updated 7/16/2007 1:26:07 PM ET 2007-07-16T17:26:07

Guest: Montgomery Blair Sibley, Rep. Dennis Kucinich, Eugene Robinson, JimMoran, Phil Gingrey, Kate O‘Beirne, Mike Duffy, Joe Califano

MIKE BARNICLE, GUEST HOST:  It‘s Friday the 13th.  Which politician could use a little luck?  A, President George Bush, B, Senator John McCain, C, Senator David Vitter, or D, all of the above?

Let‘s play HARDBALL.

Good evening.  I‘m Mike Barnicle, in for Chris Matthews.

Tonight, new details emerging on the scandal involving Louisiana senator David Vitter and women of the night.  The Associated Press reports phone records show that the woman accused of running the prostitution ring in Washington made five phone calls to Vitter‘s office when he was a member of the House, including two during votes.  And we‘ll talk to the attorney representing the so-called “D.C. madam” in a moment.

Plus: Are Hillary Clinton and John Edwards plotting to exclude their lesser-known opponents from being included in future forums and debates?  This slip of the tongue was caught on an open mike during the NAACP forum Thursday.

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE:  They are

they are just being trivialized.

JOHN EDWARDS (D-NC), PRESIDENTIAL CANDIDATE:  (INAUDIBLE)

CLINTON:  You know, I think there was an effort by our campaigns to do that, that somehow we could.  We‘ve got to get back to it because that‘s all we‘re going to do (INAUDIBLE)

Thanks, Barack!  Thanks, Dennis!

Our guys should talk.

(END VIDEO CLIP)

BARNICLE:  (INAUDIBLE) have a great afternoon, but don‘t come back.

And you remember the political ad featuring the Obama girl?  Well, now she‘s getting ready to face off with Rudy‘s girls.

(VIDEO CLIP)

BARNICLE:  Oh, man!

And President Bush is at war with Iraq and with Congress.  Tonight, the HARDBALL debate with two of the fiercest congressmen on the Hill.

And today, President Bush met with columnists at the White House.  One of them was HARDBALL political analyst Kate O‘Beirne, and we‘ll get the full debrief from her later in the show.

But first, HARDBALL‘s David Shuster has this report on Senator David Vitter and some of the other sexual escapades that have taken place in your nation‘s capital.

(BEGIN VIDEOTAPE)

DAVID SHUSTER, HARDBALL CORRESPONDENT (voice-over):  Two years ago, when Louisiana Republican David Vitter ran for the U.S. Senate, he focused on family values.

SEN. DAVID VITTER ®, LOUISIANA:  Nothing to do with party politics.

It has to do with Louisiana families.

SHUSTER:  Today Vitter is in seclusion for the fifth day in a row.  This week, his phone number was found in the records of a Washington, D.C., escort service called Pamela Martin and Associates.  Deborah Jeane Palfrey ran the service and is facing prostitution charges.  She denies them.

DEBORAH Jeane PALFREY, ALLEGED “D.C. MADAM”:  I operated a sexual albeit legal business for 13 years.

SHUSTER:  Palfrey says she has no record of who the clients were who might testify in her defense.  So two months ago, she gave some of the phone records to ABC News.  ABC found a match with a Bush administration State Department official, Randall Tobias, and Tobias resigned.  Now Palfrey has posted all of her phone records on the Internet, and the site has become a hit with people wanting to cross-reference numbers and check on boyfriends, husbands and D.C. celebrities.

Today, one journalist found another twist about David Vitter.  When he was a member of the House, the escort service called Vitter at least twice during roll call votes.

Most politicians this week have refused to talk about the Vitter sex scandal, but South Carolina senator Jim DeMint, a friend of Vitter‘s, says he has exchanged messages with the senator.  He says Vitter intends to return to the Senate next week and will not quit his job.  DeMint also told “The Capitol (ph) News Connection,” quote, “I think all of us have to look at it and say we can be next.”  That comment has fueled speculation about other possible D.C. madam clients.

Washington has long been home to some incredible sex scandals.

REP. MARK FOLEY ®, FLORIDA:  This has been a year you will remember for the rest of your lives...

SHUSTER:  Congressman Mark Foley was a top supporter of the House page program.  Last fall, he resigned from Congress after it was revealed he sent some of the male pages graphic e-mails and sexually explicit text messages.  The most famous sex scandal in Washington, of course, involved President Clinton.

WILLIAM JEFFERSON CLINTON, PRESIDENT OF THE UNITED STATES:  I did not

have sexual relations with that woman, Ms. Lewinsky.

SHUSTER:  Clinton eventually was impeached, but in the midst of that action by the House, Republican Speaker Newt Gingrich was having an affair.

Gingrich resigned the speakership for other reasons, but the new Republican speaker, Bob Livingston, soon admitted to marital infidelities, and Livingston stepped down in dramatic fashion in the well of the House.

REP. BOB LIVINGSTON (R-LA), FORMER HOUSE SPEAKER:  To my colleagues, my friends, and most especially, my wife and family, I have hurt you all deeply, and I beg your forgiveness.

SHUSTER:  Over the years, some politicians snared in a sex scandal have denied any wrongdoing.  D.C. mayor Marion Barry was caught cheating on his wife and smoking crack.  Mayor Barry blamed his mistress.  Other politicians have admitted to everything.  Remember Jim McGreevey, a married man who was the governor of New Jersey?

