updated 12/31/2009 11:58:08 AM ET 2009-12-31T16:58:08

Guests: Matt Nesto, Gerald Posner, Michael Duffy, Steve Kornacki, Jonathan Martin,

Clarence Page, Michael Isikoff, Joan Walsh, Ron Christie

CHRIS MATTHEWS, HOST:  Troll man.

Let‘s play HARDBALL.

Good evening.  I‘m Chris Matthews in New York.  Leading off tonight:

Attack dog.  Dick Cheney‘s back at it again.  He‘s joined the right-wing attack pack in blaming President Obama for being responsible for the attempted Christmas Day plane bombing.  Cheney says the president is pretending we‘re not at war with terrorists.  The most striking thing about Cheney‘s holiday attack is that he‘s more interested in condemning the president of the United States than he is of condemning al Qaeda.  The man knows his enemy.

People living in the real world, meanwhile, are trying to figure out why the warning signs were missed here.  Isn‘t this the way the National Counterterrorism center was established after 9/11?  Isn‘t this why the director of national intelligence was created, to connect the dots?  The more we learn about the planned attack, the more we realize that clues were there.  Why were they missed?  The more vital question, how many are now being missed right now?  How many dots are not being connected now that need to be connected to save us from further danger?

Also, the biggest lies of 2009.  See if you can guess how high Sarah Palin comes in.

Plus: At the start of the decade, could we ever have imagined that the United States would have an African-American president or that the country had moved this far in accepting gay marriage?  We‘ll look at some of the biggest political changes over the past 10 years and at the challenges and opportunities they present to both political parties.

And finally, which public figure would Americans most want to live next door?  Well, that‘s in the HARDBALL “Sideshow.”

We start, however, with the security blame game.  You have to call it that.  Ron Christie is a Republican strategist and former aide to Dick Cheney.  We‘ve got to read a statement here from the former vice president.  He got up the other day, or I guess it was early today, and released this statement.  And I guess he wants us to read it aloud because it‘s something that he obviously put pen to paper so that we all would do just that.

This is the former vice president of the United States, Dick Cheney.  Quote, “As I‘ve watched the events of the past few days, it is clear once again that President Obama is trying to pretend we are not at war.  He seems to think if he has a low-key response to an attempt to blow up an airliner and kill hundreds of people, we won‘t be at war.

“He seems to think if he gives the terrorists the rights of Americans, lets them lawyer up and reads them their Miranda rights, we won‘t be at war.  He seems to think if we bring the mastermind of 9/11 to New York, give him a lawyer and a trial in civilian court, we won‘t be at war.  He seems to think if we close Guantanamo and releases the hard-core al Qaeda-trained terrorists still there, we won‘t be at war.  He seems to think if he gets rid of the words ‘war on terror,‘ we won‘t be at war.

“But we are at war, and when President Obama pretends we aren‘t, it makes us less safe.  Why doesn‘t he want to admit we‘re at war?  It doesn‘t fit with the view of the world he brought with him to the Oval Office and doesn‘t fit with what seems to be the goal of his presidency, social transformation, the restructuring of American society.  President Obama‘s first object and his highest responsibility must be to defend us against an enemy that knows we are at war.”

Could you, Ron Christie, as someone who has served the vice president and remains totally loyal to him, explain to us why he comes out of wherever he lives, gets to a word processor and puts all those words together to say over and over again what the president seems to think is that we‘re not at war with terrorism?  What does he mean by that?

RON CHRISTIE, FORMER DICK CHENEY AIDE:  Well, good evening, Chris.  I think the vice president‘s statement speaks for itself.  I think if you go back—and I think it was very wise, the way that you started this segment, of connecting the dots.  President Obama, when he was on the campaign trail, was very strong about prosecuting the war on terror.  When he came in, immediately the war on terrorism vernacular disappeared from the president and his officials.

You had the secretary of homeland security saying that we‘re dealing with overseas man-made contingency operations.  You move forward later into the year, you had Guantanamo Bay, which President Bush also wanted to close but recognized that bringing enemy combatants and terrorists onto American soil would convey certain constitutional rights, Miranda rights, habeas corpus petitions, that would transform that from a war footing to a civilian footing.

And then you get this latest incident, Chris, where President Obama was on vacation.  There was a Muslim radicalized individual who tried to blow up an American airliner on Christmas Day.  The president‘s response was muted.  And again, he came out and said the “alleged” attempt and “the suspect.”

And I think that there are people—Dick Cheney, a number of politicians, Peter DeFazio, a Democrat from Oregon, Maureen Dowd from “The New York Times,” Ruth Marcus from “The Washington Post”—who look at President Obama‘s reaction throughout the entire year and say, Is he showing the emotions, is he showing the fight and the vigor to fight a war on terrorism, rather than transform this into a civilian prosecutorial matter?  I think that‘s where Dick Cheney was coming from with his statement this morning.

MATTHEWS:  Joan Walsh is editor of Salon.  Joan, your thoughts on what Cheney‘s up to here with this language of his?  I read the entire statement, I believe, for the record here.  What do you make it?

JOAN WALSH, SALON.COM:  I think he‘s reached a new low, Chris.  But one thing I want to say in response to Ron—I mean, President Bush stayed on vacation, didn‘t make a single statement about the shoe bomber incident in 2001 for six days, and then he made an off-hand reference at a press conference.  So the double standard here is outrageous.

Now, on the Cheney remarks, first of all, I think he needs to get Sarah Palin to show him how to use FaceBook.  Then he wouldn‘t have to go to Politico and use it as his personal billboard so that he gets his point across and he gets his lies across.

Lie number one: Obama is pretending we‘re not at war.  That‘s ridiculous.  Obama is bogged down in a Cheney war in Iraq.  He‘s escalated in Afghanistan.  He‘s escalated in Yemen, as well as in the tribal areas of Pakistan.  The man knows we‘re at war.

And you know, there—if you‘re going to play the blame game, two of the Yemeni plotters that worked with Abdulmutallab actually were released from Guantanamo by the Bush/Cheney administration.

So this is really foul.  This is really foul behavior on the vice president‘s part.  And it‘s just—it shouldn‘t be surprising, but it is a little bit surprising, it‘s just so beyond the pale.

