updated 2/1/2010 10:55:08 AM ET 2010-02-01T15:55:08

Guests: Joe Barton, Alan Grayson, Sam Stein, Maxine Waters, Cliff May, Jack Rice, Ernest Istook, Joe Madison, Lizz Winstead

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

We have breaking news off the top.  The Associated Press is reporting at this hour that a Continental Airlines flight was diverted to Jacksonville, Florida, because a passenger on a no-fly list may be on board that aircraft. 

The flight was headed to Bogota, Columbia, from Newark, New Jersey. 

We‘ll bring you the latest as this story develops in this hour. 

But first, these are the stories that are hitting my hot buttons tonight. 

The president of the United States took on the Republican critics at their retreat today.  President Obama was absolutely outstanding today. 

Every progressive needs to see this.  This is the guy you voted for. 

Republican lawmaker Joe Barton was in the room.  He‘ll be joining me in just a minute to talk about it. 

In another story, it looks like the administration is scrapping plans to try the alleged 9/11 mastermind in lower Manhattan.  I think it‘s a mistake, but Cliff May, he and I went at it last night.  We‘ll do it again tonight at the bottom of the hour.

Plus, Osama bin Laden is criticizing America on climate change.  “Daily Show” co-creator Lizz Winstead will take a swipe at that.  That‘s coming up in “Club Ed” later in our program.

I think the Republicans—the big story tonight, the president going over to the retreat.  I think the Republicans made a mistake inviting the president to this retreat and letting the cameras actually take this live, this question-and-answer session.

We‘re getting the truth now, folks. 

For an hour and a half, with no teleprompter, I might add, the president answered questions from members of the Republican Caucus.  On question after question after question, the president dismantled their talking points, exposed problems with their policies, and pointed out their own hypocrisy, like when they‘ve taken credit for the stimulus packages that they voted against, the projects that they voted against. 

All right.  The president just appeared very reasonable, very knowledgeable, and focused on solutions.  But the president let the Republicans know, he‘s not going to be their patsy.  He called them out for this socialist rhetoric on health care. 

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  We‘ve got to close the gap a little bit between the rhetoric and the reality. 

If you were to listen to the debate, and frankly how some of you went after this bill, you‘d think that this thing was some Bolshevik plot.  No.  I mean, that‘s how you guys presented it. 

(END VIDEO CLIP)

SCHULTZ:  I don‘t know what the applause there was about.  And although he didn‘t mention the Tea Party by name, President Obama made it clear to the Republicans that playing to their base is counterproductive. 

(BEGIN VIDEO CLIP)

OBAMA:  If the way these issues are being presented by the Republicans is that this is some wild-eyed plot to impose huge government in every aspect of our lives, what happens is you guys then don‘t have a lot of room to negotiate with me.  I mean, the fact of the matter is, is that many of you, if you voted with the administration on something, are politically vulnerable in your own base, in your own party.  You‘ve given yourselves very little room to work in a bipartisan fashion because what you‘ve been telling your constituents is this guy‘s doing all kinds of crazy stuff that‘s going to destroy America. 

(END VIDEO CLIP)

SCHULTZ:  And on the economy, the president didn‘t give any ground either.  He says the stimulus has been a success and Republican leaders know it. 

(BEGIN VIDEO CLIP)

OBAMA:  This notion that this was a radical package is just not true.  A third of them were tax cuts, and they weren‘t—when you say they were boutique tax cuts, Mike, 95 percent of working Americans got tax cuts.  Small businesses got tax cuts.  A third of it was stabilizing state budgets.

There is not a single person in here who, had it not been for what was in the stimulus package, wouldn‘t be going home to more teachers laid off, more firefighters laid off, more cops laid off.  The last portion of it was infrastructure, which, as I said, a lot of you have gone to appear at ribbon-cuttings for the same projects that you‘ve voted against. 

(END VIDEO CLIP)

SCHULTZ:  But the most telling moment of the president‘s speech was when he mentioned the good news on the economy today and got absolutely no applause.

(BEGIN VIDEO CLIP)

OBAMA:  Now, I am happy to report this morning that we saw another sign that our economy is moving in the right direction.  And the latest GDP numbers show that our economy is growing by almost six percent.  That‘s the most since 2003.

To put that in perspective, this time last year we weren‘t seeing positive job growth.  We were seeing the economy shrink by about six percent.  So you‘ve seen a 12 percent reversal during the course of this year.  This turnaround is the biggest in nearly three decades. 

(END VIDEO CLIP)

SCHULTZ:  They applauded at a lot of other points during the speech, but on that particular issue, the Republicans sat on their hands. 

And I think the question begs, folks, do the Republicans really want the economy to turn around?  I mean, if they do, the indicators just keep moving in the right direction for this administration.  If it turns around, the argument could be made that the Republicans are going to be on the wrong side of history. 

Get your cell phones out.  I want to know what you think about this tonight.  I wan to know what you think about this.

