updated 8/11/2011 5:05:31 PM ET 2011-08-11T21:05:31

Guests: Richard Engel, Ed Rendell, Michael Steele, John Harwood, Melissa Harris-Perry, Alex Wagner, Matthew Hoh, Wes Moore, Lois Romano

CHRIS MATTHEWS, HOST: Bad time.

Let`s play HARDBALL.

Good evening. I`m Chris Matthews in Washington. Leading off tonight:
Show us your plan, Mr. President. It really doesn`t matter whether S&P was
right or wrong to downgrade America`s credit rating, does it. The markets
agree we have a problem. The Dow plunged almost 635 points today on the
first day of trading after S&P`s downgrade. It was the Dow`s worst day
since December 1st, 2008. It has now lost almost 2,000 points over the
past two weeks -- 2,000 points lost in two weeks.

The president came out this afternoon and blamed the Tea Party. He
may be right. But what we need now is not blame but leadership. We need
the president to produce, I think -- I`m saying this tonight -- a two-point
plan. One, a job creation plan for the short run, and two, just as
important, a debt reduction plan for the long term. Come out with that
plan now. Yes, cuts in entitlements, but also make the wealthy start
paying their fair share. And then dare the Republicans to say no.
Corporations and the rich don`t have to contribute. Say that, Mr.
Republican. Just the poor, the middle class and the elderly. Well, this
way at least the American people and world money watchers would know where
the president wants to take us.

What would turn around the markets? That`s our big question tonight.
And what steps would give the world confidence that we`ve got our act
together here in America? We`re going to look at this from two angles,
Washington and Wall Street, tonight.

And this Saturday, of course, a major test for the Republicans who
want to be president. The Ames straw vote`s coming up this week. Perhaps
no one has more to gain or lose than Michele Bachmann, who is counting on a
big win in Iowa. Bachmann`s the subject of two big profiles in this week`s
"New Yorker" magazine -- there it is -- and of course, this very
questionable, I would say now, controversial cover of "Newsweek." We`re
learning about her deep-seated belief government is the enemy.

And this weekend`s disaster in Afghanistan ripped the scab off that
story. What are we fighting for over there? What`s our end game? And
what does victory -- there`s a word -- look like in Afghanistan? NBC`s
Richard Engel`s going to be with us tonight, and he`s the expert.

"Let Me Finish" with the man who led New York back to greatness, the
Irish-American who helped bring peace to Northern Ireland and taught us a
lot about fiscal responsibility.

We start with the president`s address earlier today. We finally got
to hear his reaction to the news that the S&P downgraded the U.S. credit
rating last Friday night. But was he able to inspire some confidence and
prove he`s still in charge? We`re going to ask that right now.

Here to answer the question is former Pennsylvania governor Ed Rendell
and former Republican national chairman Michael Steele, both of whom are
now MSNBC analysts.

Gentlemen, I want you to look at -- I have a plan here I want to talk
about. I just mentioned it. I want to get into detail with you on it. I
think we need details.

Governor, thank you for coming on. And I have the question before us.
You watched the president today. You know the fix we`re all in right now,
the market down 2,000 points in less than two weeks, and it may not stop
going down. How did he do today as the leader of the country?

ED RENDELL (D), FMR. PA GOV., MSNBC POLITICAL ANALYST: I thought he
just gave us words. He`s got to give us specifics. He`s got to give us
details and he`s got to lead. And he`s got to do exactly what you say.
He`s got to be able to convince the country first that, yes, we`ve got to
reduce the debt and the deficit and we`ve got to make significant cuts to
entitlements, defense, and we`ve got to, in fact, raise revenue from the
sources you indicated.

But at the same time, we`ve got to invest to get this economy going,
to create jobs in the short run and long run economic competitiveness.
That`s why today, as you know, Chris, the organization that I head with
Mayor Bloomberg, Building America`s Future -- we unveiled our plan. And
our plans calls for a 10-year infrastructure plan, spending $200 billion
more each and every year on infrastructure. That`s not just federal money.
That`s all money -- federal, local, state, private investment -- but $200
billion more. That will produce 5 million jobs each and every year for the
next 10 years.

MATTHEWS: Well, that`s the question to you, Michael. I know you`re a
partisan Republican. You`re here for that reason, to a large extent. But
let`s look about (ph) this -- in this situation today. I am scared about
this market.

MICHAEL STEELE, FMR. RNC CHAIRMAN, MSNBC POLITICAL ANALYST: I am,
too.

MATTHEWS: America`s lost credibility, for whatever reason, in the
last two weeks. You can blame the Tea Party. I do. But you can blame,
what? What`s wrong? What`s the president supposed to do?

STEELE: You can blame the entire system. I think -- I think both of
you, the governor and you both, hit it right on the head. The president
today came out and said the same old, same old. He didn`t add anything
new. He didn`t move the American people to believe that he`s actually
going to put forward a jobs agenda.

So the reality right now is that you`ve got Wall Street hemorrhaging
600 points. You`ve got the people hemorrhaging confidence in the
leadership in Washington, including the president. And the country is in -
- - it`s not a malaise, it`s just a funk.

I mean, it`s just in a spot right now where someone with a bold vision
and a plan -- you -- you`ve laid it out, Chris. Maybe you should run for
the office here, laying out a bold plan that says, Look, this is going to
be the jobs plan. All right? Republican, Democrats, take it or leave it.
I`m the president. I see where the people are. This is what I want to do.
You can either follow me or you can get out of the way. That has not come,
and that`s why we are where we are.

MATTHEWS: Well, let me get back to Governor Rendell and make it clear
what I think here. Here`s my two-step plan. It`s very simple -- real
jobs. The word "infrastructure" is a very smart word. Id` even narrow it
down to construction jobs on sewer and water and bridges and road stuff
that everybody uses every day when they flush the toilet or turn on the
faucet, every day they go across a bridge, every day they ride down a road.
Everybody knows this stuff is fallen to hell, and it`s real work, not phony
work.

