updated 12/5/2007 12:35:27 PM ET 2007-12-05T17:35:27

Guests: Sen. Joe Biden, Dana Milbank

CHRIS MATTHEWS, HOST:  World War III?  Thank God not on Bush‘s watch.

Let‘s play HARDBALL.

Good evening.  I‘m Chris Matthews.  Welcome to HARDBALL.  The National Intelligence Estimate concludes that Iran stopped working on its nuclear weapons program back four years ago, in 2003.  So why did President Bush warn the world of World War III?

(BEGIN VIDEO CLIP)

GEORGE WALKER BUSH, PRESIDENT OF THE UNITED STATES:  If Iran had a nuclear weapon, it would be a dangerous threat to world peace.

We got a leader in Iran who has announced that he wants to destroy Israel.  So I told people that if you‘re interested in avoiding World War III, it seems like you ought to be interested in preventing them from having knowledge necessary to make a nuclear weapon.  And I take the threat of Iran with a nuclear weapon very seriously.

(END VIDEO CLIP)

MATTHEWS:  Well, did the president know about the National Intelligence Estimate‘s findings when he ramped up that rhetoric and shocked the world with all that talk about World War III?  Today President Bush faced some tough questioning at his morning press conference, but the key question is still, What did President Bush know, and when did he know it?  In a moment, we‘ll talk the full story with NBC chief foreign affairs correspondent Andrea Mitchell.  And we‘ll talk to Democratic presidential candidate Senator Joe Biden.

And later on HARDBALL tonight, what impact will the NIE findings have on the 2008 presidential race?  Hillary‘s been a hawk on Iran.  Will she pay a political price?  And the Republicans were armed to fight, to run on the very issue of the threat of Iran going nuclear.  Does this mean it puts the focus back on Iraq, which is much more controversial?

Plus, going negative.  Hillary Clinton keeps up the attack on Obama, but he‘s just shrugging it off.  Does Clinton think nasty is the way to win this thing?

We begin tonight with Iran with NBC‘s Andrea Mitchell, a perfect guest to have here.  Andrea, I have to tell you I rarely get up in the morning and look at all the papers and I‘m happy.  To me, it was like Christmas morning.  It was much better even than Chavez losing that election the other day.  My God, I thought we were heading toward war in Iran, and now it looks like we‘re going to be able to avoid it for at least—at least 10 years.

ANDREA MITCHELL, NBC CORRESPONDENT:  Well, there‘s no way—first of all, I never felt militarily that they could have done it, but I was told that the president was thinking about it, had not yet decided to rule it out militarily.  And now there is no way.  He has no pretext.  He has no ability to do any kind of military action barring some other kind of attack on the U.S. by Iranian forces because this is the clearest, most definitive, unanimous intelligence...

MATTHEWS:  Here‘s David Gregory, or colleague, asking President Bush at that morning press conference why he warned the world about World War III when he knew about this latest intelligence estimate on Iran.  Let‘s take a listen.

(BEGIN VIDEO CLIP)

DAVID GREGORY, NBC CORRESPONDENT:  When it came to Iran, you said in October, on October 17, you warned about the prospect of World War III, when months before you made that statement, this intelligence about them suspending their weapons program back in ‘03 had already come to light to this administration.  So can‘t you be accused of hyping this threat?  And don‘t you worry that that undermines U.S. credibility?

BUSH:  Well, David, I don‘t want to contradict an august reporter such as yourself, but I was made aware of the NIE last week.  In August, I think it was John—Mike McConnell came in and said, We have some new information.  He didn‘t tell me what the information was.  He did tell me it was going to take a while to analyze.

(END VIDEO CLIP)

MATTHEWS:  Well, you have to ask—the president is known for his lack of curiosity, but on a question of war and World War III, wouldn‘t he have said to the guy who works for him, Well, give me an indication, is it going down or up, this threat  of war?

MITCHELL:  And should I moderate my rhetoric?  Is there going to be a shift here?  I know you haven‘t established, you haven‘t proved it.  You‘re still bringing in your experts.

It is incomprehensible to me that the president of the United States could be told by his director of National Intelligence, We have new information on Iran, which was the key foreign policy issue seizing him and his team, and not ask, So what is it?  How could he not ask?  How could they let him go out and give speeches that are carefully vetted that talk about nuclear holocaust and World War III?  The vice president on October 21.  It is just impossible to believe.  And in fact, we were told yesterday by their own briefers that he was briefed along the way all these months as they were working on it.

MATTHEWS:  It could be a lack of curiosity, but this is such a big issue, I would hesitate to do any psychobabble here.

Here‘s President Bush and what he said today.  Again, he‘s told—he made the point that he was never told to tone down his apocalyptic rhetoric about—after learning about Iran.  Let‘s take a listen again.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  Are you saying at no point while the rhetoric was escalating, as World War III was making it into conversation, at no point, nobody from your intelligence team or your administration was saying, Maybe you want to back it down a little bit?

BUSH:  No.  Nobody ever told me that.  Having said—having laid that out, I still feel strongly that Iran is a danger.  Nothing‘s changed in this NIE that says, OK, why don‘t we just stop worrying about it?  Quite the contrary.  I think the NIE makes it clear Iran needs to be taken seriously as a threat to peace.

(END VIDEO CLIP)

MATTHEWS:  That‘s nonsensical.

MITCHELL:  The way...

MATTHEWS:  He just said it doesn‘t change our policy.  If we were operating under the assumption that he gave us, the president—fair enough, if that‘s what he believes, he should tell us—that we were facing the threat of a World War III over there because Iran was (INAUDIBLE) ready to put a missile ready—they were working on weapons programs.  Now we find out for four years, they haven‘t been working on a weapons program, and he comes out and says nothing‘s changed.  Well, everything‘s changed.

