updated 1/26/2009 11:58:47 AM ET 2009-01-26T16:58:47

Guest: David Sanger, Josh Gerstein, James Clyburn, Richard Wolffe, Ed Schultz, Michael Smerconish, Ron Brownstein

DAVID SHUSTER, HOST:  Tonight, the president‘s first White House meeting in office with leaders in Congress.  We will talk with the lawmaker who was there as the president urged Congress to pass the largest economic plan in U.S. history. 

Plus, why on earth did troubled Merrill Lynch last year give billions of dollars in executive bonuses? 

Also, embattled Illinois Governor Rod Blagojevich and his delusions.  In today‘s news conference, he spoke about cowboys. 

Later, as the Obama administration ramps up its foreign policy, there‘s now been a breakthrough with Cuba‘s Fidel Castro. 

And wait until you see what students in Japan are doing thanks to Obama‘s inaugural address. 

All tonight on 1600 PENNSYLVANIA AVENUE.

Welcome to the show, everyone.  I‘m David Shuster. 

By all accounts, our nation is now in the most severe economic crisis in 75 years.  And leading analysts say it‘s getting worse, not better. 

So this morning, in a White House meeting with Democratic and Republican congressional leaders, President Obama began his personal effort to get them to quickly pass an $825 billion stimulus plan, the biggest in our nation‘s history. 

(BEGIN VIDEO CLIP)

BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES:  I recognize that there are still some differences around the table and between the administration and members of Congress about particular details on the plan.  But what I think unifies this group is recognition that we are experiencing an unprecedented, perhaps, economic crisis that has to be dealt with and dealt with rapidly. 

(END VIDEO CLIP)

SHUSTER:  So how did it go?  Well, when the meeting was over, the top Republican in the U.S. Senate said that, in his view, the session had gone well. 

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL ®, MINORITY LEADER:  The administration strikes me as open to our suggestions, and we made a number of them, both Senate and House leadership.  I do think that we will be able to meet the president‘s deadline of getting the package to him by mid-February. 

(END VIDEO CLIP)

SHUSTER:  Majority Whip James Clyburn was in the meeting today with President Obama and the congressional leaders, and he joins us now. 

And Congressman Clyburn, what did the president say to both Republicans and Democrats that made the Republicans at least think that this can be done in the next couple of weeks? 

REP. JAMES CLYBURN (D), MAJORITY WHIP:  Oh, yes, I think it can be done.  The president restated the fact that we are in dire economic straits.  He talked about all the experts coming to that conclusion, and these are experts that are bipartisan. 

You had the leading economic adviser to Senator McCain saying that what we‘re doing is exactly what needs to be done.  You‘ve got the president‘s economic advisers agreeing.  And so I think it was a good, productive meeting, and I do believe the tone is set for us to get this done on the president‘s schedule. 

SHUSTER:  Congressman, there‘s a report out there that at a certain point, when some of the Republicans were presenting some of their counterproposals, the president said, “I won.”  Explain the context of that remark. 

CLYBURN:  Well, I think that what the president was saying in that instance was that this was the kind of tax proposals that you campaign on, and I campaigned on a different proposal.  Both our proposals got vetted by the American people.  They went to the polls on November the 4th and they voted for President Obama‘s proposals. 

And so I think that‘s all he was saying to them is that, yes, I agree that this is a way to do it.  I just have a different way, and the voters voted for me.  And that‘s what...

SHUSTER:  Now, some of your colleagues...

CLYBURN:  ... what it is.  I‘m sorry?

SHUSTER:  Some of your colleagues on the Republican side have been complaining about some of the specific spending proposals.  Here‘s John Boehner. 

Watch. 

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER ®, MINORITY LEADER:  I‘m concerned about the size of the package, and I‘m concerned about some of the spending that‘s in there.  How are you going to spend hundreds of millions of dollars on contraceptives?  How does that stimulate the economy?  You‘re go through a whole host of issues in the bill that have nothing to do with growing jobs in America and helping people keep their jobs. 

(END VIDEO CLIP)

SHUSTER:  Congressman, on his point, why should spenting on something like contraception be part of this economic plan? 

CLYBURN:  Well, if it‘s a part of a big health plan, then I can understand it.  And I think that‘s what this is.

I argued in this meeting today for us quadrupling our appropriations for community health centers.  I do believe that if you take the State Children‘s Health Insurance Program that we‘ve already passed in the House, the president made it very clear that this is just one leg on what may be a three, even four-legged stool. 

So I don‘t believe that we can look at what‘s being supplemented in this program to stimulate and divorce it from other two or three legs that are involved in this process.  And the State Children‘s Health Insurance Program is certainly one of them, and we can build upon that with other health care programs. 

And so I believe that‘s why this is in here.  And I think we ought to look at that within the context of what else is being done going forward. 

SHUSTER:  There is something of a debate within the Democratic Party about what to do with the Bush tax cuts.  Nancy Pelosi has urged that those tax cuts be repealed. 

Watch. 

