updated 1/24/2007 11:57:11 AM ET 2007-01-24T16:57:11

Guests: A.B. Stoddard, Terry Holt, Charlie Rangel, Dick Armey, Rep. Jim Moran

TUCKER CARLSON, HOST:  Welcome to a special Tuesday here on Capitol Hill. 

Tonight at 9:00 local time, President Bush will deliver the State of the Union to a nation and to a Congress that stand in staunch opposition to his foreign policy.  The president is expected to spend at least half of his time talking about Iraq.  It‘s a subject on which he has almost no credibility. 

The war in Iraq has been a tragic mistake, conceived in error, and prosecuted poorly.  Bush will be judged harshly by history for starting it.  But that doesn‘t mean he is entirely wrong now. 

George W. Bush understands the one thing that most of the rest of us have since forgotten—it could be worse.  An unambiguous defeat in Iraq, or retreat, a strategic redeployment—pick you euphemism—would make the U.S. weaker, it would make our enemy stronger.  There is no way around that. 

On this question, for once, Bush is right.  The irony is, though, it may be too late.  The public, the Democratic Party, even his fellow Republicans are so angry and so frustrated by four years of arrogance and mismanagement, they have lost the willingness, maybe even the ability to hear the president when he talks about Iraq. 

They oppose him out of reflex.  That‘s an understandable response, but in this case it‘s unfortunate.  Yes, Iraq is a mess.  Yes, it‘s Bush‘s fault.  But it‘s not yet the beginning of World War III.  And yet, with a few more missteps, it could be, and we should remember that. 

Joining me now to preview the State of the Union and to bat around other big political news of the day—and there‘s a lot of it—Alexandra B.  Stoddard, associate editor of “The Hill” newspaper, Republican strategist and friend of this program, Terry Holt. 

Welcome to you both. 

TERRY HOLT, REPUBLICAN STRATEGIST:  Thanks, Tucker. 

CARLSON:  Take a look at some of the approval ratings this president has faced going into his State of the Union addresses over the years. 

2002: Bush‘s approval rating 82 percent.

2003: Fifty-four percent.

2004: Fifty-four percent.

2005: Fifty percent.

2006: Thirty-nine percent.

This year, 2007, 35 percent.  This guy is going down faster than Paris Hilton.  Isn‘t he?

HOLT:  Well, it‘s a measure—it‘s a measure of the people‘s support for the war, their enthusiasm, and maybe a measure of their hesitation and frustration for how well it‘s gone.  But ultimately, the State of the Union is the day the president finally engages with the Democrats in a face-to-face way.  The State of the Union is a place where the president has the bully pulpit, and we‘ll hear tonight he will have a powerful moment to make an argument for why this Iraq policy needs to continue the way he says it does. 

CARLSON:  Do you think, A.B., when you‘re at 35 percent, anyone is listening? 

A.B. STODDARD, EDITOR, “THE HILL”:  Well, the interesting thing about the approval rating is that he doesn‘t care. 

CARLSON:  Right.

STODDARD:  And he‘s not really pressurable.  So that‘s—what‘s coming out in the polls now and why the public is becoming so increasingly hostile is because after this last speech and the new way forward on Iraq, which of course majorities of the public oppose, he is now perceived by majorities of voters as someone who is not listening and doesn‘t intend to listen. 

And because the Republican Party knows this, they are now moving.  And they are trying to do it softly and not so directly, but they are now moving to oppose him in significant numbers.  And that will increase as the weeks and months wear on.  And that is going to be a huge problem for him.  And we‘ve seen evidence of this, stark evidence in the last 48 hours. 

CARLSON:  Well, of course.  His party his abandoning him.

But you know what the big lie is, Terry?  The big lie really of our time? 

People give you credit for standing on principle. 

They give you no credit.  People give you credit for being in sync with what the majority believes.  They give you credit for pandering. 

If you stand alone and say, no, actually, I think I‘m right, people call you a crackpot.  This is the one time Bush has been right on Iraq, in four years, in my view.  And people hate him for it.  He doesn‘t get the credit John McCain gets for being, you know, Mr. rock solid, onery, stand-alone guy. 

HOLT:  Yes, and that‘s too bad, because this president has been—has tried to run this country based on a philosophy, he believes in it deeply.  But ultimately, this is a democracy, and you have to be sensitive... 

CARLSON:  It‘s “American Idol,” basically.  That‘s it. 

HOLT:  And, in fact—well, and that may be—that may be a point that we need to address, because, ultimately, an informed public gives a more informed choice when elections come. 

But, look, you know, the big changes that often take place in policy often happens when people of the same party begin to have a debate inside.  And I think with Boehner‘s proposal that was to offer more oversight, I think that‘s a great thing.  And John Warner out there trying to put a little bit finer point on what Republican policy ought to be, that there is a reason for Republicans to be optimistic that we may yet be the party that solves the problems of the global war on terror. 

CARLSON:  I just see from the Republican side, A.B.—and you cover the Hill well—assiduously, I see only resentment and loathing toward the president. 

STODDARD:  So do I.  So do I, actually. 

You really do not see them rallying to his defense anymore.  They like to tell the Democrats that there is only one commander in chief because there is, and they also want to make a political point with the other side.  But they are not defending the president.  And what you see with John Boehner...

CARLSON:  Is anybody?

STODDARD:  No.  I mean, he‘s really alone at this point. 

