updated 12/31/2009 11:39:55 AM ET 2009-12-31T16:39:55

Guests: Chuck Todd, Evan Kohlmann, Andy Stern, Peter Morici, Rep. Jim Moran, Brent Budowsky, Karen Hanretty, Todd Webster, Michael Medved

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

Three big stories have hit my hot button tonight. 

First, the attempted terror attack in the skies above Detroit.  And a guy who was on the terror watch list was allowed to get on the plane in the first place?  That‘s coming up in just a moment.

Also, the Senate passed the health care bill without a public option, and now we‘ll see if Democrats in the House will fight.  Or will they cave in?

And I want to know if the economy is going to rebound in 2010.  Top economist Peter Morici is going to be joining us to tell us what he thinks about all of that.

I want to start tonight, first with the failed Christmas Day terror attack on a plane traveling from Amsterdam to Detroit, which everybody has been talking about.  Today, al Qaeda took responsibility for providing the terror suspect with the explosive device that he tried to detonate before landing. 

This afternoon, President Obama announced he has launched a full investigation into what went wrong. 

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  Those who would slaughter innocent men, women and children must know that the United States will do more than simply strengthen our defenses.  We will continue to use every element of our national power to disrupt, to dismantle and defeat the violent extremists who threaten us, whether they are from Afghanistan or Pakistan, Yemen or Somalia, or anywhere where they are plotting attacks against the U.S. homeland.

(END VIDEO CLIP)

SCHULTZ:  It‘s unbelievable that this guy was even let on the plane in the first place.  His father had reported him to authorities at the U.S.  Embassy in Nigeria earlier this year.  He was banned from banned from the country of Great Britain.  He was on the terror watch list. 

But it seems to be nobody was actually watching this guy.  He wasn‘t even on the separate no-fly list.

So, what does it take to get on that list?  Fair question.  And why even have a terror watch list if the airlines can‘t even identify the folks who are on it when they come through the door? 

I think the public has a right to know who‘s getting on the plane and going to be sitting next to them.  I know I‘d like to know that.  I mean, heck, we just had the holiday season. 

Let‘s say your son or daughter is coming home for the holidays and they‘re flying home.  Would you like to know if your son or daughter is sitting next to a person who happens to be on this watch list?

And throughout all of this, where‘s the TSA?  Where‘s the accountability?  And how about this sky marshal program?  What do you mean there weren‘t any sky marshals on an international flight? 

What‘s happening here?  What are the other countries doing?  This was a failure of airline security.

Homeland Security Secretary Janet Napolitano admitted as much this morning. 

(BEGIN VIDEO CLIP)

JANET NAPOLITANO, HOMELAND SECURITY SECRETARY:  Our system did not work in this instance.  No one is happy or satisfied with that.  An extensive review is under way.

(END VIDEO CLIP)

SCHULTZ:  The bottom line here is that the guy got on that plane undetected, and he was in a position to kill civilians.  Let‘s not use sight of that.

And we should really need to rely on civilian heroes to take these guys?  I guess we‘re still the front line of security.  Are we getting paid for that?  We pay a lot of tax dollars to keep this country safe.

The president said today that the additional air marshals have been put on flights coming in and out of the United States.  That‘s the proper move.  But what about domestic flights?  Those planes can be just as deadly.  If the government won‘t step up, maybe it‘s time for the airlines to step up, charge customers more—that‘s right—raise the ticket prices and give us better security.

Of course, it didn‘t take long for this whole thing to turn political in this country.  Here‘s some of the Republican reaction today. 

(BEGIN VIDEO CLIP)

REP. PETER KING ®, NEW YORK:  The silence on this issue almost is if they don‘t want to talk about terrorism.  And if you recall, in the first several months of this administration it was their policy not to use the word “terrorism.”

(END VIDEO CLIP)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  Homegrown terrorism, the threat to the United States, is real.  I think this administration has downplayed it.  They need to recognize it, identify it.  It is the only way we‘re going to defeat it. 

(END VIDEO CLIP)

SCHULTZ:  Oh, we‘ve got a lot of experts out there now.  And, of course, Joe Lieberman is supporting a preemptive strike on Yemen, where the attacks were reportedly planned. 

(BEGIN VIDEO CLIP)

SEN. JOSEPH LIEBERMAN (I), CONNECTICUT:  I‘ll leave you with this thought that somebody in our government said to me in Sana‘a, the capital of Yemen.  Iraq was yesterday‘s war.  Afghanistan is today‘s war.  If we don‘t act preemptively, Yemen will be tomorrow‘s war. 

That‘s the danger we face.

(END VIDEO CLIP)

SCHULTZ:  Get your cell phones out, folks.  Want to know what you think about all of this.

Tonight‘s text survey is: Do you want an air marshal on every flight that travels to or from the United States? 

Text “A” for yes and “B” for no to 622639.  We‘ll bring you the results later on in the show today.

As we said, the president spoke today.  Joining me now from Honolulu is NBC political director and chief White House correspondent, Chuck Todd.  There‘s another develop story.

Chuck, what is the latest on this family urgent matter that took the president away from his activities today.  What can you tell us?

