updated 1/3/2012 11:03:10 AM ET 2012-01-03T16:03:10

Guests: Doug Heye, David Yepsen, Nate Silver

ED SCHULTZ, "THE ED SHOW" HOST: So, here it is. I mean, he is just
surging. I think he`s going to win it, Rachel. I really do.

RACHEL MADDOW, HOST: You think he`s this year`s Huckabee? You think
he`s going to run away with it?

SCHULTZ: I do. I think that there`s -- even though the pie is split
with, you know, Rick Perry and with Michele Bachmann, I do think that he`s
been that strong in the state.

MADDOW: Wow. Well, you know, at this point the only thing that I
have learned about predictions in politics is that I should never make
them. But if Rick Santorum wins in Iowa, it`s going to be a really fun few
months, Ed. Just for you and I.

SCHULTZ: We`re looking forward to that, aren`t we?

MADDOW: Oh my God. I`ve never been having more fun in politics in my
life.

Thanks, my friend. It`s going to be fun tomorrow night. Looking
forward to it.

SCHULTZ: Absolutely. Thanks, Rachel.

MADDOW: All right. And thanks to you at home for staying with us for
the next hour.

Happy New Year. And I got to say, before we knew that the Iowa
caucuses were going to start right after the New Year, I was hoping that it
would be sort of later on in the month, because I enjoy this process. I
wanted it to spin out. I thought people wouldn`t be paying attention
because it was the holidays.

Now that it`s happening right after New Year`s, I`m so excited I feel
like it`s still New Year`s Eve. The party is still going on. I`m waiting
for a ball to drop somewhere. It`s very exciting.

Anyway -- so it`s 7:00, local time, tomorrow night, which is 8:00
Eastern Time tomorrow night, the doors will close at precincts all over
Iowa. The caucuses will officially be under way. It`s very exciting.

We are less than 24 hours out from the first contest that will decide
the Republican candidate for president this year. And as of right now,
here`s where the various candidates stand.

Public Policy Polling has the top three candidates virtually tied.
They have got Ron Paul at 20 percent, Mitt Romney at 19 percent, Rick
Santorum at 18 percent.

A new Insider Advantage poll again shows a Mitt Romney/Ron Paul
virtual tie with Senator Santorum just behind them. And the latest poll
from "The Des Moines Register" has Mitt Romney ahead, Mitt Romney at 24
percent, followed very closely by Ron Paul, 22 percent, and Rick Santorum
trailing them in third place with 15 percent.

Now, this is important because "The Des Moines Register" poll
historically has been a pretty reliable indicator of how things are going
to go in Iowa. "The Des Moines Register" poll is considered the poll to
watch if you`re going to watch one.

Here`s the most interesting thing about that poll right now, that very
well-respected poll. The most interesting thing about that is not that
Mitt Romney squeaking out a two-point lead in that poll over Ron Paul.

The most interesting thing about that poll is that a huge proportion
of likely Iowa voters are still undecided in that state, even now. Forty-
one percent of caucusgoers, 41 percent, say they are still not sold on any
one candidate. They still might change their minds about who to support
tomorrow night.

The candidates do not have much time left to convince these people.
They do not have much time left to make their case, to make their closing
arguments. In fact, the campaigns are now sort of in logistics mode. Now,
it is about getting people to the caucus, as it is about turnout of your
most ardent supporters. It is about organization.

It`s even in some cases about instructions -- instructing people how
to caucus, like in this Mitt Romney ad.

(POLITICAL AD PLAYS)

MADDOW: Worth noting here, can we just go back? Can we show, right
after they show the stylized computer thingy? We have this part right here
saying go forth and find your caucus. There are more than 1,700 caucus
sites, by the way.

So, right after that, that`s step one. And right before, do we have
step three? Yes, step three, where they put your Mitt Romney Girl Scout
cookie logo in the Mitt Romney toaster step.

Between step one and step three, they have step two. Look at step two
here. Do we have that?

Yes, step two, show up. Don`t forget your id. No, Romney, want
Santorum. I don`t think they mean "Id." I think they mean ID. Bring your
identification. Punctuation matters.

But, interestingly, the good thing to know, heading into Iowa, whether
or not you`re going to be supporting Mitt Romney in an Iowa caucus or not,
looking at those instructions, I think it is important to note that you
don`t really have to remember your ID. You don`t really have to do that.
The Iowa caucus is not a state-run contest. It`s run by the Republican
Party, itself.

So the Iowa state Republican Party makes its own rules about how to
run things tomorrow night. They could have decided to do what Republicans
in the Iowa legislature have been pushing for the whole state this year.
They could have banned any caucusgoer from voting unless he or she showed a
government issued photo ID, which of course not everyone has. But the
party decided for its caucuses it would not require that.

See, in the state of Iowa in a general election, you`re not banned
from voting if you don`t show a government issued photo ID. In Iowa, you
can show a non-driver ID card or student ID or something else that proves
where you live like a bill or piece of mail.

And if you have none of those things, another registered voter can
vouch for you, that you are who you say you are. That is how it works in
most places in the country, including in Iowa for real statewide elections.
Voting is your right as a citizen. There are not supposed to be arbitrary
or prejudicial bureaucratic barriers to you exercising that right.

So, if you`re elderly, say, and you no longer have a driver`s license
or you just don`t have a photo ID. That`s no crime, that shouldn`t
interfere with your constitutional rights.

