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'The Rachel Maddow Show' for Monday, February 13, 2012

Read the transcript to the Monday show

Guest Host: Ezra Klein
Guests: E.J. Dionne, Peter Orszag, Jan Schakowsky, Brian Beutler

EZRA KLEIN, GUEST HOST: And thank to you for sticking around at home
with us tonight. Rachel is on assignment.

But we begin with a big day on the annual political calendar. In
fact, a very big day for me personally.

Today is budget day. It`s the day the White House releases its
proposed budget for the next year.

It turned out President Obama introduced his 2013 budget today at a
speech in northern Virginia.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Today, we`re releasing
the details of that blue print in the form of next year`s budget. And
don`t worry, I will not read it to you. It`s long and a lot of numbers.

But the main idea in the budget is this: at a time when our economy is
growing and create be jobs at a faster clip, we`ve got to do everything in
our power to keep this recovery on track.

(END VIDEO CLIP)

KLEIN: I will also not read you the budget, even though I would kind
of like to, because I`m super excited. I love budget day. I love budget
day because I love budgets. Love `em.

And not just because I have an unusual and what some may say is an
unhealthy fixation on charts and tables and graphs, although, but to be
clear I sort of do. I love budgets they force to run the numbers, to make
trade-offs, to decide what`s really important, and to be honest what we are
willing to sacrifice to get it.

The annual budget is frankly as honest as the government ever is with
itself and with the American people.

I mean, just ask the most basic question. What is a federal
government? What does it do? Ask a politician, and get some rambling
answer about freedom and personal responsibility and Ronald Reagan and
Thomas Jefferson and World War II and flags.

But ask the budget and you`ll get the right answer. Look at what we
spent in 2011. We`re just looking at what the government is actually
buying. So, we`re not looking at interest on the debt here -- 43 percent
of our spending went to Medicare, Medicaid and Social Security. Another 25
percent went to the military, went to defense.

So, 68 percent, almost three-quarters, either went to insurance or
defense. That is what the federal government is now. It is an insurance
conglomerate with a large standing military.

The also budget can do for us. It can cut through the rhetoric, and
tell us what politicians are doing or trying to do. That is what this
budget will do, it may not pass the House, it may not pass the Senate, but
it will tell us what President Obama plans to do in the country, his
vision.

And then we can compare it with Mitt Romney`s budget, to see what he
wants to do.

And, in fact, we can particularly do that on taxes because at CPAC on
Friday, Romney said this.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: I will finally balance the
American budget.

(END VIDEO CLIP)

KLEIN: Yay! That sounds just like rhetoric to you, right? That is
another line. But that`s an important line from Romney. That`s like a
Rosetta stone to his whole platform, because we`ve seen Romney`s tax plan,
we know how much money it will probably raise.

And we can see what will have to happen to the rest of the budget to
make it balance. Here`s a hint. It`s not pretty.

But before we get in that and I do apologize for this, we`re going to
have to dive in the numbers a little bit more. Taxes are usually measured
as a percentage of gross domestic product, GDP. That is to say they`re
measured as a percentage of the size of our economy.

So, if your economy produces 10 bucks worth of stuff and services
every year, and you tax $5, taxes are 50 percent of GDP.

Right now, taxes are way, way, way low. In 2011, tax revenues were
15.4 percent of GDP.

To give you an idea of how low that is, before the financial crisis,
you had to go back to 1950 -- 1950 -- to find a year when taxes were that
low. In 1950, there was no Medicare, there was no Medicaid, there wasn`t
even a Hawaii as one of the 50 states of the United States.

For comparison sake, taxes under Reagan were 18.2 percent of GDP.

So, think about that next time you hear about Obama is taxing the
economy to death. Taxes under Obama are lower, at least they have been so
far, than they were under Reagan. It`s not even close.

Now, taxes are so low right now Obama the Bush tax cuts brought them
there, and because of the recession. But as the economy recovers, takes
will come back a bit, too.

Budget experts say they`ll get back to 17.9 percent of GDP. That`s if
we just keep the Bush tax cuts and let the economy come back. But if that
happens our deficits will be huge -- huge. So we have to do something.

But Mitt Romney and President Obama have very, very, very different
ideas as to what to do and who should pay for it.

Obama`s budget wants to raise taxes on the rich by $1.5 trillion.
That means taxes rise to 19.2 percent of GDP.

Romney meanwhile wants to cut taxes further. His plan would extend
all of the Bush tax cuts and then further reduce taxes on the rich. Taxes
would fall to about 17 percent of GDP.

But what`s really interesting in these two plans is who would pay.
The Tax Policy Center is this great group of non-partisan wonks who look at
all these policies in way more detail than I even can stand. But every so
often, they emerge from their caves and they sort of blink because they
haven`t seen the sunlight forever, and they give us great estimates how
much different groups of people would pay under the different plans.

And they`ve looked at Obama and Romney`s plans. Turns out very
different groups of people would pay.

If you are eye in the bottom 20 percent of the income distribution, in
Obama`s plan you`ll pay federal tax rate of 1.8 percent. Under Romney`s
plan, you`ll pay almost double that, 3.4 percent. That`s the poorest
group.

