updated 1/3/2012 10:50:20 AM ET 2012-01-03T15:50:20

Guests: Chris Matthews, Chuck Todd, Perry Bacon, Rick Santorum, Rick Green, John Nichols, Mike Rogers, Tom Vilsack, Caroline Heldman, Mayor R.T. Rybak, Richard Wolffe

ED SCHULTZ, HOST: Good evening, Americans. Welcome to THE ED SHOW,
live from Minneapolis.

Rick Santorum is surging in Iowa at exactly the right time. I caught
up with the former senator from Pennsylvania today in Muscatine, Iowa.
That interview is next.

This is THE ED SHOW -- let`s get to work.

(BEGIN VIDEOTAPE)

SCHULTZ (voice-over): The ground game is heating up in Iowa. We`ll
talk with Rick Green of the "Des Moines Register" on how the race is
shaping up. Agriculture secretary and former Iowa governor, Tom Vilsack,
will give us the Democratic perspective. John Nichols is in Iowa, and
he`ll join us with the latest from the trail.

Ron Paul is running away from a controversial pastor who says gays
should be put to death. We`ll have more on the latest scandal to plague
the Paul campaign.

And with just five days to go, who will come out on top in Iowa?

MSNBC political analyst Richard Wolffe, vice chair of the DNC R.T.
Rybak and Dr. Caroline Heldman will join me to assess the candidates and
their chances in Iowa and beyond.

(END VIDEOTAPE)

SCHULTZ: Good to have you with us tonight, folks. Thanks for
watching.

The focus tonight on THE ED SHOW starting out is going to be on Rick
Santorum. Now, you know my political persuasion. But I bring this story
to you tonight completely objective from Iowa.

On the stump, Rick Santorum is impressive. He is well versed,
schooled up, and very strong in his conviction.

It was town hall number 358 today in Muscatine, Iowa. Santorum calls
it his "Faith, Family and Freedom Tour," which carries a strong anti-
government message. And I`ll tell you, there are few on the stump who do a
better job of retail politics.

(BEGIN VIDEO CLIP)

SCHULTZ: Senator, the polling here shows you`ve had an uptick. Is it
real?

RICK SANTORUM (R), PRESIDENTIAL CANDIDATE: Well, I think you saw from
the crowd in there that, you know, there`s a lot of energy and enthusiasm.
We`re packing them in. And I think you also saw, you see allot lot of
people taking signs.

SCHULTZ: Yes.

SANTORUM: That`s a good sign, that folks are excited about our
campaign. I hear this all the time. People come in and say, OK, I found
the guy I was looking for.

And people say, well, where have you been? Well, you know, it`s not
like I`ve gotten a whole lot of time at the debates or a whole lot of time
being covered by the media. And I expected that.

You know, I got into this race, I knew that this was going to be a
hard slog and not a lot of money and not a lot of coverage. And so, I was
going to have to do what every small business has to do, which is just work
harder to make ends meet.

SCHULTZ: Senator, what`s the plan? Conservative blogger Erick
Erickson was very critical of you in the last 24 hours, saying that you
can`t go past Iowa, you don`t have anything in New Hampshire.

SANTORUM: Well, we have 20-plus state reps who`ve already endorsed us
in New Hampshire. I think we`re second or third in the number of
endorsements we have from elected officials in New Hampshire. We`ve had a
staff there I think longer than anybody but Romney.

SCHULTZ: So you`ll do well in New Hampshire?

SANTORUM: Oh, you go to our office in Bedford, send a crew by there,
and you see all the phones buzzing. And they have been for weeks.

We`ve got great volunteers there. We have -- I`ve been there 30
times. I`ve visited and done over 100 town hall meetings there.

SCHULTZ: Yes.

SANTORUM: Again, I`ve said this from the very beginning. Iowa
provides the spark. We`ve got lots of tinder out there on the ground that
can pick it up.

You know, look, I`m not going to compete against Mitt Romney, but we
can do very well versus the rest of the field.

(END VIDEO CLIP)

SCHULTZ: Santorum`s pitch to Iowa voters on the stump is all about
judgment and leadership. At the drop of a hat, he`ll invoke religion and
family values. He loves to do that.

He`s also quick to go after Mitt Romney on the health care mandate.

(BEGIN VIDEO CLIP)

SCHULTZ: You`re in competition with Mitt Romney, and he says, to go
back to the point of the conservative principle, a mandate is a
conservative principle. I mean, can you have it both ways?

SANTORUM: I know how you can say a government mandate is a
conservative principle. I mean, it obviously is not. It`s a fundamental
misunderstanding of what conservatism is if he believes government mandates
are a conservative principle.

(END VIDEO CLIP)

SCHULTZ: A crowd of about 100 people paid close attention to the
former Pennsylvania senator. Santorum constantly vilified government and
the role of government. And he also went after the Obama administration
repeatedly. He assured the crowd that he would be strong, a very strong
leader on national security, where he questioned Ron Paul`s judgment and
wisdom.

(BEGIN VIDEO CLIP)

SCHULTZ: You took a pretty good crack at Ron Paul in there. Yet he`s
polling well in the very state that you`ve been in every county.

SANTORUM: Oh, he`s been here, too. I mean, he`s been here for like
three elections or four elections.

SCHULTZ: You whacked him pretty good on the question of the Straits
of Hormuz and the volley verbally back and forth with Iran and the United
States right now.

