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updated 12/29/2011 12:03:30 PM ET 2011-12-29T17:03:30

Guests: Ron Reagan, Steve Israel, Major Garrett, Terry Branstad, Joan Walsh, Kathleen Matthews

CHRIS MATTHEWS, HOST: Cave men.

Let`s play HARDBALL.

Good evening. I`m Chris Matthews back in Washington. Leading off
tonight: Surrender. John Boehner and the House Republicans finally
realized there was no way out of the corner they`d painted themselves in on
the payroll tax cut, and they`ve caved.

Late today, Boehner agreed to a vote on the Senate bill that calls for
a two-month extension. Hours earlier, President Obama jammed the House
Republicans with a "rub it in their faces" moment in front of cameras.
Score one, a big one, for the president and the Democrats.

Plus, uneasy lies the head that leads Iowa. Almost immediately after
Ron Paul topped just one Iowa poll, he began getting hit from all sides,
from "The Wall Street Journal," from Redstate.com, and from Republicans who
fear that a Paul win in Iowa would make the caucuses irrelevant. Welcome
to the top, Mr. Paul.

Also, let`s go to the videotape. Remember this moment?

(BEGIN VIDEO CLIP)

MARK BLOCK, SR. HERMAN CAIN ADVISER: America`s never seen a candidate
like Herman Cain. Together, we can do this. We can take this country
back.

(END VIDEO CLIP)

MATTHEWS: Well, not quite. We`re going to look at our favorite
YouTube political videos of the year.

And leave it to the Republicans, who oppose anything, anything
President Obama does, to criticize him for going Christmas shopping.
That`s in the "Sideshow."

Finally, this is my favorite night of the year on HARDBALL, of course,
the night my wife, Kathleen -- we call her "the queen" at home -- turns the
tables and interviews me.

We start, by the way, tonight with the big story, the payroll tax cut
crisis. U.S. Congressman Steve Israel`s chairman of the Democratic
Congressional Campaign Committee. And I see a smile on the face of the
congressman.

Congressman, it looks to me like this may be one of those moments
where Democrats grabbed the political high ground, the Republicans got
stuck on the low ground, and you won.

REP. STEVE ISRAEL (D-NY), DCCC CHAIRMAN: Well, it`s not just me
that`s smiling. It should be 160 million Americans that we fought for who
are smiling because they`re not going to see a smaller paycheck.

Look, you know, this isn`t about whether the Democrats deserve credit
or the Republicans. The credit belongs to the American people, who
expressed a sense of outrage, Chris. I had my pre-dawn commuter office
hours at the Long Island Rail Road this morning, and there was a steady
flow of outrage that the Republicans were in this internal war, but those
middle class people getting on the train were going to be the victims with
a smaller paycheck.

So they deserve the credit for expressing outrage in congressional
districts all across America, and they get the win with a paycheck that`s
not going to be smaller in January.

MATTHEWS: Well, this is interesting. Here`s a case where it`s the
Democrats looking out for a tax cut, but in this case, for the regular
people, not for the wealthy. Here`s the president today, late this
afternoon, sounding a populist message while he urged House Republicans to
pass the Senate agreement, which they finally did just moments ago.

By the way, they`re getting around to do it actually right now. He
stood in front of a crowd of people who had written in to the White House
specifically to explain what losing the payroll tax break would mean to
them personally. Let`s watch the president and listen.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: This is an issue where
an overwhelming number of people in both parties agree. How can we not get
that done? I mean, has this place become so dysfunctional that even when
people agree to things, we can`t do it? Enough is enough. The people
standing with me today can`t afford any more games. They can`t afford to
lose $1,000 because of some ridiculous Washington standoff.

(END VIDEO CLIP)

MATTHEWS: How does Boehner, who seems like an old-time Republican --
meaning the kind of Republican that was around, say, 25 years ago, in other
words, center right -- he strikes me that way -- how does he deal with the
hard right, I`d have to call them fanatical Tea Party types, who -- you
should call them the "no deal" as opposed to the New Deal. They don`t want
to do anything that means compromise.

How`s he going to deal with the fact he`s sort of bucking them right
now?

ISRAEL: Well, look, he has not been able to deal with them thus -- he
has not been able to deal with them thus far, and that`s why you have this
chronic chaos. Every three months, these Tea Party Republicans are willing
to take it to the mat and hurt our economy, and hurt the middle class.

Boehner has a real problem on his hands. Every time -- every day,
he`s got this Tea Party caucus, this group of extremists who are offending
moderate sensibilities, the sensibilities of those Bucks County
independents that you talk about so much...

MATTHEWS: Yes.

ISRAEL: ... and as a result, there has been paralysis in the
Republican Party and there`s chronic chaos. And that`s what voters are
going to remember.

Let me give you one example. In Arkansas`s first congressional
district, you had a congressman, Rick Crawford, on December 20th puts out a
press release demanding that Boehner join him in rejecting what he called
"this irresponsible payroll tax deal," and on December 22nd, he put out
another press release demanding that John Boehner join him in a compromise.

I don`t know how you deal with the entire Republican caucus when you
have two Congressman Rick Crawfords.

MATTHEWS: Well, it just looks to me like these people are willing to
take a federal paycheck to be representatives and deal in a congressional
body, but still they play like they`re carrying placards, like they`re
still protesters. They`re actually in the United States government, but
they refuse to function in the government.

Let`s look at this. After staying quiet most of the week -- now,
here`s a real old dog Republican, Senate Republican leader Mitch McConnell.
He released a statement today calling for the House to pass that payroll
tax extension.

