updated 12/15/2008 4:50:40 PM ET 2008-12-15T21:50:40

Guest: John Harris, Mark Green, David Corn, Rep. Janice Schakowsky, Kwame Raoul, John Harris, Jill Zuckman

CHRIS MATTHEWS, HOST:  The Chicago sausage factory.  What happens inside that city‘s politics? Let‘s play HARDBALL.Good evening.  I‘m Chris Matthews.  Leading off tonight: The noose tightens.  How much longer can Illinois governor Rod Blagojevich hold onto his job?  He didn‘t get any help today from Illinois attorney general Lisa Madigan, who petitioned the state supreme court to temporarily remove Blagojevich from office, challenging his fitness to serve.

(BEGIN VIDEO CLIP)

LISA MADIGAN (D), ILLINOIS ATTORNEY GENERAL:  In the interim, state government is paralyzed by a governor who is incapable of governing.  My action will not eliminate the need for impeachment and trial, and the Illinois constitution gives the Illinois supreme court the authority to determine a governor‘s ability to serve.

(END VIDEO CLIP)

MATTHEWS:  While that was happening, Blagojevich‘s chief of staff resigned, and everyone is peeling back the onion right now, trying to figure out who else was involved and what contact, if any, did President-elect Obama‘s staff have with the governor‘s office. Plus, what was it like to be considered for the available Senate seat if you didn‘t have anything to offer Blagojevich, something like money or influence or a job?  We‘ll talk to two Illinois lawmakers who may have found out. Also: Why did the auto bail-out die in Congress last night, in the U.S. Senate?  Opponents say the UAW, the United Auto Workers, played hardball on wage concessions, while the UAW head, Ron Gettelfinger, says, Wrong, the Republicans never wanted a deal. Well, whoever is at fault, this isn‘t just about cars and money now.  It‘s about North versus South, Democrats versus Republicans, union workers versus non-union companies.  This is the first big fight of the post-election era and it may tell us a lot about how politics will be played in Barack Obama‘s first year in office. Also, would John McCain have won the election if he‘d used the Reverend Jeremiah Wright to attack Obama, as many Republicans were urging him to do?  McCain‘s pollster has some hot news on that topic in the “Politics Fix” tonight. And speaking of McCain, wait until you see how he channeled Rod Blagojevich last night on David Letterman.  The guy is something of a card these days.  We‘ll have that on the HARDBALL “Sideshow.”  It seems that John McCain is his old self again. But we begin tonight—we have to begin right now with Illinois state senator Kwame Raoul and Illinois U.S. congresswoman Jan Schakowsky, who both spoke Governor Blagojevich‘s office about Obama‘s Senate seat. Was there the sense, Senator Raoul, that in Chicago politics, if you wanted to succeed Barack Obama in that Senate seat by appointment, you better have something to offer the governor?

KWAME RAOUL (D), ILLINOIS STATE SENATOR:  Well, you know, I‘ve got to say just in general conversations in and around Springfield, where I serve, our state capital, it was expected that if Blagojevich was going to be running for governor again in 2010, he probably would take that into consideration in...

MATTHEWS:  He‘d want you to raise him a ton of money or...

RAOUL:  Well, I don‘t know if it‘s about raising money, but that would be on his mind in making...

MATTHEWS:  What was Blagojevich‘s reputation, Senator, about money and politics?  How would you describe his reputation?

RAOUL:  Well, we just—as a state senate, we just passed an ethics bill to try to eliminate “pay to play” politics.

MATTHEWS:  Because of him?

RAOUL:  Largely because of him and the ongoing investigation surrounding him, so...

MATTHEWS:  Would he be considered a sleazeball in politics?

RAOUL:  Well, you know, I‘m not going to...

MATTHEWS:  How about—would you consider him clean?

RAOUL:  Well, with the revelations that have come out...

MATTHEWS:  How about before the revelations?  Did you have a smell of him, a sense of him?

RAOUL:  You know, I don‘t know the specific facts.  I‘m not in and around all of these things that have been alleged.  You know, many of them were alleged to have occurred before I even came into the General Assembly.

MATTHEWS:  Yes.

RAOUL:  So I try not to judge people on things that I‘m not present for.

MATTHEWS:  Like reputation.  But let me ask you about the sense of what would be required.  We‘ve seen in this investigation this week that Blagojevich was looking for a lot of opportunities, depending on which candidate he was looking at.  He was looking at perhaps a job in a union.  He was looking at some sort of a non-governmental position, where he would get paid a lot of money in a 501-3C organization, non-profit.  He was looking to get his wife a job.  He was looking for a million dollars in campaign money in one case and $500,000 in a perhaps a direct personal payment to him, what he called “something tangible up front.”  Does that shock you that he was looking for those things?

RAOUL:  Well, a lot of those things are shocking.  You know, my impression going—prior to just a couple of days ago, was that Blagojevich was going to be considering whether or not he was going to be running in 2010 and who could benefit him.  You know, that could be, you know, who could benefit him running simultaneously because whoever would be appointed would also be running in 2010. But the revelations coming from U.S. Attorney Patrick Fitzgerald were kind of shocking, and in a day when Illinois should be prideful by the fact that we just elected President-elect Obama on a message of change, changing the way we do things, instead, we have a cloud of shame on us because of these things that have been...

MATTHEWS:  Senator, you strike me as an ambitious young politician, which is a good thing generally.  I think you guys are great.  You‘re really sticking your neck out.  You‘re taking a chance.  Did you get a sense, as you thought about becoming a U.S. senator and getting that appointment—I mean, you‘re an African-American, from that neighborhood.  It would have made sense for that appointment to be going to you.  Did you get a sense somewhere along the line that you weren‘t going to make it because you didn‘t have the money?

RAOUL:  Well, you have to kind of understand how my name got thrown in, in the first place.  I‘m at the Democratic national convention.  I‘m sitting at the Illinois delegation hotel and I get approached by a reporter who tells me, Hey, how long have you been considering being a candidate for U.S. Senate?  I say, What the heck are you talking about?  I didn‘t know anything...