MATTHEWS:  Let me ask you, Ron, about the statement that—do you want Obama, the president, to act like he‘s Mussolini, to walk around with a big chin stuck out, to act like he‘s matching the zealotry of our enemies, to engage emotionally, as they do, those who sit, those thousand or so people out there who plot against us?  Do you want him to act like them?  Is that what you want?  In other words, he must act like he‘s zealously involved in a war for you to be convinced he knows we‘re at war.

CHRISTIE:  Chris, I don‘t...

(CROSSTALK)

MATTHEWS:  ... want from him.

CHRISTIE:  I don‘t want him to act zealously.  I want him to show some emotion...

MATTHEWS:  You say he‘s not showing the right emotion.

CHRISTIE:  He‘s not showing the right emotion.  And it‘s not a Republican attack or a Ron Christie attack.  Look what Maureen Dowd said in “The New York Times”...

WALSH:  Oh, please.

CHRISTIE:  ... this morning.  She said that he appeared like Dr.

Spock, this sort of—you know, a little bit detached...

MATTHEWS:  It‘s Mr. Spock.

CHRISTIE:  ... aloof.  And I think, Chris...

WALSH:  Mr. Spock.

CHRISTIE:  ... frankly, this is a time of war.  As much as Joan and as much as many on the Democratic left don‘t like to admit it, we are dealing with very serious issues right now.

WALSH:  Ron, I admit that!

CHRISTIE:  And Americans are looking...

WALSH:  When in God‘s name...

CHRISTIE:  Joan, I didn‘t cut you off!

WALSH:  ... did I ever...

CHRISTIE:  Excuse me!  We are looking...

WALSH:  But you just made few (INAUDIBLE) accusations.

CHRISTIE:  Excuse me, Joan.  We are looking for the president of the United States on Christmas Day—when you have a radicalized Muslim trying to take down an American airliner or Christmas Day—to reassure the American people.  I think he could have come out and said, We‘re assessing the facts.  We‘re assessing the situation.  We‘ll get back to you.  But I think that‘s what all Americans, not Republicans or Democrats...

MATTHEWS:  OK, you haven‘t responded...

CHRISTIE:  ... but Americans want from their president.

MATTHEWS:  ... to the double dealing charge against you personally, sir, that you have a different attitude about President Bush and President Obama.  President Bush took six days, according to the record, to respond to the shoe bomber.  The president we have now, our president, took three days or 72 hours, I believe it was.

What‘s the difference in the way you score this?  You seem to score it differently—is there is bell curve for Republicans...

WALSH:  Really!

MATTHEWS:  ... where they‘re given more time?  Is this the Katrina rule, where if it‘s anything faster than a week, it‘s somehow Speedy Gonzalez here?

(LAUGHTER)

CHRISTIE:  Chris...

MATTHEWS:  I mean, why do you give credit to Bush for six days you don‘t give to this president for three days?  What‘s your scorecard, sir?

CHRISTIE:  I‘m not looking at a scorecard, Chris.

MATTHEWS:  Well, what are you looking at?

CHRISTIE:  I‘m looking at connecting the dots.  If you go back to Major Hasan Nidal (SIC) this past summer...

MATTHEWS:  You‘re changing the subject.

CHRISTIE:  ... the shooting at Ft. Hood...

MATTHEWS:  Why does Bush get six days?

CHRISTIE:  No, no, Chris!  No!  I‘m going to actually answer this question.  Again, we had a very tepid response from the Obama administration initially.  First they said everything was under control.  Then they said it was an isolated incident.  Then we come forward to the Christmas incident.  Chris, the difference is one thing and one thing only, Christmas Day is one of the most holiest day in the Christian religious faith.

MATTHEWS:  Yes.

CHRISTIE:  This was a radicalized Muslim who tried to kill 300 Americans on Christmas Day.  I wanted my president to come out and say, We recognize this is an act of terror by a radicalized Muslim on Christmas Day...

WALSH:  That‘s ridiculous.

CHRISTIE:  ... and we have the situation under control.

MATTHEWS:  Why did he have to say “radicalized Muslim”?  Why is that lingo so important to you?

WALSH:  Richard Reid was a radicalized Muslim three days before Christmas.  I had relatives flying in.  It was 2001.  I was actually scared to death at that point.  So were a lot of Americans.  But nobody thought to bray about President Bush staying on his vacation because that wasn‘t the climate at the time.

The climate right now is that Republicans use everything they can to undermine and delegitimize this president.  And it‘s actually un-American.  It‘s traitorous, in my opinion.  Do you want to give aid and comfort to our enemies?  Continue to treat this president like he wasn‘t elected and he doesn‘t know what he‘s doing!  He knows what he did.  He knows what he‘s doing.  I‘m proud of him.  I believe that he has the stalwart, resolute nature to get this done.  In my opinion, sometimes he goes too far, but to talk about him like he‘s some socialist out-to-lunch...

MATTHEWS:  OK...

WALSH:  ... is just outrageous!

MATTHEWS:  Ron, here‘s my concern, and I don‘t limit this to Dick Cheney, your old boss, the man you‘re loyal to, but I do think he‘s part of this problem.  I‘ve been reading the New York tabs today.  I‘m up here in New York.  And I have to tell you, every person on the right has used this attack or this attempt on our lives, on that plane, to go through their checklist of wars they‘d like to start.  Some people want to go to Yemen.  This guy, Michael whatever his name is, in “The New York Post” wants to go to war in Iran now.

WALSH:  Always.

MATTHEWS:  He says this is grounds for regime change.  You know what

that means.  That means go to war again.  These guys on the right are dying

for an all-fronts war on Islam.  Every country they want to go to war with

well, Michael Ledeen, let‘s go to war in Syria, let‘s go to war with Iran, now it‘s Yemen.  They want an all-front war with the billion-person Islamic world.  That‘s what our enemy wants to start.

WALSH:  Right.

MATTHEWS:  Doesn‘t anybody get it on the right that what the enemies of America want is an Islamic war against the United States, a million people forced to choose between East and West?  That‘s what they want, and your guys sometimes sound like they want it, too.

WALSH:  Really.

MATTHEWS:  Does Dick Cheney want an all-out war with Islam?  Is that what he wants?

CHRISTIE:  Well, of course not, Chris, and...

MATTHEWS:  Well, then, why does he talk like this?

