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updated 12/5/2012 10:54:12 AM ET 2012-12-05T15:54:12

HARDBALL
December 4, 2012

Guests: Dana Milbank, Barney Frank, Steve McMahon, Dana Milbank,Jeff Zeleny, Susan Milligan

CHRIS MATTHEWS, HOST: In the belly of the beast.

Let`s play HARDBALL.

Good evening. I`m Chris Matthews in Washington.

"Let Me Start" tonight with some grave robbing. We`re going down into
the dark, cold tomb of the late Romney campaign. We`re going to excavate
the murky truths that were the living heart and mind of the defeated
Republican effort, going to exhume tonight the guts of the thinking that
went on and went so wrong.

Tonight, we get what we only guessed at, the results of which played
out in the numbers of election night -- the nasty, anti-immigrant politics,
the attitude toward that 47 percent, the failure to turn out the white male
vote, the reason Romney picked Ryan, and the wild prelude to the Clint
Eastwood performance.

Tonight right here on HARDBALL, the dark aroma of what lies now
beneath the dirt so we can understand what it looks like to think and feel
your way into an historic disaster.

With me tonight are Jeff Zeleny, national political correspondent for
"The New York Times," and Susan Milligan, who`s contributing editor at
"U.S. News & World Report."

You laugh. It`s not funny. Now you both attended that Harvard
Institute of Politics forum last week with top advisers from both the Obama
and the Romney campaigns. And they just released, by the way, tonight --
we`ve got the audio recordings of that not filmed event. And we got a real
autopsy of what went on behind the scenes during the primaries, the
conventions and the general election on the Romney side.

Let`s start with the Republican race for the nomination. Romney`s
campaign manager, Matt Rhoades, was asked whether his candidate had gone
too far to the right on immigration when challenged by Texas governor Rick
Perry, and whether he had any regret about that.

Rhoades brings up the Romney attacks on Perry for calling Social
Security a Ponzi scheme and says he now feels that would have been enough
to defeat Perry. He says he didn`t need to take the hard-right stance on
immigration.

Well, let`s listen to this. Here it is.

(BEGIN AUDIO CLIP)

MATT RHOADES, FMR. ROMNEY CAMPAIGN MANAGER: I regret that -- I truly
believe that people were shocked that we were going after Governor Perry in
a Republican primary on Social Security. They were critical of us at the
time, saying we were hitting him from the left.

UNIDENTIFIED MALE: Right.

RHOADES: And you know, if you look through the unwinding of the Perry
campaign, a lot of people put a focus on that one infamous debate moment,
but it was the very early debates, the first and second debates.

UNIDENTIFIED MALE: The "heartless."

RHOADES: And by the third debate -- and this is well before the other
moment...

UNIDENTIFIED MALE: Sure.

RHOADES: ... I think Governor Perry was -- was badly hurt. And I --
in retrospect, I believe that we could have probably just beaten Governor
Perry with the Social Security hit.

(END AUDIO CLIP)

MATTHEWS: Boy, talk about a ruthless comment by a cynic, a real cynic
talking there, saying, We didn`t have to go in on immigrants tactically, we
could have beaten him on his stupid comment on Social Security. What an
amazing admission! In other words, the whole thing about immigration,
self-deportation, all the rotten, hard-right position they took was just a
tactic and they could have avoided it. That`s his entire assessment.

I don`t think these people deserve to win elections.

JEFF ZELENY, "NEW YORK TIMES": I think he was -- I think Matt Rhoades
was saying something that we problem all have believed all this time,
that...

MATTHEWS: That Romney`s pretending to be anti-immigrant.

ZELENY: Not about that, but he did not necessarily have to go quite
as far as...

MATTHEWS: But why did he?

ZELENY: Of course, immigration -- well, he was worried about the
other opponents in this primary campaign. Michele Bachmann was still in
the race. But they were really worried about Governor Perry.

What this forum was really interesting in showing was when Governor
Perry got into the race, their fund-raising fell down, and the Romney
campaign did not quite realize that Governor Perry, you know, was going to
be as bad of a debater as he was.

MATTHEWS: Yes.

ZELENY: I mean, if they had known that, of course, they never would
have said any of this stuff. But this just opens a bit of a window into...

MATTHEWS: But I`m telling you...

(CROSSTALK)

MATTHEWS: ... straight reporter, you can`t agree with me. I have an
opinion here. And my opinion is if they`re willing to say no student --
in-state tuition for people who come here because their parents brought
them here, which is a normal break you give the kid who grows up in Texas -
- if he attacks him on that, what a rotten approach to take just to win a
couple points against Perry.

SUSAN MILLIGAN, "U.S. NEWS & WORLD REPORT": Yes, but Chris...

MATTHEWS: Now he`s saying, Oh, it was a tactical mistake.

MILLIGAN: But this was his whole campaign, was basically a
businessman`s approach and accommodating the product for the consumer. And
the consumer in the primary was a conservative voter, just as a consumer in
Massachusetts was a liberal voter, and the general election was different.
So he thought he had to come at him from the right. I mean, in retrospect,
it`s easy for Matt Rhoades to say, yes, we probably should have knocked him
out with this and...

MATTHEWS: Why didn`t he just say it`s wrong?

MILLIGAN: It`s a little early to go to...

(CROSSTALK)

MATTHEWS: ... say it`s morally wrong to beat the hell out of young
people who grew up, children of immigrants, legal or not. They didn`t
break any laws, the kids, and they`re trying to go to school here.

ZELENY: It`s funny, at the time, I mean, Governor Perry -- and Newt
Gingrich at the time, as well -- was much to the left of Mitt Romney on
immigration. So I just think the campaign manager -- Matt Rhoades is
someone -- he`s an operative. He`s been inside the Bush world, inside the
Romney world in both cycles. We haven`t heard from him hardly at all. He
didn`t talk to the press during the campaign. So this just offered a
window. I think he just was being honest there...

MATTHEWS: Yes, I know.

ZELENY: ... and saying...

MATTHEWS: Well, maybe he`s being tactical, but...

(CROSSTALK)

MATTHEWS: By the way, W was good on immigration.

ZELENY: He was.

