updated 2/13/2009 10:45:40 AM ET 2009-02-13T15:45:40

Guest: Olympia Snowe, Brad Blakeman, Tad Devine, Christina Romer, Jonathan Chait, Richard Wolffe

DAVID SHUSTER, MSNBC ANCHOR:  Hello everybody.  I‘m David Shuster. 

Welcome to “1600” on this the 24th day of the Obama administration.

There is breaking news at this hour as the president and his team are poised to witness a huge victory, the final passage of their economic recovery plan.  The raw partisan feelings have been underscored in dramatic fashion again.

Late today New Hampshire Republican Senator Judd Gregg, the president‘s nominee for commerce secretary, withdrew from consideration.  Gregg is now the fourth high profile nominee to withdraw.  The Republican cited his differences with the president over several key issues including the stimulus plan the Obama White House is celebrating. 

(BEGIN VIDEO CLIP)

SEN. JUDD GREGG, ® NEW HAMPSHIRE:  It just became clear to me that it would be very difficult day in and day out to serve in this cabinet or any cabinet, for that matter, and be part of the team and not be able to be 100 percent with the team, 110 percent with the team.  You can‘t have a blocking back who only pulls out every second or third play.

(END VIDEO CLIP)

SHUSTER:  The president has told report this comes as something of a surprise.  At the time that Judd actually made the news earlier, the president did not mention the sudden lack of having a commerce secretary but called attention to another Republican in his cabinet.  Watch.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  I want to thank Peoria‘s own Ray LaHood, who is doing outstanding work as my transportation secretary.  Ray comes from a long line of Republicans I love, starting with Bob Michael and, you know, they‘re just—I think there‘s a common sense, Midwestern, can-do, bipartisan attitude that Ray represents and I am so pleased that he‘s in my cabinet.

(END VIDEO CLIP)

SHUSTER:  The White House was certainly describing that can-do attitude for our next guest, Republican Senator Olympia Snowe.  She was a key architect of the senate bill and that is now, of course, making its way through to passage.

First of all, Senator, on the news involving Judd Gregg, what do you make of it?

SEN. OLYMPIA SNOWE, ® MAINE, FINANCE COMMITTEE:  Well, obviously, it is a surprise, but not for the reasons that Senator Gregg indicated.  We know he has strongly held views when it comes to fiscal policy.  He certainly has been one of the major contributors in designing Republican budgets here in the United States Senate over the years in his capacity as ranking member of the budget committee.

I know he feels very strongly about these issues and it‘s to his credit that he recognized that, acknowledged it, and made what was obviously a very difficult decision.

SHUSTER:  Did you get any inkling over the past couple of days that this was coming?  Was there any talk in any of these meetings?  There were a lot of White House representatives on the Hill the past couple days.  Any sense that this was coming?

SNOWE:  No, not at all.  I did happen to see Senator Gregg in leader Reid‘s office yesterday just in passing but there was no discussion, no speculation whatsoever that this was about to happen.

SHUSTER:  What about the substance of Senator Gregg‘s argument that he simply did not like the stimulus plan, that he disagreed and that Republicans, as some of your colleagues have suggested it‘s too much tilted toward spending, not enough toward tax cuts?

SNOWE:  Well, you know, I think that‘s obviously one of the fundamental issues concerning the stimulus package.  The question is not whether it‘s spending or tax cuts.  It‘s what is going to work.

So I think that‘s the issue and some spending is stimulus.  Certainly unemployment food stamps is the maximum stimulus that you can have for any provision for that matter.  So some spending is important; improving infrastructure, roads and bridges and energy development, technology, that‘s going to create jobs immediately in many instances.

So some spending is stimulative as are some tax cuts.  Not all tax cuts are stimulative.  So you have to have a combination to make it work.

SHUSTER:  Senator, you and Senator Gregg are essentially two people who have both been out on a limb; Senator Gregg has decided he doesn‘t like it out there.  You‘re still out there.  What‘s it going to be like talking to him?  What‘s been going through your mind as a lot of these slings and arrows have been slung at you?

SNOWE:  You know, we always have differences but we manage to reconcile those differences irrespective of which side of the position that we take on a given issue and I respect Senator Gregg immensely.  I served with him on the budget committee, as a matter of fact, so I understand his perspective and frame of reference.

But again, it‘s a different point of view.  We have to make the process work.  More importantly, is to have a stimulus package and Republicans, Democrats and Independents, almost universally believe we should have a stimulus package.  Economists of all political and philosophical persuasions believe we do.

The question is the content and the composition.  I happen to think it strikes the right balance.  It‘s not everything I would want.  It‘s certainly not perfect but the fact is inaction is not an option at this point in time and you have to contribute to the ultimate product.

That‘s what we did as Republicans, the few of us who were part of that process.  And, you know, to build the bipartisanship and, more importantly, the consensus that‘s so essential and critical to developing a solution to the great problem that this nation is facing.

SHUSTER:  Some of the House Republicans have been particularly critical of you and the others who came up with this deal including John Boehner who‘s the House Minority Leader.

I want to play for you what he said and get your reaction.  Here‘s Congressman Boehner earlier today.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER, ® HOUSE MINORITY LEADER:  I think if this process continues to be controlled by the White House we‘re opening the door to politicize the census and to shift billions of dollars, tens of billions of dollars around into states based on inaccurate data.

