updated 11/23/2010 12:06:16 PM ET 2010-11-23T17:06:16

Guest Host: Chris Hayes

Guests: Dean Baker, Sen. Bernie Sanders, Roxanne Brown, Jacob Hacker, Adam

Serwer

CHRIS HAYES, GUEST HOST:  Good evening, Keith.  Thank you so much for the toss.

And thank you at home for staying with us for the next hour.

           

We begin tonight with Republicans sitting behind the wheel, their foot firmly tied to the gas pedal racing towards a high, steep cliff.  We begin tonight with an entire political party engaged a dramatic high stakes game of chicken.  You know the game chicken, right?

There are a few different ways to play chicken, but here‘s essentially how it works—actually, you know what, I‘m on the TV.  So, instead of telling you how it works.  Why don‘t I just show you?

In the great movie “Rebel Without a Cause” with James Dean, there is this iconic scene, Dean‘s character plays chicken with his nemesis in town.  Check this out.

(BEGIN MOVIE CLIP, REBEL WITHOUT A CAUSE)

JAMES DEAN, ACTOR:  She signals.  We head for the edge and the first man who jumps is a chicken, all right?

(END MOVIE CLIP)

HAYES:  Darn leather jacket.

As a general rule, you have to be sort of crazy to play chicken.  In fact, typically, it‘s the crazier person, the one who cares less about their own safety and security that wins, no matter the dire consequences of winning.  At its core, chicken is a game of principle and commitment and not backing down no matter what peril lies ahead.  That‘s how you win a game of chicken.

There‘s also apparently—that‘s also apparently the single unifying political principle for the Republican Party right now.  The Republican Party‘s approach to governing at this point is that they‘re in the car, with their foot pressed to the gas, even with a giant cliff looming in the distance.

The current game of chicken involves two vitally important, careful (ph) or end-the-world as we know issues right now.  The first one is START, the nuclear arms treaty that President Obama has already agreed to with Russia and he just needs the U.S. Senate to ratify.  It‘s an agreement for both countries to reduce their nuclear arsenals and will allow inspectors to be on the ground in both countries to make sure that‘s actually happening.

START has stalled in the U.S. Senate, thanks to one man, Republican Senator Jon Kyl of Arizona.  After Republicans delayed a vote on START twice this year, after Senator Kyl was wooed by the White House for months, he now says a vote shouldn‘t happen until next year.

This weekend, Senator Kyl‘s obstruction on this issue earned him and Senate Republicans the rebuke of leaders around the world.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  Unprompted, I have received overwhelming support from our allies here that START, the new START treaty, is a critical component to U.S. and European security.  And they have urged, both privately and publicly, that this gets done.  Nobody is going to score points in the 2012 election around this issue.  But it‘s something that we should be doing because it helps keep America safe.

(END VIDEO CLIP)

HAYES:  Despite that, Jon Kyl and Senate Republicans are now saying “no” to any vote on START this year.

Now, to be clear, what we are talking about is quite literally the most dangerous thing on the earth.  The idea behind this treaty is to halt the proliferation of nuclear weapons, to be able to monitor the whereabouts of loose nuclear material so it doesn‘t wind up in the hands of people we‘d rather not have, loose nuclear material.  That‘s about as important as it gets.

It‘s something that used to be a bipartisan thing.  And yet,

Republicans staring at that cliff are apparently content to just say “no” -

to play chicken with American‘s national security until whatever demands they have are met.

           

Republicans are also playing chicken right now with America‘s economic security.  At some point early next year, Congress will have to decide whether or not to raise this country‘s debt ceiling.  A debt ceiling is essentially the amount of money the United States can borrow in order to operate.  The debt ceiling is a very big deal.

Everyone understands that given the recession, the government is going to have to keep borrowing money to get us through the downturn.  And in order to that, Congress has to raise the debt ceiling.  It should be more or less a no-brainer—because if you don‘t raise the debt ceiling, you are basically threatening to plunge the federal government into something that looks like bankruptcy.

But earlier this year, Democrats had to raise the debt ceiling and they did so with precisely zero votes from Republicans in the Senate and precisely zero votes from Republicans in the House.  Not only did Republicans in Congress vote against raising the debt ceiling, but lots of Republicans running for Congress got elected by bashing Democrats for exactly that vote.

(BEGIN VIDEO CLIP)

NARRATOR:  Salazar‘s reckless vote to increase the debt limit to a staggering $14 trillion, America may have to borrow billions more from China and the Middle East to pay it off.

(END VIDEO CLIP)

HAYES:  Right now, Republicans in Congress, especially those who just got voted in are pledging to stand on principle in this issue.  America‘s debt has gotten out of control, raising this debt ceiling is the wrong thing to do.

An increasing number of Republicans are now promising to vote against raising the debt ceiling when it comes up for a vote next year.

(BEGIN VIDEO CLIPS)

SEN.-ELECT MIKE LEE ®, UTAH:  I am going to vote against raising the national debt ceiling.  We simply can‘t continue to mortgage the future of our unborn children and grandchildren.  It‘s not fair.  It‘s not American.  It‘s is a form of taxation without representation.

REP.-ELECT JEFF DENHAM ®, CALIFORNIA:  I don‘t see this next Congress raising the debt ceiling.  But it‘s certainly a challenge that we‘re going to have to deal with.  I mean, there‘s lot of things in play during this lame duck session.

UNIDENTIFIED MALE:  So, you think that‘s something that you will probably vote against?

