updated 10/7/2011 11:55:09 AM ET 2011-10-07T15:55:09

Guest Host: Ezra Klein
Guests: Jared Bernstein, Naomi Klein, John Sculley

EZRA KLEIN, GUEST HOST: Good evening, Lawrence. How are you doing?

LAWRENCE O`DONNELL, "THE LAST WORD" HOST: Great. Thanks. Thanks for
taking over. We`re done here.

KLEIN: Happy to be here.

And thank you to you at home for sticking around for the next hour.
Rachel has a well-earned night off.

This has been a dramatic week for the 2012 campaign but not because a
lot of exciting things are actually happening. It`s more because there are
a lot of exciting things not actually happening. For instance, on Tuesday,
in a long press conference that can really only be described as epic, New
Jersey Governor Chris Christie forever left his mark on the 2012 race by
announcing he would not be part of it.

(BEGIN VIDEO CLIP)

GOV. CHRIS CHRISTIE (R), NEW JERSEY: In the end, what I`ve always
felt was the right decision remains the right decision today. Now is not
my time. I have a commitment to New Jersey that I simply will not abandon.
So, New Jersey, whether you like it or not, you`re stuck with me.

(END VIDEO CLIP)

KLEIN: Then, yesterday, there was another big development in the 2012
race, and that one also came in the form of something not happening. This
time, it was former half-term Alaska Governor Sarah Palin, who announced in
for her a curiously low-key way, a letter to her supporters that she too
was passing on the race. Governor Palin wrote, I quote, "I believe that at
this time I can be more effective in a decisive role to help elect other
true public servants to office." So, watch out, untrue public servants.

But the idea is big news. It is something not happening. Again.

These two events, or non-events as the case may be, are turning points
in the narrative, in the story we tell ourselves about American politics.
They mean some of the characters that the media was looking forward to
covering won`t be in the play. And other characters, I`m looking at you,
Herman Cain, will have an unexpected starring role. They mean the Sarah
Palin story has come to an end, not with a bang but to steal a line from
the "New Republic`s" Walter Shapiro, with a pimp-out.

But here`s the truth. Those two events this week -- they don`t really
matter that much, not if you`re asking the big question of which party will
ultimately win the presidency in 2012, of who will really control the White
House.

And that`s because these questions rely on a fallacy, a mistake, a big
analytical fault line that runs right underneath the way we cover the race
for the presidency.

We like to focus on characters and campaigns and people. We believe
in ads and messaging and we believe in speeches. Too often the way we
understand presidential elections is really no different than the way we
understood our high school elections. They`re both just big popularity
contests and the winner is whoever is cooler, whoever has a better
campaign, whoever will buy us beer.

But -- and God bless the American voter for this -- he doesn`t and she
doesn`t get the credit they deserve. The American people are not that
shallow. Candidates matter, of course, and so do campaigns, but not that
much. Not as much as people often think.

But you know what does matter that much, you know what really drives
these elections? The economy. The economy matters. The economy is where
voters look to understand whether the president is doing a good job or a
bad one -- because though campaign ads might lie, paychecks usually don`t.

This graph -- and come on, you knew I`d bring a graph -- shows the
share of the vote won by the president`s party against the income growth in
the year before the election. Except when Ike was running, everybody liked
Ike, people liked the end of World War II, it`s a pretty strong
relationship.

And right up there at the top, way up there, you notice there are
three elections we always think of as blowouts of bad candidates.
Goldwater in `64, McGovern in `72, and Mondale in `84. Those were also, it
turns out, the years in which incomes did the very best.

We look back and we tell a story about candidate failure. About
Mondale promising to raise taxes and the government being supported by
hippies, and Goldwater being an extremist.

But, you know, Bill Clinton got re-elected after raising taxes and
Ronald Reagan, he got elected despite sharing all of Barry Goldwater`s
opinions. He broke through, in fact, as a national politician when he gave
a big speech endorsing Goldwater.

So, yes, candidates matter. But sometimes in their campaigns, they
confuse us. Doesn`t it seem awfully coincidental that the biggest blowouts
happen in the years with the most income growth? Doesn`t that make you
wonder?

And then if you look internationally, if you widen the perspective,
it`s true there too. Larry Bartels, a political scientist at Vanderbilt
University, looked at 31 elections held in 26 countries after the `07
financial crisis. He found, and I quote, "Voters consistently punished
incumbent governments for bad economic conditions with little apparent
regard for the ideology of the government."

So if you were a conservative politician in charge of some European
country when Lehman went down, sorry, you`re out. If you were a liberal
leader, you didn`t know better.

Voters didn`t care that it wasn`t really your fault or that you gave
good speeches or that they had liked you a few years before. Campaign ads
don`t trump unemployment.

But, now, it looks like Europe might be about to return the favor. If
you want to know who really might decide the 2012 election don`t look to
David Plouffe or Karl Rove and his super PAC or David Koch or even Mitt
Romney and Barack Obama --though I want to be clear -- those guys are going
to be pretty important.

Instead, for the next couple of weeks, keep your eye on this woman and
this guy. That`s Angela Merkel, chancellor of Germany. And that`s Mario
Draghi -- sorry, I like to say that -- head of the Europe Central Bank.
And they`re the folks in charge right now of whether Greece and Ireland and
Portugal go down or not. And that means they`re sort of the folks in
charge of whether we go down or not.

