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'Up w/Chris Hayes' for Sunday, May 20, 2012

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Guests: Ezra Klein, Melissa Harris-Perry, Bill Black, Betsey Stevenson, Karl Smith

CHRIS HAYES, HOST: Good morning, from New York. I`m Chris Hayes.

Chicago police last night succeeded in keeping protesters away from
the city`s affluent areas, where many NATO dignitaries are staying. Some of
the police are beating protesters with their batons, to keep them in line.
You`re seeing this video.

President Obama and other NATO leaders are meeting today in Chicago
to discuss details of NATO`s future presence in Afghanistan. We`ll be
talking about what came out of this weekend`s big G8 summit later in Camp
David in the program.

But right now, joining me today: we have Bill Black, author of the
book, "The Best Way to Rob a Bank is to Own One: How Corporate Executives
and Politicians Looted the S&L Industry." And a former litigation
director for the federal home loan bank board.

Betsey Stevenson returning to the program, former chief economist for
the Obama Labor Department, now professor of business and public policy at
the Wharton School.

Karl Smith, assistant professor of economics and government at the
University of North Carolina at Chapel Hill and a blogger at the great

And MSNBC policy analyst, Ezra Klein, also a columnist for "The
Washington Post."

It`s great to have you all here.

Let`s start with this week`s back and forth over Bain. This week,
the Obama campaign and Priorities USA, a super PAC that supports the
president, unleashed a new series of blistering ads taking aim at Mitt
Romney`s record as the head of private equity firm, Bain Capital.


UNIDENTIFIED MALE: With Romney and Bain Capital, the objective is to
make money. Whether the companies they came in and worked with make money
or not was irrelevant. Bain Capital always made money. If we lost, they
made money. If we survived, they made money. It`s as simple as that.


HAYES: The ad, which will air in five key states, echoes a longer
video released by the Obama campaign earlier this week about GST Steel in
Kansas City, which closed its stores eight years after Bain Capital took
over in 1993.

In that ad, one former mill worker calls Romney a job destroyer,
another calls Bain Capital a vampire. Here`s Romney`s response to the ad
blitz at a campaign stop in Florida on Thursday.


MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: I`ve been disappointed in
the president`s campaign to date, which has focused on character


HAYES: For Obama and his allies, staging this kind of assault on
Romney`s financier past is a delicate proposition. Obama is trying to
paint Romney as an unfeeling corporate raider while raising millions of
dollars from these same financiers these attacks implicitly demonize.

Just hours after his campaign launched its first Bain ad on Monday,
for example, Obama appeared at a $36,000 per plate fundraiser in the Park
Avenue home of Tony James, president of the private equity firm, the
Blackstone Group. And one of the Obama administration`s top bundlers,
Jonathan Levine, is a managing director at Bain.

Levine, who unlike Romney, was actually still at Bain when it closed
the steel mill in 2001, has raised over $100,000 for the Obama campaign.

I want to get the substance of the back and forth over GST Steel and
the nature of private equity as fundamentally predatory or a noble steward
of creative destruction. We`ll talk about it in a second.

But, first, I want to start with this narrow question of hypocrisy.
I mean, is it fair, on either side, is it fair to go after Bain on the one
hand while having -- taking money from, you know, Bain execs on the other?
Is it, what do you guys think?

EZRA KLEIN, MSNBC POLICY ANALYST: I think in the Bain discussion,
both sides have managed to not say anything particularly interesting. I
don`t think how Romney --

HAYES: It`s politics.

KLEIN: I don`t think what Romney did at Bain shows all that he`s
very well-prepared to run the country. I don`t think it shows that he
could create jobs. I don`t think it shows that he knows how to run a

On the other hand, I don`t think it`s a particularly good reason to
think what he did at Bain is a preview for how he would govern. I mean, of
course, in Massachusetts, what he did when he went in this was did some big
social policy, particularly the Romneycare bill, which he has since
abandoned. But it`s certainly not from the Bain arguments from the Obama
campaign is making, you think the next thing he did was pass the
predecessor to the Obamacare.

HAYES: Well, and we should also note, it`s not just the health care
bill that he passed, that he signed as governor of Massachusetts. The
entire tenure of Massachusetts government is totally erased from his

KLEIN: Right.

HAYES: He never talks about it. He never says, I`m qualified to be
president because I`ve actually been an elected leader and executive
before. He said, I`m qualified because I ran this company, because I was
in the private sector.

I think the legitimate thing to say there, when you were in the
private sector, you have a specific goal. You have one interest you`re
keeping in mind, which is the interest if your shareholders. When you`re
president of the United States, you are constantly pounding on a whole set
of competing interest. And I think that`s a fair distinction to draw.

what makes it something that the Obama campaign absolutely has to respond
to is that Romney is putting it out as one of his qualifications. In fact,
his primary qualification, for someone who can run the country, create jobs
and get us back to the place we need to go.

And, you know, I think the biggest criticism of his time at Bain in
terms of -- I mean, I agree with Ezra. I don`t think it tells us anything
about what kind of president he will be, but to the extent that it does.
What he did at Bain was focused on the short run.

That`s what the job of somebody at Bain is, is to figure out how can
we make profits? How can we change business in a way -- you know, let`s
scan the landscape, let`s see, things that aren`t right where if I buy it
up and resell it and you know, tweak it and change it, I can make a profit.

HAYES: Right.

STEVENSON: That`s not actually the way we want a president to run
the country. We want a president who is going to take a long-run view, who
is going to think about things like what kind of investments do we need to
make to make sure the country is in the right place the next year, or the
year after that, but what do we need to do to make sure the country is in
right place in 20 years, 30 years, 40 years. That is not the kind of thing
that Bain gives Romney any experience with.

HAYES: Good point. So, the time horizon issue, you don`t want a
president who`s running based on what quarterly profits for --

KARL SMITH, UNC-CHAPEL HILL: I think that`s probably wrong as a way
to run the country. I think taking a long-run view is probably a bad idea,
because we don`t really know what`s going to be true in 40 years. We don`t
know what`s going to be 20 years. I can --

STEVENSON: I know what`s going to be true in 20 years, kids today
need to be educated so they can go into the workforce in 20 years. I mean,
I don`t think that`s going to change. I don`t think we can say, is it a
toss-up whether we can cut education spending today, because those 2-year-
olds, 3-year-olds, 5-year-olds, maybe they`ll need skills, maybe they

KLEIN: Well, this goes I think to criticism I have of Romney`s time
at Bain, which is that it`s not clear what it taught him, because there is
an argument that I would like to see make him, right? Creative destruction
is an important part of the economy. It`s particularly an important part
of this economy.

But when would you think somebody like Romney, who watched it, who
oversaw it in that way, would come out and say is, yes, we need to clear
the way for that. But we need to help the people who get left behind by
it. This is sort of the Nordic philosophy, right? This sort of flexi
security, where on the one hand, you allow for a flexible labor market, but
on other hand, you help the people that fall out of it.

In a way, his time in Massachusetts could be seen that way, but he`s
had to move so far towards the Republican consensus of the Ryan budget,
that he can`t on the other say, yes, we will help the people who fall out.
We will have the bigger safety net.

BILL BLACK, AUTHOR: Well, it`s worse than that in many ways, though,
because what you learn as private equity is how to get subsidies from the
government. So you actually learn how to manipulate the government.
That`s where most of the profits come from private equity is being a
political fixer, right?

So, I don`t know that we want that manipulation task, in terms of
long-term versus short-term. And creative destruction -- creative
destruction doesn`t come from destroying the company. It comes from having
a superior product. That puts the other company out of business.

And there is no case in which Romney has actually pushed an idea. In
other words, he`s never been a venture capitalist. Said hey, that`s a good
idea, we should do that.

KLEIN: Bain had a venture capitalist.


HAYES: I want to get into this, because this is one of the things
that in the Bain record, they draw these distinctions between well look at
these great, we started Staples and Bright Horizons, which is a day care,
which is the stuff that they tout was much more in the venture capital
mode. The stuff that they`re drawing criticism for was much more in the
private equity mode. There`s a kind of distinction between those two.

BLACK: Right. But bring up the short-term, what he did with venture
capital side was finance.

HAYES: Right.

BLACK: So that again is how do we get cheap funds and such. This is
not how to build a better company, how to build a better product.

HAYES: To your point on subsidies, I think is a crucial question,
because we had Joe Ricketts who is in the news, his family owns the Chicago
Cubs and, of course, the Chicago Cubs now on all sorts of government
subsidies to renovate the stadium, they want basically the amusement tax to
be diverted into their coffers as opposed to going into the city.

The Steel Dynamics, which is a company that Bain touts as a success
story, got about $37 million in subsidies and grants to open up their steel
factory. They were getting all sorts of local incentives. So, they, you
know, lurking behind a lot of these success stories is what we like to call
industrial policy.

