updated 3/26/2009 10:47:17 AM ET 2009-03-26T14:47:17

Guests: Barbara Boxer, Rob Nabors, Lawrence Moy, Dan Gross, Brad Blakeman,

Chris Kofinis

(BEGIN VIDEOTAPE)

DAVID SHUSTER, MSNBC ANCHOR (voice-over): Tonight, President Obama on Capitol Hill tries to sell his budget.

ROBERT GIBBS, WHITE HOUSE PRESS SECY.: I think the president is enormously pleased with the progress that the two committees are making.

SHUSTER: But lawmakers in both parties are trying to pare down energy reform and tax cuts.

REP. NANCY PELOSI (D-CA), SPEAKER: Budgeting is tough. To budget is to govern. And it is to establish priority.

SHUSTER: Follow the money. The AIG bonus recipients who are trying to keep their cash. We will grill their lawyer.

Republicans threatening to blow up the Senate if President Obama relies on 51 votes instead of 60. Those Republicans land in “Hypocrisy Watch.”

Later, remember this?

GOV. BOBBY JINDAL ®, LOUISIANA: As a child, I remember going to the grocery store with my dad.

SHUSTER: Bobby Jindal is now blaming the speech on others and is comparing himself to prisoners at Gitmo.

And the “Things I Thought You Should Know”: Condi Rice on Leno talks about the president and breaks with Dick Cheney‘s approach.

CONDOLEEZZA RICE, FMR. SECY. OF STATE: I‘ll give my advice privately and keep it to myself.

SHUSTER: The inside story at the Obama news conference and White House staff BlackBerry messages.

And “Twitter time” all tonight on 1600 PENNSYLVANIA AVENUE.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: You want me to start calling you by your first name?

(END VIDEOTAPE)

SHUSTER: Putting your money where were priorities are, day 65, the Obama administration. Welcome to the show, everyone, I‘m David Shuster.

There‘s often nothing more intriguing than a fight between members of the same party. And today was dominated by the budget battles emerging between President Obama and centrist Democrats.

The president‘s budget proposal was built on four principles: health care; education; energy; and cutting the deficit in half. But the ambitious progressive agenda with a hefty price tag is leading some moderate Democrats to push back.

The White House, today, tried to quell speculation about Democratic disunity, saying the budgets were brothers if not twins. And the president made the case last night he never expected to get all of his priorities passed.

(BEGIN VIDEO CLIP)

OBAMA: Now we never expected when we printed out our budget that they would simply Xerox it and vote on it. We assume it has to go through the legislative process. I have not yet seen the final product coming out of the Senate or the House. And we‘re in constant conversations with them.

(END VIDEO CLIP)

SHUSTER: Today, President Obama took his case to Senate Democrats on Capitol Hill. Afterwards the White House was optimistic.

(BEGIN VIDEO CLIP)

GIBBS: Did the president get everything he wanted? No. I think presidents rarely do get everything they want. Is the president satisfied that we‘re making critical investments in health care reform, education reform, energy independence, all while cutting the deficit in half in just four years? He‘s pleased with that.

(END VIDEO CLIP)

SHUSTER: But while debate rolls on about whether President Obama will really get what he wants from Congress‘ budget, there was one consistent message that came out of today. The budget will pass.

(BEGIN VIDEO CLIP)

PELOSI: I hope that the bill will pass with some bipartisan support, but I know the bill will pass.

SEN. HARRY REID (D-NV), MAJORITY LEADER: I‘m confident that Senator Conrad will get the budget out of his committee quickly. And that this full Senate will pass his budget next week.

JOE BIDEN, VICE PRESIDENT OF THE UNITED STATES: I feel very confident that we‘re going to get a budget that is totally consistent with and reflective of all we‘ve asked for.

(END VIDEO CLIP)

SHUSTER: Let‘s go right to Capitol Hill and a Democratic senator who met with President Obama today. Senator Barbara Boxer is a Democrat from California. She is also the chairwoman of the Environment and Public Works Committee.

And, Senator Boxer, what was the message from the president today?

SEN. BARBARA BOXER (D-CA), CHMN., ENVIRONMENT & PUBLIC WORKS CMTE.:

Well, it was a wonderful gathering. And the president got a couple of standing ovations and first we went through all of the things we‘ve accomplished. You know, people are forgetting. We got children their health insurance. We passed that stimulus package, the Equal Pay Act and several others things we‘ve been doing and they‘ve been doing, and that they‘ve been doing.

And the good news on the economy is beginning to trickle out. Then we turn to the budget. And I know what the word is out there in the media land, is that Democrats are fighting. Democrats are not fighting. Democrats are working together and this president will get more than 90 percent of what he wants, which is what most presidents get.

In this case, his investment priorities, veterans, education, health care, he wants to do clean energy, and he‘ll get that deficit reduction that he wants.

And so, I think around the edges we‘ll have changes here and there. But I think the president is going to come out a winner, but more important, the country will come out a winner.

SHUSTER: Well, as far as the reports about fighting, correct us if we‘re wrong, but aren‘t there some moderate Democrats who don‘t want to deal with cap and trade or the climate bill right now and are urging that the Obama administration back off?

BOXER: Well, actually, that issue has more to do with region that it does with moderate or liberal or conservative Democrats. We are a very big umbrella in our party and have differing views.