JAMES MCGREEVEY (D), FORMER NEW JERSEY GOVERNOR:  And so my truth is

that I am a gay America.

SHUSTER:  In Los Angeles today, the mayor of that city was showered with boos.  A few weeks ago, the mayor admitted he was having an affair with a reporter for the Spanish-language network Telemundo.

(on camera):  Here in Washington, though, with journalists, investigators and even “Hustler” magazine publisher Larry Flynt poring through phone records, the capital is filled with anticipation.  Almost everybody is waiting to learn where the D.C. madam sex scandal spotlight is going to shine next.

I‘m David Shuster for HARDBALL in Washington.

(END VIDEOTAPE)

BARNICLE:  Thanks, David.

Montgomery Blair Sibley is the attorney for the alleged D.C. madam Deborah Jeane Palfrey.  Well, we‘ve seen sort of an all-star team of philanderers right there in David‘s set-up piece.  How did she retain you and why did she retain you as a lawyer?

MONTGOMERY BLAIR SIBLEY, ATTORNEY FOR “D.C. MADAM”:  Well, I have an

expertise in civil forfeiture, which is how this matter started back in October, when the government seized all her assets and left her indigent.  And we found each other through the Internet, and she ultimately retained me to represent her.

BARNICLE:  On her tax form, on Ms. Palfrey‘s tax form, what does she list next to the word “occupation?”

SIBLEY:  Well, all her tax forms for the 14 years of this escort service were prepared by H. and R. Block.  And H. and R. Block put down that she ran a service of some sort, and I forget the exact phrase, but it‘s been a while since I‘ve seen the tax (INAUDIBLE) But that was put in.  And then every escort got a 1099 prepared by H. and R. Block at the end of the year.

BARNICLE:  Why did she release all these names and put them on the Internet?

SIBLEY:  Well, there were two reasons, Mike.  The first is very practical.  She‘s been charged with significant felonies.  And in order to defend herself and assert her 6th Amendment right to call witnesses in her defense, she needs to identify the customers of the service so that she can to call them to testify that there was nothing illegal going on.

There was no black book of names, and indeed, the only way we can identify customers at this point in time is to go through the telephone records and identify names with telephone numbers.  There‘s a second reason, if could jump in on that...

BARNICLE:  Yes.

SIBLEY:  We became aware in February and March, as we started to research these records on our limited resources, that there was significant public interest also resonant (ph) in those records.  And of course, Senator Vitter is now exhibit A for that supposition.

BARNICLE:  So did you advise her to release the names, put the names on the Internet?

SIBLEY:  Well, there‘s a consensus.  There‘s a legal time, but ultimately, that was our decision back in early March.  And we were immediately hit with a gag order because the Bush Department of Justice did not want these names coming out and fought for eight weeks.  And ultimately, Judge Kessler (ph) last Thursday lifted the gag order when the government could not produce an iota of evidence to justify such a thing.

BARNICLE:  You know, there‘s something about this, and now especially with the inclusion of Senator Vitter‘s name in this whole story, that, you know, you sort of want to take a shower before you even approach the story.

I mean, we‘re dealing here in Washington and around the country with issues of Iraq and, you know, a war that‘s ongoing, people dying.  And yet this obsession with sex, this obsession with prominent people, Washington people involved in this thing—you know, did you have anything to do with her linking up with Larry Flynt and “Hustler” magazine?

SIBLEY:  Well, the connection comes through a gentlemen named Dan Muldea (ph), who worked with Mr. Flynt back on the Bob Livingston thing almost a decade ago now.  And he is also co-writing a book with Jeane Palfrey on the entire experience she‘s gone through since her assets were seized last October.  When we were allowed finally last Thursday to release the records, we mailed out 50 copies of the records.  And it was Mr. Muldea who took the initiative to find me personally that day, get his copy and get a three-day head start on everybody else.

BARNICLE:  And are you getting any money from “Hustler” magazine?

SIBLEY:  We are getting no money from anybody for these records.

These are given out absolutely free.  They‘re on the Internet now, can be downloaded for free.  But no, we have no direct connection with “Hustler” or Larry Flynt.  It‘s only the connection through our common agent, which is Dan Muldea.

BARNICLE:  I mean, in your description of your client, I mean, you‘re sort of making her out to be a victim.  I mean, she doesn‘t sound like very much of a victim to me.

SIBLEY:  Well, I point out...

BARNICLE:  She sounds like a hooker who got caught.

SIBLEY:  Well, she‘s not a hooker.  She ran an escort service from California, and she arranged fantasy sexual experiences for men in the Washington, D.C., area for 14 years without any problems whatsoever.

BARNICLE:  You mean she didn‘t get caught.

SIBLEY:  Well, no, she was investigated many times by various vice squad agencies throughout the metropolitan...

(CROSSTALK)

BARNICLE:  Fantasy sexual experiences for men?  I mean...

SIBLEY:  Well...

BARNICLE:  ... that‘s not akin to running a bed and breakfast.

SIBLEY:  No, but it is akin to running a strip club, and there isn‘t a major metropolitan area in this country that doesn‘t have a club where men can go in and watch women take off their clothes and dance on their laps.

BARNICLE:  So what does the indictment charge?

SIBLEY:  The indictment charges money laundering because the service made, they allege, about $1.5 million or $2 million over 14 years, and a Travel Act violation for women crossing state lines for immoral purposes.

