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updated 12/20/2012 12:53:57 PM ET 2012-12-20T17:53:57

HARDBALL
December 19, 2012

Guests: Martin O`Malley, Hedrick Smith, David Ignatius, Rajiv Chandrasekaran

CHRIS MATTHEWS, HOST: Getting serious.

Let`s play HARDBALL.

Good evening. I`m Chris Matthews in Washington.

"Let Me Start" tonight with this -- as I said, getting serious on guns in
the hands of dangerous people. The president`s given Vice President Biden
a month to deal with the lethal combination of semiautomatic guns, high-
capacity ammunition clips, mental illness and a violent culture. It`s the
brew that blew in Newtown, Connecticut. Is there something we can do?

The fiscal cliff -- the president now says we`re so close, it makes no
sense to fail. Well, let`s see tonight how close is close and whether or
not the grownups can bring this to a healthy conclusion.

And back to Benghazi. There are reports in the State Department`s have
been -- the State Department`s being blamed here. Christopher Stevens
didn`t have the protection his people asked for. Did they ask enough? Did
they keep asking? The report says no.

But what if they had? Would they have gotten the reinforcements, or would
the CIA have said they didn`t want their cover blown? Again, let`s get
serious.

Joining me right now to talk about gun violence is Maryland governor Martin
O`Malley and former Pennsylvania Governor Ed Rendell.

Martin O`Malley, thank you for joining us right now.

President Obama spoke forcefully this afternoon about needing to take
action on gun safety. Let`s listen.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: This time, the words need to
lead to action. We know this is a complex issue that stirs deeply held
passions and political divides. We`re going to need to work on making
access to mental health care at least as easy as access to a gun. We`re
going to need to look more closely at a culture that all too often
glorifies guns and violence.

And any actions we must take must begin inside the home and inside our
hearts. But the fact that this problem is complex can no longer be an
excuse for doing nothing.

(END VIDEO CLIP)

MATTHEWS: Governor O`Malley, thank you. And I`ve come to really respect
you and the other governors, and Governor Rendell, because I`ve watched it
during Sandy and I`ve watched it during what happened up in Newtown.
Governors really are the responsible adults. They have to take care of
their people.

So in taking care of the people of Maryland, what do you think`s the most
important thing, deal with the gun -- the issue of the semiautomatic
weapons, the so-called assault rifles, dealing with the high-capacity gun
clips, the ammunition clips, or the mental illness piece, or the violent
culture piece?

What can you go at in a month?

GOV. MARTIN O`MALLEY (D), MARYLAND: Well, you have to go at all of those
things and you have to go at all of those things simultaneously. Clearly,
school safety`s an issue. Mental health access is an issue.

But there is no reason why we should have military assault weapons anyplace
but on the battlefield. They`re -- and most of the hunters that I know
agree. I mean, we -- law enforcement is a piece of this.

You know, Governor Rendell, who I know you`re going to be talking to in
just a second -- he and I both had the about highest title in the land, and
that was the title of mayor. We had to order police officers in the middle
of the night to go into homes, and oftentimes they would bring out these
assault weapons, these combat weapons that have no place in a civilized
society.

For their safety, if only for their safety, we need responsible bans and
controls on these military combat assault weapons that play no purpose in a
civil society.

MATTHEWS: Governor Rendell, you`re right in the heart of it up in
Pennsylvania, which you and I know, and you better than me, how sensitive
people are about the gun ownership, the deer hunter culture, the whole
thing.

Can we get something done here in terms of the assault rifles, the
ammunition clips, et cetera?

ED RENDELL (D), FMR. PENNSYLVANIA GOV., MSNBC POLITICAL ANALYST: Yes, I
think the answer is absolutely yes, Chris. It just takes leaders, and the
president looks like he`s ready to lead, to do something that takes a tiny
bit of courage but not much.

Look, Governor O`Malley is absolutely right. There`s no excuse. I was on
TV with Governor McDonnell from Virginia, and I asked him a question. Give
me one good reason why ordinary citizens should have the semiautomatic
rifles or clips that have more than 10 bullets in them? And there is no
good reason. There`s no answer to that. We`ve got to get rid of them.

We`ve got to make it impossible to buy a gun in this country -- you can`t
buy it on the Internet, you can`t buy it at a gun show -- without going
through a background check. We`ve got to tighten the existing law now that
says states have a duty to report to the national computer that does all
these background checks when there are mental illnesses. But right now,
it`s not being enforced because it`s too vague. It has to be specific.

If we do all those things, we can do it. And it`s easy to do because 74
percent of NRA members in a Frank Luntz poll, Chris...

MATTHEWS: Wow.

RENDELL: ... said that they support the concept that no one can buy a gun
without a background check.

MATTHEWS: That`s impressive. Let`s heard the other side. I`m not sure it
is the other side or why it is, but for some reason, people on the right,
when you talk like this and talk common sense gun safety, they don`t
challenge it as much. They immediately go somewhere else and say, Well,
how about trying some other approach,because they don`t want to take on the
gun lobby.

Here`s Governor Bob McDonnell of Virginia talking to local TWOP radio
yesterday. He`s open to the idea of arming school officials. Personally,
I think that`s a separate question, but he offers that as an alternative to
gun control.

Let`s listen.

(BEGIN AUDIO CLIP)

GOV. BOB MCDONNEL (R), VIRGINIA: If people were armed, not just a police
officer, but other school officials that were trained and chose to have a
weapon, certainly, there would have been an opportunity to stop aggressors
coming into the schools. If a person like that was armed and trained,
could they have stopped the carnage in the classroom? Perhaps.

(END AUDIO CLIP)

MATTHEWS: OK, you know what a .38 special is. I used to have one when I
was a cop for a while. A .38 special and walk around, a guy 60, 70 years
old, a retired cop or something -- that`s what you`re talking about,
basically. And they aren`t even talking about arming -- how do you know a
school teacher even knows how to use a gun, even if he went through
training.

