updated 1/6/2012 2:24:43 PM ET 2012-01-06T19:24:43

Guests: Steve Kornacki, Thomas Frank, Barney Frank

ED SCHULTZ, "THE ED SHOW" HOST: Rachel Maddow, her show starts right
now.

Rachel, good evening.

RACHEL MADDOW, HOST: Good evening, Ed. I`m glad you just did that
interview on Indiana. We`re going to do more about the big Indiana walkout
by those Democrats today coming up this hour. Appreciate it, man.

SCHULTZ: It`s great. It`s a big story.

MADDOW: Really is. Thank you.

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

Some congratulations in order tonight for, of all people, Republican
presidential candidate Jon Huntsman. Jon Huntsman, it appears, has finally
made it.

Now that the Republican presidential race has moved on from Iowa, we
are didn`t really compete, to New Hampshire, where he has been focusing,
Governor Jon Huntsman`s public profile has finally, maybe at least, risen
high enough for him to earn a starring role as the villain in a remarkable
new anti-Jon Huntsman attack ad. Have you seen this today? I saw this at
the website Wonkette.

The ad -- now, it does not appear to be an official campaign ad. It
appears to have been produced by Ron Paul supporters in New Hampshire. And
it specifically zeros in on Jon Huntsman`s most recent job as U.S.
ambassador to China. Watch.

(VIDEO CLIP PLAYS)

MADDOW: Jon Huntsman is secretly not only the Manchurian candidate
but secretly actually Chairman Mao video. That is claimed by a group
called NH, New Hampshire, Liberty for Paul.

Now, that group does not appear to be formally affiliated with the Ron
Paul campaign by any way, shape, or form. And that may not be the most
effective ad of all time.

For the Huntsman campaign, don`t you have to think it`s got to be a
little exciting? I mean, to at least have somebody care enough to go after
you at this point on anything, even if it is just morphing you into
Chairman Mao and even if it is just somebody anonymous on the Internet, at
least somebody`s paying attention to Jon Huntsman enough to insult him.

When Barack Obama appointed Jon Huntsman to be the U.S. ambassador to
China in May 2009, I actually was in Utah in May 2009. I remember talking
to people about that left, right, and center and everybody agreeing about
what a smart move that was.

Jon Huntsman was so well respected as governor of Utah, it was seen as
such a smart appointment. He was a high-profile, prestigious pick for that
really important job. It was a bipartisan gesture by a president who had
just been elected, saying he wanted to usher in a different tone in
Washington, D.C.

And then once he got the job, Jon Huntsman, by pretty much all
accounts, he turned out to be good at the job, as the ambassador to China.

Well, now two years later, two years after that appointment, now that
Republicans are desperately looking for a conservative, experienced,
electable alternative to Mitt Romney -- hint, hint Jon Huntsman -- and they
are unable to see that Jon Huntsman really could be that alternative
because they can`t get over the fact that huntsman did have that job
technically in the Obama administration, now two years later President
Obama giving Jon Huntsman that ambassadorship doesn`t just seem like a
smart move. It kind of seems like a genius move. It effectively killed
any chance that Mr. Huntsman had for rivaling Mr. Obama for the presidency.

But it wasn`t the only move like that that President Obama made early
in his administration. It wasn`t the only bipartisan pick, not even the
only high-profile bipartisan pick. Three months before President Obama
nominated Jon Huntsman to go to China, you may remember this bipartisan
scene at the White House.

(BEGIN VIDEO CLIP)

THEN-SENATOR JUDD GREGG (R), NEW HAMPSHIRE: Thank you very much, Mr.
President. And thank you for taking this rather extraordinary step of
asking me to join your administration as commerce secretary.

(END VIDEO CLIP)

MADDOW: That was Republican Senator Judd Gregg of New Hampshire being
nominated for and accepting the nomination to be the nation`s secretary of
commerce. Judd Gregg said that day that when the president of the United
States calls on you to serve he said, quote, "It is your obligation." in
his words, "It was my obligation to say yes." That`s what he said. And
then nine days later, inexplicably, Judd Gregg changed his mind and he
withdrew his nomination to be commerce secretary.

So, about that whole it`s my obligation to serve thing, I was just
kidding.

His book "The Promise" about the Obama administration`s first year,
here`s what Jonathan Alter wrote about how things went down. He said,
quote, "Obama chose a bona fide conservative, Senator Judd Gregg, for an
important economic post, commerce secretary.

And what happened? Instead of viewing the choice as a gesture of
bipartisanship, Republicans hounded Gregg as a traitor until he dropped out
of the cabinet. Quote, `This place is insane,` Obama told his friend Marty
Nesbitt with a can-you-believe-it grin."

Even though Judd Gregg is a conservative, the Judd Gregg appointment
was not that strange a choice for the new president. President Obama did
make bipartisan appointments. And especially given the reputation of what
it means to be a New Hampshire Republican, you know, country above party,
practical hard-nosed Yankee fiscal conservatism above all else, picking a
New Hampshire Republican like Judd Gregg for an appointment like that made
sense. It made sense at least under the old idea of what it means to be a
New Hampshire Republican.

