updated 7/11/2008 10:51:37 AM ET 2008-07-11T14:51:37

Guests: Rachel Maddow, Jonathan Alter, John Harwood,  Chris Hayes, Greg Mitchell, Michael Musto

RACHEL MADDOW, GUEST HOST (voice over):  Which of these stories will you be talking about tomorrow?

A nation of whiners and mental recession.  The wisdom of Phil Gramm, the economic brain for Senator John McCain.  So, that pain at the pump, the pain in your wallet, it‘s all in your head.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN, ® PRESIDENTIAL CANDIDATE:  Phil Gramm does not speak for me, I speak for me.

(END VIDEO CLIP)

MADDOW:  So, what you‘re saying is, Phil Gramm should shut up but keep writing your economic policy.

Senator Obama says we don‘t need more head games.

(BEGIN VIDEO CLIP)

SEN. BARACK OBAMA, (D) PRESIDENTIAL CANDIDATE:  I want all of you to know that America already has one Dr. Phil.  We don‘t need another one when it comes to the economy.

(END VIDEO CLIP)

MADDOW:  The Obama/Clinton “Show me some love, show me the money” tour hits a speed bump.

(BEGIN VIDEO CLIP)

OBAMA:  We will change the world.  Thanks very much.

(END VIDEO CLIP)

MADDOW:  Speaking of change, what about collecting some for that one-time opponent now good friend you promised to help.

(BEGIN VIDEO CLIP)

OBAMA:  Yes, Senator Clinton still has some debt.

(END VIDEO CLIP)

MADDOW:  What will that flub do to Democratic unity?

The Jesse Jackson controversy.  Bill-O‘s plays Jackson‘s off-air comments about Barack Obama caught fire by a FOX News mike.  But there are more comments but he doesn‘t want to ruin Jackson‘s career.  Would this have happened to a conservative and, more importantly, since when does Mr.  O‘Reilly get to decide what counts as news?

(BEGIN VIDEO CLIP)

BILL O‘REILLY, TV HOST:  I can go out, write it and we‘ll do it live.

(END VIDEO CLIP)

MADDOW:  The Madonna male story.  A-Rod confesses his love for her, her brother said she wanted to have Dennis Rodman‘s baby and says she cheated on Sean Penn.

A COUNTDOWN Special Report: “Material Girl on the Break.”

All that and more: Now on COUNTDOWN.

(BEGIN VIDEO CLIP)

O‘REILLY:  Do it live!

(END VIDEO CLIP)

MADDOW:  Good evening.  I‘m Rachel Maddow in for Keith Olbermann. 

This is Thursday, July 10th, 117 days until the 2008 presidential election.

The next time you need to take out a second mortgage to fill up at the gas pump, don‘t worry, any pain you might be experiencing is apparently all in your minds.  If that second mortgage turns out to be a subprime mortgage and you just happen to lose your home, again, no worries.  Any homelessness you might encounter will also be just psychological.

Our fifth story on the COUNTDOWN: One of John McCain‘s oldest and closest economic advisors, former Senator Phil Gramm, has told Americans to stop whining about the U.S. economy, which he says is only suffering from a mental recession.  I wish I was kidding, but I‘m not.

Senator Gramm strikes again.  The man who helped write McCain‘s policy on the mortgage crisis while he was being paid by some of the country‘s largest financial firms to oppose re-regulation of the mortgage industry, the same man who you curse at the gas pump for having brought us the Enron loophole.  That guy, now wants you to suck it up and stop whining.

In an interview with the “Washington Times,” the Texas Republican said, quote, “You‘ve heard of mental depression; this is a mental recession.”  In other words, it‘s all in your head.  And even when a politician believes this, Gramm says there is no way he or she can ever admit it.

(BEGIN VIDEO CLIP)

PHIL GRAMM, MCCAIN SR. ADVISOR:  But no politician can talk about, well, things are not as bad as you think because that sounds like they don‘t care.  And, yet, you just hear this constant whining, complaining about the loss of our competitiveness, America in decline.  We‘ve never been more dominant; we‘ve never had more natural advantages than we have today.  We‘ve sort of become a nation of whiners.

(END VIDEO CLIP)

MADDOW:  Senator McCain responded today that Phil Gramm does not speak for him, even if he does write some of his economic policy.

(BEGIN VIDEO CLIP)

MCCAIN:  I don‘t agree with Senator Gramm.  I believe that the person here in Michigan that just lost his job isn‘t suffering from a mental recession.  I believe the mother here in Michigan around America who‘s trying to get enough money to educate their children isn‘t whining.  America‘s in great difficulty and we are experiencing enormous economic challenges, as well as others.

Phil Gramm does not speak for me, I speak for me.  So, I strongly disagree.

(END VIDEO CLIP)

MADDOW:  Senator McCain also tried to joke away a question about how significant Gramm was, in forming his economic plan, and whether Gramm could be secretary of the treasury in a McCain administration.

(BEGIN VIDEO CLIP)

MCCAIN:  I think Senator Gramm would be in serious consideration for ambassador to Belarus, although I‘m not sure the citizens of Minsk would welcome that.  Go ahead, in the back.

(END VIDEO CLIP)

MADDOW:  You know, I can never get anybody to laugh at my Belarus jokes either.  No laughs for McCain there.  And we‘re still waiting for him to answer the question about how much of his economic plan was written by Phil Gramm.

The Democratic in the race adopted a light tone in going after McCain for his economic advisor‘s comments.

