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'The Last Word with Lawrence O'Donnell' for Thursday, May 3, 2012

Read the transcript to the Thursday show

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Guests: Chris Hayes, Alex Wagner, Eugene Robinson, Paul Krugman, Zach Wyatt

LAWRENCE O`DONNELL, HOST: The Mitt Romney campaign moved to Virginia today
where it was Michele Bachmann`s turn to pretend she never, ever said, over
and over, that Mitt Romney cannot beat Barack Obama.

(BEGIN VIDEOTAPE)

REP. MICHELE BACHMANN (R), MINNESOTA: Good morning. This is what
victory looks like.

ALEX WAGNER, MSNBC HOST: Michele Bachmann is expected to endorse
Mitt Romney.

BACHMANN: I am honored to be able to be here.

WAGNER: A move that could help the presumptive Republican nominee.

BACHMANN: To lend my voice.

WAGNER: With skeptical conservative voters.

UNIDENTIFIED FEMALE: She is a good one.

UNIDENTIFIED MALE: I think Michele Bachmann`s endorsement is good
for Mitt Romney.

UNIDENTIFIED FEMALE: Better than Newt Gingrich.

UNIDENTIFIED MALE: Recovering a little bit from a very tough
primary.

UNIDENTIFIED MALE: Mitt Romney, can he beat Obama?

BACHMANN: No.

UNIDENTIFIED FEMALE: Better than Newt Gingrich.

UNIDENTIFIED FEMALE: Are you calling Mitt Romney a liar?

NEWT GINGRICH (R-GA), FORMER HOUSE SPEAKER: Yes.

UNIDENTIFIED MALE: Romney has tough primaries.

UNIDENTIFIED FEMALE: I don`t think they want to show him love.

GINGRICH: Is Mitt Romney conservative enough?

BACHMANN: This is a very simple proposition.

UNIDENTIFIED MALE: This is really all under Republican Party
establishment.

BACHMANN: President Barack Obama, President Mitt Romney.

UNIDENTIFIED MALE: This is what they wanted.

BACHMANN: You decide.

UNIDENTIFIED MALE: I am so confident they know exactly what they are
doing.

CHRIS JANSING, NBC NEWS: Mitt Romney is closing the gap in several
key swing states.

UNIDENTIFIED FEMALE: Florida in play. Pennsylvania not in play.

JANSING: Part of the reason is the economy.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: What would you do to get
the economy going?

REP. DEBBIE WASSERMAN SCHULTZ (D), FLORIDA: At the end of the day,
it`s all about their policies.

ROMNEY: I`d say, well, look at what the president has done and do
the opposite.

SCHULTZ: Mitt Romney would take us back to the failed policies of
the past.

ROMNEY: And do the opposite.

Corporations are people, my friend.

I like being able to fire people who provide services to me.

I`m not concerned about the very poor, we have a safety net there.

(CROSSTALK)

BACHMANN: This is what victory looks like.

UNIDENTIFIED MALE: Smells like victory.

BACHMANN: Oh, my goodness, yes!

(END VIDEOTAPE)

O`DONNELL: It has been 122 days since Michele Bachmann said this
about Mitt Romney.

(BEGIN VIDEO CLIP)

BACHMANN: No, he can`t beat Obama because --

REPORTER: He can`t beat Obama?

BACHMANN: -- because his policy is the basis of Obamacare. The
signature issue of President Obama is Obamacare. You can`t have a
candidate who has given the blueprint of Obama care. It is too identical.
It`s not going to happen.

(END VIDEO CLIP)

O`DONNELL: And today, in Virginia, Michele Bachmann said this.

(BEGIN VIDEO CLIP)

BACHMANN: This is what victory looks like, to lend my voice and my
endorsement to Mitt Romney as our president to take the country back.

ROMNEY: Thank you.

(END VIDEO CLIP)

O`DONNELL: Michele Bachmann got a bigger response than the local
governor, Bob McDonnell, who is surely on the Romney short list of vice
presidential possibilities.

(BEGIN VIDEO CLIP)

GOV. BOB MCDONNELL (R), VIRGINIA: Ladies and gentlemen, I am
thrilled to be standing next to the next president, because he is somebody
who gets it.

(END VIDEO CLIP)

O`DONNELL: Michele Bachmann showed just what a good political
actress she is, pretending to be excited about Mitt Romney.

(BEGIN VIDEO CLIP)

BACHMANN: Mitt Romney`s future for America would be a legalization
of American energy, a legalization of millions of high-paying jobs. That`s
our future in America. That`s something to get excited about. It is why
we must elect Mitt Romney as the next president of the United States.

(END VIDEO CLIP)

O`DONNELL: You have already seen what Mitt Romney looks like when he
is lying. So his performance today carries no surprise.

(BEGIN VIDEO CLIP)

ROMNEY: Congressman Michele Bachmann, what a powerful leader in our
party she is. What a privilege it is to have their endorsements.