BARNICLE:  What do you figure—you know, not to—not—I mean, Vitter‘s name is in the thing now, so, I mean, you know, too bad for his family.  I feel badly for his family.  What do you figure they were calling up for, these—these men looking for fantasy sexual experiences?

SIBLEY:  They were looking for private time with young, beautiful women, educated women.  And I shouldn‘t use “young” because many of the women were in their 40s and 50s.  And that‘s what they were paying for, and that‘s what they got.  And there was no expectation or promise that there‘d be anything illegal going on.

BARNICLE:  Well, we‘ll watch it as it continues, but there are bigger things going on, certainly, but we appreciate you coming by...

SIBLEY:  Thank you, Mike.

BARNICLE:  ... Montgomery Blair Sibley.

Coming up: Hillary Clinton and John Edwards think the debate stage is too crowded, and Dennis Kucinich isn‘t going anywhere just because of that.

He‘s going to be here.

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

BARNICLE:  Welcome back to HARDBALL.  At Thursday‘s NAACP presidential forum in Detroit, Hillary Clinton and John Edwards were caught on tape giving their real opinion about the Democratic field.

(BEGIN VIDEO CLIP)

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE:  They are

they are just being trivialized.

JOHN EDWARDS (D-NC), PRESIDENTIAL CANDIDATE:  (INAUDIBLE)

CLINTON:  You know, I think there was an effort by our campaigns to do that, that somehow we could.  We‘ve got to get back to it because that‘s all we‘re going to do (INAUDIBLE)

Thanks, Barack!  Thanks, Dennis!

Our guys should talk.

(END VIDEO CLIP)

BARNICLE:  Well, Congressman Dennis Kucinich was also at that forum.  And responding to the tape, the congressman, who‘s here, said, “Imperial candidates are as repugnant to the American people and to our democracy as an imperial president.”

All right, now, we couldn‘t hear the other half of that conversation.  You were there.  You used to work for “The Cleveland Plain Dealer.”  Put on your reporter‘s hat.  Tell me what happened.

REP. DENNIS KUCINICH (D-OH), PRESIDENTIAL CANDIDATE:  Oh, I was just a

copy boy.

BARNICLE:  Well, I‘ll take it.

KUCINICH:  But well, as soon as the debate ended, Senator Edwards turned to Senator Clinton immediately, and they were involved in this intent conversation.  I wasn‘t interested in eavesdropping.  What I didn‘t know and no one else knew is there was a live mike and it was recorded.  And so that‘s—you know, that‘s what know.

But I also know, based on news reports, that an attempt apparently was made or had been made to try to rig the presidential election in terms of who participates in these efforts.  And for two candidates to get together and do that is really—really is very sad that—it‘s very sad.

BARNICLE:  What do you think the root of it is?  Is it John Edwards or is it more Hillary Clinton?  I mean, is it more Mrs. Clinton thinking that, you know, this is her right to be president, this is her right to clear the field and run for the White House?  What do you think?

KUCINICH:  Well, you know, I could say that Senator Edwards seemed to have initiated the conversation.  But going deeper, I think it‘s about fear.  I think it‘s about a fear of confronting issues such as the war and trade and health care, where there‘s real differences of opinion between myself, for example, and the other candidates, but there‘s not that much of a difference between Senator Clinton and Senator Edwards.  And so they come together and try to basically say, Let‘s make a deal, let‘s find a way to exclude these other candidates, and then it‘ll be just maybe, you know, the two of them or three.  I don‘t think that‘s acceptable.  That‘s not the way that Americans elect their presidents.  It‘s not going to be the way they‘re going to elect this president.

BARNICLE:  But—yes, but I mean, the debates, the way they are now, I mean, you have to concede, with all of you standing up there on the stage, with all of the weighty issues that we are confronted with in this country, the idea that each of you, whether it‘s Senator Dodd, whether it‘s Senator Clinton, whether it‘s you, you get, like, a total of three minutes in an hour-long debate to talk about the war in Iraq is ridiculous.

KUCINICH:  Well, that‘s true.  So that‘s an argument for more extensive debate, but it‘s not an argument for two candidates whispering to each other.

BARNICLE:  What‘s the argument for Mike Gravel?

KUCINICH:  You know what?  He has—I would say that everyone who‘s running there has something that they bring to that moment.  And I think that it‘s not—it‘s not—it‘s unseemly for two senators to be closeting themselves, whispering to each other in a way that says, well, you know, We‘ll work this out.  We‘ll figure out a way to reduce this field so we can have different types of debates than are happening now.  That‘s not appropriate.  That‘s not an appropriate role for someone who‘s a candidate for president.  We‘re not supposed to trying to manipulate the process so that we can exclude some and include others.  That‘s not an appropriate role for candidates.

BARNICLE:  Have you talked to any of the other candidates, any of the candidates talk to you about what happened yesterday?

KUCINICH:  No.  I mean, this is just a news story that broke today.  And I would say, you know, the sad part about it is—I mean, John Edwards is a friend of mine.  Hillary Clinton‘s a friend of mine.  If you—if you really believe that there could be a better way of conducting debates, then do it openly.  You don‘t have to do it like this.

BARNICLE:  Did you call your good friend John Edwards and say, Hey, Buster, I‘m staying?

KUCINICH:  No.  You know what?  I hope to talk to him about it because I think that it‘s very important to clear the air.  And he...

BARNICLE:  Are you aware of his statement that he released today, issued today, his campaign.

KUCINICH:  Yes.  I think it‘s something to the effect that—what did they say.

BARNICLE:  We can put it up on the...

