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updated 1/29/2013 10:09:09 AM ET 2013-01-29T15:09:09

THE RACHEL MADDOW SHOW
January 28, 2013

Guests: Bill Burton, Paul Krugman

ED SCHULTZ, "THE ED SHOW" HOST: That`s "THE ED SHOW." I`m Ed
Schultz. And Rachel Maddow of THE RACHEL MADDOW SHOW starts right now.

RACHEL MADDOW, HOST: Good evening, Ed. Thank you.

SCHULTZ: You bet.

MADDOW: And thanks to you at home for staying with us for this hour.

The last state admitted to the Union, the 50th state in the United
States is, of course, Hawaii. Forty-ninth state admitted the year before,
Alaska. So those were 49 and 50. Those are the last two states admitted
to the Union in 1958 and 1959.

What was the last state admitted before then? Before Alaska and
Hawaii, the last state admitted in the contiguous United States, the last
state admitted on the big part of the map? That was Arizona. Arizona was
the 48th state. It was not admitted to the union until 1912. It just has
not been a state for very long, which is maybe why it sometimes feels like
Arizona is still working out the kinks.

But it also means that all of the oldest things about the state as a
state just aren`t very old at all. The first governor of the state of
Arizona was in office starting in 1912. Only 100 years ago, right?

And if you are a schoolchild in Arizona, and you are treated to a
school field trip to the Arizona capitol museum, one of the things you`ll
be treated to on that field trip is the sight of the state`s first
governor. George W.P. Hunt, as a life-sized wax figurine, right down to
the life-sized white shoes. See? Under the desk right there. He is wax.
He is seated at his desk.

If you are freaked out by the life-sized wax figure of the first
governor of Arizona and you leave the Arizona state capitol museum and you
flee into the streets of Phoenix, you will find yourself still kind of
face-to-face with that same dead governor, because looming over Phoenix at
Papago Park high on the hill is this, the tomb of the first governor of the
state of Arizona. He is in there and so is his whole family. He built the
pyramid for himself while he still alive, and then once he died, they
arranged to put him in it. It apparently has a lovely view. Agh!

Arizona has not had governor versus long. They have only had
governors for about 100 years. But even that short history is a history
that is slightly fraught. The last governor of the state, of course, left
office to go to Washington to become homeland security secretary. We now
learned that Janet Napolitano is going to stay on for a second term.

And so, there is nothing particularly fraught about that. But it is a
somewhat unusual ending to a governorship. But even that unusual ending to
a governorship is very, very normal compared to the way it usually ends in
Arizona. Of the last nine governors of the state of Arizona, three of them
have resigned, one of them was impeached and one of them died in office.

The last Arizona governor to complete two terms that started as normal
and ended as normal was this guy, One-eyed Jack. That`s what they called
him. That`s not a blur in the photo. Jack Williams, his name was, he had
only one eye, so he wore a blurry lens in his eyeglasses. He is the last
guy who did two terms as normal, and that was 40 years ago.

"Businessweek" wrote about the strangeness of the history of Arizona
governorships recently when the current governor, Jan Brewer, started
making noises that she should stay for a third term. Now, Arizona
governors are term limited to two terms.

But the person who is in the job now, Jan Brewer, decided that she
should maybe get a third term any way. Her long-time attorney started
making the case in an op-ed, that Jan Brewer essentially should refuse to
leave office. He explained it`s his reasoning that, quote, "It comes down
to what does a term mean?"

He is right in a way, what is time? Look, George W.P. Hunt is still
there at the capital museum.

Governor Jan Brewer`s time in office has been marked by confrontation
and controversy. She has aggressively marketed herself as a
confrontational conservative. She has tried to develop a national profile
that is all about toughness and confrontation. Her memoir is titled
"Scorpions for Breakfast."

And while she may be tough and she may be confrontational, what
frankly is more central to her national profile is not necessarily
toughness, or confrontation, but rather the sense that there is something
unique, something special about her, at least something unpredictable.

(BEGIN VIDEO CLIPS)

UNIDENTIFIED MALE: And finally, we hear from Jan brewer.

GOV. JAN BREWER (R), ARIZONA: Thank you, Ted. And it`s great to be
here with Larry, Barry, and Terry. And thank you all for watching us
tonight.

I have -- done so much, and I just cannot believe that we have changed
everything since I had become your governor in the last 600 days. Arizona
has been brought back from its abyss. We have cut the budget. We have
balanced the budget, and we are moving forward. We have done everything
that we could possibly do.

We have -- did what was right for Arizona.

UNIDENTIFIED MALE: Which beheadings in Arizona were you referring to?

BREWER: Oh, our law enforcement agencies have found bodies in the
desert either buried or just lying out there that have been beheaded.

UNIDENTIFIED MALE: Jan, I call upon you today to say that there are
no beheadings. That was a false statement, and it needs to be cleared up
right now.

BREWER: And, you know, Terry, he will call you out. I think that you
ought to renounce your support and endorsement of the unions.

