updated 10/19/2011 12:45:21 PM ET 2011-10-19T16:45:21

Guests: Ezra Klein, Jared Bernstein, Robert Hagan

RACHEL MADDOW, HOST: Good evening, Lawrence. Thanks very much.

And thanks to you at home for staying with us for the next hour.

Where I live in western Massachusetts, my town, North Hampton, had a
great town asset in the form of Pleasant Street Video Store, a mom and pop
movie rental store with a genius staff and an incredible selection of all
the greats. Old movies, rare movies, cult movies, foreign movies, hard to
find stuff -- and the whole staff understood it all and could talk you
through it. It was a one of a kind place, a great resource.

But then -- I mean, you know where this is going, right? About four
months ago, Pleasant Street announced they were closing up shop. Our
little movie rental shop that could, could no longer compete with the new
online world of movie rentals.

But instead of just shutting down, the good, good, good people at
Pleasant Street video in North Hampton, Massachusetts, did something cool.
They decided they wanted to stay an asset to the town of North Hampton,
Mass, even as they were going out of business.

And so, Pleasant Street figured out a way for an $8 donation, anybody
could effectively adopt one of the movies from the store`s collection and
then that movie would be housed forever at the public library in town.

It was kind of a weird idea but it totally worked. The town fully
stepped up. Every single movie at Pleasant Street video store got adopted.
Some people picked just their favorite movie or all the movies by their
favorite director or like the James Bond movies or whatever. You chose the
movies you wanted to adopt and they all went.

So, now, instead of Pleasant Street video existing as a business and
its amazing film collection being a relic in all of our collective
imaginations now that the business is gone, thanks to this smart idea,
Pleasant Street`s entire DVD collection, 8,000 films in all, will
permanently be kept at North Hampton`s Forbes Library where anybody can
rent them for free forever.

People ask me why I live in western Massachusetts. Yes. That`s
right. Now you know. That`s how we roll.

I`m very proud of what Pleasant Street did, even though I`m sad to
miss the business.

Independent video stores like that, like Pleasant Street, has slowly
gone away in this country because of online competition, right, because of
companies like Netflix which now allows you to even stream videos online,
Blockbuster Video before that.

But Blockbuster, it should be noted, nearly went the way of pleasant
street video back in the year 2000 as a result of a disaster of a deal they
decided to make with a Texas company -- a Texas company that was ostensibly
an energy company but it was an energy company that had its mitts on a
whole lot of different things that had absolutely nothing to do with
energy. Under the deal Blockbuster partnered with this energy company,
they signed a 20-year deal that would allow people to have access to movies
on their personal computers or on their TVs instead of coming into the
store.

And while that may sound like an awesome idea now, technologically
speaking, back in the year 2000, it was not an awesome idea. It never even
got past what`s called the test stage. It did not work. It was a bust.

Blockbuster Video ultimately pulled out of that deal and the Texas
energy company that was their partner in that deal was forced to face up to
that massive failure. It`s forced to face up to that massive failure by
recording it in their books as a $111 million profit. Profit?

Yes, they called it a profit -- this deal that did not work. How
could they possibly call a deal that went bust $111 million profit? It`s a
good question, but they did it.

The company in question was Enron, one of the biggest players in the
American energy industry and a bigger player in the city of Houston, Texas,
where they were headquartered. Right around the time Enron made that weird
deal with Blockbuster, they also signed a $100 million deal to have their
name plastered all over the Houston Astros new baseball stadium. Enron had
that money to throw around because they were awash in what they declared to
be massive profits.

After the deregulation of the markets throughout the 1990s and in
particular the deregulation of anything related to the energy markets,
Enron went on a four years of what looked like astounding corporate
success, increased sales of 750 percent. And that astounding corporate
success it turned out was actually the result of astounding corporate
lying. Business deals where nothing was traded to no one for no purpose,
Enron would write those down as million-dollar deals.

For deals that actually have risk in them either by design or just by
the nature of the deal, Enron would form itself into the company that would
not only do the deal but would then be the company that benefited when the
deal didn`t work. They were essentially a criminal enterprise in which
their ostensible business was mostly being done through accounting tricks.

Enron`s accountant was Arthur Andersen. Arthur Andersen ceased to
exist as one of the world`s largest accounting firms because of the
magnitude of the Enron disaster.

But the problem wasn`t that so much that the accountants were just
helping hide their scams. The bigger problem was that the scams in some
part were legal, valuing that disastrous Blockbuster deal as $111 million
profit, that was thanks to the sort of accounting tricks that were
legalized by deregulating Wall Street to make financial transactions more
profitable.

Wall Street firms did that thing all the time. The only innovation
with Enron is that Enron technically wasn`t a Wall Street firm. They were
supposed to be an energy firm an energy firm that were some reason was
doing -- you know, home video deals and any other kind of deal they could
get their mitts on.

When Enron finally collapsed at the end of 2001, the scale of the
scandal was unprecedented in American business history.

