updated 2/27/2009 10:20:09 AM ET 2009-02-27T15:20:09

Guest: Jay Rockefeller, Allyson Schwartz, David Walker, Patrick Creadon, Michael Smerconish, Michelle Cottle, Collin Levy, Chuck Todd

DAVID SHUSTER, HOST:  The president unveils his budget.  Republicans ratchet up their complaints. 

Day 38 of the Obama administration.

Hello, everybody, and welcome to the show.  I‘m David Shuster. 

Today, President Obama formally released a $3.5 trillion spending blueprint for the fiscal year that begins in October.  While the details must still be hammered out with Congress, the contours underscore President Obama‘s priorities on energy, health care and education.  And it‘s all a reminder that elections have consequences. 

The revenue side includes higher taxes on the rich and a crackdown on offshore tax havens.  Still, the plan projects the largest single deficit in U.S. history -- $1.75 trillion next year. 

And while deficits were not an issue for Republicans the past eight years, now the GOP is promising a fight.  We will get to that in a moment. 

But first, this day began when the president‘s budget director, Peter Orszag, literally walked the document into the U.S. Capitol. 

(BEGIN VIDEO CLIP)

BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES:  This budget is an honest accounting of where we are. 

Today, we have to focus on foundations. 

I don‘t think that we can continue on our current course. 

REP. NANCY PELOSI (D-CA), HOUSE SPEAKER:  So we are saving money by making this investment. 

UNIDENTIFIED MALE:  The president‘s got it exactly right.

REP. JOHN BOEHNER ®, MINORITY LEADER:  I think we just ought to admit we‘re broke.

UNIDENTIFIED MALE:  They are scoring a number as a savings against spending which is never going to occur. 

TRENT LOTT ®, FMR. U.S. SENATOR:  But to say that you solve it by getting rid of earmarks is just not accurate. 

BOEHNER:  The era of big government is back, and Democrats are asking you to pay for it. 

(END VIDEO CLIP)

SHUSTER:  For more on all of that, let‘s bring in now NBC News Chief White House Correspondent and Political Director Chuck Todd.  He joins us live from the north lawn. 

And Chuck, as far as the initial criticism from Republicans—too much, the deficit‘s too high—how is the White House dealing with it? 

CHUCK TODD, NBC NEWS POLITICAL DIRECTOR:  Well, I think they feel OK about how this is playing.  I mean, they are a little concerned about the tax debate in particular.  Obviously, Republicans are jumping on that. 

They knew the Bush tax cuts were going to be allowed to expire, but the provision in there to fund the health care mechanism here, the fund they are trying to create in order to pay for the switchover for when actual health care legislation gets passed, is based on raising—closing a tax break for those same income earners, $250,000 or more.  And so Republicans are jumping on that as a tax increase.  So they‘re a little concerned on that. 

I think they are OK with the fact that there has been not the focus—I think they‘re a little concerned there might be a lot of focus on the fact that there is a possibility of a $750 billion additional bailout for the financial system, and the fact that that isn‘t dominating things right now.  I think that, all in all, they feel OK about this rollout. 

SHUSTER:  Chuck, I want to play for you something that Representative Hensarling said earlier today and then talk to you about it on the other side. 

Watch. 

(BEGIN VIDEO CLIP)

REP. JEB HENSARLING ®, TEXAS:  Well, the Democrats have just completed a trifecta of trillions: a trillion-dollar stimulus plan, a trillion-dollar appropriations bill, and a trillion-dollar deficit.  Rarely—I cannot remember a time in American history where so few voted so fast to spend so much. 

(END VIDEO CLIP)

SHUSTER:  Chuck, it‘s a great sound bite, but is the White House essentially betting that the public will have some patience both with the economic problems and sees this big spending as really the only solution to get us out of it? 

TODD:  Well, I think that that‘s right.  And the deficit issue hasn‘t popped up as a campaign issue.  Frankly, not since 1992, when our friend Ross Perot had those charts and graphs out, did the public start caring about the deficit. 

That‘s not to say they might not if and when the economy gets better, or if there is this sense that the deficit is somehow slowing down the economy.  But right now, that doesn‘t seem to be the case.  And so I think they are betting that this deficit issue won‘t be—won‘t hurt them. 

And frankly, Republicans, because they were the ones in charge for the last eight years, they were the ones pulling the levers of government basically for most of the last eight years, that they are not going to have credibility yet with the voters.  Maybe four years, six years, eight years down the road, that can change, but over the course of the next year or two, I think the Obama White House and Democrats in general feel as if that the attack from the Republicans are going to ring hollow. 

SHUSTER:  NBC News White House Correspondent Chuck Todd, also the NBC News political director. 

Chuck, thanks, as always.  We appreciate it. 

TODD:  All right, David.  You got it.

SHUSTER:  President Obama and his team say the soaring deficit is part of the reckoning.  A painful, upfront sum to jump-start our economy.  But are we digging a hole we can‘t get out of?  And as millions of Americans are trying to get out of their own holes, cleaning up their debt and finances, they are being targeted by predatory lenders who have created a new cottage industry in home rescue and credit repair scams. 

