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'The Last Word with Lawrence O'Donnell' for Wednesday, July 6, 2011

Read the transcript to the Wednesday show

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Guest Host: Chris Hayes

Guests: Jonathan Alter, Gene Sperling, Ryan Grim, Archie Bland, Dave Zirin

           

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

There‘s something rotten in the state of England where a piece of Rupert Murdoch‘s media empire is under investigation for truly grotesque behavior.

Here at home, the president bypasses the media and goes straight to the Internets.  The hashtag era has officially arrived.

(BEGIN VIDEOTAPE)

(MUSIC)

UNIDENTIFIED MALE:  I apologize for interrupting the prime minister.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES:  Schnapps (ph) -- when Schnapps talks about free market options.

HAYES (voice-over):  Welcome to question time.

OBAMA:  I am going to make history here as the first president to live tweet.

HAYES:  The president returns to social media to face the nation‘s questions.

ANDREA MITCHELL, NBC NEWS:  Twitter town hall or tweet-up on the economy and jobs.

MODERATOR:  Twenty-seven percent of our questions are in the jobs category.

OBAMA:  What costs would you cut, what are the programs that can help us grow?

UNIDENTIFIED FEMALE:  In a balanced way.

MODERATOR:  Our next question comes from someone you may know, this is Speaker Boehner.

OBAMA:  There you go.

(LAUGHTER)

MITCHELL:  Will you take job-destroying tax hikes off the table?

OBAMA:  This is a slightly skewed question.

LUKE RUSSERT, NBC NEWS:  Debate really will be settled by Speaker Boehner and President Obama.

OBAMA:  Eventually, I‘m sure the speaker will see the light.

HAYES:  The British prime minister wishes he could be so lucky.

UNIDENTIFIED MALE:  I apologize for interrupting the prime minister.

HAYES:  International outrage against Rupert Murdoch‘s media empire.

CHUCK TODD, NBC NEWS:  All the way to the British parliament today.

UNIDENTIFIED MALE:  The biggest press scandal in modern times.

UNIDENTIFIED MALE:  The mobile phones of several who lost family members in those attacks were hacked by the “News of the World.”

UNIDENTIFIED MALE:  Murder victims, terrorist victims who have their phones hacked.

UNIDENTIFIED MALE:  (INAUDIBLE)

TODD:  Michelle, this is just disgusting.

UNIDENTIFIED FEMALE:  Disgusting, disgraceful, heinous.

UNIDENTIFIED MALE:  He used the word targeted, some of those police officers.

UNIDENTIFIED MALE:  This government will behave in a proper way.

UNIDENTIFIED MALE:  Mr. Speaker, I‘m afraid that answer was out of touch with millions of people.

(CHEERS)

UNIDENTIFIED MALE:  Mr. Speaker, this is not the time for technicalities or -- 

(CHEERS)

HAYES:  And members of Congress will have to explain calling for cuts, just not at home.

EZRA KLEIN, MSNBC CONTRIBUTOR:  If they‘re not going to do all that much to make the country better, the least they can do is avoid making it any worse.

(END VIDEOTAPE)

HAYES:  Good evening from Washington.

Tomorrow, eight lawmakers of both parties will meet with President Obama to try and reach an agreement to reduce the deficit and raise the debt ceiling.

But the impasse on raising tax revenues remains.  And if you‘re beginning to feel as if this waiting game will have the same unsatisfying conclusion as waiting for Godot, you are not alone.

Congressional Republicans are refusing to even discuss raising revenues by raising tax breaks or loopholes, even the seemingly indefensible ones, like tax breaks for corporate debts.  That‘s despite the facts that a laundry list of conservatives, most recently David Brooks, have offered Republicans political coverage to take the deal currently offered by the administration, which is, one hesitates to note, $3 of spending cuts for $1 of revenue, a compromise wildly in favor of Republican priorities, and one who would imperil possibly the already anemic recovery.

Today, the Republicans answered the president‘s call yesterday for both parties to check their ultimatums at the door by repeating their ultimatum.

Republicans are threatening to blow up the economy by refusing to raise the debt ceiling unless President Obama and the Democrats capitulate and adopt the Grover Norquist position on tax revenues.

Here‘s how the president participating in the first ever Twitter town hall at the White House today responded to the Republicans.

(BEGIN VIDEO CLIP)

OBAMA:  Never in our history has the United States defaulted on its debt.  The debt ceiling should not be something that is used as a gun against the heads of the American people to extract tax breaks for corporate jet owners or oil and gas companies that are making billions of dollars because the price of oil—gasoline has gone up so high.  The notion that the U.S. is going to default on its debt is just irresponsible, and my expectation is that over the next week to two weeks, that Congress, working with the White House, comes up with a deal that solves our deficit, solves our debt problems, and makes sure that our full faith and credit is protected.

(END VIDEO CLIP)

HAYES:  Joining me now is Gene Sperling, the director of the National Economic Council, and assistant to the president for economic policy.

