updated 10/27/2009 10:33:14 AM ET 2009-10-27T14:33:14

THE ED SHOW

October 26, 2009

THIS IS A RUSH TRANSCRIPT.

THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

Guests: Barney Frank, Ralph Nader, Sen. John Barrasso, Jonathan Alter, Joan Walsh, Ernest Istook, Steven A. Smith, Rep. Jim Clyburn

ED SCHULTZ, HOST: Good evening, Americans. Good to have you with us tonight on THE ED SHOW.

Big news. It's the news we have been waiting for. We have a public option.

This man right here, Harry Reid, he made the announcement today that he and Max Baucus and Chris Dodd have reached a compromise, a public plan with an option for states to opt out.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MAJORITY LEADER: As we have gone through this process, I've concluded, with the support of the White House, Senators Dodd and Baucus, that the best way to move forward is to include a public option with the opt-out provision for states. Under this concept, states will be able to determine whether the public option works well for them and will have the ability to opt out if they so choose.

(END VIDEO CLIP)

SCHULTZ: Harry Reid, he's the man of the hour. He's the new dude.

Good leadership.

We've been critical of the majority leader, but you know what? He's delivered the mail. I guess you can say the rocks go with the farm. The criticism goes with maybe some slow stepping, but he got it done.

Now, you might be wondering, OK, now what's this opt out/opt in thing?

Well, let me tell you. Here's what an opt out means in very simple terms.

There will be a national public health care plan established. After one year, states will have the option to opt out if they so choose. Senator Reid says states can opt out until the year 2014.

As for the politics? Reid said he believes that he has the votes to pass the Senate at this time. Republican Senator Olympia Snowe is not supporting it, but it doesn't matter if he's got all the Dems on board plus the two Independents.

We'll have much more on this major development later on in the show, including my take on the public option. But you know what, folks? We're not in the end zone yet. We're in the red zone. We're inside the 20-yard line.

But it's very clear that Harry Reid is listening to the progressive voices and the progressive base in this country. This is a victory.

Get your cell phones out. I want to know what you think.

Did Harry Reid deliver on the public option? Text "A" for yes and "B" for no to 622639. We'll bring you the results later on in the show.

But right now in our program tonight, we want to, I guess, have a showdown. A couple of nice guys going at it.

Ralph Nader was on this program last week talking about how Wall Street is calling all the shots in Washington. He says Obama's economic team is turning a blind eye to risky practices and that lawmakers are failing to protect consumers. Mr. Nader had some tough words for Democratic leaders, especially House Financial Services Chairman Barney Frank.

(BEGIN VIDEO CLIP)

RALPH NADER, FMR. PRESIDENTIAL CANDIDATE: Barney Frank is shredding this proposal that Obama says he wants, and it doesn't look like it's going to be better under Senator Dodd, and it's going to happen again.

SCHULTZ: Mr. Nader, can I get you on with Barney Frank later this week or maybe next week? I'd like you two go at it on this, because the American people think, hey, reform is on the way, the House is all excited that this is going to happen.

NADER: Of course.

(END VIDEO CLIP)

SCHULTZ: Well, we called Chairman Frank's office. He jumped at the chance to come on and debate Mr. Nader about the issues, Wall Street versus Main Street, and what the Democrats are going to get this out of this economic ditch.

Let's get right to it.

Joining me now are Congressman Barney Frank, chairman of the House Financial Services Committee, and Mr. Ralph Nader, former presidential candidate, consumer advocate, and author of the book "Only the Super-Rich Can Save Us!"

Congressman, we'll start with you first tonight. Thanks for joining us.

 

 

I want you to respond to the sound bite that Mr. Nader produced for us the other night. He flat-out said that you're not delivering the mail, and you're really going after and tearing apart and shredding apart-is the word he used-what President Obama wants.

What do you think about that?

REP. BARNEY FRANK (D), CHAIRMAN, HOUSE FINANCIAL SERVICES COMMITTEE:

Well, it's exactly wrong. In fact, we've been working very closely with the Treasury and other people in the Obama administration on the consumer protection bill. And I'm very proud that Elizabeth Warren, who I think has become the leading consumer advocate in America in a number of areas, when the bill passed, said, you know, they told me not to push for this because the banks always win, but they didn't win today.

In fact, Mr. Nader is exactly wrong. We did not shred the Obama proposal. There was some weaknesses in the drafting and there were some problems we encountered in terms of getting it passed.

What we passed on Thursday out of our committee on an almost straight party-line vote, because we had overwhelming Republican opposition, was the strongest consumer protection-the first consumer protection agency in the financial area that we've had. And as I said, the Obama administration worked with us closely.

We lost one or two issues. We lost on the auto dealers because they are the objects of sympathy now.

SCHULTZ: OK.

FRANK: I was working closely with the Obama people on that. So, the assertion that we shredded the Obama proposal, nobody in the Obama administration thinks that. They were working with us very closely.

SCHULTZ: What about that, Mr. Nader? You used the word "shredding" what President Obama wants. What's your response to Congressman Barney Frank there?

NADER: Well, it really is a matter of expectation levels, obviously.

