updated 2/3/2009 9:50:38 AM ET 2009-02-03T14:50:38

Guest: Sen. Sheldon Whitehouse, Sen. Kit Bond, Susan Page, Steve McMahon, Todd Harris, Ron Brownstein, Jennifer Donahue High: Partisan differences emerge as the Senate begins to tackle the massive economic stimulus plan President Obama has set as his highest priority.  Former senator Tom Daschle likely to be confirmed as health and human services secretary despite his tax problems.

Spec: Politics; Economy; Obama Administration

CHRIS MATTHEWS, HOST:  Obama‘s job bill.  Deal or no deal?

Let‘s play HARDBALL.

Good evening.  I‘m Chris Matthews.  Leading off tonight: Show me the money.  That‘s President Obama‘s number one job as the Senate today started debating his fat stimulus package.  To show the country he has the plan to reverse the economic downturn, put millions of people back to work, fix the financial crisis and turn the country back toward its economic potential, he needs to show how that almost trillion dollars he‘s put in his stimulus will produce the trillions-plus in economic demand that will end the housing horror and restore the country‘s economic normalcy.  He needs to show us in dollars and cents how the money he‘s spending will recreate the money that‘s gone.  People with 401(k)s want their money back.  People who‘ve lost their jobs want their jobs back.  President Obama needs to show a healthy number of Republicans, Democrats, too, how what he wants to do will work.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  What we can‘t do is let very modest differences get in the way of the overall package moving forward swiftly.

(END VIDEO CLIP)

MATTHEWS:  But prodding isn‘t doing the job.  President Obama was quick to say yesterday that he‘s confident he can get Republican support for his, plan but can he close the deal if he can‘t to explain to all of us how spending all this money in all these different ways will spring the economy into action?  Let‘s hear from a couple of U.S. senators what they think he needs to do.

Plus, another cabinet nominee is facing tax problems.  Tom Daschle, President Obama‘s pick for Health and Human Services secretary, met with senators on the Hill today to explain why he failed to pay over $128,000 in taxes he owed for a car and driver leant to him by a business partner.  Will good will and a reputation for honesty get Daschle past his problem?

And while President Obama talks, We‘re all in this together, his fellow Democrats in Congress are running radio ads against 28 House Republicans who voted against the stimulus plan.  Can he talk carrot while they whack with the stick?  We‘ve got a Republican to fight with a Democrat on that one.

Meanwhile, more carrot.  Any day now, President Obama‘s expected to name Republican senator Judd Gregg of New Hampshire to be his commerce secretary, making him the third Republican—Bob Gates at the Pentagon and Ray LaHood at transportation being the other two—to serve in the Obama cabinet.  Does this increase the likelihood next year that yet another Senate seat will end up going Democrat?

And finally, we‘ve got a couple classic moments from Saturday night‘s “SNL” that showed the Obama-Biden team is ready for primetime lampoonery.

But we begin with the debate over the stimulus plan with Democratic senator Sheldon Whitehouse of Rhode Island and Republican senator Kit Bond of Missouri.

Gentlemen, let‘s hear—here‘s President Obama yesterday with NBC‘s Matt Lauer.

(BEGIN VIDEO CLIP)

OBAMA:  I‘ve done extraordinary outreach, I think, to Republicans because they have some good ideas and I want to make sure that those ideas are incorporated.  I am confident that by the time we actually have the final package on the floor that we‘re going to see substantial support.  And people are going to say this is a serious effort.  It has no earmarks.  We‘re going to be trimming out things that are not relevant to putting people back to work right now.

(END VIDEO CLIP)

MATTHEWS:  And here‘s Senate Republican leader Mitch McConnell reacting to what the president said.  Here he is today.

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER:  I couldn‘t agree more.  That‘s exactly where we need to end up.  Of course, that‘s not where we are right now.  We believe, Republicans, that a stimulus bill must fix the main problem first, and that‘s housing.  That‘s how all of this began.  We think you ought to go right at housing first.

(END VIDEO CLIP)

MATTHEWS:  Well, that‘s the great question.  Senator Whitehouse, you‘re a Democrat, and this house of cards economically is falling all over as people are losing their jobs right and left, 401(k)s are now 201(k)s and shrinking.  And the question is—I think it‘s raised by McConnell of Kentucky—why not start with the housing crisis, the foreclosures, the problem people had of buying houses they can‘t afford, which led to this whole problem?  Why not fix that first?

SEN. SHELDON WHITEHOUSE (D), RHODE ISLAND:  Well, I think we have three problems going on.  We‘ve got a significant problem in the financial sector.  And the president, by asking for the second section of the TARP money and by promising to clean up the way the money is delivered, is addressing that.

The second is economic meltdown, with people losing jobs and so they‘re not buying and so factories are laying off, and you‘ve got that cycle going.  This is designed to address that cycle.  I think that‘s a very important cycle.  The third one is the housing cycle, which is also, you know, spun (ph) negative as housing values decline, dragging down other housing values.

But to a certain extent, I think we‘ve got to do this one at a time.  This is where the president chose to start.  It affects people all over this country who are losing their jobs.  It affects the underlying strength of our economy.  And I think, frankly, we‘re in the right place to start with this.  We do have to address housing.  We do have to address it soon.  But I think we need to pass this piece of legislation sooner.

MATTHEWS:  Senator Bond, your leader says start with housing if you‘re going to get the stimulus package to pass and to work.  What do you say?

SEN. KIT BOND ®, MISSOURI:  First, on this stimulus package that the Democrats have drafted, it stimulates the debt, it stimulates the growth of government jobs, and it doesn‘t stimulate the economy.

When I look at this bill, I feel much like the mosquito in a nudist colony.  There‘s so many targets, I don‘t know where to start.  But it does drive up the debt.  There are a tremendous number of things that are spending on Democratic priorities, but only about 6 percent is on infrastructure, where they‘re shovel-ready projects.  And we do need to address the credit crisis and housing, and I believe that there‘s not anything significant in this bill, nor do I think the TARP alone is going to fix the housing or the financial crisis.