CHRISTIE:  Chris, I think the notion that we need to recognize...

MATTHEWS:  You just did it yourself.  You had to throw the shot...

CHRISTIE:  Chris...

MATTHEWS:  ... at the guy‘s religion on Christmas.

CHRISTIE:  Chris—Chris, let me...

MATTHEWS:  What‘s the point?

CHRISTIE:  Chris, let me answer the question.  The question that needs to be answered here and the recognition that we need to have is that there are radical elements from the Islamic faith that have been at war with the United States...

MATTHEWS:  Right.

CHRISTIE:  ... since 1979.  You go through the shah...

MATTHEWS:  Right.

CHRISTIE:  ... you go through the fall of the shah, you go through the embassy hostage taking, you go through the embassy bombings in 1998, you go to the USS Cole in 2000, you go to the World Trade Center...

MATTHEWS:  OK, so what do we do about it?

CHRISTIE:  ... in 2003 -- what we need to do is we need to seek out those who are trying to kill Americans, our way of life, our democracy, our freedom...

MATTHEWS:  Right.

CHRISTIE:  ... and we need to take the fight to them.  And I think...

MATTHEWS:  And we‘re not doing that?

CHRISTIE:  ... that‘s what conservatives are doing—that‘s what conservatives want to do and conservatives are very, very...

MATTHEWS:  Well, wait a minute.  Let me get straight...

CHRISTIE:  ... concerned—yes?

MATTHEWS:  Who‘s the secretary of defense?

CHRISTIE:  Who‘s—well, Chris, you know who the secretary of defense is.

MATTHEWS:  It‘s Robert Gates.

CHRISTIE:  It‘s Robert Gates.

MATTHEWS:  OK?  So you‘re not exactly...

CHRISTIE:  Who is a Republican holdover.

MATTHEWS:  ... had—you know, we haven‘t had exactly Mother Teresa take over our country...

CHRISTIE:  Well...

MATTHEWS:  ... and assume (ph) an end to war.

CHRISTIE:  Chris, I think Republicans...

MATTHEWS:  We‘ve got—we‘ve got Gates.  We‘ve got General Jones...

(CROSSTALK)

MATTHEWS:  Go ahead, Joan.

WALSH:  And Abdulmutallab got his American visa under Bush/Cheney.  He traveled back and forth to Yemen under Bush/Cheney.  He could have been caught years ago.  I‘m not blaming them.  I don‘t think all the signs were there.  But this is a bipartisan problem.

MATTHEWS:  I know.

WALSH:  And the Bush/Cheney administration didn‘t keep us safe from this young man from Nigeria...

MATTHEWS:  OK...

WALSH:  ... in the years...

(CROSSTALK)

CHRISTIE:  That is absolutely absurd!  And Chris, we recognize, of course, that the CIA knew that this individual wanted to come to the United States.

MATTHEWS:  We‘re going to get to that in the show tonight.

CHRISTIE:  There was a breakdown in the system.

MATTHEWS:  We are getting to the points of catching the bad guys here.  Here‘s my problem with the way this is being politicized here by your side of the tracks.  And here‘s the problem.  I understand that the two guys over in Yemen right now that basically were this guy‘s control, that were feeding this guy, were released from Gitmo under Bush.  One of them was released to go back for something called art rehabilitation.  We could play this game of making fun of this.  He‘s doing his paint by numbers back there.  It‘s a joke.  But we all know it‘s an imperfect science, trying to figure out who the bad guys are and which ones to release and which ones to deal with permanently.

But the Democrats at least don‘t make a big joke out of this and say how your side are Willie Hortons and you‘re the bad guys because you let some guy go back to Yemen who may be the control guy for this guy who tried to blow up the plane over Detroit.  They‘re not playing that cheap shot political game that the Republicans like Cheney are playing.  That‘s my point.  Your response?

CHRISTIE:  Well, and my response to that is...

MATTHEWS:  Cheap response because no Democrat is out there saying, Bush let these guys go back in his watch, you know, or whatever.  I mean, what‘s the point here?  It‘s just cheap politics by Cheney.

CHRISTIE:  And again, I think the point here, Chris, is that we need to...

MATTHEWS:  Why doesn‘t he retire?

CHRISTIE:  We need to—we need to...

MATTHEWS:  He‘s out of office.  Why is he still in our face?

CHRISTIE:  The reason...

MATTHEWS:  Why is he—does he have a robo room?  Where does he—where does he release all these statements from?

(LAUGHTER)

MATTHEWS:  Most people don‘t have a room in their house to issue statements.

WALSH:  He‘s planning the neocon...

CHRISTIE:  Chris—Chris, let me...

WALSH:  ... restoration.

CHRISTIE:  ... let me—let me answer...

MATTHEWS:  I think he is.  I think the American Enterprise Institute...

CHRISTIE:  Let—let me answer...

MATTHEWS:  ... and all the other clowns over there...

CHRISTIE:  Let me—let me answer that...

MATTHEWS:  ... are waiting for their chance.  Go ahead.

CHRISTIE:  Let me answer your question, Chris.  The important thing here is that we don‘t need to make this a political issue.  We do need to recognized that radicalized Islam is at war with us.  We need to take the steps necessary to protect the country.

MATTHEWS:  Yes.

CHRISTIE:  Republicans welcome the opportunity to work with President Obama and the senior leadership in the Congress to make sure that we don‘t have a situation where we‘re going to try to close Guantanamo Bay for political reasons, not have a viable alternative in place where these people...

MATTHEWS:  OK, let me ask you a question, Ron...

CHRISTIE:  ... can be released in the United States...

MATTHEWS:  Real simple opportunity on this holiday season.  Whose fault was it, the Democrats or the Republicans, that this character got on that plane and this character tried to blow it up?  Is either party, political party, responsible?  Just answer my question?

CHRISTIE:  I‘m—I‘m not going to...

MATTHEWS:  Is either political party responsible?

CHRISTIE:  I‘m not going to say the Democrats or the Republicans are at fault for this.  It‘s a system that has failed the American people.

MATTHEWS:  OK, thank you for that.

CHRISTIE:  The system failed us.

MATTHEWS:  You‘re not like your old boss because he‘s just blamed the Democrats.  Thank you—at least you‘re not a complete flack, Ron.  Thank you, sir.

