updated 10/19/2009 11:38:58 AM ET 2009-10-19T15:38:58

Guests: Karen DeSoto, Neil Bernstein, Joan Walsh, Rep. Joe Sestak, Jeff Santos, Michael Medved, Kem Hawkins, Markos Moulitsas, Lizz Winstead

ED SCHULTZ, HOST:  Good evening, Americans.  Welcome to THE ED SHOW from Minneapolis tonight.

A lot of people are talking about it.  I have never seen anything like this in my life, this crazy balloon story.  It keeps unfolding by the minute.  And the more we learn about the story, the more I‘m convinced something isn‘t right. 

Here‘s what we know at this hour. 

The police right now say that they think that this is a real event, but they are conducting an investigation into the parents‘ side of the story to find out if they falsely reported anything yesterday.  They‘ll question the family tomorrow. 

Police started getting skeptical yesterday, and people started getting skeptical yesterday with this exclusive interview you saw right here on THE ED SHOW.  Here‘s Sheree Silver, the woman who spent two weeks with Richard Heene and the three boys on the ABC reality show “Wife Swap.”

(BEGIN VIDEO CLIP)

SHEREE SILVER, APPEARED ON “WIFE SWAP”:  My first initial feeling is, is this a publicity stunt?  That was my first initial feeling.  Afterwards, I didn‘t feel like that anymore.  But my first initial feeling was, oh my God, is Richard trying to get himself back in the news? 

(END VIDEO CLIP)

SCHULTZ:  Then a few hours later, when the entire family, the entire Heene family, appeared on the Larry King show, dad asked Falcon, the young boy, right there on the air, why didn‘t he home out when they were calling for him? 

(BEGIN VIDEO CLIP)

RICHARD HEENE, FALCON‘S FATHER:  He‘s asking, Falcon, did you hear us calling your name at any time? 

FALCON HEENE, 6-YEAR-OLD:  Mm hmm.

R. HEENE:  You did? 

MAYUMI HEENE, FALCON‘S FATHER:  You did? 

R. HEENE:  And why didn‘t you come out? 

F. HEENE:  You guys said that we did this for the show. 

R. HEENE:  Man. 

M. HEENE:  No. 

R. HEENE:  You didn‘t come out? 

F. HEENE:  No. 

(END VIDEO CLIP)

SCHULTZ:  “We did this for the show.”  That‘s the statement in question. 

Listen to the explanation the dad had when the anchor pressed him on what Falcon had just said. 

(BEGIN VIDEO CLIP)

WOLF BLITZER, CNN ANCHOR:   He said, “We did this for the show” in explaining why he didn‘t come out of the attic. 

R. HEENE:  Yes.  Let me interrupt this real quick, because I think I can see the direction you guys are hedging on this. 

I‘m kind of appalled after all of the feelings that I went through, up and down, that you guys are trying to suggest something else.  OK? 

(END VIDEO CLIP)

SCHULTZ:  So, dad, you‘re appalled.  OK.  In fact, you‘re so appalled, that you trotted your kids out on a morning TV show.

And he didn‘t stop there, folks.  After keeping them awake all night, the kids were exhausted and uncomfortable by dawn, so naturally it was time to parade them out in front of the world again? 

Diane Sawyer asked Falcon what he meant when he said, “We did it for the show.”  Watch what happened.  Warning, this is pretty gross.  Here it is. 

(BEGIN VIDEO CLIP)

DIANE SAWYER, ABC:  Falcon?  Are you OK there? 

F. HEENE:  Mm hmm.

SAWYER:  You sure? 

R. HEENE:  He‘s tired. 

F. HEENE:  No, mom.  I feel I‘m going to vomit. 

R. HEENE:  You OK, buddy? 

F. HEENE:  No.

R. HEENE:  Yes, I think he‘s queasy.

Should we take you to the bathroom or something? 

F. HEENE:  Yes. 

R. HEENE:  OK.  Go, buddy.  There‘s a wire here on you. 

SAWYER:  Is he OK?  Is somebody going to go with him? 

Mayumi, do you want to run with him?  That‘s OK.  We‘ll understand.

M. HEENE:  Is that OK? 

SAWYER:  Sure. 

M. HEENE:  OK.

SAWYER:  We understand.

R. HEENE:  Well, he‘s got asthma, and sometimes when he starts to get an attack he feels queasy.  Maybe that‘s what‘s going on. 

It‘s not sounding good in there.  It‘s not sounding good. 

M. HEENE:  It‘s mommy.

R. HEENE:  Are you OK? 

UNIDENTIFIED MALE:  You OK? 

F. HEENE:  I just vomited three times. 

R. HEENE:  Oh, man.  I heard you in there.

I‘m sorry, what was that question? 

(END VIDEO CLIP)

SCHULTZ:  Wow.  It shouldn‘t take Diane Sawyer to tell a mother to go help her 6-year-old when he gets sick. 

It didn‘t end there either.  It‘s amazing.  The Heenes kept their sick son in front of the cameras. 

Here‘s take number two on “The Today Show.” 