But Senator Gregg freaking out in public and then un-accepting the
appointment that he had just accepted nine days earlier maybe should have
been our first sign that what we think of as a New Hampshire Republican
isn`t necessarily what a New Hampshire Republican is anymore. After his
public freak-out on the cabinet secretary position, Senator Judd Gregg
decided he would stay in the Senate just long enough to start voting
against his own economic proposals. Apparently for the sheer reason that
President Obama had said he liked them.

Then after he did that, Senator Gregg quit the Senate. He retired
from the U.S. Senate. And since he had just repudiated his old positions
because he quit, now that he`s gone, nobody really knows what he ever
really believed. So much for Yankee hard-nosed fiscal conservatism.

The common wisdom about New Hampshire Republicans, about the role of
New Hampshire Republicans in this year`s presidential nominating process is
that they`re the sane ones, right?

If Iowa Republicans are sort of the out of the mainstream Republicans,
a little bit kooky, at least the ones who turn out for the caucuses,
they`re a little on the fringe, New Hampshire Republicans are supposed to
be the reasonable ones. They`re the ones who should actually be seen as a
real barometer of where Republicans stand across the country. That is the
reputation.

If it was ever true, it is not true anymore.

When Republicans won up and down the ballot all across the country in
the 2010 mid-terms, there were few places where their victories were as big
as they were in New Hampshire. This is what the New Hampshire House of
Representatives looked like before the 2010 midterm elections. Blue is
Democrat. Red is Republican, right?

Democrats controlled the New Hampshire House by a margin of 216-173.

Here`s what the house looked like after that election. Look. Boing.
Republicans flipped the New Hampshire House and they flipped it by a huge
margin. They gained 124 seats.

That was basically the same story in the state Senate. Republicans
went from being the minority in the senate to having their biggest majority
there in nearly half a century.

So what have New Hampshire Republicans done with their big new
majorities? They have taken a state with a national reputation for being
sort of sane and within the mainstream among the Republican Party and they
have decided to let their freak flag fly. They have tried stuff that
Republicans are trying all over the country this year, stuff like stripping
union rights and blocking people from voting unless they showed
documentation that they`ve never had to show before and that not everybody
has, but they have also gone for the exotic stuff.

Back in October, one of the new Republican state representatives chose
to use his new seat in the House for Representatives there to call on the
legislature to form a commission to bring charges of treason against
President Obama.

Just a few weeks later, nine New Hampshire Republican legislators, not
conservative activists but actual elected Republicans, joined with birther
queen Orly Taitz trying to get Barack Obama`s name taken off the ballot
this coming November.

Since, of course, he is secretly foreign and therefore secretly not
really the United States president.

A few weeks after that, New Hampshire Republicans crafted a pair of
bills aimed at rolling back the teaching of evolution in New Hampshire`s
public schools.

Just this week, New Hampshire Republicans passed a bill to let every
parent in New Hampshire opt their kid out of every specific lesson out of
every specific class in public school and every school would have to
accommodate every change by setting up an alternate lesson plan for every
kid for every objection -- a bill so weird and so extreme that the
Republicans in the legislature couldn`t even get support from the state`s
fairly radically conservative newspaper the "Union Leader." The "Union
Leader" called this thing, quote, "a simply awful bill that is neither
workable nor sensible."

And just when it seemed like New Hampshire Republicans could not quite
distinguish themselves enough comes their latest effort. It is a bill that
would mandate that any new law proposed in New Hampshire cite its origin,
and it needs to cite its origin not in the U.S. Constitution but in the
Magna Cart -- the Magna Carta, the English Magna Carta of the year 1215.

Three Republican state lawmakers introduced a bill that will force
state legislators to say where in the Magna Carta they get the right to
propose any new given law for New Hampshire. The Magna Carta -- the
ancient list of feudal demands made of the king of England in the 13th
century. That`s what New Hampshire Republicans want to guide the state`s
lawmakers going forward.

Laws in the state of New Hampshire will have to be guided by passages
like this one: "no man shall be forced to perform more service for a
knight`s fee or other free holding of land than is due from it." Or this
one, "If anyone who has borrowed a sum of money from Jews dies before the
debt has been repaid, his heirs shall pay no interest on the debt for so
long as he remains underage, irrespective of whom he holds his lands."

One of the bills Republican sponsors was asked about any legal hang-
ups in requiring New Hampshire bills to derive their authority from
something foreign, from an English charter. He responded, quote, "That`s
an interesting thought."

As he eyes of the nation turn to Republicans in New Hampshire right
now, it is worth noting that Republicans in New Hampshire right now are
sort of a hot mess. Earlier this year, the chairman of the New Hampshire
Republican Party, Tea Party Republican guy, he was forced to resign over
questions about his use of party funds.