CHRISTIE:  I‘m an honest broker, Chris.

(CROSSTALK)

MATTHEWS:  You‘re not a complete flack.  Thank you, sir.

CHRISTIE:  Honest broker.

MATTHEWS:  Joan Walsh, as always, thank you for coming.  Happy new year to both of you fellows.

WALSH:  Happy new year.

CHRISTIE:  Happy new year, Chris.

MATTHEWS:  Happy new year to Ron.  You‘re seeing the religion.  It‘s neither party‘s fault.

Coming up: As more details of the terror attack are exposed, it‘s clear now that all the clues were there.  In fact, a lot of them were there.  Wait until you hear all the clues.  We‘re going to go through them.  The CIA knew there was a Nigerian working with al Qaeda over in Yemen.  The father of the Nigerian warned our embassy, and the CIA got the word.  So the CIA knew all about this situation, and they turned it over to a bureaucrat in Washington, who never turned it over to the FBI, never got on the watch list and nothing was happening.  We‘ll be right back to talk about this incredible snafu that could have cost several hundred lives.  We‘ll be right back with HARDBALL.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back to HARDBALL.  President Obama acknowledged that a breakdown in intelligence procedures led to the attempted Christmas Day plane bombing.  But why were so many warning signs missed?  Consider two bits of information that the Central Intelligence Agency had learned.  In August, the agency knew that an unnamed Nigerian had met with terrorists in Yemen.  And then in November, they got a big break.  The father of a Nigerian warned the U.S. embassy and the CIA that his son had become radicalized and was missing in Yemen.  So why wasn‘t the CIA able to connect those two dots and flag this guy before the plane boarded—before that guy boarded that plane headed for Detroit?

Michael Duffy is the Washington bureau chief for “Time” and he wrote this week‘s cover story—look at it there.  And Gerald Posner‘s the chief investigative reporter for TheDailyBeast.

Michael Duffy, it wasn‘t like there‘s a million all sort of dots all over a screen.  These two I wonder about.  The CIA knew there was a Nigerian—they just knew a Nigerian—over in Yemen was dangerous to us.  Then we got word just last month, six weeks ago, from the father of a Nigerian that his son was over in Yemen and he was radicalized and could be dangerous.

Those two bits of information never got passed the counter—counterterrorism task force to the FBI, that controls the watch list.  Nothing was done.  So, all this reorganization and bureaucratic rewiring that happened because of necessity and fear after 9/11 has been worthless. 

MICHAEL DUFFY, ASSISTANT MANAGING EDITOR, “TIME”:  Yes, I‘m afraid that is the implication of the facts as we know them so far. 

They did have a meeting about Abdulmutallab the next that the—after the father had walked into the embassy in Nigeria.  But it seems, from what we know now, all they did was put his name on a fairly large list of people of concern.  And what it means to be on that list isn‘t very much. 

MATTHEWS:  How come it was never matched up with the—quote—

“Nigerian” that they had about in Yemen who was a danger to us? 

DUFFY:  Well, I think we are going to find out about that in the next couple of days.  It is clear that, when President Obama came out yesterday, they knew they had a handoff problem somewhere in their national security bureaucracy between what they knew in one part of it and what they knew in another part of it.

But who exactly dropped the ball and where and whether this was systematic or accidental, we don‘t know yet. 

MATTHEWS:  Gerald, you are a smart guy.  We have talked many times before.  I have got a lot of respect for your investigative work.  It seems to me that, when we look at something in the rear-view mirror, it looks a lot clearer than when we look into the future. 

There‘s got to be a lot of these dots out there right now that somebody with real intuition might be able to connect and may not be able to, or you might stop somebody who is at an airport somewhere and says we think you are a danger to society and it turns out the guy is a regular person of no danger and we have got a diplomatic incident facing us. 

So, it isn‘t like a free game, where you can just nail people and say, we‘re taking you out of line, we‘re not letting you an airplane, and that‘s the end of the game.

Your thoughts. 

GERALD POSNER, THEDAILYBEAST.COM:  No.  No, you are right about that, Chris. 

But, you know, the interesting thing is here, the Israelis do this all the time.  And they are on the side of keeping somebody off a plane, rather than letting a terrorist on.  And this is a decision you have to weigh.  You‘re right.  There are a lot of dots out there.  And Monday morning, it is always easy to see where they fall.. 

MATTHEWS:  How many Nigerians want to fly to El-Al? 

POSNER:  Well, not many. 

MATTHEWS:  Right. 

POSNER:  But here‘s what interesting.  How many Nigerians are also paying cash for their ticket, coming in after the father has given a warning to the CIA representative at the Lagos airport?

MATTHEWS:  Yes. 

POSNER:  And it‘s more than even—what Michael was talking about is absolutely right, because the NSA at the same time the CIA was getting this information was picking up chatter from the summer on about the possibility of PETN, the explosive used by the Nigerian, coming back into play. 

MATTHEWS:  Yes. 

POSNER:  This is a replay of what happened in 9/11 when the CIA followed two of the hijackers who ended up on the 9/11 planes into San Diego from Indonesia and then never told the FBI or the FAA about them, so they were never put on a no-fly list.  These—as Michael said, they were put on a list of 500,000, this Nigerian, possible suspects, which means nothing.

He was never put on the smaller list of 14,000 who have a mandatory second look and search at the airport or the 4,000 no-fly list. 

DUFFY:  Chris. 

MATTHEWS:  OK.  We have been here before.  Here is what the 9/11 Commission had to say before in its report about what went wrong back in 9/11 -- quote—“Information was not shared.  Analysis was not pooled.  Often, the handoffs of information were lost across the divide separating the foreign and domestic agencies of the government.”

Mike Duffy in Washington, let‘s talk personnel right now.  Napolitano, Janet Napolitano, has taken a lot of heat for saying the system worked.  She‘s going to get hit by that for the rest of her career probably, fairly or not.  You have got to be careful in this business. 

But it seems to me the State Department got the first word.  The word then got to the FBI, so no problem with the State Department‘s handling of this in Lagos.  The CIA got it from both fronts.  From Yemen, they knew there was a Nigerian.  From Lagos, they knew there was this Nigerian.

