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updated 10/3/2013 3:18:19 PM ET 2013-10-03T19:18:19

HARDBALL
October 2, 2013

Guest: Tammy Duckworth, Clarence Page, Dana Milbank, Susan Milligan

CHRIS MATTHEWS, MSNBC HOST: Will Boehner budge?

Let`s play HARDBALL.

Good evening. I`m Chris Matthews in New York.

"Let Me Start" tonight with this. It`s interesting that the more this
government shutdown hurts and is seen hurting, the more you see John
Boehner out there on the media skillet, the less you see of Ted Cruz. This
whole phony revolution is as much a PR stunt as Ted Cruz`s imitation
filibuster, a pathetic example of a politician who`s never gotten a
positive piece of legislation passed but instead spends his time sabotaging
government.

He is the saboteur who plants the bomb, lights the fuse, then goes
scurrying off into the bushes while John Boehner stands out there on the
bridge when it blows up. Some may doubt this about Cruz, but historians
will have the record to get their hands on. Whose decision was it to put a
Senate hold on a meeting between the Senate and House Budget Committees?
That failure to meet led to the failure to pass any appropriations bills by
the deadline of October 1. That lack of appropriations bills passed and
signed by the president exposed the entire U.S. government to shutdown.

And who was it who demanded as a price for the passage of a continuing
resolution to keep the open the destruction of the Affordable Care Act?
Ted Cruz, the fellow who`s now standing back and watching the house fall
in, this new kind of patriot who requires our self-governing democracy to
plead for its life against the hostage takers.

Within the last hour, President Obama met with the congressional leaders of
both parties at the White House.

Jonathan Capehart`s a member of "The Washington Post`s" editorial board and
Howard Fineman is editorial director of the Huffington Post Media Group.

Howard, let`s talk about the setup before tonight. Where are we with this
speaker of the House? He`s got the heat on his back, on his backside.
Let`s be blunt here. He`s facing a tremendous torture. You can see it in
his face.

How long will it take for the moderates in his party -- I`m meaning not
far-right conservatives -- to give him enough backing in his caucus where
he can make a move and make a lesser demand on the president, one that he
might be able to accept?

HOWARD FINEMAN, HUFFINGTON POST MEDIA GROUP, MSNBC POLITICAL ANALYST:
Well, Chris, we`re all counting at the HuffingtonPost and everywhere else.
One by one, Republicans are saying privately first and then publicly in the
House that they would be willing to vote for a so-called clean CR, meaning
go ahead, fund the government without conditions.

Right now, there may be6 or 17 of those Republicans. That would be enough
--

CHRIS HAYES, MSNBC ANCHOR: Hello. I`m Chris Hayes. We are breaking into
HARDBALL because at this moment, Senator Harry Reid and Nancy Pelosi are
speaking at the White House.

(BEGIN LIVE PRESSER COVERAGE - IN PROGRESS)

SEN. HARRY REID (D-NV), MAJORITY LEADER: All we want you to do is open the
government. And I went through a litany of things that we would be happy
to talk about, or anything else he wanted to talk about. We said we`ll be
happy to talk about discretionary spending. We`ll talk about agriculture.
We`ll talk about parks. We`ll talk about health care. We`ll talk about
anything that you want to talk about.

And he says, No, all I want to do is go to conference on a short-term CR.
We have the debt ceiling staring us in the face, and he wants to talk about
a short-term CR? I thought that they were concerned about the long-term
fiscal affairs of this country. And we said we are, too. Let`s talk about
it. My friend, John Boehner, I repeat, cannot take yes for an answer.

REP. NANCY PELOSI (D-CA), MINORITY LEADER: Thank you, Mr. Leader.

On March 1st, we saw many of you out here after we had a meeting in the
Oval Office with President Obama. At that time, Speaker Boehner and Leader
McConnell said that they wanted to proceed on the budget discussion under
the regular order, a Washington term which means you pass a bill in the
House, you pass a bill in the Senate, you go to conference.

All of that was March 1st. Before the end of the month, the House and the
Senate both passed a bill, but the Republicans have resisted the regular
order. For six months, they have avoided going to conference.

So now they come up with their suggestion of two -- of $986 or $988, a
figure -- $988, which is a figure that our members in the House do not
like, think it is far too low, and the Republican chairman of the
Appropriations Committee says does not enable government to provide for the
needs of the American people.

But nonetheless, having said that, over 100 members of the House,
Democrats, stood on the steps of the Capitol today (ph) and made a solid,
real, offer to the speaker of the House to accept his number, which they
don`t like and they don`t respect, but for the purpose of opening up
government and going to the next step.

All we have to do is bring it up, pass it in the House, it comes to the
president`s desk, government is open. Then we go to the table, as the
leader suggests, on the budget. And some of that discussion can be helpful
in terms of addressing growth, debt -- deficit reduction and how we go
forward on lifting the debt ceiling.

So we just have to find a way. And we have to find a path that they can go
down. But if they keep moving the goalpost and won`t even accept their own
number, as the leader says, if they don`t take yes for an answer, then I
can only conclude that they wanted to shut down government, that they think
that that has a purpose for them.

And we know what that is. They want to overturn the Affordable Care Act.
That`s not going to happen. And frankly, that`s not what our Constitution
had in mind, that if you don`t like something, you threaten to shut down
government, so you don`t -- it`s not that kind of a system.

So in any event, ever optimistic because so much is at stake, I`m hopeful
that in the conversation, we heard each other and that we will be able to
find a place to go, as the leader suggests, to the budget table, six months
after we were supposed to, in order to discuss the budget that can be
helpful because the next -- the next challenge is lifting the debt ceiling.

It was a worthwhile meeting. I`m glad it was held. We had, shall we say,
some candid discussion, wouldn`t you say, Mr. Leader?

REID: You bet (ph).

PELOSI: And we won`t go into that.

