updated 1/11/2010 10:52:40 AM ET 2010-01-11T15:52:40

Guests: Austan Goolsbee, Mort Zuckerman, Thea Lee, Eric Massa, Ernest Istook, Stephanie Miller, Rep. Joe Sestak, Eliot Spitzer, Lizz Winstead

ED SCHULTZ, HOST:  Good evening, Americans, and welcome to THE ED SHOW tonight from New York.

Three stories really hitting the hot button tonight.

First, another tough jobs report.  The president, what he plans to do about it to turn this whole thing around. 

Plus, a conservative think tank says the stimulus package is working.  Well, that‘s not stopping John McCain from jumping on the Tea Party Express.

We‘ve got more on that coming up in just a moment.

Another major terror bust.  Three graduates of an American high school are accused of plotting to bomb New York City. 

I‘ll tell you about that.

Plus, more details on how the alleged Christmas Day terrorist was able to actually get on the plane. 

Plus, co-creator of “The Daily Show” Lizz Winstead in the house.  I think she‘s got something to say about Michael Steele tonight in “Club Ed.”

But first the numbers.

Four million  jobs lost in 2009.  That is a staggering number.  In November, there was a glimmer of hope.  Four thousands jobs had been created, the first positive report that we had in two years.

We couldn‘t keep it going though in December.  Eighty-five thousand jobs were lost last month, even with the Christmas shopping season.  But the White House says that the trends are moving in the right direction.

In January of 2009, let‘s not forget, the last month of the Bush administration, the country lost 741,000 jobs.  After a year of Obama economic polices, the number is now down to 85,000.  Not bad.

The fact is the stimulus package is working.  We just have to be patient. 

Now, that‘s not my assessment.  That comes from the conservative think tank the American Enterprise Institute. 

Their economic outlook report says this: “The real economy responded to massive stimulus in the United States.  Growth during the second half of 2009 probably averaged about three percent.  Absent temporary fiscal stimulus and inventory rebuilding, the economy would have contracted at about a one percent annual rate.”

It‘s all good news heading in the right direction.  Keep in mind that only a third of the stimulus money has been sent out.  The rest is going to be doled out this year.  It was a two-year plan. 

Now, today, the president announced a major tax credit for companies creating green jobs.  We‘ve been waiting for this one.

Now, the Republicans just loved to talk about taxes, but they don‘t expect to support a tax cut if it‘s coming from a Democratic president.  The Republicans don‘t have any economic ideas or any plans on the table.  They are just hoping that President Obama fails at every effort.  And really, they are trying to feed the Tea Party crowds. 

The latest Republican to throw it in with the Tea Partiers is John McCain.  Here‘s his new radio ad on the “contribute” page of his Web site.

(BEGIN AUDIO CLIP)

ANNOUNCER:  Perhaps no battle in our lifetime is more vital than the one John McCain fights now, a battle to save America.  Save our jobs.  John McCain leads the charge to slash government spending, bloated bureaucracies and ridiculously unaffordable ideas like government-run health care. 

SEN. JOHN MCCAIN ®, ARIZONA:  President Obama is leading an extreme left-wing crusade to bankrupt America.  I stand in his way every day. 

(END AUDIO CLIP)

SCHULTZ:  Now, keep many mind, in the latest Harris poll, the most influential Republican in this country is still John McCain, a year after losing to Barack Obama.  Now, he says that there‘s no bigger battle or more vital battle than the one against the Washington liberals? 

Now, They‘re all against the government helping folks out.  They think that the government has absolutely no place in business. 

I want to tell you a story tonight.  You may remember, if you watch this show regularly, we had a gentlemen on here named Noel Davis.

Now, he talked about wind turbines in this country.  The gear boxes that are made for wind turbines come from where?  China. 

So Noel Davis wants to get a loan guarantee through the Energy Department because he wants to manufacturer gear boxes in the state of Indiana.  The red tape was slow, the bureaucracy was going on.  We got the story from the Alliance for American Manufacturing. 

We put Noel on the air, made a few phone calls.  Guess what?  He got his loan guarantee, and in Indiana, he‘s going to get his 48C money and the Vela Gear Systems, Inc. is going to get over $11 million in loan guarantee and there‘s going to be 250 manufacturing jobs in the state of Indiana. 

Now, this is something that the Republicans, they don‘t have a plan, they don‘t have an effort.  We can play a role if we keep the pressure on the administration, if we keep telling the story about who wants to be innovative to create jobs in this country. 

That is a classic example.  Next week we‘re going to get Noel Davis on this program, just as he was before he got the loan guarantee.  Two hundred and fifty jobs in Indiana, manufacturing jobs, that‘s American steel, that‘s American made. 

Does that matter anymore?  Your damn right it does. 

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

Tonight‘s text survey is: Do you have faith that President Obama will turn our economy around in 2010?  Text “A” for yes and “B” for no to 622639.  OK.  I‘ll jade the poll, I‘m voting yes on that.

I‘ll bring you the results later on in the survey. 

Joining me now is Austan Goolsbee.  Austan is the staff director and chief economist on the president‘s Economic Recovery Advisory Board. 

All right, Austan.  I thought I‘d set the tone with a positive story tonight.

