updated 3/6/2009 10:28:58 AM ET 2009-03-06T15:28:58

Guest: Donna Shalala, Tom Schatz, Steve Chapman, Chris Kofinis, Alexander Hefner and Terry Holt, John Yang

(BEGIN VIDEOTAPE)

DAVID SHUSTER, HOST (voice-over):  Today, the effort to reform health care. 

BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES:  The biggest threat to our nation‘s balance sheet is the skyrocketing costs of health care.  It‘s not even close. 

SHUSTER:  The discussions are under way with Senator Kennedy in attendance, but opposition to the cost of reform is fierce. 

SEN. LINDSEY GRAHAM ®, SOUTH CAROLINA:  If we raise taxes on any business or any family right now, we‘re going to make the recession deeper and longer. 

SHUSTER:  In “Follow the Money,” the latest battle over congressional pork. 

REP. NANCY PELOSI (D-CA), HOUSE SPEAKER:  This whole thing from the Republican side about earmarks is so disingenuous. 

SHUSTER:  Who are the worst earmark offenders?  We will take a closer look. 

Plus, the senator who supports killing pet projects, just not his. 

They‘re not earmarks under the definition.  We have a specific definition. 

SEN. JON KYL ®, ARIZONA:  I would suggest that they‘re not earmarks under the definition, because we have a specific definition. 

SHUSTER:  Senator Jon Kyl lands in “Hypocrisy Watch.”

And the things I thought you should know.  The first lady is a trendsetter.  The president is considering throwing out a first pitch.  And Twitter time. 

All tonight on 1600 PENNSYLVANIA AVENUE.

OBAMA:  Let‘s get to work. 

(END VIDEOTAPE)

SHUSTER:  Hello, everybody, and welcome to the show. 

This is day 45 of the Obama administration, and the biggest so far in the president‘s effort to reform health care. 

Throughout the afternoon, Mr. Obama led a health care summit.  The discussions included lawmakers from both sides of the aisle, as well as power brokers from both the public and private sectors. 

The president today portrayed reforming health care as crucial to fixing the U.S. economy. 

(BEGIN VIDEO CLIP)

OBAMA:  Health care reform is no longer just a moral imperative.  It‘s a fiscal imperative.  If we want to create jobs and rebuild our economy, and get our federal budget under control, then we have to address the crushing costs of health care this year in this administration. 

(END VIDEO CLIP)

SHUSTER:  For more on today‘s health care summit, let‘s bring in NBC News White House Correspondent John Yang.  He‘s live on the north lawn. 

And John, what was the headline out of this event today? 

JOHN YANG, NBC NEWS WHITE HOUSE CORRESPONDENT:  Well, I think the headline is that you had everyone in the same room, David.  You know, those of us who covered the last time there was a big health care reform effort in 1994 recognized a lot of faces at this meeting.  It was the same cast of characters.  The difference was that they were all in the same room, all around the same table, all talking to each other. 

I thought that it was notable—and clearly, this is the first day.  As Robert Gibbs, the White House press secretary who‘s so fond of baseball analogies, says this was the ceremonial first pitch.  It wasn‘t even the opening pitch of the game. 

And there was a lot of sort of good feelings, but you had people in that room who fought tooth and nail against the Clinton health care reform plan—Karen Ignani, whose group ran the  “Harry and Louise” ads, the National Federation of Independent Business, the Small Business Group.  And they all stood up and said they wanted to work with Mr. Obama, they wanted to work to get something done. 

Now we‘ll have to see—the proof is in the pudding, the proof is in what comes now, what comes later as they try to put a bill together.  But certainly, all the theatrics, all the sort of atmospherics of today were positive. 

SHUSTER:  And John, you mentioned the variety of cast of characters.  A crucial character, a crucial figure in all of this, of course, is Senator Ted Kennedy.  He‘s been involved to the extent that he can in some of these negotiations.  He knows all the players. 

Here‘s what Senator Hatch said about him today. 

Watch. 

(BEGIN VIDEO CLIP)

SEN. ORRIN HATCH ®, UTAH:  Here I am a Republican, and I‘m asking you all to pray for Ted Kennedy.  And why would I do that?  Because Kennedy is the one guy can bring all of the Democrat major special interest groups together. 

(END VIDEO CLIP)

SHUSTER:  John, it was quite a moment, as you reported earlier, when Senator Kennedy came into the room.  Why don‘t you take us through that? 

YANG:  It was.  We were told he was in town, that he would attend.  We looked for him at the opening session, didn‘t see him.  He didn‘t go to any of the breakout sessions. 

And then the final session, the closing session in the East Room of the White House, everyone gathered.  People were assigned seats.  And there was even sort of a theater in the round effect.  The president was going to speak at a lectern in the middle of the room.

And then the offstage announced the president of the United States accompanied by Senator Edward Kennedy.  And let‘s take a look at what happened. 

(APPLAUSE)

It was a sustained—long, sustained, applause and cheers, and Kennedy waving and pointing to people in the crowd.  It was quite an emotional moment, and it really did contribute to what I was talking about, the sort of sense of good feelings and optimism that they were going to try to get something done this year. 

