updated 3/5/2009 10:28:15 AM ET 2009-03-05T15:28:15

Guests: Tom Costello, Ron Paul, Jared Bernstein, Tucker Bounds, Chris Cillizza, Sam

Stein

DAVID SHUSTER, MSNBC HOST:  God save the global economy.

(BEGIN VIDEO CLIP)

GORDON BROWN, BRITISH PRIME MINISTER:  We‘ve learned from what has happened over the last eight, 10 years.

(END VIDEO CLIP)

SHUSTER:  The British prime minister visits with President Obama.

(BEGIN VIDEO CLIP)

BARACK OBAMA, U.S. PRESIDENT:  We are going to recover and we are going to emerge more prosperous, more unified and I think more protected from systemic risk.

(END VIDEO CLIP)

SHUSTER:  Speaking of risk, what happens when Michael Steele, the RNC chair, criticizes Rush Limbaugh?

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST:  If I were chairman of the Republican Party, given the state it is in, I would quit.

(END VIDEO CLIP)

SHUSTER:  Last night, Steele took back his criticism of Rush and apologized.  Is any Republican willing to criticize Limbaugh on anything?  Perhaps Congressman Ron Paul.  We‘ll talk with him live.

In “Hypocrisy Watch,” Limbaugh‘s complaints about open primaries.

(BEGIN VIDEO CLIP)

LIMBAUGH:  Fixing it so that Democrats do not nominate our candidates.

(END VIDEO CLIP)

SHUSTER:  When last year, Limbaugh urged Republicans to mess up the Democratic nomination.

(BEGIN VIDEO CLIP)

LIMBAUGH:  Operation Chaos effectively using the Clinton campaign as our foil.

(END VIDEO CLIP)

SHUSTER:  Later, follow the money.  Bank of America‘s head fake on the bailout funds.

Plus, the latest political poll numbers.  Bill Clinton‘s iPod and twitter time.  All tonight on 1600 PENNSYLVANIA AVENUE.

(BEGIN VIDEO CLIP)

OBAMA:  Good to see you.  Where are the Brits?

(END VIDEO CLIP)

SHUSTER:  Day 43 of the Obama administration.  Welcome to the show, everyone, I‘m David Shuster.  We will have the latest on Rush Limbaugh in just a moment.  But first, this was another busy day at the White House.  President Obama started with a pep talk at the Department of Transportation.  Then he met in the Oval Office with British Prime Minister Gordon Brown.  And then there was a speech at the Department of the Interior.  Throughout this day the president made it clear that fixing the banking system is a top priority.

(BEGIN VIDEO CLIP)

OBAMA:  We have to jumpstart the credit markets and get private lending going again.  No matter how good of a job we do here that‘s going to be critical.  And that‘s why the Treasury and Federal Reserve are launching today the Consumer and Business Lending Initiative, which, when fully implemented, will generate up to $1 trillion of new lending for the American people.

(END VIDEO CLIP)

SHUSTER:  The president also raised (ph) that this is not going to happen overnight, declaring his main message to the American people is to recognize that we quote, “dug a very deep hole for ourselves.”

NBC‘s Tom Costello joins us live from the White House.  And Tom, is the White House giving any sort of time frame as far as how they think it will take to fix the economy?

TOM COSTELLO, NBC NEWS CORRESPONDENT:  Not definitive, not immediately.  In terms of how long it‘s going to take the fix the economy, listen, this is probably going to be a years in the making process.  Important to note the reason they‘re trying to jump-start the lending process, is because it seems to be in complete gridlock now.  Credit still isn‘t flowing as it should.  In order to get credit flowing, rather, to get credit flowing, that‘s going to be critical to get the wheels of commerce moving again in country.  Allow people to get a car loan, college loan, allow people to get a college loan, and get industry moving and small businesses moving.  David, an awful lot of small businesses, literally borrow every month just to meet the payroll.  You can see why this is becoming really critical.

SHUSTER:  And why that lending program will be so critical as well.  And Tom, the British prime minister today, he wants international regulations for all financial institutions.  How did the president handle that request today?

COSTELLO:  He, without completely and fully embracing the details of what the British want to see, he was welcome and open to this idea.  The notion from the British is that we need a bigger regulatory framework to deal with the realities of 2007.  Pardon me, 2009, not that I‘m two years behind the times here.  The realities of 2009 in terms of financial regulatory structure that was not in place in order to prevent this current economic crisis.  That we need, now, it this global interconnected world, in fact a structure that allows some sort of a new regulatory framework to be in place.

But the British prime minister also pushing very hard that he wants to see the U.S. and the U.K. take the lead on this.  Much as they did during World War II, for that matter, during the Cold War.  Calls on, of course, his New Deal, Global New Deal, kind of borrowing from FDR.

And lastly, he is really here to push and make sure the United States doesn‘t fall into a protectionist kind of mindset.  He is going to say the same thing tomorrow when he speaks before a joint session of Congress on Capitol Hill.  The concern in Europe and specifically with the British which have fully embraced for 100 years the notion of global trade.  Their concern is that the United States might fall back into kind of a protectionist environment in which they no longer believe that they should be engaging with the world as much as making sure that Americans have jobs.  It‘s a balancing act this administration is going to have to follow through on.

SHUSTER:  NBC‘s Tom Costello live from the White House.  Tom, thanks for the great report.

COSTELLO:  You bet.