If you want to know why we in America aren`t seeing a swifter economic
recovery why we`re mired in the stagnation, Europe`s a big part of it.
They`re a big economy, bigger even than ours. We do hundreds of billions
of dollars of trade with them. Our banks are interlinked.

And just as our financial crisis collapsed their economies, if they
have another economic crisis, we`re going to have one too.

A few weeks ago, Goldman Sachs was estimating that Europe`s problems
would shed a full percentage point off our economic growth next year.
That`s a lot. That is real bad. But now, it`s gotten worse. Now, they`re
estimating that they`ll bring us, quote, "to the edge of recession by early
2012." That is a lot worse.

And if things in Europe go even worse than, that that means they`ll
push us over the edge right into recession in 2012.

So, in other words, if Europe doesn`t get its act together, we`re
likely to have a global recession next year. And among other things that`s
going to make it really hard for Barack Obama to get re-elected. If Europe
manages to make the tough political decisions necessary to solve their
problems, we could see a lot of uncertainty on the economy and pressure on
the economy lift and a real recovery fairly quickly.

This is for American politics and the American voter a bit of a weird
place to be in. Perhaps the most important decisions for our economy and
for our next election are not really in our control. All we can do is try
and buy insurance against the Europeans screwing up. And that, in fact, is
exactly how President Obama described the American Jobs Act at a press
conference earlier today.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: This is not the time
for the usual political gridlock. The problems Europe is having today
could have a very real effect on our economy at a time when it`s already
fragile. But this jobs bill can help guard against another downturn if the
situation in Europe gets any worse.

(END VIDEO CLIP)

KLEIN: Guard against another downturn. That is exactly what we`re not
doing. Instead the number two Republican in the House, Eric Cantor, is
saying the jobs bill is dead, but he`s not proposing any serious
alternatives.

Meanwhile, Republicans are trying to intimidate the Federal Reserve
into cowering in the corner until the end of the 2012 election.

You know, you would think the Republicans would be horrified at the
thought of letting European leaders decide an American election. In fact,
they sort of seem to be courting it.

Joining us now is Jared Bernstein, a former member of President
Obama`s economic team, a former economic adviser to Vice President Biden.
He`s now a senior fellow at the Center on Budget and Policy Priorities and
an MSNBC contributor.

Jared, my friend of many affiliations, thank you for being here.

JARED BERNSTEIN, MSNBC CONTRIBUTOR: My pleasure, Ezra.

KLEIN: So President Obama described his jobs act today. And he said
it was at least in part an insurance policy against what`s happening in
Europe. If that doesn`t go forward, what other options do we have? How do
we prepare for this storm?

BERNSTEIN: Well, it`s a tough question. I mean, first of all,
insurance is something you buy against something bad that might happen in
the future. We`ve got bad things happening in the present, and part of
them are very much related to the European contagion -- although, of
course, our problems started years ago.

Look, fiscal policy -- you know my wrap -- it`s really the only game
in town. I like what Ben Bernanke and the Federal Reserve are doing to try
to lower interest rates to stimulate more investment. But people won`t
invest if there`s not more customers, more orders, more projects that
investors who are sitting on the sidelines would view as profitable.

So, I think there`s a sequencing here. First, you need a fiscal
boost, and I think the president`s plan is a very good one. If you tell me
we`re taking that off the table and ask me what`s next, I don`t know,
patent reform? Trade bills? It`s a very tough box.

KLEIN: And let me stick on here for just a second here. How big do
you think it might get? Are you at the canned goods and ammo stage or are
you just reading the "Financial Times" a little more attentively than
usual?

BERNSTEIN: I`m a little bit more on the former than the latter.

KLEIN: Oh, no.

BERNSTEIN: It`s not -- it`s not that there aren`t solutions to the
problems in Europe. Just like there are solutions here. I mean, there are
a set of solutions staring us in the face. In fact, markets are actually
working quite well. They have interest rates very low here. So they`re
kind of screaming at the government to borrow and engage in temporary
fiscal stimulus.

In Europe, we know there needs to be a large liquidity injection. And
most economists agree and I`m one of them, that a country like Greece have
to restructure some of its debt. It ain`t going to be easy. It ain`t
going to be pretty.

But my biggest worry is it`s not going to happen because -- you know,
I was just reading a long article about this today. And you know, Ezra,
chess is like a hard game, like 17-dimensional change is higher.

You know, right now you`ve got, what is it, Malta and I can`t remember
another country. They`re -- you`ve got so many different countries that
you`ve got to agree to this and you`ve got electorates. You`ve got
different governments. It`s very challenging and there`s a lot of
indecisiveness.

So I`m worried about the functionality of the leaders over there.

KLEIN: Right. Almost any one country can veto it. It`s like the
Senate on steroids.

BERNSTEIN: Exactly.

KLEIN: But I want to talk about the Senate here for a minute. One of
the likely scenarios is bill gets broken down a bit and maybe passed in
piecemeal basis or at least considered that way. The president broached
that in his press conference this morning. In your view, what would be the
most important parts of the package to push? What would be the ones the
Democrats are really fighting to keep?