(END VIDEO CLIP)

SHUSTER:  Now, two issues there.  A lot of Republicans have complained that the census which should be done by the Commerce Department is being shifted to the White House.  But again, he‘s also making the argument that this is shifting a lot of money to the states essentially based on faulty data.

How do you respond?

SNOWE:  Well, you know, obviously you have to look at the facts and I have not looked at those facts in terms of the way that Representative Boehner has indicated.  The point is we have to make sure that these programs work.

Shifting money to the states is important overall.  I mean, that‘s why we have Medicaid assistance.  That‘s why we have the stabilization fund because 45 states are facing budget deficits with a collective decline of more than $350 billion in revenue.  That‘s going to have a tremendous and pervasive impact on the overall health of our economy.

It means the loss of jobs in the millions.  So they‘ll either be drastically cutting their own programs or raising taxes in order to meet their constitutional requirement to balance the budget.

So we have to assist in that process in making sure we can stave off, you know, job losses to the degree that it‘s possible.  Obviously, they‘re still have to make some very difficult decisions with respect to their expenditures.

SHUSTER:  Finally, you‘ve mentioned the key, of course, is whether this works.  Clearly, Judd Gregg felt very strongly that this will not work.  How confident are you that this economic recovery plan will?

SNOWE:  Well, you know what?  I think that everybody agreed that we needed to do something.  I certainly do think it‘ll have an impact.  But it has to go hand in hand and I mentioned this last night.  I mentioned this to the president and to the vice president as well and to Rahm Emanuel and during the negotiations is that we have to get lending occurring among the financial institutions and bankers and providing access to capital and credit to small businesses across this country.  You have to have the lending happen.  It has to go hand in hand with fiscal stimulus.

The fiscal stimulus will not stand on its own without these other parts happening and most especially having credit activity begin.  That‘s what hasn‘t happened and that is of deep concern to me.  You can‘t have one without the other if we think we‘re going to jumpstart this economy.

SHUSTER:  Senator Olympia Snowe of Maine, a powerbroker in all of this, a Republican powerbroker.  Senator, thanks for joining us.  We appreciate it.

SNOWE:  Thank you, David.

SHUSTER:  Joining us now for more on this breaking news about the stimulus and the withdrawal of Judd Gregg for Commerce Secretary, MSNBC political analyst Richard Wolffe.

Richard, this should have been a great day for the moderates like Snowe and Collins and Specter and certainly for the Obama White House.  And instead it seems like there is another cabinet problem that was essentially out of the White House‘s control or they couldn‘t control it.  That‘s a problem, isn‘t it?

RICHARD WOLFFE, MSNBC POLITICAL ANALYST:  Sure it‘s a problem.  I mean, it‘s a short-term problem in the sense that this is now another hole for commerce secretary and do you want to be the third person to be offered this job?

And there‘s a certain sort of scratching of heads about what the strategy was for Judd Gregg‘s nomination in the first place.  There‘s only one thing harder to understand than him leaving right now and that‘s why he was picked in the first place.  A lot of people in the White House couldn‘t explain it.

He didn‘t deliver them 60 votes in the senate.  He wasn‘t particularly close to president Obama when they were both senators and, clearly, he had policy issues and was known frankly as someone who wasn‘t a great team player even with President Bush when they were on the same team in one sense.

So, you know, they are keeping their sense of humor inside the White House.  At this point I guess there isn‘t much else they can do.  But, you know, it‘s a diversion and a distraction.  I‘m not sure how many people know who the commerce secretary is from one administration to another.

SHUSTER:  I think you‘re absolutely right.  And I think most people who are following this, I mean, the polling suggests most people support this economic recovery plan and I think a lot of those people would suggest if it costs a Republican member of a Democratic cabinet so be it.

I do want to put for you, Richard, something that the president said at about 4:45 today.  He was talking about the sort of the opportunity that this has for the nation and here it is.  Here‘s the president from earlier today.

(BEGIN VIDEO CLIP)

PRES. OBAMA:  The bill has passed the House and it‘s passed the Senate.  It‘s been reconciled and now it‘s going back to those two chambers so it can get on my desk.  It is time for Congress to act and I hope they act in a bipartisan fashion.  But no matter how they act, when they do, when they finally pass our plan, I believe that it will be a major step forward on our path to economic recovery.

(END VIDEO CLIP)

SHUSTER:  So, Richard, just today there‘s the president talking about hoping that the Congress will act in a bipartisan fashion and his answer came literally at the same moment that he was delivering that speech, at least from another Republican saying, no, this process has become too partisan.  Who‘s winning this argument?

WOLFFE:  Well, look.  First of all, the public opinion shows that people want something to be done more than they want—they care about the process and how many votes go one side or another.  They want the money to flow.  They want to see their government doing something and they want some way out or at least some explanation of how they‘re going to get out of this recession.

Any time the president can deliver this kind of vast amount of money -

we kind of got used to these numbers being thrown around here but $700 and something billion is a lot of money.  It‘s getting to the equivalent of what this country has spent on the war in Iraq and Afghanistan.

So, you know, seeing that kind of action from a new president is going to be a positive thing.  The down side is that he now owns this economy.  He has to show that that money is working and that there is something turning around.

SHUSTER:  MSNBC political analyst Richard Wolffe.  Richard, thank you very much.