CARLSON:  I thought they were supposed to be loyal, you know, Republicans, genuflect before authority and all that. 

STODDARD:  No, but this is really significant because it‘s not just Republicans on the Senate side who are up in ‘08, you know, trying to find some resolutions to jump on.  This is—you know, this is seriously—on their own principle they really believe this. 

They are very worried that he no longer hears the concern of the generals in the military and the concern of the members of Congress and senators.  And it‘s—they really are privately fuming about this. 

HOLT:  You know, and I think that there is legitimate anger.  And you talk to Republican members of Congress, and widely mentioned, almost to a person, is the Rumsfeld scenario, where the day after the election Rumsfeld was taken out. 

CARLSON:  That‘s right.

HOLT:  Almost every Republican I‘ve talked to...

CARLSON:  What was that about?  I never...

HOLT:  ... has mentioned that as a moment where they realized that maybe the president didn‘t care about them and their election as much as it was advertised.  I think that is going to be something that takes a very long time to overcome. 

CARLSON:  Do you really think it took them that long to...

HOLT:  I really do.

CARLSON:  I mean, this president, who has treated Capitol Hill, the Congress, the co-equal branch of government, with total contempt, including his own party—shut up and do what I say.  And it took them six years to figure out that he didn‘t really care about them? 

How dumb are they?

HOLT:  Well, I think that over time things have accrued.  But you‘ve got to remember that the Republicans and this president had some great victories early on.  Cutting taxes for everybody in this country was a huge success.  And it‘s kept the economy on track.  And now we‘ll move to the next debate about who is better at balancing the budget. 

We have also reformed education, a whole host of other things.  They enjoyed a lot of success because there was this separation, as you might say. 

CARLSON:  Well, quickly, A.B., is the president going to—in the minute we have, do you think he‘s going to announce a tax increase tonight in the form of higher taxes on healthcare plans? 

STODDARD:  On healthcare?  Look, I think that you can—the White House is arguing, and I think they can still do it legitimately, that it‘s not necessarily a tax increase.  They are trying to redistribute healthcare. 

CARLSON:  I‘m trying to read your lips and understand what that means. 

STODDARD:  Which is a very un-Republican sounding idea...

CARLSON:  Yes.

STODDARD:  ... to redistribute healthcare coverage.  No, they are trying to provide a tax deduction in one place when you purchase by taxing benefits that are offered by employers. 

CARLSON:  That are not currently taxed. 

STODDARD:  Right.

CARLSON:  So that would be, in fact, adding a tax.

STODDARD:  There is not going to be a net increase is what they are saying.  Look, it‘s never going to make it in the fine print anyway.  Don‘t you worry about this. 

CARLSON:  Right.  I don‘t know.  I‘m just amazed—I‘m just amazed by the abandonment of principle.  I guess I shouldn‘t be.

Coming up, the Scooter Libby prosecution asserted in open court today that Vice President Dick Cheney was “deeply involved in the outing of Valerie Plame.”  What else did the prosecutor say and what does it all mean, if anything? 

Plus, the Hillary Clinton media blitz is on.  It‘s a wise strategy, of course, because it‘s free.  But how is she going to pay for the rest of her presidential campaign?  That‘s another matter.

Senator Clinton makes a major money move.  We‘ll tell you what it is when we come right back.

(COMMERCIAL BREAK)

CARLSON:  Between the legislative agenda, opposition to the war in Iraq, an the rich field of ‘08 presidential candidates, these are good times for Democrats in Washington. 

We‘re joined by one of their leading—the chairman of the House Ways and Means Committee, Democratic congressman from New York, Charlie Rangel. 

Mr. Rangel—Mr. Chairman, thanks for joining us. 

REP. CHARLIE RANGEL (D), NEW YORK:  It‘s good to be here. 

You know, it‘s not that we can be elated about it.  It‘s pretty embarrassing to have a president come to the Congress with no clothes on, but not saying anything.  You know, we‘re Americans before we‘re Democrats.  True, it will help us in 2008, but it‘s not as though we‘re excited about his failure. 

CARLSON:  But wait a second.  If you—and leaving aside the war Mr. Iraq, which is obviously the bulk of the president‘s legacy...

RANGEL:  Exactly.

CARLSON:  ... let‘s talk about some of the things he‘s going to talk about tonight. 

He‘s going to suggest raising taxes on health plans in order to broaden health insurance for the population.  He‘s going to tout his own—by any definition, very liberal immigration plan.  And he‘s going to say we need to get serious about climate change, and the federal government has a big role in that. 

Those are all liberal positions designed to make Democrats happy.  Are you going to be one of those applauding enthusiastically when he says that? 

RANGEL:  First of all, these are not liberal positions.  These are national positions.  And believe me, the Republicans in the House want something like this to be working with us on. 

What he should have done was done his homework ahead of time, worked with Republicans and Democrats in the House, and to give us something, not a Republican plan and not a Democratic plan either, but something that we all could be applauding about. 

CARLSON:  But why can‘t you—wait a second.  Why can‘t you applaud his immigration plan?  I mean, it is, by any measure—it is a plan that most Democrats say they support. 

RANGEL:  Well, why don‘t you tell me any part of the plan that you‘re excited about, and I‘ll tell you any part... 

CARLSON:  I‘m an ideological conservative who finds this plan repugnant. 

I‘m against every part of it. 

RANGEL:  Well, I do, too.

CARLSON:  But you‘re not.  You‘re a progressive Democrat. 