How does it stand (ph) up (ph) (INAUDIBLE) pulls out your gun, your cap
gun, a revolver, and you`re up against an AK-47? What are they talking
about here?

O`MALLEY: Could you imagine...

MATTHEWS: Or does he say that school teachers should have AK-47s? What`s
he talking about there?

O`MALLEY: Could you imagine, even if he`s only -- even if the governor
were only talking about security guards, school security guards -- could
you imagine, at an elementary school, what his gunbelt would have to look
like in order to repel an AK-47, a Bushmaster and the sort of armament that
came through that door? The...

MATTHEWS: By the way, let me get back to the issue of -- I think this is a
dodge. I think it`s talking about something besides gun control because
they don`t want to talk about it.

We can argue whether it should be a safety (ph). Maybe some schools in
touch crime areas, it`s all right to have a guard or something. Fine.
That`s not the issue we`re talking about here. We`re talking about high-
powered rifles. We`re talking about multi-shot ammunition clips, where
it`s up to 30 or whatever.

O`MALLEY: And we`re also talking about something else, and I think the
president spoke to it today, and that is that sickness in our soul as a
nation that is violence and the worship of violence and the glorification
of violence.

MATTHEWS: Well, in a free society -- let`s start on that -- OK. We can`t
stop there being mental illness. It`s part of being born. Every once in a
while, people have these problems, mental problems, like they have any
other problem.

You go to the movie theater today, and every -- I go -- I`m a movie nut.
And I`ll go movie -- I`ll pick the wrong movie, like "History of Violence"
or something like that. And at the commercials that come on, the previews,
there`ll be six in a row of, Bang, bang, bang, bang, bang, bang!

O`MALLEY: Right.

MATTHEWS: I mean, some movies, I think people go for the absolute thrill
of seeing a lot of people killed.

O`MALLEY: And you know, Chris...

MATTHEWS: How do you stop them from doing it?

O`MALLEY: You know, becomes so all-pervasive in our society...

MATTHEWS: How do you stop it?

O`MALLEY: I think that events like this, tragedies like this -- I think
we`ve all been changed by this to some degree. We find it too easy, as a
country, to accept one child being shot here and the city...

MATTHEWS: OK...

O`MALLEY: ... one child being shot there. And events like this make us
wake up. Events like this...

MATTHEWS: Are you going to stop people who go see "Django"?

O`MALLEY: No, but...

MATTHEWS: Tarantino movie. You`re going to get them to get -- stop seeing
"Jack Reacher," the new idiot movie by Tom Cruise? I mean, how do you stop
people from putting out idiot movies that are just people -- one person
after another getting killed?

O`MALLEY: Well, you can`t stop that, Chris. But what you can do is put
sensible restrictions in place so that people who are suffering from mental
illnesses, so the people can`t go in and get assault weapons as easily as
they can go buy a pizza. It`s ridiculous.

There is no other civilized nation on the planet that allows combat
military weapons to be proliferated throughout our society as much as we
do. And there are very few societies that bury as many children year after
year after year from gun violence.

MATTHEWS: OK. Governor Rendell, what would be a good record for...

RENDELL: And Chris...

MATTHEWS: ... for the president and the vice president -- I know you`ve
given some thought to this. Put your own brew together here of ideas you
think would be good to come out of this that could pass 218 votes in the
House, 50-some votes in the Senate, something that would actually get done
in honor of these kids and their parents who have had their lives
permanently -- either lost or permanently made miserable. What would be
good that they could say, come September, at the end of this year, you
know, at least something good came of this?

RENDELL: Well, one, assault weapons -- ban assault rifles, and redefine
it. Make it a much broader definition than even was in the original act.

Two, no clip or magazine sold with more than 10 bullets in it. Three, gun
show loophole closed. Four, no gun sales on the Internet anymore. And
five, that adjustment to the mental health statute that I told you about.

But Chris, what we`ve got to get over -- and I like Governor McDonnell and
I think he does some good things, but he is being nothing but a coward and
a wuss when he won`t confront and answer the question.

Governor, give us one reason why any law-abiding American should have
access to a clip that has more than 10 bullets in it or to a semiautomatic
assault weapon. There is no reason. There`s no answer. And the American
people understand that. So Governor McDonnell should be leading...

MATTHEWS: OK...

RENDELL: ... just like Joe Manchin.

MATTHEWS: Imagine...

RENDELL: Just like Joe Manchin.

MATTHEWS: Imagine you`re out in -- out in western Pennsylvania, one of the
western counties, Westmoreland or Washington, one of those counties out
there, Jefferson, whatever they are. I don`t even know them all. But
they`re conservative counties.

And you know them all because you`ve been running out there. You sit there
in a meeting, and some NRA guys in the meeting. And they`re out (ph) in
the meeting, and they say, You`re on a slippery slope here, Governor.
First thing, you take away our multi-shot weapons. Next, you`ll go after
my -- you`ll be after my -- my deer rifle. What do you say to them? It`s
not a slippery slope. What do you say?

RENDELL: I say, first of all, it isn`t a slippery slope and no one wants
to take away your deer rifle, number one. Number two, every one of our
amendments are qualified. The 1st Amendment is and all of them are, and so
is the 2nd Amendment.

And number three, if you guys are so tough, how come you opposed me in
three statewide elections in the second highest NRA membership state in the
country, and I got elected by 10 points, 12 points and 21 points, Chris.
If the NRA is so tough, how did I win all those elections?

MATTHEWS: Because the city mice and the suburbanites love you! That`s why
because you didn`t change their minds, you beat them!

RENDELL: That`s the point.

(CROSSTALK)

MATTHEWS: Yes, go ahead, Governor.