SHUSTER:  There appears to be one more item high on the White House to do list this week.  Forting Republicans into a circular firing squad over radio host Rush Limbaugh and his influence on the GOP.

Republican National Committee Chairman Michael Steele is the latest in a long line of Republicans who have felt compelled to apologize to Limbaugh after criticizing him.  Over the weekend, Steele called Limbaugh an entertainer and incendiary.  Last night, Steele apologized and back-pedaled hard.

Quote.  “My intent was not to go after Rush.  I have enormous respect for Rush Limbaugh.  I was maybe a little bit inarticulate.  There was no attempt on my part to diminish his voice or his leadership.

Today, Steele says he spoke with Limbaugh and added, quote, “We‘re all good.”

Texas congressman and former presidential candidate Ron Paul joins us live from Washington.  And congressman, let‘s get right to the heart of this.  Rush Limbaugh said the following.

Quote, “The dirty little secret is that every Republican in this country wants Obama to fail but none of them have the guts to say so.”  Congressman Paul, do you and every Republican want President Obama to fail?

REP. RON PAUL, ® TX:  No, I don‘t even think of it in those terms. 

I want nobody to have credibility on bad ideas.  If they are promoting

socialism and welfarism and totalitarianism and foreign intervention, I

don‘t want that to be successful but I want the message to be that liberty

works, that free markets works, sound money works.  And therefore, I take

it out of the context of personalities.  I think the personalities are

irrelevant.  It‘s only the issues that count, it‘s only the ideas that

count, it‘s our philosophy that counts.  I‘ve been wanting to make the case

.

SHUSTER:  Fair point.  But let‘s just be absolutely clear.  So when Rush Limbaugh says every Republican wants President Obama to fail, are you willing to take this opportunity to say on that point, even that very narrow point if you want, Rush Limbaugh is wrong?

PAUL:  No.  But I would - I‘d be quite willing to say when you hear Obama say what his goals are, I want him to be successful.  But .

SHUSTER:  I‘m asking about Rush Limbaugh.

PAUL:  I don‘t even think about him.  Because I don‘t—I don‘t .

SHUSTER:  Congressman, we‘re thinking about him right now.  Everybody‘s thinking about him.  Why is it so difficult to say, hey, when Rush Limbaugh says, look, we could all agree or disagree that maybe the president‘s policies are destined to fail.  That‘s a point of view.  But when Rush Limbaugh says I want President Obama to fail, why can‘t Republicans say, Rush Limbaugh is wrong when he says that.

PAUL:  I think a few have.  I think it‘s a matter of semantics and I think we dwell too much on the semantics rather than dealing with the real issues.  Why don‘t we ask questions like I‘d like to.  If I had a reasonable intellectual debate with Limbaugh, why doesn‘t he stand up more for civil liberties?  Why doesn‘t he explain why he has supported the PATRIOT Act?

SHUSTER:  Congressman, that‘s a great point.  I think you would win that argument.  But here‘s my point.  How can we have that argument, when even you, Ron Paul, are not willing to take this opportunity to say when Rush Limbaugh says every Republican wants President Obama to fail, Rush Limbaugh is wrong.  How can we have the next conversation if you‘re not willing to have the first one?

PAUL:  Because you want to control the semantics and the definitions.  Yes, he‘s wrong.  If he—he doesn‘t have the same understanding as somebody else.  But he‘s absolutely wrong.  And you can‘t put your definition on a particular word about failure.  I want—I want those goals to be successful.  Yet I don‘t want his philosophy to be successful.  So it‘s two different things.  You know, in the media you like to personalize and have a fight going on in the media and that‘s the way politics works.  But I would much rather talk about, you know, why Rush Limbaugh doesn‘t support my position on looking into the Federal Reserve and being able to audit the Federal Reserve.  That‘s an important issue.  Not whether or not I can say something that is confrontational to Rush Limbaugh.  I think philosophically I have confrontation.  I was disappointed with rush because he is a good conservative, yet he hardly said hardly boo against George Bush.  He supported all that big spending.  Did he complain about George Bush?  Did he complain about all those wars that were going on that caused us so much trouble?  That‘s the kind of issues that I want to talk about.  And I will be quite willing to challenge Rush Limbaugh on those issues.  But just to pick out a word or two and say, he is wrong, I don‘t think that solves any problems.

SHUSTER:  Here‘s the related issue.  In terms of solving problems including these very important issues you raise, is Rush Limbaugh the head of the Republican Party right now?

PAUL:  No.  No.  I mean, I don‘t know who .

SHUSTER:  He‘s not?

PAUL:  How could he be a head of a party?  I mean, he has a lot to say

.

SHUSTER:  When Republicans are so quick to apologize to him as Michael Steele has, when Senator Barrasso was on air last night, wasn‘t willing to say Rush Limbaugh was wrong.  Wouldn‘t go as far as you have.  It seems, congressman, like so many Republicans are terrified of Rush Limbaugh.  We‘re just trying to explore that.

PAUL:  He‘s very influential.  But they shouldn‘t be terrified of him.  Why should they be?  But they don‘t have any answers.  They don‘t have an explanation on why the party is shrinking, and how you can reach out, how you can reach people who care about personal liberties.  How we take our philosophy and translate it into real policy.  We talk about personal liberties and balanced budgets.  The Republican Party lost credibility because they didn‘t do that.  It violated the privacy of individuals, it flaunted the spending and ran up the huge deficits.  Got us into wars that are not winnable.  And those are the real issues.

