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'The Last Word with Lawrence O'Donnell' for Thursday, July 21, 2011

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Guests: Ezra Klein, Howard Dean, Michael Isikoff

LAWRENCE O‘DONNELL, HOST: Tonight, the only thing Wall Street fears more than Elizabeth Warren is a Tea Party Republican.
(BEGIN VIDEOTAPE)
(MUSIC)
UNIDENTIFIED MALE: The speaker walks out and lights up a cigarette and chain-smokes it—because he knows the guy behind him is trying to take away his job.
REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: My, oh, my, what a wonderful day.
O‘DONNELL (voice-over): The speaker of the House tries the impossible
educating Tea Party Republicans about the meaning of default.

REP. ERIC CANTOR (R-VA), MAJORITY LEADER: One-quarter of the entire House of Representatives are freshmen.
BOEHNER: At the end of the day, we have a responsibility to act.
CHUCK TODD, NBC NEWS: It‘s almost being toxic with some House Republicans.
UNIDENTIFIED MALE: A game of Russian roulette.
BOEHNER: Well, I‘m sure we got some members who believe that.
CANTOR: They‘re new. Many of them have never served in public office before.
ANDREA MITCHELL, NBC NEWS: Congress is also feeling the heat.
SEN. PAUL RYAN ®, WISCONSIN: Obviously, I‘m not qualified to speak on behalf of the markets and what they will or will not do.
NARRATOR: Republicans in Congress are driving us towards the edge of a cliff.
O‘DONNELL: But facts and Republicans parted ways a long time ago.
UNIDENTIFIED MALE: A war on math.
REP. MICHELE BACHMANN (R-MN), PRESIDENTIAL CANDIDATE: I will not vote to increase the debt ceiling.
UNIDENTIFIED MALE: Your issue is not the debt limit.
UNIDENTIFIED MALE: Texas is back on the debate over teaching evolution in public schools.
RUSH LIMBAUGH, RADIO HOST: And the heat index, manufactured by government.
O‘DONNELL: With time running out, Senate Republicans still want their chance to vote on the latest symbolic vote.
UNIDENTIFIED MALE: Cut, cap, and balance.
UNIDENTIFIED FEAMLE: We haven‘t have won World War II if we had had a cut, cap, and balance on the table then.
SEN. HARRY REID (D-NV), MAJORITY LEADER: Every reasonable voice in America has warned us time is of the essence. We are running out of time.
O‘DONNELL: And the media has finally caught up with Grover Norquist, the most powerful man in Republican politics.
MITCHELL: Who made Grover Norquist king?
GROVER NORQUIST: The people have made this commitment not to raise taxes.
RYAN: If you raise tax rates, that is violating a tax pledge.
UNIDENTIFIED MALE: Two hundred and thirty-four of the 240 have signed the “no to tax increase” pledge.
NORQUIST: So I can be clear: Americans for Tax Reform would oppose any effort to weaken, reduce, or not continue the 2001-2003 Bush tax cuts.
(END VIDEOTAPE)
O‘DONNELL: Rumors swept the capital this morning that the president and speaker of the House were close to an agreement on a deal—a deal that sent waves of panic through Washington, Democrats and Republicans, who assumed their side must have given up too much in order to strike such a deal.
Faced with a possible mutiny in his caucus, Speaker Boehner used a method no speaker ever him has employed to calm his troops. He tweeted. One word: False. Meaning, there is no deal.
The speaker then said this in a press conference.
(BEGIN VIDEO CLIP)
BOEHNER: I believe that the Congress must act before August 2nd. And I hope that we‘re prepared to do that. I‘ll keep my discussions with the president between the president and myself. It would be—listen, I always believe that keeping the lines of communication open were important. And, frankly, I think it would be irresponsible on behalf of the Congress and the president not to be looking at backup strategies for how to solve this problem.
(END VIDEO CLIP)
O‘DONNELL: Still feeling he had to make it absolutely clear that he had not moved one inch in the president‘s direction on taxes, the speaker of the House called the commander in chief of the Republican Party, Rush Limbaugh.
(BEGIN AUDIO CLIP)
BOEHNER: Rush, there is no deal. No deal publicly, no deal privately, there is absolutely not deal. I believe we‘ve got to act to prevent a default and to prevent a downgrade of our nation‘s credit rating. And the best way to do that is to enact cut, cap, and balance. But let me be clear, I think believe that is the best course of action. But I said all the way along, that we got to keep the lines of communication open. We talked about fallback option if in fact cut, cap and balance does go down. And I do think that it‘s our obligation to have a fallback plan if that doesn‘t work.