These are the kinds of things that have got to happen.  This is about government money giving a loan guarantee to a guy who wants to make something in America.  You‘ve got to tip your hat to the Obama administration and your economic team for making this thing happen. 

Can you do more of that? 

AUSTAN GOOLSBEE, STAFF DIRECTOR, CHIEF ECONOMIST, ECONOMIC RECOVERY

ADVISORY BOARD:  Look, I like that example, and we can do more, and we should do more, and we are doing more.  That program that you‘re describing totally fits with what the president was talking about today, that we get the tax credits in there for clean energy, manufacturing, to try to grow that sector. 

If you go back and look at the Recovery Act, there‘s a whole big chunk of it that is intended to give loan guarantees and other forms of direct subsidies and support to try to promote manufacturing and clean energy.  And that‘s one of the three pillars in what the president wants to be the jobs package that he outlined at the end of last year. 

So, you see the report from today on employment.  It‘s clearly a bump in the road.  We need a jobs package, as the president has been saying. 

We‘re on the right trend.  We‘re a lot better than we were in January of last year.  But it‘s not near far enough.  Ten percent is way too high to have an unemployment rate. 

SCHULTZ:  Austan, I want to ask you, we‘ve got a lot of terror news, we‘ve got a lot of security news out there.  You know, if this administration doesn‘t create jobs, it could be a tough midterm on the political front. 

But I know that human lives and families is what you guys are focusing on.  But how much pressure, how intense is President Obama with your Economic Advisory Board? 

You guys are the ones that are calling the shots.  You guys are the ones who are coming to the president with a plan. 

How intense is it? 

GOOLSBEE:  He‘s pretty intense.  I mean, inside the administration, the advisory board that‘s headed by Paul Volcker and has got some business, some labor, some academics, that‘s all people outside the government.  They come in with just good ideas.

You know, they talk to a lot of people and they say what about this, what about that?  The president is very intense on people inside the administration, you know, laser beam focus.  We have to get the jobs going because that‘s a measure of a healthy economy. 

SCHULTZ:  All right.  Will these $2.3 billion tax credits in wind and solar, is this really going to take effect between now and maybe next November, where we would see some return? 

GOOLSBEE:  I certainly think it‘s got the possibility.  What you saw in the Recovery Act is some of these things go out right away, kind of in a first wave, and then there‘s a second, medium-term wave, so a lot of the infrastructure-type projects, they‘re now coming on line.

2010 is going to be a big year for that part of the Recovery Act.  And what you‘re seeing with a lot of this clean energy stuff is it‘s more in that medium term kind of time frame. 

These credits, I think they could work right away, because if you know that you‘re going to get a credit, you know, that could affect your decision today.  If you‘re thinking, hey, should we go ahead and do this, well, we know we‘ll get the credit, so let‘s go ahead and do it. 

SCHULTZ:  Support the risk-takers.  That‘s what it‘s all about.  I think you guys are on the right track. 

Austan, good to have you with us tonight.  Thanks so much.

GOOLSBEE:  Great to see you again, Ed.

SCHULTZ:  You bet.

Joining me now is Mort Zuckerman, chairman and co-publisher of “The New York Daily News.”

Mort, great to have you with us tonight.

Is the president—does he have the roadmap to get us out of the doldrums economically?  Are we headed in the right direction, in your opinion?

MORT ZUCKERMAN, CHAIRMAN AND CO-PUBLISHER, “THE NEW YORK DAILY NEWS”: 

I think we are headed in the right direction.  I think, unfortunately, though, we‘re going there way too slowly. 

I mean, you understand and remember that they predicted that the maximum unemployment rate would be eight percent.  We‘re well over 10 percent.  But that doesn‘t really capture it, nor do the numbers of unemployed, 85,000 jobs lost in December, capture what the real problem is. 

Six hundred and sixty thousand people, according to the recent numbers, just left the labor force.  These are people who are no longer counted that‘s unemployed, but they have given up trying to get a job and left the labor force.

That‘s a staggering number.  These numbers are very, very serious and very worrisome for the economy of this country.

SCHULTZ:  What else can the president do?  What else can the administration do?  What do you think? 

ZUCKERMAN:  Well, I mean, I think there‘s very little, in fact, that they can do given the constraints that we have on the deficits in this country, and they are real constraints.  What we have to do is assume that we‘re going to just sort of stumble through the next few months.

We‘ve got to have a stronger—a much stronger, longer-term program in place.  And I will tell you that the area where we should focus is the area of our strength, and that is high technology.  So I would put in the following. 

I would—at the very least, I would change the number of what are called H1B visas.  These are for people who have very highly technical skills in the hard sciences, these are people whom we now send out of the country.  Roughly half of our graduates in the hard sciences and advanced degrees are foreign students. 

We send them out, they join companies that compete with us.  We should keep those people here.

SCHULTZ:  So you think turning that this economy around has a lot to do with immigration policy in this country? 

ZUCKERMAN:  It has to do with technology.  And the ability for us to develop innovation and technology is going to be dependent on intellectual firepower, and that‘s why we need these people. 

Bill Gates, who‘s the head of Microsoft, as you know, says that the change in the H1B policy, which is just for highly-skilled people, is the single-most important thing we can do for the world of technology.  That‘s what‘s given us the energy, the economic energy of the last decade.  We should not cut off the talent that we need to continue it for another decade. 

