updated 12/5/2005 1:37:47 PM ET 2005-12-05T18:37:47

Guests: Richard Haass, Bill Shuster, Elijah Cummings, Deborah Orin, Michael Isikoff, Doris Kearns Goodwin

CHRIS MATTHEWS, MSNBC ANCHOR:  Ten Marines killed by one roadside bomb in Fallujah.  Is the war news out shouting the president‘s speeches?  Let‘s play HARDBALL.

Good evening, I‘m Chris Matthews. 

Ten Marines were killed and 11 wounded by a roadside bomb in Fallujah.  And America could be see more bloodshed as military sources warn us that attacks could step up in the next two weeks leading up to the December 15 elections in Iraq. 

More on this tragic news in a moment. 

Later in the show, Senator John McCain, the chairman of the Armed Services Committee, marched over to the Pentagon today keeping the promise he made here on HARDBALL to look into reports that the military has a covert plan to plant propaganda in newspapers in Iraq. 

But first, NBC‘s Pentagon correspondent Jim Miklaszewski with more on the 10 marines killed yesterday in Fallujah. 

Mik, what is going on?  It seems like the number of people killed by each incident has grown over the months. 

JIM MIKLASZEWSKI, NBC NEWS- THE PENTAGON:  Well, actually, last month, there was a reduction in the number of American casualties, and we have just seen an increase recently, in part, because of the increased activity, the aggressive nature of the offensive operations in the West have exposed more of the U.S. military to contact with the enemy. 

And in this case with the Marines, apparently, what had happened is they were on a foot patrol just a few kilometers outside Fallujah, the scene of that intensive, ferocious, urban battle a year ago.

And the Marines were gathered around apparently inspecting the spot of what may have been an IED, what they thought was an IED site, when suddenly a bomb, thought to be four huge artillery shells that were connected, exploded killing 10 and wounding 11. 

Fortunately, seven of those who are wounded, already they are back on duty.  But just in the past couple of days, we have seen a pretty dramatic rise in the number of American casualties both killed and wounded.

And it‘s believed that‘s, in part, because, you know, the Iraqis are edging every closer to that December 15 parliamentary election.  And military officials have predicted that we would see an increase in insurgent violence. 

MATTHEWS:  Explain to me, if you can, the technology behind these IEDS.  Are they like ignited or triggered by garage door, that kind of mechanism? 

MIKLASZEWSKI:  Well, you know, it really depends.  There are all sorts of ways to trigger them.  One of them is by hard wire with somebody sitting off in the distance.  The wires are buried under the ground out of sight, and they are simply connected.  The electrical contact is made and boom, you have a detonation. 

Others are, in fact, made by electronic devices, such as cell phones or even remote controls or battery-operated cars.  But the most insidious lately has been the use of lasers. 

It‘s more difficult for the U.S. military to counter laser active activators because they can‘t jam them electronically.  The U.S. military has succeeded and achieved a certain amount of success in jamming many of those IEDs that are operated by radio controlled, remote controlled devices. 

In fact, at one point, one high-ranking general said it was because of those jamming devices, once he passed an IED was found, he was convinced his life was saved. 

MATTHEWS:  You know, when people think about war casualties and convention of war, you think if an American soldier or Marine going into a town and trying to find people and getting hit by a perhaps a sniper or just people resisting him in the course of an aggressive campaign.

But then Jack Murtha comes along, the Congressman from Pennsylvania, who is now a war critic, and he says no, that‘s not what it‘s like, we are simply targets. 

And the reason I am asking about IEDs and how they work is, in other words, are our troops exposed simply by being there, not even being aggressive on patrol? 

MIKLASZEWSKI:  Well, I mean, you could almost say that about any American soldier in a combat situation. 

But clearly, clearly, the U.S. Military believes at this point anyway, particularly in the West, they have to continue these pretty rigorous patrols through the certain troubled areas, because, let‘s face it, the Iraqi Military isn‘t yet up to the task to carry out these kinds of patrols. 

Once the U.S. Military goes in and clears out an area, they are now in the process of putting some of these Iraqis in place to try to hold the areas, and that‘s still an experiment in progress, actually, but could prove to be the ticket out for some American troops. 

But Congressman Murtha is right.  The U.S. Military understands full well, that as long as there are large numbers of American troops on the ground, they become a target not only for the insurgents and terrorists in their combat attacks, but also the target for a sense of dissatisfaction on many Iraqis whose lives have been turned upside down by this war and they don‘t see it getting any better any time soon. 

MATTHEWS:  Thank you very much, Jim Miklaszewski.  NBC‘s man at the Pentagon.

Richard Haass is a President of the Counsel of Formulations and was director of policy planning for the State Department and a principal adviser to the secretary of state, Colin Powell. 

Richard, I want to follow up on what Mik just said there.  The president was very, I thought, fascinating this week in his speech in Annapolis by laying out for the first time, sort of the categories of enemy we face over there. 

The largest group, he said,were rejectionists, simply people who are from that minority Sunni element in the society.  They are going to lose under majority rule, and then he said, of course, Baathists and outside terrorists led by Zarqawi.

But the first group, the rejectionists, is he suggesting that maybe we can cut a deal with those people that Mik was just talking about, who are simply angry at our presence there by A. eventually leaving and B. giving them a share in the government? 

RICHARD HAASS, FMR. STATE DEPT. DIRECTOR OF POLICY PLANNING:  I think it‘s giving them a share in the government.  It‘s giving them a share of the economic spoils.  A lot of these people, the younger men, in particular, need jobs. 

