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'The Last Word with Lawrence O'Donnell' for Friday, July 1, 2011

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Guest Host: Chris Hayes

Guests: Jared Bernstein, Sally Kohn, Steve Kornacki, Dahlia Lithwick, Rick Pearlstein

CHRIS HAYES, GUEST HOST:  I‘m Chris Hayes, in for Lawrence O‘Donnell.

There was a time when Republicans would have at least pretended their tax cut obsessions would help the middle class.  Now, they‘re just boldly defending the dignity of our long-suffering private jet-owning overlords.  Only losers fly commercial.

(BEGIN VIDEOTAPE)

(MUSIC)

ANDREA MITCHELL, NBC NEWS:  In Minnesota, the state government is closed.

UNIDENTIFIED MALE:  The happy holiday Minnesota.

HAYES (voice-over):  No matter where, no matter what, Republicans refuse to raise revenue to pay the bill.

MITCHELL:  The state‘s second shutdown in six years.

TIM PAWLENTY®, PRESIDENTIAL CANDIDATE:  Democrats demanding that we raise taxes applaud the Republicans for standing strong.

MITCHELL:  Some 20,000 state employee jobs are now in limbo.

UNIDENTIFIED MALE:  It‘s going to probably, you know, affect our bottom line.  Our campground is now closed.

HAYES:  From Minnesota to Washington, Republicans will do anything to protect the wealthy.

UNIDENTIFIED MALE:  Corporate jets, aircraft industries, pushing now at the harsh words from the president on Wednesday.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  Corporate jet owner that has done so well to give up that tax break.

UNIDENTIFIED FEMALE:  You don‘t give us what we want, we won‘t raise the ceiling.

UNIDENTIFIED MALE:  Nobody‘s bumping.

UNIDENTIFIED MALE:  Raise taxes on owners of private jets, that that somehow is going to make a difference, it‘s disappointing.  It‘s class warfare.

SEN. MITCH MCCONNELL ®, KENTUCKY:  Congress isn‘t going to approve hundreds of billions in tax hikes.

HAYES:  On the Republican campaign trail, Mitt Romney rewrites Mitt Romney.

MITT ROMNEY ®, PRESIDENTIAL CANDIDATE:  I didn‘t say the thing was worse.

He made it worse.

He didn‘t create the recession, but he made it worse.

But he made it worse.

I didn‘t say that things are worse.

HAYES:  And when did rewriting become so funny?

CHRIS CILLIZZA, WASHINGTON POST:  Michele Bachmann.

UNIDENTIFIED MALE:  Get off-key or not factually correct.

JON STEWART, THE DAILY SHOW:  The America history challenge hotness.

STEPHEN COLBERT, THE COLBERT REPORT:  I‘m reminded us as we stand here, of the pilgrims who on this very spot but in Massachusetts filed their papers to form Plymouth PAC.

(END VIDEO CLIP)

HAYES:  Good evening from Washington.

It‘s unbelievable but it‘s come to this—Republicans in Congress may actually push the United States economy over a cliff to protect corporate jets tax breaks.  Members of military may not get paid so we can continue to fund corporate jet tax breaks.  The United States could lose its AAA credit rating and incur tens of billions in additional interest payments in defense of, yes, corporate jet tax breaks.

Keep in mind, we‘re not even arguing right now about new taxes, because, of course, Republicans will not stand for those.  No ifs, ands or buts.  No.  We‘re talking about reducing the subsidy the government gives out to people that own corporate jets.  That‘s the terrain upon which the budget battle is now being waged.

Does anyone believe when the Dow is 12,500 when 88 percent of income gains in the recovery has gone to corporate profits and only 1 percent to wages and salary, but there is a class war waged against America‘s corporate jet owners?

Here‘s the headline from today‘s “Wall Street Journal”: President Gets Flak for Jet-Tax Idea.  Business leaders and some union officials, solidarity there, criticized the president, saying such a move could jeopardize the executive aircraft sectors still fragile recovery.  The mini backlash from the aviation industry showed how discussion of even small largely symbolic tax increases can provoke angst among those directly affected.

Of course, the entire U.S. economy is in a still fragile recovery.  And so, by that logic, we shouldn‘t be undertaking any deficit reduction in the near-term.

But Washington seemed intent un-contractionary fiscal policy is a corporate jet owner‘s angst worse than a teacher who can lose her job because of spending cuts?

Freshman Republican Senator Marco Rubio attacked President Obama on the Senate floor yesterday for not appropriately empathizing with the corporate jet owning class.

(BEGIN VIDEO CLIP)

SEN. MARCO RUBIO ®, FLORIDA:  The idea that if we raised taxes, as the president said, on millionaires and billionaires, raise taxes on oil companies, raise taxes on owners of private jets, that that somehow is going to make a difference in America‘s debt in terms of having a real impact is not only misleading, I think, quite frankly, it‘s disappointing.  It‘s class warfare and  it‘s the kind of language you would expect from a leader of a third world country, not the president of the United States.

(END VIDEO CLIP)

HAYES:  The conservative “National Review,” Rubio continues his assault on the president, accusing him of using the rhetoric of a, quote, “left wing strong man.”