You know, it‘s a very ambitious timetable the president has.  He wants to sign a bill by the end of the year. 

I mean, this is a big, big issue.  It touches on all sorts of things like taxes, doctors‘ interests, hospital fees, Medicare, Medicaid.  And he wants to get all this done by the end of the year.  And it is a tall order to see whether he can do it. 

SHUSTER:  Absolutely.  And it‘s going to be so interesting to watch. 

NBC‘s John Yang reporting from the White House.

John, thanks, as always. 

YANG:  Thanks, David. 

SHUSTER:  As John pointed out, 15 years ago, the failure to pass health care reform nearly crippled President Clinton‘s first term, so the political stakes are huge.  And many of the same policy challenges remain as doctors, drug companies, the insurance industry, and so many others try to push conflicting agendas. 

But President Obama believes this time those challenges can be overcome. 

(BEGIN VIDEO CLIP)

OBAMA:  Our inability to reform health care in the past is just one example of how special interests have had their way and the public interest has fallen by the wayside.  And I know people are afraid we‘ll draw the same old lines in the sand and give in to the same entrenched interests, and arrive back at the same stalemate that we‘ve been stuck in for decades.  But I‘m here today and I believe you are here today because this time is different. 

(END VIDEO CLIP)

SHUSTER:  Joining us now is a key figure from the fight over health care during the Clinton administration.  She attended the Obama summit today. 

Donna Shalala, she served as secretary of health and human services under President Clinton and is now the president of the University of Miami. 

And Madame Secretary, how did the room feel today compared to those meetings 15 years ago? 

DONNA SHALALA, FMR. HEALTH AND HUMAN SERVICES SECRETARY: 

Extraordinary, because everyone was there.  And I thought what was interesting was not simply that all the stakeholders, the interest groups were represented, but that the leaders of Congress were represented, and they were at the breakout sessions. 

I had a breakout session with Larry Summers, two senators, a member of Congress, and three prominent representatives of major interests in health care.  You just don‘t see that.  And I can‘t ever remember a time when there was ever that kind of gathering. 

SHUSTER:  There was also a moment today where, of course, President Obama took questions.  I want to play for you an exchange he had with Senator McConnell, the Republican lead inner the Senate. 

Watch. 

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL ®, MINORITY LEADER:  I‘m also among those, as you and I have discussed before, interested in seeing us address entitlement reform and, admittedly, Medicaid and Medicare would be part of that, but also Social Security. 

OBAMA:  On Medicare and Medicaid in particular, which everybody here understands is the 800-pound gorilla, I don‘t see us being able to get an effective reform package around those entitlements without fixing the underlying problem of health care inflation. 

(END VIDEO CLIP)

SHUSTER:  Ms. Shalala, how does that argument go over with Republicans?  I mean, when you were talking with the senators today, did you get the sense that that sort of disagreement is not going to be a major stumbling block? 

SHALALA:  I actually don‘t think it was a disagreement.  What the president was saying is we have to address the cost issue for all of health care before we try to address it just for Medicare and Medicaid.  Otherwise, you‘re just cost-shifting all over the place. 

You cut Medicare and Medicaid, and the rest of us who have private health insurance end up paying for those cuts.  So the underlying framework, the way in which we pay for health care, getting control of costs for everyone, for those of us that are in the private insurance system, and for those that are in the public insurance system, and then you talk about overall reforms. 

SHUSTER:  I want to play for you an ad that was essentially very effective in killing off health care reform 15 years ago, and a lot of conservatives say the issues have not changed.  So let‘s run the ad and then I‘ll get your reaction. 

Watch. 

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE:  Covered under our old plan... 

UNIDENTIFIED MALE:  Oh, yeah.  That was a good one wasn‘t it? 

NARRATOR:  Things are changing, and not all for the better.  The government may force us to pick from a few health care plans designed by government bureaucrats. 

UNIDENTIFIED FEMALE:  Having choices we don‘t like is no choice at all. 

UNIDENTIFIED MALE:  They choose. 

UNIDENTIFIED FEMALE:  And we lose. 

(END VIDEO CLIP)

SHUSTER:  Now, never mind the fact that the producer of that ad now supports the president‘s plan, but as far as the issues there, what has changed? 

SHALALA:  Fundamental changes.  The president made it clear, as did Mrs. Clinton, I should point out, that people would be able to keep the plans they currently have.  They would be able to keep their doctor.  And those two things were the things that were threatened during our last debate over health care reform. 

So we‘ve learned from that experience that the vast majority of people want to keep the plan that they have, and they want to have choices.  They want to be able to choose their doctor.  And they don‘t want a government substitute for that, though they may not object to a government framework that would help to keep costs down overall in health care. 

The other thing that has changed is the insurance companies, themselves, have not been very successful at keeping costs down.  They have to negotiate directly with doctors and hospitals, and they‘ve been struggling.  As a result, their margins have shrunk.  So they want in on this overall health care cost containment, as does every other part of the industry.