In October, New Hampshire Republicans demanded that Republican
presidential candidates boycott Nevada`s caucuses this year to save New
Hampshire`s spot at the top of the nominating process.

When Mitt Romney would not agree to that despite New Hampshire
Republicans` demands, organizers of that boycott decided to punish Mitt
Romney by endorsing him anyway. New Hampshire Republicans have this
national reputation for being the sane ones, for being the ones who have it
together, at least compared to those crazy Republicans in Iowa.

But why exactly do they still have that reputation?

Joining us now is Steve Kornacki. He`s a political news editor at
Salon.com.

Steve, thanks for joining us. Nice to have you here.

STEVE KORNACKI, SALON.COM: Yes, good to be here.

MADDOW: I know that you have been reporting in New Hampshire and that
you have been watching the contest there, as we all have, toward the 2012
race. But do you think that the Republican reputation of what it means to
be sort of a Yankee New Hampshire Republican matches the reality now?

KORNACKI: Not particularly. I mean, there is sort of -- there are
still actual moderates in New Hampshire, in the New Hampshire Republican
Party, in a way there aren`t in a lot of other states. And I think another
thing that`s significant about New Hampshire is there`s a very big
independent electorate there. In more than most states, New England and
the Northeast, it`s friendly to Republicans but it`s not that conservative.

But that said, the heart of the Republican Party in New Hampshire I
think is very conservative. The difference between it -- it`s a distinct
form of conservatism. You know, there`s not this fusion of Tea Party
conservatism and fundamentalist Christianity that you see in other states
and I think really defines a lot of the Republican Party today. It`s more
secular.

You know, in the primary next Tuesday, I think about 20 percent of the
Republicans who vote will identify themselves as evangelical Christians.
It was 60 in Iowa. It will be 60 in South Carolina.

But the conservatism that does exist in New Hampshire comes from two
places, generally. If you look in the southern part of the state where
it`s a lot of immigrants from Massachusetts, these are people who fled what
they think of as tax-assachusetts. They are fanatically, adamantly anti-
tax. And not just anti-tax, it just makes hostility to sort of all
government programs, all government services. So, there`s that kind of
conservatism.

And then outside of the sort of southern New Hampshire suburbs, you
find this older sort of paleo-conservative, almost like Pat Buchanan-ish
form of conservatism, sort of isolationist, a little paranoid in some ways,
you know, worries about like world government, those sorts of things. You
know, Pat Buchanan won New Hampshire in 1996 when he ran for president.
That`s the heart of that.

So what happened when Obama became president is the conservatives in
southern New Hampshire, the conservatives of the Buchanan, they really
asserted themselves in the party and I think they intimated the Judd Gregg
types basically into acquiescence.

MADDOW: I agree with you. And I spend a lot of time in New Hampshire
because my partner Susan`s family lives there. So, I`m in and out of the
state all the time and I`ve seem a lot of this stuff in action and I agree
with you.

And then I look at what`s going on in organized Republican Party
politics in New Hampshire and it seems like it`s a totally different strain
than anything reflected by those things. I mean, where does the don`t
teach evolution stuff come from out of that form of New Hampshire
conservatism or the birther thing or the Magna Carta thing? Really?

The best -- my favorite thing about that is the "Concord Monitor"
interviewed one of the sponsors of this bill. Not only did one guy say oh,
that`s a very interesting question when asked about citing foreign law, but
another one was asked about things that were in the Magna Carta and after
having proposed the legislation, he said, yes, I`ve got to bone up on that.

There`s this sort of what I think of as an ignoramus conservatism that
I don`t recognize as a New Hampshire thing that has taken over in the New
Hampshire legislature.

KORNACKI: Yes. And I think what that might get into is sort of the
barrier between sort of the average sort of crazy person and entry into the
actual political system in New Hampshire. It`s much lower there than
anywhere else because the legislature has 435 representatives. The state
has 1 million people. The ratio of legislator to individual citizen is
microscopic. And you get some of these ballots.

You know, basically, they vote on those state legislative candidates
in groups. So you might have like 11 in your district or something like
that. So the average voter goes to the polls -- think of last fall -- the
conservatives really organize themselves in the primaries, have these very
conservative slates. Then the independents, who are friendly to
Republicans and hostile to Obama came out, just wanting to vote Republican
and vote against the Democrats, check off all 11 names.

Then six months later, we find out it`s the guy who`s obsessed with
the Magna Carta but doesn`t know what it is.

MADDOW: I think that the New Hampshire conservative electorate is so
much more diverse and -- diverse and sort of heterodox than they are given
for this year. I think that although probably Mitt Romney is going to win
on Tuesday, it`s going to be a more fun night than we expect.

KORNACKI: I hope so.

MADDOW: I hope so too. Steve Kornacki, political news editor at
Salon.com. Steve, it`s always good to have you here. Thanks a lot.

KORNACKI: Sure.

MADDOW: All right. Some actual good news coming up. I`m not being
snarky. I`m not being sarcastic. It`s good news and it`s about you.

