updated 3/30/2010 9:05:05 AM ET 2010-03-30T13:05:05

Guests: Ed Rendell, Peter Morici, Robert Greenwald, Melanie Sloan, Jon

Soltz, Bill Press, Ron Christie, Julian Phillips, A.B. Stoddard

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

from New York tonight.

These stories are hitting my hut buttons tonight. 

Cash-strapped states, they are looking to tax everything from clowns

to haircuts in order to pay the bills in these recessionary times. 

Governor Ed Rendell will join me to talk about the tough choices states are

facing in just a moment. 

Michael Steele is in hot water again after the RNC reported dropping

nearly $2,000 at a bondage-themed strip club in Hollywood.  I guess what

went on the road didn‘t stay on the road. 

And a right-wing militia group is busted by the FBI for allegedly

planning a major domestic terror attack on cops.  This story is

unbelievable.  We‘ll bring you the details coming up. 

And Sean Hannity, is he cooking the books with his charity?  We‘ve got

a full report at the bottom of the hour.  You won‘t want to miss it.

All right.  This is the story that has got me fired up tonight. 

There‘s no free lunch.  Why are we afraid to say that as Americans

right now?  There is no free lunch. 

States have just been absolutely rocked by this economy.  They‘ve got

to make some tough decisions, cut services or raise taxes.  What do you

want to do? 

According to the Center on Budget and Priorities, 48 states will have

a shortfall—a shortfall in 2010.  They also project states will have to

deal with a total budget shortfall of $375 billion for the years 2010 and

2011. 

Now, no governor wants to increase property taxes or increase income

taxes.  Now, in New Jersey, Governor Chris Christie, he‘s found a way.  He

slashed $820 million out of public schools, fired 6,000 teachers.  In

California, Governor Arnold Schwarzenegger, well, he may release prisoners

out on the street because of budget shortfalls.  And, of course, states

from coast to coast are choosing to tax services now. 

No politician wants to do this.  It‘s a tough call.  But this is the

only way they see an out.  Garbage pickup, dating services, bowling night,

haircuts—I mean, all of that could be on the table to be taxed. 

Michigan Governor Jennifer Granholm wants a 5.5 percent tax for

haircuts.  Governor Ed Rendell of Pennsylvania wants to raise the taxes on

accounting, advertising and data processing. 

Now, the Bush administration cut taxes.  This is what we continue to

forget, and I think as liberals we‘re afraid to say it. 

The Bush administration cut taxes for the top two percent.  That cost

this country $1.8 trillion.  And, of course, the feds couldn‘t get it to

the states. 

They got us into a couple of wars that weren‘t on the budget, a

Medicare prescription drug bill that of course was an unfunded mandate, and

now it‘s time to pay the price.  It‘s all coming home to roost.  Somebody

has to pay for what‘s going on in this country. 

The Republican Party, they treat tax cuts like a religion.  They don‘t

care what they have to cut.  The rest of us are sitting here picking up the

pieces, picking up the tab. 

And I‘m a small business guy.  I know it‘s a hard pill to swallow. 

But, you know, somewhere along the line, folks, we have to be honest in our

budgeting.  This has to end. 

When you cut education and put criminals on the street, I believe

that‘s bad policy.  I think the best way to solve this crisis is that we

have to realize that this is a changing economy that we are living in. 

It is time for an Internet transaction tax.  Oh, that hurts, Ed. 

Wait a minute.  The Internet is one of the last tax-free zones in

America.  It hurts small business if I go down the street and buy a fishing

rod, if I do it online instead of doing it at the local shop.  When my wife

goes out and buys a pair of shoes, well, if she does it online it‘s going

to hurt that local store on the corner as well. 

Why should any online retailer have a safe haven and advantage? 

Because local stores, of course, let‘s see, they hire people, they pay

health care, they pay property tax, they contribute to the community.  You

can go down there and get money for any kind of organization to help

support the local communities. 

Online sales—let‘s pay attention to this—are projected to hit

$172.9 billion this year.  That‘s seven percent of all retail sales that is

going untaxed, and it‘s putting the burden elsewhere.  If that money is

taxed, it will help small businesses, it will help state budgets, it will

curb the budget deficits. 

It‘s really, folks, in my opinion, an untapped stream of revenue that

is just sitting there right now.  And we are a changing economy and we‘ve

got to balance these things out. 

We have dug ourselves into a hole, and now we‘ve got to dig ourselves out

of this economic ditch Bush put us into. 

That‘s right.  You can‘t do stuff unless you pay for it, right? 

Now, we just can‘t be the most selfish generation again and again and

again and again.  America is better than that, and we need our leaders to

stand up and make the tough call. 

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

idea. 

I want to know—tonight‘s text survey question: Would you be willing

to pay Internet sales taxes to keep your state from going broke?  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 Pennsylvania Governor Ed Rendell.  His state is

considering a tax on accounting, advertising and data processing. 

Governor, good to have you with us tonight. 

I think the discussion‘s long overdue that we have got to address a

changing economy.  We buy stuff, we service things differently than what we

used to. 

How do we start this conversation in this country instead of keep

going back to income taxes and property taxes? 

GOV. ED RENDELL (D), PENNSYLVANIA:  Well, you couldn‘t be more right,

Ed.  And the frustrating part is there‘s a federal moratorium on taxing

Internet sales. 

