updated 12/27/2005 10:43:51 AM ET 2005-12-27T15:43:51

Guest: Kenneth Fisher, Scott Erwin, Nathaniel Fick, Doris Kearns Goodwin,

Richard Wolffe, David Schertler, Stan Brand

NORAH O'DONNELL, GUEST HOST:  President Bush today begins a week's vacation at his Crawford, Texas, ranch, but there's no rest from the controversy surrounding his secret domestic spy plan. 

Let's play HARDBALL.  

Good evening.  I'm Norah O'Donnell, in tonight for Chris Matthews. 

Secret warrantless wiretaps continue to roil the country.  This weekend, “The New York Times” reported that the scope of the spying is greater than the White House acknowledged.  Major phone lines have been tapped, troves of data collected, often without court approval and with the cooperation of private phone companies. 

Stan Brand is a former counsel to the House of Representatives.  And David Schertler is a former assistant U.S. attorney. 

Thank you both for joining us. 

Is this legal, Stan? 

STAN BRAND, FORMER COUNSEL TO U.S. HOUSE OF REPRESENTATIVES:  Well, this is a—a controversy that's really been going on for at least 50 years. 

In the Nixon administration, there were wiretaps, national security wiretaps, and some of this was litigated.  It's—at least it's clear that you cannot, according to the Supreme Court, tap domestic phone lines for national security purposes without a warrant. 

O'DONNELL:  But the president says he has the authority, not only from the September 11 resolution that was passed, but also because of Article 2 of the Constitution.  Do either of those two things, in your view, give him the power to do this type of domestic surveillance? 

BRAND:  Well, no court has ever said that. 

In terms of the September 11 resolution, I think that's a thin reed, because that was passed in response to a domestic attack on the United States, and that's an area where the president is strongest.  There's not a word in there about surveillance, and, in fact, Senator Daschle wrote an article in “The Washington Post” which indicated they took the words United States out of that resolution.

O'DONNELL:  We are going to get to that in a minute, but you are saying no way under either one of these? 

BRAND:  Well, you know, the president has authority to be in charge of the national security.  The question is whether he—he can reach as far as they appear to have reached in an undifferentiated way, in sweeping in all of this—these calls as broadly as they have. 

O'DONNELL:  I was stunned by what former Secretary of State Colin Powell said about the president's authority, that—let's listen to what Powell said just this Sunday about the wiretapping. 

(BEGIN VIDEO CLIP, “THIS WEEK”)

COLIN POWELL, FORMER SECRETARY OF STATE:  It didn't seem to me, anyway, that it would have been that hard to go get the warrants.  And even in the case of an emergency, you go and do it.  The law provides for that.  And then, three days later, you let the court know what you have done and deal with it that way.  But I don't think anybody objects to the president doing this.  He was trying to protect the nation.

(END VIDEO CLIP)

O'DONNELL:  David, it's a good point.  The president is trying to protect the nation, but why not just go to courts for it? 

DAVID SCHERTLER, FORMER ASSISTANT U.S. ATTORNEY:  Well, you know, certainly, that's the safer course to take, and that's the course that would have avoided the kind of controversy. 

I think you have got law enforcement officials who are trying to be aggressive.  They are trying to act with the—the minimum amount of impediments to surveillance.  And I think that they have got some argument that the September 11 act did give them the discretion to conduct this kind of surveillance and intelligence, because it's intricately intertwined with the military force that the act actually authorizes. 

O'DONNELL:  Well, the president was asked about this very thing, of course, at his news conference, does he have the authority, and here's what he said. 

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES:  I swore to uphold the laws.  Do I have the legal authority to do this?  And the answer is absolutely. 

(END VIDEO CLIP)

O'DONNELL:  He says absolutely.  Absolutely I have the power—no question about it.  Why is the president so convinced he has the power, and yet even Republican and Democratic members of Congress don't think or aren't sure and want to have hearings on this? 

BRAND:  Sure. 

O'DONNELL:  How big is this going to be in 2006, when Congress holds joint hearings about whether the president can do this or not? 

BRAND:  Well, I think it's huge.

And what the president also has is a separate duty to see that the laws are faithfully executed.  That's—and one of those laws is the Foreign Intelligence Surveillance Act.  So, the question is going to be, did he comply with that or didn't he, or did he have to?

Senator Specter, well known in our circles as an aggressive constitutional lawyer, I think is going to have a field day with this.  I think this is going to be a huge confrontation between the executive branch and the Congress.  I think there are going to be fights over subpoenas, over access to executive branch officials, and that you are going to see a separation-of-power showdown on this issue that is going to dwarf any one we have seen in the last eight years. 

O'DONNELL:  Clearly, the NSA story is going to be a huge one in 2006, because Congress is indicating, as you said, to have these hearings. 

Another big thing for the president as he looks towards 2006 is the CIA leak investigation, which, of course, is still ongoing.  Let me ask both of you, do you think Karl Rove will be indicted? 

SCHERTLER:  I do think he will be indicted, and the impression that I had—and, of course, this is just reading from the publicized accounts—is that, at the end of October, when the grand jury was about to expire, that the special prosecutor, Patrick Fitzgerald, was on the verge of indicting Rove, along with Libby, and that he held off because Rove's attorney, Bob Luskin, who is a terrific attorney, by the way, called him and said, look, there's some additional information you ought to look at.