And if you are in the category, the decision by the Iowa Republican
Party about how you`re running the caucus tomorrow, means you without a
photo ID can still caucus for your candidate in Iowa tomorrow.

And while Iowa Republicans have decided to ensure that kind of ballot
access for Republican voters, voting for Republican candidates only at the
Republican caucuses tomorrow, the Iowa Republicans in the state legislature
have been trying to change the rules. To ensure that when there are
Democratic candidates on the ballot and Democratic voters turning out to
vote for them -- well, then they`d like to get a little bit stricter about
who`s allowed to vote.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: That was the main issue of my campaign. You have
to show an ID before you get on an airplane, open a checking account, even
to buy a beer. So, why not when you vote?

(END VIDEO CLIP)

MADDOW: Because the right to buy a beer is not enshrined in the
Constitution because I haven`t founded my own country yet.

Voting is however enshrined in the Constitution. And so, coming up
with a new rule about what you have to do to be allowed to vote is a big
constitutional deal.

The man you just saw explaining that there was Iowa`s Republican
secretary of state. He`s the man in charge of elections in Iowa. His name
is Matt Schultz. And when he ran for office in 2010, he made it his
crusade to institute strict new voter ID laws in Iowa.

Last year, Republicans in the Iowa House passed a bill that would have
blocked anybody from voting in the state unless they showed government-
issued photo ID that not everybody has, and that Democratic leaning voting
groups like minorities and poor people are statistically less likely to
have. Republicans in the House passed that. State Democrats blocked that
bill in the Senate.

But when state Republicans had the chance to institute the same rule
for this Republicans-only event that they`re holding tomorrow, they decided
not to institute that rule. What`s more, if you are an Iowan and you are
not registered to vote at all, but you do want to participate tomorrow
night in the Republican-run caucuses, you can show up tomorrow and register
right there. Same-day registration will be allowed.

It`s another great thing that exists only in a handful of states in
this country including Iowa. And it`s another thing the Iowa Republican
Party has decided works for them in their event tomorrow.

It`s also another part of secretary of state Matt Schultz`s key
reforms in Iowa. He essentially wants to get rid of same-day voting, at
least he wants to force voters who register on the same day as the
election, he wants to force them into using provisional ballots.

And, of course, provisional ballots may never be counted.

So, when Republicans in Iowa are trying to get the rules for the
electorate at large, when there may be a risk of Democratic voters voting
in an election for a Democrat candidate against the Republican, in those
elections, we must have strict voter ID regulations and an attempt at same-
day registration will get your ballot kicked down to second-class status.
When Republicans get to set the rules themselves, for their own Republican
voters, when they know there`s no chance of any Democratic voters turning
up to vote for a Democrat against a Republican -- in that case, it`s come
one, come all. The more access, the better.

Joining us now is either defend the Iowa Republican Party on this or
let me tease him mercilessly about it is the former communications director
for the Republican Party, now senior adviser to the Iowa Republican Party,
my pal, Doug Heye.

Doug, it is great to see you. Thanks for being here.

DOUG HEYE, SR. ADVISOR TO THE IOWA REPUBLICAN PARTY: It`s good to see
you, Rachel. Thank you.

MADDOW: Tell me this is -- there`s something I don`t understand about
this that means there isn`t an incredible double standard here on voting
rules.

HEYE: Well, let me make a technical point first. While we certainly
do allow people to register to vote and then vote in the caucus tomorrow,
anybody who registers tomorrow will have to show a photo ID. But we also
know that there are a lot of people, at least there`s a lot of talk about
people who are just going to be Republicans for a day -- people who are
independents, people who are Democrats, who will register to maybe put in a
no preference, no choice, maybe vote for a different candidate to affect
the outcome.

This could be a Democratic version of what Rush Limbaugh talked about
doing in operation chaos in the Obama/Clinton primary. But you will have
to show an ID to register to vote.

MADDOW: You have to show an ID --

(CROSSTALK)

MADDOW: Sorry, just to be clear -- to register, but not to actually
cast a vote?

HEYE: Exactly. But to register to vote, you`ll have to show a photo
ID.

MADDOW: If you are worried about a reverse operation chaos, is there
anything about showing an ID to register that would stop that?

HEYE: No, I don`t think so. It`s -- you know, it`s something we want
to make sure, though, as people register that they are from where they say
they are. They`ll have to show proof of the address in that area. We
think that`s important.

But then when you get past that, when you get to the actual caucus
process itself, the uniqueness of what the Iowa caucus, and I`d say this is
true whether you`re talking about the Democratic caucus or the Republican
caucus, it`s really neighbors meeting neighbors. These are meetings that
happen in schools, in churches and in few cases, even in private homes.
And when you think that if people are meeting at a private home or meeting
in a classroom of a school, because multiple precincts may be meeting at
the same caucus site, the sixth grade class in one room, the seventh grade
class in a different room, that when neighbors speak to neighbors, there`s
really any worry of that happening. It`s the uniqueness of the Iowa
caucus.

Another example, in primaries, people vote to make their voices heard.
In a caucus, people show up to make their presence felt. So, if you`re
going to be willing to sit in a room and listen to boring political
speeches for two hours, you`re probably not going to be somebody who`s
going to tamper with the system too much.