QUESTION: Leader Reid and Leader Pelosi --

REID: One of the things I was very -- I felt very happy I was there. The
president of the United States was very, very strong, strong, strong.

This has never happened before. They can make all the historical analysis
that they want, it just has never happened before, where a political party
would be willing to take the country to the brink of financial disaster and
say we`re not going to allow us to pay our bills.

The president said he will not stand for that, that -- and we were -- we
said we would be happy to work -- I said, Happy to work with you, Mr.
Speaker on a way out of this, but we are where we are. We`re not going
play -- we`re through playing these little games on -- it`s all focused on
"Obama care." That`s all it`s about.

And as I`ve said before, and I`ll tell each of you here tonight, they did
the same thing to Social Security. They did the same thing to Medicare.
And they`re trying to do the same thing to "Obama care."

"Obama care" is another Social Security. It`s another Medicare program.
It`s something that is a signature issue of this administration, and Nancy
Pelosi and Harry Reid worked hard to get it done. We`re happy it`s done.
The one thing we made very clear in that meeting, we are locked in tight on
"Obama care."

QUESTION: When is the next time you`re going to meet?

(CROSSTALK)

QUESTION: When is the next time you`re going to meet?

QUESTION: Senator Reid and Leader Pelosi, if I can ask -- you`re in that
meeting more than hour. What is your sense? How real is the danger that
the country may default (INAUDIBLE)

REID: I believe -- I believe, based on what we have seen, the performance
of the Tea Party-driven, Cruz-led House now -- no longer in the Senate,
it`s now in the House -- I think that it looks like these people are headed
where they want to go. Michelle Bachmann said, Finally, finally we`re
where we wanted to be. We`ve closed down the government. She`s not alone.

(CROSSTALK)

PELOSI: Let me just say this about the meeting, and that is the following.
I think there are certain principles or attitudes that we should have.
Now, I`m not saying we agreed to this in the meeting, but I`m just saying
for the good of the order and the confidence of the American people, we
should take the debt ceiling debate off the table.

The United States of America will always honor the full faith and credit of
our country. And no president should be held hostage to that for a social
or other agenda. So let`s just take that off the table because it`s really
dangerous. I mean, closing the government is bad. The combination of that
and not lifting the debt ceiling is beyond cataclysmic.

So let`s -- again, we have to think about whatever we`re doing now and what
the president is doing. So let`s take that off the table.

QUESTION: (INAUDIBLE) invoke the 14th Amendment?

PELOSI: Let`s -- well, that`s -- he`s not going to.

Secondly -- secondly, every bill that ever passes in the Congress is
subject to another bill passing in the Congress to amend it. And so if
they don`t like certain aspects of the Affordable Care Act, they have every
opportunity, in the majority, especially to bring anything to the floor to
make whatever changes they want.

But that should not be something that is a threat to whether government is
open or the full faith and credit. So take the lifting of the debt ceiling
off the table. Recognize that any bill that has passed and enacted into
law can be changed under the regular order. But don`t confuse the two.

QUESTION: Did the speaker say why he wouldn`t bring a clean CR to the
floor?

PELOSI: Well, I won`t go into -- I don`t know why they haven`t accepted
their own number. We stood on the steps of the Capitol with 100 members,
as I said, with the support of the other members of the caucus, to say
we`re making a firm offer to the speaker, as I have done to him privately
over and over again, that we will accept the $988.

You know that our members do not like the $988. Most of them have dug in
their heels to say they would never support the $988. But to open the
government, that opinion is a luxury we can`t afford on the side of the
Democrats or the Republicans. So we`re willing to compromise, to accept
their number.

They had two things, $988 and overturn "Obama care." This isn`t going to
happen. We`re willing to accept this. They shouldn`t move the goalposts.

(CROSSTALK)

QUESTION: Are you going to meet again?

QUESTION: -- how long you expect the shutdown to continue now after this
meeting?

HAYES: House Democratic leader Nancy Pelosi and Senate Majority Leader
Harry Reid addressing the press after the meeting at the White House with
President Barack Obama, Mitch McConnell, Harry Reid, John Boehner and Nancy
Pelosi, the four leaders from Coast Guard, a bipartisan meeting with the
president at the White House that just broke up a few minutes ago.

Before Nancy Pelosi and Harry Reid addressed the press, John Boehner came
out and said this.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: You know, at times like
this, the American people expect their leaders to come together and to try
to find ways to resolve their differences. The president reiterated one
more time tonight that he will not negotiate.

We`ve got divided government. Democrats control the White House and the
Senate. Republicans control the House. We sent four different proposals
over to our Democrat colleagues in the Senate. They rejected all of them.
We`ve asked to go to conference, to sit down and try to resolve our
differences. They don`t want to -- they will not negotiate.

We had a nice conversation, a polite conversation, but at some point, we`ve
got to allow the process that our founders gave us to work out. We`ve
appointed conferees on the House side to sit down and work with our Senate
colleagues. It`s time for them to appoint conferees.

All we`re asking for here is a discussion, and fairness for the American
people under "Obama care." I wish -- I would hope that the president and
my Democrat colleagues in the Senate would listen to the American people
and sit down and have a serious discussion about resolving these
differences.

(END VIDEO CLIP)

HAYES: That`s John Boehner moments ago, reiterating his two twin demands,
that the government delay the implementation of a key aspect of "Obama
care" in exchange for, essentially reopening the government, saying that he
wants the Senate to appoint conferees. And if that sounds confusing to
you, that means he wants the Senate to name some senators to sit down with
House members to talk about hammering out the differences between the House
and Senate on a six-week continuing resolution.

In other words, what he`s saying between the lines is he wants the
government to stay closed for the next few days at least, probably for the
next few weeks.

For more, NBC`s Kristen Welker is with me -- joining me now at the White
House. And we are getting indications the president may speak about the
meeting that just happened, as well.