And I think that's what we have seen Fitzgerald doing over the last two months, looking at the conversation with Viveca Novak that Luskin had that they claim would be a defense to a false-statements charge. 

O'DONNELL:  So you think, in 2006, the president is going to see Karl Rove indicted? 

SCHERTLER:  Yes. 

I would look at what the—the conversation that occurred between Bob and Viveca Novak, I just don't see that as viable defense for the charges that Fitzgerald was planning on bringing.  And I think what he—what Fitzgerald wants to do is say, look, I explored every little thing; I left no stone unturned, but I still think that there are charges that would—should be prosecuted against Karl Rove. 

O'DONNELL:  Do you think there is any indication, since Fitzgerald has opened this new grand jury,we have the new revolution by Woodward, Viveca Novak, etcetera, that there's any chance that Karl Rove could escape indictment, Stan? 

BRAND:  I agree with Dave.  I think that it's almost a certainty, because what they have got to account for is a five-month gap between the time they were tipped off to the fact that people... 

O'DONNELL:  At least a five-month gap. 

BRAND:  At least a five-month gap.  

And, you know, there's a question in the prosecutor's mind.  At some point, he says to himself, why didn't these people come forward and tell me about this when they knew about it?

O'DONNELL:  What you're—just to back up for everybody, what you are saying is, when Karl Rove first testified to the grand jury, he said, I never had a conversation about Valerie Plame with Matt Cooper at “TIME” magazine.

He then, 10 months later, went back to the grand jury in October and said, I need to correct the record, because I found out that I was wrong about that.  I mis-recollected.  And, of course, whether it's five or 10 months, depending on when that conversation took place, Patrick Fitzgerald is saying, why did it take so long for Karl Rove to correct the record? 

And that's why you two guys, as lawyers, say, this is a major problem. 

BRAND:  Major problem. 

SCHERTLER:  I think so. 

O'DONNELL:  Final question on the CIA leak investigation.  Do you think, based on Fitzgerald's track record, that he is going after Cheney? 

BRAND:  That's a tough...

O'DONNELL:  David.

BRAND:  That's a tough question. 

I don't know that he—I would say he is going after Cheney.  I think what Fitzgerald would say—and I think this is the truth—he is a good prosecutor and a person with good judgment—I think he is going to go where the evidence takes him.  If the evidence took him to Vice President Cheney, he would go there. 

The question is, will the evidence take him there?  And I just don't see that happening.  In order for it to happen, you would have to assume two things, first of all, that Mr. Libby would have information that would make Vice President Cheney criminally culpable for something, and then, secondly, that Libby would be willing to cooperate, and I just don't see at this point that Libby is on a cooperation path.  I think he is on a path to trial. 

O'DONNELL:  Now, to our two legal experts, of course, we have one more big legal scandal of 2006 probably coming up. 

(LAUGHTER)

O'DONNELL:  And that, of course, is the case involving Jack Abramoff, the Washington super-lobbyist connected to everybody. 

News, of course, in the past couple of days, we have learned he is willing or may be willing to strike a deal, a plea deal, with the Justice Department and maybe give up some congressmen. 

Stan, do you think there are some congressmen who are very nervous right now? 

BRAND:  Big time. 

I think this is the biggest corruption scandal in Washington in over 50 years.  I think, by the end of 2006, if Abramoff flips, you will see six public officials indicted, you will see staff.

And, remember, there's a strand out in California, the Duke Cunningham case, which isn't over yet either.  And lobbyists have pled guilty and are giving evidence with respect to other members.  So, 2006, in terms of the congressional end of what's going on in the Justice Department, is huge. 

O'DONNELL:  Dave, your take on the Abramoff scandal? 

(CROSSTALK)

O'DONNELL:  Some 200 members of Congress have received money in some way or another from Abramoff. 

SCHERTLER:  They sure have, and I think a lot of people are losing sleep over the idea that Jack Abramoff may strike a deal with the government. 

And I do think that that was the government strategy here, put enough pressure on Jack Abramoff to get him to plead guilty and cooperate.  And he is going to be the guy that knows the kinds of relationships he had with different congressmen.  And I think...

O'DONNELL:  Tom DeLay, Bob Ney. 

SCHERTLER:  Just to name two, but I think there are probably a lot more out there that may be implicated in this before it's all over. 

O'DONNELL:  All right, thank you very much, Stan Brand and David Schertler.

And coming up, more on the effect of the domestic spying story on Bush's agenda in 2006.

And later on the show, two who have different roles in the war in Iraq, they will give us their views—and news troops may be coming home in 2006. 

You're watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

O'DONNELL:  Coming up, more on the effect of the domestic spying story on Bush's agenda in 2006 -- when HARDBALL returns.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BUSH:  I earned capital in the campaign, political capital, and now intend to spend it.  It is my style. 

(END VIDEO CLIP)

O'DONNELL:  Welcome back to HARDBALL.  That was President Bush touting his political capital after winning reelection last year.  Has the president lost that capital?  What has the CIA leak investigation done to it?  What will the NSA surveillance investigation do to it? 

Here to talk about all those are Craig Crawford, MSNBC political analyst and reporter for “The Congressional Quarterly” and Richard Wolffe of “Newsweek.” 

Welcome to both of you.

CRAIG CRAWFORD, NBC POLITICAL ANALYST:  Hi.

O'DONNELL:  So, do you think the president is glad that 2005 is over? 

(LAUGHTER)

CRAWFORD:  I think he should be. 