But you have to realize that in this budget there will be a reserve fund for cap and trade revenues. But the committees have to pass the legislation. The budget doesn‘t dictate that.

So I think there is some confusion. There will also be a reserve fund for health care. So we will have the reserve funds in the budget, should we be able to come up with that legislation.

SHUSTER: What about the whole issue of transparency, though? I mean, that has been a big part of what President Obama has promoted. And it looks like at least the latest budget, it essentially sunsets the middle class tax cut in 2010.

I mean, the budget presumes that it will be sunset. Isn‘t that something of a gimmick when you don‘t include those numbers?

BOXER: Well, let me talk about transparency. The big thing that President Obama wanted to do is make sure that we paid for things on the budget and not off the budget. That was the big thing.

And that has to do, really, with the wars, because as you remember, President Bush paid for those wars off the budget. And that—those days are over. And that‘s why it may look like there‘s more spending because we‘re finally telling the truth to the American people.

As far as tax cuts, they‘re either in there or they‘re not extended. If they‘re not extended, then the president says, I think some of them will be reinstated but not all of them will be reinstated. Now, he has kept the Bush middle class tax cuts.

SHUSTER: Well, one more question for you. Budgets usually include recommendations or guidance on how to pay for some of these priorities. Why didn‘t Senator Conrad include those assumptions in terms of how to pay for it? Senator Conrad being the chair of the Budget Committee on the Democratic side.

BOXER: Well, the truth of the matter is the Budget Committee, and I served on it for many years, has no control over the other committees. It‘s going to be Senator Baucus in the Finance Committee who is going to make that decision for the Senate as to how to pay.

The budget just simply says it‘s a roadmap to our priorities. These are our priorities. These are the things we would like to do. And by the way, yes, we might—we would like to do cap and trade. We would like to do health reform. And we set up a reserve fund. But we don‘t dictate exactly how it‘s done, at least not as long as I was on the Budget Committee.

Remember, this is a document that is a roadmap to the priorities of this nation. And this is a good roadmap. And I will tell you the real story here, which you haven‘t discussed which is your call, is that the Republicans are trying to do the same thing to this budget that they tried to do to the Clinton budget that passed without one Republican vote, as I remember, Al Gore had to cast the deciding vote on that.

And the Republicans predicted gloom and doom and a depression and no jobs. And we went into a period of the biggest prosperity in peacetime ever in the history of the country, with surpluses instead of deficits and the debt on the way down.

So we Democrats know how to do this. And we‘re going to do it with or without the Republicans. We invite them to join, but they‘re on the floor of the Senate just blasting our president—our new president, who has all of this on his shoulders. And I think we‘re going to stand up as Democrats and we‘re going to give this president his priorities.

SHUSTER: Senator Barbara Boxer, Democrat from California, Senator, good of you to join us tonight. We appreciate it.

BOXER: Thanks.

SHUSTER: So are there significant differences between what President Obama has asked for in his budget proposal and what he will get from Congress? Let‘s go to the White House. Joining us now is Rob Nabors, deputy director for the Office of Management and Budget. And he joins us live from 1600.

And, Rob, as far as the senator‘s last point, that they‘re going to do this with Republicans or not, you guys have the option of using something known as budget reconciliation which would essentially mean you need only 51 votes instead of 60.

What‘s the White House view on that?

ROB NABORS, DEPUTY OMB DIRECTOR: Well, I think the most important right thing now is that the American people want progress. They want to see an agenda passed. And the agenda that the president has put forward, investing in education and investing in energy research, making sure that there is sufficient middle class tax cuts and making sure that over the—by the end of the first term of the administration that we‘ve cut the deficit in half, that has to be done.

Our first option is not to use reconciliation. But we‘re not going to take anything off the table in terms of looking at things that would be useful in terms of pushing that agenda.

SHUSTER: The big sticking point on the budget does seem to be taxes. The Making Work Pay tax, which increases the amount of take home pay employees get from their paychecks, that‘s not included in the budget. Why not? And does that mean the president will have to scrap it?

NABORS: No, I don‘t think the president is going to have to scrap it. The—it‘s important to remember that the Making Work Pay tax credit is in effect for two years. And one of the things that the president has signified is that we‘re going to ask the Volcker board to go back and take a look at various revenue proposals, things like corporate welfare, tax loopholes, and see if there are savings that can be generated that can be used to pay for the Making Work Pay tax credit going into the future.

It‘s critical to the administration‘s agenda that there is sufficient middle class tax relief. But at the same time, we have to make sure that we don‘t make the mistakes of the past. Our tax cuts have to be paid for. And we‘re dedicated to doing both the middle class tax relief and ensuring that those tax cuts are paid for.

SHUSTER: Rob, one thing that‘s also not in the budget is money for another bank bailout. Do you foresee needing another bailout? How much would it be? And how are you going to try to get Congress to go along if you do need it?

NABORS: Well, I don‘t think that anybody can really speculate about that right now. What we did in our budget was to—in an effort to be as transparent as possible, is we acknowledged that there is the possibility that additional action might be needed.

We‘re still waiting to hear back from the secretary of treasury. He‘s currently doing his stress tests on the financial sector. And we‘ll just have to see as the economy progresses whether additional action is necessary.

Right now, obviously we don‘t think that additional action is necessary.

