updated 1/27/2010 11:57:02 AM ET 2010-01-27T16:57:02

Guests: Robert Reich, Andy Stern, Phil Hare, Joan Walsh, Bob Shrum, Joe

Madison, Ernest Istook, Adam Green, Bertha Lewis

ED SCHULTZ, HOST:  Good evening, Americans, and welcome to THE ED SHOW tonight, live from the nation‘s capital. 

Hitting my hot buttons tonight, well, the White House is making a huge deal about a spending freeze.  Do you really think the middle class families care about that right now?  Or is it a job? 

The fake pimp who brought down ACORN just got busted by the FBI for trying to wiretap Senator Mary Landrieu‘s office in Louisiana.  I‘ll have an exclusive interview with the CEO of ACORN on that story. 

And Democrats are finally going on the offensive for 2010.  They have a new attack plan to expose radical Republicans. 

It‘s all coming up on THE ED SHOW tonight.  We‘ve got it all for you. 

But first, the State of the Union is tomorrow night, and tomorrow‘s my birthday, and I wish the White House would call and say, hey, Ed, would you like to write the State of the Union speech?  I sure would.

Everybody‘s talking about a spending freeze.  I don‘t think the middle class is worried about a federal budget deficit right now.  I don‘t think the middle class or the working poor in this country is worried about a deficit. 

You see, the guy that just lost his job last year, say, maybe December or October, he wants a job.  He‘s not worried about the federal budget deficit.  The woman that‘s waiting tables in a small diner, in a small town, who doesn‘t have any health insurance, who‘s got a sick kid at home, I don‘t think she‘s worried about the federal budget deficit. 

How in the world did this administration lose control, total control, of the message?  The deficit is not the real big concern right now to American families. 

They know about it.  They care about it.  But what‘s number one, what‘s number two, what‘s number three? 

It‘s about jobs.  It‘s about health care.  And who has the guts to pass it? 

I just hope that this administration doesn‘t lose focus and hasn‘t lost the guts and the nerve and the political ear that brought them to power. 

The State of the Union, I think, tomorrow night is about two things—jobs and making sure the people watching, the 90 million people who are watching, can answer this question when it‘s over with.  I think the Democratic Party and President Obama, they‘re looking out for me, I‘m in the middle class, and I think they have the answers. 

That really should be the mission.  And I‘m afraid the Obama team is getting somewhat hoodwinked to think that this spending freeze is going to appease people that only want to see him fail. 

By the way, hold it right there.  Did any Republicans in the Senate go on record today saying, hey, this spending freeze, I‘m with Obama?  None. 

OK.  Now, for the record, what‘s it going to do?  National parks, education, farm subsidies, they‘re targeted.  Uh-oh, they‘re messing with North Dakota now.  Going to cut those farm subsidies, while military spending, homeland security and entitlements, well, they‘re going to be the untouchables?

Which is costing us more, folks, the escalation in Afghanistan or the upkeep at Yellowstone Park? 

Now, I don‘t like seeing the president give any ground at all to the Republicans.  Our problem isn‘t spending right now because we‘re trying to get the economy running.  Our problem is revenue.  We need more revenue in to the Treasury to turn this economy around and create jobs. 

Tell me what you think.  Get your phones out tonight, folks.  The number to dial is 1-877-ED-MSNBC. 

And my question tonight is, has President Obama convinced you he‘s a populist? 

President “1” for yes, press “2” for no, and I‘ll bring you the results later on in the show. 

Well, it if it‘s about jobs, this is a great source.  Joining me now is former labor secretary Robert Reich.  He is now the professor at UC Berkeley and author of the book “Supercapitalism.”

Mr. Reich, great to have you on tonight. 

ROBERT REICH, FMR. LABOR SECRETARY:  Good even, Ed.

SCHULTZ:  You bet.

REICH:  Happy birthday, by the way.  Happy birthday.  You‘re going to be 30 tomorrow. 

SCHULTZ:  Well, wait a minute now, don‘t screw it up.  I was going to be 29.  Let‘s not get ahead of ourselves here. 

All right.  Do you like the idea of a spending freeze when we are trying to create jobs?  It seems to me that the White House has kind of taken some heat for not listening to Independents, and now it‘s time to get fiscally responsible. 

What do you think about all of this? 

REICH:  Well, Ed, I understand why the president must feel he must need to do this, because it‘s not Republicans, it‘s conservative Democrats, it‘s Kent Conrad and Evan Bayh and Dianne Feinstein and others who are saying to the president, if you don‘t have some sort of a spending freeze, we‘re not going to approve an increase in the debt limit.  And that is going to be a big problem for the president. 

So there‘s some gesture that the president has to make in their direction.  But a spending freeze actually is going to tie his hands, particularly when it goes into effect next year. 

If the economy is not booming, if we‘re not going to get a lot of new jobs—and I don‘t see a lot of new jobs happening, none on the horizon—then who is going to spend, if not the government?  Consumers are not spending.  Businesses are not spending. 

Government has got to be the spender of last resort in order to get people jobs and then to get the economy going again.  It‘s the only way we can actually bring down the future budget deficit. 

SCHULTZ:  Robert, if you‘re counseling the president, what do you want him to say tomorrow night?  What does he have to say? 

I mean, it would seem to me right now a lot of this is about momentum and making the American people feel good about themselves, that we are headed for sure in the right direction.  What would you say to the president, what he has to accomplish tomorrow night? 

