updated 1/28/2010 12:00:39 PM ET 2010-01-28T17:00:39

Guests: Chris Matthews, David Shuster, Sherrod Brown, Victor Fehrenbach,:Markos Moulitsos, Valerie Jarrett

RACHEL MADDOW, HOST, “THE RACHEL MADDOW SHOW”:  Good evening, Keith. 

Thank you very much.  And thanks to you at home for staying with us.

I got to tell you, true confessions here.  I love State of the Union night!  For politics fans, this is like Christmas morning on a January night!  It‘s the constitutionally mandated State of the Union—Yes! -- as our president lays out his version of how we‘re doing and what we ought to do be—what we ought to be doing better.  It‘s very exciting.  It‘s exciting every year even when news isn‘t made.

This year, both the speech made some news and the theater around the speech made a tiny little bit of news.  One moment of pure political theater tonight was a quasi-reprise of Congressman Joe Wilson‘s “You lie” moment from last year‘s speech on health reform.  As President Obama was describing last week‘s Supreme Court ruling allowing corporations the world over to spend without limit on American politicians and political campaigns, incredibly, a Justice of the Supreme Court, Justice Samuel Alito, shook his head and said, Not true, or possibly, Simply not true.

A Supreme Court spokeswoman told NBC‘s Pete Williams tonight just moments ago that Justice Samuel Alito was himself unavailable for comment on the heckling.  Pete notes that Supreme Court Justices who attend the State of the Union traditionally never applaud or signal approval or disapproval for a president‘s statements during the speech.  It was for that reason that when William Rehnquist was Chief Justice, he actually discouraged members of the Court from even going to the speech.  He said at one point, We look like bumps on a log.

That apparently is no longer true.  Now Supreme Court Justices look like Republican members of Congress muttering at the president.

President Obama‘s actual address tonight was rhetorically feisty, ending with a powerful “We don‘t quit, I don‘t quit.”  At the same time, a lot of his specific proposals were dealing from the politically conservative side of the deck.

(BEGIN VIDEO CLIP)

OBAMA:  ... tough decisions about opening new off-shore areas for oil and gas development...

continued investment in advanced biofuels and clean coal technologies...

restore the “pay as you go” law...

bipartisan fiscal commission...

proposing a new small business tax credit...

eliminate all capital gains taxes on small business investment...

We cut taxes...

We cut taxes...

We cut taxes...

We cut taxes...

Now, let me repeat.  We cut taxes...

(END VIDEO CLIP)

OLBERMANN:  Cutting the capital gains tax, drill, baby, drill, clean coal, a Republican and Democratic deficit club, tax cuts, tax cuts, tax cuts.  Get your tax cuts here.  Those are not progressive caucus talking points.  Still, though, the president‘s supporters will likely be happy to have seen him box Republicans into not standing and applauding for popular populist stuff like getting the banks to pay back the bail-out money.  And those frustrated with Republicans on health reform will doubtless enjoy a little slow-mo footage of one desperate Republican congressman—we think it‘s Patrick McHenry—flailing his arms and reminding his GOP colleagues that they‘re supposed to stand up, pretend that they like the general idea of health reform.

Joining us now is White House senior adviser Valerie Jarrett.  Ms.  Jarrett, thanks very much for taking time to talk with us.  Really appreciate it.

VALERIE JARRETT, WHITE HOUSE SENIOR ADVISER:  Oh, my pleasure, Rachel. 

How‘re you doing this evening?

MADDOW:  I‘m great.  Thank you. I love State of the Union night.

(LAUGHTER)

MADDOW:  Let me get very specific right off the bat.  On health care, when the president tonight welcomed anyone from either party bringing him what he described as new approaches for reaching the goals of health reform, was he saying that he wants to start over?  Was he reopening the can of worms?

JARRETT:  No, not at all start over.  Look, we‘ve made an enormous amount of progress.  What he did was remind the American people and Congress why he fought so hard for health care.  And he talked about the people who have preexisting conditions that should be covered.  He talked about the costs and the premiums that are—and the out-of-pocket expenses going out of kilter and are breaking the backs of hard-working American families who are trying to make ends meet and small businesses who are having to pick between hiring new employees and paying the cost of health care.

He talked about how we really do need insurance reforms and so we have insurance companies that are working for the American people again.  And he talked about how we need to make sure that all Americans are insured and that we can provide affordable health coverage to those folks, as well.

And so when he—what he really wanted to do was to remind everybody about what we were fighting so hard for, and what he said is, Look, if you have a way of achieving all those objectives and bringing down our deficit, then we welcome those ideas.  But I also think it reflected the spirit of how far we have come and how much progress we have made.  And Rachel, what he said is, I‘m not going to give up on this.  The American people deserve a health insurance program that really works for them.

MADDOW:  Welcoming new ideas at this point in the process, though, does raise the prospect of where he‘s coming down on the different strategic sides of the debate about whether or not the House should pass the Senate bill, pass whatever changes they need to pass to the Senate bill in order for them to feel comfortable with it and move on, or whether or not it is time to reopen the policy of health reform, start bringing forward new legislation to be passed for the first time.

And just to be clear, you‘re not that saying he‘s suggesting that we start new health reform legislation.