(CROSSTALK)

KUCINICH:  Yes, I‘d like to see it.

BARNICLE:  I think—I think we have it.  Congressman (SIC) Edwards, his spokesman, actually, Eric Shultz, gave us this statement.  “Senator Edwards feels strongly that voters deserve more substantive debates between candidates.  One way to do that would be to break up the field into smaller groups for real debates.  However, he was not suggesting excluding anybody in particular.  While he thought the NAACP was a terrific forum, there are inherent limitations in any format.  You cannot explain how you will end the war in Iraq or solve the climate crisis in 60 seconds.”

So a rather lame explanation from...

KUCINICH:  Well, no, it doesn‘t pass—it doesn‘t pass the straight face test, frankly.  But beyond that, you know, we—we‘re being told, Don‘t believe what you saw, don‘t believe what you heard.  You know, Believe what‘s being said about what he did.

I think there‘s two issues here.  One is the conduct of this whispering between each other, saying, you know, We‘ll figure out how to arrange these debates.  And the second one is the explanation of the conduct.  The fact is, the American people deserve an open and honest debate.  And this is really a test of our democracy.  These issues are so important, and there are real differences of opinion, for example, between myself and Senator Edwards on trade, on health care, on the war and the conduct of the war and Iran, and the same with Senator Clinton.

So I hope they‘re not trying to limit their own exposure to being questioned about their positions because, really, it‘s so early in the campaign.

BARNICLE:  I mean, instinct would tell you, or at least it would tell me, that what they want is, you know, for them to have just two, John Edwards, Hillary Clinton, maybe a third join them in some debate, and take you and I don‘t know who else, Mike Gravel, maybe Bill Richardson, maybe Chris Dodd, maybe Joe Biden, and you guys can debate at the Port Authority terminal in Cleveland.

(CROSSTALK)

KUCINICH:  Well, you know what is great about that?  What is great about that is—is, when I heard that Senator Edwards said that, you know, he wants smaller debates, you know—I‘m 5‘6“, so, maybe that would qualify.

(LAUGHTER)

KUCINICH:  But the other possibility is—I sent him—I sent him a letter today.  And I sent Senator Clinton a letter, saying, glad you like these debates that are smaller.  Let‘s, the three of us, debate, and we will see who is the serious candidate.

So, I think—you know, I am waiting to hear from—a response and -

from them.  And I think that we can approach this amicably and we can have our debate.  And I‘m looking for to it.

BARNICLE:  Why not, when Chris comes back, you come in, and—and you could get Senator Edwards, and the two of you could debate about the debates?  Would you like to do that?

KUCINICH:  I would like to debate him on health care, because I think that his position is one which would keep the private insurers rolling in clover, making billion of dollars, while millions of Americans still don‘t have decent health care.

BARNICLE:  Do you like John Edwards?

KUCINICH:  Oh, yes.  I mean, I helped him in Iowa in the last campaign.

BARNICLE:  Do you like Hillary Clinton?

KUCINICH:  Absolutely.  I campaigned with her for—you know, over the years.

BARNICLE:  Even though they don‘t want you in the room?

KUCINICH:  Oh, well, that‘s OK.  You know what?  I‘m the kind of guy who believes I can win a rigged game.

(LAUGHTER)

BARNICLE:  Dennis Kucinich—thanks very much, Congressman.

Up next:  Can John McCain jump-start his campaign in New Hampshire?

And will Bill‘s first trip there with Hillary help her out?

You‘re watching HARDBALL, only on MSNBC. 

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BILL CLINTON, FORMER PRESIDENT OF THE UNITED STATES:  In my lifetime,

I believe she‘s the best prepared non-incumbent I have ever had a chance to vote for, for president of the United States.

(CHEERING AND APPLAUSE)

B. CLINTON:  And, when I cast my vote for her in 2008, it will be my 40th year as a voter.  So, that says quite a lot.

(END VIDEO CLIP)

BARNICLE:  Welcome back to HARDBALL.

In New Hampshire today, campaign stops from Democratic Senator Hillary Clinton and her husband, Bill.  They were both up there, as well as struggling Republican Senator John McCain.

Joining me now, Gene Robinson, newspaper columnist, “Washington Post,” assisting managing editor for “The Post.”

What—why did they give you that title?  To keep you out of the union or something?

EUGENE ROBINSON, ASSISTANT MANAGING EDITOR, “THE WASHINGTON POST”:

Yes, exactly.

(LAUGHTER)

ROBINSON:  You have been in the newspaper business for a while, haven‘t you, Mike?  Yes, I think so.  So, you know...

(LAUGHTER)

ROBINSON:  I serve at the pleasure of the publisher.

(LAUGHTER)

BARNICLE:  The Clinton‘s in New Hampshire.  You keep hearing—I have not seen them together.  But you keep hearing that he is the sun and she is the moon when they appear together.

ROBINSON:  Right.

Well, you know, when the two of them are together, there is a contrast.  It—I think it works both ways for them, because I think it helps her that they can be seen—you know, they are so easy together.  It‘s a clear that they are a couple that has been married for a long time.  They were comfortable with each other.  They kind of—the back-and-forth.

And I think that humanizes her.  But the other side of that coin is that, when they speak—you know, she‘s gotten a lot better.  I mean, she‘s—she‘s become a much better speaker and much better at connecting with audiences.

But Bill Clinton is on another planet when it comes to that.  And— and—and he—he just embraces the audience and embraces the moment in a way that very few political speakers I have ever heard in my lifetime can do.  So—so...