WOLFFE:  Thank you.

SHUSTER:  And Richard mentioned, of course, there does seem to be a conflict now on the time line over both how Judd Gregg was selected and when the White House found out.  We are going to continue to follow the breaking news on “1600.”

What is it about the commerce secretary position?  The president with Bill Richardson and now Judd Gregg is zero for 2.  Who‘s on deck next?  How much does all of this hurt the president‘s political capital?

Plus, Treasury Secretary Tim Geithner continues to get hammered over the lack of details in the administration‘s latest bank bailout plan.  We‘ll talk with the New Jersey Democratic Senator Robert Menendez, a member of the senate banking committee.

You‘re watching “1600.”

(COMMERCIAL BREAK)

SHUSTER:  Tax problems humiliated Treasury Secretary Geithner and derailed the nomination of Tom Daschle but why won‘t some of their senate critics release their own tax returns?

“Hypocrisy Watch” is coming up on “1600.”

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to “1600 PENNSYLVANIA AVENUE” as we continue to follow the impact of Judd Gregg‘s withdrawal from consideration for commerce secretary.  There is now a clear conflict between Gregg and the Obama White House on how Gregg came to President Obama‘s attention in the first place.  Here‘s what Senator Gregg said late this afternoon.

               

(BEGIN VIDEO CLIP)

SEN. GREGG:  The president asked me to do it.  I said yes.  That was my mistake.  Not his.  It was my mistake, obviously.

(END VIDEO CLIP)

SHUSTER:  “The president asked me to do it.”

Take a look at this statement from White House Press Secretary Robert Gibbs.  “Senator Gregg reached out to the president and offered his name for secretary of commerce.  He was very clear throughout the interviewing process that despite past disagreements about policies, he would support, embrace, and move forward with the president‘s agenda.  Again, the key word is that according to Gibbs it was that Gregg reached out.

Joining us now are veteran Democratic strategist Tad Devine, as well as former Bush aide and Republican strategist Brad Blakeman.

And Tad where does the truth lie, I mean they both can‘t be true in this, can they?

TAD DEVINE, DEMOCRATIC STRATEGIST:  Well, I would say, you know, one version sounds credible to me, that Senator Gregg, a very conservative Republican reached out to the president, reassured the president, told the president that he could be on the team.  That sounds very credible to me.

The other version that somehow Obama was looking to find the most—farthest right Republican to put him in the cabinet, that does not sound credible to me.  I would say in terms of credibility I‘d believe Robert Gibbs‘ statement.

SHUSTER:  Brad Blakeman, what do you make of it?

BRAD BLAKEMAN, REPUBLICAN STRATEGIST:  I think it‘s incredible that Senator Gregg called up the president and said, “hey I‘d love to serve with you, Mr. President.”  I think quite the opposite.  President Obama from the very beginning was looking for Republicans willing to serve in his administration.  I think Republicans believed him initially that he would be a bipartisan president on important issues and at least reach out.  He talked a good game.

Then Senator Gregg realized that it was all talk.  And he was not going to go along with a stimulus package overrun with spending and he wasn‘t going to have an agency that‘s been gutted with a census; an important role for the commerce department now given to the White House.

SHUSTER:  Brad, we‘re going to have a little fun with you right now with all of this.  And here‘s why.

I want to read a full screen.  This is what Brad Blakeman wrote today.

“Bravo for Senator Gregg.  All this talk of bipartisanship by a president and his party turns out to be nothing but campaign slogans.  There is no change, just the same old same old politics as usual.”

And yet, Brad Blakeman, since you‘re giving a lot of credibility to Judd Gregg, here‘s what Judd Gregg said earlier this afternoon about that very same issue, the idea of Obama reaching out or not.

Watch.

(BEGIN VIDEO CLIP)

SEN. GREGG:  The president has been incredibly gracious and none of this decision is related at all and in any way to his willingness to include diversity of thought and initiative within his cabinet, just the opposite.  He has been a person who has reached out and aggressively reached out across the aisle and I immensely respect that and I immensely respect him.  I know he‘s going to be a strong and effective and good president.

(END VIDEO CLIP)

SHUSTER:  Brad, doesn‘t that just throw you under the bus?

BLAKEMAN:  No, not at all.  I think Judd Gregg—Judd Gregg is a statesman.  He‘s giving this president every benefit of the doubt.  Perhaps it‘s not the president at all.

Maybe it‘s Reid and Pelosi who the real problem lies, although the White House is the one who took the census away from the commerce department because it was in their political interest to do that.

I give a lot of credit to Senator Gregg for throwing himself under the bus and letting the president come through this unscathed.

SHUSTER:  Tad, there is this other issue in terms, of course, of the stimulus and there are a lot of complaints about measures that are in there.  You can argue whether or not, I mean I think the argument is pretty clear most economists would say that if you spend a dollar on anything and it essentially causes exchange of goods and services that‘s good for the economy.

But a lot of Republicans I think have some valued complaints about the priorities including, it turns out, what Jack Kingston and other Republicans were talking about earlier today in terms of something that‘s in a bill that‘s supposed to help rats.

Here‘s Jack Kingston from earlier today.  Watch.

(BEGIN VIDEO CLIP)

REP. JACK KINGSTON, ® GEORGIA:  Meanwhile, out in San Francisco, a rat is going to get $30 million in the so-called stimulus bill.  Apparently, it‘s a full employment bill for rats in the San Francisco Bay Area.