KRISTEN WELKER, NBC CORRESPONDENT: Well, that`s certainly a possibility,
Chris. We are waiting to hear confirmation about that from the White
House.

But this meeting was sort of what we expected. President Obama said he
wasn`t going to negotiate going into meeting. That is what happened. He
reiterated his stance, dug in his heels, called on congressional leaders to
reopen the government and to increase the debt limit without any strings
attached.

Now, we should also say that during an interview earlier today with CNBC`s
John Harwood, President Obama said, Look, I will negotiate with you on some
of these other issues, but once we reopen the government, once we increase
the debt limit. Let`s talk about this during a larger budget negotiation.
Sounds like he also made that point during this meeting.

Now, Republicans, as you just heard, continue to dig in their heels on this
issue of trying to defund or delay President Obama`s signature achievement,
his health care law.

But look, the president thinks he has the leverage right now in part
because if you look at the polls, the polls are on his side. A majority of
Americans disagree with Republicans` handling of this situation.

And Republicans continue to be divided, Chris. In all of my conversations,
there`s a lot of division amongst the Republican Party about whether or not
this is actually the right strategy. I think what is becoming increasingly
more likely, more of a possibility, is that you will see members of
Congress deal with both reopening the government and the debt limit in one
larger package because, look, if they were to go over the debt limit, allow
America to default on its loans, that could be economically catastrophic.
That`s a point they have been making. Treasury Secretary Jack Lew was in
that meeting, making that point, I am told, to those congressional leaders.

So I think that that is increasingly what is more likely. What does that
mean? It means that the government could continue to stay closed for quite
some time. And as you know, with 800,000 workers furloughed, the public
frustration only continues to mount.

HAYES: Yes, it`s increasingly the case, Kristin --

WELKER: Yes.

HAYES: -- the reporting that I`ve seen everywhere, that essentially,
everyone`s targeting now the debt ceiling deadline of October 17th --

WELKER: Yes.

HAYES: -- and that any deal that`s going to get done would be a deal
that both reopens the government and raises the debt ceiling. But what it
means is, essentially, there`s two weeks in which -- I think a two-week
shutdown at this point is looking more and more likely.

In the interview you just referenced with CNBC`s John Harwood this
afternoon --

WELKER: Yes.

HAYES: -- the president said he was exasperated by what he called the
unnecessary shutdown. Take a listen.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We have a situation right
now where if John Boehner, the speaker of the House, puts a bill on the
floor to reopen the government at current funding levels, so that we can
then negotiate on a real budget that allows us to stop governing from
crisis to crisis, it would pass.

The only thing that`s stopping it is that John Boehner right now has not
been willing to say no to a faction of the Republican Party that are
willing to burn the house down because of an obsession over my health care
initiative.

I am exasperated with the idea that unless I say to 20 million people, You
can`t have health insurance, these folks will not reopen the government.
That is irresponsible.

(END VIDEO CLIP)

HAYES: Howard Fineman is editorial director of the Huffington Post Media
Group. And Howard, you know, we are where we are. It does not seem like a
lot of movement forward came out of that meeting.

FINEMAN: Well, I was impressed initially at the fact that it was about an
hour-and-a-half long. So I figured they`d gotten past the swearing at each
other part and --

HAYES: A lot of swears, a lot of pent-up swears.

FINEMAN: That`s right. Yes, it`s a lot -- an hour-and-a-half of swearing.
But it sounds like they spent an hour-and-a-half sort of talking past each
other.

And to me, the most significant thing that I heard from the driveway
interviews that we just heard outside the West Wing is Harry Reid saying, I
was proud to be there. I was glad I was there because the president of the
United States was very "strong, strong, strong."

HAYES: Strong, strong. Three times.

FINEMAN: Three times. And what that means is that the president is
basically here, I think, trying to put the toothpaste back in the tube of
the way things went down after -- during the fiscal cliff --

HAYES: That`s right.

FINEMAN: -- because there he had a situation where there was a threat of
a debt ceiling crisis that resulted in the downgrading of Treasury bonds by
one rating agency, a near catastrophe that did result in a deal, that did
cut spending. That`s what the sequester is.

HAYES: Right.

FINEMAN: So the Republicans, the Teenage Mutant Republicans, if you will,
having had the sort of permissive parenting of the fiscal cliff situation,
are saying to themselves, Well, it worked once. Why not do it again?

HAYES: That`s right.

FINEMAN: And the president is saying and Harry -- with Harry Reid strongly
at his back because Harry Reid hated what happened during the fiscal cliff,
as did many Democrats. They`re saying, Mr. President, you`ve got to stand
firm this time. You`ve can`t -- you`ve got to be the adult. You`ve got to
be the dad. You`ve got to get these obstreperous kids to go to regular
order, as Nancy Pelosi calls it.

They don`t want to do it. They like what happened with sequester. They`ve
decided to own sequester, which, of course, they initially didn`t like.
Now they all like it. And they`re perfectly willing to stand at the brink
with the president.

So you have, I think, a very dangerous situation where you had in the White
House tonight, arguably the six adults -- in other words, the people who
are supposed to be the adults here. You had the president, the vice
president, the leaders of the House and the Senate. You didn`t have any
Tea Party people in the room there.

These are the people -- if they`re talking past each other, if they`re
getting all chesty with each other, if the president is determined to try
to get the Tea Party under control somehow, even if the Republicans can`t,
it`s a very dangerous situation.

HAYES: Well, now, it`s interesting you bring that up because here is what
I found fascinating in the past 36 hours. Up until the shutting down of
the government at the beginning of the week, you had basically the entirety
of the Republican Party establishment, lots of center-right writers,
conservative, saying, Don`t do this. This is crazy. Don`t do this. Don`t
do this.

FINEMAN: Right.

HAYES: John Boehner said it. We`ve got sound of John Boehner saying it.