The pharmaceuticals, of course, would love overall coverage for everyone, where no one is without health insurance.  That would give them a larger market.

So the interests are different, they‘re in different places.  The most important point is that no one thinks they‘re going to make any money in the private sector unless everybody has coverage and unless we‘re paying on the basis of outcomes.  That is, we‘re paying people for producing healthier people, as opposed to paying for sickness.

SHUSTER:  Former HHS secretary Donna Shalala, now the president of the University of Miami.

And thanks so much for coming on.  It‘s so interesting.  We look forward to talking with you again.

SHALALA:  Thank you.

SHUSTER:  You‘re welcome.

Up next, show me the money.  We‘ll take a look at some of the outrageous earmarks in the $410 billion spending bill and which lawmakers are responsible for them.

And later, why President Obama‘s new policies have some people longing for the days of another Democratic president.  Who was missing Bill Clinton?  And why?

And we are taking your questions via Twitter and taking your video suggestions there as well.  Let us know what you saw today on YouTube or elsewhere that we should preview and review with our panel.  Just go to Twitter.com/shuster1600.

It‘s all ahead.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.

The U.S. Senate continued its feisty debate today over a $410 billion government spending bill.  The measure contains nearly $8 billion in earmarks and pet projects.  Defenders note that the projects were requested last year, but critics are ratcheting up their rhetorical complaints. 

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN ®, ARIZONA:  It‘s not last year‘s business.  It‘s this year‘s business.  If it‘s last year‘s business, then if it‘s passed by the Senate and the House, send it down to Crawford, Texas, and have it signed by last year‘s president. 

(END VIDEO CLIP)

SHUSTER:  The bill includes pet projects that were pushed by lawmakers who are no longer in Congress. 

Remember Arizona House Republican Rick Renzi?  He was indicted in connection with a land deal, but seven of his earmarks are still in the spending bill at a cost of $1.2 million. 

And how about former Idaho senator Larry Craig?  He was arrested in a bathroom sex sting and decided not to seek reelection.  His earmarks total over $1 million.

The nonpartisan organization Taxpayers for Common Sense went through the bill and has found the worst earmark offenders in the U.S. Senate, and here they are...

Mississippi Democratic (sic) Senator Thad Cochran.  The top on the Appropriations Committee takes number one with 204 earmarks in the bill totaling over $470 million. 

His Mississippi seat mate, Republican Roger Wicker, requested 143 earmarks, totaling just over $390 million. 

Louisiana Democrat Mary Landrieu sponsored 177 earmarks for a total of over $332 million. 

Iowa Democratic Senator Tom Harkin sponsored 177 earmarks for $292 million. 

Louisiana Republican Senator David Vitter sponsored 142 earmarks for almost $240 million. 

Now, here are the senators who requested zero earmarks...

On the Democratic side, Wisconsin‘s Russ Feingold and Missouri‘s Claire McCaskill.  On the Republican side, the senators who requested zero were Arizona‘s John McCain, Oklahoma‘s Tom Coburn, and South Carolina‘s Jim DeMint. 

Joining us now is Tom Schatz, president of Citizens Against Government Waste.

Tom, what are the most egregious earmarks in the bill? 

TOM SCHATZ, PRESIDENT, CITIZENS AGAINST GOVERNMENT WASTE:  Utilization research, which means we‘ve now spent $95 million to study how to use wood to improve lamination for furniture and flooring, and that‘s been going on since 1985.  I think the industry knows how to do this, there doesn‘t seem to be any shortage of laminated wood anywhere.  And they should be paying for the research. 

SHUSTER:  What about—well, let me roll what President Obama said during the transition in early January.  He was talking about the economic stimulus, but he promised to end business as usual. 

Listen. 

(BEGIN VIDEO CLIP)

OBAMA:  But we‘re not going to be able to expect the American people to support this critical effort unless we take extraordinary steps to ensure that the investments are made wisely and managed well.  We are going to ban all earmarks, the process by which individual members insert pet projects without review. 

(END VIDEO CLIP)

SHUSTER:  What about the argument though that also has gone along since then, that the White House says, look, there are so many big issues dealing with this economy that are costing a lot of money that we need to focus on, that it‘s more important to keep members of Congress happy when we deal with things like energy reform, health care reform, than to anger them now over simply $8 billion, even though it‘s not just simply $8 billion, but in the grand scheme of things that‘s less than one percent of this particular bill? 

SCHATZ:  It‘s the same thing every president has said.  We appreciate that President Obama is saying that earmarks should disappear.  It‘s interesting that they‘re saying this is left over from last year. 

You know, there‘s a lot of leftovers in my refrigerator, but when the pork goes rancid, you throw it away.  We don‘t need these earmarks. 

They can say we have so many higher priorities, whether it‘s the health care plan or energy or anything else.  We need that $8 billion.  So just strip them out and move forward. 

And members of Congress defend this as if it‘s the most important thing in the world, and yet they say it‘s really not a lot of money.  It‘s a little bit hypocritical . 