REPORTER: Governor, why wouldn`t you recant the comment you made
earlier about the beheadings in the desert?

REPORTER: Seriously, that`s a serious question, Governor.

BREWER: This was an interesting evening tonight.

REPORTER: Governor, please answer the question about the headless
bodies. Why won`t you recant that? Do you still believe that? Come on,
Governor.

BREWER: OK, thank you, all.

REPORTER: Governor, what do you make --

REPORTER: Come on.

(END VIDEO CLIPS)

MADDOW: Governor Jan Brewer, Republican of Arizona, always worth
watching, wants a third term.

Today in Washington, a bipartisan group of four Democratic senators
and four Republican senators unveiled what they say is a viable bipartisan,
widely accepted, specific policy prescription for the country finally being
able to do something about immigration. This is not a narrow bore, tightly
focused policy micro-solution to some part of the immigration program
that`s the easiest thing to deal with.

This is actually a comprehensive effort, which is what all the experts
in the field say is necessary in order to get anything real done on this as
a matter of policy. It`s also the only way to get eight senators as
disparate as these guys to sign on to something together.

I mean, generally speaking, when you`re trying to come to a deal with
disparate elements like this, the legislation has to be complicated enough
that the eight people trying to agree on it can horse trade a little bit,
right? They can get individual things that they like, they can trade away
individual things that they don`t want to be in the bill. That`s how you
come to a deal.

So, this was a big, comprehensive, complex proposal that these eight
senators put forward today. The only major problem that was immediately
apparent in what they put forward was this.

(BEGIN VIDEO CLIP)

BREWER: We have --

(END VIDEO CLIP)

MADDOW: Yes. Republicans have long said they would not agree to do
anything about immigration unless there were tough new seal the border
enforcement actions, right? And those seal the border enforcement actions
had to be taken as some sort of precursor to doing anything else about the
11 million people who are in this country without legal immigration status.

The way that they handled that Republican requirement in this current
complex bill that they put forward today is that they establish a
commission of Southwesterners.

Elected representatives, governors, and other people from Southwest
border states, they would be put in a position of holding up all of the
other advancements in the bill, keeping people from doing all of the other
things that are in this policy, from getting in line for citizenship,
stopping all the other reforms if this Southwestern commission did not
certify that the border had been secured, that all efforts to secure the
border were complete. The border security measures would have to be done
first. This group would have to say they are completed, that everything
secure on the border, and then and only then can the reforms that were
unveiled today go forward.

That is the implication of the language that was put out today by this
group of eight bipartisan senators, which translated into political use
means nothing happens until somebody like Jan Brewer says everything OK,
everything is OK. Maybe Jan Brewer specifically, Jan Brewer is never going
to say everything is OK.

Things are not OK for Jan Brewer, whether it is making stuff up about
headless bodies in the desert that don`t exist or trying to market to the
nation how excited we should be that she wagged her finger in the
president`s face when talking to him about border security. If it all
rests in her hands, she gets veto power?

Or any other local official`s hands to give thumbs-up or thumbs-down
as to whether or not the country can go ahead with something we agree we
need as a whole country? That seems like a weakness in the plan. When
asked about this one laugh-out-loud provision in what seems like otherwise
a very reasonable proposal, senators and staffers who are on the Democratic
side of these negotiations for this bipartisan group said essentially,
don`t worry about it. This Southwesterners commission will be able to make
recommendations, but they won`t be given veto power over what happens for
the whole country and millions of Americans counting on reform.

Marco Rubio`s office on the Republican side has given a much more
evasive answer, implying that maybe he thinks that Jan Brewer would have
veto power.

So clearly, that matter is going to have to be settled. As a matter
of policy, though, in a collection of proposals and policies that is
otherwise imminently centrist, that is otherwise just a list of reasonable
incremental reforms that everyone is not an extremist on the issue has long
agreed must be done, in the midst of all these other policies, this one
clause frankly does seem to stand out as being too stupid to live.

So it will either have to disappear, or it will have to be just a
recommendation and nonbinding the way the Democrats are saying, or if
they`re going to leave this thing in there and it is going to have veto
power, it`s going to have binding authority, that will be the stupidest
hill ever on which this totally needed policy change dice on.

At a time when real substantial bipartisan legislation seems
inconceivable, even the fact that this was introduced today and announced
today seems like a great victory for the art of the possible in Washington,
right? For the prospect that D.C. could actually make policy again,
instead of just making sparks fly.

But this is an area of policy where things have felt possible before.
You might remember in 2007, it was John McCain with the support of the
Florida Republican senator who went on to be chairman of the Florida
Republican Party, Mel Martinez, all supporting a comprehensive immigration
proposal, much like this one today, that never went anywhere that year. By
the time John McCain was running for president the year after, he said
actually he would vote down his own bill.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: At this point, if your original proposal came to a
vote on the senate floor, would you vote for it?

SEN. JOHN MCCAIN (R), ARIZONA: It won`t. It won`t. That`s why we
went through the debate. No, I would not, because we know what the
situation is today. That people want the border secured first.