(BEGIN VIDEO CLIP)

OBAMA:  A nation of whiners.  Now, this comes as Senator McCain recently admitted that his energy proposals, you know, for the gas tax holiday and the drilling, will have mainly, quote, “psychological benefits.”

(LAUGHTER)

OBAMA:  I want all of you to know that America already has one Dr.  Phil.  We don‘t need another one, when it comes to the economy.  We need somebody to actually solve the economy.  It‘s not just a figment of your imagination.  It‘s not all in your head.

(END VIDEO CLIP)

MADDOW:  Here‘s McCain with his, perhaps even lamer, comeback.

(BEGIN VIDEO CLIP)

MCCAIN:  Whether it be offshore drilling, whether it be nuclear power, whether it be any of the efforts we need to make, he‘s, he is, you‘re talking about Dr. Phil, he‘s Dr. No.  He‘s “Dr. No on energy.”

(END VIDEO CLIP)

MADDOW:  Dr. Phil, Dr. No, wow, lots to talk about with MSNBC political analyst, Jonathan Alter, who‘s also a senior editor at “Newsweek” magazine.

Hi, Jon.

JONATHAN ALTER, MSNBC POLITICAL ANALYST:  Hi, Rachel.

MADDOW:  Phil Gramm does not speak for John McCain, but he does get to help write some of John McCain‘s economic policies.  So, what‘s the important difference here?

ALTER:  Well, first, you have to understand that Phil Gramm and John McCain have been friends for 25 years.  They met in the House of Representatives, formed a really close bond in their early 1980s.  Then in 1996, I remember going to a Florida straw poll and John McCain was handing out literature for Phil Gramm.  He was his choice to be the Republican nominee in 1996 when Bob Dole ended up prevailing.

I remember, you know, saying to McCain, why do you want to, do you really think Phil Gramm should be president of the United States, senator?  You know, because Gramm had a reputation as being kind of a nasty piece of work in the Senate and McCain made the case to me and a lot of other people at the time that he thought that Gramm was basically a genius on, particularly on economic policy.

And he and his wife, Wendy Gramm, who was head of the Commodities Futures Trading Commission for years, they are very, very involved in this deregulatory environment, Rachel, that has done a lot of damage in recent years.  And going into this campaign, they were very centrally involved in drafting John McCain‘s economic plan.

So, he could try to distance himself from Phil Gramm, but it‘s really not going to work if you look at the facts.

MADDOW:  And that is really the most important question here, not whether this is a gaffe but how much this represents about McCain‘s economic thinking.  I mean, in January, McCain himself said the fundamentals of the economy were strong and that our economic problems were psychological.  That‘s the word he used.

In April, he said it again, “Our economic problems are psychological.” 

So, we might need a psychological boost to fix them.

In June, he was still at that line, same, the gas tax holiday would offer a psychological impact rather than a real one.  I know that McCain is distancing himself from Gramm here because of Gramm‘s getting in trouble.

But is Gramm actually revealing what the McCain campaign believes about the economy?

ALTER:  Well, you know, I think you can take John McCain at his word that he feels your pain if you‘re hurting in this economy.  But the problem is really an ideological one.  You know, if people at the middle and lower end of the economic spectrum are an abstraction for you, if you really don‘t know and deal with such people very often in your daily lives—as some of these Republican politicians do not—I don‘t want to necessarily include McCain in that because when you‘re campaigning, you do run into these folks.

But a lot of people like Phil Gramm, they don‘t know anybody who‘s got much of a problem or maybe their net worth, you know, went from $1 million to $900,000.  So, they‘re not exactly hurting.  And so for them, all of this is just, you know, a series of abstractions, numbers that you might see on the page.  It‘s not real for them.

So, it‘s easy for them to take refuge in their supply side economics and to just kind of write all of us off and write all the people who are suffering off as a bunch of whiners, as he said.

MADDOW:  You compare this to the amount of coverage and the continuing coverage that Obama‘s “bitter” line got about Obama being some sort of elitist and out of touch and it‘s a pretty striking contrast.  Jonathan, how long do you think that Gramm lasts as McCain‘s economic adviser now?  Do you think that he actually get sort of cast out from the kingdom?  Do you think he‘s gone?

ALTER:  That happened today.  It was—Phil who?  You know, you could see that it took to use, you know, the top cliche of the season.  He threw Gramm under the bus in about five seconds.

So, you‘re not going to be hearing much about Phil Gramm any more, but it will be interesting to see whether McCain does get, you know, tagged with not really being very sensitive to some of the hurt that‘s out there right now.

MADDOW:  Jonathan Alter of MSNBC and “Newsweek,” thanks for your time tonight.

ALTER:  Thanks, Rachel.

MADDOW:  More problems for McCain tonight.  This time coming from another top adviser, former Hewlett-Packard, Carly Fiorina, thought by some to be on the short list of McCain V.P. choices.  During a speech about women and health insurance on Monday, Fiorina argued that, quote, “Many health insurance plans cover Viagra, but won‘t cover birth control medications.  Those women would like a choice.”  Yes, Carly, I bet they would.

But offering women that choice is not exactly reflected in John McCain‘s voting record in the Senate.  He voted against a proposal that would have required insurance companies to pay for prescription contraception just as they pay for Viagra.  In some of the most riveting campaign footage of the entire year so far—let‘s watch candidate McCain squirm and squint and try to will himself out of his own body when he was asked about this on his campaign bus yesterday.