MATTHEWS: Here`s Matt Rhoades again. He spoke about that infamous
"47 percent comment" Romney made when he thought it was a closed-door fund-
raiser. The doors were closed, but the tape was on. Let`s listen to what
he says about how they handled the "47 percent." Let`s listen.

(BEGIN AUDIO CLIP)

RHOADES: I remember speaking to him -- and you know, there was a lot
of negativity about our campaign as a whole, but he`s a person that takes
personal responsibility about it. And he would to me, on the -- you know,
to me, like, You didn`t say 47 percent, Matt. Stuart didn`t say 47
percent. I did.

And obviously, it was not a high moment for our campaign, but I think
it speaks a lot to who Mitt Romney is and I also like to think it speaks a
lot to who this campaign team is that we were able to make a run and come
back from that because there were periods during that time where people --
and many people in this room -- said that we had no chance.

We never allowed ourselves to believe that, and the governor never
allowed himself to believe that, either.

(END VIDEO CLIP)

MATTHEWS: Susan, what`s profoundly interesting to me there is that
here`s the people on the center right and far right, all across the board
on that campaign, recognizing that what the presidential candidate there
was caught saying about the 47 percent was so grievous that it was almost
like a mortal wound and they had to sort of suffer through it.

MILLIGAN: Yes. Well, what you can`t hear on the tape is when he
said, That was not a high moment for us, and everybody laughed in the room.
And you can`t hear that on the tape.

But they didn`t, even in this event, sort of apologize for the
substance of that. It was just an acknowledgment it did do them damage.
The Obama people said it certainly helped them, but they also didn`t think
that that rush that they had in the polls right after that was really real.

I mean, that was another thing that was very different between those
two campaigns, is I felt that the Obama people were much more realistic
about the numbers, what the numbers really were, as -- you know, as
compared to the Romney campaign.

MATTHEWS: What do you make of that, the fact -- again, we see the
pattern of tactical answers to what seem to be terrible statements about
half the country, 47 percent not being this guy`s responsibility.

ZELENY: Right. I mean, I think, in fairness, these questions were
tactical questions. This was a forum about sort of the nuts and bolts of
why they did this or that.

But I thought, interestingly -- I agree with Susan, the Obama campaign
was saying that even though things looked a little bit better for them,
they thought it was only sort of a temporary thing. They thought they were
only getting some of these independents temporarily.

And we saw that after the first debate, things switched back pretty
quickly. So the Obama campaign thought it was a good moment for them only
because it was a bad moment for Mitt Romney.

But it really showed -- this was a low moment of the Romney campaign
not just because of the comments -- A, they didn`t know how to react to it,
and B, there was a lot of internal infighting with Stuart Stevens and Matt
Rhoades and some family members. We didn`t really get to the bottom of
that in the -- the...

MATTHEWS: Well, the Romney campaign`s polling clearly suggested that
their candidate was in a much better position than he really was. Romney`s
pollster, Neil Newhouse, is a smart pollster. He spoke about what
surprised him most in the turnout on election day. This is fascinating,
this stuff. Let`s listen to Neil Newhouse.

(BEGIN AUDIO CLIP)

NEIL NEWHOUSE, FMR. ROMNEY POLLSTER: The real hidden story here from
our side -- I mean, we think (ph) -- when you lose, you nitpick the numbers
and you basically go through this stuff. The number of white men who
didn`t vote in this election compared to white women, compared to four
years ago, was extraordinary.

I mean, something like, you know, 286,000 white men who voted in `08
in Ohio didn`t vote in `12. In Florida, something like 400,000. And these
white men were replaced in the electorate to some extent (INAUDIBLE) by
white women. We were taking a group that we won by 27 points and replacing
them with a group we won by 12 or 14 points.

(END VIDEO CLIP)

MATTHEWS: So here`s a campaign geared to igniting and irritating
angry white men, getting them riled up. I didn`t think it took much
rallying to get out and vote against Obama. They didn`t show, a lot of
them.

MILLIGAN: No. And what`s interesting -- it`s hard to hear that
because we lost power at some point because we were actually all talking in
the dark, which was kind of interesting. but what was interesting to me is
they still seemed to not understand what the demographics of this country
are now.

They really seemed genuinely stunned that they didn`t get the male
white vote out more. They said they`d been replaced with, basically, white
women, and they kind of gave the impression that had they just gotten that
vote out, that they would have won. But that was an iffy proposition...

MATTHEWS: Yes, that`s true, long term, but in the short term, these
white men were angry, but apparently, they were in -- they were in a
crosswind. They didn`t know whether to vote for the rich guy, who seemed
to have no interest in them, or the liberal guy from the Democratic Party
that seemed to be from the other philosophy.

ZELENY: Right. And at the end of the day, they went with the liberal
guy because they didn`t think...

MATTHEWS: Well, some of them didn`t show.

ZELENY: Right. That`s true. But they thought the liberal guy
understood them more, and it`s all because the Obama campaign and the
Democratic super-PACs defined Romney from the get-go. And the people in
Ohio just thought that Romney did not understand their lives, their
problems...

MATTHEWS: Yes, well, that`s true.

ZELENY: And Neil Newhouse...

MATTHEWS: So they actually...

ZELENY: ... is a very smart pollster. He just did not have the size
of the electorate right. If the electorate that they predicted...

MATTHEWS: OK, so you say they`re just...

(CROSSTALK)

MATTHEWS: Susan`s right.

ZELENY: ... shown up, they would have won...

MATTHEWS: OK.

ZELENY: ... but they did not expect the black electorate...

MATTHEWS: And by the way, do you know -- do you have any history of
people, white men who are regular voters, not voting? I don`t know when
they don`t vote. They seem like they always vote. Do they just -- he`s
talking about them not showing up. Did go in and fill their ballots out
but not for president? Did they stay at home? I mean, doesn`t everybody
want to vote? I mean, I`m just stunned by that (INAUDIBLE)

MILLIGAN: Well, I don`t know. I mean, maybe there was an issue here
with -- you know, as Jeff was saying, do you vote for the rich guy or do
you vote for the black guy? I mean, for some, you know, sort of working
class white voter, that might be something...

