updated 1/5/2012 1:26:24 PM ET 2012-01-05T18:26:24

Guests: Richard Wolffe, Katrina Vanden Heuvel, John Nichols, Jonathan Alter, Bill Burton, Ezra Klein

ED SCHULTZ, HOST: Good evenings Americans. And welcome to THE ED
SHOW tonight from New York.

Mitt Romney edged out Rick Santorum. Darn it, I missed it by a few
votes. I picked Santorum, didn`t I?

By the way, liberals, why are you chewing me out for when it comes to
stumping for Santorum? I got to play out the strategy for you tonight.

You know who the big winner was last night? President Obama. Today,
he was in Ohio making moves that congressional Republicans have been
blocking for months.

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

(BEGIN VIDEOTAPE)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: You think we can get more
than an eight-vote margin here in New Hampshire, I`m going to try.

SCHULTZ (voice-over): Romney squeaked by Santorum. But the big
winner in Iowa last night was the president. Today the president is
kicking off his campaign with a big speech and some bold moves.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Today, I`m appointing
Richard as America`s consumer watchdog.

SCHULTZ: MSNBC`s Richard Wolffe and Katrina Vanden Heuvel of "The
Nation" magazine on the fallout from Iowa and how it helps the president.

NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: If you take, you know,
Santorum and Perry and Bachmann and Gingrich, you get some sense of what a
small minority Romney really represents.

SCHULTZ: The Republican plan to stop Mitt Romney is beginning to
unfold. And it`s gaining momentum. Bill Burton of Priorities USA is here
with the latest.

REP. MICHELE BACHMANN (R), MINNESOTA: I have decided to stand aside.

SCHULTZ: Michele Bachmann is calling it quits. So, tonight we`re
taking a look back at some of her greatest hits.

BACHMANN: Oh, my, goodness. Yes.

SCHULTZ: And last night, Rick Santorum made it clear, he`s in it to
win it.

RICK SANTORUM (R), PRESIDENTIAL CANDIDATE: Game on.

(CHEERS)

SCHULTZ: Ezra Klein of the "Washington Post" is here to let us in on
how slick Rick really is.

(END VIDEOTAPE)

SCHULTZ: Good to have you with us tonight, folks. I want to start
this program with a single number. Consume it. It`s an easy one. Six.
Six. Six. That`s it.

Everybody`s talking about eight. The number eight today. That`s the
number of votes that Mitt Romney beat Rick Santorum by in Iowa.

But I want to talk about six, because six is the number of votes that
Mitt Romney lost in Iowa compared to his total in 2008. After four years
of nonstop campaigning, this is what he does? Romney couldn`t pick up a
single vote in Iowa? The fact is is that he lost six.

It wasn`t cheap, either. I mean, he was spending all kinds of money.
He spent $49 per vote. Rick Santorum, ah, he`s the cheap candidate, 73
cents. Mr. Efficient with his money, right? Retail politics works again.

Iowa, I think, is just a reminder that, you know, Mitt Romney, he just
can`t fire anybody up. Doesn`t matter how long they look at him, doesn`t
matter how much they know about him or how much he`s been around. He`s
even worse off in Iowa.

Now, he was in New Hampshire today getting an endorsement from Mr.
Excitement, John McCain. But other candidates like Jon Huntsman, they want
to capitalize on this enthusiasm gap that`s out there surrounding Romney.

(BEGIN VIDEO CLIP)

JON HUNTSMAN (R), PRESIDENTIAL CANDIDATE: I was struck by the fact
that 75 percent of those who voted basically rejected the establishment`s
favorite, Mitt Romney, which suggests to me that there`s a lot of open
space in this election.

(END VIDEO CLIP)

SCHULTZ: Something about Huntsman, every time I see that guy, I think
he`s trying to sell me a vacuum cleaner. But anyway.

Huntsman wants moderate voters to see him as the alternative to Mitt
Romney. Good luck. He`s not polling very well. Romney is also taking a
real beating from conservatives who see Romney as really weak after Iowa.

Influential conservative Richard Viguerie, he wrote, "No matter how
Romney`s establishment alleys try to spin it, tonight`s results show
conservatives have strengthened their opposition to Mitt Romney`s
candidacy."

Game on, wouldn`t you say?

Viguerie told me today on the radio that he`s going to be a part of a
meeting of a group of conservatives coming up within the next week that are
going to get together to find a consensus Republican candidate. They`re
going to have a little powwow down there in Texas. I have my doubts if
they`re going it be very favorable to Mitt Romney. They simply are not.
Undecided voters are not picking Romney in great numbers either. Here it
is from last night. Only 22 percent of Iowa voters who made up their minds
yesterday picked Mitt Romney.

Thirty-five percent, the late comers, they went to Santorum. Now, if
Mitt Romney is the eventual Republican nominee, I think you can say the
Democrats are starting to feel pretty good about their chances in 2012.

Now, according to a state party, 25,000 people, 25,000 people, showed
up at and attended Democratic caucuses in Iowa last night. For what? For
President Obama? He delivered a live video address. That was it? That`s
enthusiasm. There was nothing at stake in these caucuses, but 25,000
people show up anyway just to hang out with the boss?

Obama`s political organization is picking up right where it left off
in 2008. He`s not getting much attention for it. The ground game is
getting, you know, to work, I guess you could say, and President Obama is
really spending his time leading the American people. That`s what he was
doing today, in Ohio.

He was with former state attorney general Richard Cordray.

