updated 3/16/2009 10:31:09 AM ET 2009-03-16T14:31:09

Guest: Robert Reich, Donovan Campbell, Savannah Guthrie, Mary Thompson

DAVID SHUSTER, MSNBC ANCHOR:  Tonight, on Friday the 13th, the president tries to chase away the economic fears.

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BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  We are spending every day working through how to get credit flowing again.  

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SHUSTER:  And Mr. Obama‘s top economic adviser says everybody can help by being more upbeat.

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LAWRENCE SUMMERS, NATIONAL ECONOMIC COUNCIL:  What we need, today, is more optimism and more confidence.

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SHUSTER:  How much of this mess is psychological?  We will talk with former Clinton Labor Secretary Robert Reich.

Follow the money—Bank of America refuses to provide information about executive bonuses; now it‘s up to a court.

Later, remember Sarah Palin‘s view of earmarks?

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GOV. SARAH PALIN ®, ALASKA:  Thanks but no thanks.

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SHUSTER:  This week, Palin embraced earmarks and has landed in “Hypocrisy Watch.”

And the things they thought you should know.  The amazing staff at a hospital in Boston, they shared their financial pain to help save jobs.

Olympic star Michael Phelps talks about pot.

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MICHAEL PHELPS, OLYMPIAN:  We were just celebrating, honestly.  It was a small group and we were sitting around celebrating.  

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SHUSTER:  And “Twitter” time—all tonight on 1600 PENNSYLVANIA AVENUE

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OBAMA:  Our capacity is undiminished.

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SHUSTER:  Back to the message of hope.  Hello, everybody, I‘m David Shuster.

This was day 53 of the Obama administration and today president Obama and his economic team tried out a new message for this time of crisis, dispatching national economic council director Larry Summers to make a speech pushing a lot of optimism and a lot less fear.

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SUMMERS:  If in the last few years we‘ve seen too much greed and too little fear while the problem was caused by excessive complacency and excessive optimism.  What we need today is more optimism and more confidence.

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SHUSTER:  The president spoke briefly at a photo op with top economic adviser, Paul Volcker, focused on responsibility and post-bubble economy.

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OBAMA:  We are laying the foundation for what I‘m calling a post-bubble economic growth model.  The days when we are going to be able to grow this economy just on an overheated housing market or people spending—maxing out on their credit cards, those days are over.

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SHUSTER:  NBC News White House correspondent, Savannah Guthrie joins us live from 1600‘s north lawn.  And Savannah, a clear change in tone whether it was Geithner, yesterday, saying the words confidence and optimistic over and over and Larry Summers today.  What‘s going on?

SAVANNAH GUTHRIE, NBC NEWS WHITE HOUSE CORRESPONDENT:  And the president, too.  He‘s the confidence builder in chief these days.

But you‘ll notice that they‘re threading the needle here.  They do want to set a reassuring tone and they‘re putting a little meat on those bones, too, pointing to a few signs in the economy that things are getting a little bit better.

But they‘re also very cautious.  For example, the president yesterday said it‘s a good sign that some housing inventories are starting to decline.  But they want to be clear at the same time while there‘s a few signals out there that things might be getting better, we‘re still a long way off from having a healthy economy.

But they clearly have identified a problem here.  And Lawrence summers spoke about it at length today.  And that is that the fear, itself, is now driving the problem, exacerbating the problem.  And that this is as much a crisis of confidence as it is anything else at this point.

SHUSTER:  And Robert Gibbs, at the press briefing, today, it was so intriguing.  He was asked about overselling.  Here‘s his response.

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ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY:  We‘re hopeful that the pillars are beginning to be put in place to stop the downturn, to turn the economy around.  Important to stress that we‘ve unfurled no mission accomplished banners and I think any suggestion of that would be quite premature.

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SHUSTER:  Savannah, what about those Democrats outside of the administration who are still extremely nervous, who worried as hell as our next guest suggested today.  What‘s the White House response to them?

GUTHRIE:  Well, I think they want to send two signals.  It‘s one of those cases where the mixed messages are a little bit on purpose.

They‘re saying, look, things aren‘t great and we acknowledge that.  They also see as much of a problem as what‘s going on in the economy, it is this fear.  So it‘s sort of the opposite of irrational exuberance is irrational despair.

What they‘re trying to say is, “The economy is in bad shape.  There‘s no question about it.”

Timothy Geithner is over in London this weekend talking to G20 ministers, trying to get Europe to do more in the way of stimulus and this is very much still a crisis unfolding.  And yet, what they don‘t want to do is send a signal that things are so bad that it further freezes up consumers and paralyzes them and just exacerbates the crisis.

So they‘re threading the needle as I said.  They‘re really walking this line.

SHUSTER:  NBC News White House correspondent, Savannah Guthrie.  Savannah, great reporting as always and thanks for coming on.

GUTHRIE:  Thanks David.