If you`re in the middle, it`s a lot closer, 15.2 percent under Obama`s
plan, 15.6 percent under Romney`s plan. But if you`re in that top 1
percent, as both Romney and Obama are, the difference becomes huge. Under
Obama`s plan, you pay 36.3 percent. Under Romney`s plan, 25.9 percent.

To get that out of percents and into dollars, if you`re in the top 1
percent, under Romney, your taxes will be $160,000 lower than it will be
under Obama, $160,000. Tax cuts of that size cost a lot of money,
trillions of dollars. And Romney`s promised he won`t pay for that by
cutting defense. He`s promised he won`t pay for it by raising taxes
elsewhere and his promise to balance the budget. So, you can actually run
the numbers.

To make those numbers work, to make the taxes and spending balance
out, he will have to cut almost twice as deep in spending as Paul Ryan`s
budget does. It means he will have to cut every single domestic program,
including Social Security, Medicare and Medicaid, all of them by 36 percent
-- 36 percent.

And you know who relies on domestic programs like those? Senior
citizens and the poor. Think all of the seniors voting Republican want a
36 percent cut to Social Security and Medicare in order to pay for Romney`s
tax cuts for the wealthy? I sort of doubt it.

But the budget doesn`t show us where the two parties disagree; it also
shows us where they sort of do agree. Taxes are lower under both Obama and
Romney than they would be if we simply let the Bush tax cuts expire and
returned to Clinton era rates. Then taxes would be near to 20.4 percent of
GDP.

You wouldn`t know that from the admiration which Democrats use when
they talk about Clinton`s economic policies or the horror with which
Republicans talk about Obama`s tax ideas, but both parties are in some ways
closer to Bush than they are to Clinton.

Taxes are also lower in both plans than they were under the bipartisan
Simpson-Bowles proposal, which call for revenues at 20.3 percent of GDP,
and lower than they were in the bipartisan Senate "gang of six" proposal,
which envisions revenues of 19.9 percent of GDP. Taxes in both these
plans, including Obama`s, are frankly historically pretty low.

But then that`s why budgets are useful. They help us keep the two
parties honest.

Joining us is Peter Orszag, former director of the Office of
Management and Budget under President Obama. He`s currently vice chairman
of global banking at Citigroup.

Peter, it`s good to have you here.

PETER ORSZAG, FORMER OBAMA BUDGET DIRECTOR: Great to be here.

KLEIN: You`ve actually this work of cutting a budget. You`ve been in
the room. You sat in the Oval Office. There are pictures. There`s
photographic evidence. If you sat down there and the president said, we
need to get spending down to 17 percent of GDP, how you do it? Could you
do it?

ORSZAG: Virtually impossible. So, in 2020 or so, spending is
projected to be 25 percent of the economy, to get it down to 17 percent of
the economy, is beyond -- I mean, you can make the numbers work
arithmetically, but it would require such massive reductions, especially if
you`re leaving defense completely untouched, then it becomes implausible.

KLEIN: And then on the other side, you`ve actually called for all of
the Bush tax cuts to expire in a Bloomberg column, about a year or two ago.
And the Obama administration has not gone that far.

So, even under their proposal where the revenue numbers are relatively
higher, than they are to Romney`s, do you think in the long run, you can
actually fund the government at that level? Is that a plausible revenue
base?

ORSZAG: I think unfortunately not. I think both sides are locking
into revenue bases that are inadequate for what the government needs to run
on. At least though, the administration`s budget is proposing a revenue
increase of about a percent of GDP, Romney, as you mentioned going in
another direction. I don`t -- I really don`t see how the numbers work
under the Romney budget.

KLEIN: And then we have still -- one of the interesting things about
this budget it`s a first budget after the debt ceiling deal. So, one of
the big things we`re doing is we`re figuring out how to make discretionary
spending work with all the big sort of new discretionary spending caps that
got passed in August.

Now, you were looking, you were telling me earlier about a table that
made you sort of worried because you think we might hit the debt ceiling
possibly even before the election. You want to explain a bit about that?

ORSZAG: Sure. Well, by about this time next year, we`re going to be
back into a quite dramatic period because table 62 in the analytical
perspective --

(CROSSTALK)

ORSZAG: Exactly, for anyone who maybes it through that volume, shows
at the end of September, even assuming relatively good growth under the
administration`s projections, the debt that would be subject to that limit
would stand at $16.3 trillion dollars, which only relative to $16.4
trillion for the limited self. So, we`d be bumping up against that
constraint.

By January, we`re going to be back in the soup at exactly the same
time that the tax cuts are expiring and those large sequestered cuts are
coming online. This is going to be drama, much larger than what happened
last summer.

KLEIN: The largest budget drama.

ORSZAG: If you were excited by the budget, just wait until January.
You`re going to have a great time.

KLEIN: But one of the things I worry about with that because you,
again, you sort of called for the Bush tax cuts to expire, we have the
other things hitting, the president in the comments here earlier said the
key element of this budget is protecting the recovery, the key element is
not doing anything that could be contractionary, well, we get back on our
feet -- if the Bush tax cuts expire all at ones, if the trigger hits all at
once, if we certainly we a debt ceiling problem, shaky deep ceiling
program, that would be a really big drag on the economy in 2013 -- enough
possibly to derail the recovery.