FINEMAN: Right.

HAYES: Charles Krauthammer called it the suicide caucus.

FINEMAN: Right.

HAYES: Karl Rove on Fox News every night saying, don`t do it, don`t do it.
And what happened was about 30 to 80, somewhere around there, House
Republican caucus members, along with Ted Cruz and Jim DeMint at Heritage -
-

FINEMAN: Right.

HAYES: -- forced leadership into doing this.

FINEMAN: Right.

HAYES: But here`s what interesting. And you talk about the adults in the
room.

It is now the case that they are all just all in on this. I mean, isn`t
that -- that --

FINEMAN: Yes.

HAYES: Whatever fissures you saw are starting to dissolve, and, as far as
I can tell, everyone is now falling in line, the loyal soldiers, Karl Rove,
Krauthammer. All those folks, the entire right wing noise machine, all
Republican electeds are all now behind this strategy.

FINEMAN: Well, yes.

Chris, we have been all day at The Huffington Post sort of counting the
number of House Republicans who are willing to vote for a so-called clean
C.R., and we`re up to 20.

HAYES: Right.

FINEMAN: But it`s a difference between sort of what they`re saying in the
corridors --

HAYES: That`s right.

FINEMAN: -- and what they might say is -- and actually going in there
and standing up to Ted Cruz and the Tea Party. And it`s not clear that
they were willing to do it.

John Boehner came out of that thing looking I thought like he`d been
through the washing machine --

HAYES: Yes.

FINEMAN: -- because he`s realizing that he has no power whatsoever. And
what is going to happen, as you were saying just before and as Kristen
Welker was saying, is that the government shut down now is going to bleed
right into the debt ceiling thing.

The government, predict, is probably going to stay in its shutdown mode
right up until the deadline mode of October 17. And we`re going to have
this huge stare-down between these two dug-in positions. And it`s a --
it`s -- I can`t -- I can`t do anything other than to say that it`s both
outrageous and sad that it`s kind of come to this.

The whole notion of regular order that Nancy Pelosi in a quaint way
mentioned tonight is sadly ludicrous at this point.

HAYES: Yes, well, I want to go -- I want to go -- in a second, I want to
go to NBC`s Kasie Hunt, who is on Capitol Hill.

But I just want to explain something here, because I think one of the
things that`s developing right now is there`s lots of budget terminology
and procedural terminology that are pinging back and forth.

FINEMAN: Right. That`s right.

HAYES: And two things here, just to sort through these.

One is regular order; regular order means the regular budget process as
essentially ushered in the 1970s. And part of that regular order is that
the House and the Senate each pass a budget. And, then, you know, this is
"Schoolhouse Rock," to get the budget out, to hammer out the differences,
they each appoint what is called conferees, who go into conference
committee and they hammer out the differences. Right?

Well, for a year, the House was mad at the Democratic Senate for not
passing a budget. Democratic senators didn`t pass one because they didn`t
want to be attached to a document they knew was going to immediately die in
the House. But vet they said, OK, you know what, you`re right. And six
months ago, the Democratic Senate passed a budget.

And they appointed conferees. And John Boehner will not allow the House to
send conferees. Right? So for six months the demand has been from
Democrats to Republicans, you must appoint conferees. Well, on Monday
night, John Boehner decided as his last kind of procedural thing to say
we`re going to appoint conferees to work out the difference on this
continuing resolution.

FINEMAN: That`s because -- Chris, that`s because they were trying to sound
reasonable at the very moment they were most unreasonable.

HAYES: That`s right.

FINEMAN: That was their fig leaf, their procedural fig leaf there.

And what the president is saying, what Harry Reid is saying, is saying, no,
you can`t do it that way. You can`t graft seeming calm statesmanship onto
the middle of the this shakedown operation that you`re running with.

HAYES: In the middle of a burning building.

(LAUGHTER)

HAYES: The point is that the government is shut down.

FINEMAN: Yes. Yes.

HAYES: And 800,000 people are on furlough. Kids with cancer are being
turned away from trials.

FINEMAN: Yes.

HAYES: And, well, we should go through the big process of back and forth,
sitting in a room, coming together, hammering out our differences.

(CROSSTALK)

HAYES: No, that`s for the normal budget, not when the government`s in
crisis.

FINEMAN: Yes. And what Harry Reid and Nancy Pelosi were saying and the
president was saying tonight is, yes, we will do all that stuff, but not
when you have a gun to our head.

HAYES: Yes.

FINEMAN: We`re not -- we`re not -- we`re just not doing it.

And the Republicans are saying, well, we had a gun to your head the other
year and it worked, so why shouldn`t we do it again? And as a matter of
fact, the Republicans have been planning, the Tea Party people from the
very beginning have been planning to use the debt ceiling as their forcing
mechanism. They have said it over and over and over again.

HAYES: Right. Yes.

FINEMAN: They have said it over and over. If you look at any Web site on
the debt, it`s the debt clock, it`s the debt ceiling, it`s all that.

HAYES: Right.

FINEMAN: That`s -- they -- they view that as the proper, responsible thing
to do.

HAYES: Right.

FINEMAN: That`s why I say these two sides are talking past each other.
The Tea Party people think they are being responsible.

HAYES: OK.

I want to go to NBC`s Kasie Hunt, who is on Capitol Hill.

Kasie, one of the things that Howard`s reporters over at The Huffington
Post have been doing is tallying who -- who has -- who on the Republican
side has said they`d come out and vote for a clean C.R., and there`s been
this talking point I have heard from a lot of folks saying if John Boehner
were to bring a so called clean C.R., that is, fund the government for the
next six weeks at the levels that are currently in place in sequester, it
would pass with a majority of votes.

Is that the sense you get from your reporting?

KASIE HUNT, NBC CORRESPONDENT: There`s certainly a growing faction of sort
of moderates in the Republican Party who view this as sort of a growing
problem for them.

