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updated 7/17/2012 1:25:38 PM ET 2012-07-17T17:25:38

Guests: Joe Klein, Sen. Claire McCaskill, Sen. Sheldon Whitehouse, Michael
Steele, Ron Reagan

CHRIS MATTHEWS, HOST: Back in the saddle.

Let`s play HARDBALL.

Good evening. I`m Chris Matthews in San Francisco. "Let Me Start"
with why the Republicans might just blow an election. This guy Romney`s on
the ropes and he ain`t doin` rope-a-dope. He`s got no real answer to the
charge he`s killed American jobs, sent them overseas, got no answer to the
demand he release his tax returns. If he`s not yelling, It wasn`t my job,
he`s out there exposed to his enemies.

Tonight, back from vacation, I want to know why. What is this guy
hiding? If he wanted to be president, why did he do something that can`t
pass the smell test? Are these tax returns that yucky that he refuses to
call them from -- even -- refuse the call even from Republicans to let them
go? Is this the command -- or the campaign he wants to run?

He hides who he is while the nasty right makes sick accusations, with
Rush Limbaugh saying just today that Barack Obama was indoctrinated as a
young child with anti-American hatred, with Michele Bachmann out there
declaring that Hillary Clinton`s closest aide is an agent of the Muslim
Brotherhood.

Wow! Is this what it`s going to be to November, Romney hiding where
his money came from, where he keeps it, the loony right attacking the
enemies within?

Joining me now is Howard Fineman, MSNBC political analyst and
editorial director of the HuffingtonPost. Also with us is MSNBC`s
political analyst David Corn, who`s with "Mother Jones." David`s also the
author of a great book, `Showdown."

Well, let`s talk about this showdown right now. Howard, my friend,
it`s good to be back with you. It just seems now that this campaign on the
surface is about Romney having something deeply to hide, at the same time
this wolf pack on the right continues relentlessly to declare the president
of the United States somehow not one of us, not an American, someone
indoctrinated in anti-Americanism, and of course, Michele Bachmann out
there going after Hillary`s people now by saying Huma, her top -- her
closest aide, who travels with her -- you see her with her all the time --
is somehow secretly working as a mole for the Muslim Brotherhood.

This is really loony country. Your thoughts.

HOWARD FINEMAN, HUFFINGTON POST MEDIA GROUP, MSNBC POLITICAL ANALYST:
Well, I agree with you, Chris and I think it`s gotten nastier and more
personal -- more personal sooner than I`ve seen it in other presidential
elections.

Ads, yes, we`ve had that before, everything from the "daisy" ad to the
Willie Horton ad to the Swift-Boating of 2004. But here I get the sense
that it`s personal, involving the personalities and the personal life and
times of the two candidates.

The Obama campaign is focusing relentlessly, and without apology, on
Mitt Romney`s business career, his wealth and the story of how he got
there. And even though Mitt Romney demanded an apology the other day from
the president for some of the things that the Obama campaign had suggested
about Romney`s lack of truthfulness in filling out various forms about his
career, the president rejected the call for an apology and said, basically,
to Mitt Romney, you know, Put on your big boy pants. This is the way it
is. You have to be an open book.

And the way the right is responding is with personal attacks on the
life and times of the president of the United States. So that`s where we
are. It`s only July, and it`s going to get worse from here.

MATTHEWS: Well, one side`s attacking the business practices of the
other side...

FINEMAN: Right.

MATTHEWS: ... and the other side is attacking whether the president
of the United States is some kind of in cahoots with the terrorists.

FINEMAN: Right. Right.

MATTHEWS: Anyway, over the weekend, the Obama campaign released this
devastating ad about Mitt Romney, using the candidate`s own words and with
a melody attached. Let`s watch.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R-MA), FMR. GOV., PRESIDENTIAL CANDIDATE: (SINGING) Oh,
beautiful for spacious skies, for amber waves of grain, for purple
mountains majesty above the fruited plains, America, America, God shed his
grace on thee and crown thy good with brotherhood...

(END VIDEO CLIP)

MATTHEWS: And here`s the real vulnerability, I think, coming back
from vacation -- and I want David to respond to this -- that Mitt Romney`s
problem is he doesn`t want to talk about where his money came from, but he
won`t talk about his tax returns. He won`t even discuss in any way the
kind of information most candidates put forward, including his father, who
gave us 12 years of tax returns.

And it`s not just the Democrats (INAUDIBLE) This weekend, a lot of
prominent Republicans said Romney`s refusal to do so is an indication
there`s something there he`s trying to hide. This is powerful stuff.
Let`s listen to it first, and then you, David.

(BEGIN VIDEO CLIP)

BILL KRISTOL, "THE WEEKLY STANDARD," FOX CONTRIBUTOR: He should
release the tax returns tomorrow. It`s crazy. You`ve got to release six,
eight, ten years of back tax returns. Take the hit for a day or two.

GEORGE WILL, "WASHINGTON POST," "This Week": If something`s going to
come out, get it out in a hurry. I do not know why, given that Mr. Romney
knew the day that McCain lost in 2008 that he was going to run for
president again, that he didn`t get all of this out and tidy up some of his
offshore accounts and all the rest.

MATT DOWD, POLITICAL CONTRIBUTOR, "THIS WEEK": There`s obviously
something there because if there was nothing there, he would say, Have at
it. So there`s obviously something there that compromises what he`s said
in the past about something. Many of these politicians think, I can do
this, I can get away with this, I don`t need to do this because I`m going
to say something, and I don`t have to do this.

GOV. ROBERT BENTLEY (R), ALABAMA: The best thing to do is just get
everything out in the open and just say, Hey, I have nothing to hide and
I`m going to release my tax returns.