JARRETT:  No, no.  Look, we‘ve come so far.  We‘re so close, Rachel.  We‘re right on the brink.  But I think it‘s also recognizing that the political landscape has changed as a result of the Massachusetts election.  But on the other hand, Massachusetts has health insurance.  Scott Brown voted for that health insurance when he was there.  He even said he wouldn‘t vote to repeal it now.

And so with him coming to Washington and working with a spirit of cooperation, maybe we can take this over the finish line.  We‘re on the two-yard line, and the president said, Let‘s not give up now.  Let‘s fight on behalf of this issue for the American people because in these economic times, most importantly, we have got to figure out how to help reduce some of those costs that are on the American family.

They‘re sitting around the kitchen table, Rachel.  You know this.  They‘re trying to figure out how to make ends meet.  Their health care costs adds to that burden.  It adds to the burden of the small businesses.  It adds to the burden of the large businesses.  And it certainly adds to the burden of our federal government.  So let‘s not give up now.  That was his message this evening.

MADDOW:  On the subject of the political climate, which you referenced there, the list of specific proposals the president made tonight, a lot of them very conservative ideas, ideas that have been—that have been sort of auditioned politically in recent years by Republican politicians, things like off-shore drilling, capital gains cuts, business tax cuts, the spending freeze, so-called “clean coal,” which is terminology that just makes me cringe, singling out earmarks, as if earmarks really have a significant impact on our overall fiscal health.  The number of things like that, that seem like conservative ideas to me, made me feel like I have to ask you if the president is just sort of fed up with the Democratic base and is more interested in winning over conservatives now.

JARRETT:  No, no.  Of course not.  I think what the president was focusing on is in this very tough economic time, the federal government needs to tighten its belt, just like hard-working families are having do.  Everyday people are going to have to make tough decisions about how to make ends meet.  And what he‘s saying is that we have to rebuild the public trust in the federal government, and one way of doing that is living within our means.

It doesn‘t mean that we don‘t invest in what‘s important.  Jobs and the economy were a huge part of his message this evening.  And he was a strong advocate for investing in infrastructure and small businesses and green jobs, the jobs of the future.  We have to do what government can do to jump-start our economy.

But he also said very clearly, Rachel, that the private sector is where the long-term sustainable jobs come from and we have to be cognizant of it.  So I think his message was one that will resonate broadly with the American people, and it‘s one that requires a different tone.  It requires the Republicans to come to the table in good faith and not just obstruct legislation because they want to obstruct legislation.

I mean, we had instances where they‘ve actually sponsored legislation and then voted against it—voted for it, but voted to delay it.  So ultimately, they voted for it 90 to 10.  And so he‘s saying, Come on, everybody, the stakes are too high for the businesses as usual in Washington.  He was elected on a momentum of change.  He intends to bring that change.

You mentioned earmarks.  The public has a right to know how earmarks are being spent.  He thinks that we should be transparent.  He thinks that we need to add a level of cognizance of how taxpayer dollars are being used so that there‘s some accountability and that we can begin to rebuild the trust that has been suffering over the course, really, of the last decade.

MADDOW:  I think you know—I know we don‘t have a lot of time.  I think you know that I‘ve expressed—or you may know that I‘ve expressed a real disagreement with the idea that government needs to tighten its belt because the American people are tightening their belt.  I think that does poll well.  I think it‘s actually factually macroeconomically incorrect.  I think when consumers aren‘t spending, when businesses aren‘t spending, we‘re in this kind of a downturn, there actually does need to be a political argument that the government does need to spend.  The spending freeze that the president has proposed is teaching the country bad macroeconomics, ceding to Republicans their false claim about how macroeconomics works.

I think maybe losing the long-term argument about the role of government in favor of some short-term well-polling phrase that I don‘t think actually makes very much factual sense.

JARRETT:  But you know, Rachel, I love you, but let me just take you back a bit just to refresh your memory.  President Obama passed the largest stimulus bill in our nation‘s history, nearly $800 billion, shortly after he was elected president for just the reason that you mentioned, because he knew it was important for the federal government to jumpstart the economy.  In his current budget that he‘ll unveil next week, he will have in there very concrete spending proposals that again, strategically, will help jumpstart our economy.

Whether it‘s for infrastructure or small businesses or green jobs of the future, he does believe that government needs to spend, but it needs to be strategic and there needs to be a discipline and there needs to be accountability.

And we also need to tighten our belts, and we need to get rid of programs that are not working.  We cannot be afraid to say, OK, you know what?  We tried this and it was a good idea, but it didn‘t work, and take those resources, Rachel, and put them into programs that will work.  And we do have to be sensitive to the deficit.  And I think for just the macroeconomic reasons that you set forth a minute ago, that‘s why he pushed for the stimulus bill and that‘s why he‘s not saying dramatically tighten our belts right now.  He is saying, Let‘s be prudent and let‘s be cognizant of the fact these are taxpayer dollars and we need to send them—we need to spend them strategically and sensibly.

So I don‘t think that we‘re actually on a different page here, Rachel. 

I think we‘re on the same page.

MADDOW:  Let me ask you one last question.  I know your time is very short.  When will “Don‘t ask, don‘t tell” be repealed?  And what specifically will the president do in order to get it repealed?

JARRETT:  Well, I think he was very clear this evening that he intends to do it.  He has said it—he said it in the campaign.  He said it very clearly throughout the year.  And he‘s going to begin a process starting right away to move forward with that.  And in the days and weeks ahead, he will outline that for you and for the general public specifically how he‘ll do that.

