updated 2/24/2009 9:21:57 AM ET 2009-02-24T14:21:57

Guest: Savannah Guthrie. Mark Zandi, Darrell Issa, Elana Schor, Terry Holt, Steve Hildebrand, A.B. Stoddard

High: The president offers a nation a path towards economic solvency.

Spec: Politics; Barack Obama; Economy; Richard Shelby; Jim Bunning; Ruth

Bader Ginsburg

DAVID SHUSTER, HOST:  Gorging the states, putting Washington on a diet.  The president offers a nation a path towards economic solvency. 

Day 35 of the Obama administration. 

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

This was another awful day for the U.S. economy.  On Wall Street, the Dow Jones Industrial Average finished at its lowest point in 11 years.  We will get to that in a moment.

First, today President Obama met with the nation‘s governors at the White House to try and boost confidence in his $800 billion economic recovery plan. 

Watch. 

(BEGIN VIDEO CLIP)

BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES:  Almost three months ago we came together to try to push some of our ideological rigidity aside to formulate a recovery plan that would bring some relief.  This plan will save or create at least 3.5 million jobs in every state across the country. 

By the time most of you get home, money will be waiting to help 20 million vulnerable Americans in your states keep their health care coverage.  These are the steps that we‘re taking to help turn this crisis into an opportunity. 

You shouldn‘t be succeeding despite Washington, you should be succeeding with a hand from Washington.  Right now we‘ve got to make sure that we‘re standing up for the American people and putting them back to work. 

(END VIDEO CLIP)

SHUSTER:  Following the stimulus coming the fall.  After talking to the governors this morning about how stimulus spending will help their states, this afternoon, President Obama spoke to congressional leaders and focused on cutting the federal budget deficit and returning to fiscal responsibility.  The summit this afternoon was a preview to the big speech the president will make to a joint session of Congress tomorrow night. 

For more, let‘s bring in NBC White House Correspondent Savannah Guthrie.  She‘s live on the north lawn. 

Savannah, it was a bipartisan summit meeting on the budget deficit with the involvement of Republicans, including John McCain, Susan Collins and others, but Republican Judd Gregg, I noticed described it as a photo-op, not a substantial meeting. 

What did the White House hope to accomplish today, and how does it lead in to tomorrow night? 

SAVANNAH GUTHRIE, NBC NEWS WHITE HOUSE CORRESPONDENT:  I think they would say, David, that this was just the beginning and that this is—you can‘t expect to solve all of these budget issues on one day.  But the point was just to get everybody together and to do a little bit of diplomacy. 

And you saw that town hall where he called on friends and foes alike.  And I think that‘s part of the strategy, the Obama way—let‘s get everybody in a room and talk about our differences. 

And so, you had Judd Gregg saying it was a photo-op, and it certainly was that.  But I think the White House was hoping it also was the beginning of substantial work. 

SHUSTER:  Savannah, here‘s what the president said today about those budget deficits.  Watch. 

(BEGIN VIDEO CLIP)

OBAMA:  We cannot and will not sustain deficits like these without end.  That‘s why today I‘m pledging to cut the deficit we inherited by half by the end of my first term in office. 

Now, this will not be easy.  It will require us to make difficult decisions and face challenges we‘ve long neglected.  But I refuse to leave our children with a debt that they cannot repay. 

(END VIDEO CLIP)

SHUSTER:  Savannah, as you reported, President Clinton was able to rally the markets in the 1990s over the long term by cutting the budget deficits.  But again, that‘s a long-term strategy.  For the Obama administration, what‘s their short-term strategy in terms of dealing with these markets which again hit another low today? 

GUTHRIE:  Well, they claim that they don‘t watch the markets for that, that they‘re not trying to affect a market on any one day.  And they like to raise the example, for example, when TARP passed last fall, how the market really rallied on that.  And that in retrospect, perhaps it wasn‘t as great a development as many people thought that day. 

They want to take the long view.  And part of that is what we saw today, that they want to crack down on this deficit spending. 

But in the short term, they know they‘re going to have to spend into (ph) deficits.  I mean, he talked about cutting the deficit in half.  That‘s the nearly $1.3 trillion deficit that they inherited.  After you add in some of the stimulus spending and the other bailout money, it‘s going to be even higher than that. 

So I think what they‘re trying to do is just set up their plans.  They want to still do these big initiatives—health care, education, energy—but they‘re framing them as what they need to do to help the economy.  So instead of trying to say, oh, these are separate issues and we need to do them, they‘re trying to say we need to do these, because down the road it‘s going to pay dividends.  Health care probably going to be the next big fight to come out.

SHUSTER:  Great reporting as always—David. 

Savannah Guthrie at the White House. 

Savannah, thank you so much.

The first presenter at today‘s Fiscal Responsibility Summit was an economist who advised John McCain during the presidential campaign.  Mark Zandi urged lawmakers to meet this overwhelming financial crisis with an overwhelming response. 

(BEGIN VIDEO CLIP)

MARK ZANDI, ECONOMIST:  Whether from a natural disaster, a terrorist attack, or a financial calamity, crises of the magnitude of the current one only end with overwhelming government action.  The cost to taxpayers of all this will be significant, but a less aggressive response would cost taxpayers measurably more. 