(END VIDEO CLIP)

MATTHEWS: Well, those are all Republicans talking there. Today,
Romney showed no signs the attacks were working to change his mind. He`s
still refusing to show how he made his money, what taxes he paid. Let`s
look.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R-MA), FMR. GOV., PRESIDENTIAL CANDIDATE: John McCain
ran for president, and released two years of tax returns. John Kerry ran
for president. You know, his wife, who has hundreds of millions of
dollars, she never released her tax returns, and somehow, this wasn`t an
issue. The Obama people keep on watching more and more and more, more
things to pick through, more things for their opposition research to try
and make a mountain of and to distort and to be dishonest about.

(END VIDEO CLIP)

MATTHEWS: Well, there`s a cheap shot. He goes after Teresa Heinz.
Excuse me, David. There used to be chivalry in this business. What was
that about?

(LAUGHTER)

MATTHEWS: Anyway, why don`t he respond and give us some of the tax
returns? What`s the worst case that he knows but we don`t?

DAVID CORN, "MOTHER JONES," MSNBC POLITICAL ANALYST: You know, Chris,
you`ve missed a wild two weeks, and you`ve been missed by, you know, myself
and other reporters at HuffingtonPost and -- and other outlets. We`ve --
you know, we sort of hit the motherlode in terms of looking at SEC filings,
and there were also reports about his secret funds down in Bermuda, Cayman
Islands, that "Vanity Fair" an AP did.

And so what I think is -- you know, people kept saying the
conventional wisdom is you get this stuff out, you take a hit. It`s better
than a slow bleeding wound, which is what you got now...

MATTHEWS: Unless it`s really bad.

(CROSSTALK)

MATTHEWS: Unless it`s really bad.

CORN: Opening up your chest cavity is worse than a slow, bleeding
wound. And I think just judging from what I`ve looked at and what other
people have done in the last few weeks, that if you put out these tax
returns, there`s stuff there that`s going to be -- I`m not saying illegal,
but really hard to explain, if not shady, how he got his IRA account to go
up from $450,000 to up to $102 million.

There`s a lot of stuff that is -- there are contradictions between the
tax returns he released and financial disclosure forms and Bain documents.

This is a road map. Howard and I could keep 100 reporters busy from
now until election day with these tax returns! He cannot justify -- he
cannot reveal "Romney world" and I think survive politically.

MATTHEWS: Well, Howard, it seems we all know his tax policy, which
is, Give a break to the wealthy, or the investment class, while he puts the
load of lower benefits, less government, higher taxes, in effect, more
property taxes on people who make less money.

How can he say, I`m going to write an all-new tax policy, but I ain`t
telling you what I`ve been paying? I mean, the very thing he wants to
focus on, tax policy, and he won`t tell you what taxes he`s paid!

FINEMAN: Yes, well, I think this is a classic case of your strength -
- your biggest strength being your biggest weakness. And the Obama
campaign is -- is exploiting it.

MATTHEWS: Right. You mean embarrassment of riches.

FINEMAN: Well, yes...

CORN: Literally!

FINEMAN: ... Mitt Romney came to the country and said, I am a
successful businessman. Look at how well I`ve done. This shows I know how
the modern economy works. This shows I`m the takeover guy, the sort of
turnaround artist who can turn around a bankrupt country, the United States
of America.

And that is his strongest calling card, but if he`s going to play it,
he`s got to be responsible for it. And the president of the...

(CROSSTALK)

FINEMAN: The president of the United States, in very personal terms,
Chris -- this is unusual for an incumbent president this early in a
campaign to get this far down into it. But I think the president and his
advisers realize that this is the ballgame here, and they`re going to keep
focusing on it without apology until either Mitt Romney lays the whole
thing out for the American public or goes down trying.

Or if you believe the Romney people, they still think -- and I talk to
them all the time. They think they can soldier through this...

MATTHEWS: Yes, I know.

FINEMAN: ... from now until October. I think they`re crazy. That`s
four months. I don`t think so.

CORN: And Chris, this is the first wave. I mean, there are other --
you know, I did a story about a company that he invested in in China that
took jobs from U.S. outsourcing, that happened in `98 when he was in charge
of Bain. There are a lot of the Bain deals and a lot of side deals that
have not come out yet, that the campaign...

MATTHEWS: OK...

CORN: ... I think knows something about, that journalists are looking
at. So this is just the first wave. Even if he survives this -- think of
Normandy. There are more waves of opposition attacks and research and...

(CROSSTALK)

MATTHEWS: Well, when I think of Normandy, I think of you as one of
the paratroopers that gets in the night before.

(LAUGHTER)

MATTHEWS: Anyway, you can always count on Rush Limbaugh to give the
fringe right-wing view. Today -- if you think this is mud bath, talking
about Bain, catch this clip of Obama saying the government played a role in
helping to boost the private sector. With his vicious counterattack,
here`s Rushbo I think maybe at his worst. Let`s listen.

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST: I think it can now be said
without equivocation -- without equivocation -- this man hates this
country! He was indoctrinated as a child. His father was a communist,
mother was a leftist, sent to prep Ivy League schools where his contempt
for the country was reinforced. He moved to Chicago, the home of the
radical left movement.

This is what we have as a president, a radical ideologue, rootless
politician who despises the country and the way it was founded and the way
in which it became great!

(END VIDEO CLIP)

MATTHEWS: Isn`t it funny that our Supreme Court, Howard, is dominated
by Republicans who went to Ivy League schools.

FINEMAN: Yes.

MATTHEWS: It isn`t like they all came back indoctrinated. What
nonsense. But I want to talk about...

FINEMAN: Well, my...

MATTHEWS: Go ahead. Your thoughts on what this Rushbo thing means.

FINEMAN: Well, my take on this, Chris, is that Mitt Romney was at one
point, and to some extent still is, an establishment Republican...

