updated 1/3/2011 5:14:02 PM ET 2011-01-03T22:14:02

Guest Host: Chris Hayes, Ezra Klein, T.J. Gilmartin, Sen. Kristen Gillibrand, Blair Kelley

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CHRIS HAYES, GUEST HOST (voice-over):  Which of these stories will you be talking about tomorrow?

First, do no harm—unless you‘re a politician.

The 9/11 health bill gets blocked—by a doctor.

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SEN. TOM COBURN ®, OKLAHOMA:  I want to spend whatever we need to spend to take care of the people who sacrificed for us and put themselves at risk.  This bill hasn‘t even been through a committee.

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HAYES:  Yes, it has, the Senate Health Committee, the one you sit on.

And if you think he‘s got cover?  Think again.

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RUDY GIULIANI ®, FORMER NY MAYOR:  This should not be seen as a Democratic or Republican issue.  It shouldn‘t even been seen as a fiscal issue.  This is a matter of morality.  It‘s a matter of obligation.

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HAYES:  Next up for START—the vote as Republican opposition crumbles.

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SEN. LAMAR ALEXANDER ®, TENNESSEE:  I will vote to ratify the new START treaty between the United States and Russia because it leaves our country with enough nuclear warheads to blow any attacker to kingdom come.

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HAYES:  Still not enough for Senators Kyl and Graham.

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SEN. JON KYL ®, ARIZONA:  All of these interruptions and the season have resulted in a situation in which very few members are paying much attention, very few are on the floor really thinking about this.

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HAYES:  You‘ve had it since April.  It‘s 17 pages.  All you had to read was 14 words a day.

The great recession started by Wall Street and the housing bubble—now to be paid for by teachers and firefighters.  This is what austerity looks like.

Haley Barbour doesn‘t just walk back his comments about a racist group, he‘s sprinting away.

A Marvel superhero flick under a threat of boycott because of who‘s playing a Norse God.  Not that guy.  Not that one.  Not her—him.

And the preview of COUNTDOWN favorites in 2010.

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KEITH OLBERMANN, COUNTDOWN HOST:  Sharron Angle, Republican Senate candidate from Nevada, you are a big sport for joining us here.

SHARRON ANGLE ®, FORMER NEVADA SENATORIAL CANDIDATE:  Well, first of all, Neil, it‘s great to be here to talk about this campaign.

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HAYES:  Oh, Sharron, it hasn‘t even been two months.  We missed you.

All the news and commentary—now on COUNTDOWN.

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ANGLE:  I am so proud to call you friends.

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HAYES:  Good evening from New York.  I‘m Chris Hayes, in for Keith Olbermann.  This is Tuesday, December 21st, 686 days until the 2012 presidential election, and just one week after passing $800 billion in tax cuts without paying for it, including $70 billion or so in tax cuts for millionaires, without paying for it.

The Republican Party is making a last stand to kill a bill before the end of Congress because it includes less than $7 billion for 9/11 responders and pays for it.  So, why is yet another Republican senator promising today to block passage of a bill that would fund medical costs for survivors and heroes of 9/11?  The answer, it turns out, is money.

House Majority Leader Steny Hoyer said tonight Democrats expect to pass the funding called the James Zadroga 9/11 Health and Compensation Act tomorrow through both chambers of Congress.  The House has already passed one version which Republicans killed in the Senate.

Now, it‘s Republican Senator Tom Coburn‘s turn.  A Coburn aide told “The Wall Street Journal” he wants the $6.2 billion to be paid for with spending cuts elsewhere.  This morning, he complained the bill has not even had a hearing.

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COBURN:  I want to spend whatever we need to spend to take care of the people who sacrificed for us and put themselves at risk.  This bill hasn‘t even been through a committee.  We haven‘t had the debate in our committee on this bill to know if it is the best thing to do.  We haven‘t had the testimony to know.  This is a bill that‘s been drawn up and forced through Congress at the end of the year on a basis to solve a problem that we didn‘t have time to solve and we didn‘t get done.

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HAYES:  The video you‘re seeing now is from a congressional hearing this June.  It‘s a hearing on the Zadroga Bill, hearing held by the Health, Education, Labor and Pensions Committee of which Senator Coburn is a member.  Senator Coburn chose not to attend.

So, where would Coburn get the idea Congress held no hearings on this?  It turns out the way the bill was going to be paid for was by closing a tax loophole on foreign businesses operating in the U.S., the Organization for International Investment doesn‘t like that.

And federal disclosure forms revealed the OFII lobbied Congress on the issue, writing in opposition this July, one month after the hearing Coburn skipped, quote, “Congress has not held any hearings to examine this issue.”

The U.S. Chamber of Commerce lobbied against it, too, and still is, even though Democrats switched closing the tax loophole for a tax on products made in companies that get U.S. contracts outside standard international trade deals.  The Chamber writing in its letter against the Zadroga Bill that it represents more than 3 million businesses.

But the president of the Greater New York Chamber of Commerce told COUNTDOWN today, quote, “As far as the 9/11 bill, having been down there myself, I believe that this is very necessary, and I hope the U.S. Senate passes it.”