(END VIDEO CLIP)

SHUSTER:  Dr. Zandi joins us now.  He‘s the chief economist for MoodysEconom.com and author of the book “Financial Shock: A 360 Degree Look at the Subprime Mortgage Implosion and How to Avoid the Next Financial Crisis.”

Mark, there‘s so many elements to this financial crisis.  We want to ask you about four big ones—the deficit, stimulus, housing, and the banks.  But first up, the deficit. 

You said today this crisis is unprecedented in modern times.  How do you balance short-term concerns such as rejuvenating the economy with long-term concerns like an exploding deficit, which the president today said is unsustainable? 

ZANDI:  Well, I think we have to be focused on the current economic crisis and use all the resources at our disposal to get out of the crisis.  And that‘s going to take taxpayer dollars.  That‘s the stimulus, that‘s the financial stability plan to shore up the banking system, that‘s the foreclosure mitigation plan to help stem foreclosures.  All of that‘s going to cost a lot of money. 

But I do think we need to spend it, spend it aggressively, quickly, and shore up the economy, because unless the economy finds its footing, our long-term budgetary problems are going to be more significant.  Now, having said that, I think it‘s also important—and this, I think, was the objective of today‘s summit, is to start focusing on what will need to be done in the longer run to address our long-term fiscal situation.  To ensure global investors that, yes, there are going to be a lot of bonds issued over the next couple of years, but also, we‘re going to work really hard to rein in our deficits in the long run by taking very concrete steps. 

SHUSTER:  Trying to maintain that responsibility certainly is a good message. 

As far as the short term, let‘s talk about the stimulus. 

The key question is, will this plan work?  And that‘s been asked over and over.  What are the signs that you‘re watching for that the stimulus plan will work? 

ZANDI:  Jobs.  Jobs.  The stimulus plan is—the objective of that is to short-circuit this negative cycle in the job market. 

We‘re losing jobs, it‘s causing consumers to pull back on their spending, which is forcing businesses to cut back on jobs in this adverse cycle.  The stimulus is all about short-circuiting that cycle, so right now, we‘re losing 500,000, 600,000 per month.  So by the summer, if the stimulus is helpful, we should be losing 300,000, 400,000 per month.  By the end of the year, 100,000 to 200,000, and by this time next year, the job losses should come to an end. 

SHUSTER:  I want to ask you about housing next.

You predicted earlier this month that housing prices would stabilize this year.  First of all, does that mean the end is in sight?  And you‘ve also heard the criticism that the administration‘s plan forces responsible taxpayers to bail out their less responsible neighbors. 

What‘s your view? 

ZANDI:  Yes, I think we need to do it.  It is a bitter pill.  It is going to cost taxpayers.  And it isn‘t fair. 

But unfortunately, we‘re in a situation where if we don‘t help our neighbor, who may or may not have been responsible, we‘re going to hurt ourselves.  Because if they go into foreclosure, that‘s going to drive down our home values, wipe out our net worth, make us less wealthy, and obviously less financially well off.  So we have to help them.  And by helping them, we‘re going to help ourselves. 

And I do think the foreclosure mitigation plan the president has put forward is a good plan, a reasonably good one.  And I think it will stem foreclosures.  And I do believe, with a little bit of luck, assuming the stimulus kicks in and we get a more stable job market, that house price declines will come to an end by late this year. 

SHUSTER:  Well, we all hope you‘re right on that. 

The fourth issue, of course, nationalization, and whether the government will eventually nationalize some banks.  And will that help?  What‘s your view on nationalization? 

ZANDI:  Well, we are engaged in different flavors of nationalization already.  There‘s been almost 20 banks that have been taken over completely by the government, small institutions.  That will continue.

There are some institutions that are being put into conservatorship, which means the shareholders are being wiped out, but not debt holders.  So not complete nationalization. 

And then other big institutions, the government is taking bigger equity stakes in those institutions and diluting shareholders.  So different flavors of nationalization. 

And I think right now, that‘s the fundamental problem in the stock market, particularly investors in financial stocks.  They really don‘t know how diluted they‘re going to be by the government taking equity stakes in these institutions.  I mean, they‘re only going to know that over the course of the next two, three, four months.  And it‘s going to take that long before we see confidence restored in the equity market, the stock market. 

SHUSTER:  Dr. Mark Zandi, the chief economist for MoodysEconomy.com. 

He was also the first presenter today.

And Mark, thanks so much for joining us.  We appreciate it. 

ZANDI:  Thank you.

SHUSTER:  So what did congressional Republicans who took a stand on principle against the president‘s stimulus plan think about his call for more fiscal responsibility? 

Joining us now, Congressman Darrell Issa, a Republican from California, a ranking member for the Government for Oversight and Government Reform Committee.  He attended the president‘s fiscal summit today. 

And Congressman, what did you think about what President Obama had to say about fiscal responsibility? 

REP. DARRELL ISSA ®, CALIFORNIA:  Well, we‘re glad that he‘s joining the Republican Party.  We certainly think that he‘s on the right track. 

He‘s looking at waste fraud, abuse.  He‘s looking at how we make decisions in procurement.  He‘s looking at cost overruns.  So I think we applaud that. 

I think we applaud that on a bipartisan basis.  These are things that

these good government items that need to be worked on aggressively by every administration, and particularly after the run-up in contractors during the Iraq and Afghan war. 