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI (D-CA), HOUSE SPEAKER:  Put me down as clearly as you possibly can as one who wants to have those tax cuts for the wealthiest in America repealed.  I couldn‘t be more clear.  Put me down as one in favor of repeal as soon as possible. 

(END VIDEO CLIP)

SHUSTER:  Congressman, as you know, Senate Majority Leader Reid has a different view on what to do with those Bush tax cuts.  Who‘s right, the speaker of the House or the Democratic leader in the Senate? 

CLYBURN:  Well, I don‘t know what Senator Reid may have said, but I want to do this.  I want to second Nancy Pelosi‘s emotions on that issue. 

I do believe they ought to be repealed.  But however, President Obama seems to be wanting them to just terminate or just expire. 

And so we are going to follow, I think, the lead of the president here.  If the president wants these things to stay in place until the year 2010, or whenever they expire, and not reauthorize or renew them, then I think that‘s what we‘ll probably do. 

SHUSTER:  Congressman James Clyburn, thank you so much for joining us today.  We really appreciate it. 

CLYBURN:  Well, thank you so much for having me. 

SHUSTER:  You‘re welcome. 

So, does the Obama administration believe it will win the war over the stimulus package? 

For that, let‘s turn to Newsweek‘s senior White House correspondent, Richard Wolffe, also an MSNBC political analyst. 

Richard, I was struck today in watching the stakeout cameras as the lawmakers came out.  There was something that Senate Majority Leader Reid said about the Republicans and their role in this. 

Watch and then I‘ll get your reaction. 

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MAJORITY LEADER:  I think the main thing that Republicans are asking for and they‘re getting is to be involved in the process. 

QUESTION:  But they want tax cuts...

REID:  And that‘s what—this bill has -- 40, 45 percent of the bill as we have it from the House has—involves tax cuts.  So I think that‘s what they‘re asking is to be involved, to stay involved, and we‘re going to get them do that. 

(END VIDEO CLIP)

SHUSTER:  Richard, do the Republicans just want to be involved? 

(LAUGHTER)

RICHARD WOLFFE, MSNBC POLITICAL ANALYST:  Well, they want more, but I think there‘s a big difference of tone and opinion between the House and the Senate Republicans.  The reason you‘re hearing McConnell say all those nice things about participation is because, A, the president put a lot of effort into cultivating them, and B, they have much more power to block things. 

So, to keep them on board is important, and the positioning that‘s going on is very important for the House side.  You know, they‘re worried about how it will look 18 months from now when they‘re going into those midterms.  Are they going to be defensive, saying, well, we had reservations about this, are they going to be saying we told you so because they didn‘t spend the money quick enough or they didn‘t spend it on the right things? 

Real difference in tone because the politics plays out differently in the House and the Senate. 

SHUSTER:  You‘ve covered Obama for the last two years almost.  His style in meetings like that, like this, talk about it.  And also, what have you picked up in terms of these sort of anecdotes, that at a certain point he said, look, I won this election, we‘re going to do it the American people‘s way based on this election? 

WOLFFE:  Well, he doesn‘t lack confidence, for sure.  And he‘s not beyond what may strike some people as a sort of Bush-style tactic of just asserting his authority and saying, I‘m the president here. 

What‘s interesting here is that he does two things.  And they‘re not exactly consistent with each other, but they‘re both effective. 

One is to say, I want to have everyone around the table.  I‘m going to go up to talk to the Republican caucuses, something Bush never would do, next week.  That‘s something he‘s going to do to include them there.  But at the same time, he‘s saying I‘m the boss. 

Now, you know, he‘s having it both ways here.  He wants to hear them, but in the end, he is the decider. 

SHUSTER:  Is it is sign of sort of confidence, that he feels he knows as much about these issues as anybody else, so he has no problem going to the Republican conference, entertaining the intellectual debate over tax cuts versus spending, because in the end he knows that, in his own words, he can justify intellectually, himself, why he believes the way he believes? 

WOLFFE:  Well, he makes the effort to see things from other people‘s perspective.  And that helps him politically because it builds a bigger coalition.  It‘s also personally important to him. 

But in the end, he is on the left of center.  So his principles guide him to a point which is less about tax cuts, but he still puts a lot of tax cuts in there.  More than many House Democrats would really want there to be.

So, you know, he‘s treading something of a middle ground, but it‘s not a purely middle ground.  He‘s giving some concessions, voicing people‘s consideration and sympathy and empathy.  But in the end, he is a Democrat.

SHUSTER:  And as far as the Republicans, is part of what we‘re seeing from them, at least senators, is that the guy just had two million people on the Mall, the approval ratings have him at 75 percent taking office, it‘s hard to sort of go against that, to sort of put up obstacles when you‘re looking at those sorts of numbers?

WOLFFE:  To go against that, hard to go against something that might pull this country out of this deep reception.  Do you want to get in the way of either of those?  No, but you may want to say, oh, I had my problems, just in case it doesn‘t work.