They sent the word to the~ counterterrorism unit in Washington.  They never sent it over to the FBI, which is responsible for the watch list.  Will somebody get fired?  Back when he had the Bay of Pigs, Kennedy got rid of people.  He—Allen Dulles was gone.  His number-two guy was gone.  Ted Bissell was gone.  Is there going to be a payment here? 

DUFFY:  I doubt it. 

I suspect there will be, just as there was after 9/11, very little in the way of personnel changes.  I think what you will see is a push from Capitol Hill—and maybe the White House will get ahead of this, Chris—to those four lists, all those lists we have—it‘s Dickensian—into...

MATTHEWS:  Yes. 

DUFFY:  ... one list or maybe two lists and investigate—President Obama implied yesterday we would have much more aggressive of people on that first—investigation of people on that list.  We will see if that is possible under the Constitution.  It certainly should be possible for people who are not American citizens. 

One other note is that they also had from—the British knew that this guy was a person of concern.  And we still have clearly not got some kind of handoff with some of our allies about what they‘re picking up.       

(CROSSTALK)

MATTHEWS:  Well, you know, we have had—who was it who was assassinated back in the 19th century?  All of a sudden, we had a Civil Service Commission, Gerald.  Things happen after when tragedy happens. 

(CROSSTALK)

MATTHEWS:  Remember that one?  Disappointed office seeker became a common phrase.  Next, we had a Civil Service Commission.

So, the question you have to ask is, I think we are one disaster away from a new cosmos in our country.  Right now, we are arguing back and forth about whether we should be tough on customers getting on airplanes.  I think we are going to get to something like the Israeli front here, which is presumption of guilt, presumption of danger, maybe not ethnically, maybe not nationality-wise, but in terms of your travel plans, in terms of you political associations.

I don‘t think you are going to be able get on an airplane anymore if you have got bad ones. 

(CROSSTALK)

MATTHEWS:  If you go to Yemen, if very been a radicalized student at the University of London or someplace like that, you put two of those points together, you are not flying. 

POSNER:  Yes. 

No, I think what is going to happen, Chris, you are absolutely right.  We are one disaster away from seeing the no-fly list, which is currently 4,000 people, expand significantly.  And that‘s going to be the difference.  We are also going to see the mandatory second search list, which is currently 14,000, expand significantly. 

So, I think that what is going to happen is air travel is going to become more difficult.  And we are going to have more technological intervention, sort of a loss of privacy. 

MATTHEWS:  Right. 

POSNER:  The full scanning machines, as you know, are being deployed now internationally.  They are going to show people walking through there essentially naked.  There are some privacy concerns, but they‘re going to be overridden, I think, in this desire for security.

MATTHEWS:  Overridden.  By the way, the next disaster, there ain‘t going to be more privacy concerns. 

Let me go to Michael Duffy.

Do you think the American people would stand for an Israeli-style situation, where to fly on a New York—well, first of all, we...

DUFFY:  Yes. 

MATTHEWS:  ... ought to have better rapid transit on the ground.  We shouldn‘t have to be on the shuttle all the time.  And you and I know that.  It is insane to have to fly to New York from Washington because of the stupid bureaucracy in this country.  We ought to get eminent domain and get a train between here and there.  But that‘s just the way we live.

But if you are going to get on airplanes, it seems to me you‘re going to have some kind of clearance in the future, some—you are going to almost have to prove you are safe, it seems to me, at some point.

DUFFY:  I think, before many weeks are out here, they are going to have, as Gerald said, mandatory hand and electronic and backscatter, all kinds of scanning that we are not doing consistently now, certainly on all international flights...

MATTHEWS:  Yes. 

DUFFY:  ... a change in the lists.  You know, don‘t forget he hid this stuff in his underwear.  Even a hand pat-down probably wouldn‘t have found it. 

(CROSSTALK)

MATTHEWS:  By the way, the guy who made the underwear didn‘t just make one pair. 

DUFFY:  Yes.  And...

(CROSSTALK)

MATTHEWS:  They are out there to get us. 

POSNER:  That‘s right. 

MATTHEWS:  And I think we have got to get serious about catching terrorists, not just catching weapons.  I‘m waiting for the terrorist who knows kung fu or something that gets on an airplane without a weapon.  God knows what that is going to be like.

Hey, Gerald, happy new year, even under this circumstance.

POSNER:  Happy new year.

MATTHEWS:  Duffy, you‘re great.

POSNER:  Thanks, Chris. 

MATTHEWS:  Thanks for coming on HARDBALL.

Congratulations for the latest edition of “TIME” magazine.

Up next:  A real estate company asked Americans which celebrity family they would most like to come move next door?  Guess who came out on top?  That‘s in the “Sideshow.”

You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

(LAUGHTER)

MATTHEWS:  Back to HARDBALL.  Time for the “Sideshow.” 

First: proof that Massachusetts is and will be for some time Kennedy country.  That special election for Ted Kennedy‘s Senate seat is coming up on January 19.  And while Scott Brown may be the Republican in the race, that doesn‘t mean he‘s going to cede his claim to the Kennedy legacy.

Just check out Brown‘s first campaign TV ad. 

(BEGIN VIDEO CLIP, SCOTT BROWN CAMPAIGN AD)

JOHN F. KENNEDY, PRESIDENT OF THE UNITED STATES:  Billions of dollars this bill will place in the hands of the consumer and our businessmen will have both immediate and permanent benefits to our economy. 

SCOTT BROWN ®, MASSACHUSETTS SENATORIAL CANDIDATE:  Every dollar released from taxation that is spent or invested will help create a new job and a new salary. 

(END VIDEO CLIP)

MATTHEWS:  Well, the campaign ad says that the—it highlights how Brown, the Republican candidate up in Massachusetts, like JFK, believes that lower taxes will create more jobs. 

By the way, my old friend the late Jack Kemp made that case for years. 

Next, talk about making lemonade from lemon.  Italian Prime Minister Silvio Berlusconi was attacked earlier this month by a man who threw a statuette at his face, giving Berlusconi a broken nose and two broken teeth.  Well, the Italian leader is now out of the hospital and will apparently take those grisly photos of his face and use them in campaign photos.  His slogan?  Love always wins over hate. 

I guess it‘s not love means never having to say you‘re sorry, at least.

Now for the “Big Number.”