I—probably, the only good news for him is, apparently, Cindy Sheehan is giving him a break at the ranch, or at least she hasn't gotten much coverage, if she is out there protesting. 

O'DONNELL:  Exactly. 

Richard, it was a tough year for the president, 2005. 

RICHARD WOLFFE, DIPLOMATIC CORRESPONDENT, “NEWSWEEK”:  Terrible year.  I don't think he has experienced a year like it any time in his point in his political life. 

This is—this is as bad as it comes.  They know it was bad.  And I think the moment when it really hit—hit the road was—was Katrina.  You know, that was the moment they thought, this isn't going to go away; this isn't short-lived. 

O'DONNELL:  Well, he ends 2005 with this very big story, which is, of course, the NSA story, which we have learned over the weekend, when many people were busy finishing up wrapping their Christmas presents and spending time with family over the holidays, that this is wider than we thought, that, in fact, the NSA has been tapping into—with the—with the complicity, of some ways, of phone companies, into many conversations. 

Are there going to be congressional hearings, and what does that mean for the president as he is trying to turn the corner in 2006? 

CRAWFORD:  There's already one hearing that presents an opportunity, in the confirmation hearing for the Supreme Court nominee, Sam Alito, because Alito apparently at some point in his background had delved into this issue, said it was authorized, and that will give senators who want to bring this up an early opportunity to get into it.

But I do think there will be hearings, because Republicans in Congress, you know, many of them are Republicans, but they are also senators or congressmen first.  And they have got to protect their branch of government.  And that's an issue here, is the separation of powers. 

O'DONNELL:  Richard, but I wonder what the—what the political fallout of this may be, because a lot of people look at this story and say, did I give up some freedom for security, for making sure that there won't be another 9/11?

WOLFFE:  Right. 

O'DONNELL:  And a lot of people may say, I am willing to give up that kind of freedom. 

WOLFFE:  Right, although there were some polls out just before Christmas that suggested people were concerned about some of the civil-liberties questions. 

You know, memories of 9/11 have faded, but Craig is right.  There is a political desire to see this one through, because 2006, remember, is an election year.  People want to put that distance between them and the president, and that's what they are going to do. 

CRAWFORD:  I mean, Americans were willing to take their shoes off at the airport.  We have gotten used to those kinds of things.

And I think some of—some of this we are hearing about now, the widespread eavesdropping, with no restriction—and, of course, the issue is not whether to eavesdrop.  No one is arguing that it shouldn't happen.  The issue is whether you ever get a court to look at it, and any—any judicial oversight whatsoever.  And the president, of course, arguing that he doesn't need that. 

O'DONNELL:  There's a larger storyline, of course, as the president moves into 2006.  There's midterm elections.  You have a Republican Congress.

And there are questions.  As the president said, absolutely, I have the power to do this, in—to protect the nation.  Absolutely, I can do—spy on Americans.

WOLFFE:  Right. 

O'DONNELL:  I have the—I have the right not only in the Constitution, Article 2, but also in this congressional resolution. 

Some Republican and Democratic senators certainly don't agree with

that.  Do you think there's the storyline that essentially emerges,

Richard, that people ask about the power of the presidency?  This power has

·         this presidency has asked for a lot of power. 

WOLFFE:  Yes.

Just imagine if this was Bill Clinton who had done this.  Just imagine what the reaction would be.  In a way, the technical details are going to get lost.  You are right.  The political big picture, people are going to say, we trust the president.  We do remember him protecting us after 9/11. 

But there's the overreach.  There's the image of him being beyond the law.  And that's a—that's a factor, not just at home, but also overseas.  Remember, he is trying to spread democracy and the rule of law.  What lesson do other countries take from this?

CRAWFORD:  What I find fascinating about this, here's a president who constantly talks about strict constructionism when—when it comes to the privacy right, the underpinning of Roe v. Wade, for example, wanting a very restrictive view of—of the Constitution. 

But when he talks about his own power, suddenly, it gets very broad, and not strict constructionism—constructionism in the least. 

O'DONNELL:  The president is going to have his State of the Union address at the end of the first month in 2006, and he is going to try and refocus the attention on his domestic agenda. 

We are hearing that he is going to talk about Social Security again.  He is going to try little small initiatives, in many way, like Clinton did, in order to try and boost his approval ratings.  We have seen that his approval ratings are somewhat on the rise.  What are the challenges still for him, Richard? 

WOLFFE:  Well, he has got a very short window here.

Originally, they thought they might have six months of this year.  They are not even going to get that now, because the House isn't going to be around for very long.  They are coming back late.  They're going to leave early.  So, they know they haven't gotten much time; they haven't gotten much political capital. 

You're going to hear him talking about a couple of different things.  Health care, I think he will come up for the first time.  He will try and talk about the changes in the working life, but, really, he is looking to the following year.  This isn't so much about what he can achieve this year. 

O'DONNELL:  But it's so interesting, because if—as we talk to White House officials, they want to talk about all these different issues. 

And we saw, in 2005, the president tried to do that.  He said, I have political capital; I am going to spend it on Social Security.

And, yet, his presidency is being defined by events beyond his control...

CRAWFORD:  Yes. 

O'DONNELL:  ... meaning Iraq, Katrina, the tsunami, the CIA leak investigation, this NSA story that is now—how much do all those stories sort of continue to be a burden for him in 2006? 

CRAWFORD:  They pile up.