MATTHEWS:  Yes.

RAOUL:  My name was thrown in by the senate president as somebody who should be considered.

MATTHEWS:  Did you have a chance?

RAOUL:  You know, I think doubtful.  I think there‘s some quality people who have been serving, like Congresswoman Schakowsky.

MATTHEWS:  Bottom line, was the word out that if you wanted to succeed Barack Obama in the Senate and you wanted the appointment from Governor Blagojevich, you better have something to offer tangible?

RAOUL:  All I had to offer was my record of service and my credentials.

MATTHEWS:  And you sensed that wasn‘t enough.

RAOUL:  Correct.

MATTHEWS:  Thank you, sir.  Thank you, Senator Raoul.  You represent the same seat, by the way, in Hyde Park, where you grew up and where the senator lives, right?

RAOUL:  Correct.

MATTHEWS:  Thank you.  Congratulations. Let me go on here right to Jan Schakowsky.  Congresswoman, you were on the show before.  Does that all surprise you?  I‘m trying to describe the sausage factory which is Illinois politics, how decisions got made.  Were you shocked when you learned—not the language, the “F” word, of course, which is used sometimes in a lot of offices, but the idea that there‘d be such a crass discussion between a governor and his chief of staff about how to sell what he considered a hot commodity, Barack Obama‘s Senate seat?

REP. JANICE SCHAKOWSKY (D), ILLINOIS:  Well, you know, as experienced political people, it‘s not unusual if you‘re meeting with somebody to say, Well, you know, will you support me if I support you?  Will you support my agenda, my health care plan, whatever it is.  There‘s a range within which you horse trade.  But when I read those—not just allegations, the things that came out of his mouth, what you saw was completely dealing with his own personal self-interest, his own personal gain.

MATTHEWS:  Yes.

SCHAKOWSKY:  And that really did shock me.  It did.

MATTHEWS:  Well, when you thought about succeeding Barack Obama, did you have a sense that you had to have some sort of ante money, something up front in terms of the ability to raise maybe a million dollars for the governor‘s reelection campaign, in the legal area of quid pro quo?

SCHAKOWSKY:  Well, I‘m absolutely clueless about that because when I talked to the governor—and I did—about this race on November 18, I said, I want to know, Rod—you know, we‘ve gone through a lot together.  I said, Rod, am I on your list?  Am I under consideration?  And he said that I was.  But of course, in retrospect, I think I wasn‘t at all because he never asked me for anything.  The conversation didn‘t even approach that.  Of course, I would never have done a quid pro quo of the kind that he is thinking about.

MATTHEWS:  Would it be normal for him to be concerned about maybe in exchange for naming someone, the right person, to that seat of Barack Obama, that his wife, who seems very political and very gutsy, to put it lightly, and colorful, that she would get a job somewhere?  Would that be considered a normal horse trade, a wife‘s job...

SCHAKOWSKY:  Absolutely inappropriate.

MATTHEWS:  ... a spouse‘s job for another job?  OK.

SCHAKOWSKY:  Absolutely inappropriate.

MATTHEWS:  Because that involves personal income.

SCHAKOWSKY:  That‘s right.

MATTHEWS:  How about the idea that he would get what he called—I‘m just playing here, obviously.  When he says, I want $500,000 in cash, tangible, up front, that also suggested personal wealth achievement, right?

SCHAKOWSKY:  Well, you know, whatever it suggested...

MATTHEWS:  Five hundred thousand tangible.

SCHAKOWSKY:  ... even if it was a campaign contribution...

MATTHEWS:  What does the word “tangible”—mean?

SCHAKOWSKY:  ... it‘s wrong.

MATTHEWS:  What does the word “tangible” mean?  Does the word “tangible” sound to you like personal?

SCHAKOWSKY:  Well, even if it were just a campaign contribution he was asking for, that would be absolutely wrong in the context.  You know, if you raise me money for my campaign to the tune of $500,000 or $1 million later, that is completely inappropriate.  That‘s still selling the office.

MATTHEWS:  Well, let me ask you about this...

SCHAKOWSKY:  Even if it‘s not his own income.

MATTHEWS:  ... in Illinois politics.  How are we going to get—how‘s the American people—we‘re all going to benefit or lose from this.  How are we going to get a good U.S. senator from Illinois in this situation, that doesn‘t come to Washington with his state papers from the governor‘s office and his certificate of appointment tainted?  How does this new person come in clean, at this point?

SCHAKOWSKY:  Well, you know, we do send clean people to Washington, including our president-elect, Barack Obama.  But I think, certainly, that the individuals are going to have stand on their own that are—and it could be a special election, putting the decision in the hands of the people.  The lieutenant governor, should he become the governor, which is also under consideration—or the acting governor, if the attorney general is right—could make an appointment.  But I think that that individual is going to stand on his or her own, and then, of course, have to run again in 2010.

MATTHEWS:  Last question, Congresswoman—was the word out on the street politically that Blagojevich wanted something for this appointment?

SCHAKOWSKY:  I think everybody assumed that there was going to be some self-interest, but that would normally be help for him in a reelection campaign.  It was hard to discern what he wanted.  But I don‘t think anybody in their wildest dreams thought it was going to be crazy things like a job—the secretary of health and human services or a not-for-profit created for his benefit—I mean, these wild ideas.  No, I don‘t think anyone was thinking along those lines.

MATTHEWS:  By the way, you have had some great people come out of Illinois politics.  Adlai Stevenson is one of my heroes.  And certainly, William Douglas, the great professor of economics who invented the Cobb (ph)-Douglas production function and went on to be a great U.S. senator.  You‘ve had great people coming out of Illinois...

SCHAKOWSKY:  We have.

MATTHEWS:  ... including somebody named Abe Lincoln.  He was pretty good.  Anyway, thank you, Congresswoman Jan Schakowsky.