MADDOW: Doug, to be clear, since you have been in Iowa, I know you`ve
been there a long time handling communication now, trying to make sure
everybody understands things from the perspective of the Iowa Republican
Party, has there been a fight within the party over the fact you don`t have
to show a photo ID in order to vote? Has there been consternation for
that? Has secretary of state been agitating for that?

I mean, they are trying to change the rules for the state`s election.
There`s not been worry about that for the caucuses?

HEYE: Not at all. I`ve been with the secretary of state before our
debate in Sioux City. The issue didn`t come up. To be honest, the first
time I heard about this issue being an issue is when I got the fine phone
call to appear on this show today.

MADDOW: I`d just like to point out the awkwardness.

HEYE: I`m not blaming you. I`m not blaming you.

MADDOW: I`m glad you`re willing to talk about it even if nobody else
will. I find it absolutely hilarious. But I`m also a weirdo.

Let me ask you about something that`s much more mainstream, Doug, and
that is voter turnout. Voter turnout for the `08 caucuses was huge on the
Democratic side, obviously because of the Hillary Clinton/Barack Obama
fight at that point. But it was about 120,000 in 2008 on the Republican
side. That was a big number.

What are you expecting in terms of turnout and what kind of logistical
planning do you have to do if you`re expecting a big number this year?

HEYE: I tell you, logistically, it`s obviously very difficult. We
have 809 different caucus sites, 1,774 different precincts. So, it`s
obviously a great beast that our chairman Matt Strawn is trying to tame
here.

But we haven`t made real turnout predictions because we`re just not
sure yet. Part of it is the number you talked about with people who are
uncertain as to how they`re going to support. But we do expect that there
will be a large and robust turnout because of two reasons. One, we`ve seen
a lot of enthusiasm in the past couple days, as events have been more and
more crowded for practically every candidate, if not every candidate.

And there`s also a statistic that I think is really important, that
shows the growth in the Republican Party and the excitement that we have.
For 33 consecutive months against Chairman Matt Strawn, we`ve had
Republican growth against the Democrats. That`s not us growing a little
more than they are.

Since Barack Obama has been elected, one in 10 Iowa Democrats have
abandoned the Republican Party. That`s something that should send, even
though the president certainly has a strong organization in the state,
should send a real cause of concern to the White House, to the Iowa
Democratic Party, itself. It`s one of the reasons Republicans here are so
excited.

MADDOW: Doug, that`s admirable spin. Don`t you get an increase in
registrations in the party that`s having the fight when the other party
isn`t having a fight? I mean, that`s why we saw roughly the double turnout
on the Democratic side last time around because there was this incredibly
hard-fought battle on the Iowa side that got everybody excited.

I mean, don`t you expect an increase in registration to follow the
contest? And there`s no contest on the Democratic side.

HEYE: Well, I think we expect an increase on enthusiasm based on what
Barack Obama promised us and Obama as a candidate certainly created last
year.

But I`ll concede that Barack Obama generates a lot of excitement on
our side, too. That`s why you saw us picked up 63 seats last year, seven
seats in the Senate. There was a lot of enthusiasm. Obviously, some
gubernatorial races as well.

Barack Obama has caused a lot of excitement on our side. And we`ll
see as we start this process of winnowing down that field, exactly what
that number will be tomorrow. But we`re excited.

MADDOW: Doug Heye, former communications director for the RNC, a
veteran conservative strategist, and a man who can get the anti-Obama
talking point into any totally unrelated discussion with admirable
efficiency. Doug, I always enjoy talking to you.

HEYE: Rachel --

MADDOW: Yes?

HEYE: That`s the nicest thing anybody said to me. Let me point out
one thing very, very quickly. When I voted last year in Washington, D.C.,
they asked me for my ID. So, if you want to come down with me next time,
we can make sure that great travesty is corrected, I`ll be happy to stand
with you.

MADDOW: Well, you and me will stand there and make sure the elderly
people in Tennessee who`ve lost their licenses have to go through rigmarole
three months before the election process to make sure that they can get in.

HEYE: Let`s have a road tour.

MADDOW: All right. Man, we`ll do it. Thanks, Doug. Appreciate it.

HEYE: Thank you.

MADDOWE: All right. Now, we go to David Yepsen who`s the man who
covered Iowa politics for more than 30 years at "The Des Moines Register."
He`s now the director of the Paul Simon Public Policy Institute at Southern
Illinois University.

Mr. Yepsen, thank you for coming back. It`s nice to see you.

DAVID YEPSEN, SOUTHERN ILLINOIS UNIVERSITY: Good to be back, Rachel.

MADDOW: So, 41 percent of Iowa caucus attendees still undecided in
"the Des Moines register" poll. Is that a surprisingly high number to you?

YEPSEN: No, it isn`t. I mean, if it were a general election, it
would be. But it`s not surprising to me at all.

Republicans, these are activists for their party. These are not rank
and file voters. These are people who care about their party. They`re
looking for someone who they think is a good conservative, someone who can
win the election.

And they`re taking their time doing it. As Doug mentioned in the
earlier segment, these are people who want a chance to talk to their
neighbors. You know, your friends and neighbors are some of the biggest
determinants of how you vote in an election. And so, they`re going to get
together and talk politics before they vote and talk about who might be a
good candidate, who might be a bad candidate, who might run well.