And their handling of them has struck me as more tactical.  They have

·         this has been administration that, in past years, was very strategic, laid out a plan, stuck to it, a timetable.  They're much more tactical now, much more reactive to events now, as you say, and—and very much controlled by that. 

Congress has a—a real tough choice to make on whether to look into this NSA thing, because, as—as I say, I mean, Republicans in Congress, who control Capitol Hill, they are Republicans, but they also have a branch of government to defend, which is why I think many of them are going to pursue this. 

O'DONNELL:  All right. 

Thank you to Craig Crawford and Richard Wolffe for joining us today. 

And up next, presidential historian Doris Kearns Goodwin will join us.  We will ask her, which former president can Bush look to for guidance in 2006? 

You're watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

O'DONNELL:  Welcome back to HARDBALL. 

President Bush arrived home in Texas today for a week at his ranch. 

It's fair to say there were some rough patches for the president in 2005.  And what challenges will bush face in 2006?  And which presidents can this president look to for guidance in the future? 

For that, we turn to Doris Kearns Goodwin, presidential historian and

author of “Team of Rivals: The Political Genius of Abraham Lincoln.:”

Doris, welcome. 

DORIS KEARNS GOODWIN, PRESIDENTIAL HISTORIAN:  Thank you.  Glad to be with you. 

O'DONNELL:  Glad to be with you, and happy holidays. 

How do you think 2005 has been for this president? 

GOODWIN:  Well, I think the most interesting thing is, at the very end of 2005, President Bush seemed to have learned something about the difficulties the year had presented to him prior to that. 

He did come out with a series of speeches, at least trying to explain why the war in Vie—why the war in Iraq was so important to the country.  He did acknowledge mistakes very late and not too greatly, but at least to some extent, and did seem to feel the need to open himself up more to the American public.  So, the real question is, is this a real change in him internally, or was it just done because the polls had so plummeted, and will he now go back to being more internalized and more much of in a bubble, as we have been saying he's been so far? 

O'DONNELL:  And how would you characterize that evolution that we saw in the final months of 2005?

He really tried, with these four speeches on Iraq, to do a lot more explaining to the American people about what is at stake in Iraq and why we have to be there. 

GOODWIN:  No, you are so right. 

I mean, it seemed to be, beforehand, that President Bush took pride in sort of giving these assertive speeches, where he just said what it was he wanted us to believe, and it hadn't worked all that well, because he saw that the polls show that a majority of the people no longer wondered why we were in Vietnam and had questions—I keep saying Vietnam—why we are in Iraq and had questions about it. 

And that's really critical for a president, to keep the public support.  When men are dying and women are dying in harm's way, it's up to you to be able to make sure the country still supports what you are doing there, and it seemed like he finally was taking some steps forward. 

It's possible even that his failure to explain to the public why he thought Social Security was so important to change, which, after a 60-day tour, had ended up with less people supporting him than before, had convinced him that he had to change his style of speaking, less assertive, more explanatory.  And I think he did that in these recent speeches. 

O'DONNELL:  I think you are right.  And I think was exactly his communications advisers' goal, is that many had—had talked to him in private and talked to his advisers and said, you explaining it to us, but you're not explaining it to the American people. 

And they finally made the change, because his approval ratings had hit rock bottom.  So, how do you think that then translates into 2006, and what are his biggest challenges as he tries to sort of start fresh, if you will, in the new year? 

GOODWIN:  Well, you know, I think the biggest challenge is, rather than there being external challenges—we all know what the external ones are, the CIA probe, the NSA problems, Iraq, the economy, gas prices—are, internally, has he learned from this experience of this last year?

If we now see his polls going up, does he now say, OK, I am going to go back to being the way I was before?  Is he going to, for example, widen his circle of advisers, so that there are more people inside telling him what he needs to do and what he needs to think about, so he doesn't go off on these wrong tracks? 

Is he going to be willing to learn from what went wrong and really open himself up in that way?  Is he going to look back at those presidents, I think, like Roosevelt and like Abraham Lincoln, who are able to acknowledge errors when they made them, say, if I have changed my mind about something, it means I am starter today than I was yesterday? 

All of those are temperamental qualities that he should have.  I mean, it's still inexplicable to me that his outgoing personality didn't allow him to bring more congressmen in on informal bases to the White House.  We saw that Congressman Murtha had never really been asked to be there.  Now he is doing that.  He is opening himself up more. 

If this is permanent, it may mean that his relationship with the American public will be better in 2006.  And that is what is going to carry him through, carry him through Iraq.  More importantly than the external things, it's whether he can restore his credibility and trust that he once had from the American people and bring it back. 

O'DONNELL:  In fact, in your book about Abraham Lincoln, you praise him and—or note that he had a Cabinet that largely disagreed with him a lot of the time.  Do you think Bush is going to do that in 2006?  I mean, we have no indication that he is planning on firing anybody, that the whole team is going to be back with him for 2006.

GOODWIN:  No.

It seems like he is an extraordinary loyal fellow.  And loyalty is a good quality.  But I think, at this point, he has to understand that, if you bring people in who can possibly question what you are doing, it sharpens your own thinking.  It means that you are able to have to look at broader options right within your own White House.

And even if he doesn't fire a lot of people, he has just got to bring other people in that he listens to inside that inner circle, even on an informal basis, if not a formal one.

(CROSSTALK)

GOODWIN:  I think that's critical to his administration right now. 