SHUSTER: Given the White House reaction today, that you‘re pleased with how the budget is going, despite some of the chopping that some centrist Democrats are making, what about the argument then that the initial budget you submitted was essentially for negotiation purposes and wasn‘t sort of the final thing you were hoping to get?

NABORS: No. I think that this budget essentially captures about 98 percent of what we were looking at—looking for in the budget. We never thought of this as a take it or leave it deal. This administration is different. We are trying to work cooperatively across party lines and between the executive branch and the legislative branch.

What we did is we put forward a series of principles and we think that the budget resolutions introduced in the House and the Senate accomplish the main principles that we were advocating.

SHUSTER: Rob Nabors, deputy director of OMB, Office of Management and Budget. Rob, thanks so much for coming on. We appreciate it.

NABORS: Thanks for having me.

SHUSTER: You‘re welcome. Up next, the AIG bonus battle. Some employees argue they deserve that money, even though the company crashed, we will grill one of their lawyers.

Later, Louisiana Governor Bobby Jindal‘s last nationally-televised speech did not go particularly well. Last night he tried a comeback and blamed his earlier performance on handlers who may have treated him like a prisoner of war?

At the half hour, several conservatives insist that freezing all government spending will help the economy. We will bust that myth with Newsweek‘s Daniel Gross. That‘s, again, at the half hour.

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.

(COMMERCIAL BREAK)

SHUSTER: Up next on 1600, an AIG executive sick of working for only $1 a year decided to call it quits. Should we be happy or sad? We‘ll talk with the lawyer representing the AIG bonus recipients. One question, though, when you tell your bosses you‘re leaving, is it really appropriate to do it as this employee did in a newspaper column?

(COMMERCIAL BREAK)

SHUSTER: Here‘s what many New Yorkers woke up to find in their New York Times op-ed section this morning: “Dear AIG, I Quit.” That‘s a resignation letter addressed to AIG CEO Edward Liddy, by Jake DeSantis, an executive vice president in AIG‘s Financial Products unit.

It‘s the first time we‘ve heard publicly from an AIG bonus recipient. In the letter, DeSantis explained that he had nothing to do with the derivative transactions that led to the company needing a massive government bailout.

DeSantis complained that Liddy failed to stand up for the innocent AIG employees when Liddy testified to Congress last Wednesday.

Last night, President Obama repeated he was angry about the bonuses but tried to tamp down the populist frustrations.

(BEGIN VIDEO CLIP)

OBAMA: The rest of us can‘t afford to demonize every investor or entrepreneur who seeks to make a profit. When each of us looks beyond our own short-term interests to the wider set of obligations we have towards each other, that‘s when we succeed.

(END VIDEO CLIP)

SHUSTER: Earlier this week, New York Attorney General Andrew Cuomo announced that nine of the top 10 bonus recipients at AIG had agreed to give the bonuses back. He said 15 of the top 20 have agreed as well. That comes to about $50 million from $165 million bonus pool.

Here are some of the dollar figures doled out in the bonuses. The top recipient got $6.4 million. The next seven each got $4 million. And the next 22 received around $2 million. And 73 people received at least $1 million.

Keep in mind that AIG lost over $60 billion in the last quarter of last year, the biggest loss in U.S. corporate history. Joining us now is Lawrence Moy, he is a partner at Outten & Golden in New York, the firm represents some AIG employees.

And, Lawrence, I want to read a paragraph from Mr. DeSantis‘s letter published today. And he wrote—he said: “I can no longer effectively perform my duties in the dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1. And I agreed out of a sense of duty to the company. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.”

Why should we feel any sympathy for anybody who is complaining about working 10, 12, or 14 hours a day?

LAWRENCE MOY, PARTNER, OUTTEN & GOLDEN: Well, the reason why to feel sympathy for this gentleman and other people at AIG is because you have a situation where you have a lot of people being blamed for something that they really had no connection to.

And he‘s one of the people that AIG determined it was important to retain in order to help bring the company back. He fulfilled his end of what he was supposed to do. And he‘s being painted by the same brush as the people who were really the wrongdoers.

SHUSTER: Well, on that very point, Mr. DeSantis also wrote: “We have worked 12 long months under these contracts and now deserved to be paid as promised. None of us should be cheated out of payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house.”

But what about United Auto Workers? I mean, they did their job but their managers screwed up in a major way, leading the companies almost to bankruptcy. The auto workers had to rip up their contract in order to avoid a bankruptcy. Isn‘t there a double standard when AIG employees complain in the way that they are?

MOY: I don‘t think there‘s a double standard. First of all, I think that one thing that‘s kind of being lost in the dialogue is that there‘s a lot of people—you know, you obviously featured the people who are making $1 million or more, but there is plenty of people at AIG and other financial institutions who make far less and are not millionaires or not wealthy people and are just, you know, trying to do their jobs, just like the people that—just like the auto workers and the people at UAW.

SHUSTER: Right. But—that‘s true. But why should anybody get a bonus at a company that is doing so badly that it loses $60 billion in the last quarter? I mean, granted, I agree that there are a lot of honest, hard-working people who were trying to do the right thing. But why does anybody deserve a bonus in that environment? That‘s what so hard for us to figure out.

MOY: Well, because these bonuses were not bonuses rewarding these individuals for performance, job performance, they were really tied to their staying with the company, staying with an institution that was already taking some hard knocks and trying to do what they can.

