updated 7/6/2009 10:15:22 AM ET 2009-07-06T14:15:22

Guests: Mike Huckman, Toure, Gloria Allred, Roger Simon, Mike Allen, Phil Rucker, Brian Schweitzer, Tom Davis

CHUCK TODD, GUEST HOST:  This was it, Michael‘s last dance.

Let‘s play HARDBALL.

Good evening.  I‘m Chuck Todd at the White House, in for Chris Matthews, who‘s out of the country, but not in Honduras, I promise you that.

Leading off tonight:  What happens to the kids?  We‘ll get to the full day in politics, and there‘s a lot of that, in just a moment.  But first, the latest in the Michael Jackson story or saga.  Today, a bombshell.  Jackson‘s former wife, Debbie Rowe, told our Los Angeles affiliate, KNBC, that she wants custody of the two children she had with Jackson.  In Jackson‘s will, he wanted the children to go to his mother, or if she couldn‘t care for them, Diana Ross.  So what happens now?

Earlier today, President Obama spoke publicly for the first time about the king of pop.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  I think that Michael Jackson is—will go down in history as one of our greatest entertainers.

(END VIDEO CLIP)

TODD:  And late this afternoon, video of Jackson rehearsing for his planned This Is It tour was released.  We‘ll show you more of the video and have much more of the evolving Jackson saga in a moment.

And talk about stories that keep on giving—three more.  There are more in-fighting on Sarah Palin‘s campaign staff coming to light.  New e-mails show Palin banging heads with top campaign aides over how to handle her husband, Todd‘s, one-time membership in a group that wanted Alaska to secede from the U.S.  One e-mail from campaign chief Steve Schmidt says, quote, “The statement you are suggesting be released would be inaccurate.  The inaccuracy would bring greater media attention to this matter and be a distraction.”  More on that coming up.

And as we head into the 4th of July holiday and this midpoint of this non-political year, we‘re going to look ahead at what we might expect in next year‘s mid-term elections.  These campaigns really do get kicked off in a couple of weeks.  Are the Democrats ready to bury the Republicans, or is the GOP poised for a comeback?  We‘ll look at some of the most intriguing races.

Certainly, one of the things that would help put Republicans back in power is if the economy continues to struggle -- 467,000 jobs were lost last month as unemployment rose to 9.5 percent, a 26-year high.  We‘ll talk to the White House‘s Austan Goolsbee later in the show.

And finally, who‘s the best of all time, Kobe, Michael—no, not that Michael—or neither?  President Obama weighed in on that today, as well, and we‘ll have that answer in the HARDBALL “Sideshow.”

But we begin with the latest on Michael Jackson‘s death and Debbie Rowe‘s decision to fight for custody of the two oldest children.  Gloria Allred is a family law attorney who has filed complaints with California‘s child protective services after Michael Jackson dangled his third baby from a hotel window and after Michael told an interviewer that he had children in his bed.  And Toure is a pop culture commentator and NBC News contributor.

Gloria, I want to start with you.  We have Debbie Rowe saying she‘s going to fight for her children, but she had already signed papers and had relinquished custody of her children to Michael.  So what legal standing would she have, if she chooses to fight?

GLORIA ALLRED, FAMILY LAW ATTORNEY:  Well, after the attempted relinquishment, she argued that, in fact, she had not relinquished her parental rights.  And after a long legal battle the court of appeals in California decided that, in fact, she had not properly relinquished, and therefore still retained her parental rights.  Therefore, she is still, as a matter of law, the parent and the only surviving parent of the two older of the children by Michael Jackson and Debbie Rowe.

TODD:  Well, explain in California law, so if she is—you say she incorrectly tried to relinquish.  Well, what does that mean?  Did she just file the wrong paperwork, or what did she do?

ALLRED:  Well, for one thing, for example, no attorney had been appointed to represent the children.  I‘m not saying she incorrectly did it, but there was an incorrect process.

TODD:  OK.

ALLRED:  And because no attorney was representing the interests at the time that this particular parent attempted to relinquish, there was no relinquishment.

Now, the significance of that is, if she fights for custody now, she does have an advantage over the proposed guardian, Katherine Jackson, the grandmother of the three children, because as a parent, it is presumed that she‘s acting in the best interests of the children.  What Katherine Jackson is going to have to show is that it would be detrimental to the two older children to be placed with their mother, Debbie Rowe.

TODD:  Now, to go—I want to go to that a little bit more because—the children—the oldest child I believe is 12.  You know, there are a lot of courts that do take into account, you know, what the children—the relationship.  If the child doesn‘t have any relationship with that parent, is that going to matter?  Will a court listen to that?  Does that have any legal standing?

ALLRED:  Yes, it will, and that‘s a really good point.  The 11-year-old and the 12-year-old will be able to indicate to the court what their preference is in terms of who should be their guardian or their parent.  But that will not be binding on the court.  Similarly, Michael Jackson in his will indicated that he was nominating his mother, Katherine Jackson, to be the guardian of his children, and that will be given great weight by the court.  But again, it will not be binding on the court because the court has to act in the best interests of the children.

So there‘s going to be an evaluation.  Once she files, the court will order what‘s called a 730 evaluation, and that will be a psychological evaluation by someone appointed by the court to evaluate the children, the proposed guardian, and the parent.  And each side can also hire their own experts, and there will be a full legal battle.