CHUCK TODD, NBC NEWS POLITICAL DIRECTOR:  Well, very quickly, Ed, the child of a family friend who was actually golfing with the president got hurt in basically a beach activity.  And being that the president was with this parent, they raced home to see the seriousness of it.  The president‘s back on the golf course.  I think that tells you, while they‘ve taken a lot of precautions about this injury to this family friend, it obviously is serious enough where it is derailing any presidential activities—Ed.

SCHULTZ:  Chuck, what is the White House response tonight to Janet Napolitano, who made one comment about how things worked well and then backtracked on that this morning on “MORNING JOE”?  Any response from the White House on that?

TODD:  Well, look, there‘s not an official response on that.  And they were—yesterday, for instance when, she was on the Sunday shows and she made that comment about the “system worked,” they spent a lot of time trying to clarify, what did that phrase mean?  And what they said is that it meant that the system worked after the attack was thwarted. 

The system worked in notifying other international flights of what to look for.  The system worked in how quickly they could get federal marshals in place so that they could be on all of these international flights that are coming in and out of the United States.  So that‘s where the “system worked.”

But, of course, as far as public relations is concerned, that did not play very well.  That‘s why you heard Secretary Napolitano, this morning, suddenly say, guess what?  The system didn‘t work.  And then you heard the president today lay the whole thing out.

And I want to get to what you talked about on this terrorist watch list.

The fact is, this guy actually wasn‘t even on the watch list, Ed. 

There is another level, and this is where we‘re learning about the sort of

frankly, the bureaucracy of how this terrorist database works.  He was in a bigger database, most of whom are terrorists in this database, but he hadn‘t even been elevated to the watch list.

Now, I think we‘re seeing a little bit of bureaucratic finger-pointing between different agencies, whether it‘s folks at one end of things, say the National Counterterrorism Center and the State Department, where the father of the Nigerian suspect gave that original information of that concern about his son being a potential radicalized terrorist.  What wasn‘t done, for instance, is we didn‘t know that he had an active U.S. visa.  And I think among the things they‘re going to investigate and review and fix is making sure that anybody that is put into this database, that they immediately do a check of active U.S. visas if they are a foreign national. 

SCHULTZ:  Is there any concern at the White House that this person was not allowed into Great Britain not long ago, yet was given the rubber stamp to board a plane in Amsterdam and come into the United States?  It looks to me like it‘s a big bureaucratic information-sharing mechanism that has to be refined, Chuck.

What does the White House think? 

TODD:  That‘s exactly right.  Look, they are saying this is why the president is calling for this review. 

The fact is, this database, it‘s called TIDE for short, but,

basically, it‘s a terrorist information system where they put in potential

folks that have potential links to terrorism or terrorist organizations, and from there they are investigated, supposedly all the time.  This bigger list is 550,000, approximately.  The terrorist watch list is about 400,000.  The no-fly list is much smaller than that, maybe only 14,000 at most, secondary screening, all of these things. 

And so, I think that you‘re getting the picture that, yes, it‘s a little bit of a bureaucratic nightmare.  Maybe there were too many agencies involved in this.

On one hand, you want all of this information available to different agencies.  On the other hand, you want to know that it‘s easily accessible if you have new people added into that. 

So, yes, the fact that the White House is calling for this review is their way of saying, yes, we realize there is something broken in this system because this guy fell through the cracks, however you want to put it.  Maybe there wasn‘t enough immediate intelligence about him, and maybe the father didn‘t know how much time he had spent in Yemen and all of that stuff.  But clearly, there is a feeling in the White House that the system might not be working as well as it should. 

SCHULTZ:  Chuck Todd, thanks so much for joining us tonight. 

TODD:  You got it.

SCHULTZ:  Chuck Todd reporting from Honolulu tonight, traveling with the president. 

I want to turn now to NBC terrorism analyst and founder of GlobalTerrorAlert.com, Evan Kohlmann. 

Evan, nice to have you on tonight. 

Let‘s talk about sky marshals first.  This is, of course, a traditional line of defense, that someone would be professionally trained on international flights and we‘d be armed so there wouldn‘t have to be civilian heroes. 

Where is the sky marshal program?  We haven‘t heard much about them, and I see now that the president tonight has ordered to have more sky marshals on international flights.

Tell us about it.

EVAN KOHLMANN, NBC TERRORISM ANALYST:  Look, it‘s a good measure.  And of the various different measures that have been suggested in the wake of this attack, I‘d say this is one of the few that might have some ability to have some impact.

But we also have to remember, if this bomb had gone off, if this incendiary device had gone off in the way that Umar Farouk Abdulmutallab had intended, it wouldn‘t have mattered if you had 10 federal air marshals.  You could have had 100 federal air marshals, the plane would have gone down.

The solution here is not just air marshals, it‘s intelligence.  It‘s processing, gathering and interpreting intelligence in a timely matter, sharing it amongst governments, sharing it amongst government agencies, and making sure not to overlook something glaring like this.

I mean, we had just come off of a situation in Pakistan where five Americans were picked up, and we were self-congratulating ourselves for weeks about how we picked up these guys because the parents came forward like good patriots and reported their children to be potential violent extremists, and we saved a potential terrorist attack in progress.  What happened here?  How come that same logic doesn‘t apply here?  Something went very, very wrong. 