SHUSTER:  For more now, let‘s bring in Robert Reich, former labor secretary to President Clinton, who‘s now a professor of public policy at Berkeley and author of the book, “Super capitalism.”  And it is now out in paperwork.

Mr. Reich, you wrote in your blog today that you are worried as hell.  So I gather you do not share the optimism that‘s coming from the Obama White House?

ROBERT REICH, FORMER CLINTON LABOR SECRETARY:  Let‘s put it this way, David.  Obviously it‘s very important for the White House to put out a positive message.  Remember, Franklin D. Roosevelt said back in the 1930s, “We have nothing to fear but fear itself.”

So, let‘s face it.  Part of the economy is psychological.  But At the same time, as Savannah just pointed out, it is very important to be realistic with the American people.  Most people would lose confidence in the administration if the administration were going around saying everything is wonderful, everything is golden.

It‘s a fine line, but the realistic part of, at least, me, and I‘m certainly not part of the administration, my realistic part says things are not going as well as they should be going.

SHUSTER:  Explain why.

REICH:  Well, look it.  We had a terrible report from the commerce department a few weeks ago about what happened in the fourth quarter of last year.  We saw the economy shrinking on an annualized basis of 6.2 percent.  That‘s a huge shrinkage.  And since then we‘ve had terrible jobs reports.

We know that the trends are not all in a good direction.  We know that a lot of people are hurting and hurting very badly.  Not just people who are poor, not just people who are blue-collar workers who have lost their jobs, but a lot of people in the middle class; A lot of people who had been upper income as well.

This is an equal opportunity recession/depression.  And again, we need to be upbeat to the extent we need to say to ourselves, “Look, we‘re going to get out of this.  This economy is strong.  Over the long term everything that goes down comes up;” sort of the reverse of Isaac Newton‘s Law.

But in the short term, we have to be prudent.  Individual families need to start saving a little bit more.  It would be imprudent to go into debt right now.  What is rational for the individual family in terms of pulling in their belts is irrational for the economy as a whole.  And therein lies a big dilemma.

SHUSTER:  You—the other big dilemma in Washington, of course, is the political will to pass a second stimulus.  You suggest the administration needs to get ready for that but when you look at, for example, Rahm Emanuel the chief of staff points out, where‘s the political will to do that now?  And where is it?

REICH:  There‘s no political will, at least not much.  What most people see is just mind-numbing numbers coming out of Washington; billions of this and billions of this.  A stimulus package, a bank bailout, a new budget bill, $410 billion just signed into law.  Most Americans just—they‘re dizzy with all of these dollars being spent.  They don‘t really understand the need for additional spending.

But let me just emphasize this.  If the recession/depression gets much worse, if we see 600,000 - 700,000 jobs continued to be lost month after month, I don‘t think there‘s any doubt Congress and the administration have got to think about a bigger stimulus because that‘s the only way of getting the economy moving again.

You see there‘s a huge gap, David, between what the economy could produce at full employment and what the economy is producing now because consumers and businesses and export markets that are dead in the water are just pulling back so much.

SHUSTER:  One of the key phases for the Obama administration on the economy is Geithner, the Treasury Secretary Tim Geithner.  Here‘s what you wrote to President Obama about him.

“Your Treasury Secretary is making things worse.  His dithering on what to do about Wall Street, and his incapacity to speak clearly to the Street and to the public about what needs to be done, is spooking everyone.”  What do you mean there? 

REICH:  Oh, well, just let me be very, very clear in my little blog entry, today, that was Paul Volcker.  That was my idealized version of Paul Volcker talking to the president today.  It wasn‘t exactly me.

But I think that Tim Geithner and my—look, my hat goes off to Tim Geithner.  I mean, here‘s a guy in the hot seat.  He doesn‘t even have a full staff working for him.  He‘s already shepherded the stimulus package through the Congress; done a lot of very important things.

But the problem is that on the bank bailout he has not really explained to the public what he‘s doing.  And that uncertainty is spooking a lot of the public.  It certainly is spooking Wall Street.  As quickly as possible, he‘s got to make up his mind about what he‘s going to do and how he‘s going to do it and then do it.

SHUSTER:  What about the argument that, look, this week you‘ve got Citigroup and others saying maybe they don‘t need more TARP money.  The bank stocks are up—the Dow‘s up 700 points largely because the banks have had a great week.

What about the argument that maybe the banks are working themselves out of this credit crisis and not putting a bank plan on the table a couple months from now, assuming this does continue to get better, will look like it was pure brilliance?

REICH:  Well, look, if the banks are working it out—my personal view, David, is that there are certain banks that are just insolvent.  They‘re going to stay insolvent.  They‘re technically insolvent.  And they ought to be in a receivership under the Federal Deposit Insurance Corporation.  There ought to be insurance provided to all depositors.  Let‘s get rid of them; close them down.

You‘ve got other banks that actually could get out of this are doing pretty well.  They don‘t need bailout money.  Let them work it out with their own creditors.  Let them, if necessary, mark their assets down to market prices, real market prices.  Let‘s get rid of the kind of artificial mark to market we have right now.  Let‘s not—let‘s not just dither around.  Let‘s not talk about many more bailouts.