RANGEL:  I mean, so you look at me and I‘m progressive, and I‘d take a stupid plan that you disagree with and I‘m supposed to... 

CARLSON:  Well, because I‘m a right-winger, and you‘re not. 

RANGEL:  Right-winger—I don‘t need foreigners coming into this country for jobs no American would take.  You give the Americans a pension plan, you give them training, and they will do jobs.  We‘ve got sanitation people in New York, people who work in the sewer. 

CARLSON:  Well, good for you.

RANGEL:  And these are jobs that nobody would want. 

CARLSON:  Amen.

RANGEL:  But if you pay them, they will do the job. 

CARLSON:  That‘s right. 

RANGEL:  OK.

CARLSON:  And so you think that unfettered immigration, the kind that your party enthusiastically endorses...

RANGEL:  You‘re talking to me now.  I‘m talking—I don‘t talk about your party.  And I‘ll tell you something, too.

CARLSON:  OK.  OK.  Then you think this plan—then you think amnesty for the 12 million illegal immigrants is a bad idea? 

RANGEL:  You‘ve got that right—I think it‘s a great idea. 

CARLSON:  Oh.

RANGEL:  We don‘t need any more new people coming.  Legalize the ones that are here.  Put the guys that hire new ones in jail. 

How is that for your conservative thought? 

CARLSON:  And keep the rest out?  Build a wall? 

RANGEL:  No, no, you don‘t need to build a wall.  If every employer knew that it was a felony to knowingly hire an illegal alien, you don‘t need a wall. 

These people that are going across in the desert, they know that they‘re going to be hired.  You never heard about enforcing the law against employers.  You know that and I know that, liberal and conservative.  Right?

(LAUGHTER)

CARLSON:  I‘m not making any deals with you. 

So—I mean, then you‘re not so far off from the president by what you just said.  I guess...

RANGEL:  I don‘t need any guest program.  These guest programs is about as close to slave program. 

The employer can hire someone for three years.  If he doesn‘t like him, hey, he can send him back home.  There‘s no guarantees with health.  If his baby is born here, they don‘t want him to go to school. 

No, that‘s not right.  That‘s not right.  You and I agree with that. 

Name something else that is good that the president is going to make me feel excited about. 

CARLSON:  I think the president‘s going to make you feel good about climate change.  He‘s going to get out there and say the federal government has a responsibility to force American automakers to get—to make vehicles that get better gas mileage, which strikes me as insane. 

RANGEL:  Only Democrats breathe the air.  So that‘s good.  This would be a great Democratic program. 

CARLSON:  No, here‘s my point.  Isn‘t it pointlessly partisan of Democrats not to applaud ideas they agree with just because those ideas emerge from the mouth of a president they don‘t like? 

RANGEL:  If you want to agree with me, you talk with me.  You don‘t come and lecture to me. 

If you want an agreement since you‘re in such deep trouble on foreign policy, then what you say is, can we talk?  And I have been telling this to the administration. 

Social Security, that‘s not Democratic.  Tax reform, that‘s not Democratic.  Fair trade laws, that‘s—that‘s an American problem that we need Republicans and Democrats to do. 

Send your people here.  Work out the agreements.  And then when you come to give us a lecture, say, and I‘m glad to report that we have some agreement on Social Security. 

CARLSON:  So even if—so you‘re saying that even if the president says things you agree with, he hasn‘t given you and the Congress sufficient respect, so you don‘t like...

RANGEL:  It‘s not a question of respect.  If I‘m telling you if they don‘t accept the Democratic bill, I‘m not saying they disagree with us.  I mean, they don‘t respect us. 

What I‘m saying, work out the details.  Congressman (INAUDIBLE) ranking Republican on Ways and Means.  We work every day to try to make certain that not only do we have respect, but we‘re trying to get a bill out. 

I‘m certainly not going to have a Republican bill.  And I‘m convinced that we can‘t get a Democratic bill if the president is against us.  But if the three of us work together, it‘s good for the Congress and it‘s good for the country. 

CARLSON:  Explain this to me if you could in the minute we have left.  Mrs.  Clinton running for president, senator from your state.  It‘s not clear from the statements I have seen you make in public whether you‘re supporting her or not. 

Are you going to be supporting Mrs. Clinton? 

RANGEL:  Well, I‘m the dean of the congressional delegation, Democrats. 

That‘s our favorite daughter. 

CARLSON:  Yes.  So I read that you said that.  So that means you will not be supporting Barack Obama or John Edwards?  You will be supporting Hillary Clinton? 

RANGEL:  I will be supporting a winner.  But I understand in the Democratic Party, we don‘t just pick a candidate and get the money and give it to them.  We have fights, we discuss it.

CARLSON:  Of course.

RANGEL:  They go to different states.  And guess what?  If Obama doesn‘t win, I won‘t be supportive. 

CARLSON:  I figured that.  But as of—so before the primaries take place, you can decide who your support is going to go to.  Have you decided it‘s going to Senator Clinton? 

RANGEL:  In all probability. 

CARLSON:  In all probability.

RANGEL:  I made it clear to Obama.  I encouraged him to run, because I thought at his age, his youth, that if he didn‘t run, he will hate himself for the rest of his life.  And I would like to see how far he goes.  But he‘s up against a real pro with experience. 

You know, she is from New York now. 

CARLSON:  So he may lose, but he‘ll feel good about himself?