SHUSTER:  Richard Wolffe, senior White House correspondent for “Newsweek,” also an MSNBC analyst.

Great stuff, Richard.  Thanks for coming in.

WOLFFE:  Thanks, David.

SHUSTER:  Just ahead, the Wall Street investment bank Merrill Lynch was in deep financial trouble, so why did CEO John Thain push for billions of dollars in executive bonuses and millions to decorate his own office?

Plus, after week of intrigue and speculation, today New York Governor David Paterson finally announced his decision on who will replace Hillary Clinton in the U.S. Senate.

And Cuba‘s Fidel Castro is blogging about President Obama, and there‘s one specific sentence that has a lot of people talking today. 

That and more, ahead on 1600 PENNSYLVANIA AVENUE.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.

This week, Merrill Lynch CEO John Thain resigned after an earnings report revealed his investment bank lost $15.3 billion last quarter.  You may remember Thain as the CEO who had a cameo on this show when he demanded a $10 million bonus after his company accepted billions in federal bailout money. 

He did not end up getting that bonus, but now we‘ve learned, thanks to “The Financial Times,” that he did rush through over $3 billion in bonuses last fall for other Merrill employees.  It gets worse.

As first reported by CNBC, at the same time Thain was preaching cost cuts, he also was lavishly redecorating his office space to the tune of $1.2 million, courtesy of a decorator to the stars whose next job, where he will be paid much less, is at the White House. 

Among the big-ticket items, $87,000 for an area rug; $68,000 for a 19th century credenza; and $87,000 for a pair of guest chairs; $13,000 for a chandelier; $28,000 for four pairs of curtains; and $230,000 to Thane‘s driver for one year‘s work. 

Joining us to talk about this outrage and who should be held accountable is nationally syndicated radio talk show host Ed Schultz.  And Michael Smerconish is a radio talk show host on WPHT in Philadelphia, and a columnist for both “The Philadelphia Inquirer” and “The Daily News.”

SHUSTER:  Ed, $230,000 for a driver for one year?

ED SCHULTZ, RADIO TALK SHOW HOST:  A lot of people would like to have that, David, but this is exactly the kind of story, number one, the Obama administration doesn‘t need, because they‘ve got to sell their stimulus package and more government handouts to stimulate the economy. 

I spoke with someone on the Finance Committee the other day of the Senate.  They can‘t account for the TARP money.  It happened too fast.  It went at a Patriot Act speed. 

So this is what infuriates taxpayers.  And it makes it harder to get things done when you see abuse like this.  And there‘s certainly no way that they can go back and do anything about it. 

So you‘ve got to have more checks and balances in the government if you‘re going to do this kind of stuff.  And it makes it doubly hard on the Obama administration starting out.  And I think he had to address this today.  And he put it where it had to be. 

SHUSTER:  Well, we‘re going to talk about Obama‘s comments in just a second. 

But Michael, I want to bring you in.  What was John Thain thinking in all of this? 

All right.  Well, apparently, Michael can‘t—Michael can‘t hear us.  So let‘s go ahead and play the Obama sound bite. 

Here‘s Barack Obama talking about this very issue with John Thain and the bonuses at a time when Merrill Lynch was in severe trouble.  Here‘s the president. 

Watch. 

(BEGIN VIDEO CLIP)

OBAMA:  Some of the reports that we‘ve seen over the last couple of days about companies that have received taxpayer assistance, then going out and renovating bathrooms or offices, or in other ways not managing those dollars appropriately, those all have to be part and parcel of a reform package if we‘re going to be responsible in dealing with this economic crisis. 

(END VIDEO CLIP)

SHUSTER:  Michael, that‘s probably a very appropriate sort of response, but the matter-of-fact tone, does that necessarily match the outrage that I‘m sure some of your listeners are expressing these days? 

MICHAEL SMERCONISH, RADIO TALK SHOW HOST:  You know, what‘s going on on Wall Street and with the economy, generally, I think beyond most folks‘ comprehension.  It is certainly beyond mine.  But a $35,000 toilet that ultimately we‘re paying for because of the TARP, the bailout of Bank of America, which in turn had that paper acquisition of Merrill Lynch, really brings it home, all the way into somebody‘s bathroom at home. 

It was so brazen the way that the ship was sinking and he was dispensing with the goods to that closed circle around him, that I think this is really going to have a ripple effect.  And David, if I were at Wharton, or I were at the University of Chicago, or Stanford getting a great education, hoping to end up on Wall Street and make a lot of money, I would want to string this guy up, because I think that there will be regulation.  The profits will be regulated, Wall Street will be regulated, and it‘s going to go on for a long time. 

SHUSTER:  And Ed, I mean, we hear that there‘s now an investigation in New York to possible fraud, because if you‘re a shareholder of Merrill Lynch and this stuff is going on, I mean, you‘re being misled both about the status of the company—because when the CEO is out there spending $250,000 on a driver, and you don‘t know how the quarterly earnings report is going to be, you might think, oh, it‘s probably been a pretty good year. 