SCHULTZ:  You know, what about just person-to-person contact on international flights?  You know, I do a lot of fishing.  I love to go to Canada, and we take our plane into Canada.  We‘ve got to have a manifest, we‘ve got to have names, dates, birth dates, passports, all that stuff.  And then when we land, it may be in Winnipeg or Montreal. 

They meet us on the tarmac with an agent, and sometimes they shake down the airplane and sometimes they just ask you a few questions, but there‘s that personal contact of asking people, where are you going, what are you doing?  How long are you going to be in our country?  When are you going back?  How are you getting back, do you have—a series of questions.

Is that obsolete for commercial air travel in America?  And do the general aviation people just get the shakedown?  What do you think? 

KOHLMANN:  I think one of the problems is, is that we‘ve let down our guard.  I think right after 9/11, and for years afterwards, you saw the flights going into Washington, D.C.  Everyone was told the last half an hour, you can‘t get up. 

There were sky marshals.  You could see them on the planes.  Lately, that just doesn‘t seem to be present. 

And what‘s frustrating about this, the relaxing of the security procedures, is that we knew that al Qaeda and Yemen were developing devices that were being capable of being snuck through this.  They already did it several months ago when they tried assassinating a member of the Saudi royal family. 

(CROSSTALK)

SCHULTZ:  Evan, what‘s your response to Joe Lieberman saying maybe we ought to take a shot at Yemen? 

KOHLMANN:  Well, look, there‘s a solution and then there‘s going way overboard.  Let‘s also remember that the United States is not terribly popular in Yemen.  It‘s already not popular among ordinary Yemenis. 

If we want to win this battle against al Qaeda in Yemen, we have to win hearts and minds, and we have to be very careful that we don‘t do what we did in Pakistan, which is antagonize people with air strikes and continuous intelligence activity to the point where nothing gets done, or we polarize everyone against us.  We have to win the support of the Yemeni population, the tribes in Yemen, if we want to defeat al Qaeda, because, right now, the reason that al Qaeda has found a safe haven in Yemen is because they‘ve established with local tribes.

Break up that alliance, split them.  That‘s how you defeat them. 

I don‘t think that a full-on military campaign in the long term would be a terribly productive thing for us.  We have to walk softly and carry a big stick. 

SCHULTZ:  Evan Kohlmann, great to have you on tonight.  Thanks for your time.  I appreciate it. 

Coming up, one of the most influential members of Congress has signaled that the Democrats are going to cave in on health care reform.  The leader of one of the most powerful unions will respond in just a moment.

And I want to see 2010, you know, this be the year of the comeback for the middle class.  A top economist will give us a forecast and what your wallet could look like a year from now. 

All of that and “Psycho Talk” coming up.

You‘re watching THE ED SHOW, right here on MSNBC.  Stay with us.

(COMMERCIAL BREAK)

SCHULTZ:  Welcome back to THE ED SHOW.

The battle on the Hill continues, and it‘s going to be a dandy.  The Senate‘s version of the health care bill passed on Christmas Eve has a lot of folks, especially big labor—well, they see it as a sellout.  And so do I.

Now the bill moves to the conference committee.  So the House, what are they going to do?  Are they just going to kick it aside or are they going to crack in?  But I‘m worried that this thing might just get rubberstamped. 

Congressman Jim Clyburn is downplaying the public option big-time. 

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  Can you vote for a final health care bill that does not include a public option?

REP. JAMES CLYBURN (D), SOUTH CAROLINA:  Yes, sir, I can, because, why do we want a public option?  We want a public option to do basically three things: create more choice for insurers, create more competition for insurance companies, and to contain costs.  So if we can come up with a process by which these three things can be done, then I‘m all for it. 

(END VIDEO CLIP)

SCHULTZ:  Joining me now for reaction is Andy Stern.  He‘s the president of the Service Employees International Union, which has over two million Americans. 

Mr. Stern, good to have you with us tonight.

There‘s been so much conversation about this upcoming conference committee, a lot of euphoria about the Senate passing this bill.  But it clearly doesn‘t have what labor and wage earners want in this country.

So what are your expectations at this hour, Mr. Stern, going to the next level?  What are your expectations?

ANDY STERN, PRESIDENT, SEIU:  Well, first of all, Ed, I do think it is important to say, there are lots of things in this bill that we should not just set aside -- 31 million more people having health care, closing the doughnut hole for senior citizens, expanding Medicaid, ending pre-existing condition.  But in the end, we want to make sure this bill is affordable, and we‘ve had a series of things that we thought were important—a public option, Medicare buy-in, better subsidies for individuals, and not having state workers or local government workers in New Hampshire pay $8,000 more for the same health care as the members of Congress, and now they want to tax it. 

So there‘s a lot of things that are worth fighting for in conference, and that‘s exactly what we‘re going to do.

SCHULTZ:  OK.  But if it comes out exactly the way it is right now, are you OK with that?  Would you still support all the Democrats that you‘ve supported in the past? 

STERN:  Well, we don‘t think it‘s going to come out the way it‘s been. 