SCHULTZ:  We need the brain trusts in (ph) our borders. 

ZUCKERMAN:  Absolutely. 

SCHULTZ:  I can get all that.

Mort, great to have you with us tonight.  Thanks so much.

ZUCKERMAN:  Thanks very much. 

SCHULTZ:  For more, let me bring in Thea Lee.  She is the chief international economist for the AFL-CIO.

Thea, what did you think today?  Did the president hit all of the right notes?  And do you back up this plan that he‘s got to get the economy moving?

THEA LEE, CHIEF INTERNATIONAL ECONOMIST, AFL-CIO:  I think the president is definitely on the right track.  And the jobs tax credit for green jobs is a great idea.  We‘d like to see more of it, we‘d like to see it go out faster.

SCHULTZ:  Will it put your people back to work?

LEE:  It will help.  It will help.  And I think, you know, the first Recovery Act was a huge help, and we would have seen a much, much worse jobs picture right now if we hadn‘t done a pretty major spending bill back then. 

But when we look at this job number, this is a really, really serious labor market situation.  And...

SCHULTZ:  But you‘ve only got a third of the stimulus package that‘s been out.  I mean, it would seem to me that if you step stem the tide, go from 750,000-a-month job loss down to 85,000, I mean, we‘re heading in the right direction.  And only a third of the money is out there.

It would seem to me that the wage earners, the union folks in this country, would be really encouraged about 2010.

LEE:  Well, you know, we‘re about 10 million jobs short of where we were at the beginning of the recession, and that‘s a lot of jobs.  It‘s going to take a lot of years and a lot of job growth.  And part of the problem right now is we aren‘t really seeing the private sector job growth growing yet.

You do see the impact of the government spending, and that‘s a great thing.  And that saved us from a much worse situation.  But the private sector, we lost about a million jobs on net in the private sector in the last decade. 

You know, the labor market is growing, people are entering the country, they‘re entering the labor market, they‘re growing up, they‘re graduating from college.  And they are not finding the jobs. 

And so what we worry is that we have a long stagnation, or possibly even a double-dip recession, if the Congress and the president don‘t do a whole lot more in the short term, now, to create more jobs, through infrastructure, through state and local fiscal relief, through more unemployment insurance, and through more credit to small business.  We‘d like to see more credits go out there, because the small businesses, we‘re hearing, don‘t have the money they need to hire people and to create jobs. 

SCHULTZ:  We‘ve got to get the credit opened up, no doubt.

Thea, good to have you on tonight.

LEE:  Thanks for having me.

SCHULTZ:  I appreciate your insight.  Thank you. 

Coming up, my next guest has challenged the former vice president to a debate any time, anywhere, anyplace on terrorism.  Former naval commander and congressman, Eric Massa, he‘s got some straight talk again for “Shooter” in just a moment.

Also, Rudy Giuliani and “The Beckster.”  Well, they‘ve outdone themselves.  I‘m dishing out a double dose in “Psycho Talk” tonight. 

Lizz Winstead is in the house, along with Stephanie Miller, here to give some take tonight.

It‘s all coming up on THE ED SHOW.  Stay with us.

(COMMERCIAL BREAK)

SCHULTZ:  Welcome back to THE ED SHOW.

There‘s been a lot of focus lately on beefing up airport security, but the threat of terrorism doesn‘t just come from abroad.  Last night, the FBI arrested two New Yorkers believed to be connected to a man who was charged in an al Qaeda bomb plot last September.  All three men went to the same high school in Queens, New York.

Meanwhile, the Nigerian suspect in the attempted Christmas Day plane bombing was arraigned today.  He pleaded not guilty. 

For more on the variety of terror threats that we are facing, let‘s bring in Democratic Congressman Eric Massa of New York.  The congressman sits on the Homeland Security and Armed Services committees. 

Congressman, good to have you with us. 

I think the American people basically want to know tonight, are we safer tonight than we were on Christmas Day?  Your thoughts? 

REP. ERIC MASSA (D), NEW YORK:  Well, we certainly are more focused than we have been in an awful long time, and it‘s thanks, largely, to the incredible cadre of professionals in the Federal Bureau of Investigation, in the CIA and other—in the postal inspectors, who, by the way, are—no one knows about them and they do an incredible job. 

But here‘s the problem that‘s threatening us today, and that is a group of malevolent former politicians who, with malice of forethought, are trying to tell the American people that somehow, these professionals are not focused.  I have never seen in my entire adult life a president of the United States do what President Obama did, which—where he stood before the American people and he took full and personal responsibility for the systemic failures that led to the 25th of December. 

In fact, today we had former mayor Rudy Giuliani.  I could not believe what I heard him say.  Let me just read it so I don‘t get it wrong. 

“We had no domestic attacks under Bush.  We had one under Obama.”

This is former mayor Rudy Giuliani.

Now, what we‘re seeing, Ed, is a positioning.  In other words, with malice of forethought, everybody from Mary Matalin, who on the 27th, joined former vice president Dick Cheney and his daughter in some kind of genetic Tourettes trying to rewrite American history, saying that somehow, none of this happened before and it‘s all the fault of one administration.