And the longer that this shutdown continues, the worse it`s going to get
for them. You have to remember that while these very conservative
districts that send these Tea Party members to the House may be the most
vocal contingent right now, the control of the majority in the House
actually hinges on people like those members of Congress who are coming out
and saying we need to dial this back. I might consider voting for a clean
C.R.

They represent districts where they`re not more afraid of a Tea Party
challenger than they are of the Democrat that they`re going to face in the
general election, and they`re more likely to get thrown out based on voter
anger. That is definitely a dynamic to watch over the course of the next
couple weeks.

But, at this point, I think some of the discussion that you were having
about lumping this together in the end, looking at maybe two weeks of a
crisis, is starting to look more and more likely. We`re not getting any
indications necessarily that Congress is going to work even through the
weekend. The back and forth here has sort of become almost perfunctory.

Republicans are sort of trying to set trap after trap for Democrats. They
are passing bills that are potentially politically difficult for them.
There`s been quite a bit of hubbub over the World War II Memorial that`s
gotten a lot sort of political traction, but at the end of the day, nothing
major is moving.

And so as we creep closer and closer to this deadline, it`s at some point
going to be inevitable that you have to deal with the debt ceiling and
funding the government at the same time.

HAYES: Yes. October 17 is the day the Treasury says the debt ceiling --
essentially, our current statutory authorization for how much debt we can
have outstanding runs out. That`s what the debt ceiling is.

HUNT: Right.

HAYES: I want to go back to this idea about this group of moderates.

You have got Peter King from New York. You have Michael Grimm, who
represents Staten Island, New York, the only Republican member of the New
York City delegation. How big is that group? Are they organized? And
have they gone quiet? Because I feel like two or three days ago, anyone
near a microphone or tape recorder on Capitol Hill was saying Ted Cruz is a
maniac, this is lemmings with suicide vests. This is destined to failure.

And I haven`t been hearing as much of that today as people have kind of
decided that they`re in the bunker together and they either hang together
or surely they will hang separately.

HUNT: Well, when you saw the moment that the moderates sort of rose up as
high as we have seen them so far was during that procedural motion late on
Monday night, when at one there were -- Peter King, Congressman Peter King
was saying that he had a number of people who were going to vote with him.

And I talked to him after that because it failed spectacularly. He was
essentially on his own in voting no. And those guys didn`t hang with him.
And what he said after he came out of the chamber was that Boehner had
asked for personal favors from all those people and said, essentially,
trust me.

And Peter King described that as saying, trust me, it will all work out in
the end. So, to a certain extent, you also have to think in the broader
context of this with House Speaker John Boehner, the position that he`s in.
He took the most heat after he was willing to cut a deal that many of these
right-wing Republicans saw as unacceptable.

So for him to come out of a meeting like this and say, hey, I did negotiate
with the president and in fact we decided --

HAYES: Yes, untenable.

HUNT: Right.

HAYES: Yes.

HUNT: Politically, it`s just not possible for him.

So, at this point, if he`s telling the moderates on the floor, hey, hang
with me, trust me, on the one hand, and he`s saying this in public, it`s
possible that -- to talk for an hour-and-a-half and say nothing except what
you have said before would be pretty remarkable.

HAYES: Kristen Welker at the White House, do we think we`re going to see a
lot of the president day in, day out giving his message if in fact this
rolls on for another two weeks?

WELKER: I think that`s exactly what we`re going to see, Chris.

I think that`s part of the political calculation here. President Obama is
going to speak at an area construction company tomorrow, where he will talk
about the economic impact on that construction company, other companies,
because of this shut down, and, of course, if there is a default.

He will basically take on this tactic that we have seen him take on in the
past, which is to try to build up public support for his position. It has
worked in the past, during the payroll tax cut fight, for example. So I
certainly think that that will be part of what we will see moving forward.

I was talking to one Democratic strategist earlier today who said, look, if
your opponents are tearing themselves apart, don`t get in the way. Take a
step back and let them go. I think that that is going to be one of the
governing principles here at the White House. That is what they perceive
to be happening amongst congressional Republicans.

So, I think that they believe, as much as they can add to the public
pressure and sort of stay out of the way, the better chances that they will
have of seeing this government shutdown come to an end, but ultimately and
more importantly making sure that the government doesn`t default on its
loans.

And just to pick up on a point that Kasie was making, there is a school of
thought that this government shutdown allows Speaker Boehner to make the
argument in the final analysis to his conference that he has fought the
good fight and now it`s time to move forward.

HAYES: Yes.

You know, heading into this, I was saying that I thought a government
shutdown decreased the likelihood of something truly cataclysmic happening
with the debt ceiling, because it allows you to have the fight earlier, to
have it out --

WELKER: Yes.

HAYES: -- for members of the House caucus particularly to see how the
public actually reacts in reality, as opposed to the abstract modeling
they`re doing of the public mind that`s largely coming from red state
common threads.

Thank you, Kristen Welker, Kasie Hunt and Howard Fineman.

I will be back with much more coming up at the top of the hour on "ALL IN."

Chris Matthews and HARDBALL picks things up when our coverage continues.

(COMMERCIAL BREAK)

MATTHEWS: We`re back.

For the second day in a row, veterans stormed past barriers at the closed
World War II Memorial down in Washington. They were helped today by
Republican members of Congress who worked their way past armed guards.
Hundreds of veterans had arrived on so-called Honor Flights for a
previously scheduled visit to the memorial, but found it closed due to the
government shutdown, a shutdown caused by the same Republican members of
Congress who paraded these veterans before the cameras today, among them,
notable Tea Party favorites Michele Bachmann of Minnesota, Steve King of
Iowa, and Louie Gohmert, a birther from Texas.

This is the same crowd who shut down the government. This was a sideshow
in their larger stunt of the government shutdown. These members of
Congress are merely hostage takers systematically releasing one hostage at
a time for public credit.