RANGEL:  Well, we all—I don‘t know about you, but some of us, we have lost at some times in our life. 

CARLSON:  Yes.

RANGEL:  And the experience has caused us to be stronger and better. 

CARLSON:  Amen. 

Chairman Charlie Rangel of New York, thank you.

RANGEL:  Good to be here.

CARLSON:  Coming up, the length of the State of the Union is usually about half applause.  These are not usual circumstances, though.  What kind of reception will the president get from this Congress?  Will anyone clap? 

That‘s a real question.

Plus, the prosecutor in the Scooter Libby trial said today in open court that Dick Cheney was deeply involved in the outing of Valerie Plame.  What would that mean if it were true? 

Stick around.  We‘ll tell you.

(COMMERCIAL BREAK)

CARLSON:  It was January of 1974 the last time a president delivered his State of the Union Address to such a hostile audience in Washington and around the country.  What can President Bush hope to achieve tonight? 

To speak to that question, we are joined now by Dick Armey, former House majority leader and current chairman of Freedom Works, an organization that, thank God, promotes limited government. 

Dick Armey, thanks a lot for coming on. 

DICK ARMEY, FMR. HOUSE MAJORITY LEADER:  Well, it‘s my pleasure, always. 

CARLSON:  So, the president comes out tonight to face Democrats who despise him, Republicans who are abandoning him on foreign policy, and the few conservatives left on the Republican side that—you know, genuine small government conservatives left—are going to hear the president say the federal government needs to become more deeply involved in managing industry because of global warming, and we need open borders. 

I mean, who‘s on his side? 

ARMEY:  Well, I think the president does have a big problem with a lot of people.  The Democrats do have and it is in their base, a visceral hatred of this man.  They are seeing his poll numbers hitting the floor.  They are recognizing he‘s vulnerable.

I believe you‘re going to have a fairly raucous caucus tonight.  I think there may be open—what should I say—mockery going on.  The Republicans are reluctant to stand up for him. 

CARLSON:  Wait, you think—so to just stop you there, Congressman, do you think that television cameras will actually capture members of Congress making faces at the president? 

ARMEY:  I believe that you will see things that would be the kind of behavior that elementary teachers would reprimand their students for with respect to the way you treat a speaker before your body. 

CARLSON:  Wow. 

ARMEY:  And I‘ve seen it on the floor myself.  I think it‘s going to be bolder, more aggravated. 

In fact, I remember one year during one of President Clinton‘s State of the Unions, I had a member sit behind me who was very vocal and quite mocking of the president.  I got tagged for that inconsideration (ph), that rudeness in the press.  It was—it was an obvious mistake.  I felt terrible, but I saw to it forever after that that member never sat behind me. 

CARLSON:  Who was it? 

ARMEY:  I can‘t remember. 

CARLSON:  You can‘t remember.  What did he say? 

ARMEY:  Well, just almost open booing, hissing, lots of loud groans.  And it was the—I mean, it wasn‘t facial expressions because the camera would have revealed it. 

CARLSON:  Right.

ARMEY:  I was embarrassed by it.  And it‘s just a matter of consideration.  People come before your body, in your House, as it were, you should always have respect and treat people well. 

CARLSON:  Of course you ought to. 

How many loyalists are there left?  How many—how many Republicans do you believe in the House of Representatives are still Bush men? 

ARMEY:  I think there is very few and it‘s very fragmented.  I think I could name—on some issues. 

For example, I think the president has some Republicans who are with him on immigration.  I think we have some, I believe, given the announcement he might make on some changes in tax laws that affects our acquisition of healthcare, he will have some Republicans who will applaud that move.

If, as I expect, he says it‘s time to undo the harm that was done in the 1942 ruling by the IRS and equalize the tax - what should I say—tax break given between people who buy their own insurance and those who...

CARLSON:  Right.  Those who get it from their employer. 

ARMEY:  He will win some—he‘ll win some accolades here.  If he, in fact, gets too aggressive with respect to what we can do on energy by way of mandate, as opposed to realistically understanding nothing can really happen unless the market can make it happen, it doesn‘t do any good to pass a resolution.  In fact, I was—I was installing some new software on my computer last weekend, and I passed a resolution that it would work. 

CARLSON:  Yes.

ARMEY:  It didn‘t work. 

(LAUGHTER)

CARLSON:  No.

ARMEY:  I mean, until the market is ready to see it work, until the pieces are in place, properly programmed with one another, it‘s not going to work. 

So it doesn‘t do any good to just pass resolutions.  You‘ve got to have a policy and steps of implementation to get you to where you want to be. 

CARLSON:  Of course.

The Democratic Party is clearly, I believe, moving toward de-funding this war.  I mean, I think the rhetoric has been escalating every week. 

I think you‘ll see a move by the Democratic left to make it happen.  We‘ll see.  If they do move to de-fund the war or restrict funding for it, do you think the Republicans will—some Republicans will sign onto that? 

ARMEY:  Some will.  We have seen the resolutions by Warner and Hagel today. 

And so there is some description of that. 

You have to be very careful about this.  You know, my wife, the therapist, always reminds me that in therapy, you have to be careful not to take ownership of the problem. 

CARLSON:  Yes.

ARMEY:  Right?  Now politically, the Democrats are having a good time. 

This is the president‘s problem, and they are going to make him pay and suffer.  As soon as they take some definitive action and acquire ownership of it, it becomes their problem.  And they may very well likely not want to walk very many miles in those shoes. 