(BEGIN VIDEO CLIP)

R. HEENE:  There‘s, like, 30 press people there.  And anyway, somebody had asked them if he would show them how he got in the attic, so he was obliging them.  And one of the guys told him it was for some—one of the guys told him it was for some TV show. 

So that‘s what he was referring to.  That‘s what he was referring to when he made that statement. 

MEREDITH VIEIRA, “THE TODAY SHOW”:  And I know—I want to point out that the sheriff‘s office said last night they believe your account of what happened, but they do want to question you a little bit more. 

(END VIDEO CLIP)

SCHULTZ:  This is just unbelievable.  There‘s no excuse for this. 

The father kept answering the questions while his son‘s throwing up and sick?  I mean, this story gets even more weird. 

What you‘re looking at right now is the home video shot by one of the kids of the dad releasing the balloon in the back yard.  Now, the police held a press conference this afternoon.  They said that they believe the parents at this point, but are looking into the course of the events and statements. 

One thing that struck me in the order of this is the phone calls that the dad made after the balloon went up.  And everybody was covering. 

And now, according to the Larimer County sheriff, Jim Alderden, right after the balloon took off, the father first called the FAA.  His second phone call was to local News 9, Channel 9, because he thought that their helicopter might be able to help out in the search.  And the third phone call that was made is really a dandy. 

Recording is out now, and in the beginning of it mom sounds panicked, but she also says early on that the balloon had lifted off 20 minutes ago.  The dispatcher asked her to put the father on the phone. 

Dad tells her that the kid is in the balloon.  The dad tells her that the kid‘s in the balloon.  He sounds panicked, but then daddy takes his eye off the ball for a second. 

Here it is. 

(BEGIN AUDIO CLIP)

R. HEENE:  Hold on one second. 

OPERATOR:  OK. 

R. HEENE:  Who the hell is calling me? 

(END AUDIO CLIP)

SCHULTZ:  For a few minutes later, he disappears completely. 

(BEGIN AUDIO CLIP)

OPERATOR:  OK.  Hang on just a second.  Don‘t hang up. 

We‘ve already contacted the FAA.  They‘ve already been made aware of if.  I‘m going to go ahead and call the Loveland Airport and let them know as well.

My caller is completely gone.  I don‘t know if he is on another line or what, but I‘m going to put him—sir? 

(END AUDIO CLIP)

We don‘t know if he took another call, but we don‘t know if he hung up on the 911 dispatcher either. 

I just find this just absolutely unbelievable.  I‘ve never seen anything like this in 30 years of this business. 

And there‘s a lot of folks in Colorado that want answers to this.  The police want answers.  A lot of resources went into this. 

And I really think it‘s up to the media to do the due diligence and really get to the bottom of this.  The police, NORAD, the Colorado National Guard, the list of people and agencies who were hunting for this kid, is as long as your arm.  Air traffic control over Colorado had to adjust because there were so many people involved in this. 

That, in itself, is an issue.  I mean, and every parent watching this yesterday had to be thinking, gosh, what if that was my kid in that balloon? 

This is a long way from being over, and whether you like it or not that we‘re talking about it and so many people around the country are talking about it, it might upset some folks that we‘re focusing on this.  But people, I really do believe—folks, I really do believe that people want to get to the bottom of this whole thing when you‘re talking about taxpayer dollars that are being spent on this whole thing. 

Arianna Huffington and I got into it on this program over this last night.  As much as we respect each other, she challenged me on why we are still talking about the story. 

I‘ll tell you why we‘re still talking about it.  Because we‘re still learning about it as the day goes on. 

And Arianna, not to pick on you and “The Huffington Post,” but I do believe you had the story on the front page of your Web site all day long and it‘s still there now. 

Now, here‘s what we don‘t know.  If we find out the parents were lying, what are the charges?  What could take place here? 

There‘s a legal aspect to this, and then there, of course, is a tremendous strain on the family.  Let‘s face it, last time I checked, crying wolf doesn‘t go over too well with the American people. 

Here‘s your chance to weigh in on this, folks.  Get your cell phones out. 

And the basic question is, do you think this is a hoax?  Text “A” for yes and “B” for no to 622639.  We‘ll bring you the results later on in the show tonight. 

Now, the legal aspect in all of this.

Joining me now is former prosecutor and defense attorney and legal analyst Karen DeSoto.

Karen, let‘s have this conversation as if it was a hoax.  What kind of charges could this family be facing?

KAREN DESOTO, LEGAL ANALYST:  Filing a false report.  That is going to be—there‘s a whole crux of charges that you could, but the main charge would be filing a false report, making that 911 call and knowing that it was a hoax.  That‘s a really serious offense.

And, you know what, Ed?  I‘m so glad that you‘re actually covering this, because you would be surprised at the number of hoaxes and the number of phone calls that police and first responders spend precious time and money responding to.  And if this was, in fact, a hoax—Ed, I don‘t remember—about three or four months ago, do you remember the boy scout in Massachusetts who had...

SCHULTZ:  I do. 

DESOTO:  ... disappeared, and he actually was lost for about three days and they eventually found him.  They had all kinds of people out looking for him—volunteers, fire, police. 