SCHAKOWSKY:  Thank you.

MATTHEWS:  Thank you, Senator Raoul.

RAOUL:  Thank you.

MATTHEWS:  The Blagojevich corruption case is like lifting up the rock and seeing the bug life underneath.  Where does Obama fit into this world of Illinois politics?  And who from the Obama transition team may have talked to the governor about Obama‘s replacement?  We have to assume that Barack Obama cared about who got his Senate seat.  Was it Rahm Emanuel?  Who held the seat—by the way, he held the seat that the governor once held.  Interesting place, Chicago politics.  Rahm‘s role and the sticky web of Illinois politics all coming up next.  More on this Blagojevich case in the next minute.

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  Did Obama know that Governor Blagojevich was interested in selling Barack Obama‘s U.S. Senate seat?  And who in the Obama transition team talked with the governor‘s office about that vacancy?  Jill Zuckman is with “The Chicago Tribune” and John Harris is with “The Politico.”  Thank you, John, and thank you, Jill. Let me ask you—I want to do this like a Jesuitical syllogism.   Everybody knew that Blagojevich wanted something for that seat, right?  Everybody in Chicago politics knew that the word was out on the street this guy was looking for something in—well, in consideration of him naming them.

JILL ZUCKMAN, “CHICAGO TRIBUNE”:  Everybody certainly knew he was under investigation and I think suspected that he might get indicted some point.

MATTHEWS:  John, did everybody know what was going on out there?  Apparently, with all these conversations going on—well, we‘re getting this after the fact, but was the word out that a guy like Blagojevich wasn‘t going to give a U.S. Senate seat away without his sticky fingers grabbing something?

JOHN HARRIS, POLITICO.COM:  Well, normally, in most states that I know, these things don‘t have to be stated quite so explicitly as, apparently, Governor Blagojevich was stating it.  I don‘t think he was leaving a lot to the imagination, based on the conversations that we heard unsealed in that indictment the other day.  So I think yes.  The answer is that this was widely known that he expected a service fee of sorts.

MATTHEWS:  OK, then, following that syllogism, Barack Obama is one of those people who knew that this is what he was dealing with, a tainted politician who was looking to save himself, perhaps get reelection money or a job somewhere else.  What do we have in terms of hard reporting about the response of Barack Obama to the situation he faced, that he didn‘t have a clear opportunity to get the right person, as he saw it, named to replace him?  He had to deal with Blagojevich and perhaps be stuck with the wrong person or the right person at a cost.  John?

HARRIS:  Well, it‘s not clear to me that...

MATTHEWS:  What do you know about that?

HARRIS:  I don‘t know much.  And with the Obama campaign has—obviously hasn‘t rushed rushing to illuminate that question.  I do think, in fairness, this was probably—even though he obviously has concern about who‘s going to replace him, it seems unlikely that until earlier this week, this whole question was at the top of his mind as the newly elected president-elect.

MATTHEWS:  You don‘t think he was thinking, Jill, for months that  he was going to have to give up that Senate seat as part of his hope for election to the presidency, and that being a guy who lives in South Side—lives in Hyde Park, he would care who was going to be his replacement.

ZUCKMAN:  Absolutely.

MATTHEWS:  It wouldn‘t be some idle interest on his part.  He damn well—he earned the seat.  He wanted somebody in there that was going to be friendly to him.

ZUCKMAN:  He did cared.  He cared about that Senate seat.  So did Senator Durbin, the assistant majority leader.  Durbin and Obama had conversations about who would succeed Obama.  Durbin and Blagojevich had a conversation about who Blagojevich was considering.  And at that point, Blagojevich told him he was considering 20 different names.  And so it‘s totally natural that someone like Rahm Emanuel would have a conversation with Blagojevich.

MATTHEWS:  Why Emanuel...

(CROSSTALK)

ZUCKMAN:  Well, first of all, Emanuel has known Blagojevich for a long time.  He...

MATTHEWS:  Because they held the same seat.

ZUCKMAN:  ... represents the same district in Congress that Blagojevich used to represent.  He‘s dealt with him for years, certainly when he was in the White House for the Clinton administration.

MATTHEWS:  Well, let‘s wait until we hear what Rahm Emanuel has to say about that because he‘s sort of being quiet about this.  Maybe he has to be under the law.  Is that true, John Harris, by the way, that when we hear from Rahm Emanuel that he really can‘t talk right now because he‘s under some sort of advisory from the prosecutor not to talk?  Is that what‘s going on here?

HARRIS:  Well, that‘s what people always say when there‘s a legal matter that they don‘t want to talk about, that they‘re under orders.  I mean, in most cases...

(CROSSTALK)

MATTHEWS:  Well, sometimes they are.  It has the advantage of being true.

HARRIS:  ... they could talk, if they wanted to.  I mean, Generally, people who are even bystanders to a legal case—and I think, so far, based on the evidence, Chris, that‘s all Obama...

MATTHEWS:  That‘s all he is.  Let me ask you about this...

HARRIS:  ... and his people are, are possible bystanders, so they don‘t have a real interest in sort of trying the case in the press.

MATTHEWS:  Well, let‘s find some hard ground here.  “The Chicago Tribune,” your newspaper, reported today that a million dollars has been gathered or there‘s a plan to raise a million dollars in campaign money to help Blagojevich get reelected—not that that‘s likely now—on behalf of getting Jesse Jackson, Jr., that Senate seat. In other words, this quid pro quo that was discussed in the indictment, the complaint about the possibility that in order to get Candidate 5 the Senate seat, there was going to be $500,000 up front in tangible advantage to the governor—I assume personal money—and a million dollars raised for his reelection campaign in consideration of naming Jesse Jackson, Jr., to that seat. Now we know there is, in fact, under way a group of South Asian, Pakistani, I think...

ZUCKMAN:  Indian.

MATTHEWS:  ... or Indian gentlemen, Indian-Americans, who are putting together or at least planning to put together a million-dollar kitty to get Blagojevich reelected to help get Jackson that Senate seat.