Number two, he has got to get credibility. Governor, back to you. I
think his -- I`m not an expert on how he can be president of the United
States. I can step back and watch it from a day later. But it seems like
there was a couple steps missed here. When he went to the Tea Party crowd
that were pushing Boehner around all day long, he could have said to them,
OK, we have differences of opinion. Here`s my opinion, and here`s my plan,
dammit!

I think we can cut $4 trillion over the next 10 years. Big national -
- international (ph) cuts that the world would recognize. I want some
spending cuts in here, but I also want some revenue from the rich -- from
the rich.

Now, here`s my spending cuts. I`m sticking my neck out, boys and
girls. Here are the cuts. I want to go after Medicare. I want to put
some means testing in here. I want to have some co-pays in here. I want
to have changes in dates when you`re eligible. I`m going to stick my neck
out, and I want you guys to do your part and tax the frickin` rich! Now,
are you going to do it or not?

He didn`t go that far. I think he was being coy, cute, too clever by
half, Governor, by not laying out his plan. What do you think? Should he
have done it or not?

RENDELL: Well, absolutely. First Chris, not just construction jobs
on the site, but manufacturing jobs. You saw that in the manufacturing
last week. That`s what infrastructure does.

But you`re right. The president`s got to stop worrying about
politics. This idea that somehow we`re going to win the election by
running against Representative Ryan`s budget and the Medicare plan -- what
people are looking for is the president to lead. If he leads, if he did
exactly what you said and if he put that plan together and we got a big
deal and cut $4 trillion off the deficit and invested it in infrastructure
and maybe research and development -- if we had put that all together, he
would look like a great leader.

Two things would happen. He`d have a landslide victory, number one.
And...

MATTHEWS: You think the Republicans would deal with him on that
basis? Would they say, OK, you put your cards on the table, we`ll cut some
-- would they?

(CROSSTALK)

RENDELL: The answer to that, Chris is -- just real quick. The answer
to that is, if they don`t, then they`ve got hell to pay in the election.

STEELE: Absolutely right. But you know, I`m kind of having a deja vu
all over again here because I`ve sat on this very set with you, Chris, and
said exactly what you`ve just said. Other Republicans around the country
said exactly what you just said about the president putting forward a plan,
and...

MATTHEWS: Would they have come back with their own tax increase to
back it up?

STEELE: You saw...

(CROSSTALK)

MATTHEWS: ... met him half way?

STEELE: Boehner put $800 billion of tax increases on the table!

MATTHEWS: Yes, and then he got -- then he got cut off by...

(CROSSTALK)

STEELE: But the point of matter is, you know, you guys are going back
and forth here. All of a sudden now, we`re up against this wall and
everyone is saying what we`re saying...

MATTHEWS: We`re all learning.

STEELE: ... the last three months!

MATTHEWS: We`re all learning. I`m not an expert.

(CROSSTALK)

MATTHEWS: Well, look, I don`t think either side has been forthcoming.
And here`s the president today -- I`m (ph) talking again (ph) about taking
a balanced approach. It was what I`m saying on a deficit reduction plan.
Here he is talking about it.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: We didn`t need a rating
agency to tell us that we need a balanced long-term approach to deficit
reduction. That was true last week. That was true last year. That was
true the day I took office.

What we need to do now is combine those spending cuts with two
additional steps, tax reform that will ask those who can afford it to pay
their fair share, and modest adjustments to health care programs like
Medicare. Making these reforms doesn`t require any radical steps. What it
does require is common sense and compromise.

(END VIDEO CLIP)

MATTHEWS: Well, I think they do require radical steps, and he should
be ready to lead us that way. Let`s take a look at what`s happened in the
past few days leading to today`s market plunge. On Friday, the S&P
downgraded the U.S. credit rating. Today S&P downgraded the credit ratings
of both Fannie Mae and Freddie Mac, and now Moody`s, another of the rating
agencies, is threatening to downgrade U.S. credit, as well.

So there`s the problem. And I go back to you, Michael. He says
nothing radical, we can do this with a little finesse. I don`t think he`s
being Rooseveltian enough here. I think we face a challenge here, and I
think unless he`s willing to say, It`s big enough for me to tell you, here
are the cuts I want, here`s the tax increase I want. I`m putting it on the
table.

STEELE: I agree with you. I`m not going to argue with that, Chris,
because that`s exactly what I`ve been saying. Put your plan on the table.
Ryan went out on a limb. Everybody in this town knows he went out on a
limb with a big plan, one that he knew he was going to get blown up on, and
yet he put it out there. What was he met with? Crickets and criticism.

So the reality of it right now is the president has put himself in
this box by not -- as the governor and yourself has said, come up front and
say exactly what...

MATTHEWS: OK, let`s talk about...

(CROSSTALK)

MATTHEWS: The president of the United States right now -- I don`t
know what his plan is, Governor. You`re a politician. You know how this
works. Going out on the road -- he`s going to Michigan, Minnesota, he`s
going to Iowa, he`s going to other states out there -- Virginia. What good
is -- what can he do on the road? I`m wondering if he`s doing what
Pawlenty would do, or some middle-level Republican would be doing right
now, a bus trip.

I don`t want to downgrade it because people need to meet their
president and it would be good for them. But doesn`t he need to bring
something along concrete?

RENDELL: Sure. The bus trip would be a great idea if he was going to
spell it out. And Chris, I absolutely agree with you. He`s got to be
bold. This is not the time to tinker at the edges. We need to do
something to restore the world`s confidence in our economy, the financial
community`s confidence in our economy and the American`s people confidence
in our economy.

And he can offend people, and yet if he looks like a leader and acts
like a leader and if things get turned around, he`ll win a landslide
victory. Don`t worry about that.

And by the way, the one thing -- and he said it before, but he should
mean it in his heart. And I always tried to govern that way. Do what you
believe in. Do what you believe in. That`s what we were sent here for.
Do what you believe is right, and let the chip fall where they may.

