updated 3/9/2009 10:10:51 AM ET 2009-03-09T14:10:51

Guest: Michael Scherer, Steve King, Carolyn Maloney, Jim Pethokoukis, A.B. Stoddard, David Frum, Michael Crowley, Michael Isikoff

(BEGIN VIDEOTAPE)

DAVID SHUSTER, HOST (voice-over):  Tonight, it‘s the highest unemployment rate in 25 years.

BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES:  We‘ve got big challenges ahead of us.  We inherited a big mess.

SHUSTER:  The president talks about his recovery plan in Ohio and highlights the police officer jobs that have been saved.  But back in Washington...

UNIDENTIFIED MALE:  What we‘re doing to solve the economic crisis is not working.

SHUSTER:  “Follow the Money,” those massive salaries for bank executives. 

UNIDENTIFIED MALE:  When you start talking about the top 20, you‘re getting into some revenue producers that can really hurt your company if they leave. 

SHUSTER:  Today, the debate intensified. 

Plus, Karl Rove says White House counterfire at Rush Limbaugh is inappropriate. 

KARL ROVE, FOX NEWS CONTRIBUTOR:  This is the same old-style politics that we grew to really dislike in the 1990s, when the White House thought everything through from a political perspective. 

SHUSTER:  Karl Rove lands in “Hypocrisy Watch.”

And the things I thought you should know—the Obama kids are enjoying their swing set, the president will soon meet the queen of England, and Twitter time, all tonight on 1600 PENNSYLVANIA AVENUE.

OBAMA:  Please, everybody, have a seat. 

(END VIDEOTAPE)

SHUSTER:  Another frightening report about the U.S. economy. 

Hello, everybody.  I‘m David Shuster. 

This is day 46 of the Obama administration, and the challenge facing the White House is once again very clear. 

Today, the Labor Department reported a loss of 651,000 jobs last month, pushing the country‘s current unemployment rate to over 8 percent, the highest since 1983. 

This morning, President Obama went to Columbus, Ohio, to try to focus on jobs being saved.  He spoke to a class of police academy grads who were facing unemployment, but will now have positions paid for with money from the president‘s stimulus plan. 

(BEGIN VIDEO CLIP)

OBAMA:  And I don‘t need to tell this graduating class what it‘s like to know that your job might be next, because up until a few weeks ago, that is precisely the future that this class faced, a future that millions of Americans still face right now.  Well, that is not a future I accept for the United States of America. 

(END VIDEO CLIP)

SHUSTER:  For more, let‘s bring in “TIME” magazine‘s Michael Scherer. 

And Michael, Republicans are saying that no matter what the president says, the economy is getting worse, not better, that these plans are not working.

What is the White House response? 

MICHAEL SCHERER, “TIME”:  You know, right now, the president‘s top job is to maintain confidence.  The difference between a recession, a severe recession and depression, it really comes down to public confidence. 

Clearly, this week has not been a good week.  You have the stock market dropping on pace.  It looks a lot like 1929.  You have unemployment rising on pace.  It looks a lot like 1939.  And so, you know, what Obama is just doing is trying to get the message out there are hard times ahead, but we are going to get better, to prevent that disappearance of confidence that could create much bigger problems for us. 

SHUSTER:  How much time, politically, do the White House officials think they have? 

SCHERER:  You know, they are not going to set a deadline on that.  You know, they‘re going to move forward as fast as they can. 

Clearly, it‘s a question.  It‘s a growing question. 

Obama, since January, has been basically riding on the fact that this is not his—a problem of his creation.  This was a problem of President Bush.  But increasingly, these are going to be his problems. 

I can‘t give you a date.  You know, is it a month, is it two months? 

We know that at some point, this toxic issue with the banks is going to be settled.  It could be in three months, it could be in six months.  And by then, you know, it could be a bigger issues.

We also have coming up this fall the possibility of another stimulus coming up.  You know, this White House hasn‘t committed to that, but a lot of people are talking about it.  If that happens and we‘re still on a downward trajectory, Obama could have a lot of trouble, I think. 

SHUSTER:  And finally, Michael, President Bush was criticized for bringing a campaign mentality to the White House.  But in his first 46 days in office, President Obama has visited six of the nine red states he flipped from red to blue in 2008. 

Explain how the White House is trying to justify this and that argument about the permanent campaign.  How does the White House respond? 

SCHERER:  You know, there‘s two issues going on. 

One, a lot of the states he‘s visiting are the most economically depressed states.  He goes to Florida to talk about housing, he goes to Arizona to talk about housing.  He‘s in Ohio to talk about jobs.  These are the states that are hardest hit, so it‘s not just a red state, blue state issue. 

But obviously, you know, the idea that the permanent campaign never stops is something only people in the current administration will tell you.  Nobody in Washington believes that a president is ever in office, maybe—except for maybe the last six months of his second term, and not constantly worrying about his popularity, constantly trying to communicate with the American people, constantly running for something. 

SHUSTER:  “TIME” magazine‘s Michael Scherer. 

Great reporting, Michael.  Thanks for joining us tonight. 

SCHERER:  Thanks a lot for having me. 

SHUSTER:  You‘re welcome.

