updated 1/5/2012 1:34:19 PM ET 2012-01-05T18:34:19

Guests: Eugene Robinson, Michael Steele, Gene Sperling

RACHEL MADDOW, HOST: I got to tell you, Ed, sitting next to you and
thinking ahead that this was going to the first night of the caucus nights
the rest of the year, I had a great time. I think this is going to be so
much fun.

ED SCHULTZ, "THE ED SHOW" HOST: I think we`ve got a lot more
entertainment on the way, I might add.

MADDOW: Exactly right. Thanks, man. Appreciate it.

SCHULTZ: You bet.

MADDOW: And thanks to you at home for sticking with us the next hour.

You remember the John Ensign sex scandal? Every once in a while in
the news business, it pays to be a total dork. It pays to be unabashedly
obsessed with the story that nobody else is talking about at the time. For
example, the John Ensign sex scandal.

I confess, I found the John Ensign sex scandal obsessively fascinating
for a really long time even though it basically never made front page
national news, at least until he resigned. Sometimes, though, this is I
think true in life as much as it is in the news -- sometimes months and
years later after you`ve been interested in something and nobody else
really is, it turns out that that obsession is worth it. That obsessing
over a story nobody else is paying attention to comes in very handy.

So, the John Ensign sex scandal is suddenly newly relevant, because it
is connected to the 2012 Republican presidential nominating race.

John Ensign, you will remember, is the now former Nevada senator who
was shtooping one of his staffers who happened to be married to another one
of his staffers. Senator Ensign ultimately fired both the woman he was
sleeping with and her husband. Both of them worked for him. He then had
his parents, at least by all appearances, pay that family $96,000,
inexplicably, and he set the husband up in a lobbying job that was an
apparent violation of Senate ethics rules.

That violation of Senate ethics rules around the lobbying gig is what
forced John Ensign to quit his Senate seat in the midst of a big aggressive
Senate ethics investigation. Now, the way this came to light is that in
June 2009, Doug Hampton, who`s the husband of the woman Senator Ensign had
been sleeping with, Doug Hampton sent this e-mail to Senator Ensign`s
friend. Senator Ensign`s friend named Rick Santorum.

The letter said, quote, "I am reaching out to you because I would like
your help. I do know about you and your relationship with John Ensign.
I`m also aware of the man you profess to be and the positions you have
taken publicly with regards to family, integrity and ethics. I am sending
this note along to you because of your affiliation with FOX News. And what
I have put in motion with the letter I have sent Megyn Kelly and FOX News.

I`ve tried for one year with John and others to resolve an
unbelievable set of actions that John initiated and perpetuated, bringing
great destruction to me and my family."

Now, Doug Hampton attached to the e-mail to Rick Santorum a letter he
had sent to FOX News, to a host named Megyn Kelly at FOX News. And the
letter explained Senator Ensign`s affair. His pursuit of Doug`s wife, his
affair with Doug`s wife, and it explained how Senator Ensign subsequently
fired both Doug and his wife. So, all that is explained in this letter.

And that letter is sent to Rick Santorum.

Rick Santorum is now, of course, a front running Republican
presidential contender. Then he was a FOX News personality.

What did Rick Santorum -- self-proclaimed family values guy -- what
did Rick Santorum do with that information about a serving senator in a sex
and ethics scandal after he was tipped off to that scandal?

What did he do about it? Oh. He tipped off John Ensign. He tipped
off his friend who had the sex scandal to let him know that he was about to
be exposed.

This exhaustive and damning report by the Senate Ethics Committee into
the ethics scandal around John Ensign broke this down. Quote, "On June
15th, 2009, Doug Hampton forwarded a copy of the letter in an e-mail to
former Senator Rick Santorum. He asked Senator Santorum for help with the
matter. Senator Santorum forwarded Mr. Hampton`s e-mail and the letter to
Senator Ensign at his Gmail address that evening at approximately 10:20
p.m."

The very next day was when Senator Ensign realized he had to get out
ahead of this. So, he held a press conference admitting to the affair and
explaining he was going to try to hold on to his senate seat. So you may
recall us on the show talking about Rick Santorum`s role in the John Ensign
sex scandal last summer, because last summer Mr. Santorum was busy doing
the rounds doling out his families value guy sex scandal advice to another
politician.

(BEGIN VIDEO CLIP)

RICK SANTORUM (R), PRESIDENTIAL CANDIDATE: If I had done what
Congressman Weiner had done, I`d be worried about my family and getting my
life back together and not trying to go out and be a congressman and try to
profess to be a leader of this country. I think that, you know, I would
have taken different steps. I would have stepped down and done what`s best
for the people that I love.

(END VIDEO CLIP)

MADDOW: So, faced with a sex scandal, Rick Santorum`s family values
advice for a Democrat who has a sex scandal is that the Democrat should
resign. But when confronted with a Republican sex scandal, Mr. Family
Values Rick Santorum did not call on John Ensign to resign. He also didn`t
call on David Vitter to resign.

Instead when he was confronted with the John Ensign sex scandal while
it was going on, his response was to tip off the sex scandal guy so he
could get ahead of the bad press. And then never say another word about
it.

Was Rick Santorum`s part in the John Ensign sex scandal the worst part
of the John Ensign sex and ethics scandal? No. Rick Santorum had a craven
little bit part in what was a big very craven scandal.