(END VIDEO CLIP)

O`DONNELL: There wasn`t anyone at that Romney campaign event today
including Mitt Romney who didn`t know what Michele Bachmann was really
thinking.

(BEGIN VIDEO CLIP)

O`DONNELL: Mitt Romney is the big government candidate. That`s not
what we want in our nominee. It doesn`t even survive the falling off the
chair laughing test.

(END VIDEO CLIP)

O`DONNELL: Joining me now, Alex Wagner, the host of MSNBC`s "NOW
WITH ALEX WAGNER," and Chris Hayes, the most of MSNBC`s "UP WITH CHRIS
HAYES" -- both of them that surprised the falling off the chair laughing
test.

CHRIS HAYES, MSNBC HOST: Yes.

WAGNER: We are just back from the floor, Lawrence.

HAYES: Just barely.

O`DONNELL: There was much laughter here during Michele Bachmann`s
endorsement. I guess we are going to have to call it.

WAGNER: I guess we are going to have to call it there. You know,
Lawrence, it makes me sad this week. We said good-bye to Newt Gingrich,
the penguin bites, the zoo tour. It`s only natural that America, our heart
would cry out for the other sort of campaign clown, which is to say the
resurgence of Michele Bachmann.

I will take that endorsement if only because we get to talk about
Michele Bachmann again who I believe in that clip talked about Mitt Romney
legalizing American energy -- last I checked, it was still legal.

But, look, the bigger issue here, jokes aside, is that Mitt Romney is
going to have a problem with conservatives forever. I mean, there is --
this is not going away. We have talked a lot about the pivot, the etch-a-
sketch, is he going to take it back to the center. He is always going to
have to doff his cap or more to the conservative base because they don`t
believe him. That`s what we are facing with Michele Bachmann.

HAYES: And I think it`s going to end up -- I think it`s right and I
think it ends up restricting him strategically. He is in a position where
I think we saw with the Grinnell firing or resignation this week with the
gay spokesperson resigning.

O`DONNELL: Who he hired.

HAYES: Who he hired. That`s right.

O`DONNELL: Let`s give him the credit that begins the story.

HAYES: Absolutely.

O`DONNELL: He hires a gay man to work in his campaign. As he said
in one of the debates, I will not discriminate in hiring. So, he doesn`t.
His resolve to do that lasts about 14 days.

HAYES: Right. And the reason, I think largely the reason he does it
is because he gets attacked from his right. And as Alex said, it is going
to be a constant, persistent nagging worry that they haven`t shored up the
base insofar as getting the enthusiasm, getting volunteers, making sure
they turnout levels they need, particularly among evangelicals who provide
such an important margin and are so much I think affected by this intensity
question.

WAGNER: The thing about the Grinnell moment, in so far that it`s a
teachable moment for Mitt Romney. It`s not as if the guy had to come out
and support gay marriage or even gay rights. He just had to defend the guy
who he had hired to do foreign policy and say, his personal life has
nothing to do with that. He wouldn`t do that. I mean, this is how afraid
he is of touching anything that could spook social conservatives.

O`DONNELL: Forget about Mitt Romney`s past and where he`s been on
all these positions. He is going to be, if elected, he would be a hard
core right wing Republican conservative because he would be ordered to be
by Grover Norquist and others and he would not dare cross them.

WAGNER: There is a great piece out by Jonathan Shay talking about
Paul Ryan. And Grover Norquist actually says we don`t care who the
president is. We just need to have enough working digits to sign into law
the Paul Ryan budget which, of course, un-ensures 50 million Americans and
balances the deficit on the backs of the poor.

HAYES: And, broadly, I think we`ve seen something happen
institutionally in the Republican Party, which is become such, it has been
able to ruthlessly imposes kind of parliamentary discipline upon not just
members of Congress but just the entire party as a whole down to state
legislators with signing the Norquist tax pledge.

And what it means is that it has transformed itself like something in
European democracy in which it really is the party and not the candidate.
The party will carry the day much more than the candidate will. We know
where the center of the party is.

O`DONNELL: Let`s take a look at the state they were in today in
polling. They were in Virginia today. We have a Public Policy robo-poll
of Virginia, which shows President Obama right now with an eight-point lead
on Mitt Romney, 51 to 43. There is the governor of Virginia doing what he
can for Romney today.

But if you are in the Romney campaign and you are looking at an
eight-point lead of Obama in Virginia, you are looking at a very serious
problem.

HAYES: Yes.

WAGNER: Look. We know the Obama campaign is going to keep Virginia
in play and it looks like it very much is in play -- Arizona, New Mexico,
Colorado. I mean, these are states that were red or leaning red. But the
fact is the demographics and the position of Mitt Romney and the Republican
Party opens up those states to a Democrat in a way they haven`t been in
decades.