(BEGIN VIDEO CLIP)

MCCAIN:  I certainly do not want to discuss that issue.

MAEVE RESTON, LOS ANGELES TIMES:  But I think you voted against -

MCCAIN:  I don‘t what I voted -

RESTON:  You voted against coverage of birth control, forcing health insurance companies to cover birth control in the past.  Is that, is that still your position?

MCCAIN:  I‘ll look at my voting record on it, but I have, I don‘t

recall the vote right now.  But I‘ll be glad to look at it and get back to

you as to why.  I don‘t -

RESTON:  I guess her statement was that it was unfair that health insurance companies cover Viagra but not birth control.  Do you have an opinion on that?

MCCAIN:  I don‘t know enough about it to give you an informed answer because I don‘t recall the vote.  I‘ve cast thousands of votes in the Senate but I will respond to what she said—safe choice.

RESTON:  Delicate issue.

(LAUGHTER)

MCCAIN:  It‘s something that I had not thought much about and I did hear about her response, but I hadn‘t thought about it much.  I will get back to you today on it.  I don‘t usually duck an issue, but I‘ll try to get back to you.

(END VIDEO CLIP)

MADDOW:  Let‘s bring in Chris Hayes, Washington editor of “The Nation” magazine.

Hi, Chris, thanks for your time tonight.

CHRIS HAYES, THE NATION:  Hey, Rachel.  How you doing?

MADDOW:  Great.  When pressed by that reporter, Maeve Reston of the “L.A. Times,” who, by the way, deserves some kudos here—when pressed by Reston on whether it was fair that some insurance companies cover erectile dysfunction medicines but not birth control, McCain answered, quote, “It‘s something that I had not thought much about,” and yet he voted on it in the U.S. Senate.

It‘s a big headline here that a senator admits to not bothering to even think about things he nevertheless votes on?

HAYES:  Well, it‘s funny.  This is actually kind of a John McCain trick.  He does this fairly often.  In fact, there was an article, I‘m going to say it was in “New Republic,” in which he talked about this and reporters like it the first time they encounter, or the second time they encounter it because it seems so kind of frank.

He says, “Well, you know, I actually don‘t know that much about that or I can‘t really remember that vote,” and it seems kind of like a breath of fresh air because it‘s honest.  But he does it enough of time; you start to think, “Well, do you pay any attention to the votes you‘re casting?”  I mean, look, clearly, a memo went out when the bill here, right, was to require insurance companies to cover something.

Now, the Republican Party is not in the business of, you know, requiring insurance companies to do anything.  So, I‘m sure he was just told by his staff, “Look, you know, vote against this bill.”  But it‘s clearly not something that he thought a lot about.

MADDOW:  And, if Carly Fiorina is appealing for women‘s vote on the basis that John McCain believes something about this, that not only that he votes against, but he‘s never thought about.  It‘s awkward.

Fiorina also said John McCain has never signed on to efforts to over turn Roe v. Wade.  Yuppie on the campaign trail.  He said that the law protecting a woman‘s right to have an abortion, quote, “should be overturned.”  How exactly is Carly Fiorina helping here, drawing attention without being factually correct to all these things that are supposedly—supposed to appeal to women voters?

HAYES:  Well, she‘s trying to help.  I mean, she‘s trying to run a hustle, basically.  I mean, look, if you—John McCain is pro-life, OK.  John McCain thinks Roe v. Wade should be overturned.  John McCain believes the government should have a right to stop women from exercising, you know, their right, the choice over what their body does, OK?  That fact is not widely known.  This sort of aura and patina of moderateness kind of lingers around John McCain.

And if you look at the polling data, far less people and far less women know what John McCain‘s stance is on abortion than you would think.  And so, Carly Fiorina is a very effective surrogate because, my own sense is that she, herself, is pro-choice.  She‘s obviously a very prominent and very gifted and smart woman and she‘s going around the country trying to sort of portray the softer side of John McCain, the pro-woman side.

But the fact of the matter is, his record is clear.  He wants to overturn Roe v. Wade and he wants to appoint Supreme Court justices who would, like Roberts and Alito, who we think will do the same.

MADDOW:  Carly Fiorina is saying things about John McCain‘s record that are not true.  McCain is, as you saw, squirming on camera like a kindergarten there between bathroom breaks.  Phil Gramm just blew bitter-gate out of the water with this “mental recession, we‘re a nation of whiner” stuff.  Where‘s the media scram?  Can you imagine, Chris, the contrast if this stuff were going on in the Obama campaign?

HAYES:  Yes, I mean, you know, McCain, once again, kind of skates by on his charm or perceived charm and, you know, I think it will wear thin.  I mean, I want to say that as this goes on, we‘re going to get to a situation where there‘s a more equalizing of treatment.  And that‘s my kind of, I guess, optimistic take on things.

But, yes, there‘s no—there‘s absolutely no balance right now between the reaction to supposed gaffes that come out of the mouth of Democratic surrogates and Senator Obama and the gaffe, the actually gaffes that come out of the mouths of the surrogates of Senator McCain.

MADDOW:  Chris Hayes, Washington editor of “The Nation.”  Thanks for joining us.

HAYES:  Thanks a lot, Rachel.

MADDOW:  Senator Obama embarks on a whirlwind fundraising tour for himself and Senator Clinton and forgets to mention Clinton.  Oh, boy.

And we‘ll tell you about a very interesting disclaimer on one Obama fundraising e-mail.

The Pentagon tilts against families of fallen war heroes.  That‘s ahead in Bushed.