(BEGIN VIDEO CLIP)

REPORTER: The extent of the devastation is still mind-boggling.
Enron was the seventh largest corporation in the country when it collapsed,
wiping out $63 billion in shareholder value, putting 27,000 people out of
work. Its glass tower and crooked "E" leaving an indelible mark on
Houston, Enron`s hometown and site of the trial.

(END VIDEO CLIP)

MADDOW: Not only was the Enron collapse a personal disaster for the
individual people who worked there, who lost everything, it was also a huge
political disaster for the George W. Bush administration. Enron`s founder
and CEO Ken Lay, was one of George W. Bush`s biggest political donors.
Enron, itself, was for a time George W. Bush`s top career donor.

When Dick Cheney was crafting the nation`s energy policy behind closed
doors in 2001, Enron officials were in the room.

At the height of Enron`s collapse, the White House was forced to
acknowledge that President Bush`s senior adviser Karl Rove owned nearly a
quarter of a million dollars in Enron`s stock. More than a dozen other
Bush administration officials also owned stock in the company as it went
down.

Enron officials were personally calling Bush administration officials
as it was becoming clear that the company was in trouble.

Because of all those ties, the Enron scandal was set to be a huge
political scandal for the new President Bush. It probably would have been
the defining scandal of the first Bush term had 9/11 not happened a month
after Enron started to fall apart.

The fix for the Enron problem came in the form of a new law passed by
Congress called the Sarbanes-Oxley Act. That new law mostly changed the
rules about how corporations kept their books and how accounting firms
should be independent from the companies they are employed by.

So, Enron goes away. Arthur Andersen goes away. There`s a tightening
of the rules, so at least there`s not going to be another Arthur Andersen
situation.

But Wall Street, essentially, keeps playing by the same rules that
Enron had been playing by in the years leading up to their collapse --
things like declaring something has value because of the fact that you
traded it even if the only entity to which you traded it was another part
of yourself. Ta-da!

And in 2008, of course, with all those shenanigans going on, we ended
up having a collapse of the only scale that could dwarf the Enron scandal -
- one created entirely on Wall Street by possibly criminal and very at
least negligent reckless behavior by totally deregulated financial
institutions.

Instead of the embarrassment of Enron Field this time, it was the
embarrassment of Citi Field. Instead of a failed but mysteriously
profitable Blockbuster home video deal, it`s multi-zillion dollar profits
off of playing casino with sham mortgages on houses like these, playing
casino with the lives of the families who once lived in these homes.

In the midst of that collapse in 2008, a presidential election was
held. A presidential election was held in a Democratic House and a
Democratic Senate and Democratic president were all elected. And despite
great gnashing of teeth by the Republicans, the Democrats did manage to
pass a fair of middling package of new regulations on Wall Street called
Dodd/Frank.

I say fair to middling because it could have been a lot tougher than
it was. They probably could have nationalized the banks and maybe they
ought to have. But what they passed is some constraints on the worst
behaviors that got us into the crash of 2008, that got us to where we are
now as a country.

And now, just three years later, we are poised to have yet another
presidential election season and the candidates vying to be the Republican
nominee are competing with one another to see who can roll back the new
rules on Wall Street the farthest and the fastest.

(BEGIN VIDEO CLIPS)

REP. MICHELE BACHMANN (R-MN), PRESIDENTIAL CANDIDATE: I know we can
do so much better in this country. That`s why I`m the chief author of a
bill to repeal Dodd/Frank.

JON HUNTSMAN (R), PRESIDENTIAL CANDIDATE: We can`t go forward with
Dodd/Frank.

UNIDENTIFIED MALE: I agree, repeal Dodd/Frank.

REP. RON PAUL (R-TX), PRESIDENTIAL CANDIDATE: Dodd/Frank obviously is
a disaster.

Sarbanes-Oxley which was done by the Republicans, it cost $1 trillion,
too. Let`s repeal that, too.

NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: I`m shocked the House
Republicans haven`t repealed Dodd/Frank. They ought to repeal Sarbanes-
Oxley now.

(END VIDEO CLIPS)

MADDOW: Dodd/Frank, come on, who needs it? 2008 wasn`t so bad.
Sarbanes-Oxley -- we don`t need that either, we`re good.

In addition to all these second tier candidates, the Republican front-
runner, himself, Mitt Romney, has also proposed repealing Dodd/Frank.
Also, he`s proposed modifying those post-Enron rules, the Sarbanes-Oxley
Act.

President Obama and Democrats are trying to make this next election
season, the president`s re-election effort about the Republican position on
Wall Street. Mr. Obama hammering home in almost every speech now that the
Republican position, the Republican plan is to hand the keys back to Wall
Street and let them start driving the country again.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Their plan says we need
to go back to the good old days before the financial crisis when Wall
Street wrote its own rules. Their plan says, let`s go back and let Wall
Street do exactly what they were doing before the financial crisis. Let`s
roll back all the Wall Street reforms that we fought tooth and nail to pass
over the objections of lobbyists and special interests in Washington.

(END VIDEO CLIP)

MADDOW: What the president says there is true, but he could say more,
because Republicans now just don`t want to go back to the rules we had when
we got the 2008 disaster. Republicans want to go back to the rules we had
before we got the disaster before that. They want to go back to the rules
we had even when we got Enron.