And so, they`ve certainly learned over the years and certainly in this
campaign you don`t want to decide too early because who knows, some gaffe
or mistake or something would change the trajectory of the campaign.

MADDOW: Because of that sort of collectivist nature of the process
that you just described there, people looking to fellow Iowans to see how
people they respect and people who they know are going to be voting at the
caucuses, do you think at this point that endorsements are particularly
important? In terms of trying to reach that 41 percent of undecided
voters, are the candidates in particular looking for both either newspaper
endorsements or prominent Iowan endorsements?

YEPSEN: Well, newspaper endorsements are kind of a throwback to the
old era. Look, a candidate will take this stuff, it gets him a day of
media. But nobody delivers anything in Iowa.

And if you`ve noted, you know, a lot of Republican leaders are not
endorsing. The reason they don`t endorse is, first of all, they can`t
deliver anything to that candidate. They get them a day of media.

But what it does do if they endorse somebody, it raises their
expectation levels. National media people say, oh my, you got the
governor`s endorsement or congressman`s endorsement, you should do better
as a result of that. So, it`s almost as if they want to stay away from
endorsing someone, because, in fact, it might hurt them.

And also they want Iowa to be seen as a fair place to play. You can`t
-- if you have local politicians taking sides, too many of them, it kind of
puts a finger on the scales. They don`t want to do that.

MADDOW: David, Iowa, of course, has this prestige position as first
in the nation to caucus. We have seen efforts by various states to move up
their primaries. Try to sort of nip at Iowa`s heels if not challenge that
front-runner status. If Iowa effectively picks another mike Huckabee this
year, another candidate that appeals to Republicans in Iowa but not to the
majority of Republican voters in the rest of the country, do you think Iowa
is risking a challenge for its first in the nation position?

YEPSEN: Iowa has a challenge every four years. I mean, I`ve covered
nine of these caucus cycles. Every year, they say this will be the last
time it happens. Some year, it may be true. It`s not carved in stone.

Iowa is the beginning of the process. It`s not the end of the
process. And the only reason it continues is because the country cannot
figure out a different way to nominate candidates. I mean, Rachel, if you
love money and politics, you`d love a national, regional primary. You
know, there are unintended consequences to changes to this calendar.

And unfortunately, for people who want to have more say. One of the
solutions that they come up with is to move their events closer to Iowa and
New Hampshire, which the unintended consequence of just making Iowa and New
Hampshire that much more important. A candidate who doesn`t do well here
in one of these states doesn`t have time to recover in subsequent contest.

So, if people want to diminish significance of Iowa, they decompress
the schedule some. Both parties have tried to do that. And they`ve had
some success.

I do think one thing the Republican Party`s doing that ought to help
keep this contest going longer, in some subsequent states, there`s a
proportional allocation of delegates. That will mean that candidate can`t
come in and win a state with 51 percent and take all the delegates. And
that may keep the nomination fight going a little bit longer.

MADDOW: David Yepsen, former "Des Moines register" political writer,
director of mow of the Paul Simon Public Policy Institute at Southern
Illinois U -- David, thank you again for joining us tonight. I really do
appreciate talking about this.

YEPSEN: Thank you.

MADDOW: All right. More ahead, including Nate Silver who`s going to
be here.

Also, a bunch of news not from Iowa.

Stay tuned.

(COMMERCIAL BREAK)

MADDOW: The Gallup poll today reports that the race for the
Republican presidential nomination remains strangely unsettled strangely
late in the game. The old saying, of course, is that Democrats fall in
love and Republicans fall in line. But so far, Republicans have done
neither -- at least not as a party. Gallup calculating that the lead in
this nominating race has changed seven times and that`s just since May.

Republicans have had four different front-runners so far among the
candidates, and two other front-runners who did not in fact run. So, six
leaders, enough for an NHL hockey side, including the goalie.

The Republican Party has not been this unsettled this late in the game
since 1964. In 1964, they ended up picking a senator from Arizona named
Barry Goldwater.

(BEGIN VIDEO CLIP)

BARRY GOLDWATER, FORMER ARIZONA SENATOR: I would remind you that
extremism in defense of liberty is no vice. And let remind you also that
moderation in the pursuit of justice is no virtue.

(END VIDEO CLIP)

MADDOW: In the 1964 contest, Senator Goldwater, who you just saw
there, was still scrapping for a share of the lead as late as June. He did
secure the nomination of his party. Then come the general election, come
November, Senator Goldwater managed to win his home state of Arizona, and
also some of the old confederacy.

Mr. Goldwater picked up five states there, and that was it. No for
him. Mr. Goldwater lost to Lyndon Johnson in a landslide almost without
precedent in American politics.

You can find bigger losses than the loss Goldwater delivered for
Republicans in 1964 but you cannot find many of them.

Now, to be fair, the Democratic Party more frequently has trouble
getting it together to support a nominee until late in the game. Gallup
compares the situation this year with the Republicans to what happened with
the Democrats trying to pick a nominee for the `04 campaign. Democrats had
nine lead changes that year, the last in February before they settled on
John Kerry. And then they lost.

Also in 1988, Democrats struggled to pick a nominee before settling,
finally, on Massachusetts Governor Michael Dukakis who also lost.

So, historically, regardless of what you`re talking about, whichever
political party, red or blue, blue or red, it simply is not good for a
party to have this much volatility this late into the race. Having this
much volatility this late in the race is not a harbinger of electoral
success.