How do you -- how do you calculate his support in this state?

SANTORUM: People are upset. I mean, he`s sort of the zeitgeist
candidate. You know? And so, I get it.

But the people of Iowa I believe and the people of this country are
going to step back and say, you know, what`s the right course to put the
person up against Barack Obama who`s going to present the contrast that is
most likely to get the big problems in this country solved?

And the big problem in this country is not a military that has grown
out of proportion. Fifty years ago, the military took up 60 percent of the
budget. It now takes up 20 percent. It is not the reason that we are in a
deficit situation.

(END VIDEO CLIP)

SCHULTZ: Ron Paul and Mitt Romney lead Santorum in the latest polls.
And Santorum is not afraid to take a whack at either of them, especially
Romney, when he says he comes from the private sector.

(BEGIN VIDEO CLIP)

SCHULTZ: What about jobs? He claims that he`s been the job creator.
What would your job plan versus his look like?

SANTORUM: Well, you`ve heard me talk about this. And you`ve heard me
say at the debate, I love these governors who run around saying, I created
all these jobs. If you`re a Democrat, you may say that, because you may
believe government creates jobs.

But if you`re a Republican and you`re conservative and you`re running
around saying I do this and I do that, then you don`t understand how
conservatism works. I`ve said I`m not going to run around and say I`ve
created all these jobs. What I`ll say is we`re going to work hard to
create the atmosphere for the private sector to do well, and in particular
to make sure that we have a private sector where all of society can
benefit. And that includes small town, rural, and blue-collar America.

And that`s why I focus my "Made in the USA" plan on manufacturing and
processing.

(END VIDEO CLIP)

SCHULTZ: So less than a week to go, five, six days out what`s the
landscape look like right now?

Well, it`s pretty clear that Santorum, Perry, and Bachmann are
fighting for the social conservatives in Iowa. If they fracture the vote,
it`s all great for Mitt Romney and Ron Paul. So how is Santorum selling
this?

(BEGIN VIDEO CLIPS)

SCHULTZ: Have you seen all the candidates?

JOHN GERST, ATTENDED SANTORUM EVENT: Personally? No. I`m trying to
keep track of what`s going on, what I see on TV and so on. But he`s my
guy.

SCHULTZ: How do you think he plays in Iowa?

GERST: I think he plays pretty well. I think there`s going to be a
surprise come January 4th.

MARY FRIEDEN, ATTENDED SANTORUM EVENT: I really like Senator
Santorum. I agree with his values, his family values. He`s got a good
economic plan. Solid. I like him.

SCHULTZ: Have you seen all the candidates?

FRIEDEN: I have seen most of them. And the ones who have come to
Muscatine, I believe I`ve been in each of their --

SCHULTZ: And he`s your guy?

FRIEDEN: Well, I like him. I would have to say I probably -- I have
another guy in mind.

SCHULTZ: OK.

FRIEDEN: Also. So I have not decided who it`s going to be.

SCHULTZ: So you`re an undecided?

FRIEDEN: I am an undecided.

SCHULTZ: And when do you think you`ll decide?

FRIEDEN: I think I`ll probably decide January 3rd, whenever I`m in my
precinct.

DAVID UTLEY, ATTENDED SANTORUM EVENT: I liked what he said. I
believe that he`s intelligent. I believe he`s principled. And he has a
lot of good thoughts on what would strengthen the United States.

SCHULTZ: Is he your guy?

UTLEY: I wouldn`t say that yet. I listened to Romney yesterday. And
Romney has a broader view of the world. And I really think that he is more
focused internally and we need somebody with more leadership. Being the
governor is more about leading a diverse group than leading a committee in
Congress.

SCHULTZ: Sure.

What did you think about what you heard?

LINDA BIRD, ATTENDED SANTORUM EVENT: I liked what I heard. I came in
here undecided, and now I`m really leaning heavily toward Rick Santorum.

SCHULTZ: That impressive?

BIRD: Yes.

SCHULTZ: Is a social conservative very important to you in this race?

BIRD: Yes, it is.

SCHULTZ: And where do you think Iowa is going to fall in this caucus?

BIRD: Oh, I don`t know.

SCHULTZ: It`s too tough to call?

BIRD: Right.

SCHULTZ: What did you think?

SAM WILSON, ATTENDED SANTORUM EVENT: I like Rick Santorum. I will be
supporting him in the Iowa caucus on January 3rd.

SCHULTZ: Were you of that mindset before you came in?

WILSON: I was leaning towards him. I hadn`t quite made my mind up
yet because there are other candidates very similar to him. But from what
I`ve seen, that was enough to put me solidly in his corner.

SCHULTZ: So he closed the deal today?

WILSON: Yes.

(END VIDEO CLIPS)

SCHULTZ: Just a flavor of the crowd in Iowa, Muscatine, Iowa. A city
with a rich, progressive history.

Congressman Steve King -- everybody wants his endorsement. The Iowa
congressman good friends with Michele Bachmann. He says today that Ron
Paul is dangerous and Rick Santorum will surprise.

But when you go to these meetings, they`re not rallies. These folks
are serious.

They show up. They`re curious. They`re looking for information.
They want to be sold. They want to ask questions.

They`re not there to rah, rah at all. They are really inspecting and
overhauling all of these candidates when it comes to information to find
out exactly who is the best choice.