REICH:  Well, I think he does have to be optimistic, but he can‘t be overly optimistic, Ed, because a lot of people are suffering.  One out of five Americans right now is either unemployed or underemployed.  And there are six people lining up for every single job that is out there. 

And the president‘s going to be cognizant of the amount of pain out there—homeowners who are in danger of losing their homes.  But he has got to be upbeat and he has to have a plan.

He‘s got to say to people, look, this is what I‘m going to do.  I am going to—and if I were him, I‘d say, I‘m going to have a second stimulus. I know those of you who are concerned about a budget deficit may get a little bit concerned about that, but I‘ve got to do it in order to make this economy work and get it going again and get more jobs. 

I‘m going to bail out state and local governments and Main Streets and homeowners.  I‘m not going to bail out any more—no more bailouts for Wall Street.  I‘m going to bail out Main Street. 

And beyond that, I am also going to do everything I can to ensure that homeowners can declare bankruptcy if they can‘t meet the payments on their homes so that they can actually have the mortgage debt as part of bankruptcy, which is not now the case.  And it doesn‘t give them—well, that would give them much more bargaining leverage with their mortgage bankers, something Wall Street doesn‘t want at all. 

SCHULTZ:  Mr. Reich, I believe that the president—and I think his base believes—that he has done everything he possibly can to bring Republicans on board and to be part of the process.  Now, I understand later this week, after the State of the Union, the president‘s going to be speaking at a GOP retreat for the House members.  That, of course, could have been done a long time ago, but now they‘re interested in having him come over there.  The point being here is that we‘ve heard “Waterloo,” we‘ve heard “failure,” we‘ve heard “break him,” all of these negative tones coming from the Republicans. 

How aggressive should the president be tomorrow night?  What tone should he strike? 

REICH:  I think he‘s got to be very aggressive in terms of what he believes in, Ed.  And it‘s not just jobs, it‘s also health care. 

He can‘t give up on health care.  I mean, he should not and cannot afford to do what Bill Clinton when Bill Clinton actually lost health care, and then moved as fast as he could to the right.  And he did get re-elected, but that was because the economy by then was doing very, very well. 

Barack Obama does not have that kind of economy.  He also has an electorate and a base that is getting increasingly impatient and not nearly as fired up as the base on the other side.  The Republican base is very fired up.  And what Obama has to do is fire up the Democratic base, because those 2010 midterm elections are coming on. 

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

REICH:  Thanks, Ed. 

SCHULTZ:  I want to know and I want to talk more about this spending freeze and exactly what this is all about.  What could it mean to the future of health care reform in this country? 

Joining me now is the head of one of the most powerful unions in America, and that‘s Andy Stern, president of the Service Employees International Union. 

You want to create jobs in this country, pass this health care bill.  I think that‘s pretty well known.  And the number of jobs it would create, maybe up to a million jobs. 

Mr. Stern, how much does the president have to rely on getting this message across that we‘ve got to pass health care?  What does he have to do tomorrow night? 

ANDY STERN, PRESIDENT, SEIU:  Well, I think the president has to do what he did so well during the campaign.  He has to tell the story that so many Americans face. 

In his case, it was his mother who had cancer.  And not only was she worried about her health, she was worried about paying the bills. 

It‘s about Pat Sajan (ph), who lost her ranch.  It‘s about Georgia Ann Kohler (ph), who lost her brother because he couldn‘t pay for the medical advice. 

And what he has to say is health care will create nearly a million new jobs.  Health care, passing health care, is the only way to reduce the deficit, Medicare and Medicaid.  But more importantly, health care is the right thing to do for America and for all the families. 

SCHULTZ:  Well, it is.

STERN:  And I think he has to put them all together. 

SCHULTZ:  All right.  And it‘s an important thing, apparently. 

Today, obviously, you were speaking at the Center for American Progress and you made the statement that the country‘s labor activists will not be eager to help the Democratic Party in 2010, in the elections, if things don‘t happen when it comes to health care. 

Are you willing to say tonight that it won‘t be the same support from unions in this country if the Democrats don‘t get this done? 

STERN:  Well, what I can say with absolute surety is that our members are not Democrats or Republicans, they‘re not left or right.  They do what‘s right or wrong for their families.  And they have told us over and over again, they need some peace of mind, some security, some guarantees about health care.

And I don‘t care what any union leader says or any candidate says.  Unless the Democratic Party takes advantage of the majorities they have and do something about health care, I couldn‘t get people motivated enough to vote.

We saw it in Virginia.  We saw it in New Jersey.  We saw it again in Massachusetts.  Voters are smart people.  They care about issues.

And our members‘ health care is the number one priority, and they‘re expecting some action.

SCHULTZ:  You also took after some senators who are looking out from their own back yard.  You went so far as to say that they should send the national security over to the Senate to explain to them why we don‘t negotiate with terrorists.  And this has caused quite a stir in the blogosphere.

Are you comparing Democrat conservatives to terrorists when it comes to health care reform? 

STERN:  I would say that was a bad choice of words.  But what I would say is that the American people sent the Senate there to have a debate, not to say we are going to hold the whole Senate hostage until I get my way.

We don‘t even debate until I get my special needs, that is not what people are expecting from the Democratic Senate.  Hostage-taking, deal-making has to end, and we have to stand up and fight for what‘s right for people. 

