updated 1/23/2009 4:33:35 PM ET 2009-01-23T21:33:35

Guest: Michael Isikoff, Bob Ehrlich; John Harwood, Michelle Bernard, Ed Schultz, Rep. Eric Cantor, Mike Murphy, Kit Crawford, Megan Kilgas

DAVID SHUSTER, HOST:  Chris, one of your sayings which I like to use most often is that elections matter.  We certainly seem to see that today with President Obama making the announcement on Guantanamo and clarifying there will be no waterboarding.

First of all, Chris, what do you make of the symbolism of this day? 

CHRIS MATTHEWS, HOST, “HARDBALL”:  Well, I think it‘s very important to do what you‘re going to do if you promised to do it.  I think it‘s very, very important that people see vividly that elections matter. 

If a Republican says, “I‘m going to cut taxes,” he better do it.  If a Democrat says, “I‘m going to balance the budget,” or “I‘m going to increase spending and create a stimulus package,” it‘s vital that they do it. 

Nothing is more discouraging to democracy than to see that your vote didn‘t matter.  You like to see that even if you‘re wrong, the person who promised to do something does it. 

SHUSTER:  Here is how Obama described it when he was talking about torture and what the United States is aiming for now. 

Watch. 

(BEGIN VIDEO CLIP)

BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES:  It is precisely our ideals that give us the strength and the moral high ground to be able to effectively deal with the unthinking violence that we see emanating from terrorist organizations around the world.  We intend to win this fight.  We‘re going to win it on our terms. 

(END VIDEO CLIP)

SHUSTER:  Chris, when you hear Barack Obama talk about the moral high ground, it is such a sort of not-so-subtle message to the rest of the world; right? 

MATTHEWS:  Well, yes.  You know, I grew up with the idea that we were the good guys all the time in foreign policy.  Maybe that‘s naive, but when we use words like “aggressor,” we‘re going to stop aggression, we‘re going to stop countries from invading other countries, we had to stop using that language from the Bush administration because we were the aggressor.  We took over Iraq. 

They didn‘t attack us.  We attacked them, overthrew their country, threw out their leaders, hanged the guy in charge, and ran the show for all these last few years. 

We can‘t even use the old-time good guy/bad guy language of “stop the aggressor.”  Hitler was an aggressor.  Stalin was an aggressor.  The Japanese empire was an aggressor.  They were the bad guys, aggressors. 

We have had to change to terms like—these totalitarian terms like “homeland” and “weapons of mass destruction.”  We have had to have a whole new lingo to justify this war footing we‘ve been on for the last eight years, and I think if Barack Obama brings us back to familiar American language, that would be a start right there.  How about saying aggressors are bad guys? 

SHUSTER:  Chris, Barack Obama spoke out for the first time today about this. 

MATTHEWS:  Torturers are bad guys.

SHUSTER:  I agree.

MATTHEWS:  That would be nice.

SHUSTER:  Barack Obama spoke out today for the first time about the Israeli war and Hamas and Gaza.  This was something, as you know, that he did not want to talk about during the last couple weeks of his transition.  But here he was talking about that foreign policy challenge today. 

(BEGIN VIDEO CLIP)

OBAMA:  Just as the terror of rocket fire aimed at innocent Israelis is intolerable, so, too, is a future without hope for the Palestinians.  I was deeply concerned by the loss of Palestinian and Israeli life in recent days and by the substantial suffering and humanitarian needs in Gaza.  Our hearts go out to Palestinian civilians who are in need of immediate food, clean water, and basic medical care, and who‘ve faced suffocating poverty for far too long. 

(END VIDEO CLIP)

SHUSTER:  Chris, I didn‘t really detect, though, any big change.  I mean, obviously showing some sympathy for the Palestinians.  That‘s terrific.  A lot of people want to hear that.  But he also stood very strongly with Israel in terms of cracking down on these tunnels. 

Did you hear anything that was that different in terms of... 

MATTHEWS:  Yes.  How about this?  If anybody gets to visit that part of the world—and you can be very pro-Israel and say this—you‘re basically seeing a first world country.  Israel is, for all practical purposes, a European or American society.  It‘s state of the art. 

They live as well pretty much as we do.  They live like we do in terms of technology and lifestyle.  It would be very familiar for an American to go live in Israel, for example. 

But right next door is a fourth world reality which is the Palestinian territories.  It‘s fourth world.  It‘s the Flintstones. 

It‘s—sometimes you go to certain parts of the West Bank and you think you‘re back in the Stone Age.  Some it‘s not so bad, but some of it is really, really poor.  And I think he‘s talking about, how can there be a two-state solution without some bringing up of the society across the border from Israel? 

By the way, another point that has to be made here about language.  He never said the word “terrorism,” Barack Obama, in his inaugural address because he doesn‘t believe that terror is an ism.  He‘s think it‘s a tactic, a bad tactic. 

We‘re totally against international warfare, forbids it, of course. 

But ism, no.  It‘s not an ism.  It‘s not like communism or even jihadism. 

It‘s a method. 

We‘ve got to stop fighting a method and start fighting a problem we have, which is the hatred of the Middle East against us and elsewhere in the Islamic world.  Try to find the roots of the hatred, try to deal with it, try to kill it. 

I‘m telling you, “terrorism” is a bad word because it doesn‘t teach you anything.  It‘s as if we went to war with surprise attacks after Pearl Harbor.  We didn‘t go to war with the Japanese.  No, that would be a problem and their imperialism. 