O'DONNELL:  Well, thank you to Doris Kearns Goodwin.

And, when we come back, Secretary of Defense Donald Rumsfeld says U.S.  forces in Iraq will be reduced, but how many are coming home?  We are going to hear two different perspectives on the progress in Iraq from two who have been there. 

You're watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

(NEWS BREAK)

O'DONNELL:  Welcome back to HARDBALL. 

Secretary of Defense Donald Rumsfeld made a surprise three-day pre-Christmas visit to Iraq and served up more than just food to U.S. soldiers and commanders.  He made it clear that U.S. forces are not rushing to get out, but says the military will draw down slowly, as Iraqis shoulder more of the security and stability responsible for their own country. 

Here's what he had to say in Fallujah on Friday. 

(BEGIN VIDEO CLIP)

DONALD RUMSFELD, SECRETARY OF DEFENSE:  U.S. and coalition military leadership is trying to seek the proper balance between having a military footprint so large, large enough to help the Iraqi people win their fight against the terrorists, but not a footprint so large and so intrusive as to antagonize a proud and patriotic people or to discourage the Iraqi people from taking initiative to run their own country themselves. 

(END VIDEO CLIP)

O'DONNELL:  For two perspectives on the progress in Iraq, we turn to Scott Erwin, currently a Rhodes Scholar.  He created Ambassadors For Democracy, a program that teaches Iraqi university students about democracy.  He was severely injured, and two of his Iraqi colleagues were killed, when their car was ambushed by insurgents late last year. 

And also here with me in the studio is Nathaniel Fick, a former Marine captain and author of the book “One Bullet Away: The Making of a Marine Officer.”

Good evening to both of you.  Thank you for joining me. 

(CROSSTALK)

O'DONNELL:  Let me ask you about what Rumsfeld just said when he was in Iraq.  He said, a footprint not too large as to antagonize the Iraqi people. 

Nate, is that we are drawing down forces, almost to, in some ways, do what Jack Murtha, the congressman from Pennsylvania, said, which is, a large footprint is antagonizing the people there? 

NATHANIEL FICK, FORMER U.S. MARINE CORPS OFFICER:  It's surely one reason. 

Occupation, no matter how deftly done, breeds resentment.  When you have your boot on someone's neck, they are naturally going to resist.  So, it's a fine line between having enough troops on the ground to provide security, but not crossing that line beyond which you're actually making the situation worse. 

O'DONNELL:  The big news, of course, Rumsfeld also said, and one person characterized it as a Christmas present for our troops, is that the number of brigades would go from 17 to 15, which in the end means about 7,000 troops.  Is this going to be a drawdown of forces that we will see all throughout 2006? 

FICK:  I would suspect so, for a few reasons.  One is political pressure in the United States.  Another is Iraqi public opinion. 

The third is whether the Army and Marines can sustain this, or whether the wheels start to come off in 2006. 

O'DONNELL:  So, then I don't—it was interesting, because Chairman Pete Pace, who is the head of the Joint Chiefs of Staff, was just on television on Sunday, and he said U.S. troops may actually increase. 

Why are we hearing a different message from the secretary of defense than from the chairman of the Joint Chiefs of Staff? 

FICK:  Yes.  I saw that, too.  I think it's fascinating.  And I think it's strategic ambiguity. 

General Pace, as a military man, is thinking in terms of keeping his enemy off balance.  And you don't want the insurgents to assume with certainty that the U.S. is drawing down, so why not keep it ambiguous and say, hey, if—if the fight continues, we may ramp it up?

O'DONNELL:  Scott, let me ask you, is it a political necessity or a military necessity that U.S. troops will start to draw down in Iraq in 2006? 

SCOTT ERWIN, RHODES SCHOLAR:  I think it's a little of both. 

Secretary Rumsfeld was correct when he said our presence is one of the reasons why, despite all the difficulties, there has been, you know, marked progress in the situation in Iraq.  But, at the same turn, we run the risk, and perhaps have already, alienated some of the Iraqis who are ready to assert control of their own country.

So, I think, both from a military perspective in Iraq, then a political perspective both in Iraq, and more and more, we are seeing it at home, it is in the best interests, likely, if the situation warrants, for a slow withdrawal. 

O'DONNELL:  Scott, I am interested, because you have been helping. 

You were injured and shot in Iraq when you were working for the CPA. 

And I was interested, because you have been helping Iraqis train to deal with a new democratic state.  And, yet, after these elections, we have seen violence surge again.  And, in fact, today, Iraq's Defense Ministry said that violence has returned to pre-election levels.  Why didn't this election help in terms of the violence? 

ERWIN:  I think, in many ways, what you are seeing is a group of individuals who are—are lashing out in anger and in fear at what they see as political progress and a movement on the part of most Iraqis to assert control of their future, and, in many cases, we will continue to see these high levels of violence. 

The most important indicator in my mind is to continue to see the Iraqi people participating in elections, and the general country acting in a democratic manner. 

O'DONNELL:  Nate, what do you see happening in 2006?  I mean, we have heard Rumsfeld say, we are going to see some reduction of troops.  And that was—we kind of knew that for a while, that we are going to go back down to about 135,000. 

Secretary Powell said just this weekend, it's unsustainable to keep that level of troops.  So, there's a political reality or a—a military reality, if you will.  We have got to pull some of those forces out. 