The White House says the $787 billion stimulus plan the president signed a few weeks ago is just one part of the economic recovery effort, but Republicans, as we‘ve already told you, are complaining about the spending.  They argue it‘s the wrong approach, and this debate could have a huge impact on the budget battles that are coming in Congress. 

Joining us now, Congresswoman Carolyn Maloney, Democrat from New York and chair of the Joint Economic Committee, and Congressman Steve King, Republican from Iowa. 

Congressman King, what would the Republicans have the White House do any differently? 

REP. STEVE KING ®, IOWA:  Well, I would hope so.  And if I were calling the shots, the first thing I would do is suspend capital gains taxes for at least two years to free up the capital that‘s out there that‘s sitting on the sidelines that just doesn‘t have confidence that raising taxes and growing government is going to do anything except delay the recovery in this recession that we‘re in. 

SHUSTER:  Congresswoman Maloney, a lot of people would seem to argue that cutting taxes for a business that‘s already losing a lot of money won‘t do anything, and there‘s no guarantee that if you give people tax money, they will actually spend it to stimulate the economy.  But, I mean, tell us your view.  I mean, wouldn‘t more taxes help to a certain extent? 

REP. CAROLYN MALONEY (D), NEW YORK:  Well, let me tell you, in the stimulus package, the economic recovery package that we just passed, $787 billion, we haven‘t had a chance for that money to kick in.  But included in it was a tax break for 95 percent of working Americans.  They‘re getting a break in their paychecks this week. 

So there is relief in taxes, and fair taxes to the working men and women of this country.  But these are grim, gut-wrenching numbers.  It‘s the fourth consecutive month that we have lost over 600,000 jobs. 

Barack Obama‘s administration has said when you‘re driving toward a cliff, you have to change course, and we have changed course.  He had called for a stimulus package before he even was sworn in.  And yet, it was not accepted by the president, the then sitting president, or the Republicans in Congress.  It was one of the first things he enacted into law. 

We passed in the House a housing stabilization bill to stabilize housing.  Economists have said we would not get a hold of this economic recession until we stabilize, put a floor on housing, and then the...

(CROSSTALK)

SHUSTER:  But Congresswoman Maloney, how do you explain to your constituents why the situation continues to get worse? 

MALONEY:  Well, I would say that we inherited eight years of failed economic policies.  He has been in office, as you said, 47 days. 

He has acted to pass the Economic Recovery Plan that invested in saving or creating 3.5 million jobs, and giving a tax break.  And it‘s also—we have passed the Housing Stabilization Plan, and they are coming out with other efforts to stabilize our financial system so that we can start generating jobs and going forward in a positive way.  These are major pieces of...

SHUSTER:  Congressman King, you don‘t blame President Obama for these job losses, do you? 

KING:  Some of it is and some of it isn‘t.  I think we‘re both sad to see these kinds of numbers come out.

SHUSTER:  OK.  What of it specifically?  Wait a second.  Explain specifically what of the job losses are attributable to President Obama, and why. 

KING:  OK.  These job losses come from the second half of the TARP fund.  The previous half was part—is part of President Bush‘s economy.  But what‘s happened is that President Obama has been one who has contributed to the lack of confidence in the future of this economy, and then this massive spending, this $1.4 trillion tax increase, the $650 billion or so cap in trade that is a tax on everybody, whether they‘re the lower 95 percent or the top five percent. 

(CROSSTALK)

SHUSTER:  That hasn‘t started yet, though, Congressman.  I mean, the issue is, you said this is somehow related to the TARP.  Let‘s go back over that. 

What about the TARP is costing Americans their jobs right now?  The TARP, as far as I understand, was money to get credit flowing, to help the banks so the banks would not go insolvent.  If a bank goes out of business, all those employees of the bank lose their jobs.  If you give a bank money to stay in business, the employees still have their jobs. 

So again, what is it about the TARP that is costing jobs? 

KING:  OK.  And I hope you hear my point.  And that is that this has transitioned into President Obama‘s economy. 

He supported all of the TARP.  And only the first half can be charged against President Bush.  The balance of that was requested by the Obama administration. 

But when there‘s a crisis in confidence in credit, which the TARP didn‘t fix—and we still don‘t know where that money all went—and when there‘s a crisis in confidence in capital investment, it costs jobs.  Those are the jobs that are now showing up in our records today as the capital that‘s sitting on the sidelines. 

We need confidence that capital is not going to cost more.  It was Adam Smith who said the cost of anything is the sum total of the cost of the capital and the labor that goes together to make it work.  Capital is more expensive because...

(CROSSTALK)

SHUSTER:  Well, let me—I think I get your argument.  Let me try to simplify and try for Congresswoman Maloney. 

The idea is that, yes, the credit industry, the financial markets are worried because they don‘t see a lot of clarity in terms of how the Obama administration is going to solve the credit crisis and get the finances moving again.  And that lack of clarity, the lack of confidence, is what is causing the Dow to drop. 

Congressman Malone, what‘s wrong with that argument? 

MALONEY:  Well, I would say that the alternative to the TARP would be that our financial systems went right up to the brink of failing, of a 1929 financial breakdown.  So the effort of keeping our financial system moving and going forward was important. 