HAYES: I think when you run the numbers, the fact is now the
combination, largely because of demographic internal migrations in the
country, it is the case that there are more paths to victory for a
Democratic president, whether Barack Obama or not, than there is for a
Republican. That is a huge change from just about eight years ago. So
they have an uphill battle of why usually the economy being what it is
means that it is going to be a tightly contested race. It is a very
polarized nation.

But when you start looking at how their paths of victory work out,
there are a lot of combinations that Barack Obama can assemble that even
include him losing states he won the first time around and far fewer I
think for Mitt Romney.

O`DONNELL: And if you are wondering how big a factor the economy is
and unemployment is in the election, Virginia happens to be the state with
the lowest unemployment rate in the country. And with the lowest
unemployment rate in the country, that`s what the margin looks like.

HAYES: Right. And that would be the case, I think, you know, if
every state had that margin, we would have a --

O`DONNELL: I want to talk about this energy thing these guys talked
about today. Let`s listen to Governor McDonnell and Mitt Romney talking
about energy.

(BEGIN VIDEO CLIP)

MCDONNEL: We are an energy capital when it comes to the nuclear
industry. We haven`t built a new plant in 25 years.

ROMNEY: He`s cut back on the number of licenses by 50 percent given
to drillers and public lands. His policies have made it harder for us to
take advantage of our energy resources.

(END VIDEO CLIP)

O`DONNELL: Chris, those happen to be lies.

HAYES: Yes. First of all, lies. Second of all, domestic oil
production in this country is higher now under President Obama that it was
in any point under the Bush administration, OK? It increases the domestic
production every year. In fact, domestic oil production is setting records
in the United States. So, it`s not like Obama has been throwing -- the
president has been throwing some monkey wrench in this.

Second of all, I think the nuclear obsession of the right is
fascinating, because I really think it doesn`t dovetail at all with any
ideological commitments. In fact, the only reason you can -- the only way
to get clear industry is massive state subsidies and loan guarantees like
they hated against Solyndra. That`s the way they`re built in Europe.

Of course, they love socialism when it comes to nuclear power because
it ticks liberals off. I can understand. But it actually like it`s
completely perpendicular to their ideological posture in everything else.

O`DONNELL: We haven`t built a new nuclear plant in 25 years, happen
to be building one right now in Georgia, approved in December by the
Nuclear Regulatory Commission. Another one in South Carolina -- you know,
it`s true that George Bush didn`t get any going. Under the Obama
presidency, in fact, what they said is a complete lie.

WAGNER: Well, look, the Republicans have taken issue with the fact
that there is more domestic oil production now than at any other time or
under George Bush. They say that`s a credit to George Bush`s policy. They
also say they increased exports, because you have more demand from places
like China.

That said, logic doesn`t seem to be something this party is in favor
of, vis-a-vis energy production. The fact of the matter is, two years ago,
almost to this month, we had one of the worst environmental crises in this
country. Let`s not forget the Japan nuclear disaster. On the heels of
that, not only are we not embracing any alternative sources of energy, we
are pillaring those including the president that called for a reasonable,
rational multi-faceted portfolio for energy production which is not only
irresponsible but ludicrous.

O`DONNELL: I want to take one more poll. This one in Pennsylvania,
Quinnipiac poll. It`s actually a more reliable methodology that was used
in that Virginia poll. And they are now showing that President Obama is at
47 in Pennsylvania, Mitt Romney at 39. And just as recently, just a little
over a month ago, they were basically tied within a margin of error.

There is a real pull-ahead by President Barack Obama, significant
drop by President Obama. Interestingly, it comes after Mitt Romney ran a
TV advertising campaign and something of a campaign in Pennsylvania where
he thought he was going to be running against Rick Santorum. It seems like
familiarity didn`t work for him in Pennsylvania.

WAGNER: Does it ever really work?

HAYES: And that`s been the case throughout the primaries. And, in
fact, it was the opposite for Barack Obama in the primaries, right? The
longer he was somewhere, the more people got to see him, the higher his
favorables, the better his poll number. That has not been the case. In
fact, it`s often to inverse with Mitt Romney.

I think what you are seeing in terms of how this strategy is going to
play out in terms of what states they go big on, you are going to see Ohio
and Florida, kind of Ohio/Florida based strategy from the Romney campaign.
Those are the most gettable.

O`DONNELL: And those are tighter right now.

HAYES: And they are much tighter. I think they are right in terms
of their judgment of what the most gettable are. The amount of super PAC
money in air that is going to go into Ohio and Florida is going to shatter
every single record on the books absolutely.

O`DONNELL: And the Obama campaign in Florida will be telling you all
about that Ryan plan, and what it does to Medicare and what the Republicans
--

WAGNER: They`ll be running clips of Newt Gingrich and Michele
Bachmann talking about Mitt Romney.

O`DONNELL: Alex Wagner and Chris Hayes, thank you both very much for
joining me tonight.

WAGNER: Thanks, Lawrence.

