updated 1/19/2012 4:40:47 PM ET 2012-01-19T21:40:47

Guests: David Cay Johnston, Jon Soltz, Bill Press, Tyler Jones, John Nichols, Rep. Steve Israel, Krystal Ball, Ari Melber

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

Mitt Romney is taking heat from all sides for not releasing his tax
returns. Late breaking news this evening raises major questions about Bain
Capital`s offshore accounts.

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

(BEGIN VIDEOTAPE)

GOV. CHRIS CHRISTIE (R), NEW JERSEY: You should put them out, put
them out sooner than later because it`s always better in my view to have
complete disclosure.

SCHULTZ (voice-over): Even Mitt Romney`s pals are piling on. And
now, we find out Romney wants to lower his own taxes.

David Cay Johnston will crunch the numbers.

Does Romney pay a lower rate than veterans? The head of Vote Vets,
Jon Soltz, wants to know. And he`s here tonight.

Newt and Mama Grizzly are scratching each other`s back.

SARAH PALIN (R), FORMER ALASKA GOVERNOR: If I had to vote in South
Carolina, in order to keep this thing going, I`d vote for Newt.

NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: I would ask her to
consider taking a major role.

SCHULTZ: We`ll have all the latest on the chaos in Carolina.

Scott Walker is licking his wounds with his pals on FOX.

UNIDENTIFIED MALE: I believe this is your debut on the curtain couch,
is it not?

GOV. SCOTT WALKER (R), WISCONSIN: That`s right. Yes.

SCHULTZ: "The Nation`s" John Nichols has the latest from the Badger
State.

And Colbert versus Citizens United keeps getting better.

NARRATOR: A vote for Herman Cain is a vote for America.

SCHULTZ: Ari Melber of "The Nation" magazine and Democratic
strategist Krystal Ball are here tonight to explain.

(END VIDEOTAPE)

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

Mitt Romney is getting attacked by enemies and his friends aren`t
helping.

Newt Gingrich says he`s going to release his own tax returns tomorrow
and says Romney should do the same.

(BEGIN VIDEO CLIP)

GINGRICH: We can confirm that I pay 31 percent rate. And although
let me be clear, the 21st century Contract with America at Newt.org has an
optional 15 percent flat rate for every American. So my goal is not --

REPORTER: Not just Mitt Romney?

GINGRICH: My goal is not to raise Mitt Romney, it`s to let everybody
pay Mitt Romney`s rate. And so, I`m not going to criticize Romney. I`m
just going to say, shouldn`t we all have the option of a flat tax at the
same rate that he was paying?

(END VIDEO CLIP)

SCHULTZ: Mitt Romney stands to gain a lot from his own tax policies.
Citizens for Tax Justice broke down the tax proposals of President Obama
and Mitt Romney. Now, under the president`s plan, Romney would be taxed at
24 percent.

But wait a minute, under his own plan, he would be taxed at less than
15 percent. Good deal, huh?

Romney`s new friend, Chris Christie, tried to run interference for
him. Well, he may have done more damage.

(BEGIN VIDEO CLIP)

CHRISTIE: The way I conducted myself and my public life all along is
I released all my tax returns. And I did it during the campaign, went back
a number of years and released my tax returns, and I release them every
year after I file them, right after I file them, to the public in New
Jersey so they can see everything. And I think that`s the right way to go
and that`s what I would tell Governor Romney to do.

Now, he says he`s going to release them in April. I hope he does.
The fact of the matter is, that`s what I would advise him to do.

(END VIDEO CLIP)

SCHULTZ: Romney has said that he will probably release his tax
returns in April. Christie wants Romney to release them now and release
them going back a number of years.

Former labor secretary Robert Reich pointed out why Romney is being
coy about his taxes. Writes Reich on "Huffington Post," "A loophole in the
tax laws allows private equity managers like Romney to treat their
compensation as capital gains. It`s legal but it`s a scandal."

So Mitt Romney already is hiding the amount he stands to gain from his
own tax policies, and he`s hiding the tax loophole he exploits to get a low
rate right now.

And here`s some interesting stuff as well about Romney`s tax returns
that if it would be released, it would reveal this. A "Reuters" report
discovered Bain Capital has millions of dollars in foreign tax havens in
the Cayman Islands, Bermuda, Hong Kong and Ireland. This is not illegal
but offshore holdings brings in massive profits for companies like Bain,
which is the source of Mitt Romney`s income.

Romney, I guess, you could say, is becoming the poster boy for what`s
wrong with our tax code in this country. He calls himself an expert in
creating jobs, but Romney is really an expert in gaming the system.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: What is the effect it rate I
have been paying? It`s probably closer to the 15 percent rate than
anything, because my last 10 years my income comes overwhelmingly from
investments made in the past rather than ordinary income or earned annual
income. I got a little bit of income from my book but I gave it all away,
and then I get speaker`s fees from time to time but not very much.

(END VIDEO CLIP)

SCHULTZ: Not very much.

You know, the story just won`t go away. There`s like a new chapter
every day.

His favorable rating across the country is starting to take a dive,
too. He has an unfavorable rating of 53 percent in a new PPP poll. A 47
percent rte in a new Pew poll. And only 33 percent of Americans say that
they look at Romney favorably.

Romney, you know, this guy, I think he`s just got ice in his veins.
He can`t relate to the middle class in any way, shape or form. The money
Romney makes in speaking fees, if you look at it, is really a life-changing
number for most Americans.