But, also, as Secretary Rumsfeld said, we don't want to look like an occupying force.  How low does it go in 2006?  Do we see down below 100,000, before, for instance, the midterm elections here in the United States? 

FICK:  I think it has to be event driven.  It will never be calendar-driven as long as this administration is in power.

They are properly going to say, we will have the forces on the ground that we need.  And setting a date, again, is—is—it gives away the ambiguity.  And, so, if the date is too soon, your enemy will wait you out.  And if your—your date is too far away, they will drive you out.  And, so, it depends largely on what the outcome of the election is.

The election day was 11 days ago, but we still don't know what—what the seats are going to look like.  And, so...

O'DONNELL:  Yes.  But we do know that we have the Sunni—the Sunni minority is protesting and asking for new elections, because they don't think that they won enough seats.  So, you do have a minority, a very vocal minority, upset already about what appears to be the preliminary results of this election. 

FICK:  Absolutely. 

And I think the verdict is up in the air, whether the Kurds and the Shia will reach across that divide and bring the Sunni in to the political process.  Right now, they have one foot in the insurgency and the other in the political process.  And I don't want to push the analogy too far, but it's like the IRA and Sinn Fein.  Will this insurgency become politicized or will it remain military? 

O'DONNELL:  Let me ask both of you, because you have been in Iraq.  You have served in Iraq, whether for the military, or in a public capacity, on a diplomatic front, as in your case, Scott. 

One of the complaints that has been made is that the media focuses on the negative stories in Iraq, focuses on the violence in Iraq, but has not focused on the progress being made. 

Scott, what progress has been made in Iraq, do you think, that there should be more focus on? 

ERWIN:  Well, it's difficult, because the progress is slow, and, in many cases, it's two steps forward, three steps back, four steps forward.

But I returned to Iraq around two months ago, and was amazed with the

·         the amount of authority Iraqis are now taking in controlling their own security services, from the top down, and the respect that they are garnering amongst the populace. 

On a personal note, I am very happy to say that a lot of the students that I worked with in my democracy programs are continuing, at great risk and personal sacrifice.  And they are a few of many that are working to ensure that the development of civil society in Iraq occurs. 

And there are women's rights occurring in Baghdad and throughout the entire country.  There's civil society development that we just really don't see in the news.  And you have to look hard, but it is occurring. 

O'DONNELL:  Nate, do you think there's too small of a snapshot about what's going on in Iraq? 

FICK:  I think that the troops, the platoons and companies and battalions on the ground, are doing tremendous good every single day that we don't hear about. 

The big question, though, is whether that good is taking place in a

politically sustainable framework.  And going forward, the outcome in Iraq

isn't going to be military in nature.  It's political.  And success now is

·         is going to be on the political front.  It can't be won by the military alone.

So, I think that's why we don't see the focus on the tactical level day to day, even though there is good taking place that we don't hear about. 

O'DONNELL:  And, if this new government takes shape, as it will after these elections, puts together its constitution, and this—what if this new government were to say, we don't want American troops anymore in Iraq; we don't want this occupation force?

Would this government, would this president say, OK, we will leave? 

FICK:  I think there would be a lot of leaning behind closed doors to keep the Iraqi government from saying that too overtly, but they may certainly start sliding down that track.

And I think that that would be met with general acceptance and—and maybe some gratitude in our government as well. 

O'DONNELL:  All right. 

Well, Nate Fick and Scott Erwin, thank you very much for joining us. 

And we are going to have General Pete Pace here on the program later this week, so thank you very much to both of you. 

(CROSSTALK)

O'DONNELL:  And a reminder:  For the best political debate online, go to Hardblogger, our political blog site.  And now you can download pod costs—podcasts—look, I can't even say it—on HARDBALL on your iPod. 

Just go to our Web site, HARDBALL.MSNBC.com.

(COMMERCIAL BREAK)

O'DONNELL:  Coming up, Chris Matthews tours Fisher House at Walter Reed Army Medical Center, then sits down with the president of the facility for an update—when HARDBALL returns.

(COMMERCIAL BREAK)

O'DONNELL:  We are back. 

It was one year ago that HARDBALL's Chris Matthews toured Fisher House at Walter Reed Army Medical Center, a residence that provides temporary lodging for members of U.S. armed services and their families during a medical crisis. 

Currently the program consists of 33 Fisher Houses, with more under construction.  And Chris got an update from the organization's president, Ken Fisher, last week.

But, first, let's take a look back at his original report on this nationally acclaimed program that assists over 8,500 military families annually. 

(BEGIN VIDEOTAPE)

KENNETH FISHER, CEO, FISHER HOUSE FOUNDATION:  The idea behind Fisher House is to give families injured or sick, service member and women, an affordable place to stay.  The core of Fisher House is these houses.  We essentially put the houses up and then we gift them to whatever branch of the military they serve. 

CHRIS MATTHEWS, HOST:  What's the longest stay?  What—what—what sort of tenure do people have? 

FISHER:   Typically it was about two weeks.  But given our actions right now in Iraq and Afghanistan...

MATTHEWS:  In Iraq and Afghanistan.

FISHER:  ... it's really as long as they need to be here.  Nobody is ever kicked out of here. 

CONNIE HALFAKER, DAUGHTER WOUNDED IN IRAQ:  The Fisher House Foundation has been a most remarkable gift to us.  And not just us.  To all the families.  The Fisher Houses are kind of like a bed and breakfast, more of a family situation. 