The tech survey is: Do you want to see President Obama spend his time working with Republicans this year?  Text “A” for yes and “B” for no to 622639.  We‘ll bring you the results later on in the show. 

Joining me now is Texas Congressman Joe Barton, who was at the House Republicans‘ retreat today. 

Congressman, good to have you with us. 

I think the American people tonight want to know, is this a step forward?  Did the president make some headway today in bringing the two parties together when it comes to communication and working together?  Because there‘s a lot of angst out there across the country and this political divide. 

Did we take a step forward today, Joe? 

REP. JOE BARTON ®, TEXAS:  I think we did.  But I want to point out that there‘s another side to this story, not just the presidential sound bites. 

I would also say the president came because our leader, John Boehner, invited him to come.  So, both sides wanted to get together, and it was kind of like a first date.  We weren‘t sure how to act.  We both kind of were glad we were there.  And at least on my part, I hope that we have a second date. 

SCHULTZ:  Well, I hope you do, too.  And after the president has been called a lot of things in the past year, and “Waterloo” and everything else, I think it‘s nice that he came over and took you guys up on the offer. 

But on the serious notion of this, on the economy, are the Republicans willing to admit that the economy is turning in the correct direction? 

BARTON:  Well, we certainly want the economy to turn in the right direction.  There are two numbers the president didn‘t talk about.  Unemployment is still over 10 percent, and the federal deficit is over $100 billion to $125 billion per month.  So, there‘s still a lot of work to be done, and we offer constructive alternatives to help the economy get back to where we want it to be and put more Americans back to work. 

SCHULTZ:  One of the Republican talking points has been that the Republicans have been excluded when it comes to the health care debate.  Now, earlier this week, I had House Majority Leader Steny Hoyer on this program, and he said absolutely not.  I had Jim Clyburn on here, and said absolutely not.  And I think the American people want to know the truth.

Do you Republicans really feel that the president, the administration and the Democratic leadership has held you out of any kind of conversation on health care reform? 

BARTON:  Oh, absolutely.  We have been in the markups where we put the

we actually vote on the bills.  Those are public by law.  They have to be. 

But in the meetings where you put the bills together, I‘m the senior Republican on the Committee of Primary Jurisdiction.  I haven‘t been asked to participate in one meeting where we actually tried to constructively work together to put those bills together, and I have asked Chairman Waxman, I have talked to Majority Leader Hoyer.  I have even talked to the president of the United States about that. 

You know, when they talk about open and transparent, we can‘t even get documents from their White House meetings that we were excluded from.  We did a notice of inquiry Thursday—or Wednesday, I should say, in committee, where the chairman of the committee, Mr. Waxman, a Democrat from California, agreed to sign a letter with me and other Republicans asking the White House for more transparency. 

SCHULTZ:  And when you‘ve talked to the president about this, what has his response been? 

BARTON:  Well, his response has been rhetorically fine, and he‘s encouraged that we should work together.  But the proof is not in the rhetoric in front of the cameras.  The proof is an open, transparent process where the American people are part of and both sides, Republicans and Democrats, participate in a way that the people get to know what‘s going on and what goes into putting these bills together. 

SCHULTZ:  Congressman Barton, good to have you with us tonight.  I appreciate your time.  Thanks so much. 

BARTON:  Thank you.  And we appreciated the president—we appreciate the president coming.  I‘m sorry.

SCHULTZ:  Yes.  I would imagine so.

Thank you, sir.  I appreciate it very much. 

Joining me now is Democratic Congressman from Florida, Alan Grayson.

Congressman Grayson, your thoughts?  From the reports that you‘ve seen and the videotape and some of the comments, have we moved forward today as a country?

REP. ALAN GRAYSON (D), FLORIDA:  Well, all this happened as the president is, again, trying to find some way to get the Republicans to support change in this country.  And despite the lip service that you hear from the Republicans today, because they‘re ashamed to admit how they really feel, despite the lip service that you hear, I didn‘t hear anybody on the Republican side saying that they were going to support health care reform.  I didn‘t hear anybody on the Republican side saying that they were going to support the president‘s efforts to increase jobs and to save the economy.

They like the fact the president paid attention to them, and I like it too.  But it‘s no different from what the president was doing during the campaign, when he said that we have to work together, and what he was doing all last year.  The only difference is that now it‘s obvious to everybody whose fault it is if they don‘t cooperate. 

SCHULTZ:  Congressman, has the president done everything he can do, in your opinion?  Because I think that from what I sense from my radio show, that the American people, Democrats, progressives out there, think the president has done everything he can and it‘s time now to fish or cut bait and move forward.  You know, I don‘t think George Bush would have gone over with 59 votes in the Senate and a strong majority in the House under these circumstances.

Your thoughts?  Has the president gone far enough? 

GRAYSON:  I think the president has, in many respects, gone too far, and at the price of progress.  I think that the president should have told the Senate a long time ago, we need to get the job done, and I think that there were signs of that this week in his speech and there were signs of that today. 