I mean, what would you do with $375,000? Down in South Carolina
alone, the median income is just over $42,000. But, you know, that
$375,000 is really not that much.

Mitt Romney doesn`t relate to the plight of every day working folk in
this country because he hasn`t had a job in five years. Even Chris
Christie knows this.

(BEGIN VIDEO CLIP)

CHRISTIE: For people who know this, I don`t think it comes as any
great shock because the guy hasn`t been having a job where he`s been
getting income over the last number of years and so, he`s been getting
money from investment income which is taxed at a different rate.

(END VIDEO CLIP)

SCHULTZ: Mitt Romney doesn`t need to work for a living. He makes
millions from untaxed offshore investments and he pays less in taxes than
people who earn a fraction of what Mitt Romney is worth. Romney`s only
real job is running for president. So he can pass policies to make himself
even richer.

Is he your guy tonight?

Get your cell phones out. I want to know what you think.

Tonight`s question: should Mitt Romney have to explain Bain Capital`s
offshore accounts? Text A for yes, text B for no, to 622639. And you can
go to our blog at Ed.MSNBC.com. We`ll bring you the results later in the
program.

Joining me tonight is David Cay Johnston, columnist for "Reuters", and
author of the book "Free Lunch". And Jon Soltz is also with us tonight,
chairman of votevets.org.

Gentlemen, great to have you with us.

David, you first, how advantageous are these offshore holdings by Bain
for Mitt Romney?

DAVID CAY JOHNSTON, REUTERS: Well, they are enormously better than 15
percent, Ed, because you and I and Jon and most of the viewers get a
paycheck from which the government takes the taxes out before we get our
money. And if you`re a single person making a bit over $60,000, you`re
paying 15 percent of your income to the federal government.

But Romney set up these deals where he was allowed to get
compensation, not investments, compensation from managing other people`s
investments, and be paid with what`s called carried interest. Well, he
doesn`t pay any taxes on that, until he cashes out. He`ll pay taxes on
dividends or other things that flow out of it.

But imagine if you could for five or 10 or 20 years have wealth in
your bank account or your offshore account and all you had to do was pay
this low 15 percent rate on the dividends that flows from that and your
wealth is untaxed. We don`t know how much of your wealth is untaxed and we
won`t unless we get his tax returns all the way back to 1984.

SCHULTZ: Well, you know, you talk about that carried interest, today,
Rupert Murdoch put this out on Twitter. He says, "Romney`s tax uses as
long term legal loophole, carried interest, makes all fund managers rich.
It` time both parties stop selling out to Wall Street."

What do you think about that?

JOHNSTON: Well, I think that if I were a Wall Street executive or
hedge fund manager, I`d be really worried about Romney running because once
ordinary Americans sitting around the kitchen table understand this, and
that`s what my column at "Reuters" will be about tomorrow, once they
understand this and how this game is rigged, far worse than they ever have
been told, there`s going to be public pressure to end this practice of pay
now, pay your taxes years later.

SCHULTZ: Jon, your group, Vote Vets, has a petition to get Romney to
release his tax returns. Why is this an important issue for Vote Vets?

JON SOLTZ, VETVOTES.ORG: Well, look, he`s running for commander in
chief and it`s no surprise you can go in any Army times or military times
article and see what the pay scale is.

You know, look, when we`re in Iraq or Afghanistan deployed, we get
actually, you know, a non-taxable income for those months that we`re
deployed. But when we return, we`re probably taxed at a higher rate other
than the man that wants to be president.

But when we are deployed, there is a certain percent of officers that
are field grade officers and higher that actually do pay taxes because
we`re only allowed to get tax-free pay up to the highest enlisted man.

So, if you`re running to the president, there is a leadership
responsibility here that the troops need to know, you know, who the
commander in chief is. I mean, you don`t have this type of secrecy. I
think that`s the first issue. The second issue is really simple, I mean,
the public is appalled at the fact that people that can spend 20 years
fighting for our country could possibly be paying higher taxes. I mean,
we`re the real 1 percent -- than a man who is making hundreds of millions
of dollars annually, and this is something the public has a right to have
disclosure on instead of the troops.

SCHUTLZ: Is there anything in his tax returns that you could think
would disqualify him for the presidency? Everything he`s doing right now
is legal -- it may not seem fair to the average Joe or to the combat
soldier, or to retired veterans.

But you see anything that could disqualify him in your opinion?

SOLTZ: I mean, I don`t -- I can`t see these things. I have no idea.
But it`s perception is reality.

And, you know, votevets.org, we just released a poll yesterday, we
looked at veterans messages in battleground states. And this is the issue
that popped. It wasn`t veterans talking to veterans, it`s the issue that -
- in places like Ohio and Pennsylvania or Michigan or Montana, where you
start looking at Republican white men and white independent men -- I mean,
these people are appalled to find out the wealthiest 1 percent actually is
in the lower tax bracket based on the capital gains structure than people
who served 20 years, the real 1 percent, the people who spent 20 years
fighting for the country.

So, politically, it`s an Achilles heel. And I think if it wasn`t, he
would have released these things already.

SCHULTZ: David Cay, is there anything he can do between now and the
date that he`s going to release these returns, I guess the middle of April,
that might soften the blow a little bit or it`s just done and that`s the
way it is?