These bailouts are extraordinarily expensive.  The public doesn‘t like them.  They are preventing some banks from doing what they might have to do eventually.  And they don‘t necessarily help.

SHUSTER:  Robert Reich, former labor secretary for President Clinton.  Thanks so much for coming on.  Always a pleasure to talk to you and so interesting.  We appreciate you coming on, David.

REICH:  Thanks very much David.  Yes.  Goodbye.

SHUSTER:  Should a bank getting bailout money be forced to name its 200 highest paid employees?  Up next, the latest in the investigation into why Merrill Lynch employees got bonuses right before Bank of America took over the failing company.

Plus the curious case of Governor Sarah Palin.  On the campaign trail, said she was against pork barrel projects and earmarks.  But now, she‘s requesting some for her state.  Palin lands in “Hypocrisy Watch.”

And we‘re taking your questions and video suggestions during the hour over Twitter.  Just go to twitter.com/shuster1600 or click on the link at shuster.MSNBC.com.

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SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE.

New York‘s attorney general went after one of the nation‘s biggest banks today.  At issue is $3.6 billion in bonuses doled out to Merrill employees back in December.  A New York judge says he will rule next week on whether the names of 200 top bonus earners at Merrill Lynch should be kept confidential.

Here‘s some background.  Merrill‘s former chief executive, John Thain, awarded the bonuses back in December before the company announced it had lost more than $15 billion in the fourth quarter and before Bank of America‘s government-assisted takeover of Merrill.

In a letter last month to house financial services chairman Barney Frank, Cuomo says, “Merrill chose to make millionaires out of a select group of 700 employees.  Furthermore, Merrill Lynch awarded an even smaller group of top executives what can only be described as gigantic bonuses.”

Cuomo says the top four bonus recipients received a combined $121 million; the next four got bonus recipients got a combined $62 million; and the six after that a combined $66 million.

Joining us now is CNBC‘S Mary Thompson.  Mary spent the day at the courthouse.  And Mary, what was the scene inside?  And give us a sense if the judge gave indication which way the judge is leaning on this?

MARY THOMPSON, CNBC CORRESPONDENT:  It was a very orderly meeting.  Essentially the big players—John Thain wasn‘t there, nor is Ken Lewis, the CEO of Bank of America.  There were basically lawyers representing both sides—the banks as well as the New York attorney general‘s office.

And I think what you can read from what the judge said here in the court today a couple of things.  First of all, he told the lawyers for Bank of America, he said, “You know, I read the testimony by John Thain, the CEO of Merrill Lynch.”  And reading his testimony and that of the other Merrill executives he said, “I can see no clear policy of confidentiality when it comes to compensation for the company.”  And then additionally he said, “If I do issue a gag order on these names, basically that could be perceived as me micromanaging the attorney general‘s investigation,” something the judge indicated he was disinclined to do.

SHUSTER:  So it sounds like then the judge is moving in the direction of the attorney general.  And again, the reason—explain for us the reason that Cuomo is trying to go after this; what benefit is it to him if he is able to say, “here are the employees and here‘s what they got?”

THOMPSON:  Well, Cuomo‘s side maintains that he needs to interview these

200 people who received these bonuses to determine exactly when Merrill

Lynch knew that its loss for the fourth quarter was going to be that much

bigger than initially forecast.

The company had initially forecast it was going to lose $8 billion.  And then the week before it reported a $15 billion loss, it awarded these bonuses to the executives.  Under the New York State Martin Act, Cuomo says that this could be perceived as fraudulent activity by Merrill Lynch.

That‘s why he says he needs to interview all these people who were awarded the bonuses to see if he can glean the information as to when Merrill knew when these losses were coming.

SHUSTER:  And there‘s also a Congressional committee led by Barney Frank that‘s also very interested in this.  Are the congressional investigators simply working in tandem with the New York attorney general letting him do the investigation?

THOMPSON:  They are—as far as I know, they‘re letting him do the investigation.  Their presence hasn‘t been seen there at all.  But as you indicated Mr. Frank and Mr. Cuomo—it was reported today—are working on some kind of limit or structure to pay, to make sure that pay on Wall Street is tied more to long-term performance as opposed to short-term performance, something a number of people feel contributed to the problems that we are seeing in the financial markets right now.

SHUSTER:  Mary Thompson on a fascinating day in a New York courthouse.  Again, it will be so interesting to see what the judge does next week with this request to release this information on 200 employees who got a lot of money right before Merrill folded.  Mary thanks so much for joining us with the update.  We appreciate it.

THOMPSON:  Sure thing.

SHUSTER:  Remember Sarah Palin‘s famous line on the campaign trail, “Thanks but no thanks?”  Palin was talking about Congressional earmarks.  But since the election she has been requesting them.  “Hypocrisy Watch” is ahead on 1600.