MATTHEWS: Yes.

FINEMAN: ... and yet he has run a campaign from the very beginning
that`s been, for the most part, all attack. It was that way in the
primaries. It`s that way now.

So if you have an establishment Republican behaving like an attack
dog, you`re going to have the Rush Limbaughs of the world behaving like
werewolves.

MATTHEWS: Yes.

(LAUGHTER)

FINEMAN: Mitt Romney has dragged the center of gravity of the
discussion over to the nasty realm, which brings -- which brings the --
what happens in talk radio and elsewhere in the conservative grass roots --
legitimizes the nastiness that you`re seeing there, and again, has only
begun -- has only begun. They`re going to become increasingly hysterical
as the months go on.

CORN: This is what...

MATTHEWS: Howard -- Howard and David, we have to go, but I`m at home
with my brothers. Thank you, sirs, for joining us tonight. Also,
tonight...

(CROSSTALK)

MATTHEWS: ... why Bain matters. Why sending American jobs overseas
is a killer politically and why Romney needs to show his hands are clean of
it, if he can.

Also, Republicans want photo ID cards for regular voters, but not for
their big-dollar donors. Have you noticed? Why do Republicans want to
keep their sugar daddies in the shadows? Senator Claire McCaskill joins us
next.

And yelling fire in the theater. Michele Bachmann and her allies say
the Muslim Brotherhood has infiltrated our government. I`m beginning to
talk like Rushbo! She says Hillary`s close aide is one of its agents.
This is a U.S. congresswoman talking! I`m going to finish tonight with
this nasty new campaign of the right to sell a candidate -- and here`s the
secret -- they don`t love, don`t like, the just want to beat the president
they hate.

And this is HARDBALL, the place for politics.

(COMMERCIAL BREAK)

MATTHEWS: We got a bunch of new polls from the Purple Strategies
Group of swing states that show just how close this election has gotten.
Let`s to the HARDBALL "Scoreboard."

In Colorado, it`s neck and neck with President Obama leading Mitt
Romney by just 1 point, and he needs that state, 45-44. Same story in
Virginia, a make-or-break state where the president leads Romney by just 2
points, 46-44.

In Ohio, a state that Mitt Romney must win -- historically,
Republicans have to win there -- President Obama has a 3-point edge, 48-45.
But in Florida, another state the Republicans need, it`s Romney in the
lead, 48-45. Every one of the states I mentioned within the margin of
error.

We`ll be right back.

(COMMERCIAL BREAK)

MATTHEWS: Well, if they ain`t so dirty and ain`t so angry, why don`t
they tell us who they are? We`ve been talking about Romney`s refusal to
come clean on how much he paid in taxes in years past, if he paid anything
at all, of course, and where he hides his money in offshore accounts, how
precisely he made his millions.

Now Republicans are taking the stealth strategy of Romney a step
further. They want to hide the names of contributors to a pro-Romney
outside political groups -- all outside political groups.

Senator Sheldon Whitehouse is sponsor of the Disclose Act of 2012 that
the Senate`s voting on today, which would require campaign donors who give
at least 10K -- $10,000 -- to be identified. Senator McCaskill is a co-
sponsor of the bill.

Senator Whitehouse, for example, you know, we talk a lot about this
show about this very, I think, controversial proposal that people who want
to vote -- and they all should vote -- have to have a photo government-
issued ID card in big cities and rowhouses where people don`t even have
cars. It`s quite a problem for them. At the same time, we don`t want
identification of the wealthy people who are influencing this campaign by
the tens of millions of dollars.

You`re smiling. Do Republicans see the contrast in the way they look
at regular working people and the way they look at rich people when it
comes to identifying them?

SEN. SHELDON WHITEHOUSE (D), RHODE ISLAND: I think they have a lot of
trouble with this one both for the reasons that you mention, Chris, and
because so many of them for so many years -- 10 sitting Republican senators
have been out in favor of transparency and disclosure in election finance
before.

Mitch McConnell is actually being critiqued in his home state
newspaper with editorials quoting from previous editorials that he had
written in favor of disclosure. So they`ve really tied themselves in a
knot. It`s not a great spectacle from their point of view.

MATTHEWS: Well, before I get to Senator McCaskill, I got to ask you
this. You`re the chief sponsor. Have you confronted a guy I respect,
certainly, John McCain, Lindsey Graham, people like that? How do they hide
from this? It seems to me it would be purely partisan for them not to
support this measure, not at all to do with their ideals.

WHITEHOUSE: Well, first of all, like you, I admire Senator McCain.
He joined me on the brief in the Supreme Court criticizing Citizens United.
That was a brave step on his part.

In this case, he tells me that there`s something in my bill that
favors unions. I don`t see it. It`s $10,000 across the board. I keep
saying, John, tell me what it is and we`ll talk about it, and nobody`s ever
been able to show me what it is. So...

(CROSSTALK)

MATTHEWS: ... your bill covers union money, PAC money from unions, as
well as money from -- money from corporate...

WHITEHOUSE: Absolutely.

MATTHEWS: OK, let me go to Claire McCaskill...

WHITEHOUSE: PACs, individuals (INAUDIBLE) corporations...

MATTHEWS: Senator McCaskill, we`re all big fans of yours on this
show. We`ve seen you how as a moderate Democrat in the Midwest have been
really fighting, fighting for a different kind of politics, right down
close to the middle on the liberal side.

Now, let me ask you thins. Why would any Republican oppose this bill?

SEN. CLAIRE MCCASKILL (D), MISSOURI: Well, because of what`s going on
in Missouri this year. You know, here`s the deal. There has been almost
$8 million of secret money spent against me in this campaign. They began
back in October. They`ve been on the airwaves with false and lies about me
-- false claims and lies about me since then.