JOHNSTON: I think he`s got a real quandary here. First of all, he
shouldn`t delay until April. You get the news out and you try to get it
over with and move on.

But as soon as he releases those returns, people are going to
recognize that he`s been running for president now for five years. He`s
had five years to shape his finances to make whatever return he makes
public look as good as possible. The returns that matter are the ones from
1984 when Bain was founded through 2000. Those are the ones that will tell
us about the money he made and it`s not investment income as he calls it.
It`s compensation, just like your and my paycheck that under this special
rule hasn`t been taxed or isn`t taxed until he sells that compensation that
buys him shares.

SCHULTZ: Well, both parties are guilty of not doing anything about
it. But the wealthy, they shake down the Senate and the House, and they
give to both parties. And so, there hasn`t been any push to change any of
these loopholes, is that fair enough?

JOHNSTON: Yes, but if people called the capital switchboard and asked
for the Congress person by name and say you got to stop this, we may see
some movement about it. But, absolutely, there is only one political party
right now in Washington. It`s the party of the green buck.

SCHULTZ: Well, we had such a big discussion in this country about
income inequality. I show the chart quite often. I called it the vulture
chart -- the top 2 percent, their income has gone up almost 300 percent
over the last 30 years. The blue liners have only seen a modest increase
in wages over the last 30 years.

And I would imagine for soldiers, that`s the same way for the
military. The military is down there at the blue line, and I just don`t
think this is a real good morale issue, is it, Jon?

SOLTZ: No, I mean -- the soldiers are, you know, we call ourselves 1
percent because we`re always gone. But people who serve, the regular
Americans, they`re making, you know, $25,000 in taxable income up to maybe
$80,000 or $90,000 in taxable income, and the retirees get 50 percent after
they served 20 years, the longer you serve/

So, you`re talking about middle class people. That`s why we`re
involved in this issue. The veterans are the middle class. I mean, that`s
why we had 4,000 veterans and families sign this petition. I mean, we have
pending budget cuts going on over at the Pentagon. Is Governor Romney, if
he`s president, going to want to 401(k) the pension system so he can
continue to pay 15 percent taxes or even lower because he`s relying on
offshore accounts? I mean, these are real concerns, will he take from the
middle class programs that have been earned, they are not given to us but
earned by military retirees so he can keep himself, you know, in municipal
bond funds that pay zero percent taxes or carried interest program, where`s
he`s actually playing with other peoples money that he gets taxed his
capital gains even though he wasn`t his principal in the first place.

SCHULTZ: Great point.

David Cay Johnston, always a pleasure.

Jon Soltz, great to have you on the program tonight. Thanks for your
insight on all of that.

This story just won`t go away.

Remember tonight to answer the question at the bottom of the screen.
And, of course, share your thoughts on Twitter. We want to know what you
think.

Coming up, is Newt Gingrich -- I mean is this guy a surge on the who
the horizon down in South Carolina? We got the latest polling and it looks
pretty good for Newt. Tyler Jones from South Carolina is going to join us,
and Bill Press will weigh in as well.

And the Democrats in Wisconsin partied pretty hard last night, but
now, the real fight begins. We`ll bring you the latest on the record-
breaking recall of Governor Scott Walker and the media tour he`s doing to
try to gin up support.

(COMMERCIAL BREAK)

SCHULTZ: Oh, yes, Twitter is alive on THE ED SHOW. I mean, if Obama
has to show his birth certificate, why doesn`t Romney have to show his tax
returns?

Coming up: Newt Gingrich, is he rebounding in South Carolina? Should
Mitt be worried?

Democratic strategist Tyler Jones and radio talk show host Bill Press
will join me next.

"Psycho Talk" coming up. Find out what this superstitious cheesehead
says is to blame for the Packers lost to the Giants last Sunday. I mean,
it`s just brutal.

And Stephen Colbert won`t be on the ballot this Saturday in South
Carolina. But here comes Herman Cain. Colbert`s new plan to win the
United States of South Carolina later on the show.

Share the thoughts on Twitter using #EdShow. We`ll be right back.
Stay tuned.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

GINGRICH: I fully expect the Romney campaign to be unendingly dirty
and dishonest for the next four days because they are desperate. They
thought they could buy this. They are discovering they can`t buy this.

(END VIDEO CLIP)

SCHULTZ: That was Newt Gingrich earlier today hitting frontrunner
Mitt Romney pretty good.

Romney looks like he`s in for a very rough few days. Gingrich is
catching up in the polls in South Carolina. The latest poll numbers show
Romney with a 10-point lead, but Gingrich is gaining ground.

Romney campaign has taken notice. Today, Romney surrogates on a
conference call explaining why Gingrich is unreliable. As "The Washington
Post" reports, Romney hasn`t organized such a call with Gingrich as the
target since the former speaker led the field back in December.

And last night, Gingrich`s Southern strategy got a boost from way up
north.

(BEGIN VIDEO CLIP)

PALIN: If I had to vote in South Carolina, in order to keep this
thing going, I`d vote for Newt, and I would want this to continue -- more
debates, more vetting of candidates, because we know the mistake made in
our country four years ago was having a candidate that was not vetted.

(END VIDEO CLIP)

SCHULTZ: Yes, we didn`t vet President Obama at all. Believe it or
not, you know, right there, she was not referring to herself.

Gingrich says the half-term governor will be a key player in his White
House.