SCHULTZ:  Well, a lot has happened in three days.  President Obama called Senator Conrad, the head of the Budget Committee, and said, will you do this?  Will you take on a 9/11-style commission investigation?  You‘ve got a budget of $3 million, you‘re going to have subpoena power.  We‘ve got to get to the bottom of this. 

This is going to be a long, drawn-out story to make sure we get to the bottom of it.  It‘s the due diligence of what has happened.  And once these findings come out, then we‘ll know what to regulate, how to do it, where to go, and how restrictive to be. 

How restrictive should the government be?  Do we get down to the detail of what they can spend the money on?  And that‘s a tough one to define.  It‘s really a tough one to define. 

SHUSTER:  The other thing that‘s sort of difficult for a lot of people to stomach, Michael, is the CEO of Bank of America, part of this deal is that Bank of America essentially acquired Merrill Lynch.  And they were surprised by how badly the books were at Merrill Lynch, so last week, they had to go to the government and get another $20 billion because of the toxicity of what Merrill Lynch brought to Bank of America. 

So that‘s part of the reason why Thain got fired, because Bank of America was so shocked.  And yet, I mean, that‘s another $20 billion that we‘ve had to ship to Bank of America because of the activities of Merrill Lynch. 

SMERCONISH:  Exactly.  And that‘s the—the rub of the matter is that it‘s taxpayer money that now ends up paying for it.  And it comes at a time when everybody is asking, well, what happened with that first allocation from the TARP funds?  And frankly I don‘t think the answers have been forthcoming. 

And you‘ve covered extensively how many banks have refused for a long, long time to identify what they did with the money.  So now we look at this and we say, well, is this the explanation?  Is this where the first $350 billion ended up?  Because we don‘t want any part of the rest of it. 

SHUSTER:  Absolutely.  In fact, that was our “Hypocrisy Watch” last week.  Bank of America was not explaining what they‘ve done with the money.  There may be valid explanations, and I‘m sure there are, but they need to come from Bank of America. 

In any case, Michael Smerconish and Ed Schultz, thank you very much.  Good to see you both. 

SCHULTZ:  Good to be here.

SHUSTER:  The regulation of Wall Street financial firms is just one of the many issues that is on the plate of the Obama administration and Congress.  And today, New York Governor David Paterson ended weeks of speculation about what would fill Hillary Clinton‘s vacated Senate seat. 

(BEGIN VIDEO CLIP)

GOV. DAVID PATERSON (D), NEW YORK:  Please welcome our next senator and current congresswoman, Kirsten Gillibrand.

(APPLAUSE)

(END VIDEO CLIP)

SHUSTER:  Kirsten Gillibrand was first elected to Congress four years and ago and served during the Clinton administration at the Department of Housing and Urban Development, where she worked for then-HUD Secretary Andrew Cuomo, who was reportedly interested in this Senate seat. 

President Obama quickly called Gillibrand to congratulate her today.  The announcement comes one day after Caroline Kennedy abruptly withdrew herself from consideration.  Gillibrand will stay in the seat until 2010, when a special election will be held to fill the final two years of Clinton‘s term. 

Today, impeached Illinois Governor Rod Blagojevich ratcheted up his media tour, and that brings us to today‘s “Hypocrisy Watch.”

First, the governor faces a trial next week that could end in his removal from office.  And today, he accused lawmakers of rigging the rules. 

(BEGIN VIDEO CLIP)

BLAGOJEVICH:  If you can remove me from office like this, then you tell me what governor is going to challenge the legislature?  Do you honestly think that my successor will challenge them when they try to raise taxes or my successor will challenge them when they want to do certain things that might not be good for the people? 

(END VIDEO CLIP)

SHUSTER:  The governor of the people of Illinois is asking all of us in the media do grill Illinois lawmakers about their motives in this impeachment and trial.  But the governor, himself, refuses to answer any questions about allegedly trying to sell Barack Obama‘s vacated Senate seat.  Could it be because the details are so disgraceful?  When you demand that the media question for critics but you won‘t answer questions about your own behavior, that‘s hypocrisy. 

By the way, the governor spoke at length today about cowboys.  We will have more on that later in the show, but here‘s the view of Blago from the mayor of Chicago. 

(BEGIN VIDEO CLIP)

MAYOR RICHARD DALEY (D), CHICAGO:  I said cuckoo once.  I‘ll say it again  Cuckoo. 

Thank you.

(END VIDEO CLIP)

SHUSTER:  Up next, back to President Obama.  Ron Brownstein will join us to talk about Mr. Obama‘s first week as commander in chief.  Will he be able to work with his rivals and bring about change? 

And later, the relationship between President Obama and the media.  If there was a honeymoon, it didn‘t last very long.  Wait until you see what happened when the commander in chief surprised reporters in the briefing room yesterday. 

More 1600 after this. 

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.

As we reported earlier, Obama‘s economic meeting with congressional leaders this morning seemed to be a show of bipartisanship.  But some analysts wonder if the president can really reach across the aisle and accomplish his agenda of change. 