That‘s why it‘s been translated into personality squabbles and who‘s running what because they‘re really not talking about why the Republican Party is a minority party and why they lost.  And I think, as long as they do that, they‘re not going to solve their problem and we will continue to dwell on Steele versus Rush Limbaugh.  And quite frankly, I don‘t think that‘s a relevant debate.  I think the debate ought to be our foreign policy.  Why don‘t we have a foreign policy of non-intervention and why don‘t we deal with the Federal Reserve?

SHUSTER:  Congressman, you raise some very important issues.  We always appreciate having you on.  Good of you to join us tonight in the midst of all this.  We appreciate it.

PAUL:  Thank you.

SHUSTER:  Up next, Bank of America‘s CEO says he made a big bailout blunder.  Why, then, did he still get paid $10 million?  We‘ll follow the money and talk with Vice President Biden‘s chief economist.

Plus, remember Operation Chaos when Rush Limbaugh encouraged Republicans to vote in the primaries?  Now that Democrats are voting in open Republican contests, Rush is whining.  “Hypocrisy Watch” is ahead.

Plus we‘re taking your questions during the hour over twitter.  Go to shuster.msnbc.com or twitter.com/shuster1600.  You‘re watching 1600 PENNSYLVANIA AVENUE.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.  Today, the Dow closed up slightly ending the day at 6726.  President Obama called the stock market a potentially good deal for long-term investors.  But Mr. Obama cautioned against measuring the progress of his economic plan by the market.

(BEGIN VIDEO CLIP)

OBAMA:  The stock market is sort of like a tracking poll in politics.  It bobs up and down day-to-day.  And if you spend all your time worrying about that, then you‘re probably going to get the long term strategy wrong.

(END VIDEO CLIP)

SHUSTER:  But White House critics say the administration is not getting the message that Main Street is feeling the pain of downward trends in the markets.  Here‘s CNBC‘s Jim Cramer.

(BEGIN VIDEO CLIP)

JIM CRAMER, CNBC HOST:  Until the Obama administration starts listening, until they start paying attention to what you‘re watching, to the stock market, until they realize that their agenda is destroying the life savings of millions of Americans, then all I can give you a caution.  I just want some sign that Obama realizes the market is totally falling apart.

(END VIDEO CLIP)

SHUSTER:  Joining us now from the White House is Jared Bernstein, the chief economist for Vice President Biden and executive director of the White House Task Force for Middle Class Working Families.  First of all, Mr. Bernstein, what do you make of Jim Cramer‘s criticism that the White House is essentially tone deaf right now?

JARED BERNSTEIN, VICE PRESIDENT‘S CHIEF ECONOMIST:  I think it‘s shovel-ready nonsense.  Look, I‘m always out here talking about Econ 101.  Let‘s talk a little Philosophy 101.  Occam‘s Razor.  This is the principle that the simplest, most straight forward explanation is usually the right one.  News flash.  We are in a recession that is deep and protracted and it‘s not just here, it‘s global.  And it‘s a recession that is amplified by a credit market freeze.  This is precisely the kind of climate wherein we see stock markets turn bear.  That‘s what is happening.  That was here when we got here.  Our agenda is to attack these problems.

SHUSTER:  What about the argument though, the administration is creating more uncertainty?  And here are some of the statistics a lot of critics like to point out.  If you look at the post-election trends.  Pending home sales index 87.2 in October.  It‘s now down to 80.4.  That‘s down 7.7 percent.  Unemployment in October 2008, it was 6.5 percent.  The latest report, it had hit 7.6 percent.  The Dow closed at 9625 on November 4.  Today it closed at 6726.  You can go on and on.  When does the recession essentially stop being President Bush‘s recession and start belonging to President Obama?

BERNSTEIN:  It‘s a fair question.  You have to recognize this recession began officially in December 2007.  These trends that you just articulated were firmly in place well before we got here.  And by the way, if you look at our agenda, and I‘m sure you have over the past what is, 30 days?  Every single policy action we‘ve taken have been targeted at turning trends around.  We have a recovery package we believe is going to create 3.5 million jobs by the end of next year.  We have a financial stabilization package targeted at financial markets.  The housing package.  All, by the way, done in context of a very ambitious budget deficit that brings the budget program that actually cuts the deficit in half at the end of our first term.  I think that‘s a very positive accomplishment.

These trends, though, these trends are very difficult to turn around.  And you can‘t do it if you sort of get here and just let the economy drift along.  We are—no one can accuse us, I don‘t think fairly of not taking large and serious steps to intervene in precisely these problems.

SHUSTER:  Fair point.  But I think some of the uncertainty in the eyes of the public has to do, for example, when you look back at whether or not the TARP money, the financial bailout money was effective.  Yesterday, for example, Bank of America‘s CEO Ken Lewis, he told the “Financial Times” if he had to do it all over again he would have taken $10 billion less in TARP money but wasn‘t prepared to give the money back now.  What do you make of that?  And also on a related note, Bank of America had its worst quarter ever and still paid Lewis $10 million.  Is that appropriate?

BERNSTEIN:  That sounds problematic.  Look, the TARP is a great example of what we‘re talking about.  This is a program, again, that was constructed and implemented before we got here.  And I think badly done. 