ZUCKMAN:  That‘s right.  That seems to be-

MATTHEWS:  There seems to be some truth here.

ZUCKMAN:  ... their understanding—I mean, it was their understanding that if they could put together this money for Blagojevich, that that would help their friend, Jesse Jackson, Jr., get that seat.  They had ties to both Blagojevich and Jackson, and it‘s not clear who went to them and said, you know, Would you do this?  We‘re still—you know, we‘re still waiting for more facts to come out.

MATTHEWS:  John, any reporting on that?  Do you have anything from “Politico” on that, the fact that there is in fact some reality here to that story about money being raised to help Blagojevich get reelected, but really in the interest of getting Jesse Jackson Jr., who we‘re watching here, get that Senate appointment? 

JOHN HARRIS, EDITOR IN CHIEF, POLITICO.COM:  Well, other than that this is obviously—this connection that you have drawn is a serious thing.  And—and Congressman Jackson, as I understand it, is supposed to be talking to prosecutors early next week to answer their questions about it, and presumably give his explanation for what he knew about it. 

MATTHEWS:  So, where are we going with this story, John?  Do you know?  Where is it going to end up?  Are we going to continue to go after Rahm Emanuel, and find out what in fact conversations occurred, either in rejecting Blagojevich‘s attempt to sell that seat, or in some way trying to play with him or work with him to try and deal in a very difficult situation, if you want the right person, from the Obama point of view, named to replace you? 

HARRIS:  Right.  It‘s—it‘s just not tenable for the question to be unanswered.  I think the Obama team, based on what I know, from conversations with them, has a clear understanding of that, and that, by next week, they are going to start to try to give answers to these questions, what conversations took place, and specifically with Congressman Emanuel what conversations took place.  So, yes, we‘re going to get answers.  It‘s simply not—this story will not go away until the—those answers are provided. 

MATTHEWS:  Yes. 

I guess we can guess, early next week...

ZUCKMAN:  Sure.

MATTHEWS:  ... they‘re going to come out with a statement. 

ZUCKMAN:  Yes. 

MATTHEWS:  Somebody is going to do it with somebody like Robert Gibbs, who is going to come out with a clear statement as to who talked to who.  And they have to be honest about this, because, otherwise, they won‘t look honest.  They have to stay honest.

ZUCKMAN:  Well, and that‘s why I think they‘re taking the time to get everything together. 

MATTHEWS:  Yes. 

(CROSSTALK)

MATTHEWS:  Yes, he can‘t...

(CROSSTALK)

MATTHEWS:  I think, in fairness to the president-elect, he can‘t simply say, nobody talked to nobody, because then the first evidence that somebody talked to somebody undercuts his credibility. 

HARRIS:  Right. 

(CROSSTALK)

ZUCKMAN:  And then the other question is whether...

MATTHEWS:  Yes, John. 

(CROSSTALK)

HARRIS:  Well, in fairness—again, in fairness to them, it would be crazy for them to come out with a partial list they had to modify, to revise and extend, you know, as new facts come out. 

MATTHEWS:  you‘re right.

HARRIS:  I‘m sure it‘s going to be carefully vetted by both people from a public relations perspective, also a legal perspective. 

MATTHEWS:  The worst thing in the world in politics is rolling disclosure:  Release the information as it is convenient for you to do so.  And, if it looks like that, nobody trusts you.  That‘s why you have got to put it out early.  Hang a lantern on your problem, as Bobby Kennedy once said.  Thank you, Jill Zuckman. Thank you, John Harris. 

HARRIS:  Thanks, Chris. 

MATTHEWS:  Would you believe that Rod Blagojevich once considered himself—and said he was—a reformer?  That‘s what he said when he met that original maverick himself, John McCain.  He said, “Hi, I‘m a reformer, just like you.” We‘re going to have more about that.  We learned about that on “Letterman” last night.  McCain, by the way, channels the Illinois governor, Blagojevich, in his appearance on the late-night show with David Letterman.  Up next in the “Sideshow”:  McCain is a very good actor.  That‘s an interesting part of his life. You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

MATTHEWS:  Back to HARDBALL.  Time for the “Sideshow.” First up: John McCain and Dave Letterman, together again.   Here‘s the senator on the “Late Show” having a little fun with some of the colorful language we have heard from Governor Blagojevich lately. 

(BEGIN VIDEO CLIP, “THE LATE SHOW WITH DAVID LETTERMAN”)

DAVID LETTERMAN, HOST, “THE LATE SHOW WITH DAVID LETTERMAN”:  Now, what—after a campaign like this—and it consumed two years and probably more, really—what do you do?  What has your life been like since?  You go from going 1,000 miles an hour to a much slower pace.

SEN. JOHN MCCAIN ®, ARIZONA:  I don‘t want to talk about the bleeping campaign, understand.

(LAUGHTER)

(APPLAUSE)

MCCAIN:  If you think that I‘m going to go back to that bleeping situation, then bleep you. 

LETTERMAN:  OK.  Thank you. 

(LAUGHTER)

LETTERMAN:  Whoa.

(LAUGHTER)

(APPLAUSE)

(LAUGHTER)

LETTERMAN:  Do you know this guy, the governor of Illinois? 

MCCAIN:  He came to my office one time after he was elected governor, at his request, and told me...

(LAUGHTER)

MCCAIN:  ... he was going to be a great reformer. 

(LAUGHTER)

LETTERMAN:  Really? 

MCCAIN:  Yes. 

(LAUGHTER)

LETTERMAN:  Is that right? 

MCCAIN:  I‘m not making it up. 

(LAUGHTER)

LETTERMAN:  Yes. 

MCCAIN:  I mean, that he—that he wanted to do like I had done in the Senate and have all these reforms. 

(LAUGHTER)

MCCAIN:  I—I really must have impressed the guy. 

LETTERMAN:  Yes. 