And there are a lot of undecideds that are out there. For every
person that I have found on the ground in Iowa ready to say I support such
and such a candidate, I find someone who says I haven`t made up my mind
yet.

Good cross-section there in Muscatine, Iowa.

Get your cell phones out. I want to know what you think. Tonight`s
question, do you think Rick Santorum can pull off an upset in the Iowa
caucus?

Text A for yes, and text B for no to 622639. You can always go to our
blog at Ed.MSNBC.com. And we`ll bring you the results later on tonight.

Now, three of the people that I talked to after Santorum`s
presentation today told me that they had made up their mind, that he was
the guy that they wanted. And then I think about how many counties Rick
Santorum has been to in Iowa. I mean, if that is a microcosm of what he`s
running into in county after county, he might surprise. He just might
surprise.

He`s not getting the crowds that Romney`s getting. And he`s not
getting the crowds that Ron Paul is getting. We`ll talk more about that
later on in the program.

The polls show the race closer than ever in Iowa. But the wheels have
completely fallen off one campaign. John Nichols of "The nation" magazine
and Rick Green of the "Des Moines Register" will join me later in the
program.

And the economy is looking up as the Obama administration plans their
path of victory in 2012. The president`s secretary of agriculture and
former Iowa governor, Tom Vilsack, will join me to talk about what`s
happening on the ground and what`s the landscape for jobs. That`s next.

(COMMERCIAL BREAK)

SCHULTZ: Coming up, more from the campaign trail in Iowa with Rick
Green of the "Des Moines Register" and John Nichols of "The Nation"
magazine.

Ron Paul gets an endorsement from a radical pastor -- Raw Story`s Mike
Rogers on what this latest controversy means for the Ron Paul campaign.

And later, our political panel will weigh in on the Republican field,
voters` rights, and more. Tweet us your thoughts throughout the show using
the #EdShow.

We`ll be right back.

(COMMERCIAL BREAK)

SCHULTZ: Polls are tightening in the Republican race to win Iowa. An
average of the latest polling shows Mitt Romney and Ron Paul all tied up.
Newt Gingrich and Rick Santorum are nearly tied for third place.

Meanwhile, one campaign is experiencing I guess what you could call a
total meltdown.

Kent Sorenson, the Iowa state chair for Michele Bachmann, endorsed Ron
Paul last night hours after appearing at a campaign event with Bachmann.
Bachmann accused Sorenson of taking a large sum of money to work for Ron
Paul.

Sorenson says her charge is absolutely false.

(BEGIN VIDEO CLIP)

KENT SORENSON (R), IOWA STATE SENATOR: The fact of the matter is, I
did not accept any money from the Ron Paul campaign.

MEGYN KELLY, FOX NEWS: But, you know, as you know, accept is
different than offered. And I just want to make clear -- you`re also
saying they never offered it? No one, not Ron Paul, not anybody affiliated
with his campaign or supporting his campaign offered you any money to
support Ron Paul?

SORENSON: I was -- I was -- I was never offered a nickel from the Ron
Paul campaign.

(END VIDEO CLIP)

SCHULTZ: During Sorenson`s interview, it seemed like the Bachmann
campaign was keeping a close eye on him. Take a look at the Bachmann truck
in the background, as well as the Bachmann campaign bus, just happened to
be rolling by. There`s nothing like a do or die election to bring out the
paranoia in politicians. More than interesting.

Let`s turn to Rick Green. He is the vice president and editor of the
"Des Moines Register" newspaper. Also with us tonight, John Nichols,
Washington correspondent for "The nation" magazine, who has spent quite a
bit of time on the ground in Iowa as well.

Gentlemen, great to have you with us.

I`ve got to start out with this. NBC News is confirming that
Bachmann`s political director, who defended Kent Sorenson yesterday, is
also gone from her campaign.

Rick Green, have we ever seen one unfold as fast as it is for Michele
Bachmann? I mean, her campaign, what will her supporters do in these final
days? What do you think?

RICK GREEN, DES MOINES REGISTER: You know, it`s amazing how quickly
things can deteriorate. There`s an expression out here in the Midwest
about Iowa nice. I think what we`ve seen in the past 24 hours if not the
past week and a half, two weeks or so, you can kind of throw that idea out
the window.

Not a big surprise in terms of all the jockeying that`s going on.
We`ve seen a $10 million advertising blitz hit the airwaves out here. And
I`ll tell you, the majority of it has been very, very negative. It`s not
something that Iowans see very often during these cycles.

The candidates as well as the super PACs have put a totally different
spin on this race. And I think we`re starting to see the effects of it.
There are candidates like former Speaker Gingrich that has really, really
taken a big slide, and I`m convinced a big part of that is some of this
negative advertising that`s been out there.

SCHULTZ: Well, as far as Michele Bachmann is concerned, she does a
lot of, you know, quick stops. She goes to a lot of places in a day`s
schedule, spends 10 minutes here, 15 minutes there. And from what I can
see, Iowa voters, they want more. I saw that yesterday at Ron Paul`s
event. I saw it today at Rick Santorum`s event.

Do you think this also plays into her negative polling? What do you
think, Rick?

GREEN: Well, you know, retail politics is the bread and butter out
here.

Even Mitt Romney, who is very sporadic in terms of visiting the state,
has recognized that. He`s gone and launched a bus-capade to take his name
across the Hawkeye State. But his strategy`s a lot different than Michele
Bachmann`s.