Now, this is not a prediction that the ostensible current front-
runner, Mitt Romney, or any of the other Republican nominee so they
eventually settle on will lose in November. It`s not an assertion that Mr.
Romney is a bad candidate. The lack of ability to settle on Mr. Romney or
anybody else may have less to do with him than it does with the Republican
Party that seems to lack a thorough understanding right now of what it
stands for.

I just have one thought on this, because you see it playing out on the
campaign right now. It`s not being remarked upon very much, but I think
it`s important. This weekend, Mitt Romney was asked about a long-standing
policy goal of Republicans. He was asked about passing the DREAM Act --
the DREAM Act for young people who have grown up in this country but who
did not immigrate here legally in the first place. It would give them a
chance at citizenship.

The DREAM Act is a Republican idea. It was championed by prominent
Republicans over the years, including Dick Lugar, and John McCain and Orrin
Hatch. Republicans began pushing the concept in President Bush`s first
term in 2001.

The DREAM Act is a Republican thing. It`s a Republican idea. It`s a
Republican ideal. It is a Republican proposal.

Ladies and gentlemen, your Republican front-runner.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: Hi there.

UNIDENTIFIED FEMALE: Hi. If you`re elected and Congress passes the
DREAM Act, would you veto it?

ROMNEY: The question is, if I were elected and Congress were to pass
the DREAM Act, would I veto it? And the answer is yes.

(END VIDEO CLIP)

MADDOW: Boing!

The DREAM Act is apparently not a Republican idea anymore. Not this
time around because it`s 2012. A Republican candidate has to be against
that Republican idea.

Similarly, the old Mitt Romney used to embrace the Republican idea of
reducing greenhouse gases by setting a limit on emissions and then letting
companies sort it out with market-based regulations. Cap and trade was a
Republican idea, developed and promoted by Republicans as an alternative to
Democratic ideas about air pollution and climate change.

But because it is 2012 this year, a Republican candidate must now
reject that Republican idea, even when it`s one he used to endorse,
himself.

Similarly, health reform, an individual mandate to buy health
insurance. Pre-2012 Mitt Romney believed in that Republican idea so much
that he implemented it in Massachusetts when he was governor there. He had
the law on his gubernatorial desk, in his official gubernatorial portrait.

But because it is 2012, a Republican candidate must now reject the
Republican idea of health reform, the Republican idea of an individual
mandate in health reform, an idea that Mitt Romney not only personally
embraced but championed in his previous time in office.

I think this might be being missed as an issue because our political
analysis has become really over-personalized. And who knows, maybe it
really is all about which person you`d want to have a beer with. Which
person seems like your buddy, somebody who would hire you and not somebody
who would fire you. Maybe that is what`s going on. Maybe it`s all
likability and personality.

But it may also be policy. It may also be that Republican politics
have come to the point in 2012 when as a candidate, you are supposed to
rant and rave to blood-thirsty crowds about the evil of policies that your
own party spent a really, really long time selling to the country.

That is not an enviable position for anybody. And maybe that`s why
they can`t make up their minds.

But in any case, good luck tomorrow in Des Moines.

(COMMERCIAL BREAK)

MADDOW: Used to be the way they caught political science classes
about Iowa politics was that they taught you about ethanol. Iowa was awash
in a sea of corn. Corn is used to make ethanol. Subsidizing ethanol was
therefore a way to subsidize corn production.

So, Iowa politics were all about keeping those subsidies. Iowa`s
first in the nation caucuses gave that rather provincial Iowa issue a ton
of political punch in the country. Politicians wouldn`t dare challenge the
power of the ethanol lobby if they wanted to get anywhere in Iowa. That`s
how ethanol and Iowa politics got caught for decades in American political
science and American history courses. It`s what ticks at the heart of Iowa
politics. It`s what makes ethanol subsidies immortal in America. That was
how they taught it for years.

Then this year, history ended. This past weekend, the federal tax
credit for ethanol expired. Just like that -- after more than 30 years and
more than $20 million in subsidies paid for the production of corn-based
ethanol, those tax subsidies ended and pretty much without a fight.

They still grow corn in Iowa and people outside Iowa still have a hard
time understanding Iowa politics. Those things are probably eternal. But
some things that everybody thought would be forever, quietly just end.
Change happens.

More ahead.

(COMMERCIAL BREAK)

MADDOW: The single most entertaining ad to come out of Iowa this
political season was released today. It was made by a couple of Iowa
filmmakers named Scott Siepker and Paul Benedict. It`s called "Iowa Nice."

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: So I hear you think you know something about Iowa.

(EXPLETIVE DELETED) you.

You`ve heard we`re a bunch of knee jerk conservative reactionaries. I
guess that`s why we went Democratic in five out of the last six
presidential elections. How do you like me now?

Did your state legalize gay marriage before us? Probably not.

The first woman in America to become a lawyer was in Iowa in 1869.

You think we`re all hillbillies. Well, four out of five of us live in
cities, punk.

Iowa has the sixth lowest unemployment in the nation. Des Moines is
ranked the richest metro in the country and the second happiest. Guess you
can`t have it all.

So stop worrying about what we know and spend a little more time on
what you don`t know. The next time you fly over, give us a wave. We`ll
wave back. We`re nice.

That`s right. We`re nice. (EXPLETIVE DELETED) wad.