There‘s a time to re-rationalize our work force.  All of that is a plus. 

Unfortunately, we did get a little bit of less-than-good answers, particularly on the president‘s statement that he was going to cut the deficit in half in his first term.  Which deficit?  He‘s using a figure of over a trillion dollars.  He‘s not using the base budget figure, but rather, using these one-time bailout and stimulus as part of the deficit. 

I think that‘s pretty disingenuous...

SHUSTER:  Well, Congressman, wasn‘t it disingenuous of the Republicans and the Bush administration to not include the price of the Iraq war in the budget figures? 

ISSA:  I‘m absolutely in agreement that we never should have been doing on the first one these so-called emergency supplementals.  I felt they were wrong all along.  I‘ve spoken against the fact that the supplementals turned into two pots of requests, with people actually deciding in advance how much they were going to put into each of them, as though it was two opportunities. 

You‘re absolutely right.  But when you look at a deficit, you look at one-time expenses.  We know those are going away. 

There is a peace dividend if we‘re able to get out of Iraq.  Afghanistan has to be viewed as a long-term commitment as of right now that‘s going to cost us.  But at the same time, when you look at $350 billion that went out in TARP money, that certainly has to be considered to be something that, even if there‘s another $350 billion in this year, both of those have to be set aside when you‘re going to set a goal to go from the roughly $500 billion of deficit to $250 billion. 

So we are a little concerned that the number has to be established half of what—the half has to be of the non-war-based deficit which has crept up, which is an extremely great problem.  And I agree, the president said we shouldn‘t use the fuzzy numbers of the past, including, I would assume, the last two years of a Democrat Congress.  And I agree with him, and I hope we all agree on good commonsense numbers that the American people can believe in. 

SHUSTER:  Well, the president was asked this afternoon—he took a question from one of your Republican colleague who asked for more bipartisanship.  And here was the president‘s answer. 

Watch. 

(BEGIN VIDEO CLIP)

OBAMA:  On the one hand, the majority has to be inclusive.  On the other hand, the minority has to be constructive.  What you should see, I think, is the majority saying, what are your ideas?  The minority has got to then come up with those ideas and not just want to blow the thing up. 

(END VIDEO CLIP)

SHUSTER:  Congressman, is the Republican Party ready to be constructive, as opposed to destructive? 

ISSA:  Well, the president reached out to us and we responded in a constructive fashion on committee after committee activity here today.  Many of those thoughts were put into the president‘s statements at the wrap-up.  We intend to continue to work with him.  So I‘m very pleased that today was the beginning of an outreach by the Democrat Party, but only...

(CROSSTALK)

SHUSTER:  But didn‘t the president reach out several weeks ago in the stimulus? 

ISSA:  No.

SHUSTER:  I mean, today wasn‘t the beginning of outreach.  That outreach started several weeks ago. 

No, no.  Speaker Pelosi made the decision to announce a conference decision before she called a conference. 

It‘s very clear, there never was any outreach in the House.  The Senate I can‘t speak for, but in the House, Speaker Pelosi made a decision, she could deliver the president a bill that they liked with all their pork in it.  They being the House Democrats.  And the president, today, in his wrap-up, he was talking about 15 percent or more...

SHUSTER:  Well, regardless of who shut out who, are you guys ready to move on?  I mean, I thinks that seems to be the bottom line, is, regardless of who‘s responsible or who made the mistakes a couple weeks ago, is this a new day in terms of dealing with the budget? 

ISSA:  Every day is a new day when it comes to us standing for doing the right thing with the other party for the American people.  Every day‘s the right day to say we won‘t tolerate race, fraud, abuse, or pork, regardless of the reason being thrown into budgets.  That‘s part of our most important responsibility, is when we see $8 billion into a train to Sin City as part of a stimulus, we reject it. 

SHUSTER:  But Congressman, there‘s no project for a train from California to Las Vegas.  You Republicans know better.  It‘s $8 billion.  It‘s going to the Department of Transportation.  And a Republican, Ray LaHood, he was a Republican in your Congress, he‘s the transportation secretary who gets to decide where the money is spent. 

ISSA:  He does not.  No.  This is—it is not.

SHUSTER:  It is wrong to say that there‘s a project from L.A. to Las Vegas.  It‘s not in the bill, Congressman. 

ISSA:  It is.  Look, the $200 billion, plus up to that $6 billion that was already in, showed up in conference.  We very much know this is Harry Reid‘s pork project. 

SHUSTER:  Well, that‘s different than saying that it‘s in the bill. 

It is not in the bill. 

Now, whether this is to help Harry Reid, we can argue about that.  But it‘s incorrect to say that there was this project to Sin City. 

(CROSSTALK)

SHUSTER:  In any case, Congressman, we love having you on the show. 

We appreciate you coming on. 

Congressman Darrell Issa. 

Coming up, one Republican senator questioned Obama‘s citizenship, another declared that a liberal member of the Supreme Court would be dead in nine months.  The senators have now apologized, but clearly something toxic is brewing on the conservative right.  Is it the modern version of an old GOP strategy known as slash and burn? 

And why is it back? 

Plus, President Obama is preparing to address a joint session of Congress tomorrow night in the midst of growing fears about the economic meltdown.  The challenge from the president is huge.  We will take a look at the risks and the awards. 