Bachmann launched a very ambitious 99-county 10-day tour just before
Christmas. She`s certainly hitting all the spots. But you`re right,
they`re just quick in and out visits.

Romney`s been more deliberate. He`s spending more time in places.
And we`ve seen greater crowds for him the past couple days.

We think today I think he hit three or four stops and saw about 1,000
people -- 15, 30-minute conversations. And the crowds seemingly are
reacting to him.

It`s more than just making a cameo, Ed. I think that the voters want
to see you but they want to hear you. They want to understand your vision
for what it is for not only Iowa but obviously for the rest of the country.

SCHULTZ: Well, you know your state as well as anybody, Rick, and I
saw that today. I mean, these people that show up, they`re curious, they
want answers, and they want to spend time with the candidate.

John Nichols, that`s exactly what Rick Santorum has been doing in his
campaign. But I want to talk about the Bachmann supporters. Would they go
to Santorum or would they go to Rick Perry? What are you hearing?

JOHN NICHOLS, THE NATION: What I`m hearing is a very strong tendency
toward Santorum. Rick Perry has worked hard in this state, and he`s still
working hard, stopping today at coffee shops and restaurants across the
state, in much the same way that Bachmann is.

But both Bachmann and Perry seem to be kind of on a desperation, you
know, last attempt to find somebody who might support them.

Santorum seems to be very much on the rise. And his last advertising
hit right now goes to that message. He is saying, you know, let`s unite,
let`s get our social conservatives together. He`s using quotes from
conservatives like Glenn Beck and Rush Limbaugh as regards his candidacy.

So, he`s really trying to unite the social conservatives. And I think
the Bachmann people will hear that.

To my mind, the decision of Bachmann`s campaign leader to go over to
the Paul campaign doesn`t really help Ron Paul. It probably helps Santorum
because it makes Bachmann look weak. But there aren`t a lot of Bachmann
people who are necessarily going to go to Ron Paul.

SCHULTZ: Yes.

NICHOLS: So, on so many levels, I think Santorum`s doing well.

SCHULTZ: Well, John, also the polls make it look like Romney will
finish at least in the top two. Is this big trouble if he doesn`t meet
expectations here?

NICHOLS: It`s absolutely. This is high-stakes stuff. I heard all
through the day today that Romney`s people were going back and forth on
whether they should position him in Iowa on Tuesday night or have him be in
New Hampshire.

Struggling with the question of whether he should be here to claim a
big victory or get out fast to avoid any embarrassment. That`s how high
stakes this is.

And remember, the dynamic of the caucuses are such that if you see the
Gingrich support and the Santorum support come together and then throw in
some Bachmann and Perry numbers there, Santorum could well finish very high
up in that number.

SCHULTZ: And, Rick Green, I`ve got to ask you, can you explain Ron
Paul`s position in Iowa? I mean, I listened to him yesterday, and it`s all
about the Constitution, and it`s pretty radical stuff beyond that. And
he`s gotten some endorsements that are more than controversial.

How do you explain his position in Iowa with the polls there?

GREEN: You know, I think what`s interesting is that there is a
certain slice of Iowan voters who really are appealed -- are really turned
on by what it is that Representative Paul is talking about -- particularly
that little libertarian streak: a smaller government, we`re going to whack
a trillion dollars out of the budget the first year he`s in office. We`re
going to look closely at our foreign relations and military bases overseas.

I think that -- I think there`s a group of folks who think that`s the
right thing to do.

Here`s where I think it`s going to come down, Ed. I think you`re
going to see Romney and Paul duking it out for the first spot, Santorum,
Perry, and -- Santorum, Perry, and Gingrich fighting for the second place,
third place.

SCHULTZ: OK. Rick Green, John Nichols, great to have you with us
tonight.

And, Rick, we`ll be looking forward to your poll coming out, your
infamous poll over the weekend. We`re waiting to see how that all plays
out. Thanks so much for joining us.

Ron Paul`s latest fringe supporter, a reverend who believes
homosexuals should be executed.

And more of my interview with Rick Santorum. I`ll ask him about the
new voter ID laws going into effect. What does he think of them? He
insists it`s not voter suppression.

Stay tuned.

(COMMERCIAL BREAK)

SCHULTZ: Welcome back to THE ED SHOW.

The Ron Paul campaign has landed the endorsement of a reverend whose
beliefs are absolutely jaw-dropping. The Reverend Phillip G. Kayser thinks
homosexuals should be executed.

But the Paul campaign was thrilled to get Reverend Kayser`s
endorsement. Putting on their Web site, saying in a press release on
Paul`s Web site, "We welcome Reverend Kayser`s endorsement and the
enlightening statements he makes on how Ron Paul`s approach to government
is consistent with Christian beliefs."

But later, Paul`s camp scrubbed the news of Kayser`s endorsement from
its Web site. No explanation was given.

It turns out Reverend Kayser is in favor of what he calls biblical
law, including the execution of homosexuals.

He has written about it. "As we have seen," he says, "while many
homosexuals would be executed, the threat of capital punishment can be
restorative."

Kayser confirmed all of this when contacted and interviewed by Talking
Points Memo. He said he didn`t see much hope for it happening anytime
soon.

But he did say, "Under a Ron Paul presidency, states would be freed up
to not have political correctness imposed on them."

I`m joined tonight by Mike Rogers, managing director of rawstory.com.

Mike, good to have you with us tonight.