With us now is T.J. Gilmartin, a Brooklyn cement mason who went to Ground Zero on day one and stayed for two weeks straight, taking apart the pile.  He lost 30 percent of his lung capacity, is now lobbying for the passage of this Zadroga Bill.

T.J., thanks for what you did and thank you very much for joining us tonight.  I really appreciate it.

T.J. GILMARTIN, 9/11 RESPONDER:  It‘s no problem.  It‘s like, you know, it was—it was nothing.  Anybody would have been down there.  Everybody was together back in 2001 when that happened.  And all of the sudden, they all forgot.

HAYES:  T.J., you made headlines here in New York for your exchange with Senator McCain on this issue.  Can you share that story with us?

GILMARTIN:  I had been down—I came down to Washington—it was two weeks ago.  Right after Thanksgiving, I came down with my cousin Matthew who teaches down here at, I think it‘s St. Johns.  And we—I was by myself walking around the Senate, lobbying that this bill was to pass.  I spent a couple of days.

And every time I went into McCain‘s office, they kept giving me, please, here‘s an e-mail address.  Send your request in to us.

I started having breathing problems about 3:00 in the afternoon.  I was tired.  And I walked over and I was looking over the rotunda in the Russell Building at the police shields which I had been to with Police Commissioner Kelly and I was invited to that.  And I looked to my left and who was standing at the elevator but Senator McCain.

With that, I stepped in front of the senator, I introduced myself and I says, “Senator, I hope we can have your support on the 9/11 Zadroga Bill.”  And he turned around and said to me, “Thank you for your service.  There‘s nothing I can do.”  And he jumped right around me and jumped onto the elevator.  This all took a matter of about 15 seconds.

HAYES:  T.J., I want you to just explain how this bill, if it is—if it were to pass, would impact you directly.  What are the stakes here?

GILMARTIN:  Well, directly, my union took care of me for a couple of years.  My health didn‘t start deteriorating until about 2005.  And it‘s very little and a little bit at a time.

And they give (INAUDIBLE) job, the last one I had was in Manhattan.  And after that, I couldn‘t—I couldn‘t do it anymore.  I—they gave me another job after that and two guys didn‘t show up to work so I had to go in and work as the steward.  I just couldn‘t do it.  And I haven‘t been working since 2008.

What it would do for me is, hopefully, you know, it will give me some

I have been living on unemployment.  It would give me a life for whatever‘s left of it.  I—you know, I would be able to offer something to my daughters, who I have been estranged from, you know?  I mean, you know, what do I have to offer them?  A sick father?  You know?

           

So, it would give me my medical coverage for 10 years.  And, you know, just maybe some peace of mind.  You know, because that‘s all I‘ve got left.

HOLMES:  T.J., I wish that I could say that I have Senator Coburn watching the program right now.  But if on the off chance he is out there, I‘m wondering if you have one final message for him.  What would you like to say to him as this bill nears possible passage?

GILMARTIN:  Well, Senator Coburn, I would—as it nears to passage, how about the sick responders in Oklahoma?  What about them?  What are you going to tell them when—as they get sicker and sicker and start dying and they need help?  Are you going to tell them, well, I had to bicker like a 5-year-old in kindergarten, you know, Republicans and Democrats running around like 2-year-old kids?

When we were at the World Trade Center and we were digging for survivors, we were recovering bodies, we didn‘t ask, oh, that‘s a Republican body, don‘t touch that one.  Or there‘s a Democrat survivor, don‘t go near that one.

I mean, it has nothing to do with parties.  It‘s about taking care of

your own in this country.  And, you know, this is a great country and, you

know, we should take care of our own.  We would be that much more stronger

and a better country, you know, if people around the world could see that

we take care of our own, you know?  They‘re going to laugh at us when, you

know, they turn around and they look and they see us—excuse me, but, I -

you know, when they see us that we can‘t even take care of our own people, I mean, what kind of country is this?

           

HAYES:  T.J. Gilmartin, I just really want to thank you for your time tonight and for your eloquence on this matter.  And we‘re going to keep following this down the stretch.  Thank you so much.

GILMARTIN:  Yes, I‘m going to keep following it myself until it‘s passed.

HAYES:  Sounds good.

GILMARTIN:  Thank you.

HAYES:  T.J. Gilmartin.

Let‘s turn now to the senator spearheading this bill through the Senate, Democrat Kirsten Gillibrand of New York.

Senator, good evening.

SEN. KIRSTEN GILLIBRAND (D), NEW YORK:  Good evening.

HAYES:  OK.  Are you going to pass this thing tomorrow?

GILLIBRAND:  I‘m very hopeful we will.  We are really working hard to come together, to have the votes we need.  I‘m very confident that if we hold this vote, we will pass this bill.

HAYES:  Coburn‘s office released a statement today saying he is working with the bill sponsors, you know, to find—quote, “to find a way to help those who need our aid without creating new burdens for other Americans.”

Leaving aside the assumption that, you know, that other Americans would not want to shoulder the burden, how are you going to pay for this?  And what is the current status of the pay-for that‘s in the bill to come up with the revenue for $6.2 billion?