With us to talk about the contrast is Ron Brownstein, political director for Atlantic Media. 

Ron, I want to read what you wrote in a fascinating piece today. 

You wrote, “It‘s easy to envision Obama‘s twin goals of broad coalitions and big change colliding.  To attract meaningful support from Republicans or other groups outside the Democratic orbit, he must offer those interests not just consultation but substantive concessions.  Yet he cannot concede so much that his ideas lose their forward thrust.” 

What do Obama‘s first actions as president signal about where he is on the continuity versus change continuum?

RON BROWNSTEIN, POLITICAL DIRECTOR, ATLANTIC MEDIA:  Yes.  Well, look, I mean, I think that the two dominant themes from President Obama since his election have been ambition and inclusion.  And in many ways, this is a gamble, because I think the most partisan voices in each party believe these two things are mutually incompatible.

That if, in fact, you want to be inclusive and compromise, that it is very difficult to pursue a bold change.  But we saw again in his inaugural address that he struck both of these themes very strongly, in a sense arguing that the only way we were going to make big change at a time of big problems was to come together.  But in practice, as you suggest, there can be a tension between these two ideas, and as he meets with the Republicans and begins to work through this stimulus plan, you begin to see these two ideas coming into conflict. 

SHUSTER:  What about the argument that working together, bipartisanship, represents change itself? 

BROWNSTEIN:  It absolutely does.  And I think Obama—I think he recognizes that one of the reasons why he was elected was an exhaustion in the country with the style of reflexive partisanship that really has dominated Washington politics for much of the past two decades. Part of what people want to see out of him, as well as different results, is a different process here, that does seem more inclusive, that is open to a broader range of views. 

There‘s also the reality, and we saw this in the Inauguration Address, he understands he won and that he has very clear ideas of where he wants to bridge these divides.  As I said in the column, where he wants to place the bridges that span the distances between the two sides.  Within that, I think he‘s looking for ways to accommodate Republican and other, for that matter, interests, not only Republican interests, business interests, that will expand his coalition without surrendering the basic direction he wants to establish. 

SHUSTER:  This idea about reminding people that he won, apparently, that came up in this meeting today with Republicans when there was arguing over a point.  He said, look, you had your opportunity to sell that to the American people.  I won the election. 

Obama clearly, though, is effective at this charm offensive.  Whether it‘s trying to woo the media or members of Congress, make them feel like they‘re part of the process.  There was an interesting take on that from Democratic Congressman Barney Frank at the end of last year.  Watch. 

(BEGIN VIDEO CLIP)

REP. BARNEY FRANK (D), MASSACHUSETTS:  I think he overestimates his ability to take people, particularly our colleagues on the right, and sort of charm them into being nice.  When he talks about being post-partisan, having seen these people and knowing what they would do in that situation, I suffer from post-partisan depression. 

(END VIDEO CLIP)

SHUSTER:  Who knows more about that?  Who is wiser on that point?  Frank?  Or does Obama really think, hey, I‘m going to try something different.  Maybe I can accomplish change and bring people into the process? 

BROWNSTEIN:  First of all, the House is a knife thing.  It is the most partisan institution.  In fact, reinforced by the redistricting that tends to push Democrats into more Democratic districts and Republicans into conservative places. 

So that is not the best place to begin.  Barney Frank is right about one thing; Barack Obama is not going to charm Republicans into voting against what they perceive to be their political interests.  Ultimately he‘s going to move some of them in his direction by changing their political calculation, by either being strong in their home states and in their home district.  In fact, he won nine states that Bush won in 2004.  So he has some ability to put leverage on them.

Even more—and that‘s what I was talking about before when I talked about broadening the definition of inclusiveness.  Obama may have to build his coalition from the outside in.  Many of these—you know, after two tough elections in a row, the Republicans that are left in Congress tend to come predominantly from very conservative places.  Their initial instinct is not going to be to work with Obama. 

He may need to find ways to build coalitions to groups that they listen to, business groups, the health insurance industry perhaps later on, outside-in coalitions that build pressure.  As they try to build their coalition on this, it‘s worth noting, for example, they‘ve attracted a lot of high-tech business leaders to this plan.  That may be the way it has to go.  Congress may be the last place that gets the message of a shift in political style. 

SHUSTER:  Great piece today, Ron Brownstein, “Atlantic Media.”  Ron, thanks so much.

Up next, Cuba‘s Fidel Castro has been blogging about President Obama.  It‘s fascinating.  Castro is also offering some clues about his own mysterious health. 

Plus, were the musicians who played at Tuesday‘s presidential inauguration pulling an Ashley Simpson?  Yes and no.  We‘ll explain when 1600 continues right after this. 

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE.  Ailing Cuban leader Fidel Castro has broken his silence, speaking out in praise of President Obama.  These reflections from Comrade Fidel and the U.S.  president were posted online last night.  “The intelligent and noble face of the first black president of the United States is a living symbol of the American dream,” adding that “no one can doubt the sincerity of his words when he affirms that he will convert his country into a model of freedom, respect for human rights in the world and the independence of other nations.”