So, how do you play those against each other? Because that seems to
me to be the other side of the Republican leverage against the Democrats.

ORSZAG: First, I agree it would be far too large, and we don`t want
that kind of fiscal austerity too soon. In fact, what we want is much more
stimulus now coupled with deficit reduction that takes effect over time.

But what I think would make a lot of sense is to be tying that upfront
stimulus like a much-expanded payroll tax holiday to unemployment rate or
to the share of the population working, so it`s in effect as long as the
economy is weak, and then you don`t have to worry about things going away
when the economy is weak.

KLEIN: What happens if Romney gets elected right about then, or
frankly any of the Republicans? One of the things that is odd about the
moment that all of these are expiring, is they all expire in the lame duck.
They are expiring when they may actually -- you could actually imagine
everything happening when the Senate is going to change hands in three
weeks, when the House is going to change hands and White House changes
hands.

So, every single branch of sort of the government that have to deal
with this could be in turmoil at that exact moment. I almost don`t know
how you handle that in those terms, you just kick the can down the road?

ORSZAG: Oh, I think in that scenario, it`s extremely likely that you
don`t actually legislate during the lame duck, that it gets kicked to early
next year and then the circumstances that you were suggesting, that new
administration is going to have a huge mess on its hands right during the
honeymoon period when you`re trying -- you know, right at the beginning of
the administration when you want to be proactive along whatever you`re
trying to get done, you`re going to have to clean up this mess of those
three things that are being left behind. It`s not going to be pleasant.

KLEIN: So, that would be if Obama is reelected the second time, the
beginning of the term is the biggest mess he`ll face in the entire term,
right?

ORSZAG: Yes, whoever is president at this time next year is going to
face an intricate dance to navigate through those three things that are
happening at the same time.

KLEIN: Peter Orszag, thank you so much.

ORSZAG: Good to be with you.

KLEIN: So, comparing President Obama`s proposed budget and Mitt
Romney`s expected budget is extremely useful, extremely interesting, and if
you`re me, even extremely fun to do. But it also sort of assumes Mitt
Romney is going to be the Republican presidential nominee, right? What if
he`s not?

The likelihood of that possibility, the whole brokered convention
thing, plus the inexplicable politics of birth control and the stealthy
ninja politics of tax cut -- all of it making news, all of it coming up.

(COMMERCIAL BREAK)

KLEIN: Still ahead, historian Newt Gingrich tells the inspiring true
story of Newt Gingrich on Facebook. If this appeals to you, click "like"
now.

(COMMERCIAL BREAK)

KLEIN: OK, this right here, this is a county by county map of the
state of Michigan. Michigan is made up of 83 counties in total, which is a
lot of counties. And this one right here down in southeast Michigan is
called Oakland County. Oakland County is home to the city of Troy,
Michigan, it`s home to the Chrysler Museum. It`s known as Automation Alley
because of the growing technology sector there.

And when it comes to presidential politics, Oakland County is doing
what Republicans across the state of Michigan were expected to be doing
right now. Oakland County is supporting Mitt Romney for president. Mitt
Romney is from Michigan. His dad was the governor there. Oakland County
is for him. That should be good news for Mitt Romney, right?

The bad news? Oakland County appears to be the only county in the
entire state of Michigan that`s for Romney.

The polling from Public Policy Polling released their latest poll out
of Michigan and it finds that not only is Mitt Romney now losing his home
state to Rick Santorum by 15 points, 15 points, but, quote, "Rick Santorum
is ahead of Mitt Romney every where in Michigan except Oakland County."
That`s it. Oakland County, home of the Chrysler Museum, the place where
Mitt Romney was raised as the child -- they are the only ones behind him
right now in Michigan. The rest of Mr. Romney`s home state is going for
Rick Santorum.

I am on record over and over and over and over and over again saying
Mitt Romney has this race locked down, saying there`s no way anybody but
Romney had even the slightest chance and I have been steadfast. The rise
of Herman Cain, I ignored it. Newt Gingrich, laughed at it. I even
dismissed Rick Santorum when he won Iowa.

But now, for the first time, you can really tell -- I can tell a
plausible story in which Rick Santorum might actually be the Republican
nominee for president in 2012. Rick Santorum has now grabbed the lead over
Mitt Romney in two new polls out of Romney`s home state of Michigan.
Santorum has also leap-frogged Mitt Romney in a pair of national polls that
were just released today.

If you look at the states that have vote sod far, Santorum has won
just as many states as Mitt Romney has and Santorum`s rise in the polls
perfectly coincides with the central argument of Mitt Romney`s candidacy
beginning to fall apart. Mitt Romney is supposed to be the guy who can
beat President Obama, right? He`s supposed to be the uber-electable
Republican. That`s what makes up for his shortcomings in the eyes of
conservatives.

You don`t have to love the guy, but he`s the guy who can win. So, you
support him, right? That`s the pitch.

But look how he`s doing among those all important independents right
now. A month ago, Mitt Romney was beating President Obama among
independents by 10 points. Now, he`s losing that group to President Obama
by 9 point margin. Mitt Romney is hemorrhaging support among independents.