Gene, thanks so much.

You were in the White House in 1995, the last time there was a Democratic president in a Republican-led House.  And they were at odds over the budget.

What do you think has changed, what strikes you as different this time around?

GENE SPERLING, NATIONAL ECONOMIC COUNCL:  Well, truthfully, what we have inherited is much worse.  Obviously, in ‘95, we were fighting to bring the deficit down, but we had passed the ‘93 Deficit Reduction Act, and the deficit was at least on the way down.  Now, we‘re inheriting, really, the worst financial recession since the Great Depression, and this president inherited a $1.3 trillion deficit.

So, the problem is greater.  You do have the same type of division that you had in ‘95, and what we really just have to hope is we can work through that quicker than we did last time.

And I think what the president is doing tomorrow in calling the leadership down is saying everybody has got to check their politics, their rhetoric, their ultimatums at the door and see if we can find common ground on a major downpayment on deficit reduction that‘s done in a way that will help not discourage this recovery from gaining more strength, still leave room for investing in our future, and honor our basic compacts on Medicare and Social Security.  The president thinks that is very possible but understands it‘s going to require compromise from all sides, Democrats as well as Republicans.

HAYES:  I want to ask you something in that vein about something the president said in his weekly address.

(BEGIN VIDEO CLIP)

OBAMA:  The government has to start living within its means, just like families do.  We have to cut the spending we can‘t afford so we can put the economy on a sounder footing, and give our businesses the confidence they need to grow and create jobs.

(END VIDEO CLIP)

HAYES:  There‘s two assertions in there.  One is that the government has to, quote, “live within its means” as families do.  And the other is that, essentially, the businesses need confidence, the problem we have in the economy right now and the lag is confidence.

I wonder, what is the empirical evidence for that?  On the first premise, right, governments are not like family balance sheets.  Families can‘t borrow 1 percent, they don‘t have access to the printing press.  And why is the president convinced that confidence is the problem in the recovery right now and not demand?

SPERLING:  OK, well, let me answer three parts.

Number one, no, families and governments are not exactly the same, but they both need to live within their means in their own way.  And for a country, you do not want to see your debt rising as a percentage of your income.  Worldwide, that is never seen as a sign of stability.  And so, you do want to—you do want to show you‘re getting in control of your deficits and your debt and bringing them down into a sustainable pace.  And that is what the president is trying to do by trying to bring together Democrats and Republicans for a deficit reduction package.

Secondly, there‘s probably $2 trillion of cash sitting on the sidelines.

HAYES:  Exactly.

SPERLING:  It‘s not all because of uncertainty because of the deficit, but it‘s a piece of the puzzle.  If you can give confidence that amidst this very divided government, we‘re capable of coming together, solving some of our problems, and putting the deficit on a downward path, getting our debt under control, I do believe that will be one component in creating confidence that will lead to longer-term investment that where people decide to locate here more, create long-term jobs.  That‘s very important.

But let me make the third point.  Nobody is suggesting that his alone is the answer.  That‘s why when the president puts forward his deficit reduction package, we always stress three things—one, it needs to be done in a way that‘s consistent with strengthening the recovery.  He has to phase it in.  The president has called for things like extending unemployment insurance.  He‘s called for things like extending the payroll tax cut, because he knows families are still struggling and this economy does need a little help to get the momentum we need.

And third, you know, we understand that you‘ve got to still leave room to invest in the future, in education, in innovation.  So, we very much believe that restoring our fiscal sanity is a component of the confidence we need to get investment and job creation.  But it‘s one piece of a president‘s larger economic strategy for shared prosperity.

HAYES:  I want to follow up on cash on hand of businesses.  You cited the statistic of $2 trillion and said that, clearly, uncertainty over the deficit isn‘t the totality of the reason that money is on the sidelines, but it‘s part of it.  I wonder why is it that the bond markets, which is probably the most deep and liquid market, the most profound sort of pricing instrument we have for precisely the kind of risks we‘re discussing here, are pricing risks so low, and interest rates continue to be at such historic lows, and yet people from the Chamber of Commerce and other people saying, “We‘re worried about the deficit.”

What explains that disconnect?

SPERLING:  Well, I think there‘s a lot of factors that go into the interest rates right now, but there‘s certain things you know that are just sound.  This isn‘t just the United States or President Obama, any country anywhere that has its debt escalating as a percentage of its income creates doubt about its sustainability.  That‘s got to discourage some people from feeling as good about the long-term investment, not just the short-term spike, but the decision to locate, invest here, create jobs.

But again, as I‘ve said many times, no one is suggesting this is the only piece of the puzzle, that‘s why the president fought so hard for “Win the Future” agenda, has stressed repeatedly that when the plane is overloaded, you take out some of luggage, not engine, not the education, not the innovation.