Quote, "Leader Reid" -- he`s referring to Democratic leader Harry Reid
-- "should appoint conferees on the long-term bill, and the House should
pass an extension that locks in the thousands of Keystone XL pipeline jobs,
prevents any disruption in the payroll tax holiday or other expiring
provisions and allows Congress to work on a solution for" -- boy, is this
Senatesqe. (ph)

Anyway, he`s talking there -- let me ask you about looking down the
road. I know you have to get Democrats elected to the Congress next
November. Will this be an issue come election day, next November, how the
Republicans foot-dragged on a tax cut for working people?

ISRAEL: Absolutely. Every election is about, Who are you for? And I
believe that if we take back the House -- and I`m telling you, you`ve heard
me say it, Chris, we are within range. It`s going to be razor close. If
we take it back, we`re going to look back at these -- the past several
weeks as that defining moment that told moderate and independent voters and
middle class voters around the country and our base, we`re for them.

Now, here`s the important thing, Chris. This battle is not over.
First of all, you know, John Boehner is having a conference call right now.
You know, he can have -- he has these conference calls and thinks he`s in
good shape, and then the bottom drops out.

But secondly, we have gotten a two-month extension on the payroll tax
cut to try and work out our differences for a one-year commitment. And in
two months, we`re going to be back to where we were today.

Who are you for? Are you going to ask the middle class to pay for a
middle class tax cut? Or are you going to ask the rich to pay a little bit
more in order to provide that tax cut to the middle class?

MATTHEWS: Well, Allen West and Joe Walsh, all the real red-hots in
the Tea Party movement, will be jumping up and down like jumping beans on
that conference call. I`m telling you, it`s going to be the most
unpleasant conference call in history when John Boehner tries to sell it to
the red-hots.

Anyway, thank you, U.S. Congressman Steve Israel of New York, the
chairman of the Democratic Campaign Committee.

With us now is one of the great reporters of our time, Major Garrett,
congressional correspondent for "National Journal." He broke the story
today that Speaker Boehner was reversing his position and calling a vote.
OK! OK!

(LAUGHTER)

MAJOR GARRETT, "NATIONAL JOURNAL": The hyperbole...

MATTHEWS: Deadline...

(CROSSTALK)

MATTHEWS: Let me ask you this, Major. What broke them? Why did
Boehner finally break to the wheel and say, I`ve got to teach these Tea
Party people to get in line, if he can do it?

GARRETT: Look, they came back to them. I don`t think this conference
call is going to be that contentious. On Saturday, when the conference
call came to look at the Senate bill, Boehner had been notified with some
degree of directness by Eric Cantor, the majority leader, and Kevin
McCarthy, the majority whip, that the conference did not like and was
hostile to the two-month Senate bill.

The exact opposite is happening now. The conference wants to break
this. They want to get this over with. They have seen the condemnation
from "The Wall Street Journal," they see their own internal poll numbers.
When Steve Israel talks about that Republican congressman in Arkansas, you
know what happened, Chris. They took one position, looked at their
overnights, they did some numbers...

MATTHEWS: Newt`s even warning them!

GARRETT: ... and they read...

MATTHEWS: Newt Gingrich, Mr. Fun (ph)...

(CROSSTALK)

MATTHEWS: ... is saying, Stop being obnoxious.

GARRETT: They know they can`t win this, that they were too far
behind.

MATTHEWS: Yes.

GARRETT: And so this is a ceasefire being called internally after
creating a firefight among themselves.

MATTHEWS: Let me ask you about the big fight. It seems to be
something really big that everybody watching ought to pay attention to, I
think. And you`re an expert on this, as well as anybody.

This idea that you can get elected to Congress, these Tea Party
people, not with the idea of coming to Washington and doing what people
have done since Jefferson`s day -- conservative, liberal, middle of the
road -- you state your position, you take your position, you hear the other
person`s position, you find common ground, and you get something done. You
move the ball down the field.

You don`t just simply stop everything by saying, No taxes, only
spending cuts, knowing that that will get nowhere in terms of spending
cuts. This thing about the Tea Party thinking they can cut spending by not
cutting deals -- the only way to cut spending is to cut a deal.

GARRETT: And that`s what the appropriations process this year, for
two years running, has shown. You have to cut deals. You can`t get
everything, but you have to advance the ball.

MATTHEWS: Yes.

GARRETT: I wrote two-and-a-half days ago on the Web site of "National
Journal" that, yes, the House Republicans had pride of authorship in their
one-year bill. And it`s a decent piece of legislation viewed from their
perspective. But I asked everyone, OK, suppose you get this magical
conference committee. What`s your bottom line? What do you want to
extract from this? They had no answer.

MATTHEWS: Right. So they don`t -- they`re like the Occupy people on
the left.

GARRETT: They didn`t know what their next step was.

MATTHEWS: OK...

GARRETT: Legislation is about steps and final product. What they`ve
learned is to take steps, but they have not in any way, shape or form
reconciled their mind or their strategy to final product.

MATTHEWS: Yesterday, though, the conservative, sometimes right-wing
"Wall Street Journal" editorial page took the Republican leaders to task.
Well, today the conservative blogger Erick Erickson had a strong warning
for Republican people.

He wrote, quote, "The payroll tax holiday has become a mess for
Republicans. The GOP lost, and they did lose. Here being clubbed to death
like," -- I love this phrase, I hate it, actually -- "like a baby seal
because they abandoned long-held Republican principles. It has been a
defining principle of the GOP that drives the left crazy, that tax cuts
need not be paid for. Tax cuts generate economic growth, which then causes
the tax cuts to pay for themselves. The GOP has abandoned this in this
case and instead decided to engage in a tit for tat over cuts with the
Democrats."

So since Reagan, since Jack Kemp -- Kemp-Roth in `78, as you remember
-- Republicans have said, Cut taxes for rich people especially, and they`ll
pay for themselves in more revenues because people will make more money out
there. In this case, tax cuts for working stiffs, they weren`t willing to
say these tax cuts will pay for themselves by people getting more income.