DENHAM:  Absolutely.  Yes.

GEORGE STEPHANOPOULOS, ABC NEWS:  Will you filibuster any attempt to raise the debt limit?

SEN.-ELECT RAND PAUL ®, KENTUCY:  I think exactly what tactics we‘ll use will have to be discussed and I do plan on working with others, to see what the best strategy is.  You need some people with principle in Washington who will stand up and say, enough is enough.

(END VIDEO CLIPS)

HAYES:  In addition to incoming Republican Senators Rand Paul and Mike Lee and incoming Republican Congressman Jeff Denham, a number of other incoming Republican members of Congress as well as current Republican members of Congress have also been making noises about opposing any increase in the debt ceiling.

Speaking for himself and his fellow Tea Partiers, Congressman-elect Bill Johnson of Ohio told the “Wall Street Journal,” quote, most of us agreed that to increase the limit would be a betrayal of what we told voters we would do.”

If these Republicans actually follow through on their threat to vote against raising the debt ceilings, the consequences could be catastrophic for the country.  We‘re not just talking about a government shutdown, which would be bad enough.  We also run a real risk of precipitating a genuine global financial panic.

That‘s how this particular game of chicken ends.  That‘s what the car flying off the cliff looks like.

On these two major policy areas, one having to do with our national economy and one having to do with foreign policy—Republicans right now are behaving like adolescent nihilists willing to drive the family‘s Country Squire station wagon off the cliff in some negotiations with their parents—not people interested in the well-being of this country.  The approach appears to be: turn the headlights on, slam on the gas, and see what happens.

Joining us now, economist and co-director of the Center for Economic and Policy Research, Dean Baker.

Mr. Baker, it‘s very nice to see you.

DEAN BAKER, CENTER FOR ECONOMIC AND POLICY RESEARCH:  Thanks for having me on.

HAYES:  Well, Dean, first off, just to ground this conversation, the kind of embedded, implicit assumption behind railing against the debt ceiling is that debt is bad.  It‘s just debt is bad.  And therefore, we should not have more of it.  How accurate an argument is that?

BAKER:  Well, it‘s close to crazy.  I mean, it‘s unfortunate that there have been very few people out there really making the sort of obvious point that right now, debt is keeping the economy going.

The simple story was we had an economic collapse associated with the collapse of an $8 trillion housing bubble that led to the loss at about $1.2 trillion in annual demand, about half of that from construction and about half of that consumption.  We lost $8 trillion in housing.  People stopped spending because they lost the money.

And in order to upset that, we got the deficits.  And if we didn‘t have the deficits, we‘d have lower growth and more unemployment.  So, the people who were upset about deficits today, what they are saying is they want more Americans out of work.  They may not know that.  I don‘t know.  But that‘s what, in effect, they are saying.

HAYES:  OK.  So, let‘s game this out.  And you and I discuss this before.  If you—if they vote against raising the debt ceiling, game out for me what happens?  I know it‘s not necessarily the car going off the cliff right away.  But how much road do we have left after they vote against the debt ceiling?

BAKER:  Well, it‘s hard to say exactly.  I mean, there is some sort of shufflings that the president and treasury secretary will do.  He will be the immediate one.

Secretary Geithner will be doing the shuffling, doing different accounts, trying to extend things.  Then, presumably, the president will be deciding that there are some services that could be done without, you know, nonessential services.  They will be furloughing people.

But then at some point is that, you know, 20 days, 30 days, it‘s hard to say.  At some point, you have bills, Social Security checks, Medicare checks and, of course, you know, interest on the debt or debt being rolled over, that you‘re not in a position to pay.  The money is not in the bank.

So, that‘s where you really talk about a financial crisis.  The U.S.  is suddenly in a situation it can‘t pay its bills.

HAYES:  And it seems to me watching this—I mean, if you look at the way the global financial markets have reacted to problems with sovereign debt and other countries obviously increase, and now in Ireland, the markets tend to be pretty panicky right now.  I mean, it just—it‘s sort of worrisome to me to imagine this kind of inducing this, precipitating a crisis like that, given the fact that there‘s all this kind of poorly understood risk floating around international financial markets.

BAKER:  It‘s not a really clever thing to do.  I mean, it wouldn‘t be clever in the best of times.  And we‘re clearly not in the best of times.

So, where that gets you, what sort of situation develops in financial markets, it‘s very hard to say, you know?  You know, we are sort of panics of September, October of 2008.  But still, there‘s a lot of unease.  You‘re mentioning the problems in Ireland and elsewhere in European.

So, it doesn‘t seem like the sort of thing you would really want to do, deliberately sort of thwart a financial crisis.

HAYES:  So, if we are talking about this game of chicken, and I‘ll get you out of here on this one, if we‘re talking about chicken, you know, Alan Simpson, who is in the president‘s fiscal commission, is saying that he‘s looking forward to the bloodbath, his words, over this showdown, over the debt ceiling limit.  And, obviously, there‘s a political objective there.

What is there?  What do the Republicans and folks, like Alan Simpson, hope comes out of a showdown over a debt ceiling limit?

BAKER:  Well, they want President Obama to buckle.  They want him to give up on key programs like Social Security and Medicare.  I should point out—at the end of the day, their boys, the Wall Street boys, are the ones who will have the most to lose, because at the end of the day, the economy is still going to be sitting here.  What may not be is Goldman Sachs—I must said Lehman Brothers, they‘re already gone—but Goldman Sachs, Morgan Stanley, and the other Wall Street banks—at the end of the day, those guys stand td most to lose.