If President Obama is a left wing strong man for targeting a corporate jet tax subsidy, and Alan Greenspan must be a Trotskyite for saying the U.S. should return to Clinton era income tax rates.

The current position of the Republicans in Congress that they will allow the U.S. to default on its debt unless there‘s a deficit reduction deal with absolutely no revenue component is so insane, so totally ludicrous that a series of Republicans are now publicly calling out their party in an effort to sound the alarm.

The latest Republican to issue a cry for help is former Senator Pete Domenici who is quoted in “Bloomberg” today saying, “The debt‘s coming due and the Republicans say it isn‘t coming down.  They‘re wrong.  Who do we get?  Bring God down, Christ?”

The treasury‘s official drop dead date for raising the debt ceiling is August 2nd but an agreement needs to be reached before then in order to write, score and vote on legislation in Congress.  But if Republican Party elders cannot get through to the obstinate caucus, what can President Obama possibly say to convince them?

Joining me now, Jared Bernstein, former chief economist to Vice President Biden, currently a senior fellow at Center on Budget and Policy Priorities and MSNBC contributor and in Aspen I believe; and Sally Kohn, the founder of the Movement Vision Lab.

Welcome to you both.

SALLY KOHN, MOVEMENTVISION.ORG:  Thank you.

JARED BERNSTEIN, MSNBC CONTRIBUTOR:  Thank you.

HAYES:  OK.  Jared, does it scare you at all?  I mean, there‘s a certain way of understanding this, which is this is political theater.  They always do this and Lawrence has been on this show and played clips from “The West Wing,” this has been going on forever.  There‘s one way of viewing political theater and others that there‘s actually something new here.  That there‘s a difference in kind in the kind of resistance we‘re seeing the Republicans, that‘s actually quite scary.

Which of those two scenarios do you think it is?

BERNSTEIN:  I think it‘s both.  I think it‘s very scary political theater.

But, you know, the thing about it is, when you call it political theater, it sounds costless.  Everyone‘s in their corner trying to get the leverage they think they need in order to get the best deal.  It‘s not costless by any stretch of the imagination, because every time the bond market begins to get worried and yields, interest rates go up, that means the budget deficit rises.  That means it costs that much more to service the debt.

If interest rates go up half a percent, that‘s $50 billion more on debt service.

So, it‘s not hard to convince yourselves that Republicans are, you know, deeply hypocritical on debt and deficit.  I mean, one thing I always like to remember is that these are the folks that voted for the Paul Ryan budget, which unquestionably implies a $6 trillion increase in the debt ceiling.

So, it‘s really hard to get your head around this.  I don‘t think the theater is costless at this point, though.

HAYES:  Sally, I wanted to talk to you a little bit about where the center of this debate is, because you and I have had conversations about this before.  And, you know, we‘re talking about 17 percent of the whole being closed by increased revenue.  No rate hikes.  No claw backs on the—on the giveaway to the rich in the lame duck session -- 83 percent on the spending side.  It seems we‘re already so backed into a corner defending a very small portion of the turf.

KOHN:  Yes.  And I have to say, I‘m at least glad to see President Obama come out and swing a little harder.

Look, I mean, any American, any working class American who‘s worked harder and harder for the last 10 and 20 years and seen their paycheck not grow while seeing, as you‘ve noted, the share of the economy, the share ever the wealth for the richest 1 percent of 1 percent grow out of control, understand something has to be done.  The majority, the vast majority of country wants to see, not only some of the—but some tax increases, they support it.

Why won‘t the Democrats come out and really fight on this issue?

HAYES:  Jared, yes?

BERNSTEIN:  Let me say something about that, Chris.  Here‘s what I have in my mind.  Imagine somebody drops in to this country from outer space right now and looked at the nature of this debate.  They would very quickly conclude that the problem facing the American economy is that rich people don‘t have enough money and middle class people are doing far too well.

I mean, there is no other way to interpret that policy.  They also probably figure out that the policy road map that the Republicans are pushing is the best policy for growth and prosperity—completely, of course, disproved by the biggest recession since the Great Depression.

So, topsy-turvy upside down and to tell you the truth, I‘ve been in this town a couple of decades now—well, not in this town but in D.C.—and I really haven‘t seen anything like it, the extent of hypocrisy is a bit frightening.

HAYES: But, Jared, I want to stay with you just on this point, because you were you in the White House when the tax cut deal was put through in the lame duck session, that preserved the Bush tax cuts for the upper bracket.

BERNSTEIN:  Right.

HAYES:  If the Republican Party is resolutely and unanimously opposed under any circumstances to raising taxes, what is the next move?  How is that log jam broken in absence of some crazy crisis that has them running back?  I honestly can‘t see the path forward.

BERNSTEIN:  Yes.  Well, the path forward is an ugly one, because the path forward has to be calling, if it‘s not a bluff, it has to be calling their position.  There cannot be a deal without revenues in the deal.

If you try to squeeze out a path of budget sustainability or anything like that without revenue, you will have to cut government to the point where it would be unrecognizable, and I‘m talking about military, Social Security, you know, health security, retirement security, education, infrastructure, protection for low income people.