Joining us now is "Washington Post" columnist and MSNBC contributor
Ezra Klein. Ezra, thanks very much for your time tonight. Nice to have
you here.

EZRA KLEIN, MSNBC CONTRIBUTOR: Good evening.

MADDOW: I have not seen Republicans this united and excited about
anything since rallying to extend tax breaks to zillionaires. Why the
sudden push, really, the sudden enthusiasm about not just repealing
Dodd/Frank but maybe even Sarbanes-Oxley?

KLEIN: You know, I take it as a generalized world view that isn`t
even just about financial regulation, that there`s been a move in the
Republican Party to say that what`s gone wrong in the economy of the last
couple years and even before that, both before the crisis and in the Obama
years is government, is anything in general the Democrats did.

And so, in another part of that same Bachmann clip she said, you know,
the financial crisis was not Wall Street`s fault, it was government`s
fault, it was Fannie Mae and Freddie Mac. It was the effort to expand home
owning into minority and low income communities.

And so, the answer in all things in all ways has been to repeal
whatever government has done, usually whatever they have done lately
because people are more interested in repealing new things. So, repeal
health care reform but never say how you`ll replace it exactly. Repeal
Dodd/Frank, don`t say how you`ll replace it or if you will. Repeal
Sarbanes-Oxley, nobody knows if you replace that either. Just undo it all
because if you don`t have what government is doing, then, clearly, our
problems will be solved.

MADDOW: I get how this -- this comes out of a feeling that government
can`t do anything right, and so anything government has done must be
undone. I get that part of it. But I also wonder if this is one of those
things where there`s sort of two sets of facts. There`s a set of facts for
Republicanland, where deregulation created no trouble at all on Wall
Street, where deregulation has never been trouble, and one for the rest of
the world but we recognize that there being no rules about these plainly
stupid things happening at Enron and on Wall Street, where these things
were actually a problem.

KLEIN: Absolutely. And it has become the gap between the two world
views has become real striking. If you remember, we had the Financial
Crisis Inquiry Commission, and it was trying to figure out much like the
9/11 Commission did, what happened? Why did this happen?

And the idea was we could all settle on a single set of facts and we
could come up with a response that took those into account. And every
Republican dissented from the report and they all dissented from the report
because they said the report blamed Wall Street in a way that made
regulation would be clearly the next step.

And if you read the two sets of reports, they actually didn`t disagree
on all that much. They agreed on a lot of what Wall Street did wrong.
They agreed on a lot of what government did wrong. But Republicans just
didn`t want the regulation to go forward.

And so, there`s been a sense in which Republicans have had a series of
preferred outcomes and they worked backwards to find the story that fit
them. And in some ways, that`s a little dangerous and I think even
dangerous for the Republican Party. You get the sense listening to those
debates where they don`t say what President Obama did with Dodd/Frank did
not sufficiently regulate Wall Street and we`re going to go and do a better
job. They just want to repeal it.

They`ve actually not done the hard thinking, that a lot of what Obama
did isn`t popular. And there`s a good reason to think it`s not the wrong
thing. You might want to do Wall Street reform differently, might want to
do health care differently. But your position can`t be the status quo,
because the American people don`t have enormously long memories
necessarily.

But you remember 3 1/2 years ago, the status quo was not good. It did
not work for the country.

MADDOW: And to be bringing -- that`s the amazing part of this. You
wrote about the extension back to the Enron problem. Today at "The
Washington Post," the thing that is amazing to me is that not only would
they be willing to fly in the face of public opinion that is still quite
angry even on the right at Wall Street for what happened in 2008 but go all
the way back to the last scandal that happened in 2001. The last super
embarrassing thing with all these Republican ties to it that they shouldn`t
want to remind the country about and to say they want to undo those rules,
too.

It is -- it is striking to me to see this push from Republican elected
officials and candidates in the face of public opinion about Wall Street.
That`s something I just don`t understand.

KLEIN: Right. And I think it goes -- I think it goes to internal
dynamics in the party, right? Because if you`re Mitt Romney and have a
sort of somewhat reasonable moderate position, you want to undo Dodd/Frank
but say you`re going to replace it with streamline version. You say some
stuff Dodd/Frank does make sense.

And then, you`re Michele Bachmann or you`re Herman Cain, or you`re
Rick Perry, and you want to get some traction against Mitt Romney. So, you
got to think, well, what can you do to show Mitt Romney is too much of a
compromising moderate, he`s going to make deals with the Democrats? You
say, well, I`m going to completely repeal Dodd/Frank. And Sarbanes-Oxley,
I`m going to take that out, too.

And so, this happens in primary sometimes. It`s happening in a very
exaggerated way here, too, where they`re speaking too much to one another
and to a conservative base and to funders and to sort of very ideological
folks and they`re not coming up for air long enough to see how this is
going to play before the country and they say that we want to roll back the
regulations, we want to cut taxes on the rich and, yes, we can`t really
explain how this is different from what George W. Bush did.

MADDOW: Ezra Klein, "Washington Post" columnist and MSNBC contributor
-- Ezra, thanks very much for writing about this today. Thanks for being
here tonight.