I was very heartened to see the level of applause in the chamber tonight behind that.  I think that the time has certainly come for the repeal, and I think that the president made it very clear tonight that he‘s committed to getting it done.

MADDOW:  Senior White House adviser Valerie Jarrett, very generous with your time and for joining us tonight.

JARRETT:  Oh, my pleasure.

MADDOW:  Really appreciate it.  Thank you very much.

JARRETT:  All right, Rachel.

MADDOW:  Thanks.

JARRETT:  You take care.

MADDOW:  Will do.

JARRETT:  Bye-bye.

MADDOW:  Joining us now is Democratic senator Sherrod Brown of Ohio. 

Senator Brown, thank you so much for sticking around to talk to us tonight. 

Really appreciate it, especially at this late hour.

SEN. SHERROD BROWN (D), OHIO:  Thank you, Rachel.  It‘s good to be with you, whatever time it is.

(LAUGHTER)

MADDOW:  That‘s very kind of you.  I know you just heard Valerie Jarrett say that the president is not trying to start from scratch on health reform, that he thinks that these efforts are on the two-yard line.  Do you agree with her that you‘re on the two-yard line?  Do you think it is going to pass?

BROWN:  Yes, I do.  I think we‘re going to use reconciliation and blend it with the—or basically, use reconciliation to add some things and fix some things that were in the Senate bill.  And then I think the House will pass the Senate bill.  It‘s obviously easier said than done.  The president needs to weigh in.  The House doesn‘t much trust the Senate because of the Senate Finance Committee‘s slow walk all last summer that really cost us getting this bill by August or September.  We would have been done with it if the Senate had moved faster, but that committee decided not to, so—with the whole bipartisan exercise that really was sort of a fool‘s errand.

SO—but—but because the House doesn‘t totally trust the Senate in doing this right, we have to move on reconciliation.  Then I think the House will pass our version.  I would imagine it‘ll be in the next two or three weeks.  I‘m not speaking for Harry Reid, but—we can‘t—we can‘t start pulling it apart and passing little things because it has to go together.

And the country wants this.  It was one election in one state.  Granted, people are upset, but they‘re upset because this bill‘s been hanging out there so long and we‘re not doing other things.  We got to focus on jobs now.  In the next two or three weeks, pass the health care bill.  Move on once the public—once this bill‘s passed, the public‘s going to see the sky‘s not falling and they‘re going to begin to hear the good things in this bill, to—that women are no longer going to pay more for the same health care, that pre-existing condition will be eliminated.  People won‘t lose their insurance because it was—because they got sick.  We‘ll have tax breaks for small businesses so they can do what they want, and that is cover their employees, all of those things.  The public‘s going to like this bill once it‘s out there and enacted.

MADDOW:  On four occasions tonight, I noticed that the president mentioned legislation that has already passed the House but has yet to pass the Senate.  A lot of the political stuff in tonight‘s speech was about the Senate.  He talked about the jobs bill, financial reform, climate change, legislation on community colleges all having passed the House, not having passed the Senate, urging the Senate to follow suit and pass these bills, too, also urging the Senate to pass pay-go.

Is the Senate in any position to follow through on that stuff, or is there a real structural problem in terms of getting stuff through your chamber of Congress right now?

BROWN:  Well, look, yes, it‘s a structural problem because we‘re the only democracy in the world that requires 60 votes to—requires a supermajority to do much of anything.  I saw you last night interview Tom Udall and some of the plans he has.  That‘s not going to happen for another year, if it happens at all.  And I like what he‘s—what—he‘s a very good man and I like what he‘s trying to do with making the Senate more democratic—with a small D.

But the point is, I think to close the loop on what you said, Rachel, is—is the president at the end said to Republicans, If you block everything, then, you know, you‘re responsible here for this.  And I can‘t believe they Republicans are going to stop the U.S. government in its tracks from being able to deal—to answer any of the problems we have in this country.  If they‘re going to block a jobs bill, they‘re going to block—on behalf of their interest groups—they tried to block health reform because of their—their obedience to their insurance paymasters.

They‘re trying to block—they blocked the jobs bill and the banking reform because they‘re so close to the bankers and the bankers give them so much money. 

If they do all that, the American people are going to lose their patience.  So they‘ve got to play ball in this.  And for them, bipartisanship means doing it their way.  More tax cuts for the rich, more deregulation, more budget deficits, more wars without end that our children pay for, our grandchildren pay for, our great grandchildren pay for. 

Those days are over.  The public doesn‘t want that.  They rejected that in ‘06.  They want a new direction.  And they‘ve got to begin to play bipartisanly with us, not have us give away our principles to play the way they want when it clearly betrayed the country. 

RACHEL MADDOW, HOST:  Senator Sherrod Brown of Ohio, thank you for joining us tonight. 

BROWN:  Thanks. 

MADDOW:  Thank you for watching the show last night and for saying here that you did as well.  I‘m very flattered. 

BROWN:  I did.  I usually do.  Thanks. 

MADDOW:  Appreciate it, sir.  Thanks very much. 

All right, we have heard from the White House and from the gentleman from Ohio.  Coming up, we have the gentleman from “HARDBALL.”  Chris Matthews helps us sort out the importance of what was said tonight in Washington.  That‘s next. 