So, if President Obama just stands tough, I promise you, the Wall Street boys will be screaming at the Republicans.  And I have a feeling that they‘re going to jump out of the car.

HAYES:  Dean Baker, economist and co-director of the Center for Economic and Policy Research—thanks so much for your time.  I really appreciate it.

BAKER:  Thanks for having me on, Chris.

HAYES:  Joining us now is independent senator, Bernie Sanders of Vermont.  He‘s a member of the Senate Budget Committee.

Senator Sanders, thanks so much for joining us.

SEN. BERNIE SANDERS (I), VERMONT:  Good to be with you, Chris.

HAYES:  Senator Sanders, you have exactly zero Republicans in the Senate who joined the Democrats and yourself raising the debt ceiling back in January.  And we‘re going to see this vote come up again.  What is your sense of what the sort of temperature of the caucus is on the other side of the aisle about this vote?  Are we going to see a showdown over this?

SANDERS:  Well, whether it‘s a showdown over that or a showdown over something else, there is going to be a showdown.  And I think the Democrats and the Democratic leadership have to pick the place where that fight is going to occur.

And in my view, we should stand firm, not yield an inch in saying that when we have a growing gap between the very rich and everybody else and we have a $13 trillion national debt, we are not going to give one penny more in tax breaks to millionaires and billionaires.  That‘s insane.

We are going to use some of that money to invest in infrastructure.  We are going to create jobs.  We should use some of that money to lower the national debt.

But we can‘t surrender on that issue.  It will be fatal in terms of the good of the country as well as politically.  So, the Democrats, the president have got to hang tough.

HAYES:  I want to talk about that, what that approach of “hang tough”

means.  I mean, we‘ve just set up this sort of chicken metaphor that you‘re

you know, that Republicans, Democrats are racing at each other in the cars.  And it‘s sort of who‘s worst first.  Republicans have demonstrated this kind of implacable opposition.  And also, it seems a sort of disregard for the consequences.

           

How do you—what is the strategy for dealing with that when—if you feel like the other side credibly is sort of willing to sort of blow things up, particularly around things like the START treaty now or the debt ceiling limit down the road?

SANDERS:  Well, I think that the strategy has got to be—is to go out to the American people and organize them and say that, here you have a Republican Party that wants or is prepared to blow this country up in the sense of not extending the debt ceiling in order to protect the wealthiest people in this country.

Chris, this nation has enormous problems.  We have got to grow jobs and we have to lower the deficit.  There are ways that you can do that in a fair and progressive way.

And our job—to answer your question in terms of strategy—is go out to ordinary people, ask them whether we want to cut Social Security by 20 percent, ask the young people of this country whether they want their indebtedness as they go into college to go even higher, ask the veterans whether they should be paying more to get V.A. health care, ask the middle class whether we want to get rid of the mortgage home deduction or we want to raise other types of taxes that hurt the middle class.

I think we have got to draw a line.  We got to rally the troops.  And if we do that, I think we can expose the Republicans for what they are.  And that is a group of people representing the wealthiest folks in this country who could care less about the middle class or the most vulnerable people.

HAYES:  And I want to get you out here on this question, which is about the START Treaty, which is another place in which we are seeing a similar approach from Republicans.  And there it seems a more difficult—you have a more difficult problem in so far as—the START Treaty is probably not front in mind for most folks right now who are struggling through this economy.

How do you bring measure to bear there on the Republicans across the aisle to get this thing ratified?  Because if it doesn‘t happen now, it‘s not looking good in the next Congress.

SANDERS:  Well, I think when you have three former Republican secretaries of state telling the Republican Party that it‘s imperative that we pass the START Treaty, when now is the time when we don‘t want another Cold War with Russia.  We want to work with Russia.  When everybody should be very concerned about nuclear weapons and the need to cut back on nuclear weapons, the need to make sure there are not nuclear weapons out there falling into the hands of terrorists—it is imperative that the Republicans come on board with this.

HAYES:  Independent Senator Bernie Sanders of Vermont—thank you so much for your time tonight.  Have a great holiday this week.

SANDERS:  Thank you.  You, too.

HAYES:  Republicans frequently talk about choices our governor makes now that will affect our kids and the future.  What about our children and grandchildren?  Amazingly, these conscientious people are now nearly unanimously agreed that we shouldn‘t bother with the whole climate change thing, because while our children and grandchildren shouldn‘t be burdened by debt, it won‘t be so bad if they all melt.  That story is next.

(COMMERCIAL BREAK)

HAYES:  Still ahead

(BEGIN VIDEO CLIP)

BART SIMPSON:  Then I have these dreams and my whole family was just cartoon characters, and that our successful has led to some crazy propaganda network called FOX News.

(END VIDEO CLIP)

HAYES:  “Simpsons” to FOX: eat my shorts.

(COMMERCIAL BREAK)

HAYES:  If there is one thing everyone can agree on in Washington these days, it‘s the importance of grandchildren.

(BEGIN VIDEO CLIPS)

GOV. BOBBY JINDAL ®, LOUISIANA:  We don‘t want to be the first generation that leaves fewer opportunities for our children and grandchildren that we inherited from our parents.

SEN. JOHN MCCAIN ®, ARIZONA:  We are worried about our children and our grandchildren, and we can‘t keep on going like we are.