The Paul campaign welcomed the reverend`s endorsement. Now, we`re
talking about a reverend who makes extremists look tame by comparison.

What do you make of this? And is this damaging?

MIKE ROGERS, RAWSTORY.COM: Well, I think that this is typical Ron
Paul. You know, we`ve seen him kind of disavow things he said in the past.
He likes to work this kind of what he wants to market as a kind of
libertarianism. But this you see is the end result.

He wants to free up states to be able to do things like this reverend
wants. So, it`s no surprise that he touted his endorsement and then with
the sheer insanity of such statements I think that the pressure came that
he had to get it down.

SCHULTZ: Do you think that the Paul camp just didn`t vet the reverend
very well and maybe they didn`t know he had said that?

ROGERS: Oh, I don`t -- I wouldn`t be so convinced totally. I mean,
there is the chance that they didn`t do the proper work. We`ve seen them
falter time and time again.

But we`ve seen him make these statements and then kind of backtrack
time and time again. So, I think that there might actually be a strategy
out there in which he throws out this kind of incendiary stuff because he
knows it fires up that base.

But in reality what happens is he pretends that it`s this whole
libertarian kind of thing. But what he wants to do is just take those
rights and the civil rights that have been afforded and throw it back to
state control. For example, Lawrence v. Texas is a great example. He
wants the state of Texas to basically make being gay illegal if they want
to.

And we hope there`s a higher court, the Supreme Court that will stop
that from happening under a Ron Paul presidency.

SCHULTZ: Yes. This is pretty much in the context of Paul trying to
disavow other extreme positions in these newsletters years ago that are now
dogging his campaign. Paul wants to be bold, but he also seems to attract,
you know, a fringe element that`s out there. And it is out in Iowa. The
guy does have support. He`s getting massive crowds compared to the other
candidates.

What do you make of all of this?

ROGERS: Well, I think a lot of it is pretty kind of crazy marketing.
Because what he`s really hoping for is a kind of reconstructionist growth
of -- where Christian law and the Bible are what become one law with the
civil law.

It`s interesting. These are the guys who screamed the most about the
infringement of Sharia law supposedly coming to our country, but what they
want, what Michele Bachmann went to college for to learn, was how do we
take these laws and make our laws as a civil society more in line with
Biblical teachings?

And I think that those are the people that Ron Paul is trying to
signal by this. And it puts out the kind of message that he looks for in a
positive way and then has to backtrack, as we`ve seen time and time again.
I think he`s feeding the fire and knows what he`s doing with that.

SCHULTZ: Well, we should point out that Paul`s Iowa state director --
his name is Mike Heath. He`s got plenty of baggage of his own. He tried
to out gay members of the Maine legislature, according to "Talking Points
Memo." And he`s now focusing on Paul`s outreach to the Christian right in
Iowa.

Interesting track record and assignment, don`t you think?

ROGERS: Well, it is. Again, it`s kind of these dirty political
tricks. And of course, we`ve talked about these issues before. And people
like you who cover them in a responsible way -- and then we see folks like
Ron Paul and the people who are following him, and it`s all -- it shows the
kind of followers that he has. They`re just a little bit off center, that
--

SCHULTZ: Do you think -- I`ve got to ask you quickly before we go, do
you think that Ron Paul needs to make a statement on gay marriage? Does he
need to make a very crystal clear on how he feels about the gay community
in this country, in the wake of this endorsement.

ROGERS: I think he does. And what he`ll say is I don`t think the
government should be involved in marriage. He`ll wave it off. But what we
really need to realize is he doesn`t think the federal government should be
involved in guaranteeing rights. He believes that every state should be
able to discriminate.

SCHULTZ: Yeah. Mike Rogers, great to have you with us. Good to have
you on the program.

ROGERS: Thank you.

SCHULTZ: As Republicans fight to the finish in Iowa, President
Obama`s re-election team is plotting dozens of ways to win in 2012.
Agriculture Secretary and former Iowa Governor Tom Vilsack -- we`re looking
forward to having him on the program. He joins me next. He`ll tell us
about the landscape.

And later, more of my interview with Rick Santorum. He shares his
views on voter suppression and gives his thoughts on other candidates.
Stay tuned.

(COMMERCIAL BREAK)

SCHULTZ: As Republicans tear each other apart in Iowa, the Obama re-
election campaign is increasingly optimistic about their chances in 2012.
President Obama`s campaign manager, Jim Messina, released a fund-raising
video today where he explains several possible roads to re-election. He
says they have planned out more than 40 pathways to victory.

In an election about jobs and the economy, it seems President Obama
has momentum on his side. The American people are starting to realize the
economy is improving. A new A.P. poll shows 62 percent of Americans are
optimistic about the country in 2012; 78 percent are personally hopeful
about the coming year.

A Pew study finds that 67 percent of people in this country have a
positive view of the term "progressive," making it the most positively
viewed political label in America.

Folks are right to be optimistic about where this country is headed,
because the numbers of people applying for unemployment has dropped 10
percent since January. The unemployment rate is at its lowest level in
almost three years. A lot can happen between now and November. But the
tide seems to be turning to the president`s favor.

Joining me tonight is President Obama`s secretary of agriculture and
former Iowa -- the state of -- state of Iowa, the former governor, Tom
Vilsack. Mr. Vilsack, good to have you with us tonight. Good to see you.
I hope everything`s going good for you on the holidays.