GARRETT: Or that they should be more offset by the tax increases on
the wealthiest few Americans. Now, that was not the original White House
proposal, but Senate Democrats did the president a great favor by not
taking his tax increases, which went down to $250,000, but just isolating
them on the millionaires because they knew that polled the best.

And Republicans walked in -- and they kept telling me, No, we`re not
walking into a trap, no, we`re not walking into a trap. Trust us, we`re
going to work our way out of this.

Well, I think today`s results give you and everyone in your audience a
sense of whether or not they walked into a trap or not.

MATTHEWS: Let`s talk about the president. It looks like a couple --
I always believe in economics drives everything. I think the economy,
whether it`s quicksilver or not, is getting a little better. The
unemployment rate has dropped to 8.6. We didn`t think that would happen
until next spring or summer. It`s gone -- it may go down again. We`ve had
three weeks of good jobless numbers. They`re really pretty good the last
three weeks, right? We`ve got a Dow that`s certainly been up this week,
dramatically up.

So here`s my question. Does this economic backdrop give the president
a wind at his back in these negotiations? If we were suffering through a
terrible week with the Dow, terrible jobless numbers, would he still be
able to get the Republicans to cave?

GARRETT: Actually, I believe there`s a completely different answer
for the payroll tax...

MATTHEWS: OK.

GARRETT: ... which is, I believe the White House understands that the
economic future in Europe is unpredictable, and possibly shrinking or
recessionary. That will have a negative effect on the U.S. economy. It
can`t possibly help but not have a negative effect.

MATTHEWS: Next year.

GARRETT: Instability in Europe creates global instability. Global
instability could mean shrinking markets, less demand in developing
countries. I think the president saw the payroll tax not only as something
he wanted to continue as a matter of policy, but an insurance policy for
him and for the economy at large over what may happen in Europe and what
effects that might have across the global economy.

MATTHEWS: A decline in demand next spring.

GARRETT: Absolutely.

MATTHEWS: And so this can help. So it has an economic benefit...

GARRETT: And I believe that`s -- not only the politics, but I believe
on the economics, that`s why the president was so adamant about this
because I think he knows...

MATTHEWS: OK...

GARRETT: ... economically, he needs this payroll tax cut to give him
some buffer in case things really...

MATTHEWS: OK, you`re also...

GARRETT: ... go south in Europe.

MATTHEWS: ... telling me in a kind way to the president that this is
going to be one heck of a tough reelection campaign for him.

GARRETT: Absolutely.

MATTHEWS: Really tough. I mean, he may have a pretty good week or
so, but...

GARRETT: And remember, when employment...

MATTHEWS: ... it`s going to be tough.

GARRETT: ... goes down to 8.6 and 315,000 drop off the rolls because
they`re so sick and tired of finding jobs that aren`t there...

MATTHEWS: I know.

GARRETT: ... that`s not great news.

MATTHEWS: I know. I know. Sober news.

GARRETT: Indeed.

MATTHEWS: Anyway, thank you, Major Garrett.

GARRETT: My pleasure.

MATTHEWS: Coming up -- what a good day for the Democrats. Now
leading into Iowa, if Ron Paul pulls an upset out there -- and he`s winning
in some of these polls -- what is Iowa saying about the Republican Party
this year? What`s it say about its war policy? Is it saying war fatigue
in the Republican Party? Remember how Giuliani used to beat up this guy,
Ron Paul, every time he said we should have less wars?

You`re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: You might assume that a Texan would always support a Texan,
but that`s not the case with former president George H.W. Bush. Bush 41
offered words of support -- close to an official endorsement -- not to his
-- the governor of his state, Rick Perry but to candidate Mitt Romney. The
former president told "The Houston Chronicle" this week, quote, "I think
Romney is the best choice for us." He also said, quote, "I like Perry, but
he doesn`t seem to be going anywhere. He`s not surging forward."

On Newt Gingrich, he said, carefully, "I`m not his biggest advocate."
What a gent, the former president Bush, the senior Bush.

We`ll be right back.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL. Ron Paul now leads the race to
win the Iowa caucuses on January 3rd. And with that lead comes a level of
scrutiny he hasn`t yet faced, including a closer look at some of his more
unconventional positions.

What does Paul`s popularity in Iowa tell the rest of us about that
state? And what would a Ron Paul Iowa caucus win tell the country?

Terry Branstad is Iowa governor, and it`s great to have you on,
Governor. An honor, in fact. Thanks for coming on.

You are not only governor of your state, you are a veteran political
observer of that state. You have won every race, I believe, statewide,
you`ve ever fought. Let me ask you this question. Are you surprised by
the -- what looks to be a blooming support out there in your state for Ron
Paul? And what does it tell you as an expert on the state`s politics?

GOV. TERRY BRANSTAD (R), IOWA: Well, in this caucus race, we`ve had
more leaders than ever before. People are really disgusted with what`s
going on in Washington, the lack of leadership from the president, the fact
that we see the national debt going up more than $1 trillion every year.
Obama`s health care is unaffordable, unsustainable.

I think Iowa voters want to send a real signal. We need to
dramatically cut federal spending and have somebody that has the courage --
and Ron Paul has had the courage -- to vote against all these deficits and
all this manipulation of the currency.

We don`t want to be the next Europe. We see the disaster Europe`s in
because of their excesses in spending...

MATTHEWS: I know.

BRANSTAD: ... and failing to manage their fiscal house. We don`t
want to see that happen in America. And I think people are very concerned
about it.

But also, as you pointed out, a lot of people are now starting to
focus on Ron Paul`s positions on foreign policy, some other issues. And I
think a lot of Iowans have some concerns, think he might be naive with
regard to Iran and some other places.