That family recently, it was very highly publicized, got a bill for $25,000.  And people were beside themselves saying they shouldn‘t have gotten the bill.  You know, that‘s not fair, he was lost.  You know, this is what our tax dollars are supposed to be going to. 

But you know what?  It‘s an interesting question.  You‘re going to charge in that case $25,000?  And then what about in this case?  If this really was a hoax, then somebody better pony up a couple dollars here. 

SCHULTZ:  Karen DeSoto, what about Colorado social services, an investigation on how the children are being handled?  Is there anything that you have seen so far unfold in this story that would suggest that Colorado social services would be involved in this case? 

DESOTO:  Well, Ed, I have to say, one of the things I used to do as a public defender was represent parents in Division of Youth and Family Services and have trials.  And anything that‘s highly publicized, the first thing people do is, you‘ll get 20 phone calls from people reporting to the Division of Youth and Family Services these parents. 

So, I would not be at all surprised if an investigator has to go out there and do a report.  You know, us trial attorneys, when we see a child throwing up on television, we call that a physical manifestation of emotional distress.  So, that‘s a little disturbing, and I‘m sure that they have received a few phone calls, and I would not be surprised at all. 

Now, of course, the Division of Youth and Family Services can go out there, interview, do a report and close the file.  But I would be really shocked if somebody hasn‘t made a couple phone calls in this case, Ed. 

SCHULTZ:  Thank you, Karen DeSoto. 

You‘re welcome.

SCHULTZ:  Appreciate your time tonight. 

I want to turn now to a psychologist to get some perspective on how the family has been behaving.  And with me now is child psychologist Dr.  Neil Bernstein.  Dr. Bernstein is also the author of “There When He Needs You: How to Be an Available, Involved and Emotionally Connected Father to your Son.”

Dr. Bernstein, appreciate your time tonight.

Can you take us through what you professionally think this 6-year-old boy was going through this morning when he was exposed in two pressure interviews.  And also, well, he threw up on national television twice.  I mean, tell us what this kid was going through. 

DR. NEIL BERNSTEIN, CHILD PSYCHOLOGIST:  Well, best guess is he was under enormous stress, was feeling a lot of pressure.  He was probably exhausted.  He wasn‘t thinking clearly. 

What we don‘t know was whether he was torn between two conflicting types of statements, perhaps one from the family and perhaps one that he was feeling.  I‘m guessing he didn‘t know exactly what to say and how to deal with it. 

And it‘s really hard to read what else was going on within him other than the fact that, you know, why should a little boy, a 6-year-old boy, be pressured that much?  I mean, what does that say about the situation?

SCHULTZ:  Well, that‘s my next question.  Doctor, that‘s my next question.  Is this normal behavior by a parent, to put a 6-year-old through something like this? 

BERNSTEIN:  Well, I don‘t know about the—if “normal” is the right choice of word.  But let‘s say I wouldn‘t consider it good parenting to put a child through something that he couldn‘t tolerate.  And one can‘t but wonder what is the child like even off camera? 

Is he an anxious child?  Is he a sensitive child?  Is he an adventurous child?  Is he an aggressive child? 

Is this the real kid we‘re seeing or is this a shadow of him?  You know, who really can answer that?  Perhaps the parents, maybe his schoolteacher can lend some insight into that.  But all I saw—go ahead.

SCHULTZ:  Go ahead.  No, go ahead.

BERNSTEIN:  I was just going to say, all I saw was a very upset child, and sometimes it‘s hard to know why.  Perhaps he was guilty about his role in it.  Perhaps he wasn‘t.  Perhaps he was torn between what he should and shouldn‘t say.  One can only speculate. 

SCHULTZ:  Here is the father denying in an interview that it‘s a hoax. 

Here it is.  I want you to respond to this. 

(BEGIN VIDEO CLIP)

R. HEENE:  Now I‘m starting to get a little ticked off, because I‘m repetitively getting asked this in the last couple of interviews.  And what have I got to gain out of this?  And I‘m not selling anything.  I‘m not advertising anything. 

My family and I, we do this all the time.  You know, we‘re always doing some kind of scientific research, we‘re always building something together. 

I teach my kids how to shoot cameras.  You know, it‘s highly educational for my boys.  So, no.  I mean, obviously not.  This is not some kind of a hoax. 

(END VIDEO CLIP)

SCHULTZ:  Doctor, would you consider it highly educational for the boys to be exposed the way they were this morning? 

BERNSTEIN:  I would consider it highly stressful and, perhaps, over the top for them.  I don‘t know that one could have predicted how they would react, but it‘s clear that they were overwhelmed. 

And dad‘s not speaking so much about the children as he is the generic issue of all the publicity.  And I can tell you, Ed, if it was my son, I would sure be protective of my kid and would worry about the hell that he went through and what was going on and what he was feeling and try to tune into that.  I‘m not hearing much about that. 

The other thing I‘m not hearing about that I haven‘t heard you or anyone else comment on is, the mom is in the background.  She‘s not saying anything. 

What the heck is going on there?  Mothers protect children.  They should be tuned in.  I‘d love to hear where she is in this whole thing. 

SCHULTZ:  Would it be able to manipulate a 6-year-old and these other kids into some kind of a scheme? 