(END AUDIO CLIP)
O‘DONNELL: Of course, cut, cap and balance is going to go down, probably tomorrow. Senate Majority Leader Harry Reid plans to bring it to a vote tomorrow, so Senate Republicans can vote for something cruel and extremist to the delight of the Tea Party before Republican Senate leader Mitch McConnell will ask some of them to vote for something more reasonable that actually gets the debt ceiling raised in the process.
That of course is the fallback position that Boehner is referring to and that Senator McConnell proposed last week and that Harry Reid and McConnell have been seriously negotiating ever since. Reid and McConnell‘s negotiations on the last resort bill are clearly the only serious negotiation, which is to say negotiations that last more than a day, that are actually happening in the midst of all the rumors that fly through the capitol every day. The White House also had to calm Democrats who feared that the president had surrendered to Boehner on taxes.
White House communications director Dan Pfeiffer sent out a series of almost panicked tweets, shooting down reports of a deal. “Anyone reporting a $3 trillion deal without revenues is incorrect. POTUS believes we need a balanced approach that includes revenues.”
“There is no offer of a plan with no revenue, lots of misinformed, anonymous aides talking.”
“Then, not trying to be dense, but how would you do taxes in the middle of the year?”
And then, there are lots of bad rumors and worse reporting today”—which of course makes it like most days in Washington.
Here is the president on NPR today discussing yesterday‘s quickly passing fad, the bipartisan “gang of six” proposal that realists have declared impossible to legislate before the deadline on the debt ceiling on August 2nd.
(BEGIN AUDO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: It‘s not so much that it‘s hugely different from some o the previous framework that were, for example, put out by my fiscal commission or that I talked about several months ago. What was different was that you had Republican senators acknowledging that revenues need to be part of a balanced package.
(END AUDIO CLIP)
O‘DONNELL: Tomorrow morning, at 11:00 Eastern, President Obama will hold a town hall at the University of Maryland College Park on the, quote, “ongoing efforts to find a balanced approach to deficit reduction.”
He will continue to make his case to the American people that he has bent over backwards. In fact, you can expect to hear that actual phrase from the president in his dealings with Republicans, offered all sorts of compromises, painful for him as a Democrat, while Republicans have remained immovable in their defense of tax breaks for corporate jets, and any form of tax revenue increase. The president will make that case, with the full confident as proven by polls, that his position has the overwhelming support of the American people, including most Republican voters.
Republican congressional leadership, as usual, will look on helplessly as the president commands a national television audience, and try to calculate how much political damage the president‘s public reasonableness and the Tea Party‘s public insanity is inflicting on the Republican Party.
Joining me now is former Governor Howard Dean, former chair of the Democratic National Committee, and a CNBC contributor.
Thanks for joining me tonight, Governor Dean.
HOWARD DEAN, CNBC CONTRIBUTOR: Thank you for having me on, Lawrence.
I love that line about public insanity. That‘s what it is.
O‘DONNELL: That‘s what‘s come to—and you hear Boehner now talking about, hey, 25 percent of these people are freshmen in the House of Representatives. What he‘s trying to say is you‘ve got to understand how hard it is working with these amateurs, trying to make them even understand what the debt ceiling is.
DEAN: He‘s in a tough position, worse than McConnell, I think.
What Boehner—if I‘m John Boehner, I look at the analysis this way:
I could lose my speakership if I make a deal, but I‘m definitely going to lose my speakership if I don‘t make a deal, because this is killing the Republicans. If we go over the cliff, we‘re going to pay the debts. And then the president is going to have to say but we can‘t pay the veterans and the Social Security and the military contractors and so forth and so on, because we can‘t do both with no money coming in from the debt ceiling.
So, the Republicans are going to wear this. It‘s incredibly clear. I think the White House as you pointed out last week has done a terrific job of basically making the Republicans wear this as they should, since they have been incredibly unreasonable throughout the entire discussion.
O‘DONNELL: And Boehner is starting to look weary. I mean, we‘ve seen this happen. You‘ve seen this happen.
People with the burdens of leadership, when most of their problems in leadership positions, they always come from within their own party. The other party tends to act in a fairly predictable way. But he‘s got this unpredictable dynamite that‘s going off in his party in the House.