(CROSSTALK)

MATTHEWS: ... we`re being crude here, but I think it`s true.

(CROSSTALK)

MATTHEWS: Let`s take a look at this -- Romney adviser Stu Stevens, of
course, and Russ Schrieffer, spoke about one of the campaign`s biggest face
plants, if you will, the Clint Eastwood conversation with an empty chair at
the Republican national convention.

Eastwood had already spoken enthusiastic -- as -- at a number of GOP
fund-raisers before, and so Schrieffer asked him to do the same thing he`d
done before successfully at the convention, without much success
ultimately, we now know. Let`s take a look at this one, this thinking.

(BEGIN AUDIO CLIP)

RUSS SCHRIEFFER, FMR. ROMNEY CAMPAIGN ADVISER: I said, you know, Are
you going to, you know, do what we talked about? Are you going to talk
about what we talked about at the -- at these fund-raisers? And he looked
at me and said, Yes.

(LAUGHTER)

UNIDENTIFIED FEMALE: Make my day?

SCHRIEFFER: And it`s Clint Eastwood. You argue with him!

(END AUDIO CLIP)

MATTHEWS: Well, that`s not really useful in a person who`s putting
together a platform for the president. The nomination -- the night he`s
accepting the nomination in Tampa was not a great convention because of a
couple things, one of them being the distraction of Eastwood`s performance.
I liked it as show business. It was out of place, obviously.

But what do you think of the work they did in terms of prepping that
thing? Did they do it wrong? Or was it all Eastwood`s number?

ZELENY: I think they did it wrong. That clearly should not have been
in primetime.

MATTHEWS: Yes, right before the presidential candidate.

ZELENY: Right. Had that happened an hour earlier, it would have been
funny. The room would have liked it and the viewers on cable television
would have liked it.

But when the broadcast viewers came in and saw that that was their
introduction to Mitt Romney -- and the look on Ann Romney`s face, who
looked horrified to me -- I remember sitting not that far from her in the
convention hall, you could easily see that she was troubled by this and
certainly startled by it.

So it just -- it`s stunning that for all the planning, for all the
millions of dollars and polling ads that something like this would happen
and they wouldn`t vet his speech. It`s almost mind-boggling.

MATTHEWS: I don`t think it`s the Romney sort of humor anyway.

MILLIGAN: No, and...

MATTHEWS: My thought there.

MILLIGAN: Well, the interesting thing, too, is that the Obama
campaign was saying it`s a good thing that they didn`t run that Romney
video during that time because that was a very well done, powerful
introductory or biographical of Governor Romney. And if that had been what
people had seen in primetime, it would have been something of a different
story. I don`t think it would have won the election...

MATTHEWS: No, but I think they would have had a better convention.

MILLIGAN: Yes.

MATTHEWS: Anyway, thank you, Jeff Zeleny. Thank you for giving us
the inside of the -- the belly of the beast. Anyway -- Susan Milligan.

Coming up: The drip, drip, drip of big-name Republicans who say higher
tax rates are inevitable for the top people. That continues (ph). And
polls say voters will blame the GOP if we go over that fiscal cliff. But I
worry that when the time comes, it`s the president will also take the hit.

Also from the "just get over it" department, there`s a new PPP poll
that finds that 25 percent of Republicans want their state to secede from
the union. Do you believe this number? I am deeply convinced it`s mainly
in the South.

And by the way, another 19 percent say they aren`t so sure about
secession. Are these people meatheads or what? Forty-four percent of the
Republican Party either does or might go along with secession. What do you
want to bet these are the same people who say that President Obama is a
Muslim? Just guessing.

And he`s outspoken, tough, irreverent, biting, funny, sarcastic and
very, very smart. Well, he`ll be insufferable now. Barney Frank entered
the Congress at the start of the Reagan revolution. He`s leaving it as it
begins to crumble, some say. The man from Massachusetts joins us tonight.

Finally, consider yourself warned, Barack Obama is a socialist leading
the country to communism. That`s the latest from the sage of Wasilla,
Sarah Palin. That`s what she`s still saying.

And this is HARDBALL, the place for politics.

(COMMERCIAL BREAK)

MATTHEWS: Political campaigns are always competing to figure out the
best ways to use social media, but as the Romney campaign learned, not all
publicity is good publicity. Yahoo! announced its top search terms of the
year, and 3 of the top 10 memes came from the Romney campaign. Good news?
Not really.

Coming in at 9 -- number 9 -- Etch-a-Sketch, Romney adviser Eric
Fehrnstrom`s famous prediction that Romney would shift sharply to the
middle in the general election, and he did.

Number 8, "Eastwooding," inspired by Clint Eastwood`s bizarre
convention performance talking to that empty chair. And the number 1
Yahoo! meme, "binders full of women." Well, that came out of the second
debate as Romney clumsily explained how he searched for qualified women
when he was governor of Massachusetts. "Binders full of women," not
binders of resumes of women, binders of women.

Anyway, we`ll be right back.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL. Today, President Obama again
made clear there will be no deal to avert the so-called fiscal cliff
without the rich paying a higher tax rate. Got it? Higher rate.

In this interview on Bloomberg TV, he made it. Let`s listen.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The issue right now
that`s relevant is the acknowledgment that if we`re going to raise revenues
that are sufficient to balance with the very tough cuts that we`ve already
made and the further reforms in entitlements that I`m prepared to make,
that we`re going to have to see the rates on the top 2 percent go up, and
we`re not going to be able to get a deal without it.

(END VIDEO CLIP)

MATTHEWS: Well, there you heard it again, top rates have to go up --
and rates. And some Republicans are saying that the GOP will ultimately
say uncle. Conservative columnist Byron York, a very smart guy, wrote
today, quote, "Republicans will cave on the question of raising the tax
rate for the highest-income Americans. The only question is whether they
do so before or after the government goes over the so-called fiscal cliff."

And "New York Times" columnist David Brooks describes the GOP
conundrum this way. Quote, "Republicans will be raising middle class taxes
in order to serve the rich, shafting Sam`s Club to benefit the country
club. If Republicans do this, they might as well get Mitt Romney`s 47
percent comments printed on T-shirts and wear them for the rest of their
lives. So Republicans have to realize that they`re going to have to cave
on tax rates. The only question is what they get in return."