I`m out.

(END VIDEO CLIP)

MADDOW: Thank you, funny, foul-mouthed Iowa nice guy.

It is important even on days when it is this exciting to be covering
Republican politics in Iowa -- and I am a little overexcited, I`m sorry.
It`s important to remember what Iowa foul-mouthed nice guy said there about
Iowa`s rather Democratic character these days. Iowa has indeed gone blue
in five of the past six presidential elections. And whether or not it`s
directly related, it`s also worth noting that the Democratic caucuses in
Iowa tend to pick the candidate who goes on to become the Democratic
nominee.

The Republican caucuses for president in Iowa do not tend to pick the
candidate who goes on to be the Republican nominee. Over the past 30 years
when there`s not a Republican incumbent, here`s what the Republican record
has looked like in Iowa. They only got it right twice. Look at the
Democratic record. Again, over the past 30 years when there`s not an
incumbent. They only got it wrong twice.

Democrats in Iowa over the past three decades have tended to pick
their party`s nominee. Republicans on the other hand have tended to pick
Huckabees. They tend to not be representative of what Republicans
nationally are thinking. The Iowa results have just not been predictive on
the Republican side.

So why do we pay so much attention to the Republican contest in Iowa?
Well, first of all, it`s first. And we`re distracted by shiny objects.
And the candidates do spend tens of millions of dollars competing in Iowa.
So there`s that.

But if it doesn`t tell you anything about who the nominee is going to
be, there has to be some other reason why it is a big deal. Part of the
common wisdom about why it is still a big deal is that there`s this theory
that Iowa may not pick the winner on the Republican side, but at least it
has a way of picking the losers on either side.

One part of the common wisdom is that Iowa separates out the
candidates who are viable from the candidates who don`t have a prayer and
the ones who don`t have a prayer will drop out of the race after losing big
in Iowa.

So, in 1996, Republican Senator Phil Gramm dropped out of the race
after a poor finish in the Iowa caucuses. To be fair, he had been
disappointed in Louisiana which committed political blasphemy and caucused
before Iowa that year.

In 2000, Republican Senator Orrin Hatch dropped out of the race after
finishing last in the Iowa caucuses.

In 2004, Congressman Democrat Dick Gephardt dropped out after
finishing fourth in Iowa.

Democratic Senators Chris Dodd and Joe Biden both dropped out of the
`08 race after losing big in Iowa.

Republican Lamar Alexander, now a U.S. senator, dropped out of the
2000 presidential race in 1999. After a disappointing finish in the Ames,
Iowa, straw poll which is kind of a fake thing. But he didn`t make it to
the real voting.

Republican Tommy Thompson, former Wisconsin governor, did the same
thing in 2007, heading into the 2008 race.

As did former Minnesota Governor Tim Pawlenty. Remember when Tim
Pawlenty was running for president last year? Yes, that was fun.

So, Iowa can narrow the field on both sides. It can cause people to
quit. But this year, the candidates you could see as being least viable,
if they don`t do well in Iowa, at least don`t appear to be prepared to drop
out as the result of a bad showing.

Newt Gingrich, for example, says he knows he won`t win in Iowa but he
definitely won`t drop out no matter how he places. He`s already announced
his campaign plans for after he says he will loose Iowa.

Rick Perry and Michele Bachmann both have also announced what their
post-Iowa campaign events are going to be. Both signaling they will not
drop out.

So, maybe Iowa won`t exactly narrow down the field this time around.

Another thesis about what the Iowa caucuses are good for on the
Republican side, and this is statistically sound. This was advanced by
Nate Silver at "The New York Times" this year. And that is that Iowa does
not tell you who is going to be the nominee, but Iowa does tell you
something about who`s going to win the next contest in New Hampshire. And
New Hampshire can tell you something about who`s going to be the nominee.

But again, this year is a little bit weird. Michele Bachmann and Rick
Perry when they talked about their post-Iowa events -- they have not been
talking much about New Hampshire at all. Their first events after Iowa
that they have announced have them heading straight to South Carolina, just
bypassing New Hampshire.

Common wisdom among the candidates right now is that New Hampshire is
so far from being a competitive race, Mitt Romney has essentially locked it
up. But given the likelihood of losing big in Iowa tomorrow, they plan on
more or less ignoring the Granite State and just going straight south,
starting all over again in South Carolina.

Given all that, what is left, what is the most consequential result
that could possibly come out of tomorrow`s Republican results in Iowa?

Joining us now to help us figure it out is Nate Silver, author of the
"538" electoral politics blog at "The New York Times" -- Nate, thank you
for being here.

NATE SILVER, NEW YORK TIMES: Thank you, Rachel.

MADDOW: Did I get anything wrong there?

SILVER: No, good. Good history lesson, too.

MADDOW: Iowa can predict New Hampshire and New Hampshire can predict
the nominee, was that basically what you`re saying?

SILVER: It`s kind of like chaos theory, right, where a butterfly
flaps its wings in Des Moines and then that reverberates to Concord. And,
yes, but especially in the Republican side, it`s a tenuous predictor of
future success.

MADDOW: Looking at the results heading into that, with that caveat
that it may tell us nothing other than Iowa. What do you see as the state
of the polls right now for tomorrow?