I mean, we don‘t just spend money like that on any rat.  They got to be San Francisco marsh rats.  They probably walk around, they got some nice looking clothes on, San Francisco stuff.  They probably wear flip-flops and sunglasses as they go out there to the, you know, Sausalito for lunch.

REP. ED PERLMUTTER, (D) COLORADO:  There is no earmark for rats in San Francisco.  There is money that goes to the EPA and the department of interior for cleanup of wetlands or maintaining wetlands.

(END VIDEO CLIP)

SHUSTER:  Congressman Perlmutter is absolutely right but Tad, it‘s a lot easier argument for the Republicans to think about helping rats, isn‘t it?

DEVINE:  Well, yes, David.  But listen, this is what they‘ve been reduced to.  Okay?  They cannot stand up and say they have a credible alternative to fix the disastrous economy that George Bush left this nation with, that Republican leadership left this nation with.  Instead they‘ve got to grab for little bits here and there and say a-ha.

The fact of the matter is that the Republicans really have been reduced to obstruction.  That‘s the only tactic they have left.

And I think the Democrats and President Obama and the leaders in the house and senate have very effectively gotten this legislation through.  We‘re going to have an unprecedented stimulus package because we‘ve got real leadership.  And I think we have real ideas to turn around this country.

SHUSTER:  Democratic strategist Tad Devine and Republican Strategist Brad Blakeman, thank you both very much.

It was just over a week ago when tax issues brought down two key Obama nominees but many Republicans in the senate jumped on the story.  They criticized Tom Daschle‘s failure to pay taxes on a car and driver and reminded anybody who would listen about the unpaid taxes of Treasury Secretary Geithner.

That takes us to tonight‘s “Hypocrisy Watch.”  The news organization Politico recently asked all 99 sitting senators to say who prepares their taxes, whether the senators or the IRS has ever discovered an error and whether the senators ever had to pay back taxes.

Only 56 senators responded to the request.  Out of those, eight said that mistakes had been made and six said they paid back taxes.  Thirty respondents said no mistakes have been made and they‘ve never paid back taxes.

Everybody else, 42 senators in all refused to respond.  Those included the office of Republican Senator Jim Bunning.  In discussing the tax problems that plagued Treasure Secretary Tim Geithner Bunning called Geithner‘s explanations unconvincing.  Regarding any of Senator Bunning‘s taxes, his office referred Politico to financial disclosure forms which are public.

Republican Senator Michael Enzi‘s said Geithner‘s failure to pay taxes was “inexcusable.”  Regarding Enzi‘s tax records, his office told Politico, quote, “all the financial records Senator Enzi‘s required to release are open for anyone to see.”

That‘s true those records are open for anyone to see but there is no requirement that senators include their annual tax returns in the disclosure forms.  And many senators including Enzi and Bunning don‘t.  They don‘t include their tax returns.

Furthermore the disclosure forms provided only cover the time a senator is in office.  Earlier tax problems like those that brought down Tom Daschle‘s nomination are not in the documents.

There‘s a good argument that tax issues are more pertinent when you‘re talking about a treasury secretary than when you‘re talking about a United States senator.  Furthermore there is no indication that any current senators have tax problems but for them to complain about noncompliance and the lack of transparency regarding somebody else while refusing to provide their own tax returns for public review?  That‘s hypocrisy.

We are following the breaking news this afternoon.  Republican Senator Judd Gregg says he cannot be commerce secretary because his priorities are just too different from the Obama administration.

We‘ll get reaction from Senator Robert Menendez straight ahead on “1600.”

But first, it appears the commander-in-chief isn‘t very superstitious.  Last night while at Ford‘s Theater, the site of President Lincoln‘s assassination, Obama did what theater folks never do, he said the word “Macbeth.”  Apparently mentioning the name Macbeth in a theater when you‘re not performing could spell doom.  The good news?  The superstition only applies to performers.  Non-actors and apparently presidents have nothing to worry about.

More at “1600” after this.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to “1600.”

The breaking news: New Hampshire Senator Judd Gregg has withdrawn his nomination to be secretary of commerce citing differences with the president on the stimulus and who is going to control the census.

We‘ll talk to one of the senator‘s colleagues about that in a moment.

But first, the financial world continues to be deeply troubled about the latest bank bailout plan rolled out this week by Treasury Secretary Geithner.  Even top Democrats who support the new bailout plan seem confused about the message.  Here‘s House Speaker Nancy Pelosi at a news conference today.

(BEGIN VIDEO CLIP)

REP. NANCY PELOSI, (D) HOUSE SPEAKER:  They aren‘t calling it TARP anymore.  What are they calling it now?  National—national—no acronym there.  I can‘t find one.  But National Financial Stability Plan.

(END VIDEO CLIP)

SHUSTER:  Senators on the banking committee expressed their own frustrations over the lack of details at a hearing on Tuesday.

(BEGIN VIDEO CLIP)

SEN. ROBERT MENENDEZ, (D) NEW JERSEY:  I have to be honest with you.  A lot of questions still remain unanswered.  A lot of details are necessary before I can give it my support.

This is like testing the canary in the mine to see whether it lives or dies.  As far as I‘m concerned it could be dead already because there‘s not a hell of a lot here to get a sense of.