Karl, you did not get to finish your thought before --

SMITH: So, yes, to Betsy`s thing, we know now even right now, so
early education pays dividends, we see it paying dividends right now. So,
if you want to put money into that, that`s not a bad thing to do. But to
say we`ve have a big long-run vision about where America is going to be in
40 years, where America is going to be in 30 years, is just not realistic,

I mean, to make a decision to make at the margin. I mean, that`s the
same thing that Romney does, right?

STEVENSON: I completely agree with you and I actually am not a big
fan of you know the kind of industrial policy where we say, this is where
America is going and we should try to push businesses in this direction.

HAYES: I think we need a five-year plan, personally. But continue.

STEVENSON: I do think that we know, there`s basic investments that
can be made in the economy in an infrastructure that we`re not doing. And
I mean those are things where we don`t have a lot of questions. Like do we
need good roads? Do we need good Internet access throughout the country?
Do we need kids that have access to education from age 2 to 22?

SMITH: Yes, you can see where the bad roads right now, right? I
mean, you`re saying in 20 years, America is going to be like this and so we
need this infrastructure. So, you can say, look --

HAYES: We`re under-investing in some things right now.


STEVENSON: But that`s not because of what the administration wants
to do.

HAYES: Let`s talk more about that right after a quick break.


HAYES: One of the political difficulties of attacking Mitt Romney`s
record at Bain Capital is the fact that private equity is a powerful
industry in America and there`s lots of people around the orbit of the
Obama campaign who are from private equity, either former private equity,
equity private equity.

Steve Rattner, who ran the auto unit, the auto task force inside the
Obama White House, went on "MORNING JOE," right after the ad came out and
had this to say.


unfair. Bain Capital`s responsibility was not to create 100,000 jobs or
some other numbers. It was to make profit for investors, most of whom were
pension funds, endowments and foundations. This is part of capitalism.
This is part of life.

And I don`t think there`s anything that Bain capital did that they
need to be embarrassed about.


HAYES: This strikes me as an important political threat as we head
towards the election, which is I do think the attacks on Bain Capital are
politically effective. I think if you look at the polling among working-
class voters in the Republican primary in South Carolina when Newt Gingrich
went totally nuclear on the issue, it was very effective. And it`s one of
the most effective lines.

It was what Ted Kennedy I think pushed him over the edge in a hard-
fought race in 1994. And if you go back and talk to Ted Kennedy`s campaign
people, they`ll say, it was much closer until we started running ads at the
factories that were shut down by Bain.

And yet, if they go with that line of attack, they -- like we said --
were raising money from private equity folks and they`re going to have them
showing up on "MORNING JOE."

KLEIN: Yes. And I mean, one thing about attacking an industry of
incredibly rich, heavily media-connected billionaires, is that they get
access to sort of elite organs of opinion to come out and say.

I mean, when Mitt Romney comes on and says Barack Obama, goes around
the world apologizing for America, which has been rated false by every sort
of fact-checking organization of the business, he doesn`t have to deal with
a lot of sort -- you know, there`s no particular industry that mobilizes to
say that isn`t true.

But one thing to the political effectiveness of this is that Mitt
Romney`s issue right now, is he`s never come up with an effective reply.
In the Republican primary, his reply was how can you say that you`re a

HAYES: That`s a great point.

KLEIN: This week his reply was, how can you assassinate my

HAYES: Which is not the issue.

KLEIN: He hasn`t come back to say here is why that is wrong.

HAYES: Can we play the greatest hits -- because that was by far my
favorite through the looking glass moment in the entire bizarre spectacle
that was the Republican primary, were the anti-Bain attacks, coming from
fellow Republicans, sounding like editors of "The Nation". Here`s a clip.


GOV. RICK PERRY (R), TEXAS: They sit there and they wait until they
see a distressed company and then they swoop in and pick the carcass clean.

SARAH PALIN (R), FORMER ALASKA GOVERNOR: Governor Romney has claimed
to have created 100,000 jobs at Bain and we, you know, people are wanting
to know, is there proof of that claim?

believe in free markets, and those of us who believe that in fact the whole
goal of investment is entrepreneurship and job creation, would find it
pretty hard to justify rich people figuring out clever legal ways to loot a


HAYES: Rich people figuring out clever legal ways to loot a company,
which sounds like a line from a Bill Black article. And this is the best
part of this, just to put the capstone. This is Gingrich talking to the
"Atlanta Journal-Constitution," now that everything resulted as Romney as
the nominee.

"You want me to be mad because in some company somewhere Romney may
have been in fact involved in somebody losing their job? While the U.S.
president had been involved in millions of people losing their job?" Like
no harm, no foul, no looting, no picking the carcass clean.

But I think you`re right. I think they have not come up with a
politically effective response to it. And I do think there`s both, there`s
both an emotional appeal to it, because people feel the dislocation of the
economy both in the long term sense of outsourcing and lose of the
industrial base and lose of manufacturing jobs and the acute cyclically
sense to the fact that we still have bad job performance.

BLACK: And this is only the first shoe, this is the shoe they had to
throw because you know, Romney made this the centerpiece of why I should be
elected. So they had to counter it.

But the second piece is hey, didn`t we just have an MBA president for
the first time? How did he get rich? He got rich by being the political
fixer for a sports club. And got the local jurisdiction to donate
property, which and then they ultra-paid him off, they gave him five times
what he was supposed to make.

HAYES: Right.

BLACK: You know, just so that he could become wealthy and such. And
have friends.

So that political fixer aspect is very dangerous for Romney. And
that could be the second shoe that they can push.

SMITH: I don`t know. That doesn`t seem like that big a deal to me.
Most political ads are kind of silly, I don`t pay attention to them. But
"The King of Bain" thing they put on there, that I thought was good.


SMITH: That`s emotional. I, it`s a completely opposite of what I
believe, and I see that and I was like -- I don`t know if I like this guy
any more. It was incredibly emotional. Like almost no political ad is.

HAYES: And partly that`s because there is something and I say this
as a reporter and having spent time talking to people who lose their jobs
because of creative destruction or dislocation or totally predatory
behavior like what happened at Enron and the subprime crisis. You know,
the existential dislocation involved in a sudden inexplicable job loss that
has nothing to do with your performance is so profound and so terrible, and
has such emotional consequences, that`s just showing people on the other
side of that deal has a real resonance.

BLACK: If they ever link it to the offshore accounts --

HAYES: I think they will.

BLACK: -- it`s really going to have a lot of legs.

KLEIN: I assure you there`s no if about that. They`ve already run
ads about his sort of Swiss bank accounts. They`ve focused in on that.

BLACK: Linking it.

STEVENSON: I think there`s two issues with Bain. One is this you
know, do we want, do we want him to run the country the way he ran Bain?
And then there`s other issue, which is portraying him as a guy who has no
empathy for people.

HAYES: Right.

STEVENSON: And that really resonates because he comes across as a
guy who has no empathy for people in many different dimensions. You know,
you`ve got the gay-bashing thing when he was in high school. You`ve got
his wife saying, I don`t feel rich. Even though I`m richer than 99.9
percent of Americans, and they come across as having no empathy for people.


SMITH: Putting the dog on the car.

HAYES: I thought we were going to have this high-level conversation
about creative destruction.


HAYES: Twenty minutes in, Karl Smith has the dog on the roof.

SMITH: This is going to move no one I know who is not a complete
geek. But they put a dog on top of the car. That`s going to move people.
I mean, people are going to say, how could you do that?

HAYES: Let me say one final one thing -- the deep philosophical,
ideological and political point here is not only the sense he doesn`t have
empathy. It`s the fact that empathy would have been an impediment to him
doing his job at Bain Capital, right?

I mean, the point is to be ruthless. The point is to be an amoral
robot and pursue profits. We`re on that after the break.



was the majority owner, they were responsible. Mitt Romney was deeply
involved in the influence that he exercised over these companies.

UNIDENTIFIED MALE: They made as much money off it as they could.
And they closed it down. They filed for bankruptcy without any concern for
the families or the communities.

JACK COBB, STEELWORKER: It was like a vampire. They came in and
sucked the life out of us.


HAYES: That`s the ad from the president`s re-election campaign on
Romney`s buy-out of a company called GST Steel. It ended up closing down.

The Romney campaign has responded, the critics talk about GST Steel,
they say oh, there`s this other steel company. Here`s their response about
another steel company called Steel Dynamics.


NARRATOR: Steel Dynamics started with an empty field and a big

UNIDENTIFIED MALE: The beginning of Steel Dynamics is a perfect
entrepreneurial story.

NARRATOR: But SDI almost never got started. When others shied away,
Mitt Romney`s private-sector leadership team stepped in.

UNIDENTIFIED MALE: Building a dream with over 6,000 employees today.