Now, there is effort to bring clarity to exactly where these dollars are going.  I even have a bill in that would track all the TARP money in a centralized database government.  I hope you‘ll join me on this bill so can study the trends and whether or not it‘s really being used to halt systemic risk in our government. 

I think that President Obama has done a superb job, he has restored confidence.  He has come into a mess. 

George Bush created fewer jobs than any president in history, and he tripled our debt, our deficit.  And President Obama has come out with a plan to cut our deficit in half and to move forward to protect and create new American jobs.  And we do have the third—third—I would say the third stool or the third area that we need to work on. 

(CROSSTALK)

SHUSTER:  Well, that‘s true.  No, I mean, there‘s still a lot of work to do. 

MALONEY:  A lot of work to do. 

SHUSTER:  Congresswoman, I agree.

MALONEY:  But he‘s got a good economic team around him. 

SHUSTER:  Now, there is a lot of work to do.  And—well, and it‘s a good sign that the two of you can agree to try to bring some more transparency to how the banks are using the money that we give them. 

MALONEY:  Exactly.

SHUSTER:  So that‘s at least an important start.

In any case, Congresswoman Carolyn Maloney from New York, and Congressman Steve King, Republican from Iowa, thank you so much for joining us.  We appreciate it.

MALONEY:  Thank you so much. 

KING:  Thank you.

MALONEY:  Thank you.

KING:  Of course.  You‘re welcome. 

And coming up on Monday on 1600 PENNSYLVANIA AVENUE, we‘ll speak with Nobel Prize-winning economist Paul Krugman of “The New York Times” about all of this. 

And for all of you and all of us on the show, I know that everybody is outraged over those Wall Street executive bonuses.  Today, one financier argued that the big bonuses are fair and deserved and that those who work on Wall Street are heroes.  A hot debate on that is coming up next. 

Plus, Karl Rove, Rush Limbaugh, and the double standard that has landed Bush‘s brain right in the middle of tonight‘s “Hypocrisy Watch.”

And we are taking your questions, considering your favorite—taking your questions and considering your favorite videos over Twitter.  Just go to twitter.com/shuster1600, or find the link on shuster.msnbc.com.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back. 

Four and a half million Americans have lost their jobs in the last year, but they are not the only victims of the financial crisis.  Apparently, a trader at a major Wall Street bank wrote an article for forbes.com complaining that his bonus was too small.  The author didn‘t use his name or specify which bank he works for, but his argument is that not every Wall Streeter exploited false profits for personal gain, and the ones who played by the rules deserve to get paid for it. 

“These heroes—and I include myself among them—deserve to be rewarded.  I believe my bonus last year was too low, given what I accomplished.  Yes, it‘s hard to feel sorry for someone who makes more than $400,000 a year.  But is it crazy to suggest that if I had a true, positive economic effect on my firm of $100 million, that I should receive 1 percent of that number as compensation?”

Joining me now for a spirited debate on this topic is Jim Pethokoukis, money and politics columnist for “U.S. News & World Report.”

Jim, I think we agree that if you can verify that somebody added value to a firm, sure, they deserve 1 percent, but isn‘t it a problem when the firm, itself, was making the claim about what the value is? 

JIM PETHOKOUKIS, “U.S. NEWS & WORLD REPORT”:  Well, listen, if what we want to do is that if there‘s these huge bonuses and then it turns out that, you know, down the line the company doesn‘t do well, and you want to put some sort of provision saying they have to give some of the money back, you know, that‘s fine.  I don‘t think too many people are going to argue that. 

But listen, the average Wall Street bonus was about $112,000 pretax.  After tax, we‘re talking, what, 50 grand, 60 grand?  And you can‘t even rent a two-bedroom in Manhattan for 50 grand or 60 grand?  That‘s not why we are in this problem, and punishing people is not going to get us out of this problem.

In fact, it may make it worse if you drive accounts (ph) away from places like AIG and Citigroup.  Is that what we really want to do? 

SHUSTER:  But Jim, given the way Wall Street performed last year, a lot of Americans would say, why give them any bonus at all? 

PETHOKOUKIS:  Well, listen, I think as the writer of the article said, if your individual unit is able to do well, you should be compensated.  You want a merit-based system, you want pay for performance.  And if you do perform, you should get paid. 

Listen, they put in all these rules before because they‘re worried about high salaries that weren‘t justified by performance.  So then they made a lot of it stock options and bonuses.  Well, that‘s what you want to do.  You want to pay for performance. 

HARRIS:  Well, here‘s a question.  AIG‘s former CEO, Robert Willumstad was only there for about five months last year.  And yet, he was offered a golden parachute of $22 million. 

Thankfully, he had enough sense to turn it down.  He said, “I prefer not to receive a severance payment while shareholders and employees have lost considerable value in their AIG shares.”

Thankfully, Willumstad is one of those heroes.  But why was AIG offering him that to begin with? 

PETHOKOUKIS:  I mean, really, is that why AIG is in trouble, because of that bonus?  Is that why the government has had to pump in over $100 billion? 

I mean, you take these outliers and you say, well, gee, that‘s the reason they‘re in trouble.  If only they didn‘t give money to the—you know, the $27 million here, the company would be just fine. 

That‘s not why these companies are in trouble.  That‘s how it‘s going to save.