Michael Steele is former chair of the Republican National Committee
and an MSNBC political analyst, and Steve McMahon`s a Democratic
strategist.

Gentlemen -- Michael, you`re on the Republican side. And what do you
think of that, the argument made by Brooks, which is more sophisticated,
Make your deal now while you can get something for it because after January
1st, you`ll just be saving your rear end?

MICHAEL STEELE, FMR. RNC CHAIR, MSNBC POLITICAL ANALYST: I think he`s
right. I think he`s absolutely right. And I think part of that deal
should include giving the president what everybody in this town agrees on,
and that is those middle tax -- tax cuts for the middle class out of the
Bush tax cuts. Go ahead, set that aside, because everyone agrees we`re not
going to go after those.

Then it gives you some time and some room to really negotiate down on
that -- what that...

MATTHEWS: Well, we have to do all that by January 1st.

STEELE: You have to do all -- and it can be done. I mean, Chris,
this is not rocket science. That piece is very easy to take off the table.

MATTHEWS: But once you do that, why don`t you just admit you`re not
going to change the -- you`re going to let the top rates go back to 39.6?

STEELE: Well, yes, you can do that, but this is the kicker. The
Republicans want to see that they`re actually going to get something in the
bargain that`s going to be real and genuine, not the promise for cuts in
entitlement spending, you know, four or five congresses from now, but in
the next...

MATTHEWS: OK. Let`s talk -- let`s talk turkey. Everybody on the
shows do it their way. I want to do it a certain way.

STEVE MCMAHON, DEMOCRATIC STRATEGIST: Of course.

MATTHEWS: During the Cuban Missile -- of course, because we always
try to...

(CROSSTALK)

MATTHEWS: And sarcasm won`t stop you. It might not have you back
here again.

MCMAHON: Ooh!

(CROSSTALK)

MATTHEWS: OK. Let`s go to this one.

No, I`m just kidding. You`re invaluable.

(LAUGHTER)

MATTHEWS: Let`s go with this thing. During the Cuban Missile Crisis,
which were much higher stakes, Kennedy and Khrushchev were actually
communicating through different ways. Kennedy was trying to communicate, I
will do it this way, this won`t work for you, carrot and stick, this will
work for you. Then he threw in the Turkish bases, remember? So they found
ways to communicate.

Is there a communication going on head to head between the president
and the speaker right now?

MCMAHON: Well, as of last...

(CROSSTALK)

MATTHEWS: Are they thinking back and forth?

MCMAHON: As of last Wednesday, they spoke on the phone for 25
minutes. Here is what I think is interesting in the evolution.

MATTHEWS: Are they thinking this thing through back and forth?

MCMAHON: Well, I don`t know.

MATTHEWS: Are they gaming each other?

MCMAHON: I actually think they`re starting to move farther apart,
because you remember the president when he had his news conference right
after the election said, elections have consequences, all those things.

MATTHEWS: Yes.

MCMAHON: You he talked about higher revenues. He didn`t stick on
higher rates. Today...

MATTHEWS: He`s back.

(CROSSTALK)

MCMAHON: ... he`s actually moved to higher rates.

(CROSSTALK)

MCMAHON: He`s not moving off this.

MATTHEWS: I think people on the left, left, all the way to center,
are saying you got to do rates or you`re not going to get Pelosi and the
core of the Democratic Party.

STEELE: I think you`re absolutely right. And that again is where the
leverage point for Boehner is right now knowing that fact.

MATTHEWS: Does he know that the president can`t deliver his party
without that rate change?

STEELE: I think he does, but I think also that the president knows
that Boehner has got some problems in his corner as well.

MATTHEWS: What does Boehner need to do to pay for that? If Boehner
knows -- this is smart -- if Boehner knows he has to give on the tax rate
at the top, what does his party insist on getting in return? Do you know?
Do you know? What do they want?

(CROSSTALK)

STEELE: No, I think that they get -- as I said on this show before,
the deal has always been, here, we will give you tax -- give you the cuts
in spending if you give us a tax increase. We get the tax increase. We
never get the cuts in spending. I think they want a definitive...

MATTHEWS: What do they want in spending, 50/50?

STEELE: I don`t know if it`s 50/50?

MCMAHON: Ten to one.

(CROSSTALK)

MATTHEWS: No, no, no, let`s not get sarcastic.

(CROSSTALK)

STEELE: ... three for one.

(CROSSTALK)

MATTHEWS: We`re getting close to this.

(CROSSTALK)

MCMAHON: Chris...

MATTHEWS: Three to one?

STEELE: Yes.

MATTHEWS: Three dollars in spending cuts for every $1 in revenue.

MCMAHON: At least, at least.

(CROSSTALK)

MATTHEWS: Well, that`s crazy. They will never get that. They won`t
get that, will they?

(CROSSTALK)

MCMAHON: No.

MATTHEWS: The president can`t do that.

MCMAHON: The speaker and the Republicans have no leverage. The only
people who haven`t figured out that they have no leverage are the
Republicans and the speaker.

MATTHEWS: Why don`t they have leverage? Why don`t they have
leverage?

MCMAHON: Because if the president goes and gives a speech -- all he
has got to do is manage the markets, really. If the president goes and
gives a speech this week and says we`re going to go over the cliff, it`s
not going to be a calamity -- the markets have already priced this in,
Chris.

MATTHEWS: Oh, my God. Oh. Oh. No, I don`t believe that.

MCMAHON: We`re going to go over the cliff. It`s not going to be a
calamity.

(CROSSTALK)

MATTHEWS: The world is listening. And the world is not going to
listen to the president.

STEELE: Exactly. I agree with you, Chris. And I think, quite
frankly, that if the president goes out and announces that we`re going over
the cliff, then this is something that rest squarely on his shoulders.

(CROSSTALK)

MATTHEWS: Here is a poll that makes your point. I will give you
something on your side. Let`s take a look at the blame game question.

A new "Washington Post"/Pew research poll shows that Republicans will
get most blame if there`s no deal done. Congressional Republicans will get
53 percent of the blame game, Obama just 27 percent.