And, fallout from the FOX News‘ Jesse Jackson tape.  Why is Bill O‘Reilly only playing a portion of the tape and then telling us that there‘s more that gets worse.

That and more, ahead on COUNTDOWN.

(COMMERCIAL BREAK)

MADDOW:  Will Clinton supporters laugh off Obama‘s fundraising blooper last night when he forgot to mention Clinton‘s fundraising needs or will the hard feelings fester?

Bill O‘Reilly promises to not read into Jesse Jackson‘s whispered remarks about Obama and then proceeds to re-read to those remarks.

And: Madonna/A-Rod madness, is this is just all about selling tour tickets?

Stand by.

(COMMERCIAL BREAK)

MADDOW:  I wonder what Freud would have thought about what happened, actually, what almost didn‘t happen last night at Barack Obama‘s New York City fundraiser.  We can‘t, of course, book Sigmund as a guest.  So, let‘s make this rhetorical.

Our fourth story on the COUNTDOWN: Obama and Clinton, awkward.  Barack Obama spoke last night for a half hour before an audience of 1,000 people, he praised Senator Clinton as extraordinary and got a substantial ovation.

(BEGIN VIDEO CLIP)

OBAMA:  I promise you, not only will we change this country, but we will change the world.  Thank you very much.  Thank you.

(APPLAUSE)

(END VIDEO CLIP)

MADDOW:  It‘s what came next that left us analytically scratching our chins, wondering if something subconscious was at work.  A full 35 seconds later, after he seemed to remember what he forgot, Obama returned for a curtain call.

(BEGIN VIDEO CLIP)

OBAMA:  I‘ve got one more thing that‘s important to me.  Senator Clinton still has some debt.  There are many supporters of mine here who have not yet given something to help her retire that debt.

(END VIDEO CLIP)

MADDOW:  In case there was any doubt, he underscored his admiration for his erstwhile rival first thing this morning.

(BEGIN VIDEO CLIP)

OBAMA:  I‘ve learned from her as a candidate.  I‘m proud to call her my friend.  I know that I desperately need her and Bill Clinton involved in this campaign.

(END VIDEO CLIP)

MADDOW:  And he does.  Take a look at this recent Pew Poll.  Obama bests McCain in the presidential horse race, further among their respective supporters, Obama has a higher number who strongly support him than McCain does—Democratic Party unity in play.

But looking deeper at this same poll, fissures start to emerge.  Just 35 percent of Democrats who favored Clinton think Obama is more personally qualified than John McCain.

And on the flipside of the proverbial coin, there‘s also apparently some doubt, Obama booster and venture capitalist, Ed Chandler, included this passage in an e-mail dinner invitation, “None of the money raised will go to pay off Hillary Clinton‘s debts.  While you may have heard that Senator Obama has asked people to make a separate donation to the Clinton campaign for that purpose, neither the law nor the ethic of this campaign, will not allow for any transfer of funds from Obama for America to Clinton.”

John Harwood joins us now, he‘s CNBC‘s chief Washington correspondent and a political writer for the “New York Times.”  He‘s also the author of “Pennsylvania Avenue: Profiles and Backroom Power.”

Thanks for being here, John.

JOHN HARWOOD, CNBC:  Hey, Rachel.  I think you‘ve got some news today. 

I think this bonanza-filled day for the entire political community.

MADDOW:  Everybody screws up and we have the best night ever, that‘s how it works.

John, even if Obama and Clinton personally have sufficiently repaired their relationship, they now have a genuinely healthy campaign relationship, do these two still have work to do when it comes to their supporters?  I mean, that Ed Chandler e-mail saying none of this money will go to Clinton, ouch.

HARWOOD:  I think the strong feelings of some of those closest supporters to both of these candidates remain and that‘s something they have to work on.  It‘s part of pulling the party together for the convention.  I think more significant was the slip by Barack Obama.  Look -that was a kind of an unconscious projection.

I‘m sure it was not deliberate on his part, but to the extent there‘s a part of Barack Obama that people criticize for being aloof, the kind who gives sort of back-handed compliments, the kind who said at the debate that time, you‘re likable enough, Hillary.  This was one of those moments that underscored that quality.  It‘s was unfortunate for him.  Exactly the thing he didn‘t need at this moment.

Now, I happen to believe, Rachel, that this fissure is not going to prove all that significant in the long run, but right now it‘s a bit of a headache.

MADDOW:  Obama‘s finance team last night told donors that fundraising on the Obama side is, quote, “a little slow.”  Is it possible that this is Obama die-hards not wanting their money to be used to retire Clinton‘s debt?  Could this be the base backlash against the recent unveiling of “Mr.  Centrist” Obama?

HARWOOD:  I wouldn‘t expect much of a backlash on Mr. Centrist but I do think the trajectory of Obama‘s fundraising is something to watch.

This is something Carly Fiorina said that was on target over the last couple of days which was that, you know, they‘re watching the trend line and John McCain is creeping up.  He still hasn‘t had a month half as good as Barack Obama‘s had but Barack Obama has not, so far as we know, come anywhere close to that $55 million month that he had during the spring when he was fighting against Hillary Clinton.  He clearly is counting on having a substantial financial advantage, that‘s why he‘s going out the taxpayer funded system.

So, the pace of his fundraising in June, July and August is going to be significant to watch.