KLEIN: Thank you.

MADDOW: There`s a story in today`s news about drug testing the rich.
A story that we almost decided to title "My Cup Runneth Over." We decided
against that title in the interest of taste. My cup runneth over for a
drug testing story? Seriously?

But the story is still about drug testing and drug testing
specifically the 1 percent. And it is still genius even without that
prurient title. That would never make it on our show in any context.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I`m not the Democratic
president or the Republican president, I`m the president.

(CHEERS)

(END VIDEO CLIP)

MADDOW: The president today speaking in North Carolina, criticizing
Republicans for what he described as their reflexive partisan opposition to
his jobs plan to even ideas they and most Republican voters support. We`ll
have more on that coming up.

And "Best New Thing in the World Today" goes to 11 after "Spinal Tap"
makes an unexpected cameo in today`s political news.

That is all ahead.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

HERMAN CAIN (R), PRESIDENTIAL CANDIDATE (singing): Imagine there`s no
pizza --

(END VIDEO CLIP)

MADDOW: At "Talking Points Memo" today, they mentioned something that
we initially did not notice about the spectacular edition to what we know
about the career of Republican presidential candidate Herman Cain. This,
of course, is Herman Cain in a choir robe repurposing John Lennon`s
"Imagine" -- song about world peace -- to instead be a song about pizza and
tacos.

We missed something in this video when it surfaced yesterday. We
missed something that "Talking Points Memo" caught and actually to see this
-- you guys, you have to fast forward just a little bit from where we were.
Can we show that?

There. There. Do you see who that is? Politics geeks of the world,
do you see who that is?

Standing and enthusiastically cheering on Herman Cain, that is Ben
Nelson. Now a sort of Democratic senator from the great state of Nebraska.
At the time of this video in 1991, he was the sort of Democratic governor
of the great state of Nebraska. Yay! Good spotting.

Now, aside from his where are they now cheering on Herman Cain cameo
in the news today, Senator Ben Nelson of Nebraska is also in the news today
because he says he is going to vote with the Republicans again against
President Obama`s jobs bill. He and Senator Jon Tester of Montana already
did vote against the jobs bill as a whole once but now that they`re
breaking it up into its component parts for the Senate to vote on it again,
now, Senators Jon Tester and Ben Nelson and maybe Joe Lieberman, God bless
him he still exists, now these conservative Democrats say they may vote
against even just the specific part of President Obama`s jobs bill that
stops the layoffs of teachers and firefighters and cops.

Incidentally the polling on this issue is amazing. In the new CNN
poll, when they asked people whether they favor or oppose providing federal
money to state governments, to allow them to hire teachers and first
responders, the number of Americans who say yes, I favor that, is 75
percent -- 75 percent. That is an unreal number for an economic policy.

Even Republicans want to save teachers and first responder jobs. Even
Republicans support that by a huge number. Republicans support that by 63
percent.

Think about that for a second. If a huge majority of Republican
voters supports the teachers, cops, firefighters jobs bill, then Republican
elected officials voting against it are voting against what the voters want
by a huge margin. They are voting against even what their own voters want
by a huge margin. That is a gigantic and very exploitable split between
what Republican voters want and what elected Republican officials are doing
that.

And into that amazing opportunity for Democrats, conservedems like Jon
Tester and Ben Nelson and Joe Lieberman are siding with the Republican
senators who are siding with no voters, not even their own, and who are
siding against firefighters and against cops and against teachers.

(BEGIN VIDEO CLIP)

OBAMA: Just last week, all the Republicans in the Senate got together
and blocked this jobs bill. They refused to even debate it.

A hundred percent of Republicans in the Senate voted against it.

We got 100 percent no from Republicans in the Senate.

(END VIDEO CLIP)

MADDOW: Also from a small, weird handful of Democrats you got nos as
well. Conservedem senators like these guys always try to get ahead by
trashing their own party. That is what makes them conservedems in those
case.

But in this case, it is a weird one. The calculus here is weird
because it means tacking to the right of the Democrats -- yes, which they
love to do, but it means tacking to right of the Democrats into what is
clearly an electoral no man`s land.

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

Jared, thanks very much for being here.

JARED BERNSTEIN, MSNBC CONTRIBUTOR: Thank you for inviting me.

MADDOW: So, voters are as close as they get to unanimous. That
keeping teachers and firefighters and cops on the job is the right thing to
do right now. Is there anybody else who is opposed to this along with
these Republican senators and Ben Nelson? I mean, are economists as a
group saying that this is a bad idea or something?

BERNSTEIN: No, I mean, you can always find some economist to say
something bad about anything. But, overall, it`s widely recognized that
the president`s jobs plan in total is what`s needed to start nudging the
unemployment rate in the right direction. If we don`t do that, we`re
probably going to be looking at an unemployment rate that`s 9 percent or
north of that a year from now, just like we are now.

But as you pointed out, we`ve got Democrats who are to the right of
Republicans. I was struck by these poll results -- 27 percent more
Republicans wanted to see teachers and firefighters and first responders
keep their jobs.