UNIDENTIFIED FEMALE: If it wasn`t for a company like Steel Dynamic,
this county wouldn`t have a lot.


HAYES: And Mitt Romney said, "Let there be steel" -- and lo, there
was steel. Here`s what I find interesting about this. If you start
putting into a chart, there were two things Bain capital was doing. They
were doing private equity in the traditional private equity sense. Which
was go out, find companies that you think are undervalued or inefficient,
can be made more efficient or are distressed in some way and you can swoop
in, you can put a lot of leverage on and you can find a way either to flip
them for a profit or extract more profit out of them by changing their

Then they were doing seed funding. There was part of Bain that did
things that looked like venture capitalist. And what`s interesting to me
is that all of the things they got attacked for were on the private equity
side. And all the companies that they came in like GST Steel and Ampad,
which is another one they get attacked more.

And all the companies that Mitt Romney touts tend to be on the
venture capital side -- businesses that were essentially seed-funded,
Staples, Bright Horizons and Steel Dynamics. That says something
interesting about these different models of financial capitalism.

You yourself, Bill Black, touted venture capital as a kind of example
of what good financing looks like, as opposed to the predatory version of
private equity.

BLACK: Right. Except this was owed to private enterprise, but it
was a public-subsidized project. So, that`s the political fixer aspect.
That`s how you make money in that aspect of the business.

The private equity is often a very seamy thing. You don`t go in and
make the business more efficient. You just take out income, you know,
before it goes down. And by adding a whole lot of debt, you shaft the
existing debt holders and such. And so, interesting tax advantages are
created. But not new jobs, not better enterprise, not more efficient.

HAYES: Do you agree with that, Karl Smith?

SMITH: So it depends on the situation. I mean obviously there are
different companies. But in general, let`s just say what looks the worst,
when you`re basically just shutting a company down, selling off the assets,
that frees up resources that are used elsewhere, right?

So we`re in the middle of a bad recession. So, it`s hard to think
about the world like that. But when the economy is doing well, when the
Federal Reserve is doing its job, then when you do that, those are the --
those are resources that get used somewhere else.

And as long as they`re trapped in that company, as long as you have
bad corporate oversight, as long as you had bad corporate governance,
you`re going to have these resources that are inefficiently trapped. And
someone can come in and solve that problem and take them and free them up
and that allows the entire economy to grow.

BLACK: That has nothing to do with private equity.


HAYES: Why not?

SMITH: I mean you`re complaining that these shut-down factories and
fired people. But shutting down factories and firing people is how you
free resources.

BLACK: Why don`t they just take dynamite, then?


SMITH: Well, you can sell these assets, right?


HAYES: Explain this point. Because I think this is the key point.
The argument you`re making in the broad sense and it`s actually a hard
argument I think for Mitt Romney to make, it`s an argument about creative
destruction, is basically, look, we went into companies that a lot of times
were in bad shape because they were being squeezed by international
competition, poor business practices, whatever. And in the ones that
didn`t work out, we tried our best but the market ended up killing them --
and you`re saying that this basic model of creative destruction, hence of
reference to Schumpeter is not what private equity is about.

It seems to me that private equity can be about both. It seems to me
there are cases in -- there are cases where it looks more
straightforwardly creative destruction. There are cases where it looks a
lot more like rating.

BLACK: You can`t take the propaganda. This was Drexel Burnham
Lambert`s propaganda, right? Just go back Mike Milken and how he was making
more efficient. It was all a lie.

It was all about extracting wealth and taking companies that might
well have survived and killing them. That`s not creative destruction,
that`s destruction by looting, right? And so that is an enormous part.

I agree. Sure, there are real things where you come in and you have
some expertise.

HAYES: Right.

BLACK: This is not a place that had expert decent in managing.

SMITH: There are things that should go away. So Palm is hanging on
here, producing things, producing things, wasting U.S. resources when they
just need to go away and that happens in the world and because --

HAYES: Karl Smith, to the employees of Palm, you`re fired.

SMITH: And so the management of the company, right, almost never has
an incentive to shut the company down.

HAYES: But I think --

STEVENSON: But there are people who get paid to do the hard work of
shutting down businesses that need to be shut down. And they, you know,
these guys swoop in and they heartlessly shut down businesses that you`re
saying need to be shut down. I don`t think we should be arguing over that.
I mean, that`s an argument over whether Bain should exist. No one in this
campaign I think is talking about should Bain exist.

HAYES: I would love to have that argument. The point is that`s
exactly the point. That is not the political argument. That`s the UP WITH
CHRIS HAYES argument.

STEVENSON: But I do think there`s this important aspect of what goes
on in businesses like that, which is that they do scan the way that the
government system works through taxes, through regulations, to try to
figure out what are, what are the ways to exploit that. What are the
things that politicians didn`t think about that we can exploit for a

So, there`s this constant game between -- between business and
government where government has to try to anticipate how will business try
to exploit this? And I`ll tell you, I actually teach that course to MBAs,
business exploitation --



HAYES: Lining your pockets with taxpayer subsidies.

BLACK: How to go after the people you teach.

HAYES: It`s called building stadiums. That`s the name of the

I want to talk about debt in the public sector and the way that we`re
talking about loading up companies here and tax treatment. The Romney
campaign, the Republicans really tried to put debt back at the center of
the national political conversation this week. I want to talk about it
after the break.


HAYES: At a summit Tuesday on fiscal responsibility, Treasury
Secretary Tim Geithner was interviewed and said the country will likely hit
its debt limit sometime before end of the year. Then, he said this.


TIM GEITHNER, TREASURY SECRETARY: Only Congress of course can act to
raise the debt limit. We hope they do it this time without the drama and
the pain and the damage they caused the country last July.


HAYES: Hearing this, House Speaker John Boehner took to the same
stage at the veteran and wasted no time in raising the specter of another
debt ceiling fight, insisting that Congress would not raise the debt
ceiling this time around unless he got cuts and reform greater than the
debt limit raise.

And he laid this out like the debt ceiling fight is something
Americans should embrace.


the debt limit. As a matter of fact, I think we should welcome it. It`s
an action-forcing event in a town that`s become infamous for inaction.


HAYES: What we`re seeing is not just the threat of another debt
ceiling standoff., but something of a coordinated strategy by Republicans.
They think it`s in their political interest to make debt the center of the
conversation in an election year, and that`s why Mitt Romney gave a big
speech this week, attacking the president`s record on deficits, even
unveiling a gimmicky national debt clock that he trots out as campaign

But on the heels of all this talk about fiscal responsibility,
yesterday, the Republican-controlled House passed the defense authorization
bill, adding $8 billion more than last year`s budget and $4 billion more
than President Obama requested, which of course is par for the course.

For all their railing against the debt, Republicans are almost always
happy to pile it on when they`re running things. That to me is the key
element here.

That vote I thought was just remarkable in the same week for John
Boehner to get up there and say, action-forcing event. It`s going to
restrain us, it`s going to impose discipline, and then out of his own
house, passes something in excess of what the limits that they agreed to

KLEIN: I think it`s really important to say that Mitt Romney`s plan,
his actual announcements of the things you can read on his Web site do much
more to increase the debt than to reduce it. He`s got trillions of dollars
in announced specific tax cuts that he`s not offset any of them. He has
actually just about no specific spending cuts. I mean, he talks about
block granting Medicaid, talks about changing Medicare. He doesn`t say
what the grates of growth would be so you can`t score any of that.

So, it`s great to talk about debt all the time, and Republicans do a
lot of that. If you look at their priorities, they`ve taken taxes and
defense. They want to add a lot to that. And it`s not clear where they`re
going to get the savings to not just offset that, but reduce the debt
beyond that.

SMITH: The thing I want to ask you -- maybe you know this, is how
much of --

KLEIN: Almost certainly.

SMITH: How much do they really care? And how much of it is just a
talking point?

HAYES: I`m glad you`re raising this question, this to me is the
theme before we get into the wonky parts of it, like let`s talk about the
dog on the car element. Which is the fact that you cannot under -- make
logical sense of Republican rhetoric around the debt or deficits, which are
distinct things, one is a total that accumulates the debt, the deficit is
what we are spending more than we`re taking in each year. You cannot
listen to them on that and attach the standard semantic meaning to those
words and make sense of them or their actions.

You cannot. You cannot think that they`re speaking at face value
about the things they say they`re speaking about. Debt and deficits and
look at the way they behave.

SMITH: That seems right to me. I mean, is that, is that just
dissonance on their part? Or --

KLEIN: I think they care a lot and have a lot of dissonance. I
mean, out of power parties often care a lot about the debt. You remember
in the Bush years, Democrats were very, very upset about Bush`s deficits
and Republicans --

HAYES: Barack Obama voted against the debt ceiling.