MATTHEWS: Well, that`s what did you in Philadelphia, Mayor -- when
you were mayor, and I never forgot it. When you came in, you made the
tough decisions. The unions didn`t like it. Your friends that got you
elected didn`t like it.

RENDELL: Nobody liked it.

MATTHEWS: And by the way, a man we lost this weekend, Hugh E. Carey -
- going to talk about him later, the mayor -- the governor of New York, who
had the guts to come into New York in `75, when that city was broke, and
did all the right things and made it sound again. And we have a New York
today, the most exciting city in the world right now, because of that.

Anyway, thank you, Ed Rendell. Thank you, Michael Steele.

Coming up: A huge drop in the stock market. We`re going to talk about
the economic aspect of this (INAUDIBLE) 634 points just today, 2,000 points
in two weeks. So what will it take to turn things around? We`re getting
at the hard reality here. Boy, it is a tough thing to face right now.
This is sliding and it hasn`t stopped sliding, and nobody thinks -- or has
any reason to believe it`s going to stop sliding this week -- 600 points in
a day. Wealth is disappearing.

You`re watching HARDBALL on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Well, if the government seems dysfunctional (INAUDIBLE)
consider what happened this day back in 1974. President Richard Nixon
announced his resignation because of the Watergate scandal, the first and
only U.S. president in our history to resign from office. He delivered an
Oval Office speech, of course, the next day, saying he was resigning for
the good of the -- actually, he resigned that night -- you`re right -- for
the good of the country, but he never admitted wrongdoing and spent much of
the speech recounting his accomplishments. He would officially leave
office the next day to be succeeded, of course, by Gerald Ford.

We`ll be right back.

(COMMERCIAL BREAK)

MATTHEWS: Welcome back to HARDBALL. We told you earlier about
today`s drop in the markets and a two-week total drop in the market, in the
Dow, of nearly 2,000 points so far. So what can Washington do to bring
confidence back to the markets? And how about a real jobs program as part
of it?

John Harwood is with CNBC and writes for "The New York Times" and
Melissa Harris-Perry is a professor at Tulane. Thank you both for joining
us.

John, put it together, the politics and the economics the president`s
facing right now in terms of what he can do about it?

JOHN HARWOOD, CNBC: Boy, I`m not sure what he can do, Chris. You
know, he faces two problems in dealing with Republicans. One, they want to
take him down politically. And two, they have a fundamentally different
vision of the role of government. And they have a willingness to try to
withstand political pressures that most politicians you and I covered
aren`t willing to do that.

They don`t care too much about Wall Street. They don`t care too much
about their leadership. And they are so resistant to tax increases that
they prevented John Boehner from having the ability to strike that grand
bargain with President Obama. And even this afternoon after that market
drop, Eric Cantor, the House Republican leader, put out a letter that he
wrote to his members saying, With all this turbulence, there`s going to be
a whole lot of pressure on Congress to compromise on tax increases, on us,
the Republicans, to compromise on tax increases. I ask you to resist that
pressure.

That`s what President Obama is facing. And unilaterally -- you know,
Michael Steele said in the last segment, he ought to say, you know, Follow
me or get out of the way. We`re not China. He doesn`t have the power to
implement a deficit reduction plan...

MELISSA HARRIS-PERRY, TULANE UNIV., MSNBC POLITICAL ANALYST: Exactly.

HARWOOD: ... if he doesn`t get some bipartisan buy-in.

HARRIS-PERRY: Exactly.

MATTHEWS: I`ll be back to you in a minute, Melissa. But let me
propose something. The president of the United States has one card to
play. He come out and say, Here`s my plan. We have a radical problem
facing us right now. I have a solution. Here`s my job solution, a million
jobs, come out with a way to develop that in the short term to deal with
the cyclical problem.

To deal with the long-term problem of debt, deal with himself. Come
out with his $4 trillion plan. Put it on the table. He said he had one.
Tell us what it is, including revenues, including spending cuts, including
entitlements, including defense. Lay it all out on the table, This is what
I want the country has to do. This is what it has to do. If the
Republicans want to feel the pressure, I`m going to put more pressure on
them.

What would happen, Melissa?

HARRIS-PERRY: Look, I mean, I`m in absolute agreement here about the
-- how small the room is in which President Obama is currently operating.
And I hear you. I mean, I certainly know that I would feel better and that
many Democrats who now are going to have to make choices in 2012 would feel
better with that on the table.

But I think the notion that somehow Republicans will respond,
particularly House Republicans, particularly Tea Party House Republicans,
are going respond to that sort of ordinary politics, This is what makes
sense, here`s a plan, here`s how this will improve our country...

MATTHEWS: OK, what do you do, then?

HARRIS-PERRY: I got to tell you, that`s not what it looks like to me.

MATTHEWS: Well, what do you do then? What`s your alternative?

HARRIS-PERRY: Well, I think the alternative is that the folks who
actually run this country are us. And so the notion that the whole
responsibility for a jobs bill must come at this point from the president I
think is inaccurate. I think it`s time for us to demand that this House of
Representatives, that has done very little legislative action at all during
its time in Congress, in power since 2010, has now got to give us a jobs
bill. And I think that the call every single day needs to be for...

MATTHEWS: Well, that won`t happen.

HARRIS-PERRY: ... a congressionally based jobs bill.

MATTHEWS: They`re not going to do it. They control the -- let me
tell you how the leadership of the -- I worked there. The speaker of the
House sets the agenda. He won`t bring it up. She won`t bring it -- he
won`t bring it up. Boehner won`t do that.

HARRIS-PERRY: So...

(CROSSTALK)

HARRIS-PERRY: The notion that the president...

MATTHEWS: How does the public do this? How do they do this?

HARRIS-PERRY: Well, look, I think that the public does it in a couple
of ways. I think, one, they take immediately to the airwaves, to our
capacity as a public to actually speak directly to our representatives.