(LAUGHTER)

(END VIDEO CLIP)

MATTHEWS:  Next, it‘s wedding day for Charlie Crist.  There‘s the Florida governor‘s fiancee, Carole Rome, at yesterday‘s wedding ceremony rehearsal in Saint Petersburg.  Tonight‘s ceremony makes Crist, the one-time Republican V.P. contender, the state‘s first governor to get hitched in office since 1967.  Best wishes to both of them.  Time now for “Final Daze,” HARDBALL‘s daily look at President Bush as his eight-year term draws to a close.  Late last night, the auto bailout went down in flames.  This morning, with a national industry and three million jobs in limbo, what was President Bush‘s response?  A written statement expressing disappointment through White House Press Secretary Dana Perino.  So, just where was the president?  Well, this morning, he was delivering the commencement address at Texas A&M. 

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES:  As you embark on this journey, let me leave you with a few last pieces of advice.  Remember that popularity is as fleeting as the Texas wind, character and conscience are as sturdy as the oaks on this campus.   If you go home at night, look in the mirror and be satisfied that you have done what is right.  You will pass the only test that matters. 

(END VIDEO CLIP)

MATTHEWS:  Wow.  I agree with that, although a little due diligence along the way might be helpful.  Anyway, moving on, tonight‘s “Big Number.”   According to an obscure clause in the U.S. Constitution, a member of the U.S. Congress can‘t be appointed to a government position if the salary for that position was increased during his or her term in the Congress.   Why does this matter?  Well, during Hillary Clinton‘s time in the Senate, the salary for her future position as secretary of state was increased.  So, this week, to clear the constitutional barriers for Hillary, Congress passed a pay cut for that post.  How much less money will Condi Rice‘s successor, Hillary Clinton in this case, be making?  Forty-seven hundred dollars.  I would say it‘s a pay cut well worth taking.  Forty-seven hundred dollars to clear the constitutional path for Hillary Clinton to be secretary of state, that‘s tonight‘s “Big Number.”  Up next:  The $14 billion auto bailout crashes down in the U.S.  Senate.  Democrats blame Republicans.  Republicans blame the Auto Workers union.  What‘s going on here?  And what should president-elect Obama do next?  We will get into the politics of the auto bailout. You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

JULIA BOORSTIN, CNBC CORRESPONDENT:  I‘m Julia Boorstin with your CNBC “Market Wrap.” Stocks rebounding from heavy losses early in the—early in the day, after the Bush administration said it will step in to prevent the auto industry from collapsing.  The Dow Jones industrials finished up 64 points, the S&P 500 up six, and the Nasdaq up 32.   After the $14 billion auto industry bailout plan collapsed in the Senate last night, the White House says it is considering options to keep U.S. automakers from failing.  Those include tapping the $700 billion financial bailout fund.   Meantime, General Motors announced it will cut first-quarter production by 250,000 vehicles.  As a result, it will also temporarily close 20 factories.  Retail sales fell in November for a fifth straight month.  Wholesale prices also fell for the fourth month in a row.  And oil prices dropped, after two straight days of hefty gains.  Crude fell $1.70, closing at $46.28 a barrel.  That‘s it from CNBC, first in business worldwide—now back to

HARDBALL. 

MATTHEWS:  Welcome back to HARDBALL.  The auto bailout bill crashed into a Republican wall last night in the U.S. Senate.  Is there still hope for the Big Three?  Should they get help at all?Michael Smerconish is a radio talk show host and an MSNBC political analyst.  And Mark Green is president of Air America Radio and editor of the book “Change For America.” Let me ask you, gentlemen, about this—this thing that happened last night.  But let me start with some quotes here.   Let‘s take a look at what the Senate leader, Harry Reid, a Democrat, had to say late Thursday. 

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MAJORITY LEADER:  We could spend all night tonight, tomorrow, Saturday, and Sunday, and we‘re not going to get to the finish line.  That is just the way it is.  There‘s too much difference between the two sides.  I dread looking at Wall Street tomorrow.  It‘s not going to be a pleasant sight.  Millions of Americans, not only the autoworkers, but people who sell cars, car dealerships, people who work on cars, are going to be directly impacted and affected. 

(END VIDEO CLIP)

MATTHEWS:  Well, actually, the market had a modest gain today, despite that worry.  Let‘s take a look at Bob Corker, a Republican from Tennessee, a senator who tried to forge a coalition last night, a compromise, which failed. 

(BEGIN VIDEO CLIP)

SEN. BOB CORKER ®, TENNESSEE:  I basically pleaded with them to give me something, give me some kind of language, where we would know that, at some date certain, they were—quote—“competitive,” not parity, competitive with these other companies.  So, that is where it broke down. 

(END VIDEO CLIP)

MATTHEWS:  OK.  He talked about it breaking down over the UAW‘s refusal to give him—the Senate a date next year where they would equalize pay between the union and the non-union shops on the auto floor.  Now let‘s take a look at here the head of the UAW saying that‘s not true, challenging Senator Corker. 

(BEGIN VIDEO CLIP)

RON GETTELFINGER, PRESIDENT, UNITED AUTO WORKERS:  But there‘s no question, and I think, at the end of the day, who was the minority in the Senate representing, regardless of their motivation?  They thought perhaps they could have a twofer here maybe, you know, pierce the heart of organized labor, while representing the foreign brands. 

(END VIDEO CLIP)

MATTHEWS:  Let‘s go to Mark Green, to start with.  Mark, it looks like we have a battle here between the union leader there, Gettelfinger, of the UAW, United Auto Workers, who tried to defend his position, which was, they agreed to equalize rates between—wage rates between union and non-union workers at some point.  The Republican senator from Tennessee said, yes, but you‘re no—you‘re not agreeing to do it next year, which is what we want as part of a compromise.  Is this about labor rights?  Is that what this fight is really about, whether we should have unionized labor or not in the auto industry? 

MARK GREEN, PRESIDENT, AIR AMERICA RADIO:  No. 