CARLSON:  And finally, Hillary Clinton, is she taken seriously, do you think, by the people who, to the extent they still exist, run the Republican Party, people thinking deeply about 2008?  I mean, is she seen as someone who could become president by Republicans? 

ARMEY:  Oh, yes, absolutely.  She is a very skillful politician.  You have seen evidence of her willingness to redefine herself before the public view. 

She is probably not as much a chameleon as her husband was and is, but she could still have Boy George do her campaign song, “Karma Chameleon,” and get away with it, and we know it. 

CARLSON:  That would be a good tune, actually.

Dick Armey, thank you very much. 

ARMEY:  It was my pleasure. 

CARLSON:  Coming up, the man who will sit over President Bush‘s shoulders tonight as has been described in open court moments ago as being deeply involved in the Valerie Plame leak case.  What are the implications of that assertion, proven or not? 

Plus, no one has ever gone from city hall directly to the White House, but Rudy Giuliani just made a move that indicates he may try.  Can America‘s mayor make the big step?  We‘ll tell you.

We‘ll be right back.

(COMMERCIAL BREAK)

(MARKET REPORT)

CARLSON:  The trial of Scooter Libby got considerably more dramatic today when special prosecutor Patrick Fitzgerald declared in his opening statement that Vice President Dick Cheney was, quote, deeply involved in the administration‘s effort to publicly identify Valerie Plame as a CIA officer.  With all the days developments, with us is MSNBC‘s David Shuster, who has covered this story from day one.  David, welcome.  What is the relevance of the vice president‘s involvement in this case? 

DAVID SHUSTER, MSNBC CORRESPONDENT:  Well, just to clarify, Tucker, it‘s not that he was deeply involved in the actual leak of her identity.  It was that he was deeply involved in the actions that Scooter Libby took, which then, according to  prosecutors, resulted—it‘s a finite sort of difference.

But in any case, the point that prosecutors made today is they were simply going at motive.  In other words, Scooter Libby has testified that he had no reason to lie to the FBI, to lie to the grand jury when he said that he learned about the Wilsons from reporters.  But, in fact, what prosecutors are suggesting was that he was trying to block the view of investigators, and he didn‘t want to get into political trouble for the office of the vice president. 

That‘s why the prosecutor suggested that the very—that the evidence in the case will show that it was Vice President Cheney, not reporters, Vice President Cheney who was the first to tell Scooter Libby about the Wilsons and about Valerie Wilson‘s CIA status.  The prosecutors also said the evidence will show that vice president‘s press secretary, in a separate conversation, also told this to Scooter Libby. 

Furthermore, the prosecutor said that the vice president actually wrote out for Scooter Libby the script of how he was to respond to a reporter on the day that Scooter Libby then confirmed for that reporter that Valerie Wilson‘s status at the CIA was under cover.  Again, the prosecutors are not suggesting the vice president faces any sort of criminal exposure.  They are simply trying to get at the motive.  The embarrassment, as prosecutors would suggest, for Scooter Libby, essentially being caught. 

Remember, back in the summer of 2003, it was Press Secretary Scott McClellan who had said that anybody who‘s caught being involved in this will not be part of the administration.  So essentially Scooter Libby was boxed in.  Well, it‘s so interesting, in addition, Tucker, to the role of Vice President Cheney being much deeper than had previously suggested.  Today, as you mentioned, the defense also put the blame on Karl Rove, and they talked about a note between Vice President Cheney and Scooter Libby, in which they were both complaining about how essentially one staffer is being protected and another one is being sacrificed. 

And essentially the way the conversation went, according to defense attorneys, is that Scooter Libby felt that he was being set up by Karl Rove, that essentially Scooter Libby was having to be a scapegoat for this mess, in order to protect the president‘s guy, Karl Rove.  It was all very interesting. 

CARLSON:  Amazing, David Shuster from the site of the trial.  Thanks a lot David.

SHUSTER:  Thanks Tucker.

CARLSON:  Joining us again, we are back with associate editor “The Hill,” A.B. Stoddard and Republican strategist Terry Holt.  Welcome to you both.  A.B., I am confused by this.  I have been confused by this story since day one. 

STODDARD:  Nothing is more confusing than the Valerie Plame affair. 

CARLSON:  Factually it is confusing, but here is the essence of my confusion: the story itself is that the White House, for political reasons, leaked the name of this vital CIA officer to the press in order to destroy her and her husband, because he wrote a “New York Times” op-ed piece that they don‘t agree with.  It turns out that has nothing to do with the charges against Scooter Libby, who is being charged with perjury for lying in his conversations with federal agents. 

What exactly does the vice president being involved in this—how does that have any bearing on what Scooter Libby did or didn‘t do? 

STODDARD:  I don‘t know.  I don‘t think we know today.  I don‘t think we‘ll know for several months, but it‘s—Obviously Patrick Fitzgerald is going for the drama, as he does.  There were indications early on that Robert Novak spoke to Fitzgerald and told him who his source was, that it was early on, and he didn‘t even need, from that day forward, by some people‘s estimation, to proceed with his investigation that went on for much, much, much longer, and sort of dug up a lot of other names of people that were involved. 

If you look at the time line, that there are people that believe that he went on, obviously, some kind of an expedition. 

CARLSON:  Basically everybody I know is involved in this case. 