GILLIBRAND:  Well, the very important fact is this bill is fully paid for which very few things in Washington are.  So—

HAYES:  Almost nothing as far as I can tell.

GILLIBRAND:  Yes, this is fully paid for.  And the way we are paying for it is a fee on foreign companies that get procurement contracts from our government.  And so, think that this pay-for addresses some of the concerns our Republican colleagues had early on, not wanting to have a tax.  And, you know, we have addressed a lot of those concerns.  And I think we have the support we need, we got the votes we need.  We just need to hold the vote and we need to make sure that we can vote in a timely way so that we can really deliver for these first responders.

And you just heard T.J.‘s testimony.  It‘s heart-wrenching.  These are men and women who gave everything.

They didn‘t care who they were helping.  They just heard the call to duty.  They rushed to the towers.  They are the ones who literally ran up the towers when people were coming down.  They‘re the ones who looked for survivors, they looked for remains, they did the cleanup days and weeks and months after the towers fell.

And, now, because of those toxins that were released, they are suffering from cancers, other ailments, terrible health effects.  And so, we have to deliver for them.  We really have to stand by them in their gravest time of need.

HAYES:  You know, it‘s striking to me the United States Chamber of Commerce is lobbying against you on this bill, the Organization for International Investors.  I‘m wondering, have you talked directly with companies behind these groups with their representatives?

GILLIBRAND:  No.  And the interesting thing is, this is not a New York issue.  This is a national issue.  This is a national security issue.  We were attacked—terror attack in New York, but it was not an attack on New York.  It was an attack on America.

And so, we are hearing from people all across the country right now. 

They want to see justice done.  They want to see these first responders get

the health care they desperately—they need.  They want these survivors -

they want these first responders to survive at this point.  And they need the health care.

           

You know, you heard from T.J. that the health care costs are so expensive.

And another thing to know about the bill—this is the payer of last resort.  Health care plans that these men and women have pay first, their worker‘s comp pay second, any settlement pay third and this is their, in case all of that runs out, to make sure they are not having to bankrupt their families to pay for the health care they need literally to survive.

HAYES:  I know in a country with a stronger social safety net, we wouldn‘t—we need this bill, but I‘m glad you are pushing this.  Senator Kirsten Gillibrand, sponsor of Zadroga Bill, thank you so much.  We really appreciate it.

GILLIBRAND:  Take care.

HAYES:  The government lights will stay on through March, but at what cost to financial regulation?  The Republican dream to defund begins—next.

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HAYES:  By complaining about how they haven‘t had time to think about the START Treaty, they seem to be telling us they can‘t finish 17 pages in 36 weeks.

And the target of the austerity movement: public servants, teachers, firefighters, city workers—because they are caused the financial mess we‘re in?

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HAYES:  It has been endorsed by every living secretary of state, Republican and Democrat, military leadership and national security experts.  Yet, in our fourth story: as the START Treaty moves one step closer towards ratification, Republican dead-enders Lindsey Graham, Jon Kyl and John McCain throwing what might be their final tantrum of 2010.

The Democrats getting the 60 votes needed to break the Republican filibuster and then some.  Eleven GOP op senators voting with the Dems to end debate, 67-28 including Lamar Alexander, the number three Senate Republican.  And Lisa Murkowski who is still waiting for the final results of her write-in re-election bid against Tea Party favorite Joe miller.  She also voted with the Democrats on “don‘t ask, don‘t tell” and the DREAM Act.

The treaty, designed to scale back American and Russian nuclear arsenals, set for a final vote tomorrow and, according to Senator John Kerry, is expected to get as many as 70 votes.  It needs two-thirds of senators present for ratification.

Senator Jon Kyl of Arizona has been leading Republican efforts to block ratification.  Today, a glum Mr. Kyl let everyone know he‘s overworked and hungry.

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SEN. JON KYL ®, ARIZONA:  Parachute in this issue, have a vote on that, go back to the treaty, come back with two votes on judges, go back to the treaty, now it‘s dinnertime.

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HAYES:  Yes, the Democrats in the role of Scrooge just keep piling on the work.

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KYL:  Come back tomorrow.  Now, we have to do a cloture our vote on this or that.  All of these interruptions and the season have resulted in a situation in which very few members are paying much attention.  Very few are on the floor really thinking about this and, frankly, the other side doesn‘t have an open mind about accepting anything.

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HAYES:  Senator Lindsey Graham leapt to his colleague‘s defense—nobody puts Jon Kyl in a corner.

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SEN. LINDSEY GRAHAM ®, SOUTH CAROLINA:  And here we are the week of Christmas about to pass potentially a treaty that will follow this country‘s national security for decades.  And I am just really disappointed.  And to Senator Kyl, I want to apologize to you for the way you‘ve been treated by your colleagues.

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HAYES:  That‘s a sad thing.

While Kyl and company await apologies, all is not lost for Republicans.  Since the GOP successfully killed the omnibus funding bill, Democrats moved to fund the government by continuing 2010‘s funding levels, which means some of their key accomplishments like health care and financial reform will be deprived of implementation funds.