O`DONNELL: Coming up, someone I have been trying to get on the show
since day one, simply because he is right about everything. He just is.
Everything he has said about what we should do and shouldn`t do to pull
this country and the world out of the big recession has been right. Paul
Krugman will join me. I will be taking notes.

Also joining me, the Republican legislator who fought the anti-gay
legislation this week and told us a lot about himself in the process. He
never expected to be telling the world that he is gay but he did.

And in the "Rewrite" tonight, another president in favor of ending
the war on drugs. He is a former president since this is not the kind of
thing presidents like to say when in office. Guess which former president?
That`s coming up.

(COMMERCIAL BREAK)

O`DONNELL: Tonight`s edition of veep auditions, Virginia`s Bob
McDonnell gave it a try. But, unfortunately for him, Michele Bachmann was
also on the stage. That`s coming up.

And which former president has come out in favor of legalizing drugs?
The answer is in the "Rewrite". Hint, he has a mustache.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MCDONELL: Any candidate calls a potential nominee and says, listen ,
you could help the party, you could help the country, of course, you
consider it. But I`m not asking for an interview. I just want to see Mitt
Romney win.

(END VIDEO CLIP)

O`DONNELL: Another day, another audition for a possible vice
presidential candidate. Today, it was Virginia Governor McDonnell.

(BEGIN VIDEO CLIP)

MCDONNELL: Welcome to the state with the lowest unemployment rate in
the Southeast.

(END VIDEO CLIP)

O`DONNELL: Governor McDonnell talked for a few minutes more but that
first sentence really is his entire case for being on the Republican
ticket. He is a term-limited governor who is not running for anything but
he`s still spending money on campaign ads just for himself in Virginia.

(BEGIN VIDEO CLIP)

MCDONNELL: When we took office, times were tough for Virginia`s
families. But together, we focused like a laser on jobs and our economy.
The result, the lowest unemployment rate in over years, and thousands of
new Virginia jobs. Ands we`re rated best state in America for business.

(END VIDEO CLIP)

O`DONNELL: Joining me now Pulitzer Prize-winning journalist for "The
Washington Post" and an MSNBC political analyst, and Virginia registered
voter, Eugene Robinson.

Eugene, here, your governor is running campaign ads in Virginia and
he is not running for anything. What do we make of this?

EUGENE ROBINSON, WASHINGTON POST: Well, we make of this that he is
running for vice president. There is no reason, zero reason for a Virginia
governor who serves one term and out -- for a Virginia governor to run
those sorts of ads. He can`t be reelected, you can`t run consequential
service, sequential terms as Virginia governors. So, what else could he
possibly be running for. I can`t imagine.

O`DONNELL: And how did he do in his audition today up on stage? I
supposed it didn`t help to have Michele Bachmann up there stealing all his
thunder.

ROBINSON: Yes, she`s got that sparkle, doesn`t she? She -- you
know, Bob McDonnell is not the most charismatic politician you will ever
meet.

Next to Michele Bachmann, I think it makes him somewhat recede into
the background in terms of establishing a national profile, which he
frankly doesn`t much have right now. He`s not -- you now, you ask people
on the west coast, who is bob McDonnell, I don`t think they would have
frankly the slightest idea who he is.

O`DONNELL: Can he win the state? Can he pull in Virginia for them?

ROBINSON: Well, there have been some indications from polls that he
doesn`t help that much in Virginia. I certainly don`t think he would
necessarily hurt it. You know, he -- Virginia is the purplest of purple
states. It can really go either way.

And to be elected, you`ve got at all. You`ve got to do fairly well
in the bluer parts of the state, northern Virginia. That`s where a lot of
the economic growth has been, a lot of the population growth, a lot of the
diversity. He ran well there.

So, I can see why he would be attractive. Virginia is really going
to be a slugfest for Virginia this time.

O`DONNELL: Gene, I`m just filling out my checklist on my vetting
file of McDonnell. Is he likely to get the ticket in trouble at any point?
Is he one of these stable performers that never misspeaks and never commits
a gaffe that costs them anything?

ROBINSON: Yes, he is not going to mire himself in some sort of
surprise controversy at the last minute. Now, there are a few issues on
which he`s got problems. He has kind of a women`s issue with this issue of
the vaginal ultrasound before an abortion legislation that was up. He
ended up signing a kind of different ultrasound version of that.

And now, there is a voter ID law that the legislature has passed that
he has indicated he has problems with. He wanted some changes to the law,
because he thought it was unfair the way it was written. They didn`t make
the changes. He`s got to decide whether to sign it or veto it. That will
be very interesting.

O`DONNELL: Let`s listen to what Newt Gingrich had to say tonight
about the Republican vice presidential candidate possibilities.

(BEGIN VIDEO CLIP)

WOLF BLITZER, CNN: He has been in there a long time. You know him.

GINGRICH: Joe Biden has ridden the train from Delaware to Washington
for many, many years.

BLITZER: He`s done a lot of other things, too.