Famously, Paul O`Neill said that Dick Cheney in a meeting said Reagan
proved deficits don`t matter. And now, we`re in the Obama years,
Republicans have become enormously concerned about debt and deficits, but
not to the exclusion of other things.

And one thing that -- it is clear they care more about defense and
tax cuts than they care about deficits in a short.

I mean, I have Tom -- I spoke to Tom Coburn early this week and what
he said his problem with the Republican Party is they may want to reduce
the debt, they`re not willing to take any second-best compromise to do it.
That is not frankly their top priority. Their top priority is not crossing
Grover Norquist and doing some of these other things.

HAYES: Here`s Tom Coburn speaking to one Ezra Klein, talking about
what his worry is if Romney wins.

"One of my biggest worries is what happens if Romney wins and
Republicans control both chambers. Do they have the courage to do what it
takes to fix the country? It`s kind of their last chance. If they`re
given the favor of control and they don`t act on it, why should you ever
trust them again? We shouldn`t. It will be the death knell of the
Republican Party."

And here`s what I found interesting about the quote. I don`t know if
Coburn is being disingenuous, or he`s believed his own hype. But no one
cares about deficits.

See, Dick Cheney was right from a political perspective.

KLEIN: Coburn believes we`ll have an enormous fiscal crisis within a
matter of a few years. So that`s what he thinks the sanctions will be on

HAYES: I see.

KLEIN: I`m not sure I think he`s right but he believes there will be
an outside force that will come in and destroys this country`s economy if
we don`t do something very quickly.

BLACK: Both parties make no sense on this issue. Both parties are
saying things that are preposterous economically. Both parties are saying
things that are internally inconsistent.

We have Obama running around saying, we`re running out of money. We
have a sovereign currency. You can`t run out of money. We have zero debt

Look at what we can borrow money for. We can borrow money for
nothing. Japan has twice as much in terms of deficit as relative to GDP as
the United States. It borrows money for next to nothing as well.

As long as you have a sovereign currency, and you let it float and
you have your debts in your sovereign currency, you are not subject to
attacks from these bond vigilantes, you will not become Greece.

So that`s all nonsense. What`s happened is they`ve used this
stupidity of this budget debt limit, which makes no sense when you`re not -

HAYES: As a procedural matter, it makes no sense, right?


BLACK: Every other conceivable way, it is stupid, it is simply a way
to extort.


BLACK: And they deliberately extorted something that would impede
the recovery. So, they force significant cuts in spending on the social
side, right? The already-inadequate stimulus, which everybody in economics
told them it was inadequate, got more inadequate.

Meanwhile, we`ve allowed a complete gratuitous crisis in state and
local government, because the Obama proposed the right thing, a Republican
idea, revenue-sharing. Everybody knew --

HAYES: Explain what revenue sharing. Federal government gives money
to state and local governments.

BLACK: Right. State and local governments, unlike the federal
government don`t have sovereign currency, they can`t -- have large
deficits, so the federal government needs to run a deficit to get people
employed. It`s a great recession. Gives big chunk of money to the states
and localities, they don`t have to fire all the teachers, the police
officers, everyone else who services are need.

We don`t have that war on women, the Republican meme about how women
are losing their jobs. Why? Because women are disproportionately in the
governmental sector.

HAYES: And we`ve lost 600,000 public-sector jobs, if I`m not
mistaken since --

BLACK: So the unemployment rate would be much lower there would be
much less grief in the nation. The economic recovery would have been far
faster. All due to the blue dog Democrats, the conservatives, and the
Republicans ganging up.

You wrote about this, Karl, you have a study about this -- and
killing the bill. But the terrible political thing is Obama let it die
without a fight. And if he had dug in his heels and say, this is going to
produce a disaster, this is going to produce a disaster, even if he had
lost, he could be able to say now.

HAYES: I want your response on that, Karl. First let me take a
quick break.


HAYES: Karl, I want to give you a chance to respond to what bill was
saying about the travesty that was the failure of revenue-sharing.

SMITH: I don`t remember exactly what I was saying -- but the biggest
thing that I wonder is always why, why wasn`t the Democratic Party more
into pushing for revenue sharing or doing this. Or even back in the
original stimulus, why wasn`t there more effort to state and local
governments. It seems to me like whatever you believe about how people
think about the debt, at the end of the day, what they care more about is
what unemployment is like, what their jobs are like, what their families
are experiencing.

And if you know and believe that look, we with lower unemployment by
doing this it seems you just take the short-term chatter and you win the


HAYES: That has not -- somehow that has not penetrated the
consciousness of politicians in Washington. Wouldn`t you agree?

KLEIN: No, I don`t agree with that at all. I think that they felt
like they couldn`t get it passed. They brought up revenue-sharing bill and
state and local bill. I mean, you remember, they had FAST, which was a
Jerry Bernstein idea, to repair schools. They had the saving teachers

They did during 2010 and 2009, over and over again, they tried to
pass state and local bills. It wasn`t popular, it didn`t get through
Congress. There`s an argument, maybe they should have figured out a way to
go through budget reconciliation again.

But everything got filibustered. They will 60 votes in the Senate
for like a couple of months. And during that time, it was unpopular as the
health care bill. Thought they should take the short-term hit for the big
bill, but they couldn`t get it passed.

I remember them trying, it`s not like it didn`t happen, they couldn`t
get it passed. People just forget it now.

STEVENSON: I think there was a lot of effort put into it and
continued to be a lot of effort, and they just couldn`t get any traction.
Certainly, lots of time and energy was spent even figure out you know how
you could sneak it through. Like you know, hiding vegetables in a cake for
kids, they`re trying to figure out how can we funnel more money to the
states --

HAYES: Do you do that with your kids? Is that a thing? Have I
missed that? Is that a parenting thing?



BLACK: As soon as they accepted the 60 votes, they crippled the

KLEIN: Well, I don`t know what it means to -- I mean, I`m possibly
the largest opponent of the filibuster you`ll find in the media today, but
it is like rule 22, I don`t know how you don`t accept it.

BLACK: Because the Republicans would have killed it in these

KLEIN: You`re saying they should have ended the filibuster? That`s,
I mean, I think the filibuster needs to end. But I think it`s hard to do.

According to Senate rules, you need a 2/3 vote. I think at the
beginning at the session --

HAYES: There`s a constitutional argument --

KLEIN: Only at beginning of a new session. You couldn`t do that

BLACK: If you flip the parties, it would have been done.


HAYES: Well, they did walk closer do the line. We should say this
as an historical matter, but the biggest frontal assault of a filibuster in
the last 10 years did come from Republicans.

KLEIN: But even there, they ended up backing down on a limited part
of it.

HAYES: They pursue the filibuster to its natural conclusion, the
history of the filibuster reform and it changed a number of times, is
because it is a non-judiciable -- not something you bring to the Supreme

KLEIN: Although common cause just brought it to the Supreme Court.

HAYES: Common cause just brought to the Supreme Court, I doubt
they`ll get --

KLEIN: It`s not going to go anywhere, or likely not.

HAYES: Because you`re dealing with the situation in which there is
no higher authority, right. Let`s say the court`s not going to rule on it,
the things that have provoked reform in the past are essentially
brinksmanship. Or essentially someone saying, you know what, we`re killing
this thing and that`s what produced reform.

KLEIN: And Harry Reid came out a week ago and I think this is really
important. Harry Reid came out a week ago said I was wrong to think that
we could get by with the filibuster. The filibuster has been abused and
abused, and I now agree with those who say it needs reform.

But it`s tough to do, in part in the middle of a session, when you
see the bad mid-term coming up. None of the Democrats who thought they are
going to be in the minority, wanted to get rid of the filibuster, and then
have the situation where they cannot block the Republicans from doing
things on the --

HAYES: I want to talk about why it is that given the argument you
made about the logical consequences of short-term stimulus, of not firing
teachers, why the politics of the debt retain their power or if they do,
right after this.



MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: I will lead us out of this
debt and spending inferno. We will stop borrowing unfathomable sums of
money we can`t even imagine from foreign countries we`re never going to
visit. I will work with you to make sure we put out this spending and
borrowing fire.


HAYES: That`s Mitt Romney, giving his big debt deficit speech on

This line I found so hilarious and inscrutable: "Stop borrowing
unfathomable amounts of money that we can`t even imagine from foreign
countries we`ll never even visit." That`s rub, right? If you`re borrowing
from like Kyrgyzstan, you`re really in trouble. If you`re borrowing from
Canada or maybe France, you`re fine.

Here`s a provocative idea that Joe Wiesenthal at "Business Insider"
wrote about. He basically said, "Look, we have a jobs deficit in this
country. We`re mired in sluggish growth. We need expansionary fiscal
policy. The Fed isn`t providing what they should be providing."

Karl you`ve written eloquently on that point.