SCHULTZ:  OK.

STERN:  People have sometimes said this bill is dead, sometimes they say it can‘t be improved.  You know, we have a House bill that has a public option, has lots of the things we want.  We‘re in conference committee. 

Our members only knew how to do one thing, which is to keep on pushing, keep on organizing, keep on mobilizing.  We‘ve gotten the bill this far.  We can fix this bill, make it a lot better, and then we‘ll all decide what we want to do. 

SCHULTZ:  All right. 

Are you counting on the president to roll his sleeves up?  There‘s a lot of indication that he is now going to get personally involved and be more involved than he has been.  Are you comfortable with that?  Do you think he will do that? 

STERN:  Yes, I think the president will do that.  I mean, you know, let‘s be fair.  It would have been really easy to take a U-turn or take an exit ramp on this pathway to change, and a lot of people would have been very happy on the left and the right.  The president stuck with it.

We‘re now down to the final moments.  There are issues that he believes in, the House and the Senate believe in about affordability that we need to improve.  And I think that‘s what the president is going to do. 

SCHULTZ:  It doesn‘t sound like you‘re ready to put any pressure on anybody, Mr. Stern.  I mean, I just have to—your answers tonight, respectfully, are you‘re OK with everything, it seems like.  You‘re just going to try to make it better.  And I wonder, what are labor‘s expectations at this point?

STERN:  I think we expect people to make this bill better.  I think we look at the House bill and say that‘s where we need to go.

You know, this is not a time—this is not a spectator‘s sport for our members.  They‘re out organizing, they‘re putting pressure on Congress.  We‘re telling people we‘re going to watch how we vote.  But right now there are big decisions for people like Georgeann Kohler (ph), who started a “Where is My Brother?” on this Christmas Eve campaign because, unfortunately, he died because he simply couldn‘t afford the money he needed for his cardiac care treatment.

SCHULTZ:  OK.  Mr. Stern, great to have you with us tonight.  I can appreciate that.  Thanks so much. 

STERN:  Thank you.

SCHULTZ:  You bet.

Coming up, there are some positive signs our fragile economy is recovering.  People are shopping and jobless claims just dipped.  A top economist will walk us through the new normal and what we face in 2010 in just a moment. 

Stay with us. 

(COMMERCIAL BREAK)

SCHULTZ:  And in my “Playbook” tonight, finally some good news on the economy.  Notice no Republicans are talking about it.

Holiday retail sales are up 3.6 percent from this time last year.  Good news.  And the Labor Department said initial jobless claims fell by 28,000 last week.  That‘s the lowest level since September of 2008. 

Good numbers.  Putting the number at a 15-month low, more good news. 

I sure hope these positive signs are an indicator for something that‘s on the horizon in 2010. 

Joining me now is Peter Morici, who is a former chief economist at the United States International Trade Commission and a professor at the University of Maryland.

Shouldn‘t we be encouraged by this, Peter?  These are numbers we haven‘t had for 15 months.

What do you think?

PETER MORICI, ECONOMIST:  Yes, we are.  We are finally turning the corner.  In fact, we might be at that corner right now. 

I expect in January, February we‘ll have positive jobs growth.  Automobile sales are up.  Appliance sales are doing better.  People are spending more money on discretionary items.  It‘s not going to be a wild blockbuster recovery, but things are getting better.

SCHULTZ:  OK.  And not even half the stimulus has been spent yet, and the money hasn‘t gone to the community banks for small business lending.  With those two big factors out there, we‘re already seeing some positive signs.  I want to feel good about 2010.  Make us feel good about that, Peter.

MORICI:  All right.  Well, I‘ll make you feel as good as I honestly can.

We‘re going to get a lot of traction out of the stimulus money in the first two quarters of 2010.  Growth will exceed three percent. 

You know, we‘d like more than that, but the unemployment rate might not come down, but it‘s not going to rise.  And we‘re going to create more jobs than we lose.

We‘re going to see a good recovery in the Midwest that we haven‘t had in a long time.  It‘s not going to be happy days, but things are going to start getting better.

How do we get all the way home?  Well, the Obama administration is finally going to have to address trade with China and, yes, get money to those community banks so those small businesses can make loans. 

SCHULTZ:  Now, is this—these numbers that we just quoted, better numbers in 15 months, the jobless claims, this is normally how recoveries work, isn‘t it, Peter?

MORICI:  Yes, it is.  And the thing to remember about those jobless claims is this has been a solid trend downward.  This is not just one month, or one week, or what have you. 

SCHULTZ:  Yes.

MORICI:  The same thing with the net jobs position in the monthly jobs report.  So, what I‘m saying is this is solid progress.  It‘s just not as robust as we would like.

And I think to solve that problem, we‘re going to have to loosen up the New York banks and get them to lend money to all those community banks, which is their job.  And we‘ve given them a lot of money to do that. 

You know, they‘ve made a lot of money.  Now they‘ve got to start doing their part.

In addition, the president talks about, and Larry Summers, his adviser, talks about more exports.  Well, he‘s got to come up with a plan to get that done and to get closer to balanced trade with China.  We can‘t balance it all at once, but we have to start paying for more of what we buy from China at the Wal-Mart with stuff that Americans make. 