(BEGIN VIDEO CLIP)

OBAMA: I`m appointing Richard as America`s consumer watchdog. And
that means he is going to be in charge of one thing -- looking out for the
best interests of American consumers, looking out for you. His job will be
to protect families like yours from the abuses of the financial industry.

(END VIDEO CLIP)

SCHULTZ: Appointing Richard Cordray as the director of the Consumer
Financial Protection Bureau, well, that gives Dodd/Frank financial reform
bill some teeth, I guess. Of course, Republicans hate that, too -- the
Dodd/Frank bill.

President Obama said he was not going to let them hold up the process
this time.

(BEGIN VIDEO CLIP)

OBAMA: For almost half a year, Republicans in the Senate have blocked
Richard`s confirmation. The only reason Republicans in the Senate have
blocked Richard is because they don`t agree with the law that set up a
consumer watchdog in the first place. They want to weaken the law. They
want to water it down.

And by the way, a lot of folks in the financial industry have poured
millions of dollars to try to water it down. When Congress refuses to act,
and as a result, hurts our economy and puts our people at risk, then I have
an obligation as president to do what I can without them.

I`ve got an obligation to act on behalf of the American people. And
I`m not going to stand by while a minority in the Senate puts party
ideology ahead of the people that we were elected to serve, not with so
much at stake, not at this make-or-break moment for middle class Americans.
We`re not going to let that happen.

(END VIDEO CLIP)

SCHULTZ: Where`s that guy been? I`m all for it. Republicans, of
course, are outraged President Obama appointed Cordray as a recess
appointment. There were even more hysterical later in the day when Obama
made three recess appointments to the National Labor Relations Board. I
really like this.

Obama said this action represents -- Mitt Romney said that "This
action represents Chicago-style politics at its worst."

I want Mitt Romney to take a look at this chart. President Obama has
made fewer recess appointments than any recent president. Listen, Mitt.
Your buddy, Ronald Reagan, averaged more than 30 per year.

These appointments by President Obama are nothing out of the norm.
Reagan did it. Bush 41, Bush 43, they did it. They made recess
appointments all the time.

The obstructionists have forced President Obama to do this. And they
still say it`s a heavy hand despite those past numbers. Here`s a message
for the Republicans: President Obama is working on behalf of the American
people. If the president continues to fight for the middle class and do
what the country wants him to do, the Democrats aren`t going to have to
worry about any enthusiasm gap coming up.

Not to be critical, but it`s a little late. But it`s damn good.

Get your cell phones out. I want to know what you think. Tonight`s
question: who was the real winner in Iowa? Text "A" for Mitt Romney, text
"B" for Rick Santorum, or text "C" for President Obama because he`s really
got the message now. The number, 622639. You can go to our blog at
ed.MSNBC.com. We`ll bring you the results later on in the show.

Joining me now is Katrina Vanden Heuvel, editor and part owner, and
publisher of "The Nation" magazine, and also MSNBC political analyst
Richard Wolffe.

Katrina, why are these recess appointments so important to the
president? You heard me question the timing of it, but it did happen. OK?

KATRINA VANDEN HEUVEL, THE NATION: No, it`s -- it`s sweet. He --
it`s important, look, he`s in Shaker Heights, Ohio, standing with the
middle class, with a consumer watchdog who`s going to work on behalf of
veterans, seniors, students, those who have been shafted by the scams,
schemes and swindles of Wall Street. And it shows where he`s coming from.

Meanwhile, you got Romney talking about how this is Chicago-style
politics at its worst. He`s standing with the predatory lenders and Wall
Street. Which side are you on?

I think it also yolks Romney to an obstructionist GOP Congress, which
is just sinking in the opinion polls.

SCHULTZ: The president really had no choice, did he?

VANDEN HEUVEL: You know, I will admit, it`s been late coming, Ed, and
when I saw today that the fight was on, we`ve been following Cordray, and
NLRB, which is so critical for workers rights for rebuilding a strong
middle class in this country. Didn`t know in my gut, but boy, it`s coming
out of the Kansas speech at the end of last year.

Elections matter. I think they`re already looking to campaign at
Romney. Consummate Wall Streeter, who has real problems not only with the
Latinos and seniors in this country, but with working, middle, low income
people. I think they`re looking ahead.

SCHULTZ: Richard Wolffe, how organized is President Obama`s ground
game compared to the Republican candidates` right now?

RICHARD WOLFFE, MSNBC POLITICAL ANALYST: Well, you just cannot
compare it. I`ve seen the reports today that said Santorum succeeded
because he played a ground game. He didn`t play a grand game.

He traveled to 99 counties in Iowa. That`s one kind of ground game.
But the real ground game is organizing people to show up to vote.

And, you know, if Democrats and Republicans have forgotten what that
looks like, they should just think back to 2004. Republicans like to say
that all of that anti-Obama spirit is enough of a ground game in and of
itself. And it will get Republicans to the polls.

But, you know, there was a lot of anti-Bush feeling in 2004, and John
Kerry was not carried over the finish line by that, alone. In fact, the
superior ground game that the Bush folks had really made all the
difference. In a close race, where you can add two or three points by
having super organization, use of good technology, lots of volunteers, just
what they showed in Iowa in that dry run, that can make all the difference
in a very close election. And I think that`s what we`re facing this year.

VANDEN HEUVEL: You know, I think it`s going if be Romney. He`s the
vehicle, the vessel for the corporate establishment in this country. Look,
you had the Chamber of Commerce, right, which his essentially a third party
in the country with the money it throws around, already saying it`s going
to sue to halt Cordray`s appointment to head the Consumer Financial
Protection Board.