MATTHEWS: Well, let me ask you about that because four years ago,
whenever he said something that sounded isolationist or anti-war, about the
Iraq war, for example, Rudy Giuliani was there on the platform and he just
whacked him and said, 9/11, and that was the end of it. He got the
applause and Ron Paul was quieted.

This time around, Ron Paul -- is he benefiting from a bit of war
fatigue, now that we`ve been over in Afghanistan for 10 years, we`ve been -
- we`re just coming out of Iraq after 8-and-a-half years? Do you sense in
Iowa among conservatives a sense of war fatigue on the part of our
military?

BRANSTAD: No. I think, really, his appeal to conservatives is the
fact that he`s a libertarian that`s been against all this excessive
government spending and manipulation of the -- of the currency. I think
that`s his real appeal. He wants to send a real message there.

Now, he`s getting some support from some nontraditional places, from
the Occupy groups and some of those, who are just plain against defense and
against the military. But he also does get some support from rank-and-file
people that serve in the military.

So his support comes from a lot of different places. But also
recognize, he`s now a front-runner.

MATTHEWS: Yes.

BRANSTAD: And with being a front-runner comes more scrutiny.

Others that have been front-runners have been there for a while and
dropped back. So I think the Iowa voters are looking for somebody that
would be the perfect candidate. There isn`t such a thing as a perfect
candidate, but they want a better alternative.

MATTHEWS: I know.

BRANSTAD: They are convinced the country`s going the wrong direction.
We can`t afford four more years of Obama. We need to have the strongest
and best candidate.

MATTHEWS: It`s been a tough audition for all those guys.

Here`s Ron Paul, by the way, taking center stage. The NBC News
political unit took at some of his let`s call them unconventional
positions. He opposes any federal regulations, including those for car
safety, medicines, even air traffic control.

He leaves it up to the states whether drugs like heroin, marijuana,
and cocaine are legal or not. And he also says it`s for states to decide
whether prostitution be legal or not. He says the Americans With
Disabilities Act should never have been passed. And he believes Social
Security, Medicare, and Medicaid are unconstitutional.

Those -- it reminds me of being a kid and liking Barry Goldwater. I
think a lot of young people love that stuff. Why do you think it`s
grabbing not just young people?

BRANSTAD: Right.

MATTHEWS: Young people are love and healthy. Let me ride my
motorcycle without a helmet, let me live my life. Is that what it`s about?
Is that the appeal of Ron Paul in Iowa?

BRANSTAD: Right.

He`s got a lot of support from young libertarians, but, also, you have
got to remember the Iowa caucuses are going to be held on January 3. The
colleges are going to be on Christmas and New Year`s holidays. So not all
of those people are going to be here to vote.

MATTHEWS: Yes.

BRANSTAD: And it really depends upon who turns out. He`s got some
very strident supporters, but also I think that have got to remember, too,
there`s a lot of candidates in this race, and we`re looking at maybe the
front-runner getting around 20 percent or something like that.

MATTHEWS: Yes.

BRANSTAD: In the end, it could change hands another time or two
before it`s over. It`s a wide-open race. I don`t think we should focus
too much on any one candidate. Let the voters decide. I have a lot of
confidence in Iowa caucus-goers. They will choose the candidate they think
is the strongest and the best to be the leader of America.

MATTHEWS: Well, as you know, as a watcher, the more wide-open this
election is, this caucus you`re having on January 3, the more everyone gets
somewhere around 25 percent or less, the better it is for Romney, because
that means dividing up the conservative vote.

Here`s Ron Paul getting front-runner treatment on CNN last night from
Gloria Borger. She asked about incendiary language in a newsletter
published under the name "The Ron Paul Report" back in -- here`s a 1990
newsletter that criticized Ronald Reagan for honoring Martin Luther King
Day by creating a federal holiday called -- he called it, by the way, in
the newsletter, whoever wrote it, the Ron Paul newsletter, "Hate Whitey
Day."

Well, Borger asked Paul whether he read the newsletters. And watch
what happened here next.

(BEGIN VIDEO CLIP)

REP. RON PAUL (R-TX), PRESIDENTIAL CANDIDATE: Not all the time.
Well, on occasion, yes.

GLORIA BORGER, CNN: And did you ever object when you read them?

PAUL: We talked about this twice yesterday at CNN. Why don`t you go
back and look at what I said yesterday on CNN and what I have said for 20-
some years? It`s 22 years ago. I didn`t write them. I disavow them.
That`s it.

BORGER: But you made money off of them?

PAUL: I was still practicing medicine. That was probably why I
wasn`t a very good publisher, because I had to make a living.

BORGER: Is it legitimate? I mean, is it a legitimate question to ask
that...

(CROSSTALK)

BORGER: ... your name?

PAUL: No. And when you get the answer -- and when you get the
answer, it`s legitimate that you sort of take the answers I give.

BORGER: It`s legitimate. These things are pretty incendiary, you
know.

(CROSSTALK)

PAUL: Because of people like you. Because of people like you.

BORGER: No, no, no, no. Come on, some of the stuff was very
incendiary, in saying that in 1993 the Israelis were responsible for the
bombing of the World Trade Center, that kind of stuff. So, well...

PAUL: Goodbye.

BORGER: All right. All right. Thank you, Congressman.

(END VIDEO CLIP)

MATTHEWS: Well, there you have it. I don`t know what happened there.
But Gloria Borger is not usually that -- well, she was asking questions.

Are they legitimate questions, Governor, about what was published
under his name in a newsletter that many years ago, 20 years ago?

BRANSTAD: Well, any time you get to be the front-runner, you`re
running for president of the United States, you better be ready for a lot
of scrutiny. That`s just the way it goes.

MATTHEWS: OK.