MADDOW:  John, this Pew Poll that‘s out now.  It‘s kind of a good news/bad news thing for Obama.  On the one hand, only 35 percent of Clinton‘s original supporters seem to be sold on Obama.  That‘s the bad news.  On the other hand, even without them, he‘s beating McCain by eight points and he‘s still got a big well of presumably persuadable Clintonites to go after.  Do you think that‘s the right interpretation there?

HARWOOD:  I think it‘s precisely the right interpretation.  If he‘s got an eight-point lead over John McCain with some resistance being expressed by those Hillary Clinton supporters, that tells you how much upside he‘s got in the election.  We see the number of Hillary Clinton supporters who say they‘re voting for McCain, is creeping down.

I would expect that to creep down further and you‘ve got to look, Rachel, at the overall theory of the campaign by the Obama side, which is that, voters have fundamentally decided they don‘t want Republicans and they don‘t want any more of Bush‘s policies, and what they‘re going to do is wait until the end of the campaign and maybe break late.  And if he‘s got an eight-point lead and he gets the break late, he‘s going to have a comfortable November against John McCain.

MADDOW:  John Harwood of CNBC and the “New York Times,” great to see you, thanks for joining us.

HARWOOD:  Hey, my pleasure.

MADDOW:  President Bush signs his increase spying powers into law today as efforts to try to stop the new FISA law already hit the courts.

And, the referee is supposed to watch the game, but who‘s supposed to watch the referee after he‘s hit the soft too hard.  An Oddball investigation is coming up.

(COMMERCIAL BREAK)

MADDOW:  On this date in 1893, Daniel Hill Williams, an African American doctor, became the first surgeon to successfully perform open heart surgery, a historic day for Dr. Williams.  It was a bigger day for James Cornish, the guy Williams opened up.  Before Dr. Williams, other patients had survived heart surgery, only to die soon after.  Jamie Cornish, whose stab wound to the heart was repaired by Williams without anesthesia, lived a healthy and complete post-surgery life, presumably with a well-deserved rest of his life aversion to knife fights. 

Let‘s play Oddball.

(BEGIN VIDEO CLIP)

MADDOW:  We begin on a soccer pitch in Phil Gramm‘s future home of Minsk, Belarus, where there‘s a break in the action, because the ref is wasted.  I know soccer can be a little boring, but wow, during the match, Referee Sergei Smolik (ph) had been observed staying in one place, not really following the action; some thought he might have injured his back, turns out he was completely hammered, sauced, totally in the bag.  After his exit, the hospital tests revealed a high level of alcohol in his system.  Smolik now faces disciplinary action from the league and a totally counter-productive, but still overwhelming desire for a big, greasy breakfast. 

A different kind of self-medication in Beijing, China, where the Olympic spirit doesn‘t mean wearing flag pins on your lapel, but rather on your skull.  This is self-taught acupuncturist Wei Shung Chu (ph), who is so jazzed about the upcoming games, he is sticking 205 different flag pins into his head, you know, as you do.  Wei says this is his special way of celebrating the Olympics in his home country.  For his next trick, he plans to volunteer as the official Javelin catcher for this year‘s track and field competition.  You can tune in to see how all that goes on 8/8/08, only on the networks of NBC. 

(END VIDEO CLIP)

MADDOW:  On the show that takes place inside Bill O‘Reilly‘s head, the Jesse Jackson whispering tape is a whole lot worse than what O‘Reilly showed us last night.  Why should we believe him without proof? 

And Madonna-mania.  The divorce rumors, the new boyfriend rumors, the tell-all book from her estranged brother; is it all an elaborate marketing ploy?  Michael Musto will analyze all that. 

But, first, the headlines breaking in the administration‘s 50 running scandals, Bushed.  Number three, war?  What war-gate.  Imagine a grieving military family‘s shock at having their last wishes for their fallen loved one disrespected by the Pentagon.  They arrive at Arlington National Cemetery to bury their family member and they want the media there to commemorate the moment, only to find that the reporters and the cameras have been pushed back to set up 50 yards away. 

Enter Gina Gray, herself a veteran of the Iraq war; she became the new public affairs director at Arlington National Cemetery in April.  When Gray witnessed this unfold first hand, she did everything she could to make the family‘s wishes happen.  Gray‘s efforts got media attention, got reporters asking questions of the Pentagon about why the media rules are even more strict now under Secretary of Defense Bob Gates than had been under Donald Rumsfeld.  The Pentagon‘s response to the inquiries, they haven‘t changed their policies; they fired Gina Gray. 

Number two, ignoring the constitution-gate.  Today was the day Karl Rove was subpoenaed to testify before the House Judiciary Committee.  Congress has had a few questions of Mr. Rove and others about the political firings of U.S. attorneys and Rove‘s involvement in getting the government to go after former Alabama Governor Don Siegelman.  Karl Rove was a no show today, shocker.  You can catch him day after day after day after day on Fox News, but put him under oath and ask him to tell the truth, forget about it. 

And number one, FISA-gate, the majority in Congress may have stopped fighting for the fourth amendment, but the battle is not over.  Today, the ACLU, along with Amnesty International, Human Rights Watch, “The Nation Magazine” and former “New York Times” reporter Chris Hedges filed suit in federal court to block the new Foreign Intelligence Surveillance Law.  The lawsuit says the law makes legal dragnet surveillance and mass acquisition of phone calls and e-mails of U.S. citizens. 

