updated 1/28/2009 5:26:03 PM ET 2009-01-28T22:26:03

Guest: John Campbell, Peter Orszag, Jeanne Cummings, Michelle Bernard, Ken Gardner, Eugene Robinson, Jonathan Martin High:

DAVID SHUSTER, HOST:  And Chris, thank you very much.

Chris, we‘re going to play a remarkable clip of Rod Blagojevich today in just a second. 

But I‘ve got to ask you, what struck you as the most interesting development today in his impeachment trial down in Springfield, Illinois? 

CHRIS MATTHEWS, HOST, “HARDBALL”:  Well, the fact if this was all incriminating, what they showed to the Senate out there in Springfield, why isn‘t it used in the trial against him by the U.S. prosecutor, Fitzgerald?  I wonder whether they‘re just throwing stuff at him now that looks bad, but wouldn‘t win in a case before a jury?  So I wonder whether it‘s as good as it looks.  I don‘t think it looks that good.

I find it very murky to read these tapes.  I‘ve listened to them on the show. 

I don‘t know.  What do you think, David?  I don‘t know whether to put the guy in jail.  They may be good enough for the state politicians out in Springfield, but I don‘t think they‘re good enough for a jury. 

SHUSTER:  Yes.  I think the one thing that Pat Fitzgerald has going for him in terms of the indictment that‘s coming is he‘ll have the benefit of sort of analyzing all these statements that Blagojevich is making and he‘ll be able to craft his indictment in a far stronger fashion than they may be able to craft this impeachment trial. 

But in any case, Chris, you‘re going to love this.  Here‘s Rod Blagojevich responding to the idea of the cynicism that those of us in the media have for him and this idea that this is all designed to somehow shape the views of potential jurors. 

Watch. 

(BEGIN VIDEO CLIP)

HARRY SMITH, CBS NEWS:  So if you can soften up a jury pool, why not come and blab with guys like us? 

GOV. ROD BLAGOJEVICH (D), ILLINOIS:  That‘s a cynical interpretation.  No, I would like the senators to change those rules.  Give me a chance to bring in all the tapes and bring in witnesses so I can prove my innocence and I can... 

SMITH:  It could be cynical, but could it also be accurate? 

BLAGOJEVICH:  No.  This is all about doing the best I can to try to persuade those senators to change their rules. 

(END VIDEO CLIP)

SHUSTER:  Now, Chris, I suppose they have all these media programs down there in Springfield. 

(CROSSTALK)

MATTHEWS:  I‘m laughing because Harry Smith is right.  I mean, he‘s right. 

This is going—he‘s going to the jury.  He‘s trying to defend himself and stay out of prison.  That‘s what this is about, and I understand completely why he‘s going to the airwaves. 

He‘s going to reach those jurors, perhaps minority jurors, poor people.  He‘s talking very much, as you‘ll notice, populist politics. 

He wants this to be about the establishment against this little guy looking out for the regular people, the little people, if you will.  And that‘s what he wants to frame this as.  And if he can frame it that way, maybe he can find a couple jurors who will sympathize with him and hang that jury, and then he can cop a plea.  That‘s what I think.

SHUSTER:  And then especially of some of those—I agree.  And especially if some of those jurors that seem to like Martin Luther King.  Rod Blagojevich invoked Dr. King again today. 

Watch. 

(BEGIN VIDEO CLIP)

BLAGOJEVICH:  You know, during times like this there‘s a saying that Dr. King had.  “In the end, we remember not the words of our enemies, but the silence of our friends.”  It‘s a very lonely period when things like this happen.  People tend to be afraid to talk to you. 

(END VIDEO CLIP)

SHUSTER:  People are afraid to talk to you—Chris. 

MATTHEWS:  Well, yes, let me tell you something.  Some of the best trial lawyers in history have gotten people off to some extent by trooping you know, Barbara Jordan in before the committee as a character witness, or the great congresswoman, of course, from Texas all those years.  Or they brought Joe Louis to come in and shake hands with the defendant at the defense table. 

I mean, there‘s all kinds of performance art that goes on here.  And there‘s no greater performer of the art than Rod Blagojevich. 

SHUSTER:  Well, and Chris, another great performer in all of this is Roland Burris, you interviewed last week.  He spoke this morning at the Rainbow/PUSH breakfast in Chicago, and here‘s what he said: “If there was no Martin Luther King and no Roland Burris, there would be no Barack Obama in the White House today.”

What did Senator Burris mean by that? 

MATTHEWS:  Well, he was elected many times statewide in Illinois before Barack Obama was elected.  Before, you know—he was the trailblazer.  He was. 

I mean, technically he was.  And he sees it that way. 

He‘s an older man who was there long before.  And winning statewide office if you‘re an African-American is a big deal. 

You can say everything‘s changed, but a couple of years ago, for an African-American to win statewide for any office was a big, big deal, because you had to win in a larger constituency than simply African-American.  So you look at the U.S. Congress today, there are a lot of African-Americans who are members of Congress.  But statewide, name the senators, name the governors. 

They‘re not there because white voters have been hesitant—let‘s put it lightly—to vote for black candidates statewide.  So he‘s right. 

You‘ve been laughing.  I know you‘re laughing, Shuster, but he is one of those trailblazers getting elected statewide. 

SHUSTER:  Chris, you‘ve changed my mind.  You‘ve absolutely changed my mind.  You make a great point. 

