here`s what "Politico" calls -- they`re calling it the Mittness
protection program. I love that metaphor. The Mittness protection
program. He`s been hiding. Let`s bring him out.

This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Congresswoman Gabrielle Giffords returned to the Capitol
last night, eight months after she was nearly killed in an assassination
attempt. It was a dramatic, emotional moment. There it is. Her
colleagues gave her a lengthy standing O. She returns.

So, what`s next for Congresswoman Giffords? Will she run for re-
election next year?

Her communications director tells NBC News, quote, "Congresswoman
Giffords is focused on her recovery. No decision has been made about
2010."

We`ll be right back.

(COMMERCIAL BREAK)

MATTHEWS: We`re back.

Mitt Romney`s back in the headlines today not because he`s making
news. Romney`s actually being lampooned for being absent from the campaign
trail. "Politico" frames it like this: "Call it the Mittness protection
program. Through the hot summer of 2011 the front-runner for the
Republican nomination has been in hiding."

Well, joining me right now to talk about the invisible candidate and
more, the author of the "Politico" piece himself, Ben Smith; and "New York
Magazine`s" John Heilemann.

Ben, this thing, this candidacy, what is it based upon? Is it based
upon simply everybody knows who I am, I`m a familiar name, I`m the so-
called front-runner because of name ID, it`s going to be a Republican year,
so I don`t have to say nothing? Is that what is based on?

BEN SMITH, POLITICO: I mean, it`s an unusual situation. You talk
about, you know, a Rose Garden campaign for a president who has a Rose
Garden, who everybody knows, who wants people to pay attention to his
governance. Romney is not that widely known, people know his name.

And he`s -- but I think in his view, every day we`re not talking about
him as the day he wins, and if he can navigate his way through a narrow
path through the Republican primary by keeping his head down, you know, he
feels like he`s in a good position for a general election because of the
economy.

MATTHEWS: But in other words -- let`s go to John Heilemann -- he just
believes that merely being the Republican nominee is a 50/50 shot at the
presidency and he just wants to get to there. And therefore, once he`s
there, he`s got 50/50. So, he doesn`t have to build anything in terms of
belief or create activity or stature. He just has to arrive there somehow.

JOHN HEILEMANN, "NEW YORK" MAGAZINE: Well -- I mean, Chris, you know
that everybody has the same attitude, which is that they keep their eye on
the first challenge, which is to win the nomination and that`s obviously
what he`s focused on. I would be a little bit less dismissive of the
strategy in the sense that I think they realize that people in Romney world
realize that Mitt Romney is going to have to engage. And even if he didn`t
want to engage, he is going to be engaged, because he is the front-runner
by every indication. And the people who are running against him in the
Republican Party are going to attack him and they have started doing that
recently.

I think their strategy has been to try to keep their head down for
now, focus on fund-raising to get -- to build a big monetary lead over his
rivals and to talk about Barack Obama. Not only because it makes Mitt
Romney look like a national figure and help Republicans visualize what it
would be like if he`s the nominee in the fall, but also because anti-Obama
animus is what`s driving both the Republican electorate and he`s a good
message for the general election, they think.

MATTHEWS: Now, here`s Jon Huntsman, the guy, he`s speaking out on the
campaign trail, taking a jab at Romney. Let`s listen.

(BEGIN VIDEO CLIP)

JON HUNTSMAN (R), PRESIDENTIAL CANDIDATE: To dodge the debate or wait
until the debate is over effectively and to take a side, I don`t consider
that to be leadership. You look at Governor Romney, you look at some of
the others on the race, and you see that they all have taken different
positions. It`s easy to take a position later on. It`s tough to take a
position early on, which is the real world.

(END VIDEO CLIP)

MATTHEWS: Ben, what happens when the voters say, where were you in
the war, daddy?

SMITH: I mean, I think Romney`s hope is that he says, here, you know,
I was on this side, and nobody is going to remember whether it was Monday,
or Tuesday or Wednesday, exactly when it was.

MATTHEWS: Right.

SMITH: I think John is right. It`s a strategy that`s working so far.
And, you know, I think their hope is basically not -- never have a primary
and never have a contest, but just to compress it as much as they can into
a kind of ferocious short fight in which they can --

MATTHEWS: OK. Let`s look at the numbers. Let`s look at the numbers
because I think the president is dipped down so far in the polls, that
Romney is starting to look good. Maybe he`s being deceived by this.

