updated 11/12/2009 11:38:30 AM ET 2009-11-12T16:38:30

THE ED SHOW

November 11, 2009

THIS IS A RUSH TRANSCRIPT.

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Guests: Lanny Davis, Brent Budowsky, John Harwood, Rep. Joe Sestak, Rep. Adam Smith, Rep. Joseph Cao, Katrina Vanden Heuvel, Michael Medved, Jeremy Scahill, Jack Rice

ED SCHULTZ, HOST: Good evening, Americans. Welcome to THE ED SHOW in New York tonight.

OK. Here we go.

Harry Reid wants to bring the health care bill to the floor next week. And since getting 60 Senate votes is kind of like herding cats, he brought in the big dog.

That's right, Bill Clinton came to Capitol Hill to give a pep talk on health care. Here's what he had to say after lunch.

(BEGIN VIDEO CLIP)

WILLIAM JEFFERSON CLINTON, FMR. PRESIDENT OF THE UNITED STATES: The second thing is that on the policy, there is no perfect bill because there are always unintended consequences. So there will be amendments to this effort, whatever they pass next year and the year after and the year after. And there should be.

It's a big, complex organic thing. But the worst thing to do is nothing.

(END VIDEO CLIP)

SCHULTZ: OK. I get all that. You know, I'd like to have lunch with Bill Clinton and find out what the story is.

Now, we've got some Senate speak going on here, folks. He told them don't let the perfect be the enemy of the good. The problem is, I don't think Bill Clinton were talking to Democrats who were screwing this thing up like Ben Nelson or our friend Joe Lieberman, who seems to be camping out across the street talking about filibuster all the time.

He was talking to the progressives, you know, the good guys who believe in the party platform of universal health care. That's what I'm afraid of.

He's trying to deliver the guys that want the public option to give in, people like Tom Harkin, Chris Dodd, Sherrod Brown. He's asking them.

I mean, my interpretation of this is Bill Clinton is asking the liberals to cave in on this. And I want to know, why are the good guys always being asked to compromise on health care reform? I thought we already gave up on single payer. Democrats have got to stop rewarding bad behavior.

Now, Harry Reid said what I think he should have said, OK, we've had a great lunch. What do you say we go down to Arkansas, Bill Clinton's back yard, and let's start going to Arkansas and really give a strong endorsement about the public option? Put the fear of God in Blanche Lincoln, right, the senator that just can't seem to find her way on the public option, and let those Democratic voters down there in Arkansas know that she's on the wrong side of this issue?

The former president, he didn't put the heat on any senator, as I see it. In fact, the conservative Democrats, they came out of this meeting feeling really strong, really emboldened.

Here's Ben Nelson. He wasn't even back to the office before he started squawking noise about how, hey, I can't go along with this.

(BEGIN VIDEO CLIP)

SEN. BEN NELSON (D), NEBRASKA: What I heard him say is that you don't have to let the desire for perfection get in the way of the good. And that makes a great deal of sense.

But I would add the caveat that we have to be sure that it's not a bad bill, that's is based (ph) with a decision about whether or not to move a bill that's bad. I won't vote to move it for sure.

I'll tell you what I can't support. I can't support a government-run robust public option that will undermine the insurance that 200 million Americans enjoy through the private market.

(END VIDEO CLIP)

SCHULTZ: Now, that's speaking with clarity right there, Senator Nelson.

The conservative Democrats are practitioners of the same triangulating, run to the center politics as usual, which really defined the Clinton presidency. That's exactly what President Obama ran against. That was the change.

I'm nervous about this lunch. I'm nervous about this outcome. And I'm nervous about the influence and how he may have emboldened those who are trying to kill the public option on the Democratic side.

Get your cell phones out, folks. I want to know what you think on this.

Do you think Bill Clinton is an asset to health care reform? Text "A" for yes and "B" for no to 622639. We'll bring you the results later on in the show.

Now, joining me now is Lanny Davis, former special counsel to Bill Clinton.

Now, get that smile off your face. I don't know if we're going to see things eye to eye on this. I'm nervous about these lunches that leave out, you know, certain terminology that we worked so hard for.

Lanny, please tell me tonight that this wasn't the capitulation lunch hosted by Bill Clinton.

LANNY DAVIS, FMR. SPECIAL COUNSEL TO BILL CLINTON: First of all, it wasn't. And I really love you, Ed Schultz. If I get you in trouble with all your friends by saying that-and I'm not going to accuse you of being patronizing or get angry with you. You are great.

And I favor the public option. I favor fighting for the public option.

There's only one difference between us, which is why I agree with Bill Clinton. If we can get universal health care for the first time since Harry Truman first supported it, and we can get mandatory coverage for everyone, no denial of pre-existing conditions, everyone gets covered and all the 45 million uninsured are eligible for buying insurance and getting subsidized if they can't afford it.