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SHUSTER:  As we‘ve been reporting, the government‘s spending bill president Obama signed this week contained thousands of pork barrel projects and earmarks; some of the pork was requested by Alaska Governor Sarah Palin.  And that takes us to tonight‘s “Hypocrisy Watch.”

First a background, if you followed last year‘s presidential campaign, you will remember Governor Palin‘s claims to be a crusading reformer who fought earmarks and wasteful spending.

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PALIN:  We suspended the state fuel tax and championed reform to end the abuses of earmark spending by Congress.  I told the Congress thanks but no thanks on that bridge to nowhere.

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SHUSTER:  And the earmark abuses?  Well, that‘s interesting.  Because according to the group Taxpayers for Common Sense, Alaska‘s going to receive more money per capita in earmarks than any other state; $209 for each state residence.  Altogether, there are 100 earmarks in the bill worth $143.9 million.

In response to questions by “Mother Jones” magazine, Sarah Palin‘s spokesman, Bill McAllister, pointed to Sen. Lisa Murkowski and Rep. Don Young as responsible for the Alaska projects but he noted a few of the Alaska earmarks were requested directly by Governor Palin.  Which ones?  How many?  Palin‘s office refuses to say.

The Alaska projects include $200,000 for crab research; $475,000 for an Indian village heritage center and $1.2 million for construction work on an airport on Akutan Island, the island only has 800 residents.  Governor Palin, is that the airport to nowhere?

When you criticized earmarks on the campaign trail and then request them in the next government spending bill, that‘s hypocrisy, and it‘s wrong.

By the way, speaking of earmarks, one other politician to tell you about. 

Watch Minnesota Republican Congresswoman Michele Bachman.  Watch. 

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UNIDENTIFIED FEMALE:  How about a no pork bill?  Would that ever be a reality? 

REP. MICHELE BACHMAN ®, MINNESOTA:  I think it is possible.  I took a pledge in my own district.  I have not taken earmarks in the last three years that I have been in Congress because the system is so corrupt.

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SHUSTER:  In fact, according to Legistorm, Bachmann requested seven earmarks in fiscal year 2008, costing taxpayers a total of $3.7 million.  Some examples: $94,000 for a sheriff‘s youth program; $335,000 for equipment acquisition for Northland Medical Center; $803,000 for the replacement of small buses in St. Cloud.

Congressman Bachman, if you want to claim the system is corrupt, that‘s fine, but your own credibility appears to be an issue as well.

Still ahead, President Obama says the government is working to smooth Americans‘ economic pain.  But how well is it going?  We‘ll pose that question to our panel of political experts.

But first, President Obama is getting ready to announce his strategy for the war in Afghanistan.  Up next, we‘ll talk to a marine who spent a tour there.  We‘ll get his perspective of what needs to be accomplished in the country.

You‘re watching 1600.

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OBAMA:  With our friends and allies we will forge a new and comprehensive strategy for Afghanistan and Pakistan to defeat Al Qaeda and combat extremism because I will not allow terrorists to plot against the American people from safe havens halfway around the world.

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SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE.  President Obama is expected to announce details of his new Afghanistan strategy next week.  Democrats and Republicans agree that Afghanistan is a central front in the war on terror.  And the president has already committed to sending 17,000 more troops to the effort there.

But there‘s some new pushback today from experts who say there is no military solution in Afghanistan.

Joining us now is someone with a unique background and experience in both of the wars fighting America, Captain Donovan Campbell.  He recently finished a tour in Afghanistan.  He previously served two tours in Iraq.  And he wrote a book about the experience called “Joker One: A Marine platoon‘s story of courage, leadership and brotherhood.”  Donovan is also a graduate of both Princeton and Harvard.

Donovan, first of all, when you hear the president and these plans to put in 17,000 more troops in Afghanistan, what goes through your mind?

DONOVAN CAMPBELL, “JOKER ONE” AUTHOR:  What goes through my mind is the question, what do you want to do with these troops? What do we hope to see in Afghanistan? Because we need to know what we want Afghanistan to be before we can give these troops a viable mission. Do we want it to be a Jeffersonian democracy? Do we want it to be a relatively stable nation/state that we sort of recognize as a nation/state or do we want it to be something more akin to a mid-evil fuel able kingdom where local warlords have this a loose alliance of convenience with a central government? Once we define that, then I think we have a better ability to assign these 17,000 troops a viable mission.

SHUSTER:  What‘s the realistic goal in your view?

CAMPBELL:  The realistic goal in my view is almost certainly some sort of loose alliance between a central government and powerful provincial figures, perhaps warlords, perhaps just strong politicians with ties to militias. That might be the best outcome we can hope for at this point in time. But then, again, time will tell. 

SHUSTER:  Tell us a little bit about your story. I mean you have this incredible education. Yet, you chose to go into the Marine Corps. Tell us about your service and whether it met expectation or tell us a little about what you thought going in and what it was like?