BERNSTEIN:  Absolutely.  Kids can be manipulated.  They can be threatened.  They can be coerced.  They can be convinced. 

That‘s not to say they did do that.  It‘s very hard for me to know. 

But young kids are very suggestible. 

They want to please.  They don‘t like getting yelled at.  There‘s many, many possibilities here. 

And, you know, who knows if this kid is speaking the truth, if he‘s speaking from his heart.  But I will tell you one thing.  If it was up to me, Ed, and I was interviewing the parents, and I was on TV, I would look those parents in the eye and ask them to say to their child, look, it‘s really important that you tell the truth and we want you to be really honest about what you feel and what‘s going on, et cetera, et cetera, and it‘s OK to say whatever you want to say. 

I didn‘t hear anyone saying that to him.  And it leaves me wonder—it creates doubt.

SCHULTZ:  Yes, it certainly does.

Dr. Bernstein, very insightful.  I appreciate your time tonight. 

Thanks so much. 

BERNSTEIN:  My pleasure. 

SCHULTZ:  Up next, Speaker of the House Nancy Pelosi tells her caucus it‘s time.  Are you for the public option or not? 

Salon.com‘s Joan Walsh joins us on that issue next. 

Plus, Wall Street gets a great week while Main Street sees the worse levels of foreclosures on record.  It‘s time—here we go—for Main Street, Mr. President, to be made part of the team with Wall Street. 

Congressman Joe Sestak joins us at the bottom of the hour.  He‘s talking small business right here on THE ED SHOW.

Stay with us.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BARACK H. OBAMA, PRESIDENT OF THE UNITED STATES:  What I reject is when some folks decide to sit on the sidelines and root for failure on health care or on energy or on our economy.  Another way of putting it is when, you know, I‘m busy and Nancy‘s busy with her mop, cleaning up somebody else‘s mess, we don‘t want somebody sitting back saying, you‘re not holding the mop the right way. 

(APPLAUSE)

Why don‘t you grab a mop?  Why don‘t you help clean up? 

(END VIDEO CLIP)

SCHULTZ:  That‘s the president naming the public option‘s strongest defender, House Speaker Nancy Pelosi.  And she‘s ready to put the House on the line. 

The Speaker informed the Democratic Caucus that it‘s time to say where they stand on the government-run insurance option. 

For more on this, let‘s bring in Joan Walsh, editor-in-chief, Salon.com. 

Joan, it sounds to me like Nancy Pelosi‘s ready to kick it in gear. 

I‘m kind of excited about this phase of the whole thing. 

JOAN WALSH, EDITOR-IN-CHIEF, SALON.COM:  Me too.  I think they‘re starting to fight.  And I think it really meant something that President Obama spoke about her the way he did. 

She‘s definitely out there with the mop helping him, not like some other Democrats.  And I thought it was just an overall big endorsement. 

I think it‘s interesting, Ed.  You and I both worried about, and we will worry still worry, about the way the summer let the right wing get the upper hand.  But it seems to me that it may have worked in our favor, because the more you get to explain this thing, we‘re going to force people to buy insurance but they‘re not going to have a choice of whether to go private or public, they‘re going to have to pay sky-high premiums, et cetera, the more I feel like it‘s starting to sink in.  So, I think it‘s been a good week or so. 

SCHULTZ:  Here‘s the president in that sound bite just a moment ago showing, you know, openly that he is depending on Nancy Pelosi.  And there‘s an air about that comment that he knows he can depend on her.  Yet, in “The New York Times,” a couple of sources were quoted as saying that they would go along with the trigger. 

Are we getting mixed messages from the White House?  What do you think? 

WALSH:  I think we are and I think there are mixed—that there are

people who disagree in the White House.  And so, it‘s going to watch this -

·         it‘s going to be interesting to watch this unfold because, you know, the Clinton White House got bogged down in competing leakers and people really not serving the president.  I hope that doesn‘t happen here. 

And I‘m concerned about some of what I‘m hearing.  I believe in my heart—maybe I‘m too optimistic—that the president really wants a public option, that he‘s smart enough to understand why we need it both politically and fiscally, and that he‘ll fight, and that he‘s putting his money on Nancy Pelosi.  But there are definitely people in the White House who think it‘s too big a risk. 

SCHULTZ:  Well, and, of course, they don‘t want to increase the deficit.  The numbers both have been scored, the first and second version of the bills on the House side. 

The CBO has come out and scored the first version at $859 billion, and the second version at $905 billion, which covers 95 percent of Americans.  And, of course, the big difference is the cost in Medicaid.  There‘s more of a cost in Medicaid to the first version. 

WALSH:  You know, I think they‘ll probably come out with the higher version.  You know, there are problems with the higher version as well because there are some reasons that doctors need to be paid decently for Medicare patients.  So, that‘s a very contested issue. 

I‘m going to go out on a limb here.  I wish the president had never committed to fiscal neutrality for this bill, because it may cost more initially to do it right.  I feel like he‘s really hamstrung himself.  So, both these bills got under the magic $900 billion trigger, to use a different word, by cutting corners that I think we may regret.  There‘s a lot of fighting to be done about the details.