(COMMERCIAL BREAK)

MADDOW:  After one tradition comes another.  This one with less clapping.  “HARDBALL‘s” Chris Matthews joins us for his take on State of the Union in just a moment.  Please stay with us. 

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  Neither party should delay or obstruct every single bill just because they can. 

I know it‘s an election year, and after last week it‘s clear that campaign fever has come even earlier than usual, but we still need the govern. 

To Democrats, I would remind you that we still have the largest majority in decades, and the people expect us to solve problems.  Not run for the hills. 

(APPLAUSE)

OBAMA:  And if the Republican leadership is going to insist that 60 votes in the Senate are required to do any business at all in this town, a super majority, then the responsibility to govern is now yours as well. 

(APPLAUSE)

OBAMA:  Just saying no to everything may be good short-term politics, but it‘s not leadership. 

(END VIDEO CLIP)

MADDOW:  I think they do think it‘s good short-term politics.  I think Republicans think saying no to everything is, in fact, great politics. 

Joining us now is Chris Matthews, host of “HARDBALL.” 

Chris, thanks very much for staying up.  I appreciate it. 

CHRIS MATTHEWS, HOST, “HARDBALL”:  Thank you, Rachel.  You know, I agree that it‘s a hard call, but we‘re all looking at these coming November elections and I was looking at John Cornyn from Texas, the head of campaign committee, chuckling away there tonight, and of course, Mitch McConnell who has a sort of a George Will kind of chuckle. 

And I thought they were enjoying the president‘s joke without any intention whatever of playing ball with him.  That they are going to be no people. 

MADDOW:  So it‘s just. 

MATTHEWS:  No down the line. 

MADDOW:  It‘s just theatre but it‘s theatre on both sides.  Because we see the president saying Republicans have to lead, you have to participate, we really would like you to participate.  We expect you to participate. 

And then you see the Republican response in which they say we don‘t want all this partisanship, we‘d love to be constructively involved. 

MATTHEWS:  Right. 

MADDOW:  You think both sides equally know it‘s in never going to happen? 

Or do you think the Democrats are naive and think it will? 

MATTHEWS:  Well, he has to try and I think the president was very much the -- you know, they have a number of hats they wear, the presidents.  One of the them is, obviously, head of the executive branch, chief executive. 

They‘re also heads of state.  I thought as a head of state tonight, he was amazing, if you think about.  And I‘ve said this before how stunned I was when the 21 gun salute went over on inaugural day.  How he became not just head of a political party, head of the executive branch, but really head of the country. 

And I thought he did speak almost Eisenhower, down to the country, and new politicians out there.  And I‘m above lobbying and all this sleaze.  And you guys are a part of that.  And I thought he did a very good job of establishing a moral level above them.  Both sides. 

And I thought that worked.  I thought he was very much an inclusive sort of American leader tonight, not just a politician. 

Now of course he was also playing a game, I think, of trying to seduce through love, if you will, through honey, to bring the Republicans aboard on health care.  You and I think both saw somewhere towards the end of tonight‘s event where the Republicans even felt they better get the signal to stand up and applaud for some of the—the more obvious good—you know, we can all agree on this one kind of thing. 

But I think health care is there.  I think they all have health care problems at home.  They all have the problem of, you know, pre-existing and portability and all those questions, and affordability.  They‘re all real. 

And if you‘re a Republican from the state, you‘ve got 45 percent of your state is Democrat and they‘re going to make a lot of noise.  And you‘ve got poor people, working people.  They‘re all complaining with letters to you all the time about these problems. 

So you‘d like to—at least look like you‘re going to address them, I think. 

MADDOW:  Meanwhile, though, the other sort of political theatre on Capitol Hill today were really conservative Republicans like Michele Bachmann and Steve King and all these guys, signing a declaration of independence on health care, almost—in the language of it, almost promising a revolution in order to stop health care. 

So I mean, they‘re—the pressure from the right is so hard for them. 

Even if any of them were moved. 

MATTHEWS:  You‘re so right.  It‘s so hard.  But, you know, people like Mike Ensign of Wyoming and people like John McCain we know so well.  And people like Orrin Hatch.  You know, Orrin Hatch is worried about Robert Bennett, his fellow Republican senator from Utah, getting a primary challenge.  Obviously J.D. Hayworth is scaring the heck out of McCain. 

All these guys who would normally be open—potentially at least—to a deal with the center and across the aisle now are honoring one thing.  Don‘t have a primary challenge.  If you have one, be scared to death.  So it is creating a terrible dynamic today for any kind of grab-five Republicans on health care.  Grab three.  Grab two. 

Certainly, you know, it‘s a tough job to grab 10.  But I did think he was really good.  I know we can‘t get beyond philosophical arguments and we shouldn‘t, because that‘s what this country is based on.  Good philosophical arguments. 

Can we get ahead of petty partisanship?  Probably not in an election year between now and November on most issues, unless this guy, this president is able to really take us beyond the usual. 

But I was overwhelmed by the harmony with which he spoke to the country tonight.  I think he‘s going to get good numbers tomorrow and the next couple of days from the reaction of the country that I think he was so presidential, so big, so wide in his scope on all these issues. 

I think he was Clinton-esque when—Bill Clinton-esque when it came to addressing so many concerns.  I think the public wants those concerns addressed.  It shows he‘s connected to us. 

And I was impressed tonight.  I know we had arguments, you and I, about how he‘s addressing things that he promised he would, but I was impressed by his leadership of the country. 