No.  We had to go to war with surprise attacks.  It‘s just that idiotic. 

You‘ve got to go to war with the enemy, not their tactics.  And I think he‘s smart enough to know that and Bush wasn‘t. 

SHUSTER:  Chris, the other thing I wanted to ask you today that I haven‘t had a chance, and that is I caught—Dick Cheney apparently told “The Weekly Standard” that the conviction of Scooter Libby, the fact that he did not get a pardon, was somehow a miscarriage of justice.  You and I covered this story, the CIA leak case for several years.  I‘ve got some strong opinions, but I‘m curious to hear yours on Dick Cheney‘s statement. 

MATTHEWS:  Well, Scooter and Dick Cheney helped talk the American people into that war in Iraq.  They sold the WMD case.  They knew it was faulty.  They sold it, and then they tried to defend it when they were challenged on it, and they did it in the worst way. 

So here‘s the question.  Does Scooter Libby have something that he could tell the public that would embarrass or, in fact, ruin the reputation of Dick Cheney?  That‘s a question you might have to ask if you‘re Dick Cheney. 

They worked together hand in glove all those years.  They put together whatever they put together in terms of selling the war with Iraq, the WMD case, the whole thing.  The hanging out with Chalabi, the whole routine of the Iraqi National Congress.  Completely sold that bill of goods to the American people. 

He knows all about that.  And by the way, Scooter knows what Cheney did.  If I were Dick Cheney, I‘d want Scooter to be happy.  I wouldn‘t want him to resort to being an author.  I‘d want him to be a lawyer. 

And the only way he could be a lawyer is if he gets pardoned.  So then he‘s re-barred again, he‘s back in the bar.  I don‘t understand why he couldn‘t use his influence to get him pardoned.  He couldn‘t use it, and now he wants at least Scooter to think he tried.

He wants Scooter to hear him publicly saying he deserves a pardon.  That‘s in the interest of Dick Cheney.  It‘s not in the interest of Scooter Libby or anybody else.  He wants Scooter to think he was on his side because, in the end, he‘s the one that has to fear Scooter because Scooter knows what Cheney did. 

SHUSTER:  Chris Matthews, the host of “HARDBALL.”  Nobody is better on this stuff. 

And Chris, thanks so much for joining us again. 

MATTHEWS:  It‘s great being on.  Thank you. 

SHUSTER:  We appreciate it. 

The big news of this day is the imminent closing of Guantanamo Bay and the questions of where those detainees will go. 

For more, let‘s turn to “Newsweek” investigative correspondent, Michael Isikoff.

And Michael, it came up at Robert Gibbs‘ -- the press secretary—first briefing, the sort of divide between the intelligence community and the Obama sort of senior levels of the White House. 

Here‘s the exchange from Jake Tapper of ABC.  Watch. 

(BEGIN VIDEO CLIP)

JAKE TAPPER, ABC NEWS:  There are a lot of intelligence officials in the outgoing administration, or the gone administration, that disagree with both the decision to rely on the Army Field Manual, as well as the decision to close Guantanamo Bay. 

ROBERT GIBBS, PRESS SECRETARY:  I think there have been varying opinions in any number of administrations.  The president‘s opinion, based on all that he heard and all that he saw, was that these executive orders lived up to the very high standard that he holds to do everything in his power to protect the American people. 

(END VIDEO CLIP)

SHUSTER:  But again, that was very different than the view of the CIA director and the senior staff over there; right? 

MICHAEL ISIKOFF, “NEWSWEEK”:  Exactly.  And that‘s the real news in this. 

Certainly, the symbolic statement, you know, to close down Guantanamo, gets the headline.  But the real interesting thing that Obama did today was overrule the intelligence agencies.

Top intelligence officials went to his team and said, look, we don‘t want to be bound by the Army Field Manual.  That puts too many restrictions on us.  We want to have the leeway to use some harsh interrogation techniques or, more precisely, to be able to threaten harsh interrogation techniques against some of these suspects. 

Obama heard what they had to say.  They reviewed it and said, no, we want to make a clean statement here that we‘re departing from the Bush administration policies, and they issued this executive order. 

There are some really striking details in that executive order saying that none—all those Justice Department legal memos between September 11, 2001 and January 20, 2009, everything that generated controversies, they‘re all invalid.  No U.S. official can no longer rely on Justice Department legal memos issued during the Bush administration.  That was pretty striking.  But to overrule, overturn what the intelligence officials said, I think, is the real news that took place here today. 

SHUSTER:  Aside from the policy argument, there are a lot of questions about how the process is going to be implemented.  You were at the White House today for a briefing on that.  How many details were they able to provide about how this is going to happen? 

ISIKOFF:  Well, again, the symbolism of Guantanamo is what they were trying to emphasize here today.  But when you get into the weeds, in the details, they have no better answers or no further answers than we‘ve heard before. 

They‘re going to take those 240 detainees at Guantanamo, some chunk of them, a third of them, this first category, and they‘re going to try to get them returned to their country of origin, or get other countries to take them.  Bush administration officials saying, hey, that‘s what we‘ve been trying to do for the last several years.  The Obama people think they may have better leverage with some of these countries. 

The second category, they say they‘re going to try either in criminal courts in the United States, or court-martials, or as a backup these military commissions revamped.  They haven‘t said they‘re going to strike down the military commissions, they said they‘re going to put them on hold and try to see if they can get—bring the same cases in American criminal courts.  They may be able to do that with some. 