They want to buy this election, Chris. It`s pretty simple. This is
the party of big money and there`s a few masters of the universe that...

MATTHEWS: Well, why are they afraid of saying they`re masters of the
universe? Why are they -- if they`re proud of backing your opponent or
proud of backing anybody, why don`t they say so?

MCCASKILL: I don`t think they are proud. I don`t think the
Republicans want everybody to know who`s paying for these ads. I think it
would be very unpopular.

I think the people of Missouri, if they knew who were paying for these
ads against me, I think they`d be proud of the enemies I`ve made.

MATTHEWS: Do you know who they are?

MCCASKILL: I think it would get me votes. I don`t know who they are.

I have got some good guesses.

MATTHEWS: OK.

MCCASKILL: But I don`t know -- I don`t know who they are.

I know this. We`re trying to get this thing passed. And I think we
have to keep the pressure up on this. They say, why do you keep bringing
this up?

We bring it up because people are upset about it. And at
ClaireMcCaskill.com/discloseact, sign on to be a co-sponsor of the bill, a
citizen co-sponsor.

MATTHEWS: OK.

MCCASKILL: Let`s not let these guys buy our elections out from under
us.

MATTHEWS: Let`s just guess, probably the Koch brothers, oil and gas,
Sheldon Adelson, gambling. Let`s make the worst assumptions.

MCCASKILL: Oil. Probably big oil.

MATTHEWS: If they don`t want to tell us who, go to the worst-case.

Anyway, today, the Senate minority leader, Mitch McConnell, who wants
desperately to be the majority leader, criticized the Disclose Act, calling
it -- what an odd thing for a Republican to say -- it`s like they`re saying
somebody is swift boating. They`re the ones that swift boated.

They`re calling it -- Mitch McConnell is calling it Nixonian. Was
that a bad word for a Republican? Let`s listen. This is bizarre.

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: The purpose of this
legislation is totally clear. After Citizens United, Democrats realized
they couldn`t shut up their critics, so they decided to go after the
microphone instead by trying to scare off the funders.

The creation of a modern-day Nixonian enemies list is currently in
full swing. And, frankly, the American people shouldn`t stand for it.

(END VIDEO CLIP)

MATTHEWS: So he doesn`t like Richard Nixon anymore.

Anyway, on "Meet the Press" in 2000 -- he switched on this one as well
-- McConnell had a different opinion back then. Let`s listen.

(BEGIN VIDEO CLIP, "MEET THE PRESS," 2000)

MCCONNELL: Republicans are in favor of disclosure. We need to have
real disclosure, and so what we ought to do is broaden the disclosure to
include at least labor unions and tax-exempt associations and trial
lawyers, so that you include the major political players in America. Why
would a little disclosure be better than a lot of disclosure?

(END VIDEO CLIP)

MATTHEWS: God, our good friend Tim looked great in that picture, Tim
Russert.

What do you think of that switcheroo, Senator Whitehouse? There is a
guy singing the praises of full disclosure, and here is opposing that
disclosure.

WHITEHOUSE: I know. That`s the pickle that they`re in. As Claire
has pointed out, it`s because the big money is with them.

But, also, as Claire pointed out, the public is against them. She`s
got probably a ton of people on her Web site -- Credo Action, I showed on
the Senate floor 213,000 signatures on a citizen petition. If you go to
discloseact.com, we`re at nearly 300,000 different signatures of people
coming in to register.

This is an issue that Americans care about. They know very well that
their democracy is slipping away from them into the hands of the special
interests.

(CROSSTALK)

MCCASKILL: You know, Chris...

(CROSSTALK)

MATTHEWS: Go ahead.

MCCASKILL: Yes. And, Sheldon, let me throw in here, Chris, you
remember a time, Chris, when people used to carry around a briefcase of
cash.

MATTHEWS: Well, I`m not that old, but I know about it.

(LAUGHTER)

(CROSSTALK)

MATTHEWS: I think it was before `74, when they actually would
actually put money in the pockets, the raincoats of senators when they`d
walk into their offices. But that were the bad old days, yes.

MCCASKILL: And that`s what we`re getting back to here. It`s like
we`re going back to a time where they don`t want everyone to vote without
showing five forms of I.D., but they want secret money to buy elections.

And there will be a scandal. I don`t know if this ugly petri dish
that we`re seeing across this country will produce it this year, but mark
my words. If we don`t get transparency, if we don`t get antiseptic
sunshine on the buying of American elections, there is going to be a big
scandal and people will go to jail eventually.

And that`s why we have got to get this disclosure thing done. I hope
the Republicans come to their senses, and they will if the American people
put enough pressure on them.

MATTHEWS: Well said.

Thank you very much, Senator Claire McCaskill of Missouri.

And thank you, Senator Sheldon Whitehouse, the chief sponsor of this
Disclose Act. It sounds like good American politics to me. You ought to
know who`s running our election, who`s influencing us with all these TV
ads. What`s wrong with putting a name on those ads?

Up next, Dana Carvey takes on the 2012 race in the "Sideshow," a
little break, a little comedic break.

(BEGIN VIDEO CLIP, "THE TONIGHT SHOW WITH JAY LENO")

DANA CARVEY, COMEDIAN: Romney, he seems sincere, but he`s a little
jumpy, you know, like, I like to set people on fire.

(LAUGHTER)

JAY LENO, HOST, "THE TONIGHT SHOW WITH JAY LENO": Right.

CARVEY: What? I mean, I like to fire people...

(LAUGHTER)

CARVEY: ... that don`t provide me services. OK.

(LAUGHTER)

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Michelle has told me I
should not be singing in public all the time.