DEAN: He has to do something unusual. I‘ve seen it done before. But it‘s unusual. And that he has to pass a bill with Republican and Democratic votes. He needs to be talking with Pelosi right now about how they can get this together and pass something that‘s fairly moderate and just throw the Tea Party people over the side.
Look, some of them are so extreme they‘re not going to get re-elected anyway. So, he‘s in a really tough spot.
He is an adult. McConnell is an adult. There are not too many of those in the House caucus that—or at least not enough of them to pass a reasonable bill. And that‘s his problem.
O‘DONNELL: Now, the president has an op-ed in tomorrow‘s “USA Today.” He‘s going straight to the people with that, in which he stresses, quote, “The balanced approach position.” He is going to stress that balanced approach, saying, “a balanced deficit deal that includes some new revenues isn‘t just a Democratic position. It‘s a position that has been taken by everyone from Warren Buffett to Bill O‘Reilly, and it‘s been the position of every Democratic and Republican leader who has worked to reduce the deficit in their time, from Ronald Reagan to Bill Clinton.”
DEAN: True.
O‘DONNELL: He‘s got a winning position there, Governor, doesn‘t he?
DEAN: He does. And the polls show it.
Ronald Reagan raised taxes five times. The conservatives don‘t want to talk about that.
Look, this is lunacy what these folks are doing. They basically are destroying the social safety net of the country, and ultimately, they‘re going to destroy the country should they ever get in charge. And they aren‘t get in charge.
And I think the American people got to be terrified of what they see that‘s been unleashed in the 2010 elections.
These are truly ideologically committed people where the facts never get in the way of their story. And it‘s—you can‘t run a democracy or anything else if you don‘t care what the facts are. And they genuinely do not care what the facts are. They make them up as they go along.
O‘DONNELL: Governor, did you sense in Washington today some real worry among Democrats that the president may be straying over the line into some position that they would not be able to vote for?
DEAN: Well, Lawrence, I think that‘s left over from the health care debate. A lot was given away to the insurance industries and others during the health care debate. I think there‘s a lot of people in the Democratic Party are really worried about what might happen.
The tax debate, even though I think—and I agreed with most of the Democrats on this one, but I think the president did a great job after the election on the tax debates. Many of the Democrats felt that he should not have given away the decrease in taxes for the wealthy in exchange for the extension of unemployment benefits. It made the president look like a strong leader, so politically it was a winner.
But I can see why the Democrats are gun shy.
O‘DONNELL: Governor Howard Dean, thank you very much for joining us tonight.
DEAN: Thank you.
O‘DONNELL: Coming up, Grover Norquist exposes a technicality in his anti-tax pledge. But we‘ll explain why Democrats really can‘t celebrate just yet.
And new details tonight in Rupert Murdoch‘s media empire and hacking allegations in the United States. Michael Isikoff is here with word on where the federal investigators are already digging.
(COMMERCIAL BREAK)
O‘DONNELL: Coming up, the revenue battle in the debt ceiling talks.
Grover Norquist most certainly did not throw negotiators a lifeline today.
And later, Stephen Colbert actually breaks character, and for depend reason. We‘ll show you the tape—Stephen Colbert as you have never seen him before.
(COMMERCIAL BREAK)
O‘DONNELL: This morning, “The Washington Post” published a portion of an interview its editorial board conducted with American for Tax Reform president, Grover Norquist, whose pledge signed by nearly every Republican in Congress binds them to never raise taxes in any form.
“The Post‘s” Ruth Marcus asked President Norquist if allowing the Bush tax cuts to expire at the end of 2012 would violate that pledge.
“Not continuing a tax cut is not technically a tax increase,” Mr. Norquist told us. So it doesn‘t violate the pledge? “We wouldn‘t hold it that way,” he said.
Norquist had pointed out that Republicans could allow the Bush tax cuts to expire and raise government revenue by as much as $4 trillion over the next decade without violating the Grover Norquist pledge—the pledge to him to oppose any and all efforts to increase the marginal income tax rates. This made Democrats very excited.
(BEGIN VIDEO CLIP)
SEN. CHARLES SCHUMER (D), NEW YORK: Grover Norquist, the hall monitor when it comes to enforcing the Republican Party‘s anti-tax pledge, has given House Republicans a hall pass. They should use it.