(BEGIN VIDEO CLIP)

GINGRICH: I would ask her to consider taking a major role in the next
administration if I`m president. But nothing has been discussed of any
kind, it wouldn`t be appropriate to discuss it at this time.

(END VIDEO CLIP)

SCHULTZ: Major role by Sarah Palin in a Gingrich administration?

Let`s go to Tyler Jones, Democratic strategist of South Carolina and
co-founder of South Carolina Forward Progress. And nationally syndicated
radio talk show host Bill Press with us tonight, author of the upcoming
book, I can`t wait to read it, "The Obama Hate Machine."

Bill, what`s that all about? You`re writing about how they are going
after Obama all these years. I`m looking forward to it.

All right. Speaking of going after candidates, ABC News has an
interview with Newt Gingrich`s ex-wife, Marianne. While we don`t know what
is in this interview, we do know that she once she told "Esquire" magazine
once she didn`t believe that he was fit to be president of the United
States.

Bill, what do you think? Could this be something that derails his
momentum in South Carolina if ABC runs the story?

BILL PRESS, RADIO TALK SHOW HOST: You know what, Ed? This reminds me
of way back in the Clinton days when Drudge reported, I think also NBC, had
this story about a girl named Monica Lewinsky, that the president might
have been having an affair with, a young woman I should say, and there was
a big debate inside whether or not to run it.

Now, that debate is going inside ABC. If this comes out, this could
tube the Gingrich candidacy.

But as you said, there`s no doubt about it. Here`s in South Carolina
today, people don`t like Romney even though he won the first two primaries,
sort of one in Iowa. They`re looking for somebody else.

And Newt is a bomb-thrower. He`s the one that throws the red meat out
there. They like Newt and they want to give Newt one last chance. He may
not win, but he`s going to go down fighting and is giving Romney the run of
his life -- which is why Romney sent his people in here today to move
around and trash Newt Gingrich.

SCHULTZ: Interesting. You know, for a guy, Tyler Jones, who is not
the front-runner, Newt Gingrich is certainly acting like it. What do you
make of his move in South Carolina -- cutting this lead by Mitt Romney to
just 10 points?

TYLER JONES, DEMOCRATIC STRATEGIST: Well, good evening, Ed. I think
the surge is for real. Newt Gingrich needed two things in order to win
South Carolina. He needed money and he needed debates and he got both of
them. He obviously got the $5 million contribution and he also got two
debates in one week.

And if there is one candidate that benefits from two debates in one
week it`s not definitely Rick Perry. It`s Newt Gingrich. He had a great
debate on Monday night. It was full of hateful and insulting rhetoric
toward poor people, which we know South Carolina Republicans absolutely
love. And Mitt Romney had a terrible debate.

So, I think he`s got some momentum.

SCHULTZ: Well, Gingrich believes his momentum is coming out of this
Tuesday debate you`re talking about, the exchange between Juan Williams and
Newt Gingrich came up in a town hall today. Let`s go to that, here it is.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I would like to thank you, Mr. Speaker, for
putting Mr. Juan Williams in his place the other night.

(END VIDEO CLIP)

SCHULTZ: What about that Tyler? I mean, did he knock it out of the
park with these red neck voters down in South Carolina? I don`t mean to be
disrespectful but holy smokes.

TYLER: No offense taken. I mean, yes, he had a tremendous debate. I
mean, he threw out the red meat he needed to, to connect with let`s just
say eccentric Republican voters in South Carolina.

But I think the surge has a lot to do with the debate but I think has
a lot to do with Mitt Romney imploding. He is not able to fill rooms at
his events in his events here in South Carolina. Obviously had a terrible
debate. And the ads in South Carolina are finally starting to stick and
people are looking for that alternative to Mitt Romney and I think they
found it in Newt Gingrich.

SCHULTZ: I mean, you can listen to that crowd, Bill Press. He`s got
a base down there.

JONES: Oh, yes.

PRESS: There`s no doubt about it, Ed. And, you know, his specialty
throughout this primary season and all these debates has been attacking the
moderator, right? Attacking the members of the media. He`s done it over
and over again. Juan Williams was just the latest.

Now, wait until tomorrow night. The word around town here in
Charleston, Ed, is that CNN knows this is the last stand. This is the last
chance for most of these candidates. And they`re just going to let them go
at each other.

And, boy, that`s going to be fun to watch and there is nobody better
at slash and burn than Newt Gingrich.

SCHULTZ: Well, he called for Perry and Santorum to drop out of the
race. Here is Rick Santorum`s response. Here it is.

(BEGIN VIDEO CLIP)

RICK SANTORUM (R), PRESIDENTIAL CANDIDATE: Well, I think it`s an
enormous amount of hubris for someone who lost their first two races, who
thinks enough of themselves that they should now -- because of a couple
polls have him at this moment in time ahead of me, that everybody should
step aside and let him who hasn`t won, who hasn`t defeated me in two of the
elections so far, to let him, you know, have a wide berth.

(END VIDEO CLIP)

SCHULTZ: And there`s other drop-out talk as well. Right wing talkers
Laura Ingraham and Erick Erickson, they want Rick Perry to drop out and
consolidate to the anti-Romney vote.

Here is Perry earlier.

(BEGIN VIDEO CLIP)

GOV. RICK PERRY (R-TX), PRESIDENTIAL CANDIDATE: The idea that we`re
going to do anything else other than try to impact this election and that`s
why we got in it. We didn`t get in it because it was our purpose in life
to be the president of the United States, we did it because it was our
purpose to serve this country and that`s what we have been called for and
will continue doing.