One of the first things we‘ve done—we did this in the transition before

we got here, was to start figuring out ways to learn from past mistakes and

re-craft a financial intervention package we think is going to work.  We‘re

in the process of rolling that out.  And I grant you that that process does involve some continued uncertainties that we‘re working on that.

But the policy measures that we‘re rolling out, whether it‘s the TARP or this recovery package, housing, whether it‘s the omnibus budget, every one of these is focused on diminishing, ultimately diminishing that uncertainty and making these interventions work so we can get this economy back on track.

SHUSTER:  Jared Bernstein, chief economist for Vice President Biden. 

And Mr. Bernstein, good of you to join us and come out .

BERNSTEIN:  Thank you, David.

SHUSTER:  . onto the lawn and take on some of the criticism.  We appreciate it.

BERNSTEIN:  Sure.

SHUSTER:  Up next, Rush Limbaugh was awfully proud last year of his Operation Chaos, you know, when he told Republicans to vote in the Democratic presidential primaries.  Why then is Rush complaining about Democrats voting in open Republican primaries?  “Hypocrisy Watch” is straight ahead.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

DAVID LETTERMAN, TALK SHOW HOST:  What about this bonehead Rush Limbaugh?  Honest to God.  I mean, what is going on there?

KATIE COURIC, CBS NEWS ANCHOR:  Don‘t do this to me, please.

LETTERMAN:  No, because .

COURIC:  Don‘t do this to me.

LETTERMAN:  He gets up in Washington and he‘s the keynote speaker at some function and he comes up.  He looks like an Eastern European gangster.  You know?  He‘s got the black jacket on.  The black silk shirt.  It‘s unbuttoned like, oh, yeah, when you think of Rush Limbaugh, you think, oh, let‘s see a little flesh.

(END VIDEO CLIP)

SHUSTER:  That was David Letterman and Katie Couric discussing Rush Limbaugh‘s appearance at a big conservative conference over the weekend.  Limbaugh said he hopes President Obama fails.  When RNC Chair Michael Steele first criticized Limbaugh, Limbaugh then spewed out a string of complaints.

And that takes us to tonight‘s “Hypocrisy Watch.”  First, the background.  Yesterday while hammering Michael Steele, Limbaugh referred to the fact that several states have an open primary system.  Watch.

(BEGIN VIDEO CLIP)

LIMBAUGH:  I hope the RNC chairman will realize he‘s not a talking head pundit.  That he is supposed to be works on the grassroots and rebuilding it.  And maybe doing something about our open primary system in fixing it so that Democrats do not nominate our candidates.

(END VIDEO CLIP)

SHUSTER:  Democrats should not nominate our candidates?  That‘s an interesting point of view, especially given what Limbaugh encouraged Republicans to do a year ago.  Remember the Obama-Clinton primary contest?  Limbaugh encouraged Republicans to vote in the open democratic primaries.  In Texas, Ohio, Pennsylvania, Indiana and North Carolina.  After those contests he bragged about his Operation Chaos, possibly lengthening the nomination fight.

(BEGIN VIDEO CLIP)

LIMBAUGH:  We have successfully created chaos.  We have done our part to expose Obama through our support of operation chaos effectively using the Clinton campaign as our foil and Obama and the Democrat Party are the weaker for it.  Every objective has been met and surpassed.

(END VIDEO CLIP)

SHUSTER:  But now, Rush is complaining about Democrats voting in and possibly shaping Republican nomination contests.  Amazing.  Rush, to you and all your ditto head followers, when you ask Republicans to vote in open Democratic primaries and then whine when Democrats vote in open Republican primaries, that‘s hypocrisy, and it‘s wrong.

A new NBC News poll shows people like President Obama and the job he‘s doing.  But does that mean they‘re buying into the president‘s stimulus plan?  The latest numbers are straight ahead on 1600.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.  A new poll released just moments ago by NBC News and the “Wall Street Journal” shows that President Obama continues to enjoy the support of a strong majority of Americans; 60 percent say they approve of the overall job President Obama is doing, 26 percent say they disapprove, 14 percent say they are not sure; 56 percent said they approved of the job he‘s doing on the economy. 

As for Congress, only 31 percent approval of the job they are doing, while 54 percent disapprove and 15 percent are not sure.  The numbers, including the polling on Republicans, underscores the leadership vacuum on the GOP side that‘s been filled lately by Rush Limbaugh.  Joining us to talk about these numbers are Sam Stein, political reporter, White House correspondent for the “Huffington Post,” Chris Cillizza, who is a “Washington Post” White House reporter and author of “The Fix” on WashingtonPost.com, and Republican strategist Tucker Bounds, former chief spokesman for John McCain. 

Tucker, it wouldn‘t be MSNBC if we didn‘t greet you back on the air with some tough numbers for you to try to dig out of.  The poll asks, who can get us out of the recession?  Democrats 48 percent, Republicans 20 percent, neither, 16 percent.  Who‘s to blame for the lack of bipartisanship?  Republicans 29 percent, Democrats 14 percent, both parties 56 percent.  Would you acknowledge the GOP is hurting? 

TUCKER BOUNDS, REPUBLICAN STRATEGIST:  You know, it just proves that the respondents to the poll are very smart and educated, because they recognize that Democrats control town.  It would be very difficult for us to depend on Republicans, when they‘re in minorities in both houses on Congress and they don‘t own the White House. 