But the biggest and hardest is that third tranche.  That‘s 50 to 60 people who are deemed too dangerous to be released. 

You‘re not going to let them go in foreign countries.  And they may be untriable.  Why?  Because they‘ve been waterboarded or had other techniques that, you know, amount to torture, that taints the evidence against them.

And what Obama did today is he‘s created this interagency taskforce headed by Eric Holder, his soon-to-be attorney general that‘s going to review it.  But right now they‘ve got no better answer for what is the toughest part of the Gitmo problem. 

SHUSTER:  And the lack of answers is starting to infuriate some of the Republicans, including those who live—who represent Kansas. 

ISIKOFF:  Sure. 

SHUSTER:  Brownback, Roberts, the senators, because Fort Leavenworth is possibly where some of these guys may go. 

ISIKOFF:  Right. 

SHUSTER:  And without any clear answers as to what‘s supposed to happen once they get there.  And the Republicans, of course, also want to know, how come we weren‘t consulted?  How come you haven‘t figured this out already? 

ISIKOFF:  Right.  No sooner was the ink dry on the executive order than Pat Roberts, the Senator from Kansas, issued a press release saying, you know, it‘s unacceptable to send them to Fort Leavenworth, in my state.  If you really—why don‘t you send them to Illinois or California?  Citing the fact that Dianne Feinstein had endorsed what Obama had to do. 

Yes, there‘s going to be a real fight about where you put those people that you transfer out of Guantanamo.  But, you know, then—I mean, that‘s one fight.  And there you‘ll be hearing the home state parochial interests of senators and congressmen. 

The tough issue is what I was alluding to before.  You know, how do you deal with these people who are dangerous but, you know, may have been tortured and can‘t be tried? 

SHUSTER:  Right.  I mean, for everybody who agrees that it was the right symbolic decision, actually putting it in place is certainly not going to be easy. 

Mike Isikoff, thanks so much for coming in and explaining.  We appreciate it.

ISIKOFF:  Any time. 

SHUSTER:  Coming up, “Hypocrisy Watch.”  Sarah Palin wants to stay in the spotlight but doesn‘t want anybody else controlling it. 

Plus, this was a big day for Hillary Clinton and her colleagues over at Foggy Bottom.  Our panel has some intriguing views on the initial approach of the new secretary of state. 

Later, the Labor Department today released another awful unemployment report, and it‘s putting even more pressure on the Obama administration and Congress to work out their differences and come up with a stimulus plan. 

We will get the latest. 

And back once more to the inauguration and those massive crowds.  In the midst of two million people witnessing the swearing in of a new president, there was a remarkable inauguration love story. 

All that and more, ahead on 1600 PENNSYLVANIA AVENUE.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.

It‘s time for today‘s “Smart Takes.”

Two days after President Obama‘s inaugural address, that speech continues to reverberate around the political world.  It is sparking fierce debates, and many Republicans are drawing battle lines. 

Former Maryland Governor Bob Ehrlich, a Republican, wrote this in today‘s “Washington Post”: “Obama‘s words reflect a stated desire to reconfigure the role of government and markets in our country.  And not even casual observers can claim surprise.”

The former governor joins us now. 

And Governor, first of all, welcome. 

BOB EHRLICH ®, FMR. MARYLAND GOVERNOR:  Good to see you, David.

SHUSTER:  Let‘s listen to part of the speech that you—good to see you.  Let‘s listen to part of the speech that you described today as class warfare. 

Listen. 

(BEGIN VIDEO CLIP)

OBAMA:  This crisis has reminded us that without a watchful eye, the market can spin out of control.  The nation cannot prosper long when it favors only the prosperous. 

(END VIDEO CLIP)

SHUSTER:  Class warfare?  I mean, wouldn‘t it be class warfare—I mean, if that‘s the term you want to throw around—wouldn‘t it be class warfare when you essentially only favor the rich? 

EHRLICH:  Well, one percent of the top wage earners in the country now pay, as you know, 40 percent of the federal income tax burden.  So I can‘t say—it‘s difficult to conclude that the federal tax code favors the rich, but that certainly is the point that the president was making. 

And by the way, that rhetoric fits right into his campaign rhetoric.  It fits right into his principles.  It fits right into the Democratic Party‘s platform.  It fits right into his voting record as a United States senator, and as a state legislator, as well. 

SHUSTER:  Well, for those people who would say, look, we‘ve tried the sort of trickle-down economics, giving tax cuts mostly to the wealthy, hoping that would spur economic investment, and their arguments that that didn‘t work, what‘s wrong with people saying, of course we should try it the other way and give tax cuts to the middle class? 

EHRLICH:  Well, they‘re talking about giving tax cuts to people who don‘t pay any taxes in the first place, as you know, which is—you can make that case, that their income tax credit is basically what it is, which is already on the books.  So the fact of it is, don‘t call it a tax cut.  Call it something else, but don‘t make terms up that don‘t really fit the situation here. 

And as I said as well, we have a very progressive system of taxation in this country that is what it is at present.  We have 40 percent, again, paying—the top one percent paying 40 percent of the federal income tax burden.  It‘s very hard to argue that‘s not progressive in nature, which is what the president has been doing for a number of years now. 

SHUSTER:  Right, but it didn‘t work. 

EHRLICH:  Well, it didn‘t work.  We had—you know, what didn‘t work, the great economic recovery in the boom years of 2003, 2004, 2005, 2006?  Obviously, we‘ve had a very difficult patch here. 