As Mitch McConnell tells it, “There is much for them—the Democrats

to be angst -ridden about.  If they think it‘s bad now, wait until next year.”

           

Time now to call in MSNBC contributor, columnist for “Newsweek” and staff writer for “The Washington Post,” Ezra Klein.

Mr. Klein, how are you this evening?

EZRA KLEIN, MSNBC CONTRIBUTOR:  I can‘t believe you have me here the week of Christmas, Chris.

HAYES:  I know.

KLEIN:  It‘s dinner time to talk about the START Treaty and continuing resolutions.  Appalling.

HAYES:  You can—you can sneak a bite to eat during cutaways if we go to, you know, voice-over.

So, you wrote, I thought, a very smart thing on your blog today in which you zeroed in on a problem with the basic structure of just carrying over the continuing resolution.  What is the problem with just passing this stopgap funding?

KLEIN:  OK.  So, first, we had the omnibus bill and that bill funds the government.  It‘s the 2011 budget for the government.  Republicans killed it for a couple of reasons.

But the main thing McConnell told his people was, if we pass the bill, it has all this money in it to set up health care reform.  And do you really want to be caught voting in favor of setting up health care reform?  So, he got enough of his people to pull off, to peel off.

And now, we have the continuing resolution.  And a continuing resolution essentially says we will make no new decisions on this.  What we‘ll do is extend the decisions we made in 2010.

But, of course, in 2010, when you passed that budget, there was no health care bill.  There was no financial regulation bill.  So, there is no money in this continuing resolution for any of these things to get set up.

And I think what‘s important here is: you may remember a couple of months ago, the GOP was talking about defunding health care, right?  That was their big thing.  They said, you know, Democrats won‘t allow it.  We‘ll go to a government shut-down.  Well, they didn‘t.  They allowed it.  It passed today with 70-some votes and now we are going forward.  And nobody quite knows what‘s going to any of these bills.

HAYES:  So, let‘s separate out what the sort of practical effects of these are over the next two months and then the sort of symbolic political effects.  Practically, what are the kinds of things that would be done with the money that would have been in there had they passed the omnibus spending bill in the next two months?  I mean, are there things that need to get off the ground now?

KLEIN:  Yes.  This is money to set up exchanges where people buy health care insurance.  This is the money where you regulate the insurers, where you set up rules, where you have time to go back and forth with the industry and the stakeholder groups.  These are—this is the meat of the bill.

Now, you can do it.  The fact that you‘re not giving them the money they needed to do it, it just means you have fewer people doing more work.  It just means you don‘t do it well.

And one of the things that‘s important for people to realize here is Republicans haven‘t struck a bill against a financial—blow against a financial regulation bill or against the health care bill.  They are not repealing anything here.  It‘s not that it won‘t go forward.  They‘re just making it go forward worse.

The options here aren‘t between “yes” the bill and “no” the bill, but just sort of wounding it, letting it limp along, doing a worse job than it would otherwise do.  Really, what we‘re talking about here is a choice between good and bad government.  And because Republicans don‘t like these bills, they are forcing bad government on the American people here.

HAYES:  Finally, Ezra, what do you think the sort of political effects of this in terms of pre-staging or setting up what‘s going to be—I think you and I both agree—a pretty—well, I hope actually a fight in March over the actual budgetary omnibus spending?

KLEIN:  I have been shocked watching Democrats say essentially nothing about any of this.  I mean, if you thought they were jonesing for a fight, it‘s not—they are not giving evidence of it now.  And it‘s not clear why they didn‘t pick it now when they frankly have a little bit more power when they‘re coming off of some good legislative wins.  So, I wouldn‘t say it looks good.

You talk to people.  They say, listen, there are things we can do.  There are ways we can move money around.  There are ways you can do reprisals against Republicans.  If you can defund the government, maybe the part that gets defunded is not the part they wanted to get defunded.

But at the end of the day, the Democrats at some point have to choose, to stand up, pick a fight and risk a shutdown and risk a battle here.  And as of yet, they haven‘t.  Whether or not they will in the future, it‘s impossible to say, but they‘ve not—that‘s only because they haven‘t said anything yet.

HAYES:  “Washington Post‘s” Ezra Klein—thanks for joining us. 

Happy holidays.

KLEIN:  Thank you.

HAYES:  Coming up, austerity in action—states solving their budget problems by taking from the people least able to handle it.

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HAYES:  Austerity is not just the Merriam-Webster word of the year.  We will explain why it will become a very important principle for several GOP-controlled states next.

First, time for the sanity break.  And happy birthday wish to Samuel L. Jackson, the star of such classics as “Deep Blue Sea” and the remake of “Shaft.”  Mr. Jackson turns 62 years old today.  According to my inside sources, he only wants one of two things for a gift, a Royale wit cheese or a 747 stuffed full of pythons.

Let‘s play “Oddball.”

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HAYES:  We begin with a story from the “It wasn‘t funny the first time” file.  Three separate drivers in Shanghai, Berlin and Key West all decided it would be fun and kooky to dress up as Santa and go scuba diving.  Apparently, this is a yearly tradition in Key West and Berlin.