But I think it does demonstrates that there is a leadership vacuum that we‘re currently working through right now.  I think we‘re going to have to wait and see who steps up to the plate.  As soon as the Republicans can be behind policies, they can effectively make change.  I think that will naturally come as we approach the next presidential election.  Perhaps there will be more of that as we go into 2010. 

As it exists right now, I think these are observant pollsters that recognize the Democrats are in power.  And if we‘re going to get through this, it‘s going to be their policies.  If we don‘t get through this, you know, it‘s going to be their policies as well. 

SHUSTER:  Here‘s why, Tucker, I‘m not sure I agree with you.  Chris Cillizza, let‘s set this up for you.  When the respondents were asked, are you willing to pay higher taxes for universal health care—in other words, this isn‘t an issue of who‘s in charge, it‘s higher taxes for universal health care; 49 percent say yes, 45 percent say no.  Chris, what do you make of this?

CHRIS CILLIZZA, “THE WASHINGTON POST”:  David, there‘s been a lot of talk about this lately.  I do think what we‘ve seen, whether it‘s Hurricane Katrina, whether it‘s the faltering economy, this idea that the era of big government is back, I do think there is some truth there.  I do think that people now, generally, though not large majorities -- 49 percent is pretty good, but it‘s not 70 percent.  People now recognize that you have to give some to get some. 

How long will that last?  I think that remains to be seen.  Remember, answering a hypothetical poll question that you‘d be willing to have your taxes raised in order to get universal health care is very different than having your taxes raised in order to get universal health care.  I would caution it.  But I do think it goes back to the general point, which is people no longer want government entirely out of their lives.  They believe there is a place for government in their lives.  How big a place I think we‘re going to define over the next two years.  But they believe there is a place for it. 

SHUSTER:  Sam Stein, on that very point; when the poll asked whether the government should do more or less, 51 percent said the government should do more, 40 percent said the government is already doing too much.  What do you make of that number?

SAM STEIN, “THE HUFFINGTON POST”:  Well, I think it‘s a vindication of what Jared Bernstein was talking about.  A lot of the respondents in this poll seem to suggest that the economic problems are to blame—the blame for them lies with Bush.  They trust the government to get them out.  They‘re willing to give the government a bit of time to actually do its job. 

Instead of following the whims of Wall Street, they‘re hoping for a massive restructuring of the economy.  They‘re willing for the government to take over more control.  So I‘m with Chris on this.  I also think this is a vindication for the Obama administration‘s position. 

SHUSTER:  I want to tie all this in then to Rush Limbaugh.  Given that public, at least, clearly seems right now, for whatever reason, to be sort of on the Democrats‘ side, there‘s Rush Limbaugh essentially occupying the vacuum on the right.  There are the Democrats trying to take advantage of it.  There‘s an ad out there, in which they try to paint the Republicans as being the party of Rush Limbaugh.  Watch. 

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  Who is the leader Republicans hailed as a hero last weekend?  Was it Sarah Palin? 

GOV. SARAH PALIN ®, ALASKA:  Nope, nope, nope. 

UNIDENTIFIED MALE:  Bobby Jindal? 

GOV. BOBBY JINDAL ®, LOUISIANA:  No, no, no. 

UNIDENTIFIED MALE:  Michael Steele? 

MICHAEL STEELE, RNC CHAIRMAN:  No, no, no. 

UNIDENTIFIED MALE:  Mitch McConnell? 

SEN. MITCH MCCONNELL ®, KENTUCKY:  No, no, no. 

UNIDENTIFIED MALE:  Then who?  Not Rush Limbaugh? 

RUSH LIMBAUGH, RADIO TALK SHOW HOST:  Yes.  Yes.  Yes.  Yes.  Yes. 

Yes. 

UNIDENTIFIED MALE:  Call the Republican leadership.  Tell them to just say no to the politics of Rush Limbaugh. 

LIMBAUGH:  I hope he fails. 

(END VIDEO CLIP)

SHUSTER:  Chris Cillizza, we‘re getting a lot of people who suggest, why are the Democrats spending so much time focusing on Rush Limbaugh.  Explain the political play. 

CILLIZZA:  Well, the political play is pretty straight forward, David. 

Rush Limbaugh is extremely popular among the base of the Republican party.  There‘s no question about that.  He was someone who was a prime mover in the early 1990s, that helped Republicans gain control.  He remains very powerful.  It‘s why you saw Michael Steele, chairman of the Republican National Committee, apologize for maybe offending Mr. Limbaugh.  It‘s why you saw Phil Gingrey, Congressman from Georgia, do the same.  Because, remember, the base of the party is the people who elect people like Michael Steele and people like Phil Gingrey. 

The problem, in the broader middle, certainly among Democrats—but let‘s talk about the broader middle, the independents.  Rush Limbaugh is not nearly as popular.  He is somebody that people generally disagree with.  They think he may just sort of spout off, as opposed to sort of, you know, talk about the issues and be fair.  So by painting all Republicans with this broad brush of Rush Limbaugh, Democrats know that they‘re just scoring points with independents. 

Is the election going to be decided because of an ad like this? 

Absolutely not.  But it goes to the broad definitions of the two parties.  And the more that Democrats can push this idea that Rush Limbaugh equals Republicans, the better they know they‘ll do with independents. 