MATTHEWS:  Let me ask you, Senator Whitehouse, how do you explain—because I think the president has yet to do this—how the almost trillion dollars in the stimulus package leads to a re-excitement of our economic—our economy, that gets the American economy rolling again and creating jobs and getting people to invest and to spend money.  How does it—do you actually see how this works?  Can you imagine all the elements in this spending plan adding up to a recovery of our economy?  Do you see it?

WHITEHOUSE:  I think we‘re probably...

MATTHEWS:  The connection.

WHITEHOUSE:  I think we‘re probably going to need to do more before it‘s over.  I think that this is an important down payment on economic recovery, and it does it in three ways.  First, there‘s an enormous amount of infrastructure work in here and it‘s infrastructure that we need.  We came into this administration with an infrastructure deficit.  We need to rebuild America in many different dimensions, and this bill does that in important ways.

It also contains significant tax cuts, ones that the American public voted for when they elected President Obama to lead our country.  And third, it helps families who are suffering as a result of the changes, the economic changes, that we‘re going through, things like extending unemployment benefits and helping support the Medicaid program.  This is basic humanitarian necessity, and I think it‘s appropriate.

I think it‘s necessary.  It may be too little.  And I think the idea that it‘s going to be a problem for the deficit is—I mean, it‘s almost ironic to hear my Republican friends discussing this because they ran up $7.7 trillion in relative debt off of the Clinton years during the Bush administration when times were good and they could have been setting it aside.  Now spending what, one seventh of that at a time of real economic crisis, and now they‘ve discovered that deficit spending is a problem?  It seems very unlikely.

MATTHEWS:  But you admit that it may not do the job.

WHITEHOUSE:  I—my personal feeling is that more will be required, but this is an important down payment to start turning it around.  If we don‘t do it, every responsible economist that we have heard from tells us that we are headed for a really significant economic crisis.  And...

MATTHEWS:  But...

WHITEHOUSE:  Go ahead.

MATTHEWS:  But you say adding a trillion dollars to the national debt over the next two or three years may not work, and yet it will add to the debt.  So you know for sure it‘s going to create more of a debt problem, but you‘re not sure it‘s going to create a demand for more goods and services and get our people working again.

WHITEHOUSE:  No, I...

MATTHEWS:  But you do know the bad part.

WHITEHOUSE:  It will definitely do that, Chris.  It will definitely do that.  The question is, Will it do enough of that?  It is definitely good stimulus.  It is good economic recovery.  But is it enough, given the depths of the negative spiral we‘ve turned into?  I can‘t say that this is enough.  I can‘t say that we won‘t have to come back and do more.  But it is the right thing, and it will help Americans.

MATTHEWS:  On the other hand, Senator Bond, you voted for the big measure coming out of Appropriations.  Why did you vote for it, a big part of this program, and now you seem skeptical?

BOND:  I voted for it simply to move it to the floor because Republicans were totally shut out on both the House and the Senate side from having anything to do with it.  The best chance we had—as I stated when I voted for it, I do not approve it.  I do not approve of it.  I‘m hoping we can do massive surgery on it.

There‘s over 90 percent of that bill that doesn‘t have anything to do with infrastructure, with the stimulus, with things that are going to happen today, that could happen in 2009.  We tried having a one-time rebate last year, and frankly, it had no impact on the economy.  It showed a slight blip, and the economy continued to go down.  Tax cuts, to the extent we include them for small business and for working families, should be done in a modest manner that will continue and give small businesses the opportunity to plan for making productive investments to put more people to work.

This bill has, for example, $265 million for Hollywood producers.  Folks in Missouri if you look at those and many, many other things like that, will say, This is not where we ought to be spending our money.  To talk about the debt—we have—we‘ve run up the debt getting out of the 2001 credit bubble, fighting a war that was necessary to keep our country safe from the terrorists who attacked us on 9/11.

MATTHEWS:  Right.

BOND:  We need to get—we need to get...

MATTHEWS:  Well, that‘s an argument you made.

BOND:  Yes, that‘s the...

MATTHEWS:  A lot of people—most Americans don‘t believe that war was necessary to fight for our self-defense.  They think that war was a distraction.  So you can say that was necessary spending, but that‘s in dispute right now.

BOND:  Well, I can tell you...

(CROSSTALK)

BOND:  I can tell you, I serve on the intel committee, and the intelligence we have is that al Qaeda has come at us.  They‘re going to keep coming after us, and...

MATTHEWS:  Yes...

BOND:  ... until we can keep them off balance, as we have, by driving them out of Afghanistan, shutting down their operations in Iraq, we need to continue with those operations to keep our country safe, or nothing we can do for the economy is going to take care of our security, which is—which enables us to get our economy back on sound footing.

MATTHEWS:  Well, there we are, back at the issue that got you elected, Senator Whitehouse.  Are we wasting money fighting in Iraq?  Is that good use of government spending?  Is that a stimulus package, to keep spending money in Iraq?

WHITEHOUSE:  It‘s a stimulus for the Iraqi economy.  It‘s a stimulus for Halliburton.  I don‘t know that it does much for jobs at home.  Certainly—just today in Rhode Island, I was up in North Providence and with the mayor and he was listing off all of the different infrastructure projects that they‘re going to be able to go wit as soon as this bill passes.  Across the state, we‘re seeing infrastructure projects.

I don‘t know where my distinguished colleague gets the notion that there‘s such a small percent of infrastructure.  Just in Rhode Island—maybe it‘s all coming to Rhode Island, Senator, but we‘re see an awful lot of infrastructure projects that are going to be teed up.  We‘re looking forward to the work.  People need it.  And we think it‘s important.

BOND:  Well, that‘s why...

MATTHEWS:  What about the $265 million for Hollywood?  I‘ve never seen that as a—can you explain that, Senator Bond?

BOND:  I haven‘t seen...

MATTHEWS:  What is exactly the money—the quarter trillion dollars going to—quarter billion going to Hollywood, what is that money?