SCHULTZ:  Mr. Stern, great to have you with us tonight.  Appreciate your time here on THE ED SHOW.

STERN:  Thanks, Ed.

SCHULTZ:  All right.

Coming up, the pretend pimp who took down ACORN just got busted, arrested by the FBI for trying to wiretap a United States senator‘s office. 

We‘ll have a full report and an exclusive interview.  And we‘ll tell you what kind of costume he wore. 

And the president has promised to have a laser focus on jobs this year.  Congressman Phil Hare, well, he‘s got a plan that would make FDR awful proud, maybe even blush because it‘s so aggressive. 

All that, plus “The Beckster.”  Well, we‘re talking about a guy who‘s speaking out of both sides of his mouth.  He‘s in “Psycho Talk” tonight. 

Stay with us.

(COMMERCIAL BREAK)

SCHULTZ:  Welcome back to THE ED SHOW.

Millions of Americans, they want to get back to work, and they‘re looking to the president to make it happen.  And if it doesn‘t happen, he‘ll pay a political price. 

Tomorrow, in his State of the Union Address, the president of the United states will show that he‘s got the message.  He‘ll be focused, laser-focused, on job creation. 

My next guest has a plan of his own about getting Americans back to work.  In December, he introduced a jobs bill in Congress that I think would rival FDR‘s New Deal. 

Joining me now is Congressman Phil Hare of Illinois.  He is a member of the Congressional Task Force on Job Creation and the chairman of the Congressional Progressive Caucus Task Force on Jobs.

Phil, great to have you on tonight.

REP. PHIL HARE (D), ILLINOIS:  Thanks for having me, Ed.  Good to be on.

SCHULTZ:  You bet.

Let‘s talk about the politics of this first. 

HARE:  Sure.

SCHULTZ:  Have you had any Republican reach out to you and say, Phil, this is a great bill, let‘s work together on this?  What do you say?  Have you had anybody do that? 

HARE:  No.  The short answer is, absolutely no.   

SCHULTZ:  OK.  So it‘s all about messaging. 

What should the president, in your opinion—before we get to your bill and what it is—what should the president say tomorrow night about a party who hasn‘t done anything in the Senate—and you just told us—and you‘re on the Jobs Task Force—they haven‘t reached out to you to work on jobs. 

So what‘s the mission tomorrow night?  You know?  What do you think? 

HARE:  Well, I think the mission tomorrow night is to look in the camera, as I‘m looking, and say, look, every one percent—you want to reduce this deficit, Ed, you‘re really serious about it?  Every one percent of unemployed people in this country is a $450 billion drain on the deficit.  So, you put three percent of people back to work, do the math. 

I mean, look, the president needs to reach out to Americans and say, look, we don‘t need to retool.  We‘ve got the things that we need here. 

I mean, I don‘t care what the other side doesn‘t like.  I‘ve got 11.1 percent unemployment in my state.  I‘ve got a bill, HR-4290, that will put a minimum of three million people back to work over a three-year period of time.  And quite frankly, they‘re telling us now that could be up to five million people. 

Look, if you don‘t have a job, you can‘t buy health care, you can‘t buy a car, you can‘t put your kids through school.  Ordinary people need to go back to work. 

If you look at what we did in the stimulus, we had over $10.6 billion in payroll that went out, and the Treasury saved $295 million in unemployment checks they wouldn‘t have to spend.  So, look, what‘s the deal here?  It‘s simple math. 

Put people to work, reduce the deficit, and move on.  And if the other side wants to stand in the way, that‘s their problem, not ours. 

SCHULTZ:  All right. 

Let me play devil‘s advocate here.  Let‘s look oat the other side. 

Congressman Hare, how in the world can you put together a bill that can‘t attract one Republican?  What‘s wrong with you? 

HARE:  Well, you know me.  I don‘t know. 

I‘ll tell you this—this bill, by the way, is paid for out of TARP money.  It doesn‘t add a single penny to the deficit.  It puts young people to work in our forests and our national parks, learning work ethic.  It gives the opportunity for municipalities to be able to keep firefighters and police officers and teachers, for heaven‘s sakes.  It gives us the opportunity to really have meaningful employment for people. 

And the bottom line is, I said this I think to you one more time.  If I keep hearing this term about jobless recovery one more time, I‘m going to throw up.

SCHULTZ:  Yes.  OK.  So you have got—and this sounds pretty common sense, I think the American middle class would jump on this.

HARE:  I hope so.

SCHULTZ:  You want TARP money for job creation.  Plain and simple. 

HARE:  I do.  I want the money that went to the banks, who, by the way, didn‘t even do half of what we asked them do at the banks.  They‘re paying it back.

Let‘s invest—you know, you hear about Main Street.  OK, fine.  I want to invest in main, ordinary, decent people who want to go to work. 

Look, I‘ve got 1.1 percent in my state.  It‘s not sustainable.  We can‘t sustain double digits. 

You can talk about the politics of this and what‘s going to happen in November.  What happens between now and November for the steel worker that‘s unemployed, for the clothing and textile worker that‘s unemployed, for, you know—we couldn‘t get the health care bill through. 

And look, the bottom line is, I did not come here to just sit there and be some back-bencher and go, well, you know, things are tough.  They are tough, but there is a way out of this if you have the courage to stand up.