BERNSTEIN: OK. You`re asking a starving man to pick one choice on a
menu but I`ll try. I`m going to cheat a little bit. I think the rule
should -- if that`s my choice, I`m just going to say economic Hippocratic
Oath, do no harm.

Right now, we have a payroll tax cut and extended weeks of
unemployment benefits at work in the 2011 economy that leave the scene and
December 31st, at the end of this year. They`re both in the jobs plan.
And renewing them, which is part of the jobs plan, doesn`t put your foot
down any harder on the accelerator because they`re already in the economy.
There`s no new fiscal impulses the way economists talk about it.

But if you don`t do them, you take your foot off the accelerator. So
I`d say at least payroll tax and extend U.I. benefits.

KLEIN: Jared Bernstein, thank you very much, and good luck getting
the canned goods.

BERNSTEIN: Thank you, Ezra.

KLEIN: Moving on, Chris Christie -- gone. Sarah Palin -- bye-bye.
Rick Perry, slipping.

So, who`s left in the Republican field? Herman Cain -- oh, actually,
yes. Herman Cain. What that means is up next.

(COMMERCIAL BREAK)

KLEIN: In 2008, a Democrat won the White House in a historic victory.
So, how did we get here where the average American feels so left behind?
Coming up, I`ll talk with the author of "Shock Doctrine," Naomi Klein about
the "Occupy Wall Street" protests and what`s next. Just ahead.

(COMMERCIAL BREAK)

KLEIN: Welcome back.

Summer is officially over. According to the Gregorian calendar, it
ended on September 21st. But according to the presidential campaign
calendar, it ended when presidential hopefuls stopped taking pictures at
state fairs mid corn dog.

For some candidates, now is the time to get serious and show they`re
grown-ups. For example, Mitt Romney released his list of foreign policy
and national security advisers today. Tomorrow, he`ll make what his
campaign is billing as a major foreign policy address in South Carolina.

This is what front-runners do. They explain how they will govern.
They tell us what they will do.

But Mitt Romney, to his great dismay, isn`t alone on the stage this
week. A new poll out shows him tied for first place with Herman Cain.
Herman Cain, who used to be known to most people as the guy from the pizza
company, the guy who said what about Muslims in his cabinet?

But now that guy, according to Nate Silver at must-read 538 blog, now
that guy is -- depending on how you slice the numbers -- either leading or
tied for the lead in polls of Republican voters.

Now, look, one glance at the unemployment numbers is enough to get at
the basic importance of this election. It is not for kicks. Obama is not
a shoo-in.

Whoever the Republicans nominate might well be sworn in as president
in January 2013. And that means they`ll have their finger on the button.
It means they`ll have to take charge of the Treasury Department.

And, frankly, given the poor relations between Democrats and
Republicans right now, given the gridlock, probably means responsibility
for reforming the tax code, too.

So, in addition to evidence that they`re tied at moment, Mitt Romney
and Herman Cain have something else important in common also. They have
both released economic plans that would, among other things, reform the tax
code.

Mitt Romney`s is very long. It is 160 pages. But good for him, the
tax code and the rest of the economy is complicated.

Herman Cain`s plan for the economy is -- I`m trying to think what the
best way to put this is -- it has a title. It definitely has a title.
It`s Herman Cain`s 999 plan. And to listen to Cain tell it, it`ll wash
your car and do your dishes.

But to read about it can be a bit of a mind-bending experience,
actually. Cain`s Web site says it is based on the principle that, "a
dollar must always be a dollar, just as an hour is always 60 minutes." OK,
then.

Also, quote, "The natural state of our economy is prosperity. Freedom
ensures that." So thumbs up for freedom.

But what is the 999 plan? I mean, it`s got to be more than just
bottled freedom. Well, it`s a 9 percent flat tax on businesses, a 9
percent income tax, and a 9 percent national sales tax.

That`s really all we know. We don`t have numbers on it. We don`t
have specifics. We don`t have revenue estimates or information on who it
will hurt and who it will help.

It`s sort of like going to a car dealership and getting a photograph
of the car. Except car dealer is running for president.

FOX`s Chris Wallace seemed similarly confused a few weeks ago when he
interviewed Cain. So, he pressed him for some specifics.

(BEGIN VIDEO CLIP)

CHRIS WALLACE, FOX NEWS: There`s no explanation on your Web site of
how you arrived at 999 or how these numbers add up.

(END VIDEO CLIP)

KLEIN: That is a good question, Chris Wallace. How do these numbers
add up?

Other than the rhetorical value of the title, 999 -- it`s fun to say,
though -- how did Cain decide that 9 percent was exactly the right amount
at which to tax people across all forms of taxation? How did he decide
that was a perfect policy for freeing the economy?

(BEGIN VIDEO CLIP)

HERMAN CAIN (R), PRESIDENTIAL CANDIDATE: Here`s how we arrived at it.
I had some of the best economists in this country help me to develop this
plan.

(END VIDEO CLIP)

CAIN: That is intriguing. Who are the best economists in this
country, Mr. Cain?