And, yes, I think, as the United States gradually reduces, as the United States gradually reorients its role, and the president indicated we would be doing both sometime in 2006, then I think there is at least a decent chance that you will see some improvement in relations between the U.S. Military presence and minority Sunnis in Iraq. 

MATTHEWS:  Are we facing resistance on that front—I shouldn‘t say we.  The administration when they try to doctor, perhaps the constitution, or find a way to give a strong minority role to the Sunnis in the way that the black South Africans gave that minority as sort of an artificial minority power to the whites as they were gaining power in South Africa.

I hear there are some ideologues or neo-conservatives who say we don‘t have to go in there and protect the minimum rights of the Sunnis.  We‘re going to back democracy and majority rule.  Tough if they can‘t take it. 

HAASS:  Almost, you could say politically and economically, Iraq is not ready for a pure Adam Smith pure market. 

We need to have a doctored political system.  And that is essentially what the constitutional battle is about.  And then once you have a new government, my hunch is probably sometime late January, February, there‘s going to have to be some accommodation of Sunni interests. 

The message has to go out, that even though the Sunnis aren‘t going to enjoy anything like their privileged status that they had under Saddam.  It still isn‘t bad or at least it‘s good enough for them to give up the military option. 

MATTHEWS:  Do you think our country—as you watch it from the outside now.  Do you believe our administration through the Defense Department and the State Department are really pushing that political piece? 

HAASS:  Well, clearly, the ambassador on the grounds Zalmay Khalilzad, is pushing it hard, and there have been a number of political milestones, and I think in two weeks, Chris, we are likely to see a pretty decent political turnout and a pretty impressive demonstration of democracy. 

MATTHEWS:  Well, let‘s take a look at what Lawrence Wilkerson, of course he worked with you at the Department of the State.  He served as Colin Powell‘s chief of staff. 

He blames Vice President Dick Cheney and Secretary of Defense Donald Rumsfeld for the poor post-war planning over there in Iraq.  Let‘s listen.

(BEGIN VIDEO CLIP)

LAWRENCE WILKERSON, FORMER COLIN POWELL CHIEF OF STAFF:  The post-invasion planning for Iraq was handled, in my opinion, in this alternative decision-making processes, which in this case constitute the vice president and the secretary of defense and certain people in the Defense Department, who did the, quote, “post-invasion planning,” unquote, which was as inept and incompetent as perhaps any planning anyone has ever done.

UNIDENTIFIED FEMALE:  You see to be laying the blame pretty fairly and squarely at the door of Dick Cheney.  Am I correct in assuming that?

WILKERSON:  Well, in the two decision-making processes into which I had the most insight, the detainee abuse issue and this issue of post-invasion planning for Iraq, I lay the blame squarely at his feet.        

(END VIDEO CLIP)             

MATTHEWS:  Was ideology to play in our development of post-war planning in Iraq?  Did it get in the way of clear thinking, in other words, an attempt to keep down the power or destroy the power of the Baathists to perhaps engineer a different form of democracy or whatever?  Did we fail to understand the practicalities over there? 

HAASS:  Well, clearly, the aftermath has gone terribly wrong.  You can attribute it to any number of people or political processes.  The planning was only as good as the assumption, Chris, and the assumptions were wrong.

The assumptions were that the troops, the American troops, who are liberators would be greeted that way.  And what I think happened, is many people who advocated the war, not surprisingly I think, what they did was they tended to emphasize the benefits that would flow, and they tended to underestimate the costs and the difficulties. 

MATTHEWS:  OK.  So, listen, I want to interrupt you for just a second, Richard, because it‘s clear to me, I get to do a little out take here, they made four promises that there were nuclear weapons being developed, that there was going to be a happy Iraqi scenario.

To quote Howard Fineman, “They are going to greet as liberators.”

That the oil over there was going to pay for the war, in fact, we were going to have cheaper gasoline here at home.  They made it seem incidental, but all these promises were made, but here‘s a promise that‘s still out there.

They say that, well, by establishing a workable, defensible democracy in Iraq in the middle of the Middle-East, in the middle of the Arab world, that the other Arab countries will catch on to how great this is, and they‘ll follow suit and they‘ll become a magnet for democracy. 

We have got a new poll Zogby Poll out, Richard, that points out the fact that 69 percent of the Arab people polled in this poll by an American polling group, doubted that spreading democracy was the real U.S.  objective. 

In other words, the message they‘re getting over there is not we‘re spreading democracy.  It‘s oil, protecting Israel, dominating the region and weakening the Muslim world.  They are seen as our goals over there.  And if people are getting the message we are simply over there as imperialists, negative towards Islam, how does our model nation building achieve any goal in that region? 

HAASS:  Well, that is why it is important for gradually the United States to reduce it‘s troop presence.  I also think the administration would be wise to publicly rule out any special position vis-a-vis oil, any long term bases and so forth, to essentially make it clear that our motives are essentially pure. 

But you‘ve raised a big question, Chris, which is what is it impact of Iraq on the spread of democracy in the region.  And I think it has been mixed up to now.  On one hand, you had those impressive pictures of Iraqis voting and that resonated around the region. 

On the other hand, the chaos has scared off a lot of people around the region, and also Sunni countries in particular.  Those societies in the Arab world which are Sunni majorities are obviously unhappy with what they‘re seeing in Iraq.  So at best, it is something of a wash for what, if any, impetus, this will give to the spread of democracy throughout the region. 