But he‘s been saying all along that there‘s a need for bipartisans.  That need for bipartisanship can‘t take precedence over the need for actually accomplishing anything. 

And frankly, you know, the White House has been so accepting of the Republicans for so long, and the fact that they just won‘t vote for anything, that I was beginning to think that the White House is suffering from the Stockholm Syndrome.  They‘ve been held hostage for a year now.

SCHULTZ:  Yes. 

Alan, do you think that the economy is turning around? 

GRAYSON:  Yes. 

SCHULTZ:  This most recent number that came out this morning, GDP, best number that we‘ve seen, best growth we‘ve seen in a quarter in six years.

Is it working?  And you were with the president yesterday.  Does he really believe it‘s all working? 

GRAYSON:  Yes.  I was with the president on Air Force One, and I‘m sure that he thinks it‘s working because it is working. 

You‘ll continue to hear carping from the other side, but the fact is that the economy is healing.  And everybody knows who hurt the economy, and everybody knows who‘s healing the economy.  That will become clear as the year goes on. 

But it‘s not enough.

We have to improve health care in this country.  We have to find our way to energy independence.  And we have to create not just more jobs, but better jobs.  Jobs with pensions, jobs with health care, jobs with paid vacations, those are the kinds of jobs Americans deserve. 

SCHULTZ:  Congressman Grayson, good to have you with us.  Thanks so much.  I appreciate your time tonight. 

GRAYSON:  Thank you.  Thank you.

SCHULTZ:  For more, let me bring in Sam Stein, political reporter for “The Huffington Post.”

Sam, did the president school up the Republicans today?  What were your impression? 

SAM STEIN, POLITICAL REPORTER, “THE HUFFINGTON POST”:  Oh, yes, I think it was sort of a virtuoso performance, and it‘s something that I know that Obama‘s supporters have long been looking for.

You know, it was a telling sign.  He got up there.  The White House was actually pushing for the cameras to be in there and to persuade House Republican leadership to let that happen, because the contrast is pretty strong when the president is up there talking from a stage and looking down on his Republican detractors, sort of lecturing them both on policy and political matters, and basically going point by point as to how they‘ve been either disingenuous or dishonest in characterizing his health care and economic plans. 

I thought it was exactly the type of tone that Democrats want to hear. 

SCHULTZ:  What does it say when the Republicans don‘t even respond to positive economic news?  Your thoughts?

STEIN:  Well, you know, it says a lot.  I think the Republicans are very entrenched in the notion that they have the right prescriptions for an economic recovery.  I wouldn‘t go so far to say that they hope for a lagging recovery.  I think, you know, there is—despite the GDP growth numbers, I think there is a lot to worry about in terms of unemployment statistics. 

We can‘t have an economy that grows without people going back to work. 

I think that‘s really problematic. 

There is good news, and Republicans should cheer for that.  It‘s sad that they‘re not.  But clearly there is still a long way to go. 

SCHULTZ:  Sam, do you think that the American people believe—based on your reporting, do you get a sense that the American people think that this president has done everything he can at this point to bring these folks into the process on the conservative side, yet they sit there, and you just heard that Joe Barton say that they‘ve been shut out? 

Who do we believe? 

STEIN:  Well, I mean, I think Representative Grayson is dead on, on this one.  I think the American public thinks he‘s done almost too much. 

Remember, it was the Gang of Six, the efforts to win bipartisan support for health care.  That very well could have meant its death. 

The time wasted trying to recruit a Republican senator to vote for a health care bill was ultimately fruitless.  Anyone can know that when they listen to Senator Jim DeMint‘s “Waterloo” comments. 

But under the directives of the White House, the Democrats tried to find a Republican cosponsor.  And what ended up happening is you delay the bill, the Massachusetts Senate election happened, and all of a sudden, the supermajority was lost.

SCHULTZ:  Yes.

STEIN:  We would not be sitting in this situation had it not been for bipartisan outreach efforts.  And let me remind—one other anecdote.

The first caucus that the president attended was the Republican Caucus.  It was right in the early months and weeks of his presidency.  It was to discuss the stimulus policy.  He attended that before he met with any congressional Democrats.  And even before he went in there, the Republican Caucus was already saying it was going to oppose the stimulus package.

So, you know, I think the American public, long ago, got the sense that there was no real hopes for bipartisanship outreach.  And now the president seems to be catching on. 

SCHULTZ:  Good to have you with us tonight, Sam. 

STEIN:  Thanks, Ed.

SCHULTZ:  Sam Stein, political—you bet—political reporter, “Huffington Post,” with us here on THE ED SHOW.

Coming up, Rahm Emanuel wants to put health care reform on the back burner while House Democrats are trying to jump-start the public option.  I‘ll ask Congresswoman Maxine Waters to make sense of it all.  And she‘s just back from Haiti.  She‘ll comment on that.

Plus, the White House is now open to moving the KSM trial out of the Big Apple.  I think it‘s the wrong thing to do. 

I‘ll go a round with my buddy Cliff May coming up at the bottom of the hour.