And Chris, you‘re the best.  And thanks so much for joining us tonight again. 

MATTHEWS:  Carol Moseley Braun is another one of those trailblazers.

SHUSTER:  Absolutely.  I got you. 

MATTHEWS:  OK.

SHUSTER:  Thanks, Chris. 

MATTHEWS:  OK.  Great.

SHUSTER:  “No blood was drawn, no minds were changed.”  That‘s how one Republican summed up President Obama‘s foray to Capitol Hill this afternoon for the $825 billion stimulus bill lobbying effort. 

The president spoke briefly after the meeting, urging Republican lawmakers to put aside politics. 

(BEGIN VIDEO CLIP)

BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES:  There are some legitimate philosophical differences with parts of my plan that the Republicans have, and I respect that.  I don‘t expect 100 percent agreement from my Republican colleagues, but I do hope that we can all put politics aside and do the American people‘s business right now. 

(END VIDEO CLIP)

SHUSTER:  President Obama was a bit more candid inside the closed-door meeting.  According to our Hill reporter, Mike Viqueira, he told Republicans, “There will be time to beat me up.”  And that he knows he will “watch you on Fox News and feel bad about myself.”

Joining us now is Congressman John Campbell, a Republican from California and a member of the House Financial Services Committee. 

Congressman, thanks for joining us. 

REP. JOHN CAMPBELL ®, CALIFORNIA:  Sure.  Good to be with you. 

SHUSTER:  You were in that meeting today.  What was the tone like? 

And did the president say anything to change your mind? 

CAMPBELL:  The tone was good, as your previous report indicated.  I think the questions were respectful.  Everybody was cordial. 

And frankly, you know, the president is—he‘s very good in a small group like this.  I don‘t think a person walked out of that room not feeling that they liked him, and that they liked him and felt he was candid.  He was funny at a number of points.  And so the atmosphere was very good. 

But as you said, no minds were changed.  We certainly didn‘t change his, and he didn‘t change mine.  And I haven‘t talked to any of my colleagues who were in the room who were against the bill before and are for it now.  I think—in fact, I‘ll be surprised if there‘s maybe any or more than just a handful of Republican votes for this bill tomorrow. 

SHUSTER:  You‘ve criticized the package because there‘s no multiplier effect with the jobs.  You talk about money should be spent establishing national broadband, wifi infrastructure.  But the bill does include some $32 billion to transform the energy grid, $30 billion for highways. 

Isn‘t that—aren‘t these multiplier effects? 

CAMPBELL:  Yes, absolutely, but the problem is the total bill is $825 billion, and that of the sort of—let‘s say the spending that we or I certainly believe has multiplier effects to it and will really create multiple jobs, it‘s only about 4 or 5 percent of the total package.  You know, if you pay somebody to paint a government building, all you do is create one job to paint the building.  But if you pay somebody to create some infrastructure—a road, a bridge, wifi, electrical grid—then what you‘re doing is creating something that many other jobs in the private sector will be created in order to use that new infrastructure, in addition to creating the job to build the infrastructure. 

There just isn‘t not enough of that in there.  And unfortunately, the gulf I think between the bill and the president and me, certainly, and Republicans largely in general, is that there‘s just too much of this spending in there that doesn‘t—isn‘t really stimulative.  And that‘s really our problem with the bill. 

SHUSTER:  Right.  Fair point, but aren‘t Republicans trying to have it both ways?  Because if you want only shovel-ready projects, there‘s going to be certain limit to what you can do.  And some of these projects that you‘re talking about take time, far more time than Republicans say you have right now in terms of some Republicans are criticizing because, well, there‘s not enough that‘s stimulative within the next 18 months. 

CAMPBELL:  Fair enough.  Fair question.  And so I think what—we would be happier if some of that non-stimulative spending was just taken out so the bill wasn‘t $825 billion, so it was somewhat smaller. 

Certainly there‘s more shovel-ready or more infrastructure projects we could do.  There‘s a lot of this other just flat general spending that we could get rid of.  And then there‘s a few more things we think could be done on the tax side as well. 

Even the tax provisions that are in there, you know, the tax provision gives rebates to people who didn‘t pay federal income taxes.  That‘s another point that was discussed, that‘s an area of disagreement between Republicans and the president. 

He believes that if you pay payroll taxes, that‘s enough.  You should get a debate.  We believe that you don‘t rebate income taxes to someone who didn‘t pay income taxes.  Or if you do, that is not a tax cut, that‘s really just a wealth transfer.  And again, we don‘t think that‘s going to be particularly stimulative. 

SHUSTER:  Congressman John Campbell, Republican from California.

Congressman, thanks for joining us.  We appreciate it. 

CAMPBELL:  Thank you. 

SHUSTER:  Ahead on 1600, he has the job of scrutinizing and selling government spending, including this massive stimulus plan.  And President Obama once said this guy “knows where the bodies are buried.” 

We will talk live, one-on-one, with Peter Orszag, the Obama budget director, next. 

Later, President Obama‘s first interview since taking office was given to an Arab broadcaster.  We will take a closer look and bring you the latest views of President Obama in the Muslim world with NBC‘s Richard Engel. 

Plus, the ongoing problems at Ground Zero.  Seven years after 9/11, the site where the iconic twin towers once stood, remains a symbol of engineering and rebuilding incompetence.  But momentum is growing to ditch the embattled Freedom Tower project and rebuild the twin towers. 