Also, we got Thomas Frank coming up and Barney Frank coming up. And
no, they are not related.

That`s all ahead.

(COMMERCIAL BREAK)

MADDOW: Hey, microphones at press conferences sometimes pick up
sounds from the audience, not just sounds from the featured speaker. This
is what happened on a live microphone today at the Pentagon while reporters
were waiting for President Obama to make his big announcement there.
Listen.

(BEGIN VIDEO CLIP)

REPORTER: See this room? Two thirds of us laid off when Ron Paul is
president.

(END VIDEO CLIP)

MADDOW: Reporter humor.

Before Ron Paul is president, President Obama laid out big plans on
defense today. Congressman Barney Frank is here in studio to talk with us
about that. That`s just ahead.

(COMMERCIAL BREAK)

MADDOW: Good news. Seriously.

Applications for unemployment were down again last week. Making the
average over the past four weeks the lowest it has been in more than three
years. Steve Benen at "Washington Monthly" made that into a pretty picture
today. This is weekly new unemployment claims from 2007 to early 2009,
right? So unemployment claims going up.

Then look what happened starting early in 2009. Around the time the
stimulus money starts getting spent. Unemployment applications start going
down. And they go down a lot. So, fewer and fewer people filing for
unemployment.

Also, further signs of life. In manufacturing, the lost art of making
stuff in America. Tomorrow`s jobs report is expected to show there were
new manufacturing jobs in America this year for the second year in a row.
The last time there were new jobs in manufacturing for even one year in
America was 1997. Now, we`ve had that for two years in a row.

And further, further good news today from the American auto industry.
Today, we learned that each of the big three Detroit automakers made gains
in their overall share of the market last year. That`s the first time
that`s happened since 1988.

Corporate profits have also been up lately. They have rebounded and
then some from the Great Recession.

So there are these green shoots. There are signs of growth in the
economy all over the place, including for corporations, which are not
people.

In fact, check this out about how corporations, who are not people,
check this out about how they are doing with all their record the recession
never happened profits these days.

Look at what they`re paying in taxes on all those record profits.
While corporate profits rose to a record of nearly $2 trillion in the third
quarter of last year, the amount of money corporations paid in taxes on
that still remarkably low. In fact, as of November, it`s $132 billion less
than government projections for the amount of profit they are making.

So, again, here`s what corporate profits look like right now, right?
They`re at a record high, nearly $2 trillion in a single quarter last year.
And here`s what corporate tax payments look like right now.

Somehow corporations are making record level profits and they`re
paying recession-level taxes. It must be nice.

What have corporations been doing with their windfall record profits
and their low, low taxes? They have not been doing record hiring.
Meanwhile, overall jobless claims are going down, which is a good thing.

The record corporate profit numbers have not been matched by record or
even particularly brisk corporate hiring, because as corporate profits have
risen over the past year, corporations have mostly just been hoarding that
cash. They have not been spending it. They have not been putting it into
the economy. They have mostly just been holding on to it.

So even as there are some signs of life, some signs of growth in this
economy, given what`s going on, how is it that the one economic idea shared
by all the Republican presidential contenders right now, the one idea they
all say would be the magic ticket to us really getting back on track
economically speaking, the one big idea would be lower corporate taxes.
How would that help? How would that help right now?

I`m sure the view from an enormous pile of money is nicer than the
view from just a very large pile of money. But still, actually, in the
real world, how would that help, given what`s going on in our economy right
now?

Joining us tonight for "The Interview" is a man who has just published
his explanation of the intellectual miracle, the alternate universe that is
conservative economic thought after the great recession.

Thomas Frank`s great new book is called "Pity the Billionaire."

Mr. Frank, it`s great to have you here, sir. Congratulations on the
book.

THOMAS FRANK, AUTHOR, "PITY THE BILLIONAIRE": Thank you, Rachel. How
are you today?

MADDOW: I`m good. I felt like when I was looking at all those sort
of good news economic stories today, it keyed in for me to your thesis
here. I mean, your book is about this remarkable revival of the right
after the financial crash and how in empirical terms it really makes no
sense. But we did get from this financial disaster to an era of right-wing
economic fundamentalism.

How do you think that happened?

FRANK: Oh, my God. Isn`t that the great mystery? I mean, that`s
what I`ve been wrestling with ever since I saw it beginning back at the
very first Tea Party rallies back in 2009. When you come out of this --
you know, this financial catastrophe brought on by, and almost every
serious observer that`s looked at this agrees, brought on by decades of
deregulation of the financial sector, you know, allowing all kinds of crazy
predatory lending, mortgage origination, you know, these people writing
these toxic investments and ripping one another off -- all of this crazy
stuff completely unsupervised.

And then you have a political movement that rises up and is in fact
triumphant in so many parts of America claiming that you know, all we`ve
got to do is get government out of the way and deregulate some more. You
know?