PAUL:  We are concerned about passing that debt on to our kids and our grandkids.

LEE:  We simply can‘t continue to mortgage the future of our unborn children and grandchildren.

UNIDENTIFIED MALE:  People don‘t want to have—carry or put this huge debt on their children or their grandchildren‘s shoulders.

GOV. HALEY BARBOUR ®, MISSISSIPPI:  Trillions of dollars or more debt loaded on our children and grandchildren.

UNIDENTIFIED MALE:  The debt burden on children and grandchildren.

REP. MIKE PENCE ®, INDIANA:  A mountain range of debt we are filing on our children and grandchildren.

(END VIDEO CLIPS)

HAYES:  The as-yet unborn grandchildren of America are perhaps the best represented political group in this great nation of ours, at least rhetorically.  So, it‘s a little funny, given our great concern about America‘s grandchildren and the world they will inherit that when all this grandchildren rhetoric is buzzing around the capital, particularly boisterous and vociferous as you just saw on the Republican side of the aisle that the entire House GOP leadership team would have signed on to an Americans for Prosperity No Climate Tax Pledge.

According to the blog for the group, Americans for Prosperity: More than 525 elected officials have now signed on to this pledge to oppose—well, apparently, any sort of climate tax.

What that means in practice is this: we‘re not even going to try to stop the planet from warming.  We don‘t even care if we give our grandchildren a hotter planet—a planet with far more unpredictable and disastrous weather events, a planet with droughts and higher sea levels, a planet with a global unrest and refugees, and resource wars across the globe.  All of these things, future grandchildren of America, we give to you.

Look, I‘ve been sitting in Washington watching this hysteria over long-run actuarial projections about the deficit with my mouth agape.  There is a problem down the road with, for example, the ballooning costs of health care in this country.  We‘re going to have to deal with it.  We already tried to a little bit with the health care reform bill.  There‘s no question about.

But when you‘re talking about problems that involve moving money around and cutting taxes, increasing spending—those are difficult problems.  But for one day to the next, you can solve those problems, you can put money into an account, you can fix money problems.  It‘s been done before.

A balanced budget deal is struck during the Clinton presidency.  When Social Security was in crisis during the Reagan years, the deal was to save it.  These things have been done before.  Disaster has been averted.

Physics is another thing entirely.  You can‘t just wake up one day, survey the U.S., see that we can no longer grow corn in Iowa because the summers are to hot there and just vacuum the carbon out of the air.

So, if you want to talk about grandchildren, check it out.  Right now, the leaders of one party have completely abrogated the moral responsibility to future generations.  At the same time, they are beating their chests with grand and martyred nobility about all they‘re doing for their grandchildren.

Joining us is the assistant legislative director of United Steel Workers, Roxanne Brown, the steelworkers point person on climate change.

Roxy, thanks so much for joining me.

ROXANNE BROWN, UNITED STEELWORKERS LEGISLATION DIR.:  Thanks for having me, Chris.

HAYES:  OK.  So, first of all, I think you got an interesting perspective.  You‘re from the steel workers.  And why is it that steelworkers have been so ardent to support of change climate legislation, including a tax on carbon?  It seems a bit antithetical?

BROWN:  You know, Chris, our union‘s concern around issues involving the environment really stems from our desire to have safer working conditions for our members.  So, you know, this is something that we‘ve been concerned with, you know, since the ‘60s—something that we‘ve been working on for over 40 years.

And in 1990, we identified global warming as the most pressing challenge facing our future in a document actually entitled, “Our Children‘s World.”  So, a lot of the rhetoric that you talked about in the segment just before this is actually not rhetoric to us.  It‘s something that we are seriously trying to work to attain a cleaner, sustainable environment for our current members and workers, but also their future children and our future grandchildren.

HAYES:  And even the grandchildren.

BROWN:  Absolutely.

HAYES:  So, let me ask you, I know you‘ve been—you‘ve done a lot of work on the Hill around the climate change legislation that was there.  First of all, with this pledge that‘s been signed by the House leadership, is hair any meaningful climate change without a tax on carbon, without a price on carbon?

BROWN:  You know, yes.  I think, you know, the reality is we are going to into a very different Congress in the 112th Congress that begins in January.  And will we see a comprehensive climate bill?  Chances are, you know, no, we won‘t see that.  But, I think we will see things or that we can see things that are seen as bites at the apple.

So, a strong renewable electricity standard is one thing that can be real and something that actually can do something great in terms of reducing our greenhouse gas emissions and creating jobs.  Programs like Building Star and Home Star and policies that encourage industrial energy efficiency are all things that have strong bipartisan support in Washington and can be done in this Congress.

HAYES:  The Republican argument, the big argument they martial out, is that this is a jobs‘ killer, that it‘s going to be for business.  Policy-wise, I wonder how you answer that.  I mean, presumably, something that puts steelworkers out of business would be bad, right?  So, you guys must have a perspective on this that doesn‘t see it that way.

BROWN:  You know, this is a very old argument for us in the steel workers.  Like I said, this is something we‘ve been dealing with for over 40 years, you know?  We were very key players in the shaping of the Clean Air Act and a series of toxic policies.  And this is something that we‘ve been hearing for a long time from the business community.  That all these policies are jobs killers.

And we‘ve, in fact, seen the opposite.  And, you know, we strongly believe that clean energy policy, that climate policy, can, in fact, drive investment, development and deployment of these technologies that spurs job creation, job retention.