Christmas is not officially celebrated in China, which makes it a dive in Shanghai seemed a little unnecessary.  Still, it is hard to chastise these fishy folks for getting into the holiday spirit.  But maybe next year, they should coordinate this better.  There are reindeer and elf costumes as well.

In television news, everyone‘s rent critic, Jimmy McMillan made an appearance after singing a single off his upcoming album—yes, you heard me—he has an upcoming album out.  Mr. McMillan switched gears to sing a tune to lift your spirits for the holidays.

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JIMMY MCMILLAN, FORMER NY GUBERNATORIAL CANDIDATE (singing):  Santa Claus got evicted because he couldn‘t pay his rent.  Now, he‘s sleeping in the park on a bench.

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HAYES:  He can really sing.  You are not seeing things.  He‘s holding a doll version of himself.  If he is still trying to get into politics, I believe the singing senators had a few spots open up recently.

Blame for the great recession cannot be placed on the backs of people who collect your garbage or who work at the DMV.  So, why is everyone ready to make them pay for it?  What Merriam-Webster‘s word of the year, “austerity” means for public servants—next.

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HAYES:  Merriam-Webster recently announced that the 2010 word of the year is “austerity.”  With 250,000 online searches, the term beat out runners up pragmatic and, somewhat surprisingly, socialism.  In our third story tonight, given the austerity measures imposed by governments around the world, from Greece to Ireland to England, it is not surprising people flock to the Interwebs looking for answers. 

Here at home, austerity is being floated as a solution to the staggering budget shortfalls that many states are facing, as we head into the third year of the worst economic downturn since the Great Depression. 

What exactly does it mean?  Merriam-Webster defines it as “enforced or extreme economy.”  I like to think about austerity in terms of a nerdy high school metaphor.  Every year, students across the country participate in competitions in which they must build a bridge out of a certain number of toothpicks.  Contestants compete to see design can withstand the most weight. 

When it comes time for the contest, you watch as more and more weight is added to your bridge until—crack.  It breaks.  What you notice is a bridge doesn‘t break everywhere at once.  It tends to break in just one or two places, just where it‘s weakest. 

This is what happens when the force of austerity is applied to a state budget.  In California, the state‘s public university system, once the envy of the country and engine of upward social mobility for millions of middle and working class Californians, is probably facing another round of fee hikes and budget cuts, as new Democratic Governor Jerry Brown looks to close a 28 billion dollar budget gap.  It already had to raise tuition last year by 32 percent. 

In Republican ruled Texas, which has a budget deficit of 25 billion dollars, conservative Republicans recently floated the idea of pulling out of the federal Medicaid program, an unprecedented move that would kick 2.6 million poor Texans off of health insurance. 

In New Jersey, Republican Governor Chris Christie, austerity‘s most zealous crusader, recently seemed to hint to “60 Minutes” that the state might eventually default on its pension obligations. 

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GOV. CHRIS CHRISTIE ®, NEW JERSEY:  If you don‘t partner with me to get this done, in ten years, you won‘t have a pension. 

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HAYES:  Think about that for a moment.  New Jersey, like all states, owes money to a number of creditors.  Some of the folks it owes money to are Wall Street banks and investors who purchased its bonds.  Christie isn‘t suggesting the state might default on those bonds.  He‘s suggesting, rather, that when push comes to shove, the state might just walk away from its commitment to its retired workers, tossing them into penury in their old age. 

That‘s where the crack in the bridge is.  As soon as a little pressure is applied, public service retirees, poor people seeking health care and working class students find all of the weight placed on their slender frames. 

Joining me now is Dean Baker, economist and co-director at the Center For Economic Policy and Research. 

Dean, good evening. 

DEAN BAKER, CENTER FOR ECONOMIC POLICY AND RESEARCH:  Good evening. 

Thanks for having me on. 

HAYES:  Dean, you wrote something great on your website about the—after the “60 Minutes” piece about the sort of state budget shortfall.  You pointed out that they were missing a big piece of the story.  What is the context that is not being discussed when we talk about state budget problems? 

BAKER:  The whole story here is the housing bubble that was fueled by Wall Street greed and Washington incompetent, people like Bernanke and Greenspan, who weren‘t doing their jobs.  Now we are faced with the worst downturn in 70 years.  That‘s why the state and local governments are facing shortfalls. 

We have “60 Minutes” running around, going, oh, this person might get paid too much, and you can find this piece of waste and all that.  The bottom line, though, is if we weren‘t in the worst downturn in 70 years, the state governments would basically be fine.  This is all a contrived story.  And basically “60 Minutes” pulled off a hoax on its viewers. 

HAYES:  I think austerity is appealing.  Although it‘s interesting Chris Christie‘s approval ratings have been plummeting.  But I think austerity is appealing to a certain segment of the population because it invokes prudence and virtue and self-restraint.  What‘s wrong with austerity as the approach to the situation we find ourselves in? 

BAKER:  Because it‘s totally at odds with what got us here, why we are in this situation.  Again, we all can sympathize with the idea of working hard, not spending more than you earn.  We all understand those values.  And that makes sense. 