MATTHEWS:  Another poll number.  This can be maddening to you, whether you are a war critic or a war supporter.  This number—you‘re probably familiar with this, Richard, because you know the world out there.  Fifty-eight percent of the people in the Arab world believe there was more democracy there under Saddam than there is under us. 

HAASS:  Yes, it‘s one of those numbers that you wonder what exactly the pollster asked.  It‘s rather extraordinary.  What it just reflects, Chris, is the general alienation of what the United States is doing in Iraq, of U.S. policy in the region more generally, in part associated with this Palestinian issue where the U.S. reputation overall, obviously, still takes a considerable beating for the perception—and I underscore the word perception—that the U.S. is extremely biased towards Israel and its foreign policy. 

MATTHEWS:  Well, we have always been supporters of Israel.  The

question is, as previous administrations—certainly George Bush‘s father

I always say it is almost like that music from “Brazil.”  You have two pieces of music playing at the same time. 

We‘re pro-Israeli and everybody knows it, but we are also trying to be umpires in the region and we‘re trying to be fair in looking at all the nations that we do.  We‘ve always try to do both at the same time.  This administration hasn‘t been so deft at that, has it? 

HAASS:  Well, there‘s been some recent progress.  I think the Israeli withdrawal from Gaza is a singularly important political development, and I think the real test for this administration is going to come in the aftermath of this coming spring‘s Israeli election, and to see to what extent the administration is able and willing to advance the political agenda between Israel and the Palestinians. 

MATTHEWS:  When you look at—I wasn‘t going to ask about this, but I‘m fascinated by the courage of Sharon, of Ariel Sharon, the prime minister, in forming a new political party.  Forward, it‘s called in English.  I think it‘s Katrina in Hebrew. 

HAASS:  Kadima.

MATTHEWS:  It is so impressive that he and Shimon Peres are joined together.  These old opponents have come together to form a centrist party to try to broker a deal using the wall, using the relationship of Mahmoud Abbas and all that, do you think it will work? 

HAASS:  I think it has got a decent chance.  And I think what it represents more than anything else is a transition in Israeli thinking and it is no longer a question of hawks versus doves.  But those Israelis who look at demography and they basically say to themselves if we want Israel to remain a Jewish, democratic, prosperous, safe society, we have to give back territory. 

We have got to allow the Palestinians to form their own state.  So it‘s no longer the old arguments.  And I think what‘s so interesting about Sharon—and he has the potential to go down as really a major historical figure if he sees this through ...

MATTHEWS:  I think so.

HAASS:  ... is that he has made a tremendous political and intellectual transition, it seems. 

MATTHEWS:  Let‘s come back and talk about when it happens.  I‘m so profoundly impressed by what he has done and what Shimon Peres has done.  Thank you Richard Haass of the Council on Foreign Relations.

Coming up, what‘s it like on the ground in Iraq?  Same old question.  But what really is happening?  Congressman Bill Shuster, a Republican from Pennsylvania is coming here.  He has just gotten back and we‘re going to talk to him.

Also, Elijah Cummings is going to join us, a Democrat from Maryland.  Plus, President Bush moves away from his party and politics to push for a free and democratic Iraq.  I think that‘s what is happening, but is that a realistic goal?  You are watching HARDBALL on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  What‘s it like on the ground in Iraq?  We keep asking.  Congressman Bill Shuster, a Pennsylvania Republican, just returned from Iraq this week.  We‘re also joined along with Congressman Elijah Cummings who has been with us before.  Congressman Cummings, thank you for joining us.  You voted against the war back in 2002.  Let‘s get a mix of opinions here.  Firsthand ...

REP. BILL SHUSTER ®, PENNSYLVANIA:  Yes, sir.

MATTHEWS:  ... what‘s happening in Iraq in terms of are we winning the hearts and minds of the Iraqi people to a new kind of government? 

SHUSTER:  I believe we are.  There is progress being made.  Our troops are handing over control to—for instance, in Baghdad, 50 percent of the space in Baghdad, the battle space, is controlled by the Iraqi security forces and that has gone up since September by 20 percent to 50 percent.  I heard your man at the Pentagon give his report and, quite frankly, I think he was irresponsible what he was reporting. 

MATTHEWS:  Who, Jim? 

SHUSTER:  Jim.

MATTHEWS:  What did he say?

SHUSTER:  Well, he was said that for many Iraqis, the situations in their lives have gotten worse.  And in fact, their lives in many cases have gotten better.  First of all, they are not worried about getting drug out of their houses and raped and killed in the middle of the night.  Second, the economy is getting better in Iraq.  People ... 

MATTHEWS:  But why are so many Sunnis, as the president said the other day—why are there so many Sunni rejectionists?  He‘s the one—the president—who in Annapolis said the main body of our enemy are not rag-tag terrorists or Baathists.  They‘re just regular Sunnis who don‘t us being there. 

SHUSTER:  Well, they think they are losing party.  For years, they were the party in power.  It was their religious sect that ran the country.  What we are seeing and what we heard from our generals over there and our commanders on the ground, that they are going to participate in the election.  They realized they made a huge mistake back in October ...

MATTHEWS:  How many days were you in the country? 

SHUSTER:  Two days, two full days. 

MATTHEWS:  And how many hours did you spend with actual people, the actual Iraqis? 

SHUSTER:  With actual Iraqis?

MATTHEWS:  Regular civilians.

SHUSTER:  Very little. 

MATTHEWS:  Did you spend any time with them?

SHUSTER:  No, but what we spent ...