And you look at virtually every Republican candidate, and now they
move their circus to New Hampshire and that`s what they`re demanding.
You`ve got to get government out of the picture. You know, you`ve got to
unleash Wall Street, by God.

It`s an amazing -- it`s an amazing turnabout.

You know, look, Rachel, I have never seen in my life, and I doubt I`ll
ever see it again, an ideology more directly discredited than the whole,
you know, laissez-faire thing was. The whole deregulatory push was by the
financial crisis in 2008. And yet, it`s back as though it never happened.

MADDOW: Well, and you write about, though, it seems like the key
you`re able to find to how Republicans were able to push something that was
the exact opposite of what circumstances would seem to warrant they should
push. The sort of the key that you find is essentially that they were
willing to do it, that they were willing to make a case for it, that they
were willing to be activist good it, to be coherent and to speak with
conviction and say, no, no, no, it`s deregulation that we need. I know, I
know, I know, it`s just -- trust me, it`s deregulation.

And by being so vehement and internally coherent about it, it just
seemed like it was basic and made sense and so people latched on to it.

Is it almost like a psychological argument that you`re making that we
need to hear simple truths?

FRANK: It is in some ways. But I wasn`t going to go there just yet
because it`s more than that. It`s a kind of utopianism, you know?

It`s what they decided, and they decided this very on, with the very
beginnings of the right-wing revival, is that the main, you know, problem -
- you and I can sit here and say, we`ve been engaged in, you know,
conservative politics in this country for 30, you know, maybe 40 years, and
whether the same is true in basically every other western country,
privatizing, deregulating, de-unionizing, you know, outsourcing, all of
this sort of thing, but their answer to that is uh-uh, we just haven`t gone
far enough and we`ll never -- you know, we`ll never be prosperous again
until the day we deregulate all the way and we privatize everything.

And until then you can`t say that laissez-faire -- you know, or that
the free market has been discredited because we haven`t been allowed to do
every last little thing that we want.

You know, and what`s weird, Rachel, this worked. This argument
worked. This argument was successful.

And yes, there`s a psychological element to it. It`s called the
social construction of reality. And you see it in a lot of these kind of
utopian movements throughout history but you especially see it with our
friends in the Tea Party. It looks like you see it in New Hampshire --

MADDOW: Well, exactly. But that`s sort of where I was going to go
with this, is I feel like your thesis absolutely has helped me understand
what happened in 2010 and how the simplistic, incredible but simplistic and
vehement argument that sounds simple and effective repeated loudly can work
and can move people toward something especially when they`re scared.

But I wonder if you feel like your marveling at the success of this
movement on the right, is it all damaged by the field of presidential
candidates for 2012? They do not seem poised to do as well in 2012 as they
were in 2010, and in fact, they`re having a hard time even mounting kind of
a credible slate of candidates, aren`t they?

FRANK: Well, you know, it looks like it. But I wouldn`t write them
off. I mean, this is a mistake that so many of my pundit friends made back
in 2008.

Remember, after the crash itself, when pundits just across the board
were saying, first of all, conservatism is dead, laissez-faire has had its
moment, deregulation is over. And that furthermore, the Republican Party
has to either moderate itself or basically face irrelevance for a
generation.

And, you know, what did the Republicans do? Did they move to their
moderate wing? No, they purged those guys and they went the opposite
direction. You know, they sailed as hard as they could to the right and
had this, you know, fantastic victory in 2010. And so when you -- you
know, when you achieve success by doing that, of course they`re going to
continue to do something like that.

And I would not write these guys off. Remember, Rachel, they have --
you know, as silly as they seem, and I admit, Rick Santorum? I`m just like
watching this, my mouth agape. I cannot believe it.

But this is a party that`s well-organized, extremely well-funded.
They have a powerful infrastructure. They`re able to bounce back from the
most incredible defeat.

Just two years ago, all those scandals in the Bush administration, the
delay Congress. Oh, my God. I would not write them off.

Although I will say this, the debt ceiling showdown was a huge black
eye for these people. I mean -- and in Wisconsin, what, you know, electing
Scott Walker, that sort of thing.

MADDOW: Thomas Frank, columnist for "Harper`s" magazine and author of
the very good new book, "Pity the Billionaire" -- thank you for writing
this book. It`s a great read like everything you write, and I appreciate
the chance to talk to you about it tonight. Thanks.

FRANK: Well, thank you, Rachel.

All right. President Obama had never held a press conference at the
Pentagon until today. I will have the details about a big shake-up in
American military priorities with the man who has been calling for that
shake-up for a very long time, Massachusetts Congressman Barney, just
ahead.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GEORGE W. BUSH, FORMER U.S. PRESIDENT: If we`re an arrogant nation,
they`ll resent us.

If we don`t stop extending our troops all around the world, in nation-
building missions, then we`re going to have a serious problem coming down
the road. And I`m going to prevent that.

I don`t think our troops ought to be used for what`s called nation-
building.

(END VIDEO CLIP)

MADDOW: Yes, then he got elected.