MITCHELL:  Everything‘s changed.  And in fact, look, we should say one word about the intelligence guys.  They got it wrong on Iraq.  They relied on Curveball, infamously.

MATTHEWS:  Yes.

MITCHELL:  They decided this time—they were about to release this report, send it to Congress last spring.  They got new information, multiple streams of information, I‘m told human intelligence, electronic intelligence, all of these streams coming together.  They said, Whoa, let‘s not release this.  They brought in outside experts.  They scrubbed it.  They didn‘t want another Curveball, and they got it right, we are told.

MATTHEWS:  OK.  Let‘s talk about the other side.  Ahmadinejad goes to Columbia University a while back and acted like he‘s the stud duck, like he‘s got this big weapon he‘s going to use against us, right?  So he was part of the act, just like Saddam Hussein was part of the act before the war with Iraq.  These guys act like they‘ve got the missile.  Is this a mutual game that‘s being played here?

MITCHELL:  If you‘re going to try to scare your neighbors, it‘s good enough to act like you‘ve got it, unless it‘s, of course, going to bring...

MATTHEWS:  He was strutting around like he had a nuclear weapon in his pocket!

MITCHELL:  Well, the other thing is that the president is blaming Ahmadinejad for all this.  You know, This wouldn‘t have happened...

MATTHEWS:  OK, now...

(CROSSTALK)

MATTHEWS:  You haven‘t gotten to the sweet spot here.

MITCHELL:  No.

MATTHEWS:  Here‘s the sweet spot.  Here‘s the president saying something that is, by all recollections of everybody watching and listening right now, not true.  He said the election of Ahmadinejad in 2005 was to blame for us shutting down our diplomatic track, which was otherwise going along swimmingly with Iran.

Let‘s take a listen to what the president said today, which is not true what he just says here.

(BEGIN VIDEO CLIP)

BUSH:  You might remember that I have consistently said that we will be at the table with the EU3 if Iran would verifiably suspend their program, and the offer still stands.  What changed was the change of leadership in Iran.  We had a diplomatic track going, and Ahmadinejad came along and took a different tone.

My hope is, is that, you know, the Iranian regime takes a look at their policies and changes their policies back to where we were prior to the election of Ahmadinejad, which was a hopeful period.

(END VIDEO CLIP)

MATTHEWS:  Hopeful period?  That‘s when he called him evil, “the axis of evil.”

MITCHELL:  He called...

MATTHEWS:  Everybody knows in 2002, the president said they were the “axis of evil.”  Now he‘s trying to say, We were sweet-talking them before Ahmadinejad came in.  How can he say that?

MITCHELL:  He calls then the “axis of evil” in 2002.  They still, for whatever reasons, cooperated with us in Afghanistan, and then in 2003, offered an open communication.

MATTHEWS:  Right.

MITCHELL:  They sent a two-page faxed letter.  We never responded to it.  So there then was a total freeze.  The U.S. did nothing to try to open any kind of approach to Iran.  He gets elected in 2005.  It wasn‘t until Condoleezza Rice was beginning to work with the Europe allies and then had this new initiative...

MATTHEWS:  OK.  I‘m going to ask you a brutal question because you‘re so objective and you‘re so nonpartisan.  But this is a question here.  If it isn‘t the weapons that causes us to want to fight with Iraq, which they didn‘t have them, and it‘s not the weapons that we wanted to fight with Iran over, is it just geopolitics?  Are we just challenging other nations in that region we want to be tougher than, we want to put them in their place, and it really doesn‘t have anything to do with the threat of WMD, it has to do with the fact we don‘t like them challenging us on our block?

MITCHELL:  I wouldn‘t come to that conclusion.  I would say...

MATTHEWS:  Well, what is the motive then?

MITCHELL:  I mean, Iran is a bad actor.

MATTHEWS:  Well, what‘s the- give me the motive besides weapons.

MITCHELL:  You know, terrorism, killing our guys in Iraq...

MATTHEWS:  OK...

MITCHELL:  ... lots of reasons to really be against Iran, to sanction Iran.  Our allies have, the Europeans, the French, the Germans.  They trade with Iran, but they...

MATTHEWS:  So it‘s really Hezbollah, probably, more than it is the weapons system.

MITCHELL:  Sure.

MATTHEWS:  Fair enough.  Say it.  Why don‘t we speak English?

MITCHELL:  I do believe the president felt that there were weapons there.  I really believe that.

MATTHEWS:  Yes.  Why didn‘t he ask the guy in August, his intelligence chief, when he said, We got some big developments on the Iranian front?  Wouldn‘t you or I—I mean, you‘re one of the best journalists around.  You would say, Well?  You would say, I‘m not leaving this room until you tell me what it is.  This guy works for him, and he says, Oh, good afternoon to you.  Have a nice vacation.

MITCHELL:  It‘s unbelievable to me that he did not ask.  In fact, you‘re going to talk to Joe Biden.  I asked...

(CROSSTALK)

MATTHEWS:  ... I‘m so happy today.  I got to tell you, as a citizen, as a part of this world, I thought we were heading for trouble over there.  I thought we were going to face an Armageddon kind of situation because this guy and Cheney were ready to go.  The other guy (INAUDIBLE) had a weapon ready to go.  We were going to do something like—you know, a lot of people were talking about this, remember?  Some time at the end of this administration, right before they do all the pardons, they‘re going to attack Iran.  Before Scooter gets his pardon, they‘re going to attack Iran.  Now it looks like we‘re not going to be able to do it, thank God.  And I mean, Thank God.

MITCHELL:  I don‘t see how, based on this intelligence.

MATTHEWS:  (INAUDIBLE) this and Hugo Chavez getting it thrown back in his face this week.  As an American...

MITCHELL:  It‘s Christmas three weeks early.