If you believe an expansionary policy, if you think that`s the way
out of the mess, if that`s what you`re voting on, you have a better chance
of getting expansionary policy, out of Mitt Romney, despite the noises he`s
making about austerity, than you do out of President Barack Obama. The
reason being all of a sudden the Republican House would be willing to
engage in expansionary policy as soon as they had a Republican president.
Do you think that`s true?

SMITH: I don`t know. Like I was just saying before --

HAYES: You can`t say that, we`re on cable news.

SMITH: If I firmly believe they were lying and cynical, I would go
for that and I would be happy with that. People say all sorts of things to
get elected. But what matters in the end is what happens to real people.

I would support Romney and support the House by thinking they would
do expansionary policy. But more and more, I get slightly convinced
they`re believing their own B.S. and that worries me, right? Once you
really start to believe that we need to cut the debt, then you`re
dangerous. I mean, as long as it`s just a lie, you`re OK.

HAYES: Yes, this is a great question. Are they bad -- how bad is
the faith on this conversation? Because it actually really does matter.
Is this completely disingenuous? Or do they now believe it?

KLEIN: Not only do I think they believe it. I think it`s important
to, we have a problem. We say Mitt Romney will get elected. What happens
if Mitt Romney gets elected, is a Republican Senate and a Republican House.
What they`re going to do, I firmly believe this for better or worse --

HAYES: Wait, stop right there, you say if Mitt Romney is elected,
Republican Senate and Republican House, you`re saying because the
conditions --


KLEIN: Yes, it tips that way. I think through budget reconciliation
there will not be a filibuster, because it will just be a budget bill.
They`re going to pass the Paul Ryan budget. I means, the House and the
Senate spent two years taking vote after vote preparing to pass the Paul
Ryan budget, dealing with the political consequences. He`s not going to
come in and saying, oh, ha, ha, we`re going Keynesian.

SMITH: Right.

KLEIN: Conversely with Obama, I do know they think about this when
we come to the sort of the tax-megadon, the debt ceiling and tax cut
expiration, they do think a lot about how to get the infrastructure into
that package. They do think about how to get tax cuts in there.

There is a Keynesian divide in American politics today. And while in
another world you might see Romney go to short-term tax hits. I do think
that congressional Republicans truly believe that the key think they need
to do, the one thing to expend political capital on is the Ryan budget.
And they will.

HAYES: They`ve convinced themselves that the political case they`ve
been making is that debt stands for a symbolic token of the way we`ve lost
our way, the way we lost our virtue, the thing that`s accelerating our
decline --

KLEIN: They don`t think it`s symbolic.

HAYES: No, no, I know. But they now believe what they`ve been

I think there`s evidence they actually don`t believe it and Romney
doesn`t believe it -- and I want to show that evidence after the break.


CHRIS HAYES, HOST: Good morning, from New York. I`m Chris Hayes.

With me this morning, we have Bill Black, the author of the book,
"The Best Way to Rob a Bank is to Own One: How Corporate Executives and
Politicians Looted the S&L Industry," and formerly with the federal home
loan bank board.

Betsey Stevenson, former chief economist for the Obama Labor
Department and now assistant professor at the Wharton School.

Karl Smith, assistant professor of economics and government at the
University of North Carolina at Chapel Hill.

And MSNBC policy analyst Ezra Klein, also with the "Washington Post."

We`re discussing about Republicans putting debt and deficits front
and center this week through two different means, Mitt Romney gave a speech
about the debt and deficit. He`s unveiled a debt clock, like the one
midtown a few blocks from here. Which is essentially meaningless, it gives
a nominal value of the debt, not in relationship to GDP, which is the key
ratio you want to keep your eyes.

He -- John Boehner also at the fiscal summit this week threatened
another debt ceiling showdown.

On the Romney point, one of the things we`re discussing, we`re trying
to understand whether Republicans are making these debt and deficit
arguments in good faith. Will they actually do what they say they`re going
to do? And the reason there`s reason to doubt they will, because in the
past they have expanded deficit and debts, and in fact the Romney plan
calls for in some ways -- even though it doesn`t call for expanded deficits
and debts -- it`s unclear where the spending cuts come from, right?

Here`s Mitt Romney, as evidence of the idea that they`re being
disingenuous, here`s Mitt Romney also speaking on "MORNING JOE" on January
16th, 2009, talking about the proposed Recovery Act stimulus from the


economic recovery including a stimulus bill, which includes a healthy dose
of tax reductions , is something which I think showed a willingness to
actually listen to some of his own economic advisers that have pointed out
in their research that tax reductions have a bigger economic stimulus
impact than spending money and infrastructure does. That`s encouraging.


HAYES: First of all, we should say all the literature I`ve seen
shows that tax cuts are very inefficient in terms of multiplier fact as
stimulus, but that said, that was Mitt Romney praising expansionary policy,
even if it was done through tax cuts. So, you know, maybe that`s an
argument we`re in favor of the fact that he would be expansionary.

KARL SMITH, UNC-CHAPEL HILL: I would believe that about him. I
mean, that sounded like (INAUDIBLE), what he said there. So, I would
believe that Mitt Romney believes that and that if he doesn`t believe it
quite now, that his economic adviser could convince him.

But it is the House and the Republican house, people that it`s scary.
That they have convinced themselves of their rhetoric and that they`re
going to blow up the country.

EZRA KLEIN, MSNBC POLICY ANALYST: As a psychological matter I don`t
think you can overestimate how much the last two years for the Republican
Party have had a radicalizing sort of anti-Keynesian effect. I mean, all
their sort of intellectual organs, all of the think tanks, all these people
they`ve come up with a million arguments about why the stimulus doesn`t
work, why the stimulus didn`t work, and more like why the key thing here is
long-term, structural unemployment.

They`ve come up with a 100 very sophisticated and interesting and
somewhat persuasive arguments for why they shouldn`t believe the things
they believed in 2009. And they believe it.

BILL BLACK, AUTHOR: I was with you until the last sentence.

KLEIN: I`m not saying I find them persuasive, but they do. Like I
think people always underestimate the amount of sincerity there is in
American politics. People convince themselves of what they need to
convince themselves of. People do not like to feel insincere.

HAYES: This is true of lawyers, right? I always marvel at the
psychological fact. I mean, if can you sit all day, working 16 hours a
day. You`re billing 15 hours, working on a brief and maintain the belief
that you`re totally wrong and preposterous, you`re a social sociopath,

I mean, at a certain point, you put enough effort into making
argument you come to believe them.

SMITH: Let`s say -- OK. Let`s say that Romney becomes president and
Republican in Congress and the House, will someone come forward and say
hold on, guys, let`s remember Ronald Reagan, we don`t worry about the
deficit, just need to cut taxes?


SMITH: And that will not sell.

BLACK: But what will happen quite possibly is Europe will be in a
state of disaster because of austerity. And that is going to cause the
business community to come en masse --


BLACK: -- and say you will not do this, Ryan budget and destroy


BLACK: I think -- we fund you, clowns.

KLEIN: The business community never does this thing that everyone
expects them to do and dissents on the Republicans --


KLEIN: They never do that.

BLACK: They do in crises and they did for example when they voted
down TARP, the first time.


BLACK: Because the markets exploded, everybody saw and the same
thing is about to happen.

HAYES: That, that brings --

SMITH: It happened in the first place, which was unbelievable,

HAYES: You`re saying that TARP got voted down.

SMITH: They got it voted down in the first place, right?

KLEIN: Businesses weren`t whipping that initial vote.


SMITH: And you could -- I mean, I remember the experience vividly,
watching --

HAYES: That was an amazing moment.

SMITH: Yes, it was amazing. I mean, just guaranteeing everyone that
this would never happen and whatever, just freaking out, amazing --


BLACK: All the letters and phone calls were something like 80/20
against on TARP.

HAYES: Right, on the first vote, yes.

BLACK: So there was enormous pressure. Plus we had ex-FDIC folks,
Bill Isaac, go in front of the blue dogs and say, it`s free. You don`t
need anything. You just lie about the numbers.

HAYES: Right.

BLACK: I`m serious. You just lie about the losses, and there will
be no crisis.

HAYES: But the more recent -- the more recent precedent for this,
the TARP, is the debt ceiling. Because that`s actually the first place, we
actually ran this experiment once. What happened was, there was this
tremendous brinksmanship -- I would say unprecedented in American politics
that produced concrete, real and measurable negative impacts on the

I mean the economy took a hit because of it. And if the Chamber of
Commerce were acting in a rational fashion and putting the thumb on the
scale that you`re indicating they might in the future. I don`t think we
would have seen that. What that moment to me showed was that their
ideological commitment even outstripped their commitment to their sort of
corporate people.


frightening thing is I think the biggest risk our economy faces, right now,
is this fiscal cliff and the debt ceiling debate. And there are too few
people who understand that. I think that --

HAYES: So, you`re on TV right now, so explain that.