Barney Frank looks at it one way. I look at it another.

I don't think there should have been federal preemption of the states in this consumer financial regulatory area. I don't think there should have been so many exemptions. He seems to agree on the auto dealers, that there shouldn't have been an exemption.

I think there should have been a shift of power. Congressman Schumer, when he was in the House Banking Committee, 1985, proposed a financial consumer association, which I tried to get the attention of Chairman Frank, which would allow millions of consumers, voluntarily, to send contributions to their own non-profit financial consumer organizations so they can create a counter-lobby to the big bank lobby.

And also, there was no civil right of action. That is, consumers could not invoke the regulations as this agency if the agency was not enforcing the law to go to court as a civil right of action.

(CROSSTALK)

SCHULTZ: Go ahead, Congressman. I want you to respond to that.

FRANK: First of all, understand that Mr. Nader has just totally retracted implicitly his accusation that I shredded the Obama plan, which was wrong. And I worked closely with the Obama people every step of the way on this.

As to the specifics, I know he has for some time now been interested in this consumer association. It doesn't have a lot of support, certainly not in the Obama administration, not from others in the consumer movement.

Finally-well, not finally, but additionally, the Obama administration didn't ask for (INAUDIBLE), but here's what he did do. We gave the state attorneys general and the state banking commissioners the right to enforce this, over the great objection of the banks.

Mr. Nader, I saw somewhere, said, oh, the banks are celebrates. No, the American Bankers Association denounced this. We lost every Republican but one. It's a very strong pro-consumer bill.

Now, on preemption, it is true, we could not get total preemption. What we did do in this bill is to roll back significantly where we are today.

In 2004, a Bill Clinton holdover under the Bush administration promulgated a sweeping preemption of all state bank laws. We have rolled that back to where we were in 2004, and they can only preempt a state banking law or regulation if it is can be shown seriously to interfere with national banking.

(CROSSTALK)

SCHULTZ: All right, gentlemen. I want to talk about Glass-Steagall.

Now, Mr. Nader, are you in favor of the reinstatement of Glass-Steagall? Would that fix what has happened a year ago on Wall Street?

NADER: Well, I agree with former chairman of the Federal Reserve, Paul Volcker, who wants to separate commercial banking from retail banking so that the risky part of investment banking, using your deposits and savings, do not lead to another Wall Street collapse and gigantic bailout. Barney Frank voted against the deregulation in 1999.

FRANK: I did?

NADER: He voted against it properly, and I can't understand that with Paul Volcker and many others on his side, he doesn't push for that separation. If you don't get that separation, you're going to get-with the derivatives-and he's been very weak on derivative reform.

SCHULTZ: What about that, Mr. Frank?

FRANK: I'm sorry, but Mr. Nader keeps shifting his ground. And I know he's still pining for that consumer association he wanted. The fact is that on Glass-Steagall, two things.

Restoring Glass-Steagall-and I did vote against it, and I thought it was a mistake. But unfortunately, restoring it wouldn't solve the great majority of the problems. What I plan to do is this: I plan to offer an amendment to the administration's bill...

SCHULTZ: Well, wait a minute now. Hold it. You mean to tell me it would not have prevented what happened, Glass-Steagall?

FRANK: No, because, for instance, AIG, which was a major cause of the problem with these unregulated derivatives, they would not have been affected by Glass-Steagall. They were not a bank investment house. You had some of the most irresponsible activities done by people that were purely investment houses.

AIG would not have been stopped by Glass-Steagall. Lehman Brothers wouldn't have been stopped. That doesn't make it wrong, but there are broader things.

I believe, by the way, the biggest single problem we have, which I hope to resolve in this bill, is 30 years ago, if you got a loan, you had to pay back the person who lent it to you, and we had real scrutiny about who borrowed money. They then came up with securitization where people made a whole bunch of loans and then sold the whole loan. We're going to put in there a risk retention like with insurance, where you...

(CROSSTALK)

SCHULTZ: You would go along with that, wouldn't you, Mr. Nader?

NADER: That's good. The question is, how much? What percentage is the risk?

FRANK: I want to start with 10 percent and give the regulators a chance to go up or down if. It's a straight 30-year mortgage at a fixed rate, you might need less.

SCHULTZ: All right. Let's talk...

FRANK: If it's more speculative you go up. But on Glass-Steagall, what I plan to do is to give the regulators the ability to impose Glass-Steagall institution by institution where there is reason to think that there's a problem.

SCHULTZ: All right.

Mr. Frank, I want a ask you, because a lot of Americans have communicated with us on the radio show and here on THE ED SHOW that they're upset about the pay bonuses to the executives...

FRANK: Absolutely. They should be.

SCHULTZ: Well, why wasn't there oversight to that before the money went out?

FRANK: There was.

SCHULTZ: There was?

FRANK: Well...

SCHULTZ: I mean, you forked out billions of dollars to Wall Street and they went off and did the same thing they had done before.

FRANK: The problem is that we had the Bush administration in power. If you will notice, now that we have the Obama administration, under Ken Feinberg, very tough rules have been imposed.