TODD:  And so let‘s talk about timing in here and how long this could take.  So you‘ve got—if she files—and she has yet to file any suit, correct?

ALLRED:  Exactly.  She hasn‘t filed.  The reports are that her attorney is going to attend on Monday, but nothing has been filed yet.  So this is all assuming that she decides that she, in a sense—well, that she wants custody.  And then she‘ll take whatever legal steps are necessary for her to take to become part of this action.

TODD:  And how quickly does California‘s family courts work in a case like this?

ALLRED:  Well, this is a case that‘s a rather unusual case, but it really depends.  It‘s not going to—there‘s a temporary guardianship and temporary custody type of proceeding going on, and then there‘s the effort to have permanent guardianship or permanent custody.  So I think whoever has temporary custody or guardianship may not be the ultimate one who has permanent custody or guardianship, or they may be.  We‘ll have to see.

The court is going to have to look at a lot of factors.  They‘re going to have to look at the bonding that the children have with whomever is trying to have custody or guardianship of them.  And they‘re going to have to look at the homes that would be provided and a home study will have to be done.  So quite a bit has to go on before the court makes its ultimate and final decision, not just a temporary one.

TODD:  Not surprising, all things Michael Jackson always has involved a lot of lawyers in a lot of potential courtrooms.  Toure, I want to go to you a minute.  We got this video today of Michael Jackson in his last days, and I want to show how at—about an hour ago, at 4:00 PM Eastern, all three cable news channels were playing it at the same time.  It was one of these, like, collective cultural moments, and I know that everybody‘s been seeing it over and over again.

You know, Toure, you‘ve been watching this as both a fan, an interested observer.  What was just that collective moment like for you to see this video of Michael?

TOURE, NBC CONTRIBUTOR:  Well, I don‘t know.  I didn‘t really see the moment.  I was in a car going home from being on MSNBC.

And I really actually want to go back to the Debbie Rowe point because it makes me think of King Solomon, you know, and when the two women come to him and he says, OK, well, if I can‘t decide whose baby this is, I‘ll just split the baby in half.  And suddenly, the real mother stands up and says, I would rather not have this baby than have it be killed.  You know, so then you see a mother‘s real love is selfless.

Debbie Rowe seems completely selfish in this situation.  She doesn‘t really know these children.

TODD:  Right.

TOURE:  Michael clearly made it—you know, made it clear he doesn‘t want her to be the mother of these children or raising these children.  Why is she now stepping up?  Is it because she wants money, perhaps?  You know, I mean, there‘s one child that she doesn‘t really have a connection to, so will they be separated now?

You know, it doesn‘t seem at all to be what King Solomon would choose, you know, to give the babies to her.  And plus, you‘re going to take the children away from Katherine Jackson, who knew Michael, already knows these children?  I mean, it seems quite obvious what should really happen here.

TODD:  Well, I‘m no Michael Jackson expert, but the idea that people around this Michael Jackson saga are trying to make money doesn‘t seem like that much of a surprise.

(LAUGHTER)

TODD:  But Toure, I want to go back to all of that video.  The promoter talked about today—I think they have 100 hours of this.  Can you at all put a price tag on what this footage is going to mean?  I mean, look at Michael in this footage.  He didn‘t seem to be overly sick.  He looked like he was certainly—I mean, you know, to be in time, on rhythm.  You can‘t sit here and say, Gee, he must have been on drugs or something.  Looks like this dress rehearsal was fairly successful.  That‘s going to make this video very, very valuable going forward, is it not?

TOURE:  I think the video‘s going to be valuable.  Not sure where we‘re going to see it, in a special DVD, perhaps a special performance on TV, maybe one of these sort of movies sort of thing, where they create, where you got to go to see a theater to see it.  That could be interesting.  But I think that the live recordings of the rehearsals, where you finally get a Michael Jackson live album...

TODD:  Right.

TOURE:  ... is where you might see real money because that could sell for years and years and years—Michael Jackson one of the greatest live performers of all time.  It‘d be great to see what his voice sounds like at this advanced age, doing those older songs, you know...

TODD:  Right.

TOURE:  ... what‘s that last moment of Michael felt like.

TODD:  Right.

TOURE:  So I mean, that could be the real gold mine here.

TODD:  And...

ALLRED:  May I say something about the advanced age issue?

TODD:  Yes.  Go ahead, Gloria.

ALLRED:  Because the advanced age issue also brings us to Katherine

Jackson, who is 79 years old.  And that is—you know, if heaven forbid,

she doesn‘t have a long life—we all hope that she will have a long life

but you know, what if she should pass away, you know, not long after she gets these two children or a few years later?  How traumatic will that be for them to have a second primary caretaker pass away and...

TODD:  Actually, Gloria, I want...

(CROSSTALK)

TOURE:  But then also, like, I mean, Blanket, the youngest child, is 7.

TODD:  Right.

TOURE:  What kind of energy does a 79-year-old woman have to deal with a 7-year-old, and you know, even when he‘s 12, she‘s quite advanced.  And you know, it takes a lot of energy to deal with 12, 11, 7.