And I remember, Rachel, from back in the Recovery Act days where you
don`t have to be well versed in the economics of Keynesianism to understand
this. I mean, we had mayors who were saying, you know, I have a bunch of
pink slips in this hand that I was about to hand out to a bunch of teachers
and a Recovery Act check over here so I can rip up the pink slips and keep
teachers on their jobs. This is simple stuff.

MADDOW: In terms of the economic messages, Jared, it`s -- as I said,
it`s hard to get better polling numbers in any policies than the president
has on most aspects of the jobs bill.

But on the Republican side, the Republican presidential candidates and
Republicans in the House are sort of trading the lead in terms of who`s
going to get the lead economic message. We keep hearing about how much
people like the amazing Herman Cain 9-9-9 plan.

Now that Mr. Cain is polling so well, I understand we`ve got some new
analysis of how that plan won`t work?

BERNSTEIN: So, this is -- this is incredible. This is really part
and parcel of what we`ve been discussing and also what you were talking
about with Ezra -- the idea that these folks are speaking to themselves in
an insular way that they are definitely leaving the country behind.

This new analysis out today from the Tax Policy Center which is a very
highly regarded nonpartisan scorekeeper of this stuff shows that the Herman
Cain 9-9-9 plan would raise taxes on the lowest income people. Their
income is around 10,000 bucks on average. Would raise their taxes by
$1,600, would raise federal taxes on the middle class by over $3,000, would
lower taxes, take them down, lower tax payments for those in the top 1
percent, OK? So, those at the very tip -- actually really the only group
that`s been doing well -- would lower their taxes by over $300,000.

But then when you get up to the stratosphere, to the very top of that
top percentile, the top 0.1 percent, their average income is around 8
million bucks a year. So, that`s a pretty nice neighborhood. This takes
their tax bill down $1.8 million. takes it down. OK?

So I mean, this is -- I guess -- class warfare? I don`t know what to
call it. I was actually talking to my 12-year-old daughter, which I don`t
like to burden her with this sort of thing. I just wanted to get like a
kids response to this. I actually showed her these numbers.

And her response was, whack job. I thought that was actually pretty
good.

MADDOW: Paul Ryan of Wisconsin, who`s the House Republicans` top
budget guy, he has essentially endorsed the Herman Cain 9-9-9 plan. He
says he likes the sound of it. So --

BERNSTEIN: So, here`s the thing. Sorry, go ahead. Sorry.

Here`s the thing on that, Rachel. Paul Ryan, a couple economists out
there, couple people I`ve been debating lately, now that these numbers are
out, I really want to hear what those folks have to say about it. I mean,
these numbers are -- they just came out this afternoon. We have to keep an
eye on that.

MADDOW: In terms of the Democrats versus the Republicans on this, I
mean, now, if we got the top House Republican endorsing the 9-9-9 plan,
can`t the Democrats start saying, listen, here`s your choice, the wildly
popular ideas of the jobs act versus raising taxes on everybody in the
country except for rich people.

BERNSTEIN: Right. Exactly. I mean, that`s exactly the point. You
could not be more out of step with where not just the American people or
the Democrats or -- but with the broad majority of Democrats and
Republicans.

I keep thinking there are Tea Party folks out there who are among the
20 million-plus people who are un- and underemployed. Do they want to see
their taxes go up? Do they want to see their opportunities to work get
thrown by the wayside as Republicans throw this plan under the bus for
political advantage? Do they want to see their kids in classrooms that are
twice as large as they would be otherwise?

So, I really think this stuff is coming to a head. I think the
president has got it right in bringing this message over the heads of
Congress right to the people.

MADDOW: Jared Bernstein, a former member of President Obama`s
economic team, former economic adviser to Vice President Biden. Jared,
thanks for your time tonight. I really appreciate it.

BERNSTEIN: My pleasure.

MADDOW: All right. "Best New Thing in the World Today," Mitt Romney
and "Spinal Tap" together at last. That is coming up.

(COMMERCIAL BREAK)

MADDOW: OK. So, sometimes targeted Internet ads work out perfectly.
They know who you are and they know what you might want to buy. Weird
like, right, like I was just thinking about buying a shake weight. And
some Acai Berry hair gel or whatever.

I mean, online ads can be oddly and creepily right on sometimes.
Sometimes, however, they can be the "Best New Thing in the World" -- like
when Mitt Romney ads turn up where we found them on the Internet machine
today.

Best unintended new political thing in the world today, coming up.

(COMMERCIAL BREAK)

MADDOW: Hey, good news. And I do not mean it in an ironic way or
what I`m about to say is actually bad news that proves a point. I mean
actual good news.

Today, we learned for the first time in three years, there will be an
increase in Social Security payments. So, if you or anyone you know is
live living on Social Security or partially dependent on Social Security
for your income, you`re about to get a raise. The cost of living increase,
about 3.5 percent.

This is good news for the individual older people getting this extra
money. Obviously, it`s also good news for the economy. People being poor
and having no money to spend, it isn`t just a symptom of the economy being
bad, it is a cause of the economy staying bad.

So, more people having money is a good thing. For the people who get
the extra money and for all of us. So, yay, Social Security.