BRANSTAD: Politics is tough. You call this HARDBALL. That`s what
it`s all about. It`s hardball, especially when you`re running for
president of the United States. People have a right to know what stands
you have taken and even though it might be over 20 years ago.

MATTHEWS: Yes. I think you`re rooting for Romney. That`s my hunch.
But you don`t have to respond. My hunch is you want a winner in November
next year, and you think the best bet is Romney.

(CROSSTALK)

MATTHEWS: That`s what I think. Right?

BRANSTAD: Well, listen, I think that Iowa voters are the best ones to
decide.

I have confidence in them. I have tried to be a good host to all the
candidates, want to treat them all fairly. I want to see a great turnout
for the Iowa caucuses. And we can`t afford four more years of Obama. We
want a Republican that can restore fiscal integrity and focus on helping
the private sector create the jobs to renew the American economy.

MATTHEWS: OK, thank you very much, Iowa Governor Terry Branstad, a
pro, as you can tell.

Up next: Jon Huntsman goes musical. He`s got talent and that`s in
the "Sideshow."

You`re watching HARDBALL -- yes, you are -- only on MSNBC.

(COMMERCIAL BREAK)

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

First up: striking a chord. Jon Huntsman and Mitt Romney both
appeared on "David Letterman" this week, and last night Huntsman showed his
skills at the keyboard.

(BEGIN VIDEO CLIP, "LATE SHOW WITH DAVID LETTERMAN")

DAVID LETTERMAN, HOST, "LATE SHOW WITH DAVID LETTERMAN": Is it
possible for you to run over there and do a little something at the organ
with Paul?

PAUL SHAFFER, BAND LEADER: Yes, come on.

(APPLAUSE)

JON HUNTSMAN (R), PRESIDENTIAL CANDIDATE: What do you think?

LETTERMAN: I would love to hear it.

(MUSIC)

LETTERMAN: Jon Huntsman, ladies and gentlemen.

(CHEERING AND APPLAUSE)

(END VIDEO CLIP)

MATTHEWS: Pretty good, actually. Back in his youth, Huntsman hit the
road with a rock band.

Next up, who needs Scrooge? President Obama took some time out
yesterday to hit up a few stores, buying Christmas gifts for the family,
including something for the dog, Bo. Well, according to some Republicans,
the gridlock in Congress over the payroll tax cut was reason to skip that
presidential shopping trip altogether.

Here`s House Majority Leader Eric Cantor and Senator John McCain
earlier today saying just that.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: I think that the president should play
much more of a lead role, rather than go shopping for his dog. Maybe call
these people over to the White House, as the previous four presidents that
I have served under would have done.

REP. ERIC CANTOR (R-VA), HOUSE MAJORITY LEADER: I saw the president
out yesterday doing his Christmas shopping. I saw he brought his dog with
him. You know, we`re here. He could bring his dog up here. We are pet-
friendly.

(END VIDEO CLIP)

MATTHEWS: That`s pretty geeky stuff, isn`t it, if you think about
these two guys giving him trouble for going Christmas shopping for an hour
or two.

Let`s see. The Republicans went after Franklin Roosevelt for his dog
Fala back in `44, and Nixon played a big defender of his dog in 1950,
Checkers, of course. Now President Obama`s getting attacked by Republicans
for his dog. Human tricks, they never change.

Up next, let`s go to the videotape, the top political videos of 2011
on YouTube.

You`re watching HARDBALL. By the way, stick around for Kathleen, the
queen. She`s coming on later in HARDBALL tonight, only on MSNBC.

(COMMERCIAL BREAK)

(JOINED IN PROGRESS)

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: Members will work
expeditiously to complete the one-year extension that all of us want.

We will ask the House and Senate to approve this agreement by
unanimous consent before Christmas. Middle-class families and small
businesses are struggling, and they`re making sacrifices. And I think this
agreement will help our economy.

One important provision in this measure that I want to highlight is
the Keystone pipeline. As you know, this project would create tens of
thousands of jobs in our country. This jobs project has bipartisan support
in the House and Senate. It`s backed by a broad-based coalition. And I
hope the president will approve this pipeline to put those Americans to
work.

I want to thank our members, particularly our conferees who have
remained here in the Capitol with the holidays approaching, for their
efforts to enact a full-year extension of the payroll tax cut for working
families. And under this agreement, we`re going to do that just as quickly
as possible.

I don`t think it`s any time for celebration. Our economy is
struggling. We have got a lot of work ahead of us in the coming year. But
I want to wish the American people and all of my colleagues a very merry
Christmas and a happy new year.

QUESTION: Mr. Boehner...

(CROSSTALK)

QUESTION: Speaker Boehner, do you have assurances from your
conference that nobody will object to unanimous consent on the House side,
that you have everybody in line?

BOEHNER: I don`t know that, but that`s -- our goal is to do this by
unanimous consent.

QUESTION: Speaker Boehner, there are a lot of folks who are saying
that you caved on this. Did you cave? And, considering the fallout, was
this the worst week of your speakership?

BOEHNER: You know, sometimes, it`s hard to do the right thing. And,
sometimes, it`s politically difficult to do the right thing.

But, you know, when everybody called for a one-year extension of the
payroll tax deduction, when everybody wanted a full year of extended
unemployment benefits, we were here fighting for the right things. It may
not have been politically the smartest thing in the world, but I`m going to
tell you what. I think our members waged a good fight.

We were able to come to an agreement. We were able to fix what came
out of the Senate. You know, all year, you have heard me talk about short-
term extensions, short-term gimmicks, and the consequences they have for
our economy.

And, you know, when you look at -- at this, it`s just another -- it`s
another short-term extension. This creates uncertainty for job creators.
I used to run a small business. I know how this works. And kicking the
can down the road for a couple of months does cause problems.

And when you look at the reporting requirement that came out of this
bill because it was hastily put together, it was a big burden for
businesses, frankly, of all sizes.