(END VIDEO CLIP)

MADDOW: John McCain in 2008, running against his own immigration
position from 2007, in order to try to get his party`s nomination for the
presidency that year. In order to win his party`s presidential nomination
this past year, Mitt Romney was the champion of self-deportation.
Remember, he said he would veto the DREAM Act, and he brought on the guy
who wrote the papers please law in Arizona as his immigration adviser.

The Republican Party`s own platform that they just agreed to for the
Romney campaign is vehemently opposed to the exact reforms that these eight
senators brought forth today. But there were four Republican senators
today making this proposal. The proposal has been made, and should it be
noted that it matches almost word for word the exact immigration proposal
that President Obama made in a big speech in El Paso back in the spring of
2011.

President Obama is due to announce his own ideas on this subject
tomorrow. We can guess if he meant what he said in El Paso, that what he
says tomorrow will very closely mirror what the senators laid out today.
Presumably with the exception of this one absolutely indefensible bizarre
please the Republicans clause.

This is -- this is an incremental centrist consensus lift of long
accepted moderate reforms, which in any reasonable political science,
reasonable understanding of how Washington works, this should be totally
viable, should be. But, of course, this isn`t political science. This is
our real Washington. And that means it has to go through the House too,
where mark my words, watch. The Jan Brewer clause will be the only part of
this thing that they like.

Joining us now is E.J. Dionne, "Washington Post" columnist, senior
fellow at Brookings. He`s author of "Our Divided Political Heart", which
is now out in paperback.

E.J., it`s great to see you. Thank you for being here.

E.J. DIONNE, WASHINGTON POST: Good to be with you.

MADDOW: Is it naive for me to think that this might be possible?

DIONNE: I don`t think so at all. And thank God you didn`t ask me
about the headlessness issue.

I think we saw today, people talk all the time about the cost of
politics and the price of politics. But they`re actually achievements in
politics. And today was brought to you by the 2012 election.

And there was something poignant about John McCain being there,
supporting the bill that he originally supported before the 2008 election,
because he suffered badly at the polls in 2008 among Latinos, even though
he had championed immigration reform. Mitt Romney did worse among Latinos.

And I think a lot of Republicans realize that they cannot hold to this
restrictionist position forever without suffering real costs.

In terms of that crazy commission provision, it was fascinating to see
the Democrats say and the language on your screen said "make a
recommendation," that is vague language. The Democrats were trying to say
this is a very vague thing. The Republicans like Rubio are probably going
to try to make a big deal of it.

But you know what? There`s even action in the House. And the House
is where progressive legislation goes to die these days. But even Paul
Ryan has been saying good things about what Marco Rubio is up to.

So I don`t rule out the possibility that this thing can actually pass.

MADDOW: I`m glad you brought up the possibility of movement in the
house. CBS first reported tonight that there has been bipartisan group in
the House meeting on immigration in secret, just like these senators did on
the other side of Congress.

Is there something structurally different between the House and the
Senate that would make a bipartisan agreement that`s possible in one of the
two houses, not possible in the other one? Or would you expect a
bipartisan group in the House to be able to come up with something much
like this Senate plan?

DIONNE: The House has a much more difficult problem. I mean, what
you have here is a split between the national Republican Party and
nationally-oriented Republicans who know the price of continuing to oppose
immigration reform. But a lot of these individual Republican House members
represent districts where not only are they very safe, but many of their
voters would like them to continue to take a hard line on immigration.

So there is a kind of conflict of interest between the views of those
members and their view of what their constituents want and the national
party.

Nonetheless, there was a significant number of Republicans and
significant enough number that if John Boehner can yet again figure out how
to pass a bill with significant Democratic support, I think this can get
through.

The question is how often can Boehner do that? If he can do that a
lot, we`re going to get a lot of legislation through the House.

MADDOW: E.J. Dionne of "The Washington Post" and Brookings -- I feel
we`re in a very interesting and unsettled time when stuff might be
possible. I also feel naive for saying it, but you make me feel better.
Thank you, E.J.

DIONNE: Thank you. Good to be with you.

MADDOW: It`s great to have you here. Thanks.

All right. We have lots more ahead, including Nobel Prize winning
economist Paul Krugman here tonight for the interview.

And later, an "I call bullpucky story" has gotten even more bullish
since I covered it. We will be right back.

(COMMERCIAL BREAK)

MADDOW: The president and vice president are doing work on the issue
of gun safety reform. The president`s brand spanking new political
operation tried to do work on gun safety reform, but it kind of did not
work. Bill Burton, who knows about these things, joins us next.

(COMMERCIAL BREAK)

MADDOW: OK. Here is how you know it has been a busy day in politics.
Here is how you know when there is a lot going on in Washington, D.C.

At around 2:30 Eastern Time this afternoon, we had that big bipartisan
group of eight senators come out to announce that they have reached a
framework agreement on how to move forward on comprehensive immigration
reform.