And it must, it has to, it absolutely, incredibly, needs to stop.  I don‘t want the president being distracted with these metal Chihuahuas.

I am taking this fight and standing in front him saying, you want to change American history somehow, I‘ll debate you anywhere, anytime to bring truth and light to this issue.  Let the president do his job. 

SCHULTZ:  Congressman, one letter in a misspelling of this alleged terrorist‘s name on the visa program allowed him to get on to the plane, and he was already classified as a possible terrorist.  Now, we need to upgrade the hardware, don‘t we? 

Is that pretty much what we‘ve got to do? 

MASSA:  Not just that.  This was a systemic failure.  And I said that the day it happened. 

I was very critical of the secretary of homeland security, who, I don‘t know what planet she was on when she said it, that the system worked.  Thankfully, she‘s corrected that.

It‘s more than just a hardware failure.  Apparently, authorities actually knew he was a threat to the aircraft while it was in the air, and the procedures that are in place that many of us know about and all of us can think about were not instigated to safely turn that plane around and to, in fact, inform the crew who are trained to do this. 

It‘s more than just that hardware failure.  And we are going to see more and more and more as these reports come out.  I know on Wednesday, Tuesday of next week, when the Congress gets back in session, the Homeland Security Committees in both the Senate and the House are going to be focusing like a laser, but it‘s going to make it so much harder to do our jobs with these failed, out-of-office individuals sniping like Chihuahuas at our ankles instead of being able to focus on what has to be corrected.

And that‘s why I‘m being very clear about this. 

SCHULTZ:  Yes.  Well, you are very clear, and the American people appreciate it.  And I hope next week, when you get back—and this videotape is about as ominous as it gets from the Newark airport earlier this week. 

A lady gets through security, then goes over to rope line, lifts it up, and I guess her boyfriend or husband or somebody slips through.  They still haven‘t found this guy.  And they go off and he ends up leaving.  It was a kiss good-bye on an airplane. 

I mean, what‘s your response to that?  How are the American people supposed to feel safe or feel that the TSA is getting the job done when we have evidence right here?  And this is an airplane where a plane took off on September 11th and ended up in the field of Pennsylvania. 

MASSA:  That‘s right.  But the good news, in defense of the TSA in that case, is that the system was in place for people to not only monitor it, but to review it.  And the reviewers caught the tape. 

And I‘ve seen the tape just like you have.  And by the way, you‘ve got to be pretty trained to look at that and actually figure out what is going on. 

They caught it, they shut the airport down.  Terrible inconvenience, by the way.  It cost millions of dollars because all of those airplanes that were supposed to leave couldn‘t leave, all those passengers were inconvenienced.

But in that case, they caught it.  And that‘s the kind of extra vigilance that, frankly, makes me very optimistic.  I will fly on any American airliner at any time.

And by the way, it‘s going to mean, probably in the future, they‘ll have to review such basic things like body-scanning technology and others.  So we‘re going to put a lot of focus on this, and I am going to stand here and commit to you and to others that as long as there are people trying to score political points with terrorism, I‘m going to stand up against them.  It absolutely has to stop. 

SCHULTZ:  Congressman Massa, great to have you with us tonight.  Have a great weekend.  Thanks so much.

MASSA:  Good to be with you.  God bless you and good health, Ed.

SCHULTZ:  All right, my man.  Thank you.

Coming up, “The Beckster” stepped in it talking about race again.  And America‘s mayor needs a major history lesson. 

That‘s in “Psycho Talk,” coming up.  

Stay with us. 

(COMMERCIAL BREAK)

SCHULTZ:  And in “Psycho Talk” tonight, so much material out there, we just couldn‘t settle on one, so we‘ve got a doubleheader for you tonight.

First up, we have Mr. 9/11 himself, Rudy Giuliani.  This week he went on “Larry King Live” and criticized President Obama for taking just too long to respond to the Christmas Day terror attempt.  When Larry pointed out that President Bush took six days to speak up about the shoe bomber incident, Rudy started to rearrange history. 

(BEGIN VIDEO CLIP)

RUDY GIULIANI ®, FMR. NEW YORK MAYOR:  And I believe that six days was before the September 11 attack. 

(END VIDEO CLIP)

SCHULTZ:  Wrong.  We all know the shoe bomber incident happened three months after 9/11.  But Rudy‘s rewriting history continued this morning. 

(BEGIN VIDEO CLIP)

GIULIANI:  We had no domestic attacks under Bush.  We‘ve had one under Obama. 

(END VIDEO CLIP)

SCHULTZ:  No domestic terror attacks under Bush.  Hmm.

Rudy, you can‘t make 9/11 the cornerstone of your presidential campaign and then just ignore it when it it‘s convenient for you to go out and do some fear mongering.  Now, that kind of stunt puts you right into “Psycho Talk.”  

Now, for part two tonight, doubleheader, here we go.

“The Beckster,” he steps up to the plate.  And, of course, he‘s said in the past that he doesn‘t have any African-American friends because he‘s afraid he might say something wrong.  You know, he might say something really wrong.

Somebody would take him wrong if he said.  You know, something wrong. 

And he don‘t want that.

In other words, he just can‘t keep his racist trap shut.  Well, he provided it yesterday on his radio show. 