(CROSSTALK)

QUESTION: Speaker Boehner, on the conference call, I know that you
spoke with not a lot of questions. I know, on Saturday, it was a rather
lengthy (OFF-MIKE) session.

Number one, was that by design not to have that this time? And,
number two, one member who I spoke with said that he felt that he had been
-- quote -- "hung out to dry" by the leadership because people weren`t
allowed to speak this time.

BOEHNER: I don`t set up the conference calls.

QUESTION: But you`re the speaker of the house.

BOEHNER: Listen, we got a lot of members with a lot of opinions.

QUESTION: Mr. Speaker...

QUESTION: Speaker Boehner

BOEHNER: We have been -- we have been -- we have fought the fight,
the good fight.

But, you know, I talked to enough members over the last 24 hours who
believe that, hey, listen, we don`t like this two-month extension. We
don`t like this reporting problem in the Senate bill, and if you can get
this fixed, why not do the right thing for the American people, even though
it`s not exactly what we want?

QUESTION: If someone objects tomorrow and it`s not going to pass by
unanimous consent, will you bring the House back for a vote next week?

BOEHNER: Absolutely.

QUESTION: Mr. Speaker?

BOEHNER: Last one.

QUESTION: Mr. Speaker, just given the whole last weak and just we
have seen photo-op after photo-op and news conference after news conference
on both sides.

Democrats are really charging that the radical Tea Party element of
the House Republican Conference are to blame for this. Do you think that
this whole fight was worth it in the political costs that have come up?
And do you think that you guys ended up getting a good compromise?

BOEHNER: Listen, doing the right thing for the right reasons is
always the right thing to do.

And while everyone asked for a full-year extension of these programs,
a lot of people weren`t willing to put the effort in, as the holidays were
approaching, to get it done. Our members were. So, I`m proud of the
efforts that they put into this.

Again, it`s not always -- it`s not -- it`s not always easy to do the
right thing. But we believe that we came here to change the way this town
does business, and no more gimmicks, no more short-term this, short-term
that. It`s time to do solid policy, and it`s time to do it the right way.

Thanks.

QUESTION: Thank you.

(CROSSTALK)

MATTHEWS: Welcome back to HARDBALL.

Joan Walsh is editor at large at Salon, and Ron Reagan is a political
commentator for us.

Thank you, Joan.

You`re smiling because you saw, what, the pain on the face of John
Boehner? I mean, he spent a lot of words there basically saying uncle.

JOAN WALSH, EDITOR IN CHIEF, SALON.COM: Yes.

He practiced in front of a mirror saying, it`s the right time to do
the right thing and all those other platitudes, Chris, but that was a full-
on cave. That was a political pratfall.

And, you know, I hear he`s even been hearing from Newt Gingrich that
this was the right thing to do. I think he might be talking to Newt
Gingrich about what it`s like to be ex-speaker and what it`s like when your
members come after you, because this is a full-on meltdown for the House
Republicans.

And it`s not pretty to see. You know, I mean, I smiled, but it`s also,
you know, it`s so disingenuous, that they were the ones fighting for the
full year and Democrats or even the Senate Republicans didn`t want that.
But everyone`s seeing through it. And I guess that makes me smile, that
the entire country is seeing through this charade and these people cannot
take our country hostage anymore.

That`s a good thing. That`s a "happy holidays" story, but the rest
of it is not.

MATTHEWS: You know, I wonder, Ron Reagan, if he`s not surrounded by
200 people that look different than him, more red hot than this sort of
calm, sometimes nervous speaker, whether he hasn`t gotten 200 people
looking for scalps out there on that conference call with him, and he`s
saying, let`s smoke the peace pipe, to use an old cowboy expression. And
he wants to smoke the peace pipe, and these guys want to yell Geronimo
again.

I think he`s the strangest leader for a Tea Party-led party. It
doesn`t seem like he`s the right guy to lead these people.

RON REAGAN, POLITICAL COMMENTATOR: He`s not, and apparently he`s the
one being led here. This has been a disastrous week for John Boehner, a
disastrous week, ultimately, for the Tea Party wing of the House, the
Republican House there, and ultimately, a disastrous week for the
Republican Party.

They`ve been revealed here in this whole discussion about the payroll
tax extension as a party that really is less interested in tax cuts, per
se, than rewarding their rich benefactors.

MATTHEWS: Yes. Well, I remember --

REAGAN: When a tax cut for the middle class comes along, they don`t
like it.

MATTHEWS: I remember somebody who was president who said if you cut
taxes, the revenues will go up, not down.

REAGAN: You also remember somebody --

MATTHEWS: Then Republicans believe --

REAGAN: That`s the same guy -- that same guy said it`s not fair that
a bus driver pays more in taxes than a wealthy person. And the Democrats
seem to be more in line with that sort of sentiment from Ronald Reagan.

WALSH: Absolutely.

MATTHEWS: Aren`t you good? Aren`t you a good son? You are a great
son. You remember the positive populist Ronald Reagan and forget the other
type.

(CROSSTALK)

(LAUGHTER)

MATTHEWS: Let`s go to Joan. You can go up there and trickle down
now because the Republicans there, here they are saying, don`t give a tax
cut or risk a tax cut for people who are making a salary, regular people --
160 million of them, we`re told. But then they`ll always say, but protect
that top millionaire guy, and to protect the people who make the big bucks
against any fair tax share.

WALSH: Right. And go after the bus drivers and go after the public
workers while you`re at it, every chance you get. I mean, it is just --
it`s really a sad sight to see.

But the other part of this that we`re not talking about is, A, it`s
definitely protect the wealthy, but it`s also get Obama. Get President
Obama. This is Obama derangement syndrome. They will -- they really
thought that they could do anything, that they could get away with
anything, as long as it made him look bad.