If we can get all that, then I say, going back to 1948, that's a win for progressive government. And if we don't get the public option, then I'm still going to say, after I fought the good fight, we've got to vote for that health care bill and not vote it down because we didn't get the public option.

SCHULTZ: OK. Well, Lanny, so you're telling us tonight that it's OK if the Democrats and the progressives give up the public option which, in fact, would be the framework for giving the private sector competition, which, in theory, if the market holds true, would bring rates down.

I mean, it seems to me that Bill Clinton went over there to lunch-and I'm not picking on Bill Clinton. I just think this has to be pointed out. He went there to talk to Tom Harkin and Chris Dodd and Sherrod Brown, who have said on this program repeatedly, we're going to come out of the Senate with a robust public option.

It seems to me that the White House's chief of staff, Rahm Emanuel, asked Bill Clinton, hey, come on over and water these guys down for us because we're not going to get the 60 votes and Harry needs some help. That's my interpretation and I think that's going to infuriate a lot of progressives in this country.

DAVIS: Well, look, you have to decide whether if you're uninsured and poor and about to go bankrupt, or you depend upon public hospital emergency rooms for your health care, it isn't even close. What the decision should be, if you fight for the public option and lose, and the bill comes up that would give that uninsured person insurance. They'll say yes.

People out there who have insurance, who are under federal employee health insurance plans-or you're under the MSNBC plan-it's fine for you to say, let's vote it all down. But I'll bet you not one person watching who can't afford health insurance, is uninsured and is facing bankruptcy, would agree with you, let's vote the whole thing down because we fought the good fight and lost. Let's just vote it all down. I don't think there's anyone out there who would agree with that.

SCHULTZ: Lanny, there's no reform if we don't have the public option because the insurance industry will still be calling the shots.

Now, talk about the insurance industry for a minute. We are handing private insurance, that industry, 40 million new customers. And we're basically saying, OK, you've got to cover the pre-existing condition, and we're going to force them to buy and we're going to subsidize it, but the public option, we'll make sure that you really don't have competition.

That is capitulation. And I don't think the progressives should go with that.

And I want Bill Clinton to clarify to the American progressives and the liberal movement of this country I want the public option and I told those senators to do the public option. Can you say that?

DAVIS: Well, first of all, I don't think you mean go with that. I think you mean fight the good fight and then you...

SCHULTZ: I mean go with that. I mean line in the sand. It is time to define.

DAVIS: If you were in the Senate, would you want to defeat a bill that provides universal coverage and mandates coverage if it didn't have the public option? Would you say no or yes to that proposal?

SCHULTZ: I would say no to it because it doesn't go far enough.

LAWRENCE: OK.

SCHULTZ: And you know what I would do, Lanny? And I've talked about this on my radio show. I'd say, OK, we'll see you next year at the polls. We can wait one more year and win more progressive seats and move it up faster than 2013.

DAVIS: Let me give you something to think about because I respect you so much. If you didn't have health insurance, you were facing bankruptcy, if you had to use public hospitals as your doctor because you can't afford to go to a doctor, you wouldn't take that position. And moreover, if you went through the battle of '94 and the battle since Harry Truman to get universal care and to get mandatory coverage...

SCHULTZ: This is not universal care, Lanny. This is not universal care. This isn't going to cover everybody. Universal is everybody. This doesn't cover everybody.

LAWRENCE: Well, it is virtually-it is over 90 percent, and probably over 95 percent when all is said and done. But it's certainly better if you're uninsured to get a bill than not to get a bill. And I'm simply saying that while we fight the good fight, the people like yourself who have insurance, it's easy to say wait until next year.

SCHULTZ: My rates are through the roof, by the way. My rates are through the roof. There's a lot of people in this country-and small business is getting butchered by this. And I'm telling you, if the insurance industry doesn't have competition, rates are going to run away.

DAVIS: Well, let me take you on, on that. The insurance industry will have to compete on the public exchanges. I don't accept your premise that we can have-we should have competition across state lines. Insurance companies are going to be competing.

SCHULTZ: Lanny, that's why you have to have public option. And I'm nervous about the fact someone of Bill Clinton's stature decides to go into the Democratic Caucus and water it down.

And unless he clarifies where he is, I think he may have done some damage to this. That's just my opinion. I'm not picking on him.

I think that there's a lot of liberals in this country that voted for change, and not having a public option, that-it's not change, Lanny. It's not the kind of change we voted for.

DAVIS: My last experience in debating you is that you're a tough debater and I never change your mind, but you're always fair and that's why I love you.

SCHULTZ: All right, Lanny. Great to have you with us.

DAVIS: Thank you.

SCHULTZ: We'll do this again. I'm just nervous over these lunches.

By the way, who paid for that, anyway? The taxpayers. All right.

For more, let me bring in Brent Budowsky. He's a columnist for "The Hill" and former Senate and House aide.

Brent, what was Bill Clinton's mission yesterday? Was he there to make the conservatives more liberal or the liberals more conservative on health care?

What do you think?