Now, that`s an interesting development there. I have looked at that
all afternoon, and your view of that?

MCMAHON: I think it`s absolutely right, number one.

Number two, the Republicans are creating a symbol that is not good for
their brand, that they`re going to let the tax guys -- the tax codes go up
for the middle class in order to protect the wealthy. The president has
actually framed this very well. He`s talked about balance.

He`s talked about the 2 percent having to do a little bit more. And
on every one of those things, the public is overwhelmingly with him. One-
third of Mitt Romney`s voters believe the top 2 percent need to pay a
little more.

MATTHEWS: Conceptually, you obviously are right. The polling is
right. Here is my difference, the conditions in which the world lives.
Right now, we`re talking about a possible fiscal cliff. We`re not off the
cliff.

STEELE: Right.

MATTHEWS: If it`s January 2 or 3 and the stock market is going down
by a couple thousand points all around the world, the Japanese market is
going down, the European markets are going down, countries in Europe which
are precarious are in bigger trouble, the whole thing is going wacky, one
guy is going to be standing in the middle of that storm, one person.

It`s not going to be Grover Norquist or some Republican. It`s going
to be the president of the United States, who then has to weather the
storm. And then he has to point the finger across the aisle to someone
that nobody else in the world knows and says, Speaker Boehner, would you
solve this problem?

(CROSSTALK)

MATTHEWS: That`s why I`m against you on this one. I think times
change.

MCMAHON: Economically, the biggest risk to the economy is the
sequestration. It`s not the tax cuts. It`s not the tax cuts going into
effect.

(CROSSTALK)

MATTHEWS: Yes, you mean the tens of millions -- the billions of
dollars...

MCMAHON: The $1.2 trillion of cuts that would be forced through in
the next two years.

MATTHEWS: Defense.

MCMAHON: That`s a much bigger risk to the economy than tax hikes.

MATTHEWS: So, therefore?

MCMAHON: So, therefore, if the president lets this thing go -- look,
the markets have already priced this in. I did CNBC yesterday.

(CROSSTALK)

MATTHEWS: I hear the opposite.

(CROSSTALK)

MATTHEWS: I hear basically that they believe that the grownups will
do the job when they have to. They don`t believe they`re going to let us
go over the cliff.

MCMAHON: But I don`t think they believe that the grownups have to do
the job by January 1. That`s the point. I think they believe that the
grownups have to do the job by January 30 or February 15 or some point...

(CROSSTALK)

MATTHEWS: They`re going to believe the politicians can get the job
done when they failed to get it done by January 1.

(CROSSTALK)

STEELE: I hear what Steve is saying there.

But I`m standing in your camp, which is a rare spot for me to be in,
standing in Chris` camp here. But I think you`re right. I think the
markets have not baked this into this -- into their equation.

MCMAHON: Dysfunction and childishness?

(CROSSTALK)

STEELE: Dysfunction and childishness has nothing to do with my bottom
line, necessarily, in terms of how I`m going to pay for things going
forward.

So, yes, I get the political side of that. But, as a market force, I
don`t think they have baked that in, number one. Number two, I don`t think
that the president is going to allow this thing to get to that point. I
think that they`re going to cut a short-term deal to get through that first
quarter of next year.

MCMAHON: Kick it down the road.

STEELE: Kick it -- no.

MATTHEWS: No. Who is the only hero from this election besides the
president? Only hero? Chris Christie, the only hero, the only one who is
running 72 percent now.

STEELE: Right.

MATTHEWS: People of all colors in this country, all ethnic groups,
you poll them, you go into -- I have been in the rooms. I was there just
recently. They want a peace treaty of some kind to make it work. They
don`t want a big victory for the left or the right. They want a peace
treaty right now.

That`s what they most want to know, that their parents are getting
along.

(LAUGHTER)

MATTHEWS: OK?

(CROSSTALK)

MATTHEWS: The president should get a little edge in this because he
earned it, some edge, 60/40 deal.

(CROSSTALK)

MCMAHON: He`s just asking for rates. That`s all he`s asking for, but
he`s asked for the same thing he campaigned on.

(CROSSTALK)

MATTHEWS: I`m with you. I`m with you.

(CROSSTALK)

MATTHEWS: He`s got to get it done by mid-December.

(CROSSTALK)

STEELE: But he`s got to get it done.

(CROSSTALK)

MATTHEWS: You go off that fiscal cliff, you`re just part of the chaos
and you`re in the midst of the chaos.

MCMAHON: However he gets there, he will get there.

MATTHEWS: OK, Captain Ahab.

(LAUGHTER)

MATTHEWS: Thank you, Michael Steele and Steven McMahon.

I`m with Michael tonight. It will drive some people crazy. A broken
clock is right twice a day.

(LAUGHTER)

MATTHEWS: Up next: the latest from Sarah Palin, who is never, ever
right. If the fluoride in the water didn`t get Barack Obama -- well,
anyway, she says the president is turning the nation commie. Wait until
you hear her. She`s still at it and totally irrelevant.

And this is HARDBALL, the place for politics.

(COMMERCIAL BREAK)

MATTHEWS: Back to HARDBALL and the "Sideshow."

A protest takes a turn for the better? It started out when Ohio
Senator Rob Portman took to the stage at a fix the debt conference here in
Washington today. A group of protesters preempted Portman`s speech with a
staged walkout and a chant about Republican plans to cut spending.

It was caught on camera by BuzzFeed.

(BEGIN VIDEO CLIP)

UNIDENTIFIED PROTESTERS: We`re going to grow, not slow, the economy!
We`re going to grow, not slow, the economy! We`re going to grow, not slow,
the economy! We`re going to grow, not slow, the economy! We`re going
to...

(END VIDEO CLIP)

MATTHEWS: But here is how the episode ended. There, you see Senator
Portman with four of the protesters after his speech.

Well, according to BuzzFeed, Portman and those four protesters, all
Ohio residents, had an impromptu meeting after his speech ended. It lasted
about 20 minutes and concluded -- and concluded with that group photo. So,
I guess that is one way to be a politician and a protester. Get the guy`s
attention. He gets their attention. They meet, you have a meeting,
something gets done.