And of course we‘re taking your questions during this hour over Twitter.  Just go to twitter.com/shuster1600. 

All of that and “Hypocrisy Watch,” ahead on 1600.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.

Foot in mouth disease is not just a Washington, D.C., phenomenon.  Over the weekend, a few Republicans were back in their home states proving their affliction knows no bounds. 

Senator Richard Shelby took questions in Cullman County, Alabama, and was asked if there was any truth to rumors discredited during the campaign that Obama is not a U.S. citizen.  “Well, his father was Kenyan and they said he was born in Hawaii, but I haven‘t seen any birth certificate.  You have to be born in American to be president.”

Well, that‘s true, but it‘s also true that the state of Hawaii has produced overwhelming evidence proving that Obama was born there—in Hawaii, in America. 

Today, a spokesman for Shelby said the senator was simply using a throwaway line. 

Also this weekend, Jim Bunning, a senator, made some stunning comments about Justice Ruth Bader Ginsburg, who‘s back on the bench today after two and a half weeks recuperating from surgery for pancreatic cancer.  “Ruth Bader Ginsburg had cancer, bad cancer, the kind that you don‘t get better from.  Even though she was operated on, usually nine months is the longest that anybody would live.”

Bunning has since apologized, but what gives? 

Joins us now is Elana Schor, who works for the Web site talkingpointsmemo.com. 

And Elana, what is up with these slash-and-burn tactics that have emanated from the conservative right? 

ELANA SCHOR, TAKLINGPOINTSMEMO.COM:  Well, in Shelby and Bunning, you‘re talking about two of the more ornery and less nice guys in the Republican conference, to be honest.  So this is, in a way, just them being themselves.  They don‘t really pull punches.  And you‘ll notice that Bunning, when he apologized, actually spelled Ginsburg‘s name wrong. 

So heck of an apology there.

SHUSTER:  Well, speaking of apologies, let‘s actually put it up on the screen.  This came from a spokesman who said, “‘The Cullman Times‘ article contains an incomplete account, and therefore a distortion of Senator Shelby‘s comments regarding President Obama‘s citizenship.  At the town hall meeting in Cullman, Senator Shelby laid out the constitutional qualifications for the presidency and said that while he hasn‘t personally seen the president‘s birth certificate, he is confident that the matter has been thoroughly examined.” 

If it was confident, then why would he bring it up in the first place?

SCHOR:  It‘s an excellent question.  Frankly, the voters back home in Alabama probably want Shelby to play into their doubts and fears about this.  It‘s a conservative state.  He‘s throwing them a bit of red meat.  It‘s what Republicans do well.

SHUSTER:  And to be fair, I mean it was a question that he was asked.  And I suppose he just wanted to sort of play along, instead of saying, look, there‘s nothing to it.

But here‘s the other thing that‘s going on.  Here‘s some of the language, for example, from South Carolina Governor Mark Sanford, who opposed the stimulus and whatnot.

He says, “It kind of sounds like the Soviet grain quotas of Stalin‘s time—X number of jobs will be crated because Washington says so.  If we go too far in just spending too much money and borrowing money, we could put ourselves in the exact position Argentina found itself in the 1920s when they had, you know, cratering of their currency.  If you look at the Weimar Republic, you know, between World War I and World War II, you had a cratering of the currency, so much that you ha to carry a wheelbarrow load of currency to get so much as a loaf of bread.” 

Talk about doom in his metaphors.  I mean, what does this accomplish for people like Mark Sanford?

SCHOR:  Well, I mean, it‘s what they sometimes call dog whistle politics, to be honest.  I mean, conservatives hear a really harsh take on this presidency and they like it.  They eat it up.  I mean, CPAC is coming up, the big conservative conference.  And a guy like Sanford wants to be a rising star in the party.  So at this point, being that oppositional is the best way to get ahead. 

SHUSTER:  And we saw it happen with Bill Clinton, when there were all the conspiracy theories that somehow the Clintons had murdered people.  There was the stuff during the Obama campaign about him being a Muslim. 

Again, is it just that some of these politicians are playing to a conservative base who just simply wants to believe it even if this stuff is nonsense? 

SCHOR:  Frankly, yes.  And you see the conservative blogosphere serving as an echo chamber for these rumors that refuse to die. 

I mean, Michelle Obama was the subject of some very nasty, completely false rumors during the campaign, which is what this is frankly reminiscent of.  If you recall, Hillary Clinton, when she was opposing President Obama, saying, well, you know, he‘s not a Muslim as far as I know.  This hearkens back to the days of the campaign. 

SHUSTER:  Elana Schor with talkingpointsmemo.com. 

Elana, thank you very much.

And for the record, we are inviting Mark Sanford, Senator Shelby and Senator Bunning to come on the show and clarify as much as they want, and try to explain what they‘re doing. 

In any case, thanks again.  We appreciate it. 

Coming up, President Obama said he wanted Congress to pass budgets that were free of earmarks, but Congress is still pushing about 9,000 of them, adding up to about $5 billion.  Many lawmakers, Democrats and Republicans, swore off the pork to help win re-election, but now they have a different position. 

“Hypocrisy Watch” is coming up. 