BRENT BUDOWKSY, COLUMNIST, "THE HILL": Well, Ed, the Lord and President Clinton both work in mysterious ways. And the answer is we don't know. And the answer is what you said, that what we ought to have is a clarification.

And who knows? Maybe President Clinton is watching this show right now.

Here's the bottom line and here's where I disagree with Lanny. He wants to fight for the public option, but announces on THE ED SHOW he surrenders and will give it up.

I want to fight for the public option and announce that we've made enough concessions. We're going to fight for the public option and we're going to win.

Those of us who believe in what Senator Edward Kennedy believed in are fighting for a health care bill that we can proud of. And the fact of the matter is, if the bill goes down because a few liberals say they're not going to support a bad bill, it can be brought up a day later, a week later or a month later. And even more, the fact of the matter is that we have made the compromises from the beginning until the end.

The president supports the public option and won a big victory in the election.

SCHULTZ: Yes.

BUDOWSKY: We have a Democratic president, a Democratic Congress. And let me tell you one other thing, Ed.

The bill that's up now is not what Teddy Roosevelt or Harry Truman or Lyndon Johnson or Jack Kennedy wanted. They would never have thought about turning over 40 million people to an insurance industry that has been rampaging and gouging on rates for all these years without competition.

SCHULTZ: And there's no guarantee that's going to stop. There's no guarantee that's going to stop whatsoever.

I don't see the mechanism in place right now that is going to hold insurance industry-the industry in check when it comes to rate. And I'll tell you what. If the Democrats are wrong on this and rates continue to go up over the next three years, you can talk about amendments until the cows come home. The Democrats are going to pay a long-term political price for this because they'll never be trusted again.

It's better to hold the line on the public option, wait one more year for the midterms, paint the Republicans as the obstructionists, and get rid of people like Ben Nelson and Blanche Lincoln and Mary Landrieu, who can't line up with the Progressive Caucus and line up with the progressive voters of this country.

We're talking about real change in this country. And to piecemeal this could be torn apart too fast in the Republicans get, you know, back in office.

BUDOWSKY: No, I agree completely, Ed. And it's not going to take a year. If our people hold firm and say we will not make any more compromises beyond now, we will get a better health care bill and we will get it soon.

SCHULTZ: Yes. I'll tell you what-I'm calling on progressive groups. Let's do some survey in Nebraska. Let's to some surveys in Arkansas. Let's find out what the people want and see if they still matter, or if this is all about getting people reelected and caving into the insurance industry.

Brent Budowsky, always great to have you. You tell it like it is, and I appreciate your time. We'll do it again.

Coming up, I've got a Veterans Day call to action. We have shocking revelations of just how many vets are in desperate need of basic health care and housing.

Plus, a bombshell report reveals that Blackwater executives arranged for $1 million worth of secret bribes to Iraqi officials after 17 civilians were killed in Iraq.

All that, plus Katrina vanden Heuvel is in the house tonight.

And, oh, I've got a very special "Psycho Talk" with O'Reilly. It's coming up on THE ED SHOW.

Stay with us.

(COMMERCIAL BREAK)

SCHULTZ: Welcome back to THE ED SHOW.

President Obama has got to step it up on the economy. That's what the numbers say.

Wall Street may be up and running again, but folks on Main Street are getting a little bit nervous. They're not feeling so good.

A new poll shows that 49 percent of people disapprove of the way Obama is handling the economy. That's up five percent from just a month ago. And it's no secret why.

Regular people just don't care about what the Dow is doing if they're not in the market. Above 10,000? What's that mean to a lot of Americans?

They care about jobs and unemployment. And unemployment right now is sitting at 10.2 percent.

Let me bring in John Harwood, CNBC chief Washington correspondent and political writer for the "The New York Times."

John, good to have you with us tonight.

This story catches my attention because I was reading in "The Financial Times" an article by renowned economist, Jeffrey Sachs. He writes, " The Obama administration's stimulus policies are not well targeted. The Republican alternatives are even worse. Both sides are missing the key fact-the U.S. economy needs structural change that requires a new set of economic tools."

With that, John, do you think the White House is completely confident that they do have the tools and they're headed in the right direction to turn these numbers around?

JOHN HARWOOD, CNBC CHIEF WASHINGTON CORRESPONDENT: Well, I think they're trying, Ed, but they're running up against the limits of what the political marketplace will bear. One of the things that Jeff Sachs mentions in that story is transforming a so-called green economy. Well, Barack Obama is trying to do that in energy legislation, pushing this cap and trade idea, but it's running into some serious political resistance. It doesn't mean it's impossible it will happen, but it's very, very tough.

SCHULTZ: Are we headed for a second stimulus package?

HARWOOD: I think it's going to be difficult, Ed, for Democrats to resist calls for a second stimulus. You now have unemployment at 10.2 percent, as you mentioned. But it's headed-Mark Zandi tells me-he's an economist respected by both sides-to 11 percent. The middle of next year, we'll still be over 10 percent, in his projection, by Election Day next year.