Today, the influential magazine "The National Review" publish an
editorial calling the other non-Romney candidate, Newt Gingrich, to drop
out of the race. The editors there writing, quote, "The proper course for
Newt Gingrich now is to endorse Santorum and exit."

When you look at the Republican race right now, there are all sorts of
preconceived notions that we all bring to it. We know deep in our hearts,
or I thought I knew deep in my heart that Mitt Romney was inevitable.
Thought I knew the Republican Party would never in a million years nominate
Rick Santorum, a guy who lost his Senate race in Pennsylvania by like 7,000
percent.

Those are things I thought were clearly true. There was no chance,
I`d be proven wrong. And yet, if you come at this with fresh eyes, forget
everything you know about this campaign, what you see is that Rick Santorum
looks like the guy right now with the best chance of winning.

Am I willing to say he is the guy with the best chance of winning?
Not yet. But the numbers show what the numbers show. Can`t deny `em.

Joining us now is E.J. Dionne, "Washington Post" columnist and MSNBC
contributor, and a good friend.

E.J., thank you for being here.

E.J. DIONNE, MSNBC CONTRIBUTOR: And happy budget day, Ezra. It`s
good to see you so cheerful.

KLEIN: Happy budget day.

DIONNE: Thank you.

KLEIN: It`s not been as happy a budget day for Mitt Romney. So
here`s my question for you, is what we`re seeing here, is it Rick Santorum
doing something right or is it Mitt Romney doing something wrong or both?

DIONNE: Both I think is the answer. I think the worst number to come
out today for Mitt Romney was in that Pew poll. Mitt Romney`s argument as
you said in the intro is that he`s electable. And a lot of conservatives
weren`t sure what Mitt Romney believes. Many of them would be willing to
take a flyer on him if they thought he was the only guy who could beat
President Obama.

But in the Pew poll, Obama has an 8-point lead over Romney and a 10-
point lead over Santorum. Not even the margin of error, when you compare
to Gingrich and Gingrich was the main competitor, Romney could make a
strong case that he was stronger than Gingrich.

And I think what`s happened is on each side, the Romney side, Santorum
side, Romney has been very awkward to the point where when he uses a phrase
like he governed in a severely conservative way, that`s a story for days.
We`re talking about the word "severely" and he just does not seem
comfortable.

Rick Santorum knows what he believes and looks comfortable saying it.
And I think it`s that contrast that is really helping Rick Santorum right
now.

KLEIN: What I thought amazing about severely conservative, was Mitt
Romney`s only deviation from the script. He went off his script for one
comment, and it was a gaffe.

There was -- there was a joke in a "New York Times" magazine profile
of Mitt Romney`s campaign or Mitt Romney I guess, when they said some of
his campaign staffers from 2008 used to say that we want to fire our
speechwriter. He`s this guy on the fourth floor, and his name is Mitt.

And there`s a bit of that in this campaign. Romney has not been --
he`s been a disciplined campaigner, but he`s not been a mistake-free one.
He`s made a fair number of mistakes. That wasn`t expected.

I mean, I thought the whole thing with Romney he would never sway from
the message, that he would run this campaign like a corporate campaign.
Has that been a surprise to you?

DIONNE: It hasn`t been a complete surprise to me that in the
spontaneous moments when you really can`t script the candidate, he has been
off. You know, he was really off in the period when Bain Capital was under
discussion, and he just really hates talking about money and it`s in those
times when he has shown himself out of touch with ordinary people, just
can`t understand or give the impression anyway that he can`t understand the
way average people live.

And again, I think that is key to those numbers among independents,
and it`s very striking, Obama in the Pew poll is beating him in every
region of the country except the South. He`s got a big lead in the
Midwest, the president does.

If the Republicans who made a lot of gains in the Midwest in 2010
can`t dent Obama in the Midwest, it`s very hard to see how they can win.
And Romney does not seem to be making it there at all.

KLEIN: And real quick, because there was a sort of hilarious
"National Review" editorial calling for Gingrich to drop out. They were
tweaking him a bit, because Gingrich has said this to Santorum. But it
does pit Newt Gingrich`s two motivations against each other, right?

Is he in there to run, or is he in there now to take revenge on Mitt
Romney for all the negative ads him? What`s your prediction -- does
Gingrich drop and if he does, he endorse Santorum?

DIONNE: I think Gingrich is like the old song when you were a kid,
this is the song that never ends just goes on and on -- I don`t think he
wants --

KLEIN: My friends.

DIONNE: My friend, yes. Newt doesn`t want to drop out. I think he`s
going to wait until the next debate on the 22nd and try to do debate magic
that left him during Florida. But beyond that, I don`t know what he`s
going to do. But I just don`t see him ever dropping out.

KLEIN: He will be in there come November, 2012.

DIONNE: Yes, exactly.

KLEIN: "Washington Post" columnist and MSNBC contributor, E.J. Dionne
-- thank you so much for joining me tonight.

DIONNE: Good to see you, Ezra.