CAMPBELL:  The service met and exceeded my expectations. I would be lying if I said it wasn‘t hard and it wasn‘t tragic at some points in time. My marines met and exceeded my expectation, they were phenomenally young men.  It was an honor to be with them. I hope that as Americans read their story they can see that out there, even in these hard times there are still people who do what they do not because they are greedy or they want money or they want fame or power but they do what they do because somebody needs to stand in the gap and they are willing to do it so my decision to join the Marine Corps I view simply as my duty. Because going to Princeton gave me an opportunity I didn‘t deserve. I wanted to do the best to give back to my country. That is why I did that, this story is about my men and I hope it brings them the honor they deserve. 

SHUSTER:  Given how precise your Marine Corps colleagues and members of the military are to you and to of course everybody but particularly to people who have served, explain, again, what you consider to be the  situation in Afghanistan right  now. Also, you spent two tours in Iraq. How do you see Iraq going right now?

CAMPBELL:  I think Iraq is going as well as we can expect militarily or security wise. Politically, the outcome remains to be seen. And I suspect that we may not know whether that line of operation succeeds for another two or three generations, until the politicians that came of age under the Saddam era die off and are replaced by a new administration. Afghanistan is a bit more of a mixed picture or probably a bit more of a tough picture.  Things are disintegrating in the south and east. NATO coalition is willing but, perhaps, less than able.

There‘s multiple different chains of command and when I was there I was actually at the NATO headquarters and I can tell you, there are good people, good men from all these different countries working together to do their best, but it‘s a very difficult effort and it‘s a very different—very difficult command structure. So their efforts are to some extent hampered. 

SHUSTER:  And Donovan as far as Afghanistan, what surprised you the most about being in Afghanistan and what you saw, felt and smelled while you were there?

CAMPBELL:  Almost everything surprised me. Because it was so different from Iraq, the terrain was different, the people were different, the culture was different, and, of course the language was different. Just flying in and looking at out the windows of the plane was amazing to me. Landing in the middle of the air field up high up in the mountains was amazing to me. The people, themselves, were amazing to me. The Afghans are very tough and I have a great deal of respect for them. They are fierce opponents, they are terrific allies and time will tell what they become to us. 

SHUSTER:  Donovan Campbell, captain in the Marine Corps, finished a tour in Afghanistan previously two tours in Iraq, also a graduate of Harvard and Princeton. And Donovan on behalf of all of us thanks for your service to the country. We appreciate you joining us tonight and enlightening us about the situations in both countries. 

CAMPBELL:  No thanks necessary, David. I was doing my duty. I appreciate you having me on today. 

SHUSTER:  For now lets turn to our panel, Ed Schultz is a host of the nationally syndicated Ed Schultz radio show. Nia-Malika Henderson, White House reporter for “Politico.” Ron Christie, a former special assistant to President George W. Bush, now Republican strategist. Ed what is your reaction? 

ED SCHULTZ, RADIO TALK SHOW HOST:  One, phenomenal America. You know, behind the scenes in the greenroom, had a chance to visit with this gentleman. The marines are so proud. We should be proud. He has a very academic approach to both Iraq and Afghanistan. This is the kind of voice that we need to hear in this country. The boots that were on the ground. He sees the total picture. The one thing that I took from that interview, David, was the tough command structure. It‘s going to be a tough command structure in Iraq for decades to come and also in Afghanistan.

But the fighting terrorism is what the American people want to do. This is what the president committed to do. Putting these troops in, figuring the dynamics out and making sure that there are not cells operating in Afghanistan that are trying to hit the United States. That is President Obama‘s focus someday.

SHUSTER:  There is a big political challenge, when you hear stories like that about how difficult Afghanistan is, somebody so committed to the cause saying that it‘s going if the wrong direction. How does the president overcome that and overcome the fears that a lot of people have that Afghanistan could be the next Vietnam?

NIA-MALIKA HENDERSON, “POLITICO:”  Yes, well I think what we‘re going to see next week and what we‘ve seen already is the lowering of expectations  of what Afghanistan could probably end up looking like. Not a Jeffersonian democracy but something far less than that. So that is what is going to happen next week, we‘re going to see the unveiling of these new plans. Part of it is going to be the 17,000 additional troops. But also expanded diplomacy and really trying to get Pakistan involved in what‘s going on there in the south and really trying to tap down on what‘s going on there with the Taliban and al Qaeda. 

SHUSTER:  Ron a lot of Republicans have been somewhat critical of the president and his approach to foreign policy. As far as what we‘re hearing about what the president is going to do in Afghanistan, your reaction?

RON CHRISTIE, REPUBLICAN STRATEGIST:  The president has a unique opportunity now to clearly articulate to the American people this is the Obama foreign policy agenda; this is the Obama national security agenda.  This is why we need to continue to have a presence in Afghanistan, Iraq, in the Middle East and what the geo strategic importance is to the United States. I think the people have heard so much from the president from the last 50-some odd days in office about the economy and domestic issues. I think this is an opportunity for the president now to speak out as not only the president but the commander in chief and articulate a mission not only to the American people but the brave men and women such as the Captain Donovan that we saw. This is our objective. 