SHUSTER: Right. But they wouldn‘t have gotten any bonus money had the company gone bankrupt.

MOY: Well, nobody would get bonus money probably if any company went bankrupt, that‘s true. The government, realizing that this particular company, AIG, and companies like it, are vital to the entire economy, not just the financial services sector, are, you know, obviously taking a softer approach now, recognizing that they‘re going to have to woo these same people to work for these companies in order to make this recovery happen.

SHUSTER: All right. Lawrence Moy, we appreciate you joining us. It‘s an interesting discussion. And thanks for coming on. We appreciate it.

MOY: Thank you.

SHUSTER: Republicans are warning Barack Obama not to play “Chicago-style politics” in passing the budget. The thing is, the parliamentary procedure they‘re referring to is the exact same thing Republicans used to pass key parts of President Bush‘s agenda. “Hypocrisy Watch” is next on 1600.

(COMMERCIAL BREAK)

SHUSTER: Welcome back to 1600. The Obama White House is now considering the possibility of embracing a parliamentary procedure in the U.S. Senate that would enable Democrats to push their agenda through with 51 votes instead of 60. Several Republican senators are threatening to go nuclear. And that takes us to tonight‘s “Hypocrisy Watch.”

First, the background. Democrats have 58 members in their Senate caucus. And Majority Leader Harry Reid, along with the Obama White House, appear to be considering something known as budget reconciliation, which would enable them to pass their agenda with a simple 51-seat majority.

Obama adviser David Axelrod last night refused to rule it out.

(BEGIN VIDEO CLIP)

DAVID AXELROD, ADVISER TO PRESIDENT OBAMA: I‘m not going to—I‘m not going to deal with that right now. And I don‘t think the American people are particularly consumed by the procedural.

(END VIDEO CLIP)

SHUSTER: But the prospects of Democrats needing 51 votes instead of 60 has left Republicans infuriated.

(BEGIN VIDEO CLIP)

SEN. KIT BOND ®, MISSOURI: This post-partisan time of Barack Obama, we‘re seeing a little Chicago politics. They steamroller those who disagree with them and then I guess in Chicago they coat them in cement and drop them in the river.

(END VIDEO CLIP)

SHUSTER: Well, that‘s interesting, because Senator Bond and his Republican colleagues during the Bush administration embraced the budget reconciliation maneuver. The GOP-controlled Senate used it to pass the Bush tax cuts in 2001 and 2003. They also used it to open the Arctic National Wildlife Refuge for domestic oil drilling in 2005.

At the time, Republican Senator Gregg—Judd Gregg said, quote: “The president,” President Bush, “asked for it, and we‘re trying to do what the president asked for.”

Now that President Obama is thinking of the same tactics, Senator Gregg says it would be, quote, “regarded as an act of violence.” Senator Gregg, an act of violence? Clearly it‘s frustrating to be in the minority. But, senators, given your previous embrace of the 51-vote threshold, when you whine and complain about it now, that‘s hypocrisy, and it‘s wrong.

Up next, Senator Chuck Grassley is the latest Republican to argue for a three-year government spending freeze to help fix the broken economy. But would that help or hurt? Myth-buster Daniel Gross is here to set us straight.

And it‘s no coincidence that Louisiana Governor Bobby Jindal was in Washington, D.C., speaking to his party on the same night the president held his second primetime news conference. Can Jindal be the party‘s next leader? We will explain ahead on 1600.

(COMMERCIAL BREAK)

SHUSTER: Welcome back to 1600 PENNSYLVANIA AVENUE. Republicans, today, again, went after spending in President Obama‘s budget.

(BEGIN VIDEO CLIP)

SEN. JUDD GREGG ®, NEW HAMPSHIRE: Here is a budget which basically does what the president said he was going to do, which is radically expand the size of government.

(END VIDEO CLIP)

SHUSTER: That was late this afternoon. We‘ll have more on the budget battle in just a moment. First, in an interview Monday with the “Washington Times,” Iowa Republican Senator Charles Grassley borrowed a line from the playbook of the House Republican leadership, and argued that a three-year spending freeze would help solve the economic crisis, pay down the federal debt, and control the Obama White House.

(BEGIN VIDEO CLIP)

SEN. CHARLES GRASSLEY ®, IOWA: They have more confidence in 535 members of Congress deciding the distribution of goods and service in this country than the 137 million taxpayers. That‘s a trend toward socialism.

(END VIDEO CLIP)

SHUSTER: So is a spending freeze really the way to get our economy moving again? Joining us now is our myth buster, Daniel Gross, senior editor at “Newsweek.” Dan, welcome. How about it? Freezing government spending as a way of improving the U.S. economy?

DAN GROSS, “NEWSWEEK”: David, Senator Grassley talking to the “Washington Times;” this is an example of a loony talking to the moonies. When the economy is shrinking at a six percent rate, which is what it did in the fourth quarter, I would say 99 out of 100 economists would tell you that it is not only stupid but criminal for the government to think about not spending money at this period.

There are three sources of demand in an economy: business, consumers and government. Business and consumers are flat on their back. Government is the only source.

SHUSTER: So, when Grassley and others say, well, you know, we need to reign in the government, their argument is, well, if we give some tax cuts, give some money to the people in the economy, that will take care. That‘s better than actually government spending. What about that?