George W. Bush ran for president in the year 2000 as Ron Paul. Not
really, but kind of, on national security. He talked about a humble
American foreign policy.

He posited that the Clinton administration had used the military way
too much. He said that as president, he would use the military less. He
certainly wouldn`t allow the U.S. military to be used for nation building.
He said that over and over again.

Then after 9/11, as president, George W. Bush launched two massive
ground wars in the Middle East and Central Asia, overthrowing governments
that, whatever their sins, had not launched the 9/11 attacks. After
overthrowing those governments in Iraq and Afghanistan, the Bush
administration decided to stay in those countries, setting up a large-
scale, long-term multitrillion-dollar U.S. military presence in both of
those countries to try to set up and prop up new governments there,
indefinitely. We were remaking those countries and remaking the world.

It would take a new president from the opposing party to come in after
those eight big neo-conservative years to finally end one of the Bush
administration wars and to start the end -- start ton end the other. And
it should be noted to finally get the guy whose al Qaeda organization
actually did attack us on 9/11.

Well, today, that president, President Obama, went to the Pentagon, I
think the first time a president has ever held a news conference at the
Pentagon, and he announced there a new overall national plan for defense --
reducing the size of the military not back to where it was before the Iraq
and Afghanistan wars but back toward that. Reducing the defense budget not
back to where it was before the Iraq and Afghanistan wars but at least to
start to slow that budget`s extortionate growth.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Over the past 10 years,
since 9/11, our defense budget grew at an extraordinary pace. Over the
next 10 years, the growth in the defense budget will slow, but the fact of
the matter is this -- it will still grow, because we have global
responsibilities that demand our leadership. In fact, the defense budget
will still be larger than it was towards the end of the Bush
administration.

And I firmly believe, and I think the American people understand that
we can keep our military strong and our nation secure with a defense budget
that continues to be larger than roughly the next 10 countries combined.

(END VIDEO CLIP)

MADDOW: This new plan the president announced today at the Pentagon
also entails what I think is an important demotion -- a demotion for the
radical and elegant idea of counterinsurgency, an idea that was
wholeheartedly adopted during the Bush wars, this maximalist idea that U.S.
military force is something so broad-based, so permanent, so infinitely
resourced, so omnipotent that its goal could be the stabilization of whole
foreign societies, it could establish trust in government and justice and
education and utilities and local government and national government,
policing, everything.

It is a fantastic theory. But I mean the word "fantastic" literally
here. Counterinsurgency does not hesitate to call for hundreds of
thousands of soldiers being deployed abroad for decades. Seriously, for
decades, plural. It is the kind of thing a country might decide to do if
we had infinite resources and if we really did love the idea of nation-
building in other nations.

If the new plan announced -- in the new plan announced today,
counterinsurgency, which became doctrine of the U.S. Army under George W.
Bush, counterinsurgency under this new plan is busted down to ninth place
on the new list of U.S. military priorities. Large-scale prolonged
stability operations are explicitly ruled out in this new plan. Ruled out.
No more Iraqs. No more Afghanistans. At least no more Afghanistans after
this current Afghanistan that we`re still in.

The grand remake the world neocon wizard vision of the past 10 years,
what George W. Bush explicitly did not run on but then brought us as
president, as of today that experiment is over. It has finally been
declared dead.

For several years, Congressman Barney Frank has championed changes
like the ones announced today. He joins us here in studio next.

(COMMERCIAL BREAK)

MADDOW: Joining us now here in studio is Congressman Barney Frank of
Massachusetts. He has been one of the loudest and most persistent voices
in Congress, calling for big reductions in military spending and is the
first person I wanted to speak to today after I heard President Obama`s
announcement. Thanks for being here.

REP. BARNEY FRANK (D), MASSACHUSETTS: Thank you, Rachel. And thank
you for doing such a good job on this particular issue.

MADDOW: Do you feel like the president`s announcement today of this
new defense plan is a significant change in course or is this a tweak?

FRANK: No, it`s a significant change in course. It doesn`t go far
enough. And I was sorry to see him almost boast about the fact that his
budget`s going to be bigger than Bush`s. But it is a very significant
change.

First of all, the fact that the military budget is being appropriately
identified as one of the causes of the deficit is a big breakthrough. I
mean, you can go back and do a content search. And I`ve been on this for a
long time.

You know, I told you so today. One of the great lies people say is
oh, I don`t like to say I told you so. Everybody likes to say I told you
so. And I have found it to be one of the few pleasure that`s improves with
age.

So I get better at it as I get older. And there aren`t many things
about which that`s true.

But the fact that we`ve got it on the table, and I give some credit to
Erskine Bowles and Alan Simpson. And I talked to them beforehand.
Secondly, you made a very good point by talking about no longer long-term
stability.

The dollar number is secondary to the goals you set yourself. If you
were going to set for America very broad range of goals in which we have to
we have to run the world to make it better, you`re going to have to spend
more. And if you then try to cut back people say -- well, you`re putting
the military in a bad position because you`re telling them to do this and
you`re not giving them the resources. We have to pull back on this
overreach.