GINGRICH: Yes. I`m just saying, I think the comparison is, do I
think that Bobby Jindal or Marco Rubio would be as good as Joe Biden?
Absolutely.

(END VIDEO CLIP)

O`DONNELL: There is no way those young inexperienced men would be
that good. He brought to the office his experience. That`s his currency.
That`s exactly what those two don`t have.

ROBINSON: Yes, Joe Biden brought experience. He might have been
from Delaware but he was known as the third senator from Pennsylvania in a
way. You know, the neighboring state is very popular in Pennsylvania,
certainly didn`t hurt President Obama in Pennsylvania where he was kind of
weak during the primaries but, in fact, helped him.

So, Bobby Jindal and Marco Rubio are not in by his class as an
experienced politician on that national stage by any stretch of the
imagination at this point.

O`DONNELL: We`ve got our board of possible vice presidential
candidates up here, Gene. We`ve got about 12 names on it.

Should ob McDonnell be on that short list of the top four at this
stage?

ROBINSON: Top four, five -- sure, I would put it in there. He`s got
the right look, as I said. He`s not going to really overshadow or
overpower Romney with charisma. He is not going to -- he is going to do
his job as a vice presidential candidate. If it is attack dog, he will do
his best. He doesn`t snarl very well, but you think he will try.

And he is in a state that everybody wants to win. So, he checks a
few boxes. He ought to be on the list. He is somebody to watch.

You know, the question is whether Romney will get to a point where
things aren`t looking that good. The Latino vote, the electoral math, and
whether he decides if he has to roll the dice for Marco Rubio who would be
at least a sure thing.

O`DONNELL: The game changer. Eugene Robinson, thank you very much
for joining me tonight.

ROBINSON: Great to be here, Lawrence.

O`DONNELL: Coming up, he says the problem with the economy isn`t
economics, it is politics. He is right, because he is root about
everything. Paul Krugman has been right about everything about our economy
since President Obama took office. He joins me next.

And, in the "Rewrite", a former president reminds us that the country
that is leading the global war on drugs is the country that uses the most
drugs in the world. That former president has come out in favor of
legalizing drugs. Who is he? The answer is in tonight`s "Rewrite".

(COMMERCIAL BREAK)

O`DONNELL: LAST WORD exclusive, the Republican state representative
who when presented with a bill that keeps anyone from even talking about
gay and lesbian issues in schools, including bullying, chose to do more
than just vote against it. He came out and told his constituents he is
gay. Zach Wyatt`s first national interview is coming up.

And Paul Krugman will separate politics from economics and tell us
how to get out of this depression. Paul Krugman joins me next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: It must be nice to always believe you know better,
to always think you are the smartest person in the room.

UNIDENTIFIED FEMALE: No, it is awful.

(END VIDEO CLIP)

O`DONNELL: That`s from the Oscar-nominated screen play of "Broadcast
News," written by James L. Brooks. Joining me now is Nobel Prize-winning
economist, Paul Krugman. He is a columnist for "the New York Times," a
professor of economics at Princeton University. He is always the smartest
person in the room.

His new book "End This Depression Now!" Paul, I have been wanting to
ask you for a long time, how awful is it being you these days, watching the
craziest I think possibly -- You tell me. is this the stupidest public
discussion of economics that this country has had since Keynes?

PAUL KRUGMAN, "THE NEW YORK TIMES": It probably is. We had some
pretty stupid discussions in the 30s, but they were only stupid after the
fact, because people didn`t actually know how the thing worked.

We have the knowledge. We have the tools. That`s what drives me
crazy right now, is that we actually have everything we need. There have
been some surprises, but by and large this is a well-understood script. We
know exactly what we could be doing. The tools are there.

We could be out of this depression, which it really is. It is a
depression. We could be out of it faster than anyone now imagines. And we
are insistently doing the wrong things.

Terrible for me, but of course much worse for the 13 million people
who are out of work and the 3.9 who have been out of work for more than a
year. And we are not doing anything for them.

O`DONNELL: Now in your book, you trace some of the political history
of Keynesian economics, John Maynard Keynes, British economist, who came
out with some ideas that were considered radical at the time, but started
to take hold over time. You talk about William Buckley and other old line
conservatives opposing everything about Keynesian economics.

But then, by the time we get to President Nixon, President Nixon
actually said -- he said -- people think he said "we are all Keynesians
now." You point out that it was the conservative economist Milton Friedman
who said that. Nixon`s actual words were, "I am not a Keynesian in
economics."

How did we go from there, where this was kind of the accepted math of
economics, to where we are now?

KRUGMAN: Yes. So I have actually been thinking about this. If this
crisis had struck in 1971, which is the year Nixon said that, we would have
dealt with it effectively. So somehow, we moved backwards. We lost it.
What happened is -- part of it is just the polarization. Republicans will
vote against anything that President Obama proposes.