STODDARD:  And that‘s true.  But if Cheney was involved in a significant way, it‘s going to come out, and I don‘t - all I know is politically this—I‘m not going to get into the legal ramifications for Dick Cheney.  Politically this, Republicans have one more thing they have to answer to in this very difficult time for them.  If Dick Cheney is dragged over the coals in this trial, they are going to have to separate themselves not only from Bush on the war, but from Dick Cheney as well. 

If we‘re going to spend—no, if this is the environment that we‘re in. 

CARLSON:  But it‘s just so unfair.  Look, if you hate the war in Iraq, as I do, then attack the administration for waging it.  But this seems to me purely political and I think an abuse of power by this prosecutor, that the Bush administration, run by morons, by the way, encouraged to take over the case.  Remember, it was the Bush people who said we need a special prosecutor.  This guy Fitzgerald is the best of the best.  Remember when they said that, just like they said about Harriet Myers, the best of the best.  Whenever they say that, you know there‘s trouble.

HOLT:  If this were a side show, I‘m not sure anybody would by any tickets.  It‘s an incomprehensible story.  I‘m not sure that people have a thought that‘s this is at all relevant to how we engage in the war on terror.  I‘m not sure anybody even knows who Scooter Libby is. 

(CROSS TALK)

HOLT:  It seems to me that this is all about a prosecutor that needs a little fireworks to get his case going.  You know the defense attorneys, just because they say it, doesn‘t mean it‘s true.  I think there is a whole lot more important issues that the American people would like us to be talking about than Scooter Libby and whether or not he lied.  Although, if he lied, he ought to be held accountable. 

CARLSON:  Yes, but am I the only one who thinks it‘s the scariest possible scenario when a prosecutor is out of control.  I mean, there‘s nothing scarier than that, because he has got the power of the government.  He has guns behind him. 

HOLT:  But these independent prosecutors are a sucking money pit.  The American people ought to be concerned when it costs two or three million dollars every time we appoint a special prosecutor. 

CARLSON:  Speaking of sucking money pits, the Hillary Clinton for president campaign has all but announced—and they are all sucking money pits.  It‘s not just Mrs. Clinton.  They all are.  They spend a lot of money on these campaigns, spend hundreds of millions.  But she has essentially announced that she will not be taking matching funds, either in the primary or general elections. 

She is opting out of this very complex campaign finance system, pushed by Democrats in order to shield the political process from undue influence from special interests.  How can she, with a straight face, do that?  How can John McCain, with a straight face, not take federal money and opt out of the system? 

STODDARD:  Well, it will be interesting to see what happens with McCain obviously, but I think he will be able to fall back on -- 

CARLSON:  Since he wrote the legislation himself. 

STODDARD:  He will be able to fall back on the fact that if everyone else is not doing it, he can‘t do it either.  The system has made its demands.  She has made the call that she can raise the money and that taking the matching funds is not going to help her. 

CARLSON:  I think she is doing the right thing.  I don‘t think she is doing anything immoral at all.  I am just saying, she‘s doing something very hypocritical, because she is a member of a party that has pushed this nonsense for so many years.  Do you know what her spokesman said, Senator Clinton would support modernizing the campaign finance system.  This bill just passed about 20 minutes ago, McCain/Feingold.  Bush signed it.  It is modern. 

HOLT:  Two things, good for her, because the current system is broken and she can‘t compete and become president if she opts to stay in the system.  But I find it very hypocritical that the Democratic party, who for years thought that the taxpayer ought to fund election campaigns, public financing was the way to go, they have all abandoned that for obvious political reasons. 

CARLSON:  Well good.  I hope we can stop talking about it.  I hope the death of campaign finance reform, we can acknowledge that it‘s ridiculous.  Rudy Giuliani, Alexandra, is apparently selling part of his business, Giuliani Associates, the part that deals with Wall Street, the part that would have the most potential conflict, were he to assume federal office.  Is he really going to run for president? 

STODDARD:  Well, if you check all the boxes, it certainly looks like that.  I have to jump in with the conventional wisdom and say that—just like people do about Barack Obama, that he really hasn‘t been tested on the national stage, and he hasn‘t been subjected to—especially in these conservative primaries by conservative—I don‘t know who is polled in these polls, where he beats everybody.  I don‘t know if they are the real primary voters of the Republican party. 

HOLT:  Well, I‘m not sure that they are, but ultimately—

STODDARD:  I see the appeal and I think he‘s going to go for it, but I just don‘t see how he overcomes the many liabilities he has. 

CARLSON:  Well, the first time somebody says, some nasty little reporter, me potentially, says to Rudy Giuliani, you know, what‘s your problem, buddy, answer the question.  He‘s going to flip out, don‘t you think? 

HOLT:  No, I‘m not sure he will.  I think that he has the kind of composure—Remember, Rudy Giuliani, when he was an attorney, a prosecutor, as the mayor of New York, he is operating in the most hostile media environment known to man.  I think he can be very media savvy.  He has a quality that‘s quite intriguing for Republicans over and above the issues.  That is he has demonstrated leadership qualities, things that sometimes pave over the specific issues of the day, somebody who can stand up and offer a hopeful message, somebody who has demonstrated they have led during a difficult time.  That is a strength of Rudy Giuliani that can‘t be discounted in a national campaign. 

CARLSON:  Plus his father is Kenyan. 

HOLT:  There you go.

CARLSON:  Coming up, we expect a very personal, even emotional Democratic response to the State of the Union from Senator Jim Webb of Virginia, whose son‘s tour in Iraq was just extended by the troop surge.  Insight on what we may hear from another Virginia Democrat.  That‘s next. 