BOND:  That‘s in the bill.  If you read that bill—and I‘ve read the summaries of it, and there are many, many things like that.  That‘s why I say that...

MATTHEWS:  Well, what‘s Hollywood do...

BOND:  ... when you look at that bill, only 10 percent...

MATTHEWS:  ... with the money?

BOND:  ... only 10 percent—whatever they do in Hollywood with it.  I don‘t know if my friend from Rhode Island is going to get all of the less than 10 percent in the stimulus package in Rhode Island.  I sincerely doubt it.  But it is less than 10 percent of that $1 trillion that‘s going to go into shovel-ready stimulus infrastructure construction.

MATTHEWS:  OK.  OK, I want to find out about that Hollywood money.  We‘ll be right back with more.  Thank you very much, Senator Sheldon Whitehouse of Rhode Island, Senator Kit Bond of Missouri.

Coming up: President Obama says he stands by his cabinet pick, Tom Daschle, after Daschle apologized for not paying $128,000 in taxes.  Should Daschle be allowed to serve?  That‘s the question.  How damaging is this question of not paying taxes and paying them late?

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY:  The president, again, is not insensitive to—at all to the reports that are out there, but believes that both Secretary Geithner and Secretary-designate Daschle are the right people for very important jobs.  And he does not believe that that will undercut their ability to move forward on an agenda that makes sense.

(END VIDEO CLIP)

MATTHEWS:  Welcome back to HARDBALL.  Former Senate leader Tom Daschle‘s on Capitol Hill today, trying to convince his former colleagues up there in the Senate that his mistakes on his taxes shouldn‘t keep him from being named and confirmed as secretary of health and human services.

We have Howard Fineman joining us now and “USA Today‘s” Susan Page.  Howard, let‘s take a listen here.  Hi, Susan.  Let me—let me show you—here‘s something Jon Kyl, the senator from Arizona, said.  By the way, he‘s shaping up as a real firebrand on the Republican side these weeks.  Here he is, talking on Fox.

(BEGIN VIDEO CLIP)

SEN. JON KYL ®, ARIZONA:  I just have to note, you know, with the problems that now Secretary Geithner had with his taxes, with these problems with former senator Daschle, with the problems of Bill Richardson, the number two person brought into the Defense Department, I know that President Obama wanted to have a very ethical administration starting out and so on, but I think he‘s seeing how hard it is to avoid these kind of problems.  And I just wonder, if President Bush had nominated these people, what folks would be saying about that.

(END VIDEO CLIP)

MATTHEWS:  Well, Howard, you can tell what red—what color the map is out in Arizona!

(LAUGHTER)

MATTHEWS:  You know, it‘s interesting.  People, like, in Pennsylvania, like Arlen Specter, are very careful.  They‘re in a purple state, even a blue state at times.  And here‘s a guy from a very red state.  I noticed that the president and the vice president both endorsed Pittsburgh, your team...

HOWARD FINEMAN, “NEWSWEEK,” MSNBC POLITICAL ANALYST:  Yes.

MATTHEWS:  ... because they know they‘ll never carry Arizona.

(LAUGHTER)

MATTHEWS:  I mean, it‘s so interesting to read the—you can read everybody, Susan, now by the map.  Just think map, and you got everybody‘s thinking.  By the way, you had to root a little bit for the Cardinals this weekend, didn‘t you, a little bit?

FINEMAN:  Yes, I rooted for them right up until the last two minutes,

OK.

(LAUGHTER)

MATTHEWS:  Fair enough.  (INAUDIBLE) two minutes (INAUDIBLE) Susan, were you in there a little bit for Kurt Warner (ph) there yesterday or not?  What do you think?

SUSAN PAGE, “USA TODAY”:  He‘s got a pretty good story.  You got to say.

MATTHEWS:  I think so, too.

PAGE:  He‘s got an Obama...

MATTHEWS:  I think...

PAGE:  He‘s got an Obama-like story in coming from nowhere and almost winning—not quite.

MATTHEWS:  Yes.  Well, I thought that was one of the great games ever. 

I was down there.  It was a great game.

FINEMAN:  It was terrific.

MATTHEWS:  What do you—let‘s talk about something here that‘s so

familiar to our Washington hearts.  That‘s a tax problem.  And Susan, maybe

you can start this—this question.  Will he get through?  We‘re going to

know that perhaps by the next couple days, but not paying taxes because

you‘ve been given the use of a car and a river by your business associate -

I guess the only explanation is you thought he was paying taxes on the guy and the car, that somebody was, because you never got the 1099 form.  That‘s his explanation.  Will it sell to the committee?

PAGE:  You know, I think he‘s likely to get confirmed, in part because President Obama is right behind him, supporting him, and he has all these personal relationships in the Senate from his own service there.  I think if it was a nominee without those personal relationships in the Senate that this nomination might well not be going forward.

MATTHEWS:  Because of that $128,000 tax deficiency?

PAGE:  That‘s right.  I mean, there‘s actually two problems.  There‘s the illegal stuff by not paying the taxes.  There‘s also the legal stuff.  You know, you leave the Senate and you make millions of dollars selling your expertise.  This is perfectly legal.  It‘s classical Washington, and it‘s an example of the sort of thing that candidate Obama said he was going to change.

MATTHEWS:  Yes, but—but how many senators leave the Senate, get beaten or retired, and go to the real private sector?  They‘re...

(LAUGHTER)

FINEMAN:  No, this is their...

MATTHEWS:  You go downtown Washington.

FINEMAN:  Sure.  Right. 

MATTHEWS:  You don‘t go too far away. 

FINEMAN:  That‘s right. 

And David Kirkpatrick of “The New York Times” had a beautiful story of that.  There‘s—you go downtown.  You go a few blocks down.  You—you sell indirectly.  You don‘t go back and lobby directly on the Hill.  You don‘t do that.  The big guys, guys like Daschle, they sit down there.  They go on boards, and they give their Buddha-like advice...

(LAUGHTER)

FINEMAN:  ... to the people who actually do the lobbying. 