(BEGIN VIDEO CLIP)

WALLACE: Now, you say that, and you say that -- and you`ve just
repeated, that this plan was researched and developed by some of the
leading economic thinkers in the country.

CAIN: Yes.

WALLACE: Again, we looked at your Web site. No mention of anyone.

CAIN: No. I haven`t put them on there.

WALLACE: Tell me the name of one of these leading economic thinkers
who helped you come up with this plan.

CAIN: My -- the chairman of my economic advisers is a gentleman by
the name of Rich Lowry out of Cleveland, Ohio. He worked with a couple of
other people quite frankly that are well known that I`m not at liberty to
mention their names.

WALLACE: Why not?

(END VIDEO CLIP)

KLEIN: Why not indeed. If it was such a great plan, wouldn`t they
like their names attached to it? Wouldn`t they like to be a part of
history? Wouldn`t they like to be famous for coming up with a plan that
saved the American economy?

You shouldn`t be so humble, secret economic advisers. We want to hear
from you. We need to hear from you -- because no one I talked to can
really make heads or tails of the plan.

In fact, I`m getting two completely different interpretations, when I
went and looked around.

The Center for American Progress checked out the plan, and they
concluded it would raise about half as much as our current tax system.
That`s not the fiscally responsible revenue-neutral plan Cain promised. In
fact, that would create a deficit that it`s impossible almost to figure out
how big that would be.

So I asked the non-partisan Tax Policy Center to take another look.
And though they weren`t sure, they thought the corporate tax would act more
like a consumption tax. And so, all in all, the plan would impose an 18
percent tax on everything you consume.

Now, let`s be real clear. That`s a huge move, to move from an income
tax system which is progressive, to a consumption tax system, which is
regressive, because poor folks spend more of their money. It is a huge
shift in the burden -- perhaps the biggest, most radical seismic shift in
taxes since we created the income tax.

But I couldn`t get the Cain campaign to tell me which interpretation
was right.

Earlier today, Cain told Lawrence O`Donnell that the other tax changes
in his plan would more than compensate every low-income American. But
that`s not what the tax experts seem to think. You can`t change it this
radically and everybody comes out ahead.

And so until Cain releases a detailed analysis of his plan or at least
a more detailed description so somebody else can do a detailed analysis,
it`s not something we can check.

Ronald Reagan once said quite wisely but in another context entirely,
"trust but verify." In a primary, in politics generally, you don`t want to
trust that much at all. You just want to verify. So please, GOP voters,
please go heavy on the "verify." Verify, verify, verify.

Joining us now to help us verify is Melissa Harris-Perry, an MSNBC
contributor and a professor of political science at Tulane University.

Melissa, it is wonderful to see you.

MELISSA HARRIS-PERRY, MSNBC CONTRIBUTOR: Hi, Ezra. Glad to join us.

KLEIN: So do you think -- do you think this is right? What Herman
Cain`s plan do the unspeakable, raise taxes on the things we buy and move
taxes from the rich to the poor?

HARRIS-PERRY: Well, so first, deep breath. Right? I suspect that
the Cain campaign is as surprised to be in a potentially front-running
position as the rest of us are. And so, remember, people run for president
in all kinds of different ways and for different reasons and part of -- you
know, sometimes people are really running for vice president or they`re
really running for a cabinet position. They`re running hoping that their
primary bid will actually gain them status and credibility within the
party.

But in this particular circumstance, the Republicans have had such a
hard time getting a candidate that is a clear consensus front-runner that
all of a sudden Cain finds himself out there with a plan that is certainly
half baked. Now, that said, if he were elected president of the United
States and he were elected somehow with a Republican Congress that was
prepared to pass any tax plan that he suggested and we somehow ended up
with a 999 plan, all of which is pretty unlikely to happen, if that
happened, this is undoubtedly, incredibly regressive. And would create a
circumstance where middle-class, working-class, and poor households would
carry an enormous, enormous tax burden.

KLEIN: And here`s the thing about that because obviously you`re right
in almost all of the particulars. We have a system in which it is very,
very hard to make change. You can ask President Obama about that. There
are many road blocks. And, of course, Cain is trying to get headlines.

But I actually think it`s sort of important. I think it`s important
that when these candidates say this is what I want to do we take that
seriously because it is the only guide that we have to what they will do in
office and also in particular in a crisis.

And we`ll talk about this a bit later in the show. We had an event in
the Senate tonight where the rules got changed slightly but in a fairly
dramatic fashion. And so, if Republicans decide to eliminate the
filibuster, suddenly some of the things we think are very unlikely now
become in a burst of political energy with another recession and a new
president much more likely.

So I do think -- I sort of wonder whether or not Republicans would
look at this and become a little bit unnerved because people do bring up
things like the value added tax and sales taxes now and they don`t tend to
like it.

HARRIS-PERRY: Well, here`s exactly -- I think that you and I are on
exactly the same page with this. So you started in your last segment,
we`re really talking about the fact that this election very well may be
decided by macro or even global economic processes.

KLEIN: Right.

HARRIS-PERRY: But that doesn`t mean that what happens in the election
itself is irrelevant because what happens in these campaigns is we really
start talking about what are the things that we value. When we elect a
president, we are not in fact electing someone who can just make policy
however he or she would like. But we are typically sort of choosing a
package of values and ideas.