This is a huge development. Immigration reform has been inexplicably
elusive in Washington over the last decade. But with this announcement
today, we do appear to have broken through some of the gridlock. Since the
White House has been pushing immigration reform for years, and in
particular in recent months, you would think they would greet today`s
announcement from these bipartisan senators by dropping everything and
making today immigration reform day in Washington.

But that did not happen, because the White House in fact decided to
preempt that big immigration reform photo op this afternoon with a photo op
of their own a few hours earlier on a totally different subject.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Vice President Biden
and I just want to thank the police chiefs and sheriffs who are here today
representing law enforcement officials all across the country, who
obviously share our deep concern about issues of gun safety and how we can
protect our communities and keep our kids safe.

(END VIDEO CLIP)

MADDOW: There are few things historically speaking that are seen as
bigger political lifts in Washington than immigration reform or than gun
reform.

But just eight days into this second term, the Obama administration is
working actively to accomplish both of these things simultaneously. Today,
President Obama and Vice President Biden met with police chiefs and local
sheriffs from around the country, including police chiefs from Newtown,
Connecticut, Aurora, Colorado, and Oak Creek, Wisconsin, all of which have
endured major mass shootings just within the past six months.

Vice President Biden also held a roundtable discussion on gun reform
in Richmond, Virginia on Friday. He had the homeland secretary and health
secretary with him there.

President Obama himself made a high profile reference to gun reform in
his inauguration speech last week.

Other cabinet members, including the attorney general, have been
making their own news on moving forward on gun reform, mental health
reform, background checks.

The administration, in other words, doing everything they can to not
only move on this, but to keep gun reform at the top of the national
agenda, to not let it slide out of the news with the passage of time after
the Newtown shootings.

The White House said they would work on it this way, because they know
it`s going to be a heavy lift. Well, in addition to the White House
meetings with law enforcement and the speeches and the roundtable
discussions in places like Richmond, and in addition to all of that stuff,
the way the White House has said that they were going to try to get around
what has made this too heavy of a lift for previous presidents is that they
said they were going to play the outside game. They were going to go
outside Washington. They were going to get the grassroots involved.

Specifically, they were going to bring the president`s 2012 campaign
apparatus to bear on this really important and difficult policy issue. As
NBC`s Michael Isikoff reported this morning, the Obama campaign has now
given over its massive voter database to the new Democratic advocacy group
Organizing for Action.

Organizing for Action is being run by the heavyweights of President
Obama`s 2012 reelection campaign. Their stated goal is to use the
apparatus and the contact list and the volunteer energy that got President
Obama reelected, use that to get his agenda passed in his second term.

Nobody has ever done this before. But the Obama folks are doing it.
They have now started that effort with gun safety and with immigration.

And if you think about just gun safety in particular, I mean, it makes
sense, right? If it is traditionally too hard to get the politics of this
done, then you better bring nontraditional means to bear if you want to get
it done this time. And using the president`s reelection campaign apparatus
to get it done is definitely a nontraditional way of doing it.

But when Organizing for Action puts out what appears to be the very
first solicitation to that giant list on a policy issue, when they urge the
millions of recipients on the mailing list to call their member of Congress
immediately and to tell them to get behind the president`s proposals on gun
reform, that call your congressman right now e-mail went out at 4:26 p.m.
on a Friday afternoon. Specifically, on a Friday afternoon when neither
the House nor the Senate were in session.

Really? Call your senator right now? Late on a Friday afternoon on a
day when he or she does not have to be at work, at a time when the staffers
are likely to be on their way home, too?

The whole idea of making their people call their member of Congress is
to show those members of Congress that you can, right? Flex your muscles.
Show that you have millions of people ready to be mobilized at any given
issue at a drop of the hat and drive that home by making the phone ring in
their office when they can do that. Doing that at 4:26 p.m. on a Friday
when Congress isn`t in session? I mean, even if people would do it, you`re
aiming to fill up the voice mail maybe and hoping when people check it
Monday morning that that`s what it was about?

This was the big launch? What`s going on here?

Joining us now is a man who is the closest I can get to the White
House or to the Obama campaign apparatus without actually being allowed to
talk to somebody from the White House or the campaign apparatus.

Bill Burton is the former White House deputy press secretary and co-
founder of Priorities USA Political Action Committee. He is now an
executive vice president and managing director at Global Strategy Group,
which sounds both leviathan and terrifying -- Bill Burton.

BILL BURTON, GLOBAL STRATEGY GROUP: That`s what I was going for.

MADDOW: Executive vice president and managing director of Global
Strategy Group, do you realize how evil that sounds?

BURTON: You said bright but uncertain future when I was on not too
long ago. And now it`s certain, Global Strategy Group.

MADDOW: All right. Fair enough. I won`t ask. I assume I`ll know
before it kills me, right?

BURTON: I have to say, though, 4:30 on a Friday is actually a really
good time to get a member of Congress. They`re probably not doing
anything.

MADDOW: They`re probably not at work.