Now that he`s essentially tied Mitt Romney in the Iowa caucuses, does
an ethical face plant like that matter? Does a big ethical hypocrisy face
plant like that matter for a guy like Rick Santorum?

Is Rick Santorum going to get vetted as a front runner in the
Republican contest? Or is Rick Santorum still seen as being so unlikely to
win the actual nomination that nobody`s really going to care? That his
record will continue to get as little attention as it has had so far? It
is hard to know.

I mean, if you were the Mitt Romney campaign right now, what would you
decide? It would be hard to decide I think whether to take Rick Santorum
seriously because he just about matched you vote for vote in Iowa? It`d be
hard to know whether to take him seriously, maybe unleash your dark money
super PAC to start trashing Rick Santorum the way you did Newt Gingrich.
It would be hard to know whether to do that or whether to keep saying nice
things about Rick Santorum, and maybe hope you win over the people who like
Rick Santorum because he`s not a real competitor.

It is likely that the reason Rick Santorum was able to do so well in
Iowa is because he hasn`t really been vetted in this process. Nobody`s had
reason to. Nobody`s had much of a negative word to say about Rick Santorum
this whole time. There`s been no reason to bother.

It is still not clear whether anybody will bother, whether anybody
will find it useful to say a negative word about him. What is clear,
interestingly, is after Mr. Santorum and Mr. Romney virtually tied in Iowa,
we know we`re going to see new attacks against Mitt Romney.

I mean, for a purported front-runner all this time, Mitt Romney has
thus far really avoided the searing spotlight of front-runner status
Everybody else who has challenged him one by one has instead drawn all the
negative attention. It was assumed the bad things about Mitt Romney and
his record was already known, so let`s focus on the other people and
whether or not they`d make a suitable challenger to him.

Now, though, we know that Newt Gingrich may not himself be a top tier
contender for the nomination anymore, but Newt Gingrich has no intention of
dropping out. And in fact, he has a new singular purpose for remaining in
this race. Newt Gingrich lives now to attack Mitt Romney.

We got the tip off to the newly focused anti-Romney strategy last
night during Gingrich`s astonishingly disgruntled Iowa caucus speech.

(BEGIN VIDEO CLIP)

NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: We`ll have one other great
debate, and that is whether this party wants a Reagan conservative who
helped change Washington in the 1980s, or we want a Massachusetts moderate
who, in fact, will be pretty good at managing the decay, but has given no
evidence in his years of Massachusetts of any ability to change the culture
or change the political structure or change the government.

(APPLAUSE)

GINGRICH: We are not going to go out and run nasty ads. We`re not
going to go out and run 30-second gotchas. We`re not.

(APPLAUSE)

GINGRICH: But I do reserve the right to tell the truth.

(APPLAUSE)

GINGRICH: And if the truth seems negative, that may be more a comment
on his record than it is on politics.

So, this is going to be a debate that begins tomorrow morning in New
Hampshire, and will go on for a few months.

(END VIDEO CLIP)

MADDOW: We`re not going to go out and run nasty ads. Applause,
applause. But with doe reserve the right to tell the truth! Arr! And if
the truth seems negative, arr, the blood-thirsty crowd.

Newt Gingrich throwing down the gauntlet. And that does not appear to
be a bluff on Newt Gingrich`s part. He said that last night before going
to bed. And then after he woke up this morning, here`s what he had to say
to NBC`s Chuck Todd.

(BEGIN VIDEO CLIP)

CHUCK TODD, NBC NEWS: It seemed last night you indicated you`re going
to fire shots in these next six days.

GINGRICH: Well, I don`t know if it`s firing shots if you have an
honest discussion about two different tracks. Governor Romney raised
taxes, created Romneycare, appointed liberal judges. Those are facts.

I mean, it seems to me you can have an honest fact-based campaign that
draws a contrast between a Reagan conservative and a Massachusetts
moderate. That`s not an attack, per se. Unless you regard somebody`s
record, the statement of the record, as being an indictment which is a
comment on the record.

(END VIDEO CLIP)

MADDOW: Good morning, Mr. Romney.

Then also today, just as the world was getting world that John McCain
was endorsing Mr. Romney, a pro-Newt Gingrich super PAC posted this ad
online.

Now, the important thing about this is that this is a John McCain
attack ad against Mitt Romney from 2008. Ouch. That kind of hurts the
endorsement.

The Gingrich campaign also took out a full-page ad in the Manchester,
New Hampshire "Union Leader" today calling Romney a timid Massachusetts
moderate.

It has been clear all along that a big portion of the right, even some
of the mainstream right, but definitely the far right, right, they have
been uncomfortable with Mitt Romney for a very long time. And Newt
Gingrich is apparently going to be a giant exclamation point on that
discomfort for the rest of the campaign.

Is it still possible for a non-Romney candidate to become viable
because of the weaknesses in Mr. Romney`s record, because of all those
vulnerabilities, particularly if somebody is pointing them out every day?

Well, some top tier conservatives are looking into at least.
"Politico" reports today that conservative elites plan to get together soon
in Texas to try to find a consensus Republican presidential hopeful to
coalesce around.

Conceivably, I guess they could be considering Rick Perry? Maybe he
could come back now that he`s decided not to get out of the race? That
frankly does not seem very likely, but it`s possible.