Plus, this is a congresswoman pole dancing in a video you can watch on YouTube.  The lawmaker is trying to get her constituents to click on an alternative YouTube run by Congress. 

So which would you watch?  We will compare and contrast ahead on 1600.

(COMMERCIAL BREAK)

SHUSTER:  Tonight, in our “Call for Change,” we have another update on the foreign policy challenge facing the Obama administration in Africa.  As we‘ve been reporting, Zimbabwe is starving, its ruler is a tyrant.  And this man, a key opposition leader, has been kept in jail for over a week.

Roy Bennett was supposed to be part of a coalition cabinet, not thrown in prison.  It now appears that associates of leader Robert Mugabe are holding Bennett in exchange for an amnesty deal for Mugabe‘s cronies. 

Many of Mugabe‘s crowd may face charges for murder and other crimes once the 85-year-old dies or is forced out of power.  Over the weekend, we learned that Mugabe‘s thugs tried to pressure Bennett and his supporters by leaving a rotting corpse in Bennett‘s cell for several days.  Two other prisoners have reportedly died in the jail over the past week. 

Human rights advocates have asked the Red Cross to intervene.  The Obama administration and western governments need to get involved as well. 

What‘s happening in Zimbabwe is an outrage.  Roy Bennett, a courageous advocate of democracy, has now been in jail 11 days and counting. 

As the budget discussions get under way here at home in Congress, several lawmakers are now refusing to swear off earmarks and pork barrel projects.  And that takes us to tonight‘s “Hypocrisy Watch.”

First the background.

Last year, in a survey conducted by the group Club for Growth, 41 members of the House of Representatives promised to swear off earmarks.  Democrat Henry Waxman, a top member of the House Oversight and Government Reform Committee stated, “We have a problem in Congress.  Congressional spending through earmarks is out of control.”

Some lawmakers, like Republican Eric Cantor, said it was important to cut down on wasteful spending.  Other members campaigned on the issue winning re-election with their pledge to clean up Washington. 

Now that the election has come and gone for most of the House members, the pledge to swear off earmarks is gone as well.  Out of the 41 who made the pledge to the Club for Growth last year, only 17 are making the same pledge now.  That‘s right, 24 lawmakers who made the pledge before the election are now refusing to say.  The Republican list includes House Minority Whip Eric Cantor, leadership member Thaddeus McCotter, Congressman Michele Bachmann and Congresswoman Marsha Blackburn.  The Democratic list includes Henry Waxman, Jackie Speier and Jim Cooper. 

To be clear, most members of Congress don‘t swear off earmarks in the first place.  Still, when you make a campaign promise to get rid of earmarks and clean up Washington, and then you come back to D.C. and go back to your old ways, that‘s hypocrisy and it‘s wrong. 

Coming up on 1600 PENNSYLVANIA AVENUE, President Obama hammers the misleading accounting principles that hid the true budget deficit during the Bush years.  But even with honest accounting, can the deficit really be cut in half in four years? 

Plus, so many of us love Twitter and so many of you love following the Washington Tweet.  Who are you following the most?  Where does President Obama rank in the top five?  Later on 1600.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA:  What I don‘t want us to do, though, is to just get caught up in the same old stuff that inhibits us from acting effectively and in concert.  There‘s going to be ample time for campaigns down the road.  Right now, we‘ve got to make sure that we‘re standing up for the American people and putting them back to work. 

(END VIDEO CLIP)

SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE.  That was President Obama speaking to the nation‘s governors today and possibly doing some early defense for his speech on the budget tomorrow night.  Republican Governor Bobby Jindal was in the audience today.  He will give the GOP response tomorrow.  He‘s a top contender to challenge the president in 2012. 

Let‘s bring in our panel, Democratic strategist Steve Hildebrand, who was the deputy national director for the Obama Campaign, Republican strategist Terry Holt, who was a spokesman for the 2004 Bush/Cheney campaign, and A.B. Stoddard, associate editor for “The Hill.” 

Terry, let‘s start with you.  As a member of the opposition party, what did you make of the president essentially making some not so indirect remarks about some of the governors who may want to run against him and what the stakes are right now? 

TERRY HOLT, FMR. ‘04 BUSH/CHENEY SPOKESMAN:  I‘m still dizzy.  Last week, we sent a trillion dollars and this week we‘re talking about fiscal responsibility.  It‘s difficult for me to make that transition.  I think it‘s going to be difficult for the American people to be very confident at all that this money is going to be spent wisely, when it‘s going out in huge truck loads, with very little oversight. 

I feel like we‘ve gotten off to a rough start here.  But I do like the way he talks.  I mean, he does present himself as not a harshly partisan president.  I look forward to opportunities to have some common ground on things like cleaning up waste, fraud and abuse.  I don‘t think we‘re going to see it as part of this stimulus bill. 

SHUSTER:  Steve Hildebrand, I would think if Republicans like Terry Holt are dizzy, then the Democrats are probably doing a good job, because the whole idea is to try to set up the speech tomorrow night so that Obama can say, yes, I‘m reaching out to the Republicans again.  By the way, yes, we‘re going to cut the budget deficit. 