MATTHEWS:  Right. 

FINEMAN:  You know, you might consider this.  You might consider that. 

And there‘s big money in it.  But the real thing going on in the Finance Committee, Chris, I don‘t think, is so much about the taxes, although that‘s part of it.  Something that people haven‘t focused on is a company called EduCap...

MATTHEWS:  Right. 

FINEMAN:  ... which is deep into the student loan business.

MATTHEWS:  Right. 

FINEMAN:  The Finance Committee has jurisdiction over part of that.

MATTHEWS:  Right. 

FINEMAN:  And Tom Daschle has been on the board of and taken a lot of trips from EduCap.

MATTHEWS:  And how‘s that—how‘s that going to be a problem? 

FINEMAN:  Well, apparently—I didn‘t know this until just the other day, but the Finance Committee has been in the midst of a two-year investigation of EduCap and its spending through its charitable organizations...

MATTHEWS:  Right. 

FINEMAN:  ... to help guard its position as a prime contractor for federally subsidized or...

MATTHEWS:  Right. 

FINEMAN:  ... federally backed loans.

And the question might—what they‘re looking through now is to see if Daschle showed up anywhere in that investigation.  I don‘t know that he did, but I know that he took trips from them. 

MATTHEWS:  Well, we will we know that...

(CROSSTALK)

MATTHEWS:  We will know if he did anything wrong.

FINEMAN:  We will know that.

And I‘ll tell you what.  I talked to a top Senate Democrat a couple hours ago.  I said, what‘s the situation?  And this guy said, it‘s still doable, meaning that Daschle is doable. 

MATTHEWS:  Yes. 

FINEMAN:  That‘s the from the leadership.  And that, to me, doesn‘t sound like 100 percent certainly that he is going to survive. 

MATTHEWS:  Susan, let me ask you about the—the headlines here, the $128 million -- $128,000 in taxes.  It has been paired with the Geithner thing, where he didn‘t pay taxes because he was working at the IMF, the International Monetary Fund, and they didn‘t take out for Medicare or Social Security there. 

And then he discovered that he hadn‘t paid for a couple of years.  And then he paid that, but then he must have realized he hadn‘t paid two prior years...

(LAUGHTER)

MATTHEWS:  ... and never paid that, until he got, basically, caught. 

He got through. 

PAGE:  He got through. 

But these are kind of special cases.  Geithner got through because the economy‘s in a meltdown, and President Obama was saying this is the perfect guy to help us try to get out of this economic hole. 

But these are—I think these are both pretty serious charges.  You better—what is it, the rule of three?  You better not be the third guy to come up and have some tax problems with an appointment, because then people will really feel like you have to crack down. 

I think there‘s been some cost for President Obama in standing with these two guys.  You know, the Geithner thing was, in a way, more inexplicable than the Daschle situation, given that this is a smart financial guy who is going to head the IRS.  You would think he knows when he was need—when he needed to pay taxes. 

FINEMAN:  The danger here, I think, politically for the White House is, they keep saying that all these people deserve special treatment because they‘re indispensable... 

MATTHEWS:  Yes. 

FINEMAN:  Geithner is indispensable.  Tom Daschle is indispensable. 

It begins to sound not only hypocritical, but elitist. 

MATTHEWS:  Yes. 

FINEMAN:  It is like, there are rules for everybody else, and then there are the rules for indispensable people. 

And that‘s exactly the opposite of the grassroots message that he came here with. 

MATTHEWS:  What about the UnitedHealthcare issue?  Is that a big issue or not, the fact that he worked for UnitedHealthcare?  I think—I think we are on the UnitedHealthcare plan here. 

(LAUGHTER)

MATTHEWS:  I mean, is that...

FINEMAN:  Well, I...

(CROSSTALK)

MATTHEWS:  We are on the plan.  I mean, it‘s a health care plan. 

(CROSSTALK)

FINEMAN:  There‘s no—there‘s no question that he‘s made money through his association with various parts of the health care industry that he is now going to regulate. 

MATTHEWS:  Right. 

FINEMAN:  That, in and of itself, is not a disqualification in Washington.  Were it to be so, practically nobody who is around here would work in the government. 

MATTHEWS:  Right. 

FINEMAN:  So, that‘s not the problem.  It‘s the taxes.  It may be whatever other business trips there may be with these free trips from EduCap. 

And it‘s what Susan brilliantly said, the rule of threes.  You don‘t want to have other people get—get the pass, and then you be the third one through. 

MATTHEWS:  OK. 

Thank you, Howard Fineman.  Thank you, Susan Page.

We will see what happens. 

Up next:  How many Americans think it‘s OK to cheat on their taxes?  Not many.  That‘s the “Big Number” tonight, by the way.  You will be impressed how small it is. 

Plus, President Obama tries to improve on the one thing he didn‘t do too well during the campaign.  I think you remember the sport.  It‘s an indoor sport.  It has to do with alleys and balls.

You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

MATTHEWS:  Back to HARDBALL.  Time for the “Sideshow.”

It is quite a trick, keeping the glow of inauguration, even an historic one, out there, once you start talking economic hard times and what to do about them. 

Here‘s “Saturday Night Live” lampooning President Barack Obama‘s best efforts. 

(BEGIN VIDEO CLIP, “SATURDAY NIGHT LIVE”)   

FRED ARMISEN, ACTOR:  Tonight, I am here to talk to you about the grave state of the American economy. 

Now, I‘m not going to sugarcoat it.  I‘m not going to dumb it down. 

I‘m going to tell it like it is.

But, before I get to the hard truths, remember the inauguration? 

(LAUGHTER)

ARMISEN:  That was pretty cool. 

(LAUGHTER)

ARMISEN:  A lot of great speeches, Aretha Franklin. 

(LAUGHTER)

ARMISEN:  Yo-Yo Ma. 

(LAUGHTER)

ARMISEN:  Aretha‘s hat. 

(LAUGHTER)

ARMISEN:  But now is the not the time to look back. 