Newt Gingrich went through a brutal vetting process from which he did
not come out well on the right. He seems well positioned to be somebody
else`s fullback but not the man with the ball, himself. Michele Bachmann
is out of the race now.

And so, that means that those conservative elites in Texas are
probably going to look at Rick Santorum. They`re going to have to be
looking at him, and that means they`re going to have to be vetting him.

And they have lots to look at. I mean, there is his role in the John
Ensign sex scandal, and the hypocrisy about his family values there.
There`s the fact that he received a half million dollar mortgage loan from
a private bank ran by Santorum contributors. As ABC reported, that bank
advertised you could only get one of their sweet mortgage loans if you
were, "A" very rich, and "B" invested with them. Mr. Santorum did not
reach their definition of rich in terms of his assets, nor did he invest
with them, but he still did get their sweet, sweet loan.

Mr. Santorum has also been a champion of earmarks when he served in
Congress, including a multimillion dollar earmark that benefited a
developer who was close to Mr. Santorum. And regardless of purported
shadiness of any individual earmarks, his enthusiasm for earmarks in
general made him the subject of what might be the one anti-Rick Santorum
2012 ad in existence this year.

(BEGIN VIDEO CLIP)

SANTORUM: I`m not saying necessarily earmarks are bad. I have had a
lot of earmarks. In fact, I`m very proud of all the earmarks I put in
bills.

I`ll defend earmarks.

I`ll defend earmarks.

(END VIDEO CLIP)

MADDOW: The only person who has seemed fit to run an attack ad
against Rick Santorum is Rick Perry. That was that ad.

There`s also the issue of Rick Santorum not just defending torture but
saying that John McCain was only against torture because John McCain
doesn`t understand it. Mr. Santorum saying, quote, "He doesn`t understand
how enhanced interrogation works. I mean, you break somebody, and after
they`re broken they become cooperative."

See, Rick Santorum understands. John McCain, how would he ever --
what`s he ever done to -- yes.

There`s also the time Rick Santorum said President Obama being in
favor of abortion rights was, quote, "almost remarkable for a black man."
Oh.

Rick Santorum also thinks states should be allowed to ban birth
control. As president, he also says he would annul all existing same-sex
marriages in the country. How is that for small government?

And his position if we only banned abortion, then we could afford
Social Security? That baffled even the usually unflappable Greta van
Susteren at FOX News.

(BEGIN VIDEO CLIP)

SANTORUM: What happened, there was a caller that called into a radio
station up in Lavonia -- excuse me, New Hampshire. And they called in and
said, made the point, that because of the number of abortions in America,
that there are fewer people out there working and, of course, Social
Security is based on having people working to support those who are in
retirement.

And one of the problems with Social Security is a demographic problem
which is people are living longer and collecting benefits on Social
Security. And our birthrate is lower. I mean, we are now not at
replacement rate. And so, that combination is causing a problem in Social
Security. I simply made that point. My --

GRETA VAN SUSTEREN, FOX NEWS: You don`t think that`s a little weird?

(END VIDEO CLIP)

MADDOW: Greta in the background saying that`s a little weird.

Some of these things the religious right will care about. Some of
them the religious right will not care about. Most pragmatic conservatives
will mostly care about the fact Mr. Santorum lost his last electoral
contest by 18 points when he was an incumbent senator in Pennsylvania. But
strategically, at this point in the race, I am fascinated to figure out
whether or not Rick Santorum gets vetted.

Does anybody bother? Or do they just wait for him to wither on his
own?

Joining us now, MSNBC political analyst and Pulitzer Prize-winning
columnist to "The Washington Post," Mr. Eugene Robinson.

Gene, it was great to be with you last night. Thanks for coming back
tonight.

EUGENE ROBINSON, MSNBC POLITICAL ANALYST: It`s great to be you, too,
Rachel. We had fun last night and it`s just starting.

MADDOW: It is just starting. And you and I have both been on the
same page, the woefully wrong page on mis-underestimating Mr. Santorum`s
chances here.

Do you think that he has contender -- he has the makings of a
contender here and will be treated as such or do you think that people will
ignore him and wait for him to go away?

ROBINSON: Well, I don`t think you can ignore him at this point. I
mean, you know, but for eight votes he would have won Iowa. And he is the
surging candidate right now.

He`s not going to be ignored. He will be vetted. You kind of started
the process tonight, I think.

But others will pick it up including others in the race because, look,
Rick Perry, who went home to Texas, I guess, for five minutes to think
about the race is now back in the race. He`s got to go after Santorum if
he`s going to get any traction at all. Santorum is getting all the voters
that normally you would think would be Perry voters.

So, he, if any -- only one person does it, it would be Rick Perry who
would have to vet him and get all his stuff out.

MADDOW: Do you think as the right starts to look at him, obviously,
Rick Perry is the only one who`s shone a demonstrable willingness to go
after Santorum so far. So, I think you`re right to say that we should look
for it from him.

Do you think that there is anything in Rick Santorum`s record that
makes him particularly vulnerable to an attack from another Republican? Is
it just the earmark stuff? That sort of seems weak tea to me, but maybe it
only seems like weak tea on a liberal.

ROBINSON: Oh, go talk to some of those folks out in Iowa, Rachel --
I`ll tell you. The earmarks thing, people mentioned that to me as a reason
not to vote for Santorum, he was too much a creature for Washington, that
he voted for the bridge to nowhere. That has resonance among staunch
conservatives, fiscal conservatives.