The numbers we need to look at, Romney spent $4 million. Romney and
his super PAC spent $4 million in Iowa to lose six votes. We`re already
seeing the Republican super PACs, they`ve outspent candidates two to one in
Iowa and other primary states ahead.

I think, you know, we`re looking -- let many be honest -- we`re
looking at a party that is -- Republican Party -- that is now very, very,
very conservative or very, very, very conservative. The end of the
moderate possibility.

So, anyone who`s going to start doing the game around Romney, oh, he`s
more moderate, can`t bring together the social conservatives. The
enthusiasm gap was there on the ground last night in Iowa.

SCHULTZ: Yes.

VANDEN HEUVEL: But I think that hatred of Obama is going to pull
together the electability numbers for --

SCHULTZ: And it is out there.

VANDEN HEUVEL: And the money numbers.

SCHULTZ: There`s no doubt it`s out there. When I was in Iowa, all of
these candidates are just working over President Obama big-time on the
stump. That`s the one thing they all have in common is that they just go
after him big-time.

Iowa Democratic chairwoman Sue Dvorsky said this during our Iowa
election coverage about Mitt Romney.

(BEGIN VIDEO CLIP)

SUE DVORSKY, IOWA DEMOCRATIC CHAIR: He won 17 of 99 counties. I`ll
tell you this, 13 of them are the top performing Democratic counties in the
state.

UNIDENTIFIED MALE: Interesting.

DVORSKY: So, if Mitt Romney is, indeed, the inevitable candidate as I
actually suspect he might be, for the long haul, when he comes back, truly
I feel very good about our general election chances here.

(END VIDEO CLIP)

SCHULTZ: Richard, is Romney going to have a more difficult electoral
map than other Republicans maybe?

WOLFFE: Well, let`s see how badly he gets beaten up by this primary
season coming up, because when you got Newt Gingrich out there, obviously
very steamed. You know, Mitt Romney has not -- just like Rick Santorum, he
has not had any negative advertising dumped on his head. He`s about to
experience that.

So his numbers with independents have, in national polls, been good.
Actually, he didn`t do so well among independents in Iowa as Ron Paul did.
So, this race has got a long way to play out.

There has been a working theory that he, Mitt Romney, would challenge
President Obama with some of these younger voters, with independents.
That`s not what we saw last night. I doubt that`s what we`ll see if we go
through several months of this protracted and ugly primary.

SCHULTZ: I think it`s a very disappointing performance by Mitt Romney
after all that investment and so many years, and that`s all he`s got to
show for it.

Katrina Vanden Heuvel, Richard Wolffe, great to have you with us
tonight. Thanks for your time this evening.

Remember to answer tonight`s question there at the bottom of the
screen and share your thoughts on Twitter @EdShow. We want to know what
you think.

Newt Gingrich has popped the cork. He`s going after Mitt Romney and
he`s willing to join forces to take him down.

Later, I predicted Rick Santorum would win Iowa on Monday. Well, I
was close. He did win the night, just a few votes short. Where does
Santorum go from here?

Jonathan Alter, Joy Anne Reid, and Bill Burton coming up.

Stay with us

(COMMERCIAL BREAK)

SCHULTZ: Coming up, Newt Gingrich ditches his positive campaign and
goes on the attack. Can Newt`s negativity take down Mitt Romney? John
Nichols will join me on that.

Michele Bachmann calls it quits after a disappointing finish in Iowa.
Oh, yes, we have the greatest hits from the campaign trail. Those moments
coming up in "Psycho Talk."

And with Rick Santorum`s popularity on the rise, I`ll take a look at
where he stands on issues, with Ezra Klein, when it comes to jobs.

Share your thoughts on twitter using #EdShow.

We`ll be right back and I`ve got commentary for you lefties who think
I`m for Santorum.

(COMMERCIAL BREAK)

SCHULTZ: Welcome back to THE ED SHOW.

Newt Gingrich has finally unleashed his inner attack dog personality -
- I think you could call it -- in the presidential campaign. And he is
going after Mitt Romney and it`s personal.

(BEGIN VIDEO CLIP)

NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: Governor Romney was first
an independent then repudiated Reagan/Bush.

Romney raised taxes, created Romneycare, appointed liberal judges.
Then ran to the left of Teddy Kennedy in 1994. This is not a conservative
Republican. He is not going to win the nomination.

Then became a moderate to run for governor.

I think what`s really striking about last night is that three out of
four Republicans once again repudiated Mitt Romney.

And then with Romney care, for example, included state-funded
abortions.

It`s pretty clear. He`s not truthful about his record in
Massachusetts and his background. He`s not truthful about his PAC, which
has his staff running it.

NORAH O`DONNELL: I have to ask you, are you calling Mitt Romney a
liar?

GINGRICH: Yes.

O`DONNELL: You`re calling Mitt Romney a liar?

GINGRICH: Well, you seem shocked by it. Yes. I mean, what else can
you say?

(END VIDEO CLIP)

SCHULTZ: Most of that was from the past 24 hours. Gingrich is just
warming up.

If he can`t get the nomination, he wants to make sure Mitt Romney --
he ain`t going to get it either. Next weekend, a group of conservative
power brokers -- I really love this story -- including James Dobson, Tony
Perkins and Gary Bauer, I mean, they`re going to have a big shindig down in
Texas trying to find a consensus candidate, according to "Politico." In
other words, they don`t want Romney. Their objective seems pretty clear to
stop the guy from Massachusetts.