And by the way, let me give some credit to Senator Chris Dodd, who has been very unfairly attacked by a lot of people. He is the one who authored in the economic stimulus bill the provision that was the charter for Ken Feinberg to do what we did. What we've done in the House-and we did this in August, and we tried to do it before-we've done two things. First of all, what we call say on pay. For every public company, we believe the shareholders ought to have a chance to express their opinion on pay, and we believe that will have a very severe affect on...

SCHULTZ: All right.

But this money went out to Wall Street, Mr. Nader.

FRANK: I'm trying to respond.

SCHULTZ: You responded to it.

FRANK: No, I didn't get to the full question, because we also passed a law for the companies-every company an Wall Street to require the regulators to restrict bonuses so you don't have this crazy situation where it's heads they win and tails they break even, where they take risks. If the risks pay off...

(CROSSTALK)

SCHULTZ: All right.

Mr. Nader, are you satisfied with that answer?

NADER: First of all, giving shareholders non-binding authority on gigantic executive bonuses won't work. He should give shareholders binding authority, and the shareholders should have in these giant companies a small staff so they can take on the executives. That's one.

FRANK: I agree.

NADER: And then the second thing that's really important here is on the derivatives. These are bets on bets on bets. There was $600 trillion changed hands last year.

Volcker and a lot of others who know quite a bit about banking think that they should be not only better regulated, but the commercial banks should not be trading on their account, using deposit and savings accounts to the American people. But the important thing is-and this is where I think Barney the weakest. In 2000, he voted for a bill that continued the deregulation of the burgeoning derivative racket. And now he's supporting a bill that has a huge loophole in terms of exempting trillions of dollars of certain categories of derivatives.

FRANK: Let me respond.

(CROSSTALK)

SCHULTZ: Let him respond.

Go ahead.

NADER: And he hasn't-don't interrupt so much, Barney.

SCHULTZ: All right, Mr. Nader. Let him respond to that.

NADER: And the other is he didn't support a categorical ban on abuse of derivatives.

SCHULTZ: All right.

Quickly respond to that, Barney.

FRANK: Well, first of all, I think Ralph gets to luxuriate in the impurity of his irrelevance.

We're in there fighting these things. I had overwhelming Republican opposition to any regulation derivatives, and some Democrats. And we fought hard for it.

We are establishing a great framework for the regulation of derivatives. We are moving forward in that. And we've done as much as we can politically.

But the fact is that we have a political situation. And I'll tell you, here's the real irony of this, Ed. The right wing took control of government and ruined it. They gave it a bad reputation.

Now that we are trying in every front to increase the role of government in the regulatory area, we run into this public opinion that says, hey, those are the guys who screwed up Katrina. So- the frustration is, they're benefiting from their own incompetence.

SCHULTZ: All right, Gentlemen. Stay with us, because we've got to go to round two when we come back.

In just a moment, we'll get into the president and the Congress, what they should be doing to repair the broken backbone of our country. And that's small business.

And later, we're not in the end zone, but we're in the red zone. Harry Reid delivers the mail. He says he's going to push hard for a vote on a public option that gives states the choice to opt out.

I'll tackle that with Republican Senator John Barrasso at the bottom of the hour.

(COMMERCIAL BREAK)

SCHULTZ: Welcome back to THE ED SHOW.

Now I want to talk about small business. What is the government doing to help small business owners survive this recession?

They have to make payroll. They want to grow. And I want to know why there's a disconnect. Why does Wall Street get the breaks and Main Street doesn't?

Congressman Barney Frank and former presidential candidate Ralph Nader with us for round two of this discussion tonight.

Congressman Frank, why is it that it's taking the Obama administration so long-or maybe it hasn't-to get the TARP money to small businesses and get lending going to small businesses? Why was it the money went so quick to Wall Street, but yet, it's been so slow to come to the small communities and community banks?

FRANK: I've been frustrated by that. And, of course, it went out, remember, under the Bush administration. In fairness to the Obama administration, most of the money went out, the first $350 billion, under the Bush administration.

We tried to impose compensation restrictions and other requirements, and we couldn't get the Bush administration to enforce them. The Obama administration has been better.

The other thing I would say though, in our legislation, by the way, we have differentiated. Mr. Nader said the biggest banks were cheering. No, the biggest banks are very angry.

We worked with the community banks. I'm very proud of that. We worked with the Independent Community Bankers Association. We worked with the credit unions. What we did in the consumer bill, frankly, was to treat the smaller banks, the community banks and the credit unions, differently than the larger banks.

We put more constrictions on them.

SCHULTZ: Mr. Nader, are they doing enough? For time constraints, Mr.

Nader, are they doing enough?

NADER: Well, one thing to do is to crack down with stronger antitrust enforcement budgets and break up the big corporations who are too big to fail, and then have to be bailed out by the taxpayer, which includes small business taxpayers.

Now, Barney mentioned something about what's politically possible.

That's why I beseech you, Barney, to revisit Chuck Schumer's proposal in 1985 to shift some power to investors and consumers not funded by taxpayer, voluntarily joined by consumers and investors so they can develop a counterbalance and give the Democrats some backbone to come up against "the political rallies." September 17, 1985, is the statement by then-Congressman Chuck Schumer. And there has got to be a civil right of action. I don't know why you oppose that.