SILVER: Well, you really do, I think, have very nearly a three-way
tossup where Mitt Romney leads in the plurality of polls but Rick Santorum
is closing and Ron Paul is only a point or so behind in the polling average
from Mitt Romney.

We know, even in a general election, a point is not much. But in a
caucus where the polls can be off by five on 10 points, it`s a very small
advantage, indeed.

Romney needs to be careful that expectations aren`t getting too far
ahead of themselves. I`d say he has about a 40 percent chance of winning
and maybe 20 percent or 30 percent for the other two candidates.

MADDOW: In terms of the results of Iowa, spoken broadly, it has a lot
to do not just with your enumerative result but also the relationship of
that result to expectations.

SILVER: Yes, if you look at what predicts the balance you get to New
Hampshire, it has to do with how you out-perform your polling more than the
absolute standing. If you get, if, for example, in Rick Perry -- I don`t
think he`ll do this -- but if he were to get 20 percent of the vote
tomorrow, he`s polling at 10 percent. He might get a huge balance. That
probably wouldn`t help him in New Hampshire where he`s still too far
behind. He might become the front-runner in South Carolina.

So, that`s why it`s very hard to predict the spin that will result.
It`s precisely what you don`t know precisely. That`s unexpected. That
tends to affect the media narrative and the momentum going on to New
Hampshire and the other states.

MADDOW: Well, in terms of the momentum and the expectations in New
Hampshire -- the sense is that it is not competitive. That Mitt Romney has
essentially put together a prohibitive lead in New Hampshire.

SILVER: Yes.

MADDOW: Is that true?

SILVER: It`s a relatively safe lead. We have to keep in mind 1984,
Walter Mondale had a lead of about 25 or 30 points in New Hampshire over
Gary Hart and Hart actually finished second in Iowa but got the media spin.
And so, he came back and won New Hampshire.

Ronald Reagan nearly lost the big lead to George H.W. Bush in 1980,
but came back toward the end to recover.

So, it depends. I mean, if you have, for example, Romney finishing in
a distant third place tomorrow night or fourth place, that would be so far
below expectations that you can`t spin that result favorably. And Romney
would become more vulnerable.

The problem, though, is a candidate like Rick Santorum is not someone
who would be a natural fit for New Hampshire. The best New Hampshire
candidate might be a Jon Huntsman, for instance, but he`s not competing in
Iowa. His campaign is too much of a moderate to win over the evangelical
vote there.

And so, you don`t really have any candidate but Romney who can pull
off this one-two parlay in the first two states.

MADDOW: I don`t want to get too hypothetical, although that`s what
this whole discussion is I guess. It`s predictive and hypothetical.

But if predictions prove to be, or polling proves to be roughly in
line with the results in Iowa and New Hampshire, and we get sort of a
three-way cluster tomorrow in Iowa and Romney wins pretty big in New
Hampshire. If that happens, are you already looking ahead to South
Carolina in terms of its predictive ability and who is likely to run
strongest there as a determinative race?

SILVER: Well, that would be Romney`s first opportunity to close out,
I think, essentially the nomination, unless there were some scandal or some
vetting issue later. If a candidate like Romney who`s a Mormon in a very
evangelical protestant state certainly not a Southerner, if you were to win
in South Carolina, after also having won or done well in Iowa and New
Hampshire, then there`s not a real argument that other candidates are
viable at that point.

You know, I think it might a little bit more like some candidate comes
back and win South Carolina, maybe a Santorum, or who knows? Maybe
Gingrich will have a miraculous comeback.

But then Romney has good states, right after that in Florida where the
older vote tends to like him. Gingrich is fading a little bit. And in
February, he has Michigan, another good state for him.

There are a lot of good Romney states on the calendar. He lives in,
like, half the states in the country pretty much. So, he doesn`t go too
long before you have a home court advantage. Nevada also has caucuses in
early February.

So, he has a lot of opportunities to look good as you go through the
calendar.

MADDOW: Yet another advantage of being a zillionaire.

SILVER: Yes.

MADDOW: Absolutely. It`s hard to come them.

Nate Silver, author of the "538" electoral politics blog at "The New
York Times" -- Nate, thank you. I expect we`ll be back talking again soon.

SILVER: Thanks, Rachel.

MADDOW: Appreciate it.

All right. Right after the show, on "THE LAST WORD," Lawrence
O`Donnell talks to a man who lost his job after Mitt Romney`s firm bought
the company he worked for. An up close look at Romney-nomics is just
ahead.

And here, apparently, there`s news happening that has nothing to do
with Iowa. That`s weird, right? That`s next.

(COMMERCIAL BREAK)

MADDOW: In 1984 on Christmas Day, two men from Pensacola, Florida,
fire-bombed an abortion clinic in that city. Matthew Goldsby and Jimmy
Simmons were convicted and sentenced to ten years in prison.

In 1993, another Pensacola resident named Michael Griffin assassinated
a doctor who worked at a different Pensacola clinic that provided
abortions. The man who was killed was Dr. David Gunn.

A little more than a year after that, in 1994, the site of the other
fire bombed clinic in Pensacola was visited by an antiabortion activist
named Paul Hill. Paul Hill shot and killed another doctor who provided
abortions in Pensacola, Dr. John Britton, as well as a clinic volunteer
named James Barrett. Paul Hill also wounded Dr. Britton`s wife in that
attack.