That`s going to be a problem for him, probably a bigger problem
frankly than the Ensign thing. I assume he`ll say I was being loyal to a
friend, conflicting moral imperatives. I don`t know how he`ll explain that
away.

But I think the earmarks thing is serious.

MADDOW: The thing that Rick Santorum is most nationally known for is
his social conservatism. The famous interview with an "Associated Press"
reporter in which he was talking about same-sex marriage and the reporter
remarked, I can`t believe that I`m talking to a United States senator who
just used the phrase "man on dog".

(LAUGHTER)

MADDOW: I mean, a lot of people think of him as man on dog Santorum
because of the sort of vituperative language he uses against gay people.
He does want to ban contraception. He does want to annul existing same-sex
marriages. He does think a person who is raped should be forced to bear
the child and not allowed to have an abortion even in that instance.

Are those things only assets in the Republican Party? Or is any of
that stuff too extreme to hurt him among Republicans?

SCHULTZ: You know, I think some of -- we`ll see Greta was wrong.
He`s not a little weird. He`s really weird.

Some of his positions he`s taken are just so weird that I think some
Republicans are going to be off-put. Not everybody is going to be down,
for example, with the story of how he and his wife handled the stillborn
child whose body they took home to kind of sleep with and introduce to the
rest of the family. It`s a very weird story.

And his positions on gay people and gay marriage are just offensive,
objectionable and so totally wrong.

It`s -- you know, so let`s repeat that. Every time we talk about Rick
Santorum, let`s be clear this is a guy who should never become president in
my view.

MADDOW: Eugene Robinson, MSNBC political analyst, and Pulitzer Prize-
winning columnist for "The Washington Post," firmly putting himself on the
record as not a Rick Santorum for president supporter. We`re going to have
to chyron you that way every time you`re on TV. Thank you, gene, I
appreciate it.

ROBINSON: OK, Rachel.

MADDOW: All right. So, among the not Mitt Romneys, Rick Santorum,
about whom I was very wrong, take him seriously, dude. He finished second.
Ron Paul finished third.

But since they are Republicans, their supporters will forget their
differences and get in line when the time comes, right? Right? That`s the
common wisdom. Is it true?

That`s next with former RNC chairman Michael Steele.

(COMMERCIAL BREAK)

MADDOW: Former Senator Rick Santorum and Congressman Ron Paul have
three things in common. Number one, they are both running in the
Republican presidential primary. Number two, they both gave Mitt Romney a
huge run for his money last night in the Iowa caucuses last night. And
three, because of the fact they`re both Republicans, Mr. Santorum and Dr.
Paul also both believe government should be large enough and intrusive
enough to make sure every fertilized egg in this country results in a live
birth of a baby.

In today`s Republican Party and Republican presidential politics,
especially, being antiabortion is orthodoxy. It`s a given.

For Ron Paul being antiabortion is the one real exception to his small
government ideological purism.

Being against abortion is the one and only thing these two Mitt Romney
alternatives agree on.

On every other policy issue of substance, Rick Santorum and Ron Paul
are total opposites. They are oil and water, black and white, carbohydrate
and fat. Rick Santorum believes that it is the proper role of government
to determine the purpose for and meaning of every American`s sex life, for
example.

(BEGIN VIDEO CLIP)

SANTORUM: We`ll repeal Obamacare and get rid of any kind of idea that
you have to have abortion coverage or contraceptive coverage. One of the
things I will talk about that no president has talked about before is I
think the dangers of contraception. It`s not OK. It`s a license to do
things in a sexual realm that is counter to what, how things are supposed
to be. They`re supposed to be in marriage, supposed to be for purposes
that, yes, conjugal, but also immunative, but also procreative. That`s the
perfect way that sexual union should happen.

(END VIDEOI CLIP)

MADDOW: Rick Santorum would like to use the government to dictate the
perfect sexual union for all families in America, because he knows what it
is.

Contrast that with Ron Paul who would happily legalize prostitution,
and, hey, even heroin, too.

(BEGIN VIDEO CLIP)

CHRIS WALLACE, FOX NEWS: Senator, are you suggesting that heroin and
prostitution are an exercise of liberty?

REP. RON PAUL (R-TX), PRESIDENTIAL CANDIDATE: You know, I probably
never used those words. You put those words someplace. But, yes.

(END VIDEO CLIP)

MADDOW: On foreign policy, Rick Santorum is an unapologetic fire-
breathing neoconservative, interventionist and military expansionist. He
believes we should use our military to solve every problem east of the
Atlantic and west of the Pacific. Every bad guy who doesn`t like America
should be met with the full force of our military, if you`re Rick Santorum.

(BEGIN VIDEO CLIP)

SANTORUM: I think we want to have an activist America to keep our
country safe by being a leader in the free world. And that means to go
after the enemy who has attacked us.

(END VIDEO CLIP)

MADDOW: The activist America Rick Santorum wants is one that would
still be at war in Iraq, would not have honored the agreement brokered by
President George W. Bush to leave Iraq by the end of last year. The
mistake made in terms of that war was not starting the Iraq war in the
first place but in Santorum`s mind, the only mistake there was ending the
war too soon.