MATTHEWS:  No?  You didn‘t spend any time with actual Iraqis? 

SHUSTER:  Absolutely.  We spent ...

MATTHEWS:  So who did you spend time with?

SHUSTER:  ... some of the party—the minister of defense, the deputy prime minister we spoke to and, of course, we were able to interact with some Iraqis on the ground.

MATTHEWS:  How did you get to meet them?  It‘s pretty dangerous over there.

SHUSTER:  Well, they‘re working.  Many of them work within the compounds.

MATTHEWS:  The green zone.

SHUSTER:  Absolutely, the green zone up in Mosul, and the camps.

MATTHEWS:  Did you get out of the green zone?

SHUSTER:  We made a very short trip out of the green zone to go to the ministry of defense. 

But what we talked about and what I insisted upon, is I didn‘t want to talk to the generals.  We did talk to them, but I wanted to talk to the commanders, battalion commanders, and sergeants and captains, guys on the street, the guys that are dealing with it every day, the guys that are... 

MATTHEWS:  Well, what was the opinion you got from the soldiers? 

SHUSTER:  Things are getting much better. 

And when I asked the question about—it‘s important that we are training their military and their police force so they can do the job.  But what is absolutely essential was the leadership?  What is the leadership?

I think all of us believe, that all the good guys, all the people that cared about freedom and democracy were driven out of the country or killed. 

And when I asked that question about leadership, I had on every occasion to talk about these great leaders that are rising up under threat of death and under threat of their families being killed.  And their resolve is strong. 

MATTHEWS:  Are they Shia or Sunni? 

SHUSTER:  It‘s a mixture of it.  It‘s a mixture.

We learned about one mayor up in the Mosul area who was a former army general under Saddam, who helped us as we came in.  He was made the mayor of this town.  And under the threat of death his nephew‘s head was delivered to his doorstep three weeks ago, telling him to stop it. 

Now, somebody who is doing that day in and day out, I think, they are going to be successful.  They are working hard at it. 

MATTHEWS:  Congressman Cummings, your reaction to this report? 

REP. ELIJAH CUMMINGS (D), MARYLAND:  First of all, let me express my sympathy to the families of our 10 sliders that were killed, and those who were injured.  That‘s what this war is largely about.

But let me say this as listen to my good friend Bill, I‘m glad to know that there are emerging leaders that want to do the right thing and I think that‘s important in the Iraqi population. 

But when you got 80 percent of the Iraqi people saying that we really don‘t want the United States troops in our country, and you‘ve got 45 percent that‘s saying it‘s OK, it‘s justified, for American troops to be harmed, that is not the best picture for us. 

I think, basically, what we have got to do is be about the business of doing, and Bill alluded to this is we have got to make sure we empower the Iraqi people.  We have got to make sure that they are properly trained to address these issues. 

And I think that—and then, let us move back, going back to the Murtha proposal where he talked about redeployment, and we need to be about the business of making sure the outside forces don‘t come in and be harmful, but allow the Iraqi people to fend for themselves.

We need to be about the business of empowering them.

MATTHEWS:  OK.  Let me try something. 

There‘s an interesting possible overlay here, we‘re going to come back in a minute, but the president of the United States said, you know, there are terrorists out there we got to fight them.  And Jack Murtha says we got to fight them.  We got to be in that region to fight terrorists who come in that country.

But when it comes down to a battle, the Civil War potential between the Sunnis and the Shia, should the United States be taking the sides of the Shia killing Sunnis?

And the president, maybe, I don‘t know, do you think so Congressman?  Congressman, do you believe that he might be trying to say, well, maybe we are going to try to broker a deal between those two groups so they are not shooting at us? 

CUMMINGS:  I‘m not sure what he‘s saying, what the president is saying, but I can tell you this.  I think we need to be about the business of using the very, very best diplomacy tools that we have available to help the Shiites and the Sunnis deal with their differences. 

This thing has got to be dealt with not only from the military standpoint to a degree, and that is the Iraqi people addressing their own military concerns within the country, but we have also got to use, I think, a good role for the United States, as Congressman Murtha has said, is that we use the diplomacy, our skillful diplomacy, to help them resolve their differences. 

The Congress of the United States deals with differences every day.

MATTHEWS:  Let‘s come back and talk to the two Congressmen about how we can use our smart political brains to try to bring this war between the Shia and the Sunni to an end so that we don‘t have to stay there forever.

Anyway, we‘ll be back with Congressman Cummings and Congressman Shuster.

And later, a new twist in that CIA leak case.  Does Prosecutor Patrick Fitzgerald have Karl Rove still in his sights?  It looks like it.  You‘re watching HARDBALL on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  We are back with our two Congressmen, Bill Shuster of Pennsylvania, he‘s a Republican, Elijah Cummings of Maryland, he‘s a Democrat. 

Gentlemen, let‘s try to find is there a common ground here?  I look at all these proposals out there.  Jack Murtha, get out as fast as you can.  The president staying as long as we have to forget the timetables. 

Somewhere in the middle you have got Feingold, a year.  You‘ve got John Kerry saying maybe some kind of timetable.  You‘ve got the Republicans in the Senate saying oh, let‘s have something happen next year. 

How long are we going to stay there, do you think? 

SHUSTER:  Well, I think we need to be there as long as necessary.  And I think that... 

MATTHEWS:  Could that be 25 years? 

SHUSTER:  Well, I think we are going to have a presence for 25 or 30 years just like we do in Korea, Japan. 