And after last night, Rick Santorum could be their man.

I`m joined tonight by John Nichols, Washington correspondent of "The
Nation" magazine.

Great to have you with us, John. I know you`re still doing work in
Iowa just kind of deciphering through all of this. But I want to focus
now, as I said, moving forward, and this attitude that Newt Gingrich -- I
mean, he`s the new pit bull. Is Newt Gingrich -- is he ready to go after
Mitt Romney point by point? What do you think?

JOHN NICHOLS, THE NATION: Oh, there`s simply no question he`s ready
to go after him. Newt Gingrich in addition to buying a full-page ad in the
"Manchester Union Leader," the biggest circulation newspaper in New
Hampshire, detailing his differences with Romney, did a round of all the
conservative talk radio shows, Hannity and others, today, to do exactly
what we`re talking about here -- going out there, reinforcing his attacks,
not backing off in any way.

And the interesting thing is that he probably said the most important
thing last night, that in his concession, he spent a huge portion of that
speech talking about what a great guy Rick Santorum is.

SCHULTZ: Here`s what --

NICHOLS: He`s effectively signaling he`s willing to go in after
Romney on Santorum`s behalf.

SCHULTZ: Well, here`s what he said to Laura Ingraham today on her
show. Here it is.

(BEGIN AUDIO CLIP)

LAURA INGRAHAM, RADIO HOST: Can you see a scenario under which the
two of you would align together to try to defeat the establishment
candidate, Mitt Romney?

GINGRICH: Absolutely. Of course. If you take Santorum and Perry and
Bachmann and Gingrich, you get some sense of what a small minority Romney
really represents.

(END AUDIO CLIP)

SCHULTZ: The answer was absolutely? I mean, this is a long way from
Ronald Reagan`s philosophy, hey, don`t take down your partner in the party,
you can have gentlemanly like differences. I mean, he is clearly ready to
join forces to take down Romney. I mean, it`s personal and it`s bitter.

What do you make of it?

NICHOLS: Well, I think it`s bitter but it`s also tactical. Newt
Gingrich knows that he has been pretty much ruined by this process as a
perspective presidential candidate, unless everybody is taken down. I
still think that Gingrich entertains a little bit of hope that he might yet
have a resurrection here. But the only way that he`s got any kind of
chance in South Carolina or other states is if things get so ugly in New
Hampshire that Mitt Romney really is harmed and, perhaps, Rick Santorum
ultimately is harmed by Romney super PAC ads. And maybe when everybody
looks so awful they might once again look at Newt Gingrich.

SCHULTZ: Well, I don`t disagree with you, but I think it`s kind of a
stretch. I think Newt Gingrich is of the mindset right now --

NICHOLS: It`s a pipe dream.

SCHULTZ: Yes. You know, look, I`m in this to just take, you know,
Mitt out almost at all costs.

Richard Viguerie told me this today about Santorum. He said, you
know, we just didn`t see him. But he could do very well in Wisconsin, in
Michigan, in Indiana and Ohio, because of the Catholic vote.

Does Rick Santorum need to be taken seriously at this point?

NICHOLS: Well, Rick Santorum gave by far the best speech of the
candidates after Iowa last night. It wasn`t a speech that appealed to
everything that I believe, but it was certainly a very effective outreach
speech for Catholic voters, for evangelical voters. And I think also for
some folks who might have been in that old Reagan Democrat camp.

Santorum`s appeal to Republicans is going to be that ultimately he is
like Reagan. He is somebody who can reach across some partisan lines, find
the conservatives or the semi-conservative folks on the other side.

I don`t know that that`s true. What I do know is he is certainly a
far more appealing candidate than Mitt Romney, and if he can convince
conservatives that he`s that, yes.

SCHULTZ: To that conservative wing of the party, I mean, he`s the
full package form. That`s what they`re saying. That`s why they`re going
to be meeting down in Texas, because they`ve got to be thinking, how would
this guy do if he had the same kind of resources Mitt Romney has?

I mean, right now, the conservative right in this country, they do no
want to settle for some milquetoast Republican. They want somebody who`s
going to be a values guy, who was going to be a strict conservative, that
is going to just get after it in their way of thinking.

Now, the Catholic vote here, John, it is, what, 40 percent of the vote
in the states I talked about -- in Wisconsin, in Michigan, in Ohio and
Indiana. I mean, so I think liberals have got to take Rick Santorum very
seriously at this point. And, of course, money is going to have everything
to do with it.

NICHOLS: Yes. They should take him seriously. They should also take
seriously the fact that he isn`t just talking about abortion and same-sex
marriage.

SCHULTZ: No, he`s not.

NICHOLS: Every one of his speeches involves an address that talks
about manufacturing.

SCHULTZ: Yes, we`re going to talk about that.

NICHOLS: -- bring jobs back to the United States.

SCHULTZ: You bet. We`re going to touch on that later in the show,

John Nichols, great to have you with us tonight. Great work in Iowa.

Michele Bachmann is out of the race for president. Her sixth place
finish in Iowa was the final straw. But the six months of "Psycho Talk"
leading up to the caucuses really did her in. We`ll take a trip down
memory lane next.

There are two more debates this weekend. I tell you what? They`re
going to be dandies. Will the candidates pile on Mitt Romney? Is it going
to be Saturday night in the alley? Jonathan Alter, Joy-Ann Reid and Bill
Burton weigh in on all of that.

Stay with us.