And also, there are values in how you do deficit reduction.  And we don‘t believe deficit reduction should be done in a way that puts all the burdens on the working poor or the middle class or the seniors.  It‘s got to be done in a way that is shared sacrifices, and that means asking those who are most well-off or have the most egregious corporate tax breaks to be part of the solution in getting deficit reduction.

HAYES:  We have just a little bit of time.  So, final question here, I just wanted to ask you—in terms of the “Win the Future” agenda that looks at the medium term and long-term, I wonder what is the “win the present” agenda?  What is short-term agenda?  What can Washington do in the next six months to get this stubbornly high unemployment rate that I think everyone thinks is intolerable down?

SPERLING:  Well, number one, I think it is true that you need the competence of a deficit reduction right now, but you don‘t want it to be front-loaded, so you‘ve got contraction that takes away the demand that you help—need for the economy.

Second, one of the things that‘s helped a lot of families deal with the higher gas prices and some of the stubbornness in the economy was the president cut—the payroll tax cut for 150 million families, cut the payroll tax by 2 percent.  That‘s $1,000 for families making $50,000.  Extending that, making sure that unemployment insurance is extended, I think these things are important.

I also think there are things the president is proposing that may not be part of this package like having an infrastructure bank could all be part of nudging that economy forward, helping it to gain the traction we need, because we have inherited probably the deepest economic hole any president has inherited since FDR, and it‘s going to take a long time to climb out.

And, you know, we want the American people to know, we‘re not satisfied.  There‘s no mission accomplished banner behind us, and nor will there be until we get the type of growth for a sustained period of time, where we start seeing jobs being created, and unemployment falling to the type of rates we saw before we fell into this terrible financial crisis that has led to so many of the troubles we‘re still digging our way out of.

HAYES:  Gene Sperling, head of the National Economic Council, assistant of the president for economic policy—really appreciate you taking the time tonight.

SPERLING:  Thanks for having us.

HAYES:  We now turn to Jonathan Alter, MSNBC contributor and columnist for “Bloomberg View.”

So, Jonathan, what did you make of Mr. Sperling‘s argument there?

JONATHAN ALTER, MSNBC POLITICAL ANALYST:  You know, I think he makes a pretty good argument.  The problem that I have with what the administration is doing so far on jobs is that there‘s not enough creativity.  So everything he said is fine as far as it goes, but it doesn‘t go far enough.

So, what I‘m looking for—and I understand why this has to be after the debt ceiling is dealt with—so sometime in late summer  are a series of new proposals for job growth.  I‘m kind scouring the country for ideas.  The best one I‘ve heard so far, Chris, is from Allen Khazei, who is a candidate for the Senate in Massachusetts the last time out.

And his idea was give people their unemployment insurance in the form of a voucher that they can take to an employer, and the employer can then, you know, pay them basically half as much or he will otherwise be incentivized to hire this person because he‘ll come much cheaper by virtue of his unemployment insurance voucher.

HAYES:  I see.  So, the government—the government steps in and subsidizes the hiring cost of unemployment insurance which currently played by employers.

ALTER:  Right.  But it would not actually cost the Treasury anymore money, you would just take the money that will be coming to the long-term unemployed through unemployment insurance and essentially giving that to the employer in exchange for providing a job.

Now, there might be certain problems with that, you know, maybe there‘s certain things about it that wouldn‘t work, would have to be adjusted.  The reason I raise it is this is the kind of thing we need to be thinking about now, creative ways for getting that unemployment down.

HAYES:  It‘s interesting you bring up jobs, and, obviously, I was focused on it in the interview with Sperling, because at the White House town hall today with Twitter, they basically—they showed this amazing preponderance of questions about jobs.  There‘s this great graphic that showed up in the “Boston Globe” that was comparing questions from the press recently about the issues that they sort of are most focused on and the questions at the Twitter town hall.  You can see there‘s no issue that comes close to jobs from the people that were on Twitter today, and journalists have been asking a lot about Congress and negotiations, et cetera.

What do you make of that disconnect?  Is that part of why we‘re not getting a jobs conversation in Washington?

ALTER:  I don‘t think so.  I mean, this has been a problem with the press going back a very long time.  The press tends to be obsessed with conflict, with process, with politics—and any time that average Americans are given an opportunity to, you know, question politicians, they are much more substantive.  They are interested in themselves understandably, and what the government can do for them, and that brings them back to the issue.

But the reason right now—in the press‘s defense, the reason there‘s a lot of focus on the deficit is the parties are playing a game of chicken now.  It‘s like, you know, the James Dean movie “Rebel Without a Cause” where they are going towards a cliff.

So, this is a very dramatic and important political story for the press to cover.  So, I really don‘t blame reporters, especially trying to ask the Republicans, are you really going to drive the United States into default for your narrow agenda for the rich?  And this is something that‘s not framed that way very often but that this is something the media needs to stay very tough on.

HAYES:  The answer to that, so far, seems to be a resounding yes.

Jonathan Alter, columnist for “Bloomberg View”—thanks so much for joining me tonight, appreciate it.