It is the time to look forward and acknowledge the sacrifices we are all going to have to make.  But, before we do that, remember the election night? 

(LAUGHTER)

ARMISEN:  Grant Park in Chicago.  Nice weather.  Oprah. 

(LAUGHTER)

ARMISEN:  The white guy Oprah was crying on. 

(LAUGHTER)

(END VIDEO CLIP)

MATTHEWS:  And here‘s “SNL” sending up Vice President Joe Biden‘s gung-ho urge to join in. 

(BEGIN VIDEO CLIP, “SATURDAY NIGHT LIVE”)   

UNIDENTIFIED ACTOR:  If I may, please.

Look, I know $819 billion sounds like a lot of money. 

(LAUGHTER)

UNIDENTIFIED ACTOR:  But it‘s just a tip of the iceberg. 

(LAUGHTER)

UNIDENTIFIED ACTOR:  I mean, that money is going to get us to April, tops. 

(LAUGHTER)

UNIDENTIFIED ACTOR:  I mean, if you people knew how bad it is going to be...

ARMISEN:  That‘s great, Joe. 

UNIDENTIFIED ACTOR:  OK.  OK.  I‘m out of here, partner.  I hear you.

All aboard Amtrak!

(LAUGHTER)

UNIDENTIFIED ACTOR:  Never again.  Never again.  No way.  I‘m flying Air Force Two now, the deuce.

(LAUGHTER)

UNIDENTIFIED ACTOR:  Choo-choo, choo-choo. 

(LAUGHTER)

(APPLAUSE)

(END VIDEO CLIP)

MATTHEWS:  Next up: bowling in the basement. 

Back in my White House speechwriting days, I would sit alone, trying to think brilliantly in my office in the Old Executive Office Building, right across from the West Wing.  I would hear this familiar sound coming up from the heat ducts, like a bowling alley. 

I would hear what sounded like a ball rolling down the lane, then the smash of 10 pins.  What a weird coincidence I thought, for months, a noise coming up from the ducts that sounded just like a bowling alley. 

Well, it turned out the sound I was hearing all that time was a bowling alley down in the basement, the one Richard Nixon liked the use.  Well, now it has got a new customer, someone we learned in the campaign can best be described as a real beginner. 

(BEGIN VIDEO CLIP, “THE TODAY SHOW”)  

MATT LAUER, CO-HOST, “THE TODAY SHOW”:  Have there been any surprise in terms of life in the White House, or something that the White House has you didn‘t think they had, and doesn‘t have you thought they did have? 

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  You know, the bowling alley doesn‘t seem to be improving my game. 

(LAUGHTER)

OBAMA:  That‘s the one thing I have noticed. 

LAUER:  Have you used it?

OBAMA:  We did.  We took the kids down.  And I—I wanted to use the bumpers, but Michelle said, no, that‘s only for kids. 

LAUER:  It doesn‘t work?  You had the gutters, at least?  That‘s good.

(END VIDEO CLIP)

MATTHEWS:  And now for tonight‘s “Big Number.” 

First, it was Treasury Secretary Tim Geithner, now Obama‘s pick for Health and Human Services, Tom Daschle, who is in hot water over lately discovered unpaid taxes.  Well, people don‘t like this stuff, as if we needed to know. 

A newly released poll shows that 9 percent—less than one in 10 -- of us say it is OK not to turn in a completely honest tax return.  This country may not like taxes, but they like people who fail to pay taxes even less. 

Nine percent, less than one in 10, would like the other way—would look the other way if a guy doesn‘t pay his taxes—tonight‘s “Big Number.” 

Up next:  Two weeks into the Obama administration, is the president‘s strategy of bipartisanship working, or are the Republicans unwilling to play ball?  Our strategists tackle that one.

You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

JULIA BOORSTIN, CNBC CORRESPONDENT:  I‘m Julia Boorstin with your CNBC “Market Wrap.”

The Dow fell more than 64 points, financials mostly lower on worry the so-called bad bank plan is faltering.  The S&P 500 lost a fraction, and the Nasdaq picked up 18 points on bets the economic stimulus plan will boost spending on tech and telecommunications. 

Macy‘s shares tumbled more than 4 percent after the department store announced plans to cut 7,000 jobs and slash its dividends.  Employees that stay on will have to do without merit raises and see their 401(k) matching contributions reduced. 

General Motors is offering buyouts and early retirement to all hourly union workers in the U.S.  The $45,000 packages include $20,000 in cash and a $25,000 voucher to buy a vehicle.  Chrysler is offering a more generous buyout deal, up to $75,000 in cash and $25,000 to buy a vehicle.  The early retirement incentive is $50,000 in cash, along that vehicle voucher. 

That‘s it from CNBC, first in business worldwide—now back to

HARDBALL. 

MATTHEWS:  Welcome back. 

We have got the strategists joining us right now, Steve McMahon and Republican Todd Harris. 

Let me ask you about the—this new campaign by the Democrats.  They‘re apparently putting together an ad campaign, where they—they shop it around to all the—they—they send it around to the little markets, 28 members of Congress on the other side who voted against the president‘s stimulus package.  These are Republicans. 

And they give to the local announcer of a local TV affiliate the following words, something like this.  “Did you know Congressman Eric Cantor”—he‘s the guy in Raleigh—or Richmond—“voted to bail out big banks, but opposed tax cuts for 95 percent of American workers?  Times are tough.  Tell Cantor to put families first.”

Now, they get the local guy, the announcer from the local TV station, to read this announcement, as if it‘s news, it seems to me.

STEVE MCMAHON, DEMOCRATIC STRATEGIST:  Right.  That‘s right. 

MATTHEWS:  Do you think this is—you‘re chuckling already. 

MCMAHON:  Well, we—actually...

MATTHEWS:  This is what you‘re—this is the—this is the stick that goes along with the carrot of Barack Obama saying, let‘s all reason together here. 

MCMAHON:  Well, no, no. 

(CROSSTALK)  

MCMAHON:  This is the Democratic—this is the Democratic Congressional Campaign Committee.