SCHULTZ:  All right, Peter Morici.  GDP, consumer confidence, unemployment, lending—it‘s going to be a better year in 2010?  Yes or no? 

MORICI:  Absolutely.  Yes. 

SCHULTZ:  I love it.

MORICI:  Absolutely. 

SCHULTZ:  Great to have you on.  Thanks, Peter.  Appreciate it. 

I like good news this time of year. 

Good to have you with us. 

MORICI:  Take care.

SCHULTZ:  Coming up, a top dog at the White House just waved the white flag on the public option.  It‘s got me kind of fired up.  Congressman Jim Moran will be right back to talk about that. 

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

(COMMERCIAL BREAK)

SCHULTZ:  Welcome back to THE ED SHOW.  Thanks for watching tonight.  Good to have you with us.  While the Senate kicks back for a long holiday break, President Obama says he‘s taking a close look at how their bill in the Senate also can be merged with the House version.  If there was ever a time for the president to make a clear commitment to the public option, I would say now or never. 

Congressman Jim Clyburn has already pretty much downplayed it.  And now the head of the Democratic Congressional Campaign Committee really isn‘t making me feel too optimistic about it either. 

(BEGIN VIDEO CLIP)

REP. CHRIS VAN HOLLEN (D), MARYLAND:  We‘re not going to rubber stamp the Senate bill.  On the other hand, we recognize the realities in the Senate.

UNIDENTIFIED MALE:  Is the public option dead? 

VAN HOLEN:  It‘s not dead.  But we also recognize that the Senate was able to just muster the 60 votes. 

(END VIDEO CLIP)

SCHULTZ:  I want to know who, if anyone, is going to be the fighter out there for the real reform, when they get behind and get behind closed doors next year, when they come back.  Joining me now is true fighter, Democratic congressman from Virginia and a member of the Progressive Caucus, Jim Moran. 

Jim, good to have you on tonight.  Hope you had a nice holiday season. 

Thanks for working on a Monday here when it‘s your vacation. 

REP. JIM MORAN (D), VIRGINIA:  Good to be with you on the holidays. 

SCHULTZ:  You bet.  Congressman, what do you see coming out of the merged bill?  Is the Senate going to rule on this?  What do you think? 

MORAN:  Well, I certainly hope not.  And I don‘t think so.  I think that the biggest issue that will make the most difference for the most people is the insurance exchanges.  If we can have national exchanges, where the insurance companies can‘t cherry pick by going outside the exchange, finding the younger and healthier workforces, forcing the older and sicker workforces into the exchange—that is what they‘ve done with the other states, where they‘ve tried it.  So it‘s been a failure. 

You need to put everybody, have the largest pool possible into national exchanges.  Do it the way we do the Federal Employees Health Benefits, the Congressional Health Insurance works that way.  It works well.  You‘ve got to have competition.  It‘s got to be in the exchange.  And the federal government has got to play a role. 

If you do that, I really think we can drive down costs, and we‘ll get everybody insured.  That‘s the objective.  I‘d much rather have a public option.  I think you need that competition.  Chris and Jim are smart.  And I agree with them, we should lower expectations.  But I think the speaker is going to push for the public option.  I hope and trust that the president will as well. 

I don‘t think it‘s dead, but we ought not raise it up there.  And if we don‘t get it, then it‘s a failure.  Because it‘s not a complete failure if we don‘t have it. 

SCHULTZ:  All right.  Well, we‘ve got to have the competition or I think we can debate whether it‘s a failure or not.  That mechanism has to be in there.  Let‘s talk about the president.  This is the president on PBS just a few days before Christmas.  Here‘s what he said. 

(BEGIN VIDEO CLIP)

OBAMA:  I‘ll be rolling up my sleeves and spending some time before the full Congress even gets into session, because the American people need it now.  I intend to work as hard as I have to work, especially after coming this far over the course of the year, to make sure that we finally close the deal. 

(END VIDEO CLIP)

SCHULTZ:  Are you comfortable that President Obama is going to, quote, roll-up his sleeves and get involved and get the best that he can possibly get? 

MORAN:  Ed, I believe him.  I do think that there are people in the White House, Ed, that feel that the bottom line is that they get a health care reform bill by that name.  The contents fully are negotiable.  And I‘m not sure that they really think that the content matters as much as the achievement of the bill itself. 

I think the president is more substantive than that.  I think he wants a bill that he can be proud of.  As he said, he‘s got to run on in 2012, before it‘s fully implemented.  So it means a lot to him.  This is his legacy.  And I think he wants the kind of bill that Ted Kennedy would have insisted on.  And my money is on Barack Obama. 

SCHULTZ:  Your money is on Barack Obama? 

MORAN:  Certainly my political career is and that of the Democratic party.  He‘s got to prevail.  But you‘ve got to keep up the pressure.  They pay much more attention to what is said on MSNBC, particularly shows like yours, than on Fox or something like that.  You know that. 

SCHULTZ:  Well, look, they know where I‘m coming from.  The White House is so mad at me that, they don‘t talk to me anymore. 