Joining me right now is Iraq War vet and Congresswoman Tammy Duckworth OF
Illinois and "The Chicago Tribune`s" Clarence Page.

I am absolutely stunned, Congresswoman, at the chutzpah -- that`s a good
Yiddish word for it -- of people who would shut down the government as a
tactic and then try to open up a piece of the government they shut down to
try to get credit as patriots.

REP. TAMMY DUCKWORTH (D), ILLINOIS: Oh, absolutely.

And, then, you know, further, they introduced a bill that cuts $6 billion
in funding for the Department of Veterans Affairs last night and claimed
that they were trying to help veterans. These people will stop at nothing.
Our veterans are not to be used as pawns. They`re to be honored. And it`s
sickening what they`re doing.

MATTHEWS: Well, how do you make them pay the price of having shut down the
Veterans Administration and everything else in the first place yesterday?

DUCKWORTH: Well, it`s just -- I have been out there. And one of the
things that I want to make sure people understand is that the veterans bill
last night, you know, was a nonstarter.

We don`t pass a budget piecemeal. We don`t ask a veteran, do you want us
to pay for you, but not allow your grandbaby to go to Head Start? You have
to pass a budget. We need a clean C.R. And then to use veterans, look,
this is political theater and it`s not acceptable. My dad was a World War
II veteran. And he`d be shaking his head right now if he saw what was
happening to the country that he fought for.

MATTHEWS: Let me go to Clarence on this.

Clarence, the whole country`s been shut down by this. There were no
appropriations bills passed as in past shutdowns. The whole government now
is vulnerable. You can`t go to Yosemite. You can`t go to the Washington
Monument. You can`t go anywhere. And all kinds of really life and death
issues are up in the air right now. And who knows what our national
security situation is. We`re hearing reports that today from briefings,
that our country may be in danger by this shutting down.

And then for the people who have done it to win their fight against the
president`s health care bill are around there strutting around, pretending
they`re the caretakers of the people.

CLARENCE PAGE, COLUMNIST, "THE CHICAGO TRIBUNE": That`s right. This fits
into the narrative that the Republicans are trying to promote now, because
they know they`re on the defensive, just as they were back in the 1990s,
when they got most of the blame from the public for that shutdown.

Same thing is happening now. So here they arrive. Reince Priebus, head of
the Republican National Committee, committing over $100,000 to pay for
guards riding to the rescue because those darn Democrats are closing down
the government. That`s the narrative that they`re promoting. I don`t
think anybody`s buying it who knows at all what is going on.

MATTHEWS: Yes.

PAGE: But it shows kind of a ragtag effort. This wasn`t planned. This is
kind of reflexive. But they were trying to push the notion that the
Democrats are at fault.

MATTHEWS: Speaking of theater, Congressman, it`s like they believe in P.T.
Barnum, a sucker`s born every day, because look at this. Talk about crazy
performance.

RNC chairman Reince Priebus, not my favorite person, pledged that the
Republican National Committee will pay the security expenses so the World
War II Memorial is open for business during the government shutdown, the
government that his party shut down. Let`s listen to this P.R.

(BEGIN VIDEO CLIP)

REINCE PRIEBUS, REPUBLICAN NATIONAL COMMITTEE CHAIRMAN: I have come here
to announce that the Republican National Committee has put aside enough
money to hire five security personnel, full-time, to keep the World War II
Memorial open.

(END VIDEO CLIP)

MATTHEWS: How can you lose, Congresswoman Duckworth, to such lightweights
as this guy, political lightweights, Puppetoons? How do you lose to them?
How can anybody believe the act? Everybody in America knows who wanted
this. It was a tactic used to bring down the government. And the only way
that Obama could stop the government -- from bringing it down is to give up
his major achievement in history, which no one on Earth is stupid enough to
believe he is going to do.

DUCKWORTH: Well, it`s not even about President Obama.

This is about our nation`s people. My constituents like a lot of the parts
of the Affordable Care Act. Now, there are problems with it. But they
like that their preexisting conditions are covered. And these are two
separate things. You have problems with the health care bill, let`s talk
about that, but don`t shut down government over it.

These same veterans that they`re pretending to help today at the World War
II Memorial, they`re going to have access to their disability pensions is
going to be limited after October 15. There`s going to be cuts in
prosthetics research for veterans. The National Cemetery Administration is
not going to be able to lay our heroes to rest at the same rate that they
were -- that they were.

And Michele Bachmann, who was there today at the World War II Memorial,
actually said shut down is exactly what we wanted. We got what we wanted.
A good day for the Tea Party is when government is having a bad day.

MATTHEWS: Who said this?

DUCKWORTH: Michele Bachmann. Michele Bachmann was the one who said that
she got exactly what she wanted, which was a shutdown. It was quoted in
"The Washington Post."

MATTHEWS: Didn`t she know she was supposed to be shedding crocodile tears?
Wasn`t that part of the act, that she was hurt, as everyone else is, by the
loss to the veterans here and other groups?

(CROSSTALK)

MATTHEWS: Isn`t that part of the game?

DUCKWORTH: They are gleeful. They are gleeful about shutting down
government.

But, of course, when they were with the veterans, I`m sure when they were
it seem like it everyone`s else`s fault but their own. And we owe our
veterans a heck of a whole lot more than showmanship. We need to make sure
that we do fund the VA, that we do need to make sure that our veterans who
are in the backlog waiting for their benefits to be processed gets
processed.

MATTHEWS: A spoiler alert here, Clarence, isn`t it the responsibility of
the elected officials of the U.S. government to make the U.S. government
work? Aren`t they responsible by the constitution to make the government
perform, not to die?

PAGE: That`s right. And as a Vietnam era veteran, I certainly salute
Tammy Duckworth for her service. And I too deeply offended by this.