Plus for the first time in his experience, President Bush will face the Congress with his opposition sitting just right over his shoulder.  What to watch for from Speaker Nancy Pelosi when we come back. 

(COMMERCIAL BREAK)

CARLSON:  Tonight‘s official Democratic response to the State of the Union will be delivered by Senator Jim Webb of Virginia.  Senator Webb is a veteran, a father of a U.S. marine now serving in Iraq.  He himself is vehemently opposed to the war.  For insight into what the senator will say, we are joined now by another Virginia Democrat, Congressman Jim Moran.  Congressman welcome. 

REP. JIM MORAN (D), VIRGINIA:  Well thank you Tucker. 

CARLSON:  Why, of all the senators on the Democratic side, some of whom know a lot about—Joe Biden, for instance, who‘s served since 1972, knows everything about foreign policy.  Why Jim Webb? 

MORAN:  Well, he‘s the only one, as far as I know, with a son serving in Iraq, in the Marines.  But he is also a guy that is very genuine.  He is not partisan.  He tells it like it is.  I know his chief of staff, because he used to be my chief of staff.  He‘s going to tell him, you know, just be moderate about this and not harsh. 

He‘s going to—I think the White House is going to be pretty upset about both his tone and the content of his speech, because it‘s going to be what the American people want to hear.  They want to hear that we‘ve got a different course, a different strategy for getting out of Iraq, and it‘s time to show something economic fairness to the middle class and the working class in America. 

CARLSON:  So, as far as I understand, Senator Webb‘s idea was to take the money earmarked for the reconstruction of Iraq and divert it to New Orleans for the reconstruction after Katrina.  Are you familiar with this idea? 

MORAN:  I don‘t think he‘s going to get into that. 

CARLSON:  What do you think of that idea? 

MORAN:  I think that I would have taken even a small portion of what we wasted in Iraq and investing it in one of America‘s major cities is a good idea.  You have been down to New Orleans, I‘m sure, Tucker. 

CARLSON:  And I have been to Iraq. 

MORAN:  There is only half of New Orleans left.  I think it‘s a darn shame.  I have also seen Iraq and we have destroyed much of Iraq.  I think it would have been a better investment. 

CARLSON:  The ugliest buildings in almost every single American city are government buildings.  So, I guess I don‘t trust the government, certainly in its stays in architecture, pretty awful. 

MORAN:  I don‘t think Jim Webb is going to suggest that we build monolithic office buildings in New Orleans. 

CARLSON:  You said that he was chosen because he is the only member of the Senate with a son in Iraq. 

MORAN:  You know, I‘m not sure why he was chosen, but the fact is that he has handled himself very well since coming into the Senate.  He beat a major Republican incumbent, somebody who was going to run for president.  I think the way he communicates to the American people in such a genuine manner, he is very believable and he should be, because he is telling people exactly what he thinks.  He is kind of the a-political—the most a-political senator we have. 

CARLSON:  On social issues he‘s one of the most conservative.  He has got a concealed weapons permit.  How long before Jim Webb—my favorite Jim Webb quote, I never tire of repeating it, I wouldn‘t cross the street to watch Jane Fonda slash her wrists.  So, how long before a guy like that has problems with his fellow Democrats?  Ted Kennedy, I suppose a friend of Jane Fonda‘s; how long before there is a culture clash there, do you think? 

MORAN:  I think if that people grow and mature, and if I had been in the midst of fighting in those marsh lands in Vietnam and - I probably would have reacted in much the same way.  If you read his books, you see that he is very genuine. 

CARLSON:  He is. 

MORAN:  And I don‘t blame Jane Fonda for being opposed to the war, but neither do I blame Jim Webb for defending those who were fighting the war. 

CARLSON:  I think Webb‘s problem was her open sympathy with the enemy. 

MORAN:  Aren‘t we getting a little far afield from the State of the Union, Tucker? 

CARLSON:  Let me ask you about contemporary politics.  Hillary Clinton has all but announced she is opting out of the campaign finance system. 

MORAN:  Because she can afford to. 

CARLSON:  You must have a moral problem with that.  Most supporters of campaign finance reform would. 

MORAN:  I have a moral problem with a lot of things, but that‘s way down the list, I‘ve got to tell you.

CARLSON:  But it‘s wrong though, you have to concede that. 

MORAN:  I think it would be better if we had public financing, so that elections weren‘t so influenced by the amount of money that you can raise, because much of the political process now is a matter of raising money.  I think that does a disservice to the citizens, the electorate. 

CARLSON:  But here Mrs. Clinton was a supporter, voted for the McCain-Feingold legislation, which she is now ignoring.  That‘s kind of weird, isn‘t it? 

MORAN:  Didn‘t George Bush opt out? 

CARLSON:  Yes, and then he went and signed the McCain-Feingold bill, unconstitutional bill, to his great shame. 

MORAN:  I think campaign finance is a good thing, generally speaking, and I‘d like to see a tougher campaign finance law.  I‘m not surprised that Mrs. Clinton is not going to—is going to opt out of the current system.  I think we ought to have a better system.  I don‘t think that says much about her candidacy.  I think the fact is that she is very popular.  She knows that she can raise a lot of money, and much of it is for all the right reasons. 