Joining me now, someone uniquely qualified to talk about all of this, West Virginia Senator Rockefeller, chairman of the Commerce and Intelligence Committees and a member of the Finance Committee. 

Senator, I want to talk about the budget in a second.  But first, as consumers and families try to fix their own finances, you held a hearing today on predatory financial rescue and repair companies.  What are the most common scams, and what do you think the government should do about it? 

SEN. JAY ROCKEFELLER (D), WEST VIRGINIA:  The worst the economic crisis is for, you know, the American people, the more the fraud people and the corrupt people come in and try to take advantage of them. 

We had a witness today, 67 years old.  She had a doublewide house.  Her husband died.  Tried to borrow money and tried to refinance. 

You know, she got all kinds of charges for it.  Then she went to some other company in Texas.  They charged her $5,000 before they even opened. 

That‘s two criminal acts.  And the FTC, which is meant to be overseeing all of this, just isn‘t doing it.  So, I mean, we have to pay attention to this. 

Swindling people, taking advantage of people, because they are poor and they have no way to defend themselves, and because they can‘t—you know, lot of them don‘t have Internet capacity, and therefore, they are just getting swindled.  It‘s fraudulent.  It‘s outrageous.  It‘s infuriating.  People should go to jail for it. 

SHUSTER:  Are you satisfied that this budget has the proper resources to either give the Department of Justice or whoever, the FTC, the proper authority, the proper resources to go after these scammers, given that we are in this scam-rich environment, as a lot of people put it? 

ROCKEFELLER:  I don‘t know.  The answer is they will.  We‘ll make sure of it. 

And secondly, it‘s not just a matter of money, it‘s a matter of will.  It‘s a matter of acting like cops. 

The FTC has been acting too much like arbitrators or talkers or whatever.  And we need cops in there, a cop mentality, arrest these people, put them in jail. 

SHUSTER:  Now, regarding the budget and the soaring deficit, are you OK with a $1.57 trillion deficit for this year? 

ROCKEFELLER:  I have to be because a lot of it is inherited.  The president is doing the right thing.  It‘s the most transparent budget we have ever had before, and it‘s just going to a really, really strong series of bold actions he‘s going to take to work our way out of it. 

The main part of it is health care.  So he sets aside $634 billion.  He doesn‘t set aside a plan.  He leaves that up to the Congress and the White House to work out together.  But he‘s saying here is a whole lot of money, more money than we have ever seen for health care, and let‘s go ahead and try to solve it. 

Is it going to be all the money we need?  I don‘t know, but it‘s the biggest start we have ever had on health care, and health care is the most important thing we can do. 

SHUSTER:  And it‘s such a fundamental shift in strategy from the way the Clinton administration tried to dealing with health care in terms of first crafting up the plans themselves in secret, and then presenting it to Congress. 

Explain—does this strategy of essentially saying, OK, here‘s the money, you guys figure it out, what does that do in terms of increasing the chances for getting health care approved? 

ROCKEFELLER:  It makes it much better.  Look, I‘m head of the subcommittee on Finance—and on health and finance.  I‘m working with a group of nine that meets all the time.  We‘re having health care hearings in the Finance Committee almost every day.  They are doing it in the House. 

It‘s going to be a combination.  We‘re going to use White House; we need their ideas.  They‘re going to use us; they need our ideas.  But the point is, $634 billion has been put aside to take on some of these—you know, these huge needs that we have in health care. 

SHUSTER:  As far as the economy is concerned, the president‘s budget director, Peter Orszag talked about perhaps another series of jolts that may be needed.  Watch. 

(BEGIN VIDEO CLIP)

ORSZAG:  There is a placeholder for potential additional financial stabilization efforts in the budget.  We hope that it will not be necessary.  We have no plans to go to Congress at this point to ask for additional money.  And again, the hope is that it will not be necessary. 

(END VIDEO CLIP)

SHUSTER:  Another financial stabilization set of funds.  What‘s he talking about?  Is he talking about more stimulus?  Is he talking about bank bailouts?  And what‘s your reaction? 

ROCKEFELLER:  I don‘t know, but my reaction is positive because the president said that from the very beginning.  He has always said we may need to do more. 

He has never said the stimulus is going to be enough.  He‘s never said the banking bill is going to be enough.  He‘s never said the housing or health care is going to be enough. 

He says he is going to do everything it takes to get us out of our doldrums, put this country back on track, and he means it.  And it‘s a completely transparent budget, a completely transparent budget.  I‘ve been here 24 years.  I have never seen such a transparent budget. 

SHUSTER:  But doesn‘t that argue that perhaps the stimulus bill that just passed should have been bigger? 

ROCKEFELLER:  Maybe it should have been.  And he‘s also calculated that.

He says we may have to come back and do more. 

Look, what President Obama is trying to do is to change—bring the real change he talked about for two years running for the office to the people, to bring that change.  And that means tremendously bold action, a great deal of bold action, no sitting on the sidelines, and you do what it takes, what it requires, to solve these problems. 