At the end, Castro offered an unprecedented glimpse into this own deteriorating and closely guarded health conditions, saying “I have had the rare privilege to observe events.  I expect I won‘t enjoy that privilege in four years when Obama‘s first presidential term has ended.” 

Let‘s go to NBC‘s Mark Potter, who is following the story in Miami.  Mark, we should mention, there‘s a new picture of Castro with the Argentine president just out.  But what‘s the reaction to that and Castro‘s own emission that his life is coming to an end soon? 

MARK POTTER, NBC NEWS CORRESPONDENT:  Well, all of this has people talking.  That‘s sort of the national sport here in Miami and in Havana.  Everybody is talking about all of this, particularly that picture.  We have not seen a picture of Fidel Castro since November.  There was a lot of speculation that maybe he was dead or just so critically ill that he could not be seen, could not speak, could not write.  A lot of talk. 

And now, suddenly, we have a new editorial called “The Reflection” and we have this picture, with him with the Argentine president, debunking the rumors. 

Last week here, this town was hot with rumors that he had died, that Raul Castro was going to wait until the inauguration of President Obama to announce his death, so that he could be honored after the American president is sworn in.  All kinds of talk.  That‘s all been debunked now.

There are a number of questions that have been raised about the quotes that you pointed out in the reflection.  Why is Fidel and Raul Castro, why are they together being so nice to President Obama?  Why did Cuban TV three times put out reports on the inauguration?  Why are they talking about potentially being willing to talk? 

President Obama has done the same.  Lots of talk and particularly on the streets of Havana, where I was not too long ago.  You here people there speaking hopefully about all this, saying that they hope these are signs that maybe there can be some changes in the political and economic relationship between the U.S. and Cuba. 

So everybody‘s talking and, again, the picture is the big issue out there, today.  That surprised a lot of people.  Actually looking pretty good, despite what he wrote about his few years that he might have left. 

SHUSTER:  So interesting.  NBC‘s Mark Potter in Miami.  Mark, thanks for the update. 

POTTER:  Thank you. 

SHUSTER:  Hamas is also talking about the new president, warning supporters that Obama won‘t be any different from President Bush.  President Obama broke his silence on the conflict in Gaza yesterday, speaking forcefully about the humanitarian toll the crisis is having an Palestinian civilians.  Yet a Hamas spokesman told al Jazeera, quote, Obama will make the same mistakes as Bush that ignited the region instead of bringing stability. 

Joining us now, David Sanger, “New York Times” Washington correspondent and author of “The Inheritance, the World Obama Confronts and the Challenges to American Power.”

David, is there a significant difference in terms of how President Obama is talking about the conflict in Gaza, as opposed to how President Bush was talking about it? 

DAVID SANGER, “THE NEW YORK TIMES”:  There‘s a modest difference.  I think you heard President Obama at the State Department yesterday talk more about the humanitarian element.  Now, he also made it clear that he believes that the Israelis responded to a provocation, the rocket attacks and so forth. 

But you could detect a little bit more of an effort to sound a little more even handed about how one had to step into this; explaining the plight of the Palestinians and then explaining plight of the Israelis.  I thought that was an interesting mix. 

SHUSTER:  The hope in the region is that sort of attention to detail and facility on the issue may help in terms of bringing about a peace arrangement. 

SANGER:  Well, it may.  Then, you know, having the appointment of a special envoy here, you know, makes a—I think, a very big difference.  And in addition to that, I think you‘re probably going to see that Secretary Clinton spends a huge amount of time absorbed in this issue.  But the problem that they‘re all going to have, and you saw this this morning with the military strikes in Pakistan, is that very quickly their attention is going to get sucked in by Afghanistan and Pakistan.  In fact, there was a long National Security Counsel meeting today.  It was all Afghanistan. 

SHUSTER:  Let‘s talk about the envoys you mentioned.  George Mitchell to the Middle Eastern conflict between Israelis and Palestinians, and other Muslim capitals, and then Richard Holbrooke, who‘s going to deal with Afghanistan and Pakistan.  Those are two heavyweights, right?

SANGER:  Big heavy weights.  George Mitchell, of course, is best known for his work in northern Ireland, though perhaps dealing with the baseball owners during the drug issues may have been better preparation for what he‘s headed into.  And Richard Holbrooke, of course, dealt with the Balkans through the entire Clinton administration, and ended up with the Dayton Accords. 

So they are two heavy weights.  But there are a couple of complicating factors here, David.  The first is the special envoy thing sounds wonderful, but it can wreak havoc on the inside of the State Department, where the diplomats who are responsible for those regions frequently can feel as if either they are cut out or lines are being crossed.  And you do have the possibility of having a lot of diplomatic chaos as they‘re trying to figure out whose responsibilities they are. 