MATTHEWS:  ... I‘m thrilled.  Hanukkah, everything.  It‘s a good time.  It‘s Kwanzaa.  It‘s everything.  And thank you for this.  Anyway, Andrea, great report, as always, totally objectively delivered to a person here with nothing but passion on this subject.  Anyway, thank you, sir.  Thank you, madam.  Sir.  What an awful thing to say.  Anyway, thank you, Andrea Mitchell, chief foreign affairs correspondent for NBC News.

We‘re going to have Joe Biden joining us right now.  Here he is, the chairman of the Foreign Relations Committee.  Senator Biden, I know you‘ve been the foreign affairs expert for the Democratic Party.  Were you snowed?  Were you shocked to hear we do not face a weapons system under production in Iran?

Sen. JOSEPH BIDEN (D-DE), PRESIDENTIAL CANDIDATE:  No.  I never believed we were.  And I said it.  I‘ve been trying to engage Iran way back five years ago with Dick Lugar and others, trying to engage them.

Look, this is not—you know, if this weren‘t so deadly earnest—this isn‘t about curiosity, it‘s about credibility.  This administration has damaged us to a degree that no other administration has in American history.  We have no credibility, Chris.  It‘s amazing, absolutely amazing to me.  Were it not for the fact, your point about it making it virtually impossible for them to go to war now, were it not for that silver lining, which is immense, this is unconscionable.  It‘s unconscionable.

(CROSSTALK)

BIDEN:  What are we talking about here?

MATTHEWS:  Did you think—what did you think about the policy and how it‘s changed?  Let‘s go to—you‘re a critic, as well as a candidate.  The policy of this administration was to scare the bejesus out of everybody in the world that we were going to face a World War III—those are the president‘s phrases there...

BIDEN:  Right.

MATTHEWS:  ... World War III.  And now, what do you think the policy is now?  Despite what he said today at the press conference, what is our policy now, do you think?

BIDEN:  The policy‘s no different now.  The policy—the rhetoric is going to change.  The policy‘s no different.  I made a major speech yesterday on Iran.  I‘ve laid out in detail over the last five years exactly what we should be doing with Iran, which is diametrically opposed to everything this president is doing.

Now look what‘s happened, Chris.  In terms of our allies being willing to stay with us on other really critical issues, it‘s going to be virtually impossible.  The Russians are running around the world, touting the fact that now it‘s proven that they‘ve been right and we‘ve been wrong.  Now it undercuts our ability to deal with the real problem.

The real problem is their continued effort to deal with Hezbollah and Hamas, their continued effort to deal with trying to find—being able to produce highly enriched uranium.  That‘s real.  That‘s real.  And now what‘s happened?

Now—and secondly, what have we done?  We have added to the urban legend in the streets of all the Muslim capitals in the world that this is a war against Islam.  We have made it more difficult for every moderate Muslim leader, from Karzai on, to be able to deal directly with us.  This is incredibly devastating to our interests in the Middle East, from Iraq through Pakistan, as well as our credibility around the world.  It is going to cost us in a way that no one‘s calculating it.

The good news is it makes it harder for these cowboys to go to war.  The bad news is we have been further damaged, and that hurts America‘s interests in a big way.

MATTHEWS:  Well, this propaganda war that‘s been fought now for years now, their phrases like “weapons of mass destruction” that you and I never heard of growing up, “regime change,” all the rest of it, “homeland,” all the rest of the new language we‘ve learned from this crowd that came in a few years ago, around the late ‘90s they started pushing this—if their motive is not to find weapons of mass destruction, which don‘t seem to materialize when they‘re supposed to in either Iraq or the Iranian case, what is the grand motive for war?  Why did we invade Iraq?  Why were we threatening World War III with Iran?  Why did this administration, Cheney and the president, keep pushing the war?  Why do they always want to fight or scare somebody?  What‘s it about, if it‘s not weapons?

BIDEN:  Let me tell you what I think it‘s about.  I can‘t prove it.  I think it‘s about our ability to try to dominate that region of the world and control oil.  I don‘t think we went to war because of oil, but I think there was an absolute belief.  The only thing I can fit together with Cheney and his gang is that they went to war—they‘re smarter than they‘re acting.  They‘re smarter than they‘re acting.  What they do—they went to war in the hope they would be able to do two things.  One, have a government that sat on a whole bunch of oil that still exists in the world that would be indebted to us.

MATTHEWS:  Right.

BIDEN:  Two, have permanent military bases in Iraq to dominate that part of the world to be able to control oil.  Not to go steal it for American oil companies, but to be able to control the pricing, control the access of it, a very Machiavellian view.  There‘s nothing idealistic about Cheney.

I don‘t know what President Bush thinks, but I think he‘s bought hook, line and sinker the Cheney rationale that the only way for us to be able to be dominant in the 21st century is to use our overwhelming power in the face of the moral disapprobation of the rest of the world, threaten the rest of the world and that‘s how we avoid war in the future.

I think these guys are irresponsible.  But the thing that angers me the most—and it angers me, Chris—is how incomprehensible it is for anyone to think that the president did not know that his intelligence agencies didn‘t believe what he was saying.  I believe that‘s why these guys came out with now 16 American intelligence agencies uniting, saying, I‘m not going to wear the jacket again on this one.

And I disagree with only one thing that Andrea said.  The intelligence community didn‘t misread what was going on in a major way in Iraq, they misused the intelligence they were given.

(CROSSTALK)

MATTHEWS:  I keep waiting for that second part of that intelligence analysis...

BIDEN:  Me, too.

MATTHEWS:  ... to show how it was manipulated.  But I want to ask you about something you‘ve been involved with.  You said that if the president of the United States had launched an attack on Iran without congressional approval, that would have been an impeachable offense.

BIDEN:  Absolutely.

MATTHEWS:  Do you want to review that comment you made?  Well, how do you stand on that now?  Do you think...