HAYES: When you say, when you say fiscal cliff and the debt ceiling,
what are those two things?

STEVENSON: So, the fiscal cliff is the upcoming fact that we have a
lot of expiration of tax cuts that are coming up. We also have expiration
of unemployment insurance benefits. So what we have basically is a
contraction, a fiscal contraction of $600 billion, which is basically like
taking $2,000 per person of the United States out of their pockets and
asking them to hand it back to the government and asking them to do it
within the first four months of the year, most of this stuff is going to
come due in April.

If I ask them to hand me $2,000 tomorrow, they`re going to have to
immediately curtail their spending. If they immediately curtail their
spending, they`re not going to the coffee shops and buying coffee. They`re
not going to the movies, they`re not doing stuff and that`s going to be a
massive contractionary effect on the economy.

HAYES: And that`s just one half of it, right? That`s the fiscal
cliff. Let`s talk about the other half right after a quick break.


HAYES: The great Future Island band out of Baltimore, you should
check them out.

You were just talking about the first half. There`s two components
to the terrible disaster towards which we may be rushing and that disaster
towards which we may be rushing happens after the election, which is part
of what makes it so strange politically, because it`s all going to take
place in the lame duck session. Which I think adds, I would say adds a lot
of uncertainty. It adds uncertainty of who is going to -- we know who will
be sitting in that body. But how many of those are going to be essentially
walking dead.

The first part of it is the fiscal cliff, which is the expiration of
a whole bunch of tax cuts, the expiration of people with unemployment

Are there also sequester elements which kick in?

KLEIN: There`s also the automatic spending cuts --


KLEIN: -- of that together is about $6.8 trillion. Not that much
over one year, but over 10 years.

So, that`s the hit that the market will be expanding the economy over
10, right? So, that`s the first part. But what`s important here is the
sequencing. The debt ceiling, that all happens by January 2nd. All of
that comes due by January 2nd. We don`t hit the debt ceiling, we don`t
breach it until February or March, we expect.

So what will happen is we actually get to the debt ceiling. What it
will mean is we didn`t come to a deal on the huge hit Betsy was talking
about. So the financial markets are freaked out already. Americans are
paying more money, we`re in the single-largest government-induced fiscal
contraction in American history.

And now on top of that, on top of that demonstrated inability to
agree on that and on top of the economic hit, now we got into the financial
chaos of the debt ceiling. This is not like August 2011, where there was
only one thing, the debt ceiling. This is four or five different massive
hits to the economy coming on top of one another and we have no idea the
level of financial chaos. And that`s before you talk about Europe.

I mean, this is layman-like event this is an event where you
reshuffle the way the market thinks about America. It is significant.

HAYES: Well, that`s scary. What is the --

BLACK: Europe is far bigger than layman. We`re talking about the
two largest economies in the world, simultaneously, taking out a gun,
aiming it at their head, pulling the trigger. It will have catastrophic

BLACK: Right, but they`re going to happen at the same time.

HAYES: Right.

BLACK: And that`s what -- we will have actually, it will be Europe
pulled out the gun, shot itself, we saw -- if it`d do that. And said, you
know, that`s a great idea.

KLEIN: The Keynesian case for Mitt Romney in my view, is not that
he`ll do more Keynesian spending, is that there will not be a debt ceiling


HAYES: It strikes me as a deep, deep political issue, right, a deep
problem of self-governance, because -- you and I were having brunch
yesterday and e were talking about polarization. I used to not worry about
party polarization, I wanted to crush our foes and you win elections and
you get enough people and you get your program passed. I`ve gotten to
worry more about polarization, partly because I think we can`t do the big
things we need to do in this current environment.

But the debt ceiling to me is the acute -- the worst microcosm, the
essence of what this kind of polarization, particularly asymmetric
polarization, right, where Republicans are willing to be far more extreme,
take far larger risks, drive the truck off the cliff at a far faster speed
-- that`s what it looks like.

So, then, the question is what has broken down in the accountability
system that it`s politically possible, feasible, possibly political
expedient to go before the cameras, as John Boehner did, at the fiscal
summit, with everyone knowing what happened the last time the debt ceiling
happens, everyone knowing there were real effects, actual concrete negative
macroeconomic effects, to be able to do that politically and it didn`t make
that much news. There doesn`t seem to be any sanction, right?

What -- what has broken down and how do you restore, what could make
them accountable?

STEVENSON: What is very scary is we actually all have the same
incentive here on the debt ceiling. There`s not Republican and Democratic
differences, like nobody wants us to default on our debt and be --

HAYES: I don`t know if that`s true. Let me just say --

STEVENSON: It`s no good for everybody.


HAYES: That`s true, that`s a distinction. But in terms of what Ezra
said, sorry to interrupt. I want to put this out there. Don`t
underestimate sincerity.

The last time around the debt ceiling, there were Republicans saying
we should default. They were going out and saying, actually that is an
eventuality to be wished for.


HAYES: Right, exactly.

STEVENSON: When they say that, they can`t understand what that would

SMITH: Sure, politicians don`t understand things. I mean, that`s --
how is it that --

KLEIN: Breaking news.

SMITH: -- how is there no elite in America to come down on them and
tell them that look, can you do whatever you want about all these other

HAYES: Mess with all your other stuff, cut food stamps, do your


SMITH: But you are not going to destroy the republic and you`re not
going to destroy the global economy, right? That`s off limits.

KLEIN: When they come to that choice, I think it`s important to
remember what it looks like when they come to that choice, because they
never say, we just shouldn`t raise the debt ceiling. They have said we
have given you this perfectly reasonable package which cuts $2 trillion
from Medicaid or whatever it might do. If you won`t sign it, you are the
one who is making us breach the debt ceiling. And that ends up being the
justification. That`s what they say to their interest groups.

If President Obama wants to breach the debt ceiling and give us
dollar for dollar cuts that is him.

HAYES: OK. Let me say this, the first time around, that was a more
effective argument I think than the second time around. I think that`s a
harder to make though.

BLACK: The problem is bipartisanship. Bipartisanship on deficit

HAYES: In terms of rhetoric or votes?

BLACK: Rhetoric, votes. The Obama administration has made it
incredibly difficult to push back, because of his accepted the general idea
that we should be cutting the deficit right now.

HAYES: I think that was, I think there was a high-water mark of that
kind of rhetoric. But I think it has come down substantially in the last
six to nine months.

BLACK: Do you see some major effort out of the administration
publicly, where they try to explain that we`re not --

HAYES: They did the Jobs Act.

BLACK: The Jobs Act is a disaster.

HAYES: Right. But the American -- the American Jobs Act was a
concrete and discreet piece of expansionary legislation that the president
made a primetime speech over. That he --

BLACK: It`s a pure scam. It has nothing to do with creating jobs.


HAYES: Not the J-O-B-S acronym. The actual American Jobs Act.


HAYES: Two different Jobs Acts. The JOBS acronym for joining our
business survival --

BLACK: Our business start- up.

HAYES: That got passed and we had you on to talk why it is a scam.

The actual Jobs Act, the (INAUDIBLE) letters that refer to the thing
that people do when they go 9:00 to 5:00, the American Jobs Act, that was a
concrete discrete bit of expansionary policy they tried to put forward. He
did the primetime speech, he did all the things that he wanted, agenda, you
know, it went nowhere because whatever you say about partisanship, at a
policy level one party is implacably committed.

BLACK: But Obama has put Social Security on the table to be cut
under the theory of this phony crisis that doesn`t exist.

HAYES: Right.

BLACK: Right? And as soon as he did that, and we now have a good 30
percent, 40 percent of progressives saying, oh, we need shared sacrifice
and we need to get our fiscal house in order. It`s all nonsense. It`s
exactly the opposite of what we need to do know. And Europe has proven

HAYES: I agree with Bill in that the rhetorical bones that were
thrown to the austerity argument in the long-term have made short-term,
making the short-term argument much harder. You just talked about Europe.
Watching them put the gun to their head and austerity there. I want to
talk about what going on in Europe, because I think we don`t understand it
that well in America and we don`t understand just how much it`s going to
affect us, after this break.


HAYES: A group of eight economic superpowers, the G8 yesterday at
Camp David, pledged to revitalize the European economy through stimulus,
investing to encourage growth. Austerity measures, though, are implemented
and also still on the table. And the G8 did not say how this balanced
approach will affect the most vulnerable and volatile E.U. member, Greece.

It`s not unthinkable if things don`t change swiftly, Greece could
potentially bring down the eurozone and with it, the fragile U.S. economy.