SHUSTER:  But isn‘t the objective more difficult now because of what we‘ve been doing in Iraq for the last several years? The military stretched thin.  We have so many people saying that this is a tough mission anyway because of the commitment that we have to Iraq. When people hear Afghanistan is getting worse, a lot of Americans are going to say, why is it getting worse?

CHRISTIE:  I‘m a civilian; I‘m not in the military. I haven‘t worn a uniform. I would never prestige to say that because we‘re doing certain things in Iraq that it hurt Afghanistan. I am smart enough to know that there are people who wear the uniform, the chairman of the joint chief of staff Admiral Mullen, the Secretary Gates, these are the individuals now whose responsibility it is to access what the men and woman are doing on the ground to make this country safer. 

SCHULTZ:  The president has made a commitment to get out of Iraq but then we‘re told 35 to 50,000 troops which the majority leader Harry Reid is now on board with, about 50 thousand troops in Iraq is $4 billion a month.  There‘s going to be some real navigating the president is going to have to do with the American people on that. Because 17,000 troops going to Afghanistan is a real commitment. They‘re going to be there for a while. If we can knock down the terror cells and the threat I don‘t think the president is going to have a hard time selling this to the American people and to the Congress. This is just a generational fight that we are in, no matter who the president is. 

HENDERSON:  Polls definitely show that Americans seem to back this surge of 17,000 troop surge in Afghanistan something like 62 percent say it‘s a good idea and worth it. 

SHUSTER:  The irony is the polls in Afghanistan, the views of the Americans they are getting worse. One point, when the United States went in it was something like 80 percent who had a variable view of the United States. At this point, according to ABC News, 47 percent view the U.S.  favorably, only 37 percent support a coalition presence. A lot of this is due to some of the civilians who have been killed in these bombings. But the more troops we put in, obviously the challenge is you‘re angering more of the locals who are there. 

CHRISTIE:  That could be true. But also we‘re working with the governments in the region. Not only Afghanistan. But Pakistan is a very critical ally for the United States. I think they‘re at a very critical stage for their development. Pakistan, many experts say could go either way. We need to insure not only in Afghanistan, but Pakistan, our neighbors are our allies in that region that they are stabilized and that they have if not at least a stable government.

SHUSTER:  Ron Christie, Nia and Ed are sticking with us. And coming up next, remember what John McCain took heat for saying the fundamentals of our economy are strong? Well President Obama is now talking about the quote. Fundamentally sound aspects of the economy. What‘s the difference?  We‘ll go through it. 

And your twitter questions is coming up at the end of the hour, just go to Twitter.com/shuster1600 or use the link at Shuster.msnbc.com.

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BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  And, look, there are a lot of individual families who are experiencing incredible pain and hardship right now. If you‘ve been laid off your job, if you‘ve lost your home, then right now is very tough. But if we are keeping focused on all the fundamentally sound aspects of our economy, all the outstanding companies, workers, all the innovation and dynamism in this economy, then we‘re going to get through this and I‘m very confident about that. 

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SHUSTER:  Welcome back to 1600 PENNSYLVANIA AVENUE. That was President Obama, today, talking about the fundamentally sound aspects of our economy.  After meeting with economic adviser Paul Volcker. The presidents choice of words there are interesting, because remember this?

(BEGIN VIDEO CLIP)

JOHN MCCAIN:  Our economy, I think, still the fundamentals of our economy are strong but these are very, very difficult times. And I promise you we will never put America in this position again. We will clean up Wall Street. We will reform government.

(END VIDEO CLIP)

SHUSTER: Of course, McCain made those comments on the same day Lehman Brothers declared bankruptcy protection and Merrill agreed to be bought by Bank of America in order to avoid the same fate. But it brings us to an interesting point. All the confidence building and optimistic message out of the White House this week despite more bad economic news. Back with us now are Ed Schultz, Nia- Malika Henderson, and Ron Christie. Ron your reaction.

CHRISTIE:  Well, again, more of the same out of the president. One minute we‘re told that if we don‘t pass a stimulus package, there is going to be a catastrophe, the market could crash, the world could come to an end. The president goes to Chicago and goes shopping and waits four days to sign the bill. Then the president says he is fiscal responsible, he is not going to have earmarks, he is going to change the way Washington works. Then he has a bill that he signs over his dire objection with 8,500 earmarks in it.

The president seems to say one thing David and do something entirely different. This week we‘re hearing maybe the economy is much better. But a few weeks ago we heard it was terrible. There is inconsistent coming out of the White House and there is inconsistency coming out of this president. He seems to say one thing and then do something entirely different. 

SHUSTER:  Ed Schultz.