(LAUGHTER)

OBAMA: Well, it`s happy birthday? What`s your name? Adam. All
right, let`s sing happy birthday to Adam then. We can sing.

OBAMA AND CROWD (singing): Happy birthday to you. Happy birthday to
you. Happy birthday, dear Adam. Happy birthday to you.

Yay!

(CHEERING AND APPLAUSE)

OBAMA: All right.

(END VIDEO CLIP)

MATTHEWS: I think I worry more about this election than that guy
does.

Anyway, back to HARDBALL.

That was an impromptu serenade from President Obama this afternoon in
Cincinnati.

Now all with the "Sideshow."

"Saturday Night Live"`s Dana Carvey goes after the 2012 election on
"The Tonight Show."

(BEGIN VIDEO CLIP, "THE TONIGHT SHOW WITH JAY LENO")

CARVEY: Obama`s like a Zen master of speaking.

And Romney is -- he seems sincere, but he`s a little jumpy, you know,
like, I like to set people on fire.

(LAUGHTER)

LENO: Right.

CARVEY: What? I mean, I like to fire people...

(LAUGHTER)

CARVEY: ... that don`t provide me services. OK.

(LAUGHTER)

CARVEY: That`s not a winning -- winning thing against Obama.

LENO: No. No. No. No.

CARVEY: Because Obama -- Obama has a lot of confidence.

Romney is...

(LAUGHTER)

CARVEY: Obama knows how to pause. He knows how to let things settle
down.

(LAUGHTER)

CARVEY: And if someone tries to interrupt, he`s like, no, no, no, no,
no, no, let, let, let, let, let...

(LAUGHTER)

CARVEY: Bah-duh-bum, bah-duh-bum-bum-bum, buh-buh-buh-buh-buh-buh-
buh-buh.

(LAUGHTER)

(END VIDEO CLIP)

MATTHEWS: Same thing in 2008?

(BEGIN VIDEO CLIP)

CARVEY: Barack Obama is so smooth and smart that he just like --
McCain`s all crunched up and, I know how to do this. I can do this.

(LAUGHTER)

CARVEY: I have been there. I know what it`s like.

Senator Barack Obama, what do you have to say?

People are losing their jobs and people need help, and that`s all I
got to say.

(LAUGHTER)

(END VIDEO CLIP)

MATTHEWS: Well, you shouldn`t make fun of John McCain`s war injuries
that way. I must make that disclaimer.

I have been doing this myself, by the way, on the serious side, trying
to figure out what each guy should do in these big three debates coming up
this fall.

Next, why has this photo of President Obama gotten such buzz the last
few days? Well, he`s just staring -- there he is -- at a tomato. Well,
apparently, a lot of people are curious why he looks so engaged there.

Well, the folks at "New York" magazine see the president thinking
something like this. "Guys, check this out. Have you ever seen a tomato
this beautiful? Just look at it. I don`t even think I could eat this,
honestly. It really should be in a museum somewhere. Let me know if you
can find a museum for it, and if not, I will put it on display in the Oval,
instead of that dusty old bust of MLK. Seriously, great job on this
tomato."

Well, that`s a lot of imagination. They launched a whole sideshow of
these -- slide show of these presidential moments back in 2010. Another
highlight from the reel? Here he is with Joe Biden at the Museum of Nature
and Science. "No, Joe, I have no idea what we`re supposed to be looking
at. Just keep looking."

Now for the really bizarre. Iowa Republican Randi Shannon was running
for a state Senate seat, until she sent out a four-page letter to
supporters saying she was dropping out. That wasn`t the end of it.
Shannon now says she`s been appointed -- catch this -- senator for an
alternative government, the so-called, as she puts it, Republic of the
United States of America.

That`s right. Shannon has joined a libertarian group that says they
re-inhabited the original government back in 2010. Prepared to be
confused? The group says that that`s what we now think of as the
government is this really -- quote -- "United States corporation," they
call it. And we have it to blame for things like invasive TSA screenings
and even the 14th Amendment and everything amendment after that.

By the way, the 14th Amendment was back in the 1860s. And here`s the
case in a nutshell. There`s an appropriate phrase -- quote -- "If people
think it`s crazy to want to have a constitutional government back in place,
then so be it."

So, there are people out there who are thinking that they have been
appointed to some other government besides the one that actually exists.
These people on the right are really getting zany. And that`s right, the
senator from the alternative universe. So be it.

And a programming note tonight. On Thursday of this week, Jeff
Daniels, starts of the new HBO series "The Newsroom" joins us here on
HARDBALL.

I`m happy to say that my son, Thomas, has a role in that program.

Anyway, "the Newsroom," it`s a great show, and I can`t wait to get you
to actually see the cable show in a real cable news show. That`s Thursday
night on HARDBALL.

Coming up, why Bain matters, and what is Mitt Romney running away from
on his tax returns?

You`re watching HARDBALL, the place for politics.

(COMMERCIAL BREAK)

AMANDA DRURY, CNBC CORRESPONDENT: I`m Amanda Drury with your CNBC
"Market Wrap."

Well, the Dow fell by 50 points today, the S&P dropped by three, and
the Nasdaq down by 11. Stocks ended lower after a report on retail sales
showed consumers held on to their wallets last month. It was the third
month in a row that sales slumped. On the earnings front, Citigroup`s
profit beat expectations, but revenue was light and shared ended little
changed.

And Yahoo! has hired a former Google executive to be its new CEO. It
will be the firm`s fifth CEO in five years.

And that is it from CNBC, first in business worldwide -- back to
HARDBALL.

MATTHEWS: Welcome back to HARDBALL.

The Bain story just isn`t going to go away, and neither will the
intensifying drumbeat for Mitt Romney to release more of his tax returns.
And while the Romney campaign scoffs that these are distractions, the
attack is sticking, because it tells a lot about how Romney operates.