And the steelworkers, we often talk about the fact that a lot of the jobs we‘re talking about are jobs that already exist right now.  There are 8,000 component parts in a wind turbine—the steel plates, the cells, the gears—all of those parts are being made right now by some of our members around the country for different applications, like defense and automotive.

So, you know, there‘s no reason that we can‘t do the same thing for those clean energy technologies that we‘re hoping to see grow in the United States.

HAYES:  Roxy Brown is the assistant legislative director for the United Steelworkers—thanks so much for joining me.  You are—

BROWN:  Thanks, Chris.

HAYES:  -- ardently programmed child.

BROWN:  Thank, Chris.  Bye-bye.

HAYES:  So, everyone is completely freaked out about the new TSA body scanning and pat down stuff at the airport.  Ands I get it, the junk.  I‘m with you.

But the backlash against the TSA has in the last 72 hours begotten backlash, backlash in certain quarters, including mine.  The “Junction Debunktion” is coming up.

(COMMERCIAL BREAK)

HAYES:  Welcome back.  I‘m Chris Hayes.  Rachel has the night off. 

In coordinated raid this morning, FBI agents executed search warrants in Boston, New York and Connecticut at the offices of three hedge funds - Loch Capital Management, Level Global Investors and Diamondback Capital Management. 

The searches continued until early this evening as a part of a massive three-year investigation conducted by the Justice Department into what sources there are calling an insider trading ring that netted millions of dollars by trafficking in non-public information about companies. 

“The Wall Street Journal” reports that, quote, “The investigations, if they bear fruit, have the potential to expose a culture of pervasive insider trading in U.S. financial markets, including new ways non-public information is passed to traders through experts tied to specific industries or companies, federal authorities say.”

One of the firms being investigated, according to the journal, is our old friend, Goldman Sachs, which “Rolling Stone‘s” Matt Taibbi famously described as, quote, “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smelled like money.

Now, no one, as far as I know, is arguing that the alleged activities of insider trading in stocks had anything to do with the financial meltdown.  But the meltdown happened not in the old, sturdy world of stocks, but the new high-flying and increasingly arcane universe of derivatives, swaps and alphabet soup instruments.

But today‘s FBI actions provide a good occasion to marvel at just how little there has been in the way of criminal law enforcement in the wake of the largest financial crisis in 80 years.

$1 trillion of wealth vanished, leaving an economy hammered hard by the worst recession years, working people bearing the brunt, record bonus and profits on Wall Street.  And there‘s a ton of anecdotal evidence from lawsuit depositions to interviews I‘ve conducted for a book I‘m writing that much of what created the crisis was systemic deception and institutional corruption.

Yet, aside from Bernie Madoff, who had seen hardly a perp walk or a conviction.  So what gives?  Part of the problem is that actually bringing cases, financial fraud cases, is very difficult.  In 2009, the federal government tried but failed to convict two Bear Stearns hedge fund managers for security fraud.

Convincing 12 jurors beyond a reasonable of ill-intent while guiding them through a dizzying array of complicated numbers is an exceedingly tall order.  But part of it has to do with the mindset with which the governing and financial classes have come to view the crisis.

In the mind of those who run Wall Street in Washington, the entire financial meltdown was a kind of collective error in judgment.  Nothing untoward about it.  No bad faith, just fundamentally good faith mistake that a whole bunch of very wealthy and powerful firms and economists and politicians made. 

We thought the housing bubble would last forever.  We thought people would pay back the loans.  We thought these financial instruments were distributing and reducing risk, not exacerbating and multiplying it.  It turns out, we were wrong.  Mistakes happen.  Let‘s move on. 

There‘s another way of interpreting what happened, which is to view the entire chain of housing bubble, mortgage securitization as a giant Ponzi scheme, fundamentally predatory in nature and predicated on deception. 

In other words, you have to use the F-word - fraud.  Now, these two ways of thinking about what happened aren‘t mutually exclusive.  In fact, it is probably some combination of both. 

But I was struck when I read Michael Lewis‘ masterful account of the crisis, “The Big Short,” by a quote from one of the book‘s protagonists about exactly this good faith and bad faith distinction, “There were more morons than crooks,” short seller Vincent Daniel told Lewis, “but the crooks were higher up.”

The crooks were higher up.  Goes a long way towards explaining why we haven‘t seen more prosecution of the crooks.  If we want to avoid another crisis, that‘s going to have to change. 

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  Should the Bush tax cuts be extended in this lame duck? 

GEORGE W. BUSH, FORMER UNITED STATES PRESIDENT:  Well, here is the way I describe it.  If one is interested in job creation in the private sector, it is important to recognize that lower taxes enable the job creators, i.e., small businesses, to have more money in which to expand their work force.  And I would - yes, I think they ought to be extended. 

UNIDENTIFIED MALE:  Does the incentive model work if it pays more after tax to work, save, invest and take? 

BUSH:  Of course, it does.  My record shows that.  We had over 40 something months of consecutive job growth.  And I believe a lot of that had to do with the tax cuts. 

(END VIDEO CLIP)

HAYES:  That was, of course, President Bush in an interview with CNBC that aired earlier this evening.  A very familiar face, speaking very familiar words which altogether formed a very familiar George W. Bush argument that not only do tax cuts create jobs but evidence that they do is right there in the George W. Bush presidential record for all to see. 