All tonight on 1600 PENNSYLVANIA AVENUE. 

(COMMERCIAL BREAK)

SHUSTER:  Welcome back. 

Although today‘s meeting between President Obama and congressional Republicans were closed, the views of nearly everybody involved seeped into the Capitol‘s quarters throughout the day. 

Here‘s the House Republican position courtesy of GOP Congressman Eric Cantor. 

(BEGIN VIDEO CLIP)

REP. ERIC CANTOR (R-VA), HOUSE REPUBLICAN WHIP:  What it seems like is that the congressional Democrats have adopted the advice of Rahm Emanuel, who says never miss an opportunity to seize on a crisis.  And that‘s exactly what they‘ve done, and taken out the favorite programs they have been unable to pass in this institution over the last several years and put them in this bill. 

(END VIDEO CLIP)

SHUSTER:  Joining us now is President Obama‘s budget director, Peter Orszag.  His formal title is actually Director of the Office of Management and Budget. 

And  Peter, thanks for joining us.

PETER ORSZAG, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET:  Thanks for having me. 

SHUSTER:  I want to get to the Republican complaint in a moment.  But first, you said in a letter last week to lawmakers the administration was “committed to having at least 75 percent of the stimulus funneled into the economy by 2011.”  But the nonpartisan Congressional Budget Office said the figure in this bill is 64 percent. 

What happened? 

ORSZAG:  Well, again, I think there‘s going to be changes between the House and the Senate.  There are technical differences. 

I think the important point is that the CBO, which, as you know, I used to run, said that the bulk of the money is going to spend out over the next 18 months.  And that‘s really what‘s important to jump-start the economy and address the worst economic crisis since the Great Depression. 

SHUSTER:  On this Republican complaint that the bill is not focused heavily enough on job creation, would you acknowledge that part of the package is not designed to create jobs, but is instead a plan to save them or to help states and communities cushion the recession? 

ORSZAG:  Well, I think the plan combines jump-starting the economy, saving and creating jobs, and also starting the process of reinvesting in our long-term productivity through schools and a new electricity grid and other things that will add to economic growth over time. 

SHUSTER:  Well, that‘s a fair point, but here‘s some of the specific items that have come under fire as not being long term: $200 million to rehabilitate the National Mall, including new grass; $600 million for new government cars; $400 million for NASA climate change research; $360 million for military base day care. 

All of these, you could argue, will help create or save some jobs in the short term, but how do they help our long-term economy? 

ORSZAG:  Well, a lot of those things—some of those things are things we need to address.  They‘re problems that we‘re inheriting that have been built up over time.  And that by using the recovery act to address them, you‘re both creating jobs and addressing a legacy problem that needs to be addressed at some point anyway.  So you‘re, in a sense, taking care of a problem that would have been hitting down the road, and that is beneficial. 

SHUSTER:  Democratic Senator Kent Conrad, who‘s the head of the Senate Budget Committee, as you know, he‘s disputing the idea that this bill will create or save as many jobs as the White House argues.  Here he is from Bloomberg News last Friday. 

Watch. 

(BEGIN VIDEO CLIP)

SEN. KENT CONRAD (D), CHAIRMAN, BUDGET COMMITTEE:  Most of the assessment is that this will reduce unemployment from what it would otherwise be by two percent.  My people‘s analysis suggests maybe only half of that.  I think we have to seriously consider bolder, more far-reaching steps. 

(END VIDEO CLIP)

SHUSTER:  First, does Kent Conrad, the Budget Committee chair, is he wrong in his analysis of the job creation here? 

ORSZAG:  Well, my understanding is the House Budget Committee held a hearing today in which the majority of the witnesses embraced figures of three million to four million jobs created from this package.  Even the CBO, the Congressional Budget Office, suggested that the jobs number could be as high as 3.6 million. 

Obviously there are people who think the package should be bigger, it should be smaller.  That‘s part of the legislative process. 

SHUSTER:  Well, what do you make of the congressman we just had on, John Campbell, who said, you know what?  Let‘s strip out the stuff that‘s cushioning effect or is only sort of designed for short term, and let‘s only do the long-term economic stimulus? 

How would that go over? 

ORSZAG:  Well, I really think we need a balance here.  We need things that jump-start the economy in the short run, and that‘s got to be a big part of the package.  But we also should have things that, again, add to long-term productivity. 

I don‘t think you want to go to too hard in either direction.  And it‘s that balance that the House package seems to be achieving and that we would be looking to achieve as the legislation moves through the Senate and into conference. 

SHUSTER:  If you had your druthers, would you follow the Democrats‘ lead and take out the payroll tax cut?  Because, I mean, some of the Democrats are suggesting, you know what?  This is not a good idea, because if people get money back in $500 or $1,000 per family for the payroll tax, they‘re only going to save it, they‘re not going to spend it. 

ORSZAG:  Well, I don‘t know.  My read of the economic research on this and my discussions with real people is that working families are under stress right now.  And if they have more cash in their pockets, they‘re going to use it to meet their needs in terms of food and shelter and just life.  So I am pretty confident that that—those provisions will help to jump-start the economy and thereby create jobs. 

SHUSTER:  And Peter, here‘s the big question.  I mean, the government is already projecting a trillion-dollar deficit. 