BIDEN:  Yes, I do.  I want to stand by that comment I made.  The reason I made the comment was as a warning.  The reason I made—I don‘t say those things lightly, Chris.  You‘ve known me for a long time.  I was chairman of the Judiciary Committee for 17 years, or its ranking member.  I teach separation of powers and constitutional law.  This is something I know.

So I got together and brought a group of constitutional scholars together to write a piece that I‘m going to deliver to the whole United States Senate, pointing out the president has no constitutional authority to take this nation to war against a country of 70 million people, unless we‘re attacked or unless there is proof that we are about to be attacked.  And if he does—if he does—I would move to impeach him.  The House obviously has to do that, but I would lead an effort to impeach him.

The reason for my doing that—and I don‘t say it lightly.  I don‘t say it lightly.  I say it because they should understand that what they were threatening, what they were saying, what was adding up to be what looked like to the rest of the world what we were about to do would be the most disastrous thing that could be done at this moment in our history that I can think of.

MATTHEWS:  OK.  You know, Senator, the great thing about you being elected to the Senate when you were about 29 years old is that you were a senator back when there were real senators there, like Wayne Morse and J.  William Fulbright, who understood the constitutional importance of what you just said.  I wonder whether a lot of people who watch this show don‘t even get what you‘re talking about.  They don‘t even remember when there were senators that understood the checks and balances of our government, of our Constitution.  I am so impressed you said it.

Thank you very much, Senator Joe Biden, candidate for president.

BIDEN:  Thanks for having me.

MATTHEWS:  Now that Iran isn‘t the threat  President Bush said it was, will the Republican presidential candidates be forced to confront reality and talk about a question they don‘t like to talk about too much, Iraq?  And how vulnerable is Hillary Clinton for voting to give the president more power to pressure and target Iran?  Up next, Iran and the 2008 campaign and what it all means.

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL. 

The national intelligence report that showed that Iran stopped trying to produce nuclear weapons way back in 2003, four years ago, sent shockwaves across the political 2008 campaign. 

Here‘s HARDBALL‘s David Shuster. 

(BEGIN VIDEOTAPE)

DAVID SHUSTER, NBC CORRESPONDENT (voice-over):  Just moments after the president‘s news conference...

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES:  That it‘s diplomatic pressure that caused them to change their mind. 

SHUSTER:  ... the criticism began. 

Democratic presidential candidates in a radio debate in Iowa said The Bush administration‘s credibility has been shredded. 

(BEGIN AUDIO CLIP)

SEN. JOSEPH BIDEN (D-DE), PRESIDENTIAL CANDIDATE:  With all due respect with anybody who thinks that pressure brought this about, let‘s get this straight.  In 2003, they stopped their program.  You cannot trust this president.  He is not trustworthy. 

(END AUDIO CLIP)

SHUSTER:  One by one, the Democrats accused the president of pursuing an Iranian policy based on hype and fear. 

(BEGIN AUDIO CLIP)

SEN. BARACK OBAMA (D-IL), PRESIDENTIAL CANDIDATE:  This saber-rattling was a repetition of Iraq, a war I opposed, and that we needed to oppose George Bush again.  We can‘t keep on giving him the benefit of the doubt, knowing the ways in which they manipulate intelligence.

(END AUDIO CLIP)

SHUSTER:  Five years ago, Hillary Clinton voted to give President Bush authority to go to war against Iraq.  This summer, she voted to give the president more authority to pressure Iran.  With the administration‘s rhetoric on WMD proven wrong in both cases, Clinton again today faced barbs about her judgment on the Iran resolution. 

(BEGIN AUDIO CLIP)

SEN. CHRISTOPHER DODD (D-CT), PRESIDENTIAL CANDIDATE:  The language of the resolved clause in that resolution, that nonbinding resolution, specifically eliminated any option except the military one. 

JOHN EDWARDS (D), PRESIDENTIAL CANDIDATE:  Senator Clinton has said she agrees with George Bush terminology that we‘re in a global war on terror, then she voted to declare a military group in Iran a terrorist organization.  What possible conclusion can you reach other than we are at war? 

SEN. HILLARY RODHAM CLINTON (D-NY), PRESIDENTIAL CANDIDATE:  If we thought that anything in that resolution gave even a pretense of legitimacy to President Bush taking any action, we wouldn‘t have voted that way.  In fact, a number of the Democrats worked furiously to clarify the meaning of that resolution.

(END AUDIO CLIP)

SHUSTER:  Yesterday, when the Iran news first broke, Clinton used a campaign speech to remind Iowans that Obama didn‘t consider the Iran vote a priority. 

CLINTON:  He didn‘t show up for the vote.  He didn‘t speak out during a presidential debate that night.  And, finally, he decided to play politics and claim that the vote he missed, a vote for diplomacy, was really a vote for war.  Well, if he really thought it was a rush to war, why did he rush to campaign and miss the vote? 

SHUSTER:  Among the Republican presidential candidates today, the statements about Iran were muted.  Rudy Giuliani, who has expressed a readiness to attack Iran, issued a written statement today that said—quote—“Sanctions and other pressures must be continued.”

John McCain today argued that Iran still sponsors terrorist organizations and exports weapons into Iraq that are killing Americans. 

SEN. JOHN MCCAIN (R-AZ), PRESIDENTIAL CANDIDATE:  So, because we have found out, apparently, that they are not embarked on the acquisition of nuclear weapons does not mean that it‘s a whole new day dawning in our relations with Iran. 

SHUSTER:  Still, the new intelligence about Iran and what war critics see as the president‘s worsening credibility problems could hurt the GOP in the presidential race and in the congressional elections. 

REP. RAHM EMANUEL (D), ILLINOIS:  The last seven years in the Mideast by this administration has been the lost seven years, when you see on every front a reversal of what has been the central tenets of this administration. 