And there`s one principle I would hope we could adopt, and it`s really
implicit in the very good comments you were making about building
societies, et cetera. We have a wonderful military. They are
extraordinarily able people. They are dedicated. They are well-equipped.

And they are very good at doing what a military can do, and that is to
stop bad things from happening. But militaries are not the place you go
when you want good things to happen. Militaries stop bad things. They
don`t start up good things or bring on good things, particularly in foreign
societies.

I mean, I`m sorry that the Shia and the Sunni and the Kurds are
fighting. But 25-year-old heavily armed Americans are not the answer to
that.

So the president took some steps forward, But not far enough. And I
think it`s important for a lot of us to continue to press -- for instance,
he said we`ll be secure if we spend more than the next 10 countries in the
world combined.

I`m going to be radical. I`d feel securer if we were spending more
than the next seven combined. I`d knock off the last three. I bet you
that would save us $15 billion a year.

MADDOW: The thing that I have always felt like was the structural
issue about why the defense budget didn`t get down -- go down, is that
defense dollars were seen as dollars that somehow magically didn`t compete
with other dollars for American priorities.

Do you think that Erskine Bowles and Alan Simpson and the sort of
arguments that have been had about fiscal responsibility in Washington in
the last couple years, has that changed?

FRANK: Without question. If you and I were just talking before, and
you mentioned the trigger, the sequester. One of the good things that
happened this year, and again, you and I have discussed this, the right
wing has had an advantage in the debates up until now because they were
ready to let everything blow up.

You know, in the story of King Solomon and the baby, the woman who was
not the mother had a kind of bargaining advantage. She was willing to see
the baby get cut in half. It was the real mother who had to give in and
say, no, no, don`t cut the baby in half, I`ll give it up.

Well, the right wing has been willing to cut the baby in half, the
baby being government. They were willing to macerate it and we sometimes
had to give in. But through a number of things, and the administration
said they were thinking about this, I`ll give them some credit for it. If
nothing happens this year everybody`s taxes go up, not just the rich,
because the Bush tax cuts expire in their entirety, and there are cuts
across the board, except the administration did exempt Social Security,
Medicare, and programs for poor people.

Now, there will still be cuts in the environment and transportation I
don`t want to see. But the military will be cut bad. So that now makes it
clear to people, it`s a zero sum game. When the issue was should we cut
the military or not, I wasn`t doing very well. But we kept emphasizing.

And as the deficit issue became an issue, exactly what you said. The
military is competing with everybody else. And in that competition I think
they`re going to lose.

One last example, in Massachusetts, defense contractors who are
present in our state, we have a good high-tech base, were getting articles
in the "Boston Globe" about how this is going to hurt Massachusetts. The
military budget was cut.

And I wrote an op-ed making the I think incontestable point if you hit
Medicare we get it worse because we are a center for medical education, for
medical treatment, for medical instruments. So that is exactly right.
It`s the zero-sumness.

The other point about it is this -- we`re not good at it. Look, if we
could go into Iraq or Afghanistan or other places and make them the kind of
democratic, open societies with equal rights, I would feel conflicted
without saying let`s not try. But it`s impossible to send the most well-
trained, heavily-armed young people with the best weaponry into a society
they don`t know anything about and transform it in a good way. Again, you
stop bad things. You can`t make good things happen.

MADDOW: Yes, and if you decide to stay for the fifth, sixth, seventh,
eighth year --

FRANK: President Obama is now withdrawing from Iraq. As George Bush
originally said he would. And the president was shaky about that, but he`s
doing the right thing.

He`s now getting attacked by the right wing, by John McCain, by Mitt
Romney because, well, how can you get -- we can`t withdraw, the Iraqis
still don`t get along with each other. That is exactly a recipe for what
you said, decades long. This notion that we will stay in any country or in
several countries until their politics improves despite the fact that
they`re no threat to us or anybody else is a recipe for, A, futility and,
B, bankruptcy.

MADDOW: Congressman Barney Frank of Massachusetts -- I get to see new
person to rarely. It`s really nice to have you.

FRANK: Thank you, Rachel. It`s nice to be here.

MADDOW: Thanks.

All right. Right after the show on THE LAST WORD, Lawrence
O`Donnell`s guest will be the newly sworn in director of the Consumer
Financial Protection Bureau, Richard Cordray. That is the definition of
recommended viewing. You should watch that.

And here, I`m going to stick politics into your Super Bowl. I`m very
sorry.

(COMMERCIAL BREAK)

MADDOW: This is Lucas Oil Stadium in Indianapolis. Holds up to
70,000 people for big events and Sunday, February 5th, a month from today,
the biggest event, the Super Bowl will be played there.