MATTHEWS:  And take (INAUDIBLE) for 25 years.

SHUSTER:  Well, no I don‘t believe that.  I don‘t believe that at all.

But I do believe we are going to be there for the long haul. 

MATTHEWS:  If we‘re not going to take casualties, why are we there? In other words if it‘s not going to be a fighting situation? 

SHUSTER:  Well, first of all, we are talking about 25 years.  Now, let‘s talk about the next 18 months.  We are going to be there for the next six to 18 months.  It‘s going to depend on these elections coming up.  Who is elected.  And that is what I heard everywhere I went with the generals and the colonels we talked to.

It depends on the quality of leadership that is elected in Iraq. 

MATTHEWS:  Are you willing to face your voters in Pennsylvania next November and say, I‘m the guy who is for the war and let the other guy or person be against the war?  Are you willing to fight on that issue? 

SHUSTER:  Absolutely.  Absolutely.  I‘m not going to politicize this. 

This is too important for the next 20 years in this country. 

MATTHEWS:  Congressman Cummings, are you comfortable with having war as the key issue in next year‘s election for your vote? 

CUMMINGS:  What am I am most concerned about is that we do the right in Iraq.  And that is, I think, you know, when I confront and talk to my voters, they usually talk about common sense solutions to problems. 

And one of the things that they like is trying to help folk become independent.  They don‘t want to necessarily see, as we have seen in my district in the course of maybe 10 days, five of our young men and women come back in body bags.  They don‘t want to see that. 

What they want though is to make sure that the money that we spend in Iraq is spent effectively and efficiently, and they want to make sure, therefore, that troops are trained. 

Again, the Iraqi troops are trained to do this job.  Now, my good friend Bill just mentioned Korea.  Yes, Korea is fine, but think about what we are doing in Korea.  We are basically trying to help—we don‘t go around basically policing the streets of Korea now. 

What we do is try to—South Korea—we try to protect them from outside forces coming in.  And so maybe that‘s what Congressman Murtha was talking about and maybe that‘s where we need to be. 

But let me tell you something.  This thing about being there for 25 years, one of the things that the president did not address is where is this money going to come from to do this? 

I mean, while we are doing all of that, we‘ve got roads and streets and Bill‘s father, a good friend of mine, former chairman of the transportation committee, was one that preached about how we need to make sure that we take care of American streets, that we take care of Americans. 

And don‘t get me wrong.  I think we do have to have a balance.  We do have to protect ourselves against terrorism, but at the same time, we are spending a lot of money and, we need to deal with homeland security right here.  When our ports don‘t even have ...

MATTHEWS:  I know, congressman.  And, by the way, the president wants

more money.  He said so the other day.  I have to leave it now.  I‘m sorry

please come back. 

CUMMINGS:  I‘ll be back.

(CROSSTALK):

MATTHEWS:  Please Congressman Cummings, it‘s always great to have you. 

Congressman Elijah Cummings of Maryland.

CUMMINGS:  My pleasure. 

Up next, the latest in the CIA leak investigation.  And a new report showing President Bush‘s political guru Karl Rove may still be in legal jeopardy.  This is hardball on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  New signs that President Bush‘s top political guru, Karl Rove, could still be in legal jeopardy in the CIA leak case.  The “New York Times” is reporting today that a conversation between Rove‘s lawyer, Bob Luskin, and “Time” magazine‘s Viveca Novak, a friend of Luskin‘s, led Rove to change his testimony last year before the grand jury.  HARDBALL correspondent David Shuster has more. 

(BEGIN VIDEOTAPE)

DAVID SHUSTER, HARDBALL CORRESPONDENT (voice-over):  It‘s another sign that the president‘s top adviser, Karl Rove, remains in legal jeopardy.  Early in the investigation, Rove testified he had only spoken about CIA operative Valerie Wilson with one reporter, columnist Robert Novak. 

At the time of Rove‘s testimony, reporter Judy Miller and “Time” magazine‘s Matt Cooper were waging a legal battle to keep from having to reveal their White House sources. 

But the “New York Times” reported today that during this period, Karl Rove may have received a valuable tip that caused him to change his position.  Rove‘s lawyer, Bob Luskin, had a conversation with an old friend, “Time” magazine reporter Viveca Novak, no relation to Bob Novak. 

And according to today‘s “New York Times,” quote, “at a minimum, Ms.  Novak communicated to Mr. Luskin that Mr. Rove might fact legal problems because of potential testimony from Mr. Cooper.”

Legal sources say Rove then went to the grand jury again, said he had found an e-mail that refreshed his memory, and testified he had discussed Wilson with Matt Cooper.  Rove reportedly told the grand jury, however, he thought most of the conversation was about welfare reform.  This summer ...

MATT COOPER, “TIME” MAGAZINE REPORTER:  I testified openly and honestly ...

SHUSTER:  ... when Matt Cooper finally went to the grand jury, he testified the conversation was not at all about welfare reform and that Rove spoke only about Joe Wilson‘s CIA connection. 

COOPER:  This is the first time I knew Wilson had a wife, let alone that she worked at the CIA and might have played some role in dispatching Wilson on this mission he took to investigate whether Saddam Hussein was trying to buy Uranium in the African country of Niger.

SHUSTER:  Cooper testified that the conversation with Rove ended with Rove saying, “I have already said too much.”  This fall, Rove went back to the grand jury for a fourth time.  And ever since then, prosecutor Patrick Fitzgerald has been trying to determine whether Rove‘s inconsistencies were the result of a faulty memory or faulty character. 