If you really want to get into the genesis of all this and the mortgage crisis and the meltdown and congressional pressure on the banks, I‘ll be very glad to have that debate as well.  But don‘t go telling me we‘re in a post-market time because markets built this country, markets will continue to perpetuate the great wealth of this country.  So being an anti-market politician or president, for that matter is not going to work. 

SHUSTER:  All right.  Here‘s one other part of the speech I want you to talk about.  Here it is. 

Watch. 

(BEGIN VIDEO CLIP)

OBAMA:  And for those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to the suffering outside our borders, nor can we consume the world‘s resources without regard to effect, for the world has changed, and we must change with it. 

(END VIDEO CLIP)

SHUSTER:  Now, Governor, you call that collective national—a collective national guilt trip.  How so?  I mean, isn‘t Obama just acknowledging that the United States needs to take more responsibility for consuming 25 percent of the world‘s energy and lagging on environmental concerns related to energy consumption, like global warming? 

EHRLICH:  We shouldn‘t apologize for capitalism.  We shouldn‘t apologize for our standard of living.  And we‘re certainly not going to apologize for the American tax dollar floating to every country around the world in very large volume over many, many decades. 

The United States has done that.  As you know, the American taxpayers are very generous.  This country has been very generous. 

This country should be generous.  We‘re very wealthy.  But please don‘t apologize to it.  That‘s a collective guilt trip and I just don‘t buy it.  And I think a lot of Americans don‘t buy it either. 

SHUSTER:  All right.  Governor Ehrlich, interesting discussion.  And thank you so much for coming on.  We appreciate it.

EHRLICH:  My pleasure.  Thanks a lot, David. 

SHUSTER:  It is now time for the segment we call “Hypocrisy Watch,” and our focus today is Alaska Governor Sarah Palin. 

Palin has reportedly now hired superstar Washington attorney Robert Barnett to broker either a book deal or to help Palin with a potential television gig.  Barnett is terrific, and it‘s nice to hear Palin may be interested in talking more about the ‘08 campaign or about her political views.  And if she wants to stay in the political spotlight, that‘s great, but it is a bit ironic given that Palin has repeatedly complained in recent weeks about the spotlight on her and her family. 

When Palin‘s future son-in-law Levi Johnston got an oilfield job without proper state certification, Palin said the reporting by the state newspaper was out of bounds.  When another news organization noted that Johnston and Palin‘s daughter Bristol were unwed parents who had dropped out of high school, Palin lashed out hard.  Never mind, of course, that the couple left high school, are still not married, and now have a child. 

Again, there‘s nothing wrong with talking about yourself or your family values to maintain political viability.  But choosing that path while slamming others who take note of your own family‘s values, that‘s hypocrisy.

Up next on 1600, Hillary Clinton‘s first day at the State Department. 

(BEGIN VIDEO CLIP)

HILLARY RODHAM CLINTON, SECRETARY OF STATE:  This is not going to be easy.  I don‘t want anybody to leave this extraordinarily warm reception thinking, oh, good.  You know, this is going to be great. 

It‘s going to be hard.  But if it weren‘t hard, somebody else could do it. 

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600. 

This is Hillary Clinton‘s first full day as secretary of state, and if there was any doubt about her ability to serve in an Obama administration, today it seemed to be put to rest.  More than a thousand staffers crowded the State Department lobby this morning to greet her.  She spoke briefly, saying the words some Clinton skeptics have been waiting to hear. 

(BEGIN VIDEO CLIP)

CLINTON:  Among the many conversations that I‘ve had with the president and with the vice president, over years, but certainly much more astutely and in a concentrated way in the last weeks, we want to send a clear and unequivocal message.  This is a team. 

(END VIDEO CLIP)

SHUSTER:  Let‘s bring in our panel: Ed Schultz, nationally syndicated radio show host; Michelle Bernard, president of the Independent Women‘s Forum and an MSNBC political analyst; and John Harwood, CNBC‘s chief Washington correspondent and a political writer for “The New York Times.”

Ed, is it a team? 

ED SCHULTZ, RADIO TALK SHOW HOST:  It is a team.  And the Senate Democrats are disappointed that it had to go to a vote on the floor for a confirmation, and the holdup and whatnot, because they thought that as much as Hillary has been through, as much as she has contributed over the years, and as tough a fighter as she was, she really didn‘t deserve that.  And I know that the Obama people aren‘t happy about that either. 

It is a team.  It‘s more of a team than it‘s ever appeared to be before.  And it‘s a smart move, it‘s a safe move.  She‘s an international figure, well respected.  And she won‘t make any rookie mistakes. 

SHUSTER:  Two people who are definitely not rookies who are joining the team, George Mitchell, who‘s been appointed special envoy to deal with the Middle East, then Richard Holbrooke, who‘s been appointed special envoy, Michelle, to deal with Pakistan and Afghanistan.

How do all of them work together?  What are the lines of authority there?

MICHELLE BERNARD, MSNBC POLITICAL ANALYST:  Well, we don‘t really know yet.  There are some people who are reporting that they will all report to the president and to Secretary Clinton.  Not really quite sure how—you know, how that‘s going to work yet. 

There are also people who have reportedly questioned why would she, you know, immediately subcontract out such an important part of what happens at the State Department?  But if you look at the travails of Condoleezza Rice in negotiating Mideast peace, for example, things didn‘t go so well.  So maybe, you know, having a Middle East envoy and an envoy for Asia right off the bat, answering to the secretary and the president, was the smartest move she could make. 