If he wanted to honor motherhood, they would be against it. Also,
rich -- you know, billionaires have never liked Keynesian economics for a
couple of reasons. One is that it -- it suggests that the government can
do some good. If the government can do some good, then maybe the
government needs to raise some taxes, which means taxing them.

It also suggests that the government can solve a slump like this. And
what business people, particularly what corporations love, is they love to
talk about confidence, because that gives them power. If you say, well,
you mustn`t say anything nasty about us and you mustn`t annoy us, because
you have to have confidence to get us out.

If you can say, no, actually, we don`t need confidence. What we
actually need is a jobs program, they have lost that lever over policy. So
there has been this onslaught on Keynesian economics, on the economics that
we understood, the economics that works.

I mean, the last three years have been a kind of acid test for which
views of the economy work. Guess what, good old Keynesian economics has
tracked this crisis very, very well. The other views have been completely
wrong.

But we -- there was a campaign to drive that out of the discussion,
which has ended up paralyzing us in this crisis we now face.

O`DONNELL: And Paul, just for the audience, what would be the bullet
points of what the Keynesian approach would have been for President Obama
in 2009, taking on this crisis?

KRUGMAN: First and foremost, the private sector is not willing to
spend. It`s not able to spend, because it has some problems, hangover from
the financial crisis. This is when you want the government to spend, to
step into the breach.

That`s almost the principal goal of point. Everything else is kind of
secondary. There are other things you should be doing. We should be doing
a lot of mortgage debt relief. We should have the Federal Reserve doing
more expansionary policy. A little bit of inflation would be helpful.

But the core thing is now is the time for the government to spend.
Later on, we can talk to it. Keynes said the boom, not the slump, is the
time for austerity. This is the slump. This is not the time for
austerity. We should not be laying off hundreds of thousands of school
teachers. We should be adding government employees.

So we have done this precisely wrong.

O`DONNELL: Yes, I think because you have been saying from the start,
for example, that the stimulus package should have been much bigger to take
on the crisis that we were facing, and you were right about that --

KRUGMAN: Right.

O`DONNELL: I think some people have labeled you -- people on the
right have labeled you as someone who is not at all interested in trying to
deal with the deficit or deal with government overspending in any form
where it might occur. But more than anything else, what you are talking
about, before you get into any specifics of what you might cut at some
point, is when do you do this?

When do you cut? When do you spend? Those are the most important
decisions, more so than even how much those things might be.

KRUGMAN: Right, depression conditions are different. When you are in
a depression, when the economy is flat on its back, when the Federal
Reserve has cut the interest rates it controls directly all the way to zero
and can`t cut any further, that`s a time when cutting spending is a
disaster. It`s actually a disaster not even -- not just because it leads
to higher unemployment and it shrinks the economy.

It doesn`t even help the budget position, because the economy shrinks.
Tax revenue goes down. Long-term employment undercuts the economy`s long-
run productive capacity, which means lower tax revenue in the future.

It`s pretty much a slam-dunk, if I can say that, that at this point
cutting spending, austerity policies, are a lose/lose proposition on every
front, even on the debt front. So now give me an economy that is not in a
depression, an economy that is doing reasonably well, and it is a very
different story.

I was actually a deficit hawk when George Bush was trying to -- ran
through tax cuts that were unfunded, ran through unsupported wars, wars
without any revenue source to pay for them. That was a really bad time to
be running deficits.

But right now -- right now is the wrong time to obsess over the
deficit. Incredibly misguided obsession to have right now.

O`DONNELL: When I was studying economics in college, I can tell you,
the economics faculty used to very clearly look down their noses over
across the river at the business school, the Harvard Business School. Now,
I think with this Harvard Business School candidate for president, we can
see why.

I want to listen to what he said about how young people should handle
the massive expense of going to college. Let`s listen to that.

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: This attack of success is
very different than what we have seen in our country`s history. We have
always encouraged young people, take a shot, go for it. Take a risk. Get
the education. Borrow money, if you have to, from your parents. Start a
business.

(END VIDEO CLIP)

O`DONNELL: Forty, fifty thousand dollar tuitions, borrow money from
your parents. He seems to think, Paul, that when we say students can`t
afford a college education, he thinks we literally mean just that student.
We mean the student, their parents, their cousins, everybody who they could
possibly get any money from are tapped out. They can`t afford it.

He doesn`t seem to know that.

KRUGMAN: Yes, there is a special Romney touch, which is this apparent
complete inability to put himself in the shoes of someone else, to
understand that other people don`t grow up as the children of successful
business executives. So that`s really distinctive. I don`t think we have
ever seen anything quite that obtuse, if you like, in a candidate before.

The main point is the -- what he is not grasping is the sheer extent
of the suffering that`s going on in this economy, and the fact the policies
he is advocating would make it work -- would make it worse. I mean, we
have just done -- we have just, in effect, carried out a monstrous
experiment on the workers of pretty much the whole western world.

We said, OK, we believe -- we have this theory that says, slash
government spending in a depressed economy and prosperity will follow,
because we`ll have confidence. As I`ve been saying, the confidence fairy
will come and make it all right.