Because for nearly all of the two terms Mr. Bush served as president, the Bush tax cuts were in effect.  The tax cuts Bush signed into law in 2001 were accelerated two years later when he signed a new act into law, one that ironically had the words “jobs” and “growth” in the title. 

These tax cuts were designed ostensibly to create jobs and President Bush, again, tonight, claims that his record shows that there was job growth during his administration.  And he is right. 

1.1 million jobs, according to the U.S. Department of Labor - 1.1 million jobs over nearly 8 years.  So George W. Bush isn‘t lying when he says that his administration created jobs in an economy featuring lower tax rates. 

What‘s not clear is the cause-and-effect relationship between the tax rates and the jobs.  Mr. Bush lowered tax rates from the era of President Clinton.  So by the lower tax rates - lower taxes create more jobs serum, Mr. Bush‘s administration saw more job creation than did Mr.  Clinton‘s. 

Actually, no, by a factor of 20 or so.  Wrong by 2000 percent.  The eight years of President Bill Clinton, the country netted 22.7 million jobs.  The policy argument for the Bush tax cuts is pretty weak tea, almost, I would say, nonexistent. 

It‘s far more illuminating to understand the Bush tax cuts not as an attempt at job creation, but as one among many examples of what political scientist, Jeffrey Winters, calls “the income defense industry.” 

Here‘s the average American household income after taxes from 1979 to 2006.  In those 27 years, the poorest 20 percent of American workers saw an 11 percent rise in average annual income. 

In comparison, what did the top one percent see?  A 256 percent bump from somewhere right below $400,000 to $1.2 million.  The hallmark feature of the American economy over the past three decades is rising in equality and a larger and larger share of national income being captured by a smaller and smaller group of extremely wealthy people. 

And in response to this, Bush, the entire GOP and some Democrats propose extending tax policies that exacerbate rather than mitigate the problem.  They want to pour fuel on the inequality fire.  That‘s the agenda. 

Given the recession, you can argue the middle class and low-income people need a tax break right.  But at the top of the income scale, that argument falls apart.  And yet, the zombie arguments for it never seem to die. 

Joining us now is Jacob Hacker, political science professor at Yale and co-author of an amazing new book on this topic.  It‘s called “Winner-Take-All Politics: How Washington Made the Rich Richer and Turned Its Back on the Middle Class.”  I really highly recommend it.  Jacob, it is great to see you. 

JACOB HACKER, POLITICAL SCIENCE PROFESSOR AND AUTHOR:  Thanks for having me on, Chris. 

HAYES:  OK.  Let‘s first talk about the post-tax inequality.  What role has tax policy in the Bush years and the Reagan years before that and throughout - what role that has played in the rising inequality that you and Pierson document in the book? 

HACKER:  Well, if you listen to some commentators, it doesn‘t play a

big role because they are mostly looking at the middle of the income

distribution for people making $50,000 or $100,000 a year, 

Changes in tax rates haven‘t really made a big difference.  But when you start looking at the top of the income distribution, at families with $1 million or $5 million or $25 million a year in income, then you are talking about huge, huge cuts in the effective taxes that they are paying, cuts that are so large that just recently, Warren Buffett complained that he was actually paying a higher tax rate than his secretary. 

So for the very top of the income distribution, my co-author, Paul Pierson, and I say that there have been these big economic smart bombs that have been delivering payloads of cash to carefully-selected wealthy recipients. 

And that‘s been the story, not just of the last 10 years, but really of the last 25 and 30 years. 

HAYES:  One of them, since you talk about a smart bomb, one of the smart bombs that I have been reporting on since I got to Washington is the hedge fund loophole.  There‘s a loophole for what‘s called carried interests.  And it means that hedge fund people can take home money and it gets taxed at a much lower rate than the wages that you would make from income.  Why did that thing refuse to die? 

HACKER:  Well, I mean, it really is perhaps the greatest illustration this is more than just good arguments at work. 

HAYES:  Yes.

HACKER:  Because everyone agrees that the carried interest provision is a huge boondoggle.  It‘s essentially a loophole in the tax code that allows these hedge managers to pay only 15 percent on their $100 million, $200 million, billion-dollar incomes. 

And the reason it survives is basically that neither party has had the courage to take it on because it is so complex most voters don‘t know anything about it.  And so four years after the Democrats capture Congress, vowing that they are going to take this on, it is still on the books. 

And it sort of happens to die in the Senate one time or in the House another time.  But you know, conveniently, it never makes it to the point where it is seriously challenged.  And I think that‘s very revealing about what Paul Pierson and I call “winner-take-all politics.”

HAYES:  And finally, I‘m going to give you the difficult task of distilling the argument you make in the book about how government actions have affected pre-tax inequality, what people make, not the tax rates, distilling that down to a TV-friendly 30 seconds and I can get you out of here. 

HACKER:  Well, that‘s a challenge, but I think I can make it very simple.  So we tend to think that, you know, government just redistributes income.  But we all know that government has a huge effect on pre-tax incomes. 

And if you want one illustration of that, I give you financial market deregulation.  These folks brought our economy to the brink of ruin and made millions because, basically, government opened up all these opportunities for gambling with other people‘s money. 

So these titans of finance weren‘t superstars that were surfing some new kind of global, technologically-rich economy.  They were basically people who were enabled by government policy to make millions at our expense. 