And as I said before, look at AIG.  They‘re having trouble retaining people.  They‘re having trouble attracting new executives of the company.  You don‘t want that company to go under because it‘s going to cost a lot more than $120 billion if it goes under. 

SHUSTER:  Well, here‘s the—let‘s try to boil this down.  And I think this gets to the idea of, how do you determine what value is to a company? 

Suppose that I take this Hannah Montana lunchbox that I just bought for 8 bucks, I give it to MSNBC and I say, you know what?  In 50 years this is going to be a collector‘s item, it‘s going to be worth $10 million.  I can write up the value to MSNBC and say, I just gave you an added value of $10 million.  You give me $100,000. 

Isn‘t that what so many of the financiers and traders on Wall Street have been doing?  They are determining themselves how much value they are adding in their trades, when now we‘re finding out that these trades, a lot of them, are not worth even a percentage point of what they were claiming. 

PETHOKOUKIS:  Right.  And that‘s why I say there‘s a lot of talk among compensation experts about putting in provisions that, you know, if it turns out that these great trades and these great profits don‘t pan out, that they have to give some of that money back, put some of that money in escrow. 

You know, that‘s fine.  But I don‘t think you want the government determining, you know, what the compensation package should be, what the limits on executive compensation should be.  I don‘t see where that has ever worked.  And they‘re having just as much trouble in other countries that do have much firmer rules on compensation. 

SHUSTER:  That‘s a good point.  But the problem, Jim, as you well know, as you‘ve reported on, is that when these companies are determining the value, themselves, and based on their own determination of value...

(CROSSTALK)

PETHOKOUKIS:  Well, who do you want to determine the value?  The Treasury Department? 

SHUSTER:  Well, that‘s the thing...

(CROSSTALK)

SHUSTER:  Well, that‘s true, but the market as been artificially inflated. 

The market totally missed this one.  And that‘s the problem...

(CROSSTALK)

PETHOKOUKIS:  Listen, you‘re always going to have people who get paid too much and then the company does well.  That is just the price of doing business in a free market economy.  I mean, good luck coming up with an alternative. 

SHUSTER:  Jim Pethokoukis.

PETHOKOUKIS:  You bet. 

SHUSTER:  Jim, always a pleasure having you on.

PETHOKOUKIS:  Thanks, David.

SHUSTER:  Great sparring with you on this.  Good to talk to you tonight.

PETHOKOUKIS:  I like the lunchbox.  That‘s great.

SHUSTER:  Jim Pethokoukis, columnist for “U.S. News...”

Thanks.

Jim Pethokoukis, columnist for “U.S. News & World Report.” 

For most of his career, Karl Rove practiced the political art of slash and burn.  And while serving President Bush, he injected politics into countless White House decisions.  But now that the Obama White House is focusing on Rush Limbaugh in order to hurt the GOP, Karl Rove, of all people, says it‘s inappropriate. 

“Hypocrisy Watch” is next on 1600 PENNSYLVANIA AVENUE.

(COMMERCIAL BREAK)

SHUSTER:  Former Bush political adviser Karl Rove has now joined the conservative bandwagon in complaining about the Obama White House criticism of Rush Limbaugh.  And that takes us to tonight‘s “Hypocrisy Watch.”

First, the background. 

It was almost a week ago when Rush Limbaugh told conservatives at a conference that he wants the president of the United States to fail.  Then a string of Republicans agreed with Rush, or refused to distance themselves from him. 

The Obama White House hit back hard.  Chief of Staff Rahm Emanuel and spokesman Robert Gibbs argued that Limbaugh is the leader of the GOP.  Now Karl Rove says the White House strategy of linking Republicans to Limbaugh is inappropriate. 

(BEGIN VIDEO CLIP)

ROVE:  This is the same old-style politics that we grew to really dislike in the 1990s, where the White House thought everything through from a political perspective, road-tested it by running polls and focus groups, and did everything with a very keen eye towards the politics in the matter, not what was in the best interest of the country. 

(END VIDEO CLIP)

SHUSTER:  Putting politics ahead of the best interests of the country?  That‘s interesting, because in 2003, “The Wall Street Journal” reported that Karl Rove or his top aide visited nearly every federal agency to outline Bush White House priorities, preview polling data, and call attention to races that could be affected by regulatory action. 

In 2001, according to former HHS secretary Tommy Thompson, President Bush limited stem-cell research—thrilling the religious right—because of Karl Rove.  Rove had no background in health or science. 

But never mind Rove‘s politicization of government policies.  Let‘s examine his claim about the old-style politics that he claims we all grew to dislike in the 1990s. 

In 1994, Rove helped manage George W. Bush‘s gubernatorial campaign.  The campaign featured automated telephone calls to voters suggesting that Democrat Ann Richards was a lesbian. 

In 1996, Rove printed flyers to help a political client campaigning for the Alabama Supreme Court.  The flyers Attacked the opposing candidate‘s family members. 

Rove‘s sudden concerns about the moral high ground are unbelievable. 

Literally. 

Karl, you‘ve spent your entire career putting politics ahead of everything else.  When you now complain about the Obama White House playing politics with the GOP, your whining is hypocrisy, and it‘s wrong. 