Real estate site Zillow.com asked Americans which celebrity family they would most like to have move in next door.  Who came out on top?  The Obamas.  They narrowly edged out Ellen DeGeneres and her partner, Portia de Rossi, and Sarah and Todd Palin. 

What a strange country.  We have an interesting mix of people in this country.  First place, the Obamas, America‘s number-one most desirable neighbors—tonight‘s “Big Number.”

Up next: a look back at the top political lies of the year.  This should be fun. 

You‘re watching HARDBALL.   You will recognize some of these in this bad bunch.  You‘re watching HARDBALL, only on MSNBC.  

(COMMERCIAL BREAK)

MATT NESTO, CNBC CORRESPONDENT:  I‘m Matt Nesto with your CNBC “Market Wrap.”

Stocks inching higher today after a better-than-expected report on Midwest manufacturing, the Dow industrials gaining three points, up for the seventh time in eight days, the S&P 500 also up a fraction, and the Nasdaq up three points to its highest closing finish of the year.  Now, one analyst called that report on manufacturing—quote—“unambiguously robust”—Chicago PMI, Purchasing Managers Index, up almost four points in December, to its highest level in nearly four years. 

As for stocks, well, light holiday volume again in order today.  Investors are locking in profits on some of the years‘s big winners, like Microsoft, down 1.4 percent today, still up nearly 60 percent for the year.  And Oracle up more than 40 percent so far this year, also declining just a bit. 

Finally, in news breaking just after the closing bell today, the Treasury Department says it‘s going to pump another $3.8 billion into GMAC.  That is, however, about 30 percent less than they expected, but also comes on top of an existing $12.5 billion government loan. 

That is it from CNBC.  We are first in business worldwide—now back to HARDBALL. 

MATTHEWS:  Welcome back to HARDBALL. 

So, what were the biggest political lies of 2009?  The year is about to end.  We have got to keep score.  The editors of PolitiFact.com have ranked them based on readers‘ responses.  PolitiFact is a Pulitzer Prize-winning fact-checking Web site of the “Saint Petersburg Times.”  And the most outrageous lies get their lowest rating. 

Joining us now from “The New York Observer,” Steve Kornacki—he‘s been on before—and Politico‘s Jonathan Martin. 

Guys, it‘s great having you on for a little fun here at the end of the year.

One of the biggest lies of 2009, ironically, is an accusation of lying itself.  Here he is, Congressman Joe Wilson, known only for this, interrupting President Obama as the president addressed a joint session of Congress.  Let‘s listen. 

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  The reforms—the reforms I‘m proposing would not apply to those who are here illegally. 

REP. JOE WILSON ®, SOUTH CAROLINA:  You lie!

(AUDIENCE BOOING)

OBAMA:  It‘s not true.

(END VIDEO CLIP)

MATTHEWS:  You know, guys, there should have been one of those “Austin Powers” in that room right there.

(LAUGHTER)

MATTHEWS:  You know, when it goes down into the ground, and he is alive, but he‘s badly burned kind of thing?  I‘m sorry.  What should have happened to that guy?  Your thoughts.

STEVE KORNACKI, COLUMNIST, “THE NEW YORK OBSERVER”:  Not—not what happened.  You mentioned, it is the only thing anybody has ever heard about him.  Well, nobody had heard anything about him before.  Now he has got an extra $2 million in the bank for 2010.  He is a hero to the right.  He sort of had to apologize, but he got to say, well, you know, I apologize for going too far, but...

MATTHEWS:  Aren‘t we happy? 

KORNACKI:  Yes.  In one way, you know, listen, Charles Sumner got beat to within an inch of his life 150 years ago on the Senate floor.  So, maybe this is a little better than that.  But, still, it‘s a modern low.

MATTHEWS:  Well, my worst—Jonathan, my worst fear is that he knew he would have this kind of right-wing backup when he did it.  He didn‘t sit alone when he did that.  He said, I‘m going to have a lot of people patting me on the back if I lie—if I say the president is a liar.

JONATHAN MARTIN, SENIOR POLITICAL WRITER, POLITICO.COM:  I don‘t know if it was premeditated, but there‘s no question that, by saying that, he has become an a folk hero on the right. 

But, also, his opponent down in South Carolina, who wasn‘t given a shot before this incident, has now raised quite a bit of money himself.  And it may actually be something of a competitive race now.  But the memorable thing from that moment, Chris, that look on Speaker Pelosi‘s face, unforgettable. 

MATTHEWS:  Yes.  Well, I think she was what you would expect from a speaker, because I worked up there for years on the Hill.

MARTIN:  Right. 

MATTHEWS:  And there was a certain amount of respect that came to the president of the United States when he is invited to speak to a joint session of Congress. 

(CROSSTALK)

MARTIN:  It was a “How dare you?” kind of look. 

KORNACKI:  Right. 

MATTHEWS:  Well, I‘m with her. 

Let‘s take a look.  Here‘s the birthers.  Talk about lies.

What do you make of this? 

You first, Jon.

MARTIN:  Yes. 

MATTHEWS:  This is a lie that is out there.  Even Hillary Clinton said, “as far as I know,” or one of those lines, when this came up.

What do we make of this obsession with certain people who believe that you can‘t find the birth certificate—at least the birth certificate they want to find—therefore, this guy is an alien, illegal alien, and ought to be kicked out of the country, basically?

MARTIN:  Yes. 

I think, Chris, it is a vehicle for those who just do not want to believe that this president is legitimate, so that they sort of, you know, grasp on to this, that, no, this is not our reality because he is not an American somehow. 

So it is a way to convince yourself that he is not really your president.  But I think it sort of exposes some of the most extreme and, frankly, scary elements on the right wing of this country right now. 

MATTHEWS:  Steve, is this a Rorschach test for insanity?  Is this something that you—I mean, as Mike Huckabee said, if he were really not born in the United States, don‘t you think Hillary Clinton would have used it against him?  Don‘t you think any politician would have used it against him?

KORNACKI:  I think most rational people can put it to rest and put it to rest a long time ago, and never even really considered it.  It did give rise to one of the funniest and most creative things I saw in the year 2008. 

MATTHEWS:  “SNL”? 