(BEGIN VIDEO CLIP)

SANTORUM: We have a president who is not able to set conditions and
actually have the kind of influence over the Iraqi government. Now, three
years, the president has had to work with the Iraqi government to try to
mold and shape that relationship, the weakness of this president in being
able to shape the battlefield, if you will.

And I think that`s the reason people are so upset. That, you know,
we`ve lost in many respects we`ve lost control and lost the war in Iraq.

(END VIDEO CLIP)

MADDOW: Rick Santorum wishes we were still there in Iraq, not being
there is a sign of weakness.

Ron Paul never thought we should have been fighting in Iraq in the
first place.

(BEGIN VIDEO CLIP)

PAUL: I talk a lot about the wars going on overseas. I did my best
to try to stop them. I remember the first speech I gave on the House floor
about trying to stop something in Iraq. It didn`t happen in 2001 or 2000.
It happened in 1998. That`s when they passed a bill that said it is now
our policy to have regime change in Iraq. I said, it`s going to lead to
war.

(END VIDEO CLIP)

MADDOW: On the other war, on Afghanistan, Rick Santorum is a big
supporter. Ron Paul, he thinks that`s illegal.

(BEGIN VIDEO CLIP)

SANTORUM: This war is an illegal war. This war is an immoral war.
This war is an unconstitutional war.

And the least could you could say, it`s illegitimate, there`s no
purpose of this. The Taliban did not attack us on 9/11. You know, after
we went into Afghanistan, immediately the concerns were shift to remaking
the Middle East.

(END VIDEO CLIP)

MADDOW: So Rick Santorum, huge fan of both of our wars this decade.
Ron Paul, totally and completely against both of them.

And what about our maybe future wars? Like in Iran, possibly?

Rick Santorum would -- forgive the term -- like to bomb the bejesus
out of them as soon as possible.

(BEGIN VIDEO CLIP)

SANTORUM: I would be working openly with the state of Israel. I
would be saying to the Iranians, open up those facilities, begin to
dismantle them and make them available to inspectors or we will degrade
those facilities through air strikes and make it very public we`re doing
that.

(END VIDEO CLIP)

MADDOW: Now, Ron Paul on the other hand could not be more the
opposite. Ron Paul is not just against going to war with Iran, he`s
against sanctioning the nuclear ambitious country.

(BEGIN VIDEO CLIP)

PAUL: Countries that you put sanctions on, you are more likely to
fight them. I say a policy of peace is free trade. Stay out of their
internal business. Don`t get involved in these wars and just bring our
troops home.

(END VIDEO CLIP)

MADDOW: On corruption and ethics issues, we got the same kind of
divide. Rick Santorum is a former lobbyist. Quote, "Pennsylvania which
became one of the first states to deregulate pro wrestling after an
aggressing lobbying effort begun in 1987 under the law executive at
Kirkpatrick and Lockhart named Rick Santorum lobbyist."

Ron Paul however has never been a lobbyist and I have no idea he feels
about pro-wrestling. Ron Paul`s financial portfolio shows he`s invested
most of his money where you would invest it if you were the guy with the
darkest forecast for the American economy and you`re always warning about
inflation. He`s invested in gold mining. Ron Paul`s money lives where his
mouth is.

And if you compare their voting records, from Rick Santorum`s last
couple years in the senate, Rick Santorum voted for the defense
appropriations bill. Ron Paul did not. Santorum voted for the Central
American Free Trade American. Ron Paul did not. Rick Santorum voted to
renew the Patriot Act and is very proud of it. Ron Paul did not and is
very proud of it.

So, to the extent that Mitt Romney has to contend with a Republican
electorate that doesn`t like him that much, that can`t seem to coalesce
around him, what Mitt Romney specifically has to contend with is a
Republican electorate that doesn`t seem to like him very much and the part
of the Republican electorate that doesn`t like him very much is totally
bifurcated and totally split between two not just different but completely
opposite positions.

If you take Ron Paul seriously and his followers seriously, and I do,
and if you take Rick Santorum seriously and his supporters seriously, and I
newly do, the idea Republican voters will eventually coalesce around a non-
Romney candidate powerful enough to unseat Mitt Romney is hard to see. The
Santorum people and Paul people are not going to find common ground, except
on banning abortion. That`s it.

It`s only if you frankly ignore Ron Paul and you ignore his issues and
you pretend all the other candidates are kind of like Santorum and Gingrich
and Perry and Bachmann and all the rest of them, it`s only if you ignore
what Ron Paul stands for that you can see a non-Romney consensus candidate
emerging.

You have to wish the Ron Paul thing away in order to believe that.

Joining us now is Michael Steele, MSNBC contributor and the former
chairman of the Republican Party.

It`s great to see you.

MICHAEL STEELE, MSNBC CONTRIBUTOR: Good to be back. Happy New Year.
I see you`re a fire brand as ever. I`d take exception to a few of the
things you`re saying.

MADDOW: Tell me.

STEELE: Well, I think just on two points just very broadly. Number
one, with respect to the abortion question in particular. Both Ron Paul
and Rick Santorum, their objection, where they agree, is at the federal
level government. They don`t want to grow government to get involved in
that.

They would actually like to move it back to the states and have the
states decide these issues on a state-by-state basis, which is more
consistent with what Republicans have argued. Let`s get the federal
government out of the realm, that`s one of the objections with Roe v. Wade,
it federalized the issue as opposed to keeping it at the state level.