At what point do you see or does the Obama White House see the United States running the risk of having such a large deficit, that we endanger our AAA credit rating?  Do we get to that point at any point in the foreseeable future if things continue in this direction? 

ORSZAG:  I think we need to meet, again, this very severe—I mean, again, look at the job numbers and other economic data coming out, very significant economic downturn.  And then as we emerge from it, we do have, unfortunately, a large long-term fiscal gap that needs to be addressed. 

The president is going to have a lot more to say about that when we release our budget in late February.  It‘s a very serious problem.  It needs to be addressed not while we‘re trying to fight off the most serious recession since the Great Depression, but rather as we‘re emerging from that.  And we‘re going to have a lot more to say about that in about a month. 

SHUSTER:  Fair enough.

Peter Orszag, budget director for the Obama administration.

Peter, good of you to join us.  And we appreciate it. 

ORSZAG:  Thanks for having me. 

SHUSTER:  You‘re welcome.

Let‘s turn to our political panel for their reaction to what we just heard.  Michelle Bernard is president of the Independent Women‘s Forum and an MSNBC political analyst.  And Jeanne Cummings is the chief money correspondent for Politico. 

Jeanne, first to you, what jumped out about what Peter just said?

JEANNE CUMMINGS, POLITICO:  Well, I think the idea of the balance they‘re trying to reach.  And it‘s really interesting to hear him talk, because he was head of the Congressional Budget Office when they did a report that said these kind of infrastructure projects are really not stimulative in a fast enough way.  So he comes from a place that was skeptical of them, and he now is going to be in charge of making sure they do have a swift impact. 

And so I found it interesting, his confidence, that they can get these projects going in the next 18 months or so.  And the notion of balance, that you have to stimulate and invest all at the same time. 

I‘m not sure about the so-called legacy problems that were taken care of in here.  I have not heard of the day care military camp legacy problems before, but maybe we should do a little more reporting on that. 

SHUSTER:  As far as the effort to try to have it both ways, to both deal with long-term economic stimulus but also short-term cushion, the political price seems to be, well, you may chase off Republicans anyway. 

MICHELLE BERNARD, MSNBC POLITICAL ANALYST:  And that there‘s a very serious danger to doing that.  But I think that if they chase off Republicans, the reason that that might happen is because there are so many things that look questionable.  It seems as if the entire apple cart is being thrown at the American public right now. 

What is truly—part of the stimulus package and what is pork?  A lot of the items that were shown on the screen that you talked about earlier all seem to the American public to be pork.  It‘s nothing that is going to put dollars in the peoples‘ pockets, and it‘s nothing that‘s going to free up credit in the financial system. 

We had a huge government bailout over the summer.  People want to call it a recovery package, but it was—you know, it was a bailout.  And to most of the American public, people are not feeling it.  No one‘s pockets are feeling a positive effect yet.  And that‘s going to be a serious problem. 

SHUSTER:  And yet, Jeanne, when you look at that top item, $200 million for the National Mall, there are landscapers or people who build grass in the Washington area who are celebrating because it‘s going to mean employment for them. 

CUMMINGS:  Absolutely.  And that‘s part of the short-term stimulative effort that they‘re talking about. 

If every one of these things gets somebody hired, then in this environment that we‘re in, where people are losing 10,000 people—people are losing their jobs a day and weeks, that sort of thing, then any job saved is something that helps.  And so some critics, you know, dismiss a painter‘s job or a landscaper‘s job.  But if you‘re in that business and if your, you know, husband or father just got laid off, or your mother, then this is important to you. 

SHUSTER:  Or if you‘re in the theater.  The National Endowment for the Arts, $50 million is important to you. 

What about the Republican argument, though, this idea that Democrats are trying to take care of things that they haven‘t been able to pass previously and they‘re simply throwing it in this bill? 

BERNARD:  Well, and it looks like that.  I mean, there is a very good argument to be had that there is a lot of pork in this bill and a lot of things that are not going to anything to stimulate the economy in the short term or in the long term. 

I mean, every single night there‘s something else that we take a look at.  And people have to scratch their heads and wonder, what is that going to do to open up the credit market?  What is it going to do to get people employed?  What is it going to do to stave off the thousands of jobs that we‘re seeing disappear every single day? 

And you look at that, and it is pork.  And I don‘t think it‘s just Republicans that have a problem with it.  It‘s Democrats as well. 

SHUSTER:  And yet, we hear from governors and mayors.  They love the idea that they‘re going to get education aid, Medicaid aid, because it means, for example, they don‘t have to slash the jobs of teachers in order to balance the state budget with this assistance that they‘re going to get. 

CUMMINGS:  Yes.  I mean, there are fans and critics of this thing.  And this whole notion of pork, I don‘t really think given the size of this that there is a lot of pork in here. 

The real question I think later will be, whose pork, if we‘re going to have a pork discussion?  And that mean... 

BERNARD:  Or any.  Should there be any pork? 

CUMMINGS:  But what it‘s going to be is it‘s going to be the governors‘ pork.  And that‘s why they‘re so happy. 

They‘re going to be getting these grants that they can do projects in their own state.  Their members of Congress and their senators are not being allowed to earmark that money.  The governors are going to get the money. 