Now, that‘s coming close to—the time period is coming close to

ending.  But we‘ve got to do that. 

And you‘re absolutely right.  Why should that little bookstore who

hires people and pays real estate taxes, et cetera, why should that

bookstore have to pay sales tax and Amazon not pay sales tax?  There‘s

absolutely no rhyme or reason to it. 

But I want to add one thing to what you said.  And I thought what you

said was great and on point. 

We owe Barack Obama a great debt of thanks.  States and the people who

live in those states, which means all of us, because in the stimulus he

gave significant relief to states.  This year‘s state budget, the one I‘ve

just proposed in Pennsylvania, has $2.7 billion of federal stimulus funds

out of about a $29 billion budget. 

SCHULTZ:  What if you didn‘t have it? 

RENDELL:  Take away that—we would have to lay off somewhere between

20,000 and 30,000 people.  And that would have not just been state workers,

it would have been down to the counties—police, firemen, emergency

service workers, teachers, all of those things. 

Now, Pennsylvania happens to have a better economy than almost every

large state in the union.  We have a fairly decent unemployment rate. 

Nothing‘s good these days, but fairly decent. 

But we‘re facing—this year we‘re going to be OK thanks to the

stimulus money.  We might be able to get through this year without any

additional taxes.  But next year, when the stimulus money goes off, and the

following year, it‘s going to be hell to pay. 

And what I‘ve suggested is raising taxes now, putting them into a

fund.  I don‘t want to say lock box, because Al Gore gave lock boxes a bad

name, but essentially putting them in a lock box.  They couldn‘t be used

until the stimulus money goes away the following year, when I‘m no longer

governor, so that we‘ll be prepared to begin to deal with that almost $3

billion shortfall. 

And if we didn‘t have Barack Obama—and by the way, he‘s also saving

the states bacon because in his budget proposal there‘s something called

enhanced FMAP he‘s going to give the states for this calendar year, another

two quarters of additional enhanced FMAP.  Without that states would be in

terrible shape, Pennsylvania included.  But when that falls off we‘re going

to have to do things. 

SCHULTZ:  Well, Governor, why did you pick accounting, advertising and

data processing?  Those are businesses. 

RENDELL:  Well, those aren‘t the only three.

SCHULTZ:  Oh, you got some other ones in there as well?  Because the

middle class has been butchered in this economy.  I mean, families, they

just can‘t, you know, bear the brunt anymore of what‘s going on. 

So where do you think you should go for revenue? 

RENDELL:  Well, we have a sales tax that‘s at 6 percent, Ed.  And we

have 74 specific exemptions.  Most of those exemptions are the results of

lobbyists and special interests. 

For example, candy and gum are not taxed in Pennsylvania.  They‘re

considered food.  They had a good lobbyist. 

Popcorn is taxed—sales taxed.  It‘s not considered food.  They had

a bat lobbyist.  Simple as that. 

So I want to remove every single exemption except food, clothing,

pharmaceuticals, manufacturing exemption, and for non-profits.  Other than

that we want to take—but the good news is we‘re cutting the sales tax,

my proposal, from 6 percent to 4 percent -- 

SCHULTZ:  OK. 

RENDELL:   -- which will make us competitive with all the surrounding

states.  And with that cut, by eliminating the exemptions, we still produce

over a billion dollars a year in new revenue.

SCHULTZ:  Governor, I‘m telling you, you‘ve got 7 percent of the

retail economy out there that‘s not getting touched.  They‘re not hiring

local people.  I mean, when it gets to 10 percent, when it gets to 15

percent, it‘s going to happen.  It‘s going to happen. 

And if states aren‘t bringing the money into the Treasury because

these kind of sales are going out of town and off of Main Street in

Pennsylvania, it‘s going to be hell to pay for everybody‘s economy. 

RENDELL:  Keep pushing this, Ed, because the original moratorium made

sense.  When the Internet was young, we didn‘t want to in any way restrict

--

(CROSSTALK)

SCHULTZ:  Yes.  But it‘s a changing economy now. 

RENDELL:  It‘s powerful now.  Now‘s the time to tax it.  And you‘re

absolutely right.  Local small businesses, they‘re the ones who will

benefit. 

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

RENDELL:  Nice to be with you.

SCHULTZ:  Governor Ed Rendell from Pennsylvania. 

You bet.

For the other side of the story, let me bring in an economist who

thinks it‘s really not a good idea to do this—Peter Morici.  He‘s an

economist and professor at the University of Maryland.

Peter, if we‘ve got a changing economy, don‘t we have to change the

way we collect? 

PETER MORICI, ECONOMIST, UNIVERSITY OF MARYLAND:  Oh, absolutely. 

There are too many holes in the state tax base. 

They rely on sales taxes.  Some goods are in, some goods are out. 

Generally, they don‘t tax services.  I‘m with the governor, but I want to

go across the board, no exemptions, lower the rate. 

The other thing I think we need to consider is the states are very

reluctant to play with their income taxes because they don‘t want to seem

competitive relative to their neighbors.  You know, it‘s about time we

stopped having 51 IRS‘s. 

Let‘s just collect one income tax, let the states put a surcharge on

the federal income tax, the structures there, and have money flow directly

to the states.  That way they‘re not disadvantaged and we save a lot on

administration. 

What I‘m really against is taxing haircuts or funeral parlors.  Why

don‘t we tax redheads? 