MADDOW: But by preventing the states from doing it, you prevented the
state from being involved in monitoring every fertilized state in the
country.

STEELE: Again, that`s a federal intervention. And there isn`t a
party who object to that.

MADDOW: OK.

STEELE: Just put that there.

MADDOW: You get my point, though, that a big intrusive state
government is still a big intrusive state government.

STEELE: Well, exactly. But, again, but that big intrusive state
government answers more directly to the people who elect those officials
and have a way of saying and putting on the table what they want versus
what they don`t want. Much more than you do at the federal level.

MADDOW: Well, the federal level protects rights, right?

STEELE: Well, but so do states. So the states.

But you can`t negate the Tenth Amendment. And so, you cannot take
away from the states the ability to regulate and make decisions that are
closest to the people because that`s what the people want or don`t want.

MADDOW: Should the states have the right to make a decision about
what types of people are served in private businesses?

STEELE: Well, now you`re talking about mixing the private sector and
the government sector.

MADDOW: Does -- if a state wants to -- if a private business wants to
say, you know what, we don`t serve a specific kind of people here, we`re
going to make that decision --

STEELE: If it`s like a private country club?

MADDOW: Yes.

STEELE: Yes, sure they can.

MADDOW: So, 1964 Civil Rights Act was a bad idea?

STEELE: No, no. See, now you`ve leapt to something that is
inconsistent. Not saying that that`s a bad idea because this group of
people who have this private club over here don`t want to do that, that`s
doesn`t make that a bad idea. It`s more about these people over here than
it does about the good idea of the Civil Rights Act.

MADDOW: But this is the basic idea, right, the federal Constitution
stops states from doing things that --

STEELE: And how does the federal government regular rate that?

MADDOW: -- that cross our basic human rights.

STEELE: If this private club wants money to fix the public street in
front of its business, then guess what, the federal government says you`re
going to have to adhere to all those things like the Civil Rights Act.

MADDOW: Civil Rights Act, do you think that the Civil Rights Act
should be tied specifically to highway money and that there`s no way a
constitutional ruling by the Supreme Court should be applied to block
somebody from doing something that the state wants to allow? That`s crazy.

STEELE: I agree. But that`s what we`ve gotten to where they do take
federal money and they use it as the incentive or disincentive to engage in
constitutional behavior. So, that`s --

MADDOW: The U.S. Constitution being used to protect rights that
states don`t want to protect is an argument that I would love to have, if
we`re going to do that.

But I got to ask you about Rick Santorum versus Ron Paul here.

STEELE: Yes.

MADDOW: Don`t you think they`re sort of opposites? I mean, aside
from abortion. They sort of represent every opposites in policy.

STEELE: They do. They do represent opposites. But, you know, the
second point that I was going to disagree with you slightly on is I would
not see that there`s this level of equality in saying that, you know, this
segment of the GOP is now split in half and half of it is, you know, Ron
Paul and half of it is represented by Rick Santorum. I think that you find
that, you know, that libertarian portion of the GOP is smaller than a lot
of people think it is.

MADDOW: Not that much smaller in Iowa.

STEELE: Well, Iowa --

MADDOW: Twenty-five, 25, 21.

STEELE: Iowa -- well, keep in mind, the Iowa vote wasn`t just
Republicans voting. OK? So --

MADDOW: Those weren`t Republicans voting for Ron Paul?

STEELE: You had independents who signed up to vote in the Republican
primary. I mean, that was part of that process. And you`ll see the same
thing in New Hampshire.

So, you cannot take these primaries, particularly they`re open
primaries and say that that`s a reflection necessarily of --

MADDOW: Your reaction to this thesis is you really should not count
the Ron Paul people.

STEELE: No, no, I`m not saying that at all.

MADDOW: You`re saying that`s only a tiny sliver of the Republican
electorate?

STEELE: I`m not saying this is tiny sliver. I`m saying you`re trying
to say there`s a one for one equality that, you know, that the party is so
split in half that you got half the folks on this side and half the folks
on this side of the room saying it`s not that way. There are points of
disagreement without a doubt.

But as you pointed out, there are also areas where they do agree. And
when you talk about small government, you talk about economic issues. You
talk about those types of things --

MADDOW: No. They`re totally different, on economic issues and size
of government. Other than on abortion, Rick Santorum and Ron Paul are
diametrically opposed.

STEELE: You`re talking --

MADDOW: You put Mr. Earmark and Mr. Earmark --

STEELE: You`re talking Rick Santorum`s position and Ron Paul`s
position. And what I`m talking about the people behind them who represent
those various factions within the party as conservatives, small government
conservatives, who are economic conservatives, who are fiscal
conservatives, they kind of intermix. It`s not the sort of wall of
division the way you point.

MADDOW: Well --

STEELE: Or would like to paint it.

MADDOW: I love that that is the way you see it because if you`re
thinking about that represents mainstream Republican thinking on that, that
means nobody`s taking Ron Paul seriously. And that means those votes are
still out there absolutely confusing the process.

STEELE: Ron Paul is taken very seriously. I think, you know, right
now, if these candidates are smart, they would be making whatever appeals
that they can to the Ron Paul supporters out there, particularly because
they`re young, energetic individuals who have engaged in the political
process.