(COMMERCIAL BREAK)

SCHULTZ: And in "Psycho Talk" tonight -- well, we say good-bye to the
presidential candidacy of Michele Bachmann. Doggone it. In the last less
than five months, I think it was, Bachmann went from winning the Iowa straw
poll to coming in sixth in the Iowa caucuses. But I think I know what
happened.

(BEGIN VIDEO CLIP)

BACHMANN: What I would like to do is have the win-win-win plan.

Oh, my, goodness. Yes.

I haven`t had a gaffe.

Now, with the president, he put us in Libya. He is now putting us in
Africa.

Because he has a lot of chutzpa.

I`m a serious candidate for president of the United States and my
facts are accurate.

What I love about New Hampshire, you`re the state where the shot was
heard around the world at Lexington and Concord.

John Wayne was from Waterloo, Iowa?

There was a woman who came up crying to me tonight after the debate.
Her daughter suffered mental retardation as a result of that vaccine.

The win-win-win plan.

The people of Iowa spoke with a very clear voice. So I have decided
to stand aside.

(END VIDEO CLIP)

SCHULTZ: I think the vaccine comment probably was the turning point,
don`t you? Iowa was the end of the line for Bachmann`s 2012 presidential
hopes, but her husband, Marcus, will be glad he can stop campaigning and
return to other activities.

(BEGIN VIDEO CLIP)

BACHMANN: He was buying doggy sunglasses for our dog, Boomer, while
we were out visiting all of the many businesses.

(END VIDEO CLIP)

SCHULTZ: There you go. Of course, Michele Bachmann is still a member
of Congress and the leader of the Tea Party Caucus. And she still wants
President Obama to be a one-term president.

So you can bet we haven`t heard the end of Bachmann in Psycho Talk.

My prediction about Rick Santorum got a lot of liberals really worked
up. Come on, chill out. I go interview a righty and everybody`s working
me over on Twitter and Facebook and everything else. What do you think,
I`m endorsing this guy? Give me a break.

I`ll explain it all when we come back.

And later, I`ll show you why Santorum`s job plan won -- actually won
Iowa voters last night. The "Washington Post`s" Ezra Klein will tell us if
his proposal has any substance or if it`s just smoke and mirrors.

(COMMERCIAL BREAK)

SCHULTZ: I`m actually doing better at this than at the NFL playoffs.
The NFL playoffs haven`t started yet. I saw it. I saw it coming last
night and last week when I was down in Iowa. I think Rick Santorum has lot
of qualities. And Monday night, I made this prediction.

(BEGIN VIDEO CLIP)

SCHULTZ: I think that he has been trending for more than a week. And
I think he is ahead of his poll numbers. And I think that Rick Santorum is
going to win Iowa. If that`s an upset, so be it.

(END VIDEO CLIP)

SCHULTZ: OK. So I missed a few votes, right? But my conjecture got
a lot of liberals kind of wigged out over this. Make no mistake. I think
Rick Santorum`s positions are radical. And I don`t agree with them at all.
Millions of Americans feel the same way.

But here it is. It`s a point that even Bill O`Reilly brought up to
him just moments ago.

(BEGIN VIDEO CLIP)

BILL O`REILLY, FOX NEWS ANCHOR: All I`m saying to you is I`m not
debating the issue with you, saying if you`re right or you`re wrong. I`m
not doing that tonight. I`m saying that this is going to be put on you,
that you`re an extremist man, out of the mainstream. How are you going to
reply to that?

(END VIDEO CLIP)

SCHULTZ: Out of the mainstream? But Rick Santorum essentially tied
with Mitt Romney last night because he`s just great at retail politics. I
saw this guy in action. He`s impressive. He looks people in the eye. He
doesn`t give them the generic pablum bullet point answer. He gets to
specifics. That`s what Iowa voters were looking for.

I don`t think he`s going to be going away any time soon. He`s polling
in single digits right now in New Hampshire. Romney is up there at 43
percent in most of the polls. This is going to be interesting to see how
he closes the gap, if he does at all.

The best thing that could ever happen to the Obama campaign, in my
opinion, and the Democrats -- we got this fight going on in the Republican
party. A social conservative like Rick Santorum moves the Republican
nominee further to the right. And that`s not where most Americans are.

For more on this, let`s turn to Jonathan Alter, MSNBC political
analyst and columnist for "Bloomberg." Also, Joy-Ann Reid, MSNBC
contributor and managing editor of "The Grio." And Bill Burton with us
tonight, former deputy press secretary under President Obama. Great to
have all of you with us.

Jonathan, where does Rick Santorum go from here?

JONATHAN ALTER, "BLOOMBERG": I think he`s in very good shape going
forward. You know, in presidential politics, money follows momentum. So
as long as he can keep things going, he`s going to have the resources to be
competitive. He`s not going to match Romney dollar for dollar, but he sure
didn`t in Iowa and he matched him in terms of votes.

So if he can beat the expectations gap spread in New Hampshire, which
is not going to be difficult -- that doesn`t mean winning New Hampshire.
It means doing better than single digits, which is where he is now. And
then South Carolina will be a good state for him. That is a Mormon
unfriendly state.

I hate to say it, but that`s the facts.

SCHULTZ: That is the facts on the ground.

ALTER: So he`ll do well there. He may even win South Carolina. And
then he`s not a bad candidate going into Florida.

SCHULTZ: Joy-Ann, what about the 60 percent of the registered voters
in New Hampshire are Catholic? I mean, it would seem to me that this would
be a real good place for Rick Santorum to carry this momentum.