That makes it very, very tough for Democrats running for reelection. There's going to be a lot of pressure for some sort of a new jobs tax credit, other measures to extend unemployment, keep the safety net going.

And I've got say, in light of your previous segments with Lanny and Brent, it makes it a difficult play that you were calling to turn down health care and take it to the voters next year, because Democrats don't want to take a huge policy argument to the voters when unemployment is over 10 percent. It's going to be a hard year to run as a Democrat next year.

SCHULTZ: You know, John, that's a great point, but my counter to that is this-you could commit a lot of sins and make a lot of mistakes if you can create jobs in politics. I mean, if they can turn these numbers around, if they can chip away at it between now and the midterm, it would be a political gamble. I'm not saying it wouldn't be, but I think if there's enough groundswell support for real change in health care in this country, that if they were to say, OK, no public option, we'll see you at the midterm, and if they turn these jobs numbers around, I think the Democrats could fair out extremely well.

But I realize that would be a big political gamble. But I do sense that there's a lot of lefties in this country that would stick it out with this president.

He's still very popular, is he not?

HARWOOD: Well, it's a big gamble. Yes, he's personally popular, but the intensity right now is on the Republican side. So it would be a major roll of the dice for the administration to take that stance. And I don't expect them to.

On the point about doing something about jobs, if you have a second stimulus, it's still going to be difficult to get the unemployment rate down very much by Election Day, even. Zandi says if you add a couple hundred billion dollars in stimulus, which wouldn't be an easy lift in this Congress, given all the concern, all the fog out there about spending and deficits and that sort of thing, you might take a little bit of the peak off of how high unemployment goes, but the best you could hope for is getting it moving in the right direction. It wouldn't come down all that much.

SCHULTZ: It is about jobs. And this White House is going...

HARWOOD: No doubt about it.

SCHULTZ: They're going to have to create jobs in Michigan, in Ohio, and Indiana.

HARWOOD: Pennsylvania.

SCHULTZ: Pennsylvania. There's no question. I mean, jobs everywhere count, but I'm talking about the places where Obama won by not very much.

You know, manufacturing in Indiana, Ohio, and also Michigan. These are key states. I think health care reform is a big part of it.

One quick question with you John on health care. Harry Reid says he thinks he can get it done by the end of the year. What do you think?

HARWOOD: I do think he can get it done by the end of the year. Now, whether he's talking about getting it through the Senate or actually getting a bill conferenced and on the president's desk, it's not clear.

But look, I think Democrats are headed probably not with the public option provision that you favor, but are headed for something that is truly a historic achievement. You're talking about something, near universal coverage, that hasn't been done in 70 years in this country. It's a big deal.

I think they're likely to get it in the end. The question is, given those jobs number we've been talking about, how much political credit do they get for it? Unclear.

SCHULTZ: Yes. OK.

John Harwood, always a pleasure to have you with us. Thanks so much.

HARWOOD: You bet.

SCHULTZ: Coming up, a ghost from the past is coming back to haunt Bill O'Reilly. Tonight, I spook him a little bit coming up here in "Psycho Talk."

Stay with us.

(COMMERCIAL BREAK)

SCHULTZ: And a special classic edition of "Psycho Talk" tonight for the veterans thanks to Fox news' own Bill O'Reilly.

A little history here, folks.

Long before I came to work here at MSNBC, I hit the talking head circuit, of course. About two years ago I was on O'Reilly's show talking about John Edwards and the campaign. Then the conversation entered into the psycho zone.

(BEGIN VIDEO CLIP)

BILL O'REILLY, FOX NEWS: Well, we're still looking for all the veterans sleeping under the bridges, Ed. So, if you find anybody, let us know, because that's all the guy said for the last...

(CROSSTALK)

SCHULTZ: Well, they're out there, Bill. Don't kid yourself.

O'REILLY: They may be out there, but there's not many of them out there. OK? So, if you know where one is, Ed...

SCHULTZ: Well, actually-now, wait a minute.

(CROSSTALK)

O'REILLY: If you know where there's a veteran sleeping under a bridge, you call me immediately and we will make sure that man does not do it. Is not there.

SCHULTZ: I will do that.

O'REILLY: OK.

(END VIDEO CLIP)

SCHULTZ: Well, here I am, Bill. And I'm telling you that the Department of Veterans Affairs estimates that 131,000 American veterans are sleeping on the street.

What are you going to do about that, Mr. O'Reilly? I dare you to go on the air the day after Veterans Day, tomorrow, and tell us that there aren't any homeless vets out there under bridges.

And by the way, did you see that video shot, that Peabody over the shoulder there?

Hey, O'Reilly, where's yours? Maybe the reason you don't have one is because you keep making stuff up.

Suggesting there aren't any veterans sleeping under a bridge in America, that is ignorant "Psycho Talk."