(END VIDEO CLIP)

SHUSTER:  Joining us now is Senator Robert Menendez of New Jersey, Democratic member of the senate banking committee.

Senator, first let‘s talk about Judd Gregg‘s announcement.  Were you surprised?

MENENDEZ:  I was.  You know, Senator Gregg was offered an opportunity, a very unique opportunity to be in the president‘s cabinet.  He was offered an opportunity to promote bipartisanship and he ultimately rejected it.

SHUSTER:  Do you think he was putting politics ahead of national service as a lot of people for example on the web have been suggesting tonight?

MENENDEZ:  Well, he certainly was taking a lot of hits from the extreme right wing of his party and I guess to some degree he responded to that.

SHUSTER:  I want to turn real quickly to the bank bailout.  What‘s the biggest problem in terms of the administration‘s effort in terms of this bank bailout that they‘ve rolled out this week?  Is it the lack of details?  Is it the direction that they‘re going?  Give us a sense of what issues you have.

MENENDEZ:  Well, look.  I give them enormous credit for opening up a system that is going to be very transparent where everyone in our nation is going to be able to go to a Website and clearly know who got access to this money, under what terms and conditions, and whether they‘re fulfilling those terms and conditions.  But the problem is outside of that transparency, which is incredibly important, and accountability, which is also important, those measurements, we don‘t have any meat on the bones here.  We don‘t quite know, outside of broad terms, what they intend to do and how they intend to do it. 

So we need to get a better sense of those two questions fully answered to understand that they‘re headed in the right direction.  I‘m confident when they produce that information we‘re going to feel a lot better about this.  But until they do, we‘re in somewhat of a flux. 

SHUSTER:  Were you disappointed, as some other Democrats said away from the cameras, that they felt this was mishandled, in the sense that the president is the one right now who has so much credibility and knowledge of these issues and seems so comfortable in front of the cameras.  Yet a lot of Democrats have told us, it felt like so much was being put on the shoulders of Tim Geithner, who is relatively new.  And that didn‘t exactly help boost the confidence when he rolled out the proposal. 

MENENDEZ:  I think what happened here—if I have a criticism, and it‘s a constructive one—is until you know what you‘re going to roll out, I would rather you wait.  The reality is I think the uncertainty of the market place showed, the uncertainty that those of us who want to be helpful with the administration, move it in the right direction, to create stability in the financial institutions, to return consumer and investor confidence, to begin the credit rolling—we want to see that happen.  We believe the administration will do this. 

However, if you just produce broad outlines, I think you would have been better suited to have waited until you had the details, and then made a comprehensive presentation. 

SHUSTER:  Senator, have you had an opportunity to share that constructive criticism with the White House?  If so, what‘s been their response? 

MENENDEZ:  I shared it with Secretary Geithner.  And I said, you know, here‘s our challenge.  I understand that they feel the pressures to give a sense of what they‘re trying to accomplish.  And he did in broad outlines talk about mortgage mitigation.  He talked about capitalization of banks, but with greater conditionality, particularly as it relates to lending.  He talked about how to get rid of those bad assets in a way that doesn‘t put the taxpayer at risk, but finally gets these institutions unfrozen. 

But we know those are the things that have to be done.  The question is how they‘re going to be done.  And I think that‘s where they erred.  And I would have erred on the side of waiting longer and having the details, so that, in fact, it would have had a very powerful impact. 

SHUSTER:  Finally, as far as the Commerce secretary position, is it your recommendation that the president now try to essentially nominate a Democrat, instead of going back to the Republicans? 

MENENDEZ:  Well, I think the well, having seen how our Republican colleagues have taken opposition to the president‘s economic recovery package and investment package, which will save or create 3.5 million jobs and will ultimately put the nation back to work, that will give 230 billion dollars in tax cuts to middle class and working families—it seems to me that their almost unified opposition to it is a bet against economic recovery.  In essence, it‘s a bet against the American people.  If that‘s their attitude, which I don‘t think anyone should be betting against the nation—but that‘s what Republicans think they‘re accomplishing and hope to see political capital in 2010.  I don‘t think that‘s a well you can draw from. 

SHUSTER:  Strong words tonight.  Senator Robert Menendez, we appreciate you sharing them with us.  Democrat from New Jersey.  Thanks again for coming on.

MENENDEZ:  Good to be with you. 

SHUSTER:  There is much more ahead on 1600.  The mayor of Las Vegas wants a presidential apology.  We‘ll tell you why he‘s so upset at the commander in chief. 

But up next, the president‘s economic recovery plan; some lawmakers are frustrated with the White House priorities.  We‘ll get reaction from Christina Romer, the head of President Barack Obama‘s Council of Economic Advisers. 

Later, former Illinois Governor Rod Blagojevich is back in the news.  You won‘t believe what he‘s saying about the lawmakers who removed him from office.  All ahead on 1600.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.  At a Caterpillar factory in Peoria, Illinois today, President Obama expressed confidence about the effectiveness of the economic stimulus plan and said the disagreements in Washington will not hurt the process.

(BEGIN VIDEO CLIP)

OBAMA:  These past few weeks, we‘ve had a spirited debate in Washington about this plan.  Not everybody shares the same view about how we should move forward.  At times, our discussions have been contentious.  But that‘s a good thing.  Diverse viewpoints are the lifeblood of our democracy. 