In this context part of what choosing Herman Cain for president would
mean is choosing simplicity over recognition of how complex something like
the tax code is, so saying, look, I don`t care really what 999 means, I
just know it`s simple and I can understand it.

It would also mean saying that we value sort of the wealthiest
Americans keeping more of their money while burdening the poorest Americans
really on the consumption end. So, burdening them in the sense that every,
you know, loaf of bread that they buy, every pair of shoes that they buy,
is exceptionally more expensive relative to their income than it is for
wealthier Americans.

And really sort of opting into that as what our is next set of
economic and political values would be. And that I think I agree with you,
that is why it matters, whether or not Herman Cain is actually going to be
president is less relevant than whether or not we buy into those things as
our value system.

KLEIN: Beautifully put. Melissa Harris-Perry, MSNBC contributor and
a professor of political science at Tulane University -- thank you so much
for coming out today.

HARRIS-PERRY: Nice to see you, Ezra.

KLEIN: You don`t hear it from the media nearly enough. But the left
is officially -- what`s the word? Perturbed. Author Naomi Klein joins me
for the interview, just ahead.

(COMMERCIAL BREAK)

KLEIN: It`s been three years now since this country`s hit by the
great recession or depending what you want to call it, the lesser
depression. And we are still suffering from it. So you might think that
addressing the predatory lending by banks that helped get us into this mess
might be the sort of thing that no one in American politics could safely
oppose, at least not if they wanted to keep their job. That postulate is
about to get a stern testimony.

Richard Cordray, the president`s nominee to lead the Consumer
Financial Protection Bureau, cleared his first hurdle today when he made it
out of the Senate Financial Services Committee on a party line vote. But
Republicans, we`re told, are planning a filibuster when Cordray comes
before the full Senate. That`s not all.

A few years after the richest folks in the richest sector of the
richest economy in the world crashed the global financial system and left
millions jobless, Republicans might also filibuster. In fact, it seems
like they`re planning to filibuster the president`s jobs bill -- a bill
that would give the middle class a tax cut, extend unemployment benefits,
hire people to repair roads, all to keep taxes for millionaires from going
up.

It is a remarkable display of solidarity with the top 1 percent. In
fact, it`s a little odd. If you didn`t know better, you might think the
GOP wanted Wall Street to get occupied.

When we come back, we`ll talk about the other 99 percent and the
protests some of them have launched with the author of "The Shock
Doctrine," Naomi Klein, who just gave a speech this evening to the "Occupy
Wall Streeters" today.

Stick around.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CROWD: We are the 99 percent. We are the 99 percent. We are the 99
percent.

We are the 99 percent! So are you! We are the 99 percent! So are
you!

(END VIDEO CLIP)

KLEIN: The "Occupy Wall Street" movement has grown well beyond Wall
Street and spread to cities far away from New York. And the protesters who
are occupying parks and sidewalks all over the country are making one thing
clear. They are, as you just heard in the chant, the 99 percent -- which
is to say they are not part of the richest 1 percent of America.

So what`s bringing them out in the streets? What do the Occupy Wall
Streeters, the 99 percent, want? They`re not protesting because they want
a revolution or communism or anarchy.

Listen to them. You should take a look at their stories, which
they`re telling online on a Tumblr blog.

Here`s one. "I moved home in August after six months in my friend`s
basement. Between my low wage, no benefits job and $70,000 in private
loans, I could not afford to rent. I`m unemployed and uninsured but I am
in good company. I am the 99 percent."

Another. "I am 36 years old. I have my master`s degree, and I work
two jobs. My husband has his PhD and works four.

We have one child and health care coverage. We are luckier than most.
My parents can`t afford to retire. They live week by week deciding to
purchase their medications or pay their bills. What happened to the
American Dream?"

These folks are protesting because they feel like they made a deal.
You might be familiar with this deal. You worked hard, you get a good
education, you probably pick up loans in order to get that education, but
you do it because that is what you`re supposed to do to get ahead, to reach
for that brass ring you call the American Dream.

But these folks, they didn`t end up with the American Dream. They
ended up with debt, a lot of it.

And perhaps if everyone was suffering, that wouldn`t be so hard to
take. But for the top 1 percent, the deal seems to have actually changed a
little bit. You work hard, you actually make a lot of your own rules, and
you end up with more than you ever dreamed possible.

Thirty-five years ago, the top 1 percent of income earners made 9
percent of all the income in this country. Now that top 1 percent makes
almost a quarter of the income in the country. That is 1 percent of
Americans making nearly 24 percent of every dollar in income paid out
anywhere in the country.

So you have to ask yourself, how is it that the 1 percent is doing so
great? They haven`t been playing more by the rules or getting more
educated.

And here`s the really important part if you want to understand why the
other 99 percent are out protesting and they`re calling their movement
"Occupy Wall Street." How come the top 1 percent has stopped bringing
anybody else along with them?

Look at the relationship between the 1 percent, they`re the red line
here, and everyone else, the blue line. If you look at what everyone was
making in 1945, set that as your 1, there was a while when we were all
pretty near each other. There was a while when we rose and we fell
together.