Coming up, the only Republican to vote for the health care bill is facing a fierce backlash from conservatives in his district. The lone wolf congressman Anh Cao, will join me in "The Main Event" to explain what life is like when you support health care reform.

Plus, the president just vowed to do right by the veterans we've left behind. He's got a lot of work to cut out for him. The numbers of uninsured and homeless vets will blow your mind.

Congressmen Joe Sestak and Adam Smith will be here in just a moment.

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

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: If we're honest with ourselves, we'll admit that there have been times where we, as a nation, have betrayed that sacred trust.

Our servicemen and women have been doing right by Americans for generations. As long as I'm commander in chief, America is going to do right by them. That is my message to all veterans today.

(END VIDEO CLIP)

SCHULTZ: A sobering message from our commander in chief on this Veterans Day. We honor our veterans one day a year, but we need to do it every day. The numbers show that we are falling short on our commitment to our bravest. A new Harvard University study says that nearly 1.5 million veterans don't have health insurance; 2,200 of those veterans died in 2008 because they were uninsured.

Think about that. Inadequate care has killed more of our military heroes than in the entire war in Afghanistan. We have to do better. We can do better. These Americans put their lives on the line to protect us and serve this country. The least we can do-the least we can do is make sure we take care of them when they come home.

It's not about charity, folks. It's about character of our country.

Joining me now is Pennsylvania Congressman Joe Sestak, retired three star naval admiral, and also Congressman Adam Smith of Washington, who just got back about a month ago from Afghanistan. Both gentlemen are members of the House Armed Services Committee.

Congressman Sestak, where are we making mistakes here? I know the

G.I. Bill has passed, which was really fantastic, not long ago. But when it comes to our veterans, where are we making mistakes?

REP. JOE SESTAK (D), PENNSYLVANIA: We're making two major errors. First off, we have to get this bill, this health care bill through. It is going to take care of many of these veterans who are just above poverty level. What I mean by that is back in 2003, the Bush administration kicked out of the V.A. Priority Eight veterans, those that were making just a bit more than 29,000 dollars. So they no longer have access if they have a service-related disability to the V.A. That's why we need this public health care option. Although the president's budget does get them back into the V.A. system, but not for about five years.

Second, it really does become a matter of getting the V.A. to be even much better at its ability to have our veterans, as they leave the service, to be able to address the signature issue of this war: Post Traumatic Stress Disorder. Someone said there's no war where there is not a wounded soldier, all of them. Post Traumatic Stress Disorder is still not being properly addressed.

SCHULTZ: Congressman Smith, the numbers are growing every year. We're about to make another commitment to Afghanistan. There are reports we may end up sending another 40,000 to Afghanistan. The president expected to make a decision here in the coming days. This is going to go on. And we're going to have to address this. What do you think we should do?

REP. ADAM SMITH (D), WASHINGTON: There's no question. No matter what decision we make going forward in Iraq and Afghanistan, it's going to be a while that we're still going to have our men and women serving overseas in combat roles. We're going to need to do a better job of dealing with them when they come home. I think Congressman Sestak hit on the biggest point, and that is PTSD, and changing the way we handle our veterans when they come back.

Now we have made steps in the last couple of years. We have made mandatory that when veterans come back from serving in the field that they sit down with a mental health professional and have a conversation. But we also need to do more in the transition, when they leave the service. Do they still have care? A lot of that is funding for the V.A. A lot of that, also-

SCHULTZ: I want to talk about that. I don't mean to interrupt you. But this is a big sticking point with a lot of Americans. Someone goes into the military, spends two or four years, should they come out with a lifetime benefit? What about that, Congressman Smith?

SMITH: I think they should come out-I think, first of all, I think every American should have access to health care. That's what we're working on in health care reform. The number of people who don't have access to health insurance, and through that health care, is large. It's not just veterans. So I think that needs-we need have to a universal access program. That's what we're working on in Congress.

I don't know that every veteran that serves two or four years should automatically have free health care for life. But they should have access to more than they have right now.

SCHULTZ: Admiral, where do you stand on that? Admiral, if somebody goes into the military, and four-year commitment, and, you know, they get Post Traumatic Stress Disorder and they're afflicted for life. Should there be a time limit on how long their benefits should last with them or should it be lifetime? What about that?

SESTAK: We actually, in Congress, two years ago, extended the amount of time that they could have access-

SCHULTZ: But they have to go prove themselves, too?

SESTAK: That's the problem. So here's my belief: if it is a service-related disability, they should have access to health care from the V.A. for life.

And the missing part here is PTSD. I was at a prison today. I sat down with four veterans. All of them had had Post Traumatic Stress Disorder from Vietnam or Gulf War. All of them had a substance abuse issue for many years, because they weren't so sure where to turn because nobody knew what PTSD was in those days, or they just couldn't get the right treatment over the years.