SCHULTZ:  Well, if they did I‘d pay it.  I mean—

MORICI:  I know. 

SCHULTZ:  You know, no one‘s asked me to pay more through the two wars

and the Medicare prescription, the unfunded mandate.  No one‘s come to me

in the top 2 percent and said, hey, you‘ve got to do a little bit more. 

Now the Bush tax cuts are going to go off and whatnot, but the point

is, the changing economy, none of these states are going to be able to have

7 percent of the retail taken out of their state—and some states it‘s

more than that because of the population—without them having to address

how they‘re going to collect money.  I mean, this is just the tip of the

iceberg because of the purchasing habits of Americans that are out there. 

I‘m against taxes, but I realize that they have got to be paid.  And I

think this country is really at a crossroads of recognizing that there‘s no

free lunch.  You can‘t cut everything. 

MORICI:  The states are in a terrible bind.  The federal government

has the income tax.  The local governments have the property tax. 

Property taxes went up a lot during the boom, and as a consequence

people feel adequately taxed.  But not all that money was used by

municipalities very wisely.  You know, if you build a deck these days, you

have a lot more inspections than you did 10, 15 years ago. 

The states, themselves, have to renegotiate to some degree their

relationships with the municipalities and how they give money to the local

governments.  And at the same time, if you want to talk about a broad-based

sales tax, you know where you really need to go?  The value-added tax,

because that‘s the only way you can do this equitably, across states, so

one state isn‘t trying to rob Peter to pay Paul in competition and so

forth.  And that requires a national solution. 

SCHULTZ:  Yes. 

Professor, I don‘t hold it against you for picking on redheads.  You

know, it just happens all the time. 

MORICI:  My mom was a redhead. 

SCHULTZ:  Then you know. 

Good to have you on, Professor.  Appreciate your time tonight. 

Coming up, in the past year we‘ve had a 244 percent rise in hate

groups in this country.  A psycho band of WMD-loving cop killers just got

busted by the FBI.  You won‘t believe what they had planned in this

country. 

And I‘m not the only one asking if Hannity‘s charity is a scam.  A top

veterans organization and a Washington watchdog group have filed complaints

with the IRS.  We‘ll have that at the bottom of the hour. 

All that, plus RNC parties at strip joints? 

And “The Beckster‘s” sub lands in the “Psycho Talk” zone tonight. 

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

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  The United States of

America does not quit once it starts on something.  You don‘t quit.  The

American armed services does not quit. 

We keep at it.  We persevere.  And together, with our partners, we

will prevail.  I am absolutely confident of that. 

(END VIDEO CLIP)

SCHULTZ:  President Obama made a surprise visit to the U.S. troops

fighting in Afghanistan this weekend, and his message was very clear—

we‘ll stay until we win.  That means dismantling al Qaeda and its allies.

But as the president was giving a pep talk to the troops inside Bagram

Air Force Base, the Taliban was bragging about launching rockets at him. 

The United States military confirms there was rocket fire, but it says it

happened after the president had left. 

This is a stark reminder that after eight years of fighting and nearly

a thousand American lives have been lost, the Taliban is still very much in

power in Afghanistan. 

For more on that, let‘s bring in Robert Greenwald, Brave New Films, he

is the director of “Rethink Afghanistan.”

Mr. Greenwald, good to have you with us.

What message did you take from the president‘s visit when he says

we‘re going to stay there until we get the job done?  What does that mean? 

ROBERT GREENWALD, FILMMAKER:  Well, I think it means that he‘s sending

a message to the troops, he‘s supporting them.  But all the reports from

what‘s going on over there, Ed—and we‘re hearing this at “Rethink

Afghanistan” from person after person who‘s stationed over there—it‘s a

horror show. 

Morale is down.  People are being killed.  And, you know, you earlier

were talking about there‘s no free lunch.  We also have to remember war is

not free. 

During the time the president was giving that speech, we spent $2.5

million on the war in Afghanistan.  And I cannot wait until he gives the

speech when he talks about spending that same amount of money on jobs and

homes and all the things that the states so desperately need in this

country. 

SCHULTZ:  Well, the United States has spent $6 billion since 2002

setting up a police force, arsenals, academies, training, all of this

stuff.  And what do we have to show for it?  When does it end? 

Now, the president reportedly told Mr. Karzai you‘ve got to get it

together and knock off this corruption.  But—

GREENWALD:  Yes, but Karzai is a corrupt leader, Ed.  I mean, he was

elected with a false election.  Millions of votes that were not even cast

were somehow tallied for him.  So the notion that he‘s going to change his

way when he and his family are making billions of dollars, to say nothing -

you know this, the number of private corporations that are ripping us off

over there is an obscenity. 

And the timing couldn‘t be worse, because as you reported earlier, the

states are going out of business in this country.  And meanwhile, we‘re

pouring this insane amount of money.  It‘s going to be $300 billion for the

war in Afghanistan, and we are no safer than when we began. 

SCHULTZ:  So from your reporting, and your documentary work in

Afghanistan, Mr. Greenwald, this is Iraq all over again when it comes to

the private contractors? 

GREENWALD:  In some ways worse because there‘s more money flooding in. 

It‘s flooding in with a government in Afghanistan that‘s part of the

corruption. 

We didn‘t exactly have that in Iraq.  It was our contractors taking

it, stealing it all.  Here, the government over there is taking it and

stealing it. 