SHUSTER:  But it does help grease votes on some of these larger issues.  Would you acknowledge that? 

SCHATZ:  Well, look, we didn‘t have this many earmarks until really the mid ‘90s, and the highest we ever had was $29 billion.  So how did we survive more than 200 years without earmarks? 

It really doesn‘t grease the wheels as much as people think.  And when Republicans were in charge, they thought it would help them get reelected, and look what happened to them. 

SHUSTER:  Is there a pattern to earmarks?  In other words, it looks like members on the Appropriations Committee seem to get more in.  Is that the pattern here?

SCHATZ:  Absolutely.  Members of the Appropriations Committees, House and Senate, are writing these bills, they put the conference report together, they direct these projects, mostly to themselves.  Certainly looking at the senators and representatives that don‘t accept earmarks, they do get reelected.  So you don‘t really need it if you stand on a principle saying I don‘t want them. 

But yes, it goes 60 percent to the majority—in this case, Democrats

40 percent minority, Republicans.  It was the reverse when the Republicans were in charge. 

SHUSTER:  Tom Schatz from Citizens Against Government Waste.

Tom, thanks for coming on.  We appreciate it. 

SCHATZ:  Thanks. 

SHUSTER:  And just a clarification.  I think it said on the screen that Thad Cochran was a Republican, but I said he‘s a Democrat.  He is a Republican.  Sorry about that.

Up next, “Hypocrisy Watch.”  One senator this week has taken a rather unusual view on some of the earmarks.  Republican Senator Jon Kyl wants to kill 10 of the projects that were pushed by colleagues but wants to keep all of his own. 

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.

In the battle over the government spending bill, Republican Senator Jon Kyl has now joined an effort to remove some of the earmarks, and that takes us to tonight‘s “Hypocrisy Watch.”

First the background. 

The U.S. Senate is considering that $410 billion bill that will keep the government funding.  The measure has more than 9,000 earmarks worth nearly $8 billion. 

Yesterday, Senator Kyl said he would support an effort by Senator Coburn to remove some of the pet projects, including $1.7 million for swine manure odor research, and $200,000 for gang tattoo removals.  However, Senator Kyl doesn‘t want anybody messing with his earmarks.  And Senator Kyl‘s total adds up to more than $118 million.  And the pork projects include a $15 million crash rescue station; a $19 million Navy instruction facility in landlocked Arizona; and $30 million for safe schools—you know, to protect kids from gangs, among other things. 

Like all earmarks, the items Senator Kyl is pushing did not go through the normal review process.  Still, the senator insists there is nothing wrong with his set. 

(BEGIN VIDEO CLIP)

KYL:  I can defend everything that I have recommended in the budget, and I would suggest that they‘re not earmarks under the definition, because we have a specific definition. 

(END VIDEO CLIP)

SHUSTER:  Because of a specific definition? 

Senator, removing gang tattoos has a specific definition and purpose as well. 

In any case, here is the issue.  If you claim to be against earmarks you‘ve got to be consistent.

And Senator Kyl, when you criticize the earmark projects of your colleagues but defend your own earmark spending, that‘s hypocrisy, and it‘s wrong. 

Still ahead on 1600...

(BEGIN VIDEO CLIP)

GEORGE H. W. BUSH, FMR. PRESIDENT OF THE UNITED STATES:  Today we heard from four presidents of the United States.  And I think there‘s a lot of interest because of who she is. 

(END VIDEO CLIP)

SHUSTER:  The emotions overtook former President George H. W. Bush today when he spoke about his wife Barbara one day after her heart surgery. 

We will give you an update on her condition ahead. 

But up next, the (INAUDIBLE) in Chicago wrote this morning that after watching President Obama in action, he misses former President Bill Clinton.

We will explain coming up.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CLINTON:  We know there‘s not a program for every problem.  We know and we have worked to give the American people a smaller, less bureaucrat government in Washington.  And we have to give the American people one that lives within its means.  The era of big government is over. 

(END VIDEO CLIP)

SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE.  One of our next guests says he misses the Clinton era especially now.  Is this just a clever way to criticize President Obama?  We‘ll get to the guest in just a second, who wrote a column today that everybody seems to be talking about. 

But first let‘s talk to our political panel, Chris Kofinis, Alexander Hefner and Terry Holt.  Chris, the main argument that a lot of conservatives are making—we‘ll hear from the “Chicago Tribune” columnist in just a second—is that Bill Clinton represented a downsizing of the U.S. government, whereas Obama represents ratcheting it up, making it much larger.  What‘s the Democratic reaction to that? 

KOFINIS:  Well, the reaction is it‘s a completely different reality from where we were in 1993 to where we are today in 2009.  I mean, in terms of one piece of this, you know, President Obama inherited a series of crises not of his making, not of his doing.  It happened under President Bush‘s watch.  And a series of economic crises that demanded multi-trillion dollar responses.  And that is just the reality, to help stabilize the economy. 