JOY-ANN REID, "THE GRIO": I think Jonathan is right that there will
be money, you know, following him now, and he`ll be able to raise money.
His campaign infrastructure is nonexistent. We were trying to get a
comment from him yesterday on a story we did at "The Grio." And all of his
campaign offices have voicemail on.

You know, he didn`t even have enough staff to do that. So he really
needs to get his act together in terms of a campaign. Look, the reality is
Mitt Romney won a bar fight last night. But it`s Rick Santorum that`s
getting the free drinks at the bar, and then Newt Gingrich is waiting
outside with a broken bottle. He`s coming after Mitt Romney.

So when we get to New Hampshire, as long as Newt Gingrich does the job
on Mitt that we all anticipate he`s going to do, anybody can bounce,
including Santorum.

SCHULTZ: Well, Mr. Burton, I said that it`s going to be Saturday
night in the alley with this debate coming up here this weekend.

BILL BURTON, FORMER OBAMA ADMINISTRATION PRESS SECRETARY: Broken
bottle and all.

SCHULTZ: Maybe so. Where is Santorum in this? I mean, could he make
a serious run in the long haul? Could he develop enough infrastructure
fast enough, and get enough people onboard, if the money comes in, to make
a run and spoil this for Mitt Romney? A lot of people think he is the
nominee.

BURTON: Well, like you, I`m not a big Santorum supporter. But I will
say, he did something smart last night, which is when he had a chance to
introduce himself to a much larger group of voters, he used that
opportunity to say, look, I`m a blue collar guy. I come from a blue collar
state. And if you pick me as your nominee, in places like Michigan,
Wisconsin, Pennsylvania, I can be a lot more competitive than the hedge
fund guy, basically.

SCHULTZ: No other Republican talks like that.

BURTON: That`s right. That`s why I think South Carolina is actually
a great state for him, because he can go in there with a message that`s a
lot more resonant than Mitt Romney`s. As for New Hampshire, you know, it`s
tough. There`s a very short period of time for him to perform and get his
bounce off Iowa.

But he`s in the single digits now. I think that he will perform a lot
better than he`s doing.

SCHULTZ: Jonathan, if he gets second in New Hampshire, he`s really in
business. Fair enough?

ALTER: Yeah. Remember, I`ve seen primaries, Ed, in the past where I
landed in a state, like say Gary Hart in 1984. He had zero people on the
ground, zero. And then a couple days later, he`d win that primary. This
is the way it works in presidential politics.

So all this talk you see on things like Intrade, you know, the markets
for the candidates that people sometimes follow, they don`t really comport
to the dynamics of these races. And especially this year, when things are
so unsettled, when Mitt Romney has yet to break 25 percent, not just in
Iowa, but in national polls. Seventy five percent of Republicans are
uncomfortable with Mitt Romney. that`s a real problem.

SCHULTZ: Now they`ve got, of course, Newt Gingrich, Joy-Ann, who is
making this really personal. It`s almost like this is his mission, to make
sure that Mitt doesn`t get it. Let`s let the cards fall where they may.
How effective is that going to be for Santorum?

REID: Well, Newt still has money. That`s the other issue too. Newt
is still sitting on enough cash to play, if not for himself, he`s already
openly said he would do it for Santorum. And if you just look at the map -
- that`s always been my issue for Mitt Romney. If you look at the map,
he`s got to go down South. He`s got to perform in, as Jonathan said, an
unfriendly state for a Mormon candidate.

Then he goes to Florida, which is heavily Tea Party, where Newt
Gingrich again is going to have a lot of influence. Then you have remember
too that Rick Perry is still out there.

(CROSS TALK)

SCHULTZ: What about that, Bill? Rick Perry is still out there, has
3.5 million dollars, spent six million dollars of super PAC money there in
Iowa. He can get a lot of oil money behind him.

BURTON: There`s a lot of money in Texas that`s still there for Rick
Perry. and I will say that even though he was terrible in the debates, he
was very smart about how he spent his money. He ended his campaign in Iowa
as the candidate who had the highest favorables in the whole state.

Now people may have already made up their mind about Rick Perry. What
he`s probably doing is just standing by, hoping that Rick Santorum falls
apart, just like every other front-runner has done in the Republican field.
But, you know, as long as he`s in, he`s a factor that`s not helping Rick
Santorum.

SCHULTZ: Isn`t this great for the Obama team, to see this fighting
going on over there on the right?

BURTON: If you look at the impact that the primaries already had on
Mitt Romney, who will still probably be the nominee, he`s way out there on
the Ryan Budget, which is going to be a huge problem for him with seniors
and others. And where he`s gone on immigration is going to be irreparable
with the Hispanic community.

SCHULTZ: Great to have all of you with us. Jonathan Alter, Joy-Ann
Reid, Bill Burton, thank you so much.

The remaining candidates will debate this weekend. We`ll see a united
effort to attack Romney. That`s next.

(COMMERCIAL BREAK)

SCHULTZ: Newt Gingrich is already on the attack with his eye on Mitt
Romney. Will the other Republican candidates follow suit? There`s a
debate in Manchester, New Hampshire, on Saturday night. We can only
imagine what`s going to be going back and forth. It`s the first time Rick
Santorum will be front and center on the debate stage, instead of way down
on the end saying, hey, I`m here.

He`s going to be right next to the former Massachusetts governor,
where he belongs. He`s earned it. The candidates will debate again Sunday
morning on NBC and MSNBC, hosted by moderator of "Meet the Press" David
Gregory. I won`t miss that.