And I would just tell you, Ed, this is a good bill.  Is it the perfect bill?  I don‘t know that there is one. 

But I will tell you, I‘m not giving up and I‘m going to work this bill.  We have got over 75 cosponsors on it.  I told my caucus...

SCHULTZ:  And no Republicans?    

HARE:  And no Republicans that I‘ve asked.  And we sent—well, we sent the letter out to every member of the House and we don‘t have one yet. 

But I will tell you, look, we‘ve got 218 in the House, and we need to get this bill through.  The American people have got to understand that what we‘re trying to do is help them get back to work again. 

And the other side, if they want to sit there and fiddle while people are losing everything they‘ve ever had, they pay the price in November, not us.  But I don‘t even worry about that. 

I care about the price that the people are paying when they lose their home every 30 seconds because of health care.  Every 30 seconds in this country, Ed, a bankruptcy. 

SCHULTZ:  I‘ve got to ask you, Congressman, quickly, before we go, it‘s a heck of a battle for the Senate nomination in your state of Illinois.  I believe there‘s five candidates there. 

HARE:  It is.  There is. 

SCHULTZ:  Have any of these candidates embraced your bill or even looked at it? 

(CROSSTALK)

HARE:  Yes.  Let me tell you, before I endorse him—but before I did, I wanted to know, where are you on job creation in our state?  And I‘ll tell you, he‘s ahead in the polls.  And you know why?  Because he went and he‘s been slugging this out and talking about putting people back to work. 

I think he‘s going to be our nominee.  And if I were Nark Kirk, I would be very, very concerned, because he‘s moved now from being this moderate to having Sarah Palin commit for him. 

Good look there, Mark. 

SCHULTZ:  All right.

Congressman, great to have you with us.

HARE:  Thanks, Ed. 

SCHULTZ:  I know you‘re fighting for the regular folks out there, the middle class. 

HARE:  Every day.

SCHULTZ:  It sure makes sense to me to use TARP funds to create jobs. 

And I hope it hits the president‘s desk. 

HARE:  Absolutely.

SCHULTZ:  Great to have you with us.

HARE:  Well, I do too.  Thank you, Ed. 

SCHULTZ:  Coming up, I think Glenn Beck has a deep-seated hatred for reality.  His delusions land him in the most famous “Psycho Talk” zone next.

(COMMERCIAL BREAK)

SCHULTZ:  And in “Psycho Talk” tonight, our old pal Glenn Beck, he‘s back at it again. 

Apparently, he‘s gone off on some road trip with his old buddy, Bill O‘Reilly.  I guess they‘re calling it a “Bold and Fresh Tour.”  Well, we know it‘s not the bold and the beautiful.

Now, I‘m going to go ahead and guess that “The Beckster” is the bold one in this tour.  And here‘s why. 

Part of their dog and pony show involves O‘Reilly and Beck asking each other questions.  Listen to Beck‘s response when O‘Reilly asks him why progressives are just out to get them.

(BEGIN VIDEO CLIP)

BILL O‘REILLY, FOX NEWS:  These people want to hurt us.  They want to hurt us. 

Why do you think that is? 

GLENN BECK, FOX NEWS:  I think because that‘s the only way you can win the argument.  If you can‘t win the argument, you have to shout them down, you have to call them racists, you have to call them names, you have to do whatever it is you have to do. 

(END VIDEO CLIP)

SCHULTZ:  We‘re out to get them?  I‘ve got to hear that one more time. 

Glenn, what do progressives do when they can‘t win an argument? 

(BEGIN VIDEO CLIP)

BECK:  You have to shout them down.

Get off my phone!  Get off my phone, you little pinhead!

You have to call them racists. 

This president, I think, has exposed himself as a guy over and over and over again who has a deep-seated hatred for white people or the white culture.  I don‘t know what it is.  This guy is, I believe, a racist. 

You have to call them names. 

Committed communist system of fascism. 

This is what Hitler did. 

Get off my phone, you little pinhead!

(END VIDEO CLIP)

SCHULTZ:  All right.  You got the point on all that?  It takes a bold man to be that blatantly hypocritical. 

There are a few other words besides “bold” I could use, but let‘s stake with a family-friendly one.  OK? 

Glenn, that is big-time “Psycho Talk,” buddy. 

Coming up, my exclusive interview with the head of ACORN after today‘s late-breaking news that an infamous fake pimp who brought her organization down just got busted by the FBI.  You won‘t believe this one. 

All that and much more coming up. 

You‘re watching THE ED SHOW on MSNBC. 

Stay with us. 

(COMMERCIAL BREAK)

SCHULTZ:  Welcome back to THE ED SHOW.  Thanks for watching tonight.  We are live in Washington, D.C. tonight.  It is kind of the pre-game show to the State of the Union.  Democrats, just settle down.  Everything‘s going to be OK.  All is not lost. 

Our NBC News/”Wall Street Journal” poll has just been released.  I want to start with this number that I think is very profound.  When asked, who do you blame for not finding solutions to America‘s problems, the number one answer was Republicans in Congress; 48 percent of the folks blamed Republicans for not helping find solutions; 41 are blaming the Democrats in Congress.  Fewer than one-third said that President Obama was the problem; 71 percent said that he is not to blame. 