And there are problems with energy, there are problems with housing, there

are problems in banking, there are problems in health care, there are

problems in everything.  And he inherited a lot of in mess.  They were just

it was just ignored in the last administration. 

So he‘s got a big job, and he‘s up to it, and he‘s determined.  And I think he‘s on the right track. 

SHUSTER:  Senator Jay Rockefeller. 

Senator, thanks so much for joining us.  Good luck in going after these scam artists.  And let us know what we in the media can do to bring some attention to these scams and warn people about what they need to be on the lookout for. 

And thanks again for joining us. 

ROCKEFELLER:  I surely will.  Thank you.

SHUSTER:  OK.

The fight over government revenue, raising taxes on the rich.  But even if you think they should pay more, are any new taxes right for right now?  We‘ll ask Congresswoman Allyson Schwartz, the vice chair of the House Budget Committee.

And later, “Hypocrisy Watch.”  Senate Minority Leader Mitch McConnell slammed President Obama‘s budget because it grows the government, but the senator wants to keep the same budget for Republicans in his chamber despite seven fewer Republican seats. 

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

That and more, ahead on 1600.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.

The budget drop today included news that is music to the ears of some of President Obama‘s progressive supporters.  An adios to Bush-era tax cuts for the wealthiest Americans. 

President Obama wants to reinstate those taxes when the Bush-era plan expires in 2011.  But at a time when the White House is trying to get the country‘s economic engine back on track, does it make sense to essentially raise taxes on anyone? 

Here‘s Republican Minority Leader John Boehner. 

(BEGIN VIDEO CLIP)

BOEHNER:  Everyone agrees that all Americans ought to have access to affordable health insurance.  But increasing taxes in the middle of an economic recession, especially on small businesses, is not the way to accomplish that goal. 

(END VIDEO CLIP)

SHUSTER:  Joining us now is Representative Allyson Schwartz of Pennsylvania.  She‘s vice chair on the Budget Committee. 

And Congresswoman, welcome to the show. 

REP. ALLYSON SCHWARTZ (D), PENNSYLVANIA:  Thank you.

SHUSTER:  Let‘s start with that very point.  Is it ever appropriate to raise taxes in the middle of an economic recession and given we are talking about 2011?  But in general, if we are still struggling, does it make sense to raise taxes on anybody? 

SCHWARTZ:  Well, what it does make sense to do—and this is what the president has laid out today—is that it makes sense to get to this economy back on track and to make sure that we have enough money to operate our government, meet our obligations, and to help make the investments that this country needs to be3 economically competitive in the future.  And that‘s talking about energy and energy efficiency and alternative fuels, energy independence.  It‘s talking about health care and containing health care costs, and making sure that Americans have access to quality health care.  And it means making sure we that we invest in education. 

So, the provisions of this budget do that.  And they make sure that we are honest with the American people that we have to pay for some of what we spend. 

Now, we look for cuts everywhere we can, and in any of the departments.  And the president outline that as well.  But what‘s exciting about this budget is that it gets control of this budget and the whole fiscal concerns of the nation, and starts to rebuild this economy. 

SHUSTER:  But what about the argument that, look, if it‘s important to spend money in education or in energy or in health care—I mean, you already have a $1.75 trillion budget—how is it helpful to essentially take money from anybody and give it to the government in terms of taxes?  I mean, if the idea is you need to stimulate the economy as much as possible, even if you agree that rich people, they should be paying more than they are paying now, that‘s fine.  But why do that in the midst of an economic recession? 

SCHWARTZ:  Well, the fact is that we don‘t have enough money to meet our obligations, and we are not making the investments that we need to make to be economically competitive.  What we knew and certainly the Bush administration knew and planned for, the tax cuts on the wealthiest Americans to expire in 2011.  We‘re going to let those tax cuts expire.

And, you know, look, when you hear the Republicans on the House side in particular talk about not liking this and not liking that, that‘s what they have been doing since the beginning of this administration.  It‘s really easy to say no to everything, but that‘s not going get us out of this terrible economic crisis we‘re in, nor is it going to build for the future. 

For eight years, we‘ve had the Republicans cutting taxes on the wealthy and saying that‘s going to grow our economy.  And look where we are.  We don‘t have enough money to meet our obligations that all of us agree that we—they even say that we ought to be doing and, of course, we don‘t have enough money to really make those kinds of investments in the future.  And our economy is struggling.

SHUSTER:  As far as the revenue side—I hear you.  As far as the revenue side is concerned, there is an issue in terms of charitable organizations. 

They‘re having a tough time in this economic climate.  Some are worried about a provision which will limit the amount wealthy Americans can claim in deductions. 

“The administration‘s budget includes a proposal to limit the tax rate at which high-income taxpayers can take itemized deductions to 28 percent—and the initial reserve fund would be funded in part through this provision.  This provision would raise $318 billion over 10 years.”

Again, how do you explain to charitable organizations who are worried that the wealthy guys down the street, or women, who might be giving them lots of money, might say, you know what, ,I‘m not going to get that money off my taxes so forget about it? 