European economy is in everybody`s best interests, including America`s.
Europe is our largest economy partner. Put simply, if a company is forced
to cut back in Paris or Madrid, that might mean less business for
manufactures in Pittsburgh or Milwaukee. And that might mean a tougher
time for families and communities that depend on that business.


HAYES: As the gross domestic products of the big European nations
indicate, the austerity imposed on Greece as a condition for loans from its
European neighbors has not worked. Rather than improving confidence and
economic growth, the sharp cuts have accelerated the staggering erosion of
Greek GDP. You can see it falling off the chart there.

Greek unemployment has soared to 21 percent. At the time that
funding for pensions, health care and education have also been slashed.
Not surprisingly, the economic devastation has created intense political
unrest. Already, two governments have collapsed with a new round of
elections slated, and into the power vacuum comes among others, the neo-
fascist Golden Dawn party.

On the march yesterday chanting "traders, scoundrels, politicians
fight back with the national resistance and foreigners out of Greece".
Golden Dawn along with the far left Syriza party helped kick out the
incumbent centrists, balking at the harsh terms of the bailout they`ve
threatened to default, raising the possibility of the end of the currency
in Europe, and opening the door to a full-fledged, continent-wide economic
and political crisis.

If that does happen, don`t bet it will stay contained. Here`s U.K.
Prime Minister David Cameron making that case.


DAVID CAMERON, U.K. PRIME MINISTER: Either Europe has a committed
stable successful eurozone, with an effective firewall, well-capitalized
and regulated banks, a system of fiscal burden-sharing and supportive
monetary policy across the eurozone, or are we in uncharted territory,
which carries huge risks for everybody.


HAYES: At the conclusion of the G-8 summit, Obama waxed optimistic.


OBAMA: There`s now an emerging consensus, that more must be done to
promote growth and job creation right now in the context of these fiscal
and structural reforms.


HAYES: But Angela Merkel had not budged, insisting on holding Greece
to the original terms of its loan. If Greece leaves the euro, it will be
like pulling on a small thread, one that may lead to the unwinding of the
entire European project. Once that unravels, who knows what comes next.

How terrified should we be about the situation?

And I want to make the case -- let me give my sense of this and Paul
Krugman a column similar. I think for Americans particularly of my
generation and I think for a generation that aren`t the greatest
generation, we think of Europe as conservatives think of it as this nanny
state place where they`re always telling what to do and they`ve got lots of
regulations. Liberals think of it as social democratic paradise and
broadly people think Paris is awesome, there`s old buildings, they`ve got
it figured out.

But it`s basically stable and maybe they face a demographic problem.
I think what the history of the continent, the fact that the most horrific
evil and bloodshed in the history of human civilization took place in one
small plot of land in the span of about 35 years. It was -- and that in
the wake of that, in the blood-soaked soil of Europe, they slowly but
surely built up a set of institutions to make sure that would never happen
again. And these were institutions that they wanted to put in place to
create stability, to avoid crisis, because crisis would bring on extremism
and fascism, and to promote peace and cooperation, right, to make it
possible, to dis-incentivize the constant nationalistic, militaristic
conflict that had roiled the continent for 1,000 years, and that`s what the
project of the E.U. is.

And I think we don`t in America appreciate it as sublime at a certain
level because it`s full of Euro-crats and they`re in Belgium. It`s a big
transnational government, it`s easy to puke fun at. You hear a story about
hair salon regulations that are now going to be all over Europe.

But it is the most effective project of transnational governance in
the history of human kind on the planet that is not an empire, that is
democratic, and we are watching the possible unraveling of it.

I mean, you know, the currency union and the political union are
distinct things, which is part of the problem we can get into. But I think
the stakes need to be planted in the ground for Americans about why this
matters, because I really think it does.

KLEIN: I agree. It matters enormously.

When ways in Germany, I went there to report on this a couple of
months back, the other thing I came away impressed by, the thing I figured,
I realized that we didn`t understand here, the thing that made euro breakup
less likely that it looked to us, who just look at the economics, look at
the market turmoil, who look at what you need to do to keep together is
their commitment to that political project. That is why they can`t let it
fail. That is why to them it`s not a simple calculation of how much it
will cost.

But the problem at this point is it`s not clear they can make it
succeed, either. So they`re in sort of gray zone between being able to do
enough to make it succeed and never wanting to let it fail. In the history
of the euro crisis so far has been we keep getting near failure, and people
say things like, 10 more days, 10en more days. They pull it back for a
certain amount of time.

The question is, at what point do we get a systemic solution or a
crisis that unravels faster than they can pull it back from.

BLACK: The euro is the greatest threat to European unity because --

HAYES: Interesting. The currency union?

BLACK: The currency union, it was inherently designed in way that
exposed it to precisely this kind of disaster. And Trichet, just a few
days ago, the former head of the European central bank, said, first, it was
set up in a fundamentally flawed way. And second, the only answer to it is
to be able to put national member states into bankruptcy, and go Michigan
on them. You know like Benton Harbor.

HAYES: Right, emergency managers.

BLACK: Emergency managers who come in and run your fiscal affairs.

HAYES: Right.

BLACK: And so Greece gets to be both the birth and the death of

HAYES: Well, this point about the death of democracy is an important
one. Even though I said the E.U. is a democratic project, it doesn`t feel
like democracy to Greece, because Greece right now is at the whimsy of its
creditors and they -- what`s happening is you are seeing a democratic, a
democratic rebellion, which if you say to people we`re going to impose
horrible misery on you, would you like that? People go to the polls and
say, we do not like that, no thank you, we will vote for whoever says we
don`t like that.

And the biggest party that`s gained is the left party, Syriza, which
is saying basically, no, we`re not going to take the terms of this deal.

I want to play Nigel Farage, who is a member of the a European
Parliament from the U.K. independent party, which is a euro skeptic party.
And he`s giving his articulation of the skeptical case of what the currency
union and what the E.U. is doing. Take a look.


hit the iceberg. It is a European Union of economic failure, of mass
unemployment, of low growth. But worst of all, it`s an E.U. with the
economic prism of the euro.

And this now poses huge dangers to the continent. We face the
prospect of mass civil unrest, possibly even revolution in some countries
that are being driven into total and utter desperation. We are headed the
wrong way. We must break up the eurozone.

I want the Europe --but a Europe based on trade, a Europe based on
cooperation, a Europe based on our sitting around the table and agreeing
sensible rules on crime and the environment. We can do all of those
things. But we cannot do it if we`re asked to rally behind that flag. I
owe no allegiance to that flag, nor do most of the people in Europe,


HAYES: A case for breaking it all up. I want to get the panel`s
feedback on whether that sounds like a good idea or the road to disaster
after a break.


HAYES: Karl, you`re making a point about -- you`re like I don`t know
if I want to say it on TV.

That, you know, that this is not genuinely democratic. That this, I
said it`s not an empire.

SMITH: So it`s as practically speaking it`s a German empire, right?
Germany is the largest economy, they`re driving the eurozone.

And right now, it`s falling apart because they`re not acting like the
hegemon of Europe. They`re not acting like, you know, this is our
responsibility. We have to take care of our project. We have to pay
what`s necessary to keep our empire together.

So, they have a wayward province, Greece is doing bad things, they`re
acting like we`re all partners, we have to follow the rules. That`s not --
when you`re the head among us, that`s not what you do. You do whatever is
necessary to hold the empire together, is we have this vision for what
Europe wants to be and it costs money. It costs money to buy that vision,
and so you pay, you know?

HAYES: But the other side of that, which is what makes the politics
around this so tricky, I find politics can get so byzantine, but they`re
fascinating, right? Because the other side of it is that Angela Merkel has
her own democratic politics to worry about, right? I mean, we saw what
happened with the TARP?

Can you imagine if TARP was directed entirely to Mexico, you know
what I mean?

KLEIN: Although the politics on this turning to Germany in an
interesting way. So, Angela Merkel`s party just lost a big election in a
province I`m not going it try to pronounce. They lost it not to far right,
they lost it not to euro skeptic party. They lost with social democrats.

And the social democrats want more European integration. They want
more European help. They want more stimulus. They want more growth.

I mean, it was an it has been taken in Germany as a sort of anti-
austerity election and since then, Merkel has been speaking much more about
growth. Whether or not she`ll follow up on it, but she`s been speaking
more about growth.

BLACK: Merkel made that state election explicitly a referendum

KLEIN: And she lost.

BLACK: Deliberately. And she`s lost seven of eight state elections.
So you know, you said two governments have gone down. Every government
that`s adopted austerity and gone to the polls has lost, from either the
right or the left.

HAYES: Yes, it`s not an ideological rebellion as much as it`s a
rebellion against misery.

BLACK: It`s a policy where you handed a gun and told to shoot
yourself. Eventually people say, now why exactly should I do that type of

HAYES: Right, right.

BLACK: So whether Greece has been good or bad, the policy is stupid.