(BEGIN AUDIO CLIP)

GLENN BECK, RADIO TALK SHOW HOST:  “African-American” is a bogus PC, made-up term. 

UNIDENTIFIED MALE:  Yes. 

BECK:  I mean, that‘s not a race.  That is—your ancestry is from Africa, and now you live in America. 

(END AUDIO CLIP)

SCHULTZ:  Buddy, you  were our Psycho Talker of the Year last year, partly because you called the president a racist.  The subject of race clearly isn‘t your strong suit.  You may not want to—you might probably want to stay away from all of that. 

And if you can‘t say something around your friends, you shouldn‘t be saying it on the radio.  And that lands you right into “Psycho Talk.”  

Coming up , I‘ve got a “Deep Throat” over there in the insurance industry.  He just gave me the inside scoop on what kind of backroom deals are going down behind closed doors.  Members of Congress are involved.  Senate candidate and Congressman Joe Sestak will be here to react to all of that in just a moment. 

Plus, I just can‘t get over this AIG story, and I want to know what President Obama knew about Tim Geithner and when he knew it.  Eliot Spitzer in the house tonight to comment on that.  All of that, plus Lizz Winstead and Stephanie Miller coming up in Club Ed.  Stay with us.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA:  -- for the last quarter of 2009 were one tenth of what we were experiencing in the first quarter.  In fact, in November, we saw the first gain in jobs in  nearly two years.  Last month, however, we slipped back, losing more jobs than we gained, though the overall trend of job losses is still pointing in the right direction.

(END VIDEO CLIP)

SCHULTZ:  Today, the president said that despite the job setback last month, the trends are moving in the right direction.  He also said the stimulus plan is working and kept the economic crisis from becoming worse.  The conservative think tank the American Enterprise Institute agrees.  But Republican lawmakers are still attacking this president.  They say that they want more tax help for businesses, which is exactly what the president offered today when he announced 2.3 billion dollars in new green manufacturing tax credits. 

For more, let‘s go to our panel on this tonight.  Stephanie Miller, nationally syndicated radio talk show host with us tonight, and Ernest Istook is the former Republican congressman, and a visiting fellow in very high regard with the Heritage Foundation. 

Ernest, I‘m going to ask you first.  The numbers are the numbers;

741,000 jobs were lost a year ago this month.  Now it‘s 85,000 12 months later -- 11 months later.  Are we headed in the right direction? 

ERNEST ISTOOK, FMR. CONGRESSMAN:  I think you‘re comparing January and December, instead of the same months apart.  The problem is we‘re still losing jobs.  Whether we‘re losing at the same pace as before, President Obama said that had the stimulus plan passed, we would gain something like 7.7 million jobs. 

SCHULTZ:  The question is, are we headed in the right direction? 

ISTOOK:  No, when we‘re still losing jobs.  We‘re not moving in the right direction. 

(CROSS TALK)

SCHULTZ:  So it‘s better to lose 741,000 jobs than it is 85,000 jobs?

ISTOOK:  You‘re still moving in the wrong direction, Ed.  Even if you‘re not going there as fast, you‘re going in the wrong direction. 

SCHULTZ:  How can you say that, Ernest?  The numbers don‘t lie.  Would you rather have lost 740,000 jobs in the December? 

ISTOOK:  I would rather have gained jobs, Ed. 

SCHULTZ:  I‘m sure the president would, too. 

ISTOOK:  Sure. 

SCHULTZ:  Ernest, I find it amazing.  There isn‘t a number out there that you would give the president any credit at all.  Why are the conservatives this way? 

ISTOOK:  Because, Ed, we‘ve lost something like three million jobs in the last year.  OK?  President Obama claims we would gain millions of jobs under his plan.  Instead, he keeps doing things that reduce the number of jobs.  Businesses are holding back on investment because of the enormous uncertainty that he‘s creating, not just in the tax area, but in the regulatory area, and the cost of health care, the cost of doing business.  He‘s increasing all of those.  Businesses are skittish and they‘re holding back.  Great article in “The Wall Street Journal” on that Monday.

SCHULTZ:  Stephanie, maybe I‘ve failed math, I guess.  I don‘t know. 

Are we not heading in the right direction?

STEPHANIE MILLER, RADIO TALK SHOW HOST:  Ed, thank God this isn‘t pass-fail, for Ernest‘s sake, because, yes, we are heading in the right direction.  There‘s no other way to spin it, Ed.  You‘re absolutely right. 

Look, this is like turning the Titanic around, what he inherited from George Bush.  Are you really kidding me?  Do they really think some Republican president, that we were going to turn things around that quickly?  The stimulus is working.  You are right.  We are absolutely heading in the right direction. 

SCHULTZ:  All right, we got 2.3 billion dollars in tax credits offered up today in the energy sector.  Ernest, would you agree that that would be a good thing to do? 

ISTOOK:  The reason they are doing—they‘re trying to buy jobs with subsidies to businesses, rather than letting businesses create jobs.  You are saying that by spending tax payers‘ money, you‘re going to create a handful of jobs.  Actually, if you didn‘t have, for example, the new regulations announced this week by the Interior Department, which restrict the development of oil and gas, the exploration for them in the United States, you could create 100,000 jobs without spending new money, if would you just not create these new regulations. 