ALTER:  Thank, Chris.

HAYES:  Coming up, GOP freshmen who campaigned against the stimulus and government spending are privately saying that spending is actually necessary.

And the story that could prove to be the one that breaks Rupert Murdoch.  The incredible tangle connecting Murdoch, voice mail hacks, and the British prime minister—still to come.

(COMMERCIAL BREAK)

HAYES:  We here at THE LAST WORD would like to help this debt ceiling debate.  Where can we find tax revenue to improve the economy and not fall on the backs of the middle and working class?

Here‘s one idea, headline hat tip to alternate.  If just the top 25 hedge fund managers, that‘s 25, 2-5, paid taxes like you and me, we‘d cut $44 billion off the national deficit over the next 10 years.  Top 25, two dozens, hedge fund managers made a total of $22 billion in 2010, but a tax loophole allows them to keep the overwhelming majority of that because they get to call it capital gains, which means they pay a rate of just 15 percent.  That‘s opposed to the regular 35 percent top marginal rate.

Keep in mind: we‘re talking about just 25 people in the entire country.  An American making $50,000 a year for 47 years would earn $2.4 million over his or her lifetime -- $2.4 million is what the top hedge fund manager John Paulson made in one hour in 2010.  One hour.

Close one loophole, make $44 billion over 10 years.  See?  That wasn‘t so hard.

Coming up: freshmen GOP congressmen admitted they need government spending in their districts, next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. JIM DEMINT ®, SOUTH CAROLINA:  And to every Republican that I supported in this race is committed to banning earmarks, which is at parochial interest that gets the focus of Congress off national interest on the paving local parking lots ,we can‘t have 500 congressman and senators that think it‘s their job to bring home the bacon.  And that‘s what‘s going to change—one of the first things we‘ll do in the House and Senate is ban earmarks as Republicans.

(END VIDEO CLIP)

HAYES:  When a new wave of Tea Party-backed Republicans swept into Congress, many promised to be fiscally conservative, to ban earmarks, and to bring tax return to the front and center of the debate.  Out of the 85 Republicans seen in this House of Representatives freshman class photo, all but three have signed a pledge to not increase taxes or eliminate deductions.

And as for those earmarks, that practice has since been banned under new budgeting rules.  But would it surprise you to learn that a freshman GOP congressman who said this -- 

(BEGIN VIDEO CLIP)

REP. BILL JOHNSON ®, OHIO:  Our nation is broke.  The federal government has maxed out its credit card.  Americans want the tools to grow the economy instead of growing government.  So, when making spending decisions, we should ask two simple questions in this House, how much does it cost?  And who‘s going to pay for it?

(END VIDEO CLIP)

HAYES:  Well, he also co-signed a letter to the Federal Aviation Administration, asking for the Department of Transportation to fund a $4.365 million project to improve a runway at the Youngstown-Warren Regional Airport in his Ohio district.

Or how about GOP freshman Congressman Joe Walsh—sponsor of the balanced budget amendment and who has said -- 

(BEGIN VIDEO CLIP)

REP. JOE WALSH ®, ILLINOIS:  This is a spending problem, and we have an unbelievable opportunity here to use this debt ceiling issue as a real opportunity to get once in a generation spending reform.

(END VIDEO CLIP)

HAYES: Well, according to “The Huffington Post‘s” Sam Stein, Congressman Walsh, quote, “wrote the Department of Agriculture o February 14th, asking for $7,498,015 in cash and commodities contributions for the American Nicaraguan Foundation and Fabretto Children‘s Foundation, groups that ran education, health and nutrition programs in Nicaragua.”

Now, tell us—this sounds like a pretty good use of money actually, but that‘s just the point.  A lot of so-called wasteful spending doesn‘t look wasteful when it‘s spent on your priorities.  In fact, Stein‘s reporting found Republican lawmakers have pressed for tens of millions of dollars to help their districts.  They don‘t want government in the abstract and they are happy to rail against it when the cameras are on, but they‘re more than happy to get theirs when the camera is off.

Joining me here now is a man who has witnessed this power shift, “Huffington Post” Washington bureau chief, Ryan Grim.

Ryan, how are you doing?

RYAN GRIM, HUFFINGTON POST:  Pretty good.  How are you doing?

HAYES:  I wonder how much this hurts when this hypocrisy stands forward, right?  Does it—do you think it leaves a political mark either on the district or on Capitol Hill?

GRIM:  It certainly hurts the Tea Party broadly, but it‘s not going to hurt these particular members.  They didn‘t do it to benefit themselves personally.  They did it because they thought it was smart politics back at home.

It always has been smart politics.  That‘s what you do.  You go to Congress, you get federal money for your district, for projects that you support.

These people are all on the record publicly supporting these projects after Sam got their secret letters that they sent to the Department of Transportation.  But once it‘s out, they said, yes, this is why this is a good project.