BURTON: You catch them right before happy hour. You get right
through. You get right through.

MADDOW: No. What -- is this just -- is the Obama for America
organizing apparatus that existed in 2008 that got folded into the DNC,
essentially went on autopilot and wasn`t effective during the president`s
first term, is that is what is going to happen again in the second term?
Are they going to run this thing on autopilot?

BURTON: No, look, you`ve got some of the smartest minds in politics
who are over there putting this together. They`ve got one of the best
lists ever assembled.

MADDOW: The best list ever assembled?

BURTON: The best list ever assembled, and they`re going to put it to
work. You know, the thing we have right now is the NRA has always been
this powerhouse organization, which has been a lot more money than actual
action.

What you have now is a countervailing force where you can actually
have a grassroots effort to get people to call their members of Congress,
to put some pressure on them, and actually get something done from the
outside. And I just came from "The New Republic" launch party. As the
president told "The New Republic", you know, you`ve got to get the change
from the outside in, or else it`s never going to happen.

And if people don`t call their members of Congress and say to the ones
who disagree with this policy, you`ve got to move or you`re going to pay a
political price. And tell the ones who do agree with the policy -- great,
thank you, keep pushing because we need this right now.

MADDOW: So, but the first time they are employing it, they sent out a
couple of e-mails essentially saying we`re doing this thing. This is the
first time they have tried to employ it on a policy matter. You have to
admit the timing was ridiculous.

BURTON: Well --

MADDOW: That makes me feel like there might be big minds coming up
with the big ideas. But people who are executing it are doing a bad job.
And that`s the thing that seems surprising to me for a campaign that was so
good at executing both times.

BURTON: Well, one thing I don`t think you noticed because the Obama
campaign was so big and it was so many things all at once, is that when you
execute one of these online campaign, what you have to do sometimes is the
soft launch, and that e-mail that got sent out is probably slightly
different from other e-mails that went out. It`s a test. You see what
people really react to, and you use that data in order to really engage
voters who are on the list when you do your huge, big launch later on.

So I think this is just part of a strategy leading up to what is going
to be a sustained effort to really hold members` feet to the fire and get
the kind of change we need.

MADDOW: And you don`t have any doubts about it?

BURTON: No. I don`t have any doubts.

MADDOW: Here is the thing. I don`t care about how effective any
political organization is, except just in terms of studying the tactics, I
would expect the best list in politics to produce big results.

BURTON: Yes.

MADDOW: When it is employed. And if they don`t know how to drive
that car, it`s doesn`t matter.

BURTON: You can`t always do it right from the beginning. Sometimes
you test different messages, you test subject line, you test different
PS`s, all sorts of different things. You figure out what is the best way
to do this and that is what gives you the big results.

MADDOW: One last question on immigration specifically. Do you expect
this outside game if they try to employee it on guns and immigration, it
will be employed differently? Or is it the same set of tactics that you
try to use that campaign apparatus to employ? Or is this a multifaceted
thing, you can do a lot of things with it?

BURTON: Well, I think it will be similar. The difference in the
immigration fight is you`ve got much larger groups on the outside who have
been doing a lot of this work. On the gunfight, you`ve got the Brady
group, you`ve got the Bloomberg group, you`ve got all these people who are
doing work. But on the immigration fight, you have the enormous
apparatuses. And I think the grassroots behind that is going to be
intense.

Luckily, it`s already a bunch of momentum going today. And tomorrow
with the president`s speech, I actually think we`re going to get something
done.

MADDOW: I think the thing that is going to be fascinating to watch is
the president`s speech. I have no idea if he`s going to do it, but I think
he should totally pro tend he didn`t propose all of these in May 2011,
which he did. It`s like letter to his proposals exactly what he rolled
out. I think if he disavows it, he might have a chance. You never know.

Bill Burton, it`s great to have you here. I`m sorry that I always
tease you, but it`s too fun to stop.

BURTON: Thanks for having me.

MADDOW: All right. We`ll be right back.

(COMMERCIAL BREAK)

MADDOW: The most over-covered story on the Beltway media are what
Republicans say need to be do differently in wake of the election which was
a Republican disaster. It`s an awful lot of talk with not a lot of news.
They say it, the Beltway press writes it down. For some reason, we call
that news.

On the other hand, the most under-covered story in the beltway media
is what Republicans like this, Republicans with actual governing power, are
actually doing with that power in the places where they are in charge.
What you do with power says a lot more than what you say about power, even
if it isn`t always said quite as loudly.

Paul Krugman is our guest tonight for the interview. That`s coming
up.

(COMMERCIAL BREAK)

MADDOW: They have these where you live? These are called loosies.
It means single items of something that are usually sold in packages, like
these crackers. But because not everyone can afford to buy a whole box,
store owners who have a customer base that doesn`t necessarily have a lot
of money to spend, those store owners sometimes sell things loosely, as in
loosies.

Most of the time when people talk about loosies, it means cigarettes.
It is an often illegal, but often available way to buy one cigarette at a
time instead of buying a whole expensive pack.