RENDELL: I think Martin`s right. And in my second election, Chris -- in
my first election, I won 15 out of 67 counties. In my second election, I
won 33 out of 67 counties.

MATTHEWS: Yes. Yes.

RENDELL: So they`re not that tough. They are literally a paper tiger.
They`re the Wizard of Oz.

O`MALLEY: Yes, and Chris, I think we ought...

MATTHEWS: That`s because you were running against my brother and Lynn
Swann!

(LAUGHTER)

MATTHEWS: I`m just teasing -- I`m teasing my brother there. You get 33
states -- counties. Did you find yourself successful, as a guy who`s known
to be for gun control, in areas of the state that are very tough on that?
Did you change any minds on other -- did you manage to win minds over of
anybody on this issue? Because that`s where we are right now...

RENDELL: Sure. In my...

MATTHEWS: ... trying to find the hearts and minds of the hunters.

RENDELL: When I ran for re-election, I carried counties like Mercer County
in the west that are gun -- NRA counties because I had done other stuff,
not because I convinced them about guns.

And by the way, one last thing. And Martin O`Malley has done this
consistently as governor. It`s about time that some of our elected
officials risked their future. If you have to risk losing, well, risk it
on protecting children.

MATTHEWS: Yes.

RENDELL: Risk it on doing something that is incredibly meaningful to stop
this carnage because if you`re not going to risk for something like that,
then why are you in elective office?

O`MALLEY: Right.

MATTHEWS: OK, let me bring that back to that question. We had a great
liberal senator from Pennsylvania years ago, Joseph Clark (ph), a classic
reformer. This is one of the things that killed him, gun control. It`s
for real. It can ruin a career.

O`MALLEY: But our ability to grow as a people is also for real. Our
ability to evolve...

RENDELL: I agree.

O`MALLEY: ... our ability to look at the fact that our gun laws and the
ability to -- for people to purchase assault combat weapons makes us an
anomaly in the free world.

MATTHEWS: I know.

O`MALLEY: I mean, those are -- those are things that are also that we`re
capable of, growing in our understanding of one another and also in what we
can do...

MATTHEWS: OK, you`re...

O`MALLEY: ... to put bad guys in jail, protect kids, and have sensible...

MATTHEWS: We meet again here, and Governor -- I hope we meet before then,
but we meet here in September, at the end of this congressional session.
Do you think we`ll have a bill that does something real and is signed by
the president on gun control?

O`MALLEY: I do.

MATTHEWS: Governor -- Governor Rendell, will we get something done?

RENDELL: I think we`ll have it by the -- I think we`ll have it by the end
of February, Chris.

MATTHEWS: Well, that`s optimism. I hope we get it done. It`d be great to
have as a memorial to these -- I keep thinking what it was like to be 5
years old, and we can all remember it. We were real people with big souls,
little bodies and big souls. We thought a lot about life. It meant so
much to us as kids. Santa Claus was coming. We were very big in our
hearts. And these kids -- oh! It`s just horrible to think about. The
more we think about this, the worse it`s going to be.

Thank you, Governor...

(CROSSTALK)

RENDELL: ... one of the mothers said -- the night of the memorial, one of
the mothers said, If we can pass sensible gun legislation, our kids won`t
have died in vain.

MATTHEWS: Yes, and that is one hell of a price. But thank you so much,
Governor. You`re a good guy. Thank you. Happy holidays. Merry Christmas
to you, Governor O`Malley.

Coming up -- coming up, another big story. What`s John Boehner up to with
his plan B? His plan would raise tax rates only for those making over a
million. What about the first million they make? Under his plan, they get
off scot-free. Is he serious about keeping this country from going over
the cliff? We`ll see. It`s getting interesting here, and as I said, it`s
getting serious all around tonight.

Plus, an independent inquiry into the Benghazi attack criticizes the State
Department for systemic failures in management, management deficiencies and
inadequate security at that -- well, it wasn`t a consulate, it was that
facility which was basically a cover for a CIA operation out there. And
that could be significant for Secretary Clinton.

And now how about this little sugar plum? While General David Petraeus was
the top American command in Afghanistan, he was being advised day to day on
classified matters by a couple of civilians with strong ties to the neocon
movement, Fred and Kimberly Kagan. Of all people, they were on the inside
of a Democratic administration. Let`s get to the bottom of that very weird
arrangement. This was supposed to be a battle between the neocons and
progressives. How did the neocons get in the tent?

And what does this Christmastime classic, "It`s a Wonderful Life," have to
do with the fiscal cliff? Well, Mr. Boehner, meet Mr. Potter. And that`s
in the "Sideshow" tonight.

And this is HARDBALL, the place for politics.

(COMMERCIAL BREAK)

MATTHEWS: Robert Bork has died. The conservative legal scholar served as
solicitor general under Richard Nixon and fired Watergate special
prosecutor Archibald Cox in the 1973 "Saturday night massacre." He then
served as a circuit judge in the U.S. court of appeals for the District of
Columbia.

He was nominated for the United States Supreme Court by Ronald Reagan in
1987. Bork`s nomination was vigorously opposed by liberals, led by Senator
Ted Kennedy, who took to the Senate floor with a strong condemnation of
Bork`s positions on the rights of women and minorities. Robert Bork was
85.

We`ll be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: And if you just pull back from the immediate, you know, political
battles, if you kind of peel off the partisan war paint, then we should be
able to get something done.

(END VIDEO CLIP)

MATTHEWS: Redskins (ph). Welcome back to HARDBALL. That was President
Obama this afternoon, actually, speaking about the fiscal cliff. On the
other end of Pennsylvania Avenue, House Speaker John Boehner plans to send
his so-called plan B to the floor for a vote tomorrow. Plan B would keep
Bush tax cut rates for everyone making under $1 million a year. The
question tonight is how does this deal get done?