All that, plus a brand new “Drugster” “Psycho Talk.”  And Lizz Winstead heads up “Club Ed” tonight.

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

(COMMERCIAL BREAK)

SCHULTZ:  Welcome back to THE ED SHOW.

Another senator is echoing Mary Landrieu‘s comments, who says health care reform is on life support.  Arkansas Senator Mark Pryor says, “It‘s very possible that health care is just at a stalemate and you can‘t solve it this year.” 

Well, Landrieu criticized the president for not laying out a specific path for Congress to pass a final bill.  And today, “The New York Times” reports that Rahm Emanuel wants health care moved to the back burner behind jobs and financial reform.

Joining me now is California Congresswoman Maxine Waters, who is just back from Haiti.  And we‘ll talk about that as well in just a moment.

But Congresswoman, I was at the White House yesterday and had a lengthy meeting with Mr. Axelrod, and I didn‘t get a sense that they have a roadmap to get conclusion on this, that this is really in the hands of Nancy Pelosi and those in the House who still want to continue this fight.  Although, the White House is going to work on it, but it appears to be the next move is on the part of the House. 

What do you think?  How do you see it at this hour? 

REP. MAXINE WATERS (D), CALIFORNIA:  Well, I think you‘ve summed it up.  Nancy Pelosi is saying that we‘re going to bet it by hook or crook some way.  She made a very strong statement about that. 

The president says he wants it, but, of course, they are correct.  Those who say he did not say how we are going to get there and what he‘s going to do to provide leadership in some specific direction—and it may be because he recognizes that the differences are so great.  And if he takes one side or the other, that he does nothing to bring people together.

So, I suspect that the people who say it‘s on life support are correct.  This is going to be very difficult.  We don‘t have a roadmap. 

Nancy Pelosi is strong.  She‘ll do everything that she can do, but it‘s going to be very difficult. 

SCHULTZ:  Do you think that there should be some separation?  I mean, cooler heads prevail, put some time and space between this? 

And I have to ask you, it‘s hard to, as a broadcaster, to accept that, and as a radio broadcaster as well.  I want to tell you, Maxine, today, I got an e-mail from one of your constituents in California who has Anthem Blue Cross.  Her premium is going from $826 a month to $1,182 a month. 

Now, the American people are suffering.  The president said that in the State of the Union Address. 

Does it make sense to put this on the back burner, in your opinion, or continue to push forward?  What do you think? 

WATERS:  I agree with the president in his State of the Union Address.  He said that we‘ve come too far to turn back now.  And I think we should push ahead.

I think we should try to get to the floor of the Senate.  And I think we should try and just get a bill.  And if they want to filibuster something, let them filibuster. 

Let‘s go.  Let‘s try and let the world see who is for it and who‘s against it, why they are for it, why they are against it.  Let‘s lay down the gauntlet and let‘s go for it. 

SCHULTZ:  Congresswoman Waters, you just came back from Haiti.  Can you summarize—are we making great progress?  Is this relief getting to the people? 

It‘s been several weeks now and the reporting continues on, the suffering continues, but how do you assess the situation today? 

WATERS:  Each day it gets a little better.  The logistics have just been very difficult. 

Coordination is not easy.  You have all of the international community there, all of our agencies are there, all of the nongovernment organizations on the ground.  They are trying to have these cluster meetings every morning to try and coordinate, but the country is in terrible shape. 

The buildings have been flattened.  In some cases, you can‘t get past the roads, in other cases, to get to certain communities.  But each day it gets a little better.

People are working very hard.  All of the agencies are.  And so that‘s all we can do, is encourage them, get the medical aid there, get the food stuff there, and hope that they can get them distributed a little better each day. 

SCHULTZ:  Congresswoman, thanks for your time tonight.  Thanks for your work.  I appreciate it so much.

WATERS:  You‘re welcome.  Thank you so much, Ed. 

SCHULTZ:  You bet. 

And back to the top of health care, if I may, I want you to know that next week, the National Association of Free Clinics will be in Hartford, Connecticut, on Wednesday, February 3rd.  Free health care will be provided to anyone who is uninsured. 

We‘re teaming up with “COUNTDOWN WITH KEITH OLBERMANN,” and I‘ll be broadcasting live from the clinic all day long.  That‘s something that we just feel so compelled to do, to continue to bring this story and push health care reform forward in this country and help people out. 

Here‘s what you can do to help.

We are told there is a need for doctors, volunteers and donations.  To volunteer, make an appointment or a contribution, go to FreeClinics.us or Ed.MSNBC.com. 

And thanks for your help. 

Coming up, nothing gets “The Drugster” more excited than a bin Laden tape.  This time he‘s found a way to make it Nancy Pelosi‘s fault.  That lands him in the zone. 

That‘s next on THE ED SHOW.  Stay with us. 

(COMMERCIAL BREAK)

SCHULTZ:  And in “Psycho Talk” talk tonight, we‘re finishing off the week with “The Drugster.”