FISHER:  This is an eight-room house that was opened in 1997.  There are 32 that in operation right now.  We are building the largest one we've ever built down in Houston, Texas, which is going to be a 21-room house. 

MATTHEWS:  You've got the key. 

FISHER:  Yes.  We found the key. 

(LAUGHTER)

MATTHEWS:  OK.  Great. 

FISHER:  This is the living room.  And this is typical of the smaller eight-room house.  As you can see, there is a very comfortable seating area here.  This is really for the families to get together.  As you can see, we have the Christmas tree up.  That was decorated by the families.  So, there's a real sense of family.  And that's what these houses are promoting. 

ROBIN GLENN, HUSBAND WOUNDED IN AFGHANISTAN:  The Fisher House has been great.  Since—since we've been able to get in here, everyone has a private bedroom and their bathroom.  There's a community kitchen.  There's washers and dryers to use.  There's a community living room, family room, and a community dining room.  Not only does it give us a place to sleep and rest our head at night and just comfortably be together, but there's a support system that—that is created here. 

FISHER:  This is where the families get together and have their meals.  The families will sit together.  They'll eat together.  But it is all part of the support network.  It is a very stressful time for all of these families that have basically been thrown into the similar circumstance, which is a need for an affordable place to stay and a loved one who is sick or injured.  So, that's the beauty part of the foundation. 

VICKIE FIELD, MOTHER OF WOUNDED U.S. SOLDIER:  If it wasn't for them, I would not be able to stay here with my son.  He was fighting in Fallujah.  He was in an assault division, and he was a gunner, and he was shot in the head. 

He went through five hours of brain surgery.  And they removed 25 percent of his brain.  The doctors just say it's a miracle, because he—he can walk.  He can talk.  He can do everything, but there are still things that we have to worry about. 

I think, if you do not have somebody that's in the military, then you don't understand.  You just don't understand what—how important this is.  I would be devastated if I could not—if I couldn't be here with my son. 

MATTHEWS:  Look at this.  How long have you been here? 

UNIDENTIFIED MALE:  About three weeks. 

MATTHEWS:  What happened? 

UNIDENTIFIED MALE:  My son had complications at birth.  And he had four surgeries done in Germany.  And then we came here to follow up on his liver enzyme levels. 

MATTHEWS:  Wow.  How's it look?   Is everything all right?

UNIDENTIFIED MALE:  Yes, everything seems to be working out fine. 

MATTHEWS:  It looks more and more like a bed and breakfast, Ken. 

FISHER:  You know what, it's got that feel.  But again, with the sense of family here, it really is a home. 

Chris, this is a typical bedroom here in Fisher House II.  This is set up for, you know, a family that may have children with them.  We have a desk over there where they can do some work or write some letters home and then television here and, you know, some draws, a bathroom right here.  Every room has its own bathroom.  This is all part of being comfortable during the stressful time. 

MATTHEWS:  So, this has been pretty amazing.  You know, when I was coming in here, Ken, I just saw this plaque over here. 

What does that mean to you, as the—the family heir to this whole operation? 

FISHER:  Well, this quote is on every house that we build.  It's dedicated to our greatest national treasure, our military servicemen and women and their loved ones.  This is our legacy now.  And this house really is dedicated to service men and women that we have come, in many cases, to take for granted. 

MATTHEWS:  Are you going to teach your kids to keep up this legacy? 

FISHER:  You know what, Chris?  I hope, when my kids get older, they never have to build a house, because there's never a need for one.  But That may not be realistic.  And I would be thrilled to have my children carry on that legacy. 

(END VIDEOTAPE)

O'DONNELL:  And, when we come back, Chris interviews the president of Fisher House, Ken Fisher, once again, to see what has changed in the year since his visit.  They are an amazing family. 

This is HARDBALL, only on MSNBC. 

(COMMERCIAL BREAK)

O'DONNELL:  A lot has happened since Chris Matthews toured the Fisher House at Walter Reed Army Medical Center last year. 

Chris sat down to get an update on this nationally recognized program with the CEO and president of the Fisher House organization, Ken Fisher. 

(BEGIN VIDEOTAPE)  

MATTHEWS:  You know, we were all watching here when they had the base closing announcement a while back.  And, lo and behold, having gone out and watched your incredible operation at Fisher House at Walter Reed, we learned that Walter Reed is about to get shut down.  How is it going to affect your efforts? 

FISHER:  Well, Chris, we are still kind of taking a wait-and-see attitude to what BRAC will—what effect BRAC will have on the Fisher House.  As it stands with Walter Reed right now, they're talking about closing Walter Reed some time within the next few years. 

MATTHEWS:  Two thousand eleven.

FISHER:  Two thousand eleven.

And then Fisher House may still be in effect, because they're talking about potentially expanding Bethesda or—or building a new hospital somewhere in the area.  So, Fisher House may still...

(CROSSTALK)

MATTHEWS:  Can you move your—can you move your buildings?

FISHER:  I don't think that would be feasible from a cost basis and from a feasibility aspect of it. 

We would explore ways that maybe we could work out something where we could be compensated and build new Fisher Houses in another location, if that does come into play.

MATTHEWS:  You are hopeful for that? 

FISHER:  Well, we're talking about it. 

I can't tell you one way or the other right now.  It's something that is being discussed. 

MATTHEWS:  Well, the president, before Christmas, was talking about the—you know the number of people that have been killed over there and the number of injured.  I mean, we all know about the number of injured.  That will continue...