There are a lot of other numbers to get to tonight, but this is what David Plouffe meant when he told Democrats, you know, don‘t wet the bed.  At least that‘s what I think he meant. 

Then they need to remember, I think, just who the opponent is in all of this, the party of Bush and Cheney, right, the birthers, the death panels, those folks that are pushing those lies, the party of tax cuts for the rich, and the crusade in Iraq and how‘s that going for us. 

Democrats have to work—they got a lot of work to do but they have to stay focused on the message.  They need to pass health care reform and they need to show some progress on jobs.  But they are trying to find solutions and the American people, by these numbers, certainly recognize that. 

Joining me now is Joan Walsh, editor in chief of Salon.com.  Joan, great to have you on tonight.  Not to shift gears here, but none of those poll numbers say anything about a spending freeze.  I‘m curious your thoughts on is president Obama or the administration taking a step too far to get along?  Is this really necessary?  Your take on that tonight? 

JOAN WALSH, SALON.COM:  Yeah, I think they‘ve gone too far.  But it also seems to me that it‘s cynical, because you and I both know, it is not really a freeze.  They dispatched people to talk to the left, and I appreciate that.  I appreciate them showing us some respect.  But they dispatched people to say, well, it‘s not a freeze, and this won‘t be frozen, and some things will go up, and we could do a second stimulus, conceivably. 

So then what is it?  It feels like a cynical attempt to tell the American people, as though they‘re really that worried, we are serious about reducing the budget, rather than to lay out what they‘re going to do for the American people.  Because the problem for Democrats is simply not delivering on their promises, that people right now don‘t have additional health care subsidies, don‘t have protection against being discriminated against because of preexisting conditions. 

So there‘s really a gulf between the rhetoric and the delivery.  And that—all that‘s going to save Democrats in November, Ed, is delivering. 

SCHULTZ:  Well, it‘s up to the president now.  It looks to me, by the poll numbers that we‘re going to show you, that the people are behind him.  They like him.  When you look at the state of the economy right now and you look at this heavy lift with health care, the president‘s approval rating right now, his job approval rating, is at 50 percent and 44 percent disapprove.  Isn‘t this a fairly high number for some of the other numbers that are out there when it comes to trying to muscle health care through, and also the job situation?  What do you think? 

WALSH:  It is a high number and it should encourage him.  It should encourage the White House.  It should, but it won‘t, shut up the Republicans and particularly the media mob on the other side, who are making him out to be a debacle, a failed president, et cetera.  The only thing that concerns me, I don‘t think those are great numbers for the Democrats and I think that there is—

President Obama has an enormous reservoir of goodwill and I feel it myself.  When I criticize him, I kind of feel bad because I really do like him and I‘m rooting for him.  He is an enormously likable person.  But the Democrats are being associated with the drift and the lack of delivery and the lack of clarity.  So he could stay popular and the Democrats could still lose heinously in November.  So I wouldn‘t be entirely reassured by his poll numbers. 

SCHULTZ:  What do you think the strategy was, in an interview, the president talked about one term versus two terms and performance.  Here it is. 

(BEGIN VIDEO CLIP)

OBAMA:  I‘d rather be a really good one-term president than a mediocre two-term president.  And I believe that.  There‘s a tendency in Washington to think that our job description of elected officials is to get reelected.  That‘s not our job description. 

(END VIDEO CLIP)

SCHULTZ:  Joan, I think this is a pretty interesting strategy.  Telling, I think, the independent voters, it‘s not about me.  It‘s about what we‘re trying to get done.  It‘s not about job security.  What do you think the message was there? 

WALSH:  I think that is the message.  And I can‘t really speak for other people, but, you know, I think he will be—he will either be a good two-term president or an utter failure.  And what I want—I think he‘s governing as though he does care about reelection. 

I really do feel like the message from the White House and the message with this spending freeze rhetoric is more about covering his butt and getting him—keeping his popularity, rather than really getting things done that will prove to the American people, hey, Democrats can govern.  When they get in office, they do things for you so you should vote for them again.  If he doesn‘t do that, he won‘t be re-elected. 

SCHULTZ:  Thank you, Joan Walsh.  Great to have you on tonight.

SCHULTZ:  For more, let me bring in Democratic strategist Bob Shrum, professor at New York University, who I think has been around a few State of the Union addresses in his career.  All right, we keep hearing, Bob, about the president‘s got to be feisty.  He‘s got to be aggressive.  He‘s got to set a strong tone.  What does the president, in your opinion, have to do tomorrow night, the tone he has to hit? 

BOB SHRUM, DEMOCRATIC STRATEGIST:  He has to lead.  He has to inspire.  He has to give people a sense of confidence.  He cannot create a sense of retreat.  If there‘s a sense that he‘s retreating, for example, on health care, if he looks like someone who‘s oscillating between faux populism and a faux freeze, then he is going to look inauthentic. 

My mantra for tomorrow night is let Obama be Obama again. The country likes him, as these poll numbers indicate.  His approval number, by the way, is 13 or 15 points higher than Ronald Reagan‘s was in a similar situation, and Reagan kept on going, stood his ground, and by doing that when the recovery came, he not only assured a landslide reelection, he secured an era of conservative dominance in American politics.  This is the president‘s moment.  He has to rise to it. 