SCHWARTZ:  Well, let‘s hope that doesn‘t happen.  But let me also be clear that everyone would be getting this same tax deduction, whether you‘re wealthy or whether you‘re more middle income. 

We‘re going to look at that tax provision as we‘re going to—really, it‘s our responsibility as members of Congress.  I‘m on the Ways and Means Committee, I‘m on the Budget Committee, as you pointed out.  This is the starting point. 

We‘re going to look at the president‘s proposal.  We‘re excited about the kind of investments he‘s making where he‘s taking us to a path forward.  But we‘re going to look at every one of those cuts in the programs—hopefully we can do many of them—and we‘re also going to look at the tax provisions.  And then we‘re going to reach agreement.  And that‘s our job as members of Congress, and it begins today. 

SHUSTER:  Representative Allison Schwartz of Pennsylvania, vice chair of the Budget Committee.  She and her colleagues will be filling in some of the details of this budget in the next few months.  Congresswoman, thanks for coming on.  We appreciate it. 

Up next, Senate Minority Leader Mitch McConnell is criticizing the size of government in this new budget.  But he refuses to cut the budget for Republicans in the Senate despite the election results.  We will explain in hypocrisy watch. 

Plus, folks across the Internet are abuzz with talk that Louisiana Governor Bobby Jindal reminded them of someone.  Late night television seems to agree.  More 1600 ahead.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.  In the on-going debate over the budget, Congressional Republicans are hammering the growing size of the federal government.  That takes us to tonight‘s hypocrisy watch.

First, the background.  Republicans Senate Minority Leader Mitch McConnell issued a statement today, expressing concern about what he calls unprecedented spending increases.  Quote, “we should be following the  lead of American families during these tough times, and cut unnecessary spending.”

Sounds great, but for McConnell, it appears to depend on his definition of unnecessary.  You see the budget for Congressional operations is going to be 10 percent higher this year, up to 4.4 billion dollars.  Why?  Here‘s Senate Majority Leader Harry Reid. 

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MAJORITY LEADER:  We had a situation.  You should direct that question to Senator McConnell.  They wanted to maintain a lot of their staffing, even though they had lost huge numbers.  And the only way we could get it done is do what we did.  So you can direct that question to Senator McConnell. 

(END VIDEO CLIP)

SHUSTER:  Senator McConnell‘s leadership office acknowledges the budget for the Republican office and committee staff is the same as last year.  That‘s right, it is the same, even though Republicans lost seven seats in the fall election and may lose another that‘s unresolved.  In other words, fewer Republican senators, but just as many Republican staffers. 

To be fair, those staffers are not responsible for as much of the budget increase as Democrats claim.  But keeping those Republicans staff while accommodating the new Democratic staff means growing the budget by tens of millions of dollars.  And this is due to the GOP, the self-proclaimed party of fiscal responsibility. 

Senator McConnell, when you demand the government cutback, and then, despite losing seven seats, you refuse to cut back in the GOP Senate staff, that‘s hypocrisy, and it is wrong. 

Up next, what happens if somebody decides to cash in on America‘s IOUs?  There is an informative and entertaining new documentary about the national debt.  We will talk to the filmmaker and one of the men featured in the movie. 

Plus, who are conservatives turning to in this hour of exile?  Joe the Plumber, a man who didn‘t have a proper license and owed back taxes was given a major speaking slot today at a big conservative conference.  That‘s ahead on 1600.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE.  As the White House and Congress scramble to pull our nation out of the current financial crisis, an even greater economic reckoning could be around the corner.  We learn today that the budget, the bank bail outs and a massive stimulus plan, will increase the national deficit nearly 1.8 trillion dollars, the highest in U.S. history.  It projects the total national debt rising in ten years to 23 trillion. 

Anti-deficit crusaders say it won‘t be long before the U.S. hits its breaking point.  And a new documentary, “I Owe USA,” is trying to sound the alarm.  Watch.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  I would argue that the most serious threat to the United States is not someone hiding in a cave in Afghanistan or Pakistan, but our own fiscal irresponsibility. 

UNIDENTIFIED MALE:  What hit the economy first was a housing slump.  Fears spread to Wall Street.  Consumers tightened their purse strings. 

UNIDENTIFIED MALE:  U.S. Federal Reserve cut its key interest rate by half a point. 

UNIDENTIFIED MALE:  The I word, inflation is coming to the fore.  

UNIDENTIFIED MALE:  Major developments in the lending crisis in the U.S.

UNIDENTIFIED MALE:  Oil and gold prices are spiking. 

(CROSS TALK)

(END VIDEO CLIP)

SHUSTER:  Joining us now, Patrick Creadon, the director of “I.O.U.S.A.,” and David Walker, who is the former comptroller general of the United States, and head of the Government Accountability Office.  He‘s now the president of the Peterson Foundation, and a crusader on this issue. 

David, let‘s start with you.  First of all, how much money can we borrow before, for example, we start to threaten the credit rating of the AA Treasury, in terms of these IOUs? 