GROSS: There are times when tax cuts work really well and there are times when government spending works a lot better. When we cut taxes today, people will spend some of that money, but they will also use a lot of it to bolster their cash holdings, which is what they‘ve done so far.

To see the absurdity of this argument, you need look no further than the states. All the 50 states have to balance their budgets. They‘re not allowed to run deficits. They are like 50 little Herbert Hoovers out there. Remember, California a couple months ago was freezing spending. What was it doing? It was furloughing employees, cutting school days, closing the DMV offices, shutting state parks, which means that all the businesses that serve tourists had nothing to do.

It was enormously destructive for them to basically stop spending.

SHUSTER: What about the Republican argument that health care, energy, those are separate? Those are separate issues from the economy. The president says no. They‘re interconnected. Who‘s telling the truth and who‘s got a myth on that one?

GROSS: Of course, they are interconnected in more than one way. When you look—the last five months, who has added jobs? It‘s been the government and the health care and education departments—segments of the economy. The federal—the government accounts for about 44 percent of health care spending. It‘s really connected in the sense that the government provides a lot of the health care spending.

The larger issue is that when you ask people, what are they worried about? What keeps them up at night? It‘s lack of health care. They may not want to leave a job to go start a business, because they can‘t get health insurance for themselves. I happen to think that if we do something about health care on a national level, it will increase consumer confidence. People won‘t be thinking if I fall down, if I get in a car crash, I‘ll be bankrupt.

SHUSTER: “Newsweek‘s” Daniel Gross, senior editor. If it‘s Wednesday, it‘s myth buster Wednesday with Dan Gross. Dan, thanks so much for coming on. We appreciate it.

GROSS: Thanks for having me, David.

SHUSTER: You‘re welcome. Let‘s turn now to tonight‘s political panel, Chris Kofinis, Democratic strategist and former communications director for John Edwards, and Brad Blakeman, Republican strategist, and former deputy assistant to President Bush. Brad, Dan is not the first person to talk about the absurdity of the argument that, oh, we should just freeze government spending as away of fixing the economic mess. When the House Republicans did it a few weeks ago, Paul Krugman said that the House Republicans were ignoring 80 years of economic thought and understanding.

Why is Chuck Grassley coming out and saying this stuff?

BRAD BLAKEMAN, REPUBLICAN STRATEGIST: Chuck Grassley is right, as Barack Obama was right, in using the scalpel to go through the budget. I‘m not saying that a permanent freeze for three years on government hiring for non-essential services is the way to go. There‘s no silver bullet. I happen to think, in that respect, he‘s wrong. A blending of cutting spending and restraining government and giving more money back to the people with tax cuts, and not busting the budget like the Democrats have done—a trillion dollars here, 400 some trillion there, 9,000 earmarks. That‘s not the way to go either. There‘s a blending of fiscal constraint and also spending. You can‘t just spend—

SHUSTER: Never mind that out of those 9,000 earmarks, 40 percent of them were from Republicans. In any case, Chris, your point?

CHRIS KOFINIS, DEMOCRATIC STRATEGIST: The notion of a spending freeze would be catastrophic for our economy now. I think everyone understands that the only institution or force that has enough resources to pump the economy and give it some life is the federal government. This notion that Republicans keep falling back to, these old, tired ideas, like a zombie party—all their ideas are dead.

BLAKEMAN: The government is a cure-all for Democrats.

KOFINIS: -- some new ideas.

(CROSS TALK)

SHUSTER: Here‘s the reason why I think a lot of economists don‘t have faith in the people in terms of tax cuts. A, if you‘re a company that‘s losing money, and suddenly you get a tax cut from the government, that‘s not going to encourage you to hire more employers. If I give you a tax cut, there‘s no guarantee that A, you‘re going to spend it in the United States. Brad Blakeman may fly off to France and spend it on their economy. There‘s way to predict. There‘s no way to guarantee that when you give somebody a tax cut, they‘re actually going to use it in the economy.

BLAKEMAN: There‘s no guarantee specifically what people are going to do. You look in the macro sense, if you get enough money on the street, every time a dollar changes hands is what spurs our economy. The Democrats believe the government is the answer. The bigger you grow it, the better it is. It‘s not.

KOFINIS: That‘s completely inaccurate. Here‘s the problem with their argument—this is a consistent argument—flaw in the argument the Republicans have. They ignore the fact that while they were in power, all the fundamental problems that we‘re talking about, that President Obama talked about last night in that conference, energy, education, health care, the economy, were ignored. All of them got worse. There fewer people that were going to college. There were fewer people that had affordable health care. Our energy dependence got worse. And our economy struggled.

So the idea is to make the tough decisions. And they are tough decisions. They are going to cost us now. But to make the tough decision that we need to make now to put us in a position where we grow in the future.

SHUSTER: In making those decisions, the process, of course, is important. Late this afternoon, of course, Republicans talked about the bipartisan nature they want to see. Let‘s play, here‘s Mitch McConnell talking late this afternoon on a news conference, in terms of the idea that Democrats may do this entirely themselves. Watch.

(BEGIN VIDEO CLIP)

SEN. MITCH MCCONNELL ®, MINORITY LEADER: If you insist on doing this 100 percent with your own members, you own the whole thing. These kind of major changes tend to generate a great deal of controversy. There‘s a lot to be said for trying to do it on a bipartisan basis.