Joan Walsh is editor-at-large of Salon and an MSNBC political analyst.
There she is. And Hedrick Smith is author of "Who Stole the American
Dream," a great reporter for years for "The Times."

Let`s go right now -- President Obama called on Republicans to cut a deal
with him, saying compromise is doable. Let`s watch him again. More on the
president today.

(BEGIN VIDEO CLIP)

OBAMA: What separates us is probably a few hundred million dollars. The
idea that we would put our economy at risk because you can`t bridge that
gap doesn`t make a lot of sense. So I`m going to continue to talk to the
speaker and the other leaders up in Congress.

But ultimately, they`ve got to do their job. Right now, their job is to
make sure that middle class taxes do not go up and that we have a balanced,
responsible package of deficit reduction. It is there for all to see. It
is a deal that can get done.

(END VIDEO CLIP)

MATTHEWS: Joan, it`s a bit like a sumo wrestling match, a -- a sport I
know nothing about, except what it looks like....

(LAUGHTER)

MATTHEWS: ... two giant guys sort of moving around each other, not
actually engaging.

I get a sense that the president is pretty confident that he has the upper
hand here. And I get a sense from Boehner, who really is a guy who gives
it away -- he could never play poker. This guy gives it away. It looks
like he doesn`t think he wants to enjoy January in the middle of this stew.
He wants it over with.

Is this something we`re going to watch over the next 24, 48 hours to get to
some sort of conclusion? The president`s plane won`t take off for Hawaii
probably until Saturday afternoon at 3:00. There will be "The Perils of
Pauline," if you will. They will be tied to the railroad tracks.

And, in the end, they will get a deal this Saturday, because the end, it
looks like arithmetic at this point. It will end up being $500 million or
something -- $500,000 a year. How do you see it? You`re a games person.
You know how they`re looking at this thing.

JOAN WALSH, MSNBC POLITICAL ANALYST: I -- you know, I`m not sure. We
usually agree, Chris.

I don`t know that I see it the same way.

MATTHEWS: Go ahead.

WALSH: John Boehner appears to be going off his own personal political
cliff, because what he is doing -- if you just look back at the last few
days, clearly, it seemed as though he and the president were dealing with
each other in relatively good faith. They were compromising.

MATTHEWS: Yes.

WALSH: They were both giving up things that were making their base
unhappy.

And then Boehner goes to plan B and says they`re going to vote on plan B.
Now , today, he`s sticking to the plan B idea, except it sounds -- last
thing I heard as I went in here is he`s going to attach some spending cuts,
because he doesn`t control his caucus, Chris. He doesn`t -- he`s getting
such major blowback from his far-right wing nut caucus that he can`t bring
plan B without spending cuts.

Once you get into spending cuts, it gets much more complicated to get that
Republican caucus to hold together. So I am not sure that we are getting
closer to a deal here. I think that Boehner is just out of control of his
people.

MATTHEWS: OK. OK.

Rick Smith, what do you think? Do you see a deal in the works here, or do
you have any thoughts that could add to this deal, make it work?

HEDRICK SMITH, AUTHOR, "WHO STOLE THE AMERICAN DREAM?": I think this says
Boehner`s in trouble.

My rule of thumb, whether or not I was covering arms control or politics,
when you have serious negotiations going on, what`s going on in private is
real, what`s going on public is for show. So, we`re seeing a show here.
It looks to me as though Boehner is trying to get his caucus with him or to
demonstrate to that that going this way isn`t going to work. He`s going to
have to go...

MATTHEWS: Yes, like if they don`t get the 218 tomorrow that Joan is
talking about to basically cut off the tax cut at a million, if that
doesn`t work because they don`t want to be known as the guys just looking
out for the millionaires, then what`s he do with that information?

SMITH: Well, he`s going to go over the cliff.

(CROSSTALK)

MATTHEWS: You think he will go over.

SMITH: Yes, he`s going to go over. Well, if he can`t get him on this
deal, he`s certainly not going to get them on the deal that he`s got the
president on.

WALSH: Right.

SMITH: Because the president is going to push him to go further.

No, I think he`s trying to show to them, even if we get this, we can`t get
it from the president, we can`t get it from the Senate, we`re going to have
to go further. In other words -- this is a bad deal for the middle class
when you look at it.

WALSH: Thank you.

SMITH: Remember, the top 1 percent starts at $360,000. So Boehner`s
giving a bye to the biggest part of the top 1 percent. The middle class
ought to keep their eye on that.

The second thing is, he`s putting off the cuts, and therefore the automatic
cuts are gone. And they`re going to hit the middle class badly. And this
is a stall to jump it into next year.

WALSH: Right.

SMITH: So this is a desperation tactic. It`s not a tactic from strength.

MATTHEWS: Joan, what do you -- let me just take a look. Here`s what the
president said.

After the president spoke, Speaker Boehner came out and tried to sell his
plan B. Let`s watch. Just before he starts talking, it basically says the
Bush tax cuts don`t go into effect if you make more than a million. But it
does -- the Bush tax cuts would go into effect under his so-called plan B
for your first million of income. So, you would get a tax break for the
first million. It`s only after that that you would be taxed. Let`s watch
his explanation.

WALSH: Right.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: Republicans continue to
work toward avoiding the fiscal cliff. The president`s offer of $1.3
trillion in revenues and $850 billion in spending reductions fails to meet
the test that the president promised the American people, a balanced
approach.

And I hope the president will get serious soon about providing and working
with us on a balanced approach. Tomorrow, the House will pass legislation
to make permanent tax relief for nearly every American, 99.81 percent of
the American people.

And then the president will have a decision to make. He can call on the
Senate Democrats to pass that bill or he can be responsible for the largest
tax increase in American history.

(END VIDEO CLIP)

MATTHEWS: By the way, Boehner and the Republicans do their math
differently than the president does.