SCHULTZ:  And finally, Joan Walsh, what do you make of Congressman Mike Ross, who‘s a Blue Dog from Arkansas?  He says he‘s open to buying into a Medicare plan for those without insurance rather than an entire new program. 

WALSH:  It signals progress.  You know, there are a lot of people who think that the whole—that the program should have been—the option is buy into Medicare, that there‘s an established program.  That it potentially saves Medicare because it‘s not just taking care of old people by definition, but you get younger people into the pool. 

So, it‘s progress, as far as I‘m concerned.  I don‘t know if that‘s the winning argument, but a lot of progressives have said that from the beginning.  So, it was interesting to hear Mike Ross say that. 

SCHULTZ:  Joan Walsh, Salon.com.  Appreciate your time tonight.  Thank you. 

WALSH:  Thanks, Ed. 

SCHULTZ:  Sean Hannity thinks that George W. Bush deserves the Nobel Prize.  That‘s just one half of the crazy.  Wait until you hear what the definition of peace is. 

Oh, “Slant Head,” you‘re in “Psycho Talk” tonight.

(COMMERCIAL BREAK)

SCHULTZ:  Welcome back to THE ED SHOW.  Tonight in Psycho Talk, Sean Hannity joining the club.  Now, it‘s no surprise that he‘s on board with the right wing opposition to President Obama winning the Nobel Peace Prize.  But listen to who he thinks should have got it instead. 

(BEGIN VIDEO CLIP)

SEAN HANNITY, FOX NEWS ANCHOR:  You know who else deserved it?  Ronald Reagan.  Frankly, I would have given it to George Bush over Barack Obama. 

(END VIDEO CLIP)

SCHULTZ:  Hey, that‘s a good idea, because when you think of George W.  Bush, you got to be thinking peace.  Let‘s see, Bush started an unnecessary war based on false intelligence because he felt like it.  Bush approved torture because he thought it was the right thing to do, despite the law.  Bush also decided it was OK to ignore millions of Americans suffering after Hurricane Katrina. 

(BEGIN VIDEO CLIP)

HANNITY:  I define peace as the ability to defend yourself and blow your enemies into smithereens. 

(END VIDEO CLIP)

SCHULTZ:  OK, Sean obviously got his dictionary from the public library of Crazy Town, USA.  If that‘s your definition of peace, buddy, you belong in Psycho Talk.

Coming up, Main Street takes a beating while Wall Street pops champagne.  Congressman Joe Sestak, Pennsylvania, is one of the members who‘s really fighting for small businesses out there.  He‘ll join me next. 

Plus, new reports that Majority Leader Harry Reid is working on the inside game to get a public option.  I hope it‘s true, because I‘m not seeing any game at all out of Rockefeller, Harkin, Schumer.  They‘re holding the seat to the fire, OK?  They don‘t see the game either.  That‘s stories coming up on THE ED SHOW.  Stay with us. 

(COMMERCIAL BREAK)

SCHULTZ:  Welcome back to THE ED SHOW.  More than a year after the economy took a nose dive, the Dow has worked its way back to the 10,000 mark.  So Wall Street‘s all happy.  They‘re popping champagne.  What about the rest of America?  Small businesses can‘t get loans.  Foreclosures are at a record level.  And, of course, I‘ve been saying this over and over on this show. 

Now the “New York Times” ran an op-ed about it today.  The quote, “the unemployment rate is now at 9.8 percent.  Unemployment as a share of the population is at its lowest level since January 1984.  State governments are teetering near bankruptcy.  Solvent businesses are seeing their credit lines cut or canceled.  Consumer and mortgage lending are both down, while foreclosure filings rose to a record in the third quarter.”

Hey, folks, Wall Street may be celebrating, but we can‘t lose sight of what‘s really going on in this country right now.  Let me bring in Democratic Congressman Joe Sestak of Pennsylvania.  He‘s the vice chairman of the House Small Business Committee. 

Congressman, is the Obama administration doing enough to create jobs?  I mean, I‘m hearing stories from small business people across the country that credit is tight.  It‘s tough to get money to keep things going, or to expand to create jobs.  What about all that? 

REP. JOE SESTAK (D), PENNSYLVANIA:  Let‘s give him credit for taking some good steps to stop the cratering of our economy, Ed.  But no, we aren‘t bold or aggressive enough.  Nor do I believe that our first economic stimulus bill was bold or aggressive enough.  Another 150 billion dollars, every model showed you, that we would have had hundreds of thousands of less unemployed today if we had taken more aggressive measures. 

You hit it on the head, however.  The real problem now is the acceleration of foreclosures.  In the past year, they have increased 35 percent.  And this January, the 25-5 adjustable rate mortgages have an increase now in their adjustable rate mortgages.  If we don‘t have a much more bold, aggressive plan to stop foreclosures, we are not going to be soaking up unemployment, because the small community banks are fearful that the mortgage securities they‘re holding on to will just more rapidly go into foreclosure. 

SCHULTZ:  Congressman, I want you to respond to this comment on this program last night from a North Carolina small businessman named Eric Perry.  This is how he called it. 