But I think the other piece of it is to resist this notion that if
President Obama just became sufficiently John Wayne, if he just sort of was
strong enough and courageous enough -- would I like to see a little more
pushback? Sure. But this is a fundamentally pragmatic president. He has
been from the beginning. And I think that some of the fire and the passion
here is going to have to come from ordinary American citizens.

MATTHEWS: Well, let`s talk about that. I don`t see the labor unions
of this country with big -- I don`t know why they don`t have demonstrations
in Washington with a million people coming to Washington, like in the Civil
Rights movement, the Vietnam war movement. I see the...

(CROSSTALK)

HARRIS-PERRY: Well, they`re fighting for Wisconsin right now.

MATTHEWS: Well, I know. Let`s talk about what`s not happening here,
Melissa. Where is the action from the people you talk about? Where is it?

HARRIS-PERRY: Well, I mean, I would...

MATTHEWS: Where`s that action you`re talking about?

HARRIS-PERRY: I would say, for example, on unions, I think that in
Wisconsin they are literally fighting for the spirit and soul and the union
power in Wisconsin.

But I agree part of it is, one of the reasons people are not in the
streets is in part because people have very few resources right now. This
is the painful piece is that in not having jobs, they`re also in a
circumstance where it`s also very difficult for people to do this, but I
think it`s the only chance here.

(CROSSTALK)

MATTHEWS: Are you serious about that? Is that a serious argument?
Are you seriously arguing that we can`t have a massive national call?

HARRIS-PERRY: Oh, no. I think we can.

MATTHEWS: You said you -- a minute ago, you wanted the country to --
well, how do they do it?

HARRIS-PERRY: Oh, well, I mean, I think we do it as we have always
done it. I think you have to do it community by community, in local
community-based organizations and demonstrations.

And I think, will it happen with a march on Washington? Maybe. But I
think far more importantly we have to remember the Tea Party did not get
here from being kind of dropped down from a UFO. The Tea Party was voted
into office.

MATTHEWS: Yes, OK, I don`t see this happening. I`m waiting for
people to do this. And I`m telling you, I don`t see the United -- I don`t
see the Auto Workers, I don`t see the AFL-CIO, I don`t see anybody in the
streets of Washington. I go out there, I don`t see anybody there.

Back when I worked for Tip, we had rallies in the middle of the night
with the steel workers at 4:00 in the morning. We organized them,
officially organized them. We did stuff that got done. We made noise.

HARWOOD: Chris?

MATTHEWS: We knew how to keep pressure. We went out into the
streets. We made sure that everybody knew what wasn`t getting done in
people`s districts.

I don`t see it happening, Melissa. I think it`s a great idea. But I
don`t see anybody doing it. The president of the United States has to
lead. That would be my argument.

Your thought, John?

HARWOOD: Well, there is another way. I agree with you, Chris, that I
don`t see spontaneous pressure coming up.

First of all, the president`s own ratings are fairly weak. And many
Americans are confused about who`s to blame for the economic situation
we`re in. But you did notice that there were cracks in the Republican
leadership, cracks in establishment Republicans vs. Tea Party Republicans
at the end of that last debate.

MATTHEWS: Yes.

HARWOOD: And the reason that there were cracks is that people like
Lamar Alexander, people like Mitch McConnell, like John Boehner were
worried about the consequences of a default and a catastrophic reaction.

MATTHEWS: Well, they`re right. OK, John...

HARWOOD: Well, we didn`t get to default, but we`re seeing some of the
reaction now and that`s a language that some of those Republicans --
establishment Republicans can understand and may act upon.

MATTHEWS: You just gave me two great reports. One is that Eric
Cantor`s worried that the grownups will take over, that there will be
pressure on the people to raise taxes as part of a solution.

You`re also saying that there are people who are already grownups.
And I do recognize people like Boehner, who would like to save this country
from fiscal collapse. And they`re against the ideologues.

OK, what`s the president do given those two facts? And then back to
Melissa. What`s the president do given that reporting, that information,
that there are Republicans he can reach in the leadership ranks, that there
is a concern even by the crazies out in the right reflected in the smart
thinking by Eric Cantor that they`re exposed now as having been too
radical? What can he do to make -- take advantage of that?

(CROSSTALK)

HARWOOD: Well, first -- there are two things that he can do.

First of all, you saw him respond to the criticism that he has faced
about, you haven`t laid out your plan.

MATTHEWS: Yes.

HARWOOD: He said today he was going to lay out more specifics than he
had done.

MATTHEWS: Good.

HARWOOD: I would not expect him, even though there are a lot of
Democratic economists who agree with you, Chris -- we ought to have a major
jobs program, maybe even direct government hiring. People like Alan
Blinder have made that point.

But the other thing the president can do is to sharpen the contrast
between the visions of the two parties.

MATTHEWS: That`s right.

HARWOOD: Remember, the reason that Republicans won`t deal on taxes is
because they want to reduce our deficit by shrinking government. What does
that mean? Medicare and Social Security. Their vision is a much smaller
entitlement culture than we have got.

MATTHEWS: Sure.

HARWOOD: If the president can make the contrast between a -- a --
cutting Medicare a little and cutting it a lot, that could put pressure on
them.

MATTHEWS: OK.

Melissa, last thought, quickly. What should he do?

HARRIS-PERRY: Yes, I was going to say -- I was going to say that`s
exactly where I agree. You give people the place to rally around by making
the plan clear. And I think that`s where I absolutely agree with you.

I don`t think that simply by saying it, he gets the Republicans on
board. But if he makes the plan clear, then there`s something that the
people have to rally on. But they will have to do it. If the pressure
doesn`t come from the bottom, it will not be sufficient to move the GOP.

MATTHEWS: I agree with you both. I agree. The people have got to
back the president. The president has got to lead.

Thank you so much, John Harwood.

I want to know the president`s plan for America`s economic salvation.

Thank you, Melissa Harris-Perry.