(END VIDEO CLIP)

SCHULTZ: Bill, what about this, anybody going to drop out and
coalesce behind one conservative?

PRESS: Well, probably not, because they`ve got their super PACs and
they`ve got their money.

But, Ed, I got to tell you, for Newt Gingrich, right, who hasn`t beat
Santorum yet in two primaries, to suggest that he ought to drop out so that
everybody can get behind Newt, I mean, remember Madeleine Albright called
it cojones.

SCHULTZ: Yes.

PRESS: And, boy, he`s showing them with that.

(CROSSTALK)

SCHULTZ: And they may announce tomorrow a different ending to the
Iowa caucus.

Tyler Jones, at this point, it really doesn`t matter, does it, whether
Mitt Romney won by eight votes or he might lose by 12 on a recount, what
does that do to South Carolina, if anything?

JONES: Nothing. I don`t think that matters. A new poll came out
that showed Mitt Romney up 10 on Newt Gingrich and showed Rick Perry at 6
percent. So, Ed, even if Rick Perry were to drop out and all his support
went to Newt, he would still be four points down on Mitt Romney.

SCHULTZ: Yes.

JONES: He`s got to go after Rick Santorum, especially in the upstate,
among Christian conservatives, social conservatives. If he`s able to do
that, he could win.

SCHULTZ: Tyler Jones, Bill Press, always a pleasure, good to have you
on.

Bill, enjoy that warm weather.

Up next, a very depressed Green Bay Packers fan has a unique theory
about why her team lost to the Giants. I have a sparkly surprise for you
in "Psycho Talk."

And today, the president took a stand against Republican pressure to
build the environmentally unfriendly Keystone XL pipeline. Congressman
Steve Israel will join me later in the show and talk about how it affects
the 2012 elections.

(COMMERCIAL BREAK)

SCHULTZ: And in Psycho Talk tonight, well, you know, we just got back
from Wisconsin. And there were a lot of sad faces in Packer-land after
Green Bay got booted out of the playoffs by the New York Giants. Working
in New York, believe me, I have heard a lot of it.

Now we have all heard all kind of rumors about why the Packers didn`t
get it done. But a fan named Casey had the best theory of all.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: -- to the Superbowl.

UNIDENTIFIED FEMALE: Casey?

UNIDENTIFIED FEMALE: They didn`t because they told me to put the
sparkles on my nails.

UNIDENTIFIED FEMALE: I`m sorry, don`t cry.

UNIDENTIFIED FEMALE: It`s not your fault. Sparkles. I told you not
to do the sparkles and you told me to do it. It looks pretty. I don`t
care about pretty. I wanted the Packers to go to the Superbowl, Megan.

UNIDENTIFIED FEMALE: Oh, my God.

UNIDENTIFIED FEMALE: And I wore my jersey and I said let me wear my
Aaron Rodgers jersey. You said no.

(INAUDIBLE)

(END VIDEO CLIP)

SCHULTZ: We don`t know how serious she was about the sparkle nail
polish, but Packers` all pro linebacker Clay Matthews, he`s a dandy, but he
really let her have it on Twitter.

He posted the video and tweeted, "damn you, Megan, and your sparkles."

Clay, all I can tell you, dude, is just relax. The sparkles probably
weren`t the reason why you lost. But if they were, she wasn`t the only one
that put them on her nails. I kind of like the Pack.

(BEGIN VIDEO CLIP)

GOV. SCOTT WALKER (R), WISCONSIN: Normally you have a recall about
someone who breaks their promises. We kept all of our promises.

(END VIDEO CLIP)

SCHULTZ: Scott Walker is raising cash all over the place to save his
job. Will the Democrats field a winner? John Nichols of "The Nation"
magazine has all the answers.

Republicans are twisting themselves into knots over the president`s
Keystone decision. Congressman Steve Israel responds.

And Stephen Colbert is reheating some cold pizza to expose the
ridiculous Citizens United decision.

(BEGIN VIDEO CLIP)

STEPHEN COLBERT, "THE COLBERT REPORT": Anybody who shares my values
can show it by voting for Herman Cain.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: I believe this is your debut on the curvy couch,
is it not?

WALKER: Yes, absolutely. .

UNIDENTIFIED FEMALE: It`s so great to see you in person. I wish for
you personally it was for better circumstances.

(END VIDEO CLIP)

SCHULTZ: It`s just so great to see him in person because he`s always
on satellite on Fox. There he is, spending his morning on the curvy couch.
Scott Walker after the big fundraiser that he had with the boys at AIG in
New York on Tuesday night.

When I woke up this morning in Madison, Wisconsin, this is the
headline I woke up to. I saw the "Wisconsin State Journal" out of Madison.
Walker is running scared, big time, after the record setting recall
petition drive. Walker`s basically on the ropes and so he runs to the safe
haven of conservative talk radio and the noise machine.

(BEGIN VIDEO CLIP)

LOU DOBBS, FOX BUSINESS ANCHOR: Scott Walker I think arguably one of
the -- if not the best governors in the entire country.

WALKER: They certainly don`t want to see endless campaigns, but that
is what we have thanks to the big money coming in from Washington, from the
public employee unions. We`re going to be able to fight that,
ScottWalker.org. Hopefully people will join us in that cause.