HAYES:  Yale professor, Jacob Hacker, doing an admirable job of that, co-author of “Winner-Take-All Politics,” which, again, I cannot recommend highly enough, I really appreciate you coming on the show. 

HACKER:  Thanks for having me on, Chris.

HAYES:  Coming up on “THE LAST WORD,” hip-hop entrepreneur, Russell Simmons.  Don‘t miss that. 

And on this show, “The Simpsons” versus “Fox News.”  Excellent.

(COMMERCIAL BREAK)

Coming up, the TSA backlash, backlash.  Everybody just heave deep breaths, all right?  Oh, and please stand behind the screen.

(COMMERCIAL BREAK)

HAYES:  Did you see the start of “The Simpsons” last night? 

(BEGIN VIDEO CLIP)

(MUSIC)

UNIDENTIFIED MALE CARTOON CHARACTER:  We are unbalanced.  It is not fair. 

(END VIDEO CLIP)

HAYES:  Now, “The Simpsons” has repeatedly used Fox News as a punch line. 

(BEGIN VIDEO CLIP)

BART SIMPSON, CARTOON CHARACTER:  Then, I had this dream that my whole family was just cartoon characters and that our success have led to some crazy propaganda network called Fox News. 

UNIDENTIFIED MALE CARTOON CHARACTER:  Why, here is Fox News. 

(MUSIC)

HOMER SIMPSON, CARTOON CHARACTER:  I‘m sorry, Marge, but I won‘t live under the same roof as a member of the liberal media. 

MARGE SIMPSON, CARTOON CHARACTER:  You have to excuse him.  He has been watching a lot of Fox News. 

HOMER SIMPSON:  Did you know that every day, Mexican gays sneak to this country and unplug our brain-dead ladies?

(END VIDEO CLIP)  

HAYES:  “The Simpsons” have done brilliant parodies of Fox News itself. 

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE CARTOON CHARACTER:  Welcome to Fox News, your voice for evil.  Tonight, we‘ll be interviewing the top two candidates for Springfield‘s 24th congressional district.  For the Republicans, beloved children‘s entertainer, Krusty the Clown.  And for the Democrats, this guy. 

UNIDENTIFIED MALE CARTOON CHARACTER:  I have a name. 

UNIDENTIFIED MALE CARTOON CHARACTER:  Yes, I‘m sure you do, comrade.  I do appreciate your being here.  You are usually so mired in sleaze.  It must be an effort to come down to the studio. 

KRUSTY THE CLOWN, CARTOON CHARACTER:  May I say something? 

UNIDENTIFIED MALE CARTOON CHARACTER:  Certainly, Congressman. 

UNIDENTIFIED MALE CARTOON CHARACTER:  He hasn‘t won yet. 

UNIDENTIFIED MALE CARTOON CHARACTER:  You make a very adulterous point.  We will now conclude this debate with a Krusty campaign commercial. 

(END VIDEO CLIP)

HAYES:  But what was so significant about last night‘s opening sketch is that it totally pushed the line.  I mean, they literally called out Fox News, a seriously gutsy and rare move considering both Fox News and “The Simpsons” are owned by the same company. 

And it‘s a move that made me once again proud to have been a member of my high school‘s “Simpsons” appreciation club.  True fact.

(COMMERCIAL BREAK)

HAYES:  This show does not normally cover holiday-specific stories unless they include the words “egg” and “nog” in that order. 

But right now, with Congress waiting for the “Don‘t Ask, Don‘t Tell” report to come out and the elections over and done with, there‘s some downtime in the news business, which is why, perhaps, it is not surprising that this is the biggest story in the country. 

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE:  The new measures from the Transportation Security Administration have set off a wave of criticism and frustration among passengers. 

UNIDENTIFIED MALE:  You‘ve heard the backlash.  Passengers are calling some of these security measures humiliating, intrusive.  Others have likened it to a sexual assault.  These are some really harsh words.  Do you understand the outrage here? 

UNIDENTIFIED MALE:  Some passengers - it‘s not just that they‘re saying it‘s stupid.  They‘re saying, some, that it amounts to sexual assault.  And some are also saying that it‘s a violation of the Fourth Amendment to the Constitution‘s ban on unreasonable search and seizure. 

(END VIDEO CLIP)

HAYES:  New screening protocol at airports is the biggest story out there right now in no small part because of images like this one.  That‘s awkward, right? 

But here is the thing.  Yes, there has been wall-to-wall coverage of the story.  It‘s all over CNN and Fox and network shows and MSNBC.  And it just seems to hit all the right outrage buttons, all the right outrage buttons like the story has a great tag line. 

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE:  If you touch my junk, I‘m going to have you arrested. 

(END VIDEO CLIP)

HAYES:  “If you touch my junk, I‘m going to have you arrested.”  That quote has been reduced to its very essence, to its very core with just four simple words, “Don‘t touch my junk.” 

Great catchphrase.  A moment of supposed civil disobedience posted on YouTube for all to admire with the line that is the most Twitter hash tag-friendly thing since “Don‘t tase me, bro.” 

So that was the first public outrage button the story pushed.  The second, a young boy, six years old, reportedly forced by Transportation Security Administration officials at the airport in Salt Lake City to take off his shirt as a routine part of the new pat-down protocol. 

Third, anti-Muslim outrage, according to certain right-wing blogs and media outlets, “The TSA is making an exception to the screening and pat-down rules for women wearing the hijab, a get-out-of-jail free card for women wearing headscarves. 