(CROSSTALK)

ROBINSON:  ... you have got to draw the comparison.

BARNICLE:  Yes.  You know, it‘s funny you say that.

I was watching something a couple of weeks ago.  And maybe it was their last joint appearance together.  She was speaking.  He—he spoke first.  And she followed him.  And the person that I was watching it with turned to me and said, she should stop yelling.  And she wasn‘t yelling, but the contrast...

ROBINSON:  Right.

BARNICLE:  ... was such that she appeared to be yelling, because she followed him.

ROBINSON:  Right, right, right.

He—you know, you could—you could probably analyze it technically and say, you know, the timber of their voices—and, you know, he has this kind of soft tone.  Again, it‘s very—very embracing.  And she—you know, she can sound a little metallic.  It‘s just the comparison.  Again, you would not have thought she was yelling if—if—if he had not spoken.

BARNICLE:  Let me ask you something about this city that we‘re in, Washington, D.C.

ROBINSON:  Mm-hmm.

BARNICLE:  You live here.  You work for “The Post.”

ROBINSON:  Mm-hmm.

BARNICLE:  You cover politics.  You write about a lot of other things, too...

ROBINSON:  Yes.

BARNICLE:  ... but politics specifically.

Yesterday, the House passes another resolution, you know, withdrawal of the troops from Iraq by April ‘08.  The Senate is debating the war in Iraq for—for two weeks.  Does—how frustrating does it get for you, as a citizen, not as a newspaper columnist, to live in a city where all they do is talk and talk and talk while people die?

ROBINSON:  You know, it‘s frustrating for me.  I have a feeling that, here in Washington—and this is—this is unfortunate—we get a little numb to it.  We get—we expect the talk.  We expect them to talk everything to death.

But you hear from people in other parts of the country.  I hear from military families, you know, who have—who have seen death or hardship of other kinds from this—from the war.  You hear from—you know, from people in other—around the country, and you get a since that—that Washington really is out of touch in—in—in that—in that way.

You know, most—most people here—Jim—Jim Webb is an exception

most people in Washington don‘t have that personal stake in the war, a son or daughter who is serving, perhaps a son or daughter...

BARNICLE:  Yes.

ROBINSON:  ... who has been injured or—or killed.

(CROSSTALK)

BARNICLE:  Or a sense of the sacrifice that...

ROBINSON:  Exactly.  Exactly.  The sacrifice is being made elsewhere.

And—and, so, you know, when I go home to South Carolina or go anywhere in the country, it‘s much more palpable.  And the urgency is much more—much more palpable out there.  And I don‘t think Washington quite gets that yet.

BARNICLE:  Gene Robinson, assistant managing editor, not the union.

Up next...

(LAUGHTER)

BARNICLE:  ... tonight‘s HARDBALL debate:  Is Congress‘ job to fund the war and keep their mouth shut?  We‘re going to find out.

You are watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

VERA GIBBONS, CNBC CORRESPONDENT:  I‘m Vera Gibbons with your CNBC “Market Wrap.”

Another record-breaking day on Wall Street, the Dow Jones industrial average closing at a record high of 13907, after gaining 45 points, the S&P 500 also closing at another record high, after gaining almost five, and the Nasdaq up today a little over five points—stocks helped by strong earnings from General Electric, the parent company of MSNBC and CNBC.  GE also announced plans to sell its subprime mortgage business and increase its stock buyback program.

Retail sales plunging nine-tenths-of-a-percent last month, the big drop surprising economists—it was the largest decline in almost two years.

Oil prices jumping today, rising $1.43 in New York trading, closing at $73.93 a barrel.

And former publishing mogul Conrad Black was found guilty on four of 13 counts in his fraud and racketeering trial.  He faces 35 years in prison.

That‘s it from CNBC, America‘s business channel—now back to

HARDBALL.

BARNICLE:  Welcome back to HARDBALL.  I am Mike Barnicle, in for Chris Matthews.

Thursday, President Bush reiterated his opinion that Congress should fund the war, not decide how it‘s fought.  Well, is he right?

That‘s the topic of tonight‘s HARDBALL debate.

Democratic Congressman Jim Moran or Virginia sits on the Appropriations Committee.  And Republican Congressman Phil Gingrey of Georgia sits on the Armed Services Committee.

Congressman Moran, let me ask you something.  The president steps up to the plate, and he basically says to you guys:  Just give me the money.  I will run the whole thing.  And leave me alone.

Is that not what he said?

REP. JIM MORAN (D), VIRGINIA:  Yes, that‘s certainly what he said.

That‘s not what is going to happen.

Of course, he has been trying to rewrite the Constitution since he got into office.  It‘s our responsibility not only to declare war, but to determine whether that war should be funded.

I don‘t think that we have fulfilled our responsibility for most of the last six years.  But the American people are demanding that we respond to their will.  And their will is that we get out of this fiasco in Iraq.

BARNICLE:  Congressman Gingrey, one other thing that the president said in his press conference yesterday was that he didn‘t want to end up with Congress running this war, Congress telling the generals what to do, that he wanted to listen to the generals and not Congress.

(CROSSTALK)

BARNICLE:  And, yet, all I could think of was General Shinseki.  He was a general who clearly was not listened to.

REP. PHIL GINGREY ®, GEORGIA:  Well, General Shinseki wasn‘t there at the time when he—he recommended a higher number of troops.  Maybe he was right.