So, they are going to defend it and people in their district are going to defend it, and whoever they face in the general election, whatever Democrat they face is not going to bash these projects.  The only risk they might face is somebody even further to the right taking them out based on this.

HAYES:  You know, one of the really interesting things about last time we had a Republican House was this arc from, you know, cause to business to racket, as that quote goes, right?

GRIM:  Yes.

HAYES:  I mean, by the end of it, you weren‘t—there were all these high-minded principles with the—you know, Contract for America, and very quickly to send it into a total miasma of corruption and self dealing.  And I wonder if we‘re seeing a similar trajectory with this Republican Congress.

GRIM:  Well, yes, so—you know, this all started because Tom DeLay instructed to use the earmarking process for very purely partisan political gain.  It had always been political, but been a bipartisan kind of fest where if you were the ranking member or the subcommittee chairman, you got money back to your district.  It was a seniority thing, an embarrassment for riches for these members.

He made it partisan.  Earmarks exploded and that‘s where this pushback came from.

But the situation that has developed is much worse than what we ahs before because there‘s no more transparency anymore.  Now, Congress just sends a giant pile of cash over the White House and White House can do whatever it wants with it.  And then these members of Congress who are against earmarks are stuck sending letters to a White House of a different party, saying hey, how about a little bit of money in my district?

HAYES:  So, what you‘re saying is this is a law of unintended consequences with respect to earmark reform, that once they got rid of it.  And people made this point at the time, you‘re not getting rid of the money, you‘re just changing how it is spent.

GRIM:  No, you‘re not going to get the federal government to stop dispersing money.

HAYES:  Right.

GRIM:  And people did say this at the time, they were derided, but they definitely said this at the time, that, look, you‘re not going to—you‘re not going to change the fact that money is spent.  What we need is transparency.  You need to have a more open process for how this money is spend.  And then it will be more democratic, on and on and on.

They said, no—so, it went all the way.  No, we‘re just going to simply ban earmarks.  It‘s typical Washington stupidity, and this is where it gets them.

HAYES:  Ryan Grim of “The Huffington Post,” my guest, thanks a lot. 

Appreciate it.

GRIM:  Thank you.

HAYES:  Coming up, the extraordinary scandal that‘s riveting England, tying phone-hacking journalists working for Rupert Murdoch‘s NewsCorp to the highest echelons of British government.  Prime minister got hammered with questions today.  You really don‘t to want miss this story.  It is cramazing.

And the politics of the NBA lockout, perhaps the most monumental labor struggle of the year.  That‘s coming up.

(COMMERCIAL BREAK)

HAYES:  In the spotlight tonight, the scandal that‘s rocking the political media world in England and reverberating across the Atlantic.  At the epicenter of it all, the man behind Fox News, the “New York Post” and British tabloid paper “The News of the World,” Rupert Murdoch. 

The story revolves around Milly Dauer, a 13-year-old who was kidnapped and murdered in 2002.  The case was trashed relentlessly by the British tabloids until a former nightclub doorman was convicted of her murder last month. 

But here‘s where this story goes off the rails.  Murdoch‘s “News of the World Newspaper” is accused of hacking into Dauer‘s cell phone after she went missing nine years ago.  The family‘s lawyer says the paper intercepted voicemails they left on the girls phone, and then deleted those voicemails, making room for new ones, and then listened to those new messages from the girl‘s family. 

Because the phone‘s mailbox was no longer completely full, and the family was able to leave those new messages, they thought Milly Dauer was still alive. 

This was no isolated incident.  Investigative reporters have been tracking cell phone hackings by the “News of the World” for five years.  But until now, most of those allegations centered on celebrities. 

Now the bombshell of Milly Dauer and more.  Reports that Murdoch‘s “News of the World” hacked into phones of victims of the 2005 bombings in London.  And just breaking tonight, even into voicemails left for widows of fallen British soldiers. 

Because of the cozy relationship between Murdoch and Britain‘s Conservative Party Prime Minister David Cameron, Cameron has been sucked into the scandal too.  Cameron actually hired the disgraced former “News of the World” editor, Andy Coalson (ph), in 2007 as his communications director.  Coalson was forced to resign from that job six months ago over earlier hacking violations. 

Now Cameron has a lot of explaining to do. 

(BEGIN VIDEO CLIP)

DAVID CAMERON, BRITISH PRIME MINISTER:  Let me be very clear, yes, we do need to have an inquiry, possibly inquiries into what has happened.  Let us be clear, we are no longer talking here about politicians and celebrities.  We‘re talking about murder victims, potentially terrorist victims having their phones hacked into.  It is absolutely disgusting. 

(END VIDEO CLIP)

HAYES:  Murdoch has responded, backing his paper and its former boss, Rebecca Brooks.  Brooks, by the way, now heads Murdoch‘s entire British newspaper empire, a company within a company, called News International.  Murdoch called the phone hackings, quote, “deplorable and unacceptable,” adding “I have made clear that our company must fully and proactively cooperate with the police in all investigations.  And that is exactly what News International has been doing and will continue to do under Rebecca Brooks‘ leadership.”