He was flying high on his radio show today over a newly released audiotape supposedly from Osama bin Laden that blames America for global warming.  In typical “Drugster” fashion, Rush decided to take the low-rent approach and use the tape to compare Democrats to terrorists. 

(BEGIN AUDIO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST:  It gets harder and harder to tell bin Laden‘s complaints from those of the average, run-of-the-mill leftists like Obama or Harry Reid or Nancy Pelosi or the entire Democratic Party. 

Every time Osama releases a tape, it‘s just Democrat talking points. 

Or maybe they are getting their talking points from him.

(END AUDIO CLIP)

SCHULTZ:  Bin Laden is writing the Democrat talking points.  Enough aid.  That‘s psycho talk.

Coming up, the Republicans are standing in the way of bringing terrorists to justice.  And the White House might be letting them get away with it.  Cliff May and I butted heads on this yesterday, and he‘s coming back tonight to talk about the new developments. 

Plus, a great sign that this recession is in the rearview mirror.  Our economic growth for the fourth quarter for ‘09 was the best its been since 2003.  And Dylan Ratigan, my colleague, will deliver his thoughts coming up in the Playbook.  Stay with us.

(COMMERCIAL BREAK)

SCHULTZ:  Welcome back to THE ED SHOW and thanks for watching tonight.  This week, New York City Mayor Michael Bloomberg joined the growing call to move the trial of alleged 9/11 mastermind Khalid Sheikh Mohammed out of Manhattan.  The Obama administration initially stood firm behind the decision to hold the trial near Ground Zero.  But today, a senior administration official said, quote, “it seems less and less likely that it will be held there.”

The Justice Department is considering alternate locations.  My next guest was on the program with me last night.  We had quite a debate. We got to come back for round two tonight and he‘s agreed to do that.  The president of the Foundation for Defense of Democracy, Cliff May. 

Cliff, you won round one on that because it looks like the White House is going to move the trial and move the trial and go along with Michael Bloomberg.  I think it‘s a mistake.  I think it‘s got to be in the civil court for this country to take the moral high ground.  We can‘t be so strong fisted and have the military look to it.  Obviously, you see it a different way.  Is this capitulation on the part of the Obama administration? 

CLIFF MAY, FOUNDATION FOR DEFENSE OF DEMOCRACY:  No, I don‘t think so.  I think probably they watched your show last night and decided that while you‘re better looking, my arguments were more persuasive.  Look, Khalid Sheikh Mohammed is a combatant.  He‘s an unlawful combatant.  He‘s a terrorist.  He targets innocent civilians.  But he‘s a combatant.  He‘s not somebody who held up a bank and shot a bank teller.

He should be, I think, tried by a military tribunal.  There‘s nothing wrong with military justice.  It‘s what American soldiers are subject to.  We certainly shouldn‘t do it in New York because of the national security dangers.  New York is a big fat target.  Spending a billion dollars—you and I can come up with better uses for that money.  And because we don‘t want to give him such a great big Broadway stage as New York. 

SCHULTZ:  Where was all off this outrage with the Moussaui trial in Virginia?  Why is it now you‘ve got Peter King and Senator Graham, they want to introduce legislation that would block it going to a civil court?  Where was all this outcry when Moussaui was on trial?  Was he not a bad terrorist?

MAY:  I do think you‘ve got a point there.  There were those who objected to that trial.  Senator Joseph Lieberman was one of them.  Check the record, you‘ll see he did object there.  I think when Moussaui was tried, we didn‘t know as much as we know now about the enemy we face.  I think we now should know—I understand this is a big debate—that we do  have a war against al Qaeda, and not just al Qaeda, but the president says al Qaeda.  If we‘re fighting a war, you don‘t take a criminal justice template and impose it.  You don‘t say that Khalid Sheikh Muhammad has the presumption of innocence, because you and I and Eric Holder and President Obama do not believe for a minute that he is innocent. 

SCHULTZ:  So you think that the United States of America can achieve the high ground by going away from its judicial system, civilian court, and going right to a military court that looks heavy handed?  You think that will play well around the world with our allies? 

MAY:  Well, we have never before in American history used the criminal justice system to prosecute a war.  And I do think that this is a war.  As for the terrorists we‘re fighting, they don‘t deny they‘re doing this.  They believe that they are justified in doing this based on their very, very radical ideology. 

By the way, to have a criminal trial when the president has already said—and the attorney general has already said that the defendant is guilty, that‘s not going to win us any PR points anywhere in the world, Ed.  We might as well not do it, put it on a military base, maybe in Fargo, like you‘ve said.  We‘ll only need so much in the way of security.  We‘ll have you and Rachel Maddow out there with a couple of whips.  That should take care of the whole thing.

SCHULTZ:  Be nice now, Cliff. 

MAY:  No. 

SCHULTZ:  We could hand them over to you and your friend Dick Cheney and just torture him right away.  We can torture him right away before any trial whatsoever. 