FRANK: I don't oppose...

(CROSSTALK)

FRANK: Let me correct...

NADER: And by the way, all this is academic. If you're not going to regulate derivatives without any loopholes, et cetera, you have to-you have to split commercial banking from investment banking.

SCHULTZ: All right. Go ahead, Barney.

FRANK: You have got this stream of accusations. When one is disproven, Mr. Nader moves to another.

He's been in love with this notion of a consumer association. I think he thinks that will somehow bring him back to power. It's not been on the agenda of any other consumer groups.

As to the private right of action, first of all, we've empowered the state attorneys general and the state bank regulators over the objection of the banks, and they, frankly, are very powerful.

Secondly, when the Republicans tried to move to strike private rights of action from the bill, because many of the laws that we're dealing with here and giving the consumer agency the power to enforce them have rights of action, and we beat back that amendment. Mr. Nader keeps bringing up new and inaccurate accusations.

SCHULTZ: Mr. Nader...

FRANK: And I do want to go back to small business. We have split off, frankly, the smaller community banks. That's relevant in your question. We've pushed for them to get money, and we'll continue to work with the community banks, as opposed to the big banks.

NADER: Do you support Elizabeth Warren to head the new consumer financial regulatory agency?

SCHULTZ: Do you, Barney? Congressman Frank?

FRANK: I think she would be a great appointment. I've worked very close with her. I'm very impressed with her knowledge and her political sophistication.

SCHULTZ: Mr. Nader, you didn't answer the question. Is the Obama administration doing enough to spur small business and job creation in this country?

NADER: Well, they're talking a good game. I hope they can implement it up against the Republicans in Congress.

SCHULTZ: All right.

NADER: But the important thing is, I keep saying, if you don't split commercial banking from investment banking, as Paul Volcker and others have been repeatedly stating, including the head of the Bank of England, if you don't do that, everything's academic. We're going to have another round of speculative collapse and bailout.

This book, Barney, she sent this to you. I will send this to you.

She's a former managing director...

(CROSSTALK)

SCHULTZ: Will we have another collapse?

FRANK: Oh, Ralph, please. Can we have a rational conversation?

SCHULTZ: Congressman Frank, will we have another collapse?

FRANK: Not if we get all the legislation through. And by the way...

SCHULTZ: OK. Gentlemen, I've got to run. I'm up against the clock.

I appreciate your time tonight.

Congressman Barney Frank and consumer advocate and former presidential candidate Ralph Nader here on THE ED SHOW.

Thanks so much.

Coming up, righty hate-mongerer Laura Ingraham says the White House has been softer on jihadists than it has been on Fox News. That brings her with a hard landing right into the psycho zone.

Stay with us.

(COMMERCIAL BREAK)

SCHULTZ: And welcome back to THE ED SHOW, "Psycho Talk" tonight. I guess you could say in celebration of Halloween week, we've got the hate witch of the North, Laura Ingraham, to talk about.

She hopped off her broom this Sunday to work some black magic on TV.

Of course, as you're about to hear, no one fell under her spell.

(BEGIN VIDEO CLIP)

LAURA INGRAHAM, RADIO TALK SHOW HOST: If the administration had the same view of the way to treat other threats to the United States, whether economic threats or real threats, Islamic jihadists-and they'll probably put Fox in that same category-then it would be OK. I mean, they're so impassioned about Fox. Meanwhile, it's kind of like very even rhetoric about other threats.

GEORGE STEPHANOPOULOS, ABC NEWS: (INAUDIBLE) on Islamic jihadists...

(CROSSTALK)

INGRAHAM: Well, I just think, honestly, the passion...

(END VIDEO CLIP)

SCHULTZ: Oh, it's just say anything, isn't it, Laura?

Interesting that she lumps Fox News in with "other threats to the United States" like Islamic jihadists, implying that President Obama and his administration is more interested in going after Fox News than actually combating terrorism, is flat-out ridiculous. The president is actually trying to come up with a solid strategy after the Bush folks decided to put it on the back burner for the last several years.

Laura, until President Obama sends 68,000 troops across the street to Fox News headquarters, that's "Psycho Talk."

Coming up, an ESPN executive gets fired for a personal foul. The Bronx Bombers are heading to the World Series. And Brett Favre, did his luck run out?

Stephen Smith will break it down for us all coming up in the "Playbook.

Plus, Harry Reid scored a major victory on the public option today. We congratulate him, and we're locked and loaded on that one.

Republican Senator John Barrasso will be here with his reaction in a moment. And also, House Majority Whip Jim Clyburn will be in "The Main Event" tonight.

Stay with us. You're watching THE ED SHOW on MSNBC.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

REID: It's something I believe in. The state of Nevada-all the national polls show a wide majority of Americans support the public option. I think it's important that the matter that we work in from the Senate have a public option in it.