DAVID WALKER, FMR. US COMPTROLLER GENERAL:  We may find out before too long.  We‘ve gone from a 162 billion dollar deficit two years ago to 455 last year to 1.8 trillion this year.  We now have about 11 trillion in total debt, and we have another 45 trillion off balance sheet obligations. 

The problem is we don‘t control our own destiny anymore, because we are relying on China, Japan, OPEC nations to finance our debt. 

SHUSTER:  Patrick, in the creation of this documentary, do you envision that time, for example, when China decides to launch an economic war by saying, OK, we are going to dump the IOUs that we hold from the United States Treasury? 

PATRICK CREADON, “I.O.U.S.A.” DIRECTOR:  Well, that‘s the kind of thing that certainly happened in the past to other countries.  And that—that happened during the Suez Canal Crisis in the ‘50s to England.  And that‘s certainly something we hope would never happen to the United States.  But like any other person or group of people that borrows beyond its means, you are putting yourself in jeopardy.  And the people who are your bankers end up being the people that oftentimes call the shots. 

That‘s certainly something that I think most of us do not want to wake up one day, where someone else is telling our country what we need to do. 

SHUSTER:  In case people don‘t understand, here is the percentage of foreign owned debt, compared to what it was in 1945.  Of course, in 1945, it was zero percent; 2007, it was 44.5 percent.  Again, Patrick, explain the danger here. 

CREADON:  Well, I think the danger is that you want to—you always want to be able to act and behave from a position of strength.  And if you are a country that is so reliant on borrowing money year after year, eventually your bankers are the ones that will tell you what you can do and what you can‘t do.  And I think that people have been saying for a long time, well, that would never happen.  But we live today in a much different world than we did six months ago. 

The unthinkable is much more thinkable today.  So I think America—you know, President Obama is hopefully going to lead us down a road where we can get out of this short-term financial crisis that we are in.  But once we get past this, we need to really look at our long-term financial health.  That‘s something that I want to point out that David Walker is really one of the leaders on.  That‘s why we chose to make him a star of our film.  He is, in my opinion, a national hero. 

SHUSTER:  David, I want to get your reaction to, speaking of President Obama—there‘s so much contradictory talk today about the deficit and how important is it right now to deal first with the economic crisis or pay attention to the deficit.  Watch this. 

(BEGIN VIDEO CLIP)

OBAMA:  We will save billions of dollars by rolling back tax cuts for the wealthiest Americans, while giving a middle-class tax cut to 95 percent of hard-working families. 

UNIDENTIFIED MALE:  Raising taxes in a recession causes job loss and extends and prolongs recessions. 

OBAMA:  While we must add to our deficits in the short term to provide immediate relief to families and get our economy moving—

REP. JOHN BOEHNER ®, MINORITY LEADER:  we are broke.  We can‘t continue to pile debt on the backs of our kids and grandkids. 

(END VIDEO CLIP)

SHUSTER:  Dave, who is right there? 

WALKER:  It‘s a combination.  There‘s a little bit of a right from each of them.  The bottom line is this: we are in a recession.  We face some unprecedented challenges with regards to financial institutions, with regard to housing and the ripple effect.  The deficit debt levels are going to go up dramatically in the short term.  It is disappointing.  It‘s a matter of concern.  But it is understandable. 

What we have to do is to take steps to put our own financial house in

order.  President Obama says he wants to do a grand bargain.  He wants to

re-baseline the base of the federal government.  How is he going to do it? 

We need a fiscal future commission.  We need it now. 

SHUSTER:  David Walker, former comptroller of the United States, head of the Government Accountability Office, now with the Peterson Foundation, and Patrick Creadon, the director of “I.O.U.S.A.,” thank you both for coming on and congratulations on a terrific documentary.  It‘s a complex issue.  But Your documentary is both informative and entertaining.  And we appreciate your coming on and sharing some of that with us tonight. 

CREADON:  Thank you, David. 

WALKER:  Good to be with you. 

SHUSTER:  You‘re welcome.  Spending, stimulus and deficit are what everyone is talking about on this day, when President Obama released his 3.5 trillion dollar budget. 

For more on that, let‘s bring in our panel.  Michael Smerconish, nationally syndicated radio talk show host, and columnist for both the “Philadelphia Enquirer” and the “Daily News,” Collin Levy, senior editorial page writer at the “Wall Street Journal,” and Michelle Cottle, senior editor of the “New Republic.”  

Michelle, let‘s start with you.  Do you think Americans right now really care that much about a deficit?  Or are they more concerned about simply getting out of the economic hole we are in? 

MICHELLE COTTLE, “THE NEW REPUBLIC”:  I think option B.  Ordinarily you can talk about deficits and wanting to balance the books and things like this.  But people are scared right now.  They want something done and they want something done fast.  They want to see that money is coming back to them in tax cuts or rebates and things like this.  They will worried about the deficit, the long-term projection later. 

SHUSTER:  Collin Levy, is that the appropriate approach for Americans, to essentially push aside the deficit right now, focus on what they can do, what our government can do to fix the economy?  