Viveca Novak is expected to testify soon about her conversation‘s with Rove‘s lawyer.  On top of the legal cloud though, still hanging over Karl Rove, there is the political one because the White House denied Rove was involved. 

SCOTT MCCLELLAN, WHITE HOUSE PRESS SECRETARY:  I‘ve made it very clear that it was a ridiculous suggestion in the first place.  I mean, it‘s public knowledge.  I have said that it‘s not true and I have spoken with Karl Rove. 

SHUSTER:  McClellan has never explained those false statements or apologized.  In the meantime, an investigation that has snared half a dozen reporters has now netted one more: “Time” magazine‘s Viveca Novak. 

(on camera):  And the reason she looms so significant is because while several reporters have been attached to this case, this appears to be the first time a reporter‘s involvement has possibly driven an administration official to change testimony.  The question is, will Viveca Novak‘s testimony help Karl Rove or hurt him.  I‘m David Shuster for HARDBALL in Washington.

(END VIDEOTAPE)

MATTHEWS:  Thank you, David Shuster. 

Michael Isikoff is an investigative reporter for “Newsweek” magazine.  I think he‘s been called the best one in the country.  Deborah Orin is the Washington bureau chief of the “New York Post,” a paper and a column I read every day.  Deborah, you don‘t buy this story? 

DEBORAH ORIN, “NEW YORK POST”:  No, I have been told that it‘s not true.  That ...

MATTHEWS:  How good are your sources on this? 

ORIN:  Who knows how good anybody‘s sources are?

MATTHEWS:  Well, how good do you think they are?

ORIN:  I think they are good.  I mean, obviously, the “Times” thought its were was good, too.  My understanding is that this story may have been linked to the “Times” by reporters at “Time” magazine who are mad at Viveca Novak and thinks he did something unprofessional by tipping off Karl Rove that he was in trouble, which arguably, would be unprofessional.  I‘m told that this conversation in question had nothing to do with that, and it was an entirely different subject. 

MATTHEWS:  Do you believe though—your sources tell you this Viveca Novak, no relation to Bob Novak, is actually being called before the grand jury in the next couple of weeks? 

ORIN:  Well, “Time” magazine has said that she‘s being called. 

MATTHEWS:  So it‘s a fact. 

ORIN:  I don‘t know if it‘s before the grand jury or to testify.

MATTHEWS:  So, what is the alternative speculation as to what she is being called for if not to give this evidence we are talking about here? 

ORIN:  Well, there‘s two possibilities.  It‘s one is, what she said to Luskin.  The other is what Luskin said to her.  And, you know, we don‘t know. 

MATTHEWS:  Let‘s get back to the beginning.  Let‘s get a little bit of an update here.  Karl Rove we thought three or four weeks ago, was getting a reason for relief, that he wasn‘t nailed the day that Scooter Libby was hit with that 30 years of prison sentence potential.  Is he still under the microscope of Patrick Fitzgerald?

MICHAEL ISIKOFF, NEWSWEEK:  Oh, well, he clearly is, otherwise there wouldn‘t be any reason for Viveca‘s Novak‘s testimony. 

But it‘s hard to know based on the available evidence just how serious that is at this point.  I mean, clearly, it‘s being taken seriously by Fitzgerald.  He‘s been treating it seriously.  But it‘s just very difficult to figure out how strong a possible criminal case there is here. 

With Scooter Libby, who was indicted for perjury and obstruction, you had five administration officials who told him about Joe Wilson‘s wife, who testified they told him about it, including Vice President Cheney and then he says no, I heard it from Tim Russert. 

MATTHEWS:  I didn‘t know that part.  You have given me a particle of newness here. 

ISIKOFF:  No, no, no, no, that‘s in the indictment.

MATTHEWS:  The vice president, himself, testified to the effect that he told his chief of staff about Valerie Plame.  I didn‘t know that. 

ISIKOFF:  We know that Cheney testified.  And it‘s in the indictment that Cheney relayed this. 

MATTHEWS:  I‘ve never seen that.

ISIKOFF:  So Cheney testified something other than what‘s in the indictment then, you know, we have a more interesting character. 

MATTHEWS:  Well, that is fascinating that the boss said he told the chief of staff and that the chief of staff denied it. 

ISIKOFF:  Well, that is a reasonable surmise from the indictment. 

MATTHEWS:  Well, then we are in a brutal situation here.

Let me ask you, do you understand that Karl Rove is still under the microscope here?  What does your reporting tell you? 

ORIN:  Well, he‘s obviously still under the microscope because he hasn‘t been, you know—if he were not, we would know it. 

So I think, though, that one of the interesting things that‘s going on here and should be of concern to all journalists is the way journalists are sort of stabbing their own in the back over and over again. 

I mean, to me what this story in “The Times” looks like is possibly an attempt by some people at “Time Magazine” to Judy Miller Viveca Novak.

MATTHEWS:  Why would they do that?

ORIN:  Well, because...

MATTHEWS:  If she didn‘t do what they think, they say in the reporting she did, then why would they be angry at her? 

ORIN:  Well, I mean, the story implies that she tipped off Rove and Luskin. 

MATTHEWS:  Yes.

ORIN:  So, whoever is responsible for that story suspects that‘s the case.

MATTHEWS:  Well, isn‘t that a reasonable thing to report if you believe it and you can substantiate it? 

ORIN:  Sure.  But I don‘t think it‘s not true or I have been told it‘s not true.  But what I‘m saying... 