MAY:  I‘m not for torture.  Dick Cheney and a hunting rifle might be a good security system, I‘ll grant you that.

SCHULTZ:  Cliff, good to have you on.  I appreciate it. 

Let‘s turn to now former CIA special agent Jack Rice is with us.  Jack, is this capitulation on the part of the White House?  Or this an admission of a mistake?  Or are they just going with popular appeal here?  Or maybe just going cow-towing to the political influence of Michael Bloomberg?  What do you think? 

JACK RICE, FMR. CIA AGENT:  This is a huge mistake.  The fact is he should be tried.  Khalid Sheikh Muhammad and four conspirators should be tried in a federal court, without question.  I love your previous guest‘s argument.  The idea if you tried Khalid Sheikh Muhammad in lower Manhattan, all of a sudden, New York is going to be a target of terrorism?  Really?  Come on, it‘s the number one target now. 

If al Qaeda could attack New York, they would do it now.  I guess the logic is that they‘re holding off—they‘re not going to do it unless Khalid Sheikh Mohammed is prosecuted there.  That‘s perfect.  That is totally, totally ridiculous. 

SCHULTZ:  Jack, does this make the administration look weak, if they change? 

RICE:  I think it is a capitulation.  I think the answer is yes.  I‘m not just a former CIA officer.  I‘m also a former prosecutor.  The advantage of doing this in lower Manhattan is this is one of the most experienced prosecution units in the country.  More than 300 prosecution cases for terrorism related case have taken place in the last ten years in federal courts.  More than 90 percent of them have been successfully convicted. 

This is a ruse in the first place.  You see this from the GOP.  They don‘t want to close Gitmo.  And the biggest problem, overall, is that we‘re trying to convince 1.5 billion Muslims that we don‘t have kangaroo courts, that we stand by principle, and that we‘re not changing because of this ultimate fear of al Qaeda.  What we‘re doing right now is exactly that.  And that is ridiculous. 

SCHULTZ:  Jack Rice, always a pleasure.  Good to have you with us tonight.  Thanks so much. 

RICE:  Thank you. 

SCHULTZ:  Earlier today, the president met with House Republicans in an effort to communicate and get the country together, get both parties working together again.  Remember those days? 

Let‘s bring in our panel on that issue again tonight.  Joe Madison is an XM satellite radio talk show host and Ernest Istook, a former Republican congressman, and now distinguished fellow at the Heritage Foundation. 

Joe, did the president do the right thing today or has he gone too far? 

JOE MADISON, XM RADIO TALK SHOW HOST:  Oh, no, he did the right thing.  This is not something new.  Presidents of both parties, I understand, have done this time and time again.  So to answer your question directly, of course he did the right thing. 

You know what I find interesting, though, is obviously this was planned even before the State of the Union.  But then when the Republican leadership stood up after the State of the Union and addressed the press, they said, well, OK—they never admitted that a meeting had already been arranged. 

What does it mean?  Personally I don‘t think it means—and politically—anything.  I think that—here‘s the line, Ed.  The Republicans are playing political rope a dope. 

SCHULTZ:  Ernest Istook, do you believe that?  Are the Republicans playing political rope a dope?

ERNEST ISTOOK, FMR. CONGRESSMAN:  I think it‘s very good for the country when the president and the GOP are sitting in the same room, having questions and answered exchanged, a little bit of contention.  I‘d like to see it opened up when the president meets with the Democrat caucus, and to see if he‘s saying the same thing to them as he says to other people. 

But the president, of course, has the advantage in this setting.  He has command of the microphone.  He can give long answers to short questions.  He‘s up on the stage and so forth.  So probably Obama came out a little bit better.

But I did notice, Ed, he showed he hadn‘t been paying attention. 

Republicans said, these are the plans we‘ve been saying for a long time. 

The president says, I don‘t know that any economists agree with them.  They‘ve had hundreds of economists come out and say, you ought to support that plan, and the president hasn‘t been paying attention. 

SCHULTZ:  What about that, Joe?

ISTOOK:  Why didn‘t he check them before.  Those plans have been out there for months.  He hasn‘t been paying attention.  But I am glad he is now. 

SCHULTZ:  Go ahead.  That‘s a point.  I‘ve had Steny Hoyer on this program this week, and also Jim Clyburn.  They say the process has been open.  They‘ve consulted from Republicans on this.  But I keep hearing tonight from Republicans, no, you‘ve been shut out.  Joe, what is it? 

MADISON:  I‘ve heard the same thing that you have heard.  We know that the Republican leadership has been invited to the White House, and that‘s an open process.  All you have to do, unlike the last administration, is look at the guest book to see who has been there. 

So, I don‘t know where it is.  Quite candidly, I would like to know what this new plan is and how it benefits 45 million uninsured people and others like, Ed Schultz, whose premium just went up. 

SCHULTZ:  Yes, it did.

ISTOOK:  We talked about that before.  Again, in Washington, there are meetings and then there are meetings.  There are meetings for show and there are meetings for work.