MORAN:  Well, I think they‘re madder at Howard Dean than you.  But—

SCHULTZ:  This is about holding people accountable.  And I know that there‘s going to be a lot of disappointed people in this country, outside the Beltway, that don‘t understand all of this process.  And they want to see some fighters down the stretch.  And they want to see some real mechanism and some real change. 

That isn‘t to say that this bill doesn‘t have some good things in it.  It does have some good things in it.  But this is—I think you‘re going to find a lot of Democrats in this country, progressives, who aren‘t real sure that the sleeves are going to be rolled up when it‘s time to do that. 

MORAN:  You know what I want to know, Ed?  I want to know when you‘re going to run for the US Senate.  That‘s what I want to know.  We need people like you in the senate.  We need to get rid of the dam filibuster, and make it a more representative body.  That‘s what we need.  You‘ve got to keep up the pressure for us, my friend. 

SCHULTZ:  I‘ll keep the pressure up here.  But do you realize how that would cut into my fishing and my hunting?  Do you have any clue how the whole thing -- 

MORAN:  Not to mention your salary.

SCHULTZ:  Jim Moran, have a great holiday.  I appreciate your time tonight.  That‘s really what we‘re looking for right now over here on the left.  We want to know who the fighters are going to be.

Joining me now is columnist for “The Hill” Brent Budowsky.  He‘ll give us a pretty straight answer on that.  Brent, great to have you on tonight.  You have been vocal throughout all of this.  What are your expectations of President Obama‘s leadership.  You saw that sound-byte.  He says he‘s going to roll-up the sleeves.  I‘m not sure what that means right now.  What do you think? 

BRENT BUDOWSKY, “THE HILL”:  I agree with Jim Moran that you ought to move to Connecticut and run for the Senate.

SCHULTZ:  Stop it.  No.  It‘s not going to happen.  I wouldn‘t want that job.  No way.  Look, I feel very comfortable doing what I‘m doing here.  I love interacting with the people.  I think there is a lot of people in this country that listen to the progressive voices, that pay attention to the blogosphere, the progressive websites.  They want to be heard.  And when the president says he‘s going to roll-up his sleeves, I think there‘s a lot of people saying, OK, what does that mean?  The president is going to roll-up his sleeves.  What does that mean?  What do you think it means? 

BUDOWSKY:  Let me do some truth telling.  I said on this show, probably two months ago, that I thought the president, at that point, had already signaled he was going to surrender on the public option.  I thought it then.  I think it now.  I believe it‘s unfortunate.  I regret it.  But that‘s the honest truth about what I see happening. 

I regret that we‘re seeing some of our friends on the Hill announce concessions or backing off without getting anything in return.  I think that‘s a problem that the president has, a problem that Democrats have.  They‘re bad negotiators.

Let me tell you where we are strong and where the leverage is.  Number one, we can pass a version of the Dorgan amendment on the drug imports for lower price.  We have a lot of Republican support.  We can get it in conference and if we cannot get it in conference, we can pass it and threaten to pass it as a separate bill, because we will get 65 or 70 votes in the Senate.  And that is what the Pharma companies like the least. 

Point two, the Senate bill allows price fixing by insurers.  It‘s unbelievable.  The House bill repeals the anti-trust exemption that the insurance companies have.  The Senate bill continues it.  It‘s the Ben Nelson Pricing Fixing amendment Act is what‘s in the Senate.  I think we can win that one on the Senate floor with 65 or 70 votes in the House.  That is the thing that the insurers hate the most. 

If we do a full-court press again on those two issues, we might have a chance of the insurers and the Pharmas going to Ben Nelson and going to Joe Lieberman, their guys, and saying, maybe you ought to make a deal on the public option.  It won‘t come from Obama.  It might come from the Progressive Caucus in the House.  And it could come from that kind of the strategy.  Those two issues we can win and those two issues give us leverage.

SCHULTZ:  How do you view Harry Reid‘s leadership throughout all of this?  He‘s had to balance the White House.  He‘s had to balance conservative Democrats.  He‘s had to keep the progressive caucus motivated and together.  I think Harry Reid has done one hell of a job, all things considered. 

BUDOWSKY:  I agree.  I have a letter in the “Washington Post” today saying he‘s going to go down in history for acts of legislative leadership.  Here‘s the bottom line: once the president telegraphed he was going to give up things two or three months ago, he totally undermined Reid‘s leverage with Lieberman and with Nelson.  That‘s the truth about what happened. 

What Reid did was make the deals he had to make to get a bill passed.  It was a spectacular example of leadership.  The bad things that were put in for those guys, Ed—I want to remind everybody—they are not in the House bill.  They can be taken out again.  And we still have that leverage.  But I think Harry Reid did a miraculous job and should be applauded. 

SCHULTZ:  Brent Budowsky, great to have you with us tonight.  Thanks so much.  Appreciate you coming in.   

Joining me now on our panel tonight is going to be Democratic strategist Todd Webster is with us, and also Republican strategist Karen Hanretty.  I want to revisit our top story tonight, and that is, of course, the security watch that‘s going on in this country.  I want to talk about what do we do with airlines and security? 