But I remind Jim, talking about the Constitution, absolutely, Congress has constitutional power to declare war and to fund the war.  But the president has the constitutional power and authority to run the war.  He is the commander in chief.  And I think it‘s totally inappropriate for Congress to try to tell General Petraeus, as an example, and these other combatant commanders how to conduct the war.

Jim has the checkbook over there in the Appropriations Committee, along with John Murtha.  If they want to cancel the checks and stop writing them and end the war, they have the authority and—and the right to do that.

MORAN:  Phil, when—when President Bush said that Iraq was part of the war on terrorism, there was not one single uniformed officer who believed that he was correct.  They followed his orders.

But, for the last six years, he has mismanaged this war.  And it is time to bring our troops home, before we lose more of them.  The fact is that this policy is not worthy of the sacrifice of our troops and the military—our military families.  It‘s not right.

GINGREY:  Well, we have a plan.

MORAN:  It‘s not fair.  And it has got to end.

GINGREY:  Jim, we have a plan, as you know, the new forward.

MORAN:  What is the plan, Phil?  To stay the course.

GINGREY:  But, look, we have asked General Petraeus to give us...

MORAN:  That course has led us in the wrong direction for six years.

GINGREY:  ... to give us a report in two months from now.  And I think we owe it to the—to the families of the 3,600 who have given their lives and the thousands more that have been injured to give victory a chance, Jim.  And I think we have that obligation.

And that‘s what I talked about yesterday on the floor of the House.

You know.  You were there..  And I talked about those six or seven...

MORAN:  I heard you, Phil.

GINGREY:  ... from—from my district.

MORAN:  But, you know, we have been getting respects for four years now.  How many times do we have to be told this isn‘t working?  The Iraqis are not stepping up to the plate.

(CROSSTALK)

MORAN:  This government isn‘t...

GINGREY:  Let me...

MORAN:  ... is not worth the—our treasure, and particularly the lives of our soldiers.

GINGREY:  You know what we have been hearing, we have been hearing...

MORAN:  This Iraqi government isn‘t functional, Phil.

GINGREY:  ... Jim, from the Democratic minority at the time, and now the majority, of which you are a part of.  But this—this backbiting and sniping and criticism started in July of 2003, and it has continued.

It was:  We don‘t have enough troops.  We have too many troops, too little too late.  You know, everything that the president and the commanders have tried to do, you have not given them a fair chance to give victory a chance at success.

MORAN:  As Mr. Duffy (ph) said, the fact is that we were told by General Shinseki in the Defense Appropriations Committee that we needed 400,000 troops if we were going to wage war in Iraq.

And Rumsfeld said, no, I know better than that.  The president decided he knew better.  They turned down the recommendations of our generals.  And they went ahead with inadequate troops, with a—they went to war without any plan to win the peace, no exit strategy.  And now we are stuck in this quagmire.

But they are not paying the price.  Our soldiers are paying the price.

And they shouldn‘t be.

BARNICLE:  Congressman Gingrey, let me—let me ask you a question, at the risk of sounding like we are ganging up on you, Congressman.

(CROSSTALK)

BARNICLE:  But you mentioned the word victory a couple of minutes ago, victory in Iraq.

Define victory for me, would you?

GINGREY:  I will be glad to.

Victory would be to be there long enough to give the Iraqi military and police an opportunity to be qualified, to be trained, to be—to be manned, to be equipped, so that they can secure that country, so that the man on the street, the Iraqi citizen, can have confidence that their government can protect them.

They don‘t have that yet.  That‘s what we are working.  That‘s what these military transition teams that we are embedding with their military in each and every province in Iraq, and—and, as my good friend from Virginia talking about General Shinseki—General Shinseki probably was right.  Mistakes have been made.  There is no question about that.

But, on the House Armed Services Committee, I am a proud member of a -

of a committee—Subcommittee on Oversight and Investigation.  And, yesterday, while this debate was going on, on the floor to cut and run— absolutely, that‘s what it is—we were hearing from General Wesley Clark, a—a Democratic marquee name.  And he said it would be an absolute to pull these troops out immediately, like that bill called for.

(CROSSTALK)

MORAN:  Phil, I respect you, but I can‘t believe what I am hearing from you.

The fact is, we have given more training to the Iraqi troops than we have given to our own troops.  We have spent more training them than we spend for our own.  And we‘re—and it‘s our troops that are going into battle, not the Iraqi troops.  They are hanging back.  I guess they are resting up, so that they can participate in the insurgencies at night.

The fact is, what we are doing is arming and equipping and paying the very people that are—that go and shoot us and shoot each other when— when we‘re—they‘re not under our control.  And we‘re going to wind up leaving all these weapons behind.  They‘re going to use them to shoot at each other.

BARNICLE:  We have to cut it out at that point.  Congressman Gingrey, Congressman Moran. Thanks very much.  It‘s a tough topic.

Up next, our HARDBALL panel will break down the big news of the week.

This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

BARNICLE:  Welcome back to HARDBALL.  Now it‘s time to dig into the top political headlines of the day.  And here to do it with us, the “National Review‘s” Kate O‘Beirne, who met with President Bush today.  Good for you Kate.  Former Secretary of Health Education and Welfare, Joe Califano, author of “High Society: How Substance Abuse Ravages America and What to do About It.”  He‘s been pushing candidates to address addiction.  And “Time” magazine‘s Michael Duffy (ph), who co-wrote this week‘s cover story, about faith and the 2008 election.