Today, July 10th, 2008, President Bush signed the FISA bill into law in the Rose Garden.  As Senator Russ Feingold said to us last night, one of the greatest assaults on the Constitution in the history of our country.  The purported justification for this assault on the Constitution is the threat posed by terrorists, terrorists who, our president tells us, hate us for our freedoms.  Freedoms we‘re now abolishing ourselves, we say, because of the looming terrorist threat. 

If this is winning, what would losing look like? 

(COMMERCIAL BREAK)

MADDOW:  In our number three story, we now have the Fox News explanation for why Jesse Jackson‘s disparaging whisper about Barack Obama caught on a Fox and Friends hot mic took 72 hours to see the light of day.  They didn‘t know it happened until a producer screening the tape the next day heard the whispers and sent a transcript to “The O‘Reilly Factor.”  Then after an internal discussion, Fox News made a Fox Business decision, they would air the tapes and Mr. O‘Reilly would do it live!

(BEGIN VIDEO CLIP)

JESSE JACKSON, CIVIL RIGHTS ACTIVIST:  See, Barack Obama, been talking down to black people on this faith based.  I want to cut his nuts out.  Barack, he‘s talking down to black people.

(END VIDEO CLIP)

MADDOW:  Mr. O‘Reilly aired that portion of the tape and then took the following oath. 

(BEGIN VIDEO CLIP)

BILL O‘REILLY, FOX NEWS ANCHOR:  Talking points is not going to speculate about his motivation or describe his comments in any pejorative way.  You heard them, you can decide. 

(END VIDEO CLIP)

MADDOW:  That promise lasted a few minutes, until Mr. O‘Reilly couldn‘t help himself, and he speculated about Jackson‘s motivation and described his comments in a pejorative way. 

(BEGIN VIDEO CLIP)

O‘REILLY:  But I think it might be a more malevolent motivation here, Clarence.  I think there might be a tinge of jealousy. 

(END VIDEO CLIP)

MADDOW:  Later Mr. O‘Reilly announced there were other more damaging remarks made by Jackson, but he wasn‘t going to air them. 

(BEGIN VIDEO CLIP)

MADDOW:  Wait, wait, wait, Warren.  I want to make this very clear, we‘re not out to get Jesse Jackson.  We‘re not out to embarrass him and we‘re not out to make him look bad.  If we were, we have would used what we have, which is more damaging than what you heard. 

(END VIDEO CLIP)

MADDOW:  Big Brother Bill decided not to report but he still wants us to decide that we would really think much more poorly of Reverend Jackson if only Mr. O‘Reilly had seen fit to allow us to hear the really bad stuff.  Tonight, O‘Reilly said the other material is trash talk and doesn‘t deal with public policy, so there‘s no need to air it.  An executive at Fox News tells the “LA Times,” in an article running tomorrow, that news executives were in discussions about whether to air more of the tape. 

Now, setting aside any collateral damage this may cause Barack Obama, it is worth noting that despite his claims to the contrary, Mr. O‘Reilly has been out to get and embarrass Jesse Jackson before, notably in one of the ambush interviews, when a factor stalker/producer tried to surprise Reverend Jackson with an in-your-face interview about Jeremiah Wright in the wake of Reverend Wright controversy. 

That may have been repayment for Jackson holding O‘Reilly‘s feet to the fire after O‘Reilly made ridiculous comments about dining in a Harlem restaurant in September of last year.  To refresh your memory, O‘Reilly said about his dining experience in an African-American owned establishment, quote, “there wasn‘t one person in Sylvia‘s who was screaming M-Fer, I want more iced tea.”

Jesse Jackson visited O‘Reilly in September of last year to find out what exactly that meant. 

(BEGIN VIDEO CLIP)

JACKSON:  What concerns me that fear and ignorance lead to hatred and that leads to violence. 

O‘REILLY:  Absolutely. 

JACKSON:  So, to underestimate the civility of blacks was insulting to many people. 

O‘REILLY:  Who underestimated the civility of blacks? 

JACKSON:  That‘s how it came off. 

O‘REILLY:  No, it didn‘t. 

(END VIDEO CLIP)

MADDOW:  Joining us now for an official on the record interview is Greg Mitchell, editor of “Editor and Publisher Magazine,” and author of the book “So Wrong For So Long.”  Greg, thanks for being here. 

GREG MITCHELL, “EDITOR AND PUBLISHER MAGAZINE”:  Happy to be here. 

MADDOW:  I think I know the answer to this, but is it strange that Mr.  O‘Reilly gets to decide what information is released to the public and what information is not?  I mean, Fox News has this material, but it is Mr.  O‘Reilly individually, apparently, who gets to decide what we get to know and what we don‘t. 

MITCHELL:  It‘s not even his show.  I wonder what Roger Ailes knows about this.  It is strange that it would take that long, and it would only go on O‘Reilly.  They were able to tease it.  They were able to draw it out.  And as you mentioned, they even teased it out for tonight, and there was absolutely nothing released tonight.  It adds to the sense that they‘re out to not provide the context for the remarks.  They‘re out to make Jackson look as bad as possible. 

On tonight‘s show, O‘Reilly, I think six times, accused Jackson of playing the victimization card. 

MADDOW:  When O‘Reilly said there was more from Reverend Jackson that was worse, but he wasn‘t going to play; isn‘t that an incredible way to smear somebody, to say, I am going to let you hear something that is going to make this person look bad.  Trust me, you can let your imagination run wild.  I‘m not going to tell you what else is out there, but trust me, it is way worse.  That is using everybody‘s own imagination to smear Jackson. 