(END VIDEO CLIP)

SCHULTZ: Harry Reid is listening to the people. He's taking the health care fight right to you. The cagey boxer from Nevada landed a political punch on the Republicans this afternoon when he announced the merger of the Senate health care bill. It includes a national public option, with the option for states to opt out after one year, 2014.

I think it's a brilliant political move. It shows Harry Reid is listening to the base. He's willing to cut Olympia Snowe loose. He knows she's not going to be there anyway. But he's not going to give away the store just for one Republican vote.

 

Way to go, Harry.

In his press conference today, he talked about the unprecedented momentum for health care reform. Now, where did that momentum came from? It came from folks who engaged and got after it. He's talking about you. He's talking about all of us who never gave up on this. You put the heat on the Democratic lawmakers, the bottom line, it worked.

This is a major victory for progressives, but also for getting health care reform in this country. Think about this, all politics is local, right? It's the old saying. Harry Reid is forcing Republicans to go home to their own backyard and say, no, I don't know if you want this or not. You know? I don't want you to have it. They're going to have to take a stand.

Here's the number. There are 37 gubernatorial races next fall. I guarantee you that health care will be the issue in these local races, these state races. And the American people will get to weigh in at the ballot box.

Smart play, Harry, no doubt about it. I want to see some Republican governors and some Republican candidates go out and campaign on taking away a health care option. Let the Republicans explain why they don't want to limit American choices, OK?

Let the Republicans tell voters they would be able to keep public health care coverage they already have.

Joining me now is Wyoming Senator John Barrasso, Dr. Barrasso. He is with us. We have sparred time and time again in a polite and respectful way on this issue. All right, senator, the bottom line, it appears that we are going to have a public option. Would you surrender that today, based on what Senator Reid said today?

SEN. JOHN BARRASSO ®, WYOMING: Absolutely not. We'll have to wait and see the bill. I saw him quoting those numbers about the overwhelming support around the country. Overwhelming Rasmussen poll this weekend, people are opposed to any of this health care reform that he's trying to push down the throats of the American people. It is going to raise the costs of care. It's going to make care less available and less of a quality.

So this is not a good plan and the American people get it.

SCHULTZ: Senator, then you must go along with the opt out, because now there are going to be governors involved. There's going to be state legislators involved, House and Senate. How it works out, whether it's unicameral, or whatever it is in some states. Here's the question: how could you not go along with that?

BARRASSO: I would like people to be able to opt out of all of it. Opt out of the Medicaid requirements that are going to be in it, opt out of the increased taxes, opt out of the cuts in Medicare. I'd love to have states have an opportunity to opt out of the entire thing, not just the government-run insurance program.

Harry Reid hasn't even made this bill available to his own members. He's going to share it with them tomorrow at lunch. The American people want to see what's in this 1,000-page bill that's going to cost over a trillion dollars, and cut 500 billion dollars from Medicare.

SCHULTZ: Wait a minute, senator. You don't know if it's going to cost a trillion, because the CBO hasn't scored it yet. The CBO did score the one in the House. And it came under budget on the House side. There's a good chance that this one is going to come under budget as well, from what the president has put out there.

BARRASSO: Under budget meaning cut, what, less than 500 billion dollars from seniors? I was at a rehab hospital talking to seniors this weekend in Wyoming. American seniors are scared to death that all this money is going to come away from their Medicare program to start a whole new program. This is money that was designed for the seniors.

SCHULTZ: You think that Wyoming would opt out of this? No one in Wyoming would want a public option? If it were to go to a vote, Wyoming would be a state that wouldn't want anything to do with this?

BARRASSO: They'd want to be able to opt out of the taxes, the Medicare cuts, the unfunded mandate of Medicaid, as well as this government run insurance program.

SCHULTZ: They're going to have a chance to do that, senator.

BARRASSO: They don't want to have to pay for other states that want to be part of it either.

SCHULTZ: Senator, they're going to have a chance to do that. This could be the-

BARRASSO: We'll see the bill. I'd like to see if they can really opt out of the whole thing, or if it's just going to do it with the government-run program. I think they want to opt out of the Medicare cuts and the Medicaid mandates.

SCHULTZ: Senator, you know you're behind the curve on this one. You know there's going to be a public option. You know where the majority of the American people are. And yet the Republican party is still against all of this.

BARRASSO: The majority of the American people, Ed, in the Rasmussen poll this weekend, are against the whole thing.

SCHULTZ: Come on, John.

BARRASSO: Poll after poll against the whole thing. And, you know, on this government-run insurance, polls are on different sides of this. Take enough polls, you can see the numbers.

SCHULTZ: I guess you'll have to work on winning some elections then, because you don't have enough people that's going to stop this.

BARRASSO: The American people are clear, if this goes through, the cost of their own care is going to go up, and the quality of their care is going to go down.

SCHULTZ: Senator, let me tell you something, the cost is going to go up whether it's a public option or not. This is about pre-existing condition. This is about-let me ask you this.

BARRASSO: Wasn't this supposed to cut the cost of care? Wasn't that the premise that the president said-

SCHULTZ: It's going to cut the cost of care. I can't believe, senator, that you're still locked on to these ridiculous bullet points from Frank Luntz. Why do you have such an defeatist attitude about health care reform?