The GOP may want to make this into a union-busting, anti-union issue.  The issue is, up to 10 million jobs in America, if you count suppliers and dealers and creditors, and, of course, the—the workers themselves, are at risk at the very moment that the economy has such an illness.  And, so, the—the ultimate issue is workers.  And, if—if the head of Goldman Sachs, now the treasury secretary, the head of an oil company, now the president, gives $700 billion because they think it‘s necessary to stabilize the economy for Wall Street, here, Detroit wants 2 percent of $700 billion, and, suddenly, the conditions are extremely detailed.  Of course, all the stakeholders should and will give up something.  But to tell a worker, Chris, that you may have to cut your pay by a fourth to a third within one year is calamitous.  It‘s not fair.  And I—and I think the GOP is now going to have to figure out to handle the political fallout.  Blue-collar Americans around the country are seeing this headline, “GOP to Detroit: Drop Dead.”

MATTHEWS:  Well, let‘s talk—is that your reading of this, Michael Smerconish, that this is about an attempt to bust unions and bust workers who are getting a good pay and getting them to accept an unreasonable pay cut? 

MICHAEL SMERCONISH, MSNBC POLITICAL ANALYST:  No.  I think it‘s a philosophical battle as to, what is the role of government when you have a distressed industry?  Where is this going to end?  What other industries will be subject to the next bailout?  And are we rewarding bad business practices, instead of forcing them into some kind of a managed bankruptcy, which would certainly guarantee a restructuring of what has plagued Detroit over the span of the last several decades? What I found distressing about the clips that you ran was—was Harry Reid and this notion that we could work all night, and we will be no closer to resolution.  Now, maybe he‘s accurate, but why don‘t they work all night?   You know, Chris, it occurs to me that we have these individuals who run for the U.S. Senate, and they raise millions and millions of dollars, and, then, the minute they get to Washington, all they want to do is go the hell home. 

MATTHEWS:  Yes.  Well...

SMERCONISH:  I mean, they work down there ridiculous hours. 

MATTHEWS:  Well, let me ask you about—let me ask you about the real conundrum here.  Is this a real conundrum, a real obstacle?  Michael, you start it here.  Is that a reasonable issue upon which to bring down the auto industry, that the Auto Workers Union, which organizes in a lot of the states, wants to hold to its wage rates, at least through next year, and the Republicans say, no, if you want a compromise, you want our support for this bailout, you have to cut wages next year?  That‘s the deal, or no deal. 

SMERCONISH:  I...

MATTHEWS:  Is that the problem here?  Let‘s try to get to the problem here. 

SMERCONISH:  Well, I think that is the problem.  I think‘s it‘s the $73-an-hour figure.  I know that gets bandied about, but the large part of it that—that needs to be addressed are the retiree benefits. And, you know, it‘s not so much that it‘s union-busting.  It‘s what the—the unions have done a very effective job for their force.  But now Detroit can‘t handle those payments.  So, what‘s to be done with those great wages that have been earned over a long period of time...

MATTHEWS:  Yes. 

SMERCONISH:  ... including the retiree benefit, and who‘s prepared to give something back? 

GREEN:  Chris? 

MATTHEWS:  You know, Michael, I always—Mark, I always looked upon the UAW as a good example of a union that got health care for its workers.   I always thought the old—the old Walter Reuther deal they struck, which was health care, or whoever did it, was good for the country, because people who work hard ought to get a health care benefit as part of their work. Who else is going to pay for it?   And I thought that—and now we‘re talking about, what, dismembering those packages or what? 

GREEN:  Look, Smerconish said $73 an hour pay.  I don‘t know if you saw yesterday‘s front page New York Times.

SMERCONISH:  I did. 

GREEN:  . which documented that 73 is totally false.  Look, the problem—you said the issue is philosophical.  This reminds me of the old joke, it works in practice, but it may not work in theory.  The theory, you‘re right, where do we draw a line on when public money helps boost and maintain a private company which is indispensable to the national economy?  That‘s an interesting issue.  We lost 2 million jobs this year.  The largest job loss of any month in 34 years, we‘re approaching 7 to 8 percent unemployment.  And so right now this is the FDE analogy with Lend-Lease.  If your neighbor‘s house is fire, you lend them your hose to put out the fire.  This is a loan, it‘s not just a gift.  The idea is a loan.  More expensive but like the Chrysler loan of 30 years ago, which was repaid, to make sure that we don‘t turn a bad recession into a near depression. 

SMERCONISH:  Mark, I think I would say, respectfully, there are a lot of houses on fire right now in a lot of different industries, and there is an alternative in this case.  And the alternative is a managed bankruptcy.  You know, there are plenty of airlines that have emerged from bankruptcy.  Why can‘t we put the auto industry in a similar parameter?  Then we know there will be restructuring. 

GREEN:  You ask a fair question.  The airline industry went bankrupt and the next day American Airlines had the same mechanics, planes and fuel costs.  And so I would go on the plane and not worry.  The minute one of the big three goes bankrupt, credit stops, supplies stop, dealers shut down, and who wants to buy a car if you don‘t know there are parts?  Everybody who has looked at it sees that a normal bankruptcy would be calamitous.  Now, if you want a structured bankruptcy through legislation, which is in effect what almost happened, well, that‘s a different story.  And when you say a lot of companies are in trouble, name an industry that is as important to the American economy as the auto industry in such trouble that could bring down the whole economy? 

SMERCONISH:  Well, the financial industry. 

MATTHEWS:  OK.  Let me ask you, Michael... 

(CROSSTALK)

GREEN:  They got $700 billion. 

MATTHEWS:  Let me take up Mark‘s argument with you, Michael, for a minute there.  Why do a lot of people, conservatives in many cases, free marketers, have a problem with bailing out the auto industry?  They are ready for a package—a bankruptcy instead, but yet they were able to vote for the $700 billion financial bailout? 