And you know, I`m very happy to see him in the last six months
realize that you can`t compromise if you don`t have a partner. And stand
up to this garbage, because they, in the end, are the ones who look
terrible. But they`re really going after the president. And it failed.

MATTHEWS: Yes, I know. To wit, or exhibit A would be Terry
Branstad, we just had on the show. You could ask him what time it is,
they`ll tell you five reasons why he hates Obama.

WALSH: Exactly.

REAGAN: I notice that.

MATTHEWS: I mean, you can ask him, where the bus stops, and did you
notice Ron, you say anything, and he responds, here`s why I hate this
president, we got to rid of. That`s how they talk like, you know?

REAGAN: Yes, and they don`t understand how revealing that is. They
don`t understand how the public is watching this and they`re seeing Obama
being, you know, reasonable, whether you agree with him or not. But, my
goodness, you know, these people are just crazy, blood thirsty.

MATTHEWS: OK. Thank you, Ron Reagan. Have a nice Christmas, if I
don`t see you -- you and your family.

And, Joan Walsh, you too.

Up next, my wife, Kathleen Matthews, is coming on to play some
HARDBALL. A little bit of that. We`re going to talk politics, the
economy, and a little bit about my book I`ve been out hawking for the last
two months, rather successfully. People love the story of John Kennedy,
these days especially. Uniting the country, I`d say.

This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Guess what? HBO has released a first look, a trailer, if
you will, a preview of the high-profile movie "Game Change," about the 2008
presidential election featuring Ed Harris as Senator John McCain, Woody
Harrelson as McCain adviser, and HARDBALL regular Steve Schmidt, and the
great Julianne Moore as Sarah Palin. Let`s take a look.

(BEGIN VIDEO CLIP)

WOODY HARRELSON: We desperately need a game changing pick, and none
of these middle-aged white guys are game changers.

ED HARRIS: So find me a woman.

CROWD: Sarah, Sarah!

JULIANNE MOORE: I will be honored to accept your nomination for vice
president of the United States.

(END VIDEO CLIP)

MATTHEWS: That`s irresistible. The movie`s going to debut in March.
I can`t wait. That`s on the script, and I mean it, I can`t wait.

We`ll be right back.

(COMMERCIAL BREAK)

C. MATTHEWS: We`re back.

And now something we`ve done in the past couple of years. The tables
get turned right now and I`m going to be grilled -- well, somewhat, by --
and I mean it -- the great Kathleen Matthews, who anchored the news here in
Washington for a while, and then became, as she is now, a top executive for
Marriott International, and has traveled the world.

I sit at home at night and she tells me about China and what`s
happening in the Amazon and what`s happening in the new St. Petersburg and
Russia. And I`m here, you know, in Washington, D.C., covering local
politics, nationally here.

And you see the world. The world!

KATHLEEN MATTHEWS, CHRIS` WIFE: It`s great to be across the table
from you. It`s a little bit like the dinner table conversation, right?

C. MATTHEWS: Well, yes, except that now you`re in charge.

K. MATTHEWS: OK.

C. MATTHEWS: The queen. By the way, what would I do, what`s the
first thing I do in the morning, every morning, first thing?

K. MATTHEWS: He brings me a skim milk latte.

C. MATTHEWS: Right. I bring right to the bedside.

K. MATTHEWS: I love seeing the White House behind you there. A live
picture.

C. MATTHEWS: People don`t realize that this is -- behind us a live
picture of the White House.

K. MATTHEWS: To see all the ornaments and everything.

C. MATTHEWS: That picture is not a picture. That`s the White House
and it`s a live camera shooting it. There you are on live TV.

(CROSSTALK)

K. MATTHEWS: So, Chris especially likes me back on the show when
he`s got a book to promote, which in case you haven`t heard it yet, he`s
got a book to promote.

C. MATTHEWS: You mock me!

K. MATTHEWS: And, you know, I`m a reader of fiction, as you know. I
don`t read that much nonfiction.

C. MATTHEWS: Yes. And what do I read?

K. MATTHEWS: And you read nonfiction, exclusively. But when I read
this book this summer in the first galleys, I fell in love with it. I was
a skeptic because I thought, why was a president who was elected more than
50 years ago relevant today? What`s the answer to that question?

C. MATTHEWS: Well, I think it`s purpose. Those of us who grew up
when this man was president -- and he looks like a million bucks there --
we had a country that had a purpose. It was to keep our place in the
world, to do it successfully against the Soviet -- what looked like a
Soviet onslaught, and to do it without war.

So, Kennedy said, here`s some ways to do it. We`ll prove our
technological expertise with the moon shot. We`ll get to the moon before
the Russians. And everybody, in the Africa, in Latin America will see
we`ve got it better than the communist system. We have a better economic
system that can produce new ideas and innovation, sort of the Steve Jobs of
the time.

And then he said, we`re going to go around with the Peace Corps like
-- guys like me, and women like me, and we`re going to go around the
country, around the world, and develop a third world in a way that is
positive, and make friends for the United States. And we`re going to have
the alliance for progress, and things like the Special Forces even. We`re
not going to go to nuclear war.

So, he found a way to have America with purpose. Also ask not what
your country can do for you. That was a real call to arms, a call to duty.
I think the reason --

K. MATTHEWS: Is this something you think is lacking today?

C. MATTHEWS: Yes, I think the reason people like television shows
like "Pan Am," it`s kind of popular at night, but it`s gleaming, it`s
positive. They like "Mad Men," despite the chauvinism, and they like the
idea of everybody was (INAUDIBLE), we`re going to get things done, can do.
It wasn`t that sort of sloppy period that came in the late `60s, let`s get
it done. And we can do it.