SHUSTER:  And the catch-22, of course, with the Obama administration is, if you try to limit the pork, if you try to say only shovel-ready jobs, you‘re limited to the $85 billion or $90 billion that they came up with.  The flip of that side is, well, if you go with this other stuff, it doesn‘t quite get into the economy as quickly, or it‘s not the long-term infrastructure spending that people want.

So if Republicans want to oppose it, they can say, you know what?  It‘s not enough infrastructure spending.  But then if you have more infrastructure spending, oh, it‘s too much pork because you‘ve got projects that aren‘t shovel-ready. 

BERNARD:  Well, I mean, I think that people are going to look at these things on a case-by-case basis.  You know it when you see it.

If something outrageous strikes you that should not be part of the economic stimulus bill, people will know it right away.  I mean, the bottom line is whether or not there should be pork in this bill whatsoever given what we see is happening on a day-to-day basis. 

SHUSTER:  Michelle Bernard and Jeanne Cummings, great stuff, as always.  And thanks for helping us evaluate the Peter Orszag interview.  We appreciate it. 

One of the great ironies of this economic crisis is that while millions of people are losing homes because they can‘t pay mortgages, the people at the top of financial institutions that wrote the loans or packaged the debt are still in their mansions, even when they get in trouble. 

And that brings us to tonight‘s “Hypocrisy Watch.”

Richard S. Fuld Jr. is the former CEO of Lehman Brothers.  Under his leadership, the company lost billions of dollars, and Fuld is now under federal investigation for possibly misleading investigators about company assets. 

Fuld lives in a 20-room mansion in Connecticut that has an indoor squash court.  Until recently, Fuld also owned a $13 million mansion in Florida.  But we learned today he sold it recently for 100 bucks. 

The purchaser was his wife.  You see, Richard Fuld appears to be trying to throw off potential lawsuit and bankruptcy creditors. 

If you or I get in big financial trouble, we downsize.  If you are Richard Fuld, you play tricks and continue the lavish lifestyle paid for by many of you. 

That‘s hypocrisy, and it‘s wrong. 

By the way, a quick update on yesterday‘s “Hypocrisy Watch.”

We told you about Citigroup, which laid off 10,000 employees and received $45 billion in bailout money, but was still planning to purchase a brand new corporate jet.  Not anymore.

We are told Citigroup has now abandoned the acquisition of the new aircraft.  Apparently, an official in President Obama‘s Treasury Department called Citigroup and the company had a change of heart. 

Up next, President Obama‘s first interview in office was with Al-Arabiya, a broadcaster in the Muslim world.  U.S. diplomacy is ratcheting up.

What does the Arab street think of Obama‘s efforts in places like Iraq, Afghanistan, and Pakistan?  We‘ will talk to NBC‘s Richard Engel, chief foreign correspondent. 

And later, the ongoing rebuilding problems at Ground Zero in New York.  Instead of the embattled Freedom Tower, how about new twin towers?  There is a plan that‘s gaining momentum.  You will hear about it ahead on 1600.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA:  My job is to communicate to the American people that the Muslim world is filled with extraordinary people who simply want to live their lives and see their children live better lives.  My job to the Muslim world is to communicate that the Americans are not your enemy. 

(END VIDEO CLIP)

SHUSTER:  Welcome back to 1600.  As you heard yesterday, in a symbolic gesture, President Barack Obama granted his first interview since assuming office to al Arabiya, a Dubai based Arab language network.  Hours later, new Middle East Special Envoy George Mitchell arrived in Cairo to begin an eight-day listening tour of the Middle East.  But new violence along the Israeli/Gaza border today underscored just how complex the challenges are for the Obama administration. 

Joining us now from Baghdad is NBC News chief foreign correspondent Richard Engel.  Richard, first of all, how is Obama‘s outreach playing in the Muslim world? 

RICHARD ENGEL, NBC NEWS CHIEF FOREIGN CORRESPONDENT:  So far he‘s being received very warmly across the Muslim world.  I was in the Gaza Strip, in Gaza City watching the inauguration in a family—there were about 20 men, women, and children in this one household.  People were gathered around the television set, very curious to see what the new American president had to say. 

They were curious about his own background.  Many people in this part of the world talk extensively about the fact that Obama had—has Islamic heritage, that some of his relatives in Africa are also practicing Muslims right now.  Then, today, when this speech was broadcast across the Arab world on al Arabiya, people were struck by the fact that it was such a conciliatory tone, that he seemed to be addressing people directly in a very humble way, that he said he wanted to listen. 

And there is a lot of encouragement across the Arab world that this could be a start of a new chapter in U.S. relations with not only the Arab world but the Islamic world in general. 

SHUSTER:  A lot of gray focus by the Obama administration on Iran.  Here‘s Secretary of State Hillary Clinton today to reporters; this was off camera, but she said “with respect to Iran, there is a clear opportunity for the Iranians, as the president expressed in his interview, to demonstrate some willingness to engage meaningfully with the international community.  Whether or not that hand becomes less clenched is really up to them.” 

What do you make of the Obama and Clinton approach towards Iran and some of the language that we‘re hearing? 

ENGEL:  Well, there‘s clearly an approach by this new administration to change American policy in the Middle East, to engage Syria and Iran in some sort of dialogue.  How that will play out is still something that remains to be seen.  But we‘re seeing these trial balloons, these public statements coming from the Obama administration to Iran, saying we‘re willing to talk.  That not only helps the president to fulfill some campaign promises to shift his focus to diplomacy; it also puts more pressure on Tehran.  If Tehran now comes back with a hard line, it looks like the one that is not willing to engage in dialogue and puts the leadership in Tehran in potentially a difficult place. 