So don`t take what I`m saying as, you know, not taking Ron Paul
seriously. What I`m saying, there`s not this big wall of divide as you`d
like to paint. What I`m saying is there are points of disagreement.

And individual candidates may have specific issues where they say, he
wants to be for earmarks and he`s not for earmarks. But that`s not
necessarily what the grassroots are saying.

MADDOW: I just think there`s no coalescing around a non-Romney
candidate any time soon. But we are going to have many further
opportunities to talk about it.

STEELE: I think they need to have a meeting.

MADDOW: I bet they are. They`re not going to invite me.

But if they invite you, will they tell you what happens?

STEELE: They`re not inviting me either.

(LAUGHTER)

MADDOW: Michael Steele, former Republican Party chairman -- they may
not be inviting you but I`m so happy you were here.

STEELE: It`s good to be back with you.

MADDOW: Happy New Year.

STEELE: All righty.

MADDOW: All right. So, how are top Democrats feeling post-Iowa?
Feisty it turns out. One of the president`s top economic advisers joins us
next.

(COMMERCIAL BREAK)

MADDOW: Why the Democrats were so happy with the Iowa results last
night and what they did to show their happiness about it today. That`s
coming up.

(COMMERCIAL BREAK)

MADDOW: You know who else had a caucus in Iowa yesterday? Democrats.
Democrats picked their party`s nominee for president in Iowa. The Iowa
Democratic Party reports that President Obama got, oh, roughly 100 percent
of the vote last night which is what you get when you are the only one
running.

But these were the numbers they really cared about, were crowing about
today. The raw number of voters who turned out for the Democratic
caucuses, even though there was really no contest there. Look at that --
25,000 people, 25,000 Iowans turning up on a cold might to caucus for an
incumbent who had no challenger.

The Iowa Democratic Party says another 7,500 people pledged last night
in Iowa to volunteer for the president`s re-election effort. So, one thing
the Democratic Party and the White House took away from the Iowa caucuses
last night was a healthy measure of Democratic voter enthusiasm in the
state, also a big pile of campaign volunteers.

What else they took away from the caucuses appears to be a conviction
that the man President Obama will be running against in the general
election come November is named Mitt Romney. You can tell that in part
because today Mr. Obama`s chief campaign strategist got on a conference
call with reporters and frankly he hammered Mitt Romney like he was a three
penny nail.

Quote, "Taking positions on every issue, one on the left and one on
the far right doesn`t make you a centrist. It makes you a charlatan."

On Mr. Romney`s narrow win in Iowa, quote, "He`s still the 25 percent
man. I don`t think Republicans in Iowa sent any signal that they`re ready
to close the books on this nomination process."

Quote, "He entered as a weak front-runner and he leaves as a weak
front-runner."

You want more? You want more of David Axelrod wailing away on Mitt
Romney today? There`s more.

Quote, "I don`t think Romney solved his problem. Had he won a
resounding victory and improved on what he did four years ago" -- when Mr.
Romney got six more votes in Iowa than he did this time -- quote, "I think
he could have argued persuasively that he was bringing the party together
and that he was in the position to close this out. I don`t think that
happened last night."

Now, early on it seemed clear that the Obama campaign was most
concerned about three candidates. The aforementioned Mr. 25 percent, Tim
Pawlenty, who was already out of the race, and former Utah Governor Jon
Huntsman.

Mr. Huntsman ignored Iowa entirely. He has staked his whole campaign
on New Hampshire. As of yesterday, he was up to 150 events in New
Hampshire. But yet, a new New Hampshire poll today shows him losing ground
there, losing ground now when attention is turning to New Hampshire. And
when he was already only at 10 percent before he started losing that
ground.

So, it seems clear that the Obama campaign thinks it`s going to be
Mitt Romney.

Mitt Romney was also the choice of the largest proportion of Iowa
Republican caucusgoers last night who said that the economy was their
biggest concern. Not just the Obama campaign but everybody thinks that the
economy is going to be the biggest concerns of voters in the general
election.

So, it is probably no coincidence the Obama campaign`s rather decisive
turn toward Mitt Romney today coincided with the White House also making a
rather decisive move on the issue of the economy.

The White House picking a fight with Republicans on the economy and on
the White House`s own terms today.

President Obama`s top economic adviser will be joining us next.

(COMMERCIAL BREAK)

MADDOW: President Obama made four recess appointments today. He
never does this. I mean, all presidents make recess appointments. The
Senate won`t confirm somebody, so they wait until the Senate is out of
session, and they appoint the person then. All presidents do this.

But President Obama almost never does this. As Ian Millhiser charted
it nicely at Think Progress today, this is the number of recess
appointments per year that we`ve had from recent presidents. Left to
right, that`s Ronald Reagan with more than 30. Then Poppy Bush, then Bill
Clinton, then George W. Bush and then that`s President Obama on the right
with less than 10 per year.

But today, there were four. Three to the National Labor Relations
Board, three new members to fill empty seats in the five-member board so
that board will have enough people to be able to have a quorum so it can
continue to function.

The president also today recess appointing his nominee, Richard
Cordray, to lead the Consumer Financial Protection Bureau. That name is
familiar to you, that`s just Richard Cordray but the Consumer Financial
Protection Bureau because that`s the agency that had been championed by
Elizabeth Warren. Mr. Cordray had been her deputy in Washington working to
set up this agency before Elizabeth Warren decided to run for Senate
against Scott Brown in Massachusetts.