A bit later in this hour we will take a closer look at the congressional investigation into Karl Rove.  Rove‘s testimony will be interesting, but the boxes of documents being turned over are the real treasure. 

I‘ll explain.

Also, President Obama is going to meet with Queen Elizabeth next month. 

It‘s a distinct honor that requires some presidential preparation. 

But up next, who won the week?  Was it the White House who were boxing Republicans into a corner over Limbaugh?  Or did Republicans make up some ground in their talking points about the growth of government? 

More 1600 after this.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600.  Conservatives criticize Rush Limbaugh at their own risk, as columnist David Frum learned this week when he wrote this: “Limbaugh is a man who is aggressive and bombastic, cutting and sarcastic, who dismisses the concerned citizens in network focus groups as losers.  With his private plane and his cigars, his history of drug dependency and his personal bulk, not to mention his tangled marital history, Rush is a walking stereotype of self-indulgence, exactly the image that Barack Obama most wants to affix to our philosophy and party.” 

Frum was absolutely eviscerated on the web and on talk radio for his column.  Here‘s radio talk show host, Mark Lavine. 

(BEGIN VIDEO CLIP)

MARK LEVINE, RADIO TALK SHOW HOST:  It‘s time to name names.  I‘ve had enough.  The Canadian, David Frum, where did this A-hole come from?  He‘s got a hate on for Rush Limbaugh.  And so in the fox hole with other conservatives, you know what this jerk does?  He keeps shooting us in the back. 

(END VIDEO CLIP)

SHUSTER:  Joining us now is David Frum, the editor of NewMajority.com and a resident fellow at the American Enterprise Institute.  Also on tonight‘s terrific panel is A.B. Stoddard, associate editor of “The Hill,” Michael Crowley, senior editor of “The New Republic.”  Welcome to you all. 

David Frum, are you trying to stab other conservatives in the back? 

DAVID FRUM, NEWMAJORITY.COM:  I actually—it‘s funny.  I could put together a compendium of the number of times Rush Limbaugh and actually Mark Levine have said things like they don‘t care how Republicans do.  It‘s not important for them to win elections.  It‘s important to them to stand up for what they believe. 

It‘s important to me to win elections.  It‘s important to me that the United States be governed in a conservative way.  What‘s been happening in the past few weeks, given the terrifying onslaught of big-government legislation, that Republicans oppose these things effectively. 

When Rush Limbaugh says, I want the president to fail, he means something different from that.  He has a private meaning.  He means that he wants these liberal projects not to be enacted.  But that‘s not the way people hear it.  Of course, he knows that.  He‘s an effective communicator.  He makes himself the story. 

The president and Rush Limbaugh have a joint interest.  They both benefit from each other.  But it‘s the Republicans and their ability to put together an affective opposition who lose.  Rush Limbaugh gets an audience and ratings.  The president gets a target and Republicans get the bill. 

SHUSTER:  A.B. Stoddard, quantify for us, how much did Republicans get hurt by this week? 

A.B. STODDARD, “THE HILL”:  Well, I think it‘s stunning that David was the only person who came out and actually said that Michael Steele was originally correct in his comments, which we all know he then took back, that Rush Limbaugh is not the leader of the Republican party.  He fell into the trap that Rahm Emanuel set.  He apologized.  And the whole party fell into the trap that the administration set, using Rush Limbaugh as a boogeyman, and talking about him all the time from the briefing room podium.

And basically I agree with David.  The Republicans lose.  I mean—I think—I don‘t hear a lot of people agreeing that Rush Limbaugh is not their leader.  I hear a lot of defense of Rush Limbaugh.  So it is true, the Democratic party‘s happy.  Barack Obama‘s happy.  And Rush Limbaugh‘s tickled.  His ratings are exploding.  They‘re better than they were a week ago.  But it‘s not good for the Republican party. 

FRUM:  Yes, the Rasmussen poll shows that about 16 percent of Americans say they would be more likely to vote by a candidate endorsed by Rush Limbaugh; 46 percent of Americans would be less likely to vote for a candidate endorsed by Rush Limbaugh. 

So it seems to me—look, he‘s an important figure within the party. 

He speaks for a real constituency, not unlike Jesse Jackson in the 1980s.  Republican leaders have to treat him with respect.  Some of us who are not Republican leaders can speak a little more frankly, the way people did about Jesse Jackson, who cared about the Democratic party, and said we need to have a smaller role for Jackson if we are going to be electable.  That‘s our situation today. 

SHUSTER:  Michael Crowley, I want to get you to react to one of those Republican leaders who is trying to turn this back around at the White House.  Here‘s House Republican Leader John Boehner.  Watch. 

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER ®, MINORITY LEADER:  Political operatives at the White House have tried to divert attention away from our ailing economy and the Democrat spending binge that‘s been underway for the last six weeks.  Now this diversionary tactic isn‘t going to create a single job or help any family in America that‘s struggling today. 

(END VIDEO CLIP)

SHUSTER:  Michael, what do you make of that?  Is there any danger of the White House appearing to be more focused on Rush Limbaugh than focused on the economy? 