REP. STENY HOYER (D-MD), MINORITY WHIP: I think Mr. Norquist has made a very, very important statement that I hope that they each take into consideration.
(END VIDEO CLIP)
O‘DONNELL: Less than 40 minutes after Congressman Hoyer praised the development, Norquist appeared on this network to clarify that though allowing the Bush tax cuts to expire may not technically violate his pledge, that does not mean Republicans should actually do it.
(BEGIN VIDEO CLIP)
NORQUIST: Now, Hoyer is wrong. There are certain things you could do technically and not violate the pledge, but that the general public would clearly understand is a tax increase. So, I can be clear, Americans for Tax Reform would oppose any effort to weaken, reduce, or not continue the 2001-2003 Bush tax cuts.
(END VIDEO CLIP)
O‘DONNELL: When reporters asked Republican leadership if they would exploit the pledge technicality, “The Washington Post” editorial board had exposed, they said, of course, absolutely not.
(BEGIN VIDEO CLIP)
RYAN: I‘m saying if you raise tax rates, that is violating a tax pledge. When we keep raising taxes in Washington, for ephemeral promises of spending cuts later that never materialized, we‘re actually not fixing the problem.
BOEHNER: I believe that would be raising taxes. I have never voted for raising taxes, and I don‘t have to.
(END VIDEO CLIP)
O‘DONNELL: But Boehner doesn‘t have to vote for raising taxes in order for taxes to go up. In fact, no one will have to vote to raise taxes for taxes to go up. They are already scheduled to go up a year and a half from now on January 1st, 2013 if Congress does absolutely nothing.
The Norquist pledge is about votes. It‘s about casting votes. It‘s about voting against tax increases when they come up for a vote. So the excited Democrats were wrong today to think that Norquist had somehow amended his pledge in his technical response to “The Washington Post” about the meaning of the pledge. Nothing Grover Norquist said today either in his first interview or his second did anything to diminish Republican anti-tax passion.
Joining me now, “Washington Post” columnist and MSNBC contributor Ezra Klein.
Thanks for joining me tonight, Ezra.
EZRA KLEIN, MSNBC CONTRIBUTOR: Good evening, Lawrence.
O‘DONNELL: Ezra, I‘ve got the pledge here and just to clarify for people. It says that, you know, I pledge to the taxpayers, blah, blah, blah, that I will oppose any efforts to increase the marginal income tax rates.
If Congress sits there and does absolutely nothing, as we‘ve described here before, in current law, the rates will automatically go up. And what Norquist is saying certainly if some bill were to come to the floor, to prevent those rates from going up, he would expect you to vote for it.
But technically, if you do absolutely nothing, you‘re still living within the pledge.
KLEIN: I find this whole story to be absolutely hilarious, actually. The pledge isn‘t a spell that if you can trick it or some sort of fantasy character guarding a gateway that if you can trick, it dissolves and no Republicans are bound by it.
The pledge is a manifestation of the fact that Republicans oppose tax increases.
Now, if you find a way to increase taxes such as that the pledge does not technically cover it, that does not mean that Republicans will begin to support your tax increases. If you let the Bush tax cuts expire, which as you say will not need a single vote to do, you raise taxes by $3.6 trillion against what would happened if you extend the Bush tax cuts. That is vastly larger tax increase than anything that is on the table, in the fiscal commission, in Obama‘s April deficit plan or in the plan Obama offered Boehner in July.
So it is very odd to think that Republicans that due to the wording of the pledge would suddenly move to support that.
O‘DONNELL: Right. Duval Patrick, who was a Harvard classmate of Grover Norquist, was at a reunion with him in 2003. He wrote about this in “The Washington Post” recently. And when Grover apparently in a panel discussion said something about trying to create a permanent Republican majority, some pointed out that—oh, you don‘t really expect to hold the presidency for the Republicans forever, and Grover‘s response was: “We will make it so that a Democrat cannot govern as a Democrat.”
Now, that certainly seems to have been successfully executed by Norquist. He has been at this for 25 years, working in utter public obscurity for most of that time, but being very, very effective backstage. And this is the year when I started bringing him onstage, and now everyone has him onstage.
But he has succeeded in making it so that a Democrat cannot govern as a Democrat. You have a Democrat spending all of this year talking about how much should we cut.