Let`s bring back MSNBC political analyst Jonathan Alter, MSNBC
contributor, Joy-Ann Reid and former press secretary for President Obama,
Bill Burton.

All right, what kind of debate are we going to see this weekend? Is
it, Jonathan, going to be a knockdown, drag-out? This is it.

ALTER: We can only hope so. This is first-class entertainment, Ed.
They`ve been good so far. The expectations are high for this weekend,
because as the voting starts, a little sense of desperation sets in. And
it`s very, very hard to consistently take the high road in these events.

They`ve got to score points. And then you have somebody like Newt
Gingrich, who has made no secret of the fact that he wants to deliver some
roundhouse punches to Mitt Romney. So, at a minimum, we`re going to see
that.

SCHULTZ: Joy-Ann, are the candidates going to pile on Mitt Romney?

REID: Well, except for Ron Paul, who seems to be going after Newt
Gingrich. He called him a chicken hawk already. I think you`re going to
see a lot of cross fire in this debate. It`s going to be interesting,
because each of them has a mission, right?

Mitt Romney has to once again prove that he`s acceptable to
conservatives. Newt Gingrich claims he owns the debate forum. So he has
to really perform well. The pressure is on him to be really good. You
know, Ron Paul has to prove he`s not crazy, which is always his charge.

It`s just they all have so much at stake in these debates that I think
it`s going to be a good show.

SCHULTZ: Mitt Romney sold himself as the change candidate 2008.
Here`s what his rival had to say about that.

(BEGIN VIDEO CLIP)

SEN. JOHN MCCAIN (R), ARIZONA: I just want to say to Governor Romney,
we disagree on a lot of issues, but I agree, you are the candidate of
change.

(END VIDEO CLIP)

SCHULTZ: The entertainment continues. Today, John McCain endorsed
Mitt Romney. Does it matter? Will it backfire?

BURTON: The trouble for Mitt Romney is that his problem with
conservatives is that they don`t trust him. He`s just as conservative, if
not more conservative, than some of the other people in the field,
especially on immigration, where he`s gone far off the deep end, to the
right wing. But people don`t trust him because he has shifted his position
so many times that they just don`t think that he`s a guy who`s going to go
into the Oval Office and actually fight for the things that they believe
in.

Having John McCain come out the day after Iowa, conservatives said,
Mitt Romney, you`re not our guy, just serves to underscore that fact.

SCHULTZ: Here`s what Michele Bachmann had to say this morning as she
stepped out of the race.

(BEGIN VIDEO CLIP)

BACHMANN: I believe that if we are going to repeal Obamacare, turn
our country around and take back our country, we must do so united. And I
believe that we must rally around the person that our country and our party
and our people select to be that standard bearer.

(END VIDEO CLIP)

SCHULTZ: Some of the things, Jonathan, she`s said on the campaign
trail, I just don`t see her in any way, shape or form getting behind Mitt
Romney.

ALTER: It doesn`t matter whether she does. You know, correct me if
I`m wrong, but isn`t she not standing for re-election to the House? Is it
possible that finally we will be rid of this woman for good?

SCHULTZ: Well, I think -- I think she beat the deadline. I think
she`s OK, that she could run for reelection in the House.

ALTER: Maybe that`s why she got out.

SCHULTZ: There are going to be lot of people who are going to want
her to run for the Senate seat against Amy Klobuchar, because that has not
been decided. And she can raise a lot of money. And she`s done that a
lot. What is her future? Is she still a viable person. I mean, she`s
ahead of the Tea Party Caucus in the Congress.

ALTER: She`s headed for being a kind of a junior minor league Sarah
Palin. She`ll do well on the lecture circuit. Maybe she can get a reality
show going. I don`t think she`ll do well statewide against Amy Klobuchar.
I think Amy Klobuchar will stomp her, should she run against her for the
Senate.

BURTON: That`s right. Amy Klobuchar is one of the toughest senators
in the United States Senate. Michele Bachmann has basically gone around
the country and embarrassed the state of Minnesota.

REID: She barely won her seat last nigh time. She barely squeaked
through.

SCHULTZ: But if she can stay disciplined, Joy-Ann, I mean, she gets
the camera time. She has the camera moxy where she could get out there and
really beat somebody up on camera, and start the narrative that, you know,
Mitt`s not the guy.

REID: Yeah. I mean, you know what, she was actually pretty good in
the last few debates. She actually stepped up her performance, but the
problem is, there`s so much Youtube history on Michele Bachmann that she
does sort of come across as a bit of a joke. I think had she just done the
really good debate performances, she might be viable. Maybe they`d think
of her as a VP candidate.

Right now, I think she`s going to fade away.

SCHULTZ: Running them for the Republicans, Bill, is that they want to
repeal the health care act. How vehemently is the president going to
defend that on the campaign trail?

BURTON: I think he`s going to fight tooth and nail to make sure that
folks know that there are a lot of great things that passed along with
health care reform, that Republicans are not going to -- that the American
people are not going to want to see repealed, the fact that folks can stay
on their parents` insurance until 26, you can`t be denied coverage because
of preexisting conditions, because you -- that you can`t get kicked out of
your health care plan as a result of --

SCHULTZ: Republicans never seem to mention those things.

ALTER: There`s something interesting that Santorum said on this. He
actually believes you should be able to discriminate against people based
on preexisting conditions.

SCHULTZ: Yeah.

ALTER: He`s on the record saying that. He`s also clear that he`s
going to go after Romney big-time on similarities between Obamacare and
Romneycare.