The other part to this I think is really critical, when you‘re talking about health care, when you‘re talking the regulatory system, when you‘re talking about global warming and the environment and energy independence, is how many more years and how many more decades are we going to go before we address these problems?  You know, I‘m 39 years old.  It seems like we‘ve been talking about these things for at least 39 years.  And it doesn‘t seem to ever end. 

I think President Obama understood that he was put into power to change.  And that is what he‘s going to do, change the country. 

SHUSTER:  Terry, the column said “Why I Miss Bill Clinton.”  Do you miss Bill Clinton, really? 

HOLT:  I didn‘t until I saw that budget last week and what it did to the stock market.  You know, the fact of the matter is—and I hate to be cynical about this—but it just could be that the group that‘s increasingly showing itself to be very left wing in this government, this new government we have, that they‘re using an economic crisis and the anxiety of the American people to enact their agenda.  They have that right.  They won this election. 

But what Bill Clinton understood about the people that this group maybe hasn‘t understood yet is that this country is essentially tight with its money, and votes on pocketbook issues, and doesn‘t want to see taxes go up on people who create jobs, and is concerned about spending, whoever is doing the spending.  A multi-trillion dollar approach to this problem, people are going to see that and view it with some skepticism.  I think a lot of people will miss Bill Clinton before this administration is done. 

SHUSTER:  Alexander, we‘ll get to you in a second, but we do have now “Chicago Tribune” columnist, Steve Chapman.  Let‘s chat with him first.  Alexander, I‘ll get your reaction.  Steve, first of all, your column.  You don‘t really miss Bill Clinton, do you?  I read some of your criticism about Bill Clinton during the Monica Lewinsky scandal.  You said some pretty tough things about him. 

STEVE CHAPMAN, “CHICAGO TRIBUNE”:  Yes, I did.  And one of the things that new presidents do is make you appreciate the things you didn‘t appreciate about old presidents.  In the case of Bill Clinton, Monica Lewinsky doesn‘t seem that important now. 

SHUSTER:  Let‘s be clear.  Despite all of the ink you spilled criticizing Bill Clinton over the Monica Lewinsky scandal, what you‘re arguing now is that what Barack Obama is doing now to try to deal with this economy is worse? 

CHAPMAN:  I think that‘s worse than anything Bill Clinton did in the Monica Lewinsky scandal.  I would point out that I did not favor impeachment of Bill Clinton.  I thought he behaved badly.  And I thought he deserved censure, but I didn‘t think he deserved to be impeached and didn‘t think he should resign. 

SHUSTER:  What about the argument—

CHAPMAN:  He did a very good job, I think, managing the federal role in the economy for a Democrat.  He worked with—

SHUSTER:  Fair point.  What about the argument we just heard from Chris Kofinis a moment ago, that you‘re mixing apples and oranges when you compare Bill Clinton and the ‘90s to the challenges that this administration is facing now? 

CHAPMAN:  Well, people forget that Bill Clinton came into office in the aftermath of the S&L collapse, the thrift crisis.  He came into office in the aftermath of a recession.  You know, times were not great when Bill Clinton took office.  They got really good during his time in office.  And he took advantage of those—of the opportunity that presented, to balance the federal budget and reduce federal spending as a share of GDP.  And I think those are good things. 

SHUSTER:  Steve, given the way you‘ve covered Bill Clinton over the years, don‘t you think if he were facing this sort of economic crisis we‘re facing now, and we had lowered interest rates as low as they can go, that even Bill Clinton would say, you know what?  The only way to stimulate this economy is for the government to do it? 

CHAPMAN:  Well, what I‘m writing about is not what the government ought to be doing, and what Obama is doing to stimulate the economy.  I‘m talking—what worries me is the level of the spending that‘s going to be rising after the recession is over.  If you look at the out years, we‘re talking about after the initial burst of stimulus, there is going to be a rising deficit until it‘s over 700 billion by 2019.  The federal share of Gross Domestic Product is going to be at the highest level in a long time. 

SHUSTER:  Steve Chapman, “Chicago Tribune” columnist. 

(CROSS TALK)

SHUSTER:  Steve, it‘s a fascinating column, very provocative, whether we agree or disagree.  It‘s certainly getting a lot of attention, well deserved.  An interesting intellectual argument.  We appreciate you coming on the show. 

CHAPMAN:  Thank you. 

SHUSTER:  You‘re welcome.  Let‘s turn back now to our political panel.  Again, Chris Kofinis, Alexander Hefner, Terry Holt.  Alexander, you are the founder and editor-in-chief of Scoop44.com.  When you hear these comparisons between Bill Clinton and Barack Obama, like the one we just heard, what do you make of it? 

HEFNER:  I think you saw today a new era of transparency that we‘re reporting on Scoop44.com, a different playbook.  It was almost Professor Obama who came into these essentially study groups and he focused on a variety of issues pertaining to health care and the implications for our economy.  But it was one dedicated to transparency.  That‘s a distinction. 

So we‘re inheriting, as Chris said, a series of crises.  But the important point is the approach is drastically different and a stark difference from the Bush administration‘s approach. 