SCHULTZ:  Exactly.  He‘s taking a page right out of the Republican play book, and going with 2.3 billion dollars in tax credits.  This is exactly what the Republicans have been calling for, tax credits in the energy sector when it comes to wind production and when it comes to solar production. 

ISTOOK:  Do you know the cost? 

SCHULTZ:  I know exactly what the cost of money is.  And I also know that the Republican party will just not line up with this president, no matter what he does. 

ISTOOK:  OK.  You‘re saying that you want expensive energy rather than affordable energy.  Consumers disagree.  

SCHULTZ:  It‘s clean and we‘re going to have to pay for it. 

(CROSS TALK) 

ISTOOK:  The president said that energy prices are going to sky rocket under his plan.

SCHULTZ:  No.  It would not.  Wind energy is going to bring the price down as time goes on, Ernest.  Stephanie, I want to give you a chance here to explain how quickly do you think this can be implemented and have a factor when it comes to the job numbers? 

MILLER:  Well, you know, maybe I‘m in a parallel universe here, listening to Ernest.  It‘s like, yes, this is a good thing and this is creating jobs.  And don‘t think we know how quickly.  But what have the Republicans ever done to create jobs?  What is giving a tax cut to the top one percent ever done, except given us a huge deficit? 

SCHULTZ:  That‘s about what they have done.  Great to have you with us tonight.  I appreciate it so much.  Thank you. 

ISTOOK:  Thanks.

SCHULTZ:  President Obama will meet with union leaders on Monday who are not happy about his support for the Senate plan to so-called tax Cadillac health care plans.  We told you some union workers who have fought hard for the health care benefits could wind up getting burned by this tax.  But Nancy Pelosi does not want to roll over on this. 

For more, let me bring in Pennsylvania Congressman Joe Sestak, a member of the House Education and Labor Committee. 

Joe, an insider in the insurance industry today told me that behind closed doors in the Senate they have protected—I‘m talking about the big insurance industry—they have protected broker compensation rates.  They have protected the state level management exchange.  And it‘s not going to be on a federal level.  It‘s going to be managed on a state level.  And anti-trust legislation. 

Now these are three big victories for the insurance industry.  So where is the House, in your opinion, going to stand on this?  These are big things when it comes to reeling in costs, keeping costs down, and giving a fair price to consumers and no gauging.  What do you think?    

REP. JOE SESTAK (D), PENNSYLVANIA:  Ed, first off, what you are talking about is what most ails America.  We‘re not having principled compromise.  We‘re having compromise of our principles.  A special interest in the back door room actually helping to shape the deal; that‘s exactly what shouldn‘t have happened. And we criticized it so harshly in the last eight years. 

So what is the House going to do?  Ms. Pelosi—I was on a teleconference with her the other day—is fighting these issues.  She said that she wants those anti-trust provisions to get in that bill.  How can we not?  Ninety five percent of all health insurance markets are a monopoly.  Right here where I sit in Philadelphia, one health insurance company has 75 percent of all health insurance plans.

And the excise tax—when they implemented that excise tax, or about to, they are not just pulling in the Cadillac.  They are pulling in the Chevrolets by 2019, because they indexed it to a wrong inflation rate.  We‘re going to have one-third pay a middle class tax.  This has to change. 

SCHULTZ:  I‘m also told tonight that there‘s going to be an effort to compromise in the Democratic camp when it comes to taxing benefits, and also an income tax increase.  The unions are very uptight about the fact that any of their health care benefits would be taxed.  So they‘re going to try to reduce that number.  They‘re also going to try to increase income tax on the folks making over a half a million dollars a year. 

Would that be acceptable to you?  Would any taxing of health care benefits be acceptable to you in the House, and some of your colleagues there?

SESTAK:  I think what you are going to see, and I‘ll accept it—I‘m opposed to this excise tax.  But if they did raise it dramatically, the amount of the plan that would actually be taxed—and I‘m not talking about 23,000 dollars per family.  I‘m talking those high paid executive Cadillac plans and tie it to the right inflation. 

SCHULTZ:  What is a Cadillac plan, Joe? 

SCHULTZ:  Right now, what they call a Cadillac plan is if you‘re a single person, about 8,000 dollars, 23,000 dollars for a family of about four. 

SCHULTZ:  So that number floats around a lot, too.

SESTAK:  Many of these workers actually negotiated these plans, and took a cut in pay in order to have health care plans for their families.  I think that‘s absolutely wrong.  You‘re probably going to see some combination of that Medicare payroll tax, that surtax on those over that 500,000, and then you‘re going to see somewhat, probably at a much higher level, I hope, much higher level of that excise tax. 

I think that, in the reality to you, Ed, is where we‘re going to end up.  The bottom line is to stand back. 

SCHULTZ:  That is politically tough for the president, because he told union leaders that he would not go after their benefits and tax them.  It‘s going to be, you know, a hit on middle class families.  I don‘t see how that‘s going to be a political winner, especially in an election year.

SESTAK:  And it‘s not.  If—look, Ed, I am not there.  I still feel we‘re in there battling.  We are Democrats that should understand that this is about the working family that George Bush over the last eight years—you talked about how many jobs were created.  In George Bush‘s regime only one million jobs have been created in his whole eight years, net, and in President Clinton‘s 23 million. 