Also, yay, Social Security because -- look at this. This shows that
as the economy has swirled round the toilet bowl, as we have not yet been
able to recover from Wall Street exploding at the end of the Bush
presidency, the one age group of Americans who is not seeing its poverty
rate raise significantly is older Americans.

As everybody else in the country has seen poverty levels rise, older
Americans have been relatively speaking OK. I mean, not great, but OK.
Not falling rapidly into poverty. And that`s because of Social Security.

So, yay, Social Security, again. Unless you wish we had more elderly
people living in poverty in this country, you should be psyched that we
have Social Security and you should be motivated to defend it.

But you know who hasn`t had anything to be psyched about? Kids have
not -- kids and young families with kids. Even as Social Security has
protected older people from the worst vagaries of the economic collapse,
kids and young families with kids have not had the same kinds of
protection.

In the era of Ronald Reagan and again in the era of Bill Clinton we
frankly took an ax to the public programs that support kids in poor
families. Reagan just attacked people for being poor, inveighing on the
campaign trail against "welfare queens" -- implying that anybody taking
public assistance didn`t need it and was just scamming you.

Bill Clinton took less of a Republican culture war approach to it, but
instead bought into the right wing arguments that a public program to
support kids in poor families was some kind of incentive to be poor. And
if you took that incentive away, people would stop deciding to be poor the
way they were.

So, public programs to help kids in poor families were slashed under
Ronald Reagan and slashed again under Bill Clinton. During the bubble
years and boom years when there weren`t that many poor families in America
relatively speaking, those programs being gone, it did hurt some but did
not hurt as much as it could have.

Now, that we are back to a time with a lot of poverty, not having
those programs to help kids in poor families, not having those programs
hurts a lot now. We killed welfare when we did not need it. Now we need
it and -- well, actually what we`re back to is Reaganite culture war --
Republicans blaming people for being poor and mounting political stunts to
shame and humiliate poor people in order to demonstrate the political point
that anybody needing help right now is really just a scam artist.

This year, Republicans in more than 30 states proposed drug testing
Americans applying for welfare or food stamps or other public programs to
help poor families.

(BEGIN VIDEO CLIP)

GOV. NIKKI HALEY (R), SOUTH CAROLINA: I so want drug testing. I so
want --

(END VIDEO CLIP)

MADDOW: So want it. South Carolina`s Republican Governor Nikki Haley
said she so wants drug testing.

(BEGIN VIDEO CLIP)

HALEY: It`s something I`ve been wanting since the first day I walked
into office.

(END VIDEO CLIP)

MADDOW: Nikki Haley`s policy goal and unrequited dream thus far as
governor of South Carolina is to collect body fluid samples from fellow
South Carolinians who are receiving public assistance or employment
benefits.

This year, 12 states proposed drug testing for unemployment insurance
and some considered making it a requirement for food stamps and home
heating assistance.

Forced drug testing measures were enacted already in three of the 30
states in which Republicans proposed them this year. Including of course
in Florida, where Republican Governor Rick Scott says his forced drug
testing program is going totally awesome.

(BEGIN VIDEO CLIP)

GOV. RICK SCOTT (R), FLORIDA: I gave a speech yesterday to the
Chamber of Commerce down in Miami. When I went through the things we`ve
accomplished, it was almost a standing ovation when I said we drug-screen
welfare recipients.

(END VIDEO CLIP)

MADDOW: I wonder what an almost standing ovation looks like. I`ll
sit back.

The point is, drug testing poor people is awesome, politically, for
Rick Scott. And also effective? Hmm.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: What does the evidence show on the percentage of
welfare recipients who do use drugs?

UNIDENTIFIED FEMALE: What did you find?

SCOTT: Here -- I think the numbers are this. It`s only 2 percent of
the people -- this just started July 1st. So, I think it`s about -- the
numbers are off a little bit. But only 2 percent to 2.5 percent think of
the people who did the test.

(END VIDEO CLIP)

MADDOW: OK. Maybe not super effective since 2 percent, 2.5 percent
is way lower than known drug use levels in the population at large.

So maybe poor people aren`t using drugs at a hugely disproportionate
level compared with the rest of the population. But still, it`s nice to
humiliate them for being poor people anyway, isn`t it? Isn`t that the
point?

In Ohio, there`s a Democratic answer to the politically popular drug
test the poor message. This is Robert Hagan. He`s a state representative
in Ohio. He`s a Democrat. He`s responding to his state`s Republican drug
test the poor proposals with his own drug testing bill.

His bill would drug test other people who get state money. Not just
poor people. His bill would drug test, say, statewide elected officials
and members of the general assembly and the state Supreme Court.

And this is my favorite part of it -- he would suggest drug testing
recipients of TARP money, anybody who got bank bailout money. Isn`t that
taxpayer money?

You want to drug test poor people who get money from the government?
How about we drug test rich people who get money from the government?

The author of that bill, Ohio State Representative Robert Hagan from
Youngstown, Ohio, joins us for the interview, next.