You can see the results all around. Take a look at the countries
where the austerity has been most severe. Look at the Irish, who have --
we have been patting them on the head, saying, good boys, you have been
doing the right thing, austerity, that`s the stuff; 15 percent
unemployment. Right?

So Romney is saying, let`s do more of that. Let`s make things worse.
But individuals can make their way by borrowing money from their parents.
Unbelievable.

O`DONNELL: And I want you to take credit for this. Everything that
has happened in Europe as a result of these austerity measures, you
predicted. Paul Krugman, thank you very much for joining me tonight. And
thank you for being right about everything.

KRUGMAN: My wife wouldn`t agree, but thank you.

O`DONNELL: Coming up, a bill to ban discussion of gay issues
including bullying in Missouri schools was too much for one Republican
legislator to take. He came out against the bill and he came out as gay.
Zach Wyatt joins me for a LAST WORD exclusive.

And a former president decides it`s time to Rewrite the unwinnable war
on drugs and start legalizing drugs. It is your job to guess which former
president. That answer, of course, is in the Rewrite.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

JIMMY KIMMEL, LATE NIGHT TALK SHOW HOST: I do have one real question
for you, Mr. President. What is with the marijuana crack down? I mean,
seriously, what is the concern? We will deplete the nation`s Funyun
supply?

You know, pot smokers vote too, sometimes a week after the election,
but they vote. Look at Brit Hume, he is high right now. He is on his
fourth almond macaroon.

(END VIDEO CLIP)

O`DONNELL: Tonight, another president is Rewriting his position on
the war on drugs, from support to opposition. Two weeks ago, we reported
that the president of Columbia told President Obama at the Summit of the
Americas in Cartagena, Columbia, that the war on drugs is a failure and
that we should be moving towards decriminalizing, if not legalizing
marijuana and possibly cocaine.

You might remember President Obama`s response.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I think it is entirely
legitimate to have a conversation about whether the laws in place are ones
that are doing more harm than good in certain places. I personally and my
administration`s position is that legalization is not the answer.
Nevertheless, I`m a big believer in looking at the evidence and having a
debate.

(END VIDEO CLIP)

O`DONNELL: Notice that President Obama referred only to his
opposition to legalization of drugs. But president Juan Manuel Santos had
urged President Obama to also consider decriminalization. Here is what
Barack Obama said about decriminalization back in January, 2004, before he
became Senator Obama?

(BEGIN VIDEO CLIP)

OBAMA: In terms of legalization of drugs, I think that the battle --
the war on drugs has been an utter failure. I think that we need to
rethink and decriminalize our marijuana laws. But I`m not somebody -- but
I`m not somebody who believes in legalization of marijuana.

What I do believe is that we need to rethink how we are operating in
the drug wars. And I think that currently we are not doing a good job.

(END VIDEO CLIP)

O`DONNELL: So President Obama has favored decriminalization in the
past. He obviously completely understands the case for decriminalization,
though he will be unable to say that while in re-election mode.

Presidencies inhibit free speech in presidents. When Vicente Fox was
president of Mexico from 2000 to 2006, he cooperated in the American war on
drugs, but chafed against it at the same time. Under intense pressure from
the Bush administration in May of 2006, just seven months before he left
office, President Fox vetoed a Mexican bill that would have decriminalized
the possession of small amounts of drugs in Mexico.

At the time, he said that in Mexico, the possession and consumption of
drugs are and will continue being crimes. The Mexican government will have
to deepen the fight against drug trafficking.

But since leaving office, former President Fox has been speaking his
mind without worrying about pressure from the United States government. In
2009, he said this.

(BEGIN VIDEO CLIP)

VINCENTE FOX, FORMER PRESIDENT OF MEXICO: Fighting violence with
violence is not necessarily the answer. I did use different instruments.
I still think that today we should open the debate on legalization of
drugs.

(END VIDEO CLIP)

O`DONNELL: Then, last year, he said this.

(BEGIN VIDEO CLIP)

FOX: We must come with new intelligent, bright ideas like, for
instance, withdrawing the army out of the battle. Number two, legalizing
the production, distribution and consumption of drugs, all together, and
for all drugs and all the way. We legalize consumption and then we can
move out of enforcement and dedicate the money, efforts and public policy
to attending a health program.

(END VIDEO CLIP)

O`DONNELL: And this week, Former President Fox called the war on
drug, quote, "an absolute failure." And he said, "the country that imposed
the prohibition, the country that has punishments and considers drugs a
crime is the country that uses the most drugs in the world. We must end
this useless war."

(COMMERCIAL BREAK)


O`DONNELL: Missouri House Bill number 2051 says "no instruction
material or extra-curricular activity sponsored by a public school that
discusses sexual orientation other than in scientific instruction
concerning human reproduction shall be provided in any public school."