The White House proposal considers their offer to be $1.2 trillion in new
revenues to $1.2 trillion in spending cuts. In other words, they have got
a totally balanced program.

Let me ask you a question of politics. You write about the Medicare
getting hurt and screwed, if you will. If the Republican Party is -- got
47 percent in the last election, and they sort of lost. We could say they
lost. Sort of is not the right word, but they lost. The president won.

We talk about the 1 percent. Here, Boehner is trying to protect the top,
what, 0.21 percent, right in the -- fifth of a percent.

(CROSSTALK)

SMITH: By his own numbers...

(CROSSTALK)

MATTHEWS: But yet 47 percent of the people voted for the Republicans.

I keep asking this question over and over again -- 47 percent of the voters
vote for the less than 1 percent of the country`s economic interests. When
are the 46 percent who vote Republican that aren`t getting a piece of the
action here going to realize that they are the palace guard for the top?

SMITH: Yes.

(CROSSTALK)

MATTHEWS: Well, they are.

SMITH: Chris, this has been going on for 30 years. We have had a
situation where we had wedge economics in the economy, where the top took
all the money in business, and they left the middle-class workers with an
absolutely steady standard of living.

And then in politics, we have had this. And we have had somebody go out
like this, politicians, and sometimes politicians from both parties,
saying, we`re protecting the middle class, when in fact they`re not.

Boehner just said -- if you watched his numbers very carefully, he just
said, we`re going to let all -- we`re going to let 0.81, we`re going to let
most of the 1 percent go. We`re only going to hit the tiny, tiny top of
that. So, he`s even...

(CROSSTALK)

MATTHEWS: Here, back to you, Joan. You`re on the progressive side of
things, but why in the world do the Republican rank and file, a lot of
these members of Congress are not rich people -- why are they defending the
very top, to the point they have go to back to the tenth of 1 percent so
they don`t offend too many of their friends?

WALSH: Because that`s who owns them. And that`s whose bidding they do.
And it`s sad that so many middle-class people vote for them. But sometimes
they get confused because the Democratic Party doesn`t always seem to
represent their interests either.

And I have concerns of my own about some of the details of what the
president is willing to concede.

MATTHEWS: OK.

WALSH: So, you know...

MATTHEWS: I know you will have more as the days go on. I know that is
coming. That fight`s coming.

(CROSSTALK)

MATTHEWS: But I will just go back to the audience here who is watching; 47
percent of the country defends the interests of less than 1 percent.

And now we see in the final battle here, when it`s down to the short hairs,
when it`s really going to decide whether we have a fiscal cliff going over
or not, and even then, they`re saying, wait a minute, our number one job
here is to defend, as you were going over the number, 99.81 -- that leaves
0.19. That`s one-fifth of 1 percent at the top they`re going down for.

Anyway, thank you. Good luck with the book.

SMITH: Thanks.

(CROSSTALK)

MATTHEWS: What is the name of your book?

SMITH: "Who Stole The American Dream?"

(CROSSTALK)

SMITH: And, remember, almost half of the members of Congress are
millionaires.

MATTHEWS: Yes, I know.

SMITH: And 49 percent of members of Congress are millionaires.

(CROSSTALK)

MATTHEWS: But the other half aren`t.

(CROSSTALK)

SMITH: Yes. But, I mean, it`s amazing.

(CROSSTALK)

MATTHEWS: Some of them live in basements with three or four other guys.

(CROSSTALK)

MATTHEWS: Don`t get the idea they`re all rich either. I know -- I know
four guys that live together. And one of them gets the living room every
night.

Anyway, thank you, Joan Walsh.

I don`t feel sorry for them. They have great jobs, but they`re not what
you would call rich.

Anyway, Hedrick Smith, thank you.

SMITH: Thank you.

MATTHEWS: Up next: Someone needs to tell David Letterman that Mitt Romney
has already lost. You don`t have to keep beating this guy like an old
horse. Letterman is still twisting that knife into Mr. Mitt.

And this is HARDBALL, the place for politics.

(COMMERCIAL BREAK)

MATTHEWS: Back to HARDBALL, and now to the "Sideshow."

We all know Mr. Potter. Remember him from the movie classic "It`s a
Wonderful Life" we see at Christmastime? He`s the greedy businessman
played by Lionel Barrymore, definitely not known for his empathy. Here`s a
refresher.

(BEGIN VIDEO CLIP, IT`S A WONDERFUL LIFE")

LIONEL BARRYMORE, ACTOR: Now take this loan here to Ernie Bishop, you
know, a fellow that sits around all day on his brains in his taxi. I
happen to know the bank turned down this loan. But he comes here and we`re
building him a house worth $5,000. What does that get us? A discontented,
lazy rabble, instead of a thrifty working class.

(END VIDEO CLIP)

MATTHEWS: Well, Mr. Potter has made his way into the debate over
Republican plans to cut funding for Medicare and Social Security. Check
out this advertisement funded by a coalition of labor groups. It`s John
Boehner meets Henry Potter.

(BEGIN VIDEO CLIP, AD)

NARRATOR: What will happen if House Speaker John Boehner gets his way on
the budget? Welcome to Boehnerville, where the rich won`t pay their fair
share, our children`s educations will be cut, Medicare, Medicaid, and
Social Security will be put at risk, and the economic recovery would
falter.

Call your member of Congress and tell them to stand up for middle-class
families, because, in America, everyone deserves a wonderful life.

(END VIDEO CLIP)

MATTHEWS: Hmm. Well, members of the same group responsible for that ad
were here in Washington yesterday, Christmas theme in tow.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: We know some of the naughty folk already.

UNIDENTIFIED MALE: John Boehner!

UNIDENTIFIED MALE: We believe that Speaker Boehner is being naughty.

UNIDENTIFIED MALE: That`s right.