Also, why is Sarah Palin apologizing to fellow Republicans? Well, it
turns out she`s having second thoughts about warning them not to be with
wusses in debates on taxes and government spending.

Here is Palin and her mea culpa, plus a nugget about socialism.

(BEGIN VIDEO CLIP, "HANNITY")

SARAH PALIN (R), FORMER ALASKA GOVERNOR: Well, I guess I shouldn`t
call politicians names, so I...

SEAN HANNITY, HOST, "HANNITY": Why not?

PALIN: So, I apologize for calling the wobbly ones wusses.

Because that distracts from the point that has to be made. I say,
Republicans, go back to what the planks in your platform represent. It
represents reining in government, putting back the power and the
responsibility in the individual, not in the state, not in government.

Again, that gets us towards socialism. What goes beyond socialism,
Sean, is communism. And I know, you know, I`m going to get slammed for
speaking so bluntly about what`s going on.

(END VIDEO CLIP)

MATTHEWS: There`s Sean Hannity getting history lessons from Sarah
Palin. Wonderful.

Next: a bit of the postmortem here from "Mad Men." That`s what Romney
staffers nicknamed their campaign ad team. Vinny Minchillo -- Minchillo,
a former member of the "Mad Men" team, thinks they did a few things right,
despite losing the election. First of all, he says, their in-house
production operation allowed them to churn out ads in record time.

But Minchillo also says -- quote -- "If you make the Chinese news
agency angry, I figure you`re doing something right."

God. Anyway, Romney drew their wrath of China`s official news agency
for promising to label the country a currency manipulator on his first day
in office. Well, unfortunately for the "Mad Men," it wasn`t just the
Chinese who were paying attention. A General Motors spokesman accused them
of entering into a parallel universe with that Romney ad saying Jeep was
shipping American jobs over to China.

Well, finally, a toddler takes in CNBC`s fiscal cliff talk.

(BEGIN VIDEO CLIP)

(LAUGHTER)

(END VIDEO CLIP)

MATTHEWS: That`s like young kids who say they like me saying, let`s
play HARDBALL.

(LAUGHTER)

MATTHEWS: Anyway, that`s gone viral, obviously.

Up next, 44 percent of a certain group of Americans tell pollsters
seceding from the union might be a good idea. Who are these people? Half
think ACORN, by the way -- half the Republicans think that ACORN, which no
longer exists, stole the election for President Obama. Talk about
paranoia. What is this fringe group called? It`s called the GOP, the
Grand Old Party. Wait until you see these stats. It`s like "Jay Walking"
with Jay Leno among them. I don`t know who these people are.

Anyway, the place for politics coming up.

(COMMERCIAL BREAK)

JULIA BOORSTIN, CNBC CORRESPONDENT: I`m Julia Boorstin with your CNBC
"Market Wrap."

The Dow falls 13. The S&P is off two, and the Nasdaq loses five
points. One big winner today was Netflix. Shares rose 14 percent after
Walt Disney greed to give the company online streaming rights to its movies
starting in 2016. Facebook gained 1.5 percent after it unveiled a mobile
messenger app. And Yahoo! bought online video chat service OnTheAir for an
undisclosed sum. It`s the latest acquisition for CEO Marissa Mayer.

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

MATTHEWS: Well, remember "The Twilight Zone" on television with Rod
Serling? We`re entering it politically with the next story coming up.

Take a look at this shocking statistics. According to the public
Policy Poll out today, 25 percent of Republicans, that`s a quarter of all
Republicans you know, say they would support their state seceding from the
union because of President Obama`s reelection.

Another 19 percent said they weren`t sure whether their state should
secede or not. That means leave the country, leave America, become
something else. It isn`t just that people tell anonymous pollsters. In
many states, people are signing openly in public marketplaces out in the
street petitions to leave the country. In seven states, the petitions have
received enough support to force the White House to respond, actually.

Take a look at this map of where the petitions have received the most
-- well, that`s a big shock -- signatures, Tennessee, North Carolina -- I
love North Carolina -- Georgia, Florida, Alabama, Louisiana, and Texas.

The secession movement has the most signatures in Texas, of course,
with nearly 120,000 people signing on. According to "The New York Times" -
- quote -- "Secession fever has struck parts of Texas. In Texas, talks of
secession in recent years has steadily shifted to the center from the
fringe."

And what is really going on here? Let`s find out.

Dana Milbank has the right attitude. He`s a columnist for "The
Washington Post" and a brilliant one. And Ron Reagan, a good friend of
mine, is an MSNBC political analyst.

I have got to let you at this first, Ron Reagan, because every time I
see "Gone With the Wind" and I see all the Southern guys cheering, they
can`t wait to tame Ms. Scarlet. Ms. Scarlet, we`re going to have a war,
this is going to be great. And then, of course, it`s the horror of 600,000
people dead, including the burning of Atlanta. And everybody says, well,
this wasn`t such a good idea.

Here they are talking like secession is a good idea again. Who are
these maniacs?

RON REAGAN, MSNBC CONTRIBUTOR: Well, I`m sure that all these people
that are plumping for secession here would call themselves patriots...

MATTHEWS: Of what country?

REAGAN: ... would call themselves real Americans.

Well, good question here. So the way it works apparently is when
democracy doesn`t go your way, when you have an election and the other side
wins, you throw the entire 200-plus years of the American experiment into
the dumper.

You have a little kind of hissy fit here.

(LAUGHTER)

REAGAN: We have all about in groups of people where -- you know,
maybe eight, 10 people, and one of the people, one of the people in this
group is character-disordered. They`re a real sociopath.

(LAUGHTER)

REAGAN: And over time, though, if you can`t get rid of them right
away, that -- they change the entire dynamic, warp the dynamic of the group
around their complaints and their sheer craziness.

These people are that person in our national conversation. They`re
the crazy uncle at the table who you have to listen to his paranoid
stories, or he starts throwing food against the wall.

MATTHEWS: OK. Let me go back to Dana for a...

REAGAN: That`s who these people are.

MATTHEWS: How about a check on that, Dana? Is it true that the right
is driven by these people who are secessionists?

DANA MILBANK, NATIONAL POLITICAL REPORTER, "THE WASHINGTON POST":
Right.