Up next: Comedians love Sarah Palin. She`s been the butt of so many
jokes. But comedian Lewis Black, the funniest of them all, says he won`t
go near there. He is a funny guy. He`s got some reasoning to show you in
the "Sideshow."

You`re watching it, HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Back to HARDBALL. Now to the "Sideshow."

First up: This one didn`t take long. The top-secret details of the
bin Laden operation will be handed over to none other than film director
Kathryn Bigelow. Bigelow, who won an Oscar for the 2008 film "The Hurt
Locker," has been tapped to direct a film focusing on Navy SEAL Team Six as
they prepared to execute the mission to capture and kill Osama bin Laden.

The film is set to be released in October 2012, just one month before
the presidential election.

Next up: an unlikely comparison during this prayer event in Texas this
weekend. Church Pastor John Hagee praised the host of the event, saying:
"Rick Perry, who`s had courage today to call this time of fasting and
prayer, just as Abraham Lincoln did in the darkest days of the Civil War."

Well, are we forgetting that Perry and Lincoln would likely have been
on opposite sides of the secession argument that brought about the Civil
War? Perry began floating this idea of Texas secession back in 2009 in a
show of opposition to higher taxes.

Next up: Most politicians find it difficult to scrape by without
being the target of one of comedian`s Lewis Black`s punchlines at some
point in their career. But an unlikely figure is managing to do just that.
Sarah Palin is avoiding him.

Let`s hear Black`s explanation for keeping his routines Palin-free.

(BEGIN VIDEO CLIP)

LEWIS BLACK, COMEDIAN: I heard her speak the first couple of times
after a couple of weeks. And I knew she was like, for me, a mother lode.

(LAUGHTER)

BLACK: But I was so shocked that she was running. It stunned me so
much, I said on stage, I wouldn`t make jokes about her, because I could not
live in this world if I believed she was a real person.

(LAUGHTER)

(CHEERING AND APPLAUSE)

BLACK: I have, for the entire time that she`s been around, treated
her as a hallucination.

(END VIDEO CLIP)

(LAUGHTER)

MATTHEWS: Hallucination. I love that guy, Lewis Black.

We will be right back. You`re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

AMANDA DRURY, CNBC CORRESPONDENT: I`m Amanda Drury with your CNBC
"Market Wrap."

Gold and the treasuries were the only places to hide today, the Dow
Jones industrials plunging 634 points in very heavy trade. The S&P 500
falling almost 80 points and the Nasdaq with the biggest decline down 174
points.

Well, you can`t point to any one reason alone for the plunge.
Certainly S&P`s downgrade had impact and growing concerns about a double-
dip recession, but S&P also lowered Fannie Mae and Freddie Mac`s debt
rating. So we have got the Federal Reserve meeting tomorrow, and let`s not
forget about Europe`s ongoing battles with its debt, the European Central
Bank stepping in today to buy Italian and Spanish bonds.

Elsewhere, bank stocks were hit pretty hard, weighed down by word that
AIG is suing Bank of America for over $10 billion that it lost in toxic
mortgages. But safe haven gold saw its the biggest one-day gain since
March of 2009, surging almost $54 an ounce to finish at a record high about
$1,700 an ounce.

Well, that`s it from CNBC on a very big market day. We`re first in
business worldwide -- let`s go back to HARDBALL.

MATTHEWS: Welcome back to HARDBALL.

It was a devastating weekend for U.S. troops in Afghanistan, of course
-- 38 people were killed when a military helicopter was shot down by
insurgents, among the dead, 22 Naval -- Navy SEALs. Of course, they`re the
heroes of our country.

And here`s has President Obama said today.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I have spoken to our
generals in the field, as well as President Karzai, and I know that our
troops will continue the hard work of transitioning to a stronger Afghan
government and ensuring that Afghanistan is not a safe haven for
terrorists.

We will press on and we will succeed. But now is also a time to
reflect on those we lost and the sacrifices of all who serve, as well as
their families. These men and women put their lives on the line for the
values that bind us together as a nation.

(END VIDEO CLIP)

MATTHEWS: For more, we go to NBC News chief foreign correspondent
Richard Engel, who is in Kabul.

Richard, I don`t think of more depressing news than we got when this
happened. And what`s the feeling over there?

RICHARD ENGEL, NBC CHIEF FOREIGN CORRESPONDENT: Well, the feeling is
one of frustration.

If you look at that bite you just played by President Obama, he said
that the troops` mission is to transition to a more stable and more
prosperous Afghan government. I think that was the wording. That`s the
meaning more or less.

And that isn`t happening. And the concern is that the Afghan
government is just getting weaker and weaker. And as the Afghan government
gets weaker, the Taliban and other militant groups get stronger. And
that`s what we saw in this -- in -- over the weekend in this particular
raid. The Taliban has become very strong in this one valley about 60 miles
southwest of Kabul.

There was an air assault mission initially led by the Ranger regiment.
Some SEALs were brought in as reinforcements, and then they were shot down
in that Chinook helicopter as they were going in. And people say that this
is just a sign that the central government here of Karzai isn`t strong
enough. There`s a transition going -- going -- taking place right now, as
U.S. troops are starting to pull back and get pulled out of this country
very slowly, 10,000 this year, 20,000 U.S. troops next year.

And as these troop, coming out, the situation is getting more and more
chaotic and more and more dangerous.

MATTHEWS: Just a question about the -- the deployment of our troops.
Are we fighting the frontline war against the Taliban or is the Afghan
forces doing that?

ENGEL: Well, we are certainly fighting the frontline war against the
Taliban, and that is particularly in remote areas.

And let`s use this valley where that -- that attack took place as an
example. There are about a half-dozen American outposts and observation
posts in the Tangi Valley, where the helicopter was shot down. There was
one -- an American outpost right near where the incident took place. That
outpost was supposed to be handed over to Afghan control in April. The
Afghan government never took it.

They decided that they couldn`t handle it. They couldn`t handle
security in that area. And the base was abandoned. Parts of it were blown
up. And that is happening in a lot of areas where U.S. troops are pulling
back. They are simply not being replaced, and what is going in place is
the Taliban, which decided that it could make an even more stable
stronghold for itself in this area.