(END VIDEO CLIP)

SHUSTER:  Is the White House satisfied with the stimulus package that is emerging now?  What‘s on the economic agenda in the days ahead?  Joining us from the White House is the economic adviser who crafted President Obama‘s stimulus plan, Christina Romer.  She is the chair of the Council of Economic Advisers. 

First of all, you obviously deserve a congratulations for a huge political victory.  No matter how you slice it, you‘re getting something that the president has wanted.  Having said that, we‘re already starting to hear from some of the states who say, you know what, we‘re not getting as much money as we had hoped.  So we are still going to have to layoff some teachers and some other public servants.  Are you disappointed? 

CHRISTINA ROMER, CHAIR, COUNCIL OF ECONOMIC ADVISERS:  Absolutely not.  I think the important thing is it‘s not so much a political victory as a victory for the American people and the American economy.  So, you know, I think the thing to keep in mind is that it is the biggest, boldest fiscal stimulus we have ever had in our history.  And it is a triumph.  And I think it is going to do the job for the American people. 

SHUSTER:  But do you regret that it‘s not bigger, not bolder, given the number of economists who have said it would probably need to be maybe twice the size to have an immediate, huge impact on the economy? 

ROMER:  From the very beginning, the president has said as his goal that he wanted to be sure it created between three and four million jobs.  And we absolutely think it‘s going to do that.  I think the other thing to keep in mind is it‘s part of a comprehensive strategy.  Really, the president calls it his three-legged stool, the recovery package, the financial rescue, and making sure we deal with the foreclosure problem.  I think you know there are important synergies between those three packages. 

SHUSTER:  I wonder if you can clear up something that happened today.  First, here‘s President Obama talking at the Caterpillar plant.  The issue is, of course, jobs and what will be created, what will be saved.  Here‘s the president.  Watch. 

(BEGIN VIDEO CLIP)

OBAMA:  The head of Caterpillar said that if Congress passes our plan, this company will be able to rehire some of the folks who were just laid off. 

(END VIDEO CLIP)

SHUSTER:  Now that was a reference, of course, to Caterpillar having laid offer 22,000 employees.  But a few minutes after those remarks from the president, here‘s what the chairman and CEO of Caterpillar told employees.  Watch. 

(BEGIN VIDEO CLIP)

JIM OWENS, CATERPILLAR INC. CEO:  Even if this stimulus package passes, not only here, but around the world, it‘s going to take those projects a while to kick in.  We think it‘ll have third, fourth quarter and principally Spring of next year when it will have a pretty big impact on construction activity in the United States. 

(END VIDEO CLIP)

SHUSTER:  That seems to be something of a contradiction.  Can you clear that up for us. 

ROMER:  I think there are a couple things to say.  One of the things we‘re so hoping for is that there will be other companies like Caterpillar that will say, just based on the passage, we feel more optimistic.  We feel more confident.  We‘re going to go ahead and rehire those people.  But I think that is something that could absolutely happen. 

The other thing to keep in mind is there are a range of programs in the fiscal stimulus.  One of the things we very much fought for and ended up in the bill is that it was balanced.  It had the tax cuts.  It had the government spending.  It had the aid for states precisely because those things affect the economies in different ways.  Certainly, tax cuts, for example, we can change those withholding tables basically overnight.  And so we think people can very quickly see more money in their paycheck and we hope go out and spend it. 

SHUSTER:  Since you raise it, in terms of tax cuts for working families, there‘s this whole thing called the Make Work Pay Tax Credit.  The Obama administration, you guys originally wanted it to be a thousand dollars per family, 500 for individuals.  It was at 800 dollars and 400.  The bottom line is you essentially took a 20 percent drop off in what you originally wanted.  How come? 

ROMER:  I think it‘s again part of the bipartisan—the conference process.  And the important thing to us is there‘s still a really big tax cut for the American family.  There are certainly other parts of the bill that also are tax cuts for families.  We think that‘s going to make a difference.  If you tell a typical family they have 800 dollars more to spend in a year, I think that‘s going to make a difference. 

SHUSTER:  Chairman Romer, I get the sense you‘re dying inside to say, you know what, we really wish they had kept it at what we wanted, because, again, the argument is if the tax cuts work, taking out 200 dollars, taking out 20 percent—again, that‘s 20 percent less for people to spend.  Right? 

ROMER:  I just think you have to keep in mind what a bold gesture this was, that we think it is going to do a lot of good for the economy.  And whether—you know, how it ends up in the final bill—we‘re still doing the last dotting the Is, crossing the Ts.  We think it is going to be a really good program.  I‘ve run the numbers.  We firmly believe it is going to create about 3.5 million jobs.  And I think that is an incredible accomplishment. 

SHUSTER:  How patient should the American people be?  What sort of timeline do you think the American people should be looking at? 

ROMER:  You know, one way I describe the economy is a little bit like a Super Tanker.  It doesn‘t change on a dime, but, you know, when you give that rudder a move, it‘s eventually going to move.  I think that‘s exactly what we‘ve done today.  We‘ve given the rudder an incredible shove and so my guess is, you know—the president said many times, the economy will get worse before it gets better.  So certainly I think the next quarter or two are still going to be rough.  But we‘re certainly hoping by the end of the year we have turned the corner, and we‘re back to adding jobs rather than losing them. 