That`s why Bain matters. "The New York Times"` Paul Krugman put it
this way. "The true charge that he`s pushing policies that would benefit
the rich at the expense of ordinary working Americans meshes with Bain`s
record of earning big profits even when workers suffered -- a record so
stark that Mr. Romney is attempting to distance himself from part of it by
insisting that he had nothing to do with Bain`s operations after 1999, even
though the company continued to list him as CEO."

Michael Steele is former chairman of the Republican National Committee
and an MSNBC political analyst. And Joe Klein writes about Romney`s
travails in the article "Bained."

Joe, I want you to strategist here.

Full journalistic integrity here absolute, this issue, do we know what
role at the point Romney played in outsourcing?

JOE KLEIN, COLUMNIST, "TIME": No, we don`t. And it really doesn`t
matter in the end.

I mean, what the Obama campaign is doing is building this giant box
that they`re locking Mitt Romney in. And the lock on top of that box is
his tax returns. In boxing, they call this kind of thing a paint job.
It`s when a fast, really dexterous fighter is fighting against a slow,
plodding guy, and he keeps on jabbing and jabbing him in the face, and
starts opening up cuts all over the guy`s face, and he starts bleeding,
painting him.

And that`s what`s been happening the last couple of weeks.

MATTHEWS: But are they getting him into a corner? To continue the
metaphor, are they getting him into a situation where he has to release
something he knows will hurt him, his tax returns?

KLEIN: Well, I suspect that he is.

And I think Chairman Steele has been among the Republicans who have
said that he should. This ain`t going to go away until he does.

MATTHEWS: Well, let me go to that question of -- let you speak here
clearly, Michael, of what do you make of this? I keep hearing your
colleagues out there on the conservative side of things, Bill Kristol, a
neoconservative, George Will, an old-time conservative, people like Matt --
Matt -- what`s his name, Matt Dowd.

(CROSSTALK)

MATTHEWS: These guys are out there all pushing on television what he
clearly doesn`t want to do, tell his story.

MICHAEL STEELE, MSNBC POLITICAL ANALYST: Yes.

Yes, I mean, it`s a little bit unnerving to see this kind of back-and-
forth angst over this issue. This is a very straightforward proposition.
Just put out five years` worth of tax returns or whatever. Have a day`s
story and move on.

There`s so many ways in which you can capture this moment to pivot to
talk about this issue in a way that says, look, yes, I played by the rules,
and the rules aren`t level, they aren`t balanced for the average worker.
And as president, I want to change that. I want to fix this. That`s why
we need tax reform. That`s why we need to bring down our deficit spending
and all of these other things, just tying it all together.

But the more you sort of sit back and sort of give the sort of
highbrow response, the less credible you are.

(CROSSTALK)

STEELE: ... just create a big box.

MATTHEWS: But, guys, can he credibly make that case? Can he say I
want a cleaner, fairer tax system with less loopholes, if I have been
exploiting every damn loophole I have been able to find?

STEELE: Sure. Sure.

KLEIN: Sure. Of course he can.

STEELE: Yes.

KLEIN: He could turn this around in a heartbeat.

MATTHEWS: Really?

KLEIN: I was talking to a prominent Republican today who said, he
should go Eliot Ness on Wall Street.

STEELE: Absolutely.

(CROSSTALK)

MATTHEWS: Well, I don`t know.

Look, suppose he -- let me give you the worst case, because I always
assume -- Michael, you been in politics. You know, if it looks better than
it looks like -- if it is better than it looks, they will tell you.

(LAUGHTER)

STEELE: Right. Right.

(CROSSTALK)

MATTHEWS: If it is better than it looks.

Now, it looks pretty bad. He`s hiding something. Suppose he is
hiding the fact, for several years, he didn`t pay any taxes? Suppose he is
hiding the fact a lot of his money has been squirreled away in Switzerland
or somewhere in the islands somewhere?

Do you think that`s going to be something that he`s going to be able
to defend?

STEELE: Absolutely, because unless he did it illegally, he played by
the rules that everybody else in this country has played by.

(CROSSTALK)

MATTHEWS: I don`t agree.

(CROSSTALK)

MATTHEWS: No, I think it makes him look like a pirate.

(CROSSTALK)

KLEIN: It`s going to be embarrassing -- it`s going to be embarrassing
as hell, but if he didn`t cheat, he isn`t a cheater.

STEELE: Right.

MATTHEWS: OK.

KLEIN: What -- what cheats -- what is cheating, what is class warfare
is the tax code.

MATTHEWS: OK.

KLEIN: And it`s class warfare against the middle class.

MATTHEWS: Let me tell you guys, I -- I`m just going to beg to
disagree.

The voter out there that both candidates are looking for is a working class
guy and woman out there that doesn`t make a ton of money, doesn`t make
money they got to shoulder, because all they got is what they live on.
These people are saying I`m losing my job, the plant`s closing down. It`s
going overseas. This is the kind of guy who sits in the front office with
a nice suit on and he did it to me.

Michael, this is a guy they hate.

KLEIN: All of which is true.

MICHAEL STEELE, FORMER RNC CHAIRMAN: Yes. I don`t think people
take it that, they personalize it so much that they look at Romney and go,
you did this to me. Look, the reality of it is, as we`ve just discovered
last week, that the uniforms that our wonderful Olympians are wearing were
outsourced to China. They were made in China.

This is part of the global economy that everybody wants to talk
about. But all of a sudden now, we`re getting skid skittish about where
stuff is made. Just take apart your car. And you want to figure out where
the parts come put to, you know, that makes an American car. That`s the
nature of the business.