Now they're incarcerated. And 61 percent of all veterans that are in our prisons across America actually are dependent upon a substance like alcohol or drugs. So my issue is they must do a better job of getting them lifetime access for that invisible wound of the war, and that is the mental challenges of PTSD and other mental anxiety issues.

SCHULTZ: Finally, Congressman Smith. the resource challenge here is that a lot of these homeless veterans are chemically dependent. Now, that takes more than just a doctor's visit and somebody paying for it and universal health care. That takes providers. And it takes people doing follow-up with these veterans. This is going to take a major commitment on the part of this country, if we're going to turn these numbers around.

SMITH: No question about that. I am pleased that Congress the last three years, every year, has increased the V.A. budget by the largest amount in its history, every year, to try to meet that. You're right. The challenge is going to be great. We're going to have to concentrate on providing those long-term funds.

I think that's one of the messages of Veterans Day, is not just thank you for your service, but I think it's really important that we concentrate on what can we do to support and help all of our veterans, throughout the year, not just on this one day, and their families as well? You mentioned the G.I. Bill. Congressman Sestak has mentioned some of the changes we made in PTSD. Efforts are ongoing, but more needs to be done. We need to view this as a commitment, a lifetime commitment, not just the occasional thank you to make sure that we take care of the veterans who serve.

SCHULTZ: Congressman Sestak, Congressman Smith, good to have you with us tonight. Thanks so much. Thanks for what you do for the vets.

SESTAK: Thanks, Ed. Appreciate it.

SCHULTZ: For more, let's bring in our panel. Jack Rice, radio talk show host, is with us tonight. Also, Katrina Vanden Heuvel, editor of "The Nation," and Michael Medved, radio talk show host and author of the book, "The Ten Big Lies About America."

Katrina, let me ask you, politicians always seem to give lip service to veterans because it plays well when you're on the stump. If you look at the numbers, they continue to increase. And the point I'm making about homeless veterans that are chemically dependent, it takes sweat equity. It takes boots on the ground to help these veterans turn their lives around. What has to be done?

KATRINA VANDEN HEUVEL, "THE NATION": Ed, you spoke earlier. You used the term resource challenge. What we desperately need is some nation building at home. It's going to take resources to address the fact that our vets-and it is a test of our country's character. Our vets lead the name in substance abuse, homelessness, depression, suicide, Post Traumatic Stress Syndrome. This takes real resources.

Ed, I think we need a country which is prepared to act responsibly in the world. And President Obama, in my view, has done right in taking his time on Afghanistan. What he hasn't done right is he hasn't put the one option on the table, which would be to reduce our footprint, reduce our goals, responsible exit strategy. We don't have the resources to send 40,000 more men and women, or 30,000 or 10,000, because we need to deal with veterans from Iraq, Afghanistan.

SCHULTZ: Yes. Michael Medved, this crosses all party lines, but money is tight. Is there an argument to be made that maybe we would spend too much money on the veterans?

MICHAEL MEDVED, RADIO TALK SHOW HOST: I think it's very tough to make that argument. I mean, there is a debt that is owed here. And it's owed by every single American to the people who have made the choice to serve their country. The one thing I want to be careful of is we call them veterans, not victims. The truth is veterans, as a group, yes, you have people who have problem areas, and it has to be dealt with. Veterans as a group have a tremendous amount to contribute to this country.

There's a best selling book out right now called "Startup Nation" about Israel. And it makes the point that Israel's economy has been built largely as the most dynamic economy in the Middle East because they use the leadership skills that military personnel develop. We have to make more use of that in American business.

I think that should be a really strong, strong focus, is perhaps, even an affirmative action program hiring vets first, not because of just who they are, but because of what they've done.

SCHULTZ: Jack Rice, weigh in on this. What can we do for veterans that we're not doing?

JACK RICE, RADIO TALK SHOW HOST: Let's make no mistake. First of all, this is a cost of war. When you do something like this, when you send about 164,000 people, right now, in Iraq and Afghanistan, this is the cost of that. We have an obligation to make sure that we cover them. If this is tied to their service, if this takes a lifetime, my attitude is we cover it.

If we talk about drug abuse, you know what that is? That's self-medication. I spent a lot of time working with men and women in uniform. I've been embedded all over the world. I'm going again. These people have saved my lives, and they saved the lives of Americans. We have that obligation.

If it costs money, then we need to suck it up. If we need to raise taxes, we raise taxes. If we need to divert funds, we divert funds. But that is an obligation.

SCHULTZ: You agree with that, Michael Medved? Raise taxes to help the veterans? You would raise taxes to help the veterans?

MEDVED: If that's the only way to do it. Look, frankly, I think you could go to Americans and make that point if you have a check-off boxes on the IRS. People would do it.

SCHULTZ: There's a lot of conversation about Post Traumatic Stress Disorder. Where was that in the Vietnam War? Where was that in Gulf War I? Why is it so prevalent right now, and happening amongst our veterans? Or is it just the media paying attention to it?