SHUSTER:  And yet, John Harwood, if there is a breakthrough in the Middle East, it means it would be less credit to the secretary of state and more credit to Richard Holbrooke. 

JOHN HARWOOD, CNBC CHIEF WASHINGTON CORRESPONDENT:  Yes, but I think right now they‘re looking more for the breakthrough rather than worrying about the credit.  They know how difficult these problems are, how intractable the Middle East has been.  And these appointments of Holbrooke and Mitchell are consistent with the ethos of Barack Obama in making his picks. 

He is picking people who are bigger than the jobs they got.  Richard Holbrooke might have been secretary of state had Hillary Clinton been elected president, and yet he is taking this special enjoy job.  She might have been president.  She‘s the secretary of state. 

He has picked an A team.  We‘ll see how well they work together.  But I think as Ed said, have you‘ve got to presume at this point that they are a team. 

SHUSTER:  Here‘s President Obama talking today about Mideast peace. 

Watch. 

(BEGIN VIDEO CLIP)

OBAMA:  It will be the policy of my administration to actively and aggressively seek a lasting peace between Israel and the Palestinians, as well as Israel and its Arab neighbors.  Now is the time for Arab states to act on the initiatives promised by supporting the Palestinian government under President Abbas and Prime Minister Fayyad, taking steps towards normalizing relations with Israel, and by standing up to extremism that threatens us all. 

(END VIDEO CLIP)

SHUSTER:  Now, that may not sound like really that much, but there is no topic, as we all know, that is more sensitive and more fraught with peril than trying to hit just the right notes when talking about the Middle Eastern conflict. 

Michelle, did he hit the right notes there? 

BERNARD:  It sounds like he did.  You know, going into the general election, and even right after the election, people kept saying, you know, he‘s not speaking out enough about what‘s happening in Gaza.  We‘re not hearing enough about what‘s happening to Palestinians.  You know, what is his policy with regard to Israel?  Is he pro a two-state solution? 

I think he hit the right tone today.  Time will tell.  I think he said what needed to be said and he addressed it as soon as he possibly could, because right before the election we heard so much from him on the economy, very little on Mideast policy, with his line being there‘s only one president at a time. 

SHUSTER:  The other story, indirectly related to Hillary Clinton, that was so fascinating today, Caroline Kennedy, the daughter of President John F. Kennedy, withdrew last night from consideration for Hillary Clinton‘s Senate seat.  David Paterson, the New York governor, said he had not told any candidates whether they were in or not.  This clearly wasn‘t an effort to say, OK, I know I‘m not going to be the pick, so I‘m taking my name out.  John Harwood, what happened here? 

HARWOOD:  I think what we saw in the last 24 hours is evidence of why Hillary Clinton is not going to end up in the Senate. 

SHUSTER:  Caroline Kennedy. 

HARWOOD:  What did I say? 

SHUSTER:  Hillary Clinton.  I thought we had a big headline. 

HARWOOD:  Caroline Kennedy.  She does not appear to be someone temperamentally suited for public life.  When she went out and tried to give interviews, did a listening tour around the state, she was—did not perform well in those interviews.  Some people blame the staff, thought that they put her in awkward situations.  And the halting nature of her withdrawal, I think, just underscored the fact this is a private person and it‘s a very public job.  It may not have been a good fit. 

SHUSTER:  Some very public explanations, according to friends of Caroline Kennedy, some who say it was Ted Kennedy.  Some said no, maybe there was some issue with the nanny.  Others said there were things about her personal life that she just felt it wasn‘t worth sharing with the American people.  Your take on any of that? 

SCHULTZ:  Why put the governor of New York through all of this?  Either you want to be in the United States Senate or you don‘t, no matter who you are.  So the process, here we are in the 11th hour, Caroline Kennedy, in a sense, I think has damaged herself with the public a little bit by going through all of this and then, at the last minute, doing this.  Certainly, she knows, being a Kennedy, how the public is going to respond and also what the public is going to expect, that all of that stuff would have been cleaned up before she would even consider about being a United States senator. 

And the fact that she did stumble in interviews and used the same verbiage over and over again, I think Americans are OK with that.  There was a certain genuine approach to wanting to be a public servant outside of the mold, so to speak, or outside of the beltway.  I think it‘s a travesty for the Democrats, because the Kennedy name could raise a lot of money around the country for House seats. 

SHUSTER:  And somebody who bears some responsibility in this, of course, is David Paterson, who allowed this process to stretch out and maybe if he had made a decision earlier, it might not have gone this way.  In any case, Ed Schultz, Michelle Bernard, John Harwood, thank you all very much.  We appreciate it. 

Still ahead, the GOP gears up for a grand old battle with Obama over his economic stimulus plan.  But first, there was a remarkable and unusual moment today during the president‘s visit to the State Department.  Today, someone yelled from the crowd, hello, in a foreign language, and Obama spoke back in the Indonesian language.  Take a listen. 

(BEGIN VIDEO CLIP)

(INAUDIBLE) 

UNIDENTIFIED MALE:  I served in Indonesia many times. 

OBAMA:  I can tell.  Your accent is flawless.

UNIDENTIFIED MALE:  I hope to be there when you—

OBAMA:  We‘re going to have to go to my old neighborhood. 

UNIDENTIFIED MALE:  I lived in your neighborhood. 