So we‘ve got to remember that these workers, their medium level of income decreased during the last eight years 2,000 dollars. 

SCHULTZ:  All the more reason why you shouldn‘t be hitting them.

SESTAK:  Exactly.  So if you‘re going to have an excise tax, place it all the way on those—up to—you know, very high up there, so it‘s not on the working family.  That‘s the key thing we‘ve got to prevail upon.

SCHULTZ:  Congressman, great to have you on tonight. 

SESTAK:  Thank you for having me, Ed. 

SCHULTZ:  Coming up, Eliot Spitzer made a career out of locking up criminals on Wall Street.  He‘ll tell us if some of the boys over at AIG might be in line for three hops and a cot.  That‘s next.

(COMMERCIAL BREAK)

SCHULTZ:  In my playbook tonight, I think Treasury Secretary Tim Geithner has got a story to tell.  So does the House Oversight Committee, because they want him to testify about his time when he was the head of the Federal Reserve Bank of New York.  We found out yesterday that While Geithner was in charge, the New York Fed told insurance giant AIG to keep quiet about over-paying Wall Street firms using their taxpayer funded bailout money. 

That information came to light after e-mails between AIG and the Fed were made public.  Now former New York Governor Eliot Spitzer thinks there‘s more skeletons in AIG‘s closet.  He‘s pushing for full disclosure of the company‘s emails, accounting documents, and financial models from the last ten years. 

Governor Spitzer joining us tonight here on THE ED SHOW.  Governor, good to have you with us tonight.  I want to play this piece of tape first, because it came up at the White House briefing today.  This is Robert Gibbs, somewhat defending Tim Geithner.  Here it is. 

(BEGIN VIDEO CLIP)

ROBERT GIBBS, WHITE HOUSE PRESS SECRETARY:  Secretary Geithner was not involved in any of these emails.  These decisions did not raise to his level at the Fed.  These are emails and decisions made by officials at an independent regulatory agency. 

UNIDENTIFIED MALE:  How do you know that he wasn‘t involved?  He was a leader of New York Fed.

GIBBS:  Right.  But he wasn‘t on the e-mails that have been talked about and wasn‘t party to the decision that was being made. 

(END VIDEO CLIP)

SCHULTZ:  Now, Eliot, you‘re a prosecutor.  The White House is on record now.  This is pretty dangerous territory if they are wrong, isn‘t it? 

ELIOT SPITZER, FMR. NEW YORK GOVERNOR:  Yes, and I‘m surprised that he was making such definitive statements about Tim Geithner‘s involvement or lack of involvement.  Frankly, nobody knows until they‘ve parsed all the emails, and gone through all the communications at the New York Fed.

What many of us have been saying for quite some time now is that AIG is the center of the web of the entire cataclysm on Wall Street.  The only way to understand what happened is to go through those emails.

The amazing thing, Ed, is we own the company.  Taxpayers own the company.  It is our right to understand what is being done with our money, what happened, what led to this cataclysm.  And only from that will we understand what did Tim Geithner do? 

The New York Fed was instrumental in creating the structure that failed.  Tim Geithner was the president of the Fed.  You go back to who choose him to be there.  It was the heads of the leaders of the New York investment banks, that have benefited from the bailout. 

So many questions are there.  Let‘s not jump to conclusions.  But I can tell you one thing with absolute certainty, until we get every one of those e-mails, we will not know.  We own the company.  Release the e-mails.  The Congress should be demanding this right now.  I don‘t know why the Senate committees, House committees, have not sent a subpoena over to the company for every email.  The company should wave all the privileges.  It is our privilege as tax payers.  Let us understand where our tax dollars have gone.   

SCHULTZ:  There is such a division between the middle class and Wall Street in this country.  This is a politically charged story for the White House.  Where do you see the president in all of this?  How forceful should he be in full disclosure about Geithner‘s activity at the New York Fed?

SPITZER:  He should be saying, we believe in transparency, open this up.  We call it an open source.  Let the public see the emails.  Let journalists, investigative reporters, people parse through what that company was doing.  There‘s no reason to protect it, none whatsoever.  It‘s our tax dollars that paid the bonuses, our tax dollars that bailed out Goldman Sachs. 

Hundred cents on the dollar—you refer to this, the counter-party payments—unbelievably improper, wrong decisions, most of us believe.  Explain why they were made.   Let‘s see what the communications were.  When did Goldman understand that AIG was going down?  Who knew what?  Who communicated, from Lloyd Blankfein, to Paulson, to Geithner, to Bernanke.  These questions must be answered. 

SCHULTZ:  The House Oversight Committee is going to get into this.  They want Geithner to come over.  Where is the potential criminal activity here?  I don‘t want to go too far with this here.  The American people—where there is smoke, there is fire.  Where would the potential—

SPITZER:  There‘s so many potential areas of criminality.  Let‘s not speculate wildly.  The first area that I would look at is to see when did the counter-parties know that there was insufficient collateral at AIG to back up these credit default swaps.  What did they then do with that information?  And what did the folks at AIG, when they realized they had no collateral and were incapable of making these payments do.  Did they sell additional credit default swaps?  Did they defraud people when they sold bad instruments?  Did they lie to the public, make misleading statements to the marketplace, misleading statements to regulators? 