MATTHEWS:  Right. 

MCMAHON:  And what they‘re doing is effective.  It‘s not new.  The Democratic National Committee did quite a lot of it in 2006.  I should disclose we did those ads for them.

But—but it‘s clever, because you get the local news or weather announcer, who is a voice that people know and trust and are seeking out, because, remember, these people are driving in the cars, and they want to know what‘s going on with traffic and weather. 

MATTHEWS:  Yes. 

MCMAHON:  And, so, when that voice comes on, they pay attention.  And, then, boom, it‘s like a drive-by shooting.  It is very effective. 

(CROSSTALK)

MATTHEWS:  And your thought, playing defense here?  What do you make of the tactic? 

TODD HARRIS, REPUBLICAN STRATEGIST:  I think, as a tactic, it‘s probably very effective and it‘s one that Republicans have used as well. 

But I think there are two larger points.  Number one, the more sunshine this bill that passed out of the House receives, the more and more it stinks.  I think, the more people examine it, the more vindicated the House Republicans are, both politically and substantively, for opposing it. 

Number two, as President Obama moves to try to negotiate in the Senate with Republican senators, it is going to be awfully difficult for the White House to say, we want to be bipartisan, or even nonpartisan, if one wing of the Democratic Party is shellacking House Republicans for voting against this bill.  It doesn‘t look...

MCMAHON:  Only those House Republicans who voted against the bill. 

HARRIS:  Yes, but how—how are you going to say, we want to all work together, let‘s put the old politics behind us, if you have got all of these groups who, during the campaign, by the way, and the DCCC, and all these outside groups, who the president used to be able to control, and now all of a sudden they‘re off beating up Republicans—this looks a lot like the old politics to me. 

MCMAHON:  But there are—but there are a lot of these district where these ads are being run that were carried by Barack Obama. 

So, the president‘s point to the House Republicans a week or so ago, which was, “I won the election and people knew what I wanted to do, and they voted for me, and they voted for me in many cases in the districts that these ads are running.”

So, it‘s a public service, if you will, to let those constituents know that their member...

(CROSSTALK)

(LAUGHTER)

MATTHEWS:  A public service.  OK. 

MCMAHON:  ... their member voted against the economic stimulus package.

MATTHEWS:  Is the strategy of the Democrats here, the president‘s party, to get those Republicans to come around and vote for the bill in its final form, the stimulus bill, or is it to whack them in the next election? 

MCMAHON:  It is both.  It‘s both. 

I think it‘s to encourage them to come along after conference committee to vote for the bill.  It is to let them know that there are going to be repercussions and there are going to be consequences to voting against these plans, particularly in an area...

MATTHEWS:  How is this any different than old politics? 

HARRIS:  Well, it is not.  It‘s not.

(CROSSTALK)

MATTHEWS:  How is this the new post-partisan era?

MCMAHON:  Well, Chris, you...

MATTHEWS:  I‘m just asking. 

MCMAHON:  Twenty-five years ago, when you worked for Tip and I was working for Ted Kennedy...

MATTHEWS:  Right.  Right. 

MCMAHON:  ... they used to...

MATTHEWS:  The old days. 

MCMAHON:  The old days.  That‘s right.   

MATTHEWS:  Right. 

MCMAHON:  They used to—they used to do politics during the day and get together at night. 

Barack Obama has changed the tone in Washington.  He has not changed very many Republican votes yet, but he‘s getting started.  It is a start, as they say. 

HARRIS:  I give the president a lot of credit.  I think he is trying. 

The problem is with Nancy Pelosi.  It‘s with Harry Reid.  It‘s with Steny Hoyer.  It‘s all of the people who have been in Washington for a long time, who have not changed one bit, in terms of the way that they‘re operating.

And you talk about the conference bill when it comes back to the House.  If it still includes things like $650 million in coupons to assist in the conversion to digital television, how is that stimulative to the economy?  If there‘s still pork in there like that, then I guess—my guess is that Republicans once again are not going to vote for it. 

MCMAHON:  Spending money is stimulative to the economy.  And the Democrats supported the president‘s bailout bill.  And this is not, after all, Barack Obama‘s recession.  That is a recession that was created by eight years of President Bush.  All he‘s trying to do is fix the problem he was left. 

MATTHEWS:  Here‘s—apparently the Senate‘s stimulus version, the Democrats wrote that, as well, includes a tax break worth a quarter billion dollars over eleven years for investors in big budget movies.  What?  Is that stimulative? 

MCMAHON:  I must have skipped over that. 

HARRIS:  The “Los Angeles Times,” which is hardly the voice of the conservative movement—is a very liberal paper—in yesterday‘s editorial said the stimulus bill that passed out of the House had less to do with stimulating the economy and more to do with moving the Democratic agenda forward.  And for the “L.A. Times” to say that—

MATTHEWS:  Let‘s show the other side.  Here‘s the National Republican Senatorial Committee.  They ran this ad against Harry Reid, the Democratic leader in the Senate, out in Nevada. 

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  Super spending partisan Harry Reid, as Democrat leader he helped pay for vicious attack ads, criticizing last year‘s bail outs.  But guess who voted for the 700 billion dollar bailout?  You guessed it.  Harry Reid.  And now he wants a trillion more dollars in new spending?  A trillion dollars? 

Tell Harry Reid to stop wasting our hard earned money. 

The National Republican Senatorial Committee is responsible for the content of this ad. 

(END VIDEO CLIP)

MATTHEWS:  Don‘t you love the sarcastic tones of the ads?  They have a very clipped voice come on and explain who paid for it.  It‘s always, who are these people that do these sarcastic voices? 

HARRIS:  It‘s a whole industry, a whole cottage industry. 

MATTHEWS:  It‘s always this undercurrent of did you know that—

MCMAHON:  A lot of money. 

MATTHEWS:  It‘s always that scurrilous voice.  Anyway, thank you. 

Thank you, Steve McMahon.  Thank you, Todd Harris.