MATTHEWS: Yes.

ENGEL: And the results were clear over the weekend.

MATTHEWS: Thanks so much, as always, Richard Engel in Afghanistan,
the best reporting around.

For what this means in the bigger picture, we`re joined by Matthew
Hoh, a former Marine captain and State Department official who resigned
from the State Department two years ago in protest of U.S. policy over in
Afghanistan, also Wes Moore, a retired Army captain and the author of "The
Other Wes Moore."

Gentlemen, thank you for joining us.

We only have about six minutes, but I tell you, this was a heart-
wrencher. This is the unit, of course, the SEAL team, the people that
captured bin Laden. They`re the best of the best, and here we have the
guys on a mission which I don`t understand exactly, but they`re fighting a
frontline on behalf of a government that isn`t worth it -- isn`t worth
much, an opium dealer of operation. And at the same time, we`re doing the
fighting, not them.

Your thoughts, Matthew? You`re against this war. What was it -- what
is showing in the policy here, the fact we`re over there fighting this kind
of operation? We`re doing the fighting.

MATTHEW HOH, QUIT DIPLOMATIC JOB IN AFGHANISTAN: You know, I agree
with the president`s goals in that region, right? We want a stable
Afghanistan to have a stable region because of Pakistan, India, the nuclear
arms race between the two of them. Al Qaeda`s a concern.

However, our policies there have just made the region worse. And al
Qaeda`s not present. So what we have seen is we have seen a policy that
wasn`t working a couple years ago. We double down on it a couple years
ago. We knew that the insurgency was growing because of resentment of
foreign forces and because of a corrupt, predatory, illegitimate
government. And what we did two years ago, we doubled down on that.

MATTHEWS: OK.

Let me ask -- let me ask Wes Moore.

Why`s the United States fighting the Taliban in Afghanistan? Why are
we the anti-Taliban force in that country? Why did -- how did we get this
job?

CAPT. WES MOORE (RET.), U.S. ARMY: Well, we got this job because we
have seen how the mission has continued to evolve with Afghanistan.

Initially, when we first had troops in Afghanistan, we didn`t have a
very real commitment. And I think what the -- Matt is exactly right. The
president has in many ways not even just doubled, but tripled down on this
Afghanistan operation.

One of the largest challenges we have, though, with the Afghanistan
operation is that one of the lead variables on whether or not we can
actually proceed successfully with this is that it relies on some type of
Afghanistan reconciliation process with the government, which I think is
very difficult.

Just a few days ago, you had the Afghan high peace council, who came
out and said that the Taliban is willing to negotiate and the Taliban is
willing to be part of this larger negotiation, come to the table, come to
the peace table. And then just yesterday, a spokesperson for Mullah Omar
says, well, not so fast. He`s not willing to negotiate with anybody.

MATTHEWS: They`re cutting people`s heads off, Wes.

MOORE: That`s right.

MATTHEWS: They`re going around cutting people`s heads off if they
show any sign of working for the government or working for the coalitions
forces over there.

MOORE: Well...

MATTHEWS: They`re going to go from cutting people`s head over to
getting their heads together with some people?

(CROSSTALK)

MATTHEWS: I mean, they`re going to go from killing people who they
think might be with the other side, just for the heck of it, and then
they`re going to become part of this sort of jamboree of get-together, this
kumbaya thing?

MOORE: Well...

(CROSSTALK)

MATTHEWS: Is that a reasonable prospect in the near term? That`s how
long we`re going to say stay there, in the near term.

WES MOORE, IRAQ & AFGHANISTAN VETERANS OF AMERICA: Well, Chris, it`s
even more complicated than that because it`s still not -- it`s still not a
unanimous decision or unanimous vote in Afghanistan, whether or not this is
something that they want. So, you still have a very divided region. You
still have a very divided country as to whether or not the Taliban should
and could be welcomed back to take on any form of leadership whatsoever.

You know, Afghanistan is still a troubled country. The idea of a
nationalistic system with Afghanistan --

MATTHEWS: I know.

MOORE: is so foreign.

(CROSSTALK)

MATTHEWS: I`m sorry to interrupt you. Ten years we`ve learned all
this. We heard this discussion. The British went through it, the Soviets
went through it.

(INAUDIBLE) word the other day. We used to clear for those Stingers
against the Russkies. You know? I don`t cheer. I had a miserable -- like
every other American, I had a miserable weekend.

My daughter told me about this when I heard about it Saturday, I go,
this is horrible. This is horrible. Some of our best and brightest are
going in there, people I know whose kids are going over there, taking in --
joining these elite units fighting for their country and they`re given
missions like this.

MATTHEW HOH, CENTER FOR INTERNATIONAL POLICY: Yes.

MATTHEWS: And who`s thinking behind this? Whose brain is behind
putting Americans forces out on the front lines to fight in a local country
-- we`re all going to be out in a couple of years? And they`re going to be
there. The Taliban is going to be there when we leave.

HOH: Yes, absolutely.

MATTHEWS: Your thoughts? I`m sorry. Go ahead, Wes.

MOORE: I was saying -- then what happened this weekend really
compounds that as well, because what happened this weekend isn`t just a
personal tragedy. It`s also a personnel tragedy as well.

You know, you look at how much soldiers. There are approximately 300
members of SEAL Team Six. They are our Spartans. You know, the best and
some of the best we have, and you look at the fact 22 were lost in one
operation. That`s approximately 7 percent of SEAL Team Six that was lost.

And then as these days are going on, today, they are starting to
release the names. They`re starting to release the faces of the people who
we lost. Fact is, these are people who don`t do this for the glory. You
know, whether you`re talking about SEAL Team Six or the Delta Force, these
people who go out and know their names are not going to be known, their
identities are not going to be known unless tragedy sets in.