TODD:  Well, actually, Gloria, I want to go to one other issue back on the children again.  Will the courts take into account the idea of separating the two oldest children from the third child, since that‘s all Debbie Rowe is asking for, is potentially custody of the two children that she has a biological connection to?  You know, will the court say, You know what, splitting these three children up is too detrimental, despite Debbie Rowe‘s claims?

ALLRED:  Well, actually, we don‘t know exactly what she will do, whether she will only seek custody of her two children that are legally her children because they were born to her in the marriage with Michael Jackson, or whether she will also seek guardianship of the third child, who, of course, was not born of their marriage, and we don‘t know who that mother is.

TODD:  Right.

ALLRED:  You know, the court is going to have a choice.  Maybe the court will decide to grant guardianship to Katherine Jackson of the youngest child, but then custody to the mother, Debbie Rowe, of the two older children.  That‘s a possibility.

TODD:  A family court nightmare.  Toure, I want you to quickly comment about—here‘s President Obama today, talking for the first time about Michael Jackson in an interview with the Associated Press.  Here‘s what he said.

(BEGIN VIDEO CLIP)

OBAMA:  I think that Michael Jackson is—will go down in history as one of our greatest entertainers.  I grew up on his music, still have all his stuff on my iPod.  You know, I think that his brilliance as a performer also was paired with a tragic, and you know, in many ways sad personal life.  But you know, I‘m glad to see that he is being remembered primarily for the great joy that he brought to a lot of people through his extraordinary gifts as an entertainer.

(END VIDEO CLIP)

TODD:  Toure, that last point—I heard you making this over and over last night, that you wanted to see more people talking about his music legacy, rather than, frankly, the much negative legacy over the last 15 years.  And here‘s the president saying that.

TOURE:  Well, I mean, you know, the first thing that jumps out there is the president talking about loving Michael Jackson throughout his life, listening to his music on his iPod.  He‘s a real man of the people, a regular person.  I don‘t think George Bush would have been able to have that direct cultural connection like that.  So it‘s just another way that, you know, I feel better about Obama as a man that way.

yes, I mean, of course, Michael Jackson had a curious end of life, a curious last act in his life, and you know...

TODD:  That‘s one way to put it.

TOURE:  Yes, I mean, you know, you have to mention that at some point in telling the story.  But you know, as we‘ve said, that among the people, you know, the music and the joy and the cultural importance of Michael has been liberated from the discussion of the eccentricities, which is what the media, and a lot of regular people, too, have focused on in the last decade or so.

TODD:  Toure...

ALLRED:  May I say we weren‘t just talking about eccentricities for the last what, 15 years or so.  What you call curiosity other people call accusations of child molestations.  So let‘s just call it...

(CROSSTALK)

TOURE:  ... now is the time, though, Gloria?  Is it appropriate now to go into those issues?

TODD:  OK...

TOURE:  We‘ve dealt with that over and over.

ALLRED:  Wait a second.  I didn‘t talk over you.  I didn‘t talk over you, sir.  And let me just be clear about this point.  He was—he settled a civil lawsuit against him reportedly for $20 million, OK?  That‘s not just a curiosity.  If that‘s true, that that was the amount—it was confidential, but that‘s what was reported—then that‘s more than nuisance value on a very serious claim of child sexual abuse by a child.  And then yet another child, of course, was the alleged victim in the criminal case.  He was acquitted.  But those were very serious accusations, too.

TODD:  Gloria...

ALLRED:  So let‘s call it what it is and not call it a curiosity!

TODD:  Gloria Allred, Toure, this is the tortured legacy that is Michael Jackson, and I think this debate isn‘t going to be solved right here.  So I thank you both for coming on and talking about this.  It‘s a very complicated story to talk about sometimes.  Thank you both.

ALLRED:  Thank you.

TODD:  We‘ll have much more on the Jackson story, plus some clips from Jermaine Jackson‘s interview with Matt Lauer tonight at 9:00 on NBC‘s special coverage, “Inside Neverland.”

Up next, we go back to politics, I promise you.  After a not so pretty “Vanity Fair” article about Sarah Palin sparked a circular firing squad among Republicans, yet another report shows more sniping that took place during the actual campaign, McCain campaign chief strategist Steve Schmidt and Palin herself getting in on the act.  The “Politics Fix” is next.

This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

TODD:  Well, on the heels of “Vanity Fair‘s” unflattering article on Governor Sarah Palin, CBS News has unearthed e-mails that show a war of words, literally, between Palin and McCain‘s top strategist, Steve Schmidt.  Here to break down these latest e-mails are “The Politico‘s” Roger Simon and Mike Allen.  Simon and Allen from “Politico.” Used to be another TV show, “Simon and Simon,” right?

(LAUGHTER)

ROGER SIMON, POLITICO.COM:  I like that.

TODD:  All right, let me go through these e-mails very quickly.  On October 15th, 2008, Governor Palin fired off an e-mail to Steve Schmidt, McCain campaign manager Rick Davis and senior adviser Nicolle Wallace.  And the e-mail said, quote, “Please get in front of that ridiculous issue that‘s cropped up all day today, two reporters, a protester‘s sign and many shutouts all claiming Todd‘s involvement in the anti-American political party.  It‘s bull, and I don‘t want to have to keep reacting to it.  Please have statement given on this so it‘s put to bed.”