Let‘s go to Chuck Todd, who is at the White House.  What is the plan now?  It seems like a bit of this, a bit of that, a little stick, a little carrot.  How‘s the president on this, Chuck? 

CHUCK TODD, NBC NEWS WHITE HOUSE CORRESPONDENT:  Well, let‘s be straight forward about this.  You would love this.  It‘s a simple problem that the White House believes they may have; and that is, this bill stopped becoming a debate about how many jobs is it going to create, and suddenly has been turned into a spending bill. 

You just showed that ad that the Republicans are running—granted, that ad really hardly ran—I think it ran one time at 3:00 in the morning in Las Vegas.  So they can say they technically ran it.  But the point is, I‘ve talked to Democrats who privately admit the Republicans have won the spin war here.  They‘re calling it a spending bill, not a stimulus bill.  They‘re calling—it‘s not being called a jobs bill. 

So today, I heard Robert Gibbs come out very forcefully to make a new argument—actually, it‘s the same argument for the stimulus bill.  Reiterating the jobs portion of this thing.  And I think that, in many ways, it is possible that things have gotten lost as we have debated the idea of the bail outs and all this, that the president—I think that‘s why these Congressional Democrats have been dragged over here tonight, to have another conversation on how to strategize this thing.  They have lost the core message of what this bill was supposed to be about. 

MATTHEWS:  You know, when you buy a bag of candies, a bag of M&Ms, you know that everything in there is M&Ms.  As an example, this stimulus package, nobody knows what‘s in there.  There‘s a little of this, a little of that, little of this thing.  We‘re finding out little things about Hollywood.  We‘re finding out something about condoms. 

Why didn‘t they put together a package with clear labels on say four or five categories of spending and tax cuts that everybody could sell, building bridges, broadband, education?  Something where they could defend each portion of it.  They didn‘t do that, did they? 

TODD:  Well, the argument that the White House will make is hey, 99 percent of this thing is that.  But the Republicans have picked out the one percent that‘s this spending.  But Claire McCaskill, Democratic senator from Missouri, she gave an interview on Friday night where she said, you know what, the House loaded it up.  House Democrats created too many targets, too many easy political targets for the Republicans. 

MATTHEWS:  Yes. 

TODD:  I think that‘s what you are going to see.  Look, the fact is the John Testers of the world, Claire McCaskills, these sort of populist Democrats in the Senate, they‘re going to team up with the Republicans here and they‘re probably going to get rid of a lot of this, what is seen by some as maybe good programs, but don‘t vote on it now.  Let‘s just go stick with straight stimulus. 

MATTHEWS:  I think we need a transparent package where you have identifiable this, this, this and this.  Everybody sees what it is and how it‘s going to create an economic recovery.  Or else there will be a problem.  Thank you, Chuck Todd, at the White House. 

Up next, is President Obama looking to name Republican Senator Judd Gregg to the Commerce secretary job?  And what will happen to that seat of his?  It looks like it is going to stay Republican for a couple of years, but then probably roll Democrat with the rest of that region.  This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  Time for the politics fix with Jennifer Donahue, political director of the New Hampshire Institute for Politics, and Ron Brownstein, who is political director of Atlantic Media and, of course, a columnist for the “National Journal.”  Thanks for joining us, Jennifer. 

JENNIFER DONAHUE, NEW HAMPSHIRE INSTITUTE OF POLITICS:  Pleasure. 

MATTHEWS:  Back to New Hampshire. 

DONAHUE:  Yes. 

MATTHEWS:  New Hampshire Senator Judd Gregg, a Republican, is up apparently the prime position now to be secretary of Commerce.  He is a Republican.  He leaves a seat in the United States Senate.  That seat will be taken by who? 

DONAHUE:  Well, when I‘m hearing is perhaps Bonnie Newman, who was a staffer for Gregg, who worked under the Reagan and Bush administrations, close with the Bush family.  And she basically is sort of a Republican but a nonpartisan.  She ran UNH during an interim phase.  She is a director of Fair Point Communications.  She is not someone who will run for Senate in 2010. 

So the bottom line is, if Lynch wants this to be clear, if he wants to not play politics with it, and I have ever reason to believe he doesn‘t, then he would put her someone like her, a neutral, as a place holder, so that it was a wide open primary race for potentially Representatives Hodes, Shea Porter and others. 

MATTHEWS:  So a Republican would replace a Republican? 

DONAHUE:  I think that‘s the logic here.  Realistically, I think Gregg is looking for that. 

RON BROWNSTEIN, ATLANTIC MEDIA”:  Obviously, there‘s some complaining from Democratic base and activists about that prospect.  But the Senate Democrats seem to be OK with it, because from a political perspective, if nothing else, it gives you a better shot at the seat in 2010.  Of course, for Obama to bring a third Republican into his cabinet would be quite extraordinary. 

I think you have to go back to Franklin Roosevelt‘s first cabinet in 1933 to find the last time a president had three members of the opposite party in his cabinet at the same time.  So it is a statement.  It has a political advantage.  And President Obama likes Judd Gregg, even though they don‘t agree on that many issues.  He‘s spoken favorably of his as someone he can work with. 

It will be interesting for me to see if, as a member of the economic team, is Gregg willing to defend the overall economic strategy of Obama, including allowing the Bush tax cuts to be repealed and this large—to lapse and this large investment spending that‘s in the stimulus plan.  Will Judd Gregg be a spokesperson for those kinds of initiatives?  That would be striking to see. 

MATTHEWS:  Are they gobbling up the moderate Republicans from the northeast?  Is this what this administration is doing?  They have knocked off John Sununu of New Hampshire.  Now they‘re gobbling up the other Republican senator.  Next time, they‘ll get the seat formally in two years, probably, right?  That‘s the way the state is going.  This is like the end of the Republican party in New England practically. 

DONAHUE:  I don‘t know though.  I mean, Judd Gregg would be the hardest man to beat in 2010.  There‘s no doubt about it, if he were there.  If he goes away, though, realistically, this idea of 60 versus 59 -- you have more Republican defections from the Senate right now.  Martinez—I mean, you could go down the list.  I believe this would make nine plus defections from the Senate since November.  OK?  it‘s not going to be—

It‘s not going to be 40.  It‘s not going to be 41.  It‘s going down. 