(END VIDEO CLIP)

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.  The theme of day two of the Obama administration, breaking with the Bush era.  The first orders of business?  Closing Gitmo and banning torture.  Flanked by 16 retired military officers, President Obama signed executive orders to close the Guantanamo Bay detention center and ban the use of enhanced interrogation techniques.  He offered strong words about his administration‘s commitment to fighting terrorism. 

(BEGIN VIDEO CLIP)

OBAMA:  We are going to do so vigilantly.  We are going to do so effectively.  And we are going to do so in a manner that is consistent with our values. 

(END VIDEO CLIP)

SHUSTER:  Also today, the president received the first of what will be a daily economic briefing led by national economic director Larry Summers, whose left cheek is visible in this picture.  Also there Budget Director Peter Orzsag, Vice President Joe Biden, and Chief of Staff Rahm Emanuel, who looks fairly amused for someone sitting in an economic briefing. 

This afternoon, it was off to Foggy Bottom to meet with the new Secretary of State Hillary Clinton.  Secretary Clinton announced the creation of two new special envoys for the Middle East and Afghanistan and Pakistan and gave a hat tip to her new boss. 

(BEGIN VIDEO CLIP)

HILLARY CLINTON, SECRETARY OF STATE:  It is an honor to be working to fulfill the goals that you have set for our country. 

(END VIDEO CLIP)

SHUSTER:  Also today, new press secretary Robert Gibbs gave us an update on how the rest of the Obama family is doing.  He said Sasha and Malia are settling in away from the cameras, and that the president likes living, quote, above the store, because he can duck into the residence and say hi during the day. 

Looking ahead to tomorrow, President Obama will hold a bipartisan meeting at the White House with members of Congress to start negotiating the specifics of the 825 billion dollar economic stimulus plan.  House Democrats want to put the bill to a vote next week.  Republicans say the bill will not do enough to create jobs and want more tax cuts included.  They requested the meeting to air their objections to the bill. 

Joining us now, Representative Eric Cantor from Virginia, the House Republican whip, one of the Republicans who requested tomorrow‘s meeting.  Mr. Cantor, House Speaker Nancy Pelosi addressed the urgency of this legislation today.  Let‘s listen and then I‘ll get your response. 

(BEGIN VIDEO CLIP)

REP NANCY PELOSI (D-CA), HOUSE SPEAKER:  Yes, we wrote the bill.  Yes, we won the election.  But that doesn‘t mean we don‘t want it to have sustainability and bipartisan support.  It just comes down to one thing.  It doesn‘t come down to Democrats or Republicans.  It comes down to jobs. 

Four million jobs created or saved.  And we‘re doing something different.  We‘re going in a new direction because the direction the Republicans had taken us in has taken us into this—to this brink. 

(END VIDEO CLIP)

SHUSTER:  Congressman, what‘s wrong with that? 

REP. ERIC CANTOR ®, VIRGINIA:  Well, first of all, nobody I think is interested in pointing fingers and assessing blame.  Right now, we are in a serious recession.  And we‘ve got to do everything we can to get this economy back on track.  The stimulus bill that the Congressional Democrats are now pushing through Congress just doesn‘t cut it.  If you look at the bill—and if any stimulus bill is going to be successful, it has to be about protecting, preserving, and creating jobs.  This bill only has 2.7 percent of the amount of the money that is being spent to create jobs actually; 2.7 percent goes to small businesses that will actually create jobs. 

Meanwhile, what you have in the rest of the bill is a couple hundred million dollars to fix up the national mall.  You have 600 million dollars to replace some of the—

SHUSTER:  But Congressman, with all due respect, that will create jobs.  Granted, the Republicans have said, yes, it‘s important to have construction jobs.  Those will create jobs.  But at the same time, I‘ve heard a lot of Republicans and Democrats say only shovel ready because we don‘t want pork.  So you have you to be careful about where the construction jobs go, and if construction jobs in the mall are shovel ready, why not move forward with it? 

CANTOR:  Well, listen, because what we want are we want lasting jobs.  We know that 70 percent of the jobs in this country are created by small business people, entrepreneurs, and the self-employed.  What we‘ve got to do is reinstill the confidence of people and give them the ability and the incentive to get back into the game and to begin creating jobs. 

Spending more government money while we have to go borrow and pay more interest on that money and then lay on trillions of dollars a year of additional debt is not the way to return this economy back to a growth cycle. 

SHUSTER:  Well, fair point.  Explain to Americans, though, who are skeptical about the idea that tax cuts can create jobs, after the past eight years, why they should take that risk now. 

CANTOR:  Well, first of all, we look at where we are.  We have just spent a trillion dollars out the window, out the door as far as the Federal Reserve and the Treasury and Congress‘s OK of the bailout.  And to what effect?  Then we‘re going to lay on top of the—of this the fact that the Congressional Democrats just cannot miss an opportunity to take advantage of this crisis and put all kinds of pet projects into this bill while we have an economic emergency. 

What we need to do is follow really the advice of the president—of the new president.  He has said Washington should change the way we do business.  We out to be singularly focused on protecting, preserving, and creating jobs.  Stem the layoffs and start creating jobs again.  What that means is we can provide—yes? 

SHUSTER:  I was going to say, we‘re out of time.  I get your point.  We do appreciate you coming on.  Congressman Eric Cantor, I hope we‘ll be able to possibly put you on again perhaps tomorrow night, so you can tell us about this meeting with the president.  Thanks for joining us tonight.  We appreciate it. 