(END VIDEO CLIP)

SHUSTER: Now, he and some other Republicans have actually said a lot worse about the Democrats, who considering using what‘s known as budget reconciliation, which is this idea you simply use 51 votes instead of 60. Chris, is it a wise idea for Democrats, if they can‘t get the Republican support to use 60, to use that maneuver and just pass things with 51?

KOFINIS: Listen, I think you keep that option on the table. There‘s no question about it. Put aside the fact that Republican are being hypocrites, in the sense that they did use it in the past.

(CROSS TALK)

BLAKEMAN: We had a slim majority.

KOFINIS: Put that aside for a second. The reality of the situation here is the president, I think, has made it very clear. He is, I think—he has done very concrete steps in terms of reaching out to them—that he‘s willing to work with Republicans if they come up with positive and productive ideas.

But the notion of just obstructing and imposing and coming out and proposing ideas like a spending freeze, that‘s a non-starter. That‘s just completely out of touch with the reality that the country and the economy faces.

BLAKEMAN: Look, the fact that they‘re even talking about budget reconciliation when they hold such high majorities in both the House and the Senate, with a Democratic president, shows weakness on their part.

SHUSTER: So it was weak when the Republicans used budget reconciliation back in 2001 and 2003 and 2005?

BLAKEMAN: We had to do it. We didn‘t have the type of majorities that this president has.

SHUSTER: He had to do it because he couldn‘t get Democrats to go along. Right?

BLAKEMAN: He can‘t get Democrats to go along. There are 32 Democrats in the House and Senate who won‘t go along with the president. Right here.

KOFINIS: That‘s false. That‘s just. Democrats are going to support this—the president‘s budget.

BLAKEMAN: They‘re coming out in droves against it.

KOFINIS: Oh, please.

BLAKEMAN: Taxing and spending. It will hurt them in the re-election.

KOFINIS: Here‘s the fundamental difference—I know this is hard to understand for Republicans. But contrary to what actually happened during the Bush Republican years, now we actually have a president and a Congress that are willing to actually discuss their differences. They‘re minor—

BLAKEMAN: You don‘t need reconciliation. All your guys will come and give you the votes you need.

(CROSS TALK)

KOFINIS: You keep every option on the table. If Republicans aren‘t willing to play ball and offer—

(CROSS TALK)

SHUSTER: Nobody‘s going to care about this process if it works. If the budget, if the agenda works, gets the economy moving, helps with health care, people a year from now, two years from now, are not going to care about budget reconciliation, whether it‘s 51 or 60. We‘ll see.

Still ahead, former Vice President Cheney recently argued that President Obama is making America less safe. That did not go over very well with former Bush Secretary of State Condoleezza Rice.

Up next, we‘ll talk with our panel about Louisiana Governor Bobby Jindal. He made his first public appearance last night since a not so great speech on national TV last month. About that disastrous performance, he made a joke about Gitmo and torture. Did it work? Has Jindal redeemed himself?

And you Twitter questions are coming up at the end of the hour. Go to Twitter.com/Shuster1600 or use the link at Shuster.MSNBC.com.

(COMMERCIAL BREAK)

SHUSTER: Welcome back to 1600. For the first time since he took office, President Obama is headlining two Democratic National Committee fund raisers tonight. The DNC needs the help, after raised just 3.2 million dollars in February.

Last night, the Republicans held their first big fund-raiser of the year. It was a 2,500 dollar a plate event that featured something of a do over for Louisiana Governor Jindal. This was his first public appearance since what you‘re looking at now, his disastrous, Kenneth the Page performance opposite President Obama a month ago.

His winning one liner last night. Quote, I‘ve just learned that because of President Obama‘s opposition to torture, it is now illegal to show my speech to prisoners at Guantanamo.”

Torture jokes are always a winning way to start off an evening. Not mentioned, of course, the inconvenient eruption of Alaska‘s Mt. Redoubt, which showered Governor Sarah Palin‘s town in ash, after Jindal mocked the whole idea of the volcano monitoring. Last night, there was plenty of (INAUDIBLE) with Iraqi-style tribute setting up Jindal as the one to watch for 2012, and a defense of Rush Limbaugh from Jindal at the podium.

(BEGIN VIDEO CLIP)

GOV. BOBBY JINDAL ®, LOUISIANA: I was to comment directly on the latest gotcha game I‘ve noticed occurring in Washington today. Anything other than an immediate, compliant, why, no, sir, I don‘t want the president to fail, is treated as some act of treason, civil disobedience or political obstructionism. will not be brow-beaten on this. I won‘t kowtow to their political correctness.

(END VIDEO CLIP)

SHUSTER: Back with us now are Chris Kofinis and Brad Blakeman. Chris, are Democrats fearful or excited when they hear that Bobby Jindal‘s profile is raising?

KOFINIS: I think Governor Jindal has a very close relationship between his foot and his mouth. He keeps inserting his foot in his mouth.

BLAKEMAN: Kind of like our vice president.

KOFINIS: OK, I don‘t know where that comes from, but nonetheless—

I think he‘s doing serious damage to whatever prospects he has with the Republican party, because here‘s, I think, the fundamental—not that Republicans are going to listen to me. Here‘s the fundamental problem with the Republican party. Here‘s the fundamental mistake with the Republican party. They keep talking to themselves. They don‘t understand that demographically and ideologically the country has changed.