It is known in Missouri as the Don`t Say Gay Bill. It would allow
absolutely no discussion of sexual orientation in any public schooling, no
discussion at all, including any discussion of bullying. Republican State
Representative Zach Wyatt yesterday stood up and said this.

(BEGIN VIDEO CLIP)

ZACH WYATT (R), MISSOURI STATE REPRESENTATIVE: Students need to feel
safe when they go to school and be able to speak with teachers, counselors
and administrators when they are getting bullied. This bill will make that
illegal.

(END VIDEO CLIP)

O`DONNELL: There was a Republican legislator opposing a Republican
anti-gay bill. In that same speech against the bill in the Missouri Senate
capital yesterday, Representative Zach Wyatt also said this.

(END VIDEO CLIP)

WYATT: I will not lie to myself anymore about my own sexuality. It
has probably been the hardest thing to come to terms with. I have always
ignored it. Didn`t even think about it or want to talk about.

I have not been immune to it. I hear the comments, usually snide ones
about me. Today, I ask you to stand with me as a proud Republican, a proud
veteran and a proud gay man who wants to protect all kids addressing
bullying in our schools.

(END VIDEO CLIP)

O`DONNELL: Joining me now for his first national television
interview, Republican Missouri State Representative Zach Wyatt.

Zach, thank you very much for joining me tonight. Tell us what your
thought process was in deciding to stand up, not only in opposition to that
bill, but to speak about yourself.

WYATT: Well, first off, Lawrence, thanks a lot for having me on this
evening. You know, it took a lot of -- I would say a lot of thought for me
to think about what I was going to do this week. It was probably in
January when I really came to terms with that I was a gay man.

Then, when this bill came out, House Bill 2051, I truly wanted to lead
on this issue and not -- not have -- not be at the sidelines anymore.

O`DONNELL: The climate that you are working in there is really, I
think, stunning for people certainly outside of Missouri, who aren`t aware
of it. I just want to read one of the comments of one of your colleagues.
One of the bill`s co-sponsors, Dwight Scharnhorst told the "Huffington
Post" that "talking about gay issues of any kind, whether it be bullying or
anything else, would lead to other discussions."

And then he said, quote, "there is no need to talk about Billy wanting
to marry a goat." That`s the legislative body that you work in.

WYATT: I will tell you. And I`ll tell you, I know Representative
Scharnhorst really well. He has been always great towards me and towards
other members in the body.

I think that there is some concern for what he said. But he has
actually since then came up and talked with me and talked with other
members. And I really appreciate that. He wanted to make sure that we
didn`t take -- know that it wasn`t meant towards us. And he was -- I think
it was just something that he said off the cuff.

O`DONNELL: What everyone watching this show I think is thinking is,
in the most simple terms, why are you a Republican? Why did you, when you
decided to go in to pursuing public office, decide to go into it, in this
era, as a Republican, knowing where the Republican party is nationally,
knowing where it is locally in Missouri on issues involving gay rights?

WYATT: You know, the thing is, I`m not a one-issue person, Lawrence.
I really truly believe that we need to have a smaller government. We need
to have a balanced budget. The state here in Missouri, we have a balanced
budget. I think that`s what saved us in these tough economic times.

I really think that the -- we should give more money to the taxpayers.
They shouldn`t be paying more into our government. We should be giving
more back to them. And we should have an efficient government.

O`DONNELL: What would you say to other Republicans out there,
particularly gay Republicans, who are not openly gay, and officeholders, in
terms of what might be their responsibility in dealing with this issue
publicly? Did you feel you had a responsibility to tell Missouri, to tell
the country this about yourself?

WYATT: You know, I really did. I really thought that I needed to
step up and lead on this issue. As you know, I am not going to be
returning to the legislature next year, because I have been accepted to go
to the University of Hawaii to study marine biology.

So I made that decision before I decided to come out. I just wanted
to make sure that, you know, if I could get one student to not go home and
be a -- go home from being bullied and hurt themselves, or worse yet,
possibly take their own life, I think I have done my job as a state
representative.

Now for the people that are Republicans, that might not be out openly
and they are serving in an elected capacity, just -- I really look towards
them and hopefully they will come to terms with their sexuality as well on
their own terms. It is a very personal thing.

And to be elected, we are all in this fish bowl. I just really wanted
to make sure that the people of Missouri truly knew that the Republican
party of Missouri is inclusive to -- it is inclusive. I can tell you,
there is 106 of us out of 163 down in Jefferson City. Each of us have
something different to bring to the table. And I really enjoy that.

O`DONNELL: Missouri State Representative Zach Wyatt gets tonight`s
LAST WORD. Thanks for joining us tonight, Zach.

WYATT: Thank you very much, Lawrence.

O`DONNELL: You can have THE LAST WORD online at our blog,
TheLastWord.MSNBC.com. And you can follow my Tweets @Lawrence.

Up next, a special "ROCK CENTER" with Brian Williams, "Inside the
Situation Room."

END

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