The best part of that statement, the most you just cannot make this stuff up part of the scandal, Murdoch announced that a lawyer named Viet Dinh would be helping to supervise his company‘s compliance with the investigation. 

If that name rings a bell, it should.  He served as assistant attorney general under George W. Bush and is considered the primary author of the Patriot Act.  That‘s right, Murdoch has tapped the author of the Patriot Act to oversee an investigation into illegal electronic eavesdropping.  Seriously. 

Joining me now, Archie Bland, the foreign editor for the “Independent Newspaper” in London.  Archie, thanks so much. 

Let‘s start on the latest details about phones of war widows being hacked.  It seems like that‘s making a lot of headlines in England.  How big is the fallout of this story going to get? 

ARCHIE BLAND, “INDEPENDENT NEWSPAPER”:  Well, I mean, it‘s reached a level that to everyone in the U.K. has just found astonishing.  It‘s a story that for a long time has been bubbling under.;  People have been interested in it.  But really, it has been the preserve of a kind of a group of people who are very interested in the media. 

Now it‘s become that‘s of obsessive interest to the whole country, because these are normal people.  they have done nothing wrong.  I can‘t really think of a more obscene way to violate somebody‘s privacy than widows of people who have been killed fighting for the country in a war.  You know, it‘s absolutely astonishing. 

HAYES:  This is maybe a dumb question, but I‘ll ask it anyway.  Why were they hacking these voicemails?   Were they then using these for scoops in the paper?  Was that the intent? 

BLAND:  Right, right, exactly.  You know, what‘s really astonishing about that, actually, is it shows that they were really going on fishing expeditions.  They weren‘t just doing it when they thought they had a really big story that they wanted to confirm with a big name. 

But whenever they had anyone‘s phone number, it seems like they would simply go through their voicemails to see what they could find.  It sounds as if they were looking at these voicemails a year after the deaths of these soldiers.  And they were basically hoping to get good, private information that would give them the jump on their rivals in the market. 

HAYES:  News Corp is facing some serious business problems from this, right?  The shares are trading down quite a bit today.  Murdoch currently is trying to buy Sky TV.  And there‘s this exchange today on the floor of the Parliament between Prime Minister Cameron and opposition leader Ed Milliband. 

(BEGIN VIDEO CLIP)

ED MILLIBAND, BRITISH OPPOSITION LEADER:  Mr. Speaker, I‘m afraid that answer was out of touch with millions of people.  The public will not accept the idea that with this scandal engulfing the “News of the World” and News International, that the government should, in the coming days—in the coming days, be making a decision outside of the normal processes for them to take control of one of the biggest media organizations in the country. 

I know this is difficult for him, but I strongly urge him to think again and send this decision to the proper authorities. 

CAMERON:  I would say to him that the decision making has been through the proper processes.  And it‘s right that the government acts legally in every way.  And that is what it has done.  One is an issue about morality and ethics.  The other is an issue about plurality and competition, which has to act under the law. 

Those are the words that he used yesterday.  And in just 24 hours, he‘s down a U-turn in order to try look good in the Commons.

MILLIBAND:  Mr. Speaker, this is not the time for technicalities or—

(CROSS TALK)

MILLIBAND:  And the prime minister, instead of engaging in technicalities, should speak for the country on this issue, because this is what people want him to do. 

(END VIDEO CLIP)

HAYES:  A pretty remarkable exchange.  I wonder how much of a threat does this pose, ultimately, to Rupert Murdoch, who is probably the most powerful man in the entire country? 

BLAND:  Well, you certainly could argue that.  I mean, it doesn‘t pose a threat to his power as a media baron around the world.  In the U.K., it poses a very big threat to his bottom line.  You know, the “News of the World” makes a lot of money. 

All this week, advertisers have been pulling out of this week‘s edition.  It will be really interesting to see whether actually people stop buying the paper.  Because over the years, as this scandal has rolled along, it‘s never really affected the circulation of his paper, his flagship paper, really, in the U.K. 

If this now starts to affect the number of who buy the paper, then it will have very serious consequences.  And it will probably end up meaning that actually Rebecca Brooks, who is kind of Murdoch‘s favorite child in the U.K., the person who relies on the most to run his British newspaper business, may eventually be forced out. 

HAYES:  It seems to me like there‘s a fair amount of—I don‘t know if complicity is the right one to use.  But in terms of how much attention this received, there‘s allegations now “News of the World” was also possibly bribing police officials.  There was a kind of conspiracy of silence around this practice. 

How far is this going to sort of—how many people are going to end up being tainted by this, do you think? 

BLAND:  So, we have reports coming out overnight here that there are five journalists who are facing arrests in the coming days over this whole affair.  So it could go very high up.  Rebecca Brooks is an incredibly senior person.  It‘s a really big deal if she were to be fired.