Mr. Holbrooke described a very broad set of responsibilities for himself yesterday that included an element of the military side of this.  And as you could see from those strikes, the military is going to be a big part of it.  You wonder how that is going to work out. 

SHUSTER:  Hillary Clinton talked about changes in the State Department.  She was greeted by a thousand of her employees yesterday and she visited USAID today.  Watch. 

(BEGIN VIDEO CLIP)

HILLARY CLINTON, SECRETARY OF STATE:  I‘m going to demand a lot.  I don‘t think we have a choice.  We have with President Obama someone who believes in development and diplomacy.  Coming to the State Department yesterday sent a very strong signal. 

(END VIDEO CLIP)

SHUSTER:  Is the message that Secretary Clinton and President Obama are sending is that, yes, diplomacy matters and to anybody who doubts that around the world, just watch our actions and how we‘ve started? 

SANGER:  Yes.  They came in saying that diplomacy would be their first option and so forth.  What I find fascinating about what Senator Clinton has talked about is her emphasis on development.  As I described in “The Inheritance,” you had President Bush step out in 2002, give a great speech about how we were going to have a Marshal Plan for Afghanistan.  There was no plan behind it. 

Beyond that, while we have expeditionary forces in the military to deal with what the military has to deal with, we have no expeditionary capability to rebuild countries.  I think what you‘re hearing in Senator Clinton‘s conversations there is a major commitment to building that kind of expeditionary development force.  Very difficult to do. 

SHUSTER:  Difficult to do.  But it would certainly mark a remarkable change.  We‘ll see what happens.  David Sanger from the “New York Times,” always a pleasure to have you in.  Thanks for coming in today. 

SANGER:  Great to be back with you.

SHUSTER:  Coming up, if there was a honeymoon between the president and the press, well, it‘s over, at least for a few reporters.  We‘ll show you what happened last night when the president made a surprise visit to the press corps after his press office couldn‘t answer some questions. 

Plus, when Illinois Governor Rod Blagojevich holds a news conference, it‘s a good bet something colorful will come out of it.  Today he‘s talking about cowboys, horses, and fear.  You‘re watching 1600 PENNSYLVANIA AVENUE.

(COMMERCIAL BREAK)

SHUSTER:  We are back with a look inside the Briefing Room.  We start with Illinois Governor Rod Blagojevich, who faces an impeachment trial next week.  Blagojevich is accused of trying to sell President Obama‘s Senate seat to highest bidder.  In the past, Blago has tried to defend himself by quoting poets, including Kennison and Kipling.  Today, he tried a cowboy allegory.

(BEGIN VIDEO CLIP)

GOV. ROD BLAGOJEVICH (D), ILLINOIS:  If the cowboy who is charged with steeling a horse was charged with doing that in town, but in fact on the date and time that he apparently stole the horse in town he was on the ranch with six other cowboys, herding cattle and roping steers, and then he expects that when his day comes to go to court he can bring those six cowboys to say it wasn‘t him, because he wasn‘t in town, he was on the ranch herding cattle—even if you could bring those cowboys in to say that, under these rules, under 8-B, it wouldn‘t matter. 

(END VIDEO CLIP)

SHUSTER:  Try diagramming or lassoing that sentence.  Good luck, governor.  Happy trails. 

In Japan, students of all ages are talking about President Obama and they are doing it in English.  We learned today that one of the hottest learn-to-speak English DVDs in that country is a compilation of President Obama‘s speeches.  The publisher says more than 420,000 DVDs have been sold.  In other words, yes we can will now roll off the tongue of Japanese students as easily as hello, thank you and good-bye. 

By the way, language acquisition works both ways.  I‘ve actually learned a few words of Japanese from a popular TV show of theirs about pranks. 

Funny? 

Next, there‘s been something of a controversy today over a musical performance at Tuesday‘s inauguration.  Watch. 

The John Williams composition played by cellist Yo-Yo Ma and violinist Itzak Pearlman was actually taped earlier in the week.  On Tuesday, the musicians strummed along as the recording was piped through loud speakers in the mall and into the inauguration television feed.  If you‘re one of the critics of the instrumental synching, get over it.  Anybody who has ever played the violin, cello or clarinet knows that the instruments, unlike brass, perform horribly in temperatures below freezing.  If the weather was warm, fine.  It should have been and would have been live.  Good grief, try just enjoying the music. 

Finally, President Obama made a surprise visit last night to the White House briefing room to check out the reporters‘ digs and to try to charm the journalists, who were miffed at being shut out over that do over swearing in on Tuesday.  But the president appeared to get irritated when a reporter from Politico asked about an Obama nominee who appeared to violate lobbying rules. 

(BEGIN VIDEO CLIP)

OBAMA:  I came down here to visit.  I didn‘t come down here—

(CROSS TALK)

OBAMA:  I can‘t end up visiting you guys and shake a hand if I‘m going to get grilled every time I come down here. 

(END VIDEO CLIP)

SHUSTER:  Politico‘s John Martin spoke about the interaction earlier today on MSNBC. 