There is no government that is respected.  And we‘re seeing that day

after day after day. 

Look, Ed, we cannot paint this as the good guys versus the bad guys. 

It‘s an awful civil war over there.  Terrible things are going on.  And we

have to decide and really embrace the idea war is not free. 

SCHULTZ:  But what about defeating al Qaeda?  Are we not accomplishing

anything in Afghanistan? 

GREENWALD:  Well, al Qaeda‘s been defeated.  General Petraeus has said

there‘s no al Qaeda.  The CIA has said there‘s less than 100.

Go after al Qaeda, but don‘t invade and occupy a country to get a

couple of bad guys.  Get them wherever they are, but the notion we need to

have 120,000 troops and 150,000 contractors over there, and spend $72

billion this year, it doesn‘t make any fundamental sense.  And we all have

to support Obama in pushing back against the Pentagon. 

SCHULTZ:  A hundred and fifty thousand private contractors.  That‘s a

bunch. 

GREENWALD:  Yes.

SCHULTZ:  Mr. Greenwald, good to have you with us tonight.  Thanks so

much. 

GREENWALD:  Thank you.

SCHULTZ:  Coming up, I never thought I‘d miss “The Beckster” if he

ever took a day off.  But the guy subbing for him, he didn‘t disappoint

anybody.  He‘s one sick puppy.  His conspiracy theories put him right where

he belongs, the zone. 

Stay with us.

(COMMERCIAL BREAK)

SCHULTZ:  And in “Psycho Talk” tonight, Glenn Beck has taken a break

from his radio show this week, but don‘t worry.  They found somebody almost

as crazy as him to fill in—Joe Pagliarulo. 

Joe showed the world, or at least the wacko world that listens to “The

Beckster‘s” show, that he can spout conspiracy theories with the best of

them. 

Here he is talking about the economic crisis. 

(BEGIN AUDIO CLIP)

JOE PAGLIARULO, RADIO TALK SHOW HOST:  What else can happen while this

crisis is going?  And again, a crisis I believe is being perpetuated

purposefully by this administration, and they‘ll do so, I think, until

about, I don‘t know, September or October of 2012.  That‘s when the crisis

suddenly will start seeing a crack in the crisis. 

Our economic and employment crisis, our jobs and employment crisis,

that was what this president was going to take care of if he got elected. 

And he got elected and he‘s ignoring it on purpose.  He‘s made it worse on

purpose, because as long as the crisis continues, you can keep on kicking

off the agenda items. 

(END AUDIO CLIP)

SCHULTZ:  Worse on purpose. 

I‘ll tell you what, it‘s that show prep that really puts the righties

over the top in talk radio, isn‘t it?  So entertaining. 

Joe is trying to convince us that President Obama is purposely keeping

the country in a recession so that he can magically, just in the nick of

time, pull us out of the recession just before re-election.  Even I don‘t

think Obama‘s that talented. 

Also, I seem to remember an $800 billion stimulus package specifically

aimed at fixing the economy.  That doesn‘t seem like ignoring the crisis to

me. 

And experts don‘t think we‘ll have to wait around until 2012 for

things to improve.  They‘re already happening.  Economist Peter Morici even

came on this show and predicted that the recession will end this month. 

So, congratulations, Beckster.  Your understudy, he‘s just as psycho

as you are, and he‘s in the zone. 

Coming up, Sean Hannity is being accused—the great American is

being accused of cooking the books.  Two people just filed complaints

against him with the IRS and the Federal Trade Commission.  Uh-oh.  They‘re

going to be here next to talk to me about that. 

Plus, “Caribou Barbie” says the press is making stuff up about violent

Tea Parties.  OK. 

And you won‘t believe what the RNC is doing with your donated dollars. 

That‘s all coming up. 

You‘re watching THE ED SHOW on MSNBC.

Stay with us.

(COMMERCIAL BREAK)

SCHULTZ:  Welcome back to THE ED SHOW.  Thanks for watching tonight

here on MSNBC.  Sean Hannity may be getting a visit from the tax man very

soon.  Vote Vets and the Citizens for Responsibility and Ethics in

Washington, they‘re calling for the IRS and the FTC to investigate

Hannity‘s Freedom Concerts Charity.  Now, Freedom Concerts supposedly

benefits children of killed and wounded troops.  But conservative blogger

Schlussel recently outed the charity and labeled it a, quote, “huge scam.” 

She claims only a fraction of the funds raised actually went to the

cause, while most of the money was used to shuttle Hannity and his pals

around in private jets.  Freedom Alliance denies the allegations. 

For more, let‘s bring in Jon Soltz, who is the chairman of Vote Vets,

and also Melanie Sloan of the Citizens for Responsibility and Ethics in

Washington. 

Melanie, you first.  Allegedly what has Hannity‘s charity done wrong? 

MELANIE SLOAN, CITIZENS FOR RESPONSIBILITY AND ETHICS IN WASHINGTON: 

I think the biggest thing is Hannity gets on television and promotes

Freedom Concerts, and says all the money is going from the Freedom Concert

ticket sales to the charity for college scholarships for children of

wounded and killed veterans. 

That simply isn‘t the case.  The money all goes to something called

Premiere Marketing.  Premiere Marketing is run by a guy named Dwayne Ward,

who is a longtime associate of Oliver North‘s.  Mr. Ward also happens to

run the Premiere Speakers Bureau, which represents both Hannity and North. 