COLLIN LEVY, “THE WALL STREET JOURNAL”:  Well, we do have to focus on what we can do to fix the economy, no question.  There is an element here where the deficit is growing to the point where these are almost make-believe numbers, and they have to be taken very seriously, as we talked about earlier on the show, that they can actually affect the rating of the United States. 

And I think when you look at, from the tax standpoint, what‘s happening right now, these tax increases are also going to be part of the problem down the road, if you don‘t have—give businesses and small businesses the chance to really help in the economic recovery, the recovery won‘t be sustainable.  It‘s a pure government action. 

SHUSTER:  Michael Smerconish, in order for some of the nightmare to happen with the size of this deficit, China, or an Arab country that owns a lot of this debt would have to say, you know what, for whatever reason, we are going to decide to stick it to the United States and cash in these IOUs and say enough.  Do you envision that possibly happening?  Or—give us your sense.  Is that something Americans should be concerned about? 

MICHAEL SMERCONISH, RADIO TALK SHOW HOST:  Frankly, I have no idea.  I mean, this is all beyond me.  I think it is beyond most Americans.  And what‘s amazing to me, David, is the level of certainty with which so many people are speaking about a subject that clearly they can‘t know anything about.  Who is the man or the woman that a year ago or two years ago told us the economy was going to go to hell in a hand basket?  As far as I‘m concerned, nobody did. 

And yet, you listen to the Republicans, and you listen to the Democrats.  They are diametrically opposed to one another.  But to a certainty, they know exactly what we need to be doing now.  I don‘t have a clue. 

SHUSTER:  Collin Levy, I mean, Vice President Cheney said deficits don‘t matter.  All of a sudden, they do matter to the GOP.  There is a dissonance there, right? 

LEVY:  Well, I think the real issue here is that what we feel right now is a certain sense of whistling past the graveyard.  You know, the president came out with a very ambitious agenda and, you know, you hear that agenda and think that we‘ve got all the money in the world.  These are things that Democrats have been wanting to do for a long time.  And I think that people are looking at that and going, well, these are—these may be important things.  Even Democrats may say, these may be very important things to do, but do we really have the ability to sustain that long term? 

SHUSTER:  Michelle Cottle, yet, elections matter.  Democrats get to do what they want because they are the party of power.  They picked up the seat. 

COTTLE:  Exactly.  When we are talking about rolling back the Bush tax cuts that they had during his administration, this is exactly what you are seeing.  When Bush was in office, he got to cut tax on the wealthy.  And he factored in that they would expire.  And that‘s exactly what the Obama administration is going to let them do. 

You go with the party principals.  Yes, there are projects in there that the Democrats have wanted to do and with great—you know, great trying economic times means great opportunities, to some extent.  They are going to view this as an opportunity to try out some of the infrastructure investment that they have been wanting to do anyway. 

LEVY:  If I could just say, too, the thing about the tax cuts is that, you know, President Obama is really counting on economic recovery to help make up—you know, to make sure that the tax cuts bring in enough—I‘m sorry, the taxes that he is raising actually bring in enough money.  If they have, you know, the effect that many are predicting, that they will sort of suppress the economy, then they‘re actually not going to give as much money to his programs as he‘s expecting. 

SHUSTER:  Right.  But the flip side of that is that President Bush counted on the tax cuts for the wealthy stimulating the economy, and there‘s really no evidence that they did.  But, in any case, we are going to talk about the Republican side of this coming up.  And our panel is staying with us. 

Up next, a big conservative conference is here in Washington, D.C.  There was hardly any talk about jobs, housing or health care.  But there was a lot of attention paid to Joe the Plumber.  What on Earth is happening to the conservative right? 

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

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  This is the Jack McBrayer response to the Internet response to the Republican‘s response to the president‘s address to Congress. 

JACK MCBRAYER, ACTOR:  I just want to say, I have been reading all the Internet hoo-ha about how this is supposed to be.  I just don‘t get it.  I sound more like an out-doorsy Lumber Jack or a Clark Gable.  This Jindal guy sounds like a real goober-natorial representative. 

(END VIDEO CLIP)

SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE.  The past 48 hours have not been a time Louisiana Governor Bobby Jindal, with even Kenneth the Paige, as you saw, of “30 Rock,” getting into the Jindal joke-fest.  Governor Jindal, and I‘m not kidding here, has not been available for comment, having, according to his office, flown to Disney World for a short vacation with his family. 

Meanwhile, today, the Conservative Political Action Conference, long a Washington coming out party for presidential hopefuls, kicked off in Washington.  And Jindal‘s rivals to lead the Republican revival and win the 2012 GOP nomination are beginning to roll into town. 

Let‘s welcome back our panel, Michael Smerconish, Collin Levy and Michelle Cottle.  One of the featured speakers today was Joe the Plumber.  And here‘s what he said when one of our crews caught up with him.  Watch. 

(BEGIN VIDEO CLIP)

JOE WURZELBACHER, JOE THE PLUMBER:  I don‘t see anybody as far as a leader in the Republican party right now.  They are afraid to say anything.  They are more worried about being politically correct.  They are more worried about their special interest groups.  They are not worried about the American people.  No way, no shape, do I ever hear anything about that.  They talk a good game, but I see no action. 