It`s not only cigarettes. You can also find loosie aspirin and loosie
eggs and so on. Loosie can tell us a lot about the local customers,
whether it`s poor students who are trying to bust up a six-pack of beer, or
working families scrounging something for the kids to eat. We do not all
approach the counter with the same amount of money at our disposal.

But regardless of how much we can afford to buy at one time, we are
all treated the same way by the sales tax. Sales tax doesn`t care if
you`re a janitor with four kids in one precious dollar, or if you are a
cardiologist with the second home and lots of dollars.

And because of that, the less you make, the greater percentage of
income you pay when you pay the sales tax. If you don`t make that much
money, that sales tax on the egg might be 1 percent of a day`s pay for you.
It could probably be more like a thousandth of a percent of the
cardiologist`s paycheck for the day.

A sales tax is therefore among the least populist ways of raising
money for government, proportionally speaking. It takes the most from
people with the least money, and the least from everybody who has more
money.

Because of that backwards impact, because it`s harder on the poor and
easier on the rich, you might think a tax like that would be among the most
unpopular tax ideas. But in bright red states, states where Republicans
have complete control of the government, that tax all of the sudden is
really popular.

This month in Louisiana, Republican Governor Bobby Jindal rolled out
his agenda for this year. Get rid of the income tax and corporate taxes
where how much you pay depends on how much you make. But do not worry
about the billions in lost tax revenue, because Louisiana, to compensate,
will jack up the sales tax that everybody has to pay, and that takes such a
bigger chunk out of poor people`s pocketbooks.

When the nonpartisan tax wonks calculate the effect of Governor
Jindal`s plan, they find that overall taxes will fall for the richest 20
percent of people in the state. Their taxes will go down. But for
remaining 80 percent of the population, taxes will go up.

And the people in all of Louisiana who can least afford a tax hike
will get the biggest tax hike. That is what Bobby Jindal has in the works
for Louisiana. Happy Mardi Gras.

In Kansas, which doesn`t have Mardi Gras, except privately, Republican
Governor Sam Brownback gets to do more or less what Sam Brownback wants,
because Republicans also control the legislature there.

The other day, Governor Brownback announced his agenda for this year.
And oh, hey, look, an end to the income tax. Already Republican tax cuts
approved last year have opened up a giant hole in the Kansas budget. Now,
the governor wants to pay for that with a higher sales tax and by ending
tax breaks that benefit ordinary working families.

This is after Kansas Republicans already took away tax breaks for
stuff like food, the kind of tax breaks that try to make up for the unfair
nature of the sales tax.

The nonpartisan tax wonks say they have a worried eye on the plans of
the Republican governors this year. Not just in Kansas and Louisiana, but
in Wisconsin and in Ohio and Nebraska. In North Carolina, where
Republicans won complete control last year, they`re now talking about
making the poor pay more. So that`s how the political season is opening up
this year in the red states.

In Washington, D.C., where Republicans are not in charge, where they
like to remind everyone that they only control one-half of one-third of the
federal government, Republicans have been sounding the sad trombone this
past week -- woe is them, or woe are them, I guess.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: We`re expecting here
over the next 22 months to be the focus of this administration as they
attempt to annihilate the Republican Party. And let me just tell you, I do
believe that is their goal, to just shove us into the dustbin of history.

REP. PAUL RYAN (R), WISCONSIN: He needs to delegitimize the
Republican Party and House Republicans in particular. The president will
bait us. He will portray us as cruel and unyielding.

We can`t get rattled. We won`t play the villain in his morality
plays.

(END VIDEO CLIP)

MADDOW: Democrats are not organized enough to have their talking
points be this evident. But when Republicans do it, it`s kind of obvious,
right?

This is the new Republican leadership talking point: President Obama
is mean. And Republicans are helpless before his meanness in Washington.

But you know what? Republicans have complete control of government in
24 states, which is a lot. And where they do have control, they`re not
blaming Obama, right? Look what they`re doing in governance. They`re
having the rich pay less, and they`re having the poor pay more. This is
not what they`re marketing to the nation, but this is what they`re doing
when they`re handed the reins of government.

Economist Paul Krugman wrote about this deja news in his latest
column. "What we`re seeing now," he says, "is open, explicit reverse Robin
Hoodism: taking from ordinary families and giving to the rich.

Even as Republicans look for a way to sound more sympathetic and less
extreme, their actual policies are taking another sharp right turn.

Why is this happening? In particular, why is this happening now, just
after an election and which the Republican Party paid a price for its anti-
populist stand?"

Good question. And it`s the distance between what the Beltway writes
down when the Republicans talk about themselves versus what Republicans
actually do where they are in charge. It`s a very good question.

Paul Krugman himself is here for the interview, straight ahead.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GOV. BOBBY JINDAL (R), LOUISIANA: We must not be the party that
simply protects the well off so they can keep their toys. We`ve got to be
the party that shows all Americans how they can thrive. We`re the party
whose ideas will help the middle class and help more folks join the middle
class. We`re a populist party, and we need to make that clear to every
voter and every American.