SHUSTER:  The other challenge you reported on so much lately is Afghanistan.  And, today, Secretary of Defense Gates and Joint Chiefs of Staff Chairman Mike Mullen called Afghanistan the military‘s biggest challenge.  And yet Gates also seemed to set low expectations in his testimony to Congress.  Watch and then I will get your reaction. 

(BEGIN VIDEO CLIP)

ROBERT GATES, SECRETARY OF DEFENSE:  Our primary goal is to prevent Afghanistan from being used as a base for terrorists and extremists to attack the United States and our allies.  Afghanistan is the fourth or fifth poorest country in the world.  And if we set ourselves the objective of creating some sort of central Asian Valhalla over there, we will lose. 

(END VIDEO CLIP)

SHUSTER:  By the way, Gates has a shoulder injury, which is why his jacket was off there.  Richard, as far as the overall tone he‘s striking—you‘ve spent so much time in Afghanistan.  Read into his testimony and tell us, is it accurate to lower expectations and is it wise? 

ENGEL:  I don‘t know if it‘s lowering expectations so much as giving a realistic impression of what the Obama administration hopes to accomplish in Afghanistan.  It‘s not saying Afghanistan will be a democracy.  It is saying Afghanistan, the most we can hope for is that it will be a relatively stable country that is not a threat to its immediate neighbors and a threat of—in threat of collapsing. 

So what we‘re seeing is not the ideological approach that U.S. forces are going to come to Iraq, liberate the people and plant the seeds of democracy, that are supposed to spread across the Fertile Crescent.  This is saying, Afghanistan is a major challenge.  It‘s always been a poor country.  It is very likely going to remain a poor country.  If the U.S.  has a limited goal in Afghanistan, then, perhaps, it can have some success. 

SHUSTER:  NBC‘s Richard Engel, who has spent a lot of time in all of these places we have spoken about tonight.  Richard, thanks so much for joining us. 

Two U.S. wars overseas began because of 9/11 and Ground Zero in New York is, of course, hallowed ground.  Why have city and state officials bungled the rebuilding effort?  Seven years after the attacks, the site remains a symbol of incompetence.  But there may be a solution, scrapping the proposed Freedom Tower plan and rebuilding the Twin Towers.  We‘ll talk about that next. 

(COMMERCIAL BREAK)

SHUSTER:  Yesterday at this time, we told you about the problems at Ground Zero in New York, where seven years after the 9/11 terror attacks, the proposed Freedom Tower rebuilding plan remains a symbol of engineering and bureaucratic incompetence. 

Tonight, we want to bring you an intriguing potential solution.  Supporters argue it would recapture our nation‘s can-do spirit and would send an inspiring message around the world.  The idea involves rebuilding the Twin Towers stronger, taller, and safer. 

Ken Gardner is a design engineer who has been working on the detailed plans for years.  His plans have been embraced by top architects, building engineers, 9/11 families and groups representing New York police and firefighters.  Ken joins us now from New York. 

Ken, first of all, why is it so important in your mind to bring back the Twin Towers? 

KEN GARDNER, ARCHITECT:  I believe this is one of the greatest symbols of this great country.  This symbol is recognized in countries around the world, in every culture, in every language.  I believe, especially at this time, when we are experiencing this economic crisis, nothing could be more symbolistic, nothing could be more powerful than to see these towers, the symbol of our economic power, rise once again in New York City. 

SHUSTER:  You‘ve been spending a lot of time on these designs.  Take us through some of the safety issues.  We‘re looking at some of your plans now, some of the images.  Tell us why the new Twin Towers would be safer than the older ones. 

GARDNER:  What we‘ve done, basically, is we‘ve applied the new technology to this design.  It‘s, in a way, comparing this to a 1969 Mustang and a 2009 Mustang.  It‘s a completely different design.  It‘s built to meet the current standards of today‘s technology. 

We‘ve also changed the programming in this design.  We have now a new economic and developing marketing world in this day and age.  So we‘ve added to this residential, which would require an act of legislature between New York and New Jersey.  I believe this is something that we can do.  This makes it a much more viable development.  And at the end of the day, it is still a development project. 

I believe that this is an opportunity for Americans to get together, for New York to lead the way, and show that we can build our way out of this economic crisis. 

SHUSTER:  Your design would essentially leave footprints where the old towers stood.  You would also have the memorial at the bottom.  The cost issue is crucial.  The redesigned Freedom Tower would actually be occupied to the 100th floor, not the 70th, as first envisioned.  Why would the Twin Towers cost less than the Freedom Towers, and why would the Twin Towers be a less expensive rent? 

GARDNER:  In the beginning, you‘re building two towers instead of four.  You‘re also building towers that are extruded all the way up.  By that, I mean you—these buildings lend themselves to mass production.  And mass production in any type of construction is always the most efficient and the most economic way to build. 

SHUSTER:  Some New York officials have argued that the Freedom Tower project is already too far along, because a billion dollars has already been spent on designs, et cetera, despite the lack of actual construction on the ground up.  What‘s your answer to them?