(END VIDEO CLIP)

SHUSTER:  Collin, why on Earth are conservatives giving this guy a platform to speak at this conference? 

LEVY:  I think that he actually got exactly to the heart of why people responded to him, which is that he is just a regular straight-talking guy and, you know, he likes—

SHUSTER:  Actually, he is not.  He didn‘t have a proper plumbing license.  He owes back taxes.  That‘s not regular, even amongst the world of most of us.  Again, why do conservatives want to hold this guy out as an example?  It doesn‘t make any sense to me.

LEVY:  Well, I think he just has that sort of folksy quality that a lot of people in the Republican party respond to.  I think you saw the same kind of response, whether you liked her or hated her, to Sarah Palin.  She had a folksy quality.  She sounded like, you know, real Americans.  I think that‘s what—that‘s the reason they continue to go back to him. 

SHUSTER:  Michael Smerconish, if having a folksy personality is really the only benchmark now in the Republican party, the GOP is in even more serious bit of hurt than we imagined. 

SMERCONISH:  I think it is minute 16 for the plumber.  Somebody needs to tell him that.  You ask why would they bring him in?  Why do you bring in a juggler for an after-dinner speech to warm up the crowd?  I imagine it was pure novelty. 

David, he happened to have made sense with what he said.  None of the Republican leadership has resonated I think with the American people.  Consider that all of those Republican members of the House voted against the stimulus package, but none has distinguished himself or herself as articulating something that‘s intelligible to the American people as an alternative.  The closest I think that anybody has done is this fellow Santelli on cNBC, who really had a Howard Beal moment, and struck a cord with a lot of folks. 

SHUSTER:  The guy who struck the wrong chord the other night was Bobby Jindal.  Even now, Rush Limbaugh is blasting people in the Republican party who are criticizing Jindal‘s response speech.  Here is Rush from yesterday.  Watch. 

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST:  So we have a guy, Bobby Jindal, 37 years old, first time on the national stage.  Shows up last night to make a response to the Messiah.  People on our side, I‘m talking to you.  Those of you who think Jindal was horrible?  You think—in fact, I don‘t want to hear from you ever again.  If you think that Bobby Jindal was bad and what he said was wrong or not said well, fine.  Folks, style is not going to take our country back. 

(END VIDEO CLIP)

SHUSTER:  Michelle, your view of the Republican civil war that‘s emerging? 

COTTLE:  If were Rush, I wouldn‘t be throwing out people who thought Jindal did a bad job, because that‘s pretty mu much everybody.  Now, that does not mean he can‘t recover.  We can all remember back when George W. Bush did a terrible job at a Republican conference, and everybody was kind of disappointed, because they had such high hopes for him.  So, you know, the guy is young.  He will make a comeback. 

At this point, Republicans are desperate for someone to come lead them out of the wilderness.  They really, really were hoping that he was going to be their guy.  And I think that it just kind of—expectations were high.  The hopes were high.  He let them down.  They just, you know, turned brutal. 

SHUSTER:  Our panel is going to stay with us.  And we have another segment ahead.  Before we end this segment, it is time for our Call for Change.  And there is a big one coming now from Defense Secretary Robert Gates.  NBC Pentagon correspondent Jim Miklaszewski reports that Gates has decided to lift the ban on media coverage of US war dead returning to the United States.  Gates will leave the decision entirely to the families of the deceased. 

The ban on media coverage at Dover Air Force Base in Delaware was put into place nearly 18 years ago by President George H.W. Bush.  It was upheld by the Clinton administration, the Bush 43 administration and by federal court.  The Pentagon never consulted with families of those killed and critics argued the ban was intended to prevent media coverage that might erode public support for any armed conflict. 

The decision by Secretary Gates now will not automatically permit coverage.  In the case of where there are multiple remains being returned, if any one family objects to coverage, the ceremony will be off-limits.  However, this decision marks an important milestone.  There is nothing more serious than war and its consequences. 

Coming up, Ronald Reagan did it and so did the Govern-ator.  Could Val Kilmer be next?  The future career aspirations of the one-time Batman when 1600 PENNSYLVANIA AVENUE continues. 

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.  Here is a look at what‘s on our radar.  President Obama had the chance to huddle with the Chicago bulls this afternoon.  The hoopster in chief met with his hometown team in the Blue Room of the White House late today.  Just ahead of inauguration day, Chicago paid tribute to their own president-elect, by featuring the Bulls jersey with Obama 44 on the cover.  The Bulls are playing the Washington Wizards on Friday.  For those of you wondering, there was no Chicago style pickup game for the president.  We know he loves to play, but he certainly has not gotten that dream court he spoke about with Jimmy Kimmel last summer. 

(BEGIN VIDEO CLIP)

JIMMY KIMMEL, TALK SHOW HOST:  Should you become president, will you replace the current president‘s bouncing castle with a basketball court at the White House? 