At the concerts, they sell tour collectibles under Premiere Collectibles. 

Basically, the whole thing is a money-making enterprise for Premiere

Marketing.  Then some portion of the ticket proceeds—and we don‘t know

how much—goes over to the Freedom Alliance for the scholarships. 

SCHULTZ:  OK.  Again, who owns Premiere Marketing? 

SLOAN:  Dwayne Ward, longtime conservative.  He started his career

with Jerry Fallwell. 

SCHULTZ:  OK.  All right.  Mr. Soltz, what does this mean to the

veterans if this is true? 

JON SOLTZ, VOTEVETS.ORG:  Look it‘s horrible.  There‘s a lot of great

Americans out there, American families, that give money to veterans

charities.  The “Washington Post” did a huge expose about a year and a half

ago that exposes a lot of these charities that spend 90 percent of the

money that comes in on overhead.  This looks to be a classic case of what

Sean Hannity‘s involved in.  It makes it difficult for Americans to trust

that the money they give is actually going to help fallen soldiers. 

SCHULTZ:  This is the response today from Freedom Alliance: “today,

Freedom Alliance was attacked with baseless complaints.  There is

absolutely no merit to the scurrilous charges launched against Freedom

Alliance from two of the most left week organizations in the country.  The

smear mongers who have launched this politically motivated witch hunt

against Freedom Alliance will be proven wrong as we aggressively defend

ourselves in the days and weeks ahead.” 

It was written by the president.  But I tell you what, it sure sounds

like Hannity wrote it to me.  Melanie, where‘s the violation here?  I mean,

I understand that if there‘s not a whole lot of money that goes to those

it‘s supposed to benefit, you violate the spirit of what you‘re trying to

accomplish.  But where is it written that you have to have so much go to

the cause? 

SLOAN:  That‘s not actually the essence of our complaint, how much

money has gone to the cause.  The essence is that they‘ve been on TV saying

all of the money goes to the cause, when, in fact, the money doesn‘t all go

to the cause.  That‘s really the problem.  The Federal Trade Commission

regulates deceptive marketing.  You can‘t trick people.  You can‘t say all

the money goes for something when it doesn‘t. 

SCHULTZ:  Do you think this is a scam?  From what you see, do you

think this is a scam? 

SLOAN:  I do.  I think it‘s a scam that makes a lot of money for

Premiere marketing.  That benefits Hannity and Oliver North. 

SCHULTZ:  Hannity last week, in front of the Talkers Convention, a

little get together here in New York, he actually received an award for

this, a public service award for this.  I asked him, straight up, I said,

what‘s happening with your charity?  He said to me, I haven‘t taken one

dime.  He also went up to the microphone and said that this organization

has got 15 million dollars in the bank.  And Mr. Soltz, your thoughts when

you hear that kind of number tossed around. 

SOLTZ:  I could personally care less if Sean Hannity took a dime. 

What he‘s doing is he‘s promoting a Republican corporation or conservative

corporation that‘s basically marketing something that doesn‘t exist. 

They‘re out there selling and branding that they‘re non-profit.  Their

charity raises—all the money they raise goes to the children of service

members that have fallen.  They‘re using that money to sell.  What they

should say is 10 percent of the money you give to this concert goes to

children of the fallen. 

So he‘s basically complicit in a lie that‘s benefiting unfair and—

actions that we believe are possibly illegal, from a corporation that he‘s

basically in bed with. 

SCHULTZ:  Melanie, what do you want the IRS to do? 

SLOAN:  The IRS needs to look at the Freedom Alliance.  The Freedom

Alliance is engaged in partisan political activity in violation of its

status as a charitable organization.  They have been promoting Oliver

North‘s commentary, running these Freedom Cruises, where people like

Michael Steele and Newt Gingrich come on board. 

This is a C-3 organization, which means it‘s not supposed to be

involved in partisan activity.  So that‘s what we want the IRS to look at

there. 

SCHULTZ:  What is the next move here?  You‘ve filed your complaint. 

You made it known you don‘t agree with it.  Mr. Soltz, what do you want

veterans to do? 

SOLTZ:  I want all Americans not to give money to Sean Hannity‘s

concerts.  I think that‘s the first thing.  They‘re not giving the money to

the fallen troops and family members.  I think there‘s a lot of other good

organizations, like the Wounded Warrior project, that help our troops that

have been wounded do activities.  I think that‘s the first thing. 

You know, we eagerly await the results of the investigation. 

SCHULTZ:  Thanks, Jon.  Thanks, Melanie.  Thanks for being on tonight. 

We‘ll have more on the story as it develops.

Now let‘s turn to our panel for some rapid fire response.  Senator

Lindsey Graham continued the Republican war on the nonpartisan

Congressional Budget Office on “Meet the Press” on Sunday.  He says calling

health care reform a deficit reducer is, quote, “a flat-out lie.”

Sarah Palin accused the media of lying about the Tea Party protesters

harassing Democratic lawmakers who voted for the health care bill.  She

must not be watching the news. 

And the RNC Chairman Michael Steele is under fire again after the

organization reported drooping nearly 2,000 dollars at a bondage theme

strip club in Hollywood. 

For more on that, let‘s go to nationally syndicated radio talk show

host Bill Press and former Bush/Cheney aide and Republican strategist Ron

Christie. 