Now, yesterday, on the first day of 2012, that same clinic in
Pensacola was gutted by fire. Nobody was injured. The fire apparently
happened after midnight on New Year`s Eve. But the building was reportedly
burned as if from the inside out in a fire being investigated by the state
fire marshal. This is the same clinic where anti-abortion extremists
murdered two people wounded another, that had previously been fire bombed.
And that is across town from the site of another abortion doctor
assassination in Pensacola.

Today it was announced that the FBI and the federal Bureau of Alcohol
Tobacco, Firearms and Explosives will be joining Florida state and local
Pensacola investigators looking into the cause of that fire. We will keep
you posted as we learn more.

And we got more news that`s not about the Iowa caucuses and some that
is, coming up.

(COMMERCIAL BREAK)

MADDOW: Doors close and caucusing begins in Iowa in less than 24
hours. So, the Republican Party`s process of picking its nominee is
finally about to get under way. And while that is very exciting, it is not
so exciting as to preclude all other big clangorous things happening in the
news right now.

Por ejemplo, over the weekend, on New Year`s Eve, while still in
Hawaii, President Obama signed into law the new bill that funds the
Pentagon. And despite that seeming like quite a boring thing on its face,
this bill is frankly a bipartisan potpourri of controversy.

The president had initially threatened to veto this because Congress
saw fit to include in it a ban on FBI and police involvement in some
aspects of terrorism cases. Nearly everyone involved who is not a member
of Congress thought that was a simply bizarre idea. It was Congress trying
to force the military to take over those cases even though the military did
not want to, and even though law enforcement and the intelligence agencies
did not want that to happen either.

Eventually that provision was softened enough that the administration
essentially has a work around so they never have to implement it. Still
though, that law about the military having responsibility for those cases,
that is now on the books, which means, congratulations, you live in a
country where technically at least, the military has a legal role to play
in civilian law enforcement. Here at home, for the first time. Cheers.

The law also as Adam Serwer accurately pointed out today at "Mother
Jones," with a lot of other reporting got this wrong today, the law also
leaves open the question of whether our government has the right to arrest
you, American citizen, and to hold you forever without charging you as long
as what they suspect you of is terrorism.

The president issued a signing statement along with his signature on
this bill. And the signing statement said in part, quote, "My
administration will not authorize the definite detention without trial of
American citizens."

And that is nice. But to be clear, what that means is that this
president says he won`t arrest Americans and lock them up forever without
trial. But thanks to this bill that Congress just sent him and he did just
sign, if this president changed his mind or if some other president in the
future does want to arrest Americans and lock them up in military custody
forever without trial, our government statutorily now claims that as its
right.

Even before you get to the part of this bill that`s about new
sanctions on Iran that Iran says it will treat as an act of war if they`re
implemented, even before you get to that, it is clear by the White House
threatened to veto this giant piece of legislation. And it`s clear why the
White House pressured the Senate into revising downward several of its more
alarming provisions. It`s also clearly why an averse to signing statements
president like President Obama issued a signing statement for this bill.

Still, though, it got signed and it is radical. I`m not sure we`re
going to appreciate its radicalness until it`s undone by other legislation
or until a president as radical as this bill decides to use it to its
fullest extent.

(COMMERCIAL BREAK)

MADDOW: The Republican Party`s 2012 nominating contest begins
officially tomorrow night at 7:00 Central Time, 8.p.m. Eastern, when the
doors will be closed at Republican caucuses in Iowa. Caucusgoers will
congregate at nearly 1,800 precinct gatherings around the state. After
everybody recites the pledge of allegiance, the caucus chairman and
secretary will be elected and then any candidates or the representatives
get to make short speeches. Then, comes the main order of business, a vote
by secret ballot in a presidential preference poll.

The results will be tallied right then and there, announced at the
meeting and sent to the state Republican Party, which will tally up all the
precinct totals in a secret location. Secret, they say, because party
officials are apparently afraid that Occupy Iowa protesters may try to
disrupt the counting process, even though the Occupy protesters say that
will do no such thing.

Anyway, after the super secret tallying is done, Iowa Republican Party
officials will tell the rest of us who has won. And it will be a very fun
night.

Iowa Democrats will be caucusing tomorrow night as well. For
Democrats, the process is a little bit weirder and more complicated. This
is what it looked like last time around. But thank goodness, I won`t have
to explain it because the only candidate caucusing for the Democratic vote
this time around is President Obama. So, he will win and he is therefore
going to spend caucus night video-conference with Iowa voters and taking
their questions live stream over the Internet.

So, it`s all fun, it is all interesting. And our coverage of it
starts in 2012 earnest at 6:00 p.m. Eastern tomorrow night.

MSNBC`s live coverage of the Iowa caucuses, I`ll be joined here in New
York by Ed Schultz and Lawrence O`Donnell, by the Reverend Al Sharpton and
by MSNBC political analyst Steve Schmidt who ran the McCain/Palin campaign
in 2008.

My friend Chris Matthews will be hosting along with us from Des
Moines, Iowa. And Chris Hayes will be anchoring late-night coverage of the
Iowa caucuses when we are all done and spent.

So, join us here tomorrow starting at 6:00 p.m. Eastern. I promise it
will be the overlap in the Venn diagram between a long, and fun night.
That will be us right there.

Now, it`s time for "THE LAST WORD" with Lawrence O`Donnell." Have a
great night.

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

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