GRETA VAN SUSTEREN, FOX NEWS ANCHOR: Governor, thank you. Always
nice to see you, sir.

WALKER: I hope, given the chance again this summer, with the help of
a lot of grassroots supporters and people across the country, at
ScottWalker.org, can help us out as well.

RUSH LIMBAUGH, RADIO TALK SHOW HOST: Well, that`s why they want to
recall. You`re effective. You`re -- you`re doing what you said you were
going to do. And what you said you were going to do is working. And that
is the last thing the left can tolerate.

(END VIDEO CLIP)

SCHULTZ: Really? I`m sure Rush got out of bed yesterday and said,
you know, the first thing we got to do is cover that Wisconsin story; let`s
go help that Walker guy.

I mean, they got their machine in place. Walker needs all the help he
can get. The recall effort against Walker really is unprecedented. The
Wisconsin Democratic Party points out more than 46 percent of the Wisconsin
electorate signed a petition to recall Walker.

Now, it`s only happened two other times in American history. It was
back in 1921, 31.8 percent of the voters signed when North Dakota Governor
Lynn Frazier was recalled. And not too long ago, in 2003, it took only
23.4 percent of California petition signers recalled Gray Davis. Remember
those days? Would you like to have them back?

Walker won the 2010 election. Now think about this. He won election
in the mid-terms, 2010, this gubernatorial chair by just 124,638 votes.
Keep in mind, many union households voted for this guy, before they
realized that he was out to destroy collective bargaining.

I don`t think they are going to make the same mistake again. The
working men and women of Wisconsin only needed to gather 540,208 petition
signers to recall Walker. They collected over a million. That`s 185
percent of the amount that they needed.

In 2010, Democrats -- what happened? Well, you know, across the
country, I guess you could call it a health care hangover. And many, you
know, just didn`t show up, and were mad at the democrats, didn`t do enough.
Now look what happened.

Well, the Democrats in Wisconsin, they got a major chance to correct
all of that and turn this around. They have done the due diligence. Now
they have to go the next mile.

Let`s turn to John Nichols, Washington correspondent of "The Nation"
magazine, and is now on Twitter. I love it, @NicholsUprising. How
innovative. I love that one, John.

Now, was Walker shocked by these results? And also, John, your take
on this unbelievable media tour that he is on. I mean, every right wing
heavy weight is helping this guy out with visibility, raising money. This
is now a national campaign.

Do you think he was blind-sided by the million signatures?

JOHN NICHOLS, "THE NATION": He was absolutely blind-sided, Ed.
Governor Walker and his lieutenant governor, who also faces a recall,
Rebecca Kleefisch, were both on right wing media early yesterday saying
that the Democrats -- that progressive forces that go well beyond the
Democratic Party, that set out to do this recall, had fallen short of their
goal.

Lieutenant Governor Kleefisch actually said that they would only get
700,000, 720,000. And she said that was a defeat because they didn`t get
the million. So their internal communication was telling them that this
was not going to get anywhere near a million.

When that hit, they were unquestionably shocked. When you listen to
the governor`s interviews later in the day, when it became evident to him
what he was up against, you heard a lack of energy. He was actually
mumbling in some of the interviews.

And yet, of course, this right wing spin machine did everything it
could to prop him up. And they were doing so with a clear intention, to
help him raise huge amounts of money. You pointed it out there in that
clip. Every time, on every one of these shows, he mentioned his campaign
website. That is a desperate candidate.

SCHULTZ: Well, I think that the right wing in this country views this
as an Alamo of sorts, that they have to win this to survive, to continue to
go after the Democratic base, collective bargaining, wage earners, blame
middle classers for the condition of the country economically, and balance
the budgets on the back of wage earners.

I mean, so the money that is going to be coming in -- how much super
PAC money do you think is going to be out there helping Walker?

NICHOLS: Today, we heard an upping of the estimate. It has long been
suggested that this would be a 70 million dollar campaign. Not all of it
for Governor Walker, fighting on both sides, but with Walker having the
overwhelming majority of that.

Now there is talk that this 100 million dollar campaign. Perhaps the
most expensive gubernatorial race in a state this size ever in the history
of the country.

Now here`s what significant about that as well. Governor Walker has
been raising huge portions of this money, very close to half of it, from
outside the state of Wisconsin. That is an effort to get money to support
this initiative. And Governor Walker himself has said why. He has said
that if he loses, that the anti-labor push of the right and of these
Republican governors will begin to lose steam and perhaps even fall apart.

SCHULTZ: All right, John Nichols, you know we`ll follow the story.
Great to have you with us tonight. Appreciate your time.

President Obama stood up to Republican pressure to approve the
Keystone XL Pipeline. And Republicans are hitting back really hard. DCCC
Chairman Steve Israel will tell us how the political football fits in the
2012 election strategy, the president up against the oil companies.

(COMMERCIAL BREAK)

SCHULTZ: President Obama threw the Republican some political red meat
today by putting his foot down and refusing to authorize the controversial
Keystone XL Oil Pipeline. Republicans forced President Obama to make a
quick decision on the proposed oil pipeline running from Canada to Texas as
a condition of extending the payroll tax cuts.

The president cited the GOP`s rushed and arbitrary deadline as the
main reason for his denial. The Republican backlash was very predictable.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R), HOUSE SPEAKER: President Obama is destroying
tens of thousands of American jobs and shipping American energy security to
the Chinese.