GARDNER:  There are those that say we have gone so far with this project and that we have to look at it as—and make the most of this, that it will have to be good enough.  But my answer to them is that good enough is not good enough for the United States.  The people of the United States deserve the best.  And this is the best response that we can have to this tragedy of 2001.  This can show the world that New York and that the United States is back. 

And the president said change has come to America.  I believe this is an opportunity to bring change to Ground Zero.  This is an opportunity to show the world that the boldness of America, the boldness and strength of this economy is back. 

SHUSTER:  Ken Gardner, good luck to you.  We appreciate you coming on.  And by the way, everybody, we‘re going to have some 9/11 families on tomorrow night to react to some of what Ken has just argued.  Ken, thanks again. 

GARDNER:  Thank you.  Good evening. 

SHUSTER:  Up next on 1600 -- 

(BEGIN VIDEO CLIP)

BLAGOJEVICH:  Old cowboy movies.  I want to explain how these rules work in a more understandable way. 

(END VIDEO CLIP)

SHUSTER:  We know rod Blagojevich is a fan of westerns.  But the Illinois governor also has some good ideas about who might play him in a TV movie. 

Plus, even if you missed President Obama‘s inauguration, you can relive an historic event over and over again every time your phone rings. 

(COMMERCIAL BREAK)

SHUSTER:  We are back with a look inside the briefing room.  And President Obama‘s inauguration speech is now featured in cell phone ring tones.  A company out of Boston is selling the Obama ring tones.  They cost about two dollars to download and play a snip-it of Obama‘s own voice with some background music added in. 

(BEGIN VIDEO CLIP)

OBAMA:  Today I say to you that the challenges we make are real.  They are serious and they are many.  They will not be met easily, or in a short span of time.  Know this, America, they will be met. 

(END VIDEO CLIP)

SHUSTER:  The entrepreneurial company selling the ring tone also sells audio greeting cards featuring other Obama quotes. 

This was day two of Illinois Governor Rod Blagojevich‘s impeachment trial.  Who‘s counting?  Certainly not the governor.  Hot Rod continues to bypass the trial in favor of his on-going media tour.  He‘s already appeared on NBC, ABC, CBS, Fox, CNN and “The View.”  At just about every turn, he said something unbelievable. 

First, listen to what he told “Access Hollywood” about a possible television movie. 

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE:  There‘s been discussions of TV movies of this being made.  Who would play you?  Who would you want to play you? 

BLAGOJEVICH:  Is that right?  Have there been? 

UNIDENTIFIED FEMALE:  There have been some discussions. 

BLAGOJEVICH:  I wouldn‘t mind playing myself.  I could probably use the job. 

(END VIDEO CLIP)

SHUSTER:  He‘s probably right.  But avoiding your impeachment trial

isn‘t exactly a job security move when you‘re a governor.  When Governor

Blagojevich spoke to ABC‘s “Nightline” yesterday, he made another movie

reference, this time he spoke about Frank Capra films, the ones that set

around a simple man who tries to fight Washington corruption. 

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE:  Let me give you an opportunity to answer this question that I think is on the minds of a lot of people, very directly.  Are you a dirty politician? 

BLAGOJEVICH:  No, I‘m a very honest politician.  I see myself—you can laugh and call this delusional.  But when all the facts come out, you‘ll see that I‘m right.  This is a modern day Frank Capra story.  You remember those old movies?  The guy who is siding with the little guy—I view myself as Jimmy Stewart and Gary Cooper.  I know that‘s going to be met with mockery.  That‘s how I see it. 

(END VIDEO CLIP)

SHUSTER:  So we‘ve learned that Governor Blagojevich likes spaghetti westerns, Capra movies and bio picks when he‘s the star.  Amazing. 

No matter what you think of Governor Blagojevich, he is certainly fun to watch.  You definitely want to tune tonight at 9:00 p.m. Eastern for the governor‘s appearance on “THE RACHEL MADDOW SHOW.”  That‘s 9:00 p.m.  Eastern tonight. 

In the meantime, all of this leads us to tonight‘s Smart Take.  “Washington Post” columnist Eugene Robinson has a smart take on the impeachment trial of Governor Blagojevich.  Here‘s what Eugene wrote in today‘s paper about the evidence against the governor: “from what we‘ve seen, though, it‘s not immediately apparent what crime Blagojevich has committee, except being something of a buffoon and a jerk.”  

Eugene Robinson is also an MSNBC political analyst and he joins us now in studio.  Eugene, the US Attorney Patrick Fitzgerald asked the state Senate to stay away from witnesses who might called in an eventual trial.  What exactly can the legislature do? 

EUGENE ROBINSON, “THE WASHINGTON POST”:  It‘s unclear to me.  They can play the tapes, as they have been doing today.  But they can‘t take primary evidence of his guilt or innocence—look, impeachment—the standards for an impeachment—you look at the Illinois State Constitution.  It‘s vague.  They have the right to decide this guy shouldn‘t be governor, so they can kick him out.  I—you know, it‘s certainly within their preview.  Whether or not you can convict him in a court of law is another question. 

I don‘t think that question has been answered yet. 

SHUSTER:  Do you think that Blagojevich is generating sympathy both with these media tours and with the very point that you make, that this is something of a bizarre trial, if that‘s the word you want to use, down in Springfield? 