MADISON:  True.

ISTOOK:  As the republicans made the point earlier, they‘re in certain ceremonial type meetings. 

MADISON:  Come on.

SCHULTZ:  Ernest, the president went over there today to debunk the right wing talking points that he‘s had to put up with for the last year.  And he‘s still putting out an olive branch. 

Let‘s talk about the economy.  Ernest, are you willing to admit that we‘re headed in the right direction?  The most recent number out there about the GDP today, 5.7 percent growth, best it‘s been since 2003 in a quarter? 

ISTOOK:  Well, I was glad to see that on GDP.  Of course, we still don‘t have the job numbers.  Also, there are other numbers that came out that show the income increases were twice as much for people who worked for the government last year as it was for people who don‘t work for the government.  We‘ve still got a disparity that we have so called stimulus plans that give more attention to government employees than it does—

SCHULTZ:  But the question is—that was that.  The question is, are we making progress with the economy?

ISTOOK:  There is some progress, but not enough progress. 

SCHULTZ:  I would agree with that, we don‘t have enough progress.  I want to turn this thing around right away.  It just seems like the Republicans are just so stuck in the mud that they don‘t want to give this president any credit whatsoever.  Joe, where are we headed?  

(CROSS TALK)

MADISON:  My goodness, you just hit it right on the head.  It is progress.  Can you imagine?  You know what he would have said if the numbers had gone south?  It is progress.  Is it going to be overnight?  No. 

SCHULTZ:  Gentlemen, we‘ve got to run. 

MADISON:  Stop the rope a rope. 

SCHULTZ:  Joe and Ernest, great to have you on tonight.  Thanks so much. 

Coming up, my buddy Dylan Ratigan will tell us if he thinks the recession is over.  That‘s in my playbook.  Stay with us, folks.  We‘re right back.

(COMMERCIAL BREAK)

SCHULTZ:  In my playbook tonight, the recession is technically over.  The United States economy shot up 5.7 percent in the fourth quarter of 2009.  That‘s the fastest pace in more than six years, and it‘s the second straight quarter of growth. 

Now the next step is making sure that main street feel this is type of recovery.  Today, President Obama outlines his plan to help small businesses while visiting a manufacturing plant in Baltimore. 

For more, let me bring in Dylan Ratigan, host of MSNBC‘s “THE DYLAN RATIGAN SHOW,” who, by the way, had an awesome show today on China, Russia and how they‘re trying to screw us when it comes to the economy.  We‘ll talk more about that on another show.  But, Dylan, your take on the gross domestic product.  These numbers have got to be something for the White House to tout. 

DYLAN RATIGAN, MSNBC ANCHOR:  Well, what it is evidence of is the fact that what was done to deploy money, infinite money to support the banking system a couple of years ago, has at least pushed in to create some level of business activity.  Here‘s what gives me the biggest concern, which is that most of that GDP number was businesses that had not made wholesale purchases, Ed, that were just selling off their inventories.  Think about somebody driving their car and just running on the gas they have in the tank, as opposed to going to the gas station and filling back up. 

Well, a lot of this recent GDP number was inventory replenishment after a couple of years, or a year and a half, of none of that.  The question is, are we going to see real demand to burn that gas, to burn those inventories or not? 

What we have to be honest with ourselves about, Ed—and you hit it. 

You see the statistics.  You‘re honest with yourself about it.  You‘re

honest with your audience about it.  We all want to address it.  But until

you‘re honest about the fact that the investment and lending system in this

country is not designed to invest or lend to this country—the investment

--

SCHULTZ:  They‘re going to have to—

RATIGAN:  The government has modified the system so that the investors and lenders can harvest taxpayer money, or utilize taxpayer loopholes, zero percentage, et cetera, and use that free money to gamble with, which then creates consumption when they win.  And they also use that free money to lend to foreign countries. 

But until the government creates a financial system that actually lends and invests to American, it‘s unclear why Americans are subsidizing a banking system that is there really to serve the interest who run the banks. 

SCHULTZ:  Final point I want to make is today the president came out with a small business plan that deals with tax cuts.  It deals with advantages to hiring new employees.  I‘m all about it.  It‘s going to hit the small businesses really well.  But until they change the lending criteria and the lending standards, I don‘t know how this is going to move forward.  We‘re going to get some good numbers because we‘ve thrown trillions of dollars into this mess.

RATIGAN:  Sugar high.

SCHULTZ:  Now we got to come back.  This is the next big step.  Tell me if I‘m wrong.  The Obama administration is going to have to draw a line in the sand with the community banks, and tell them they‘re part of the process, to get this money out there and then back it up the way they backed up Wall Street.  What about that? 

SCHULTZ:  They do.  In fairness to the banks, Ed, they‘re in a difficult spot, because the banks created tons of risk over the last ten years lending money that they did not have to people that couldn‘t pay it back.  So now we‘re in this process of trying to get the banks back in shape.  That simply takes time.