I think Romney can get in front of that. Put it all this in the
context of globalization and how markets work. But also more personally
talk about as I just said before, how I`ve been impacted of playing by the
rules. I feel that we need to change the system to make it better.

MATTHEWS: The problem with that is there`s a lot of northern United
States, the Midwest especially, the Rush Belt I called it, Scranton to
Oshkosh, that has lost initially New England industries like shoes and
textiles lost to the South because they were -- they had right to work and
they didn`t have labor unions. And now, you see all the United States, but
especially industrial middle getting eaten out, hallowed out by this
outsourcing.

Don`t you agree with that, Michael? Don`t you -- you ever drive
through those towns and see there`s nothing there but a Blockbuster and a
diner?

STEELE: Yes. No, you`re absolutely right. But it`s not all
outsourcing.

Let`s be clear. It`s not like every job in America in the Rust Belt
was shipped overseas.

MATTHEWS: Where did it go?

STEELE: Businesses just closed in some cases, Chris, you know, the
owners can`t afford to keep the doors open, because of the economy, because
of the inability to get cash and credit to keep their payroll going.

(CROSSTALK)

KLEIN: Chris, here`s the big problem that Romney has. You know,
Chairman Steele was right, there`s been globalization, there`s been
outsourcing, there is creative destruction. But Mitt Romney is the
exemplar of a form of capitalism and the central principle of which was
borrow money in order to buy assets and then you reap enormous profits.
This is a metaphor for our time. This has been a form of capitalism that
has been incredibly destructive to the United States, this private equity
capitalism.

MATTHEWS: You agree with that, Michael?

STEELE: No, look, I agree that there have been, you know, sort of
capitalism run amuck at times and we`ve seen that, certainly in 2008, 2009.
And I think where Romney has an opportunity as someone whose been on that
playing field to come in and talk expertly about it, yes. But to humanize
it. To talk about how this whole thing could be turned around to benefit
the American worker. To benefit, you know, those small towns I think is a
real opportunity. And the longer this thing drags out over taxes and Bain,
the more that opportunity is missed.

KLEIN: Here`s what makes it a lot worse for Romney, and that is he
hasn`t been substantive on anything. You know, if he turned around now and
was substantive on breaking up the big five Wall Street banks, which is
something we obviously need to do because they`re too big to fail. That
would be a break from everything else from his campaign. The guy hasn`t --
the reason why this stuff sticks is that he hasn`t been specific on
anything else.

(CROSSTALK)

MATTHEWS: Thank you, Michael Steele. Thank you, Joe Klein. I think
we`ve zeroed in to the problem.

Up next, some right wingers used to see communist out of their beds.
Now, they see Muslim extremists and terrorists. Michele Bachmann is back
in there saying that we`ve got a Muslim Brotherhood underground in the
United States government with some of the people working close to Hillary
Clinton. This is outrageous stuff and she`s behind it. But a lot of
right wingers buy this stuff.

HARDBALL -- well, our show -- is the place for politics.

(COMMERCIAL BREAK)

MATTHEWS: There`s been a lot of Democratic concern about -- in fact,
the outrage about these new voter ID laws that are set in motion by
Republican governors and legislators. Democrats charged that it`s their
design to depress Democratic turnout.

But Nate Silver, the numbers guru at "The New York Times" Web site
538.com has looked at a number of academic studies on the new laws. His
conclusion: Pennsylvania right now is the only swing state that will be
affected and it`s likely to only reduce turnout by only 2.4 percent.
Still, Silver estimates Obama`s chances of winning this state remain above
80 percent.

We`ll see. I am very concerned about the people living in row houses
not having cars. Therefore, no driver licenses. Therefore, no ability to
vote.

We`ll be right back.

(COMMERCIAL BREAK)

MATTHEWS: We`re back.

Michele Bachmann, of course, is no stranger to conspiracy theories
and now, she`s drummed up a new one. She and four other right wing members
of the Congress say the Muslim Brotherhood has infiltrated the American
government. Bachmann has personally attacked Hillary Clinton`s deputy
chief of staff, Huma Abedin, wife of the former New York congressman, of
former New York congressman, still the wife of Anthony Weiner.

She says Abedin is tied to the radical Islamic organization through
three family members. As for Bachmann`s source, one of the country`s
leading anti-Muslim conspiracy theorists Frank Gaffney.

With me now are: Brian Levin, director for the Center for the Study
of Hate and Extremism at California State University, and Ron Reagan, MSNBC
political analyst and author of "My Father at 100."

Brian, thank you for joining us.

You`re an expert at this. Just to get this straight, her entire
basis for saying that Huma Abedin, who works very closely to Hillary
Clinton, the secretary of state is in the Muslim Brotherhood, is based upon
something put up by Gaffney, Frank Gaffney, who also says that the logo
used for one of our government agencies actually is an Islamic symbol.

I mean, what do we make of this kind of nonsense?

BRIAN LEVIN, CALIFORNIA STATE UNIV.: Look, I could go on and talk
about individual facts. But let`s look at the forest instead of the trees.
This reminds me of very much of Army lawyer Joseph Welch who in 1948 said
this to Senator Joseph McCarthy.

He said, "Let us not assassinate this lad further. Senator, you have
done enough. Have you no sense of decency?"

And I think that is what we have here with Ms. Abedin. She has a
stellar background. She`s married to a former New York congressman who is
Jewish. She`s been in vogue. I don`t know many people who have her record
of achievement and her public persona who are members of the Muslim
Brotherhood.

To be sure, there are radicals in the United States. I just won an
investigative journalism award for looking at them. But some of these
folks they are pointing such as Huma Abedin or Rashad Hussein (ph) are
really being publicly assassinated. I think any person with decency has to
go on national television and say enough is enough.