KLEIN: There are certain combinations that get tossed around in the
news media with a lot of certainty, but not much understanding. Like
digital platform or good sushi. One of such combo is brokered convention.
All the rage to talk about, but few folks seem clear what it actually is.
We`ll clear up the meaning and actual chances for it, next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SARAH PALIN (R), FORMER ALASKA GOVERNOR: I don`t think that it would
be a negative for the party, a brokered convention, and people who start
screaming that a brokered convention is the worst thing that could happen
to the GOP, they have an agenda. They have their own personal or political
reasons, their own candidate who they would like to see protected away from
a brokered convention, so anybody who starts say can`t allow that to
happen. That`s part of competition. That`s part of the process and it may
happen.

(END VIDEO CLIP)

KLEIN: The words "brokered convention" strike joy in the hearts of
the Beltway media pundits of which I guess I`m one. A brokered convention
happens when no nominee has gathered enough delegates to secure the
nomination. And so, delegates are free to vote as they wish at the
convention, often multiple times on multiple ballots before they arrive at
a nominee.

If you were among us political geeks and you think brokered
convention, you probably imagine 1948 and the Republicans, or 1952 and the
Democrats, when Adlai Stevenson had to be convinced to join the race at the
convention before he went on to win the nomination and lose to Republican
Dwight Eisenhower.

In those days, a brokered convention meant that party power brokers
met in secrecy, presumed they chewed on big cigars, and speaking in
language to pick the nominee. Then came 1968 with all this pummeled and
rancor and chaos when Hubert Humphrey became a nominee after a series of
vitriolic speeches directed at one candidate or another at the convention
by fellow Democrats.

The Democratic Party from their own convention battered and bruise,
and Humphrey went on, of course, to lose to Richard Nixon.

After that disaster played up before TV cameras, the Democrats decided
that people`s votes at the primary process had to be the way their nominees
were selected. Their party leaders weren`t going to wheel and deal behind
closed doors anymore. Republican followed suit a few years later.

Since then, no cigar smoke, no wise guys in back rooms, no brokered
conventions.

The 1976 race came close with Ronald Reagan taking the fight against
then-President Gerald Ford, all the way to the convention. But then Ford
squeaked by, and clinched the nomination before losing to Jimmy Carter.

Today, party rules have made that much harder for delegates to throw
their support behind a nominee who did win the popular vote in their
district. Meaning, a brokered convention is a much more elusive animal.

"Talking Points Memo" has done some great digging into how a brokered
convention would actually work for the Republican this year.

First, the various candidates have to fail to attract enough delegate
to win outright because, quote, "many delegates are bound by state rules to
vote for a specific candidate based on their showing in a primary caucus or
convention." So, that has to fail first.

If it did fail, if the ballot dead locked, however, these delegates
could be released from those rules if the contest drags on and on at the
convention.

But it actually gets more complicated. Plus states have their own
rules. For example, Alabama can unbind their delegates from the candidate
who won the popular vote if two thirds of them agree to do that.

Well, Mississippi delegates don`t have to vote for the winner of the
popular vote if the candidate releases them to vote for someone else.

A RNC committee member told "TPM" quote, "The truth is, our rules are
set up so the delegates are all independent."

So, brokered convention not impossible, but pretty improbable that
Republicans could stage one.

And then you have to ask -- what would it actually accomplish? When
people think about a brokered convention, they usually imagine some sort of
a white knight scenario, say, Chris Christie jumps in or Jeb Bush, or, dare
to dream, Sarah Palin.

But think about what that would mean for any of those potential
saviors. Think about what they would be taking on.

The existing candidates, Mitt Romney, Rick Santorum, Gingrich, Ron
Paul would fight like the devil to stop them from taking the nomination.
After all, they`ve been working for it.

The party would be completely fractured. The American people would be
watching at home would see the GOP in an apparent state of collapse. And
if a new entrant nevertheless won the nomination, the GOP convention is at
the end of August.

This brand new candidate would have two months to raise money, get
organized on the ground, run ads, hire staff, learn the issues, introduce
themselves to voters, get on the ground in swing states, come up with a
policy platform, and unite a fractured party -- two months to do all of
that while taking on the behemoth that is the Obama campaign. That`s not a
coronation. That`s a suicide mission.

Look, everyone respects Adlai Stevenson, but not many politicians,
especially Republicans, want to actually be him.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIPS)

SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: The Obama
administration crossed a dangerous line.

UNIDENTIFIED FEMALE: This action by the Obama administration is an
attack.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: Outrageous assault.

RICK SANTORUM (R), PRESIDENTIAL CANDIDATE: This is the kind of
coercion we can expect.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: And in imposing this
requirement, the federal government has drifted dangerously beyond its
constitutional boundaries.

(END VIDEO CLIPS)

KLEIN: Once upon a time, you know, meaning last week, Republicans
were doing battle with the Obama administration over birth control. The
scale of the fight was enormous. Perhaps you noticed all over the TV every
night, every day.

But the policy that was being fought over was actually sort of small.
Last week, the birth control fight was about a new rule that would have
required employers, including religiously affiliated employers, to include
coverage for contraception in health plans for their employees.

The Republicans argument was access to birth control for relatively
small group of women. They were arguing that some employers like hospitals
and universities associated with the Catholic Church should not be required
to provide health insurance that covers birth control. It was a narrow
call for a special exception for a small group of employers and it largely
succeeded.