CANTOR:  Thank you very much. 

SHUSTER:  You‘re welcome.  Let‘s talk about the Republican strategy with NBC News analyst Mike Murphy.  Mike, what you heard from the Congressman, are the Republicans smart to go on that approach, to focus on tax cuts and decry the government spending? 

MIKE MURPHY, NBC NEWS ANALYST:  Yes, I think the devil is in the details with this stimulus package.  Everybody‘s for it.  But what is stimulus?  You know, anything—any time there‘s a crisis and something races through Congress, there‘s a lot of opportunity for mischief.  So I think the Republicans have a tricky road to move here.  On one hand, they‘ve got to be for helping solve the problem.  On the other hand, they have an ideological mandate to keep an eye out for crazy pork barrel and over-the-top deficit spending. 

I think it‘s actually in Obama‘s interest.  He can use the Republicans as kind of a bad cop to curb some of the Democratic stuff, and find a centrist course here.  And I think everybody can win. 

SHUSTER:  Mike, how much pressure is on Republicans, when you consider the job numbers that came out today.  It‘s 26 years—the jobless numbers at a 26-year high.  Microsoft even announced that it was laying off 5,000 more people.  Doesn‘t that put even more pressure on Republicans in Congress and Democrats for that matter to do something quickly? 

MURPHY:  Yes.  I think there‘s tremendous pressure on everybody to do something.  But two of the most dangerous words in politics or anything else are do something, because you can start doing things without defining how smart what you‘re doing is.  We got a little ahead of the curve with some of the liquidity crisis spending. 

So it‘s a delicate balancing thing.  We want smart stimulus policy.  I‘m for stuff that will stabilize the housing market and do something about foreclosures.  We make a mistake—we have a conceit in Washington that we run all economic policies.  That might have been true of Moscow in the ‘70s.  It‘s not true in a free market economy.  We have to leverage what we‘re doing in a smart way that doesn‘t totally break the budget and hurt the dollar, and actually provide stimulus. 

So the Republicans have a point.  The Democrats have the political power.  Somewhere in the middle, probably a little more what the Ds want than the Rs, we‘re going to get an outcome here. 

SHUSTER:  Mike, you‘re one of the best political advisers and strategists I‘ve ever met.  If you were advising a Republican going into this meeting with the president, who has a 75 percent approval rating, who just had two million people on the mall, how would you advise them, in terms of that meeting, what they should say to try to bring the new president to their point of view, or at least start negotiating on a firm stance? 

MURPHY:  Well, I think the Republicans have to go in there with the mindset of being part of the solution, not obstructionist.  But I think it‘s important for Obama to steer his own course here, not be totally captive to the interest groups on the Democratic party.  I give him an A for the way he‘s moved to the center since he‘s been elected. 

So he can use the Republicans I think as a counterweight, to make sure the spending is about real stimulus, real infrastructure spending, sensible tax cuts, some aid to the states that are under balanced budgets and really need some money to hold services together.  So I think if Obama is smart, he‘ll have a balance of power thing working between the Ds and the Rs in Congress.  And he‘ll get to be the king on top of the whole thing, and have the power to get a policy that‘s very close to what he wants. 

Bottom line is the Republicans have some influence here.  They don‘t have a lot of power.  Democrats have the votes.  So the Republicans are going to have to be very skillful. 

SHUSTER:  Talking about smart, there‘s nothing smarter than putting on Mike Murphy to help us through this stuff.  Mike, thanks so much for coming on.  We appreciate it. 

MURPHY:  Thank you.  Thank you very much. 

SHUSTER:  They called them crack-berries for a reason.  The good news is that President Obama won‘t have to go through withdrawal.  He gets to keep his device, thanks to a few restrictions he‘s agreed to, and some new high tech encryption stuff built in. 

Plus, you won‘t believe what happened to former French President Jacques Chirac.  Seriously, you won‘t believe it.  Safe to say that dog on Chirac‘s lap is no longer man‘s best friend.  More 1600 after this.

(COMMERCIAL BREAK)

SHUSTER:  We‘re back with a look inside the briefing room.  And we begin with the growing pains as the Obama team tries to get used to 1600 PENNSYLVANIA AVENUE.  As first reported by Bloomberg News, the Obama folks who ran the most tech savvy campaign in U.S. history are confronting seriously old technology in the White House.  Many staff have faced phones that don‘t work, computer software that is six years old, no access to outside email, no Facebook, and no instant messaging. 

Obama‘s spokesman Bill Burton was quoted in the “Washington Post” today as saying “it‘s kind of like going from an XBox to an Atari.”  If you‘re not a gamer, let me explain what Bill Burton means.  The Atari 2600 was built in 1977 and the speed was 1.9 Megahertz.  The XBox was unveiled in 2005.  It‘s a bit faster.  It has three symmetrical cores running at 3.2 gigahertz each.  Along with games, users cam play movies, TV shows, store pictures and music.  Oh yes, you can play against each other, gamers, online. 

However, Atari was a fun part of many of our childhoods, like mine. 

So, Bill Burton, ease off the Atari references OK? 

Next up, another technology issue.  It now appears President Obama has won the Blackberry battle.  He gets to keep his beloved hand held device thanks to a few upgrades.  Security teams have equipped the Obama-berry with an elaborate encryption package to keep foreign governments from tapping in.  The president has agreed to only email a few select personal friends and some senior staff.  And everything on the Blackberry is subject to the Presidential Records Law. 