But that‘s not the problem the economy faces right now.  It‘s hard for people to understand it.  The problem the economy faces right now is not enough demand, not enough spending.  It‘s kind of straight forward. 

When we had the housing bubble, that was creating a huge amount of demand, both in construction, directly, and indirectly because we had eight trillion dollars of housing bubble wealth that people were spending against.  They were taking on second mortgages, home equity loans. 

That demand has just disappeared.  We are in this bizarre situation where we are not suffering because we can‘t produce enough.  We are suffering because we are not demanding enough.  Austerity takes us exactly the wrong way.  We are going to deal with a shortfall in demand by having less demand?  It‘s the wrong solution to this problem. 

HAYES:  So what would it look like?  You had this thought experiment in the piece you wrote on the website, which I really liked.  You basically said what would it look like if we treated state governments with the kind of care and deference that we treated Wall Street banks, if we saw California as so crucial a city, what‘s one thing the federal government could do to get us through this rough patch? 

BAKER:  Well, if you go back to what we did in ‘08, when Citi and Goldman Sachs and most of the other major banks were on the edge of collapse, the federal government—we had the Tarp.  We had the special lending facilities from the Fed.  We gave them literally trillions of dollars in loans at below market interest rates. 

We played this game.  We gave them money at way below market interest rates.  They, of course, paid it back and oh, we made money on it.  Let‘s do the same with California and New York.  Everyone is suffering from hardship.  Let‘s give them trillions of dollars in loans at, let‘s say, four percentage points below the market interest rate.  They then lend the money to other people—that‘s what Chase.  That‘s what Citi did.  They will make money on it.  They could pay us back, and then we can have Timothy Geithner going, hey, we made a profit on it. 

That‘s the way it works in Washington, at least if you‘re Citigroup. 

HAYES:  I‘m terrible at managing my bank account, but I think even I, with cheap money and lending it at a higher interest rate, even I can make money doing that.  So the New Jersey—there is another part of this story, particularly in New Jersey, right, when you talk about the pension obligations down the road, which really do seem to be worrying. 

New Jersey governors failed to contribute the state‘s obligation to the pensions 13 out of the last 17 years.  Now it seems like they want to turn around and screw over the people that they weren‘t paying for those 13 of 17 years. 

BAKER:  This is really kind of incredible.  These are contractual obligations.  People thought—they worked in good faith.  These are firefighters, school teachers.  Those are most of the state employees.  They worked in good faith, and now we have the governor saying, ha, ha, ha. 

We don‘t have the money.  You‘re dumb suckers. 

HAYES:  Right. 

BAKER:  This is really outrageous.  As you were saying before, OK, if things are that bad—and by the way, they have exaggerated the story.  But if things are really that bad, well, if we‘re going to start cutting somewhere, I think the bonds that are held by Citigroup might be the first place to start, not the last place to go. 

HAYES:  Yes, I wouldn‘t hold your breath for a Chris Christie appearance in which he warns Citi that they might have to take a hair cut on their bonds.  Economist Dean Baker, thanks so much for your time tonight.  Always appreciate it. 

BAKER:  Thank for having me on. 

HAYES:  Nostalgia just isn‘t what it used to be.  Haley Barbour‘s memories of the good old days may have backfired all the way into 2012. 

She came, we saw, Nevada said, no thanks.  We can‘t forget her.  A look back at one of the great interviews in COUNTDOWN history.

And when Rachel joins you at the top of the hour, live from the 92nd Street Y, she‘ll welcome Michael Moore.

(COMMERCIAL BREAK)

HAYES:  Yesterday, we reported that Haley Barbour, Mississippi governor and potential 2012 presidential candidate, said that the civil rights struggle in Mississippi home town was, in his words, not that bad.  Yes, just three counties over from the 1964 murder of three civil rights workers. Barbour claims that civil rights, quote, “wasn‘t an issue in Yazoo City,” because of what he calls a, quote, “organization of town leaders named the Citizens Councils.” 

Our number two story, in a “Weekly Standard” interview, Barbour credits the white supremacist Citizens Councils for preventing violence during desegregation.  A group that used such peace keeping tactics as intimidating blacks from registering to vote. 

In the late 1950s, the organization put out a newsletter that billed itself as dedicated to the maintenance of peace, order and domestic tranquility in our community, and in our state, and to the preservation of states‘ rights. 

Peace, order and domestic tranquility.  Exactly what Barbour praised the group for.  But what did the Citizens Council mean by that tag line?  For one, squashing the evil NAACP and other left wing do-gooders.  Articles such as “Race Equality is a Scientific Hoax” had things like this to say:

“the equalitarian dogma, at best, represents a sincere, if misguided, effort to help the Negro by ignoring or even suppressing evidence of his mental and social immaturity.  At worst, the equalitarian dogma is the hoax of the century.” 

Thought it was egalitarian, but quibble.  So what are Haley Barbour‘s beloved Citizens Council doing now?  Well, they have changed their name to the Council of Conservative Citizens.  And currently, they are busy boycotting the upcoming movie “Thor” because a black actor was cast in the role of a Norse god, accusing the filmmakers of inserting left wing social engineering into European mythology. 