KORNACKI:  No.  There is a website that came up that took the fake birth certificate that Orly Taitz—and you can go and put your own personal information in and get your own Kenyan birth certificate.  So now I too—

MATTHEWS:  You can create these things as a joke.

KORNACKI:  I am now a native born Kenyan. 

(CROSS TALK)

MATTHEWS:  Let‘s go to the big one that really caused a lot of stink.  The lie of the year went to Sarah Palin‘s claim that the president had a health care reform plan which included the creation of death panels.  She wrote on her Facebook, “the America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama‘s death panel so his bureaucrat cans decide whether they are worthy of health care.”

So she told her people out there that the president of the United States was going to create panels to go around and tell you to die.  If you are old, they‘re going to say, pull the plug yourself.  If you‘ve got a kid who is born with problems, they‘re going to say, don‘t feed it.  This is what she is saying.  This is a lie? 

KORNACKI:  I hope it is.  I think this is the year we discovered how irrational a good chunk of the public is, not the majority, not an overwhelming chunk.  There was that 30 percent that all through the Bush years  held on and said, no, he is a great president.  There‘s that 30 percent who believe in death panels, that 30 percent that believes he is from Kenya. 

MATTHEWS:  There is also a good percentage of the country out there, small but real, that believe he had one of those plungers and he blew up the World Trade Center. 

KORNACKI:  All sorts of conspiracy theories.  But they‘ve really come to the fore this past year with Obama.  He has brought out something and we‘ve really seen it.   

MATTHEWS:  Jonathan, death panels, the biggest lie of the year, according to the “St. Petersburg Times” website. 

MARTIN:  Chris, there is a larger issue here, and that is there is increasingly less of a sense of shared facts and a shared truth in this country on left and right.  Without a Cronkite figure out there, that we all sort of know and trust, the fact is that some people in American society are going to want to believe in death panels, because if you say, that‘s not true, then they are just going to criticize you and say, you‘re just biased; you don‘t like Sarah Palin.  So --  

MATTHEWS:  You‘re young, Jonathan.  Let me tell you, in the old days, the right, the John Bircher right, would not have believed Walter Cronkite.  Let me tell you, he was the enemy to them. 

MARTIN:  It was a smaller fraction. 

MATTHEWS:  Right. 

MARTIN:  There was a much smaller fraction back then.  It is now an enlarged group in this country, where there is no set of shared facts.  I think it‘s a very dangerous element out there.

KORNACKI:  There are platforms now that didn‘t exist in the past for this stuff to get out there, like this birth certificate thing.  Orly Taitz could go and find some website that put up what she claimed was an authentic Obama Kenyan birth certificate.  The next thing you know, a thousand right wing blogs are linking to it, and there‘s a million people in the country who believe this is a smoking gun proof that Obama is from Kenya.  Never in the past would that stuff have made it through the filter of Walter Cronkite or “New York Times” or anything like that.  All these alternative platforms have sprung up, and people can go there and believe the facts they believe are facts that come from there. 

MARTIN:  We have gotten to the point in this country where people in the mainstream, or at least close to the mainstream, believe that the government would euthanize  youth and elderly; that is a pretty scary place to be, if we have folks that actually believe that right now. 

What‘s fascinating, Governor Palin, by the way, now, instead of putting out that charge, she now phrases the issue of a death panels in more of a question format.  So on her Facebook page she will say, how about death panels?  Are they still in this health care bill?  She is not making the accusation anymore.  She is sort of walking it back now, just floating it, just a question out there whether or not it is still in the bill. 

MATTHEWS:  To borrow a phrase from my colleague, Keith, the worst people in the world are not those who believe this crap.  The worst people in the world are those who pander to those who do and play to them, who say they might be right, they may have something there.  Whether it is left or right, whether it is the birthers or the truthers, politicians love to not be honest and say, you people are full crap; grow up; get some brains; and stop talking to me until you have one. 

Thank you, Steve Kornacki.  Thank you, Jonathan Martin.  I know I‘m dismissive. 

Up next, a decade of change.  Let‘s take a look at a couple of things.  You don‘t think this country is changing?  Wait until you catch this next segment.  A lot happened this past ten years that never, ever happened before.  That is in the fix.  It‘s coming up next.  This is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  We‘re back.  Time for the politics fix with the “Chicago Tribune‘s” Clarence Page and “Newsweek‘s” Michael Isikoff, who is also an MSNBC contributor.  Here are some of things we now have that we never had before this recent decade: an African American president, Barack Obama—there are a lot of firsts for women.  Hillary Clinton became the strongest female presidential contender in history.  Nancy Pelosi became the first female Speaker of the US House of Representatives.  Sarah Palin became the first woman ever on a Republican presidential ticket. 

George W. Bush gave us two African-American secretaries of state, Colin Powell and Condoleezza Rice.  Barack Obama gave us the first Latina Supreme Court Justice, Sonia Sotomayor. 

We have two Muslims in the US House now, Minnesota‘s Keith Ellison and Indiana‘s Andre Carson.  Gay marriage is legal now in a number of states, Connecticut, Vermont, Massachusetts and Iowa.  It starts in January in New Hampshire and in February in the nation‘s capital. 

Clarence, I guess one big change leaps out of this all, and that is the president of the United States, something we didn‘t think would come—

You and I are about the same age—ever in our lives. 

CLARENCE PAGE, “THE CHICAGO TRIBUNE”:  Yes, that‘s one thing that hits me about all of these break throughs.  For us older folks, I don‘t think any of us—I know I didn‘t expect to see any of these breakthroughs happen this soon.  Maybe a female speaker of the House.  Maybe an open Muslim in Congress, things like this. 

But the difference here, Chris, I think is really generational, to a large degree.  With the exception of Sarah Palin, we find that younger voters, younger people, are more accepting of gay marriage, a black president, a Latino on the Supreme Court.  I think Sarah Palin, so far anyway, her demographic are the opposite.  She seems to be more popular with older folks.

MATTHEWS:  I think she may be more of a throw-back, don‘t you think?

PAGE:  In many ways, yes.  That‘s no critical reflection against her.

MATTHEWS:  No, it is for me.  It is for me.

PAGE:  She purposefully is a—she is a conservative, which means she prefers the status quo.

MATTHEWS:  No, I think she is like Pat Buchanan, our pal Pat Buchanan.  She prefers the past to the future, as she sees it now.  She thinks the past looks a lot more cheerful.  