And then we didn`t. Starting in about the `80s, that just stopped.
It`s around the same time median wages for most of us simply stopped
moving, too. They stopped rising.

And look at what happens in the `80s. The top 1 percent goes way up.
Everyone else stays flat. If the other 99 kept rising, we wouldn`t be
talking about "Occupy Wall Street" right now.

Americans don`t resent people`s success. The 99 percent don`t resent
there is a top 1 percent. They resent the fact the system stopped working
for them. They resent the top 1 percent now inhabits a different economy
than everyone else -- an economy with different rules, an economy with
rules in fact they seem to get to make up as they go along.

When you look at these numbers, this trend, when you see how it looks
and feels to people, I can`t imagine that`s sustainable in the long run.
That`s not a political equilibrium the country can keep going with. And in
fact, people have been wondering about that.

Timothy Noah who was a writer for "Slate" at the time, now at the "New
Republic," wrote a wonderful series on inequality last year, which we`ll
link on Maddow blog so you can read it. And at the end of the series,
again in September of last year, he asked, quote, "Why aren`t the bottom 99
percent marching in the streets?" Now increasingly they are.

Joining us now for the interview is Naomi Klein, documentary film
producer, activist, and author of "The Shock Doctrine." She was at the
"Occupy Wall Street" protest this is evening.

So we should begin, what is the mood there like tonight? Last night,
there was a tense showdown with police. Some people got pepper sprayed.
How are things holding up?

NAOMI KLEIN, "THE SHOCK DOCTRINE" AUTHOR: But yesterday, there was a
huge march as well. There are arguments about the numbers, definitely more
than 10,000 people. So that incident with the pepper spray hasn`t in any
way dampened people`s feeling that they`re part of a movement on a roll.
The enthusiasm is pretty amazing.

Their biggest problem is that the square is too small. It`s hard to
move. And the early organizers are talking nostalgically about the
beginning when there was more of a sense of community because it`s so big.

So, that`s the kind of problem you want to have.

E. KLEIN: New York -- Space is very small in New York.

N. KLEIN: Exactly. So, you`re talking about maybe some more spaces.
This is a movement that`s really growing, people, their spirits are really
high. And they`re really proud of the fact that even though there has been
police violence against the protesters, we saw those really disturbing
images, the protesters are really proud that they have been really
disciplined, that they have been committedly non-violent, and that this
media narrative hasn`t lapsed into the usual, you know, cops versus
protesters fighting in the streets.

There aren`t broken windows to point to. There aren`t street fights
to point to. And it`s actually just feeding their movement that we keep
seeing images of peaceful demonstrators being beat up by cops or pepper
sprayed by cops, especially because those cops have been getting money from
some of the banks that they are protecting.

E. KLEIN: Now, one of the criticisms people have lobbed at the
movement is that they don`t have demands, they don`t have a white paper.
And some of the organizers called back and said, no, we don`t have is that,
we`re building a movement. We`re keeping an open tent.

Which side -- you were down there today and you thought a lot about
it. Which side of this argument do you fall on?

N. KLEIN: You know, it isn`t exactly a movement yet. It`s a moment.
It`s a howl against inequality.

It`s a space that has been created that is sufficiently open that it`s
allowing people to find each other. It`s allowing a movement to find
itself, to find its footing. It would be very silly at this point to come
up with a list of demands before this movement knows what it`s capable of.

The extent of those demands really depends on how powerful this
movement is. The genius of making the slogan "We are the 99 percent" is
the sky`s the limit, really. It could include everyone except for a very
small sliver of society.

So, why not wait and see how big this is? Because if this is a
relatively small movement then their demands need to be small.

E. KLEIN: Right.

N. KLEIN: But if it`s a big movement, they can dream big. We can
dream big.

So -- so the other thing is I think we have been -- I call it NGO-
ized, in the sense that there really isn`t an organized left in this
country anymore. It`s been beat up by decades of witch hunts and
McCarthyism and attacks on trade unions, which are really the backbone of
the institutional progressive movement.

So people are really in the rubble of those decades of attacks, and
they`re starting the process of rebuilding. So we become used to NGOs with
very strict -- the media train. They`ve got their demands. They`ve got
their messages.

What they don`t have is a base. So, there`s no shortage of groups
that have all kinds of very specific demands about what should happen with
Wall Street and what should happen with the tax system, but they are not --
they don`t have power because a group that`s working for income
redistribution is never going to be funded by large corporations.

So, we have to work, as my friend Billy McKibben says, in a different
kind of currency. And that currency is bodies and energy and passion. And
that`s what the left hasn`t had in trying to be so slick and sort of using
the methods of corporations to communicate.

No offense, Ezra.

(CROSSTALK)

N. KLEIN: I don`t want to offend you.

E. KLEIN: I know. I`m all for white papers and graphs, but, you
know, I do a lot of those. And I can`t say they get all that much done.
They`re good for a blog, but you need a lot in a movement.

But that actually goes to a question about the other side of it, which
is to say when I was down there yesterday, I actually found a lot of Wall
Streeters walking through, lingering on the edges, sort of trying to figure
out what this meant for them.

Did you see much of that? Is there -- do you get feeling there`s an
interfacing there, some type of odd engagement?