UNIDENTIFIED MALE: We believe that Eric Cantor is being naughty.

UNIDENTIFIED MALE: That`s right.

UNIDENTIFIED MALE: We believe Paul Ryan is being naughty. And we`re going
to make our way over to the Capitol Building to let them know that we have
got something from Santa for you. It`s a lump of coal, because you have
been far too naughty.

(END VIDEO CLIP)

MATTHEWS: Well, in a recent interview with "People" magazine, President
Obama was asked what he learned from seeing the movie "Lincoln."

And here he is -- quote -- "As a rule, if you`re president of the United
States, you shouldn`t compare yourself to Lincoln in any way."

Not everyone thinks Lincoln comparisons should be off-limits. When Florida
Republican Allen West was asked about his future plans after losing
reelection to Congress he said -- quote -- "Always remember, Abraham
Lincoln only served one term in Congress too."

Finally, David Letterman is seeing -- is still finding ways to needle Mitt
Romney, even with the election over.

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

DAVID LETTERMAN, HOST, "LATE SHOW WITH DAVID LETTERMAN": I heard the
strangest thing. I don`t know if it`s true, but just before I came out
here. And it`s weird because it has to do with the economy of the world
and financial times and the situation like that. I just heard this.
Thanks to Bain Capital, Santa`s workshop is moving to China.

(LAUGHTER)

LETTERMAN: What?

(END VIDEO CLIP)

MATTHEWS: Still the "Bain" of Mitt`s existence after all these days.

Up next: the Benghazi report. Hillary Clinton`s State Department, it is
getting the blame for bad management and inadequate security. And that`s
ahead here tonight.

And this is HARDBALL, the place for politics.

(COMMERCIAL BREAK)

HAMPTON PEARSON, CNBC CORRESPONDENT: I`m Hampton Pearson with your CNBC
"Market Wrap."

As fiscal cliff talks continue to stall, so do the markets, the Dow falling
nearly 99 points, and the Nasdaq and S&P both shedding 10 points.

General Motors traded higher after announcing it will buy back about 200
million shares from the U.S. Treasury, the government bailout essentially
reversing itself.

And a very merry Christmas in offices everywhere. A new survey found 72
percent of executives plan to hand out holiday gifts.

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

MATTHEWS: Welcome back to HARDBALL.

A damning, damning new report from an independent investigation on the
September 11 attack on Benghazi -- in Benghazi -- criticizes the State
Department for -- quote -- "systemic failures in leadership and management
deficiencies."

Overall, the report takes the department to task for failing to provide
better security in the run-up to the attack. In the wake of the report,
three State Department officials have resigned, including the assistant
secretary of state for diplomatic security and his deputy.

Here`s what the chairs of the investigation, former Ambassador Tom
Pickering and former Joint Chiefs Chairman Mike Mullen, had to say today.
Let`s listen.

(BEGIN VIDEO CLIP)

THOMAS PICKERING, FORMER U.S. AMBASSADOR TO THE UNITED NATIONS: Frankly,
the State Department had not given Benghazi the security, both physical and
personnel resources it needed.

ADM. MICHAEL MULLEN, FORMER JOINTS CHIEFS CHAIRMAN: The board found that -
- that the security posture at the special mission compound was inadequate
for the threat environment in Benghazi and in fact grossly inadequate to
deal with the attack that took place. The support the post needed was
often lacking and left to the working level to resolve.

(END VIDEO CLIP)

MATTHEWS: We have gotten more of that on the report and what it means for
Hillary Clinton, perhaps, the secretary of state, who heads that
department.

Andrea Mitchell is NBC`s chief foreign affairs correspondent. And David
Ignatius is "The Washington Post"`s foreign columnist. He handles all
these matters. He`s also associate editor of "The Washington Post."

I`m going to talk about -- I called you today on this because it baffled me
in reading it. There`s two apparently contradictory reports in the report.
One said there were repeated requests to try to get security forces brought
to that Benghazi facility. And then, later on, it said that the people
didn`t demonstrate strong and sustained advocacy for more security forces.

What is it, they didn`t do enough, they did enough? How come they weren`t
protected?

ANDREA MITCHELL, NBC CHIEF FOREIGN AFFAIRS CORRESPONDENT: It`s both.

It`s that they repeatedly requested more security. And then, when they saw
that there were budget cuts and that there were people, diplomatic security
officials, being rotated out, they didn`t push hard enough.

So they asked, they were denied, and then didn`t come back to them and
didn`t really, you know, rattle the cage.

CHRIS MATTHEWS, HOST: OK. Now, the real tough question. Is all that just
doggerel passing of the buck? Is the real issue if they asked and asked
and asked, if they`ve gone all the way to the top, would they still have
been given a contingent, a significant military force there given the CIA
activities in that area? Would they have been given what they wanted no
matter how they asked for it?

MITCHELL: I don`t believe so. I did ask that question of Senator Corker
today who was -- who attended the classified briefing. I said was all of
this because it was a low profile. They didn`t need a consulate in
Benghazi. This was a mission, not even a consulate.

But the real impact there was that they had a CIA annex, an outpost, that
they had not informed the Libyan militias about. One reason why the
militias could not go to help them.

MATTHEWS: So, we couldn`t have a show of force there. We couldn`t have a
strong contingent.

MITCHELL: They didn`t want a big footprint. But Corker said he doesn`t
think that really was a problem, in their defense. He said he thought it
just was a failure from -- at all sorts of levels. Not at the top. They
absolved Hillary Clinton herself of responsibility, although she says she
takes the blame.

MATTHEWS: Well, that`s a general acknowledgement of ministerial
responsibility.

The night of in the horror of the attack, the peak of the attack, was there
any way to get -- I hear from a lot of conservative people. A people are
just pro-military, friends of mine. They believe -- they have been led to
believe that we could have gotten forces to that facility in time to save
the ambassador and the other people.