TOM VILSACK, AGRICULTURE SECRETARY: Absolutely, Ed. And happy new
year to you.

SCHULTZ: Well, I`ve been in -- thank you. I`ve been in your state
the last couple of days. And there`s a real examination taking place by
Iowa voters. How much do they put on these job numbers? How much emphasis
do they put on jobs and the economy, versus the central issues that seem to
be so important in the middle of the country? What do you think?

VILSACK: Well, I think generally, Ed, Iowa voters, if you take a look
at the broad spectrum, not just Republican caucus-goers, but all Iowans are
very interested in what`s happening in rural America and in rural Iowa.
We`ve got the best farm economy we`ve had in 40 years. We have
unemployment dropping in rural areas around the country, and in Iowa at a
faster rate than anyplace else in the country.

We`ve got record exports. We`ve got more manufacturing jobs with farm
implements being purchased by farmers. So there`s a lot of good news
beginning to percolate out in the countryside. And we`ll continue to see
strong commodity prices. So there should be a strong ag economy in 2012.

One out of every 12 jobs connected to agriculture. So as agriculture
goes, certainly in Iowa so goes the economy generally. So I think things
are beginning to look up and people are optimistic about 2012.

SCHULTZ: Well, it is good times in agriculture right now in America.
And that ag dollar turns 11 times on Main Street. It means an awful lot to
a lot of other businesses. But here is Ron Paul. He is polling well in
your state of Iowa. And yet he doesn`t want any kind of farm program. He
doesn`t want any kind of subsidies. How does that mix with the folks in
Iowa?

VILSACK: Well, again, he`s speaking to a very narrow band of
individuals who will be caucus-goers. There are several different caucuses
going on at one time in Iowa. You`ve got the libertarian caucus. You`ve
got the Evangelical caucus. And I think Congressman Paul has been speaking
primarily to those libertarians with some success.

I`m not sure that it`s necessarily a message that would resonate with
all Iowans. Clearly, there has to be support. There has to be a safety
net for farmers when there are tough times.

SCHULTZ: Well, he doesn`t want to have a safety net. He says it`s
the free market. So it will be interesting to see how the rural vote goes
on caucus night.

Now, with Bachmann and Perry and Santorum splitting up social
conservatives, what does that mean for Mitt Romney? I mean, the crowd --
the field is pretty crowded when it comes to social conservative
candidates. Is this to Romney and Paul`s benefit?

VILSACK: Well, I think clearly Governor Romney`s going to have the
people he had in 2008. I`m not sure that he`s necessarily grown that
number, which is why he`s pretty well stuck between 25 and 27, 28 percent.
I`m not sure that that grows.

But that may be enough to be successful. Certainly, Ron Paul`s got
some very good numbers. And there has been movement toward Santorum in the
last several days. So it could be a very interesting Tuesday.

SCHULTZ: Well, how do you see these undecided voters turning? What
does turn an undecided voter in Iowa?

VILSACK: Well, again, Ed, when we`re talking about Republicans, I`m
obviously not an expert in terms of Republican politics. But I think a lot
of it has to do with whether or not you have a passion and a feeling for a
candidate, a relationship with a candidate, which is what will prompt you
to come out on a cold night and spend a couple of hours with your neighbors
at a caucus.

It may very well be that some of these undecided folks just decide to
stay home. They may not be able to choose among these various candidates.
Or they may. You may see some surprises on Tuesday.

SCHULTZ: Yeah. You know, those numbers that you were throwing out
and the state of agriculture in this country right now, it would seem to me
that President Obama could just barnstorm through the Midwest and say, you
know, things are pretty good under our administration. What about that?

VILSACK: I think you can look at ag exports, a record. You can look
at conservation, acres enrolled, a record. Income, a record. Unemployment
going down at a fast rate. I think there is a story to tell. And
certainly we`re happy to talk about it.

It`s not just our administration. It`s a lot of hard work by farmers
and ranchers. But it`s a good story and it`s a positive story.

SCHULTZ: Mr. Secretary, Tom Vilsack, great to have you with us
tonight. Thanks for your time. Appreciate it.

New voter I.D. laws will have a huge impact on next year`s election.
What does Rick Santorum have to say about it? Find out next.

(COMMERCIAL BREAK)

SCHULTZ: Welcome back to THE ED SHOW. Rick Santorum is surging in
Iowa. Could be a surprise. And earlier I asked him about the new voter
I.D. laws being passed in several states around the country, pushed by
conservative governors. Santorum says requiring folks to show a photo I.D.
is not voter suppression. Take a look.

(BEGIN VIDEO CLIP)

SCHULTZ: Twenty one million Americans voted in the last election that
did not have a voter I.D. -- A photo I.D. Do you think that`s what it
takes? I mean, if someone comes up with a utility bill to prove, you know,
their residence and prove that they are --

SANTORUM: how do the people who don`t have those photo I.D.s -- don`t
have photo I.D.s, how do they buy cigarettes? How do they buy, you know,
alcohol? How do they get on an airplane? There are so many things in
America today that you have to have a photo I.D. I don`t know how you can
almost -- how can you survive in America without it?

SCHULTZ: So you don`t view that as restrictive at all?

SANTORUM: Well, if it was a unique qualifier, and if it wasn`t such a
pervasive requirement now in our society, to be able to show an I.D. that
says who you are -- it`s hard for me to believe that there is that type of,
you know, number of folks in America that don`t have it. I`m not that
familiar with state laws, but I suspect that if you are a resident, you
could probably go in and get some sort of photo I.D. from the state in
order to qualify to vote if you don`t have one already.