Even, it‘s not inconceivable she could end up being arrested herself.  There was an M.P. today, a very influential member of Parliament, who said that James Murdoch himself, Rupert Murdoch‘s son, who runs his U.K.  operation, should face some kind of legal ramification over this.

So there really is a sense here that this has gone far too far and that someone needs to take responsibility for it. 

HAYES:  Archie Bland, foreign editor of “The Independent,” thank you so much for joining me. 

BLAND:  No problem. 

HAYES:  Coming up, President Obama overturns the policy that prevents him from reaching out to families of soldiers that committed suicide in war zone.  That‘s coming up. 

Up next, the labor politics of basketball.  How the NBA owners are using some pretty creative accounting methods to claim they don‘t have enough money to pay their players.  That‘s next.

(COMMERCIAL BREAK)

HAYES:  Yet another labor dispute this week.  This one involves an industry with 4.3 billion dollars in annual revenues.  Like other disputes, the employers are claiming financial hardship to extract cuts in employee salaries and benefits. 

Unlike the others, this one involves the greatest sport on earth, basketball.  Surely, NBA players aren‘t facing the same absolute threat as, say, Wisconsin‘s teachers and sanitation workers.  The reason I bring this up is the story illustrates the accounting gimmicks management is quick to deploy in such negotiations.

Collective bargaining agreement between the NBA owners and players union expired on Friday morning,  Fundamental issue is this: management says it‘s broke and needs concessions from players to make it whole.  Players say not so fast. 

In negotiations, the owners are primarily represented by NBA Commissioner, David Stern, who claims that last season, 23 of the 30 teams experienced a net income loss, and the league collectively lost 340 million dollars.  That figure was previously reported at 370 million, which prompted this Tweet from “New York Times‘” Nate Silver, “if David Stern really thinks the NBA lost 370 million last year, shouldn‘t he have fired himself?” 

Yesterday, Silver wrote a highly circulated column which joined the Player‘s Union in questioning whether the NBA misrepresented losses using accounting tricks.  Independent estimates of the NBA financial condition reflect a league that has grown at a somewhat tepid rate compared to other sports, and which has an uneven distribution of revenues between teams, but which is a fundamentally a healthy and profitable business. 

Those independent estimates came from “Forbes,” which concluded that last season 17 of the 30 teams lost money and the league made a profit of 183 million dollars totally.  Soon after Silver‘s column made the media rounds, the NBA released a statement claiming the figures were not accurate, and that, quote, “the league lost money every year of the just-expiring collective bargaining agreement.  During these years, the league has never had a positive net income.”  And watch the accountant speak here, “earnings before interest, taxes depreciation and amortization were operating income.”

Joining me now to discuss this is Dave Zirin, who is sports editor for my own “Nation Magazine.”  He is also author of “Bad Sports, How Owners Are Ruining the Games We Love.”  Thank you for joining me, Dave. 

DAVE ZIRIN, “THE NATION”:  Great to be here.  And I should say that the player‘s rep for the Milwaukee Bucks, Kian Dueling (ph), and the MVP NBA Players Association head, Billy Hunter, both gave full-throated support for the public sector workers of Wisconsin.  So you‘re not the only one that sees a connection. 

HAYES:  Solidarity.  Let me start out by playing Devil‘s Advocate, which is to say, you know, if you are a basketball, you look at some of these contracts, and there are these insane contracts.  There are people who are not even playing—they‘re on the bench—that are making tens of millions of dollars. 

The “Forbes” numbers show the league has a higher percentage of revenue going to player salaries than other leagues.  So maybe the owners are right.  Are the owners right?  Are the players overpaid? 

ZIRIN:  No, because nobody has a gun to the owners heads when they put out those contracts.  I mean, the typical owner, they‘re like an Aderol addict in a fireworks store with a platinum plated Zippo.  It‘s like they just want to set off all the fireworks. 

This is a crazy labor negotiation, where they are asking labor—they are asking the players, please, be our mommy and daddy.  Please, provide us with financial restraint.  Instead of a typical business where they would supply their own sense of restraint.  No one is forcing them to sign these players. 

As Ted Leonces said, who owns the Wizards and he owns the Washington Capitals—he said, the current CBA makes NBA owners take their stupid pills. 

HAYES:  OK, so they‘re saying, basically, bail us out.  Don‘t let us do this to ourselves.  What do you think of where the league is at this moment?  It seems like they are coming off one of the best years they have ever had.  And this is a crazy time for them to be doing this. 

ZIRIN:  It‘s a remarkably healthy league right now.  They just set a league record for revenues in a year, 4.3 billion.  Fifth highest attendance ever, some of the highest playoff ratings we‘ve ever seen.  This is why the current split right now, Chris, is not between players and management. 

It‘s between some owners and other owners, because there‘s a group of owners saying wow, we‘re playing with some hot dice.  Let‘s keep this going.  Why would we kill the golden goose right now.  But there are other owners, particularly the owners teams like the Boston Celtics, the Golden State Warriors, the Cleveland Cavaliers, who are relatively new owners, who paid a lot of money for their franchise on the promise from David Stern that they would get a collective bargaining agreement which would see massive profits in the future. 