BARRASSO: -- people who want to make sure we can help our seniors stay healthy, and keep down the cost of their care.

SCHULTZ: Senator, I can not believe you have such a defeatist attitude towards reform.

BARRASSO: We need reform, Ed. We don't need this reform. We need step-by-step, incremental improvements. And there's a lot we can do to increase competition, to give people more patient-centered care.

SCHULTZ: There's not going to be increased competition under your plan. You know there isn't. Senator, good to have you on.

BARRASSO: Buy insurance across state lines. Thanks, Ed.

SCHULTZ: I thing it's very interesting that you still won't capitulate to what the American people want. I appreciate your time.

BARRASSO: -- every weekend at home.

SCHULTZ: Thank you, Senator John Barrasso. There's an expression that victory has 1,000 fathers. There's been a lot of praise today for Harry Reid's bold move on the public option, and from some unlikely corners. The White House put out this statement: "the president is pleased at the progress the Congress has made. He's also pleased that the Senate has decided to include a public option for health coverage, in the case with the allowance of the states opting out. As he said to the Congress and to the nation in September, he supports the public option because it has the potential to play in a central role in holding insurance companies accountable through choice and competition."

So the president is on board and he likes it. He has said it all along.

Then there is this from Max Baucus, jumping on the bandwagon: "I included the public option in health care reform blueprint I released nearly a year ago, and continue to support any provision including a public option that will ensure choice and competition, and get the 60 votes needed to pass the Senate."

For more, let's bring in our panel tonight, Jonathan Alter, senior editor for "Newsweek Magazine." Also with us tonight, we've got Joan Walsh, editor in chief, Salon.com, and Ernest Istook, former Republican congressman and distinguished fellow at the Heritage Foundation.

Jonathan Alter, how do you read today's developments? Did Harry Reid listen to the base?

JONATHAN ALTER, "NEWSWEEK MAGAZINE": I think he listened to common sense for the Democratic party, not just his own interests in Nevada. Look, if you have a plan that the president signs, and in a few years, you have a situation where people are forced to buy insurance and their premiums are way up because there's no competition, no public option, that is a huge iceberg that would destroy, arguably, the Democratic party.

The reason they have to have a public option, politically, is they have to have a mechanism, if not this one, another one, but some kind of mechanism to put downward pressure on premiums and costs.

It's so crazy to hear these Republicans who are anti-competition. Their whole idea is supposed to be about choice and competition. This is simply another choice. They should be for it when they're complaining about Medicare cuts, opting out of Medicare cuts. These are the same folks who wanted to opt out of Medicare all together. Now they're pandering to their grandparents.

SCHULTZ: Joan Walsh, did Harry Reid deliver the mail today? Are progressives going to go along with this?

JOAN WALSH, SALON.COM: I think progressives are going to go along with this. I think we have to give credit to the progressives who stood up and said they wouldn't support a bill without a public option, and that they thought triggers were simply not enough. I mean, Russ Feingold, Bernie Sanders, Dick Durbin, Jay Rockefeller all began to say we have power, too; we have votes. And you can't sell us out. And if you want to pursue one vote in Olympia Snowe, and think that vote is more important than ours, then you can't do the numbers correctly.

SCHULTZ: Let's take a look at what Senator Reid had to say about Olympia Snowe today. Here it is.

(BEGIN VIDEO CLIP)

REID: We hope that Olympia will come back. She's worked hard. She's a very good legislator. I'm disappointed that the one issue, the public option, has been something that's frightened her.

One of the things that's been so astounding to me is when I came here to the Senate, we had a lot of moderate Republicans who worked with us on everything. We worked with them. Of course, now, the moderates are extremely limited. I could count them on two fingers.

(END VIDEO CLIP)

SCHULTZ: Ernest Istook, whatever happened to those moderate Republicans? Why have you guys gone so far to the right you can't even work on health care reform?

ERNEST ISTOOK, HERITAGE FOUNDATION: We're listening to the American people, of course. This is peek a boo politics. You don't give a little. You don't tell the details. That's still happening behind closed doors. It's kind of like people saying, I'm going to give a wild celebration at the kickoff or first down, rather than the touchdown.

Nobody knows how this supposed opt out would work. We only know, of course, that this would cost many billions of taxpayer dollars. Billions that even though Nancy Pelosi says, well, it would only be loaned to the-

SCHULTZ: Ernest, let me ask you a question.

ISTOOK: That's like General Motors. You're never getting that money back.

SCHULTZ: Let me ask you a question. Do you believe the majority of the American people want a government-run option to compete against the private sector? Do you believe the majority of Americans want that? Yes or no?

ISTOOK: I don't think the majority of American people trust the government to take on something-

SCHULTZ: Where do you get your information from on that? I mean-

ISTOOK: Senator Barrasso talked about the Rasmussen poll. Do you want to pay attention to it?

ALTER: There are 20 polls. The other 19 --

SCHULTZ: Yes, the other 19, 20, 30 polls that are out there.

ISTOOK: There's lots of polls out there. You're right.