KLEIN: I wouldn‘t give him quite as much credit I think as you do. I think two things have succeeded in that. Number one, obviously, in the Senate, you have the filibuster. So, even when Democrats do have a majority, unless they have 60 votes, which is very rare in American politics, happened for nine months, a couple of years ago, but haven‘t happened for 30 years, then it‘s pretty easy for the minority to block whatever they want to do, and vice versa, of course, when the Democrats are in the minority.
And then in 2010, obviously, the voters brought in a lot of the Republicans, brought them into the Senate, and gave them the majority of the House, and the House Republicans have kept Obama have governing as a Democrat by being unwilling to let America keep its credit rating, if he attempts to raise revenues to reduce the deficit.
So, I think that Norquist is good at articulating the Republican strategy here, but I wouldn‘t give him so much credit for being the one to put it into action.
O‘DONNELL: Well, I have actually seen legislators in the back room talking about the problem they have doing this because their signature is on—and this has been for decades, that they‘ve actually signed this thing. They take these things far near seriously than I think some people might think they do.
The—you know, the 60 votes thing in the Senate has always been kind of losery, because there are three parties in the Senate. There‘s a liberal party, there‘s a conservative party, and there‘s a moderate party. And we have never been close to having either 60 conservatives in the Senate or 60 liberals in the Senate.
When we had 60 Democrats in the Senate, we didn‘t have 60 liberals. And so, there‘s this expectation that all you need is that magic number 60 to get to some sort of coherent, consistent, governing position. But 60 wouldn‘t do it.
KLEIN: Agreed. And, you know, that‘s true. And, of course, health care reform can only be as liberal as Ben Nelson and Joe Lieberman led it be.
But on the other hand, if you only needed 51 votes, you could have cut a deal from Mark Pryor or Joe Lieberman or Ben Nelson or any of five or six or seven other somewhat moderate senators. You have a lot more running room to move the bill in different directions depending on what they personally supported. So, that ends up being with the 60 vote things comes into play, as you know better than anyone, that it allows—even if you do get it, you‘re basically giving full control over Senate legislation over to whoever are the most conservative for Democrats or liberal for Republicans members of your caucus.
O‘DONNELL: Yes. That‘s why you see reconciliation bills pass with 51 votes.
KLEIN: Exactly.
O‘DONNELL: It‘s a totally different threshold.
Ezra Klein of MSNBC and “The Washington Post”—thanks for joining us tonight.
KLEIN: Thank you.
O‘DONNELL: The governor of Virginia has had a debt ceiling conversion. If the U.S. gets downgraded, his state will get downgraded, too. So, now, he‘s suddenly for averting the crisis, since it will be bad politics for him in Virginia. He‘s finally figured that out. That‘s in “The Rewrite.”
But up next, Republicans continue to beg New Jersey Governor Chris Christie to run for president, but new polls show his political star is falling fast.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
GOV. CHRIS CHRISTIE ®, NEW JERSEY: First off, it‘s none of your business. I don‘t ask you where you send your kids to school. Don‘t bother me about where I send mine.
(END VIDEO CLIP)
O‘DONNELL: None of your business. So, how does that kind of talk play in New Jersey? The man who many Republicans would love to run for the Republican nomination for president against Barack Obama isn‘t doing so well in his home state.
A new poll by PPP Polling found that only 43 percent of voters approve of Governor Chris Christie‘s handling of the state, and 53 percent disapprove. PPP says this is down significantly from his 48-45 rating in January, which wasn‘t so good either. Christie is also down with independents, 40-54.
In a head-to-head matchup, Christie trails Newark Mayor Cory Booker 43 percent to 47 percent. And in the matchup we would really like to see, Christie is tied with Bruce Springsteen at 42 percent to 42 percent.
The poll was conducted through automated telephone interviews which the NBC political unit continues to believe are not as accurate as when a real person makes the call.
Coming up, new details about the hacking scandal at the Rupert Murdoch empire that point questions in the direction of “the New York Post.” Michael Isikoff joins me.
And later, something we never thought we would ever see. Stephen Colbert breaks character. And he does it to bring you a very important message in his own words.
(COMMERCIAL BREAK)
O‘DONNELL: Rupert Murdoch‘s son James is now being accused of not telling the truth during a key part of his testimony to parliament Tuesday. During Tuesday‘s testimony, James Murdoch said he was never told about a vital email suggesting reporter Neville Thoroughback (ph) was involved in phone hacking.