Mike, it does seem to me—I always say to people, if you want to vote like your grandparents, forget Barack Obama.  He never would have been elected.  If you want to vote like your kids, he‘s in like Flint.  And it‘s the same with all of these other issues, whether it‘s gay marriage, whatever.  Your kids are going to vote a lot differently than you.  They are already, in my case, voting differently than my parents would have.  I think Clarence has nailed it.  Your thoughts? 

MIKE ISIKOFF, “NEWSWEEK”:  Well, look, all of the accomplishments you just mentioned are genuine.  At the same time, not to put a damper on things -- 

MATTHEWS:  You always do. 

ISIKOFF:  Well, that‘s my job.  Somebody has got to.  Yeah, we‘ve also seen increasing intolerance.  I mean, a resurgence of hate groups, white supremacist groups, militia type activity.  These are the kind of things that are perhaps inevitable when you get the kind of strides and progress that you outlined.  But we should probably keep in mind that it‘s not as though all of the prejudice in the past have been overcome. 

MATTHEWS:  Do you buy that, Clarence?  I always thought it—the more I think about it, I think there are two warring factions in this country.  There is the army of progress, which liked fighting for civil rights, liked suffrage, liked all the changes, likes in some cases, in many cases, same-sex marriage.  And then there‘s this other army out there that is always going to feed off the resentment of those that don‘t like it. 

PAGE:  that‘s basically the American political scene, probably more polarized along partisan lines since the ‘60s than before.  But nevertheless, yeah, that‘s it.  It‘s like we always say, each election is about change versus more of the same.  And that‘s kind of the basic political dichotomy in this country.  

MATTHEWS:  Who‘s going to win? 

PAGE:  In the end? 

MATTHEWS:  Yeah. 

PAGE:  I don‘t like to think about the end, Chris.  It just goes on and on.  I think of a furnisher polisher.  You never quit.  You just keep on polishing until they take it away from you. 

MATTHEWS:  Because in the ‘60s, Michael—what you‘re getting to is pretty powerful.  In the short run in the ‘60s, the hard hats, the reactionaries to the ‘60s, to the long hairs, tended to win.  Nixon was elected twice.  The second time it was 60 percent.  You can argue—and even Carter came in later.  He was hardly a liberal.  The liberal trend of the ‘60s was thwarted very successfully.  The reaction won. 

ISIKOFF:  Sure, you had—and I don‘t want to identify all of the prejudices with the political opposition to Barack Obama or the democrats, because I don‘t think they are not one in the same. 

That said, absolutely.  The reaction to the ‘60s was the election of Richard Nixon in 1968.  Jimmy Carter won in ‘76, as you know, but then we had eight years of Ronald Reagan right after that, as you know.  It was the Republican resurgence that followed that decade of change in the ‘60s. 

MATTHEWS:  We‘ll be right back with Clarence Page and more with Mike Isikoff.  We‘re going to talk about this issue of Dick Cheney, who has come back to troll.  He‘s come out from under the bridge and he‘s bitten the ankle once again of President Barack Obama.  He can‘t resist.  You‘re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS:  Welcome back.  We‘re back with Clarence Page and Michael Isikoff for more of the politics fix.  Before we get into my fun segment with Dick Cheney, I got to tell you guys, a call last night at my hotel, the Ritz Carlton in Central Park South, because Polly Bergen, the great actress found out that‘s where I was staying.  My wife mentioned it last night. 

You‘re laughing, Clarence.  This is how we identified the movie stars that watch us.  I‘m show glad, Polly, you watch this show ever night, one of my great ones.  Anyway, Isikoff, what is the story about Dick Cheney?  Does he have some sort of word processor that‘s ready to go in the basement, which is hooked up to the “Politico”?  How does he issues statements?

Most of us don‘t know how to issue statements.  He‘s got this fiery attack on the president today, multifaceted, almost thematically written.  He obviously put some thought into it, just blasting him for not taking seriously the threat of terrorism.  What‘s the story on this guy?  Didn‘t he leave office last year? 

ISIKOFF:  He knows that every time he does, you‘ll do a segment on it, Chris. 

MATTHEWS:  Well, how can that please him?  I‘m the only guy that pronounces his name properly.  It‘s Cheney.  I guess that‘s why he likes it here. 

PAGE:  You get no credit for it, either, Chris.

MATTHEWS:  I don‘t want any.  But you‘re up there, Clarence.  What is the bur in his saddle with Barack Obama?  Why does he come out all the time?

PAGE:  You notice, first of all, how much less shy Dick Cheney is now than when he was vice president?  And secondly, he‘s like Sarah Palin, in the sense that right now, the Republican party, the regular people who are in office, are so charisma challenged that they don‘t have a really strong spokesperson.  So everybody on the outside, the broadcast pundits, Sarah Palin, Dick Cheney, people who have got a name, who have got a presence, who have strong voices, especially who aren‘t worried about getting elected or re-elected, there‘s the ones stepping forth.

Cheney‘s getting good at it now.  He‘s learning how to get on the phone, call “Politico.”  And he knows he‘s going to be put out there.  The rest of us will all pick up on it.

MATTHEWS:  Is he going to be like Dr. Strangelove if we get hit some time, Michael?  Is he just going to be going crazy?

ISIKOFF:  Sure, that‘s certainly part of the calculation.  There‘s two levels in which to look at this.  One is actually dissect what he says and apply some rationality to it.  He says President Obama doesn‘t want to admit we‘re at war.  Well, John Brennan, his chief counter-terrorism adviser in which he said, as the president made clear, we‘re at war with al Qaeda. 

He hits him on releasing detainees from Guantanamo; well, guess what

--

MATTHEWS:  I got to go.  We‘ve got to have more on Cheney next year.  I think the guy‘s back.  I think, like Freddy Kreuger, he‘s never going to leave us.  Clarence Page, thank you, Mike Isikoff.  Happy New Year to both of you fellows and your families.  Join us again on Monday at 5:00 and 7:00 Eastern for more HARDBALL. 

And from all of us here at HARDBALL—I mean this—Happy New Year.  I hope it‘s a good year for our country.  Right now, it‘s time for “THE ED SHOW” with Ed Schultz. 

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

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