The reason why revenues have to be part of the deal is not because we want things to be balanced or things should be even or we want this and they want that, is because without revenue, the pressure on spending is so deep that you will cut the floor out from under this economy, and that is economically suicidal.

HAYES:  Sally, do you—what do you think about this idea of calling the bluff?  Because there‘s part of me that feels like, OK, fine.  They should say, you know, you want to mess around the debt ceiling and make our day because at the end of the day, Goldman Sachs holds treasuries and the Chamber of Commerce is going to be none too pleased when those defaults start.

KOHN:  Yes.

HAYES:  On the other hand, it also seems sort of terrifying because what happens in periods of crisis, or a double-dip recession is that working people get screwed.

KOHN:  I mean, that‘s right.  You know, look, I think we should announce the campaign instead of bleeding the middle class with more cuts, we should have every working person out there donate spinal fluid to the Democrats so they can help stiffen their spine, because you know, honestly, they shouldn‘t give in on this one.  This is insane.

If we don‘t stand for this, what do we stand for?  Instead of a little pinprick in the pockets of the rich—come on!  We‘re going to—

(CROSSTALK)

KOHN: -- back into the middle class.

HAYES:  Jared, hold on one second.

BERNSTEIN:  Sure.

HAYES:  I just want to push back on that, because I feel the same way.  But what does spinal fluid look like, right?  Because in terms of what that actually looks like, what it means is calling the bluff.  I mean, what it means is, is the president taking the microphone and saying, I will—I will not pass any debt ceiling deal that doesn‘t have tax revenue, right?

KOHN:  Yes.

HAYES:  He has to make an ultimatum of an equal ultimatum to the one on the other side about taxes.

KOHN:  Yes.  I mean, unfortunately, you know, they‘re backing the president into a typical situation.  But I think, frankly, the Republicans here, and not all Republicans, but the extreme right of the Republican Party, are acting like ideological terrorists.  They are literally willing to blow up our economy and the future of our nation to score a few political points.

And I think this is a point the president has to say, look, we don‘t negotiate with ideological terrorists.  We‘re going to stake a claim.  We‘re going to stand for working people and trust that if he does the principled and economically sound thing, the public will be with him and know where the real blame lies.

HAYES:  Jared?

BERNSTEIN:  I don‘t—that may be—I actually think that‘s a position he may need to think at the end.  I wouldn‘t go there yet.

But let me say this about—you mentioned Wall Street and you mentioned the business community, the Chamber of Commerce, I‘d like to know where they are in this debate.  I understand that there‘s a wing of the conservative party that is off the cliff on this stuff, but I can‘t believe that businesses want to be looking at a default, that groups that represent small business, I‘m thinking of the Chamber here, want to see this fragile recovery, you know, rock to its core.

So, I would like—where are these folks putting pressure on Congress to take the right vote on this?  You know, President Obama said it I thought very correctly the other day—I‘m doing my best to lead this when we haven‘t had a system that requires other people to come to the table and negotiate, and for them to walk away, I‘d like to see some pressure from the other side on this, too.

HAYES:  Jared Bernstein, Sally Kohn—thank you so much both of you for your time.  Really Appreciate it.  Have a great holiday weekend.

KOHN:  Thank you, you, too.

BERNSTEIN:  Sure.

HAYES:  Only 49 states are up and running tonight.  Minnesota‘s government has shut down.  What could it mean for a certain former governor who is also running for president?  Steve Kornacki from “Salon” joins me next.

And later, an in-depth look at the most underreported story of the week.  Why with its 5-4 decision, the Supreme Court rules once again in favor of big money over small d democracy.

(COMMERCIAL BREAK)

HAYES:  The Minnesota‘s capital went dark today with the state‘s government shut down and tens of thousands of state employees are out of work.  Did this whole mess start with former governor-turned-Republican-presidential-candidate Tim Pawlenty?

FOX News has become America‘s number one source for misinformation and Republican propaganda.  New evidence has emerged of its origins in the dirty tricks world of the Nixon White House.  We‘ll examine Roger Ailes‘ original blue print for his, quote, “fair and balanced” media empire.

(COMMERCIAL BREAK)

(VIDEO CLIP PLAYS)

HAYES:  At the scene in Minnesota which is in a state of economic chaos tonight.  And all of us would do well to pay close attention, because what‘s happening there is a glimpse into our future if conservatives continue their unrelenting maximalist budgetary brinksmanship.

Early this morning, much of the state government shut down, closing everything from campgrounds to the DMV and causing a layoff of 22,000 state workers.  But it gets much, much worse as I‘ll show you in a moment.

First, the back story.  Former governor and current Republican presidential candidate Tim Pawlenty left a charred and smoking fiscal ruin for his successor.  Pawlenty claims credit for balancing budget on his watch but he did so by using the dreaded federal stimulus money and one-time fixes that included putting off some of the state‘s obligations and yes, he even raised taxes or fees as he calls them on cigarettes.

In so doing, Pawlenty left his successor, Democrat Mark Dayton, with a $5 billion deficit to tackle.  Dayton was willing to negotiate.  He offered a mix of spending cuts and tax increases on those making more than $180,000 a year.  Republicans said no.