SCHULTZ:  I have never seen the expectations so high for a president so soon. We‘re not up to day 60 yet. The bottom line is, he talked all along about the stimulus package. The American people voted for him. We‘re going through the process. The fundamentals of this economy are a lot better right now than they were when John McCain was talking because we have invested in jobs. There‘s money going to the state of Minnesota today. They are dispersing it out right now, going through the bid process. Where a bridge fell down and killed 13 people. OK. We‘re rebuilding, we are reinvesting in America. A lot of it is geared toward the energy sector to retool our buildings. This is what the American people want. I‘ll take the last four days in the market. I don‘t know if we‘ve hit the bottom but the last four days have been positive. 

SHUSTER:  But what about the argument of Robert Reich, I mean he is Democrat, the defender of the administration who is said that he is more worried now than he was a couple months ago. He said he‘s worried as hell. 

SCHULTZ:  Listen we‘ve got some heavy lifting to do here. But it‘s going to take an investment, it is going to take the economy going again, it is going to take cheap money from small businesses to get out there to get people back to work. When the people go back to work the confidence of the country is going to be turning around and this is going to grow. When that number starts turning around, when this number starts turning around on the Dow Jones on a consistent basis which we saw a little bit of this week, OK.  Four days in a row. We haven‘t had that for a while. Maybe this is going to work. What‘s wrong with that? It doesn‘t help having right-wing talkers across America use the word failure and openly hoping for the failure of the president. 

CHRISTIE:  The failure is the failure of responsibility and leadership that has come out of the president. If you look at this stimulus package, if you look, if you get in the technical terms rather than saying small jobs and putting people back to work, the majority of the funds in the stimulus bill aren‘t being spent this year aren‘t being spent next year, they are being spent in years three, four, and five.

Secondly I would say to counter that argument, this is exactly why the stimulus bill was the wrong thing to do. We don‘t want to become like Japan. We don‘t want to have the lost decade in America where you continue to do deficit spending, we continue to increase taxes and harm the economy. 

SCHULTZ:  There are tax cuts in this bill—there are tax credits in this bill. We‘ve lost 6 million manufacturing jobs since the Bush years.

CHRISTIE:  The president promised 40 percent of tax cuts in the bill. It‘s only 28 percent. If you look at what this president has put forth in this budget and his economic vision it‘s going to cripple the American economy because you‘re going to tax people and you are going to stifle -- 

SHUSTER:  Wait a second. That‘s looking pretty far forward. Our message right now, is it fair to say there‘s been something of a zigzag quality to the president‘s message when you see such a positive optimistic message today? Is that a fair criticism of not?

HENDERSON:  I think there‘s a change of message that we‘ve seen this week.  On the one hand, the sense is the sky is falling. But also no one wants to be Chicken Little. So this week I mean we saw Geithner come out and kind of bash some of the compensation packages. We saw Summers kind of come out and say, hey, we need optimism. We also saw Volcker (ph), today; say we‘ve got long-term problems.

He, of course, is a legend in economic circles. There have definitely been a shift. Also there‘s this new idea of this kind of post-bubble economy which is what he said today, this new phrase about what it‘s going to look like going forward. He hopes Americans don‘t kind of rely on consumer spending and housing and -- 

SHUSTER:  Here‘s the big problem that I think the Obama administration has.  When you have a Democrat like Robert Reich who comes on this program and says he doesn‘t have a lot of confidence in Timothy Geithner and he‘s worried as hell about the state of the economy, despite the 700 point gains of the last couple of days, I think that‘s a big problem. Because you have Democrats openly saying there are some problems here and you don‘t have the united front. I think that frightens people.

But in any case, Ed Schultz, Nia, and Ron, are sticking around.

Coming up, every employee at a Boston hospital was too valuable to lay off.  So the hospital‘s CEO came up with a creative solution to the problem. We will tell you what it is.

Plus, Olympic hero Michael Phelps tries to explain what‘s behind a picture of him holding a bong to NBC‘s Matt Lauer. You are watching 1600 Pennsylvania Avenue.

(COMMERCIAL BREAK)

SHUSTER:  Welcome back to 1600. There is a lot going on today. Here are a few things that I thought you should know. We begin with an amazing story of hope in this struggling economy. It took place at the Beth Israel Deaconess Medical Center in Boston. According to a column in the “Boston Globe,” president and CEO Paul Levy was considering layoffs. But he went before a staff and pitched a novel idea. Quote, “I would like to do what we can to protect the lower wage earners. The transporters, the housekeepers, the food service people. A lot of these people work really hard and I don‘t want to put an additional burden on them.

Explained that in order to protect those hospital workers the higher wage earners would have to give up salary or benefits. The reaction, the auditorium broke out in applause. Ron Levy asked for ideas from his employees. He got them, about 100 per hour. Staffers offered to give up raises; vacation days, sick time and bonuses, there were offers to move to a four-day workweek to cut higher wage salaries. All designed to spread the pain and make sure no one loses their job. A spokesman for the hospital told us today the story isn‘t over. We‘ll keep you posted. 