It would seem to me, Karen, that this just is not a right-left, Republican-Democrat issue, but we have a number of people in the Republican party that seem to be politicizing this. What am I missing here? 

KAREN HANRETTY, REPUBLICAN STRATEGIST:  No, Ed, you‘re so right.  This is not left-right.  The transportation authority in America since 9/11 has been a complete joke.  It didn‘t matter if it was the Bush administration, the Obama administration, or the next upcoming administration.  This idea that they don‘t actually just enforce the laws that are on the books—they don‘t look at their own terrorist watch lists. The rest of us—I guess if you‘re an innocent traveler, if you‘re a tourist and you‘re inconvenienced, bureaucrats seem to think the more inconvenient you are, the safer you feel.  This is just about making people feel safe, not actually making people safe. 

And I think—I don‘t think the American public looks at it as partisan, either.  I think the real frustration, maybe on the right, is that, on the broader scope, does the president look at this bomb attempt as an act of terrorism, or is this just another criminal act, much like I believe he viewed the Ft. Hood shooting as—

SCHULTZ:  I believe the White House did say that it was a terrorist attempt.  I think they‘ve very clear on that.  Here‘s what I think—here‘s what I think we‘re losing in this country: when we were hit on September 11th, 2001, the country was behind President Bush.  Now this was a close call.  Americans could have died.  Todd Webster, why is it that the Republicans are just bent—political operatives who are against this president are just bent on coming out and criticizing, instead of saying, OK, what can we do to make this better?  It‘s always destructive instead of constructive? 

TODD WEBSTER, DEMOCRATIC STRATEGIST:  I think they almost can‘t help themselves.  It is the—it is trying to make everybody about Obama‘s Waterloo, recognizing that he is a uniting figure, that he spent six months trying to get Republican help on the health care bill.  At the end of the day, not a single Republican supported the Democratic health care bill.

But I think on the terrorist watch list, absolutely there were failure.  I don‘t know that we need to be beating up TSA agents.  What I think we ought to be doing is giving them more discretion.  The Millennium Bomber, who was caught in 2000, who was going to Los Angeles to blow up a sight in LA for the year 2000, was caught by an alert customs agent.  So what we need to do—

SCHULTZ:  There are a lot of good agents out there.  There are a lot of good agents out there.  I don‘t want to impugn all of them.  The fact is hat I fly a lot.  We fly a lot.  We got through airports.  I know the stimulus package bought them brand new blue shirts and they all look better in their uniforms.  The fact is, you can go to an airport and see a lot of TSA people who act like they don‘t give a dam.  Look, I‘m not a problem.  Strip me down.  Put me through any machine you want me to go through.  But don‘t hold me up.

WEBSTER:  Let‘s take a lesson from the Israelis.  You go to Tel Aviv, they know how to do airline security.  They do that by—

HANRETTY:  Profiling.

WEBSTER:  I don‘t know if it‘s profiling, but it‘s having an interaction between the agent and the passenger. 

HANRETTY:  And they profile.  I traveled to Israel this summer as well.  That‘s right, there‘s a lot more interaction.  But I tell you one thing, I didn‘t have to take my shoes off.  I didn‘t go through all of this nonsense of you have to take your lipstick out of your handbag, put it in a little zip-lock bag.  They don‘t mess around with that stuff.  They‘re going to go through and they‘re going to pro-life. 

And this would not have happened in an Israeli airliner.  We‘ve got to get rid of political correctness.  We had it with the Ft. Hood shooter. 

SCHULTZ:  How about just getting a machine that I can walk through fast?

HANRETTY:  You don‘t need those machines.

(CROSS TALK)

HANRETTY:  You had this guy on a watch list.  He‘s completely ignored.  The embassy completely ignores his father, who says, hey, you better keep an eye on my son.  Can you imagine writing a letter like that about your own son, saying, hey, I think this guy is actually a threat to security?   

SCHULTZ:  I think the human due diligence is really important. 

(CROSS TALK)

HANRETTY:  That‘s not the Obama administration‘s fault.

SCHULTZ:  Well, no.  It‘s not.  Well, this did not originate on American soil.  And beating up the Obama administration over this isn‘t going to get us anywhere.  That‘s why I take issue with Peter King and Peter Hoekstra.  That‘s not moving us any—

(CROSS TALK)

SCHULTZ:  That‘s true.  She screwed up, too.  There‘s no doubt that Janet Napolitano went too far.  They are trying to put a good face on it early on.  The fact is, we are not having the due diligence and the human contact that we‘ve got to have to make this work in this country.  We pay an awful lot of taxes.  We ought to get something better than that.  Good to have you with us.  Got to run. 

Coming up, while Cheney was decorating his bunker for Christmas, one of his former attack dogs barked out some major lies on terrorism.  We‘ve got that coming up in Psycho Talk.  Stay with us.

(COMMERCIAL BREAK)

SCHULTZ:  And in psycho talk tonight, former Dick Cheney mouthpiece Mary Matalin, well, she‘s back at it on CNN this weekend.  Mary was attacking President Obama for blaming his problems on the train wreck that President Bush Junior left him when she came up with this whopper!