And so, with every name that we see released, with every face that we
see on the television screen, we know that there`s a reason why their name
is being released and that`s because they paid the highest price to be
called American.

MATTHEWS: Unbelievable. Well said. Well said.

Your thoughts? You`re against this war. I think you`re right. I
don`t know what to say.

Let me ask you this. What does anybody think victory looks like? If
we stay there 200 more years, the Taliban will still be there and they will
be the fundamentalists who say, all we got to do is go back to Koran and
live the Sharia law, and behead people who don`t obey the law. And they`re
all going to be there when we leave, whenever we leave.

So, why are we staying another week?

HOH: That`s -- you know, we should have -- two years ago, should
have disengaged. We didn`t that that. Now we`re in this mess where a lot
of us are saying, look, I`m not sure what to do, because you took a
situation that was really bad and now you`ve made it completely chaotic.

MATTHEWS: You know what? We got about as much chance of turning
them into us as they have of turning us into them. What about the Taliban
in this country? We would get them out of this country so dam fast. We
would kill them until they left and I`m telling wouldn`t change a bit. We
hate them more the second day they`re here than the first day and we hate
them a lot more after 10 years. Just to put common sense to this.

I`m sorry, we got to go. Thank you. This war makes no sense at all.
Thank you, Wes Moore. Sir, it`s great to have you on. You`re a great guy
to come on.

Matthew, I know where you stand. Thanks for coming and you`re right.

Up next, Michele Bachmann has (INAUDIBLE) fires a presidential
candidate in certain regions. She casts the federal government as the
public enemy number one in the country. That keeps it simple. Talking
about fundamentalism, it`s working in both directions. The Tea Party,
they`re the best at fundamentals. How far can she ride this anger wave?

Well, this is HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: Texas Governor Rick Perry is preparing to get into the
presidential race, it looks like. "Politico" was first to report that
Perry will, quote, "make clear his intentions to run this weekend." But
he`ll stop short of a formal announcement this time.

Perry, who hosted a prayer service in Texas this past weekend will
visit South Carolina and New Hampshire on Saturday.

"Politico" reports this statement should clear up any lingering
questions about his plans.

We`ll be right back.

(COMMERCIAL BREAK)

MATTHEWS: We`re back.

Republican presidential candidate Michelle Bachmann is making news
for the photo -- look at this -- for the photo of "Newsweek" magazine this
week which has raised some eyebrows, ahead of the GOP debate this Thursday
in Iowa.

Lois Romano wrote the cover story in "Newsweek," didn`t to the
photography; MSNBC political analyst, Alex Wagner, is with "The Huffington
Post."

Ladies, thank you for joining us.

You know, I think there`s lots of hot questions raised about this
because women candidates, issues of sexism arise. Do you think that she`s
been a victim of any kind of sexism, or condescension or elitism, is
probably a better word, from this sort of by this bicoastal press? Lois --
does she feel she`s been?

LOIS ROMANO, NEWSWEEK: Can I bring your attention to "Newsweek`s"
cover?

MATTHEWS: Looking at it right now.

ROMANO: OK. "Newsweek`s" cover on Sarah Palin a couple weeks ago.

MATTHEWS: All right.

ROMANO: OK. Gorgeous cover, looks like a model in her shorts, she
posed. Everybody said if was sexist. This one is an intense one --

MATTHEWS: Well, that`s Tina Brown`s word.

ROMANO: Well, it is. It is. And Tina is right.

MATTHEWS: OK. Why is she looking straight up in the air rather than
at the person taking her picture? That`s all I`m asking. It`s an odd
photograph.

ROMANO: I wasn`t there for those photo shoot.

MATTHEWS: Well, it`s an odd picture. You get --

ROMANO: I think --

MATTHEWS: Let me go over to somebody not working for "Newsweek" to
answer who can answer this question because I know it`s tougher for a --
Alex, you`re completely independent here. You look at that picture of
somebody, then they had a contact sheet, obviously, of all kinds of
pictures to choose. They pick a one where she`s looking skyward.

Now, Tina Brown, who I respect, came out and said that`s -- here`s
what she had to say, by the way. We`ve got there. She said about the
cover, "Michele Bachmann`s intensity is galvanizing voters in Iowa right
now and `Newsweek`s` cover captures that."

Now, does that -- does that picture of her looking skyward like she`s
Gadhafi or somebody answering to a different authority, does that picture
look like intensity, rage? Or this woman is a little daffy? What kind of
--

(CROSSTALK)

ALEX WAGNER, MSNBC POLITICAL ANALYST: I think -- I`m going with
daffy, Chris. And I think it also brings to mind her rejoinder to the
president`s State of the Union, where she was not looking at the camera.

Look, there`s a lot about Michele Bachmann that I think is probably
worthy of further examination and criticism. This to me seemed a little
unfair.

And it brought to mind, I don`t know if your remember, the Mark
Warner cover of "The New York Times" magazine, where they sort of
PhotoShopped his clothes and made him sort of look like a car salesman
huckster. This, to me, she looks sort of blank and confused, and I did
think it was unfair.

MATTHEWS: OK. Let`s go back to the content of your piece as the
piece writer (INAUDIBLE) for New York this week.

Clearly, there`s something that`s shaping up here. I`m looking --
all I do is think about politics, when I`m not living in life at home with
my family. And that is this -- there seems to be a narrative growing that
Michele Bachmann will have a lost impact this week at the Iowa straw poll
on Saturday, at the debate this Thursday night, and probably win or quite
probably win the debate, the caucuses come next winter.

But then she will fade as the more mature voices and the more
moderate forces in the Republican Party take away and you end up with
probably Mitt Romney, maybe on the outside, the governor of Texas, Rick
Perry. But she fades. Is that your sense that she`s only a Roman candle
in this campaign? That she has a role to play in the beginning but doesn`t
last until the end?

ROMANO: I think she`s speaking -- yes, I agree. I think she is
speaking to a very particular segment of the voters right now in the middle
of the country that are very angry with Washington, very angry with Obama.