SHUSTER:  Tucker Bounds, given that you worked so hard over the past two years to try to reach out to that broad middle, I wonder if you want to take the opportunity to say that, no, the Republican party is not defined by Rush Limbaugh.  When Rush Limbaugh says that every Republican in this country wants Obama to fail, Rush is wrong.  Are you willing to say that, Tucker? 

BOUNDS:  What I am willing to say is that we did work very hard to make sure that the Republican party was seen as inclusive.  This needs to be a party about ideas, not individuals.  I think we‘re moving that way.  There‘s been a reconciliation here.  As the Republicans move toward 2012, and these elections in 2010, it‘s going be a more inclusive party.  You know, I‘m not—of course I‘m not willing to go on a limb and say that. 

SHUSTER:  Sam Stein, why is it so difficult for Republicans?  I mean, I know Tucker is a very rational, smart guy.  He wants the middle for the Republican party as badly as anybody.  What is it about Rush Limbaugh that keeps Republicans from being able to say when Rush says that Republicans want President Obama to fail, Rush is wrong.  Why is it so difficult for Republicans to say? 

STEIN:  Rush is a powerful force.  I think he has, what, 20 million plus viewers who are willing to pick up the phone and make a call to a Congressional office to lobby their complaints.  The Republicans don‘t want to lose that. 

To off of Chris‘s point, I think the other benefit that the Obama administration sees in pushing Rush or elevating him to the forefront, is that for the three or four days, the only questions that GOP members of the House and Senate are going to be asked is whether or not they agree with Rush Limbaugh.  Instead of them hitting Obama on the Omnibus or on his budget, they‘re going to be asked about Limbaugh.  The Obama administration will take that any day. 

SHUSTER:  Well, here‘s an example.  There was Tim Kaine, who was on our air earlier today.  Again, he brought this up himself today in the interview.  Here‘s what Tim Kaine said unprovoked.  Watch. 

(BEGIN VIDEO CLIP)

GOV. TIM KAINE (D), VIRGINIA:  Rush Limbaugh is clearly the—kind of the godfather or the he who must be obeyed in Republican politics these days. 

(END VIDEO CLIP)

SHUSTER:  Tucker, if you were the other party, this would be—you wouldn‘t be promoting this strategy as well, right? 

BOUNDS:  Of course not, David.  We‘d be talking about the important things facing the American people.  I will say it‘s a cynical play.  It‘s a cynical play.  And you can‘t blame Democrats entirely.  They need an enemy.  Right now, they‘re writing the biggest checks in American history.  They‘re taking on policies that might prove to be very unpopular if this economy doesn‘t turn around. 

They‘re looking for an enemy.  They have unsettling news on the front page of the “New York Times.”  There are a lot of things going on that Democrats don‘t want to be talking about.  So talking about Rush Limbaugh makes a lot of sense.  I think Sam and Chris are both right. 

SHUSTER:  Chris Cillizza, get the last word here. 

CILLIZZA:  Just to Tucker‘s point about 2010 and 2012, I do think he‘s right that as the party moves forward, and as leaders emerge, this will become less of a problem.  We all know politics abhors a vacuum.  So the problem is you have Barack Obama as the clear, unquestioned leader of the Democratic party.  You have Republicans who don‘t even really have any obvious person to fill the gap in between now and when those leaders emerge.  So that chasm is hard.  I think that‘s what you‘re seeing right now.  Lots s of different people poking their heads out, not all which are good for the Republican party as it goes forward. 

SHUSTER:  Chris, Sam and Tucker, what a great panel.  Stay with us, because up next, President Obama has written his Russian counterpart, Dmitri Medvedev, a letter that refers to missile defense and Iran.  The president‘s approach is intriguing on several levels.  We will explain. 

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

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE.  In a story ripe with diplomatic intrigue, the “New York Times” reported today that President Obama sent a letter three weeks ago to the president of Russia that was hand delivered in Moscow by top administration officials.  In the sensitive letter, a quid quo pro, help the United States stop Iran‘s pursuit of nuclear warheads and ballistic missiles, and the United States would back off plans for a new missile defense system in Eastern Europe. 

Today, amidst a string of questions about the administration‘s approach, the president backed up against suggestions he was offering a deal. 

(BEGIN VIDEO CLIP)

OBAMA:  I think that the report that was in the “New York Times” didn‘t accurately characterize the letter.  What I said in the letter is the same thing I‘ve said publicly, which is that the missile defense that we have talked about deploying is directed toward not Russia but Iran. 

(END VIDEO CLIP)

SHUSTER:  Russia‘s President Medvedev responded somewhat cryptically at a news conference today in Madrid, Spain.  Quote, “we are working very closely with our US colleagues on the issue of Iran‘s nuclear program.  No one links these issues to any exchange, specially on the Iran issue.  Our US partners are ready to discuss the issue.  It‘s good because several months ago, we were getting different signals.”

Let‘s welcome back our political panel, Sam Stein, Chris Cillizza, Tucker Bounds.  Tucker, what do you make of this? 

BOUNDS:  Well, you know, you think at the situation and wonder whether Barack Obama, being dubious about the missile defense system throughout the campaign and throughout his career in the U.S. Senate—you have to look at it and think, maybe the Russians believe they are going—they don‘t have to buy the cow to get the milk.  So they like the compromise.  They like the concession.  But we‘re not likely to get the compromise. 