Well, Schmidt replied to her in an e-mail and said, “Ignore it.  He was a member of the AIP.  My understanding is yes, he was.  That is part of their platform.  Do not engage the protesters.  If a reporter asks, say it‘s ridiculous, Todd loves America.”

Well, Palin didn‘t like that answer, and said: “That‘s not part of their platform.  And he was only a member because independent Alaskans too often check that ‘Alaska Independent‘ box on voter registrations, thinking it just means nonpartisan.  He caught his error when changing our address and checked the right box.  I still want it fixed.”

Well, Schmidt wasn‘t done.

And, in a very Steve Schmidt way, he said, “Secession, period.  It is their entire reason for existence.  That‘s the stated goal on the front page of the Web site.  Our records indicate that Todd was a member for seven years.  If this is incorrect, then we need to understand the discrepancy.  The statement you are suggesting be released would be inaccurate.  The inaccuracy would bring greater media attention to this matter and be a distraction.  According to your staff, there have been no media inquiries into this.  And you received no questions about it during your interviews.”

Roger Simon, I wish I could have done Steve Schmidt‘s Sergeant Schultz voice justice.

(LAUGHTER)

TODD:  But, God, that e-mail sounded just like his voice and many a phone call that I received.

What did you—what did you see in that?

ROGER SIMON, CHIEF POLITICAL COLUMNIST, THEPOLITICO.COM:  Yes, I‘m sure she‘s glad she did it by e-mail, and not face to face. 

I think Schmidt was right.  At this point in the campaign, John McCain had much more to worry about than what Sarah Palin‘s husband—what parties he belonged to and what he didn‘t belong to. 

On the other hand, Sarah Palin was a first-timer.  She had never campaigned in a national campaign before. 

TODD:  Right. 

SIMON:  She was overreacting.  And it is almost traditional for losing vice presidents to feel that they have not been treated well by the top of the ticket. 

You know, Edwards complained about Kerry. 

TODD:  Sure.

SIMON:  Lieberman complained about Gore.  In the long—the bigger question to me is, who was the real drag on the ticket?  Was it McCain or was it Palin? 

I think there‘s a body of evidence, at least Republicans feel, that McCain was the drag on the ticket, not the behavior of his vice president. 

TODD:  And, in fact, Mike, I want to go to that.  We‘re seeing some reports of almost this backlash helping Palin among even Republican elites. 

Here is Mark Salter, who was a senior adviser to the McCain campaign.  And he goes: “She‘s a fine person with unique and unteachable political skills.  I‘m sure she has a future if she wants one.”

We‘re seeing more Republicans trying to defend her publicly, almost feeling as if this stuff is going too far. 

Are you hearing that? 

No, I think that‘s smart. 

MIKE ALLEN, CHIEF POLITICAL CORRESPONDENT, POLITICO.COM:  Looking at e-mail, looking at the blogs, it looks like that there is a rallying around Governor Palin and a recognition that a lot of what went wrong for her had to do with the press and a campaign that was focused on a lot of other things that, as Todd Purdum, in that “Vanity Fair” article, said was a Bermuda Triangle of a campaign. 

But, Chuck, these e-mails really pull back the curtain on the campaign in an amazing way. 

TODD:  Yes, they do.

ALLEN:  We see that—the candidate clearly lashing out in frustration.  Why is the number-two candidate having to plead to get a press release put out by e-mail? 

Scott Conroy, the very talented young CBS reporter who unearthed these and is working on a book about Sarah Palin...

TODD:  Right. 

ALLEN:  ... very astutely pointed out that, as the e-mails went along, Governor Palin kept adding more people to them, trying to rally her troops. 

TODD:  Right.  Right. 

ALLEN:  Steve Schmidt was giving her good advice here, and she wasn‘t taking it.  So, we‘re seeing in a microcosm how this small part of a big problem kept unraveling. 

TODD:  And, Roger, you pointed out, look, the fact is, vice president

presidential candidates rank...

SIMON:  Right. 

TODD:  ... below campaign managers.  Joe Biden was frustrated that David Plouffe and David Axelrod had more influence on the campaign than he did. 

SIMON:  Yes. 

TODD:  But I want to go to something.  If Sarah Palin cannot take direction from a campaign manager, doesn‘t that make it impossible for her to have a national future, frankly? 

(LAUGHTER)

SIMON:  No. 

You know, it‘s—it‘s candidates who are supposed to run campaigns, not campaign managers.  She was the number two on the ticket.  In 2012, should she choose to run, things will be different.  I think, if you‘re a Republican today, if you‘re still in the party today, you‘re looking at—at three or four things. 

First, Sarah Palin did everything that was asked for her.  She energized the base and she gave good speeches. 

TODD:  Right. 

SIMON:  She had a debate in which she held own against Joe Biden, did at least as well as John McCain did against Barack Obama. 

TODD:  Sure.

SIMON:  Three, she had a terrible interview with Katie Couric.  But, when you go back and look at some of George “Is our children learning?” Bush‘s interviews in 2000...

TODD:  Right. 

SIMON:  ... she didn‘t do that badly. 

And, finally, you have got to say, no matter what Sarah Palin said or didn‘t say, did or didn‘t do, none of it compared, within the worst economic crisis since the Depression, the top of the ticket saying that the economy was not his strong suit. 

TODD:  All right. 