MATTHEWS: Yes.

ROMANO: They are Christian conservatives.

What she does with it, she`s going to have momentum. She is going to
get some national attention. What she does with it coming out of Ames I
think will decide what happens next year.

MATTHEWS: Yes.

ROMANO: But I think right now, Rick Perry could very easily move
into her space.

MATTHEWS: Yes. Let me get back to this question. I think show is
an early fast burner in a big burner. I think Rick Perry does challenge
her.

But this Christian stuff, and I`m a Christian, I`m Catholic. But I
have to tell you, I think it scares a lot of people that she is carrying it
too far as part of her political agenda.

ROMANO: Yes.

MATTHEWS: This idea of running as a Christian. Not saying I am one,
but running as one, seems to be new to American politics.

ROMANO: Yes. It seems like -- I mean, I think with Michele
Bachmann, it`s one of the first candidates in the national stage whose
ideology is absolutely driven by an evangelical Christian theology.

And, you know, in the "New Yorker" story that came out, I think there
-- I mean, she studied under some very, very radical people. I mean,
people who have equated slave -- you know, who`ve questioned whether
slavery was really all that bad, folks who have talked about Christian
readings of the Constitution. I mean, she is way, way, way out there.

MATTHEWS: Well, let`s take a look at some more notable quotations.
Let`s look at these right now.

Here they are.

(BEGIN VIDEO CLIP)

REP. MICHELE BACHMANN (R-MN), PRESIDENTIAL CANDIDATE: We know there
was slavery that was still tolerated when the nation began. But we also
know that the very founders that wrote those documents worked tirelessly
until slavery was no more in the United States. Men like John Quincy Adams
who would not rest until slavery was extinguished in the country.

(END VIDEO CLIP)

MATTHEWS: Why would somebody say that? I don`t buy -- I don`t chalk
that up to ignorance. I chalk that up to some weird ideology that says
everybody who is a kid in the East Coast or Midwestern, ever gotten to
Mount Vernon, has seen all the slave quarters. It`s one of the most exotic
things, if you come from Philly.

My God, there are slaves here. This is weird. This is gone with the
wind. What`s going on here? You wanted to see the slave quarters, black
and white. Everybody is imbued with that history.

Everybody knows Thomas Jefferson, had this relationship with Sally
Hemings and had kids. Everybody knew that he had slaves. Everybody knew,
they all did. Madison, they all had slaves. Right up until the Civil War,
except for the Northerners.

Why did she say that the Founding Fathers were opposed to slavery and
fought tirelessly to get rid of it? Unless she is involved with some weird
kind of fundamentalism that believes the Founding Fathers were like the Old
Testament, to some weird, almost religious belief in the Founders.

ROMANO: Well, apparently, one of the things that she was reading
said that the Founding Fathers didn`t really free the slaves because they
knew it would be difficult for them.

MATTHEWS: OK. Yes, hey were trading slaves.

Back to you, Alex, because you have a strong feeling on this, I know.

WAGNER: No, I --

MATTHEWS: This slavery thing is essential to our understanding of
who we are as a country. It`s our original sin. It`s the thing we had to
get past, and we are still trying to get past. And she doesn`t know it.

WAGNER: It is the DNA of America. And I think to have someone on
the national stage that is -- study under folks who say that Africa was the
land of pagans and that, you know, it was benevolence that led the Founding
Fathers to keep the slaves because the free world was just too tough for
them is really something and it`s something that needs to be explored
further.

I think the same could be said for gay rights, proposition on gay
rights. One of the authors she studied called it homosexually end time
abomination.

I mean, again --

MATTHEWS: OK. Thank you. I think we got your drift, Alex. Thank
you.

Lois, what a great piece. You make news. You always make news.

ROMANO: Thank you.

MATTHEWS: She wrote the cover piece for "Newsweek" on Sarah Palin --
I`m sorry, on Michele Bachmann.

When we return, "Let Me Finish" with the tribute to another great
Irish American leader man who won election in 1960s, the man who saved New
York City, Hugh Carey.

You`re watching HARDBALL, only on MSNBC.

(COMMERCIAL BREAK)

MATTHEWS: "Let Me Finish" tonight with a few words about one of the
two great Irish-Americans to come to office in that exciting American
election of 1960. One, of course, was John F. Kennedy. The other was
Congressman Hugh Carey of New York.

Hugh Carey was the man who as governor of New York saved New York
City from financial collapse. He did it with brains, guts, heart and
common sense. He saw a city, a great city, that had lost its way. And
through tough unpleasant but necessary steps, won back its good sense, and
yes, it`s credit rating.

He made the cuts that needed to be made, raised taxes and put things
back together. He even got a Republican president changed his mind about
New York, a president who had basically told the city to drop dead.

Well, today, New York is the most vital city in the United States. A
more exciting safer city than it`s ever been. And every young person I
know wants to live there. And Hugh Carey is the guy that started that.
He`s the one that did it.

He did something else for which he will always be remembered by
Irish-Americans. He was along with Tip O`Neill, Ted Kennedy and Pat
Moynihan who ended for all times I hope American support for violence in
Northern Ireland. They were the famed four horsemen named for Notre Dame
backfield who started and ended with a Good Friday, according with that,
the end to the troubles, the time of hard that had the Irish killing each
other for too many years.

Hugh Carey, the man who saved New York. The last of the four
horsemen, not I hope the last Irish American politician, because he was
tough, because he was truly and bravely honest, because he had guts,
because he never lost his faith, because, as he said, he was always
underestimated. He gives every big city politician of every background
someone to be truly and forever proud of.

I wish his family and all his friends my warmest loved on their lost
of this great leader and pretty good singer who meant so much to us all. I
loved it when Mayor Ed Koch (ph) called him, Huey Carey, the greatest
modern governor of modern times. I say here, here.

And that`s HARDBALL for now. Thanks for beign with us.

More politics ahead with Al Sharpton.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY
BE UPDATED.
END

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