(BEGIN VIDEO CLIP)

GIBBS:  I‘ve gotten e-mails from him not recently, not in a few days, I should say, that go from anywhere from something that‘s very strictly business to why did my football team perform so miserably on any given Saturday or any given Sunday?  So I think he finds it an important way to continue to communicate. 

(END VIDEO CLIP)

SHUSTER:  Just last Friday, the future of the president‘s Blackberry was questionable for a different reason.  He dropped it on the tarmac at Reagan National Airport as he got out of his car.  A Secret Service agent hustled to pick it up.  Press Secretary Robert Gibbs was then quoted as saying “that may have solved his Blackberry dilemma.”  Right?  Forget the lawyers. 

Well, no such luck.  Aides later reported the Blackberry was still working. 

By the way, besides being the first sitting president to have a Blackberry, Mr. Obama‘s now shaking up the previous administration‘s rules about the Oval Office dress code.  Former President Bush decried that no one, including him, would ever enter the Oval Office without a jacket.  But as you can see from this picture, President Obama is not wearing his jacket. 

For those of you who consider this disrespectful, get over it.  If the president works more effectively this way, terrific. 

Finally, one of Hillary Clinton‘s first responsibilities as secretary of state may now involve sending a get well card on behalf of the American people to the former president of France.  Jacques Chirac was recently treated at a French hospital after being, quote, mauled by his poodle named Sumo. 

A couple things about the story.  First, Sumo‘s name is, yes, actually an homage to Chirac‘s love of big Asian wrestling.  Second, in order to keep from linking the pooch to a certain nationality, French observers have been quick to point out that Sumo is not a French poodle, but a Maltese lap dog. 

Third, Sumo the Maltese has been diagnosed as clinically depressed and is on anti-depression medication, though some of us might question how well it‘s working. 

Anyway, former French first lady Bernadette Chirac described the harrowing incident to a magazine, telling reporters, quote, “if you only knew I had a dramatic day yesterday.  Sumo bit my husband.”  She says they were aware the animal was unpredictable, and that he went for the ex-pres unprovoked. 

As for Chirac, he was taken to the hospital, treated, and released.  Sources close to him insist the attack won‘t leave a scar.  Chirac says he will make a full recovery in, quote, weeks. 

Up next, our profile people of the day.  A Virginia couple figured out how to make the historic inauguration of Barack Obama even more special.  Their national mall love story with thousands of witnesses straight ahead on 1600.

As we go to break, how about Chirac‘s dog?  Amazing. 

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.  This is the point in the show when we usually bring on a journalist or pundit who is stirring the pot, someone we award the title of Muckraker of the day.  But today, we‘re doing things a little bit different. 

Tuesday, during the inauguration in Washington, D.C., somewhere in that massive crowd of more than two million, in fact, right by the Washington Monument, right after the president took the Oath of Office, Kit Crawford got down on one knee and proposed to girlfriend, Megan Kilgas.  Megan said yes. 

We loved the story so much, we are naming them our people of the day.

Kit and Megan join us now.  First of all, congratulations. 

Why there, Kit? 

KIT CRAWFORD, PROPOSED DURING INAUGURATION:  It wasn‘t really planned.  It was just a few days beforehand actually.  And it just kind of dawned on me.  I was going to do it on Saturday, which is our seven-year anniversary.  But I was, like, why not?  It was already this really unique day and I just had to go for it.  And I did.  So I wanted to make a special day more special. 

SHUSTER:  And it was an emotional day, not just because of this, but because you‘re big Obama supporters. 

CRAWFORD:  Yes. 

SHUSTER:  Megan, what was your reaction?  Did you immediately say yes? 

What happened?

MEGAN KILGAS, WAS PROPOSED TO DURING INAUGURATION:  Well, at first I didn‘t really believe it was happening.  We had talked about it for a while, but I didn‘t know that he had even gotten a ring or that he was planning on doing it that day.  I was kind of just in shock and disbelief. 

And then I finally realized what was going on.  I said yes.  And then just tears started pouring down my face. 

SHUSTER:  What did people around you—what were they doing? 

KILGAS:  Some were cheering.  I‘m not sure if it was for us, if they even saw what was going on.  But I know Obama had just finished the oath.  And he was preparing to give a speech.  So I‘m sure some of the cheering was for that.  But a few of our friends were there and they happened to catch the moment on camera. 

SHUSTER:  And, Kit, were you nervous? 

CRAWFORD:  I was real nervous.  I didn‘t—I wasn‘t sure—I mean, we had been standing there in the cold for hours and I was kind of pondering over in my head how to go about it and when to do it.  And I needed the culmination of the whole event, I suppose.  So I thought right after the oath would be the best time.  So I whispered to a few of my friends how it was going to go down, and it did right after he was sworn in. 

SHUSTER:  Well, Kit and Megan, congratulations.  A wonderful love story.  You‘ll always remember it.  Thank you so much for sharing it.  Congratulations and good luck. 

That is the view from 1600 PENNSYLVANIA AVENUE tonight.  I‘m David Shuster.  Thank you for watching.  We will see you back here tomorrow night, same time, 6:00 p.m. Eastern on MSNBC.  Remember, you can get the latest political news and a sneak peek of what‘s coming up on the show sent straight to your inbox.  Also, a little information on my proposal, 1600 Daily Briefing.  Go to Shuster.MSNBC.com. 

I‘m David Shuster.  “HARDBALL” With Chris Matthews starts right now.

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