MICHAEL CROWLEY, “THE NEW REPUBLIC”:  I don‘t think so.  First of all, the White House is talking a lot about the economy.  Obama, to a fault, has a new plan every week to try to save the banks and bail out homeowners.  I think it‘s very hard to make a substance argument like the one Boehner is trying to make, to tell the public well, Rahm hatched this plot, and they‘re attacking Limbaugh because they don‘t want to talk about the economy.  It doesn‘t seem like a good sell. 

I would add also that it‘s also not helpful for the party when David is being attacked by people who are calling him an A-hole and a jerk and, god forbid, a Canadian.  By the way, Canadians are fighting and dying alongside our troops in Afghanistan.  It‘s cheap.  It‘s thuggish.  It‘s exactly, I think, the kind of politics that are bad.  It‘s the kind of tone in politics that is bad for the Republican party. 

Obama is popular because I think people sense that he‘s not part of that tone.  They don‘t want that anymore.  I think the more people are attacking David this way, the better it is for Obama. 

SHUSTER:  What do you make of these attacks on you, personally?  Hold on one second, A.B.  When they call you a Canadian, when they call you an A -- what? 

(CROSS TALK)

FRUM:  I am not going to accept being called a Canadian as an insult. 

I am from Canada. 

SHUSTER:  My father is Canadian.  I know something about Canadians with thick skin.  Don‘t worry about that.  The issue is that these charges are crazy.  It doesn‘t make any sense. 

FRUM:  No, look, it makes a lot of sense.  What is done on the radio is an anger theater that the object—the object is to make the host the star, his emotions, his tirades, his narcissism, his relationship with himself.  And it‘s a very constructive thing for the host.  They make money out of this.  And after all, in radio, if you don‘t like the host, you just turn the dial.  On television—in politics, of course, you can cast a vote against them. 

It‘s an example of, I think, how we‘ve gotten off the track and why we are not constructive.  We are speaking to ourselves and we are not speaking to a country that ought to be worried about the Obama plan, which involves the creation of enormous amounts of debt, at the same time as it‘s pretty clear—Paul Krugman rightly said in the “New York Times” this week, the administration is dithering on the central question.  They are passing all these big spending measures, while not producing an answer on the credit crisis, which is the true bleeding wound of the American economy. 

SHUSTER:  A.B. Stoddard? 

STODDARD:  Well, I just wanted to say before, I think that—they couldn‘t resist this delicious fight on the other side across the aisle.  I do think that Senator Cornyn is right.  It is cynical.  This is the kind of stuff that—this is the divisions we see that result from the smallness of our politics, as Barack Obama so often likes to say.  And they really do, I think, run a little risk if they drag this out, the Democrats and particularly over at the White House, if they drag this out and keep sort of gleefully jumping up and down on this story.  They should walk away and not get trapped. 

When we‘re talking about the job numbers and all this other bad news and bipartisan criticism of him—David is right.  Bipartisan criticism of the administration failing to act to solve the banking crisis—I do think they need to move on.  It was fun theater for a week, but I would leave it. 

SHUSTER:  One of the issues, of course, in terms of who wins the week, of course, is this jobs report.  Unemployment up to 8.1 percent.  There was every expectation, I think, amongst economists, even among the Obama White House, that the numbers are going to continue to get worse for a while.  Nonetheless, Michael Crowley, how much does that start to erode the patience the American people have with a very popular president? 

CROWLEY:  Oh, I think that the patience is starting to run out, unfortunately.  I think that we‘re in a culture that does have a short attention span and expects quick results.  I think the slide in the Dow, particularly in the past week, has people feeling like, boy, shouldn‘t things be turning around by now?  Shouldn‘t there be a little more confidence in the market? 

I think it‘s too early to judge Obama.  He‘s been in office for a month, six weeks.  But I do think they‘re probably quite worried right now.  You have a sense, David, I think we talked about this last week when I was on the show, people don‘t have their arms around this.  Even the best economists at the White House, their numbers seem a little bit too rosie.  The economic data that comes in is worse than anyone expected.  I think there is a creeping feeling, both in Washington and around the country, that actually this is much worse than anyone appreciates. 

It‘s almost like we have to rethink all over again what we need to do to get out of it, and whether we‘re approaching it in the right way. 

SHUSTER:  Michael Crowley, A.B. Stoddard, David Frum are staying with us.  David Frum, Canadians have thick skin.  I want to make sure I clarify, that‘s a good thing.  That‘s a good thing.  We will see you all in a couple of segments. 

Coming up, remember the pure joy of childhood when economic debates were not part of the equation?  To be a kid again with a swing set like the ones the Obama girls are enjoying at the White House.  We‘ll show you the photographs. 

Up next, Karl Rove has agreed to testify about the apparent political in the Bush administration‘s firing of U.S. attorneys.  The testimony will be intriguing.  But we‘ve got our eye on the thousands of documents that will be turned over and they could be explosive.  We will explain.

Your twitter questions and video favorites coming up at the end of the hour.  Go to Twitter.com/Shuster1600 or find the link on Shuster.MSNBC.com.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE.  Almost a year after Karl Rove refused to testify about the firings of nine Bush era U.S.  attorneys, he is soon set to do exactly that, under penalty of perjury.  The deposition will be behind closed doors, but transcribed.  and Former White House Counsel Harriet Myers will talk as well. 