So, Dayton sacrificed more, offering to only raise taxes on those making more than $1 million a year.  You know how many millionaires there are in Minnesota?  Seventy-seven hundred out of a population of 5 million.  That‘s less than 1 percent of the state.  Republicans again said no.

They then counter-offered, saying they would come up with a list of unspecified revenue increases, but only if Dayton was willing to sign on to a list of provisions obviously designed to destroy the state‘s Democratic Party, like placing restrictions on abortion and requiring photo ID for voters.

In other words, we‘ll bargain if you first concede to our list of obviously untenable and disruptive, preposterous demands.

What we‘re seeing in Minnesota is not all that different from places like Wisconsin and New Jersey where Republicans have taken the position that the entirety of budget shortfalls must be dealt with by cuts that fall hardest on working people and the poor and protecting to the last dime the sanctity of millionaires‘ bank accounts.

Pawlenty finally recalled, and I‘m not exaggerating when I say that, the state government shutdown that happened on his watch in 2005.

(BEGIN VIDEO CLIP)

REPORTER:  And we have some startling news -- 

PAWLENTY:  -- to continue for a while and the people of Minnesota would have seen the issues play out a little longer.

(END VIDEO CLIP)

HAYES:  Play out a little longer.

Here are some of the groups who‘d rather not play it out a little longer: food banks, the blind, those with mental health needs, and battered women.

(BEGIN VIDEO CLIP)

REPORTER:  And we have startling news from the Coalition for Battered Women.  The shutdown caused, they say, three emergency shelters to close overnight.

UNIDENTIFIED FEMALE:  As of last night, there are no available shelters in the metropolitan area.

(END VIDEO CLIP)

HAYES:  Joining me now, Steve Kornacki, political columnist for Salon.com.

Steve, thanks so much.

STEVE KORNACKI, SALON.COM:  Happy to be here.

HAYES:  Steve, I want to play some video of Governor Dayton explaining the impasse from earlier today.

(BEGIN VIDEO CLIP)

GOV. MARK DAYTON (D), MINNESOTA:  We made a lot of progress in the last couple of days because there was a real deadline, but this one basic difference remains—they don‘t want to raise revenues on anybody and I believe the wealthiest Minnesotans can afford to pay more in taxes.

(END VIDEO CLIP)

HAYES:  It seems to me like a perfect microcosm of basically everything going on across the country and in Washington.

KORNACKI:  It is the fundamental divide between the two sort of political philosophies, the two parties in this country today and the powers, sort of dynamics are similar in Minnesota, you know, to what they are in Washington, where you have, you know, the Democratic executive and you have the Republicans controlling the legislative branch—and the absolute bottom line, you know, position of the Republicans I wouldn‘t even call it a bargaining or negotiating position because they aren‘t trying to bargain and negotiate off it.  But the absolute bottom line for them is you can‘t raise taxes on anybody, any amount for any reason.

And, you know, what strikes me as sort of interesting about this, though, is I think Dayton is somewhat confident here because at the when this thing went down to the wire last night, there were some signs from Republicans in the Minnesota legislature that they were willing to, you know, maybe a way to come up with a bridge to keep this going for a few more weeks and negotiate a little longer.  They seem to be a little nervous about the prospect of the shutdown.

And Dayton‘s response then was pretty confident.  And it was no, suggested to me what he sees here, there is no negotiating a solution right now with the Republicans.  The only way to get the Republicans potentially off this position is shut down the government, people see what that means and people see and understand what that means Republicans are protecting.

And that‘s going to be interesting to watch in the days and weeks ahead.

HAYES:  And what‘s interesting to me also as you noted, this is a fundamental divide.  But there is an asymmetry, right?  Because there‘s a unanimity on the Republican side that there can be no tax increases.  There is no unanimity on the Democratic side there can be no spending cuts, right?

So, it‘s not what comes out of those two positions is a middle pact. 

In fact, Dayton starts out basically saying half spending, half cut taxes,

and then he says, OK, three quarter spending cuts, one quarter taxes, and

that‘s the sort of compromised last offer position that they walk away from

you wonder what is the possible path out of that if that‘s been dynamic set up.

           

KORNACKI:  Right.  And that‘s why I say I‘m hesitant to really call a negotiating position on the Republican side because they‘re just stating sort of an absolute, unmovable position.  And that‘s why I‘m interested to see what‘s going to happen, not just what it means for Minnesota but what it could mean nationally, you know, what happens in the next few weeks because Dayton‘s position seems to be—the only way I can actually get the Republicans to budge on this is basically if there‘s a revolt, if there‘s a revolt in Minnesota.  If you shut down the government, as Dayton did in the clip you showed, and has been doing, you know, for days and for weeks now, if he makes the case, listen, all they need to do is budge on taxes and we can reopen the government and we can restart these services, and its taxes only on a very, very small portion of the—you know, of the population.

If he makes that case and that case resonates, and these Republicans start feeling heat, I think he calculates that‘s the only way he can get them to move.  And I see, you know, that would be a lesson nationally if that works, if he takes that course and if that works, that‘s lesson for what might work nationally for Obama and the log jam in Congress.