SCHULTZ:  OK.  The spending freeze; a lot of Democrats are puzzled that, why with the numbers that he‘s got right now is he focusing on a spending freeze, which many think is going to slow down job creation and also, in the big picture, it is really minimal.  Is he trying to strike a tone with those frustrated independent voters?  Is he reaching across the aisle saying, OK, you guys want to cut federal budget deficit?  This is where I‘m going to go.  Is he, in a sense, maybe even rope-a-doping some of the Republicans to find out if they‘re really genuine when it comes to working on the budget?  What do you think?

SHRUM:  I think if Obama‘s going to be Obama again, he has to remember what he said at that Iowa Jefferson Jackson Day Dinner that sent him on his way to victory in Iowa and the presidency.  Poll driven positions and triangulation just won‘t do.  We have to govern by conviction, not calculation.

Look, this freeze is either a gimmick that‘s not going to do much, and that‘s what I hope it is, or it is actually going to lead to real cutbacks in federal spending in the immediate future.  As Bob Reich said earlier on this program, that would be a disaster, would threaten the push the economy over the cliff a second time. 

I assume it is a gimmick, but it is so transparent a gimmick that I wish they‘d never done it.  I assume there are people in the White House who are saying, look, you had a little trouble in Massachusetts—although that was not, as you and I have talked about, a referendum on him.  Now you have to move to the right just like Bill Clinton did.  I think that would be a fundamental mistake. 

SCHULTZ:  Now the last time, Bob, the president of the United States spoke to the joint session of the Congress, it was about health care.  That was the moment that he was going to captivate the country, get the attention of everybody, and this was going to be the start of the real big push to get health care reform.  Then two words were thrown out: “you lie.”  And that captivated the media and that was the story. 

What do you think it is going to be like tomorrow night at the Capitol when the president gives his first State of the Union Address?  Do you think that the Republicans might have a moment like that? 

SHRUM:  No, I don‘t think they‘ll have a moment like that.  But I think there will be moments when they sit there in stoney silence and refuse to applaud, at least if he gives the kind of speech I want him to give.  He needs to get up there, needs to talk about job creation. 

The signal he sends on health care will be fundamental.  Because you know, Ed, people are going to decide whether he stands for the middle class and fights for the middle class, not because he uses the word fight 20 or 25 times, but because he is actually out there fighting for things that matter in their lives. 

When I heard about this freeze, I thought we don‘t have a freeze on the spending in Afghanistan, 100 billion or so a year.  In the last ten years—but we do have a freeze on student loans and helping kids go to college.  In the last ten years, we‘ve been investing in Iraq and Afghanistan, and China, our greatest potential economic rival, has been investing in China.  We need to begin to figure out how to take care of people here and how to move this economy. 

SCHULTZ:  Does the president dare turn and gesture over to the Republicans and say, you‘re going to have to ask yourself the question, do you want Waterloo or do you want health care?  Does he pull a moment like that? 

SHRUM:  I don‘t think he‘ll be that confrontational.  It is not in his character but I think he could, in effect, do that.  I‘ll tell you something, it‘s already to talk about bipartisanship.  But as FDR learned about two years into his term, as JFK learned about two years into his term, at a certain point you just have to stand your ground. 

SCHULTZ:  OK.  Great to have you on, Bob.  Thanks so much. 

Coming up, I‘ve got some advice for the president on what to say while he‘s face-to-face with the American people.  And I‘ll have that a little bit later on in the show. 

Right now, we want to go to Joe Madison.  He‘s an XM satellite talk show host, and also Ernest Istook is the former Republican congressman, now a distinguished fellow at the Heritage Foundation. 

All right, the Democratic Senatorial Campaign Committee, gentlemen, claims that they‘re going to get aggressive, and they‘re going to go after Republicans.  And they have a list of questions they‘ll ask Republican candidates.  Ernie, since you‘re such a good sport and a good fellow, I thought I‘d throw a few questions on you and let Joe weigh in on it as well. 

ERNEST ISTOOK, HERITAGE FOUNDATION:  Give him the easy ones. 

SCHULTZ:  OK, I will.  Do you believe that—this is what the Democrats are putting together.  Do you believe that Barack Obama‘s a United States citizen? 

ISTOOK:  I saw that list.  This was put out by—

SCHULTZ:  Yes or no?   

ISTOOK:  Oh, you‘re asking me!

SCHULTZ:  Yes. 

ISTOOK:  I thought you were talking about the comment.  No, I believe he is a US citizen. 

SCHULTZ:  OK.  Next question, do you think programs like Social Security and Medicare represent socialism, and should have never been created in the first place? 

ISTOOK:  I don‘t think they represent socialism.  I think they represent programs that are in trouble because they‘re not being well run. 

SCHULTZ:  But should they ever have been created in the first place? 

ISTOOK:  I‘m not trying to go back and change them. 

JOE MADISON, XM RADIO TALK SHOW HOST:  You willing to give up your social security check in. 

ISTOOK:  No. 

MADISON:  OK. 

SCHULTZ:  And finally, do you think President Obama is a socialist? 

ISTOOK:  No.  I think he‘s what you might call a social Democrat, that believes government should dictate to businesses rather than own businesses.  There is a technical difference there.  I think he wants government running more than it should be running. 

SCHULTZ:  Now, you‘re too centrist.  You answered no to two of these questions.  You can‘t run for the Republicans.  Joe, this is what the Democrats are going to do.  They‘re basically going to be calling out the Republicans to ID these candidates.  Then they‘re going to take the answers and send them back to the Tea Partiers and say, do you really know who your candidate is? 