Look at the Quinnipiac poll right now, the president`s approval level
is 43, his disapproval up at 54. Look at -- I`m from Pennsylvania
originally, so let`s look at that matchup. You got Romney ahead by two
points, Santorum within two points. Aren`t we looking at the weakness in
Obama in this season rather than the strength of Romney in the matchup,
John Heilemann?

HEILEMANN: In a word, yes. It`s certainly the case. And, look, the
president has a lot of things going for him. He still remains personally
popular with the American people, but the bottom line is the economy is
horrible and it`s been really bad for the entire 2 1/2 years he`s been
president.

There was going to come a time when the weight of that economy on his
shoulders was going to start to drag his numbers down, and I think we`re
seeing it in the numbers you just showed and all across the industrial
Midwest. You can did see it in Pennsylvania, as you mentioned. But also
in Ohio, also in Michigan, also in Wisconsin. He`s having a hard time and
it`s going to be the burden he has to carry all the way until election day.

MATTHEWS: You are speaking my language, that Oshkosh to Scranton
line. I`m telling you, if the Democrats lose that section of the country,
they shouldn`t be reelected. This idea of going down to Colorado and
picking up Virginia, once you lose the heart, it seems to me, the
industrial base of the Democratic Party, I don`t see how you can win in the
other places. But I don`t think it`s even moral to go that way. You got
to defend the guys with the parkas that go to the big NFL games when it`s
cold.

Your thoughts on that, Ben. I`m talking morally for the Democrats.
Can you be the party of the working people if you don`t defend them?

SMITH: Well, I mean, I think, you know, in the long term, they see
the working people as moving away from that old stereotype -- you know,
being less white, less Midwestern. I mean, there are a lot of working
people --

MATTHEWS: What do you mean, more high tech?

SMITH: There are a lot of working people in Colorado and Virginia,
increasing numbers of them Hispanic, and I think that`s what they see is
the new base of the Democratic Party.

MATTHEWS: You know, I find that strategy pretty despicable, to turn
your back on the people who have been voting Democrat for 30 or 40 years
and say, oh, by the way, we found some new friends.

Thank you, John --

SMITH: They`ll take what they can get.

HEILEMANN: They`re not saying that. I think they`re not trying to
say they`re turning their back on those people, I think they are just
trying to say they want to -- in order to try to expand the map as much as
possible, they`re acknowledging that there`s another brand of working
person in America today.

MATTHEWS: I know.

HEILEMANN: As Ben points out, a lot of the voters are Latino and a
lot of them are in the states in the Southwest. There`s no reason
Democratic Party that stands for working people can`t go after both the
industrial Midwest and those workers out there.


MATTHEWS: That would be ideal. I`m with you on that, both.

Anyway, thank you, John Heilemann. Thank you, Ben Smith.

When we return, "Let Me Finish" with why the Tea party`s muggings --
which what we saw this week and this month and this year -- will continue
if the president lets them get away with it.

You`re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: "Let Me Finish" tonight with this bad experience the world
just been through. What we saw, what I saw at least, was a guy with a
knife, the other trying to avoid being cut. It was a thug attacking a
victim. It was a mugging.

Now, the good news -- relief is a better word I supposed -- is that
the victim did get through it. The bad news is that the mugger got what he
wanted, he got the wallet.

Now, I put to you the most important question of the week, of the
month, of the year of this presidency of our time -- is there any doubt
that he, the mugger, will try it again? Not a whit. This morning, the
Republican leader of the Senate declared his intention to name not a single
member of a new special joint committee to make the second cut in the debt
who is open to attacks or even a revenue increase. So, the mugging
continues.

Again and again and again, the people who perpetrated this assault on
the president will come back to do it again. The gang will be back and
each time will make new demands, make no concessions to exactly what they
want to get what they want.

What they want is to control the U.S. government to their ends without
having to win the White House or control the U.S. Congress. They can carry
on the Bush economic policy right through the end of this presidency, as
long as they`re willing to mug and the president is willing to turn over
the wallet.

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

More politics ahead with Al Sharpton.


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