Mr. Cordray`s nomination to run that agency had been hung up in the
Senate since July. Not because Senate Republicans don`t like Mr. Cordray,
but because they don`t like the Wall Street reform bill that gave birth to
that agency and they do not like the idea of that new agency. That new
watchdog keeping an eye on banks and credit card companies and other
entities that have earned a reputation for screwing over consumers with
their financial products.

Republicans in the Senate would not allow anybody to be confirmed at
that agency in protest of the agency`s existence. And so, the president
has now used a recess appointment to get around Senate Republicans. Senate
Republicans and other Republicans in Congress today were angry that
President Obama did this.

Well, for Democrats, this frankly was a day that they had been hoping
for and this fight whether anybody should be overseeing the banks, that is
a fight that many Democrats had been hoping for beyond to the personnel
involved.

Joining us now for the interview tonight is Gene Sperling. Gene
Sperling is the director of the National Economic Council. He`s a top
economic adviser to President Obama.

Mr. Sperling, it`s good to have you here again. Thank you for your
time.

GENE SPERLING, NATIONAL ECONOMIC COUNCIL: Thanks for having us.

MADDOW: Republicans are obviously upset with the fact that these were
recess appointments in the White House and clearly felt that it was worth
it to do this. What can be done with having Richard Cordray in this
position that couldn`t be done without the recess appointment?

SPERLING: Well, that`s a great question. And obviously, the
president wasn`t trying to pick a fight. The president was trying to
implement the law of the land that created, as you said, a new independent
consumer watchdog which is there to protect millions of working families
for the type of abuse that many have suffered from credit cards, payday
loans -- you know, school loans, and on and on.

But to your particular question, until either as an actual director in
place, you could not supervise the nonbank participants in our economy.
So, when you think of the types of abuse that so many people suffered,
unethical abuse at subprime lending, loans that exploded on them, 40
percent, 50 percent of those came from nonbanks.

Still to this day, until this appointment took place, we could not be
supervising those. There are 20 million people who take payday loans,
Rachel, 20 million. They often average two weeks and in many cases the
interest on those is 400 percent.

Because those are not banks, they are nonbanks, we could not supervise
them until Richard Cordray was in place.

So, this makes a very big difference. And think of the story the
president told today when he was there about the elderly couple who was --
had a pipe broke, somebody saw that, took advantage of them, forced them to
get a loan they didn`t need and almost ruined the entire financial security
of that family. That is exactly the family, the exact type of situation
that this bureau, this independent consumer watchdog was created to protect
people like that and to go after those who would take advantage of them,
and just simply to put forward straightforward information about fees and
interest rates so that people can make wise choices.

I have just never understood the opposition to something that
basically just gives working families more information, better protection,
and make sure that everybody abides by the law when they are dealing with
worker families in financial products like credit cards, school loans,
payday loans, or mortgages.

MADDOW: The story that the president told there that you just
described, he told at a big event today in Ohio, Richard Cordray`s home
state, talking about his appointment, talking about the consumer financial
protection bureau. And you say that the president is not trying to pick a
fight here.

But clearly he did this in a big public way with all of his story-
telling abilities, which he`s very good at and his oratory, and with a lot
of attention brought to this. I wonder if this is part of a larger
strategy to try to, I guess increase people`s confidence in what the
administration is able to do on basic economic issues.

SPERLING: Well, I think what you`ve seen is this president is
fighting very hard and he`s going to continue fighting hard. You know, I
think the most divisive decision is when the president decided he was not
going to allow the debt limit to only be extended for six months so that,
Rachel, we would be right now be going through the threat of default again.
He stood firm on that.

That allowed him to stand firm and strong in fighting for the payroll
tax cut for unemployment insurance. And, again here he tried to work with
the Congress. He wanted to get Richard Cordray confirmed.

But, as you said, you said something very important. They weren`t
challenging his credentials. They were trying to essentially nullify a law
that was passed to protect working families. This was the law of the land
and they are saying we`re going to block anyone as a way of nullifying that
law.

And what the president is saying is that if they are going to create
obstacles like that, that help protects him from defending working families
on basic economic issues, he`s going to use the authority that he has,
clear and expressed constitutional authority under Article II to make this
recess appointment and he did the right thing.

But, again, when I said he didn`t pick a fight, what I meant is that
we would have much more preferred for them to act in a cooperative way and
confirm him. But if they are not going to, as the president said, he`s
going to fight and do everything that he can under his powers to protect
American families.

MADDOW: Gene Sperling, the director of the National Economic Council
-- your time is valuable, sir, and I appreciate you spending some of it
with us. Thank you.

SPERLING: Thank you, Rachel.

MADDOW: We will be right back.

(COMMERCIAL BREAK)

MADDOW: Thanks for being with us tonight.

It`s time now 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

Copyright 2012 CQ-Roll Call, Inc. All materials herein are protected by
United States copyright law and may not be reproduced, distributed,
transmitted, displayed, published or broadcast without the prior written
permission of CQ-Roll Call. You may not alter or remove any trademark,
copyright or other notice from copies of the content.>


WATCH 'THE RACHEL MADDOW SHOW' WEEKDAYS AT 9:00 P.M. ON MSNBC.