(END VIDEO CLIP)

MADDOW: Louisiana Governor Bobby Jindal making the case that the
Republican Party is a populist party. Two weeks ago, Governor Jindal says
he wants to eliminate all income taxes in his state in a revenue-neutral
way, making up for it mostly with the sales tax. And whatever you think
about tax policy, that is pretty much the exact opposite of populist, if
the word populist has any meaning.

Joining us now for the Interview tonight is Paul Krugman, Nobel Prize-
winning economist and author of the bestselling book "End This Depression
Now", which is out with a new preface right now.

Paul, thank you for being here.

PAUL KRUGMAN, NEW YORK TIMES COLUMNIST: Hi there.

MADDOW: You have argued that the Republicans get credit for all sorts
of things they are not actually for. They get credit for being tough on
the deficit when they`re not -- conservatism in their approach to policy
when they really want quite radical changes.

Is there a coherence that matches the way they talk about themselves
that is evident in the way they are governing in the states that might not
be evident in Washington?

KRUGMAN: Wow. I mean -- in state, in deep red states like Louisiana
or Kansas, basically they are -- we`ve reached a point where they don`t
worry about losing the election to Democrats. I mean, you know, if you
talk about one-party rule, you know, and Southern whites are 90 percent
Republican voters, it`s just not. So their only concern is about fending
off challenges from their own right. And so, they are free to do what they
really want to do, or what their base really wants them to do.

And that turns out to be radically -- in a way, it`s fiscally more
honest, right? At the national level, they`ve always had the pretense we
can cut taxes and somehow that will pay for itself. We will eliminate
waste and fraud we won`t tell you what, or the magic of the Laffer curve
will deliver us the red meat.

At the state level, you can`t get away with that, but on the other
hand, they`re free to be honest and say, what we really want to do is take
away from middle class and poor families and give to it the rich. And
somebody like Jindal, who has national ambitions, but is simultaneously
running policy in a deep red state, the difference between what he says
Republicans stand for and what he shows Republicans stand for is really
dramatic. It`s quite something to watch.

What is interesting, both these things, both the rhetoric, what he
said about we must not be the party that helps the rich keep their toys,
that`s something you aren`t hearing. Republicans wouldn`t even acknowledge
that there was even a possible perception of such things until after this
last election.

So, on one sense they said oh, maybe we have to worry about this class
warfare thing. But on the other hand, this brutal upward redistribution of
income, that`s also something new. It`s quite an amazing moment.

MADDOW: In terms of understanding the magnitude of impact on typical
family life in these states, if these changes are made, if Kansas and
Louisiana and some of the other states are considering totally eliminating
income taxes, they do actually make up for it by jacking up sales tax.

What -- how will that change those states?

KRUGMAN: Well, it`s a few percent. We`re talking something like a 3
percent hit to the poorest fifth of families, and something like a 3
percent benefit in terms of income to the richest 1 percent. So, you know,
state budgets are not that big. So federal level changes could be a bigger
hit.

But if you`re living fairly close to the edge or at the edge which a
lot of poor families are this is a significant thing. If you`re -- you
know, if you`re in the top 1 percent in Louisiana, something like that
$25,000 extra a year of extra spending money, not trivial.

And this is -- you know, what is really amazing, by the way, one thing
I couldn`t get into in the column, if you`re worried about the incentive
effects, suppose you really worry about taxes diminishing the incentive to
work, it turns out in our system, the highest marginal tax rates, the
biggest disincentives to work in our system are not for the rich. They are
for lower income workers who are in the range where if you start to work
more, you start to lose benefits, you start to lose Medicaid, you lost
housing subsidies.

This is going to raise taxes precisely on people who have the biggest
disincentives to work.

MADDOW: Wow.

KRUGMAN: So it is actually even from the old supply side incentive
thing, this is going in the wrong direction. But, hey, that`s not what
it`s about, right?

MADDOW: Well, it`s about marketing in a way, and when they talk about
how they want to be seen rather than how they want their policies to be
parsed, they`re often increasing it. They`re putting it in terms of
international terms as well, talking about the global financial crisis.

One of the things you write about in a new preface in the book is how
the United States has fared in the depression compared to other countries.
We`ve sort of done comparatively better than Europe has.

KRUGMAN: Yes, we lost the race to the bottom of stupidness. We
didn`t do as many things wrong as the Europeans did. We didn`t do well, by
any means, but we didn`t do gratuitous austerity the way that Britain did.

We at least have a single currency across the continent, but also have
a single government, which is kind of helpful. The Europeans screwed up in
that dimension.

But what`s interesting, of course, is that all the things that luckily
we didn`t do are the things that the GOP wanted us to do. Wanted us to
have British-style austerity, wanted us to have hard money the way that the
Europeans have been forced to because this is bad thing.

Yes, we`re actually -- things could be worse, in the environment in
the United States. And that always ends with the punch line, and sure
enough things got worse, right? But here we are.