SMERCONISH:  Well, Chris, there‘s an inconsistency clearly between those who would oppose one and were supportive of the other.  And I think that if many of those who supported the 700 had it to do over again, they‘d be in opposition, and they felt like they had a gun to their head when... 

MATTHEWS:  Twenty-one senators. 

SMERCONISH:  . they did it.  I mean, this is really.

MATTHEWS:  There were like 21 senators who like that.

SMERCONISH:  This is really a geographical battle as much as it is an ideological battle.  I‘m sure you looked at the map as I did today with a political eye and you can‘t help but notice that it‘s the Rust Belt states versus the South in what‘s going on. 

GREEN:  You know, Chris.

MATTHEWS:  Well, why is that—explain that, Michael.  Why is it that people in Tennessee, Kentucky, Alabama, oppose the auto bailout and people from the colder part of the country, not just the Midwest, but across the north, and maybe it it‘s for support of the UAW, let‘s be blunt about it, are all for it?  Explain, Michael. 

SMERCONISH:  Because all politics are local.  And you‘ve got any number of foreign cars being made in the South by American labor forces.  I mean, here‘s another of—I think they‘re very legitimate issues.  What does it say to someone who is working for a foreign manufacturer down South that is based obviously offshore—but they‘re American workers, they‘re in this country, they‘re going to work every day.  Why should they now be disadvantaged because Detroit is being bailed out when in fact they‘re competing with those same automobile manufacturers? 

GREEN:  Chris.

MATTHEWS:  Mark?

GREEN:  . the autoworkers have lost real income over time, have given back health benefits.  And I‘m guessing a key stakeholder would be willing to give a little more if everybody else did.  But we are attacking the victim.  I don‘t know if Mike or you saw the movie “Who Killed the Electric Car?”. 

SMERCONISH:  I did. 

GREEN:  Twelve years ago we had a plug-in hybrid and GM killed it because it was threatening their carbon-based cars.  Every other—the countries we compete with have national health care so their workers are covered without having to ask consumers to pay for it.  In our country, it cost $1,500 a car, which is a competitive disadvantage.  So to simply blame workers or the unions, as a Mitch McConnell might, based on Republican economic theocracy, is, I think, so misplaced.  And it plays Russian roulette with our economy when it‘s weak. 

SMERCONISH:  But you‘re misreading me.  I‘m far from blaming workers for the predicament faced by Detroit.  I wish we had that electric car.  But I don‘t blame the workers for that.  I blame management that turned their back on that opportunity.  I just have no faith in bailing them out that will get to where apparently you and I both agree we need to be. 

GREEN:  Well.

(CROSSTALK)

MATTHEWS:  OK.  I guess the hot potato, gentlemen, has been thrown into the White House because the president is going to have to decide now, according to what you hear from the Democrats on Capitol Hill, we‘re going to have to have the president decide whether to take a portion of the guaranteed loan authority he has under the TARP bill with the financial bailout of 700 billion—take a portion of that, a small portion, and apply it to the auto industry itself.  We‘ll see how he develops that decision over the weekend.  Michael Smerconish, have a nice weekend.  Mark Green as well.  Up next, would the presidential election have turned out differently, the one we just had, if John McCain had used the Reverend Jeremiah Wright issue to attack Barack Obama?  We have an inside report coming out of Harvard, actually, from the pollster, Bill McInturff, who will tell you exactly what they thought inside the McCain campaign if they had used that baby to attack Barack Obama.  This is going to be interesting.  That‘s next in the “Politics Fix.” This is HARDBALL, only on MSNBC.   

(COMMERCIAL BREAK)

MATTHEWS:  Coming up, with all of the commotion surround the Illinois Senate seat and all of that corruption in Chicago, what‘s the latest in New York?  Is Caroline Kennedy the true frontrunner to replace Senator Clinton?  HARDBALL returns with the “Politics Fix” next.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  Time for the “Politics Fix.” Joining me now are MSNBC political analyst Michelle Bernard; and the Washington bureau chief for Mother Jones magazine, David Corn.  You know, something really happened fascinating last night at Harvard.  You know, at the end of the year, David and Michelle, they have this sort confab after every presidential election up at Harvard, the Kennedy School, and they talk about—they had the top people from both campaigns to tell what you really happened.   What I found fascinating in all this was that Bill McInturff, who is a good guy, is a pollster for the Republican Party for this campaign, he often works for NBC and The Wall Street Journal polling, he pointed out that they had a shot at winning this at the very end.  What they could have done was drop the stink bomb about the Reverend Jeremiah Wright and maybe squeaked out a few more votes which would have only taken them within striking distance of winning the Electoral College.  But they were so far behind in the popular vote that that would have been their best scenario.  In other words, Michelle, they saw the chance to squeak this election in the worst way which would have left John McCain the winner of the electoral vote, perhaps, but way behind in the popular, having used what would have looked like a racist issue. 

MICHELLE BERNARD, MSNBC POLITICAL ANALYST:  Absolutely. 

MATTHEWS:  And they said there is no way they wanted to do that. 

BERNARD:  Yes, McCain did not want to do it.  I know there were a lot of people in the Republican Party and conservatives that‘s wanted him to do.  I will always give John McCain kudos for not running that type of campaign.  He ran an honorable campaign.  He wouldn‘t engage in race-baiting.  If you look at the things that he did as a Republican candidate, going to speak to the Urban League, going to speak to the NAACP, apologizing to African-Americans for not initially supporting making Martin Luther King‘s birthday a national holiday.  He was a courageous man, he was reaching out to African-Americans.  And I give him kudos because he said he didn‘t want to win in a dishonorable way.  The only other thing that could have been worse.

MATTHEWS:  Well, who were these sleaze balls who were—these 527s out there?  David, you pick this up.  He didn‘t do it, but there were 527s out there, independent people—supposedly independent out there using Jeremiah Wright to the very end. 