First up, first topic.  Only four GOP defections yesterday, Thursday when the House passed a bill calling for a troop withdrawal that by April of 2008.  But the big headline might not be the actual passage of the bill, but how few Republicans signed on to it.  Only four of them crossed over, despite all of the talk about parting ways with the president over his failing Iraq policy.  When push comes to shove, does the president have more support in Congress than some think?  And Kate O‘Beirne, you were at the White House today, does he care?

KATE O‘BEIRNE, “NATIONAL REVIEW”:  Well, yes, he does to this extent.  He points out that he is commander and chief as certain tools as he puts it.  He has to sign legislation as we saw in the spring.  He vetoed legislation that had passed with a majority that had acts that had dates certain for withdraw.  So he has that authority.

He takes upon himself the duty.  He mentioned a number of times, it‘s up to me to keep explaining to the both the American public and Congress, what the stakes are, how the new mission is achieving, at least in the short term, some of it‘s goals.  Guardedly optimistic.

And he is also utterly determined to give General Petraeus everything General Petraeus asks for.  That‘s the solemn pledge, I think he feels he has taken.

BARNICLE:  Joe Califano, you said in another White House under Lyndon Johnson during another war.  Talk about that.  The differences.

JOE CALIFANO, FMR. SEC. HEALTH, EDUCATION AND WELFARE:  I think there

are big differences.  I mean, I think, one, George Bush chose this war.

Lyndon Johnson inherited a war that he had to fight, had to deal with.

Number two, this is being fought by a voluntary army, basically by poor people.  You‘ll recall, on October of ‘67, Lyndon Johnson said no more college deferment, no more graduate school deferments.  I‘m going to spread the pain all across our society with a lottery, that was another big difference.

Number three, went after the tax bill, he fought for 18 months to get a tax bill to pay for the Vietnam war.  The last budget was in surplus in 1969.  George Bush hasn‘t done that.

And I think lastly, think about what Lyndon Johnson did in one of the

most extraordinary acts of abnegation.  He said, I am not going to run for

re-election.  I am going to try to end this thing, end this thing on my

watch.  He did all kinds of things to try and end it.  Stopped the bombing, stopped everything.  And then, you know, almost got to the table.  Then the Russians invaded Checkloslovakia.

BARNACLE:  Mike Duffy, “Time” magazine.  I asked Kate O‘Beirne.  Well, Mike Duffy is dropped out of the picture for awhile.

O‘BEIRNE:  I will tell you one major difference.  The president is not anticipating the same kind of end, as we saw in Vietnam.  We are at some point, our troops were going to com home.  He will talk, actually in the context of talking about the Iraq study group, he will say what he wants to see done, is getting to a point, with respect to support on the part of the public and Congress, where there will be agreement to sustain an on-going troop commitment to Iraq.

BARNACLE:  He was talking about the Iraq Study Group report today with you?

O‘BEIRNE:  Sure.  Sure.

BARNACLE:  Did he just finish reading it?  He got it in December.

O‘BEIRNE:  No, no.  Even at the time, you know, they had no problem endorsing parts of it.  As you know, the Iraq Study Group itself said, that they could see the need for, possibly a surge in the short term, in order to bring the security situation into such a place as to permit the political reforms we need to do.  But he is anticipating and wants to see, a consensus.  I think what he is driving towards is, a consensus on the part of the political community to permit some level of troops over the long term.

BARNACLE:  Personally, what was his mood today?  Did he seem upset, did he seem sad?  What did he seem like? 

O‘BEIRNE:  He seemed confident, determined and relaxed.

CALIFANO:  But also, remember ...

BARNACLE:  What did Johnson seem like?

CALIFANO:  Johnson was reluctant.  He never wanted to fight that war.  What he wanted was the great society.  What he wanted was Medicare, Medicaid, the education legislation, the civil rights legislation.  And I think one things driving him to continue there, was that he, you know, Truman had lost China.  And the way he fought it, Truman had gone into Korea and the Fair Deal was dead on arrival.

The other thing, I don‘t know, with Bush, I don‘t think it‘s in his, as he sees it, even in his political interest, if you will, for the way he looks at this thing to give the Democrats any cover if there is a pull out or if there is a cut off.  So I think he is going to—I don‘t think he is going to budge.  This is—watching from a distance.

BARNACLE:  He seems to have, from a distance.  You know, just seeing him on TV, I don‘t see him in the White House like you people do, he seems to have this messianic belief that it‘s a mission like God has told him to do this in Iraq.   Am I off base here, thinking that?

O‘BEIRNE:  He sees Iraq as, and he, of course, has said this many times, he said it again today, Mike.  He sees the war against radical Islam the same as the cold war.

He thinks we are in it for a very long struggle, not unlike the cold war.  Against an enemy with a global reach.  One frustrating difference he points out, as we have this highly trained sophisticated military, but it is asymmetrical warfare, so the expression he uses is, we stand up against our enemies, this highly trained force, and they are killed by $100 IEDs.  But he sees it as a long struggle not unlike the cold war and Iraq is a key part of it.

Mike Duffy from “Time” magazine.  Do you think the president really cares about defections Democrats or Republicans or is it just the mission in his mind that‘s the most important thing?

MIKE DUFFY, “TIME” MAGAZINE:  I think what he carried about this week, Mike, was the time table.  I think he wants to get to September.  And he won that this week.