All right, let‘s get to the smut early on here.  What is going on with

this bondage club?  Bill Press, does the—the RNC is now saying they‘re

going to investigate internally.  We should point out it was not Michael

Steele there.  It was somebody else.  This is where allegedly their money

is going. 

BILL PRESS, RADIO TALK SHOW HOST:  Yes, I just want to point out, the

RNC did pay these expenses.  Now they‘re asking for the money back.  Ed,

two things.  One, as a former resident, a longtime resident of West

Hollywood, I want to thank the RNC for helping the local economy, going out

there and helping out the strip club. 

The other thing is, I have to tell you, if I were a Republican, I

would want to strip Michael Steele of his job.  As a Democrat, I‘m OK with

this.  My feeling is every dollar spent at a strip club is one dollar

that‘s not spent attacking Democratic candidates and running campaigns

against them. 

SCHULTZ:  Ron Christie, is this trouble for Mr. Steele? 

RON CHRISTIE, REPUBLICAN STRATEGIST:  I think it is, Ed.  I‘m getting

really sick and tired of the slow drips coming out of the RNC.  First,

there‘s a memo that has some very disparaging things about President Obama. 

Now you hear something about a strip club and spokesmen come out and say

it‘s a big misunderstanding. 

These people need to raise money and recruit candidates to run for

office.  I‘m getting sick and tired of these distractions coming out of the

RNC.  I just wonder whether or not this might be the third strike for Mr.

Steele.  I‘m not going to call him to resign just yet.  But I‘m just about

a millimeter away from going on the airwaves.  I‘ll probably do it on THE

ED SHOW, Ed, saying it‘s time for him to go. 

SCHULTZ:  I‘m not out to get anybody.  This was rather unusual

spending.  I know he was talking about getting a jet to be cruising all

over the place as well. 

PRESS:  Good for you, Ron. 

SCHULTZ:  Well, you know, when you give 25 dollars, you want to make

sure it doesn‘t get a G-String, if you know what I mean.  All right.  The

next thing is the Tea Party.  Ron, I want to ask you, why is Sarah Palin

attacking the media when there‘s videotape of a black congressman being

spit on? 

CHRISTIE:  I haven‘t seen that videotape.  I can certainly say that

during the Bush administration there were several very, very violent

protests.  There were several very disturbing protests launched against the

president.  Of course, you didn‘t see anything about that in the mainstream

media. 

In this particular case, with the health care bill, now there are

allegedly individuals who said some very disturbing things.  I don‘t

condone that language or that type of activity.  It seems to me there‘s a

double standard in the way it‘s being reported. 

SCHULTZ:  What about that, Bill? 

PRESS:  First of all, can we all agree this kind of language, these

kinds of actions are wrong?  I don‘t care whether they come from the left

or the right.  The other thing is, look, John Lewis wasn‘t lying when he

said what happened to him.  Barney Frank wasn‘t lying.  The Capitol Police

were not lying when they investigated these and gave ten members—at

least ten members extra security.  Who do you believe?  The FBI, Capitol

Police or Sarah Palin? 

SCHULTZ:  Or the people that called Bart Stupak at home?  You want to

believe?  The tape doesn‘t lie.  All right.  Final point, Lindsey Graham—

Bill, you first.  Is the CBO lying about the health care numbers? 

PRESS:  Well, again, look, Lindsey Graham is in trouble with the Tea

Partiers in South Carolina.  He has to say crazy stuff to save his

political butt.  Again, whom do you trust?  The CBO says health care reform

is going to save 143 billion the first ten years, 1.2 trillion the second

ten years.  Lindsey Graham says it‘s a ponzi scheme.  I trust the CBO. 

SCHULTZ:  What do you think, Ron, ponzi scheme?  Lying about the

numbers? 

CHRISTIE:  They are lying about the numbers.  Also, if you look at the

CBO, the CBO didn‘t have the opportunity to fully score the reconciliation

bill.  What they‘re also not telling you about—Ed, you and I went at

this last week -- 500 billion dollars taken out of Medicare, in addition to

the fact that 249 billion dollars that‘s going to be put back for the doc

fix.  These numbers aren‘t real.  These numbers are illusory. 

The Democrats knew it.  They wanted to get their bill done.  They got

their bill accomplished.  I think the American people are the great losers

for the fiscal train wreck this is going to unleash. 

SCHULTZ:  Let‘s three of us remember this moment now.  We have a

defining moment I think between the two parties on this health care bill. 

It is monumental legislation in the scheme of how this country works. 

Something like this hasn‘t been done for 50 years.  We have got two parties

who just absolutely do not agree on the numbers.  Bill? 

PRESS:  Ed, one other quick thing, let‘s keep this in mind, right? 

This bill is paid for, unlike the tax cuts, unlike the war, unlike the

Medicare prescription program, all of which Lindsey graham voted for. 

SCHULTZ:  Not paid for. 

CHRISTIE:  I love Bill Press, but this is not paid for.  This isn‘t

paid for.  There are so many accounting gimmicks the Democrats used to push

this through.  CBO has not fully scored this.  Lindsey Graham is right. 

This is a gimmick.  As I said at the outset, the American taxpayers are the

ones who are going to lose here. 

SCHULTZ:  Bill Press, Ron Christie—Ron, the gimmick is we‘re just

going to tax you a little more.

PRESS:  He can afford it. 

CHRISTIE:  Hardly. 

SCHULTZ:  Thanks, Fellows.