MADISON:  What I was going to say—the line I had prepared for you today, Ed, was you cannot play offense and defense at the same time.  And that‘s what the Obama administration has got to learn or should have learned in this first year.  Obama is no longer running for president or head of the Harvard Review.  He does not have to get along to get elected like he did at Harvard. 

This young man is now president of the United States, and he‘s going to have to do what FDR did.  He‘s going to have to do what Lyndon Johnson did.  And he‘s going to have to now call them out and play offense. 

SCHULTZ:  Bob Herbert had an excellent article today in the “New York Times”—

MADISON:  And score!

SCHULTZ:  And score.  Credibility gap, does the president—I‘ll ask both of you.  Does he have a credibility gap with his base right now? 

MADISON:  Yes. 

SCHULTZ:  He campaigned on one thing and he‘s kind of been doing—so I think tomorrow night has to be the sea change for President Obama. 

ISTOOK:  He‘s got a credibility gap with almost everybody.  I mean that‘s the source—

SCHULTZ:  Well, not me.  I like the guy. 

ISTOOK:  OK, other than you, Ed.  But with most people on the left and the right, and frankly these independents that he‘s going after.  I think the reason that President Obama is giving the illusion of trying to do a freeze—frankly, it is an illusion, as I understand the details of it.  But he‘s trying to win over the independent voters that are rightfully concerned about the run-away spending in Washington. 

SCHULTZ:  Joe, basically Herbert‘s column was, buddy, you got to define yourself here.  Let us know who you are. 

MADISON:  That‘s what I mean by offense.  And that‘s exactly what I‘m talking about. 

SCHULTZ:  How much does he push health care? 

MADISON:  Oh, I think he‘s—

SCHULTZ:  Does he say we have to do it? 

MADISON:  He‘s got to—look, like I‘m looking at you square in the eye, he‘s going to have to look at that camera and say “we are  to ha going to have a health care bill that is going to be meaningful and it is going to make sure that people can have health care in this country who need it.”  And I mean stare them down. 

SCHULTZ:  Does he use the word reconciliation? 

MADISON:  Hell no. 

SCHULTZ:  Why not? 

MADISON:  Why—reconcile what? 

SCHULTZ:  I‘m talking about in the procedure of the bill to pass health care?  They‘re not going to get Lieberman, or Senator Ben Nelson.  I mean, does he really get down to the detail of saying, look, we‘re going to do this—we‘re going to use reconciliation.  We‘re going to get this thing done. 

MADISON:  I don‘t know if you want to call it reconciliation.  But I think I would say, we‘re going to get it done with or without you.  I mean, I think he‘s got to say that.  Look, he doesn‘t have the 60 votes.  And the reality is, he won‘t get it.  So I would tell him move straight ahead, move straight ahead.  This is his presidency.  Never again mention first term.  Never again mention that. 

SCHULTZ:  The big challenge he has is that he‘s not speaking in a vacuum.  He has a track record and people are going to compare his rhetoric with what he‘s actually been doing in the last year.  He does not get a free pass on empty promises. 

SCHULTZ:  Gentlemen, good to have you with us tonight.  Thanks so much. 

Coming up, I‘ll tell the president of the United States what I think he ought to say to the Republicans tomorrow night.  That‘s in the playbook.  Stay with us.

(COMMERCIAL BREAK)

SCHULTZ:  In my “playbook” tonight, we just keep getting dragged right into this health care reform action.  Don‘t we?  Single payer, gone.  Public option also definitely not going to be in.  Yesterday, Senator Bill Nelson (sic) said they have to scale back the bill even more.  He was actually blaming the lefties for no health care bill.

But a new poll shows that Democrats could be in big trouble this November if they just don‘t fight back for it; 68 percent of voters in swing districts that are represented by freshman Democrats, they want the public option.  If they don‘t get one, 52 percent of the democrats in those districts say they are less likely to turn out and vote this year. 

For more on this, let‘s bring in Adam Green, co-founder of the Progressive Change Campaign Committee.  What do these numbers say, in your opinion, Adam? 

ADAM GREEN, PROGRESSIVE CHANGE CAMPAIGN COMMITTEE:  If Democrats are smart and they want to keep their seats this election year, they need to demand that Pelosi and Reid rally around the public option.  That‘s the bottom line for them. 

SCHULTZ:  But you won‘t get it in the Senate.  What do you do? 

GREEN:  The last several months, the Senate has been chipping away and chipping away at real reform, and the House has kind of taken it.  And Massachusetts was kind of the wake-up call.  That‘s the first time there‘s been consequences for the Senate.  The House has to ask themselves, are we going to take this?  So the House is going to start rallying.  Actual House members will start rallying, starting tomorrow, demanding that the Senate pass the public option through reconciliation. 

SCHULTZ:  So your polling and your research basically tells Democrats, if you don‘t have public option, you got a real good chance of not being reelected in November. 

GREEN:  That‘s absolutely right.  Just to be clear, these ten districts, most of them were Republican leaning districts until Democrats took those seats over.  Despite that, 68 percent want the public option.  Overwhelming majority of the people say Democrats need to fight harder, take on corporations more.  That was the lesson of this poll. 