Whatever you think about what the policy is here, the one thing you have to know about what‘s going on down at 1600 is that this was not the rollout for any sort of dealings with Russia they‘d planned.  So in that sense, it‘s a rough story for the Obama administration.  And we‘ll have to see how they‘re able to cope with this. 

SHUSTER:  Well, that‘s such a terrific point.  Because, Chris Cillizza, the “New York Times” reporter, Peter Baker, who broke this story, he used to be based in Moscow.  He‘s also very well known around town for his great contacts with the Clinton crowd.  Is this part of the Obama/Clinton tensions, in that Hillary Clinton gets cut out of a diplomatic initiative, her supporters aren‘t happy about it.  So I don‘t know, maybe they play ball with the New York Times” to put an end to the Obama solo effort? 

CILLIZZA:  David, let me first say, I love how you think.  A man after my own heart, a true reporter.  I know Peter pretty well.  I wish I had the sources he has, both in Moscow and in the Clinton world.  But I don‘t know, to be honest.  I don‘t want to guess.  I think the broader point here is there is going to be—there is a built-in tension in the way Barack Obama has set up both his cabinet and this series of czars that he‘s put into place to oversee various big topics in his administration. 

He has big personalities there.  Hillary Clinton did not take this job as the secretary of state to be a wilting flower, to sort of sit in the background.  She‘s already made two foreign trip.  She will make many more.  She is so high profile that, in some ways, she stands on her own, without needing the backing of Barack Obama. 

So I‘m not sure this is an example of the Clinton/Obama tensions.  I think that may be a bridge too far, just based on what we know today.  It may well—more may come out.  I do think inevitably those gears are going to grind over something.  We don‘t know what it is yet.  They are going to grind over something.  These are two huge personalities, well known both domestically and internationally, who have their own views, very well formed, on a variety of issues.  And they‘re not always going to agree. 

SHUSTER:  Well, never mind, of course, the relationship and whatever tensions may exist between the president and his secretary of state.  There clearly were tensions, Sam Stein, today, when President Obama and British Prime Minister Gordon Brown spoke.  We know that the Brits want the United States to commit to some international regulations of the financial system.  The Obama White House is hesitant right now. 

Here is how some of the awkwardness played out when the British prime minister started talking about sports.  Watch. 

(BEGIN VIDEO CLIP)

GORDON BROWN, BRITISH PRIME MINISTER:  I don‘t think I could ever compete with you at basketball, perhaps tennis. 

OBAMA:  Tennis, good game. 

BROWN:  Think that would be better. 

(END VIDEO CLIP)

SHUSTER:  I don‘t know.  Sam, that just struck me as weird. 

STEIN:  Yes, weird.  They don‘t see eye to eye on sports.  But I think the bigger point here is that you have two leaders who are, you know, facing severe economic pressures at home.  Gordon Brown, of course, under political pressures as well.  Barack Obama is still enjoying somewhat of a honeymoon period. 

They both are at the whims of their electorate.  They come over here and they need promises and assurances from one another.  Like you said, the Obama White House isn‘t willing to commit at this point to more international based economic forms that Brown wants.  So there is a little bit of friction.  I think it will be teetered over. 

SHUSTER:  Sam, Tucker, Chris are sticking around for one more segment.  Up next, Bill Clinton‘s favorite songs.  A group is auctioning of an iPod filled with a play list picked by the former president himself.  What does he listen to?  We‘ll show you.  And your Twitter questions ahead on 1600.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JAY LENO, “THE TONIGHT SHOW”:  Stock market went down 299 points today.  Oh, man.  I don‘t want to say things are bad.  I don‘t want to be one of those negative people.  You see who rang the closing bell today?  Take a look.  This is pretty bad. 

(END VIDEO CLIP)

SHUSTER:  The grim reaper, genius.  Welcome back to 1600.  On our radar today, how much would you pay or cash out of the market to get an iPod with Bill Clinton‘s play list on it?  If you‘re interested, you still have eight days to make a bid for one.  But make sure you‘re ready to dish up.  A red iPod Nano with Bill Clinton‘s signature and his play list is currently going for more than 750 dollars in a charity auction to benefit MusicRising.org, which is helping to replace musical instruments that were lost or destroyed by Hurricane Katrina, Rita and others from the Summer of 2005. 

So what does 42 like to listen to?  Here are the top five songs on Clinton‘s play list: at number five, “Crown Imperial,” played by the U.S.  Marine Band, number four, “Bridge Over Troubled Water” by Simon and Garfunkel, number three, “Bahia, played by Sam Getts and Charlie Byrd (ph), number two, Carly Simon‘s “I Get Along Without You Very Well,” and the top song on the list—

(SINGING)

SHUSTER:  Yes, that‘s Van Morrison‘s “Brown-Eyed Girl.”  It appears the former president just happens to have a preference for Van Morrison, because we checked, and the two most important women in his life both have blue eyes.  If Bill Clinton‘s music choice doesn‘t really do it for you, you can always bid on iPods that have the play lists of Hillary Duff, Mandy Moore and Scarlett Johansson.  They will be on auction at Tonic.com later this month.  So far, Music Rising has helped replace instruments for 2,700 musicians from the central Gulf Coast region.   

President Obama‘s pocket protector budget chief may have given us a little insight into his music preferences.  Today, Peter Orszag invoked country star Toby Keith while on Capitol Hill defending the president‘s budget. 