So the banks are in a tough spot.  On the one hand, we say, lend more; you have to lend.  On the other hand, we say, hang on a second; you guys don‘t have any more.  So when I say we have a structural problem, as opposed to a cyclical problem—normally you say it‘s a business cycle.  We, because of the digital revolution and the corruption of our financial structure, have a structural issue where money is being basically, like a magnet, sucked to certain parts of the economy, and is depriving the vibrancy of the science and engineering and creativity that will ultimately take our children and our children‘s children in this country to the next best place. 

SCHULTZ:  It‘s called the Tarp money to the community banks.  That is the big ticket.  The president and his administration have got to push that.  Dylan, always a pleasure.  Great to have you with us tonight.  You can catch “THE DYLAN RATIGAN SHOW” weekdays at 4:00 p.m. right here on MSNBC.

Coming up, Osama bin Laden and Al Gore have one thing in common. 

“Daily Show” co-creator Lizz Winstead can explain all that next in Club Ed. 

Stay with us.

(COMMERCIAL BREAK)

SCHULTZ:  Welcome back.  If it‘s Friday, it‘s time for Club Ed, with Lizz Winstead, co-creator of “The Daily Show” and the brains behind “Wake Up World,” which you can watch at www.WakeUpWorld.tv.  If you‘re in the DC area, Washington, DC area, this weekend, you can see Lizz do stand-up.  She‘s terrific.  She‘ll be at the Arlington Cinema and Draft House. 

Help me, my friend.  I still have a Viking hangover.  How did that happen?  What did I do? 

LIZZ WINSTEAD, “WAKE UP WORLD”:  Ed, I know.  I think you have to find your Favre thing to drink.  Did I just say that?  I did.  It‘s embarrassing.  I don‘t know what happened.  I watched that game.  You know what?  I haven‘t watched the Vikings in—I got to be honest.  Minnesotans, don‘t hate me—years.  But I watched and sadly disappointing.  Are you going to be OK? 

SCHULTZ:  Well, it takes at least a week.  And it hasn‘t been a week yet.  But I will be all right.  What does Osama bin Laden and Al Gore have in common? 

WINSTEAD:  Apparently, Osama bin Laden is now concerned with the climate change.  I don‘t know what to say other than, when you are a mastermind of terrorism, what are you going to do to help the planet?  Are you going to buy carbon offsets every time you blow something up?  It‘s ridiculous.  What kind of statement is that?

And then, of course, the right is trying to tie it to environmentalists and cap and trade, proving yet again that the biggest environmental problem we have is sort of the hot air that comes out of the right wing exterminators.  They are terrible. 

SCHULTZ:  Exactly.  Now, the State of the Union, pretty interesting stuff.  The president went after the Democrats, the Republicans, and the Supreme Court.  What did you think? 

WINSTEAD:  Well, I think that‘s true.  And yet all of our eyes were glazed on Nancy Pelosi‘s weird mouth thing that she kept doing.  I was trying to focus on the president.  Nancy Pelosi looked like she had meth-mouth.  I don‘t know what was going on.  Did she need a lozenge?  It was so distracting, I could barely  watch. 

SCHULTZ:  How about those guys right there?  What did you think of them? 

WINSTEAD:  It‘s crazy, because I‘m watching the State of the Union.  And it‘s always bizarre when they do the big wide shot and you see Lieberman sitting among the Democrats, sort of like the turd in the punch bowl.  It just makes no sense why he‘s even on that side of the aisle. 

I think there were some good messages.  Sometimes I do feel like the president‘s relationship with the GOP is a little bit like—you know you‘ve got that friend who has been in a relationship with a real creep for a long time and they‘re always complaining to you about it.  And you‘re like, dude, get out of the relationship.  At some point, he needs to get out of the bad relationship.  Speaking of which—

SCHULTZ:  Speaking of which, John Edwards is the daddy and Elizabeth has officially ditched him.  What‘s the latest on that.

WINSTEAD:  And the videotape.  And the videotape, Ed.  I‘m hoping the videotape is John Edwards and Tiger and Rielle.  I just want to combine all of the scandals into one big, giant thing that would make me never want to have sex again.  That is basically what would happen. 

SCHULTZ:  Lizz Winstead, you can see her at the Arlington Cinema and Draft House coming up—tomorrow night? 

WINSTEAD:  It‘s tonight and tomorrow night, 9:45 out there in Arlington. 

SCHULTZ:  All right, Lizz.  Thank you.  Have a good weekend. 

Tonight, in our text survey I asked, do you want to see President Obama spend his time working with Republicans this year?  Thirty one percent of you said yes; 69 percent of you said no. 

That‘s THE ED SHOW.  I‘m Ed Schultz.  For more information on THE ED SHOW, go to Ed.MSNBC.com, or check out our radio website at WeGotEd.com.  You can hear my radio show on XM 167 from noon to 3:00 pm, Monday through Friday.

“Hardball” with Chris Matthews starts right now on the place for politics, MSNBC.  Have a great weekend. 

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