(BEGIN VIDEO CLIP)

ERIC PERRY, SMALL BUSINESS OWNER:  It‘s impossible to get this money, Ed.  And, you know, what we found in our case is we got froze out just because we happened to be at the wrong bank.  You know, we met all the qualifications.  I can‘t tell you how many times I‘ve heard small construction businessmen tell me, where‘s my bailout? 

(END VIDEO CLIP)

SESTAK:  Absolutely. 

SCHULTZ:  Congressman, what about this?  This is very common.  I talked to another guy on the radio again today.  He‘s going to be on with me next week, going through the same thing in Denver, Colorado.  What can be done to help these folks out, to loosen up the money? 

SESTAK:  First, we‘ve written several letters, I have, to Secretary Geithner.  Now that we‘re getting some transparency by the Congressional Oversight Panel‘s reports, we have to insist that they begin lending money if these businessmen and women are walking in with historically good credit.  They are too risk averse. 

But secondhand of that has to be a bold housing, vesting program, where I believe, in a bill that I submitted in March—didn‘t get much support, but I resubmitted it the other day.  We have to begin to address the issue of homeowners, 12 million of them under water, where their mortgage is more than the value of their house, and begin to address the forgiving of principle.  Otherwise, we are not going to have that businessman or woman be able to get the loan from that bank. 

One, the risk averse.  Second, part of the reason is they‘re holding on to mortgage securities.  It takes a twofold effort. 

SCHULTZ:  Quickly, Congressman, does the Obama economic team—do they get it?  Do they have enough experience on Main Street?  Or are they classroom economists? 

SESTAK:  I wish we had a few more businessmen and women in the administrations.  They‘re doing an excellent theoretical job at the top.  But you see what walks in our Congressional office.  There should have been more emphasis on Main Street initially. 

SCHULTZ:  Congressman, great to have you with us tonight.  Thank you so much. 

For more on this, let me bring in our panel tonight.  Jeff Santos, radio talk show host out of Boston at WWZ, and also Michael Medved, nationally syndicated talk show host out of Seattle. 

Gentlemen, good to have you with us tonight.  Michael, is the Obama administration doing enough to create jobs?  This is the number that‘s not connecting with Wall Street, the job creation—I know we have the stimulus package going, but I‘m talking about job creation from the small business-people in America who are complaining that money is too tight.  How do they fix this? 

MICHAEL MEDVED, RADIO TALK SHOW HOST:  Well, it‘s not an easy thing to fix.  Part of the problem is they just released the figures yesterday.  They have been able to document all of 30,000 jobs that were created by the stimulus.  That means the administration spent 553,000 dollars per job.  There has to be a better way of spending the money. 

Part of the difficulty here is the answer to creating jobs is not going to be just spending more money.  It‘s going to be taking money away from something else, because we also had deficit figures announced today. 

JEFF SANTOS, RADIO TALK SHOW HOST:  Please, it‘s the same old Republican stuff that we‘ve heard since 1981, when Ronald Reagan said government is not the answer. 

Government is the answer.  They can help stimulate this.  It‘s very simple.  You put roads, you put jobs, you take the trains, you get tunnels, you take jobs.  The union jobs are ready to go.  Leo Gerard is ready to go.  Bob Haynes, who leads the AFL-CIO in Massachusetts, needs jobs, wants jobs.  We can get those jobs.  We can get people off the unemployment rolls.  We can do it now. 

SCHULTZ:  Jeff, the issue is not so much the stimulus package, as it is the small business-people in this country, who don‘t have anything to do with the stimulus package, but can‘t get credit.  The gentleman you just saw on our air a few moments ago has an A Plus credit rating with the Better Business Bureau.  He can‘t get money.  Why doesn‘t the Obama administration respond to middle class workers out there trying to create jobs? 

SANTOS:  I agree with you 100 percent.  Open the doors.  I see it every day.  We need to have credit.  We need to have more community banks.  Why do we have to have four or five banks making all the loans?  Let‘s get it out to the community banks.  Let‘s get it in the community.  I‘m sick and tired of things in Wall Street.  Let‘s get it down to main street. 

MEDVED:  One of the reasons—

SCHULTZ:  Michael, why can‘t the Republicans get on board with this?  This is an opening, I think.  This is where I think the Obama administration has been very weak.  Republicans ought to be nailing the White House on this. 

MEDVED:  You are completely correct.  One of the problems and one of the reasons that people cannot get credit right now is because of things like a budget deficit that has tripled between 2008 and 2009. 

SANTOS:  Here we go with deficits.

MEDVED:  The deficit is a huge problem because when people look at the gathering—

SANTOS:  You started.  It was the Reagan deficit.  It was the Bush deficit.  Don‘t put it on us. 

MEDVED:  I‘m not putting it on anybody.  I‘m saying this is the reality, Joe.  Simply, you cannot solve this problem by spending more money, by borrowing it from China.  The only thing that‘s going to get this economy going again is when America is profitable, when the dollar is stronger. 

SANTOS:  Let‘s start building things here, using American workers. 

That‘s the way you‘re going to do it.