(COMMERCIAL BREAK)

MADDOW: The "Best New Thing in the World" features -- as I mentioned -
- Mitt Romney and "Spinal Tap." The important thing to remember about this
is Stonehenge is 18 feet high, not 18 inches. Feet. Not inches.

(COMMERCIAL BREAK)

MADDOW: On October 3rd, 2008, President George W. Bush signed the
Troubled Asset Relief Program into law, TARP, legislation that bailed out
the banks in this country so that the world`s great recession would not be
the world`s Great Depression 2.0. In return for the billions of dollars
the banks received, not one banker was forced to pee in a cup.

Contrast that with politics this year in three dozen states across the
country where Republican lawmakers proposed drug testing, forced drug
testing of Americans asking for a different kind of help -- Americans
applying for welfare, or food stamps or public programs that help poor
families.

One lawmaker in Ohio is trying to make bankers and other recipients of
government money in Ohio live by the same standards being asked of the
poor.

Joining us tonight for the interview is Ohio State Representative
Robert Hagan. He`s a Democrat from Youngstown, Ohio.

Mr. Hagan, appreciate your time tonight. Thanks for being here.

ROBERT HAGAN (D), OHIO STATE REPRESENTATIVE: You`re welcome. Thank
you for allowing me to tell the rest of the country how insensitive and
ridiculous my Republican colleagues are in the legislature.

MADDOW: Well, Ohio is one of the states around the country where
Republican lawmakers are pushing forced drug testing for poor people who
are applying for public assistance. What do you think is motivating that?

HAGAN: Rachel, there`s a couple things that motivate that. And let
me first start out by saying our governor, John Kasich, worked for Lehman
Brothers.

And you and every, pretty much all your people, the viewers know that
Lehman brothers went under. He was the vice president of Lehman Brothers.

Wall Street started to go under. Bankers, banking started to go
under. And so, they asked and begged for additional help for the
taxpayers.

But when John Kasich, Lehman Brothers` vice president, decided between
the time he was a congressman and the time he became our governor, he lost
a lot of money and he came to the statehouse trying to pretend that that
actually did not happen. That Lehman Brothers did not go under, that
millions and millions of dollars were lost on Wall Street and hurt Main
Street.

So, what they`re trying to do is they`re to move the discussion away
from really what`s happening, what they`ve done and destroyed many people`s
opportunity for the American Dream, so many people`s opportunity to get
health care. They`ve moved the discussion away from the issues of jobs and
they keep bringing up issues about attacking working people.

This issue, too, in Ohio, is extremely important -- taking away the
rights of police, firing teachers. That`s what they`re trying to do.

So, they`re moving the subject, moving the issue away from what they
have done and they`ve destroyed this country, turned it upside-down
economically. And now, they`re trying to pretend, let`s do this, in the
most sensitive way, show the people we`re going after the poorest by
testing them.

That`s not only just the poorest. It`s people that are on workers`
comp, people that are laid off and getting benefits for being laid off.
Those individuals also under their plan would be tested.

What I say in clear, plain English is what`s good for the goose should
be good for the politician. Let`s start testing the Supreme Court
justices, all the legislators, all the people that are getting money. We
have a Jobs Ohio program where millions and millions of dollars are going
out, so many more millions of dollars that have gone out to the Wall Street
friends of John Kasich -- much, much more than they have against the poor
people.

So, you know, they take away their dignity, the poor people. They`re
already struggling, trying to find a better way to make a living, get a
job, provide health care, even maybe give the opportunity to send their
kids to school, and they end up having to go through the drug testing.

So, I said to Kasich and the rest of the Republicans that if you want
to do that, in a very insensitive way, then you should subject yourself,
too, to the drug testing and the alcohol testing that you are trying to
push on to some of the poor people.

MADDOW: One of the --

HAGAN: Bottom line is this -- bottom line, Rachel, is this: you
cannot divide us the way that they are trying to do. If you are going
after the poor, then go after those who are wealthy and those that are the
elite. They should subject themselves, too. They are getting money.

All of us are public servants, all of us who are getting tax dollars -
- we should also be subjected to the same type of test.

MADDOW: And that bottom line is actually what I want to ask about --
I mean, part of the reason so many nationalized have been on Ohio is
because of the response, the backlash, to what`s happened in Ohio, in the
past year, Governor Kasich`s agenda and the Republicans in the legislature,
do you feel like as people are doing things like fighting SB-5 with this
issue, two campaigns trying to repeal that union-stripping law and the
other response and backlash that`s been to that agenda -- is that turning
to a broader discussion about who public policy ought to help, and who it
is being used to punish?

Are people sort of having that broader discussion now in Ohio?

HAGAN: Well, we are trying to have a broader discussion. Police,
fire and the teachers who are under attack have finally decided that they
are going to be politically involved and they`re going to make sure this
issue, too, does go down to defeat, that people vote no. But the
discussion really -- sometimes it`s very difficult in a legislature.

I have railed against some of the plans that the Republicans have
promoted on the floor of the Ohio House. I have screamed and yelled to my
constituents to get involve, to talk about contacting their legislators and
contacting other politicians, because this agenda that the Republicans are
pushing is a damaging agenda to the American Dream, to people being
participants in that.