MADDOW:  “HARDBALL‘s” Chris Matthews... 

MATTHEWS:  And can I say one more point? 

MADDOW:  Sure. 

MATTHEWS:  I think something that I‘d mentioned earlier tonight.  And I‘m very proud I did it and I hope I can say it the right way.  You know, this country has been—and I grew up in a country that was driven apart by race right until the ‘60s.  You couldn‘t have a black member of the United States Cabinet.  There are no black Cabinet members in the Kennedy administration. 

It has been such a big part of our life in big cities, this sort of ethnic debate, ethnic fighting.  And then to see the president of the United States who‘s African-American, I was thinking tonight, this isn‘t even an issue tonight. 

How far we‘ve come in just a year where it wasn‘t a campaign issue in some parts of the country.  It was talked about as something that would hurt him.  And it wasn‘t in the room tonight.  You can feel it wasn‘t there tonight.  And that takes leadership on his part to get us beyond these divisions. 

Really, national leadership.  And I felt it wonderfully then I saw it almost like an epiphany.  And I hope it‘s true, I hope what I saw is true, that we‘ve gotten beyond it.  At least—well, in the presidential level, I think.  It‘s still going to be out there in American life, but I think he‘s done something wonderful. 

I think he‘s taken us beyond black and white in our politics wonderfully so in just a year.  I think. 

MADDOW:  Chris Matthews of MSNBC‘s “HARDBALL”... 

MATTHEWS:  And I‘m loving it. 

MADDOW:  . who is a both fun to talk to and a big thinker on these things. 

And willing to talk about stuff that‘s hard to talk about sometimes on TV. 

MATTHEWS:  It is. 

MADDOW:  Chris, I appreciate it.  Thanks a lot. 

MATTHEWS:  Thank you. 

MADDOW:  Tonight, the president once again pledged to end the military‘s disastrous Don‘t Ask, Don‘t Tell policy.  We‘ll talk to a decorated combat pilot, Air Force Lt. Col. Victor Farrenbach, who is being fired from the Air Force for being gay.  Stay with us. 

(COMMERCIAL BREAK)

MADDOW:  It‘s been 5 ½ years since Americans got our primetime introduction to a man named Barack Obama.  And 5 ½ years later, Barack Obama‘s most fundamental political appeal is still most easily boiled down to this. 

(BEGIN VIDEO CLIP)

OBAMA:  And tonight, there is not a liberal America and a conservative America.  There is the United States of America. 

(APPLAUSE)

OBAMA:  There is not a black America and a white America and Latino America, and Asian America, there‘s the United States of America. 

The pundits—the pundits like to slice and dice our country into red states and blue states.  Red states for Republicans, blue states for Democrats.  But I‘ve got news for them, too.  We worship an awesome god in the blue states.  And we don‘t like federal agents poking around in our libraries in the red states. 

(APPLAUSE)

OBAMA:  We coach little league in the blue states.  And yes, we‘ve got some gay friends in the red states. 

There are patriots who oppose the war in Iraq and there are patriots who supported the war in Iraq. 

We are one people, all of us pledging allegiance to the stars and stripes. 

All of us defending the United States of America. 

(APPLAUSE)

OBAMA:  In the end—in the end that‘s what this election is about.  Do we participate in a politics of cynicism?  Or do we partake in politics of hope? 

(END VIDEO CLIP)

MADDOW:  That was 2004.  Believe it or not.  An endorsement of John Kerry for president.  But soon that politics of hope would eclipse every other figure in the Democratic Party and ultimately every other figure in American politics, as he and his party thumped the Republicans at every level.  Even as Obama himself didn‘t like to dwell on the partisan nature of his victories. 

(BEGIN VIDEO CLIP)

MADDOW:  Senator, you criticized the Bush administration frequently, but you almost never criticized the Republican Party itself.  Other Democrats. 

OBAMA:  Much to your chagrin. 

MADDOW:  Much—well, yes, actually. 

(LAUGHTER)

MADDOW:  I mean other Democrats, you will heat them talk about the GOP the party that‘s been wrong and all the big stuff.  Creating Social Security. 

OBAMA:  Right. 

MADDOW:  Civil rights, the war in Iraq.  But you don‘t really do that.  Do you think there is a stark difference between the parties? 

OBAMA:  Well, I do think there‘s a difference between the parties, but here‘s my belief.  That I‘m talking to voters.  And I think there are a lot of Republican voters out there, self-identified, who actually think that what the Bush administration has done has been damaging to the country. 

If I can describe it as not a blanket indictment of the Republican Party but instead describe it as the Republican Party having been kidnapped by an incompetent, highly ideological subset of the Republican Party, then that means that I can still reach out to a whole bunch of Republican moderates who I think are hungry for change as well. 

MADDOW:  Now they do not see you the same way.  When they talk—John McCain calls you a socialist. 

OBAMA:  Right. 

MADDOW:  This redistribute-the-wealth idea.  He calls you soft on national security. 

OBAMA:  Yes. 

MADDOW:  That‘s not just an anti-Barack Obama script.  That is—he‘s reading from an anti-Democrat and specifically an anti-liberal script. 

OBAMA:  Absolutely. 

MADDOW:  And so you have the opportunity to say John McCain, George Bush, you‘re wrong.  You also have the opportunity to say conservatism has been bad for America.  But you haven‘t gone there either. 