But today, Collin Myler, editor of “News of the World” just before it shut down, and Tom Crone, the paper‘s former head of legal affairs, said they had told Murdoch of the email, which included transcripts of hacked voicemails.
In a joint statement, they said, “we would like to point out that James Murdoch‘s recollection of what he was told when agreeing to settle the Gordon/Taylor litigation was mistaken. In fact, we did inform him of the four Neville email, which had been produced to us by Gordon Taylor‘s lawyers.”
News Corp then issued this statement, saying “James Murdoch stands by his testimony to the select committee.” The committee chairman may ask James Murdoch to appear again before parliament to clear up that matter.
This cartoon appeared in today‘s edition of Murdoch‘s British newspaper, “The Times,” under the word “Priorities.” The cartoon shows a group of starving Somalian children, with one of them saying, I‘ve had a bellyful of phone hacking.
The cartoon provoked a storm of criticism on Twitter. The BBC‘s Robert Rea (ph) Tweeted, “disgraceful. Implies focusing on corruption allows famine to go unchecked.”
NPR‘s Louisa Lim said “it‘s crude. It‘s tasteless. And it comes off as pro Murdoch propaganda.”
And on this side of the Atlantic, it turns out the Justice Department has granted New Jersey Senator Frank Lautenberg‘s request. They are indeed investigating claims of repeated hacking by News Corp of one of its rivals.
Joining me now with the details, the latest details, NBC News national investigative correspondent, Michael Isikoff.
Michael, what is the latest in terms of the investigation that‘s going on here in the states?
MICHAEL ISIKOFF, NBC NEWS NATIONAL INVESTIGATIVE CORRESPONDENT: Well, the new development is this company in New Jersey, Floor Graphics, which is a advertising firm that does floor graphics for Safeway and stores like that, had been a rival of News America, which was the advertising division of News Corp.
And back in 2003 and 2004, it discovered that its password protected computer system had been hacked and traced it to an IP address at News America, its competitor. They reported this to the FBI at the time, to the U.S. attorney‘s office, then headed by Chris Christie in New Jersey, and the New Jersey State Police.
Nothing came of those. But these allegations were a central part of a lawsuit that Floor Graphics filed against News America, and that was settled with a 29 million dollar payment by News America to the owners of Floor Graphics in 2009.
What happened this week is the lawyer for Floor Graphics gets contacted by two prosecutors at the U.S. attorney‘s office out of the southern district of New York, and an FBI agent, asking about the details of that computer hacking incident.
It was clearly related to this broader inquiry of News Corp that was ordered last week by Attorney General Holder. And it‘s the first sign of a tangible, specific allegation of hacking in the United States that‘s being investigated by the Justice Department.
O‘DONNELL: And so where—News America, who is in that entity? Who does that lead to? What individuals would be exposed in this?
ISIKOFF: The chairman and CEO is a man by the name of Paul Carlucci, who also happens to be the publisher of “the New York Post.” He had been the long time chairman and CEO of News America, and he was promoted to the job of “New York Post” editor in 2005, after this incident had taken place.
O‘DONNELL: So here is an operation that may have engaged in this kind of activity just in its operation of an advertising business. When you move over into the operations of “the New York Post,” there could be even more interesting ways, as they have discovered in London, in the newspapers to exploit that kind of thing.
ISIKOFF: Well, could be. But let‘s be clear, we don‘t have any evidence of that. And I should also point out that it would be very hard to see how the Feds could make a case about this particular allegation alone at this time, because the statute of limitations has expired. There‘s a five-year statute of limitations on computer crime.
But if it‘s part of a broader pattern of conduct, which is what lawyers suspect, the FBI and the prosecutors are trying to look at here, is there this broader pattern. If so, then this could become part of that.
O‘DONNELL: And big surprise, a very, very sharp contradiction in James Murdoch‘s testimony plays out today. And the Murdoch response was basically no response at all.
ISIKOFF: Right. You know, the interesting character to watch there is Tom Crone, the lawyer. He‘s made clear that he‘s not going to be the fall guy here. And if they—if the Murdochs and News Corp try to lay everything on him, because he was the chief lawyer for “News of the World,” he‘s not going to sit idly by.
So if the Brits are looking for a John Dean character in all this, I would think that Tom Crone is the guy to watch. And the statement today contradicting James Murdoch‘s testimony about that email is the first sign that he may in fact be willing to go there.