I think the can-do thing, and the unity -- we weren`t arguing over
these little tax cuts with, you know, these, sort of, small potatoes
arguments just to fight with each other. There was a sense of big stuff.
We`ve got to beat the Russians, we can`t fight with each other.

K. MATTHEWS: But the time also got it challenges because you had --
this was before civil rights.

C. MATTHEWS: Well, he created civil rights.

K. MATTHEWS: Incredible lack of inequality in America. You also
economically had some periods in there that were not -- you know, robust
economic growth.

So what are the lessons that somebody running for president or
running the White House today could take from Jack Kennedy?

C. MATTHEWS: Get tough, Obama. President Kennedy went down to
Mississippi, brought the federal troops down there and said to Ross
Barnett, the governor, you`re going to let blacks in the university, Jim
Crow is dead, and I`ll make it official today with federal troops, with
bayonets fixed. You`re going to take blacks to the university.

And you watch a football game now at Ole Miss, there are black
players. In those days, nobody played, not even the (INAUDIBLE) athletes.

Same thing with George Wallace in Alabama, the Crimson Tide, all
white. Kennedy said that`s over with. He just did it.

And that`s bracing to think about, a president just says, OK, I`ll
bring the troops next time. And he did it. This one guy did it.

And he backed up Dr. King when he got arrested in 1960. And he had
played a big role. King was the hero, of course. Kennedy played a big
role in that.

K. MATTHEWS: You know, I think a lot of people today look at Jack
Kennedy`s record and feel like it`s somewhat eclipsed, because the media of
the time didn`t cover the warts. And today, every wart is covered ad
nauseam on cable television.

C. MATTHEWS: I`m not saying he wasn`t flawed.

K. MATTHEWS: It`s hard to be a hero today. Do you think Jack
Kennedy could have been a hero today and still have sort of the double life
he had, unfaithful to his wife, sort of a father in the back room, and some
really pretty tough, hardball politics?

C. MATTHEWS: The old man was a right winger. Here`s what I think --
once you save your crew in World War II, and you`re a hero, and you really
did protect the men in your unit and did risk your life, people cut you
some slack.

Anyway, Kathleen is staying with us. When we return, I`ll ask
Kathleen about the world. She`s been all over the world and she`s got good
news economically. We can use some.

You`re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

C. MATTHEWS: We`re back with Kathleen Matthews.

I mean, if you want to understand me, you have to watch her and see
what she does. Here`s Kathleen.

I got a big positive because we always do tough economic news on the
show. Tell me, you travel -- I was bragging on you, because you go
everywhere in the world, places like the Amazon, all parts of China.
You`ve been all over Russia, some beautiful places like St. Petersburg,
you`ve been to.

What`s the good news in all this traveling around you figured out?

K. MATTHEWS: Well, the good news is that people are traveling. I
mean, there`s a reason why companies like Marriott or Hilton or Starwood
are building hotels in India, China, Brazil. And that is because no longer
is it just an issue of Americans or Europeans going to those countries to
see the Great Wall, or to see the Taj Mahal --

C. MATTHEWS: Or the Grand Canyon.

K. MATTHEWS: It`s people within those countries, these rising middle
classes. We`re talking about hundreds of millions of people who want to
travel. First, they want to see their own country. Most of them want to
come to America.

C. MATTHEWS: Yes.

K. MATTHEWS: And so, what we need to do is make it easy for them to
get here.

C. MATTHEWS: To get their money.

K. MATTHEWS: For every international traveler that comes to America,
we create jobs.

C. MATTHES: OK. Give an example of that because when I`ve travelled
around this book tour, I go to beautiful cities like Chicago and San
Francisco, and, of course, New York. Every time you walk down the street,
I`m not saying it`s always the time, you see Russians, Germans, people from
Asia, carrying big bags, they`re buying all this stuff here.

K. MATTHEWS: They`re coming here. So, there`s this multiplier
effect. They`re staying in hotels. They`re going shopping.

C. MATTHEWS: Eating.

K. MATTHEWS: They`re going to restaurants. So, it`s huge for our
country.

C. MATTHEWS: So, our biggest export is people coming here
ironically.

K. MATTHEWS: It could be.

Now, the problem is since 9/11, the U.S. has lost share of
international travelers. We used to have about 17 percent of the world`s
global travelers --

C. MATTHEWS: Where did they go?

K. MATTHEWS: The numbers are going up. We now have 12 percent,
because we made it really challenging to get in here with our visa policy.
And you have so many people --

C. MATTHEWS: Is that because of terrorism?

K. MATTHEWS: Well, we just want to be careful, so it requires places
like China, India and Brazil an in-person interview. So, you have to
physically go to a consulate. There are only five consulates in all of
China, only five in all of India. Hundreds of millions of people would
like --

C. MATTHEWS: Just to come over for a couple weeks.

K. MATTHEWS: Sometimes it takes as much as 100 days to get an
appointment to get a visa. And sometimes, you have to take a big trip just
to get to the consulate.

So, we`re working with the State Department. We`re working with
homeland security. And right now on Capitol Hill, there are a number of
bills to actually try to make the wait times less. That`s important
because if we can get more people here to enjoy America, it`s going to be
creating American jobs.

C. MATTHEWS: Can we solve the problem with travel?

K. MATTHEWS: I think we could.

C. MATTHEWS: I`m amazed. But when you`re talking about a billion
people in some of these countries --

K. MATTHEWS: We`re putting people back to work.

C. MATTHEWS: And they have money.

Anyway, thank you, Kathleen Matthews.

K. MATTHEWS: It`s great to be here.

C. MATTHEWS: She always tells me something new. And it`s
delightful. There she is. Take a look. There she is.

That`s HARDBALL -- or softball for now. Thanks for being with us.
I`ll be back tomorrow night.

"POLITICS NATION" with the Reverend Al Sharpton starts right now.

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

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