SANTOS:  By the way, it‘s Jeff.  Secondly, the fact is that American people are going to pay for it.  The top two percent, who just got bonuses from Goldman Sachs—

MEDVED:  The top two percent did not get bonuses.  A few dozen people got bonuses from Goldman Sachs. 

(CROSS TALK)  

SCHULTZ:  Jeff Santos, Michael Medved, final comment from my standpoint: this is going to be a major issue from the Obama White House if they don‘t free up money to small businesses.  If they don‘t free up the money—because on small town main street, they are squawking about—they see this Wall Street deal.  They see this small business deal.  It‘s not matching up.  And somebody better figure it out. 

Thanks, fellows. 

Coming up, health care reform has to be paid for.  My next guest says taxing the technology, like Pacemakers and hearing aides, is simply the wrong way to do it.  That‘s next in my playbook.  Stay with us. 

(COMMERCIAL BREAK)

SCHULTZ:  In my playbook tonight, a key hurdle for the health care reform in this country has always been how are we going to pay for it?  The Baucus bill that passed the Senate Finance Committee this week is funded in part by a four percent tax on medical devices, like Pacemakers, hearing aides, and artificial hearts.  Of course, the medical companies naturally oppose the tax.  But so do members in Congress on both sides of the aisle.  They‘re worried that the costs will be passed on to consumers, or it will flat-out kill the medical services industry all together, which sounds pretty extreme. 

Let‘s talk about it.  Let‘s bring in Kem Hawkins.  He is the president of medical devices company, Cook Medical.  Mr. Hawkins, I appreciate your time tonight.  I know you‘re a worldwide company with over 10,000 employees all over the world.  What would this Baucus bill do to your industry?  What would it do to your company and to your industry? 

KEM HAWKINS, COOK MEDICAL:  Well, Ed, first of all, thanks for allowing us the opportunity to have this time with you.  Certainly, this poses maybe one of the greatest threats that we‘ve had to our business in the 46 years that we‘ve existed.  And what it does is it takes probably more money than anyone imagines, and it takes it away from putting it toward innovation and employing people and families. 

And it‘s a significant amount of money.  You know, four percent sounds rather innocuous.  But four percent of the top line for us in America would mean about 30 million dollars, which would take our tax rate up to a whopping 68 percent.  You can imagine seven out of every ten dollars that‘s going to the federal government before we even pay an employee. 

SCHULTZ:  So Mr. Hawkins, are you implying or can you just flat-out tell us tonight that you think this might impede research and development to the point where you won‘t be as aggressive and won‘t be able to do the kind of technology and medical advancements in this country, in your business? 

HAWKINS:  Well, there‘s no doubt about it.  When you look—when you‘re looking forward—you know, we‘re planning on what we‘re going to be doing for five, 10, 15 years.  It takes a long time to get the medical technology to the market.  Certainly—

SCHULTZ:  Do you have anybody on your side?  Do you have anybody on your side that would maybe take this tax out of the Baucus bill?  Do you have any help? 

HAWKINS:  Certainly, we‘ve had conversations with all of our representatives in all the states that we have companies in.  They‘ve been a very good listening audience.  I thing they‘re working to see if there‘s something that can be done. 

SCHULTZ:  Do you think this will effect medical outcomes of people and

patients in this country?  How devastating would this be?  Your technology

·         I know that your company has been very innovative with all kinds of heart procedures and all of the different things you‘ve been able to manufacture.  But when it comes to medical outcomes, what do you think the result would be? 

HAWKINS:  Well, you know, sometimes you never know what you don‘t have.  We would have to become probably more selective in what we decide to do going forward.  And that means that some products would certainly not—and some studies, I might add—may not get funded.  At that rate, it definitely would have an effect going forward.  No doubt about it. 

SCHULTZ:  Kem Hawkins—Mr. Hawkins, I appreciate your time tonight.  I think this is one part of the story we just haven‘t heard when it comes to medical reform in this country.  I‘m certainly not for the tax.  I can tell you that.  What I am in favor of is people paying for it.  But to harness the companies that are making the catheters and all the kinds of things—the advancement—I think they have to stop this.  The Democrats have to stop this one.  Thank you.  I appreciate your time, Mr. Hawkins. 

HAWKINS:  Thank you very much.

SCHULTZ:  You bet.  Balloon Boy got in the way for me going after Harry Reid last night when it came to leadership.  I haven‘t taken my eye off Uncle Harry.  Next up, the founder of the Daily Kos tells us why he should be—or who should be running things.  You‘re watching THE ED SHOW on MSNBC.  Stay with us.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. CHUCK SCHUMER (D), NEW YORK:  Leader Reid has the option of putting it in the final bill.  If he puts it in the final bill, in the combined bill, then you would need 60 votes to remove it.  And there clearly are not 60 votes against the public option.  So we‘re urging him to do that. 

UNIDENTIFIED MALE:  Senator Schumer says it is up to you whether or not to put the public option in this bill.

SEN. HARRY REID (D), MAJORITY LEADER:  He would rather say anything so it wasn‘t up to him. 

(END VIDEO CLIP)

SCHULTZ:  That is the sound bite of the week in the health care arena.  Harry Reid doesn‘t seem to understand that as the Senate Majority Leader, he is actually supposed to lead and go out and get those votes.  He should take that challenge. 