O‘DONNELL: NBC News national investigative correspondent Michael Isikoff, thanks for joining me tonight, Michael.
ISIKOFF: Thank you, Lawrence.
O‘DONNELL: Coming up, Virginia Governor Bob McDonnell flip flops on the debt ceiling, even though he never actually understood what the debt ceiling was in the first place. That‘s in tonight‘s Rewrite.
And later, one of our favorite funny men gets serious to deliver a very important message. Stay tuned for Stephen Colbert‘s powerful anti-bullying video for the It Gets Better Campaign. That‘s coming up.
(COMMERCIAL BREAK)
O‘DONNELL: Time for tonight‘s Rewrite. From day one of the debt ceiling crisis, which was actually November 2nd, 2010, when Republicans won control of the House of Representatives—yeah, that was when the debt ceiling crisis began, on election night. That‘s when I predicted that the debt ceiling would become the biggest congressional crisis of 2011, because I knew the debt ceiling was going to have to be raised this year, and I was certain that newly elected Tea Party Republicans had never before in their lives heard the phrase “debt ceiling,” did not know what it is, and when they found out what it is, they would hate it and oppose raising it.
So from day one, because they were never going to understand it, the Tea Party was always going to lead to trouble with the debt ceiling. Tea Party favorite, Michele Bachmann is fast becoming a single issue presidential candidate. She‘s running on the platform of I don‘t understand the debt ceiling.
(BEGIN VIDEO CLIP)
REP. MICHELE BACHMANN ®, PRESIDENTIAL CANDIDATE: I will not vote to increase the debt ceiling. It goes completely contrary to common sense and how I grew up in Iowa.
(END VIDEO CLIP)
O‘DONNELL: So I guess she grew up in a debt-free Iowa, where no one had a mortgage. Everyone just paid cash for their homes and their farms. No one had car payments to make. Everyone just paid cash for their cars.
The once conservative and now wild-eyed right-wing Heritage Foundation urged Republicans to stand strong and not raise the debt ceiling if they don‘t get the spending cuts deal they want. Today, Heritage issued a pep talk press release to congressional Republicans and referenced a classic film, “the Bridge on the River Kwai,” to describe what they should do, follow the lead of a deranged British colonel, exquisitely played by Alec Guinness, and blow up everything.
The debt ceiling has been easy for Republican governors to talk tough about, since they believe it has nothing to do with them. It‘s just something that congressional Republicans are stuck dealing with. Rising Republican star Governor Bob McDonnell of Virginia was willing to blow up the world, and not raise the debt ceiling.
(BEGIN VIDEO CLIP)
GOV. BOB MCDONNELL ®, VIRGINIA: The only way that it‘s appropriate to increase the debt limit is if there is a tangible, written, irreversible set of structure reforms in the spending in the United States government that makes sure that we are on a downward trajectory in spending that will get us to a balanced budget much further.
If we don‘t achieve those goals, then I don‘t see any gain in increasing the debt limit.
(END VIDEO CLIP)
O‘DONNELL: McDonnell is one of those Republicans who had no idea what the debt ceiling was before this year. Now he does. The credit rating agency Moody‘s warned earlier this week that five states, Maryland, New Mexico, South Carolina, Tennessee, and Bob McDonnell‘s Virginia, could have their credit downgraded if the federal government‘s credit is downgraded when the debt limit isn‘t raised.
Those states have an above average dependence on federal revenue, which means a downgrade in the federal government‘s credit would directly affect them. South Carolina‘s state treasurer, a Tea Partier, in a statement begged Congress to conclude its debate and raise the debt ceiling, lest his state‘s AAA rating be downgraded.
Thousands of federal employees call Virginia home; 60,000 federal jobs are based in Arlington, Virginia, alone. Virginia collects income taxes from every one of those federal employees. It needs them to be paid every week. Federal procurement contracts are a large part of Virginia‘s gross domestic product.
It will be bad for all 50 states and for the world if the United States goes into default, but it will be very, very bad for Virginia. Someone has finally explained that to the previously oblivious Republican Governor Bob McDonnell, who has Rewritten his position on the debt ceiling.
(BEGIN VIDEO CLIP)
MCDONNELL: There‘s got to be a compromise. They‘ve got to get this done immediately, or the uncertainty for the business community is going to be just devastating to our country.
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O‘DONNELL: The biggest thing Virginia has to fear now are economically illiterate Republicans in Washington who think exactly what Virginia‘s governor used to think.