REP. ERIC CANTOR (R), HOUSE MAJORITY LEADER: By deciding to block the
development of the Keystone Pipeline, he has essentially decided to block
the creation of 20,000 new jobs.

(END VIDEO CLIP)

SCHULTZ: All right, here we go; 20,000 new jobs is a bogus talking
point. Trans-Canada, the company that wants to build the pipeline,
estimates the project will only create around 6,000 temporary jobs.

Meanwhile, two of President Obama`s clean energy initiatives are
projected to create 68,000 permanent jobs. But Republicans label those
programs job-killers.

How much more evidence do Americans need to see that the Republican
party cares more about defeating this president than they do about creating
jobs?

Joining me now is the chairman of the DCCC, Congressman Steve Israel
of New York. Congressman, good to have you with us.

REP. STEVE ISRAEL (D), NEW YORK: Great to be with you.

SCHULTZ: This is a very detailed response. It has to be a detailed
response because there is a lot of environmental issues that play into this
decision. It`s hard to fit it in a 15 second sound bite about killing
jobs. What is your response?

ISRAEL: Look, this is the latest twist and turn in the Congress of
chronic chaos. This has nothing to do with the pipeline. This has to do
with these House Republicans doing everything they can, using every excuse
they can to block a middle class tax cut.

Ed, when in the history of tax cuts did the Republicans ever impose a
condition? But when it comes to a middle class tax cut, to help working
families, suddenly they won`t do it unless they get a pipeline. You cannot
approve a pipeline unless you can prove it`s safe. They were not
interested in proving that it`s safe.

SCHULTZ: So is there a chance the president someday might go along
with this pipeline? He`s just not going to shoot from the hip like the
last guy?

ISRAEL: That is exactly right. Look, did these guys forget the BP
pipeline in the Gulf of Mexico, that was spewing oil into the Gulf of
Mexico? Now they want to essentially disregard all safety standards. They
want this pipeline running through the United States.

and again, it has nothing to do with the pipeline. It`s a joke. They
want to oppose a middle class tax cut. And they`re using this pipeline as
an excuse. The American people are tired of their excuses.

SCHULTZ: But there are some serious environmental concerns about
this, about where this oil is coming from in Canada, and how toxic it could
be. And it would also -- this pipeline would be running over the Midwest,
which would be right over a major aquifer that deals with drinking water,
irrigation for crops. This is a big deal.

ISRAEL: I guess the BP spill in the Gulf of Mexico wasn`t enough.
Now they want it in Nebraska. There are some environmental issues. That
is why you have a permitting process. You know, maybe we can make the
judgment that the pipeline is a good idea one day, but you have a
permitting process.

These people want to disregard the permit process and use this as an
excuse not to do this middle class tax cut.

SCHULTZ: Today, you unveiled your plan to take back the House for
Democrats. How does the president`s Keystone decision affect the race in
2012?

ISRAEL: I think it very much affects the race. We unveiled a plan
right now. We need 25 seats to take back the House. We have 76 seats in
play. We rolled out 36 of our red to blue candidates. These are problem
solvers.

They`re not going to find excuses to pass middle class tax cuts.
These are people used to -- they`re reflections of the middle class.
They`re used to solving problems, a NASA astronaut, the first African
American woman police chief in Orlando, Florida, Val Dennings (ph).

These are people who solve problems. They are not interested in
continuing this -- this joke that these Republicans inflict on the American
people.

SCHULTZ: The Obama campaign released their first ad today. Here it
is. It`s somewhat of a soft sell. But it talks about the environmental
record and energy. Here it is.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: Secretive oil billionaires attacking President
Obama with ads fact checkers say are not tethered to the fact, while
independent watchdogs call this president`s record on ethics unprecedented,
and America`s energy industry, 2.7 million jobs and expanding rapidly.

For the first time in 13 years, our dependence on foreign oil is below
5o percent. President Obama kept his promise to toughen ethics rules and
strengthen America`s energy economy.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I`m Barack Obama and I
approve this message.

(END VIDEO CLIP)

SCHULTZ: Congressman, does that work?

ISRAEL: It does work. Look, every election is about who you are for.
This election and the House Democratic candidates that we have are about
the middle class. You know, this House Republican majority has
consistently chosen millionaires over Medicare. It`s chosen oil companies
over middle class tax cuts.

And this message is the message that our candidates are going to be
articulating throughout this campaign.

SCHULTZ: Quickly, are the Republicans lying about the job numbers
about this pipeline?

ISRAEL: The Republicans continue to spin. Again, it`s the Congress
of chronic chaos. They spin. They don`t tell the truth. We`re not going
to let them get away with it. We`re holding them accountable.

SCHULTZ: Congressman Steve Israel, good to have you with us tonight.
Thanks so much.

Stephen Colbert can`t get on the South Carolina ballot, so he`s
calling on Herman Cain for some help. I`ll explain, next.

(COMMERCIAL BREAK)

SCHULTZ: In the Big Finish tonight, Stephen Colbert has a bit of a
problem. His name does not appear on the South Carolina primary ballot.
And the state doesn`t allow write in candidates.

So how can he continue to run for president of the United States of
South Carolina? Well, with the help of Herman Cain. Cain is still on the
ballot in South Carolina. And Colbert is now asking his supporters to vote
for the pizza man.