HAYES:  Yes, the Minnesota model.

Steve Kornacki, thanks so much for your time tonight.  Have a great weekend.

KORNACKI:  Sure.  You too.

HAYES:  Gay marriage passes in New York, Michele Bachmann‘s latest history fail, even the debt ceiling debate all perfect material for the likes of Jon Stewart and Conan O‘Brien.

Friday funnies get THE LAST WORD tonight.

(COMMERCIAL BREAK)

HAYES:  Still ahead in this hour: the Supreme Court‘s newest justice, Elena Kagan, issued a blistering dissent in 5-4 decision on Monday.  She says the high court ruled against free speech.  Coming up, I‘ll tell you why she‘s right.

And does Roger Ailes outline his vision for FOX News nearly 40 years ago?  We‘ll examine the Nixon era memo entitled “A plan for putting the GOP on TV news.”

Ahead on THE LAST WORD.

(COMMERCIAL BREAK)

HAYES:  In tonight‘s spotlight, the single most under covered story of the week.  You might call it Citizens United, the sequel.  As Citizens United put a stake through our current campaign finance regulations, the court‘s latest ruling on campaign finance represents a ghastly attempt to kill off any future possibilities of reform. 

On Monday, the Supreme Court stuck drown a provision in Arizona Citizen‘s Clean Elections Act that provided additional funds to candidates who chose to accept public financing instead of private financing. 

Here‘s how that law worked.  If you run for office in Arizona, you can choose to be a publicly or privately funded candidate.  About two-thirds of candidates in Arizona opt for public financing.  Those candidates had access to an initial lump sum of public money to fund their campaign.

But if their privately funded opponent or their opponent‘s allies spend more money on their campaign than the publicly funded candidate received in their initial state grant, the state gives the public candidate additional, nearly matching, funds. 

To put it in terms of Sean Connery in “the Untouchables,” if you‘re the publicly financed candidate and you bring a knife, and your opponent pulls a gun, the state gives you a gun as well. 

Now, the public money isn‘t limitless.  A publicly funded candidate can‘t spend more than three times their initial grant.  But the law‘s intend and effect was to at least partially level the playing field and create incentives for candidates to seek public financing without imposing or mandating any restrictions on speech. 

Whereas other campaign finance laws have sought to limit expenditures, the genius of the Arizona law was to counter expenditures with more expenditures.  Alas, this was not good enough for the Supreme Court, which ruled, in a five to four decision, that those government matching funds are unconstitutionally impinging on the—get this—free speech rights of those who donate to privately funded candidates. 

A majority was identical to the majority in the shameful Citizens United decision, which, more or less, banned Congress from placing any limits on what private corporations can spend on electioneering. 

Now, the same majority is back to say even if you don‘t impose limits, but simply publicly subsidize candidates so as to level the playing field, you are violating the Constitution. 

Chief Justice Roberts wrote in the court‘s opinion, “we hold that Arizona‘s matching funds scheme substantially burdens protected political speech without serving a compelling state interest and, therefore, violates the First Amendment.” 

Obama Appointee Elena Kagan wrote a passionate dissenting opinion.  She argued the Arizona law, if anything, promotes free speech, because it entices more candidates to enter the race and keeps moneyed interests out of the election. 

She added, “they are making a novel argument that Arizona violated their First Amendment rights by dispersing funds to other speakers, even though they could have received but chose to spurn the same financial assistance.  Some people might call that chutzpah.” 

Joining me now, “Slate” senior editor and Supreme Court correspondent, Dahlia Lithwick.  Thank you for joining me, Dahlia. 

DAHLIA LITHWICK, SENIOR EDITOR, “SLATE”:  Thank you for having me. 

HAYES:  So what do you make of this decision?  At one level, it‘s not surprising.  I think this is what we thought was coming from oral arguments.  At another level, it really seemed out there to me.  And I‘m no lawyer.  So tell me if I‘m wrong. 

LITHWICK:  No.  I think you‘re right, Chris.  I think it builds on the crazy metaphor we heard in Citizen‘s United, that money equals speech and corporations equal people.  And now it really doubles down and says, oh, and by the way, non-speech equals speech and more speech equals less speech. 

So if you thought Citizens United turned the world on its head, this has turned the world on its head yet again. 

HAYES:  Getting into this sort of question of whether this is restricting speech, is there any precedent for this kind of argument, to say, look, if you subsidize another candidate, somehow that affects my First Amendment right? 

It just seemed—where was—I read both opinions.  What exactly was the legal practice that they were building on in this case to make that argument on the majority‘s side? 

LITHWICK:  Well, this is very much building on—and Chief Justice Roberts builds on case law that comes up when the court strike down the Millionaires Amendment in the Davis case.  And—

HAYES:  Explain that to us. 

LITHWICK:  He‘s really compounding—well, that was just the same sort of thing that said that—it tried to attempt to limit expenditures by people who were using their own money.  The court struck it down in Davis a few years ago, using a lot of the same rationales.  And in fact, I think folks knew that Davis was kind of the wormhole into this world. 

What‘s really, really important in this case, Chris, is that this a state ballot initiative.  The folks in Arizona in 1998 passed this, because they say that corruption is so rampant.  This is following a huge scandal, what‘s known in the court papers here as the worst public corruption scandal in Arizona state history. 