N. KLEIN: There was a youngish woman standing on the street corner in
front of "Occupy Wall Street" holding a sign. I saw her yesterday. That
said, "Increase my taxes."

And I went up to her, and I said, you know, who are you? And she
said, "I work over there." And she worked in a big corporate law firm.
She didn`t want to say which one. And she wants her taxes to go up.

And she`s identifying with the social justice demands. And she said
something really interesting to me. She said, in my spare time, I work on
immigrant rights issues.

And all we ever hear about is how there`s not enough in this country,
there`s not enough money for decent health care and decent housing, and
there`s not enough space to treat immigrants decently.

And I just realized, it is such a stroke of organizing genius once
again to counter that discourse of scarcity, which is all we hear from
Washington, the whole discussion about the deficit, to go to the site of
maximal abundance.

E. KLEIN: Right.

N. KLEIN: Which just puts the lie to it. It`s not a scarcity -- it
is not a scarcity problem. It`s a distribution problem. And it`s really
hard to argue against that when you`re right down in the belly of the
beast.

E. KLEIN: Naomi Klein, author of "The Shock Doctrine" and bearer of a
truly wonderful last name. Thank you for being here.

N. KLEIN: Thanks, Ezra.

E. KLEIN: Coming up on "THE ED SHOW" tonight, Hank Williams Jr.
versus Hank Williams Jr.`s mouth. Ed Schultz will have the latest on that
saga here after the show.

And here, the legacy of Steve Jobs as seen by one of the people who
knew him best. I`ll talk to former Apple CEO John Sculley, just ahead.

(COMMERCIAL BREAK)

KLEIN: Full disclosure, I am a lifetime Mac geek. I admit it. So,
the death of Apple CEO Steve Jobs yesterday is for me and many others a
truly significant event. We will explore how Apple got to be Apple with
one of Jobs` closest colleagues, former CEO John Sculley, straight ahead.

(COMMERCIAL BREAK)

KLEIN: The Democrats changed the Senate tonight. Not a lot. Not in
a way you`re likely to really notice or that is even likely to affect
anything. But they changed it. They showed it could be done, that the
rules of the place aren`t written on stone tablets and hand down from a
fiery mountain.

Here`s what happened. Senate Minority Leader Mitch McConnell wanted
to bring up the president`s jobs bill, which Majority Leader Harry Reid is
modifying in an effort to win more Democratic votes. McConnell wanted to
do that for a simple reason. The bill would fail and the Democrats would
be embarrassed.

To get there, McConnell tried an arcane but legal maneuver to sustain
the rules and force a vote. If you didn`t understand that, don`t worry --
almost nobody understands that. It hasn`t been done successfully since
1941.

What matters, though, is what came next. Reid objected. The
parliamentarian, the Senate`s umpire, overruled him. But rather than
backing off, Reid forced a majority vote on the parliamentarian`s ruling.
The vote succeeded and the rules were changed to outlaw McConnell`s
maneuver.

This is known in the Senate as the nuclear option. It is a way to
change the rules with a simple majority. It is in fact the very same
procedure Bill Frist wanted to use to end the judicial filibuster in 2005.

Democrats opposed it bitterly then and Republicans supported it.
Tonight, Democrats used the tactic and Republicans were left in bitter
opposition.

It appears Reid turned to the nuclear option out of annoyance, not
necessarily out of principle.

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D-NV), MAJORITY LEADER: We should be able to move
matters through here that have happened since the beginning of this country
-- nominations, for example. We can`t do that because my friend, the
Republican leader, as candid as he was, said his number one goal is to
defeat President Obama. And that`s what`s been going on for nine months
here. Let`s get back to legislating as we did before the mantra around
here was "defeat Obama."

(END VIDEO CLIP)

KLEIN: But in using this maneuver Reid and the Democrats made it more
likely that it will be used against them -- again, perhaps by the
Republicans and perhaps for a change in the rules that will actually
matter.

(COMMERCIAL BREAK)

KLEIN: I want to show you something beautiful. It is just an
ordinary kid on an ordinary bike -- except the bike is never really
ordinary, right? The bike is maybe the most efficient machine ever
invented. One person, two wheels as far as you want to go.

Everyone can do it, even little kids. You do it and you never forget
it. You learn by feeling it. You learn it right away.

This is also something beautiful. A half million people have seen
this clip. People love it. It is a little kid learning to use an iPad in
instant.

The kid is learning it by feeling it because the iPad was designed to
work way. Steve Jobs insisted on it.

One of the people that knew the Apple CEO the best, is he believed the
computer would be the bicycle of the mind. He believed computer should be
elegantly designed, so perfect to use, that anyone could learn them and
anyone could go anywhere with them.

If you are a Mac fanatic like me, you grew up watching Steve Jobs see
keynotes where he rolled out one wonder after another. And he always did
it in the same way, with the same joke. There`s as always, he would say,
just one more thing.

(BEGIN VIDEO CLIPS)

STEVE JOBS, APPLE FOUNDER AND CEO: So, this is what we`re up to
today. And I`m really glad you like everything. But there is one more
thing.

But there is one more thing -- and there is one more thing.

But we do have one more thing.

There is one more thing.

But there`s one more thing.