SIMON:  In the end, which really lost the ticket more votes? 

TODD:  Unbelievable.  Roger Simon says John McCain, a drag on the John McCain ticket. 

(LAUGHTER)

TODD:  Can‘t wait for...

(LAUGHTER)

TODD:  I can‘t wait for Mark Salter‘s e-mail to you. 

Roger Simon and Mike Allen, thank you both very much. 

Up next...

ALLEN:  Chuck Todd loves America. 

(LAUGHTER)

TODD:  Up next, speaking of the McCain campaign, Joe the plumber—

Remember him? -- talked to God about whether or not Joe should run for Congress.  We have got God‘s answer next in the “Sideshow.”

You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

TODD:  Back to HARDBALL.  It feels like the carousel should have a bunch of the Michael Jackson characters on there. 

But time for the “Sideshow.”

First up, how is this for divine intervention?  2008‘s most famous campaign prop, Joe the plumber, was asked by the Web site World Net Daily whether he would run for public office.  His answer—quote—“I hope not.  You know, I talked to God about that, and he was like, no, Joe”—however, added that he‘s keeping the door open, in case God calls on him at a later date. 

Next up:  Michael Jordan or Kobe Bryant, who is the best player of all time in basketball?  It‘s a question confronting all basketball fans.  And, today, it was posed to the first fan of basketball, the president himself.  Here is his answer. 

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  Oh, Michael.  I mean, Kobe is—Kobe is terrific, don‘t get me wrong, but I—I haven‘t seen anybody match up with Jordan yet. 

(END VIDEO CLIP)

TODD:  Well, let‘s remember the president has got to go with the hometown Chicago Bulls. 

And here is another one for the sports fans out there.  Guess who has got a new ad for Nike?  Seven-time Tour de France champion Lance Armstrong, a guy who has long been rumored to be doping.  And he‘s apparently not afraid to go there in this new ad. 

(BEGIN VIDEO CLIP, NIKE AD)

LANCE ARMSTRONG, FORMER TOUR DE FRANCE WINNER:  The critics say I‘m arrogant, a doper.  They can say whatever they want.  I‘m not back on my bike for them. 

(END VIDEO CLIP)

TODD:  Wow.  Have we crossed a cultural line here?  We have got a pitch man bragging about overcoming steroid allegations. 

Perhaps that explains the buzz over tomorrow‘s return of Manny Ramirez to the Los Angeles Dodgers.  And judging from the crowds around his stint in the minor leagues, you would never know that he was there because of a suspension back in May for evidence of steroid use.  Unbelievable, that it is.  But, Hey, I‘m a Dodger fan, and I‘m looking forward to Manny getting back in the lineup. 

Now time for the “Big Number.” 

Times are tough.  Pretty much everyone is tightening their belts, especially with respect to travel—everyone, that is, except members of Congress.  How much money did they spend on overseas trips last year? 

Well, according to “The Wall Street Journal,” $13 million.  By the way, that‘s a 50 percent increase in just the past two years, since Democrats took control.  So, there you have it.  Members of Congress are jet-setting to the tune of $13 million—tonight‘s “Big Number.” 

Up next, 2010, it‘s President Obama‘s first big political test.  Can the Democrats pick up seats, or are the Republicans ready to stop the bleeding?  We will look at the early line for the midterms next. 

You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MIKE HUCKMAN, CNBC CORRESPONDENT:  I‘m Mike Huckman with your CNBC “Market Wrap.”

And stocks tumbling today on a worse-than-expected jobs report.  It was the worst trading day leading into the Fourth of July weekend in history, the Dow closing down more than 223 points, the S&P 500 losing 26, and the Nasdaq finishing more than 49 points lower. 

Investors were shaken by the June jobs report.  Employers cut 467,000 jobs, bringing the unemployment rate to a 26-year high of 9.5 percent.  And the report says those who have jobs are working fewer hours for less money. 

Good news, though, in the manufacturing sector, as factory orders rose 1.2 percent in May, beating analyst expectations.  That‘s the largest increase in more than one year. 

And Johnson & Johnson shares slid almost 2 percent today, after announcing it was investing $1 billion in the Irish drugmaker Elan.  Elan does research on Alzheimer‘s drugs.  And its stock rose almost 9.5 percent. 

That‘s it from CNBC, first in business worldwide—now back to

HARDBALL.

TODD:  Welcome back to HARDBALL. 

With just 488 days until Election Day 2010, and, frankly, only about a month or two until candidates really have to get in these races, it‘s never too early to get ahead.  And, so, in a few minutes, I will talk to Montana Governor Brian Schweitzer.  He‘s chairman of the Democratic Governors Association.

But, first, joining me is Tom Davis, former Republican congressman from Virginia, former chairman of the National Republican congressional Committee.

And even though he has a Republican hat on most of the time, the guy -

the guy is really good at breaking down these races.  And he will give more nonpartisan answers than we will partisan answers.

Am I right, Tom? 

TOM DAVIS ®, FORMER U.S. CONGRESSMAN:  I hope—I will give you the right answers, I hope. 

(LAUGHTER)

TODD:  Oh, the right answers.  There you go.  And we will let people determine which right we mean here.