The president came out on Friday and said essentially, OK, fine, if
you`re a religious organization and you don`t want to provide
contraceptives in your health plan, you don`t have to do for it, you don`t
have to pay for it. But all your employers get access through their health
insurance. But if they work for religious organization that doesn`t want
to pay for it, it`s the insurance company that gets stuck with the bill.

That is what Republicans have been demanding all week, that Catholic
groups should not be forced to pay for birth control. So, instead of, say,
declaring victory, they have broadened the fight.

It turns out they just don`t want religiously affiliated employers to
be able to deny woman access to birth control. They want all employers to
be able to deny women access to birth control.

(BEGIN VIDEO CLIPS)

UNIDENTIFIED MALE: I think this will continue to be part of the
debate unless the president totally changes his position.

MCCONNELL: This issue will not go away until the administration
simply backs down.

ROMNEY: He did the classic Obama retreat. All right. And what I
mean by that it wasn`t a retreat at all.

SANTORUM: There is no compromise.

REP. PAUL RYAN (R), WISCONSIN: It`s not a compromise. The president
has doubled down.

MCCONNELL: If we end up having to try to overcome the president`s
opposition by legislation, of course, I`d be happy to support it and intend
to support it.

(END VIDEO CLIPS)

KLEIN: Wherever Republicans thought their position last week in their
argument about the Catholic Church and its affiliated organizations, their
widening of this political battle appears to pit them squarely against
women who want contraception covered by their health insurance. That will
be received as very good news at the White House.

Last week a poll from the Public Religion Research Institute found
that 55 percent of all Americans think all employers should have to provide
employees with health care plans to cover contraception at no cost. Only
40 percent of respondents disagree.

Better yet for the Obama administration, the idea polled above 60
percent among women and young voters, two crucial groups for the
president`s reelection campaign.

Now, these voters will know two things, in part, thanks to this.
First, the Obama administration is trying to see to it that their health
plans cover contraception. And second, the Republicans are trying to make
it possible for their boss, someone they may not like or agree with, or
have ever even met, to decide whether they get access to birth control at
all.

Joining us now, Congresswoman Jan Schakowsky, Democrat from Illinois -
- Congresswoman, thank you for talking with us tonight.

REP. JAN SCHAKOWSKY (D), ILLINOIS: Thank you so much, Ezra.

KLEIN: Were you surprised at after the president changed the rules
the Catholic universities and hospitals didn`t have to pay for the
coverage, you still have Republicans widen the fight on this, that they
said it should be all employers should get this exception?

SCHAKOWSKY: I think it is a colossal, political miscalculation on
their part. You know, 57 percent of Catholic voters think that this
pragmatic compromise was a really good idea, and only 29 percent of
Catholic voters opposed that.

And, you know, this is birth control, and I think if these
Republicans, mainly Republican men because now even some of the Republican
women senators are changing their mind or coming out in favor of this
policy, if they want to bring that on as a political issue, I say: do,
bring it on. Because virtually 100 percent of Americans not only embrace
the idea of birth control but actually use birth control. And I think that
this is such an incredible mistake.

KLEIN: Well, your point about the Republicans and we should say
Senators Susan Collins and Olympia Snowe have broken with the line is
interesting because the politics of this -- the way it`s playing in the
different coalitions, appears to have completely reversed in the last week.
A week ago, you were seeing splits across the Democratic coalition. And
now, you`re seeing splits among the Republican one.

Aside from Senators Collins and Snowe, in the House -- are you seeing
any movement of similar frictions?

SCHAKOWSKY: Well, first of all, let me tell you that even before the
compromise, the majority of Americans were in favor of organizations, you
called them religious organizations, but we`re not talking about churches,
houses of worship. We`re talking about hospitals, charities, universities,
that are Catholic affiliated or religious affiliated. But their employers
that employ janitors and orderlies and nurses and teachers, and that those
individuals ought to have access to contraception was always majority view.

And I have to tell you, Ezra, quite frankly, what we saw were some of
the men talking about how this was about religious freedom, when in fact it
is not about religious freedom. This is about access to contraception. I
think the White House, the resident, came up with an absolutely brilliant
compromise and it is accepted by the Catholic Hospital Association, by
Catholic charities and now, there`s just the Republicans and the bishops
who are saying no to it.

KLEIN: And then, how do the politics of this play out going forward?
There was a report a few weeks ago by the group Third Way, and what they
argued that the independents who broke for the president in 2008 were
overwhelmingly young female and in many way secular and this has -- this
has been the third major event this year that has put but control and
reproductive service, seemingly in threat. There was the original effort
to defund Planned Parenthood, then there was the Komen effort, to defund
Planned Parenthood, which is a huge story just a couple weeks ago, and now
this.

With the president and Democrats in general attempting to reactivate
those voters in 2012, it sort of seems like the movement that is so
skeptical of birth control has done it for them.

SCHAKOWSKY: I think you`re right. And in fact, I was looking at the
number on Catholic independent voters against 56 percent, so that is men
and women believe that this is the right policy. I think they are treading
into very politically dangerous waters, if they want to take on these
issues that are so important to women and as you say, young people.

The issue of contraception, any controversy about birth control is
done. This is the year 2012 and I think a lot of particularly young voters
are absolutely astonished that this would be controversial.

And so, I think that they have actually helped us, if they want to
double down on this issue, and say that this is immoral in some way. The
debate in the United States of America is over, people want access to birth
control.