In addition to the testimony, there are thousands of documents related to Rove and Miers that will soon be available for Congressional review.  That is where this could become extremely interesting.  Again, the documents related to Rove‘s discussions and interactions with Justice Department officials who dismissed nine U.S. attorneys.  They are also documents related to the 2006 bribery case brought against former Alabama Governor Don Siegelman. 

Joining us now is Michael Isikoff, an investigative reporter for “Newsweek.”  Michael, what do we think might be in those boxes and what does that tell us? 

MICHAEL ISIKOFF, “NEWSWEEK”:  That‘s the 64,000 dollar question.  These are all documents that have been segregated and placed in these boxes because they relate to the firing of the U.S. attorneys.  And they go through—go up to the period of March 7th, 2007, the date that Congress first began asking for these documents. 

So we do know that they relate to U.S. attorneys.  We do know some include e-mails that either were sent to or from Karl Rove or mention Karl Rove‘s name or mention discussions with Karl Rove.  Beyond that, we actually don‘t know what they contain.  We do know that, in some cases, we‘ve seen glimpses of White House e-mails, because they were attached to e-mail that were turned over to the Justice Department—that when to the Justice Department and then the Justice Department turned over them to Congress. 

But the actual e-mails among White House aides, we‘ve never seen those.  It‘s going to be, obviously, something we‘re going to be looking closely for. 

SHUSTER:  Michael, will they be going through these documents, e-mails, boxes, before they actually question Karl Rove? 

ISIKOFF:  Yes, Absolutely.  Obviously, the depositions, themselves, are not going to be worth a lot, unless they are—can reference real documents.  I mean, this is sort of, you know, deposing witnesses 101.  If you‘re just relying on the witness‘ recollection, you‘re going to get a lot of I don‘t recalls, and you‘re going to get a lot of very bland testimony. 

But when you can confront witnesses with specific e-mails, specific documents, memos they‘ve written, comments attributed to them, then you get some traction.  So for all these obvious reasons, Congressional Democrats, the lawyers for John Conyers said, no, no, we want to look at the documents first, then we‘ll question Miers and Rove. 

SHUSTER:  What sort of time frame, because as you‘ve pointed out, obviously whoever does these depositions are going to be want to be very familiar with all these thousands of documents and e-mails and have isolated the correct ones.  It‘s going to take them a little time to go through it and sort of try to piece together the narrative that may exist in these e-mails before they actually throw that at Karl Rove, right? 

ISIKOFF:  Right.  Look, there‘s a pretty extensive narrative that they‘re starting with, because, you know, thousands of e-mails were turned over from—Justice Department e-mails were turned over.  There‘s a several hundred page Justice Department inspector general report that gave a reasonably detailed chronology from the Justice Department perspective of how the attorneys were fired, but made clear that there were gaps. 

But you go back to what has come out—Remember, the very first discussion of firing U.S. attorneys within the Bush administration begins with an e-mail train—trail that dates from January 5th, 2005, which references Karl Rove going by Harriet Miers‘ office, the White House counsel‘s office and saying, what are we going to do about these U.S.  attorneys?  Are we going to be dismissing all of them, some of them?  What‘s the plan for getting rid of U.S. attorneys? 

That‘s the first reference to dismissing U.S. attorneys and it comes from Karl Rove.  So there‘s a very good reason that Congressional investigators, from the beginning, trying to get to the bottom of why these U.S. attorneys were dismissed, what were the political motivations that went behind the selection of those that got picked, have focused from the beginning on Rove‘s role. 

SHUSTER:  “Newsweek” investigative reporter Michael Isikoff, who has covered this story and many others similar to these from the beginning.  Michael, this is going to be an intriguing one.  We look forward to talking to you often in the weeks ahead.  Michael Isikoff, thank you very much. 

ISIKOFF:  Sure, thank you. 

SHUSTER:  Up next, Oprah Winfrey did a big magazine interview with Michelle Obama.  And some of the more intriguing details started coming out today.  The latest from Oprah Winfrey is just one of the things that I thought you should know. 

Plus, in Twitter time, the viral videos you wanted us to show.  How do they rate with our panel?  More 1600 after this.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JIMMY FALLON, TALK SHOW HOST:  Barack Obama bought a brand new swing set for his daughters Malia and Sasha.  It has a slide and rope ladder.  It‘s great.  Much nicer than the one George Bush Used.  Much nicer. 

(END VIDEO CLIP)

SHUSTER:  Welcome back to 1600.  That was Jimmy Fallon talking about the Obama girls‘ surprise gift, a swing set right on the White House lawn.  There‘s a lot going on today.  But the latest news from the White House south lawn is among the things I thought you should know.  Today we have the first pictures of the girls playing on the swings on the south lawn with first mom Michelle Obama.  You can see how close the swing set is to the Oval Office.  That‘s so the president can watch his daughters play while he works.  In case you were wondering, the Obamas paid for the swing set themselves. 

Oprah Winfrey is now talking about an intriguing interview she did a few weeks ago with Michelle Obama.  It was for Winfrey‘s April issue of “O Magazine.”  The talk show host even shares the cover with Mrs. Obama, the first time in nine years and 105 issues that Oprah has not appeared alone.  It was also the first interview that Michelle Obama gave in the White House.  Winfrey says the two discussed a range of topics, including the importance of the Obama girls having a down to earth attitude and how to share your new home with thousands of visitors. 