You know, this reminds me during the Reagan years, one day, Ronald Reagan,
same day he cut funds to services for the elderly was pictured visiting a
nursing home, with lots of smiling elderly people around him.

Visuals mean a lot as far as public relations goes, and that`s what
Republicans are doing here that I really feel offended by. They`re showing
the visuals of the World War II Memorial and visiting veterans, while as
Ms. Duckworth pointed out, they`re trying to cut veterans` benefits. It`s
just appalling.

MATTHEWS: Unbelievable. I remember Tip talking to Reagan one time.
Reagan said I got to go to some kids who, challenged kids, handicapped kids
and Tip says, "Tell them I`m fighting for their budget." Anyway, that one,
too, that`s stuff.

Anyway, Congresswoman Tammy Duckworth. It`s an honor to have you on.

Clarence Page, as always.

Up next, the small cabal of Tea Party whacko birds -- that`s what John
McCain called them -- whose ideology is, of course, driving this war on
government.

This is HARDBALL, the place for politics.

(COMMERCIAL BREAK)

MATTHEWS: The American people have a good idea what Republicans in
Congress are up to. Check out the latest poll from "The National Review".
It found that a plurality of Americans, nearly a third, said the
Republican`s top priority is to cause political problems for President
Obama.

Fewer people suspect such impure motives by the Democrats. Nearly a
quarter say their top priority is reducing the cost of health care.

We`ll be right back.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. TED CRUZ (R), TEXAS: Standing for liberty and if standing for the
Constitution making you a whacko bird, then I am a very, very proud whacko
bird.

(END VIDEO CLIP)

MATTHEWS: Anyway, welcome back to HARDBALL.

Whatever you thought of that, that, of course, is Senator Ted Cruz of
Texas, and the whacko bird title he proudly embraces, originate with
Senator John McCain. McCain back in March of this year when he used it to
describe some of the louder and more stubborn lawmakers on the right wing
of the Republican Party. McCain later apologized for the comment,
nevertheless it`s been worn as a badge of honor, weirdly by many in the
"never surrender" caucus, another tag they get themselves.

Well, today`s "New York Times" showcases 20 of these hardliners, what they
call a band of Republicans standing their ground, and basically wresting
control of the Republican from House Speaker John Boehner.

Dana Milbank is a "Washington Post" columnist, and Susan Milligan is a
contributing editor of "U.S. News & World Report."

Dana, you know, you`re great at satire, but I don`t know how you beat the
reality here. Let`s start with U.S. Congresswoman Michele Bachmann who
first appeared on HARDBALL in 2008, talking about suspected anti-American
members of Congress, of course, all Democrats. She told the right-leaning
Web site, "World Net Daily", that the reason President Obama and Democrats
won`t cave in on affordable care is, quote, "They can`t wait to get
Americans addicted to the crack cocaine of dependency on more government
health care."

You know, she packs a lot of crap into one sentence, I got to tell you.
Crack cocaine -- now there`s a little ethnic reference for you. You know,
it`s amazing how much the dog whistle goes past some people. Maybe it
doesn`t go past some of other people. But crack cocaine, an interesting
drug of choice for her to apply to the supporters of President Obama.

Your thoughts.

DANA MILBANK, THE WASHINGTON POST: Yes, particularly interesting since
Bill O`Reilly made the same quip, almost word for word, a few nights
before. So, we can only guess where she`s getting her ideas from.

Now, it`s easy to dismiss Michele Bachman because of all the crazy things
she says. But, you know, if you look at all the wings of the Republican
Party right now are firmly attached to the whacko bird and Ted Cruz is
essentially running this thing. He`s the one who organized the strategy of
the House is now pursuing. I`m calling it the lifeboat strategy. They
decide which pieces of government they think should be rescued.

And guess what? It`s not going to be anybody who regulates business. But
we`ll make sure the veterans and troops are taken care of.

MATTHEWS: Let me go to Susan.

Let`s go past Michele Bachman, because she`s on her way out of politics,
just like Sarah Palin. They come in for a while, make their noise, like
Roman candles and get the hell out because they don`t really believe in
government, certainly not as a career, certainly not a goal in life.

These people, these birthers, a lot of them are birthers in this group,
Gohmert, Culberson, the people that won`t even admit the president was
legitimately elected. There seem does be, without pushing the point too
much, an ethnic piece of this. This guy is from somewhere east Africa,
he`s not really one of us, you know?

SUSAN MILLIGAN, U.S. NEWS & WORLD REPORT: Well, I think that that`s part
of what`s going on here. I mean, I know they don`t like Obamacare, but
this isn`t just about getting rid of a law they don`t like. I think they
want to erase the Obama presidency from history, like it`s a smudge, or go
from, you know, 43 to 45, like there`s no J Street in Washington. You just
go from I Street to K Street.

MATTHEWS: Right.

MILLIGAN: And he`ll just somehow be erased.

And the thing is, they can`t do that if this law becomes an enduring part
of our domestic policy history. So, I think that`s a piece of this here.

MATTHEWS: Yes, it`s removing the monument.

Let`s hear what Steve King -- let`s take a look at Steve King. One of the
real characters, he`s one identified by "The New York Times" today as one
of the whacko birds. In July of 2011, Steven King was on HARDBALL,
dismissing the warnings of nearly every economist and businessperson in the
world about what would happen if the United States defaulted on its debt.
That`s the important question right now.

He said he was taking his cues from constituents, he said. Let`s listen to
this.

(BEGIN VIDEO CLIP)

MATTHEWS: Let me get this straight -- you don`t believe we would go into
default, you believe that Tim Geithner is lying, the president is lying,
McConnell is wrong, everybody in the country is worried about this. But
you have some superior knowledge.

What basis do you have for your judgment? Where do you get that
information?

REP. STEVE KING (R), IOWA: I do have superior knowledge. Thanks for
recognizing it.