MITCHELL:  That‘s another problem with it.  I think probably Fox has been a little bit divided about this whole thing from the beginning.  I think they know that—again, tonight‘s show, Laura Ingraham and other people were on there saying that they think this is a net plus for Obama.  I can just see the debate in Fox headquarters, well, we want to hit Jackson, but what if it helps Obama?  Well, we really want to hit Jackson, but it might help Obama.  Maybe that would explain why they drew it out this long. 

MADDOW:  Then there‘s that whole awkward consideration of what‘s actually news that you would hope they would be debating.  Because they have referenced that there is more of this tape, that they have more, they have more footage, more clips that they could air.  Journalistically speaking, wouldn‘t it be right when you reference that there is more that they should play more, so then people can decide for them selves? 

MITCHELL:  Sure.  I mean—within this the there is an interesting debate.  Beyond the crude language that Jackson used is the point that he‘s raising with Obama, and how he‘s interacting with the black community and the black community‘s response to him.  And that‘s a debate that‘s going to on probably after tonight that will switch over to that.  Minus the context, O‘Reilly said tonight on his show that he still didn‘t understand it.  He didn‘t think the viewers understood the context for Jackson‘s remarks.  Well why was that?  They didn‘t air the context. 

So, Bill, play the tape, you know. 

MADDOW:  Well, it should also be said that if we‘re going to talk about the relevant context for understanding what happened here, I feel like it is relevant context to understand that Bill O‘Reilly has gone after Jesse Jackson a lot before, to the point of having one of his producers ambush him, and has gone after him in ways that I think make more sense of this whole exercise than anything that we could—that we could speculate about the political impact for Barack Obama. 

MADDOW:  Again, I think this was aimed at pushing Jackson aside for—maybe for good.  And, again, O‘Reilly said that tonight again and again; he‘s over.  He‘s done.  It is the end for him.  But I really think there is a tug of war there, that they really are afraid that this will help Obama, by appearing more centrist, more moderate for the many people who, especially in Fox‘s audience, that have a problem with Jackson. 

MADDOW:  Does this play into the debate about whether or not Democrats or liberals have something to fear from Fox News, that Fox News is a place where this sort of gotcha stuff will be used for political purposes? 

MITCHELL:  Oh, absolutely.  I think this is a reason why candidates are reluctant to go on there.  O‘Reilly said again tonight he wants Obama on.  He‘s anxious to do that and talk about this stuff. 

MADDOW:  Not a good way to get that done. 

MITCHELL:  I think there are probably a few candidates out there who may want to reach Fox‘s audience, and they may find that it‘s worth doing.  But I would hope that most of the leading candidates would err on the side of safety. 

MADDOW:  Greg Mitchell from “Editor and Publisher,” thanks for joining us. 

The bitter divorce war between Christie Brinkley and her husband reaches a cease-fire.  A surprise settlement comes hours before private eyes were set to testify. 

And has the sudden onslaught of all the Madonna headlines kept your mind racing?  What‘s going on?  How could this be?  We‘ll put our private eye, Michael Musto, on the case, ahead on COUNTDOWN.

(COMMERCIAL BREAK)

MADDOW:  A merciful end to Christie Brinkley‘s ugly divorce trial, in our number two story on the COUNTDOWN, Keeping Tabs.  The former supermodel and her estranged husband have reached a settlement.  Brinkley will get custody of the couple‘s two children and she will keep 18 properties in the Hamptons, 18!  Architect Peter Cook, her fourth now ex-husband, gets 2.1 million dollars, which, if you believe the allegations made in the case, will fund 262 months of his porn habits. 

After the settlement was announced, Brinkley said, quote, it‘s to me a very bitter sweet moment because it really is the death of a marriage.  The divorce trial had exposed Mr. Cook‘s affair with an 18-year-old girl he had met in a South Hampton toy store, as well as the 8,000 dollar a month porn thing.  One more note, the family boat entitled Sweet Freedom will be sold. 

And the very pregnant Angelina Jolie holed up in her suite of rooms in a French hospital is reportedly fed up and more than ready to have her twins.  According to “In Touch Weekly,” the actress is tired of bed rest.  With her scheduled Caesarian Section still days away, next Tuesday.  A source saying, quote, she‘s starting to feel that the staff are star struck and not attentive enough.  She‘s throwing fits if she rings and they don‘t come quick enough.  I think she‘s in melt down mode.  She‘s been getting upset if there‘s not enough ice in her glass.  But Jolie reportedly perks up when her partner Brad Pitt visits with all the kids.

Aww.   

Finally, Matthew McConaughey has reportedly agreed to sell the first photos of his new baby for three million dollars to “OK Magazine.”  McConaughey and his girlfriend, Camilla Alvis (ph), have also agreed that baby Levi‘s first Christmas will be part of the deal.  That‘s according to TMZ.com.  The actor‘s publicist denies another report that McConaughey acted against his advice and that the publicist wanted a better deal, possibly with “People Magazine.”  Apparently, McConaughey thought “OK!” was all right. 

Madonna, Alex Rodriguez soul mates, and Michael Musto.  Need I say more.  To the top of the COUNTDOWN, next. 

(COMMERCIAL BREAK)

MADDOW:  We are only human.  We can only guess what lurks in the hearts of men and women.  But for Madonna and Alex Rodriguez, we the help of their former managers, personal trainers and unnamed sources.  Lucky us.  In our number one story on the COUNTDOWN, A-Rod reportedly says he is in love with Madonna, while Lenny Kravitz, in a most unfortunate bit of collateral damage, apparently almost puked.  All this and more as the stomach turns. 