Every one of those dynamics is fraught with risk and danger.  That‘s why we need to track the information, see who knew what when, and who said what when to other people in that chain of information flow. 

SCHULTZ:  Obviously, if you get the authors of the e-mails singing about who knew what and when --  I mean, it just seems incredible, when you‘re dealing with billions of dollars like this, that the head of the New York Fed would not know that his regulators are telling AIG to keep their mouth shut about what they‘re going to do with the money to buy toxic assets.  I find that hard to believe. 

SPITZER:  Shocking.  Here‘s the other thing, when Tim Geithner was being confirmed, he said, before the United States Senate, I have never been a regulator.  When I heard him make that statement, I said, this guy didn‘t understand what his job was.  He was the chief regulator of Wall Street.  And yet he completely disavowed any regulatory capacity or obligation.  That is when we should have known that his complete understanding—his fundamental misperception of the job then is what led us to this point in the cataclysm.  

SCHULTZ:  This is one thing the Obama administration does not need. 

Former Governor of New York Eliot Spitzer with us tonight on THE ED SHOW. 

Thank you, Eliot. 

SPITZER:  Thank you, Ed.  Have a good weekend. 

SCHULTZ:  You bet.

Coming up, Michael Steele has pulled a fast one on his own party, and they might just kick him to the curb.  You never know.  “Daily Show” co-creator Lizz Winstead will help the Republicans find the funny side of this one next on THE ED SHOW.  Stay with us.

(COMMERCIAL BREAK)

SCHULTZ:  Welcome back.  It‘s Friday.  It‘s time for Club Ed.  Lizz Winstead, co creator of “The Daily Show,” the brains behind “Wake Up World,” which you can watch at www.WakeUpWorld.tv.  How are you doing, Lizz? 

LIZZ WINSTEAD, “WAKE UP WORLD”:  Ed, I‘m good.  But I‘m sort of conflicted about how I feel about you not running for Senate. 

SCHULTZ:  I‘m not running for Senate.  Don‘t get me—you know what? 

I think I would—well, do you think I would have been a good senator? 

What do you think? 

WINSTEAD:  I do think you would have been a good senator.  Well, first, I was like, what am I going to do on Fridays?  Of course, I had to make it about me for a second.  And then I was like, I think it would have been great.  And I think I maybe would have had to come and work on your campaign, because I would have begged you to kick off your campaign at the Lawrence Welk Museum.  I would have begged. 

SCHULTZ:  Speaking of that part of the country, look at the weather that our friends are having.  Did you actually grow up in this weather? 

WINSTEAD:  I did grow up in this weather.  Although the sad this is that—now I‘m going to sound like one of those old crotchety people.  I didn‘t get to take a bus to school.  There was no busses.  It was you get up and you walk to school in the dark, with the boots, mostly because you could walk by where the hockey players were practicing, so you could do your wiggle past the high school boys. 

SCHULTZ:  Let‘s talk politics.  

WINSTEAD:  Yes. 

SCHULTZ:  Michael Steele, I think the name of his book should have been “Going Rogue.”  What do you think? 

WINSTEAD:  I think the name of his book should have been, “Hey, Guys, I‘m Writing a Book, Did You hear?”  Nobody knew he had a book deal.  Nobody in the party knew the guy had a book deal.  I look at Michael Steele, and he opens his mouth—and then you see people talking about Michael Steele.  He doesn‘t really appeal to the conservatives, because they think he‘s too moderate.  And the moderates just think he‘s a wing nut.  The part of the party he appeals to the most, I guess, is sort of the all about me part of the party, because he only seems to be servicing himself, and not in a Carrie Prejean sort of way. 

SCHULTZ:  All right, what about this terrorist, Lizz—or this visa problem we had at the State Department.  one letter misspelled, his name, and then look at what happened. 

WINSTEAD:  Dude, it‘s so crazy that when I first heard that, it was so upsetting to me because, like, I thought, OK, he‘s got a hard name to spell.  So I went to Google and I did my own research and I Googled and I spelled his name with one letter off.  And guess what?  Google will correct it for you.  So if we‘re spending millions and millions and hundreds of millions of dollars on a CIA and FBI and Department of Homeland Security, and they choose to have a system that‘s worse than free Google, we are in a mess of epic proportions.

SCHULTZ:  Lizz Winstead, always a pleasure to have you here on Fridays. 

WINSTEAD:  Thanks, Ed.

SCHULTZ:  Have a good one.  Tonight, I asked our viewers, do you have faith that President Obama will turn our economy around in 2010?  Eighty four percent said yes, and 16 percent said no faith, they said no.  That‘s THE ED SHOW.  I‘m Ed Schultz.  For more information on THE ED SHOW, go to my Ed.MSNBC.com, or check out our radio website at WeGotEd.com.  You can hear the show 12:00 to 3:00 on channel 167 XM, Monday through Friday. 

That‘s THE ED SHOW.  “HARDBALL” with Chris Matthews starts right now on the place for politics, MSNBC.  We‘ll see you Monday.  

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

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