HEUVEL: It's taken a long time for our country, our government, the Veterans Affairs Administration, to acknowledge that this is a hidden, invisible cost of war. "The Nation" last year exposed that the V.A. under Bush was delaying or denying benefits to veterans because they couldn't prove that their condition was service related. We helped pass legislation to change that.

You know, there's talk on the program, Ed, of the costs. I think we need to also address the fact that we want to be secure as a nation, but 56 percent of Americans at this moment are opposed to sending more men and women in to battle. We can use those funds and remain secure. And think about it, 10 billion dollars that we might send-might use to send 40,000 more troops, could be used to fund half of this health care bill that we are talking about.

Finally, jobs. Jobs, jobs, jobs. Michael talks about affirmative action. If there are no jobs, I don't know how the veterans can really contribute in ways they can. That should be our attention, to create jobs and show that this administration is on the side of veterans and working people in this country.

SCHULTZ: We have a lot of work to do. Panel, thanks so much on this. I have been to places where National Guardsmen and women have been deployed. It's tough to see a two year-old little girl hug her mom or dad because they're being deployed. You talk about child development and how it affects not just the veteran who is being deployed, but the entire family it affects. I thought the president was very cognizant of that fact today, and finally addressed it. I had not heard that addressed. The family commitment is really what we have to concern ourselves with as well.

Coming up, Blackwater-that's right, Blackwater employees have been accused of manslaughter, illegal gun use and rape. We can now add bribery to the list. A bombshell report from the "New York Times" blows the whistle on a one million dollar secret. That's next in the playbook. Stay with us.

(COMMERCIAL BREAK)

SCHULTZ: In my playbook, Blackwater shady dealings may go deeper than we thought. The "New York Times" is reporting that Blackwater bribed Iraq government officials to keep quiet about the 17 innocent Iraqi civilians that their security guards killed in September 2007. Some of the company's top executives are said to have authorized a million dollars worth of payoffs. That would be illegal under American law.

Blackwater kept its billion-dollar State Department security contract until this May. They may remain in Iraq on a 200 million dollar aviation contract. And their guys are still allowed to be armed. OK?

Well, let's bring in "The Nation's" Jeremy Scahill. He's the author of "Blackwater, the Rise of the World's Most Powerful Mercenary Army."

Mr. Scahill, does Blackwater get off Scott-free? What ramifications are to this report? What do you think the next step would be? What could happen?

JEREMY SCAHILL, "THE NATION": This is serious, Ed, in the sense that, you know, Erik Prince, the owner of Blackwater, may go the way of Al Capone, where he's involved with all sorts of criminal activity, all sorts of killing, all sorts of graft and corruption. And maybe the charge that will stick is one of obstructing justice or tampering with a federal investigation.

This was a deadly serious incident, where, as you said, 17 Iraqi civilians were killed. The Justice Department is prosecuting five Blackwater men. One already pled guilty. The company has, to date, faced no consequences for its actions. Prince hasn't.

If this is true, Ed, what this means is that Blackwater officials, not only Erik Prince knowing about it, but his top deputy, Gary Jackson, actually appeared to facilitate or attempt to facilitate the payment of bribes, totalling perhaps a million dollars, to Iraqi officials. That's against federal law, not to mention the Foreign Corrupt Practices Act, which explicitly bans bribing foreign officials.

SCHULTZ: Why are we still using them?

SCAHILL: I think there's two reasons for it. One is that these companies, not just Blackwater, but the other 600 corporations that now on the U.S. government payroll, have become the American Express Card of U.S. military operations. They don't leave home without them.

But there is another part of this that relates to Blackwater specifically. That is, Ed, that this is a company that worked for the CIA on the al Qaeda assassination program, is currently involved with covert operations in the drone campaign. Blackwater knows where a heck of a lot of bodies are buried. I think part of the problem here is that if you let these guys far off the ranch, they start talking, you have very powerful enemies.

So I think that the Obama administration is making a huge mistake by continuing to use this company, in particular, because they are essentially Christian crusaders, in the terms of one of Erik Prince's former top deputies, but also because of the damage they reap on the rest of the world comes back to hurt the United States, both in terms of its image and in terms of blow back an U.S. soldiers.

SCHULTZ: Jeremy, do they protect U.S. dignitaries overseas?

SCAHILL: Absolutely. Blackwater, right now, has a half a billion dollars in contracts in Afghanistan alone. When Hillary Clinton and Ambassador Holbrooke go to Afghanistan, Blackwater is part of their security detail. They're providing security for Secretary of State Hillary Clinton, who actually has been an outspoken critic of Blackwater, which is incredibly painful and ironic.

SCHULTZ: So our military can't protect our own secretary of state?

SCAHILL: Well, you know, during the Clinton administration, the '90s, the United States began outsourcing what's called diplomatic security to these private companies. And now U.S. diplomatic activities in Iraq, Afghanistan and elsewhere have become entirely dependent on these corporations that make a killing off the killing.