Instead of trying to figure out, OK, we have to come up with some new ideas, a new approach to expand the audience we‘re speaking to, they keep talking to their select audiences. When you have Governor Jindal going out there to defend, you know, Rush Limbaugh, you just realize this is completely, you know, oblivious, this notion of talking to the very audience that will never get you into the White House, let alone back into the majority, which personally I‘m more than happy with.

SHUSTER: Brad?

BLAKEMAN: Look, Bobby Jindal is a leader in our party. I don‘t necessarily agree with him on his comments on Rush Limbaugh. I don‘t do that. Here‘s the story: remember Governor Clinton when he appeared on “The Tonight Show?” One of the most disastrous—

KOFINIS: You mean President Clinton?

BLAKEMAN: President Clinton. Later President Clinton. That‘s the lesson you have to learn. That‘s the lesson you must learn. Because one bad appearance—

SHUSTER: Here‘s the difference between President Clinton on “The Tonight Show” or I think it was the Democratic Convention that you‘re talking about, that long speech. There wasn‘t anything about the speech where you could suggest President Clinton misled people. He talked a lot. Bobby Jindal in that speech he gave a month ago, he condemned the train from Vegas to Disney World—Disneyland, even though that wasn‘t in the bill, and even though Bobby Jindal‘s own secretary of transportation asked for money for a train from Baton Rouge to New Orleans.

BLAKEMAN: There was money in the bill for—

SHUSTER: No, there was money in the bill for the secretary of transportation to decide which train project should get the money, including—

BLAKEMAN: Who does the secretary work for? He works for the administration. You don‘t think Harry Reid, the majority leader, is going to get his train? The money‘s there.

SHUSTER: The money will more likely, Brad, go to Louisiana, for Baton Rouge to the New Orleans route, because they‘ve requested it, then for a Disneyland to Las Vegas route, which nobody has requested yet.

KOFINIS: Here‘s what‘s fascinating about this search the Republican party—this endless search for the next leader. You know, you have Governor Jindal, you have Governor Palin, you have Governor Stanford. Not one of them—

BLAKEMAN: Mitt Romney.

SHUSTER: Mitt Romney. You know, Governor Romney. Not a single one of them, other than maybe Governor Romney—he‘s not even in power anymore -- has any understanding of the current economic realities and what to do about it, let alone come up with any new ideas. Governor Stanford is saying I‘m going to take—

BLAKEMAN: And Barack Obama does? You think Barack Obama read the bill?

KOFINIS: Let me finish. Governor Palin said I‘m only going to take 70 percent of the stimulus. Then I have no idea what Governor Jindal supported.

BLAKEMAN: I think that‘s being responsible. Why should they take money—

SHUSTER: OK. Was it irresponsible then when Governor Palin, a few days later, clarified and said, no, maybe she would take that money. Was she then irresponsible?

BLAKEMAN: No. Maybe she met with her budget people. They came up with—

(CROSS TALK)

BLAKEMAN: You don‘t have to necessarily take the money the government wants you to take.

SHUSTER: We take our money from advertisers. So we‘re going to hit this next break. Our panel is sticking around, Chris Kofinis and Brad Blakeman.

Up next on 1600, a new movie looks at the political relationship between former President Bill Clinton and former British Prime Minister Tony Blair. Wait until you hear who‘s playing each of them. That‘s next.

(COMMERCIAL BREAK)

SHUSTER: Welcome back to 1600. There‘s a lot going on today. Here are a few things I thought you should know. First, former Secretary of State Condoleezza Rice sat down with Jay Leno on the “Tonight Show” last night. Leno asked Rice about former Vice President Dick Cheney‘s repeated criticism of President Obama‘s policies.

(BEGIN VIDEO CLIP)

CONDOLEEZZA RICE, FMR. SECRETARY OF STATE: I agree with the president. We owe them our loyalty and silence while they do it. I know what it‘s like to have people chirping at you when they don‘t know what‘s going on inside. These are quality people. I know them. They love the country. And they won‘t make the same decisions, perhaps, that we did, but I believe they‘ll do what they think is best for the country. And I‘ll give my advice privately and keep it to myself.

(END VIDEO CLIP)

SHUSTER: Rice also would not disclose who she voted for in the election, saying they have secret ballots for a reason. But she did say she thinks President Obama will do a good job and that his election was, quote, special.

Next, this was a special day and an unusual one in the world of Chicago talk radio. This morning, former Illinois Governor Rod Blagojevich hosted a show. It was just a temporary gig, because any day now Blagojevich will be indited on corruption charges. But today, Chicago radio station WLS asked him to fill in since both of the spokesmen were off. Blagojevich used today‘s radio show to tell listeners he was, quote, hijacked from office. He also joked around, talking about his hair and his hair brush that he affectionately refers to as the football.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Are those headphones going to mess up your hair?

That‘s my concern.

ROD BLAGOJEVICH, FMR. GOV. OF ILLINOIS: I brought my brush. I can comb it as soon as we take a break.

UNIDENTIFIED FEMALE: The football‘s here? I‘m very excited.

UNIDENTIFIED MALE: You don‘t have anybody to carry it. You‘ve got to carry it yourself.

BLAGOJEVICH: I‘m not governor anymore. It‘s a smaller brush.