(BEGIN VIDEO CLIP)

JOHN MARTIN, “POLITICO”:  All politicians should be held accountable and should be sort of dealt with, you know, very professionally by the press, but also very aggressively. 

(END VIDEO CLIP)

SHUSTER:  We all have our own approach, of course, but this is a good lesson for the Obama White House press office.  The president‘s personal charm will only get you so far if there are some legitimate questions that remain unanswered. 

Next up, the president and Guantanamo Bay, will it really be closed within a year?  In the wake of President Obama‘s executive order, our Muckraker of the day explains there are some problems, when 1600 continues. 

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA:  This is me following through on not just the commitment I made during the campaign, but I think an understanding that dates back to our founding fathers that we are willing to observe core standards of conduct not just when it‘s easy, but also when it‘s hard. 

(END VIDEO CLIP)

SHUSTER:  That was President Obama yesterday signing orders to close Gitmo and banning torture before lunch on his first day in office.  Liberals were thrilled about the apparent break with the Bush administration.  Today, Politico‘s Josh Gerstein says the executive orders may carry no significant change to US policy. 

He reports, “President Obama‘s pronouncements may sound dramatic and unequivocal.  But experts predict American policy toward detainees could remain for months or even years pretty close to what it was as President Bush left office.” 

Let‘s bring in “Politico” White House reporter Josh Gerstein, who is our Muckraker of the day.  Before we get to that, it was your colleague, Jonathan Martin, we saw in that last clip.  What do you make of the exchange with Barack Obama last night? 

JOSH GERSTEIN, “POLITICO”:  My philosophy on these things is that it‘s fine to be social with the president if you‘re also having a professional exchange, meaning he‘s taking your questions and answering them in some form.  It just so happens since inauguration night, President Obama hasn‘t taken a single question from any reporter.  I don‘t think there‘s anything wrong if he comes to stop by the press area to throw a question at him.  I thought Jonathan was pretty professional about him.  If the president doesn‘t want to answer him, we can‘t do anything about it.  I thought it was fine. 

SHUSTER:  I agree with you.  To Gitmo.  Why might Gitmo remain the same for months or possibly years? 

GERSTEIN:  Well, it‘s because almost everything that President Bush ordered the other day or yesterday had some wrinkle in it.  Either, if you talk about banning torture, for example, yes, they‘re going to ban torture.  But right now they‘re force-feeding prisoners down there and they‘re keeping them in solitary.  And that‘s going to go on for some period of time.  There‘s a wrinkle there. 

The main reason that we think it could go on for an extended period of time is they haven‘t figured out what to do with the prisoners.  The Bush administration‘s view was they would like to close Guantanamo, too, but first we need to figure out what to do with the prisoners.  The Obama people are taking the reverse approach, saying, let‘s say we‘ll close Guantanamo first, and then we‘ll figure out what to do with the prisoners. 

That thorny question really is not addressed.  It‘s all about 30 day reviews, 60 day reviews, 180 day reviews.  They haven‘t figured out what to do with the prisoners.  Without that, you can‘t close the place. 

SHUSTER:  They‘re only coming to this now after just a couple days in office, whereas the Bush administration studied this for several years. 

GERSTEIN:  Well, it‘s unclear.  They‘re saying, yes, we just sort of realized that it‘s really complicated.  A lot of people have been saying for a long time it‘s really complicated.  It is an urgent matter if you‘re detained down there.  Certainly if you‘re being force fed, I don‘t think waiting around another year to get this reviewed is going to be very palatable. 

Some of this stuff is weird.  They ordered a 30-day review of the detainee conditions at Guantanamo to see if they‘re inhumane.  What‘s going to conduct the review?  Defense Secretary Robert Gates.  Well, he may favor closing Guantanamo but he‘s been running it for the last two years.  Do you think he is going to come out and say, what is fine on Monday is now—yes, this is a heinous violation of the Geneva Convention.  Some things just seems like stop gap measures that are designed to buy the Obama people more time to figure out what to do. 

SHUSTER:  Based on all these issues, do you think it will be closed within a year?  Does your gut tell you they are not going to be able to solve this ? 

GERSTEIN:  I think it will be closed within a year.  It‘s not going to work out the way they‘re hoping.  They‘re going to have to find some other place to put these people.  And they haven‘t even begun addressing the many other places around the world, Afghanistan and Iraq, where there are far more people that are being held at Guantanamo.  It‘s really a symbolic issue at this point.  They‘re attacking the symbol, but the substance, they just haven‘t grappled with it. 

SHUSTER:  Josh Gerstein from Politico, our Muckraker of the day. 

Josh, great stuff.  Thanks for coming on. 

That‘s the view from 1600 PENNSYLVANIA AVENUE tonight.  I‘m David Shuster.  Thanks for watching.  Go to Shuster.MSNBC.com for our briefing and get all the latest news right there.  I‘m David Shuster.  “HARDBALL” with Chris Matthews starts right now.

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

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