MATTHEWS:  The motive here isn‘t important.  The fact is we are trying to figure out here in Washington whether Karl Rove, probably the most influential political adviser in recent history, is in legal trouble and may go to jail or not.

And one way to find it out is what the prosecutor is up to, and whether he has evidence that somebody was tipped off in a way that suggested obstruction of justice that is what the story here is.

ORIN:  Sure, but what I‘m saying, maybe not that clearly, is that according to what I‘ve been told “The Times” story is based on uninformed speculation by reporters at “Time.” 

MATTHEWS:  We will know in a matter of weeks. 

ORIN:  We will ultimately know, but my point, Chris, is that Judy Miller was trashed by her colleagues.  Bob Woodward has been trashed by his colleagues.  I mean, it‘s a very interesting and sort of sad example of...

MATTHEWS:  Judy Miller is accused of working too closely and too credibly with Ahmad Chalabi and with Scooter Libby of being basically a delivery person for a point of view and an information source that has a point of view that she has been delivering this. 

Bob Woodward has been accused of being too close to Cheney.  This isn‘t just somebody not liking somebody.  This is a concern about the free press and whether people are actually reporting facts or they‘re being used.  That‘s the issue. 

Do you want to say this or not?  I don‘t know why I am saying this. 

Isn‘t that the issue? 

ISIKOFF:  It‘s your show, Chris.

MATTHEWS:  You‘re saying it‘s like a battle between people who are all jealous of each other and spiteful towards each other?  You really think that? 

ORIN:  I think that‘s part of it,  yes.  I do. 

MATTHEWS:  It‘s just personal spite.

ORIN:  No, it‘s not simply personal.  I think that some of the antagonism toward Judy Miller reflects the fact that other reporters of “The Times” have a more antagonistic view toward the administration, and the same thing is true with Bob Woodward. 

MATTHEWS:  Well, that‘s fair enough.  That‘s what I think is an actual statement of fact. 

MATTHEWS:  We‘ve got to come back to you, Michael because you are the best in the business.  You have got your cards ready.  You‘ve got four aces right up here and you‘re holding them. 

We will right back with Michael Isikoff and Deborah Orin. 

And a reminder the political debate is ongoing on Hardblogger, our political blog web site.  Now you can download pod casts of HARDBALL just go to our web site hardball.MSNBC.com. 

(COMMERCIAL BREAK)

MATTHEWS:  We are back with “Newsweek‘s” Michael Isikoff and Deborah Orin now of the Washington—she‘s with “The New York Post.”  She‘s bureau chief and he‘s, of course, the chief investigative reporter for “Newsweek Magazine.”

A lot of talk in the last couple of days, including here, about this question of whether the United States Military should be used to write stories in English that can be translated into Arabic, and then planted in Iraqi newspapers to make it appear like they are written by homegrown reporters. 

What‘s the significance to the war? 

ISIKOFF:  Well, first of all, the Pentagon defends this, because they are dealing with this, you know, horrible situation of trying to influence public opinion away from the insurgency. 

You have the insurgents clearly using, you know, whatever tactics they can to use propaganda against the United States.  They are trying to fight back. 

But, look, this issue of planting stories in the news media came up... 

MATTHEWS:  Not planting.  Writing them and getting them published as camera-ready.  Run it, this way it‘s our story. 

ISIKOFF:  We had a sort of mini scandal in the United States here just a few months ago where it was revealed that the, you know, various government agencies were paying journalists to propagandize on behalf of the administration.

The president said we weren‘t going to do this anymore.  We want to put a stop to this.  And here you have the Pentagon, apparently, doing something very similar to that, and the White House not knowing anything about it. 

I mean, my understanding is people at the White House were quit miffed about this story.

MATTHEWS:  Who leaked it do you know?  How did this story get into this program?  How did it get out into the world?

ORIN:  Well, as usual, somebody who was—military career people who are critical of the current policy, almost certainly.  I mean, it‘s amazing the amount of leaks you get that are meant to be damaging to the administration.

MATTHEWS:  And knowing a bit about P.R., if a company did this, this group—any group did this, they are going to want to get credit for it.  So if they went out to go to the trouble of getting enlisted guys working on construction projects—legitimate work, by the way—oh, by the way, would you give me 200 words on that project, and I will give you a couple of bucks free money on the side.  The guys will do that.  Sure, they will do that, the military guys.  And then it turns out to be written under the name I said—I made up his name—Mohammed Habib or something, somebody over in Iraq.  That company, that P.R. company, you can bet your bottom dollar, will send that article back to their employers and say, look, look what we are getting done over there.  They‘re writing these articles.  They are saying how great our construction efforts are.  We are winning the P.R.  battle.  Won‘t they?  In other words, it ain‘t a mystery to the people paying for it.

ORIN:  That P.R. company ought to be fired and they ought to never get another Pentagon contract. 

ISIKOFF:  Well, look, I mean, I don‘t know that the onus is entirely on the contractor.  There were people in the military who were running this program, who knew full well what was going on.

MATTHEWS:  (INAUDIBLE) obviously.

ISIKOFF:  But also, you know, Senator Warner had a press conference about this today and I...

MATTHEWS:  It wasn‘t very conclusive. 

ISIKOFF:  It wasn‘t very conclusive.  He said, look, you know, he went to this briefing with Larry DiRita and other people at the Pentagon, who said we have got to get good word out, you know, schools are opening, hospitals are opening, and nobody is covering that.  Sounds a lot like, you know, every politician in America complaining about the press.  Why aren‘t you writing about anything good?  Well, welcome to the news biz.  That‘s the way it operates.  We generally don‘t cover school openings and hospital openings.  We cover bombings and you know, mass suicides. 