MATTHEWS: This is the person. Let`s get a background, a reminder
here. In her letter to the State Department`s deputy inspector general,
this is what this U.S. Congressman from Minnesota, Bachman, singled out.
As you pointed out, Brian, longtime Hillary Clinton aide Huma Abedin is
having ties to the Muslim Brotherhood.

Here`s what she writes. This is a U.S. congressman, quote, "For
example, according to `The Muslim Brotherhood in America: The America
Within`, a product of the Center for Security Policy, the department`s
deputy chief of staff, Huma Abedin, has three family members her late
father, her mother and her brother connected to Muslim Brotherhood
operatives and/or organizations. Her position affords her routine access
to the secretary and to policy-making."

Ron Reagan, this assumption here that anybody would buy this malarkey
that somehow Huma is able to manipulate somebody as sophisticated
politically as Hillary Clinton, with all the commitment she`s made to the
state of Israel, obviously to her country, is somehow being tooled around
by the wild nature of Huma Abedin who is working as a lifetime mole is
crazy talk. Isn`t it?

RON REAGAN, MSNBC POLITICAL ANALYST: Well, if crazy were people,
Michele Bachmann would be China, Chris. You know, when this topic first
came up, I thought, why are we acting as a megaphone for this sort of
lunacy? It`s clearly dog whistle politics in part. Who knows that Michele
Bachmann --

MATTHEWS: Because they win if Obama loses. That`s what you have to
keep reminding people.

REAGAN: Exactly.

MATTHEWS: The stakes and a lot of other things in our politics, this
loony right wins if the center left loses, just we want to all remember
that.

REAGAN: And that`s really the point I`m heading towards here. While
at first I thought why are we offering a megaphone? I`m actually thinking
we`re doing the Lord`s work in a way, if you will, by bringing attention to
people like Michele Bachmann, because she is an integral part of the
Republican brand.

And while Mitt Romney, let`s say, may not believe that there`s a
Muslim Brotherhood conspiracy in the States Department or U.S. government,
you know, some people do. And if you vote for Mitt Romney, that comes with
him. This is part of the Republican Party today.

MATTHEWS: That`s right. It`s part of the winning ticket.

Let me go back to Brian. You`re an expert. I just at our NBC/"Wall
Street Journal" poll I really studied this week. What stunned me, it`s bad
enough 8 percent of the country say that Barack Obama is a Muslim which he
has never been, 40 percent say they`re not willing to say what he is. In
other words, their sneaky attack line is "I don`t believe a word he says."

So, 40 percent are out there basically chomping on this, enjoying the
fact that they`re creating some mystery here about his background. Meaning
hint, hint, he really is a foreigner, he really is dangerous, he really is
a Muslim.

It`s working. The nuts are winning the argument -- Brian.

LEVIN: It is working. And unfortunately what this kind of stuff
does is it marginalizes people of goodwill who happen to be Muslim, or
happen to be one or the other side of the political spectrum. I think
Congress people like Allen West and Michele Bachmann who point people to
American or anti-American, only if they believe in their particular
positions are doing a great disservice to the electorate.

MATTHEWS: Here`s Allen West, by the way, guys, here`s Allen West --
we only have a little time -- here`s Allen West singling out the communists
in our government. Here it is, Joe McCarthy reliving.

(BEGIN VIDEO CLIP)

REP. ALLEN WEST (R), FLORIDA: I believe there`s about 78 to 81
members of the Democrat Party that are members of the communist party.

(END VIDEO CLIP)

MATTHEWS: Well, there you have it, Brian. How many communists do
you figure in the Congress? I say zero. This guy`s got it up to -- he`s
very precise. This is so Joe McCarthy, as you know, Brian. Precision is a
great tool of the nuts.

LEVIN: It is. And what he`s doing is he`s getting that number from
a progressive Democratic alliance. Look, I don`t agree with most of those
folks. But to call people that we don`t agree with communists or to label
people who are Muslim as some kind of enemy, this does a disservice. I
have students who are patriotic Muslim-Americans who want to go into
government service and to have them experience is really a disgrace. We
have to speak out against this --

(CROSSTALK)

MATTHEWS: Part of our past that keeps flashing back. Thank you so
much, Brian Levin. Thank you as always, Ron.

When we return, let me finish with Republicans trying to sell a
candidate they don`t love -- let`s face it -- in order to beat a president
they hate.

You`re watching HARDBALL, the place for politics.

(COMMERCIAL BREAK)

MATTHEWS: Let me finish tonight with this. You know, when you step
away from this campaign for awhile and look at it, you see it clearer.
It`s pretty stark now. People on the right don`t love Mitt Romney, don`t
especially like him, just barely able to defend him like this refusal of
his to come clean on his taxes.

Besides, if the big money boys out there are backing are so proud of
doing so, why are these senators they have voting down the line against
naming them, giving their names out. They want little old people living in
row houses to come up with a government-issued ID card with a photo on it,
but they with all their lawyers and accountants refuse to identify
themselves when they give tens of millions of dollars to influence this
election.

Then there`s the zoo that got growling and yelping out there, Rush
Limbaugh yelling that the president was indoctrinated in his youth and
Michele Bachmann barking that Hillary Clinton`s closest aide is an agent of
the Muslim Brotherhood. All these to exploit the dark sick thinking of
those in the tree tops of the right wing, that 48 percent who deny the
president`s Protestantism, implying that he`s of some other religion, some
exotic you-know-what religion. The 58 percent Romney voters who confessed
they`re really voting against that guy in the White House. They`re hearing
these terrible things about.

Well, you want to know the really nasty side of this campaign right
now looking at it? It`s not the peppering of shots where Romney made his
quarter million bucks. It`s the relentless un-American campaign of
innuendo and xenophobia against the man who serves us right now in the
White House.

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

"POLITICS NATION" with 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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