Well, I mean, if you lose the election, nothing succeeds like
secession.

MATTHEWS: Like secession.

MILBANK: There`s two things going on here. One is it`s normal after
elections that a lot of the losing side, they always say I`m going to move
to Canada, but these guys can`t move to Canada because it`s socialized
medicine up there.

MATTHEWS: I thought it was Australia they always wanted to go to.

MILBANK: It`s a protest against the election. Also, this is roughly the
same number of people who are going to say Obama is born in Kenya or he`s a
Muslim. This is the protest vote.

MATTHEWS: Do they vote?

MILBANK: But you know what the best revenge would be? If Obama could in
the White House receive the petition and say, OK, go ahead. You`re on your
own.

Because the states, the various states that have filed for these petitions,
red states, tend to take in a lot more in government benefits than they pay
in taxes. So, it would be very good --

MATTHEWS: OK, you didn`t name names in your one-eighth theory, Ron. But I
think it may have some truth.

But here are some names. Ron Paul, very recent congressman, national
candidate for the presidency many times. Ron Paul said secession is a
deeply American, a deeply American principle.

Meanwhile, Alan Keyes, somewhat more wild sort, he wrote that while he
doesn`t think we`ve reached the point where secession is necessary
necessarily, it remains a, quote, "God-endowed, inalienable right."

So, there you have people with educations, people with brains and a
knowledge of American history, who come out and argue that this is
something that should be put on the table.

REAGAN: Yes. I guess brains and an education but still somehow profoundly
ignorant and they`re emblematic of if not the ignorant people in the
Republican Party, at least people who will pander to that ignorance. This
secession thing is all of a piece with all the other. The birtherism, the
climate change is a hoax, the -- if you cut taxes for rich people,
magically the economy revives. It`s magical thinking, and we`re in the
thrall of magical thinkers.

Now, the Republican Party has to, you know, they have to follow their
magical thinkers. And because they do the rest of the national
conversation gets distorted and pulled way over to the right. That`s
what`s happening.

MATTHEWS: Ron, I love the way you suggest that the real patriots are the
ones who want to secede from the United States. It reminds me, we once had
a priest about 60, 70 years, named Father Feeney (ph), who`s a poet. And
he said he didn`t like the church`s view because the church didn`t support
no salvation outside the church. He was too liberal. So he leaves the
church.

I mean, that`s just like -- wait a minute, you`re one of them now. What --
that doesn`t make any sense. It`s like we`re so patriotic, we`re going to
leave this country.

REAGAN: We`re going to leave the country. Yes.

(LAUGHTER)

MILBANK: They`ll have to come up with a new name as they go.

Now, it`s not just the South. It`s parts of the plains, too, but it would
seem to me as long as we could get like from the Northeast could get air
rights over Canada to get to the West Coast, we could keep something of a
nation together.

MATTHEWS: What would be their preferred nation to join, by the way?

MILBANK: You know they`re not going to Mexico.

MATTHEWS: They ain`t going to Denmark. They don`t like socialism.
They`re not going to go where all the white people are. It`s not that what
they want. What do they want?

MILBANK: What`s in the neighborhood?

MATTHEWS: Ron, give me some candidate countries they`d like to succeed and
join or just bundle together.

REAGAN: Some autocratic regime in central Asia maybe. I don`t know.

MATTHEWS: Here is some more interesting numbers -- more interesting
numbers from the new PPP poll. What do Republicans think was really behind
the president`s electoral win? Well, he won last month.

When asked why the president won the election legitimately or whether the
now defunct ACORN group stole it for him, 49 percent of Republicans say
that ACORN stole the election. That`s why Obama won. Half the Republicans
say Democrats are engaged in voter fraud.

Ron, I`m far more fascinated by the fact that all these Republicans believe
that ACORN stole -- how can you put your signature to that? How can
somebody say to that openly on the telephone, well, I think ACORN did it?
I mean, what --

REAGAN: Because they hear it on FOX News. That`s why. FOX News beats the
drum about this kind of stuff and that`s all these people listen to. They
live in this bubble.

MILBANK: I think they misheard it and they thought a unicorn stole the
election.

MATTHEWS: I mean ACORN, the all powerful organization, ACORN.

They don`t have a nickel to rub against another nickel and they`re running
the country.

Anyway, thank you, Dana Milbank. And thank you, Ron Reagan. I think we
caught the spirit of this nonsense.

Up next, one of the most popular guests we`ve ever had on HARDBALL --
Barney Frank joins us as he prepared to leaves the Congress after more than
-- Barney has been around a long time. I thought he was the new guy.

Anyway, this is HARDBALL, the place for politics.

(COMMERCIAL BREAK)

MATTHEWS: You`ve heard the expression you are what you eat. Well, try
this one, you vote what you eat. According to David Wasserman of the "Cook
Political Report", President Obama won 77 percent of counties that contain
a Whole Foods store. No surprise really. The high end Whole Foods tends
to locate stores in more affluent neighborhoods and cities and suburbs,
right where the Democrats tend to live.

How did the president do in more rural, Cracker Barrel country? Well, not
as well. Only 29 percent of Cracker Barrel counties went for the
president. I love Cracker Barrel cheese.

Anyway, we`ll be right back.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL. I have had a lot of thought about
doing this for a while and I`m glad we could do it tonight.

Barney Frank has been one of the great congressmen for years in the United
States Congress. He`s been representing Massachusetts ever since he was
elected back in the early `80s. I want to talk to Congressman Frank
tonight.

Thank you for joining us, Barney Frank, for joining us tonight.

REP. BARNEY FRANK (D), MASSACHUSETTS: Thanks for the chance, Chris.

MATTHEWS: You know, I think you have probably been thinking big about what
you have been doing these incredible numbers of years, since the `80s,
since the Reagan era.

Can you feel in you or do you sense progress in this country or perhaps
decline from the Reagan era to the Obama era? When you put them all in
your head?

FRANK: Certainly. Look, I`ll take one very close to me. The question of
legal equality for people who are lesbian, gay, bisexual or transgender,
that fight is about over. It`s sort of odd to hear Mitt Romney complaining
that President Obama got an advantage because he was for same-sex marriage.
Not very long ago, that was a wedge issue Bob Dole was using against Bill
Clinton.