Yesterday, Barbour‘s press secretary, Dan Turner, tried to qualify the statement, saying he did not comment on the Citizen Council movement‘s history.  He commented on the business community in Yazoo City. 

Today, Barbour, who has a Jefferson Davis autographed confederate flag hanging in his office, attempted to do a complete 180.  He issued a statement today saying, “when asked why my hometown in Mississippi did not suffer the same racial violence when I was a young man that accompanied other towns‘ integration efforts, I accurately said the community leadership wouldn‘t tolerate it and helped prevent violence there.  Their vehicle, called the Citizens Council, is totally indefensible, as is segregation.  It was a difficult and painful era for Mississippi, the rest of the country and especially African-Americans who were persecuted in that time.” 

Indefensible. 

Yet, in 2003, Barbour took this chummy photo at a barbecue fund-raiser for the modern day version of the group, which was kicked out of CPAC in 1993 because, as American Conservative Union head David Keen (ph) said, “they are racists.” 

Joining me now is Blair Kelley, history professor at North Carolina State University, author of “Right to Ride, Streetcar Boycotts and African-American Citizenship in the Era of Plessy Versus Ferguson.”

Professor Kelley, thanks so much for your time tonight. 

BLAIR KELLEY, PROFESSOR, NORTH CAROLINA STATE UNIVERSITY:  Thanks for having me. 

HAYES:  So what‘s your reaction to this incident?  It‘s sort of interesting to see the arc of this.  And it recalls a little bit the Trent Lott, Strom Thurmond statements.  But as you watch the original comments and now the walk back, what‘s your talk away from this? 

KELLEY:  Well, I‘m glad to hear that Haley Barbour has walked back those comments, because there is really nothing ambiguous about the history of the White Citizens Councils.  They were formed in 1954 in response to the Brown decision.  They were segregationist and they were attempting to stop black progress in the state of Mississippi, particularly even in Yazoo City, Mississippi, where Barbour is from, where black students were under funded in their own schools.  Three dollars were spent to educate each black child, while over 200 dollars was spent to educate each white child in that community. 

HAYES:  Professor—

KELLEY:  So when the NAACP, when they organized—I‘m sorry. 

HAYES:  I‘m sorry.  We have a little bit of a delay.  I wanted to ask you if you think—when something like this happens, when you have a white politician from the south of a certain age say something like this, like we saw with the Strom Thurmond comments, Trent Lott, I think there are these kind of two interpretations, which is that this is him accidentally sort of saying what he actually believes to be the case, or that this is dog whistle politics that sort of play on these racial attitudes. 

What‘s your sense of this comment in that spectrum? 

KELLEY:  Well, I believe the governor is thinking of a presidential bid.  As part of any run for the presidency, you have to think about family history, where you come from, and that narrative of who you are has to be part of it.  Where Barbour is from and the history that surrounds him has this troubling legacy of being steeped in a segregationist dogma. 

He could make two choices here, one to sort of say, you know, we were wrong and I don‘t embrace these any of these ideas now.  Or what he seems to be trying to do is to improve the image of what exactly happened with the White Citizens Councils, made up of business leaders, indeed, but business leaders who led the charge of economic reprisals against those who dared to protest for the full citizenship. 

HAYES:  There was an incident that David Halberstam wrote about at the time.  It actually happened in Yazoo City, am I right, in which the local Citizens Council -- 

KELLEY:  Yes. 

HAYES:  How did they carry out that economic reprisal? 

KELLEY:  They chose to foreclose on mortgages, to stop renting to those black business leaders who had signed a petition forwarded by the NAACP there in Yazoo, at the request of Medgar Evers and the state NAACP in Mississippi.  They basically sent a hearse to one man‘s house who had signed the petition, basically offering a threat. 

They had published the names of everyone who had signed the petition in the local newspaper.  Then the community itself stopped doing business with those who were pushing for their rights.  So while they did nothing in particular to physically attack people, they attacked them economically.  Many of them left the county altogether in the wake of this White Citizens campaign. 

HAYES:  Blair Kelley, professor of history, as you can probably tell from that interview, at North Carolina State University, I really appreciate you taking the time tonight.  Thanks so much. 

KELLEY:  Thanks for having me.

HAYES:  A preview of COUNTDOWN‘s favorites for 2010 next.

(COMMERCIAL BREAK)

HAYES:  It was an historic year for Nevada Republicans.  They ditched the chickens for check-ups lady in the primary in favor of a more thoughtful, articulate opponent to take on Harry Reid, one who advocates armed insurrection and who isn‘t afraid to tell a group of Latino students they look Asian. 

And Tea Party favorite Sharron Angle told Fox News that she only wants reporters to ask her the questions she wants to answer, so that they would report the news the way she wants them to.  It was quite surprising she agreed to an interview with Keith Olbermann. 

Our number one story, in a preview of COUNTDOWN‘s favorites, airing this Thursday, a look back at the exclusive one on one.  And by exclusive, I mean we just made it up. 

(BEGIN VIDEOTAPE)

OLBERMANN:  Sharron Angle, Republican Senate candidate from Nevada.

You are a big sport for joining us here.