SHUSTER:  Back at the White House today, when asked about a credibility gap and potential political problems for his party, the president seemed unconcerned. 

BUSH:  And I‘m feeling pretty spirited, pretty good about life. 

SHUSTER (on camera):  Maybe that‘s because President Bush doesn‘t have to face another election.  For the Republicans and Democrats, however, who are running to be his successor and have 30 days until the 2008 voting begins, all of those candidates now face a brand-new Iran dynamic. 

I‘m David Shuster for HARDBALL in Washington. 

(END VIDEOTAPE)

MATTHEWS:  Thank you, David Shuster. 

Dana Milbank, he‘s the national political reporter for “The Washington Post.”  He‘s over at “The Post” right now.

It seems to me that this is not good news for Hillary, who has hedged her bets to the right in endorsing that targeting of Iran for sanctions.  She‘s been the hawkish Democrat.  Does this great news, that we look like we‘re not facing a war with Iran right now, help Obama? 

DANA MILBANK, NATIONAL POLITICAL REPORTER, “THE WASHINGTON POST”:

Right. 

You would imagine that the canceling or postponing of World War III would be all-around good news, but, in the long term, as you and David were noting, it‘s bad news for the Republicans. 

In the short term, the real victim here is going to be Hillary Clinton.  She has just been pounded over this vote on this—actually a nonbinding resolution involving Iran. 

This gives the other Democrats in the race a new opening to attack her at just the moment she was trying to go on the offensive against Obama.  It really takes her off her message. 

MATTHEWS:  Does this take some steam out of the hawks on the Republican side, or are they—are they safely able to keep on acting like they‘re right? 

MILBANK:  Oh, not at all. 

I think that‘s why you have this sort of deafening silence coming from the Republican candidates right now.  This had always been a convenient subject to pivot to when the conversation had been, say, on Iraq.  Now this is going to create a vacuum now, since there‘s—there‘s not really a potential anymore for this October surprise, hostilities with Iran shaping the election next fall. 

Into that vacuum, what will it be?  Will it be Iraq?  Will it be children‘s health care, any number of other issues that will be less favorable to the Republicans?

MATTHEWS:  Well, I have heard on—from an inside source, a pretty prominent Republican consultant, saying that they planned to run the campaign on Iran next year. 

MILBANK:  Yes.  It—the playbook sort of seems to be about 2002, pushing measures through Congress, whether it was the authorization for war, basically creating something of a drumbeat, putting pressure to—on the Democrats to be strong on national security.  This makes it very, very difficult to go back to that same playbook. 

MATTHEWS:  Well, let‘s go back to the very big vein of aura, and that‘s the Clintons.  From the beginning of Bill Clinton‘s career, one of the phrases that pops out at you is political viability.  He used it in the discussion of how he avoided the draft back in the Vietnam War era, how he had to cover up for his tracks in regard to all that. 

Political viability, I think it‘s he hedged his bets on the—the Iraq war, the first war, the Persian Gulf War, putting himself in a position of being able to say he supported the war, but always having that escape hatch. 

Political viability looks like the motive Hillary had for writing that

supporting that resolution to go to war in 2002, political viability, why she supported the Iranian resolution this year. 

Does that make her look like a political cynic, this—this new development, that she simply does everything to protect herself on the right for her political viability, rather than what she really believes?  Or does she get exposed as a real, genuine hawk? 

What is she, a hawk or a political opportunist? 

MILBANK:  Well, unfortunately for her, this makes her look to be more of an opportunist. 

What she did at the time, she was way ahead in the polls.  She was making a bet on a general election campaign, a position that would make her stronger there.  This pulls the rug out from under her at just the time when she—she had shrunk back in the polls. 

Now, even if Hillary Clinton has a—a genuinely principled decision.  everybody is going to look at that with a high degree of skepticism, just because that is the reputation.  I mean, Clintonian isn‘t an adjective for nothing. 

MATTHEWS:  Yes.  Well, I guess I wonder, what do you think hurts more, being a hawk or being a phony? 

(LAUGHTER)

MILBANK:  Principle—principle always seem to beat phoniness in this political game. 

MATTHEWS:  Yes.  I think—I think being a hawk is a lot more credible, although I don‘t generally agree with the hawks on a lot of things.

I think, in this case, looking like you really believe in what‘s in the national interests looks a lot better than doing what you think is in your political interests. 

(CROSSTALK)

MATTHEWS:  Anyway, thank you, Dana Milbank of “The Washington Post.” 

Tomorrow on HARDBALL, Democratic presidential candidate Bill Richardson is going to be here with us, right here in this room, in fact. 

And up next: the perfect Christmas present—I‘m being a little sarcastic—a walking, talking, denying Larry Craig doll.  Somebody has really made one. 

You‘re watching HARDBALL, only on MSNBC.  

We will show it to you when we come back.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.

Let‘s look at what else is going on out there in politics. 

I have got to start with our “Big Number” tonight. 

What percent of Republicans in the key caucus and primary states like President Bush?  I think Democrats listening right now to HARDBALL will be shocked.  Fifty-five percent of Republicans in New Hampshire think Bush is doing a swell job.  That‘s 55 percent in New Hampshire.  Seventy-two percent of Republicans—more of them—in South Carolina think him—well, they give him a thumbs up. 

And are you ready?  Eighty percent, four out of five Republicans, in Iowa are still solidly on the Bush bandwagon.  Eighty, that‘s the percent of Iowa Republicans who think the man in the White House is still peachy keen.  And, again, like it or not, it‘s our “Big Number” tonight. 

Numbers, numbers, numbers. 

Norman Hsu back in the news—he‘s the guy who spent 15 years as a federal fugitive and Democratic campaign contributor, most notably for Hillary Clinton.  Now a federal grand jury has indicted Mr. Hsu on 15 counts, the same number of years he was on the run, for wire fraud, mail fraud, and violating federal election law. 