This is what happens when you‘re in the minority. 

BROWNSTEIN:  In the 11 states from Maryland to Maine, Republicans are down from four of the 22 senators at this point, with Arlen Specter up in 2010 and the Greggs seat at risk as well.  That‘s a weaker performance right now than Democrats have in the 11 states of the old Confederacy. 

MATTHEWS:  Who do they hope to knock off as the gobble up the rest of these? 

BROWNSTEIN:  Well, they knocked off Santorum and Chafee in 2006.  They have—Obviously Arlen Specter is up in 2010.  This seat will be up in 2010.  Sununu was defeated in 2008.  At the same time, there are no Republicans left in the—in New England in the House of Representatives.  I do not believe McCain came within ten points of Obama in any state from Maryland to Maine.  So across this entire region, you‘re seeing kind of a systemic retreat of the Republicans, similar on the West Coast and parts of the upper Midwest. 

MATTHEWS:  Is Judd Gregg running as well as joining?  Is he trying to avoid defeat at the hands of what looks to be a Democratic pickup of the entire Northeast? 

DONAHUE:  No, I don‘t think that.  I think if Judd Gregg ran, I believe he would win.  He has a lot of goodwill in the state.  I really think he is a very strong candidate.  New Hampshire doesn‘t have much of a bench, surprisingly, for as political as it is.  That said, I think he announced a week after Obama won that he would run.  He would take the seat.  So he‘s—he likes this guy. 

MATTHEWS:  We‘ll be back to talk about Tom Daschle, the trouble he‘s in.  We‘ll be back with Jennifer Donahue and Ron Brownstein for more of the politics fix.  You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  We‘re back with Jennifer Donahue and Ron Brownstein for the politics fix.  There‘s Senator Clinton, now Secretary of State Clinton, and Chelsea Clinton and former President Bill Clinton getting sworn in by Joe Biden, the vice president of the United States.  That‘s a cheerful group.  Isn‘t that something?  What do you make of that, Jennifer? 

DONAHUE:  What a difference a year makes. 

MATTHEWS:  A happy day.  Who would have predicted it? 

DONAHUE:  You really wouldn‘t have, especially in light of the Daschle thing and everything, what she‘s gone through and Bill Clinton giving all his donors out, and the whole list of it.  It really makes you realize how far some people will go for these positions. 

MATTHEWS:  You mean disclosure? 

DONAHUE:  Absolutely.  I mean, that‘s the problem with Daschle. 

BROWNSTEIN:  Every time you see Hillary Clinton, I think you‘re reminded of the enormity of the challenges at home and abroad that Obama faces, and his desire to bring in a team, not only of rivals, but heavy weights.  To bring in Hillary Clinton into his cabinet is like bringing three Republicans into his cabinet, a very strong statement about the kind of government he‘s trying to organize. 

We‘ll see how they work in practice, but he has certainly found someone who is going to be instantly recognized around the globe, brings a level of star power in this job that even people like Colin Powell haven‘t had. 

MATTHEWS:  There is no way that he can succeed in foreign policy

without her succeeding, nor can she succeed without him succeeding.  It‘s -

they‘re almost like conjoined twins politically.  They‘re together. 

There‘s no way out for either one of them.  They have to succeed together. 

They have to walk together literally. 

DONAHUE:  They have to walk together.  It‘s actually amazing, because I believed Obama when he said Hillary Clinton made him a better candidate.  When he first started going to New Hampshire and other states, he was not that vetted a candidate, talking about vetting.  She made him better.  He knows that.  They do operate—yes, but he can handle it.  This guy is pretty tough. 

BROWNSTEIN:  I think their instinct clearly is to work together.  Wherever they can, they will.  I think the only issue, as we discussed before, is sometimes as secretary of state, you‘ve got to react on your feet.  You‘ve got to call inaudible.  The question will be, as we saw during the campaign, are their instincts fundamentally compatible?  Will she react in ways that he will feel comfortable supporting on some issues? 

I think that is the one big question and that is something that can be

a challenge for them as they go forward.  Clearly, they do want to work

together and they want to make it work, or else they would not have taken -

-

MATTHEWS:  Her position on the Middle East is a notch more Likudnik, a bit more right wing than him, right, if you will?  She‘s going to have to clear it with him.  They‘re going to have to work it out, obviously.  They can‘t announce a difference.  

DONAHUE:  She can‘t freelance and make him happy. 

MATTHEWS:  How do they do it? 

BROWNSTEIN:  No, I think obviously they will coordinate as much as

they can.  You will be reacting to the press, to foreign leaders.  Not

every utterance can be routed back through the White House.  There instinct

It will be interesting.  We have not had many elected officials as secretary of state in the modern area.  Israel is one area where the sensitivity that an elected official brings to it could be an asset, in terms of helping to build a domestic coalition for change.  It could also be an inhibiter, if she‘s too reluctant to take steps that might cause problems with Israel supporters in the US. 

MATTHEWS:  Daschle, he is going to get confirmed or not this week or what? 

DONAHUE:  I don‘t know.  The more things change, the more they stay the same.  This guy is—this is a big deal.  If you go outside of this little beltway here, this is a big deal, when people are losing jobs by the day and paying taxes or not because they‘re unemployed.  This is an issue and Obama should have been told. 

BROWNSTEIN:  It‘s a big deal, especially since he‘s the second one with the problem.  But he‘s got two big assets.  He‘s, of course, a former Senate majority leader.  His colleagues give him a little more slack.  More importantly, Obama really wants and needs him in this job.  He knows the substance and he knows the politics of health care. 

MATTHEWS:  Jennifer Donahue, Ron Brownstein, thank you.  Join us again tomorrow night.  Well, right now coming up, “1600 PENNSYLVANIA” is coming up.  We‘re coming back tomorrow night at 5:00 and 7:00.

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

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