To the alleged affair of the heart, first with word that A-Rod is acting like smitten school boy.  According to London‘s “The Mirror,” an unnamed pal was recently having dinner with Rodriguez, and A-Rod kept texting Madonna during the meal.  Then, Mr. Rodriguez confessed, quote, she‘s my bleeping soul mate, dude.  He also said he was in love with her. 

Meanwhile, TMZ.com claims Madonna is using the scandal to boost ticket sales for her concert tour.  While her estranged brother is still doing his part; more likes from Christopher Ciccone‘s upcoming tell-all, like Madonna at one time wanted to have Dennis Rodman‘s baby.  As for Lenny Kravitz, you may recall that A-Rod‘s wife, Cynthia Rodriguez, flew all the way to Paris to hang out with Lenny.  Kravitz‘s personal trainer says that when the newspapers got ahold of that and suggested an affair, Kravitz looked like he was going to throw up. 

Joining now us “Village Voice” columnist Michael Musto.  Mr. Musto, you‘re looking well.  Thank you for joining us. 

MICHAEL MUSTO, “THE VILLAGE VOICE”:  I‘m going to throw up. 

MADDOW:  It looks great on you.  Let‘s look through the mirror, if you will, see if there is any probability of truth from that publication.  Do you think we should believe them when they say A-Rod hearts Madonna. 

MUSTO:  I don‘t know, he doesn‘t seem gay, Rachel, though his wife does have a certain Dina McGreevey quality.  Listen, the mirror is where I turn to for my hard news.  They have great stories like Hillary married a space alien.  Actually, that was one was true. 

MADDOW:  If this relationship has something to do with Madonna introducing A-Rod to Kabalah, do you think that they‘re texting about that sort of thing during a meal? 

MUSTO:  Yes, they‘re both getting carpal tunnel from all this texting.  He can barely lift his bat nowadays, though he has managed.  Apparently, Madonna wooed him through the Kabalah.  She must have held up a red ribbon and hypnotized him.  He texted her and enough, you had me at Kabal.  It‘s a beautiful story. 

MADDOW:  TMZ.com claims that Madonna and even her husband Guy Ritchie are essentially choreographing their impending divorce for maximum buzz, to help Madonna‘s tour earn a 300 million dollar nest egg for their kids.  Is that the worst family values story ever or is that the best family values story ever? 

MUSTO:  It‘s the best.  This is so not surprising, Rachel.  This is a woman who rolled around on her mother‘s grave.  Madonna doing something for publicity.  Next you‘ll tell me she is a bad film actress.  What is shocking here?  Besides, what is so bad about marketing your divorce?  Might as well get some bang for all that heartache. 

MADDOW:  Madonna‘s brother‘s upcoming book, Michael, it says she might have cheated on Sean Penn with a dancer, and she wanted Dennis Rodman to father her child.  Do you want to take a truth squad stab at that? 

MUSTO:  I know for a fact that Sean Penn had her tied to a chair.  So that couldn‘t have happened.  Unless the dancer was extra dexterous.  As for her having a child with Dennis Rodman.  That did happen.  Guess what Rachel, it‘s Barack Obama.  Yes, if he were only darker, Madonna would adopt him right back. 

MADDOW:  All right, poor Lenny Kravitz involved here.  His personal trainer, who happens to be Alex Rodriguez‘s former personal trainer, says Lenny felt like he worked so hard to clean up his image and now it‘s implied that he is consoling A-Rod‘s wife in the middle of this scandal.  Does Mr. Kravitz have a right to be miffed here? 

MUSTO:  Yes, C-Rod, the wife, is C-List.  At least when Lenny was linked with Nicole Kidman, that was B-List.  People forget that Lenny is the son of Roxie Roker, the late star of “The Jeffersons,” so he grew up with “Moving On Up,” “Got To Get a Piece of the Pie” playing in the background.  He‘s not going to settle for no C-Rod. 

MADDOW:  The same report that Lenny was mad about also says that Kravitz blames his former manager, who is now Madonna‘s current manager, because he thinks the guy is using the story to raise Madonna‘s profile.  Personal trainers, managers, it‘s seems like these people are more gossipy than sowing circle. 

MUSTO:  No, no, former managers and personal trainers are gossipy.  That‘s why I keep them on the payroll.  I still have the same one from when I was 12 years old.  I have a flabby body and no career, but they‘re not gossiping.  They have jobs for life. 

MADDOW:  Michael, if most of this is true, let‘s say, and Madonna and A-Rod become an actual item, can any good come from this? 

MUSTO:  A lot of it.  First of all, Madonna will become M-Rod.  I like the sound of that.  Also, she‘ll stop aping Angelina and she‘ll go back to doing Marylin and marrying a Yankee, which I like.  Also, she‘ll wipe that simpering Christie Brinkley off the map.  I‘m so tired of her victimization.  I would rather have Madonna, the man eater.  It‘s much more fun. 

MADDOW:  The one and only Michael Musto, thank you for your time tonight, Michael.

MUSTO:  Thank you.

MADDOW:  That‘s COUNTDOWN for this, the 1,898th day since the declaration of mission accomplished in Iraq.  I‘m Rachel Maddow, in for Keith Olbermann.  You can catch me every week night at 6:00 pm Eastern on Air America Radio, except when I‘m here.  Thanks very much for watching.

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

END   

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