But there is one more thing.

But there is one more thing.

But there is one more little thing.

(END VIDEO CLIPS)

KLEIN: There`s always one more thing -- just one more.

The world today, my corner of it any way, is mourning the loss of
Steve Jobs at age 56 after a long fight with pancreatic cancer. We wish
there was one more thing.

But joining us now is John Sculley, another former CEO of Apple, a guy
who used to be Steve Jobs boss and saw him work up close.

Mr. Sculley, it`s great of you to be here.

JOHN SCULLEY, FORMER APPLE CEO: Thank you, Ezra. Nice to be here.

KLEIN: You`ve spoken about the Steve Jobs methodology, the way he
approached products, that was simply different from the way other people
did it. What was that?

SCULLEY: Well, if you go to Silicon Valley, certainly in the early
1980s when I showed up there, when people talked about products, they
always talked about technology, bits, bytes, performance, metrics.

Steve never thought. He talked that way. He always talked about what
it meant to the people who were going to use it, the user experience.

Steve`s great gift was his ability to put together technologies that
could be transformed in to magic. And the magic was an experience that the
world fell in love with. And he did it over and over again.

And, Ezra, Steve used to say, you know, I`ve got just one more product
inside of me -- and to him it was like a growing, birthing experience for a
product. It was something that he didn`t probably have total control in
his own mind of exactly it was going to be even though he was a
perfectionist but it took on a life of its own as he passionately worked
towards creating it. And he was totally unique from anyone I`ve ever met
in high tech.

KLEIN: And you`ve made a wonderful point about the way that product
development happened. You said that the way -- what he believed the
important decisions were, they weren`t the ones where he had to decide what
to do, but the ones where he had to decide what not to do.

Can you give an example of a decision like that?

SCULLEY: Sure. Steve was brilliant at taking complex things and
simplifying them. And again, he always did it from the user`s point of
view. I can remember one night when Steve and I were late in the Mac
building and it was typical for us to be there around midnight, even 1:00
a.m. because that`s when the software engineers really get going.

And a software engineer came up to Steve and he handed him a little
floppy disk and he said, "Steve, I think you are going to like this." And
Steve turned to him and said, "You know, is it your best work?" And the
software engineer said, "Well, it`s getting there. But it`s really, really
good and I`m proud of it." And Steve just picked up the floppy disk and he
just threw at this time at him and said do it again and didn`t even look at
it.

He had just standards that were so high that anything that was less
than perfection -- so if someone said, Steve, I did this particular
subroutine in three steps. Steve would say, well, then go back and do it
in two, and they`d say did it in two, and he said go back and do it in one.

And so, he was a demanding taskmaster but on top of every detail. I
mean, he knew everything going on in that product. There wasn`t any
decision that he wasn`t involved in and it was like the master artist in
the renaissance with the workshop of talented people around him. And each
one working on a different part of the project and there`s Steve,
orchestrating it, making the decisions.

And yet, Ezra, he was not a programmer. He wasn`t a software
engineer, but he was an artist.

KLEIN: Do you think that with Jobs gone, that methodology, that
approach to product development can survive? It is something that can be
implanted on a culture, or is it a product of a singular mind meeting a
singular personality?

SCULLEY: Well, I think that Steve worked very hard. Remember, when I
knew him and worked closely with him for almost three years, he was in his
20s. So, yes, he was brilliant and he had great visions and the products
were great for their time. There were with technology was in the 1980s.

But the reality was that he was not an experienced executive at that
point. He hadn`t hit his rhythm yet in terms of how do you manage
organizations and get a routine that`s scalable to something large and yet
still control the process and the methodology. He`s clearly hit his stride
over the last 13 years.

KLEIN: Right.

SCULLEY: And the quality of team that he`s assembled -- one of
Steve`s great strengths was his ability to recruit just outstanding people.
He`d always go for people. We`d say, Steve, you can`t get that person and
yet, he would go out and get the absolute best person in their field. And
that`s just how he thought about things.

If you look at the executive team he`s built around him, they have
been working with him for a lot of years. They understand his methodology.
They have been in their position for a good while. They stay in the
background. Take Johnny Ives.

KLEIN: Right.

SCULLEY: Johnny was there when I was at Apple. He`s clearly the best
industrial designer in the world, and yet he sits quietly behind Steve and
-- you know, while Steve is making the decisions. It`s an amazing team
that he assembled.

And I think that if Steve had left Apple five years ago, before the
iPhone, before the iPad, and before he laid the road map out as to what the
post-PC era was going to be like, Apple could have had some serious
challenges, but he made it through. And the road map is clear. The team`s
in place.

I think Apple`s best years are still ahead of it. And I think they`ve
got plenty of creativity and methodology in place for at least the next
five to 10 years.

KLEIN: John Sculley, former CEO of Apple and the former boss of the
late and very great Steve Jobs -- thank you so much for talking to us this
evening.

SCULLEY: That does it for us tonight. I`m Ezra Klein. Rachel will
be back tomorrow.

And you can read more of my work at WashingtonPost.com/EzraKlein, or
follow me on Twitter at Twitter.com/EzraKlein.

And now, it is now time for "THE ED SHOW." Good night.

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

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