SCHULTZ:  Where is the frustration in the base of the Democratic party right now?  Is it because the Democrats haven‘t pushed hard enough for health care and it‘s dragged out too long?  Trying to work with Republicans too much?  What is it? 

GREEN:  There‘s two pieces of frustration.  There‘s been on-going frustration that the Democratic leaders haven‘t been pushing hard enough.  But there‘s been recent frustration at just the fundamental lack of understanding from the message from Massachusetts.  The message voters want more change.  They want Democrats to be populist and fight for them against big corporations. 

It is just absurd.  So, just so you know, tomorrow, Alan Grayson, the bold congressman with guts, will join us at the Senate to help us deliver 200,000 signatures to Harry Reid and other top senators.  It is time for the House, again, to take charge of the situation and demand that the Senate do right. 

SCHULTZ:  Adam Green, good to have you with us tonight.  thanks so much. 

Up next, after posing as a pimp to take out Acorn, under the radar surveillance, that guy just got busted by the FBI for attempting to wiretap a United States senator.  I‘ve got an exclusive coming up with Acorn CEO Bertha Lewis.  That‘s next on “THE ED SHOW.”  Stay with us.

(COMMERCIAL BREAK)

SCHULTZ:  Welcome back to THE ED SHOW.  The conservative nut who came to fame by posing as a pimp in an Acorn office is now under arrest for attempting to tamper with the phone lines in the office of Louisiana Senator Mary Landrieu.  Twenty five year-old James O‘Keefe became a right wing hero when he posted these videos on a conservative website.  He claimed they proved that Acorn was helping its clients break the law.  It looks like O‘Keefe may know something about that. 

Joining me now is Acorn CEO, Bertha Lewis.  What did you think, Bertha, when you heard this story.  Thank you for joining us tonight. 

BERTHA LEWIS, ACORN CEO:  Thank you.  I said well, finally, people will see Mr. O‘Keefe for what we knew him to be.  Whatever his views are, he will break the law in order to further his agenda.  He broke the law when he taped us.  He broke the law when he entered Mary Landrieu‘s office.  And so we think that people in Maryland, California, Pennsylvania, those authorities should also see him for what he really is. 

SCHULTZ:  Another network jumped on this and just ram-rodded it with the populist thinkers out there saying that you guys are a bunch of crooks at Acorn, you shouldn‘t get any money, didn‘t have money.  Does this change the landscape of your situation? 

LEWIS:  I don‘t know.  We shall see if it actually does.  The rush to judgment of Acorn by some media and even Congress and funders and other people, without actually looking behind the scenes to see exactly this guy‘s methodology.  Now, finally, I think people can see that this is who they‘re dealing with.  He is no hero.  He really is a criminal. 

SCHULTZ:  You said all along that Acorn was clean. 

LEWIS:  Absolutely.  And you‘ll see those shots that you show, these are al exterior shots.  They never came into our offices dressed like that.  In fact, we had a film maker, Kevin Keating, who did “Harlem Town USA” and “Giuliani Time,” actually analyze those tapes, and we saw how highly edited they were.  But we think that, to a certain extent, we hope that we‘re vindicated. 

SCHULTZ:  Do you expect the Democrats and those who have been proponents of Acorn, supporters in the past, do you expect them to be vocal on this now? 

LEWIS:  I have no expectations.  All I know is our folks have been working to stop foreclosures and to actually get back to doing the work that we have in our neighborhoods.  There were only a handful of brave souls in the Senate and in the House that stood up for us.  Those people I commend.  The unconstitutional act of trying to defund Acorn, only a few brave souls stood up against it.  But I hope that folks now see what this guy really is, what the agenda is. 

SCHULTZ:  Why wouldn‘t you go ask for the order?  Why wouldn‘t you go to the Democrats in the House and say, look, I need your help right now.  Acorn‘s a great thing.  We want to get our money back.  Let‘s get going here.  Now you see what this is really for.

LEWIS:  I have every intention of asking everyone.  But you asked me what are my expectations. 

SCHULTZ:  Well, it would seem to me that you would have the political clout now, and maybe public opinion on your side. 

LEWIS:  Let‘s hope. 

SCHULTZ:  -- to be more aggressive on this.  It seems to me the Democrats would want to help you out on this. 

LEWIS:  Here‘s the thing though.  We were attacked by the Fox News wall of noise.  So if this message can get through with the same vehemence that we were attack on, and all of the media outlets shows James O‘Keefe for what he is, then I think you may be right. 

SCHULTZ:  Are you going to call Fox News and ask them if they‘re going to cover this story the way they did the last one when it took place?  They were all over it. 

LEWIS:  I actually don‘t speak to Fox News. 

SCHULTZ:  I know you don‘t.  Bertha, thanks for joining us tonight.

LEWIS:  Thank you.

SCHULTZ:  Appreciate it so much, Acorn CEO Bertha Lewis, with us here on THE ED SHOW. 

Tonight, in our telephone survey, I asked the viewers has President Obama convinced you he is a populist?  Twenty nine percent of you said yes;

71 percent of the viewers said no.  That‘s THE ED SHOW.  I‘m Ed Schultz.  For more information on THE ED SHOW, go to Ed.MSNBC.com or my radio website at WeGotEd.com.  “HARDBALL” with Chris Matthews starts right now on the place for politics, MSNBC.

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

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