DAVID IGNATIUS, THE WASHINGTON POST: This report is quite clear in saying
that whole line of argument that has been used by people on the right was
wrong. That -- it says the interagency response was appropriate and
timely. But they were not asked --

MATTHEWS: Did we have drone potential? Did we have forced protection that
was available we didn`t bring in?

IGNATIUS: Evidently, there were not drones. Evidently, there were not AC-
130 gunships, which would have been an alternative.

The terrible fact -- I think the report is too easy on the military,
frankly. The terrible fact is there were no military assets close enough
to protect those young people on the roof of the annex who were killed by a
simple mortar attack. I mean, it`s really inexcusable --

MITCHELL: Seven hours after this started, the problem is that the North
Africa command that had been started appropriately because of al Qaeda`s
growing influence there in North Africa, was not located in Italy or any
place close to North Africa. They couldn`t get there in time.

There was a drone that did get there and took pictures overhead.

IGNATIUS: But it wasn`t armed.

MITCHELL: Unarmed.

MATTHEWS: OK. Let`s bring this to human terms. When something goes
wrong, people like to find somebody who`s responsible. There isn`t always
somebody responsible. Some things break, you know?

You start on this -- is it true they were tough in their report? The
Pickering and the Mullen report. But in the end, are they saying this
could have been avoided, really?

MITCHELL: Yes, they are.

MATTHEWS: If Chris Stevens wanted to go into a dangerous area, could he
have been protected?

IGNATIUS: The two phrases that you heard Admiral Mullen used in the clip
that introduced this segment, first that there were inadequate sources
there. Meaning that there were requests for more forces, the diplomatic
security bureau in the State Department didn`t act in a timely way. The
nearest bureau which overseas that consulate, that mission, didn`t act in a
timely way, and the forces were grossly inadequate -- an unusual phrase to
use in --

(CROSSTALK)

MATTHEWS: Was that to save money?

MITCHELL: Partly to save money and partly to rely on the host. We don`t
have Marines at these kinds of places. We rely on the Libyans. Libyans
were not able. They don`t have -- they didn`t have a national government.
They had these local militias that ran -- they have overhead they have
camera videos, rather --

(CROSSTALK)

MATTHEWS: OK. Here`s the question -- why did everyone think they were
safe? Why did they think it was safe going in there?

MITCHELL: He -- that was part of his DNA. He had been in Benghazi during
the entire civil war before he was ambassador. But we saw -- we had
pictures shown -- videos shown last week to the Senate of the Libyan
militia getting into a pickup truck and high tailing it out of there at the
first sign of trouble.

MATTHEWS: Will Hillary Clinton, the secretary of state, as the minister in
charge, have to eventually face the lions on this?

MITCHELL: Yes.

IGNATIUS: Yes, she will. This is on her watch.

Let me make one more point, Chris. One of the most important things in
this report in terms of long-term consequences is it says the United States
can no longer depend in high-risk areas on local security forces.

MATTHEWS: Yes.

IGNATIUS: Meaning, we`re going to have to have our own forces either there
or close enough.

MATTHEWS: Will they let us bring them in?

IGNATIUS: No. I mean, that`s why this is -- this is a new world, this is
the new normal as described in this report.

MITCHELL: It means we can`t be in these posts.

IGNATIUS: Some of them we`re not going to be able --

MATTHEWS: It`s the "Lebanonization" of the world it seems.

Anyway, thank you. You don`t want to hear that. But that tends to look
like.

Anyway, thank you as always.

MITCHELL: Thank you.

MATTHEWS: I call you when I need knowledge.

MITCHELL: I come whenever you call.

MATTHEWS: Thanks, Mr. Ignatius, sir.

Up next -- member of the Legion of Honor -- up next, David Petraeus was
supposed to be the top commander in Afghanistan, so why was he being
advised by Fred and Kimberly Kagan at the American Enterprise Institute, a
couple of civilians with strong ties to the neocon movement? Who won the
last election? I thought the neocons lost. Apparently, they`re running
our war operations.

This is HARDBALL. We`ve got some questions. We`ll be right back.

(COMMERCIAL BREAK)

MATTHEWS: Wow. President Obama`s job approval is at its highest point
since the death of bin Laden. According to a new "Washington Post"/ABC
News poll, 54 percent approve the job the president is doing now, 50
percent say they approve of his handling of the economy. It hasn`t been
that high in 2 1/2 years. That`s got to help as the president tries to
nail down a deal with Speaker Boehner.

By the way, "Time" magazine named President Obama today as its Person of
the Year for 2012.

We`ll be right back.

(COMMERCIAL BREAK)

MATTHEWS: We`re back.

David Petraeus, the once-lionized general-turned-CIA-director, resigned
last month after it was revealed he had been engaged in an extramarital
affair with his biographer Paula Broadwell. Well, today, "The Washington
Post" on the front page reports on another scandal, albeit this one not
involving sex. It has to do with the incredible acts of some friends of
his were given while Petraeus was running the war in Afghanistan.

The friends were two civilians, Fred and Kimberly Kagan, prominent neo-
conservative analysts. They were provided desks, e-mail access and top
security clearance to pore through intelligence reports.

According to "The Post", the four-star general made the Kagans de facto
senior advisors, a status that afforded them numerous private meetings in
his office, priority travel across the war zone and the ability to read
highly secretive transcripts of intercepted Taliban communications.

Even Fred Kagan acknowledged to "The Post," the arrangement was, quote,
"strange and uncomfortable at times."

Rajiv Chandrasekaran wrote in today`s story in "The Post". And David Corn
is the Washington chief for "Mother Jones" and, of course, an MSNBC
political analyst.