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SEN. CHRIS COONS (D), DELAWARE: I‘m tired of seeing kids grow up in a country where their government tells them discrimination is OK. And I think it is no wonder that we continue to see kids being bullied in school, and see so many LGBT children take their own live because they have given up hope, because, in my view, this law simply encourages discrimination.
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O‘DONNELL: That was Delaware Democrat Freshman Senator Chris Coons at yesterday‘s Senate Judiciary Committee hearing on legislation to repeal the 1996 Defense of Marriage Act. Senator Coons‘ focus on discrimination couldn‘t be more relevant for the students and parents of the Anoka Hennepin (ph) school district north of Minneapolis-St. Paul in Minnesota.
That school district is the largest in the state, with 40,000 students. In the last two years, there have been seven student suicides. School officials and parents disagree over how many of those suicides were a result of gay bullying, but we do know that at least four families say that was the cause of their child‘s death.
We also know the district has a strict neutrality policy, that instructs school staff, quote, “in the course of their professional duties to remain neutral on matters regarding sexual orientation.”
Gay rights groups call it a gag order that keeps teachers from protecting gay, bisexual, and transgendered students. This from a school district that boasts about its character education. “A district wide program that teaches and emphasizes the core values of respect, responsibility, appreciation of diversity, integrity, and compassion. These values are emphasized in all schools and at all grade levels.”
Earlier today, the Southern Poverty Law Center and the National Center
for Lesbian Rights sued the Anoka Hennepin School District, challenging the
so-called neutrality policy, after school officials have repeatedly refused
to consider changes to it. A federal investigation has also been launched
by the Departments of Justice and Education.

It‘s also worth pointing out this school district is in Minnesota‘s Sixth Congressional District, the same district represented by Congresswoman Michele Bachmann.
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BACHMANN: There‘s a war going on now, in our nation, against marriage. And this is a war that we must win. Because the foundational unit of government is the family. And family begins with marriage. And marriage is something worth fighting for.
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O‘DONNELL: But every day, new voices are added to the chorus calling for equality. Since its launch, the It Gets Better Project has produced videos featuring some of the biggest celebrities in Hollywood, members of Congress, even the president of the United States. And now Stephen Colbert has joined the cause, which he takes so seriously that he actually stepped out of character to deliver this message.
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STEPHEN COLBERT, “THE COLBERT REPORT”: Hi, this is Stephen Colbert. I have a message for any gay and lesbian teens out there. And OK, I‘m being told also bisexual and transgendered. Really, anybody who is being picked on.
It sucks. I agree. When I was in seventh grade, I remember being picked on all the time. And I got called queer a lot. And I—just sort of the word that got thrown as a weapon at people when I was a kid. And it was the most hurtful thing I think that the bullies could think of calling you.
And you know, I didn‘t like it. And one day I had this revelation, because a friend of mine named Pat, who also got picked on by the bullies, was called a queer by one of the bullies, a big jock.
And Pat instead of sort of flinching or running away, turned around and said, yeah, I am a queer. Kiss me. And the bully said, what are you talking about? And he said I‘m a queer. You called me queer. I am a queer. Kiss me. I‘ll prove it.
And the bully didn‘t know what to say. And he just turned around and walked away quietly. And I was stunned. I couldn‘t believe the magic that Pat had just worked.
He had somehow figured out that if you don‘t give power to the words that people throw at you to hurt you, they don‘t hurt you anymore. And you actually have power over those people. And that‘s a lesson that I am grateful to him for, for my entire life.
So if you can, realize the things that people say about you don‘t really matter. It‘s who you are. And the older you get, the more you‘ll understand that, because it gets better.
People get nicer too.
(END VIDEO CLIP)
O‘DONNELL: And there is breaking news tonight in the It Does Get Better department. Secretary of Defense Leon Panetta will reportedly certify that the military is ready to end the ban on gays serving openly in the armed services tomorrow, clearing the way to repeal the 17-year-old ban. He will certify that letting gays serve will not hurt the military‘s ability to fight.
Just two weeks ago, the chiefs of the military services told Panetta that ending the ban would not affect military readiness.
You can have THE LAST WORD online at our blog, TheLastWord.MSNBC.com, and you can follow my Tweets @Lawrence.
“THE RACHEL MADDOW SHOW” is up next. Good evening, Rachel.
END
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