Coming up, I‘ve been a player and I‘ve been a coach.  I know

competitive sports can bring out, I guess you could say, kind of the beast

in a man every now and then, in the heat of the moment.  But when your last

name is play fair and you act like this, doesn‘t fit the name tag, does it? 

That‘s in the playbook next.  Stay with us.

(COMMERCIAL BREAK)

SCHULTZ:  In my playbook tonight, all the anti-census rhetoric coming

from the righties in Congress could end up costing Republicans

Congressional seats.  Minnesota‘s Michele Bachmann kicked things off last

summer by connecting the census to the Japanese internment camps during

World War II. 

(BEGIN VIDEO CLIP)

REP. MICHELE BACHMANN ®, MINNESOTA:  Take this into consideration;

if we look at American history, between 1942 and 1947, the data that was

collected by the Census Bureau was handed over to the FBI and other

organizations at the request of President Roosevelt.  That‘s how the

Japanese were rounded up and put into the internment camps. 

(END VIDEO CLIP)

SCHULTZ:  Oh.  That‘s one of the all-time greats, isn‘t it? 

Bachmann‘s righty colleagues down in Texas, including Ron Paul, have also

slammed the census.  And their state could end up feeling the effects. 

Texas could add four new congressional districts, and get four more

electoral college votes from the census.  But as of Friday, only 27 percent

of Texas households has sent in their forms.  That‘s seven percent lower

than the national average. 

And some of the state‘s most Republican counties have the lowest

return rates.  Culberson County at 11 percent.  Briscoe County is at eight

percent.  King County is only at five percent. 

For more on what this really means, let me bring in associate editor

and columnist for “The Hill,” A.B. Stoddard.  And also with us tonight is

political analyst Julian Phillips. 

Mr. Phillips, I want to ask you—I mean, the census is part of the

voting bloc in this country.  It‘s all part of voter registration.  Are the

Republicans, with their rhetoric, shooting themselves in the foot? 

JULIAN PHILLIPS, POLITICAL ANALYST:  I don‘t know if they‘re shooting

themselves in the foot or not, but I think once those lines of those

districts are redrawn by 2011, there‘s going to be a rude awakening on both

sides of the border, in terms of both Republicans and Democrats.  As you

mentioned, Texas stands to gain four seats, Arizona two. 

Eight states stand to gain seats.  About 11 will lose.  All the states

that will gain will be in the south.  That‘s going to cause, I think, a

true debate amongst politicians where the issues will not just be black and

white, but will be gray there.  For those folks who may—those

congressmen and senators who may have been for, say, immigration, or

against it, based on the new numbers, the new census figures, they may have

to rethink what they‘re going to say and how they‘re going to vote. 

SCHULTZ:  A.B. Stoddard, why don‘t both parties go all out and say,

get this thing done, it‘s to the advantage of everybody? 

A.B. STODDARD, “THE HILL”:  It‘s interesting you say that, Ed, because

on the Democratic side, I think they‘re going to get their demographics

out.  I think they‘re going to get the census forms returned.  I read today

that Pepsi is partnering with one of the largest Latina Internet companies

to make sure that U.S. Hispanics fill in their forms and submit them. 

Obviously, the Republican party will stand to lose if anti-government

conservatives across this country are so afraid of the intrusive process of

filling out census forms that they are not counted, and the Republican

party ends up losing representation. 

This is a an incredible irony and it really speaks so much—we‘ve

talked so much, Ed—I know have bored you with this 00 about how divided

the Democratic party is. 

SCHULTZ:  Not at all. 

STODDARD:  You look over on the Republican side and they are as well. 

If they‘re going to have this huge faction of people who so mistrust the

government and worry that this process—that standing up to be counted in

the census is an invasion of your privacy, and that the Swine Flu Vaccine

was designed to turn you into robot or something—I mean, these people

are going to withdraw really in the end.  The Republican party is going to

be much more divided than the Democrats are. 

PHILLIPS:  I think both Republicans and Democrats really basically

like the status quo.  You‘re not seeing any promotion by Republicans or

Democrats promoting the census.  They would like, basically, for things to

stay the way they are right now. 

SCHULTZ:  Well, Democrats have got more enthusiasm about this than the

Republicans and independents do, by 76 to 61 percent, in the most recent

polling on this, saying is the census very important for the country?  The

Democrats are sold on it.  They‘ve been through the gerrymandering of the

districts and they‘ve had enough of it.  They do want to get their people

out. 

It would seem to me that the independents, if they‘re truly

independents, they would recognize that there‘s real value to this. 

Mr. Phillips, I want to ask you, I was watching locally here the other

day in New York, and you made an interesting comment about Mr. Bloomberg. 

You think that he is going to run for the Senate?  I think we all know he

wants to be president.  What‘s your take on that? 

PHILLIPS:  Look, if you look at the tea leaves now, reading them, this

is pure speculation, but it makes a lot of sense.  After he won the

election this past year, he retains Howard Wolfson, big political guru, and

makes him deputy mayor.  Why would he do that if he didn‘t have any future

aspirations for running for an office? 

The key thing would be the Senate.  If he‘s going up against Kirsten

Gillibrand, who is largely unknown, and Bruce Blakeman, who is running on

the Republican ticket right now, he could win easily.  He can bankroll this

himself. 