STEVE HILDEBRAND, FMR. OBAMA DEPUTY CAMPAIGN DIRECTOR:  I think Terry‘s dizziness is a problem because he says there‘s no oversight over this money.  That‘s just not the case.  I think that—

HOLT:  You‘re going to spend 200 billion dollars on Medicaid in the next two years.  You can‘t do it.  It‘s not possible.  It‘s already one of the most fraudulent programs in the federal government.  You haven‘t taken on any of the hard decisions.  The American people already think you‘re wasting their money.  I don‘t—

HILDEBRAND:  Terry, we‘re 35 days into this administration.  They are dealing with eight years of Republican rule that got us largely into this mess.  Not only Republicans should deserve the blame for this, but the bottom line is that what we have seen in the 35 days is that Republicans really don‘t stand for anything.  They don‘t—what they are doing is opposing things.  They‘re not coming to the table with real solutions. 

HOLT:  They came to the table with a lot of tax relief and some transportation.  

SHUSTER:  A.B. Stoddard, let‘s sort this out.  A.B. Stoddard, where are the American people right now on the divide between Democrats and Republicans in Congress, and what they think of the Obama administration? 

A.B. STODDARD, “THE HILL”:  The polls show President Obama, his approval number has gone down from something like 68 to 63 percent.  Still very high.  But they‘re quite considered in a new ABC News poll about the deficit.  I think we‘re in a period now where there‘s going to be some patience on the part of the voters.  They‘re hoping the stimulus works.  They are happy for a tax cut right now.  They are enjoying low gas prices. 

They are going to probably give him the spring and the summer. 

I‘m sure they‘re happy to hear that he wants to half the deficit by 2013.  I think they‘re going to give him the spring and summer before they start looking at unemployment numbers, whether or not the credit markets have loosened up again.  We have liquidity.  Do we have inflation?  Are credit rates on the rise?  Look at all the indicators.  Then I think they‘re going to start making a decision about whether or not his efforts fail.  Auto bail outs, bank bail outs, possibly second stimulus. 

I think it‘s a wait and see.  Right now, they are fearful, but they are hopeful that this is going to work. 

SHUSTER:  In the meantime, it‘s so intriguing to see how President Obama is framing the disagreements.  Here‘s President Obama from today.  Watch. 

(BEGIN VIDEO CLIP)

OBAMA:  If we agree on 90 percent of the stuff and we‘re spending all our time on television arguing about one, two, three percent of the spending in this thing, and somehow it‘s being characterized, in broad brushes, as wasteful spending, that starts sounding more like politics.  And that‘s what right now we don‘t have time to do. 

SHUSTER:  Terry, I hear the president putting Republicans in a box and accusing all of you of playing politics. 

HOLT:  Well, it is Washington.  And after all, in democracy, the two sides are supposed to be in opposition.  I don‘t see anything wrong with that.  I think the American people expect the opposition to be loyal to the country, but to hold the majority in—to some standard.  And as far as I‘m concerned, I do.  I like the way this guy talks.  I have been impressed about his ability to reach out to Republicans. 

I think he‘s going to have more trouble within his own party, keeping the natives from getting too restless, while he speaks in moderate tones like this, because ultimately he‘s right.  If we can work together, we can accomplish a lot.  This budget that they‘re going to put out, this is like the arm of the century.  You know, one of those, you know, for four years we‘re going to spend like crazy and in the last year, we have a huge balloon payment.  I see some disingenuous politics being played on the other side here. 

SHUSTER:  As opposed to the disingenuous nature of not including the cost of the Iraq war, which will be at a trillion dollars, not including it for the last six years in the budget? 

HOLT:  You‘re right about that.  I saw that in the last segment.  I agree wholeheartedly.  Let‘s go with President Obama‘s pledge to use honest numbers.  It‘ll be the first I‘ve ever seen it happen in Washington, David. 

SHUSTER:  We‘ll see.  Terry, Steve and A.B. are all sticking around.  Next up, the government could become the biggest shareholder of the troubled bank, Citigroup.  Is nationalization the way to go?  The panel weighs in. 

Plus, Karl Rove is no longer in the White House.  But he‘s still one of the most influential men in Washington, D.C.  We‘ll explain why. 

And your Twitter questions coming up at the end of the hour.  Just go to Twitter.com/Shuster1600. 

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE.  When Senate Banking Committee Chair Chris Dodd said on Friday that it might be necessary to nationalize some banks to save them, the common sense shares of Citigroup and Bank of America tumbling.  This morning, Senate Majority Leader Harry Reid responded to reports the federal government might soon own up to a 40 percent stake in Citigroup by saying that would not be nationalization, after all. 

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MAJORITY LEADER:  It‘s not nationalization.  It‘s protecting the taxpayers‘ interest.  We did it with railroads.  We did it with highways.  So I think what we‘re doing in banking now at a time of distress is the right thing to do. 

(END VIDEO CLIP)

SHUSTER:  White House Press Secretary Robert Gibbs, who equivocated about nationalization on Friday, joked about how his comments had actually sent the market up. 

(BEGIN VIDEO CLIP)

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY:  Somebody called it the Gibbs rally, for goodness sake.  Let‘s go with that.  Right? 

I think you could look at the transcript and posit many possibilities based on any answers on any given day. 

(END VIDEO CLIP)

SHUSTER:  Let‘s welcome back our political panel, Steve Hildebrand, A.B. Stoddard, Terry Holt.  Steve, why is the White House being so sort of fuzzy on the language about nationalization when you have Republicans out there saying, maybe we do need to nationalize some banks? 