Finally, the Obama White House announced today that the president will stop at Buckingham Palace in London next month for a public audience with Queen Elizabeth.  It will not be an official state visit, just a side trip for President Obama while he‘s in England for the G-20 economic summit.  Officials are describing the visit as a getting to know you session in order to reflect the more casual nature of the meeting.  Queen Elizabeth has met 11 U.S. presidents since she took the throne in 1952. 

And those are the three things that I thought you should know.  It is Twitter time.  And Twittering has taken over Capitol Hill.  Senator Claire McCaskill does it.  She‘s known as Claire MC.  So does Freshman Congressman Jason Chafetz under the name Jason in the House. 

Did you know that John McCain Twitters?  Yes, the 72-year-old senator admits he is not super tech savvy, but he announced on the Senate today he is embracing the technology. 

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN ®, ARIZONA:  As some of my colleagues may know, I‘ve begun to Twitter, and we‘ve been Tweeting for the last week with top ten earmarks every day. 

(END VIDEO CLIP)

SHUSTER:  You may recall during the presidential campaign, Senator McCain admitted he didn‘t even know how to send an e-mail.  We‘re getting a lot of Tweets all from you, your questions and video suggestions.  Now to run them past our panel and to rate some of the videos, David Frum, A.B.  Stoddard, Michael Crowley. 

All right team, here‘s how it works, you score these, one being bad, ten being good.  Here‘s the first one, Obama‘s health.  Watch. 

(BEGIN VIDEO CLIP)

(SINGING)

(END VIDEO CLIP)

SHUSTER:  Michael Crowley, your score, please? 

CROWLEY:  I always award pure weirdness.  I give it an eight. 

SHUSTER:  Eight?  A.B. Stoddard? 

STODDARD:  I like the little play on “All by Myself.”  So I‘m going to give it a three.  I don‘t know the connection between Obama and an elf.  It just wasn‘t so funny. 

SHUSTER:  David Frum, your score, please? 

FRUM:  Any song that could play on an F.M. light rock station has me turning the thing off in a second and a half.  So I just—I had my ears plugged.  I couldn‘t hear it. 

SHUSTER:  OK, I‘m going to give that one a five.  David Frum, we like the way you‘re going here.  Here‘s the next one.  This is the Rush Limbaugh dance mix.  Watch. 

(BEGIN VIDEO CLIP)

(SINGING)

(END VIDEO CLIP)

SHUSTER:  David Frum, we‘re going to start with you for the scoring here. 

FRUM:  I like that music.  That was pretty funny.  Do I have to give it a number? 

SHUSTER:  Give us a number. 

FRUM:  OK.  I‘ll give it a B plus.  That‘s it. 

SHUSTER:  All right.  A.B. Stoddard, you want to quantify your score? 

STODDARD:  I‘m going to translate.  A B plus is like a seven.  I‘m going to agree with David.  I like the music.  And anytime you can use that kind of—I don‘t know, all of those cheeks and that naked Rush neck with a black blazer works.  It makes good video. 

SHUSTER:  Michael Crowley. 

CROWLEY:  I give it a six or seven.  The Rush dancing was really one of the real treats of the past few weeks.  The only thing missing from it, I would have loved to see him spliced into the original video, if you remember, I think they‘re in a South Boston bar.  To have him spliced in with that crowd would have been amazing.  I would have given it a ten.  This one, I‘ll give a six or seven.  Good first step. 

SHUSTER:  I think we are headed there.  We also, in addition to these viral videos, have gotten a lot of questions.  By the way, I‘m scoring that as a seven, for those of you keeping track at home.  A lot of questions.  David Frum, somebody via Twitter wants to know, what are you writing about next? 

FRUM:  I just actually was inspired in this segment.  A.B. and I were talking off camera.  I think I‘m going to write something about Michael Steele, defending him.  I think he‘s been a wonderful TV presence, warm and welcoming.  I have an article coming out in the next issue of “Newsweek” about the Rush Limbaugh excitement, and why it‘s a serious issue for Republicans, not just a fraternal bloodbath.  Something important is at stake. 

SHUSTER:  A.B. Stoddard, 25 seconds, question for you.  What does the Democratic Congress hope to accomplish with the Rove investigation? 

STODDARD:  I don‘t think they know what they‘re going to be told.  But I think they‘ve gotten a scalp that was very important to the left wing of the party, that they get Karl Rove up there?  Even if it ends up not being a big controversy, I think it was—for theatrics alone they needed to do this and they‘ve done it.  I think they should focus on the dire circumstances of the present and not too much looking back to the past. 

SHUSTER:  A.B. Stoddard, David Frum, Michael Crowley, thank you all very much.  A terrific panel tonight.  We appreciate you coming in.  That‘s the view from 1600 PENNSYLVANIA AVENUE tonight.  I‘m David Shuster.  Remember, you can get the latest political news and a sneak peek of what‘s coming up on the show.  Just go to Shuster.MSNBC.com.  You can get text alerts, 622639.  Twitter your questions and viral videos, Twitter.com/Shuster1600. 

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

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