Rajiv, thanks for that great reporting. I love it when you make news.
Holy cow, I was about to say when I read "The Post" front page today -- as
a student, in a very negative way of the Iraq war, who`s always suspected
anybody who pushed that war, was pushing an agenda that wasn`t necessarily
for a good cause.

The Kagans, Robert Kagan, Fred Kagan, Kimberly Kagan were prominently
featured on your newspaper all the time pushing the latest neocon war.
Now, we find out they`re in bed with General Petraeus who reports to
commander-in-chief, Barack Obama.

How did they get inside when they were in the other side ideologically?

RAJIV CHANDRASEKARAN, THE WASHINGTON POST: Because, Chris, four-star
generals have a lot of leeway when they`re out half way around the world.
Look, this arrangement wasn`t well known at the White House, at the
Pentagon, by senior officials who involved in the administration.
Certainly, if they knew, they would have objected the extraordinary access
that the Kagans got.

Petraeus was able to do this just because he was the general and managed to
get what I understand his lawyers to sign off on the arrangement which, you
know, they got this desk, they got the security clearance, they traveled
around the war zones, they got face time with him regularly -- very
influential approach there.

(CROSSTALK)

MATTHEWS: Who`s he off? Who is Petraeus of? Who is he off? Who his
people? Is he part of the neocon crowd? Is he one of them, those people
that pushed us --

CHANDRASEKARAN: No.

MATTHEWS: Let`s put it this way, heavily encouraged the war in Iraq? Or
is he part of the more progressive stream of the presidents which is very
skeptical about these foreign interventions? Which world is he -- is
Petraeus part of them? Part of the political other side, if you will?

CHANDRASEKARAN: I don`t think Petraeus neatly fits in the world of
neocons, but he certainly believes in, you know, the transformative power
of the military. The Kagans were very helpful to him with the intellectual
architecture in the surge of Iraq. They supported more forces in
Afghanistan, which is where Petraeus was. And they helped him sure up some
of his bona fides with Republicans on Capitol Hill who, by this point, were
starting to get new doubts about the war in Afghanistan.

MATTHEWS: I don`t mind them playing a liaison role. But I wonder about
these advisory roles.

Let`s go to David Corn who shares my views about this thing.

It seems to me that you have a very interesting situation -- I`m trying to
think of a parallel, but I can`t think of one.

DAVID CORN, MOTHER JONES: No.

MATTHEWS: Where people from the other ideological wing or spectrum of the
country have found their way into a controlling situation on a war front.

CORN: Well, what they is they have these two think tankers.

MATTHEWS: American Enterprise`s senior fellows.

CORN: Senior fellows, they burrow their way in. Neocons tend to be very
good at burrowing. They burrow their way in and they created -- as Rajiv`s
wonderful piece, you know, details -- lots of confusion in the chain of
command. People don`t know how to relate to them.

Are they spies for Petraeus? Are they conveying orders from Petraeus?
And, you know, how did this come to be?

It gets to the issue that we talked about earlier this year --

MATTHEWS: Yes.

CORN: -- which is David Petraeus` judgment because he was so lionized and,
you know, worshiped as America`s greatest general since Washington --

MATTHEWS: Yes.

CORN: -- he seemed to be able to feel like you get away with things. He
got into that scandal with Paula Broadwell, and this happens obviously
before that. But he feels he has a license to do things that other
generals couldn`t.

MATTHEWS: Let`s get at the heart of this surge strategy which worked in
Iraq, I`m told. People say. That`s eventual wisdom, applied then to
Afghanistan. How are the Kagans involved with that whole strategy?

CHANDRASEKARAN: The Kagans pushed the surge strategy. In op-eds in my
newspaper and other newspapers, they were vocal proponents for it. And
then they were proponents for taking a much tougher line against a various
Taliban factions. In fact, the irony here is that while David Petraeus was
talking a good game on counterinsurgency, on using troops to protect
civilian populations in Afghanistan, what the Kagans were lobbying to do
was to use more of those troops to conduct strikes against Taliban
infiltration --

(CROSSTALK)

MATTHEWS: Thank you. We`ll redo more on this later. We`ve got to go now.

But I salute you, Rajiv, because your story met the test of Ben Bradleys.
He said, I want to pick up the newspaper and say, holy -- I can`t use the
word here, holy. And when you say that, you know you got some. This
story, I want everybody tonight to go back and look it up on Google,
whatever else, study this story. This is a story of penetration that ought
to understand.

Rajiv Chandrasekaran, thank you much for joining us from "The Washington
Post."

And, David Corn, as always.

We`ll be right back.

(COMMERCIAL BREAK)

MATTHEWS: Let me finish tonight with this:

I`d like to know why General Petraeus was taking day-to-day advice from
people on the other side of the Iraq war argument. Fred and Kimberly Kagan
are hawks. They share the ideology of those who backed the Iraq war. Why
are they on the inside of an administration elected based on its opposition
to the Iraq war?

I`m one of those who believed from square one that the war in Iraq was an
ideological war pushed by the outset by those who wanted us to overthrow
the Iraq government and install ourselves in Baghdad. They got their way
under a less informed president that was George W.

Now, we discovered that a pair of them, the Kagans, have been right there
in the room with the head of the Afghan mission today, advising him every
step of the way.

Why? Why did General Petraeus assume the right to allow people who
represent the very opposite of President Obama`s philosophy to advise him?
What agenda was he seeking here? What was he buying into? Why was he
buying the hawkish agenda of those who advocated war in Iraq in the first
place?

If so, why was he working for President Obama who stood out there against
that war?

I have to think that Petraeus either doesn`t understand politics or
ideology, or he shapes his ideology or accepts the ideology of those who
stood against Obama from the beginning.

This is really strange. As he puts it, really strange, and someone in the
administration better start paying attention to who is getting into the
tent and who they are indeed working for. Backing the Iraq war and the
mental behind it is no small thing.

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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