We‘re continuing our good news theme. Former first Lady Barbara Bush has been discharged from the Methodist Hospital in Houston. This comes nine days after Mrs. Bush underwent aortic valve replacement surgery. She will need to restrict her activities for about three weeks, but doctors say after that the former first lady will be able to resume her normal life. 

This is about the gloved one, Michael Jackson. More proof he truly is the king of pop. Jackson is preparing for a comeback tour. Planned 50 concerts in London starting in July. Believe it or not, the 50 concerts sold out in 5 hours. Jackson is now 50 years old and announced last week he would return to the states 12 years after his last series of concerts. 

I have to tell you this Michael Jackson story reminds me of one of my favorite audio clips.

(BEGIN VIDEO CLIP)

(UNIDENTIFIED MALE):  How‘s that going?

(END VIDEO CLIP)

SHUSTER:  “Don‘t stop until you get enough.” By a very young Michael Jackson and the Jackson five.

Olympic gold medalist Michael Phelps is talking about what happened the night he was photographed smoking from a bong. The picture appeared in a British tabloid in February. Since then one of Phelps‘ sponsors decided not to renew his contract. In an interview with NBC‘s Matt Lauer, the Olympic hero refused to say the word pot. 

(BEGIN VIDEO CLIP)

MATT LAUER, NBC HOST:  Who were these people you were with? What was going on that night?

MICHAEL PHELPS, OLYMPIC GOLD MEDALIST:  We were celebrating. Honestly. We were a small group we were just sitting around celebrating. 

LAUER:  I have to ask you, were you smoking pot?

PHELPS:  It‘s a bad mistake. You know what you and I are talking about. A stupid mistake, a bad judgment. 

(END VIDEO CLIP)

SHUSTER:  You can see much more of this interview Sunday night on “Dateline.” “Dateline” airs at 7:00 Eastern on your NBC station. Those are just a few things that I thought you should know. 

Now it‘s “Twitter Time.” And back with us is Ed Schultz, Nia-Malika Henderson, and Ron Christie. And before we get to the twitter questions, he wouldn‘t say what he was smoking, Ed. 

SCHULTZ:  But he didn‘t lie. How refreshing. We have an American out there who has success and visibility and he told the truth. He talked about his family. None of us, when we were in our 20s, made any mistakes at all. This guy is a home run. I think he‘s going to come back strong. He‘s got a lot of life left. I would like to be his agent. 

SHUSTER:  Nia, no mistakes when you were younger?

HENDERSON:  No mistakes. I have to give it to him for saying, I don‘t want to talk about the past, let‘s talk about the future. 

SHUSTER:  Ron do you want to weigh in on this before we slam you with a twitter question in. 

CHRISTIE:  Not a word. 

SHUSTER:  Well let‘s start, twitter question for Ron Christie. Someone wants to know weren‘t Republicans asking the president to be more optimistic just a few weeks ago?

CHRISTIE:  Yes, they were asking the president to be more optimistic. Part of that optimism is giving the markets and giving the American people reason to believe that he knows what he‘s talking about. The markets have reacted to the president, to Secretary Geithner and others in the administration. Because there‘s a feeling out there David and you mentioned this from Robert Reich.

There‘s a feeling that the Obama administration and the Obama White House is winging it. They are making it up on the fly. They are just trying to see well maybe this will work, they want to see consistency, and they want to hear coherence. We still, after Geithner has been in office for nearly 50 some odd days haven‘t seen a reasonable comprehensive plan to deal with the banking restructuring. What‘s going on in the White House? What‘s going on in the treasury? Where are these staffers? We need more coherencies, it is not just good words, and it is good deeds.

SHUSTER:  A lot of twitter questions about sort of the atmosphere in the White House. Are officials there nervous when they see some prominent Democrats starting to bolt on them?

HENDERSON:  You know I think they‘ve got to be nervous about that. I think what they‘re, you know, what they‘re doing is they‘re trying to really kind of be more optimistic. That‘s what we‘re going to see from them and try to consolidate the Democratic base around them.

SHUSTER:  And finally, twitter question for you, Ed Schultz. How long can the president expect to have support like he does now with poll numbers in the 60s?

SCHULTZ:  I think quite a while. I think this stimulus package is going to work. We‘re going to start adding jobs before the end of the year. We are going to get some infrastructure jobs going. I think the president is going to enjoy positive numbers for months to come. 

SHUSTER:  My fear is that I don‘t think the American people are as patient as we all like to hope they are. Ed Schultz, Nia-Malika Henderson, Ron Christie a wonderful panel, great to have all of you here, appreciate it.  That is the view from 1600 PENNSYLVIAN AVENUE tonight. I‘m David Shuster.  Remember get the latest political news and a sneak peek at what‘s coming up on the show sent to your inbox with the “1600” daily briefing.

Ron Christie loves those text alerts. You can get yours text Penn to 622639. We‘re going to get Ed Schultz, and Nia, and Ron twittering before we know it. Go to twitter.com/shuster1600. I‘m David Shuster, “Hardball” starts right now.

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