And in fact, I would say that states should do that.

(END VIDEO CLIP)

SCHULTZ: Let`s turn to R.T. Rybak, mayor of Minneapolis and also vice
chair of the DNC. MSNBC political analyst Richard Wolffe is with us
tonight and Professor Caroline Heldman, professor of politics at Occidental
College.

Professor, let me ask you first. You know, there`s been a slew of
recent reports of folks denied photo I.D.s because they don`t have the
necessary documentation to obtain one. So what do you make of the
senator`s answer?

PROF. CAROLINE HELDMAN, OCCIDENTAL COLLEGE: Well, he`s using
Republican partisan talking points. He is appealing to middle-class
Americans, many of whom or all of whom pretty much have voter I.D. But the
difference between buying cigarettes and hopping on a plane is those are
not constitutionally protected rights and voting is.

And we know according to the Brennan Center Study that 11 percent of
Americans don`t have a photo I.D. that would fit many states` requirements
for various reasons, whether they`re elderly, whether they`re students who
have student I.D.s and are not driving. We also know that it
disproportionately affects blacks and Latinos.

So it`s a real problem when it comes to demobilizing people of color.
So it`s disingenuous for him to say it`s not voter suppression.

SCHULTZ: Well, the laws affect the poor and minorities
disproportionately, as you said. And I pressed the senator on that issue.
Here it is.

(BEGIN VIDEO CLIP)

SCHULTZ: What do you say to minority groups who say that, you know,
people don`t have transportation. They`re destitute. They don`t have
money. They really don`t have the means to engage in going out and getting
a photo I.D. It`s not as easy -- and you talked about poverty in there.
You`ve worked with poverty --

SANTORUM: I`ve worked with poverty, yeah.

SCHULTZ: And people view this as voter suppression.

SANTORUM: Well, I don`t view this as voter suppression. And I would
make it as easy as possible from the standpoint of the states and the
standpoint of cost to have photo I.D.s available if people come in and
prove their identity, and be able to get some sort of I.D. that would allow
them to vote.

(END VIDEO CLIP)

SCHULTZ: Mayor Rybak, does this man know what he`s talking about when
it comes to this issue? Your thoughts?

MAYOR R.T. RYBAK (D), MINNEAPOLIS, MN: Flat out no. I`m a mayor. I
understand this. And the fact of the matter is these last two presidential
elections have had more voter identification and surveying than any other
elections in American history. And there`s no widespread voter fraud,
period.

I`ve registered people on election day. We`ve gotten people to the
polls. This is another Republican tactic that just says they don`t want
people of color and young people to vote. And you know, I`m here in Iowa.
And the reality is the Republican candidates have all been here. They`ve
been spending millions of bucks.

They can`t get anybody to fall in love with them. And they want to
try to win an election by having fewer people vote, especially fewer people
who happen to be those who are people of color and younger people. It`s
another ploy. And we need to get back to the real issues.

SCHULTZ: Richard, what kind of an effect is this going to have on the
election?

RICHARD WOLFFE, MSNBC POLITICAL ANALYST: Well, you`re talking about
states, frankly, where Republicans are already strong. But I just want to
take this back a bit. People weren`t talking on Fox News about voter fraud
when President Bush was in power. These voter fraud stories, so-called
stories, popped up because they just couldn`t believe how big President
Obama won in 2008.

So they had to concoct some kind of story. It`s interesting that
Santorum doesn`t come up with any evidence. He just figures that people
are catching planes all the time, right? And if you`re on a plane, you
need an I.D. As if that`s what everyone does in this country.

Well, no, not everyone takes a plane. And that`s not the same kind of
burden of proof. And frankly, if Rick Santorum smoked or drank, he might
also not get checked for his I.D. at his age if he goes to a liquor store.
So it`s not realistic.

But you`ve got to understand where it`s coming from. And it came from
a situation, especially in these deep red states, where they just cannot
understand why anyone would have voted for Obama in the first place. So it
must be fraud, right?

SCHULTZ: R.T. Rybak, Richard, and also Caroline, professor, stay
with us. Panel, stay with us. We`ve got more coming up.

Coming up, more with Rick Santorum. Why did the Republican candidate
spend time with the most liberal guy on MSNBC? I mean, why did he do that?
Stay with us.

(COMMERCIAL BREAK)

SCHULTZ: ED SHOW survey tonight, I asked, do you think Rick Santorum
can pull off an upset in the Iowa caucus? Thirty percent of you said yes;
70 percent of you said no.

Coming up, Rick Santorum makes his case for the social conservative
vote. Stay tuned. And more with our panel.

(COMMERCIAL BREAK)

SCHULTZ: A little history. Mike Huckabee won the Iowa caucus just
four years ago as a social conservative. He had the ground game going and
an organization to come out on top. But now that pie is fractured quite a
bit. How does Rick Santorum beat a Michele Bachmann or a Rick Perry?
Here`s his answer.

(BEGIN VIDEO CLIP)

SANTORUM: If you look at the candidates who have the chance to
actually go on -- to Erick Erickson`s point, to go on and actually be
successful, well, is it a congresswoman who represents a heavily Republican
district, who has to fight every year to win that district? Is it a
governor from Texas who, you know, governed as reasonably conservatively in
a state that`s a very conservative state, who never had to get the
moderates or independents to vote for to win?