OBAMA:  Yes.  I‘ll tell you what, though, Rachel.  You‘ll notice I think we‘re winning right now, so maybe I‘m doing something right. 

(END VIDEO CLIP)

MADDOW:  He certainly was doing something right in order to get elected. 

That interview was five days before the election. 

But is that same approach suited to getting done what he wants to accomplish as president? 

After the election, Barack Obama carried on with that same theme from the campaign.  An inauguration eve dinner in honor of Republicans senator John McCain whom he defeated in the election. 

The White House cocktail parties with both Democrats and Republicans, the social invitations and policy meetings with congressional Republicans.  The back to the well again insistence that surely, surely Republicans would want to find a way to vote for health reform. 

(BEGIN VIDEO CLIP)

OBAMA:  I will continue to seek common ground in the weeks ahead.  If you come to me with a serious set of proposals, I will be there to listen.  My door is always open. 

(END VIDEO CLIP)

MADDOW:  That wasn‘t tonight.  That was back in September. 

It just hasn‘t worked out that way, though, that governing goes well when you do it that way.  Republicans are really not interested in participating in the passage of any significant legislation. 

They have used the rules of the Senate to stop any legislation from passing.  As you can see here the filibuster rule has never in history been used the way they‘re using it now, to require essentially—as Senator Brown said earlier—a permanent super majority of 60 votes on everything. 

This has never been done before.  On policy issues like cap and trade where Republicans were on record supporting the same policies as President Obama, Republican senators, including Senator McCain are now literally changing their stated policy views so as to avoid accidentally ending up on the same side as the president. 

Deciding they oppose legislation they previously sponsored since President Obama supports it, too. 

Republicans have been as unanimous as they can be in opposition to every major thing this president has tried to do, and they expect to continue to be, as best as I can tell, calculating that the political benefit of stopping a president from accomplishing anything is worth a lot more than any risk of being seen as obstructionist. 

Nevertheless, President Obama tonight continued to sound like candidate Obama.  He continued to call for Republican support for his agenda. 

(BEGIN VIDEO CLIP)

OBAMA:  If the Republican leadership is going to insist that 60 votes in the Senate are required to do any business at all in this town, a super majority, then the responsibility to govern is now yours as well. 

Just saying no to everything may be good short-term politics but it‘s not leadership. 

(END VIDEO CLIP)

MADDOW:  Barack Obama‘s first year in office has been a real challenge to his whole political brand, to his baseline appeal, to the thing that made him popular in the first place. 

The reason the hope slogan worked and didn‘t seem cynical, and the reason for all the often difficult, but earnest discussion of whether his was a post-racial candidacy was because of President Obama‘s constant message that what unites is stronger than what divides us. 

That may be true in the country at large.  I hope it‘s true.  It‘s really not true in Washington, thought.  And even Mr. Obama himself sometimes now appears to be getting that. 

(BEGIN VIDEO CLIP)

OBAMA:  You know on the heels of that victory over a year ago, there were some who suggested that somehow we had entered into a post-racial America.  All those problems would be solved. 

There are those who argued that because I had spoke of a need for unity in this country, that our country was somehow entering into a period of post-partisanship. 

That didn‘t work out so well. 

(END VIDEO CLIP)

MADDOW:  Winning in Washington.  Right now down to brass tacks.  I‘ll level with you.  It‘s going to take a strategy that does not count on any Republican votes on Capitol Hill. 

And that is the kind of strategy we know this president does not like to talk about it.  It is contrary to his all-for-one, one-for-all patriotic brand.  He may not want to talk about it.  But the success of his presidency, his ability to actually get stuff done will depend on whether he can do it anyway. 

And the answer to that question, we will learn by seeing what he does tomorrow, not by just what he said tonight. 

We‘ll be right back. 

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA:  This year, I will work on Congress and our military to finally repeal the law that denies gay Americans the right to serve the country they love because of who they are.  It‘s the right thing to do. 

(END VIDEO CLIP)

MADDOW:  President Obama tonight calling for the repeal of Don‘t Ask, Don‘t Tell, the policy that theoretically says it‘s OK to be gay in the military if you‘re closeted but in reality means that gay people are being witch hunted out of the military by the thousands. 

An estimated 600 Americans have been fired and kicked out of the military for being gay since Barack Obama has been commander-in-chief. 

Still tonight was not the first time the president has called for the end of the policy.  As a presidential candidate, he said he‘d repeal it during his first year in office.  And that he didn‘t qualified people should be kicked out of the Armed Forces for being gay. 

As president, he spoke with the Annual Human Rights Campaign dinner and again said he wanted the policy repealed.  In addition to that public commitment to repeal Don‘t Ask, Don‘t Tell, when the president met last year face to face with our next guest, he promised to, quote, “get it done.” 

Lieutenant Colonel Victor Farrenbach is an F-15 fighter pilot.  He‘s a 19-year veteran of the United States Air Force.  On September 11th Lt. Col.  Fehrenbach was picked to be part of the initial alert crew immediately following the attacks.  He‘s since deployed to both Iraq and Afghanistan. 

He‘s flown 88 combat missions including missions that were the longest combat sorties in the history of his squadron.  He‘s logged more than 2,000 flying hours, nearly 1,500 fighter hours, 400 combat hours. 

Lieutenant Col. Fehrenbach is also highly decorated.  He‘s received nine air medals including one for heroism. 