MADDOW: But this -- you know, for explanatory and political purposes,
we did sort of run a controlled experiment, with some countries tried what
they are proposing and we see how it worked.

KRUGMAN: That`s right. In the middle of 2010, when the new British
government came in, up to that point, the track of recovery had been about
the same in the U.S. and Britain. Since then, we`ve started to recover,
and they`ve gone into a triple dip recession. So there we are.

MADDOW: Paul Krugman, Nobel Prize-winning economist, "New York Times"
columnist, author of "End This Depression" now, thank you as always.

KRUGMAN: Thanks a lot.

MADDOW: Thanks a lot.

All right. We`ll be right back with a RACHEL MADDOW SHOW patented
bullpucky alert. This one appears not a test, not a drill, but a real life
pile of bull. Hold on.

(COMMERCIAL BREAK)

MADDOW: On Friday, we ended the show with a code 3 bullpucky alert.
You were all calm, just like we`ve all been practicing in our weekly
bullpucky alert drills.

Friday`s alert was triggered by a group called Use Your Mandate, which
we`re told is supposedly made up of liberals and Democratic Party, gay
rights advocates. The group is running this ad against former Senator
Chuck Hagel, the president`s nominee for defense secretary.

Here is the problem, though, the people running this ad have told the
press that they are liberal Democrats with ties to the Obama White House.
But they have refused to step out in the light. They`re doing this
anonymously. They paid for a national ad going after this president and
his nominee, but have done it secretly.

They said they wanted to be anonymity because they feared retribution
from the Obama White House, as if this White House is known for
vindictively crushing liberals who disagree with them.

The whole thing just seemed a little off.

(BEGIN VIDEO CLIP)

MADDOW: I`m not buying it. I call bullpucky. I say it is even money
that this is the right running ads against Hagel while pretending to be the
left. I might be wrong, but I call bullpucky.

And if I am wrong, there`s an easy way to prove it. Come out, come
out, whoever you are. If you are not Bill Kristol, or Liz Cheney or the
Log Cabin Republicans or someone like that, I will be the first to admit
that I`m wrong.

But I do not think I`m wrong. This is not a liberal group. It`s a
right wing group. You`re trying to look like liberals and we can tell.

(END VIDEO CLIP)

MADDOW: That was Friday, tonight, the follow-up.

The day after the censors went off, the day after our siren sounded in
our studio, the day after I said it was Bill Kristol or someone like him, I
will say I am wrong -- the day after that, "The New York Times" reported
about one very specific detail on those anti-Chuck Hagel anonymous ads.

According to "The Times," this group Use Your Mandate, the supposedly
pro-gay rights group that has no sense of irony at all about using the word
"mandate", Use Your Mandate hired a firm to place these ads, a firm called
Del Cielo Media, which is, quote, "an arm of one of the most prominent
Republican ad-buying firms in the country."

Between "The Times" reporting and a follow-up from Andrew Kaczynski at
BuzzFeed, we learned that the firm`s client list doesn`t look at all that
liberal or Democratic or nice to gay people. It includes the Republican
National Committee and the National Republican Congressional Committee, and
the Republican Governors Association, and the McCain-Palin campaign, and
the Christine O`Donnell for Senate campaign, remember "I am not a witch"?

Also a group called The Emergency Committee for Israel, which has on
its board a rather famously anti-gay Gary Bauer. Remember Gary Bauer?
He`s the guy whose Iowa campaign office Dan Savage went to in the year 2000
when Bauer was running for president, Dan licked the door knobs at the
campaign of Gary Bauer to try to give him and his staff the flu.

The Gary Bauer group also has a prominent a neo-conservative on its
board, Bill Kristol. Bill Kristol seems to be coordinating most of the
right wing opposition to Chuck Hagel`s nomination, including apparently
sharing an ad-buying firm with somebody trying to appear like they are a
left wing opponent of Chuck Hagel`s nomination, even though it really seems
like that`s made up.

We contacted Del Cielo Media for comment today. Their comment today
was, no, as in they had no comment.

Use Your Mandate also has a New York-based consulting firm called
Tusks Strategies. They did confirm to us that Use Your Mandate was one of
their clients, but declined to say who that client actually is.

So, you know, maybe there is a left wing group that prioritizes gay
rights that feels comfortable working alongside Bill Kristol and Gary Bauer
and using all of these Republican resources to do their work. Maybe, or,
bullpucky, that bullpucky alert is in effect.

Chuck Hagel`s confirmation is on Thursday. Until this group says who
they are, the important headline on Thursday about the opposition to the
Chuck Hagel`s nomination is going to be that some of that opposition
appears to be fake, comically, ridiculously fake. Do you want that to be
the headline on Thursday? If not, come out, come out, whoever you are.

That does it for us tonight. We`ll see you again tomorrow.

Now it`s fine for "THE LAST WORD WITH LAWRENCE O`DONNELL".

Have a nice night.

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

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