(END VIDEO CLIP)

SHUSTER: Blagojevich also plugged the book he‘s writing, but admitted he has only written a few pages. Yes, even Blag-O knows a few keep chapters haven‘t happened yet.

First there was “W,” now movie makers are targeting the Clinton administration in a project called “The Special Relationship.” The movie actually deals with the political relationship between President Bill Clinton and British Prime Minister Tony Blair. It was written by “Frost/Nixon” writer Peter Morgan for HBO.

Yes, the casting has already begun. Dennis Quaid has signed on to portray President Clinton. Hillary Clinton will be played by Julie ANNOUNCER: Moore. “Frost Nixon” star Michael Sheen will play Tony Blair. If that sounds like something you‘ve heard before, you have. Sheen has played the former British prime minister in the movie “The Queen” and the movie “The Deal.”

Next, if you were watching the Obama news conference last night, you might have noticed the Obama staff at the back of the room and the cut-away shots, as we like to call them, were intriguing. Chief of staff Rahm Emanuel looked really tense, except when he was laughing there. Then there was this moment, when senior adviser Valerie Jarrett showed something on her Blackberry to Emanuel.

Today, we asked the White House press office for an explanation. Officials refused to comment. We let our imagination go wild. There unconfirmed rumors that Jarrett loves Tetris. Maybe she had just broken Emanuel‘s score. Maybe Emanuel was responsible for the president picking Michigan to lose in the first round of the basketball tourney. They didn‘t and Jarrett was writing, “never doubt the Wolverines,” except in the second round. Or perhaps Jarrett was writing, this event is lame. The president should face the questions on 1600.

Hmm. All right. Maybe not.

Now it‘s Twitter time. Back with us is Chris Kofinis and Brad Blakeman. We‘ve been talking about staging the president‘s performance on Twitter. There‘s a great video a lot of people on Twitter are familiar with. It‘s from the “Late Show” with David Letterman. One is bad. Ten is good. Watch.

(BEGIN VIDEO CLIP)

DAVID LETTERMAN, “THE LATE SHOW”: Critics are not criticizing his over-use of the teleprompter. OK. Maybe he should think about stepping down.

So we put together a piece here tonight, it‘s entitled teleprompter—teleprompter versus no teleprompter. Take a look.

OBAMA: This was the time when we performed, in the words that are carved into this very chamber, something worthy to be remembered.

GEORGE W. BUSH, FMR. PRESIDENT OF THE UNITED STATES: Let me—

(INAUDIBLE)

(END VIDEO CLIP)

SHUSTER: All right. Your score? Chris?

KOFINIS: I give that an eight. Pretty funny.

SHUSTER: Brad?

BLAKEMAN: I give it a ten. I think—

SHUSTER: I‘ll split the difference, give you guys a nine. Very good. A lot of Twitter questions for both of you today. Brad, one for you. Why would Republicans who push tax cuts that tank the economy—why would they want to go that route again?

BLAKEMAN: We didn‘t tank the economy with tax cuts. Quite the opposite, we had 52 straight months of growth. What happened in our economy is endemic in what‘s happened in the entire world economy. You cannot blame that on tax cuts. We inherited a recession, and we had 52 months of straight growth. The world has experienced now a very, very deep, and what I consider to be, if we follow the Obama plan, lasting recession.

KOFINIS: The Republicans had nothing to do with the bad economy?

BLAKEMAN: We‘ll take the responsibility for what‘s due us in spending. Yes, we spent too much. The Democrats—

KOFINIS: Way too much. Didn‘t regulate. Didn‘t do anything about the core issues.

BLAKEMAN: You wouldn‘t let us regulate. You controlled the Congress.

KOFINIS: We didn‘t let you regulate?

BLAKEMAN: Who regulates? The Congress regulates.

KOFINIS: Did you guys not control the executive branch?

BLAKEMAN: Absolutely, sure we did. Yes, we did. But you guys controlled the banking committees. Dodd, who pushed loans that these guys made.

KOFINIS: It‘s amazing. I didn‘t realize the president—President Bush was so weak during his eight years.

BLAKEMAN: We had divided government.

SHUSTER: President Obama, I believe, is strong because today he celebrated Greek Independence Day. There was a special Greek chef at the White House who was honored. Here at 1600, we have our own very special VIP Greek guest. That is Chris Kofinis in honor of Greek Independence Day here at 1600. There it is. The screen graphic there for eternity. Chris Kofinis, your reaction?

KOFINIS: It‘s my big fat Greek consultant. I guess it‘s—look at that.

SHUSTER: Sing the anthem.

KOFINIS: I‘m not going to sing—no. No.

BLAKEMAN: Do the dance.

KOFINIS: No. I‘m not going to do a dance either. Look at it, you guys just keep putting it up there. My parents—this is probably my parent‘s finest moment now. They‘ve never been probably happier than what they just say.

SHUSTER: Indeed. Chris Kofinis, Brad Blakeman, a pleasure as always. Brilliant panel. Superstars they are both. That‘s the view from 1600 PENNSYLVANIA AVENUE tonight. I‘m David Shuster. Remember, get the latest political news sent straight to your inbox, Shuster.MSNBC.com. Text Penn, the Greek favorite way, to 622639. Twitter, BlakemanB, that‘s Brad‘s address on Twitter.com/Shuster1600. I‘m David Shuster. “HARDBALL” with Chris Matthews starts right now.

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

END

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