I think, also, here in New York, although he‘s largely popular here,

the unions are looking at him right now, would not mind seeing him get out

of New York and run for the Senate. 

SCHULTZ:  A.B., What do you think about that? 

STODDARD:  I think there‘s been—for the fact that everyone likes to

say that Kirsten Gillibrand is such a weak candidate, there‘s been a lot of

impressive figures falling away.  After rumors that they‘re going to run

against her, we read within days they‘re not going to run against her.  I

think obviously if the mayor plans to mount a campaign against her, he

should come out soon and get the job done. 

He didn‘t do impressively in his last re-election as he wanted to.  He

spent a lot of money.  Obviously, he could self-finance and probably do

pretty well.  I think the time is of the essence. 

PHILLIPS:  His popularity is still soaring here in New York, despite

his squeak by.  But he has a 61 percent approval rate.  I think that will

bode well for voters upstate.  Term limits certainly will not be a concern

to upstate voters as much as it would be down here in New York City. 

SCHULTZ:  Julian Phillips, A.B. Stoddard, great to have you with us

tonight.  Thank you.

One more page in my playbook tonight, the coach of the minor league

Canadian hockey team treated fans and a half a million Youtube fans to an

epic temper tantrum during the game over the weekend.  After one of his

players got a five-minute penalty for charging the opposing team‘s goalie,

the coach screamed at the referee, tore off his jacket, and smashed a

couple of hockey sticks.  He ended up getting kicked out of the game.  He

paid a fine, but he will be back behind the bench for tonight‘s game. 

My commentary on that, that‘s hockey. 

Coming up, domestic terrorism is on the rise.  A Christian militia

group planned to use weapons of mass destruction at police funerals?  More

shocking details in just a moment.  You‘re watching THE ED SHOW on MSNBC.

(COMMERCIAL BREAK)

SCHULTZ:  Finally tonight on THE ED SHOW, nine members of a Christian

militia group have been indicted on charges connected to an alleged plot to

kill police officers and spark a war against the United States government. 

The FBI arrested eight of them this weekend in raids in Michigan, Ohio, and

Indiana.  The ninth is still at large.  The defendants have been accused of

plotting to use weapons of mass destruction, improvised explosive devices

and other weapons to start an uprising against the federal government. 

NBC‘s Pete Williams joins us tonight.  Pete, this is good old-

fashioned law enforcement work, is it not? 

PETE WILLIAMS, NBC NEWS CORRESPONDENT:  It very much is, because we

believe that the FBI had actually penetrated this group, and was well aware

of its movements and plans for at least the part year and a half.  So the

government basically held the on/off switch and could shut this group any

time they thought it was about to go operational, which is, in fact, what

happened here. 

There was a belief this group planned, as the court documents say,

some sort of a reconnaissance mission.  We believe April 24th was the date. 

There‘s a date on the group‘s website that says there‘s a training mission

April 24th.  And they were concerned that if the group actually went ahead

and tried to do this, that people in the public might get hurt, because the

group had said anyone that didn‘t obey their orders could be shot. 

So the FBI let this play out as long as they thought they needed to,

and then made the arrests over the weekend, moving very quickly with

decisive force, because they didn‘t know what kind of resistance this group

might put up.  As it turns out, there wasn‘t much. 

SCHULTZ:  Are the leaders in custody tonight? 

WILLIAMS:  The leader of this group is David Stone from southern

Michigan.  He‘s in custody.  His wife is also in custody and one of their

two sons.  The other son is still at large. 

SCHULTZ:  OK.  Now it‘s interesting you said that the FBI infiltrated. 

Were they actually doing drills with them or was this the Patriot Act at

work? 

WILLIAMS:  Well, I suppose the Patriot Act—ironically, because some

people refer to these groups as patriot or militia-style groups.  I imagine

the Patriot Act very much played a role here.  There were unquestionably

wiretaps in addition to the government‘s own surveillance.  So they really

had tabs on this group, were following their movements, following their

training.  This group at one point wanted to make a trip and try to meet

with somebody they thought could give them explosives.  As it turned out,

they didn‘t get the explosives. 

You‘re looking at sketches of them today.  Seven of the eight who were

arrested today appeared in court.  They‘ll be back on Wednesday for a

detention hearing, and we‘ll see where it goes from there, in terms of

whether they get out on bail. 

SCHULTZ:  On their website, they said they were preparing for the end

times, defending themselves against the anti-Christ. 

WILLIAMS:  Yes.  That‘s right.  They said they believe that the anti-

Christ was coming, that they had to be prepared to defend themselves.  What

isn‘t so clear is how did they get from that to believing very strongly in

an anti-government group, and believing that local police was the way to

start it? 

According to prosecutors, what they wanted to do was attack police,

hoping that that would then spark some kind of anti-government revolt.  And

they apparently discussed a number of ways to attack police, calling 911,

going to the home of the law enforcement person, or this very dramatic plot

to kill a police officer and then attack other officers at that officer‘s

funeral. 

SCHULTZ:  NBC‘s Pete Williams with us tonight.  Thanks, Pete.

WILLIAMS:  You bet.

SCHULTZ:  Tonight, in our text survey question, I asked would you be

willing to pay Internet sales taxes to keep your state from going broke? 

Seventy five percent of you said yes; 25 percent 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 my radio website at WeGotEd.com.  Chris Matthews

and “HARDBALL” is next.  We‘ll see you tomorrow night.

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

E UPDATED.

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