HILDEBRAND:  I do hope we have a Gibbs‘ rally more than once.  We need that stock market to grow.  You know, I think nationalization of any industry, banking right now, scares probably all of us.  You know, it‘s not the direction that we want to take, but there probably has to be some movement, you know, in some kind of ownership of these banks.  But ideally it‘s strong government oversight and we get these banks back in order. 

SHUSTER:  Terry, I want to read for you what Paul Krugman wrote in this morning‘s “New York Times,” in a column entitled “As American as Apple Pie:” “The case for nationalization rests on three observations.  First, major banks are dangerously close to the edge.  Second, banks must be rescued.  Third, while banks must be rescued, the US government can‘t afford, fiscally or politically, to bestow huge gifts on bank share holders.  The real question is why the Obama administration keeps coming up with proposals that sound like possible alternatives to nationalization, but turn out to involve huge hand outs to bank stock holders.”

Do you agree with Krugman? 

HOLT:  I never thought I‘d say this, but, yes, I do. 

SHUSTER:  Oh my gosh, stop the music. 

HOLT:  I read it most of the time with my teeth gritted.  But in this case, you know, all of the billions that we have poured into these banks aren‘t going to do us good unless they start lending, unless credit starts to free up, and people can make transactions again.  We see this all over the market place.  Now it‘s seeping into the commercial real estate market. 

I think it‘s important for us to do something bold rather than something political.  You know, most of the things that the Obama administration has done on this front over the last couple of weeks have been mostly political, talking about people‘s salaries, and now, you know, talking about having these shock treatments on the banks.  I mean, come on, let‘s be bold, let‘s get in there and let‘s solve these problems before it gets too late.  Krugman, he‘s right. 

HILDEBRAND:  Terry, come on.  You‘ve got to give the president some credit.  He‘s done more in 35 days than what we have seen in the last four years of the Bush administration. 

SHUSTER:  But as far as what he‘s doing with the bank nationalization issue—

HILDEBRAND:  He‘s working very hard to try and restore confidence in the economy, in this country, try to keep people in their job, try to create more jobs, try to keep people in their homes.  This is a tough time. 

(CROSS TALK)

SHUSTER:  Here‘s the issue as far as—as far as the issue of bank nationalization—A.B., you can handle this one.  I want to put up the market boards from today.  The Dow is down 250 points, closing at 7,114.  This was the lowest for the Dow at least in 11 years.  Bank stocks have been getting hammered.  You sort of wonder, maybe the White House was trying to be too cute in trying to manage market expectations for the banks and share holders? 

STODDARD:  I think the Obama team is—they‘re very good at branding.  Terry knows the Republicans would love nothing more than for the Obama administration to come out and say we‘re going to nationalize the banks. 

They‘ve pretty much done it for the most part except in name.  They don‘t -

that is a toxic word.  It‘s kind of to the Democrats would be—even though it started in the Bush administration, it would be like the words privatizing Social Security was for the Republican party.  It would be a mistake.  Ask senator Charles Schumer, who represents most of those banks in New York as their senator.  He opposes nationalization. 

It is, obviously—proponents argue we should take sort of a privatization holiday, if that‘s what you want to call it, to make it really swift and really temporary, clean them up, send them back to the private sector.  Waiting too long while they‘re moribund is going to ruin the credit markets, make the situation much worse. 

I understand the argument for it.  But I sense from the Obama administration a real hesitancy about going all the way and using that word.  Now, today, the Treasury and the Federal Reserve, the FDIC and some government agencies put out a statement saying they‘re promising the banks that they will capitalize and provide liquidity and do everything to keep them viable.  Obviously, they‘re providing a lot of government support.  There is a government safety net.  I don‘t see them going all the way.  I think it will really be a political problem for them if they do. 

SHUSTER:  Our panel is sticking around.  Coming up, the fate of the U.S. auto industry is in the hands of the White House.  What kind of steering wheel is in the hands of the president‘s auto team?  Are they American made?  That‘s next on 1600.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back.  Here‘s a look at what‘s on 1600‘s radar today.  The Obama administration is going to decide the future of the U.S.  automakers and the vehicles owned by members of the president‘s team reflect, depending on your point of view, either a stunning lack of regard for American workers or they help explain why the U.S. auto industry is struggling to begin with.  According to some great reporting by the “Detroit News,” the two co-chairs of the task force, Treasury Secretary Tim Geithner and National Economic Council Director Warren Summers both own foreign vehicle vehicles.  Secretary Geithner drives a 2008 Acura TSX.  Summers owns a 1995 Mazda Protege. 

OMB Director Peter Orszag is also on the task force.  He owns a 2008 Honda Odyssey and a 2004 Volvo S-60.  Volvo is owned by Ford. 

EPA Administrator Lisa Jackson loves her 2008 Toyota Prius.  She thinks it‘s great.  She also drives a Honda Odyssey minivan.  Neither Carol Brown or the White House Climate Czar Energy Secretary Steven Chu own vehicles.  In case you were wondering, the president and vice president both own American-made cars.  Vice President Joe Biden is the son of a car dealer.  He owns a 1967 Chevy Corvette.  It was a wedding president from his dad. 