FISHER:  Yes. 

MATTHEWS:  ... unfortunately.

And, so, we are going to have men and women coming back from Iraq and Afghanistan, of course, and perhaps other places, with amputations and situations like that.  How big is the demand going to grow, at the very time you're losing this facility at—at Walter Reed? 

FISHER:  Well, you know, the good news is, the battlefield survivorship rate is up over 90 percent.

The bad news is, is these—these young men and women are coming back catastrophically injured.  This will tax the VA system going forward, because these are young men and women in their 20s that will rely heavily on the VA system.  So, we think that the future of Fisher House might be pointed in the direction of the Veterans Administration, in helping out and trying to lighten their load a bit. 

MATTHEWS:  You mean letting families visit people here for a long—visit on federal facilities for a long time? 

FISHER:  That's right.  You know, with the...

(CROSSTALK)

MATTHEWS:  So, if you come to visit your kid every couple weeks or every couple months, you would have a place to stay? 

FISHER:  Right. 

You know, the—these rehab that these men and women are going to go through are going to take some time.  And that, again, is going to require longer hospital stays, and then longer stays for their families to support them. 

MATTHEWS:  Tell me about these incredible young guys and women we—we met when we went out there.  And they're in the tape we saw, you know, people with a leg missing, people with an arm missing, people with both. 

How many of them get back into the active military and how many just have to muster out? 

FISHER:  Well, that number is growing. 

You know, the world-class health care that is being offered by the military is really benefiting these young men and women, to the point where they are able to go to active duty again, in many cases.  But the rehabilitation is also going to be important.  And that's going to affect their ability to get back into the military.

But, again, with—with the world-class health care being offered right now, that number is going to continue to grow. 

MATTHEWS:  You know, when you look—when you drive down any major street in American cities, you look up at the window and some—there's a workout room, state-of-the-art workout room. 

FISHER:  Right. 

MATTHEWS:  Do our veterans who are injured in combat and disabled in combat who come back and need rehab, do they have those kind of facilities? 

FISHER:  Well, here's something we are doing with our sister organization, the Intrepid Fallen Heroes Fund, again, in response to BRAC.  We are going to build a 60,000-square-foot, state-of-the-art physical rehabilitation center at Brooke Army Medical Center, which will be.... 

MATTHEWS:  Where is that? 

FISHER:  Brooke in—in San Antonio. 

That will supported by two 21-room Fisher Houses.  It's been, again, the most aggressive expansion that our program has ever undertaken.  But because of the show that we did last year and the country's response, which is...

MATTHEWS:  You mean here on HARDBALL? 

FISHER:  Here on HARDBALL.

MATTHEWS:  I'm so glad of that.

FISHER:  Yes. 

I mean, it's—the country's response has been absolutely phenomenal and has enabled us to undertake this... 

(CROSSTALK)

MATTHEWS:  So, once the word gets out to families and to disabled veterans who come back from the front, and they realize they have got to do a lot of rehab to learn how to walk without a leg, with a prosthetic...

FISHER:  Yes. 

MATTHEWS:  ... or with a—a new arm...

FISHER:  Right. 

MATTHEWS:  ... cosmetic or use—useful, they are going to want to go to that place.

FISHER:  That's right. 

(CROSSTALK)

MATTHEWS:  The word is going to be out.

FISHER:  The word is will be out.

And it's going to be, as I said, the—the state-of-the-art facility.

MATTHEWS:  Who is paying for it?

FISHER:  There will be nothing like it. 

MATTHEWS:  You guys?

FISHER:  That's privately funded. 

MATTHEWS:  You know, it's kind of—I have to ask you.  I know I'm—maybe this is a chance for you to toot your horn, but why does somebody like yourself have to cook up the money, to come up with the money for something that seems like it should come as a—as a benefit, if that's the right word for it, of somebody who served their country? 

FISHER:  We feel that it is the duty of every American to support our troops. 

Whether you agree or disagree with what we're doing right now is irrelevant when it deals with the troops.

MATTHEWS:  You mean in Iraq.

FISHER:  Yes, and Afghanistan.

It's irrelevant as it deals with our troops.  And we just feel as though we have been blessed and it's our obligation to give back.  And I think it's really up to the entire private sector to feel that way and, ultimately, to give something back to this nation. 

These young and men don't make policy.  They are out there doing a job.  And it's up to us to support them, so that they know that they have got support at home.  And I think that's going to be very important to them going forward.  So, I think it's up to every American to do their part. 

MATTHEWS:  If you look at every one of the polls, the opinion of this country towards this war is about mixed, moving toward negative.  Well, it goes back and forth, but it's mostly moving toward negative. 

Do you think that that has hurt people's willingness to part with some money to help the veterans? 

FISHER:  No, because I believe that we have learned lessons from the +past. 

I believe that this country realizes that you can—you can disagree, but you can also keep in mind that these people are out there doing a job.  So, I think, again, it's—it's something that we are—I think we have all learned a lesson from the past, and I think we have been better. 

Can we do better?  Sure, we can. 

(END VIDEOTAPE)

O'DONNELL:  Ken Fisher, he's an amazing man. 

And that's HARDBALL for tonight. 

Join us tomorrow night at 5:00 and 7:00 Eastern for more HARDBALL. 

Right now, it's time for “THE ABRAMS REPORT” with Dan Abrams. 

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

END   

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