Just so you know, some of the charges dealt with how Mr. Hsu strong-armed his investors into giving to political candidates.  Who does the indictment affect politically?  Well, as Hillary Clinton might recall, if the shoe fits, wear it. 

Speaking of money, U.S. Congressman Jim McDermott, a big liberal from liberal Seattle, will have to pay $800,000 to fellow Congressman Ohio Republican John Boehner for giving reporters a tape recording of a conversation among Boehner and other Republican leaders about ethics charges pending then against former House Speaker Newt Gingrich. 

That works out, by the way, to a decade of congressional paychecks for Congressman McDermott to pay.  And, for those who keep count, that‘s more than triple the $250,000 that Scooter Libby has to pay for his leak. 

If you‘re still wondering what to get for your special someone for the holidays, then, here it is: the talking, denying—whatever—Larry Craig action figure. 

(BEGIN VIDEO CLIP)

SEN. LARRY CRAIG ®, IDAHO:  Thank you all very much for coming out today.  I will read a statement. 

Let me be clear.  I am not gay.  I never have been gay. 

(END VIDEO CLIP)

MATTHEWS:  Notice the wide stance. 

Up next:  With Obama in the lead in the latest Iowa polls, Hillary is on the attack, personally. 

(BEGIN VIDEO CLIP)

CLINTON:  So, you decide which makes more sense: to entrust our country to someone who is ready on day one to make the decisions and the changes we need, or to put America in the hands of someone with little national or international experience, who started running for president as soon as he arrived in the United States Senate?  How did running for president become a qualification to be president? 

(END VIDEO CLIP)

MATTHEWS:  Well, there you see a staff-driven attack line there.  She was reading each one of those notes. 

Will going negative backfire for Hillary Clinton?  Maybe she is just getting bad advice. 

You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

MARGARET BRENNAN, CNBC CORRESPONDENT:  I am Margaret Brennan with your CNBC “Market Wrap.”

Stocks closing lower for a second straight day, with the Dow Jones industrial average dropping nearly 66 points.  The S&P 500 lost nine, and the Nasdaq down 17.  The stocks dropped after J.P. Morgan Chase cut the earnings estimates for four major Wall Street firms because of the credit crunch, those firms, Goldman Sachs, Lehman Brothers, Merrill Lynch, and Morgan Stanley. 

Oil prices fell on the eve of an OPEC meeting on production levels and word that Iran abandoned its nuclear weapons program in 2003.  Crude then dropped $1.10 in New York‘s trading session, closing at $88.21 a barrel. 

Profit warnings today from Delta and Southwest airlines.  They cited rising fuel costs and concerns that a slowing economy could cut travel demands. 

And drug-maker Merck also issued earnings forecasts for this year and next that were mostly below analyst estimates. 

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

HARDBALL. 

MATTHEWS:  (AUDIO GAP) to HARDBALL.

Getting a little nasty out there on the trail.  And, although most people will say they don‘t like negativity in campaigns, the question you always ask in politics, well, if it doesn‘t work, why do they do it?  We‘ve got Jamal Simmons here.  He‘s a Democratic strategist, who is working right now for the Nevada Democratic party.  And let me ask you, sir—let‘s take a look right now. 

Here is Hillary Clinton‘s campaign.  It released a memo that it says shows Obama‘s presidential ambitions are long held.  It reads, quote—now this is really funny, if you look at it; “15 years ago, Senator Obama told his brother in law he was planning to run for president.”  So don‘t trust your brother-in-law this Christmas. 

Here‘s the best one, don‘t trust your Kindergarten classmates because in kindergarten Senator Obama wrote an essay entitled “I want to become president.”  Now, every little kid, minority or whatever, has probably at some point said I want to be president some day.  The Clinton campaign is using this against the senator from Illinois. 

JAMAL SIMMONS, DEMOCRATIC STRATEGIST:  Well, Chris, the one thing is most people in America know politicians are ambitions.  If there‘s a politician being punished for his ambition, we wouldn‘t have any in office.  It‘s a little bit of a bad attack for her.  You want to see her go after him on some of these issues she had him on before.  The experience question is the one thing that people—the nagging thing about most people is does Barack Obama have the experience?  Is he up to the job? 

MATTHEWS:  One argument you could make for her is that he has accused her of being a professional pol, who has had the political bug all her life, and he‘s this fresh kid on the block who just came in like the people‘s choice. 

SIMMONS:  She‘s not in the strongest position to be leveling this kind of attack. 

MATTHEWS:  She is saying, he‘s as bad as I am, in other words.  He‘s as bugged by ambition as I am.  Let‘s take a look—here‘s some reporters going after Obama, trying to get him to react, which is what we always try to do, of course. 

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA (D), PRESIDENTIAL CANDIDATE:  No, it‘s silly.  I understand she‘s been quoting my Kindergarten teacher in Indonesia. 

UNIDENTIFIED MALE:  Senator, actually Senator Clinton said your candidate represented false hope.  Do you think your candidacy represents false hope, not real results?

OBAMA:  Thank you so much guys.  I appreciate it. 

(END VIDEO CLIP)

MATTHEWS:  Well, he wasn‘t born a politician, I‘m amazed.  That‘s exactly what Jack Kennedy used to do.  He would repeat Nixon‘s attacks on him and just do it with a little wry smile.  I understand she‘s quoting my kindergarten teacher from Indonesia. 

SIMMONS:  It was perfect pitch.  You could see for one second he had a little tick-tock, like do I want to talk about it?  No, I don‘t.  This is good enough. 

MATTHEWS:  But then he did.  He quoted her back to her, which was the

best shot.  So does her attack on him for having ambition as a teeny-bopper

not a teeny-bopper, a kindergartner, does she look like Nurse Ratchet here? 