Despite this record and a totally unblemished career, Lt. Col. Fehrenbach was informed of his impending discharge on September 2008.  It is pending and he is serving. 

Joining us now is Lt. Col. Victor Fehrenbach.  Thanks very much for joining us, sir.  It‘s great to have you back on the show. 

LT. COL. VICTOR FEHRENBACH, U.S. AIR FORCE FIGHTER PILOT:  Thank you very much, Rachel. 

MADDOW:  President Obama keeps saying he‘s going to repeal Don‘t Ask, Don‘t Tell.  I know you‘ve told us before that you believed it when he said it as a candidate.  Do you believe it now that he‘s still saying it a year into his presidency? 

FEHRENBACH:  Well, I can say tonight, Rachel, there was something very positive that he actually did say that it was this year that he plans to work on it.  So that was something positive.  And it was heartening to me somewhat. 

It shows a sense of urgency perhaps.  I know that, you know, any day now I could get my final discharge papers and I could be discharged, but also hopefully having a sense of urgency and getting it done this year would help the tens of thousands of brave Americans who continue to serve throughout the world who are living under this policy and serving in silence and in fear like I did for 19 years. 

But overall, I could say that tonight I was just as disheartened and discouraged as I have been every other time that we‘ve heard these words.  I was also discouraged the fact that it was just one sense out of thousands. 

So again, we‘ve heard these words in the past as you‘ve alluded to.  What I really wanted to hear tonight was a plan of action, was a timetable of some kind.  SLDN and other organizations have actually urged the president to include repeal in the defense budget that he‘s, I guess, scheduled to announce in the next couple of weeks. 

I‘d hoped to hear something in that nature where he has a plan and a timetable to follow.  And I just didn‘t hear that tonight.  So hopefully maybe over the next couple of weeks we will hear that. 

MADDOW:  I did ask senior adviser Valerie Jarrett that tonight, exactly what the president is going to do.  She said in days and weeks ahead, we will be hearing about whatever the plan is.  So like you, we will be waiting to hear that. 

Victor, since you appeared on this show in May, you have essentially been serving in the Air Force as an openly gay man.  What has that experience been like for you?  And have you experienced any of the worrying things in terms of the—your unit and the people you serve alongside with?  People who are proponent of this policy have warned about? 

FEHRENBACH:  No, in fact, you know, we‘ve discussed this before, as a matter of fact.  I went back to work that following day and there‘s been absolutely no negative impact whatsoever on my unit in regards to morale or in discipline or combat effectiveness. 

In fact, I think the opposite is true.  I‘ve heard people argue that support this policy.  They have said that in a time, you know, in two wars, this isn‘t the time to do it, while I argue the exact opposite.  The time is now.  You know, since 2001, we have discharge thousands and thousands of highly-trained, highly-qualified, highly-skilled, highly-motivated combat season veterans who we need now more than ever.

So if we need anything, discharging people like me and a thousands of others in a time of war, that is the thing that hurts morale, good order, discipline, and more importantly, it hurts combat effectiveness of that unit.  And when you do it by the hundreds and a thousands, which we‘ve done since 2001, you actually hurt national security as a whole, which in fact the president said in his speech in June that “Don‘t Ask, Don‘t Tell” hurts national security.

MADDOW:  Lt. Col. Victor Fehrenbach, thank you so much for joining us this evening.  It‘s great to have you on the show and to hear your perspective on this.  We really appreciate it.

FEHRENBACH:  Thank you, Rachel.

MADDOW:  Lt. Col. Victor Fehrenbach is a 19-year veteran of the Air Force.  He received discharge letter in September 2008 under the “Don‘t Ask, Don‘t Tell” policy.

OK.  So were it not for the state of the union, we would have been talking about when James O‘Keefe many segments ago.  Tonight we know much more about him, his three pals and what exactly they were doing dressed up as fake phone repairmen in a U.S. senators office in Louisiana.  David Shuster is in New Orleans.  He joins us with the latest reporting on that next.

Please stay with us.

(COMMERCIAL BREAK)

MADDOW:  There‘s new information to report on what the four men who are arrested at Democrat Senator Marry Landrieu‘s New Orleans office appear to have been doing there.  Innocent or guilty, these guys are incredible.  Details ahead.

(COMMERCIAL BREAK)

MADDOW:  We have new information tonight on what four conservative activists may have been up to when they were arrested at Democratic Senator Marry Landrieu‘s New Orleans offices on Monday.  The four include James O‘Keefe made famous by Fox News for his fake pimp custom punking the community group, ACORN.

Also, Robert Flanagan, son of a U.S. attorney from Louisiana.  A law enforcement official tells NBC News that the four who were arrested were apparently not trying to wiretap the senator‘s phones.  When two of the four suspects showed up at her office decked out in fake phone repairman costumes asking for access to the phone system.

According to this official, these four men, led by Mr. O‘Keefe, might have wanted to film the reaction of Senator Landrieu‘s office staff to being told that their phones were inoperable.  The named law enforcement official says the four may have been motivated an argument that Landrieu‘s constituents had issues getting through to her offices during the height of Landrieu‘s influence in the health reform debate.  So hypothesis goes.  O‘Keefe and company wanted to know if the phones didn‘t work or at least if they seemed to not work, would the senator staff demonstrate sufficient concern that the senator constituents couldn‘t get through on the phones.