Ed, the military hasn't historically done the protecting of these kinds of guards. They protected officials. They protected embassies. But this wasn't traditionally the military role. We have never had so many, quote, unquote, civilians deployed in a foreign war zone. So this is really a sort of product of the military industrial complex.

SCHULTZ: So they have a contract and they're needed. They're in a good business.

SCAHILL: Hey, Ed, if they can cut off Acorn's 53 million dollars in funding over 15 years, how about cutting off Blackwater's billion dollars? I'll tell you this much, Ed, Blackwater has done a heck of a lot more to damage U.S. national security than Acorn ever could in 15 more years.

SCHULTZ: From "The Nation," Jeremy Scahill. Great to have you with us tonight. Excellent reporting. I appreciate it. You bet.

Up next, in the main event, the only Republican-the only Republican who crossed party lines to vote in favor of health care reform is in the house tonight. Now, what has his life been like since he decided to vote yes on health care reform? We'll tell you how the righties have been treating him next on THE ED SHOW on MSNBC. Stay with us.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: We are going to pass health care reform by the end of this year with the help of Mary Landrieu, with the help of Charlie Melancon, maybe with the help of Joe Cao. We're going to get health care done this year.

(END VIDEO CLIP)

SCHULTZ: The president, well he did get the help of Joseph Cao, the Congressman from New Orleans. He was the only Republican to cross the line and vote for the House health care bill. Way to go.

Now he's facing a backlash from conservatives. Hey, if the Republicans don't want him, I'm sure the liberals would take him to take Mary Landrieu's seat. Well, that's for another day. Congressman Cao joins us here tonight on THE ED SHOW.

Congressman, congratulations for showing some guts. You're the only one there that did that. How have you been treated since that vote?

REP. AHN JOSEPH CAO ®, LOUISIANA: Well, I have been receiving mixed messages, obviously. We have received a lot of conservative criticisms, but-I guess-I guess people are rightly concerned on the health care bill. But at the same time, we have also received a lot of positive remarks from a lot of people in the district.

SCHULTZ: OK. So the constituents are OK with what you did. You think you went with the majority in your district?

CAO: Absolutely. My district is 75 percent Democrat, 64 percent minority, and we have a very poor population, who many of the people are in need of health care. So I believe that this was a vote of conscience, a vote to serve the needs of my people down here in the district.

SCHULTZ: Congressman, how has Republican leadership treated you since the vote?

CAO: Actually, we are all professionals. The leadership in the House recognized that the first priority of a U.S. representative is to represent the people of his district. So we are very professional-like. There is no conflicts between us. They recognize that. Oftentimes, many members will have to make very difficult votes.

SCHULTZ: You've had some fund-raisers canceled on you, have you not?

CAO: That is correct. A couple of fund-raisers were canceled.

SCHULTZ: You've also had some donors take money back-request it back. Is that right?

CAO: Donors-some donors have requested back the money.

SCHULTZ: Is this going to cause a lot of problems for you down the road, do you think, with the Republican party?

CAO: I don't believe so. I don't-because I believe at the end of the day people must recognize that it is the duty of the U.S. representative to represent their people, as long as it does not go against conscience.

SCHULTZ: Congressman Cao, how do you know your constituents wanted you to vote this way? Did you do a lot of surveys in the district?

CAO: I held 11 town hall meetings during the August recess. And I have to say that during most of the town halls, the majority of the people were for health care reform.

SCHULTZ: Do they want the public option? Do they want a government alternative to give competition to the private sector?

CAO: A lot of my constituents did want the public option, while there was also a good number of people-they were concerned about the public option.

SCHULTZ: Sure. Are you considering switching to the Democratic party?

CAO: No.

SCHULTZ: Why not?

CAO: I believe that I can better serve my district down here as a strong representative. And I believe that can serve them better as a Republican.

SCHULTZ: You're going to stay a Republican, not independent?

CAO: I will stay as a Republican, yes.

SCHULTZ: Who's going to give money to your campaign? Do you expect the Democrats will now support you because you voted in favor of health care reform the first round? There will be another vote coming up later. What do you think?

CAO: In politics, not everything is dependent upon how much money the person gets. I believe that the people look for strong leadership. The people look for the ones who will make the right decision for them. I believe the people of my district will see that I am a strong leader, that I make the right decisions for my people.

SCHULTZ: Congressman, I commend you. There are too many people in the Congress, inside the beltway, that walk the party line. And you supported the people. And that's how it's supposed to work. Congratulations to you. I appreciate you coming on our program tonight.

CAO: Thank you very much.

SCHULTZ: All right.

All this hour, I've been asking, do you think Bill Clinton is an asset to health care reform? Sixty four percent of you said yes; 36 percent said no. Got a town hall meeting coming up in Seattle on Sunday night. Our web page is WeGotEd.com. Hope you can join us if you're in the Pacific Northwest. HARDBALL is next, right here on MSNBC, with Chris Matthews. We'll see you tomorrow night.

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

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