Let me bring in the founder and publisher of the Daily Kos, Markos Moulitsas.  Markos, what do you make of Harry Reid?  Is he backing off?  Is he not being strong enough?  Is he a good leader at this point? 

MARKOS MOULITSAS, FOUNDER, DAILY KOS:  Look, when the Republicans had control of the Senate, you never heard them talk about 60 votes.  They had, what, 52, 55 seats.  They never talked about 60 votes.  When Harry Reid became Senate Majority Leader in 2006, he couldn‘t stop talking about 60 votes. 

It wasn‘t the Republicans.  It wasn‘t the media.  It was Harry Reid making excuse after excuse.  He didn‘t have 60 votes in 2006.  The voters came back in 2008, gave him 60 seats.  First, it was 59 seats and Harry Reid made the excuse, it‘s not 60.  I still can‘t do anything.  Then Minnesota happened, and Al Franken was seated, so you had 60 votes. 

Then Harry Reid came back and said, yes, but Ted Kennedy and Bob Byrd, they‘re sick.  They don‘t show up.  We still don‘t have 60.  It‘s excuse after—

SCHULTZ:  We‘re getting too many excuses out of Harry Reid, it sounds like.  Would you rather see Chuck Schumer grabbing the bull by the horns and being the leader?  Do you think that was a shot over the bow? 

MOULITSAS:  I absolutely do think that.  Today, we saw Rockefeller—

Senator Rockefeller do the same thing, say it‘s up to Harry Reid.  When you ask Harry Reid about it, what‘s his response?  His response is, well, Chuck Schumer would like to be in charge.  Give him—put him in charge then, because clearly Harry Reid doesn‘t seem to have the fire and the will to fight for what is right. 

And frankly I‘m personally tired of excuses.  I want somebody like Chuck Schumer or even a Dick Durbin from Illinois, people who won‘t make excuses, who will fight. 

SCHULTZ:  You don‘t buy the story out there that Harry Reid is working some inside game to get this public option done? 

MOULITSAS:  I would hope so.  I‘ll be very pleased if that‘s the case.  But you get some stories that say he‘s working the inside game.  You have some other stories saying that he‘s ready to sell everybody out.  I don‘t think anybody really knows what Harry Reid is up to, except for Harry Reid.  That‘s what you have this confusion in the news reports coming out of the Senate. 

It‘s not that hard.  He should come out, say that‘s what he‘s going to do and do it.  This is not too complicated.  It‘s a popular thing to do. 

SCHULTZ:  Markos, finally, how much heat do you think the blogosphere and the liberals, the left, the progressive movement is going to put on Harry Reid down the stretch?  Is that going to make a difference? 

MOULITSAS:  They‘ve made very clear that they‘re immune.  They say they‘re immune to any such pressure.  We try to put pressure on, saying, Harry, threaten these senators that don‘t want to play games.  Tell them you‘re going to take away their committee assignments.  He doesn‘t want to do that.  He says we do things collaboratively. 

SCHULTZ:  He‘s doing it a very unusual way.  Thank you, Markos Moulitsas.  I appreciate your time tonight.  Thank you. 

It‘s Friday night.  It‘s Club Ed.  It‘s Lizz Winstead time, co-creator of the “Daily Show” and brains behind the “Wake-Up World.”  Have you seen balloons in your neighborhood lately? 

LIZZ WINSTEAD, “WAKE UP WORLD”:  I‘m so mad at you.  What are you doing?  Stop talking about these box balloon people.  Ed, you‘re better than that.   What are you doing?  This is not a story for you.  The only reason you should be talking about a balloon floating across America for two hours is if the TARP money that we‘ve lost is in it. 

Ed, seriously, get a grip. 

SCHULTZ:  Did you go to dinner with Arianna Huffington last night and get schooled up on this?  The world is talking about this.  This has got tremendous intrigue.  What parent treats his kids like this? 

WINSTEAD:  Ed, don‘t be part of the chatter of bad parenting that is on TV now.  Who‘s next, Jon and Kate?  Are they going to co-host with you?  I‘m disappointed in you. 

Ed, look at this Jiffy Pop Thing.  This is not news.  You‘re showing a Jiffy Popping. 

WINSTEAD:  Ed, here‘s the breaking news: thing floats out of backyard.  This is what you promoted for the first ten minutes of your show, thing floats out of backyard. 

Ed, where‘s the Tarp money?  We don‘t have enough troops to go to Afghanistan.  Bobby Jindal shut down a mental health facility.  We know you.  Those are the things you should be talking about.  I‘m scolding you.  I‘m going to spank you. 

SCHULTZ:  I know.  But listen, there‘s been so many resources going

after this, and air traffic control and all that stuff.  All right.  I know

--

WINSTEAD:  Resources?  Ed, resources?  Afghanistan?  The Balloon Boy. 

I love you.  Come on.

SCHULTZ:  Got to run.  Earlier, I asked you about the Balloon Boy story.  Do you think it‘s a hoax?  Eighty seven percent of you said yes; 13 percent said no.  That‘s THE ED SHOW.

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

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