ROBINSON:  I don‘t know if sympathy is quite the word.  He‘s certainly generating interest.  We‘re all watching.  Some of us are laughing.  Some of us are wondering if the foundation is being laid for an insanity defense.  He did use the word delusional.  Really, when you look at the, you know, illusions to Frank Capra movies and spaghetti westerns, and if you look at the transcripts of some of those tapes, where we had these grandiose ideas about f what people would give him for the Senate seat, it‘s—one wonders about the state of the governor‘s mental health. 

But one also wonders about the state of Patrick Fitzgerald‘s case.  And, you know, maybe he has evidence we don‘t know about yet.  But I question what—from what we know now, whether it‘s an open and shut case. 

SHUSTER:  With Patrick Fitzgerald, my experience has always been that you probably know about 30 percent of what he ends up actually putting in an indictment.  There‘s always stuff that surprises you.  And given Patrick Fitzgerald has got to be recording and making transcripts of every one of these media appearances, he‘s going to find a way to use Blagojevich‘s own words against him from appearance to appearance as part of his trial. 

ROBINSON:  I‘m sure he‘s going to try to do that.  I would imagine that the governor‘s lawyers are just going crazy, because the last thing you want if you‘re a defense attorney is for your client out there to be talking to everybody, you know, stopping people on the street, practically, to tell them his story.  Because it‘s not the main thrust of what he says, but the little details.  If he actually gets into the meat of the case and talks about the events, one little slip can provide fodder for a clever prosecutor and a determined prosecutor.  Patrick Fitzgerald is definitely that. 

SHUSTER:  His indictment of Blagojevich is going to be one of the most highly anticipated I think we‘ve seen in some time, short of maybe Scooter Libby. 

ROBINSON:  Can‘t wait to read it.

SHUSTER:  Eugene Robinson of the “Washington Post” with today‘s Smart Take.  Eugene, thank you so much. 

President Obama is trying to sway Republicans on the stimulus, so much so, one GOPer has called him the charmer in chief.  Is it working or have Republicans already made up their minds?  Our Muckraker of the day has an answer.  You‘re watching 1600 PENNSYLVANIA AVENUE.

(COMMERCIAL BREAK)

SHUSTER:  Republicans, critical of the Obama administration‘s economic stimulus bill, have repeatedly stated their desire to be part of the process.  And, yet, today we learned that the Republicans were undercutting the process before a crucial meeting took place.  Hours before President Obama went to Capitol Hill this afternoon, we learned, thanks to some great reporting by “Politico,” that the Republican House leaders had already made up their minds against the plan.  “House Minority Leader John Boehner went for the jugular, urging his members to oppose the economic centerpiece of Obama‘s first term just hours before the president paid the Republicans the compliment of coming to the Capital a public meeting, even before he did the same for House Democrats.  Obama‘s aides cast the visit as an outstretched hand and it got slapped.  The bottom line, a coordinated effort to embarrass the president who looked largely unassailable just weeks ago.” 

The effort by Boehner underscores the fierce political maneuvering behind the scenes in an environment when everybody is trying to complain and wants bipartisanship.  We know about Boehner‘s controversial strategy thanks to Jonathan Martin of “Politico,” our Muckraker of the day. 

Jonathan, congratulations, great story.  How did you get it? 

JONATHAN MARTIN, “POLITICO”:  Thanks for having me, David.  My colleague, Patrick O‘Connor, deserves a lot of the credit.  Patrick and I were on the Hill today talking to a lot of Republicans.  It‘s really fascinating, David.  They‘re walking a very, very fine line here.  They want to sort of accept President Obama‘s olive branch and they heap praise on him and certainly his effort today. 

But at the same time, most of these guys come from conservative districts or conservative states and they are not inclined to vote for a stimulus bill that is this large and includes some of the projects that are in there.  What they‘re trying to do is not blame President Obama for the bill and for their opposition, but pinning the blame on Speaker Pelosi and Leader Reid, who by the way happen to be far less popular with most Americans than President Obama right now. 

SHUSTER:  Jonathan, were the rank and file Republicans surprised that their leaders essentially said, vote against this, even before this Obama meeting?  A lot of people thought at least they‘ll hear the president out, and then decide officially to say we‘re against this. 

MARTIN:  One rank and file conservative told me, I didn‘t have to hear my leaders to tell me to vote against it.  I was already against it.  I think the dye was probably already cast here.  And Boehner and Blunt were just reinforcing what I think will probably be what is tomorrow going to be a large GOP vote against this bill.  Talked to some folks on the Hill today and they said it‘s going to be a handful of Republicans that vote for it. 

If you‘re from a conservative seat that, you know, voted against Obama last year, there‘s not much political downside, David, in opposing the stimulus bill. 

SHUSTER:  Strange nonetheless that they would come out and say they‘re against it even before the meeting.  Jonathan Martin, great reporting today.  You‘re our Muckraker of the day.  Jonathan Martin and his colleagues at “Politico.”  Thank you very much.

MARTIN:  Thank you, David.  Appreciate it.

SHUSTER:  That is the view from 1600 PENNSYLVANIA AVENUE tonight.  I‘m David Shuster.  Thank you for watching.  We‘ll be back here tomorrow night, same time, 6:00 p.m. Eastern on MSNBC.  Remember, you can get our briefing, Shuster.MSNBC.com.  You will love it.  I‘m David Shuster.  “HARDBALL” with Chris Matthews starts now.

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

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