SCHULTZ: This is the most recent sound bite from Senator Olympia Snowe on today's developments. Here it is.

(BEGIN VIDEO CLIP)

SEN. OLYMPIA SNOWE ®, MAINE: Public option is the fundamental issue here. And the fact is that it constrains us, those who don't support that type of approach. You know, putting it at the forefront makes it very difficult to change on the floor, as the Senate majority leader knows, because it does require 60 votes.

And I know he indicated that-public option, I don't. But if this public option is with a trigger as a fallback mechanism, which could provide enough leverage to ensure that the industry does measure up and does provide affordable choices.

(END VIDEO CLIP)

SCHULTZ: A lot of dancing going on there, Jonathan Alter. Does her vote matter at this point? This direction that Harry Reid's taking, he says he's got the victory. He says he's got the 60 for cloture. Is she irrelevant at this point?

ALTER: Well, I think she might be, Ed. He can count voter a lot better than you or I could. He must feel like he can hold all of the Democrats, including Blanche Lincoln, Ben Nelson, some of the other conservative Democrats. He needs every one. Even one Democratic defection takes him down below 60.

There's also a possibility that he could strike a deal with some of the conservative Democrats, where they vote to shut off debate. The 60 --

SCHULTZ: I think that's going to happen.

ALTER: Then they vote against the bill if they want to when it comes to the floor. So it passes, you know, with a simple majority, but it doesn't require the 60 on final passage.

SCHULTZ: Joan Walsh, what about the opt out? I mean, this makes it -

all politics is local. The gubernatorial races, 37 of them across the country, this is going to be a main issue. You're either for it or against it, and it's going to keep this conversation alive. Was this a smart political move on Harry Reid's part?

WALSH: You know, I think it is. The first time you and I talked about the opt out option, I told you I was intrigued by it. I have a lot of red-state friends saying, don't sell us out, blue staters. But the fact of the matter is the rest of the country should not be held hostage by the red states. Red state folks need to organize around this issue, and make sure that their states don't opt out.

Let's be honest, they could opt out of Medicare, and the red states aren't opting out of Medicare. Once they have it, and once they see how it would work, I doubt very many states will opt out. I think everybody will be covered?

SCHULTZ: Ernest, what's the next play for the Republicans? You're behind now.

ISTOOK: Let's say the difference between opt in and opt out-if you really want to give people choice, states could establish their own plans if they wanted to. Maine and Massachusetts, for example, have tried that. They have some particular problems with it. If you're really trying-

SCHULTZ: They didn't have the federal money that this is going to have.

WALSH: It doesn't work.

ISTOOK: You don't-you're never opted in unless you choose to do so. And what's the price tag? They're still hiding that because it's going to be enormous. It's going to be just mind-boggling.

SCHULTZ: All right. Panel, great to have you with us tonight.

Thanks so much.

Coming up, first it was Senator Ensign, then it was David Letterman, now it's an ESPN commentator. He gets caught fooling around with a staffer, except he got canned for it. Steven A. Smith in the house.

A recap of what happened in sports yesterday coming up in my playbook.

(COMMERCIAL BREAK)

SCHULTZ: In my playbook tonight, we're really in the locker room tonight. Baseball analyst Steve Phillips has been kicked off ESPN's team. They fired the former Mets general manager yesterday, days after he admitted to having an extramarital affair with a 22-year-old production assistant this summer.

Of course, the story is not just that simple. OK? After Phillips broke off the affair, the girl started harassing his wife, calling her and sending a letter with graphic details of their relationship. Phillips' wife has since filed for divorce. Phillips agent said he has checked into a treatment facility to, quote, address his personal issues.

Let me bring in sports commentator and journalist Steven A. Smith.

Steven A., good to have you with us tonight. Is it over for Mr. Phillips? Is it all done? What does he really mean to ESPN? This is a big loss for them. What do you think?

STEVEN A. SMITH, COMMENTATOR AND JOURNALIST: It's a devastating loss. In the interest of full disclosure, he's a friend of mine. I think he's an outstanding baseball analyst. I think he's done a phenomenal job. I can tell you that it was probably a very, very difficult decision for ESPN to make. He is an exceptional baseball analyst in every sense of the word.

But ESPN are professionals at dotting their Is and crossing their Ts. As a former employee of ESPN, I can assure you that they make sure everybody knows what the dos and don'ts are in their workplace. Him, Steve Phillips, having an affair or messing around with a 22-year-old production assistant definitely falls under that category.

So it's pretty predictable what ended up transpiring.

SCHULTZ: Well, as far as the girl is concerned, could he have survived this had she not been not so, say, active and doing so many things after it was revealed? Going after his wife and his family and making some public statements about all of this?

SMITH: You can speculate about that. I'd say that he would have had a better chance of surviving if it was just something that was salacious that happened outside of the workplace. I think that's the most egregious part of all of this in the eyes of some people that work inside that building. It's the fact that you were dealing with an employee.