And so, yes, it is really going to make me P.O.`d. I really get upset
when -- and I`m trying to fight for so many people like this, and the
agenda keeps shifting and people kept talking about issues, about attacking
the poor, about attacking working families, about attacking teachers,
upending education, cutting the local government funding -- this is what
they think is all right, because they don`t like government.

Republicans don`t like government. They don`t like it, I guess maybe
they should find another job. But quite frankly, I will be there to fight
them every step of the way.

MADDOW: Democratic State Representative Robert Hagan joining us from
Columbus, Ohio, tonight -- thank you, sir, for joining us to night. It`s
nice to meet you. It`s nice to have you here. Thanks.

HAGAN: Thank you.

MADDOW: All right. "Best New Thing in World" -- coming up.

(COMMERCIAL BREAK)

MADDOW: OK. "Best New Thing in the World Today" -- although you will
not see the billionaire Koch brothers or Sharron Angle or somebody carrying
a sign demanding the president`s birth certificate, or demanding the repeal
of health reform, what is happening on your screen right now is the Tea
Party, the Tea Party, as in the Canadian rock `n` roll band that named
itself the Tea Party back in 1990.

They reportedly pioneered a Middle East fusion thing called Moroccan
Roll. True. They are not about politics at all, but they are about
selling records.

And way back in 1993, Tea Party, the band, bought this Web site,
TeaParty.com. Today, the band`s Web site, TeaParty.com is thought to be
worth something like a million bucks maybe on the open market, and that`s,
of course, because of politics.

The bass player from the band, Stuart Chatwood says so much damage has
been done to their good name by the name of the political movement that has
the same name even though they have no association. He says, quote, "Tea
Party was a euphemism that Beat poets used for getting high and writing
poetry and vibing with each other. As Canadians, we`re somewhat sensitive
to all the criticism of socialized medicine."

And so, the band Tea Party is selling its domain name, because,
frankly, this is not much fun anymore for them, and the Internet is
supposed to be fun. Domain names, in fact, can even and should maybe even
be fun. We own several at this show, including one about the Republican
presidential whose name who cannot be Googled, but it is spelled Rick
Santorum, Texas Governor Rick Perry missed the chance to buy his natural
domain name RickPerry.com, somebody else bought that in 1998.

So, instead, the candidate of the Texas economic, quote, "miracle,"
end quote, Mr. Free Enterprise has to campaign out of RickPerry.org, like
he is branch of NPR or something.

Today, "The Washington Post" reports on other Rick Perry domain names
that Rick Perry apparently does not own, including stickittorick.com and
BuryPerry.com, AmericansagainstPerry.com, Christians4RickPerry.com -- not
to be confused with EvangelicalsforPerry.com, or certainly with
ChristiansAgainstPerry.com.

So, there`s simply RickPerryNot.com, which takes you to a Web site
that is also how Rick Perry is not a conservative because he signed a law
creating a Gestapo type pet police. They must have missed it in the
history of the Gestapo. It is signed by a guy who describes himself as a
dog breeder.

But like the other anti-Rick Perry Web sites, that last one was bought
anonymously. So, it is hard exactly to know whether the dog breeder guy is
really the person who is running it and knowing it.

The Perry campaign tells us "The Post" that these -- that they, the
campaign did not buy these sites. The same goes for Mitt Romney`s team and
Barack Obama`s campaign team.

National Democrats are proud to say that they own this site, though,
WhichMitt.com where you can take a quiz on the ever changing positions of
Governor Mitt Romney.

So, Internet is supposed to be late bit fun at least this part of it.
You could see why a band named Tea Party would want to get out its own
domain name -- get out of its own domain here. I mean, it`s a million
bucks, yes.

You can`t really figure out who they are. When we went looking today,
we found this new Tea Party video which seems to be about -- well --

(VIDEO CLIP PLAYS)

MADDOW: I am the wrong audience for this. This is -- it is so much
like when "Spinal Tap" got booked by mistake to play at the big dance at
the military base. Remember that? And they went into that song, there`s
song "Sex Farm." They went -- and we are trying to make the connection
between the Tea Party the band and "Spinal Tap." And so, I went to look
for that song to see if it was like I remembered.

And here it is on YouTube and because that "Spinal Tap" "Sex Farm"
song is popular, a little ad pops up when you`re watching the YouTube and
it is this ad, Governor Christie -- Governor Chris Christie stands with
Mitt and will you? Paid for by Romney for president.

And coming right out of David St. Hubbins` mouth, working on the "Sex
Farm."

Who says that Mitt Romney is somewhat robotic politician with awkward
social skills and very little understanding of the younger generation, no
matter what era we are talking about? He doesn`t just sponsor a "Spinal
Tap" video on YouTube, he sponsors "Sex Farm." Oh, target entertainment
advertising which seems to know people than they know themselves, you have
provided the "Best New Thing in the World Today."

Chris Christie, Mitt Romney, David St. Hubbins, "Spinal Tap," "Sex
Farm" -- show it again -- "Best New Thing in the World Today."

It`s time for "THE ED SHOW."

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

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