(BEGIN VIDEO CLIP)

STEPHEN COLBERT, "THE COLBERT REPORT": Because Cain and I are so
similar, I think that if this Saturday, Herman Cain were to get a
significant number of votes, that would be a sign that voters are hungry,
hungry for a Stephen Colbert Campaign.

Anybody who shares my values can show it by voting for Herman Cain.

(END VIDEO CLIP)

SCHULTZ: Well, as for Herman Cain, you know, he thinks it`s a great
idea. Cain will tape a segment for "The Colbert Report" in South Carolina
on Friday, Tweeting this caveat, "to be perfectly clear, I am -- I will not
be assuming Stephen Colbert`s identity. We are very different when it
comes to the color of our hair."

Colbert Super PAC, now run by Jon Stewart, released this ad explaining
the situation to voters.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: There is one name on the ballot that stands for
true Americanimity (ph), Herman Cain. Americans for a Better Tomorrow
Tomorrow believes a vote for Herman Cain is a vote for America.

On January 21st, vote Herman Cain.

(END VIDEO CLIP)

SCHULTZ: All right, let`s get some insight from Ari Melber,
correspondent for "The Nation" magazine, and Democratic strategist Krystal
Ball, also with us tonight.

You know, the poll shows Obama at 41 percent, Romney at 38 percent.
This is PPP poll. And Colbert at 13 percent. Will this alter the outcome,
Ari, on Saturday in South Carolina?

ARI MELBER, "THE NATION": He could take a bite out of it. This was
actually the plot of an Eddie Murphy movie, "The Distinguished Gentleman,"
where they said, you know, if you have the right name ID and you say you`re
the other candidate, you can win as him. In that case it was one who had
passed away.

Herman Cain again shows he`s not very serious about this since he`s
playing along.

SCHULTZ: Sure. And of course, you never know, Stephen Colbert could
finish ahead of Rick Perry.

KRYSTAL BALL, DEMOCRATIC STRATEGIST: Hey, it`s not unheard of. Maybe
you should throw your hat in the ring, Ed. Jon Huntsman`s name is up for
grabs on the ballot.

SCHULTZ: Really. Here is what Mitt Romney had to say about
coordinating with his super PAC last month.

(BEGIN VIDEO CLIP)

MITT ROMEY (R), PRESIDENTIAL CANDIDATE: I`m not allowed to
communicate with the super PAC in any way, shape or form.

UNIDENTIFIED MALE: So you`re not coordinating in any way, whatsoever?

ROMNEY: My goodness. If we coordinate in any way whatsoever, we go
to the big house.

(END VIDEO CLIP)

SCHULTZ: Colbert and Stewart, they proved how easy it is to not
coordinate last night.

(BEGIN VIDEO CLIP)

COLBERT: I can`t tell you. But I can tell everyone through
television. And if you happen to be watching, well, I can`t prevent that,
Jon.

JON STEWART, "THE DAILY SHOW": Oh, I have an idea, hold on a second.

COLBERT: I`m calling on the super PAC -- I cannot coordinate with
them. I can`t communicate directly. But I can speak out as a citizen
talking to you. And I`m calling on them not to run vicious character
assassination ads that impugn and borderline slander any candidate, if in
any way those ads could be traced back to me.

(END VIDEO CLIP)

SCHULTZ: I mean, we are at the point now, Krystal, in American
politics where two comedians are doing more to help the process than the
politicians are, to help Americans understand exactly what the hell is
going on out here.

BALL: Although, in fairness to the Republican nominees, one of the
most beautiful things out of this campaign, in a campaign that has not been
very beautiful, has been seeing them all up on stage complaining about
super PACs, and themselves highlighting the role of money in politics.

But also, political satire has a long history in American culture and
American politics. Stephen Colbert has done an amazing job really pointing
out the absurdity of the situation and making it very real for a lot of
people.

SCHULTZ: So will this change anything, Ari?

MELBER: Yes. I think, number one, it`s going to scramble things in
South Carolina a touch. If Herman Cain picks up even three or four point,
we`re going to hear complaints about who that took votes from.

Then the other piece is I agree with Krystal. You know, most folks
don`t care about process that much. Right? People don`t worry about media
bias until they feel the bias hits something they care about. And so the
process of super PACs is arcane. But absurdities that are on display are
huge.

SCHULTZ: Could we see the Democratic president, Barack Obama, and the
Republican nominee, whoever it may be, broker a deal to cool it?

MELBER: I would love to see that. And there was a call for that by
Andy Rosenthal at the "New York Times," saying what about a mutual non-
aggression pact? Ultimately, it has got to be in the law, though.

SCHULTZ: Krystal, what do you think?

BALL: I think that is a possibility. The other piece I want to throw
into this is you have Americans Elect, which is likely to be on the ballot
in 50 states. Someone with a big personality like Stephen Colbert could
very well get the Americans Elect Nomination and have a big impact in the
general election.

SCHULTZ: Krystal Ball, Ari Melber, thanks so much.

That is THE ED SHOW. I`m Ed Schultz. You can listen to me on Sirius
XM Radio, channel 127, Monday through Friday, noon to 3:00. Follow my on
Twitter @EdShow, and like THE ED SHOW on Facebook.

"THE RACHEL MADDOW SHOW" starts right now. Good evening, Rachel.
They love you in Wisconsin, by the way.

RACHEL MADDOW, MSNBC ANCHOR: I love Wisconsin back.

SCHULTZ: It was always, hi Ed. We love Rachel.

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

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