Certainly nobody wants to advocate having an adulterous affair or cheating on your wife, messing with somebody half your age, things of that nature. But the real kicker was the fact that she worked at ESPN. I'm just speaking from a guessing standpoint. Having been an employee there for the past five and a half years, I know that place very, very well. That's something you simply do not do, not if you want to keep your job at the worldwide leader.

SCHULTZ: All right. The World Series, Yankees and Phillies. How do you see it?

SMITH: How do you think I see it, Ed? I was waiting for you to bring that up. Of course I expect-

SCHULTZ: I live in New York now. I'm going with the Yankees. You know how that works. New ballpark, they pay everybody.

SMITH: That trip from Minnesota was real quick, wasn't it, Ed? I'm here to tell you, the Phillies are definitely a team to be reckoned with. I've known Jimmy Rollins and Ryan Howard for years. They're absolute studs. Jimmy Rollins talks smack, but he backs it up. Chase Utley is a stud, Victorino, Werth and these guys, they're studs. Cliff Lee, tremendous acquisition for the Philadelphia Phillies.

But they're not the New York Yankees. They match up very well. They beat the Yankees two of three meetings that they faced them in the regular season. But it was the Yankees who had the most wins in the regular season. It was the Yankees who had led the lead in home runs.

SCHULTZ: Who's got the best pitching?

SMITH: Runs scored, comeback victories. I certainly believe that the Yankees are going to win this series in six games.

SCHULTZ: All right Steven A-we should point out that the Vikings aren't undefeated anymore.

SMITH: I'm proud of you for bringing that up. I didn't want to bring it up, Ed, but since you did. That's right. Favre is not perfect after all.

SCHULTZ: He put the ball right in the guy's hands. It should have been an easy catch.

SMITH: What about the touchdown when he ended up getting stripped? A veteran in the league.

SCHULTZ: He got stripped-OK, we don't pay the guy to tackle.

Steven A, we don't pay Brett Favre to tackle.

SMITH: Wait a minute, Ed. He didn't protect the ball in the red zone, which is something an experienced quarterback is supposed to know.

SCHULTZ: He can't block them. He's got his arm cocked, ready to fire away.

SMITH: You just had the excuse lined up, get ready to come on air, didn't you?

SCHULTZ: Well, I did.

SMITH: I'm sure you did.

SCHULTZ: He put the ball right there. It went to the guy's hands.

Are Steeler fans going to accept that victory? Come on.

SMITH: Of course they are. It's a victory. By the way, I told you before, hate the game. Hate the game.

SCHULTZ: Steven A, good to have you with us, as always.

Up next In The main event, the battle for true health care reform is far from over. Harry Reid is going for a public option model that allows states to opt out. We're going to be talking with Majority Whip Jim Clyburn when we come back. His reaction on the House side after this.

(COMMERCIAL BREAK)

SCHULTZ: Welcome back to THE ED SHOW. Big announcement today over on the Senate side; Senator Harry Reid announcing that he will put in an opt out clause for a public option in the Senate bill. What does this mean to the House?

For more on that, let's go to the majority whip of the House, Congressman Jim Clyburn. Congressman, great to have you with us tonight. How positive of news is this for the progressive movement in this country?

REP. JIM CLYBURN (D), MAJORITY WHIP: Great news. I think the progressives ought to be very, very pleased with this. Just a month ago, everybody thought that the public option was off the table, had no chance. A little bit of a chance in the House, no chance in the Senate. Here is the Senate going first and going to CBO with a public option. That is great news and a great victory.

SCHULTZ: Does this strengthen the hand for Democratic leadership over on the House side, for you, Nancy Pelosi, and Steny Hoyer?

CLYBURN: Yes, it does. It-we can now say to our members, this fear that you had that we would be walking the plank on something that had no chance of being introduced into the Senate, passed in the Senate. Here is Senator Reid telling us he has 56 or 57 votes for this public option. All we have to do now is make sure we don't allow that 41 percent to overrule that 56 percent.

SCHULTZ: Do you like the idea that the opt out is going to really push forward for a fierce local discussion in every state, with 37 gubernatorial races coming up in the midterm?

CLYBURN: Absolutely. That's the kind of thing that would make these races interesting. It will bring people into the process. I really believe it will give those people who are out there making themselves known, getting them involved in the process, making sure that their governors listen to them, and hopefully respond to them. This is a great way to get the public involved in the electoral process.

SCHULTZ: Finally, Congressman Clyburn, what message does this send? Does it make it any easier for the Blue Dog Democrats over on the House side to make a move?

CLYBURN: Yes, it does. A lot of them are in districts that are very challenging. When they can see that the Senate will, in fact, pass something, then they are more apt to be for it. So many of them have been for a public option all the time. They just didn't want to walk the plank and not see something happen in this Senate.

This is a great victory for the Democratic party, a great victory for both our caucuses, and I think it's a great day for people seeking health care reform.

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

CLYBURN: Thank you so much.

SCHULTZ: Earlier in the show I asked you, did Harry Reid deliver the mail on the public option? Eighty eight percent of you said yes; 12 percent of you said no.

That's THE ED SHOW. We're back tomorrow night 6:00 Eastern.

"HARDBALL" is next with Chris Matthews on MSNBC.

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

END

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