DAVID CORN, WASHINGTON BUREAU CHIEF, MOTHER JONES:  You know, Chris, I am just so surprised that had after the fact we have people from inside the McCain camp giving us the spin that makes John McCain look pretty damn good and make them all look very honorable.   You know, they did produce an ad to go after Jeremiah. 

MATTHEWS:  Are you being sarcastic?  It‘s possible that they‘re telling the truth here.

CORN:  Just a little bit.  I mean, they did produce an ad that had Jeremiah Wright in it, with McCain‘s face at the end, saying I approve of this message.  So he was involved in producing that ad.  But they decided not to.

MATTHEWS:  But they didn‘t air it. 

CORN:  . run it.  But they didn‘t air it.  So they got really close.  So it wasn‘t as if John McCain said, hey, never get close to this.  You know, who knows what their internal polling showed?   In the same period that we‘re talking about, John McCain had no compunction about running a campaign that accused Barack Obama of palling around with terrorists, and of trying to teach kindergarteners about comprehensive sex education, and calling Barack Obama a sexist.   So if the polls had indicated—the internal numbers and focus group numbers had indicated that using Wright would have given them a real victory, what would have happened then?  Well, we just don‘t know.

BERNARD:  I disagree.  I don‘t think it‘s spin.

CORN:  What a surprise.

BERNARD:  Can you imagine—I mean, but, well, no, I mean, maybe it is a surprise, maybe it isn‘t.  But here‘s the bottom line, it took a lot of courage to go out—if you look at his—at Senator McCain‘s involvement with the African-American community all throughout his campaign, no other Republican candidate of this Republican Party have we ever seen do that.  And I think if you look at it in the totality of the circumstances, it is not spin.  I think that John McCain did not want to win an election that way. 

CORN:  But, Michelle, why did they actually produce the ad?  Why does John McCain‘s face appear on the ad saying, “I approve of this message”?  They didn‘t run it.  I know they didn‘t run it.  But why did they get so close that they made the ad? 

(CROSSTALK)

BERNARD:  Because they‘re trying to win but they didn‘t do it. 

MATTHEWS:  Could it be that what we‘re hearing from Bill McInturff, the pollster for McCain, is accurate?  They had it ready.  And they realized if they used it, the best they could hope for was to squeak in the Electoral College.  They would still have a profound deficit in the popular vote.  It would be a meaningless Pyrrhic victory.  Is that possible that they were not being. 

CORN:  Sure. 

MATTHEWS:  . St. Francis here, but they were just recognizing, who wants to win a stinky win like that? 

BERNARD:  Exactly. 

(CROSSTALK)

CORN:  Yes, I think—Chris, Chris, I think that‘s very possible.  That doesn‘t mean that John McCain wasn‘t willing to do it.  He just wasn‘t willing to do it if those were the results that it would net him. 

MATTHEWS:  OK.  I think we‘ve agreed upon the consensus here, which is it actually happened that way. 

We‘ll be right back with Michelle Bernard and David Corn.  Let‘s talk New York Senate.  You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  We‘re back with Michelle Bernard and David Corn for more of the “Politics Fix.”

David, I want to ask you about this latest discussion.  It is fascinating, about this New York Senate seat.  We‘ve been talking about how Barack Obama obviously has an interest in who replaces him in the U.S.  Senate in Illinois.  And it‘s not so clear that Hillary Clinton has shown any interest in who replaces her in the Senate seat in New York.  Now let me ask you this.  There‘s a New York Daily News report out there that Attorney General Andrew Cuomo has praised Caroline Kennedy yesterday, but he wouldn‘t say if he thinks she‘s qualified. “I‘ve known Caroline for years.  I have a high opinion of her.  But that‘s going to be up to the governor.  I wouldn‘t second-guess his judgment.” Interesting sort if back and forth there between the Kennedys and the Cuomos.  Tell me what you know on that one. 

CORN:  Well, I guess it is like two mob families going up against each other.  No, I don‘t mean that too pejoratively, but you know.

MATTHEWS:  Oh, that‘s cute.

CORN:  But.

(CROSSTALK)

MATTHEWS:  The man‘s name, by the way, if you‘re a Cuomo or a Kennedy, is David Corn. 

(LAUGHTER)

MATTHEWS:  He is the guy that just accused you of being in a mob family.  Go ahead.

CORN:  But there is a blood feud between the two, because Andrew Cuomo used to be married to Kerry Kennedy, who is the cousin to Caroline Kennedy.  And the divorce was very public and very messy.  And now you have his ex-wife‘s cousin, Caroline, competing with Andrew Cuomo, who, by our counts, is interested in the job for this Senate position. 

And you know—and then you have Governor Paterson with lots of other people trying to get this job.  Representative Carolyn Maloney from Long Island has hired a lobbyist to try to help her get this job.  So he can make only one person happy with his pick but he can make a lot of people unhappy with the same pick. 

MATTHEWS:  That‘s the argument.  Caroline Kennedy, I‘ve heard, if he picks her, because she is sort of America‘s royalty princess if you will, that doesn‘t bother anybody else.  She is so far above the sweat of the poor.  She‘s so far above all of us that that wouldn‘t count. 

Andrew removes a primary opponent from David Paterson, a man who many people think might as well challenge him and perhaps beat him in the next primary.  Tell me more about this. 

I do find it interesting that Senator Clinton is just not involved at all apparently. 

BERNARD:  Yes, it‘s very interesting.  But she is probably not too involved in it because she doesn‘t want to oppose Caroline Kennedy.  Caroline Kennedy, from at least what I‘ve read on FEC reports, did give money to her campaign. 

But let‘s face it, she wrote that incredible op-ed where she talked about the fact that Barack Obama is the first politician that has inspired her the other way other people told her that they did of her father, so.

MATTHEWS:  Great story.  Thank you very much, Michelle Bernard and David Corn.  Join us again Monday night at 5:00 and 7:00 Eastern for more HARDBALL.  Right now, it is time for “1600 PENNSYLVANIA AVENUE.”

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