Or is it someone who governed as a conservative, who had a 90-plus
percent rating in the Senate as a conservative, and win two tough elections
in the state of Pennsylvania. I think that`s the best person who probably
has the ability, track record that shows that you have got what it takes to
be able to get the voters in the states that are necessary to win this
presidency.

(END VIDEO CLIP)

SCHULTZ: Let`s bring back our panel, Minneapolis Mayor R.T. Rybak.
Also MSNBC analyst Richard Wolffe and Professor Caroline Heldman.

R.T., do you agree with that assessment by the former senator? Is
that the right game plan and the right approach ? What`s your analysis?

RYBAK: Hey, I`d agree that Santorum`s got experience in Pennsylvania
and won a couple elections. I think he kind of got ridden out on a rail
there, come to think of it. So I don`t think he could guarantee he could
cover it.

But the fact of the matter is when you`re here on the ground in Iowa,
you can really see that none of these people are catching on. When you
look at Santorum, he`s gone to every part of the state and is barely
moving. Now he`s finally starting to get a little traction.

Romney`s the big thing, though. Romney now is saying that he`s going
to win this thing. And yet after five years and many millions of dollars
and many more millions from his friends to attack people, the guy`s barely
cracking 20 percent. So after five years and that much money, 80 percent
of the state`s not going to support him.

(CROSS TALK)

SCHULTZ: But Richard, if you look -- you know, Richard, if you look
at the way Bachmann`s campaign is on the fade. Newt Gingrich is not on a
roll, in any stretch of the imagination. You see an uptick by Santorum.
Could he rally and be -- he`s asking people to unite as social
conservatives. I mean, could he be the dark horse here?

WOLFFE: Yeah, I think he could be, actually. He is rising at this
late stage. It`s very volatile. There`s enough days in this race, and
things are moving by the day, where people could -- at least the social
conservatives could coalesce around him. You could see a top three of
Paul, Romney, and Santorum.

And if Santorum is nipping at Romney`s heels enough, it could become a
real embarrassment for Romney. So he could be a factor. Can he win at
this point? I think there`s just too much ground to make up.

SCHULTZ: I asked Santorum why he agreed to talk to me, the lefty on
MSNBC. Here`s what he had to say.

(BEGIN VIDEO CLIP)

SCHULTZ: Is it gut-wrenching to do an interview with the most liberal
guy on MSNBC?

SANTORUM: Hopefully, you`ve seen I`ve enjoyed it. You know?

SCHULTZ: The other candidates don`t.

SANTORUM: It`s so funny. When I first started this, we hired some
people on to our staff. And I would do a radio show. And they`d say, now,
we`ve lined up calls to make sure -- I said, don`t you ever do that again.
I said, I want the tough calls.

Give me the toughest questions you have. Because those are the
questions that people have in their mind.

(END VIDEO CLIP)

SCHULTZ: Caroline, what about his exposure? He doesn`t have the
money that the other candidates do. Is he just in a position where he`s
got to interview with everybody?

HELDMAN: I would very much agree with that assessment, Ed. I think
that he is surging, but he`s so far behind the other candidates. His surge
is mostly due to prominent Evangelicals endorsing him and the fact that he
is able to distinguish himself somewhat from Bachmann and Perry, who are
sliding. But I still think he`s got such a tough road ahead of him,
because you`ve got three candidates on top.

SCHULTZ: Richard, how do you call it one week out?

WOLFFE: I think Ron Paul is easily underestimated. He`s got an
organization that is passionate among his supporters. He`s got an unusual
coalition. Mitt Romney, you know, the one thing you`ve got to discount at
this point is the size of crowds, OK. It`s like a restaurant on a Saturday
night. If it`s not full, they`ve got a problem.

A small crowd is a sign of something. But everyone should be in a
full crowd. I think Paul and Romney are up there one and two. And the
question is who comes third.

SCHULTZ: Well, the way I see it is that if the social conservatives
come together -- you know, Mike Huckabee won this thing with just 40,000
votes back in 2008. If they come together on one candidate, I tell you,
it`s going to be really, really close. And then of course, professor, I
think a lot of it has to do with the youth vote.

Which candidate do you think is going to appeal to the youth vote and
mobilize them when they need them?

HELDMAN: Well, looking at the data so far, it`s very clear that Ron
Paul is appealing to the youth vote much more than the other candidates.
But I actually think that Mitt Romney is quite strong in Iowa. He did not
spend the same amount of time and resources there as he did four years ago.
And yet he`s still on top.

He`s really looking at New Hampshire. But he`s pulled in some heavy
hitters like Chris Christie to do the lifting for him in Iowa. And he`s
still on top, which means that even though he hasn`t been putting in the
big effort, he`s still up there with Ron Paul.

SCHULTZ: R.T. Rybak, Richard Wolffe, and Caroline Heldman, great to
have you with us tonight. I appreciate your time and your analysis.

This is THE ED SHOW. That`s THE ED SHOW. I`m Ed Schultz. You can
listen to me on Sirius radio channel 127, Monday through Friday, noon to
3:00 p.m. Follow me on Twitter @EdShow and @WeGotEd.

"THE RACHEL MADDOW SHOW" starts right now. Sitting in for Rachel
tonight, Chris Hayes. Chris, great to have you with us tonight.

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

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