KLEIN: Illinois Congresswoman Jan Schakowsky -- thank you so much for
joining us tonight.

SCHAKOWSKY: Thank you, Ezra.

KLEIN: Right after this, on "THE LAST WORD," Lawrence O`Donnell looks
back on the remarkable legacy of Whitney Houston with his guest, the
Reverend Al Sharpton. You`re not going to want to miss that.

And here -- Newt Gingrich on Facebook. His current status, as always,
he`s awesome! Stick around.

(COMMERCIAL BREAK)

KLEIN: What seems like a big win for the Democrats may actually be a
tricky smart maneuver by the Republicans to box them in before the fall
elections. I will explain, next.

(COMMERCIAL BREAK)

KLEIN: You know, the strangest thing happened in Washington today.
Republicans in Congress actually gave Democrats something they wanted.
House Republicans said they would get out of the way on extending the
payroll tax cut for the many millions of Americans who work for a living.
It has been set to expire at the end of the month.

Leaders of the House majority say they will no longer insist that the
money for the payroll tax cut come of someone`s hide. The two sides can`t
come to a deal, they`ll drop the demand for cuts at all and allow the
spending to go forward without -- allow the tax cut go forward without
being offset by spending cuts elsewhere in the budget.

Now, you can see this two ways. The first is Republicans are caving.
Yay Democrats. Republicans are giving. Democrats made them look terrible
on this issue last year, and they`re not going to go down that road again.
That`s interpretation A -- Republicans caving.

Interpretation B -- Democrats look out, it`s a trap!

So which is it? A victory for Democrats or a plot by Republicans?

The argument for interpretation B goes something like this -- the
payroll tax cut negotiations are not just about the payroll tax cut.
They`re also about extending unemployment insurance benefits and preventing
a massive cut to Medicare, that for reasons frankly too inane and complex
to get into here, will happen if Congress doesn`t take very quick action.

The unemployment insurance benefits are hugely important to both the
economy and unemployed. Economic forecasters say we could lose as much as
half a point of growth if they are allowed to expire. Medicare fix is
hugely important for seniors. And both were tied to the payroll tax cut
negotiations. But neither is in the clean payroll tax bill Republicans are
now offering Democrats.

So, that`s interpretation B. Republicans are not caving. They`re
just recognizing that they took the wrong hostage. So, they`re taking the
U.I. benefits Medicare hostage instead.

If Democrats take the clean payroll deal, U.I and Medicare will be
left on the cold. But Democrats come back to the negotiating table, they
no longer have the leverage of the payroll tax cut because Republicans are
now on record saying they want to extend it.

I asked Brad Dayspring, the communication director for Eric Cantor,
whether the answer was A or B, he wouldn`t say. The Republican position he
said is that, quote, "Unless there is a deal, we`ll move forward to insure
no worker faces a tax hike." So, make of that what you will.

So, on the one hand, maybe Republicans caved on the payroll tax cut.
On the other hand maybe Republicans have an awesome plan or both hands.
Maybe Democrats actually have a counter-strategy.

Joining us is Brian Beutler, senior congressional reporter for
"Talking Points Memo".

Brian, we enjoined your coverage of this today, and thank you for
coming on the show.

BRIAN BEUTLER, TALKING POINTS MEMO: Thanks for having me on, Ezra.

KLEIN: So, you reported a bit on the Democrats counter plan, that
they say, sure, this might be Republicans might have negotiating strategy
here, but they think they have a way to combat that. Explain that a little
bit.

BEUTLER: Sure. So the way this is going to have to work
legislatively is if they can`t reach a deal, I think Democrats are
perfectly happy to take this, you know, pay for payroll tax cuts, the House
will pass. They`ll have to get ether a majority or super majority of House
members to pass it and they`re going to send it off to the senate.

Well, Senate Democrats think what we can do is we can take those other
two items that you were talking about, the doc fix and unemployment
insurance and tack those on. Those two items coast about $60 billion over
ten years. They think that they have pay-fors, cuts that they can find
elsewhere in the budget that Republicans will agree to, and then present it
on the Senate floor as, you know, just a single legislative package that
extends all three, but only pays for those latter two items.

They can send right back over to the House and if John Boehner and
Eric Cantor want to pick fight all over again and, you know, fight over the
cuts that the Senate passes, they can do that. But then they`re asking for
trouble that way.

KLEIN: The idea basically is if Republicans send the payroll tax cut
deal forward and the Democrats put the unemployment insurance benefits and
they put the Medicare patch on, they can basically have a replay of the
fight they were going to have anyway and say, look, are you guys really
going to let a tax cut for all working Americans expire simply in order to
stop unemployment insurance benefits and to stop grandma`s doctor from
getting driven out of Medicare? Is that about right?

BEUTLER: It first puts Senate Republicans of saying do we want to
risk this whole thing by quibbling over how to pay for those other two
items, the doc fix and unemployment insurance. Now, if they do, I suppose
it could. And Democrats could pass the payroll tax cut. That`s $100
billion to get off their plate.