SHUSTER:  And of course we all hope that he‘s wrong on that, that things get better sooner.  But if they don‘t, certainly the president, of course, at least in the view of so many people, is being realistic.  In any case, Christina Romer, thank you so much for joining us.  A pleasure to talk with you.  We appreciate you coming on.

ROMER:  Great to be here. 

SHUSTER:  President Obama is paying a very personal tribute to Abraham Lincoln on the former president‘s 200th birthday.  And it tops our stories on 1600‘s radar.  During a ceremony at the U.S. Capitol, President Obama called on Americans to honor Lincoln‘s legacy by following Lincoln‘s example of showing generosity to political opponents and valuing national unity. 

(BEGIN VIDEO CLIP)

OBAMA:  I can say that I feel a special gratitude to this singular figure who in so many ways made my own story possible, in so many ways made America‘s story possible. 

(END VIDEO CLIP)

SHUSTER:  New numbers in today about the amount of money the president raised to help him and his team make the transition to the White House.  The figure, 4.5 million dollars from almost 60,000 private donors. 

And former President Bush is getting ready to hit the lecture circuit. 

He is scheduled to speak on March 17th at a luncheon in Alberta, Canada.  It is not known how much cash he is expected to bring in.  But we do know that 1500 people are expected to show up. 

Still to come, critics of the economic stimulus plan say the economic rescue bill has a lot of wasteful spending in it.  And still ahead, our Muckraker of the day says, exactly.  But that‘s OK, he says. 

High praise for President Obama.  Film maker George Lucas calls him a real life hero, but more powerful than Jedi Knight Luke Skywalker.  We‘ll ask that question.  The answer when 1600 PENNSYLVANIA AVENUE returns.

(COMMERCIAL BREAK)

SHUSTER:  We‘re back with a look at what‘s going on inside the briefing room.  Former Illinois Governor Rod Blagojevich has some very harsh words for the lawmakers who ousted him from office, calling them drunks and adulterers.  Take a listen a part of an interview with Chicago area radio station WSLAM. 

(BEGIN VIDEO CLIP)

ROD BLAGOJEVICH, FMR. GOVERNOR OF ILLINOIS:  It‘s how the system in Springfield works.  A bunch of these lawmakers go down to Springfield.  Nobody even knows who they are.  They‘re away from their families.  It‘s a whole different world down there.  A bunch of them are cheating on their spouses.  A lot of them drink in excess.  Very few of them know what‘s going on. 

(END VIDEO CLIP)

SHUSTER:  Blagojevich even went a step further.  He said he saw the same kind of behavior on Capitol Hill when he arrived as a Congressman back in 1997. 

The mayor of Las Vegas says President Obama owes Sin City an apology.  Mayor Oscar Goodman is upset over comments the president made at a town hall meeting in Indiana.  The president said that companies receiving taxpayer money should not use corporate jets or take trips to Las Vegas. 

(BEGIN VIDEO CLIP)

OBAMA:  You can‘t get corporate jets.  You can‘t go to take a trip to Las Vegas or go down to the Super Bowl on the taxpayers‘ dime. 

(END VIDEO CLIP)

SHUSTER:  Mayor Goodman reacted by first asking for an apology, then this afternoon he changed his tune a bit, asking for a clarification. 

(BEGIN VIDEO CLIP)

MAYOR OSCAR GOODMAN, LAS VEGAS:  I think the city is entitled to have a clarification, a rectification of the statement that was made.  We‘re getting e-mails from folks here at city hall who are saying that they‘re not coming to Las Vegas because the president doesn‘t want them to. 

(END VIDEO CLIP)

SHUSTER:  Even Nevada Senator Harry Reid has chimed in, saying on the floor of the US Senate that he has spoken to White House Chief of Staff Rahm Emanuel about the comments, and he hopes to do the same with President Obama himself.  Reid is convinced the president was only slamming the CEOs, not Las Vegas.  So far the White House has not commented. 

While officials in Las Vegas may be unhappy with President Obama, the people of Japan these days couldn‘t be more excited over our president and first lady.  Take a look at this Japanese game show. 

(BEGIN VIDEO CLIP)

(JAPANESE)

UNIDENTIFIED MALE:  Yes he can!

(END VIDEO CLIP)

SHUSTER:  Yes, he can, doing magic tricks while dressed up as Barack and Michelle Obama.  OK. 

The president may be powerful, but just how powerful?  One man says he could take on Luke Skywalker and win.  And if anyone is qualified to make that call, it‘s “Star Wars” film maker George Lucas. 

(BEGIN VIDEO CLIP)

GEORGE LUCAS, FILM MAKER:  I think Barack Obama right now has a much -

much heart.

UNIDENTIFIED MALE:  Even without the light saber?  That‘s possible?

LUCAS:  It‘s much harder for him.  He doesn‘t have a life saber. 

(END VIDEO CLIP)

SHUSTER:  Lucas was speaking at a ceremony attended by the president last night.  Lucas was not asked whether Obama could defeat Darth Vader. 

Coming up, some critics call the 789 billion dollar economic stimulus wasteful spending.  But our Muckraker of the day argues, so what, if that‘s what‘s need?  His intriguing argument, the case for waste, on Muckraker ahead on 1600.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.  John McCain called it the Generational Theft Act.  Rush Limbaugh says it‘s a trillion dollar failure filled with, quote, porkulus (ph).  Those are just a couple of the colorful ways critics have slammed the stimulus bill, warning that hundreds of billions of dollars of spending will be wasted on pork.  There‘s an argument over whether that‘s true.  But let‘s take the argument; could wasteful spending be just what we need? 