His goal is to hold the debate about what to do next until September when he controls the timing and the delivery of the statement by General Petraeus and Ryan Crocker.  That way, he gets to control the terms of the debate when he, as most people believe, will pivot into another phase.  What that phase will look like, I am not sure.  But he didn‘t want to have that pivot this month in the middle of the summer.  He wanted to wait until this period that they bought themselves in January for the surge had come to an end.

BARNACLE:  You are shaking your head, go ahead.

O‘BEIRNE:  I saw no—in fact, he says quite the contrary.  He does not seem to be contemplating a pivot into a different phase.  Now of course, we raised with him, news stories this week.  That there were some in the White House who did favor that.  And he brushes those off by explaining there are a lot of talkers in town and points out that he is not among them.  We got no impression that he himself is contemplating pivoting.  What he is looking forward to is General Petraeus‘ report and he seems determined to follow General Petraues‘s advice.

BARNACLE:  Wait until September.

We‘ll be right back with our panel.  You are watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

BARNACLE:  Welcome back to HARDBALL.  We are with the “National Review‘s” Kate O‘Beirn who met with President Bush today.  “Time” magazine‘s Mike Duffy and Joe Califano, former Carter administration Secretary of Health Education and Welfare, who happens to be pushing politicians to do more about addiction in this country.

David Vitter, details unveiled, busted for using a D.C. escort service.  The Louisiana Senator has been missing in action for days, and we learned today that Senator Vitter‘s transgression not only occurred while he was a member of Congress, but the D.C. Madam called him during actual roll call votes.

Plus, a new report from the “Times Picayune,” that‘s New Orleans‘s newspaper, has another prostitute who said she had relations with Vitter.  With Republicans trying to hand onto every vote they have, will David Vitter be forced to resign?

This is a serious change of topics from the last topic, the war in Iraq.  And it‘s kind of, you know, whatever.  But, let me ask you, Joe Califano, do you think David Vitter is a sex addict?

CALIFANO:  I think David Vitter may have been drinking when he went with these—some of these women.  Because that often accompanies somebody going to a prostitute.  I don‘t think it‘s—you know, there are so many indications of sexual abuse.  You had some in your opening piece.  Can I tell you one story about Hubert Humphrey (ph)?

BARNACLE:  Go ahead.

CALIFANO:  Hubert Humphrey said to me once, during the debate on the 1964 Civil Rights Bill, to get closure.  Somebody got on the floor and voted for the bill.  Humphrey reported, remember Humphrey was in the Senate.  Johnson was in the White House.  Humphrey reported back to the White House, LBJ said to him, that senator, that SOB, he has got a Negro mistress.  And he said Hubert, keep him around there.  And Hubert said about half an hour later, a call comes to the Democratic cloakroom and the Senator gets on the phone, and says yes, I did not know that meant it, dear.  And he goes back on the floor and attacks people that there were posing closure.  So it has happened for years.

BARNACLE:  Yes, it has happened for years.  And Mike Duffy, this might be the only tangible proof out of Washington, D.C. that Washington is no different than any other city big or small in this country, in that it is still and remains obsessed with sex.

DUFFY:  Well it‘s a relief that we‘ve settled that.  I think what‘s interesting is that Vitter is the first Republican to be elected from Louisiana, I think since reconstruction.  And what he is, is also the latest in a long line of very colorful Louisiana politicians, whether it‘s Earl Long, William Jefferson or Edwin Edwards, who said the famous line, “I will be reelected unless I am found in bed with a live boy or a dead girl.”

And in this case—by that standard, Vitter is going to be fine.

BARNACLE:  Yes, have you to love that Edwards.  The last topic right here, Obama girl versus Rudy girl.  Last month, an online parody video, called Obama girl, became an instant hit on the web.  It was produced cheaply, by a few independent online movie makers, now they are back with a new one.  Obama girl versus Rudy girl, take a peek at this.

I have to tell you, Kate O‘Beirn, no matter the content of the ad, it‘s better than looking at some of the political ads concocted by these candidates.  I mean, what are we coming to here?  Why would anyone run for anything these days?

O‘BERINE:  Mike, this is the first time the internet and YouTube are going to play this kind of a role.  I can only imagine, given how campaigns work so hard to control their message, to control their image, how frustrating this is going to be.  This is just the beginning of it.  The ability to use the internet, and the YouTube to change the message of a campaign.  This stuff is getting a lot of attention.

BARNACLE:  Do you have any frame of reference, Joe Califano, for how different politics in the culture is today, compared to not when you were in the Carter administration, not when you were in the Johnson administration, but like two weeks ago, when you were in the subway in New York.  I mean, that‘s how quickly this stuff changes.

CALIFANO:  It‘s unbelievable.  But remember, you know, the visual piece is always there.  Remember Lyndon Johnson‘s, the girl with the daisy?

The commercial that ran only once?  And LBJ said, “my God, pull that commercial, that‘s terrible.”  And then it ran on every news cast again and again?  I think now the internet is what people are watching, kids are watching it.  It‘s so—the speed of communication is terrifying.

BARNACLE:  Yes. Mike Duffy, the last word on the speed of the media around us, the print media disappearing, stuff like this, I mean, just the speed.  What has it done to your business, you know, coverage of politics?

DUFFY:  We have to fight this campaign iPod by iPod and so do the candidates, and the people covering it, too.

BARNACLE:  I‘m sorry Michael, we have to go.  Chris returns next week.

Up next, “Tucker.”

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