Let‘s look at this map of key 2010 Senate races, the—where the bragging rights will end up happening, where Republicans currently hold the seat, Kentucky, Missouri, New Hampshire, Ohio, Florida, Louisiana, North Carolina, Arizona, and Texas, because we‘re probably going to see a special election for that Senate seat there in the middle of 2010.  We can get more on that later.

And, then, we look at these Democratic seats that we think will be in play, and they include Connecticut, Nevada, Colorado, Illinois, Pennsylvania, Delaware, and maybe even California. 

These are all races we think at least are somewhat in play.  So, biggest thing hurting the Republicans right now, Congressman Davis, besides their brand issue, is the fact they‘re—they‘re playing more defense than offense.  Is that the first thing you see here? 

DAVIS:  Yes.  The Senate is a tough lineup.  You have more Republican seats up than Democratic seats.  They have five vacancies and vulnerabilities.

But understand that the midterm elections are less about the Republicans than they are about the Democrats.  Voters won‘t be hiring the Republicans to run a country. 

TODD:  Right. 

DAVIS:  They may be voting Republican to put some correction on Obama.  So, they don‘t have quite the burden they would if they were running for president. 

So—but, look, it‘s a—it‘s a tough Senate lineup at this point to try to get under 60.  I think they can do it, but the atmospherics need to change a little bit in the next year to do that. 

TODD:  Well, look, you know, everybody is going to be looking for a way to interpret 2010 and what it means for the president and 2012. 

I want to single out two states, Missouri Senate, Ohio Senate.  These are open Republican seats, George Voinovich retiring, and—and—and we have got Kit Bond retiring. 

DAVIS:  Right. 

TODD:  The fact is these were one Obama carried, one McCain carried.  If either party sweeps those two, that‘s who gets declared—quote, unquote—“the winner of the midterms.

Is that—is that fair? 

DAVIS:  I think that‘s a very fair comment.  Missouri in particular is a trend state.  Although Obama lost it, it was very, very close.  McCaskill came in on a Democratic tide after she had lost a gubernatorial election in a more Republican time.  So, these are trend states. 

They‘re large states.  It‘s harder to personalize them.  And...

TODD:  Right. 

DAVIS:  ... incumbents can become vulnerable to national trends in those states in particular. 

TODD:  One other storyline that—that I think I‘m following to see what‘s going on inside the Republican Party are, how serious are these ideological fights inside the party? 

Florida sticks out to me, Charlie Crist, the popular moderate Republican governor, who—who appeared with the president and endorsed the stimulus package back a few months ago, and then a rising star down there, Marco Rubio, who isn‘t going to have the money, is endorsed, though, by the economic sort of conservative wing of the party, Club For Growth. 

How important is this primary to tell you how quickly the Republican Party can heal itself going into 2012?

DAVIS:  Well, it‘s important. 

It‘s like Pennsylvania, where Toomey‘s chances of winning are much, much lower than the Republicans would have been had he stayed a Republican. 

But, look, the Florida case is a case in point where Crist is the most popular politician in the state.  But you get him into a Republican primary, and his...

TODD:  Right. 

DAVIS:  ... support for the stimulus package—as the Republican Party has declined, the base has become more conservative.  It‘s become a little more vehement, and it‘s a little less outreach. 

The question for the Republican Party is, are they going to be a private club with an admissions test to get in, or are they going to be a political party, which means a coalition to win elections?  And Florida will be front and center of that. 

TODD:  All right. 

Quickly, I want to talk about—I—I want to talk about candidate recruiting in this time of year.  The numbers aren‘t great for the Republican brand. 

Has that—do you—from what you have seen with candidate recruiting, particularly on the House level, how are the Republicans doing?  Do they have enough players in place to take advantage if things go south on the Democrats in 2010? 

DAVIS:  Well, you know, they have had a good recruiting year.  They haven‘t had the kind of recruiting year you need to take back the House, but you still have another six months to do that.

If you look at some of the Democrats who won in 2006, some of them were late comers.  They were second tier, but they could hoist up their sail and catch the wave.  I think that‘s what the Republicans have to be able to do.  You may not be able to get your best candidate in, but you need to get a candidate that‘s a presentable candidate if you catch that wave. 

I think the Republicans are poised to pick up seats in the House.  It‘s just way too early to tell what the atmospherics will be a year from now. 

Let me just add this: when one party controls the presidency and both Houses of Congress, the losses are usually exaggerated over the conventional wisdom.  And you go back to ‘94.  You go back to ‘06, ‘78, ‘56. 

TODD:  Very fair point.  Look at you, setting that type of expectation bar that actually these guys in the White House would love to have set for them.  Historically impossible, right, for them to break even. 

Tom Davis, I am going to be checking in with you a lot, I think, as the campaign year begins.  Thank you, sir. 

Joining us now, Montana Governor Brian Schweitzer, the chairman of the Democratic Governors Association.  You‘re a sitting governor.  Before I get into the nuts and bolts of what‘s going on in campaign 2010, talk about this crisis that many states are facing right now, this fiscal crisis.  California is writing IOUs, but they‘re not alone. 

What‘s going on in your state in Montana?  And what are you hearing from governors you talk to about what they‘re facing right now, frankly, in a lot of states? 

GOV. BRIAN SCHWEITZER (D), MONTANA:  Well, I hate to admit our situation in Montana, where we have the largest cash reserve in the history of the state.  We have 400 million dollars in the bank.  And normally we run about 20 or 30 million. 