OBAMA:  Well, I hear there is a bowling alley.  Obviously, that hasn‘t gone too well.  We are getting rid of the bowling alley.  Basketball court in the White House. 

(END VIDEO CLIP)

SHUSTER:  We think those basketball court plans have been sidelined at least for now. 

Moving on.  Holy career change, Batman.  Another sign today Val Kilmer—

Val Kilmer is actually serious about running for governor of New Mexico in 2010.  The former “Batman Forever” star has reportedly hired a political strategy firm to handle communications and media as he considers a run.  Kilmer owns a sprawling 6,000-acre ranch near Sante Fe, New Mexico.  Earlier this month, he told the Associated Press, quote, “I‘m looking for ways to be contributive.  And if that ends up being where I can make a substantial contribution, then I‘ll run.”

Contributive; he said it. 

Now we have this Twittering update.  Last night, we asked if it is rude to Tweet during a presidential address.  Apparently one lawmaker, Missouri Senator Claire McCaskill, has been scolded for her Twittering at the speech.  Today, she is addressing that complaint through a Tweet, of course.  McCaskill wrote, “OK, OK, mom is upset that I was rude at the president‘s speech regarding Tweets.  For the record, I Tweeted before, at very beginning and after speech.  I wanted to listen.”

Maybe the manners involved in Tweeting are a generational thing.  But we do know this.  Mom is always right. 

That leads us to Twitter time.  Let‘s welcome back our panel, Michael Smerconish, Collin Levy and Michelle Cottle. 

Michael, lot of questions about the GOP and whether they are in disarray. 

The first one to you: what‘s wrong with the GOP?  Are they in disarray? 

SMERCONISH:  Can I first respond to Val Kilmer?  I‘m holding out for Adam West and Kirk Ward.  If they should come back and run for the president and vice presidency, I‘m all for them. 

The GOP needs to speak with one voice and have a cohesive message, identify some leadership that can put forth an alternative, and break out of this mold of being the party of no, because, like it or not, that is how they are being perceived right now. 

SHUSTER:  Couple of questions to you, Michelle, about the D.C. vote.  The Senate voted today to give D.C. essentially voting rights in the House, by adding also an extra House vote to Utah.  Where is this headed? 

COTTLE:  Well, you know, it is going to go through all of this.  And if it gets to Obama‘s desk, obviously, he is all for it.  Then we are going to start the legal battles over this.  It is always something—something generally happens and this gets derailed.  Even if this gets all the way through, we are going to see some legal battles before anything actually gets cast. 

SHUSTER:  Yet, a big deal that the Senate simply took this up and voted, because something they have not done before.  For everybody who lives in the District of Columbia, for the record, no, we are not a state, but we also don‘t have any voting representation in Congress, other than Eleanor Holmes Norton, who can only vote in committee.  Everybody else outside of D.C. has a representative who can vote on things like the budget.  We can‘t.  You know where my position is. 

Collin Levy, couple of questions to you about the media that was encouraging a year ago everybody to go out and buy a house.  The question is, why should we trust “Wall Street Journal” again? 

LEVY:  Well, I mean, I think we have to remember that, you know, we are looking at the credit markets of this—you know, there‘s sort of a chicken and egg problem here.  People are looking at it and saying, well, you know, more credit will actually grow the economy.  But really, a growing economy and businesses that are looking for more capital is what drives the demands for credit.  It is what makes lenders willing to lend money, because they are confident the economy is going to be doing well and that they will get paid back. 

So I think we have to look at it in those terms when we are looking at our economic recovery, whether that‘s housing or anywhere else. 

SHUSTER:  By the way, we are getting a lot of Tweets about the graphic where we showed Bobby Jindal with the mouse ears and the plane going off to Disneyland.  And there it is.  So the question for you, Michael, is this appropriate or inappropriate? 

SMERCONISH:  Well, until you put a chimpanzee in that cartoon, it is appropriate.  If you put the chimp in, then it will be inappropriate and Al Sharpton will be all over you. 

SHUSTER:  Well—

LEVY:  Can I—can I just—respond to that?  I want to say, too, related to the Val Kilmer issue and the Bobby Jindal issue, the one thing that actors have is that they are camera ready.  And the real thing that people are holding against Bobby Jindal here is that he was being held up to an Obama standard.  Everyone in the Republican party was hoping that he might sound just as smooth and cool as Obama does.  I think that is where he fell short. 

SHUSTER:  I think the real problem is that he didn‘t do a very good job.  And never mind whether people liked his ideas.  They certainly didn‘t like his tone.  I suppose disappearing and not taking questions is fine.  But saying, we are going to Walt Disney World, that‘s—Whatever.

In any case, thanks to the panel.  Michael, Michelle, Collin, we appreciate it very much.  That is the view from 1600 PENNSYLVANIA AVENUE tonight.  I‘m David Shuster.  We will 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 peek of what‘s coming up on the show sent straight to your inbox with the 1600 Daily Briefing.  Just log on to Shuster.MSNBC.com or text P-E-N-N to 622639. 

If you are into Twittering, I will 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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