There are still powerful constituents that want particularly the doc
fix passed. So, if Republicans want to see we`ll pass this if you agree to
partisan budget cuts, they`re going to get an earful from doctors and from
who really want to make sure that those physician reimbursement rates don`t
go down. And, you know, no legislator with 8.5 percent unemployment wants
to see -- wants to be held to account for letting these extended benefits
lapse.

So, I think the Democrats have a strong hand. I think they win out
here and the Democrats did sort of score a big victory today.

KLEIN: So, you have a good sense of the pulse on the Hill. So, if
you take the other interpretation, they look at this and say it`s an
election year, we can`t be held responsible, it`s better compromise and get
something done -- there`s this dream people in the White House have they
call the `96 scenario in which Mitt Romney isn`t doing that well, and Eric
Cantor and John Boehner become worried that they`re going to lose their
House majority because, you know, President Obama is doing well and
Congress`s approval ratings are in the toilet. And they begin to come to
the table on big things and begin to say, look, we`re better off making
deals like the Republicans did in 1996 when Clinton was on his way to
winning then we continue a strategy of relentless obstructionism.

So, do you see the germ of that here? Do you think this is possibly
extendable to other issues? Or this is really a one offer related sort of
to the unique resonance of payroll tax or the poor job the Republicans did
framing their position back in December?

BEUTLER: You know, I guess it remains to be seen. We`ll see how
things look in March and April. This is the last really big issue where
there`s a deadline where something about to expire if they don`t act now,
something bad will happen to a lot of voters. That won`t happen again.

So, anything -- this `96 scenario that the White House envisions that
you`re talking about would require the Republicans to volunteer to come to
the table to basically -- to reverse the last year of their legislating and
say, all right, we`ll find pay-fors, maybe even tax increases that the
Democrats want in order to accomplish these goals that President Obama has
that only make it more likely he`s going to win.

I really don`t see them embracing that dynamic. I rather imagine them
trying to find much more modest areas of agreement that don`t require them
to compromise any of the principles they laid out when they came to power.
But nothing near the scale of $100 billion payroll tax cut is going to
happen.

And all the big stuff that really is on the horizon is going to be
determined by the outcome of the election. Republicans won`t make that
election margin bigger for Barack Obama.

KLEIN: Brian Beutler, senior congressional reporter for "Talking
Points Memo" -- thank you for coming on the show. It`s good to see you.

BEUTLER: Thanks, Ezra.

KLEIN: Next up, Newt Gingrich`s fabulous career now on Facebook.
P.S., we`re not sending a friend request.

(COMMERCIAL BREAK)

KLEIN: This afternoon, Newt Gingrich posted an astounding status
update on his Facebook page because, you know, he`s super digital and down
with the kids. It said, "Today, I`m proud to become the first major
presidential candidate to utilize Facebook`s Timeline to showcase important
events in my life and the history of promoting the conservative cause."

That`s a great idea. People can really get to know Newt and to see
how he became the man he is and take a look at this actually.

Let`s see. Now, starting in 2012, here`s his CPAC speech from last
week, an endorsement from Chuck Norris, one from Herman Cain. There`s the
day he won the South Carolina primary. There`s more endorsements moving to
2011.

There`s Newt`s daughters talking about their dad, talking about the
importance of music education. Lots of debate clips. There`s an
announcement last May that he`s running for president.

OK. Back to 2000, he got married to Callista in 1999, left the House
of Representatives. In `98, left his job as speaker of the House. There`s
a Contract of America `94.

OK. I`ve seen enough of this. You know, it`s funny, he seems to have
left some stuff out, some stuff are missing. He`s such a busy guy.

Maybe I can help. Let`s see here. Let`s go back to 2009 and stick
this in. Newt Gingrich on a health reform conference call talking up the
individual mandate. We believe there should be -- we actually have a clip,
I think.

(BEGIN VIDEO CLIP)

NEWT GINGRICH (R), PRESIDENTIAL CANDIDATE: We believe that there
should be must carry, that is everybody should have health insurance. Or
if you`re an absolute libertarian, we would allow you to post a bond, but
we would not allow people to be free riders failing to insure themselves
and showing up at the emergency room with no means of payment.

(END VIDEO CLIP)

KLEIN: All right. Enter, let`s get that in.

OK, another thing to stick in 2009. Gingrich`s political action
committee revokes its entrepreneur of the year awards for two adult
entertainment companies after receiving $5,000 from them. OK. We`ll put
that on.

Let`s go actually here to `08. Let`s ad Newt Gingrich sitting on a
couch with Nancy Pelosi to demand action on climate change. That should
definitely be in there. Why isn`t that in there?

OK, back in 2000 he got married. But something is easy. Oh, right,
he -- let`s add the wife number two in 2000, and also add in the beginning
of his affair with his current wife. That`s all the way back to 1993.
I`ll just scroll over there here.

Oh, wait, in `97, he left out he was the first speaker of the House to
be disciplined for wrongdoing. That`s a record. You definitely can`t have
that in. And we`re going to need to do some work.

You know, this is going to take me all night. I have a whole other
marriage to add in, and we`re running out of time.

I`m Ezra Klein. Thank you for watching tonight. Rachel will be back
tomorrow. You can find links to tonight`s stories on MaddowBlog.com.

Now, stay tuned for "THE LAST WORD" with Lawrence. OK, so, marriage
number one.

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

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