(CROSSTALK)

KING: The American citizens, who will elect the next president of the
United States, who elected the majority in the United States House of
Representatives.

MATTHEWS: So you`re polling in your district to find out whether the
United States goes into default or not at this month.

KING: I know this is a revelation here, but I have an independent judgment
as well. And they ask me --

MATTHEWS: OK, tell me where it comes from.

(CROSSTALK)

KING: -- independent judgment. It comes from a long experience of dealing
politically and in business and raising a family and being an American
citizen, just like the independent judgment of my constituents.

(END VIDEO CLIP)

MATTHEWS: Dana, I asked him in setting that up, do you trust in the
international economists? He said, I don`t trust the international
economists, they`re foreigners.

I said, do you trust the domestic economists? He said no. I said, how do
you know what you`re talking about? He said, I raised a family. You know?

Kathleen and I raised a family and I don`t know anything about
international economics and I admit it. But I do listen to those who
understand it. Like scientists, and anthropologist, about evolution. I go
to a dentist because he knows how to do that. I go to get my car fixed by
guys who know how to do that.

This guy doesn`t believe to go to people who know what they`re talking
about. What is this new sage brush wisdom that sort of builds these guys
egos up so they can talk like they know something they don`t know?

MILBANK: On the positive side, he did not use his favorite phrase, "calves
the size of cantaloupes" in your interview as he did when talking about
immigrants.

But, you know, I`ve seen it a lot and in a way, a lot of these guys,
because they`re representing such homogenous, pure districts. They say I`m
representing the will of the American people because they`re representing
this 90 percent Republican, very conservative district. And they seem to
think -- that`s what Ted Cruz said, I am here speaking on the floor of the
Senate for 300 million Americans.

No, you`re not doing anything close to that, not even half the Americans --
but they`re hearing their own echo chamber, so, therefore, I don`t think
they actually believe it, but they can allow themselves for a moment to
believe. I`m actually speaking for everybody.

MATTHEWS: Aren`t they afraid, though, that what they know deep down maybe
true, that we do face the end of our credibility as a creditor country or
debtor country, that you could always, from the time of our beginnings,
borrow, actually lend the United States government money, and treasury bond
no matter how much you didn`t like it you could always get your money in
interest.

Now, once that doesn`t happen, aren`t they afraid that it will change our
currency in the world, in terms of our reserve currency in the world and
who we are as a country, the dollar itself.

MILBANK: Well, you would hope that they`d be thinking that as a leader, as
an elected representative. But they`re not leading. They`re responding to
the members of their districts who don`t really care about national
economics at all. The only thing they`re concerned about is not getting a
primary challenge. And that means that whatever this president says, it`s
wrong, and he is opposed to it.

MATTHEWS: So, they go overseas on their one and only trip to Europe,
they`re 70 years old, they had to pay 500 bucks for a Coke because the
dollar is worthless?

Susan, I think somewhere along the way, the mail must shift from the hard
right, crazy, angry people, to those who do want to visit Yosemite, do want
to come to Washington, do want to go to the World War II Memorial, do love
this country, even if it`s run by a liberal president, they love the
country, oddly enough.

Your thoughts?

MILLIGAN: I hope so. I hope so. But actually, the thing that`s most
disturbing that we`re seeing right now is that there is very little sense
on the Hill that they`re there for something bigger than themselves. You
know this of course, your book with "Tip and The Gipper," and we both saw
it with Ted Kennedy.

When Kennedy last negotiated with the last immigration bill, the first
thing he did was have everybody in the room, the Democrats and Republicans,
and have them talk about how their families have come to America. It was a
very profound bonding moment. And it reminded people why they were in that
room and why we`re all here, because it made them realize that they were
all there for something bigger.

That is gone on the Hill. There is no sense of the responsibility to the
group, to the responsibility of the institution of Congress or the
responsibility of anyone except the constituents they talk to at town hall
meetings.

MATTHEWS: You know, I just remember that Tip and Reagan had this wonderful
meeting about the grain embargo, and Reagan`s thinking about the
constituency, the farmers he has to think about, and Tip saying, you know,
you`ve got to think about the whole country, this is about the Soviet
Union, we got to something from them out of this deal. You know, they
really tried to talk about things, trying to figure the right thing for the
country.

Dana Milbank, thank you, sir. You`re the perfect to write about these
times.

And, Susan Milligan, you`re too nice to live in these times.

And we`ll be right back after this.

(COMMERCIAL BREAK)

MATTHEWS: Let me finish tonight with this:

It takes a lot of chutzpah for the hostage taker who, to prove he`s one of
the good guys, decide to release a few of his hostages, and that`s what
some members of Congress were up to, saying they`ll open a bit of the
government, they would shut down so they can keep shutting down the rest of
it, and still get the payment they`re demanding.

So they pose these defenders of the World War II veterans, by pushing to
open the World War II Memorial down on the Washington Mall, pretending that
they were not, in fact, the very people who voted to hold the memorial and
every other government site hostage in order to kill the Affordable Care
Act.

There should be an award for such buffoonery because anyone with the self-
delusion and daring to pull up such an escapade deserves to be recognized.
Any veteran who believes it was the Democrats who came up with the shutdown
hasn`t been reading the newspapers. And something tells me, veterans are
the very best of the newspaper readers because they know the consequences,
firsthand, of what politics can do to your life and the life of our
country.

Last night, I had the honor to speak at the great hall of Cooper Union here
in New York, the same site where Abraham Lincoln once stood and talk about
my book, "Tip and The Gipper," when politics actually worked in this
country.

Tonight, a different venue. I`m Steve Colbert`s guest on "The Colbert
Report." Can you imagine the great Abe duking it out with Colbert?

Anyway, that`s HARDBALL for now. Thanks for being with us.

"ALL IN WITH CHRIS HAYES" 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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