HAYES:  Wow. 

LITHWICK:  So the citizens of Arizona come forward and say, you know what?  We need to clean this up.  They pass this by ballot initiative.  So the court is not just saying, we‘re going to tinker yet again with campaign finance laws.  What they‘re doing is striking down the will of the people in Arizona, who say we want to get big money out of our elections.  It‘s corrupting the system. 

I should say one other thing.  In that as Abscam scandal that they were reacting to, almost 10 percent of the legislators were caught with their hand in the till, either taking bribes or accepting campaign funds, in order to trade votes on a gaming bill. 

People were literally, Chris—legislators were coming to meetings with empty duffel bags that they expected to leave having literally filled with cash.  That‘s what the people are Arizona were reacting to.  That‘s what the court disrespected. 

HAYES:  When you say literally filled with cash, you mean, of course, literally filled with speech, under the court‘s reasoning.

LITHWICK:  It‘s really amazing. 

HAYES:  Let me ask you this, the really scary thing, I think, about this is—you talked about the last decision being a wormhole into this one.  the question is what is this a wormhole into?  There is legislation in both the Senate and the House that would create something like the Arizona and Maine clean elections model for public federal elections, congressional elections. 

There‘s a tremendous amount of literature that suggests this might really go a long way towards break up the dysfunction system we have now.  Is the court saying we can‘t do that either? 

Because if they are, that seems crazy to me.  What are we going to do? 

LITHWICK:  I think we need to be clear on what this case doesn‘t do.  This case doesn‘t gut public financing altogether.  In fact, Chief Justice Roberts is careful to say that‘s not our business.  We‘re not touching the issue of public financing. 

What it is gutting in this case is this trigger system you described, right, where once you spend your money and they spend their money, and they spend more, the system triggers another grant of public funds to you.  That‘s what the—technically, the court does away with.

But I think you‘re quite right.  It looks like this is a short hop between this and doing away not just with public financing rules around the country, but also—and I think Elena Kagan makes this point so forcefully in his dissent, Chris.  She said says every argument that applies here, to this trigger system, also applies to disclosure rules. 

So if my speech as a privately funded candidate is being chilled because I don‘t want the other guy to speak, how much more so is my speech chilled by disclosure rules?  So I think that we‘re looking at a wormhole into disclosure, too. 

HAYES:  “Slate” senior editor Dahlia Lithwick.  She‘s the Supreme Court correspondent and wormhole correspondent at “Slate”,  Thanks again for joining me.  I appreciate it. 

LITHWICK:  Have a good weekend. 

HAYES:  Still ahead in this hour, the birth of Fox News.  A 1970 memo from the Nixon White House shows then presidential aide Roger Ailes hatching the idea for a conservative leaning network.  That‘s coming up. 

Last week, the New York State House passed the marriage equality bill giving one of its constituents, Jon Stewart, plenty of material for his show this week.  The late-night material, coming up. 

(COMMERCIAL BREAK)

HAYES:  It sounds like a conspiracy theory to say that Fox News was dreamed up inside the Nixon White House as a way to, quote, “provide pro-administration hard news to the major cities of the United States “.  It is not. 

Apparently the 15-page blueprint titled “A Plan For Putting the GOP on TV News” has been sitting on the shelves of the Richard Nixon Presidential Library in Yorba Linda, California, all these years.  Gawker.com, to its great credit, had the bright idea to call up Yorba Linda and published the memo yesterday. 

That memo, along with other recently retrieved documents, reveal that in the summer of 1970, Nixon aides wanted to circumvent the network news with their own version of the truth, proposed sending packaged, edited news stories and interviews directly to local television stations.

They explained, quote, “today, television news is watched more often than people read newspapers, than people listen to the radio, than people read or gather any other form of communication.  The reason?  People are lazy.  With television, you just sit, watch, listen.  The thinking is done for you.”

We don‘t mean you, of course, dear viewer. 

Then Nixon aide Roger Ailes, who later launched the Fox News Channel in 1996, hand wrote notes in the margins of the memo, saying, “basically an excellent idea.  Needs refinement and good organization.” 

The idea of providing fake news to local news station eager for free content was later actually realized in the George Bush White House, as Andrea Mitchell reported in 2005. 

(BEGIN VIDEO CLIP)

ANDREA MITCHELL, NBC NEWS CHIEF CORRESPONDENT:  On issues from Medicare to farm prices, hundreds of local stations are running stories extolling Bush administration policies, reaching tens of millions of people. 

UNIDENTIFIED MALE:  Bob Ellison (ph) has that story. 

UNIDENTIFIED MALE:  President Bush‘s choice to be the next agriculture secretary -- 

MITHCELL:  But all these reports were written and distributed by the administration and its PR firms, not by journalists. 

(END VIDEO CLIP)

HAYES:  Even by the early 1970s, Roger Ailes knew it would be more powerful to have this own network than to distribute news directly from the government.  After he was fired from the White House, he got a job at a new right wing network called TBN, which was bank rolled at the time by conservative beer magnet Joseph Coors.