President Obama back in Chicago owns a car with better gas mileage, a Ford Escape Hybrid. 

Just the other day, John McCain‘s daughter, Meagan, suggested the Republicans needed to get more tech savvy.  Apparently, she hasn‘t been in contact with Congressman Ileana Ros-Lehtinin.  The Republican from Florida is embracing new technology like Facebook, Twitter, Youtube.  The lawmaker took some vice from her children and created her own Youtube page.  Watch. 

(BEGIN VIDEO CLIP)

REP. ILEANA ROS-LEHTINEN ®, FLORIDA:  I‘m a member of Congress and I vote on important issues.  Right now, we‘re discussing the farm bill.  Is that working?  These cameras are very—

OK.  Introduce yourself to each other. 

UNIDENTIFIED MALE:  OK.  I‘ll start off.  My name is George Romero (ph).  I‘m a political science major at Florida International University. 

(END VIDEO CLIP)

SHUSTER:  Here‘s some video of the Congressman from the bigger and less forgiving Youtube that the rest of us are familiar with.  Watch. 

(BEGIN VIDEO CLIP)

(CROSS TALK)

(END VIDEO CLIP)

SHUSTER:  Yes.  That was Representative Ileana Ros-Lehtinen on a stripper pole during a radio show interview.  Clearly, she has either a great sense of humor or didn‘t know cameras were rolling.  On Youtube, such distinctions matter not. 

All of us on the show love Twitter, but leave it to “Politico” to come up with a list of the most influential Twitterers in Washington, D.C., present company excluded, of course.  Starting with number five, Newt Gingrich.  Gingrich is considered the Republican‘s most web savvy elder spokesman.  The former House speaker just started Twittering last week and he‘s got about 2,000 people following him.  For the record, Mr. Speaker, we had 3,000. 

Next up, President Barack Obama, or as “Politico” puts it his staffers.  The president is the most popular Twitterer around, with more than 280,000 followers.  But the Obama campaign stopped Twittering after election day. 

Number three on “Politico‘s” list, my colleague, “Meet the Press” moderator and former host of this show, David Gregory.  David is quite active on Twitter, sending out 20 Tweets a day some times, including right before he goes on the air with “Meet the Press.”  David already has more than 45,000 followers, including yours truly. 

Senator Claire McCaskill is number two on the list.  She‘s the most popular Twitterer among her Capitol Hill colleagues.  She‘s got more than 5,700 followers. 

According to “Politico,” the most influential Twitterer in Washington, D.C., although I don‘t think I agree with this, Karl Rove, the man known as Bush‘s Brain.  He joined Twitter in January and has about 11,000 followers.  He provides updates on the future of the Republican party and even jokes about his former colleague, Dick Cheney.  Rove, however, still hasn‘t responded to my Twitters, daring him to respond to some of the policy hypocrisy that we‘ve tapped him with in recent weeks.  Oh well. 

What a perfect way to segue into our final segment, Twitter time.  The panel is back, Steve Hildebrand, A.B. Stoddard and Terry Holt.  Terry, a couple questions for you about bank nationalization.  First of all, what does it mean for ordinary consumers?  Secondly, if Obama embraces it, will the Republicans label Obama a socialist? 

HOLT:  It depends on how he does it.  He has to act boldly to get credit markets moving again.  If he can do that, he‘ll get Republican support, and the American people‘s money will be preserved for their savings.  I think he‘s got to get out of the politics of controlling people‘s pay and telling companies how they ought to deal with their own internal problems.  Over-regulation is going to kill whatever they try to do. 

SHUSTER:  A.B. Stoddard, question for you via Twitter.  A lot of people want to know about Washington Governor Locke, Washington state.  What‘s the chatter about the governor possibly being the Commerce secretary? 

STODDARD:  Well, apparently he is probably someone who‘s paid his taxes.  I‘m going to tell you that without seeing his record.  I think that he has a good reputation as a governor and has long-standing executive experience in the state, and really probably a good choice to pick someone who wasn‘t a huge political superstar like Bill Richardson and obviously the tricky pick of Senator Judd Gregg, which went awry.  I‘m sure they‘ve done their homework and found someone who is very solid.  And he has an excellent reputation.  Good luck to him in the process of a vexed position, as we know. 

SHUSTER:  Steve Hildebrand, in ten seconds, a couple people want to know, how come you‘re not part of the Obama administration. 

HILDEBRAND:  I live back in South Dakota.  I have a wonderful life there.  I am going to work hard to help the president with climate change issues, with health care, with getting this economy back on track.  I don‘t have to be in government to do that. 

SHUSTER:  Good for you.  Steve Hildebrand, Terry Holt, and A.B.  Stoddard, thank you all.  Terrific panel.  We appreciate it.  That is the view from 1600 PENNSYLVANIA AVENUE.  I‘m David Shuster.  Thank you for watching.  We‘ll see you back here tomorrow night, 6:00 p.m. Eastern. 

Remember, you can get the latest.  Go to Shuster.MSNBC.com.  A great briefing if you want to know what‘s on the show.  Also if you want to Twitter, we‘ll be online.  Go to Twitter.com/Shuster1600 as soon as the show is over.  I‘m David Shuster.  “HARDBALL” with Chris Matthews starts right now.

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

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