I don‘t know if that‘s ethical, but it‘s not illegal that David Stern promised that he would crush the union and give them a favorable CBA.  But those are the pressures right now going on.  And you‘re right, this past year was amazing. 

The Miami Heat—this Friday, you‘re talking about one year since the decision of Lebron James.  It provided just an amazing amount of interest and heat in the league itself, pardon the expression. 

HAYES:  I wonder also—I guess this is a hard question to ask, because I‘m not sure how much polling there is on this.  But your sense of we have gone through these really intense labor battles in Wisconsin.  We‘ve seen them in Ohio.  I feel like there‘s been a dawning consciousness of just how imperiled organized labor is in the country and how under attack it is. 

I wonder if that changed the dynamic of how the public receives information about this. 

ZIRIN:  It‘s a great question. 

HAYES:  -- when it‘s multi-million a year basketball player. 

ZIRIN:  It‘s a great question.  I think in the NFL, without question -

there is polling to back this up.  The public sides with the players. 

And in the NBA, we don‘t have the polling yet.  But I think one of the differences compared to previous sports labor battles is that it‘s a lockout, not a strike.

So it‘s the owners who are locking the doors.  That‘s a key difference.  In the NFL, there‘s also been a blossoming consciousness as to what NFL players go through.  They die 20 years sooner than a typical American male.  Concussions that they go with—the average playing career being only three and a half years. 

And it‘s radicalized players.  There‘s an amazing quote from Troy Polamalu of the Steelers, who says “this is not millions versus billionaires.  This is about the rich versus the rest of us.  If it has to be football players who make a stand, then that‘s what it will be.”

It sounds like Big Bill Haywood, but it‘s the guy from the Head and Shoulders commercials. 

HAYES:  David Zirin, sports columnist for “the Nation” magazine, starting center for Friends Seminary High School back in the day. 

ZIRIN:  We weren‘t great.  Thanks a lot. 

HAYES:  Coming up, the administration decides to change a long-standing policy concerning subsidies—I‘m sorry—concerning suicides by military personnel serving overseas.

(COMMERCIAL BREAK)

HAYES:  In 2003, still shy of his 20th birthday, specialist Chancellor Keisling (ph) of Indianapolis enlisted in the U.S. Army and soon thereafter deployed to Iraq.  Like many serving abroad, the distance, stress, and trauma took its toll on his relationship with his wife and the two separated while he was away. 

The stress of war also took its toll on Keisling, who became so despondent during his time in Iraq his firearm was removed for ten days for fear he could harm himself.  He returned to the United States, was transferred to a reserve unit outside his native Indiana in Ohio, and redeployed to Iraq for his second tour of duty in April of 2009. 

In the weeks running up to his deployment, he started losing weight.  And his e-mails to his parents upon arrival in Iraq for his second tour of duty sounded depressed. 

“Trying to get settled in,” he wrote his parents.  “It‘s hot.  It‘s miserable.  It has been a tough deployment for me so far.  Miss you guys a lot.” 

On June 19, 2009, he took his own life.  Upon their son‘s death, Greg and Janet were shocked to learn that, due to a longstanding policy, the president of the United States did not write condolence letters to those who died of suicide in a war zone. 

The president does send a condolence note to family members of all those killed in combat or in accidents in war zones.  The Keislings devoted themselves to advocating for the military families who had lost members to suicide and to push the president to reverse the current policy and begin to send a note to families like their own. 

“The recognition of the president could have a profound impact on the family of the suicide victim,” Greg Keisling wrote in an August 2009 letter to President Obama.  “We beseech you to reach out to military families who have lost a son or daughter to suicide.  Please change the policy and give families the dignity they deserve.” 

Today, a small though certainly bittersweet victory for the Keislings.  The White House announcing it would reverse the policy and begin sending condolence notes to families of those who succumb to suicide in Iraq and Afghanistan.  The official statement from the president reads, in part, “this decision was made after a difficult and exhaustive review of the former policy.  And I did not make it lightly.  This issue is emotional, painful, and complicated.  But these Americans served our nation bravely.  They didn‘t die because they were weak.  And the fact they didn‘t get the help they needed must change.” 

Since the beginning of the wars in Iraq and Afghanistan, more than 1,800 members of the military have committed suicide during active duty.  Even more staggering, estimates show more active duty troops have died in the last two years from suicide than in combat. 

Now the president will be writing letters to the families of the service members.  Here‘s hoping he has to write very, very few. 

Greg Keisling told us this evening that upon hearing today‘s news, his wife cried for the first time in two years.  “We‘re going to heal,” he said.  “We‘re going to heal.” 

That‘s tonight‘s LAST WORD.  “THE RACHEL MADDOW SHOW” is up next. 

Good evening, Rachel. 

END   

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