SHUSTER:  Terry Holt, how about that?  Even if you want to compare back to the Clinton administration approach, as Steve Chapman is trying to do, at least in terms of health care, everybody was in the same room.  There weren‘t these secret meetings for several months.  They‘ve already figured out here is the amount of money that needs to be included in the budget. 

HOLT:  Well, the event today was great theater.  We all know that the Obama folks know how to put on a good party.  But using props, people around town to have this event is one thing.  But, ultimately, they‘ve already tipped their hand here.  They‘re going to, you know, cut Medicare benefits for something like 11 million seniors to start this big health care reform project.  They haven‘t committed to doing any reforms of entitlements.  And they‘ve talked about paying for this with a tax that doesn‘t exist yet on a program that hasn‘t been stood up, to the tune of 600 and some billion dollars. 

It‘s fine to dream a big dream, but there‘s no money in the world that‘s going to fix this problem, unless we get a handle on costs and we let the private sector play a big role in health care.  You know, this is just theater here today.  I‘m sorry. 

SHUSTER:  Chris? 

KOFINIS:  It‘s offensive beyond words to suggest it was theater.  I‘m not sure that the Republicans that were there in the room, like Senator Grassley, would like to consider themselves as props.  The reality here is I think we are all at a moment -- 

HOLT:  I hope not.  I certainly hope not. 

KOFINIS:  Just listen for a second.  We‘re at a unique moment in our nation‘s history that I think some Republicans, clearly not all, clearly not Rush Limbaugh and clearly not you, Terry—

HOLT:  But Chris, they‘ve already

(CROSS TALK)

HOLT:  -- they‘ve had the meeting after they said how they were going to handle health care in the budget.  You don‘t do that.  You don‘t promote a plan and then say, hey guys, come in and tell us what you think. 

KOFINIS:  Terry, what‘s interesting is that you are—you and other Republicans seem to be living in the past.  You seem to be living in this past, this Twilight Zone. 

HOLT:  I‘m living in the here and now. 

KOFINIS:  No.  Do you not understand that the nation faces serious problems that require bold action. 

HOLT:  Oh, I understand it. 

KOFINIS:  How many more years do you want to wait in terms of health care?  Do you want to wait for 50 million Americans uninsured, 60 million Americans?  How many is enough before it‘s uninsured, especially when you consider that we spend more in health care than every other western industrialized power that has complete health care? 

HOLT:  I‘m not going to stand by—OK.  You‘d be good in the Senate, because you can filibuster a lot. 

KOFINIS:  Thank you. 

HOLT:  I‘m not going to sit by and let this administration raise taxes by a trillion dollars on people that create jobs in this country.  Jobs is what we need to get this economy growing again.  It‘s not government spending that has put this economy in such a strong position over time.  It‘s consumer spending.  It‘s investment.  It‘s research and development by the private sector. 

The government can‘t solve these problems.  You guys seem to think they do.  And it‘s crazy.  You‘re going to tax people out of their minds. 

KOFINIS:  Your solution, your model was played out for eight years under Bush administration.  And it has led us to the most serious series of crises that we have ever faced since the Great Depression.  So your economic model is broken.  You have to come up with a new one. 

HEFNER:  Gentlemen, I think the question is, can President Obama‘s strategic approach—

HOLT:  I‘m not drinking that Kool-Aid, Chris.  I‘m sorry. 

HEFNER:  It‘s Alexander here.  Can President Obama‘s strategic approach overcome obstacles in this philosophical disagreement between Democrats and Republicans, which really is vitally important?  And that is, is this generational theft or investment we‘re talking about, when it comes to health care, immigration, all of these chief issues that are so concerning to so many Americans today? 

HOLT:  Look.  I think there‘s plenty of opportunity. 

SHUSTER:  We‘ll take a break right on that point.  Chris, Alex, Terry, stick around.  We‘ll bring you back in a few minutes for round two.  I promise.  But first, we‘ve got some good news to report about former First Lady Barbara Bush.  She had heart surgery to replace an aortic valve yesterday, which, believe it or not, is considered a routine procedure.  This afternoon, her surgeon, accompanied by former President George H.W.  Bush told reporters she‘s making excellent—an excellent recovery.  Her husband had a more emotional reaction. 

(BEGIN VIDEO CLIP)

GEORGE H.W. BUSH, FMR. PRESIDENT OF THE UNITED STATES:  Today, we heard from four presidents of the United States, Obama, Clinton, Jimmy Carter, and George Bush—George W. Bush—and me, five.  And I think there‘s a lot of interest because of who she is. 

(END VIDEO CLIP)

SHUSTER:  Mrs. Bush is expected to be released from the hospital next week. 

Up next, Republicans argue the White House is criticizing Rush Limbaugh to take the focus away from the administration‘s big spending.  Now, the GOP is trying to zero in on White House Chief of Staff Rahm Emanuel.  We‘ll talk about the developing fight ahead and continue the last one.  Plus your Twitter questions and video suggestions 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.  A day after radio talk show host Rush Limbaugh challenged President Obama to debate him on air, some Republicans are now accusing the White House of trying to use the fight to distract the public.  Let‘s talk about that with our panel, Chris Kofinis, Alexander Hefner and Terry Holt. 