(BEGIN VIDEO CLIP)

PETER ORSZAG, OMB DIRECTOR:  But as the country music singer Toby Keith once put it, “there ain‘t no right way to do the wrong thing.”  This budget reflects that notion.  I hope you will all work with us to do the right thing. 

(END VIDEO CLIP)

SHUSTER:  Confused by the argument?  We were a bit too.  For those of you not familiar with the song, let‘s listen. 

(SINGING)

SHUSTER:  Now, let‘s translate.  Orszag is telling lawmakers it‘s as clear as black and white, do the right thing and vote for the budget.  OK, Peter Orszag. 

Finally, it‘s Twitter time.  Helping us today, as my family proudly noted this morning, is Garry Trudeau, who puts together the comic strip “Doonesbury.”  The guy on the left, it says, “Roland, are non-stop Tweets really the best use of your time?”  Roland responds, “just trying to stay competitive, Ed.”  He continues, “all the other big dogs are micro-blogging their fans.  No way I‘m ceding the low ground to your Rick Sanchez‘s or David Shusters.”  Thank you, Garry Trudeau.

Now, let‘s get to the Twitter questions for our panel.  Let‘s welcome back Tucker Bounds, Chris Cillizza, and Sam Stein.  Sam, let‘s start with you.  A couple questions about Rush Limbaugh, the White House strategy.  How long can the White House milk this? 

STEIN:  It depends how long Rush Limbaugh lets them.  He did say this once and it went away.  Then at CPAC he said it again, that he wanted Obama to fail.  And it started all over again.  So Rush is, you know—he likes to be in the spotlight.  If he continues to talk this way, it‘s going to continue to last. 

SHUSTER:  Tucker Bounds, a question for you about Gordon Brown‘s visit today to the White House, given the sort of differences, the fact that Gordon Brown wanted a long news conference.  The White House gave him 23 minutes of Q&A in the Oval Office.  Was that the appropriate political and strategic move for the White House, in your view? 

BOUNDS:  Well, it‘s a White House that claims to be very transparent and very welcoming.  So I suppose it worked out for the best.  They also had some things they needed to clear off the front pages of the “New York Times.”  So, from a tactical standpoint, I think it probably made a lot of sense. 

SHUSTER:  Chris Cillizza, a lot of questions also for you about Gordon Brown.  I‘ll just put generally, what did you make of the Gordon Brown/Obama interaction today?  Could you detect any of the sort of awkwardness that others did? 

CILLIZZA:  You know, David, I think there‘s always a level of awkwardness here.  It‘s—a lot of the cases, these guys are just sort of getting to know one another with about one million cameras and people watching at all times.  This is not the most natural setting in the world by which to get to know people.  In truth, they have differences on any number of things from the global economy to Afghanistan.  We are—a lot of our interests are aligned with Great Britain.  Some are not. 

So that‘s going to play itself out publicly and that is going to equal some level of awkwardness.  Excuse me.  I think you saw some of that today, although a lot of it was glossed over for political reasons. 

SHUSTER:  Chris Cillizza, another question for you.  What‘s the possibility of a third party rising out of all the troubles that the Republicans are having on the right? 

CILLIZZA:  You could ask that question, David, every four years until the beginning of time in politics, because every four years, there is someone or some group that says, it‘s time; people are sick of the process. 

Mike Bloomberg is going to be president this time around.  And every time -

Ross Perot, obviously, in 1992 and 1996, came as close as we‘ve seen in modern history.  He impacted the race.  I think the best bet for a third party is a very wealthy individual who can fund the race—a presidential race on his or her own, can impact the race. 

Whether they can win I think is a whole different question.  People don‘t like the two parties.  But the two parties are very entrenched organizationally and otherwise.  It‘s very hard to overcome that, especially in a short period of time. 

SHUSTER:  Tucker Bounds, a number of question for you.  You were a familiar presence to so many of our viewers during the presidential campaign, speaking on behalf of John McCain.  Some of the questions are along the lines of this one, what is life like for you these days and what are you doing? 

BOUNDS:  Well, you know, I‘m working in the private sector.  Things are certainly slower.  I get to look in at what‘s going on in the Obama administration.  I look with fascination as they make some of the same mistakes that they were very critical of the Bush administration.  Usually, it‘s a lot of yelling at the TV when I‘m not yelling on the TV. 

SHUSTER:  OK.  Well, Tucker, we‘ll have you back plenty of times so that we can all yell at you and you can yell back.  Tucker Bounds, good of you to join us.  Chris Cillizza from the “Washington Post,” always a pleasure.  Sam Stein, the White House correspondent for the “Huffington Post.”  Great panel.  Thank you all very much.  We appreciate it. 

That is the view from 1600 PENNSYLVANIA AVENUE tonight.  I‘m David Shuster.  Remember, you can get the latest political news and a sneak peek at what‘s coming up on the show sent straight to your inbox with the 1600 Daily Briefing.  Sign up at Shuster.MSNBC.com.  Also, this is a cool one, you can get text alerts.  Text Penn, P-E-N-N to 622639.  Remember, there‘s always Twitter.  We‘re on Twitter, taking your questions, getting your feedback, interacting with you.  Go to Twitter.com/Shuster1600. 

What a day in Washington.  Another big one tomorrow.  We‘ll see you then.  I‘m David Shuster.  “HARDBALL” with Chris Matthews starts right now. 

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