MATTHEWS:  This is like senators and congressmen, the interviews they do up at the recording studio with their staff, and making it look like real interviews?  Is that what you‘re talking about?

ORIN:  But you know, Chris, actually, I was talking today to Jonathan Foreman, who is a former colleague, who just came back from Iraq and did a big piece for “Vanity Fair” on the troops and the training of Iraqi troops.  And he was saying that the American troops there are—they go out all day, and they—you know, it isn‘t a routine school opening in Iraq.  It‘s not like a school opening here.  Rebuilding sewer systems in Iraq, it‘s not routine.  They go out, they bust their backs, they come back, and they see none of it gets reported.  And what he was saying is that a lot of these soldiers are developing a real distaste and distrust for the news media.  Because, you know, the basic thing on a reporting, you cover a story, you make them spell their names, because if you misspell the name, nobody will ever trust you again.  It‘s that on a multiple level.  They see us misreporting. 

MATTHEWS:  (INAUDIBLE), how do you go out and report?  I‘m told when you get over there, it‘s very hard to get outside the green zone or Camp Victory and go out there in the field and enterprise a story?  It‘s too damn dangerous. 

ORIN:  Well, Jonathan did it.  You know, I mean, it is possible to do.  And I think part of the problem is, a lot of the journalists are based in the green zone, they can‘t leave. 

MATTHEWS:  I know.  OK, thank you.  Thank you, Deborah Orin.  Thank you, Michael Isikoff.

When we return, presidential historian Doris Kearns Goodwin on how Abraham Lincoln turned political rivals into allies as he led the country through its biggest crisis.  Six hundred thousand dead in the Civil War, by the way.  This is HARDBALL, only on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  Presidential historian Doris Kearns Goodwin has written award-winning biographies of some of our greatest presidents.  Now, she writes about Lincoln in a book called “Team of Rivals: The Political Genius of Abraham Lincoln.”  Well, it sounds like an oxymoron, team of rivals.  How does a president fight a war that cost us 600,000 dead, the Civil War of the United States, and keep the North together? 

DORIS KEARNS GOODWIN, PRESIDENTIAL HISTORIAN:  Well, he made a decision early on that the Republican Party was such an unwieldy thing, it had all sorts of opinion in it—abolitionists, people who didn‘t want anything to do with emancipation, just saving the union—so he figured if he brought them all inside the White House as rivals, as we were talking about, LBJ would say, better to have inside the tent pissing out than outside the tent pissing in, and what it meant was that he could sharpen his understanding of issues, because all these opinions were fought right around the cabinet table.

They would call each other liars, scoundrels, thieves, and yet he kept them all together, doing a good job, preserving the union.  It‘s an extraordinary thing he did. 

MATTHEWS:  What was his strength that allowed him to be so diplomatic as to keep people who didn‘t like each other, didn‘t like him, working for him? 

GOODWIN:  Because what he cared about in the long run was how he would have a legacy that he could leave to have his name remembered after he died.  How he could win the war, preserve the union, and emancipate the slaves, which means you can take a lot of stuff in the short run and not worry about it. 

He had an emotional strength, I think, that understood that politics is all about human relationships.  So if you can acknowledge error, as he did immediately—I was wrong, you were right, he says to Grant.  If you can share credit with the people around you; more importantly, if you can shoulder blame when the other people in your administration screw up, they‘re not going to forget that.  And as a result, they‘ll help you get to your long-range goal.  But it means you have to sort of suppress your short-term ago, and he could do that, put past grudges beside him, (INAUDIBLE). 

MATTHEWS:  Right there, past grudges.  We all know politicians in this city of Washington and around the country spend their life getting even.  And you ask, how come this guy never got a job, how come this guy never got -- oh, do you remember what he did to him 30 years ago.  How did Lincoln absorb the punishment of his rivals and yet bring them in? 

GOODWIN:  Because, amazingly, he just said, it wasn‘t—he didn‘t have time for personal contention.  Stanton, who became his secretary of war, had humiliated him in a law case in 1855, called him a long-armed baboon, and somehow, however, he decided that doesn‘t matter, he will be the best guy for the job.  If he does the job well, I‘m going to argue with him, but still, it‘ll help the union and it will help me in the long run. 

He just said that time is short, and if you‘re going to pay back past

grudges—and you‘re right, it‘s a political profession to do it nowadays

it‘s only going to hurt you in the long run. 

It‘s great that he did it. 

MATTHEWS:  Let me ask you about how it worked back in those days.  From what I understand, the White House was pretty small under President Roosevelt you wrote about so beautifully.  Was there any staff around those days, or was it just these senators and cabinet members that came in and actually did the business one to one? 

GOODWIN:  No, he had two people who were his secretaries, Nicolay and Hay, young guys, you know, and they were always lamenting the fact that he spent so much time with ordinary people.  Again, unlike the White House in modern times.  The White House then was like the people‘s house.  If you wanted a job, you could run in and knock on his door and tell your sad story.  And they‘d say to him, Lincoln, you don‘t have time for this.  He said, these are my public opinion...

(CROSSTALK)

MATTHEWS:  Doris Kearns Goodwin, you‘re the best.  Have Lincoln for Christmas!  “Team of Rivals,” a great book to give to your friends.  Right now, it‘s time for “THE ABRAMS REPORT” with Dan.

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

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