SIMMONS:  It really is too bad, Chris, because that is not something most Americans would say is a problem for a politician, even though Barack Obama said he doesn‘t want to do it.  What‘s tough about what Senator Clinton is doing right now, she‘s telegraphing these punches.  You get stories coming out over the weekend. 

MATTHEWS:  You‘re saying the right word, Jamal, because I agree with you.  You notice how she‘s reading these attacks on Barack Obama and looking down—I‘m not sure it‘s going to show in this scene, but we just showed a minute ago, every time she took a shot at him, she looked down at something in front of her and read the very words of the attack, as if she is a lawyer or prosecutor doing the indictment.  Aren‘t you supposed to memorize these shots at people?  I just find it—

SIMMONS:  Well, they clearly wanted it had to be perfect.  They want it to be dead on, not any mistakes, no freelancing, get it out, get the quotes right. 

MATTHEWS:  Here she is, look at this.  She is going up on her lines here.  Look at this.  There she goes.  There she goes again.  Is this Mandy or is this Mark?  Who is writing this stuff?  Look at this stuff.  Look at this. 

(BEGIN VIDEO CLIP)

CLINTON:  -- who started running for president as soon as he arrived in the United States Senate.  How did running for president become a qualification to be president? 

(END VIDEO CLIP)

MATTHEWS:  Too staff driven, don‘t you think?  Do you sense she‘s a little staff driven right now? 

SIMMONS:  You would have thought they would have found another way to do this.  Here is the difference, when everyone was advocating for Barack Obama to go negative, it‘s because you wanted to see this guy fight.  You wanted to know that he had it in him.  He‘d gut it out.  With Hillary Clinton you don‘t have that question.  Everyone knows she is tough.  She is Margaret Thatcher in this race.  You would think that maybe the staff would do it, maybe they would plant some stories. 

MATTHEWS:  Usually Wolfson does it. 

SIMMONS:  One of these guys would get involved. 

MATTHEWS:  Let‘s take a look, Mike Huckabee—here he is on Mitt Romney‘s religion on “This Week” with George Stephanopoulos.  Catch the question and catch the cloying answer. 

(BEGIN VIDEO CLIP)

GEORGE STEPHANOPOULOS, “THIS WEEK”:  Is Mitt Romney a Christian? 

MIKE HUCKABEE ®, PRESIDENTIAL CANDIDATE:  You know, Mitt Romney has to answer that.  Nobody can answer for another person—for you, for me.  We all have to personally answer for what our faith is. 

(END VIDEO CLIP)

MATTHEWS:  Well, apparently today—in fact the reports are out today that he was asked if Mormonism, the church of Jesus Christ of Latter-Day Saints, is a cult or not, and again he pulled that same cloying response.  I don‘t want to be the one to say.  He‘s laying it out there for the Christian right. 

SIMMONS:  That‘s right.  If you look at what Mike Huckabee is doing, he is totally dependent on Christian conservatives showing up in the Iowa caucuses to get him over the top.  He‘s got very little staff in Iowa right now.  For a lot of Christian conservatives, Mormonism is not Christianity and he can‘t be in the—

MATTHEWS:  What would he have said?  I‘m going to have to ask him, do you think Roman Catholicism is a cult?  Is he going to say that is up in the air too?  Are they all cults except his? 

SIMMONS:  Evangelicals and Catholics have sort of made up over the last years. 

MATTHEWS:  I wonder if we‘re still on the hit list, anyway, his hit list.  It‘s really kind of awful that we have the religious test for office, we‘re even talking about this stuff.  Anyway, Jamal, thank you for coming on. 

Next up, now that we know that Iran has stopped its nuclear weapons program four years ago, how big is the Bush administration‘s credibility gap?  How wide is it?  Plus, out on the campaign trail, Hillary‘s on the attack, but Barack‘s, as we just saw, brilliantly shrugging it off.  The round table is coming up next to dissect the hottest news of the day. 

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  Let‘s go right to the round table.  Julie Mason Julie writes for the “Houston Chronicle.”  Jonathan Capehart is with the “Washington Post” editorial board.  And Matt Continetti is with the “Weekly Standard.” 

Gentlemen and lady, I have to go to Julie, since you‘re smiling.  I am so happy.  I got up and read all the papers this morning, the “New York Times,” “The Washington Post,” “The Wall Street Journal,” and every one of them convinced me this thing is for real.  We do not face an immediate near-term threat of a nuclear conflict in the Middle East because of Iran. 

JULIE MASON, “THE HOUSTON CHRONICLE”:  Yes.  And did you get confused when you heard what the president said today? 

MATTHEWS:  Well, you tell me about the confusion. 

MASON:  Well, the president says that this is terrific news.  It just proves him right and that absolutely, Iran is still a threat, and that no change in policy is forthcoming, no change in stance.  He feels vindicated by this report.  It‘s enough to give you whiplash. 

MATTHEWS:  I want to ask the same question of Matt.  Were you happy to read all this news? 

MATT CONTINETTI, “THE WEEKLY STANDARD”:  It‘s great news if it‘s true.  Remember, these are the same people who told us Saddam Hussein had weapons of mass destruction on the eve of the Iraq war.  They‘re the same people who told us that Anbar Province was lost in 2006.  They were wrong.  And they are the same people who told us Iran did have a nuclear program in 2005.  They were wrong then. 

So if they‘re right now, it‘s good news for the world.  But remember, this isn‘t about Bush.  This is about the next president.  The next president will still have to make tough decisions about Iran, because Iran continues to enrich uranium. 

MATTHEWS:  So you believe that we still face a strategic threat from Iran?  Are you part of that group?  In other words, a threat to our existence?  This country could be attacked by Iran.  No, I want an answer to that question.  Does this country face a strategic threat?  Do we face a threat from an attack from Iran? 

CONTINETTI:  It‘s a state supporter of terrorism. 