We have been able to lower taxes for Montanans and still grow the economy. 

But we‘re the anomaly.  Look, I think 45 states are upside down right now.  But, of course, in states we actually have to run government.  You educate; you medicate; and you incarcerate.  That‘s 85 percent of our budgets. 

In Congress, they get to debate.  They get to philosophize.  We actually have to keep the trains on time. 

TODD:  Should the federal government be taking more of a burden on this or have they done the—has the president sent the right amount of money to the states to fill these gaps? 

SCHWEITZER:  Well, we‘ve been partners for some time.  For example, you look at the Medicaid program.  It wasn‘t the states that created these programs, it was Congress.  And they knew they couldn‘t deliver health care in the states, and so they built this partnership.  The federal government sends about 80 percent of the money and the states put in about 20 percent, and we run the programs. 

And that‘s true in a lot of the programs that we have.  So it is a partnership.  And when revenues are decreasing in states, the federal government has sent counter-cyclical payments in the past.  And that‘s what they‘ve done this time. 

TODD:  When you look at these governors races that you‘re dealing

with, and frankly all these races, but particularly the governors, and

candidates you‘re trying to get to run, the economy is going to play a huge

role, probably more so with governors than with anybody running.  And what

you know, is that the biggest thing you‘re worried about, that your fortunes really are tied more to job losses and job gains, like the numbers we got today, than they are in how good a candidate is and how good of a campaigner they are? 

SCHWEITZER:  It‘s a great time to recruit Democratic candidates right now.  The brand name for Republicans polls a little lower than the belly of a snake.  There‘s about half the Republican party who would like to join the Whig party. Democrats have been there before, but the Republicans have to figure out who they are.  They said that they were the party of fiscal responsibility and they spent money like drunken sailors.  They said they were the party of family values, and, well, you know what came out there. 

TODD:  Governor, very quickly, do you regret endorsing in the Virginia governor‘s race this year?  Did you make a mistake getting involved in that primary with Terry McAuliffe?  

SCHWEITZER:  I don‘t know.  I think a governor that no one has ever heard of from a state that they‘ve never been to probably doesn‘t change any election prospects. 

TODD:  So why did you do it?  Did he offer any quid pro quo or anything for the future?  Was he going to help you run for office? 

SCHWEITZER:  In this business you got to ask, and Terry asked. 

TODD:  Fair enough.  Governor Schweitzer, we‘ll be checking in with you as the campaign gets heated up.  Thanks very much. 

Coming up, unemployment hits a 26-year high.  President Obama says he‘s deeply concerned.  What can he do to bring the sky-rocketing jobless rate back down to Earth?  You‘re watching HARDBALL, only on MSNBC. 

(COMMERCIAL BREAK)

TODD:  Welcome back to HARDBALL.  New unemployment numbers out today, and it‘s a 26-year high at 9.5 percent.  Another 467,000 jobs were lost in June.  Austan Goolsbee is a member of the White House Council of Economic Advisers, a big part of the president‘s economic team. 

All right, are these really green shoots?  It‘s another unemployment rate up, more job losses.  Can we still classify green shoots? 

AUSTAN GOOLSBEE, WHITE HOUSE COUNCIL OF ECONOMIC ADVISERS:  Well, look, we‘ve always been saying the job market is the last thing to turn around.  You have to turn the economy around first.  The job market comes after that. 

This is not a green shoot.  Every job lost is a tragic situation.  And since the recession began in December ‘07, we‘ve lost more than six million.  This jobs report, a little worse than expected.  Last month a little better. 

TODD:  Right. 

GOOLSBEE:  Overall, you know, when the president comes into office, we‘re losing 700-plus thousand jobs a month.  It‘s better than that, but, you know, the president is -- 9.5 percent unemployment is not acceptable and he wants to push the recovery package. 

TODD:  Robert Gibbs today, the president today both have said the recovery act is working.  Give me two or three bullet points to say to the viewer, this is how it‘s working.  I know it doesn‘t feel like it‘s working.  But trust us, this is how it‘s working.  What is it?

GOOLSBEE:  OK, two or three different ways.  One, when private economists have gone and looked at what has the impact been, they believe, like Mark Zandy, who is a guy that people respect, that the unemployment rate would be a full two percentage points higher. 

TODD:  You‘re saying right now it would be 11.5 percent without the stimulus.  A lot of Republicans on Capital Hill would say, you know what, we could have grown our way out of this, over time suffered through it.  You‘re saying without it, 11.5 percent? 

GOOLSBEE:  Look, what I‘m saying is, overall, this stimulus impact—for a counter factual, it‘s hard to pick exact numbers, but Mark Zandy is saying that over the course of this, the stimulus has had this impact.  And that‘s consistent with what we think.

Second, you‘ve got almost 2,000 highway projects, about 20 billion dollars that‘s already started.  You‘ve got teachers in a bunch of hard-pressed --  

TODD:  Those job numbers were down, too, the job numbers in construction.  Is that the first number we should see positive in the next month or two because of the recovery act? 

GOOLSBEE:  Of construction jobs?  The hard thing with any of these jobs numbers is we‘re doing this in the face of the steepest downturn since 1929.  So the overall economy is bad.  There‘s not any question about that. 