Its goal was to get local news broadcast hooked on news clips the station could use without credit, and then gradually, subtly, slowly, inject their philosophy in the news.  Its motto, fair and balanced. 

TBN ended in 1975, and returned in 1996, when Roger Ailes launched Fox News.

Joining me now is Rick Pearlstein, historian and author of “Nixonland,” which I say without hyperbole is a masterpiece that you should read.  Rick, before we get to you, Fox News released this statement in response to the “Gawker” story, “we are not going to respond to memos that were allegedly writing more than 40 years ago.  However, if Mr. Ailes have the idea for Fox News nearly half a century ago, he would have beaten CNN and MSNBC sooner.  Some trash talk from the folks at Fox.”

Rick, what surprised you most from these newly released documents? 

RICK PEARLSTEIN, AUTHOR, “NIXONLAND”:  Nothing much, Chris, I have to say.  This document, I think, was written by Chuck Colson.  You know, we‘re talking about Roger Ailes, but we might as well talk about him.  Colson is also a very prominent figure on the religious right, right now. 

This sort of thinking about how to kind of manipulate and manage the public has been going on, on kind of the plutocratic, kind of corporate right, for more than 40 years. It‘s been going on since the ‘30s and ‘40s.

I mean, the Chamber of Commerce, the National Association of Manufacturers, they were writing hundreds and hundreds of kind of fake news releases that they would make look like they were news, and distributing them to, you know, not only newspapers, but churches and schools. 

I mean, it‘s really astonishing that a movement that‘s supposedly based on a reverence for the free market simply understands that they can‘t possibly compete in the market for ideas and have to fix it. 

HAYES:  I first came across the story at how Roger Ailes and Richard Nixon met in your book, in “Nixonland.”  It‘s a great story.  How did they first encounter each other? 

PEARLSTEIN:  Well, Richard Nixon was, of course, sitting in the makeup chair of that distinguished news program, “the Mike Douglas Show .” And Roger Ailes was this kind of whiz kid producer.  He was like 26 years old. 

Richard Nixon nervously makes some joke about how ridiculous it is, the things you have to do to run for president these days.  You have to show up on this lady‘s day time TV shows. 

Roger Ailes was a pretty gutsy guy.  He looked Nixon in the eye, this 26-year-old, the vice president of the United States, and he said, if you think that TV is ridiculous, you‘re never going to become president. 

And Nixon said, this is my guy.  Pretty soon, he was working for Richard Nixon.  Low and behold, within a year, he had introduced one of his fabulous innovations in the fraudulent presentation of news, the fake town hall meeting, which was something he introduced for the 1968 campaign, where they‘d get 100 Nixon loyalists, set them up as an audience, have Richard Nixon ask kind of prepared, canned questions, and then cut them into 30-second commercials, while these wildly applauding supposedly ordinary citizens off the street acted at props for the presidential campaign. 

HAYES:  There‘s a great memo in the documents “Gawker” got about a TV

about a Christmas lighting in which Nixon has a little boy do the lighting.  But the memo—this is the attention to detail of the propaganda.  The memo says to make sure that both Nixon and the little boy flip the switch, so that the headlines the next day don‘t read, you know, this little boy‘s name lights the White House Christmas tree.  

PEARLSTEIN:  Right, you wouldn‘t want an eight-year-old upstaging Richard Nixon.  Now, the thing that really comes out of this—it‘s funny.  We can laugh.  But all of these memos, even the Christmas memo, but also the 1970 let‘s form a fake news distribution outfit memo, show how incredibly sophisticated Roger Ailes was about the medium of television. 

One of my favorite parts of the memo was when Colson wrote in the memo, you know, this is really going to work because TV newscasters and producers are so desperate to get raises from bosses, they‘ll want to impress them by having their local senator on for an interview.  They‘ll be basically bamboozling their bosses into making them think they got some exclusive interview from Washington. 

He understood.  He got under the skin and the mind set of these kind of low-level kind of TV production workers, these low-level TV air talent, and understood how to manipulate their minds.  And of course, you know, manipulating is what Roger Ailes is all about and what he does so well.

In fact, in 1972, he told the “the Washington Post” that he had this great idea.  He was going to produce news releases and make them look like real news clips.  And low and behold, he did it.  And no one imagined then how big it would become. 

It turns into Fox News, which is literally the tail that wags the dog in setting the national agenda on so many of these issues. 

HAYES:  It does feel, going back to this memo, that we are—the sort of post-truth politics era in which we live is Roger Ailes‘ work. 

PEARLSTEIN:  Yeah.  My favorite line also is he says—if I can look down—“this will avoid the censorship, the priorities, the prejudices of network news selectors and disseminators.”

In other words, let‘s parse this.  The people like Walter Cronkite, the people like David Brinkley are the biased and prejudiced people.  The Nixon White House deciding which Republican senators are going to be interviewed, how the interviews are going to be edited and who‘s going to see them, they‘re the honest brokers. 

HAYES:  That‘s the truth.  Rick Pearlstein, author of “Nixonland,” thank you so much.  Really appreciate it.  Have a great weekend. 

PEARLSTEIN:  Thanks, Chris.  Take care. 