Chris, the argument has been that Rahm Emanuel is a bad man, that Rahm Emanuel concocted this as a political ploy.  Did he? 

KOFINIS:  I don‘t think so.  When you step back and you look at how this thing developed, it was Rush Limbaugh who came out and said he wished the president failed.  I mean, that is a pretty outrageous thing for anyone to say, especially for an incoming president.  And I think there was a lot of shock surrounding that, both from Republicans and Democrats, mind you.  And so what you‘ve seen I think in the coming days is Rush Limbaugh playing to his audience, pushing the issue, and the White House, in particular Rahm Emanuel and others, fighting back.  I think that‘s appropriate. 

SHUSTER:  Terry, I‘ve heard a number of Republicans say it‘s childish and inappropriate for the White House to be targeting Rush Limbaugh.  If it is childish and inappropriate, then isn‘t it also childish for Republicans to target the White House chief of staff Rahm Emanuel in all of this? 

HOLT:  I think this whole thing is hilarious.  We have the White House fighting with a talk radio show host. 

SHUSTER:  Terry, he‘s the most powerful Republican in the country. 

His voice has a lot of sway, doesn‘t it?

HOLT:  Apparently so.  He has Barack Obama and the White House chasing their tails about what he said about them.  It‘s amazing. 

SHUSTER:  To be clear, it‘s actually not Barack Obama who‘s saying this.  It‘s his supporters and staff.  I get your point, it‘s coming from the White House.  But let‘s be clear, it‘s not coming from the president. 

HOLT:  It‘s just that they spend all their time telling us that the world is coming to an end.  Yet, they spend all this time debating Rush Limbaugh.  It doesn‘t make sense.  It‘s a disconnect and kind of an amateur mistake in Washington. 

We know where Rush is coming from.  But they kind of failed to or maybe they did use it as kind of a way to stir up their base.  But it‘s just theater again, just like the event today on the health care stuff. 

SHUSTER:  Well, I‘m not so sure I agree with you that it‘s a mistake.  The Republicans have really been put in a box.  And Michael Steele continues to suffer.  Last night, on another network, he said, on TV, referring to his appearance on CNN, “there was no attack on Rush.”  So he‘s talking about his own appearance and he says, there was no attack on Rush.  Here is exactly what Michael Steele said on CNN.  Watch. 

(BEGIN VIDEO CLIP)

D.L. HUGHLEY, CNN ANCHOR:  Rush Limbaugh, who is the de facto leader of the Republican party -- 

MICHAEL STEELE, RNC CHAIRMAN:  No he‘s not. 

HUGHLEY:  I tell you what—

STEELE:  I‘m the de fact leader of the Republican party.  Rush Limbaugh is an entertainer.  Rush Limbaugh, his whole thing is entertainment.  Yes, it‘s incendiary.  Yes, it‘s ugly. 

(CROSS TALK)

HUGHLEY:  I tell you what, you‘re the first Republican I‘ve talked to, and I‘ve talked to a lot, that said he‘s not the leader of this party.  I‘ve never heard anybody say that on any show. 

(END VIDEO CLIP)

SHUSTER:  So, Terry, Michael Steele said of Rush Limbaugh, yes, he‘s incendiary, yes it‘s ugly.  That‘s an attack on Rush, isn‘t it? 

HOLT:  Yes, it‘s talk radio.  I‘m not going to try to defend how—

SHUSTER:  Wait a second.  Let me take this point.  When Steele last night said there was no attack on Rush, Steele has a credibility problem according to you, right? 

HOLT:  I think he‘s handled this poorly.  Frankly, I think that people who make too much of what Rush Limbaugh says are always going to be in a position that maybe they‘re going to take it wrong.  You know, ultimately most of us as Republicans want the country to succeed.  And I think after the election felt like it was important for the president to succeed and still do. 

But let‘s just be honest.  When you‘re trying to raise taxes and break spending records that could ruin our country, I think that you have every right to fight against that and say that you want that kind of an agenda to fail.  And—

SHUSTER:  The other view is they‘re not trying to raise taxes.  The other view is that they‘re trying to save the economy by giving taxes to the middle class, by trying to have the sort of stimulus spending that will create jobs. 

(CROSS TALK)

SHUSTER:  Terry, that‘s a very different argument than whether or not somebody wants the president to fail, which is what Rush Limbaugh said.  In any case, we‘ll continue this in our next segment.  Don‘t worry.  We‘re going to continue this, I promise. 

But coming up, she‘s not just the first lady but also the first lady of fashion.  How the items Michelle Obama pulls out of her closet are affecting everything from beauty parlors across America to the wedding industry.  More 1600 after this.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.  There‘s a lot going on today.  Here are a few things I thought you should know.  President Obama has been on the job just 44 days, and the stress is already starting to show.  He is apparently going gray.  The “New York Times” today points out the young president is starting to show flecks of silver.  To be fair, you have to look hard to see it, and the Times says it appears to depend on when the president gets his hair cut. 