SHARRON ANGLE, CANDIDATE FOR SENATE IN NEVADA:  Well, first of all, Neil, it‘s great to be on your show to talk about this campaign.

OLBERMANN:  Let‘s start with the remarks you made to Carl Cameron from Fox.  I was thinking he may have missed what you meant, that interviews are for letting voters see how you handle yourself on the fly, under pressure.  That‘s the whole point, right?  For the voters?

ANGLE:  The whole point of an interview is to use it, like they say, earned media, to earn something with it.  And I‘m not going to earn anything from people who are there to badger me and batter, you know, use my words to batter me with.

OLBERMANN:  That would explain why you‘ve been doing interviews with Fox rather than interviews in front of the audiences that real journalists get, right?

ANGLE:  Well, in that audience, will they let me say I need 25 dollars from a million people?  Go to SharronAngle.com.  Send money.  Would they let me say that?

OLBERMANN:  No, ma‘am, they would not.  But we will.  Would you like to say it again, as if you‘re on Fox?

ANGLE:  I need a million people with 25 dollars.  They can send that to SharronAngle.com.

OLBERMANN:  Terrific.  For equal time, can you say HarryReid.com for people who want to donate to Harry Reid?

ANGLE:  SharronAngle.com.

OLBERMANN:  OK.  Tell us, how did you get into the race?  Did God just call you to run or did he also prepare you?  Maybe the word isn‘t prepare.  Equip you?

ANGLE:  When God calls you, he also equips you.  He doesn‘t just say, well, today you‘re going to run against Harry Reid.  There is a preparation.  Everyone in the Bible—when you read the Bible, you can see that preparatory time.  Moses had his preparatory time.  Paul had his preparatory time.  Even Jesus had his preparatory time.  So my preparation began on a school board.

OLBERMANN:  You said that God equips you.  And you have talked previously about the role Jesus plays in your life.  How have they helped with your campaign?

ANGLE:  They began to remake our website.  And they said, you know, you‘re pretty wordy, Sharron.  I am pretty wordy.  I say that‘s one of the benefits of electing me as a U.S. senator.  I‘ll be able to lead a filibuster.  But they said, you‘re pretty wordy.  What you need to do is condense this into small, very precise statements about who you are.  And so that‘s what they began doing, was making precise statements.  We‘re not completely there yet.

OLBERMANN:  Can you give us some examples of the precise statements you‘ve come up with so far about who you are?

ANGLE:  Jimmy Carter.

OLBERMANN:  Well, that‘s a surprise.  Anybody that Republicans could relate to better?

ANGLE:  Dick Morris.

OLBERMANN:  Anybody mainstream America could relate to better?

ANGLE:  I am mainstream America.

OLBERMANN:  OK.  Tell us a little bit about your childhood, growing up as part of mainstream America.

ANGLE:  We did those things as a kid growing up that Americans don‘t do.  We cleaned bathrooms and made beds and swept floors, did laundry, those kinds of things.

OLBERMANN:  Laundry?  Who does laundry?  You‘re crazy.  As a grown-up, though, Mrs. Angle, what do you make of your opponent‘s campaign so far?

ANGLE:  When they resort to personal attack and name-calling, it means they haven‘t got anything else.

OLBERMANN:  Name calling?  How dare they.  How do you define this race without resorting to personal attack and that kind of name-calling?

ANGLE:  I‘m running for the people‘s seat in the United States Senate, now occupied by the let‘s make a deal, tax and spend, good old boy politics as usual, Harry Reid.

OLBERMANN:  You want to try that answer again, just in case anybody might think you were calling Harry Reid names?

ANGLE:  He‘s—let‘s make a deal, raid the Social Security lockbox, tax and spend Harry Reid.  We have to ask Harry why he doesn‘t care about Nevada, why he doesn‘t care about America.

OLBERMANN:  I know you didn‘t mean that.

ANGLE:  Like I said, he doesn‘t care about America.

OLBERMANN:  Not the way you do, anyway.  Stop me on this one if I‘m wrong.  But as a U.S. senator, you‘d be in the business of creating jobs.  That means that you would—

ANGLE:  As your U.S. senator, I‘m not in the business of creating jobs.

OLBERMANN:  Of course not.  Who wants a job when you can get unemployment.

ANGLE:  You can make more money on unemployment than you can going down and getting one of those jobs.

OLBERMANN:  Of course, unemployment benefits aren‘t the only problem.  Deficit, mortgages, the economy have become a major threat to the American way of life.  As a strong Republican, what do you suggest we do about this awful economy?

ANGLE:  Water board the economy.

OLBERMANN:  We‘re almost out of time, Mrs. Angle.  Or  should I say Senator-Elect Angle.  In fact, this interview went so well—I can‘t believe I‘m really saying this on television, but Sharron Angle, I love you.

ANGLE:  I love you too.

(END VIDEOTAPE)

HAYES:  COUNTDOWN‘s favorites air this Thursday at 8:00 p.m. Eastern.  That‘s December 21st.  I‘m Chris Hayes, in for Keith Olbermann.  You can see more of my work at TheNation.com.  Rachel Maddow, live from the 92 Street Y, is up next.

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