CARLSON:  You know a lot about politics.  In 30 seconds, can you tell me why—let‘s say I‘m a Democratic voter—why in the world, why in the world would I vote for Hillary Clinton over Barack Obama?  Why would I do something like that? 

MORAN:  I like both of them very much.  Barack Obama excites me.  But I think if you are looking for someone who was articulate, extraordinarily intelligent, has a vision of a better America and a safer world, I think you would find her very persuasive, Tucker. 

CARLSON:  I would find Barack Obama much more persuasive.  That‘s just me. 

MORAN:  I like Barack very much.

CARLSON:  Keep the faith.  Thanks Congressman. 

MORAN:  All right buddy.

CARLSON:  Coming up, President Bush gave his last televised speech before the camera in the White House library.  How will he do in front of a joint session of a Democratically controlled Congress?  We have got predictions.  Be right back. 

(COMMERCIAL BREAK)

CARLSON:  State of the Union always a big night for president and for Congress.  With the majority of Americans and their elected representatives pitted squarely against the Iraq war, though, President Bush is especially on the spot tonight.  How will he do? 

For final thoughts, joining us again associate editor of “The Hill Newspaper,” A.B. Stoddard, and Republican strategist Terry Holt. 

A.B., do you think there is any chance that there are members of the president‘s own party waffling on supporting him on the war in Iraq, who will be won over by what he says tonight? 

STODDARD:  That‘s really his toughest challenge.  I think that‘s really the only thing he wants to accomplish tonight, is to try to keep this running for the hills to a minimum.  I really don‘t think, at this point, I think they have all assessed situations for themselves.  I don‘t think there is anything that shifted after the speech.  And the speech from two weeks ago was known.  Everyone knew what he was going to say.  I don‘t think there is much he can say at this point to speak to the Republicans.  I really don‘t.

CARLSON:  Do you think there are winnable Republicans out there? 

HOLT:  I think that there are Republicans that are still waiting for the Republican president to say something that will re-inspire them.  But frankly, I‘m not sure that most of the news in the speech is going to be on the topic of Iraq.  I think it‘s going to be about energy where the president really is proposing some revolutionary ideas that may put some Democrats on the spot. 

CARLSON:  But he‘s got to help.  It seems to me, he‘s got to offer something to Republicans in return for their support on the war.  He desperately needs some of them to hang in there with him.  Is he giving them anything in return tonight, do you think? 

HOLT:  Well, I think that this is going to be pretty much—I think he‘s married to the policies that he has articulated.  He is not someone who waffles.  We said a little bit earlier he doesn‘t care about public opinion, and I think that those leadership qualities demand that he is going to have to stay between the lines on Iraq tonight. 

STODDARD:  What‘s interesting is that he is going to address Iraq, and it could go—I think he is going to spend too many minutes on it, from what I read, actually.  The fact is he‘s going to come before the Congress and say what he has been saying before and what Vice President Cheney has said, which is: if you want to criticize my plan, you need to come up with your own.  Of course, the Democrats have made the case that they have their own plans out there, that they have written letters to him, that there are a phased redeployment or this kind of redeployment, or whatever it is, that they have plans they have proposed. 

He is going to be confrontational before a hostile audience, I mean, really in both parties, and a hostile public about the war.  I just think it‘s sort of—I mean, we‘re not watching the speech right now, but from what we‘re being told, I think it‘s a mistake.  I mean, I think he has a choice to reposition himself within the domestic agenda, and that‘s what he should spend the bulk of his time on.  I think on Iraq he is going to do himself no good. 

CARLSON:  Do they see this as a big deal, the White House?  Do they kind of throw off this blase attitude so often?  Do you think Bush and his advisers recognize this is a genuinely significant speech? 

HOLT:  Every State of the Union is significant, and I think that this is a time for the Republican president to finally engage the Democratic leadership in the House of Representatives, the first time he has ever faced a completely Democratic Congress, and it is, in many ways, one of those situations that may be good drama tonight. 

I‘m not sure that—I was in the chamber in 2002 when he had such high approval.  We were all still emotionally wrought over what had happened to the country at that time.  Since then, there has been an erosion in that patriotism, in that sense of unity.  I think he does have to tell people that there is still a reason to be unified in the face of terrorism in the world, but he has got other ideas that we potentially could make progress on, even in the face of that war. 

CARLSON:  What do you mean this is his last address?

STODDARD:  This is the last time people will listen.  Next year, when he gives this address, it will be in the middle of these primaries, and no one is going to tune in.  I wonder how many people are going to show up in the chamber. 

CARLSON:  It will be weird next time, because it is likely that that will take place right in the middle of the primary season.  It‘s possible that his successor will be sitting there, in fact, likely that his assessor will be sitting there in the Senate that night. 

STODDARD:  This is absolutely the last time that people are listening.  If you look at the polls and the way that they are going and how restive the public is about his performance, the fact that they are indicating they no longer trust his decision making, they don‘t trust his willingness, there were much better numbers for Clinton, when he faced a Republican Congress, about his willing—the public‘s perception of his willingness to work with the other side. 

And unless Bush makes a huge proclamation tonight—I recommend the era of nation building is over—then I don‘t think that‘s going to budge. 

CARLSON:  I tend to agree with you.  Thank you both, Terry, A.B.  That does it for us.  Thanks for watching.  Stay with us all night for complete coverage of the president‘s State of the Union Address.  Up next, “HARDBALL” with Chris Matthews.  We‘re back in hour with another live show.  See you then.

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

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