I think we`ve made progress in some other areas -- clearly,
environmentally. There`s a lot to be done and we have the deniers of
global warming, but we`re reducing the amount of oil that we import and
use. And there is progress in that regard.

On the other hand, there`s been, I think, some retrogression in the
recognition of two of the great accomplishments of America in the 20th
century, with Social Security and Medicare. Before those two, we did not
have the possibility for the average older person who wasn`t wealthy to
have a decent existence in retirement. We now have that. And I`m sorry to
see that pulled back.

There`s also an international event, for the first time, and I think we
have to recognize this. From 1940 to 1990 we had very heavily armed, very
bad people threatening our very existence as a society. Even though we may
have exaggerated that a little bit at the end.

We don`t have that anymore. We have murderous thugs and terrorists but
they`re not the communists. They`re not the Nazis. They don`t threaten
our very existence.

We have an ability now, I believe, to reduce some of the resources we put
into self-protection and do more things at home, although there`s an
ideological barrier to doing it.

MATTHEWS: Let me know the way the Congress -- I know you you`ve the
Congress, and I was thinking -- I hope you still do.

FRANK: Yes.

MATTHEWS: What about -- I mean, Tip O`Neill, your old friend and my old
boss, once said something like the people are better now. They`re better
educated than in the old days but the -- what`s he say, the process isn`t
as good. The process isn`t as good.

FRANK: I think that`s right, a couple of factors there. It`s interesting,
by the way. The Congress is less autonomous.

Now, in terms of democratic theory that`s a good thing. If you remember
back in the `80s members felt they had more freedom to make public policy
decisions on their own. What happens today is that the voters are much
more in control. And I know people say, that isn`t the case. But, in
fact, that`s part of the problem.

It`s not all the voters. It is those voters who choose to be active. And
the problem we have is that those voters who choose to be active on the
liberal side and conservative side, live in two parallel self-reinforcing
universe. The right and the left get different information, they get
different media, they talk to each other, they talk to themselves and that
-- you`re seeing that now on the side of the Republican Party, where there
is this terrible struggle.

Look, I think most sensible Republicans understand they`ve got to make some
accommodations, but there is this terrible fear that if they act sensibly,
they`ll lose primaries.

MATTHEWS: It would seem to me -- I`ve never been elected to anything --
but it seems to me the joy in the real rich fun of being an elected
official is to be an Edmund Burke, to use your judgment, to have -- to sit
around with people you respect and make a decision.

You`re saying now it`s more like the British parliament where you basically
vote party line and you have to think constituency all the time.

FRANK: And even more -- at least in the British parliament there`s still
some sense -- well, there`s an autonomy. If you remember the British
parliament, and you vote with your government, even if your own
constituency doesn`t like it, you probably survive that. They accept that.

We`ve got, people will tell me, why is there this gridlock? Let`s be
clear. It`s a combination of the American people and the American
Constitution.

In England, if you win the election for House of Commons on Wednesday,
you`re the prime minister on Friday. But in America, at any given time,
we`re governed by the result of free elections. Senators from six years
ago, the president, and his -- the main reason we`re in a deadlock now is
this, the American people drastically change their minds, at least those
who vote, between 2008 and 2010. They like Barack Obama and a heavily
Democratic Congress in 2008. They repudiate their own decision in 2010.
You have two groups of people, each with a mandate and deep convictions.

Now, I do believe and this is what I think and will ultimately prove to be
the case, the election of 2012 is the tiebreaker. I just saw John Boehner
in a kind of pathetic effort to scramble out of it saying it was a status
quo election.

Well, let me tell you, if Republicans won the presidency and gained seats
in the Senate and gained seats in the House, they wouldn`t be calling it a
status quo election. They`d be calling it a mandate. I`m particularly
amused in kind of --

MATTHEWS: I agree.

FRANK: -- a frustrated way when they say, well, Obama doesn`t have a
mandate to raise taxes. George Bush cut taxes and started two wars with a
minus half a million margin in the polls. Barack Obama has got 3.5 million
plus. So if 3.5 million plus isn`t enough of a mandate to do something
about taxes, what the hell was a half million loss?

MATTHEWS: We`re going to miss you, Congressman Frank -- Barney Frank of
Massachusetts, ending an incredible career up in Massachusetts. Thank you
so much. We`ll have you back again, I think, if we can.

FRANK: I`ll be around, Chris.

MATTHEWS: I want to ask you what you`re going to miss, positively and
negatively, from the Congress. We`ll be -- thanks for coming on tonight,
Congressman.

FRANK: You`re welcome.

MATTHEWS: And when we return, let me finish with whether the politicians
who run the government will be able to do what`s right, do what`s necessary
this month.

You`re watching HARDBALL, the place for politics.

(COMMERCIAL BREAK)

MATTHEWS: Let me finish with something important. It`s about leading this
country to a difficult time. It`s about Barack Obama`s job description.

If you read the newspapers, you see the fiscal catastrophe of Greece, the
fragile economics of other countries on the periphery, Portugal, Spain,
Ireland, you see how it`s possible for countries to blow it, to keep
running up debt, keep spending more than they bring in.

Right now, the world is looking at us, the whole world, by the way, people
as far away as Hong Kong, people have to make sharp decisions about money
and they`re watching to see if we, Americans, can be the deadline we set
ourselves. Can we do what arithmetic dictates and meet our own
commitments, or can`t we?

I`m alone before in the role I`ve got here. I was out there pretty much
alone about those wars with Iraq, with warning about the weaknesses,
political weaknesses of certain Democrats over the years, but this fiscal
cliff I say is for real. There would be nothing but trouble, deep trouble,
if we go over it, even if we get to close to it.

The president staked out his position. The top needs to give its tax rates
brought back to where they were under Clinton. That`s the catalyst that
has to be brought home to Republicans. They can make the deal now or
whenever, but they best make it now. If they make it late, there will be
hell to pay for all of us, including them.

Do you know who will pay for a failure to do the government`s business by
January 1st? The people running the government, the politicians. Good
politicians don`t take their countries off of cliffs.

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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