(BEGIN VIDEO CLIP)

MARY MATALIN, FMR. CHENEY ADVISER:  I was there.  We inherited a recession from President Clinton, and we inherited the most tragic attack on our own soil in our nation‘s history. 

(END VIDEO CLIP)

SCHULTZ:  First of all, that recession started in March of 2001.  That‘s two months after Bush took office.  And as far as inheriting the 9/11 attack, Richard Clarke tried to warn folks in the White House that something was on the horizon, something was coming.  You guys flat out ignored him.  Then you guys got that August 6th memo.  Remember that one?  I think it was something like, “Bin Laden Determined to Strike in US.” 

That was ignored as well. 

Mary, the Bush administration did not inherit the 9/11 attacks from Clinton.  Actually, what you did inherit was 22 million jobs, plus a budget surplus.  Claiming that the Bush administration inherited the worst attack on US soil is revisionist history‘s at best.  But I really do think that it‘s just plain, dirty psycho talk. 

Coming up, the Republicans, they just keep on coming, don‘t they?  Congressman Peter Hoekstra says that President Obama has understated the terrorist threat we face as a country.  Michael Medved and I will face off on that in just a moment coming up on THE ED SHOW.  Stay with us.

(COMMERCIAL BREAK)

SCHULTZ:  Welcome back to THE ED SHOW.  Well, it sure didn‘t take the righties very long to politicize the failed terrorist attempt over Detroit on Christmas.  They just couldn‘t wait to get out in front of the TV cameras on Sunday morning; what‘s wrong with our security in this country?  Here‘s is Congressman Peter Hoekstra pointing the finger at the president on Fox News. 

(BEGIN VIDEO CLIP)

CHRIS WALLACE, FOX NEWS ANCHOR:  Is it really fair to hold the Obama administration responsible here?   

REP. PETER HOEKSTRA ®, MICHIGAN:  Yes, I really think it is.  Because I think connecting the dots here is necessarily on in this particular case.  It‘s connecting the dots that we‘ve seen over the last 11 months, over the last eight years. 

What do we have here?  This is an international movement of radicalization.  All right?  The Obama administration should have came in and said we‘re not going to use the word terrorism anymore.  We‘re going to call it man-made disasters, trying to downplay, I think, the threat from terrorism.

(END VIDEO CLIP)

SCHULTZ:  Joining me now is nationally syndicated radio talk show host Michael Medved, who is a staunch conservative, but we seem to have good, realistic conversations.  I hope we have one here tonight.  Michael, what could the president of the United States have done to stop this effort by this foreign national to try to kill Americans on a flight that was coming into the United States?  I mean, why is it that—and this happens with Democrats as well.  I‘ll give you that.  Why is it that every time something like this happens, we have to go through the political comments, those that you just heard by Peter Hoekstra, who, by the way, is on Homeland Security Committee?  Why do we have to go down that road?  Why can‘t we just take the approach, what can we do to correct this and make it better to protect Americans?  Your thoughts? 

MICHAEL MEDVED, RADIO TALK SHOW HOST:  I agree with you on that.  Ed, I do.  But I thought that the president‘s statement this afternoon was very revealing.  Because what the president did is he gave two parts of a statement, one about Iran and one about what he was going to try to do to review our security procedures.  But he never connected them.  I think what Congressman Hoekstra is saying—and I think he‘s right about this—is that what we haven‘t had from President Obama is a very clear expression of the fact that this is a global struggle.  It‘s a global struggle against radical jihadism, which is every bit as serious as the struggle against communism or the struggle against fascism before. 

SCHULTZ:  OK, Michael, let me get this straight.  You think that the president of the United States does not understand that this is a global struggle, after he committed—

MEDVED:  He does understand it.  But he won‘t say it.

SCHULTZ:  What does he have to say?  The fact is that we are pouring all kinds of resources into protecting this country.  The moment something happens like this, all of a sudden it‘s Obama‘s fault.  When are we going to get out of that? 

MEDVED:  No, again, I don‘t think any reasonable person would say that this is Obama‘s fault.  But President Obama should pick up all these strands that are around us right now, including the Ft. Hood massacre, including the five Americans arrested in Pakistan, including the averted terrorist attacks in Chicago, Miami, Denver, and in North Carolina, for goodness sakes, and say, look, what we‘re dealing with here is not isolated criminal acts.  It‘s a criminal ideology.  Iran is part of it.  Today in a statement about Iran, he said we have to bear witness to Iran.  We don‘t have to bear witness.  We have to get serious about them. 

SCHULTZ:  Is it credible to throw out the idea of bombing Yemen?

MEDVED:  No.  As a matter of fact, it is credible because we did.  The

Yemeni air force did with American help.  Apparently, the Yemeni air force,

with American help, was going after this guy, Anwar al Awlaki, who inspired

--

SCHULTZ:  I just wish they would get their lists squared away. 

Michael, good to have you with us tonight. 

Tonight, our text survey, I asked our audience, do you want to air marshals on every flight that travels in and out of the United States?  Eighty percent of you said yes; 20 percent said no. 

That‘s THE ED SHOW.  We‘ll see you tomorrow night.  Chris Matthews and” HARDBALL” is next right here on the place for politics, MSNBC. 

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

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