(BEGIN VIDEO CLIP)

SEAN HANNITY, HOST, “HANNITY”:  They want an exemption or waiver for Muslim women and Janet Napolitano is considering this. 

(END VIDEO CLIP)

HAYES:  When a story hits all the right outrage buttons, when you have convenient every-man hero with a great made-for-TV comment and the kids caught in the crossfire and the rumors about special treatment for Muslims, you have to stop and wonder about the efficacy of the tale being spun. 

So, first of all, the “don‘t touch my junk” guy didn‘t record that video on a whim.  He‘s a libertarian activist who‘s blogged about the TSA pat-downs and referred to them as groping. 

As far as the incident with the six-year-old boy goes, we now know from the TSA the child set off a metal detector at the Salt Lake City airport late last week and it was his father who removed his shirt to speed up the security process. 

Finally, what about the Muslim women who are getting all that very special hands-off treatment?

(BEGIN VIDEO CLIP)

HANNITY:  They want an exemption or waiver for Muslim women and Janet Napolitano is considering this. 

(END VIDEO CLIP)

HAYES:  The TSA has responded to the charge on its blogs saying, quote, “No one is exempt.  Everyone is subject to the same screening.  TSA is sensitive to religious and cultural needs but everyone must be screened effectively.” 

So when a story hits the right outrage buttons, it is not bad idea to pause and take a deep breath.  A few things here - one, I‘m not in a great position to independently judge whether these new security protocols appreciably reduce risk or not. 

But it seems incumbent on the TSA to affirmatively make that case rather than say “trust us.”  Two, I‘m more or less on team “don‘t touch my junk.”  The TSA procedures feel onerous and invasive and are a potent reminder of the massive expansion of the security state after 9/11. 

So then, why did I find myself agreeing with a friend of mine who tweeted this weekend that he was now part of the, quote, “TSA backlash, backlash”?  Part of it, I think, is that the genuine backlash is being generated - is being marshaled by some pretty unsavory characters pushing some pretty awful ideas. 

And part of it is that a disconcerting amount of animus seems directed at TSA employees themselves, the implementers of the policy rather than the geniuses behind it. 

Joining me now is Adam Serwer, staff writer at “The American Prospect.”  And Adam, thanks for joining me. 

You wrote a really good piece about exactly this.  And I want to dive right in and say, what are the kind of ways in which this outrage is being marshaled on the right towards some pretty onerous ideas? 

ADAM SERWER, STAFF WRITER, “THE AMERICAN PROSPECT”:  Well, I just want to say that I‘m also more or less on - pretty much on team “don‘t touch my junk.”  I will say that - I will say that this has sort of dovetailed into a malicious conservative narrative against government workers. 

I mean, basically, you know, they have been after government workers.  They say they get paid too much.  They say they get too many benefits for long time now. 

And now, they are saying, “Well, look, who is the symbol of the public worker that you want?  Is it the fireman?  Is it a cop?  Or is it the guy who puts his hand in your pants?”  And you know, that‘s what they are saying now.

HAYES:  And how does the TSA - I mean, walk me through a little bit of the timeline of the actual policy, because there‘s a certain kind of like Obama-menace aspect to this story on the right as well.  This is the footprint of big government as, you know, characterized by Barack Obama.  Where did this policy come from? 

SERWER:  Well, according to the Government Accountability Office, the body scanners were in operational testing back in financial year 2007. 

What happened was that after the Christmas bombing, the Obama administration accelerated deployment of the scanners because they were worried about the threat of nonmetallic objects and explosives like the one carried by the underwear bomber. 

HAYES:  So what do you think is driving ultimately - I mean, how do you disaggregate the kind of, I think, useful frustration people feel about this sort of growth of security state from some of the scapegoating that‘s going on.  Like where do you hope to see this move politically? 

SERWER:  Well, I think there are basically three groups of people.  There are people who - they‘re sort of this civil libertarian left that‘s really genuinely concerned about this. 

There‘s the - you know, there are the people who aren‘t bothered by it at all.  There‘s the sort of small government right that‘s also genuinely concerned about this.  And then, there are people who just wouldn‘t really care unless there was a Democrat in office. 

And I think how you can tell the difference is based on the good faith of the arguments whether they are being dishonest and saying, oh, this is Obama trying to put his hand in your pants, or whether they‘re saying we should adopt the racial profiling policy which wouldn‘t work because racial profiling is about as statistically accurate as random screening. 

And I think you just really have to look at what people are proposing as an alternative.  And you can pretty much tell who has their heart in the right place and who is trying to turn this into a political scandal for their own benefit. 

HAYES:  Very quickly.  People are taking bets about when the TSA is going to walk back this policy.  I mean, the winds do seem to be moving in that direction.  What‘s your feeling about what we‘re going to see in the next month or so? 

SERWER:  I think that if the Republicans and Democrats get together with the administration and figure out a less-invasive way to do this, I think that would be best for everyone, and I hope it works out that way. 

HAYES:  Adam Serwer is a staff writer for “The American Prospect.” 

Thanks so much for joining me tonight. 

SERWER:  Great.  Thank you very much.  Take care. 

HAYES:  That does it for us tonight.  We‘ll see you again tomorrow night.  Until then, you can read more of my work at “TheNation.com” or follow me on Twitter - user name chrislhayes.  And now, it‘s time for “THE LAST WORD.”  Sitting in for Lawrence, tonight, Willie Geist.  Good evening, Willie. 

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