SCHULTZ: Well, health care is going to be a big issue. We have a lot
of time to dig into Rick Santorum and some of his radical positions. I
want to thank all of you for being here tonight. Thanks so much.

Rick Santorum wants to create jobs by giving manufacturers zero
percent corporate tax rate. The plan helped him win Iowa, but will it help
American workers? Ezra Klein weighs in next. Stay with us.

(COMMERCIAL BREAK)

SCHULTZ: ED SHOW tonight, I asked, who was the real winner in Iowa?
One percent of you said Mitt Romney; five percent of you said Rick
Santorum; 94 percent of you said President Obama. Amen to that.

Coming up, Rick Santorum`s support for manufacturing won him votes in
some key areas in Iowa last night. Ezra Klein will tell us if it`s a
winning plan nationally.

(COMMERCIAL BREAK)

SCHULTZ: And finally tonight, so Santorum is resonating with
Republicans in large part because he`s talking a pretty good game about
manufacturing I think. I`ve seen him in action. Bringing manufacturing
jobs back to America has been a consistent part of his economic plan. I
don`t know how deep the plan is, but Santorum spoke to me about it on this
show back in September.

(BEGIN VIDEO CLIP)

SANTORUM: The plan I put in place is a pro-manufacturing jobs plan,
which cuts the corporate tax for all manufacturers from 35 percent to zero.
If you want to be pro worker, you get those manufacturing jobs back, you
will see workers be able to go from the bottom rungs of the earnings
quintiles all the way up toward the middle and even beyond.

(END VIDEO CLIP)

SCHULTZ: Santorum`s rival, Mitt Romney, does not want to focus on
manufacturing. He addressed Santorum`s proposal this morning.

(BEGIN VIDEO CLIP)

ROMNEY: I`m not going to try and guide which way this economy goes.
I want to make sure there`s a level playing field here. We bring down our
tax rates overall. I`m not going to try to pick out the one part of our
economy that some would think would be the favorite.

(END VIDEO CLIP)

SCHULTZ: So how does all this talk work out? Santorum`s support for
manufacturing worked for him in Iowa. Last night, results in Jasper and
Marion Counties are really a perfect example. Both are big manufacturing
regions. Jasper County was home of Maytag until 2006, when Whirlpool
bought out the company and shut the plant down.

Marion County is where you can find Pella Windows and Doors. Rick
Santorum won both those counties last night with twice as many votes as
Mitt Romney. Talking to the working class, the middle class.

Joining me now is MSNBC policy analyst and "Washington Post" columnist
Ezra Klein. Ezra, you`ve seen the plan. Is it viable, feasible, workable?
What do you think?

EZRA KLEIN, "THE WASHINGTON POST": Probably not incredibly viable.
So the plan is that right now manufacturers, like other corporations, pay a
35 percent tax rate. At least in theory, they probably pay quite lot lower
in practice. He would just wipe it out to zero. The first thing you would
see happen is a lot of people who aren`t necessarily manufacturers would
try to become manufacturers, try to incorporate under whatever definition
the legislature brings forward in that.

So that would be a big enforcement issue. If you get past that, look,
it`s a big give-way to the manufacturing sector. You either think that`s a
good idea or you don`t.

What`s funny about it is it`s a sort of blunt policy tool normally
associated with Democrats, in fact with liberals, that you would just wipe
out all tax liabilities and pick one giant winner in the entire economy.

SCHULTZ: Aren`t you trusting these corporations when they repatriate
their money, that that`s exactly what they`re going to do with it, instead
of lining their pockets? They`re going to be creating these manufacturing
jobs? Would Santorum`s plan create jobs?

KLEIN: I think it probably would at some level. It might destroy
them other places, because you`d have to be taking that money out of
somewhere. Yes, if you give manufacturers such a big leg up, two things,
in theory, will happen. One is that you`ll have more manufacturing --
manufacturers start. Another is that the manufacturers who are currently
operating in America will become more profitable.

I should say there`s a third, that you could have more manufacturing
jobs that are currently overseas coming back here, because it would be a
better deal. Of course, if you pay companies to do things, they will do
things for you.

SCHULTZ: Sure.

KLEIN: That`s not a complete novel idea. The question is, is it a
good use of money? I can guarantee you economists will look at this
provision and say, this is an incredibly bad idea. You will waste a vast
amount of money paying manufacturers to do things they would already do.
And your actual bang for the buck is going to be fairly low. Spending that
money on infrastructure or something would be a much better use of
resources.

SCHULTZ: He`s going to use this on the campaign trail. He`s going to
these older mill towns that have lost jobs, in New Hampshire, to talk about
just this. Is this a plan you think would work for him on the campaign
trail?

KLEIN: It can`t hurt or help separate him from the pack a little bit,
show that he has a little bit more of blue collar, sort of compassionate
conservatism in him. Although I will say, there`s actually relatively few
things like this in Santorum`s plans. His -- for all the talk of being a
blue collar candidate, he`s actually not got much in terms of sort of
middle class wage supports or job programs.

SCHULTZ: The microscope is now on Rick Santorum. Ezra Klein, thanks
so much.

That`s THE ED SHOW. I`m Ed Schultz. You can listen to my radio show
on Sirius XM Radio Channel 127, Monday through Friday, noon to 3:00. You
can follow me on Twitter @EdShow and @WeGotEd.

"THE RACHEL MADDOW SHOW" starts right now. Good evening, Rachel. You
did a fabulous job last night quarterbacking this whole thing.

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

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