Here‘s today‘s Muckraker: “Republicans like to accuse Democrats of wasting taxpayer dollars and being condescending egg heads.  But if President Obama‘s economic stimulus fails to prevent a Depression, it will be because he didn‘t waste enough money, and didn‘t spend enough time being a condescending egg head.” 

Joining us now to tell us why we should celebrate wasteful spending, Jonathan Chait, senior editor at the “New Republic,” and our Muckraker of the day.  Congratulations, Jonathan. 

JONATHAN CHAIT, “THE NEW REPUBLIC”:  Thanks.  I‘ve been wanting this my whole life. 

SHUSTER:  Explain the theory. 

CHAIT:  Well look, the theory behind Keynesian economics is when the economy is in a severe depression, the government has to spend money that people won‘t spend for themselves.  What the government spends it on doesn‘t matter very much.  You‘d like it to spend on things we want and need and will value for a long time.  But if you can‘t, then you just need to just start spending on a lot of crap. 

The problem is Obama decided he was only going to start spending on relatively useful things.  He wasn‘t going to have any pork and try to basically justify it as these investments in the future.  But that list didn‘t run long enough to spend all the money we really need to be sure that we can pull out of this depression.  So the problem is he‘s too afraid to waste money, sort of anticipating this Republican attack.  And so I think he went too small and too afraid to waste money. 

SHUSTER:  Speaking of the Republican attacks, let‘s run a sound bite from Congressman Cantor and we can take an example that he offers.  Watch.

(BEGIN VIDEO CLIP)

REP. ERIC CANTOR ®, VIRGINIA:  Leader Harry Reid is looking at a train to Vegas.  That‘s exactly the kind of waste and pork barrel spending the American people are sick and tired of and expect a lot more. 

(END VIDEO CLIP)

SHUSTER:  Now, a train to Vegas, how would that help the economy? 

CHAIT:  Anything you spend money on is going to help the economy.  You want to put people to work.  What‘s the biggest and most successful example of fiscal stimulus in country‘s history?  World War II.  World War II was necessary from a foreign policy point of view.  But from an economic point of view, it was pure waste.  Right?  Imagine if there was no war at all.  How would we have gotten out of the depression?  We could have just built all those ships and tanks and planes and just dumped them in the ocean, and economically it would have been the same thing. 

It would have been 100 percent waste from an economic point of view.  The tanks didn‘t help the economy.  What helped the economy was that people were being put to work.  So what you build is pretty immaterial in a position like this.  Not all the time, but in an economy like this, what you build doesn‘t really matter. 

SHUSTER:  A lot of economists, in fact most of the economists with credibility, agree with you and say, fine to have a debate over priorities, but a dollar spent is a dollar spent.  Why then do you think the Democrats backed away from the 200 million dollars to put new grass on the Mall, given that at least where I live that would have employed a lot of landscape companies.  They would have died for those jobs and contracts. 

CHAIT:  I know.  That‘s the Republican playbook.  You take any piece of legislation and find one, you know, silly or outrageous sounding detail, even if it‘s a fraction of one percent of the whole bill, and you boil it all down to that.  And that becomes the symbol of it.  So midnight basketball.  Or remember John McCain with his joke about bear DNA studies.  You take one thing. 

You know, they tried to focus on the one thing.  They haven‘t really found one program that sounds outrageous.  But grass on the National Mall was pretty much the worst they could come up with, as if it‘s really a good thing that the country has our great national monuments surrounded by mud and dirt instead of grass. 

SHUSTER:  What about the marshland in San Francisco, which the effect of fixing the marshland will save some rodents, so the Republicans are talking about rats. 

CHAIT:  Right, exactly.  Things that you can find that involve animals are always their favorites.  If you can pick an animal name out if it.  Usually it‘s some kind of scientific study.  That‘s sort of the playbook.  Obama was very conscious of that playbook, and tried to avoid it.  And part of what I argued in my column in the “New Republic” is, look, they just made that attack anyway.  A lot of what you tried to gain you didn‘t necessarily gain by trying to avoid waste.  They just said it was waste anyway. 

SHUSTER:  Jonathan Chait, senior editor of the “New Republic.”  he‘s also a proud graduate of the University of Michigan.  That‘s the secret, Jonathan.  You‘re golden in my book for the rest of your life just because of that.  You‘re also the Muckraker of the day.  Congratulations. 

CHAIT:  Good to hear.  Thank you.  I hope I didn‘t get preference because of my alumni standing. 

SHUSTER:  You did, but that‘s OK.  That‘s the view from 1600 PENNSYLVANIA AVENUE tonight.  I‘m David Shuster.  Thank you for watching.  We‘ll see you back here tomorrow night, same time 6:00 p.m. Eastern on MSNBC. 

Remember, you can get the latest political news and a sneak peak of what‘s coming up on the show sent straight to your inbox with the 1600 Daily Briefing.  We have some fun content and stories not available anywhere else, Shuster.MSNBC.com.  If you‘re into Twittering, I‘ll be online right after the show.  Follow me on Twitter.com/Shuster1600. 

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

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