And if my secret boyfriend, Aaron Hernandez, scores a touchdown, beer
on me, everybody. I`m getting ahead of myself with the Patriots but no
matter what uniforms, or what team`s names on them are worn on that Sunday,
the stars of Super Bowl Sunday will be union members. Every pro-football
player is a member of the NFL Players Association, which is a union that
collectively bargains for wages and benefits and better working conditions
for the players. It is great for the state of Indiana that they get to
host the Super Bowl this year. It`s also a bit of bad timing for them
since Indiana state government is controlled by Republicans right now.

And here`s why that`s a problem. Last year Wisconsin`s fight over
Republican stripping union rights in that state erupted right after the
Super Bowl, which happened to be won by Wisconsin`s own Green Bay Packers.
Guess who the heroes of that Super Bowl supported in that big Wisconsin
fight.

Quote, "The NFL Players Association will always support efforts
protecting a workers right to join a union and collectively bargain.
Today, the NFLPA stands in solidarity with its organized labor brothers and
sisters in Wisconsin."

To have Wisconsin`s football heroes take the protesters` side had to
be embarrassing for Wisconsin Republicans, right? Two of whom were later
fired from their jobs as senators in that state by the people of their home
districts. Thanks to recall elections.

Another Wisconsin Republican, Governor Scott Walker is facing the same
possibility this year. With much less of the national fanfare that
accompanied the big protest in Wisconsin, Democrats in Indiana`s
legislature did exactly the last thing as Wisconsin legislatures did to
spark the protests in the streets of their state.

Indiana Democrats up and left the state for weeks to block the
Republican-held legislature from moving ahead with their union-stripping
plans. In Wisconsin, the Republicans forced the union-stripping thing
through any way.

But in Indiana, the Democrats who fled the state, they won. Now, it
is starting up all over again in Indiana. Yesterday, it was supposed to be
the first session of the Indiana state legislature for the year. Item one
on the agenda of Republican Governor Mitch Daniels and the Republicans in
the legislature is that same union right-stripping that Democrats stopped
them from getting at last year.

Republicans argued that if they use state law to kill unions, if they
institute a so-called right to work law in Indiana, that will attract
business to Indiana, particularly business that will bring manufacturing
jobs. If only Indiana had at right to work law, they say, if only Indiana
had a right to work law to kill unions, then they could create jobs.

Here`s a chart on the Economic Policy Institute on growth and
manufacturing jobs between 2009 and 2011 for Indiana, which hasn`t had
these right to work laws and for the Midwestern states that do. Indiana`s
the one other there on the right that`s really tall and tall is good in
this case.

And this chart shows net manufacturing job losses by state since 1994.
The lighter bars are right to work states, states that killed union rights.
The darker ones are states without right to work laws, states that preserve
union rights. It is hard to argue looking at this, that right to work laws
are magic ticket to ensuring against job flight.

What you can effectively argue, what you can see from the data is that
one thing right to work states have is bad pay, low wages -- lower wages
and right to work states are on average 3.2 percent lower than in the
states that don`t have right to work laws.

So, that`s what Republicans want for Indiana. Not holding on to jobs.
Not gaining jobs. But if you do have a job, let`s shrinky-dink your
paychecks. That`s what Indiana Republicans are trying to do right now,
again. And that`s why Democratic lawmakers in Indiana are fighting this
fight again.

And again, at least so far, it is without much national fanfare.
Democrats in the Indiana House who are outnumbered 60 to 40, they refuse to
appear on the House floor yesterday or today, denying the Republicans the
67-member quorum they need to get going on this plan to kill union rights
and to shrinky-dink Indiana paychecks.

Already, Republicans` efforts to block protests at the statehouse have
been walked back. They have capped the number of people they said they`d
allow at the capitol. They blocked those elevators and stairwells from the
public. They banned cameras and recording devices. They planned all of
these restrictions to keep people from protesting the union stripping law
the way they did the last time.

At the last minute today, Governor Mitch Daniels caved and withdrew
those new rules. Democrats say they want hearings all over the state.
They want a slower time frame so Indiana understands what killing union
rights would do to their state.

Republicans want to fast track it. They want it to go as fast as
possible, please, in the hope that the matter can be settled very soon,
really soon like maybe before February 5th soon.

The Indianapolis Colts have the worst record in football this year.
They were so bad that people who usually hate them rooted for them this
year out of a feeling for mercy. That is a bad way to get national
attention. That Indianapolis is hosting the Super Bowl a month from today
is weird enough given the Colts` bad session this year.

But if that Indianapolis Super Bowl is the site of a massive in the
streets Indiana union rights protest this year, then mercy schmercy for
Indiana Republicans. America`s most celebrated union members and a whole
lot of national media are coming to town. What do you have to say for
yourself?

This fight is just beginning again Indiana. We`ll keep you posted,
especially if it involves Aaron Hernandez.

(COMMERCIAL BREAK)

MADDOW: We`re going to be live from New Hampshire tomorrow. I`m
hoping to get at least one candidate other than the delightful Buddy Roemer
to speak with me. Talk to me, Jon Huntsman. New Hampshire tomorrow.

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

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

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