It seems like a much stranger plot than what initially seemed to be a phone tapping case.  But you know what?  It‘s still illegal.  The men are charged with entering a government property under false pretenses for the purpose of committing a felony.  The maximum sentence if they‘re convicted is still ten years in prison and a $250,000 fine.  An attorney for Mr.  Flanagan has publicly characterized the incident as, quote, “poor judgment.”  Mr. O‘Keefe‘s lawyer told “The Wall Street Journal,” his client is cooperating with authorities.  All four men scheduled to be in court in New Orleans next month.  What remains to be seen, of course, is whether in the meantime, any of the suspects will turn on each other.  Also it remains to be seen if any of the conservative organizations to which these young men have ties are linked to the alleged crime in any way.

Of course, we don‘t know if there‘s a wider conspiracy or even a real political point to this alleged scheme.  But what is clear is that these four men do have a lot of connections to a lot of mainstream conservative and Republican institutions.

24-year-old Robert Flanagan, for example, as we‘ve mentioned, is the son of an acting U.S. attorney in Louisiana.  The person President Obama has nominated to replace Robert Flanagan‘s dad is being held up by Republican Senator David Vitter of Louisiana, which sort of means that Robert Flanagan‘s dad owes his current job to Senator Vitter.

The younger Flanagan‘s other conservative and Republican bona fide is include blogging for the Pelican Institute, which is a conservative think tank set up in post-Katrina Louisiana to push for a more conservative state as it is rebuilt.  That institute hosted a talk by Mr. O‘Keefe just last week.  Mr. Flanagan has also interned for Republican members of Congress, including Congresswomen Mary Fallon of Oklahoma and Senator Lamar Alexander of Tennessee.

The other three suspects, Mr. O‘Keefe, along with Joseph Basil and Stan Dai all have connections to the conservative campus newspaper movement.  An operation that‘s generally not at all grassroots, but rather funded and organized by top down conservative institutions like the Leadership Institute, where Mr. O‘Keefe was an employee before his attack on ACORN.  And the Fox News celebrated fake pimp fame that followed.

Joining us now is MSNBC‘s David Shuster, who is following the case from Louisiana.

David, thanks very much for coming on the show.  Appreciate it.

DAVID SHUSTER, MSNBC CORRESPONDENT:  Rachel, good to be with you.

MADDOW:  Does what we‘re hearing about potential motive in this, and it‘s match to the tactics use, does it match up with what you‘ve learned down there today?

SHUSTER:  Yes, because there‘s every indication, Rachel, that they did not have any particular equipment on them to actually do any sort of phone tap.  In other words, what they were carrying in their blue denim and their fluorescent vests, the two guys to try to pretend that they were phone technicians.  They actually didn‘t have any technical equipment.

And, secondly, what was described as a listening device by Stan Dai who was in the truck outside, we believe was simply some sort of cell phone or a walkie-talkie so that he could communicate with the people who are upstairs on the 10th floor.

MADDOW:  In terms of a potential motive, we know from the criminal complaint that Mr. O‘Keefe was capturing using a cell phone and what was going on in the office in some way.  Does it seem like he was filming the act of the telephone repairmen interacting with the staff so as to document the staff‘s reaction?

SHUSTER:  That‘s right.  And not only Mr. O‘Keefe with him sort of filming on this cell phone, but there are indications now that, in fact, one of the two man who was dressed up as a telephone repair person actually had in his white helmet a little camera so that he could record it as well.

But, Rachel, it‘s also very important to make this sort of—make this very clear.  While a lot of people are trying to make a distinction between trespassing and wiretap or phone tap, the criminal complaint says that part of the trespassing was because they maliciously interfered with the telephone system operated and controlled by the United States of America.

So it‘s not that they just happened to sort of go into the office and trespass, but the actual act of picking up the phones, going into the phone closet, that actually constituted part of the felony trespass according to prosecutors.

MADDOW:  Briefly, David, what happens next in this case?

SHUSTER:  The next is that there‘s going to be a hearing February 12, sort of a pre-trial hearing.  But keep in mind, there‘s going to be a lot that‘s going to happen behind the scenes, Rachel.  As you pointed out, prosecutors are going to talk to each of these men individually.  They‘re going to try to figure out if these stories match up.  They‘re going to try to determine if there was any financial incentive that James O‘Keefe had, who he may have been in contact with and whether they provided a financial incentive.  In other words, they‘re going to try to expand the circle and see where this goes.

MADDOW:  David Shuster, who anchors on MSNBC weekdays, 10:00 a.m. and 3:00 p.m. Eastern, is in Louisiana covering the story for us now.

David, thank you so much for joining us tonight.

SHUSTER:  Thanks, Rachel.

MADDOW:  We‘ll return to tonight‘s big story of Washington, D.C. 

President Obama‘s very first state of the union when we come back.

(COMMERCIAL BREAK)

MADDOW:  President Obama did not deliver a progressive agenda in tonight‘s state of the union address.  What he did deliver was a clinic on how to box your political opponents into a lonely corner in an unflattering light.  Initial innings to polling shows the president‘s speech was very well receive by the viewing audience at home, but time will tell over the next few days.

We will see you again tomorrow night back at our usual time, 9:00 p.m.

Eastern.  “COUNTDOWN WITH KEITH OLBERMANN” starts right now.

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

END   

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