Mr. Obama is not the first to see the strains of the job affect his appearance.  Bill Clinton had a half a head of brown hair when he first took office.  Just two years later he went silver.  Remember how George W.  Bush looked in the early days of his presidency?  Here he is toward the end on the right. 

Call Michelle Obama the new Camelot, a fashion icon, a trend setter.  The fashion director for “Brides Magazine” says the one shouldered white gown the first lady wore to the inaugural ball is influencing what young brides are choosing.  Apparently, everyone wants a dress with one shoulder just like Mrs. Obama. 

Wedding dress designers are not the only ones cashing in on the first lady‘s style.  Paul Lebrec (ph), a hair care company, is now trying to sell an 18 dollar product called Straight Finish, which they advertise is the way to, quote, get Michelle Obama‘s look. 

Now, we‘re looking for your votes on this one.  The Cincinnati Reds have invited President Obama to throw out the ceremonial first pitch at this year‘s Civil Rights Game.  The game will take place on June 20th at the Great American Ballpark against Obama‘s favorite team, the Chicago White Sox.  If the president agrees to throw out the first pitch, we want to know what you think.  Will President Obama channel his skills on the basketball court and throw a strike, just like former President George W.  Bush did at the 2001 World Series at Yankee stadium?  Or will the president channel the bowling skills he displayed on the campaign trail, and chuck the baseball in the dirt like Dick Cheney?  That‘s the former vice president at the 2006 opening day ceremonies at RFK stadium. 

What‘s your prediction about the president‘s pitching talent?  Will they match his basketball or bowling skills?  Vote by logging online to Shuster.MSNBC.com. 

Brad Pitt made a trip to Capitol Hill today to meet with House Speaker Nancy Pelosi.  Pitt and the speaker discussed Make it Right, a program he founded that builds affordable and sustainable housing for people in New Orleans who lost their homes in Hurricane Katrina.  Also on hand was Congressman James Clyburn, who heads up the House Katrina task force.  Those are just a few things I thought you should know. 

It is Twitter time.  And before we get back to our panel, I want to bring your attention to Craig Fugate‘s Twitter page.  Fugate is the man President Obama has tapped to be his new FEMA director.  Take a look.  His handle is Disasters Are Us.  Wow. 

Let‘s welcome back our panel, Chris Kofinis, Alexander Hefner and Terry Holt.  We have a new dimension to Twitter time, and that is we are encouraging people not to just ask questions, but also to send us some videos and the panel will rate them. 

So we‘re going to first with a video that somebody caught when they were watching President Obama today at the health care summit.  Watch this. 

(BEGIN VIDEO CLIP)

OBAMA:  Excuse me.  This is a health care forum, so I thought I‘d—you know—model what happens when you don‘t get enough sleep. 

(END VIDEO CLIP)

SHUSTER:  All right.  Alexander, one being bad, ten being bad, how good was that or bad was it, in terms of his wit? 

HEFNER:  I couldn‘t see the visual, but I‘ll give it a five. 

SHUSTER:  OK, Five.  All right.  This was directed to our attention, this is an animation, which you‘re entitled to submit.  Here‘s an animation that refers to some of the banking issues we‘re all facing.  Watch. 

(BEGIN VIDEO CLIP)

(SINGING)

(END VIDEO CLIP)

SHUSTER:  All right.  Terry Holt, score that one and make whatever comparison you want to the entertainment value of Rush Limbaugh in the process. 

HOLT:  I didn‘t see it either.  I have no idea.  Catchy song.  I‘m going to give it seven and a half, just because I don‘t want the curve to go down.  I‘m sorry.  I didn‘t see it, guys.  We have to fix that for next time. 

SHUSTER:  Yes, we will work on the monitors.  I promise.  Chris Kofinis, a number of questions for you via Twitter.  People want to know what is the likelihood that health care reform will get passed, given that it‘s the same players who existed 15 years ago when it got killed? 

KOFINIS:  Well, it‘s a lot of the same players, but I think conditions have changed and what you saw today, in terms of both the corporate players, the special interests, as well as the members of the different political parties, is kind of a shared interest and an understanding that American people want this done.  I think you‘re going to see significant, arguably dramatic health care reform done this year. 

SHUSTER:  Chris Kofinis, Alexander Hefner, Terry Holt, I promise to have monitors for you next time.  We‘re still learning in the show, but we‘re going to get there.  We‘ll have you back.  Thank you very much.  We appreciate it.  Good panel discussion as always. 

That‘s the view from 1600 PENNSYLVANIA AVENUE tonight.  I am David Shuster.  Remember, you can get the latest 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 or text PENN to 622639 to have alerts sent to your phone.  If you Twitter, I‘ll be online right after the show at Twitter.com/Shuster1600.  Remember, we‘re taking your questions on the air and also looking for your videos.  If you see something that you want our panel to look at, we‘ll have monitors starting tomorrow, I promise you. 

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

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

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