The question is, what can we do to fight against that tide?  And if you look at infrastructure spending, that‘s now ramping up.  If you look at money that‘s going to the states, you‘ve got literally thousands of people who are able to keep their jobs as teachers, as policemen, as firemen, because their states got money from the federal government as part of the stimulus. 

TODD:  The California issue, when half the states—we just had Governor Brian Schweitzer on.  Most states, unlike his, without these energy reserve, have a problem.  Is that the type of second stimulus that you guys might have to consider to fill the gaps in the states? 

GOOLSBEE:  The issue in the states is very problematic, not just right now—

TODD:  It could destroy the recovery. 

GOOLSBEE:  It is pulling the recovery down.  I‘m not going to say it would destroy the recovery.  But it‘s certainly a negative.  That‘s why it‘s important to get the biggest stimulus ever out into the system.  Only the first bit of that, first 10 percent has gone out so far.  We need to keep pressing on the rest of this big package. 

I think it‘s way premature to be talking about a second stimulus when we still got 90 percent of the first biggest ever to go out.

TODD:  Very quickly, by the end of the year, is that when it‘s fair to have this conversation about a second stimulus or not?

GOOLSBEE:  It depends on what the conditions are, but certainly we can be talking about that. 

TODD:  Austan, I‘m impressed you did not use too much economist talk. 

You brought it down to something so someone like me can understand. 

Thanks. 

GOOLSBEE:  You‘re going to be an honorary accountant. 

I‘m scared of that moments.  Thanks very much.  The politics fix and the big question heading into the Fourth of July Weekend, will Governor Mark Sanford resign?  You‘re watching HARDBALL, only on MSNBC. 

(COMMERCIAL BREAK)

TODD:  Welcome back.  Time now for more of politics fix with “Politico‘s” Roger Simon and a new partner for this Simon and Simon.  That‘s the “Washington Post‘s” Phil Rucker. 

Phil, I want to start with you.  Governor Mark Sanford‘s wife today, Jenny, issued a statement today that reads in part, quote, “there is no question that Mark‘s behavior is inexcusable.  Actions have consequences, and he will be dealing with those consequences for a long while.  Trust has been broken and will need to be rebuilt.  Mark will need to earn back that trust, first and foremost with his family, and also with the people of South Carolina.” 

She sounds like the two senators, Jim Demint and Lindsey Graham, almost saying, you know, think about your consequences and think about your job.  You had a story today saying a lot more pressure on him to resign, but he was digging in his heels.  Is that what you‘re getting today? 

PHIL RUCKER, “THE WASHINGTON POST”:  Yes, he sure is.  He caught a lucky break.  The state law enforcement agency that had been investigating his travel records determined that he did not misuse any state funds in those trips to New York and South America to visit his mistress from Argentina.  So clearly a sign of relief for the Sanford clan. 

Mark Sanford is actually going down to Florida tomorrow to spend the holiday weekend with his wife, Jenny. 

TODD:  There should be some fireworks.  Roger, does the Republican party need Mark Sanford to resign?  Or after a week or so, will this sort of disappear, and he can just stay down there in South Carolina and they sweep is under the rug in 2010? 

ROGER SIMON, “THE POLITICO”:  You know, it‘s hard to say.  If you had asked me yesterday, I would say the guy is on his way out.  But Phil is absolutely right.  He caught a big break with this—although it was a quickie investigation—in saying he committed no crimes.  He paid back the state 3,300 dollars, which is a deal a lot of people would like to get after they‘ve done something wrong.  But he got that deal.

The thing about Sanford is that there are at least two things he needs to zip up, and one of them is his lips.  He‘s acting like a guy in group therapy, and we‘re the group.  We‘ve got to know every woman he got to second base with, but didn‘t cross the sex line with, as he calls it, before he spent time with his soul mate. 

You know, that doesn‘t help him.  We don‘t need to hear all this stuff.  The biggest thing helping him, maybe, is that the state legislature doesn‘t meet again until January.  So all the news being driven is driven by Sanford himself. 

TODD:  Phil, one of the more remarkable things about this story is that—and I know the Democratic party down there is not that big in South Carolina.  But you have not heard really a peep from any major Democrat in South Carolina.  They are sticking to go their guns there?  Are they hoping he stays in office at this point? 

RUCKER:  It‘s interesting, the first day or so after the affair was admitted, some Democrats called on him to resign, but they‘re really kept quiet and preferred to sort of leave this to the Republicans to deal with.  As we saw yesterday, a great number of Republican leaders in the state did call on him to resign. 

So I think they sort of see this as a win-win either way, whether he stays or goes.  They‘ll still have somewhat of a chance in 2010. 

TODD:  Roger? 

SIMON:  There is one other problem that he‘s not addressed, as “The State,” the newspaper in Columbia, South Carolina revealed, last year, he lefts the mansion without his security detail 38 times.  This year, in the first 24 weeks of this year, he left without them 39 times. 

TODD:  I‘m going to have to—that will have to be it. 

SIMON:  Where‘s he going?  What‘s he doing? 

TODD:  You got it.  Roger Simon, Phil Rucker.  Join us again Monday at 5:00 and 7:00 Eastern for HARDBALL.  Right now, it‘s time for “THE ED SHOW” with Ed Schultz. 

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

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