MATTHEWS:  No, a strategic threat.  They could attack us with nuclear weapons?

CONTINETTI:  I don‘t know whether they‘re going to attack us or not. 

MATTHEWS:  That‘s what I‘m asking.  Then say you don‘t know.  The answer is I don‘t know.  OK, the war drums are still beating here right now from the “Weekly Standard.”  Let me go to Jonathan Capehart.  We just heard from the “Weekly Standard” that the war drums are still pounding, that we face a threat of undeclared and unnoticed dementia.  I don‘t know whether they‘re a strategic threat or they‘re a pain in the butt.  But what is going on right now in US policy.  Do we still face an administration that wants to move towards a belligerent status with Iran? 

JONATHAN CAPEHART, “THE WASHINGTON POST”:  You mean the Bush administration or the Ahmadinejad administration? 

MATTHEWS:  Yes. 

CAPEHART:  Look, this National Intelligence Estimate is good news/bad news.  The good news is that apparently Iran stopped its nuclear program in 2003.  And this is good news for diplomacy.  The bad news is the National Intelligence Estimate wasn‘t nearly as confident about whether Tehran has restarted its nuclear program.  So that‘s where the caution comes in.  Is Iran an immediate threat to the security of the United States?  According to this National Intelligence Estimate, I think no.  The answer is no. 

But I think Matt is right that this presents a problem for the next president, because, you know, Tehran and Ahmadinejad and his government in Iran can‘t be trusted still. 

MATTHEWS:  What would be a bigger threat to you, Matt, to give you a chance to rebound against me—would you be more afraid of what might happen in the next couple years in Pakistan or the next couple years in Iran?  What‘s more concerning to you? 

CONTINETTI:  I think they‘re both equally concerning.  There‘s a chance for a Democratic transition in Pakistan, so that would make it slightly less concerning to me, if that transition goes well. 

MATTHEWS:  Do you think Bush looks like a credible leader right now in the world? 

CONTINETTI:  I don‘t believe so.  No, he lost the credibility early on.  He‘s hardly credible with a lot of the American people these days. 

MATTHEWS:  He had a conversation with his intelligence chief in August, where the intelligence chief warned him there‘s a big development coming on Iran, and he never asked him what it was. 

CONTINETTI:  If the story is true, it certainly calls into question Bush‘s judgment. 

MATTHEWS:  That‘s why you‘re a good journalist, despite your predilections and your magazine.  We‘ll be right back with the round table.  You‘re watching HARDBALL, only on MSNBC. 

(COMMERCIAL BREAK)

MATTHEWS:  Julie Mason, do you have any kids in Kindergarten right now? 

MASON:  No, absolutely not, Chris. 

MATTHEWS:  Well, if you did—does anybody have any kids?  Do you have any, Matt, in Kindergarten?

CONTINETTI:  Nope, no kids.

MATTHEWS:  Well, I‘ve had them in kindergarten.  I wish I had warned them not to be anywhere near a tape recorder because today in American politics what you say in Kindergarten doesn‘t stay in Kindergarten.  Apparently, Hillary Clinton‘s people have put out the word that when he was a Kindergarten student in Indonesia, Barack Obama talked about some day being president.  What do you think?  Do you think that‘s below the belt politically for her to go after him on that, Julie Mason? 

MASON:  Yes, absolutely.  Is nothing off limits?  I think, you know, for my purposes, anything I said or did before I turned 35, I think, is totally off limits. 

MATTHEWS:  Well, in my religion they talk about the use of reason.  Until you‘ve actually been five or six years old, you‘re not really accountable morally, but apparently you‘re accountable politically for anything you say ever. 

CONTINETTI:  Hillary Clinton decides to attack Barack Obama.  What does she attack him on?  On being a calculating ambition politician?  Hot meat kettle.  This is a lame attack from Senator Clinton. 

MATTHEWS:  Jonathan Capehart, are we going to have a “Washington Post” editorial defining what the foul line is now?  Is there any more foul line, I mean, in a baseball sense foul line?  Is anything out of bounds now?  The other conversation is the brother-in-law conversation.  You know, talking to brother-in-laws is always tricky, but now it‘s recordable. 

CAPEHART:  Chris, apparently there is no foul line anymore, and, actually, I think what we‘re seeing here is a role reversal.  Remember when Barack Obama and John Edwards were attacking Hillary Clinton?  Hillary Clinton stayed above the fray.  She never addressed them.  She never addressed them by name.  She never talked about who was attacking her. 

Now she is not only attacking, she is attacking by name.  I thought you raised a very good observation two segments ago with Jamal.  She is reading these attacks.  They‘re not rolling trippingly often the tongue, like a lot of her policy speeches.  And I actually think that the—her comments about Barack Obama‘s Kindergarten conversations is actually beneath her.  She is better than this. 

And what it says to me is that maybe in her mind or in the campaign‘s mind Barack Obama is the front-runner.  Only front-runners can sail above, and you showed that wonderful clip of someone trying to get Barack Obama to respond to her latest attack and he didn‘t.  He sailed above it.  He‘s 35,000 feet and it looks like she is down around 10,000. 

MATTHEWS:  You know what I think, lady and gentlemen?  I think that they have internal polling, starting in the Philadelphia debate, when Russert asked her some tough questions about driver‘s licenses, that have shown a free fall in support for her ever since that day six weeks ago.  I think she knows much worse than we know.  That‘s the only explanation for why she is fouling her opponents, why she is so desperate to get the ball back, as to resort to an attack on somebody‘s Kindergarten comments. 

Anyway, thank you, Jonathan, thank you, Julie, thank you, Matt.  Tomorrow on HARDBALL, Democratic presidential candidate Bill Richardson is coming right here, where Matt is sitting.  He‘s warming the seat for big Bill.  Right now it‘s time for “TUCKER.”

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

END   

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