HAYES:  Coming up, Fox fan favorite Michele Bachmann made her presidential run official this week when the kings of late night welcomed her to the race like only late-night can.  Friday funnies are next.

(COMMERCIAL BREAK)

HAYES:  Debt talks, Illinois former governor convicted on 17 criminal counts, Michele Bachmann‘s gaffes and New York passing the marriage equality bill.  They were all top headlines this week.  And they all provided fodder for late-night comedians.  Here‘s this week‘s Friday‘s Funnies.

(BEGIN VIDEO CLIP)

JON STEWART, “THE DAILY SHOW”:  Gay marriage passed and, of course, you know what that means. 

UNIDENTIFIED FEMALE:  The city estimates the new law will bring more than 180 million dollars to the state in the next three years. 

STEWART:  Yes, excellent.  Ladies and gentlemen, I also am cashing in. 

It‘s the perfect time to roll out my new Jon Stewart brand Tux-Speedos. 

CONAN O‘BRIEN, “CONAN”:  Reverend Pat Robertson said if more states legalize gay marriage, God will destroy America.  Yeah, and then God will rebuild America into the greatest dance club the world has ever known. 

STEWART:  Finally, New York State‘s gay and lesbian community are free from the burden that was having to set foot in Connecticut in order to get married. 

Oh.  Really?  The nuptials are in Stanford.  Hmm. 

DAVID LETTERMAN, “THE LATE SHOW”:  Anybody here for the gay pride parade yesterday?  I went dressed as Michele Bachmann. 

O‘BRIEN:  Today, Michele Bachmann said her home town of Waterloo, Iowa, is the birthplace of John Wayne, when actually it‘s the birthplace of serial killer John Wayne Gacy. 

STEPHEN COLBERT, “THE COLBERT REPORT”:  I think there is something to that, because, like Gacy, people might think you‘re a clown.  But if they dig a little deeper, they‘ll find that you are deadly serious. 

When you stumble on facts, you don‘t get backed into a corner.  You double down.  You say not only do you have the spirit of John Wayne Gacy, you‘ve got the eyes of a young Charles Manson. 

BACHMANN:  John Quincy Adams most certainly was a part the Revolutionary War era.  He was a young boy, but he was actively involved. 

COLBERT:  Right.  But he wasn‘t a founding father.  I mean, he was 9 at the time.  If he‘d signed the Declaration of Independence, this is what it would have looked like. 

JIMMY KIMMEL, “JIMMY KIMMEL LIVE”:  In other disgraced politician news, former Illinois Governor Rod Blagojevich -- 

ROD BLAGOJEVICH, FORMER ILLINOIS GOVERNOR:  My hands are shaky, my knees are week.  I can‘t seem to stand on my own two feet. 

STEWART:  You‘re quoting Elvis on your way to hear a criminal verdict and you go with, “All Shook Up”?  “Jailhouse Rock” doesn‘t come up in that? 

KIMMEL:  Convicted on 17 of the 20 corruption charges filed against him.  He was convicted of extortion, water fraud, bribery and criminal abuse of styling moose. 

BLAGOJEVICH:  Among the many lessons that I‘ve learned from this whole experience is to try to speak a little bit less.  So I‘m going to keep my remarks kind of short. 

STEWART:  You weren‘t convicted of not being concise.  Your words on Obama‘s Senate seat: “I got this thing and it‘s (EXPLETIVE DELETED) golden and I‘m just not giving it up for (EXPLETIVE DELETED) nothing.” 

That‘s actually quite succinct. 

BILL MAHER, REAL TIME WITH BILL MAHER”:  Yesterday the Republicans

walked out of the meetings.  They just walked out.  Apparently the story

was Eric Cantor got mad at John Boehner because he went golfing with Obama,

and talked about stuff that Cantor wasn‘t in on.  And that‘s it for this

week‘s episode of “Real Housewives of D.C “

STEWART:  Democrats say we have to raise America‘s 14.3 trillion dollar debt ceiling before August 2nd

You can cut spending or raise taxes.  If you take one of those off the table completely, you‘re not really negotiating.  It‘s like saying, I will do anything for love, but I won‘t do that.  You really wouldn‘t then do anything for love.   So I guess what I‘m saying is Meatloaf‘s premise is faulty.

O‘BRIEN:  President Obama held a press conference today.  I‘m sure you all watched it.  He  held a press conference where he talked about how he is going to tackle the growing debt crisis.  This is important. 

OBAMA:  The money has been spent. 

STEWART:  Sam, you‘re in the future where we did not raise the debt ceiling as the Republicans wanted.  Are there troubles? 

SAM BEE, “THE DAILY SHOW”:  No.  Not really.  The Republicans got everything they wanted.  America declared bankruptcy.  And in receivership, restructured our country as this fully privatized capitalist utopia. 

(END VIDEO CLIP)

HAYES:  Laughs get THE LAST WORD for the week.  I‘m Chris Hayes, in for Lawrence O‘Donnell.  You can read more of my work at TheNation.com, or follow me on Twitter, ChrisLHayes. 

           

“THE RACHEL MADDOW SHOW” is up next.  Good evening, Rachel. 

END   

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