HAYES: The other thing that needs to be emphasized here is because
America is going through bad economy and we`re muddling along and we have
the great recession. And we have elevated employment, I think it`s
tempting to thing things are bad there and bad here.

You know, Spain has 21 percent unemployment. That`s Great Depression
levels unemployment. I mean, 8 percent is bad, 21 percent is devastating.
That`s a devastated economy.

Greece has 20 percent and growing, it`s only going up.

BLACK: One of our sayings is because we fear becoming the next
Greece, we`re making ourselves into the next Japan.

HAYES: Right. Explain what that means.

BLACK: So we are nothing like Greece. Greece doesn`t have a
sovereign currency, we do. Greece is subject to the bond vigilantes.

But we`re acting as if you know, hyperinflation or something that`s
just around the corner. Therefore we have to have austerity ourselves,
that puts us into a long-term muddling along, weak recovery/recession,
bounce in/bounce out.

HAYES: That`s looks like Japan which is famously many years of zero
growth. You don`t think that`s true?

SMITH: No. I mean, Japan is a monetary failure. So, I mean --

HAYES: Before we get to Japan, since we`re bouncing around the
globe, I want to emphasize --


BLACK: -- worse in Japan. We all just talked about how we were
making it worse than Japan. We`re about to shoot ourselves in the head.

HAYES: But this point about using way that Greece gets invoked.
It`s become rhetorical troupe to say we`re headed in the direction of

Here`s Mitt Romney making that point on Friday.


chorus and -- I say that because they remind us that this president is
leading us towards Greece. One reason we`re going to get rid of it is to
make sure we don`t continue to have the kind of deficits that lead to
Greece. My guess is when the president speaks at the Democratic convention
in charlotte this year, he will not have Greek columns behind him, because
he won`t want to remind people of Greece.


HAYES: Are we Greece, Ezra?

KLEIN: I can`t stand this troupe. I can`t stand it.

The European -- it is a bad analogy all the way around, both on what
Europe needs to do and what we need to do. As Bill points out, Greece is a
tiny nation that cannot control its own currency. That is completely
uncompetitive. They are ranked between like El Salvador, it`s unbelievably
low on the international competition rankings. Their fiscal situation is
unbelievably bad. Their growth prospects are nil.

We are the largest, safest, best-respected economy in the world, with
the most-understood political institutions in the world. We do have this
debt ceiling problem. But eurozone has been around for 10 years or so, it
began in 1999. Greece came in in 2001.

We did not come into -- we did not come into existence 10 years ago.
So what people are pricing in in Europe is a belief about political
failure, a belief about the future survival of this currency. We have
nothing like that.

And, by the way, this means they need to do things we don`t. We
think of austerity in this country and we think stimulus. Stimulus is what
they need. And that`s a bit of it.

But it`s bigger there. They need to be willing to deals with levels
of inflation. They need to create the equivalent of treasury bonds, which
will be called euro bonds.

HAYES: Right.

KLEIN: They need to do big-governance things.


KLEIN: We did them hundreds of years ago.

HAYES: Right, right. I want to talk about elite failure in Europe
and elite failure at home. I think that in some ways is the resonant theme
across the two. And what it looks like when elites fail, because I find
the phenomenon of the rise of the Golden Dawn, the fascist in Greece,
really terrifying, right after this.


HAYES: So, one of the things that happens in these, there`s, the
check crisis produces political crisis. We`ve seen across the continent.
Rebellion against austerity and the discrediting of the center left and
center right parties that have been the stewards of that austerity. In
Greece, it was the socialist party, the long proud tradition in Greece that
was the one to implement the austerity. And their government collapsed.

The Syriza party, which is a far left party, did not have a lot of
seats in parliament until recently, now 25 percent in the latest election.
They`re now saying we don`t want the terms of the deal.

But to me the most worrying aspect of the Greek political unrest,
this is a country let`s remember that fought a civil war between fascists
and anti-fascists.

BLACK: And had a coup.

HAYES: And had a coup. So, there`s a history there of political
violence and instability. There`s a party called the Golden Dawn, which is
an explicitly fascist neo-Nazi party.

Here`s the golden dawn leader, Nikolaos Michaloliakos after electoral
victory walking through the streets.


immigration, out, out of my country. Out of my home.


HAYES: You see that`s the symbol there, that sort of swastika-
inspired symbol on the right is the symbol of the Golden Dawn party. It`s
serious stuff. These guys are explicitly fascist. They have Sig Heil.

They won 7 percent. Seven percent is not huge, you know, there`s
going to be another election in June. Things get worse. I mean, people
are going to be desperate. I find it ironic that the problem with Greece
being immigrants. It seems like not really the right diagnosis of the
progress, that`s a little immaterial.

This to me is the most worrying part of this, because there`s a
history of fascism on the continent and it tends to thrive and flourish in
times in which the major institutions get discredited and crisis.

When you said you visited Germany, that the their commitment to the
project is a commitment to the project with that in the back of everyone`s

KLEIN: Absolutely. I mean, it was very explicit. I saw a speech by
Helmut Schmidt, one of the great German chancellors, I mean, it always
about World War II and the historical sweep of the European project. I
agree with you, I mean, this is scary.

And one thing about it, too, it is not unpredictable, we think of the
Great Depression leading to FDR as an historical inevitability. We have
the wrong policies, we created the right ones.

Internationally, all different things happened. Parties that were
left that were in replaced by parties very far right. People vote against
misery. They don`t like being miserable. They don`t like to not have jobs
-- and very unpredictable things happen when misery continues for an
extended period of time. So both of the major credible centrist parties
get discredited.

HAYES: Right.

STEVENSON: People have this tendency to try to find a scapegoat, who
is at fault here. I mean it`s absurd to blame the Greece problems on
immigrants. It`s something -- they don`t want to say, we`ve been, we lied
to get into the E.U. We`ve been over-consuming for decades. I`ve been
getting too much.

You know, nobody wants to say that. So they`ve got to find somebody
to blame.

HAYES: There`s a certain appeal. What`s interesting here is that
nationalism can take both in the Greek instance, we`re seeing nationalism
take left and right varieties. I mean, the idea of, you know, the
neoliberal, banker class, running the E.U., we`re going to repudiate them.

The explicit position of Syriza, and Syriza, I should not, has very
been explicit about the fact that we`re in solidarity with working people
all over the continent. They don`t have this quasi-racist vision.

But there is a right-wing nationalism that says, you know, it`s
actually is foreigners that are at this moment imposing the mystery. I
mean, that`s not a crazy thing. We are being victims of people outside
Greece. We need to restore Greece dignity and pride. That`s an attractive
argument when it genuinely is foreign entities that are crushing heel into
your economy.

BLACK: One of the things we`re seeing is the Washington consensus
was not loved by the people of Latin America, who were the guinea pigs for
it. And you can see the whole succession of political leaders who have
come to office on an explicit anti-austerity, anti-privatization policy and
a lot of anti-American aspects as well.

This is the Berlin consensus. And so, the same thing is happening in
many parts of Europe. But you have to also look at the -- what`s happening
on the German side.

So I told you about Trichet`s proposal. Well, Trichet`s proposal
according to press reports, got from "Reuters," got a fabulous response in
the conference that was the run-up to the G8 meeting that you`re talking
about. Including from prominent German former finance minister types, who
said you know what`s really attractive? It has strong leadership.

HAYES: Right.

All right. What you should know for the news week ahead, right after


HAYES: Quick update. I mentioned that the fascist Greek political
party Golden Dawn symbol was influenced by the swastika. My point was to
note the resemblance of the party itself I should, maintains the symbol was
taken from the ancient Greek decor of element known as the Greek meander.

So, what should you know for the week coming up?

You should know what happens in Europe this week and the months ahead
matters. You should it matters just not for the Greek people who are
suffering through terrible economic contraction and dislocation but for the
global financial markets and most importantly for the project of European
immigration, which is the most ambitious attempt of democratic
transnational governance ever undertaken. You should know the spirit that
animated European integration was a desire for peace and cooperation in the
wake of the worst manslaughter in human history and you should know that`s
a spirit worth preserving.

You should know a dissatisfied elementary school student with access
to the Internet can be a powerful thing. Scottish 9-year-old Martha Payne
was so frustrated with meager unappetizing lunches she was getting at her
school cafeteria lunches. She started a blog in which she`d upload
pictures of meals every day and rate them on dimensions of taste,
healthiness and pieces hair.

It got international attention, made Payne a minor media start. And
thanks to her activism, you should know the school will now allow students
unlimited salad and bread.

You should know that embarrassment and public shaming continue to be
powerful forces in the hands of ordinary citizens against unaccountable

You should know that Democrats are counter-mobilizing against efforts
of Republicans in many states to restrict access to the ballot box through
voter ID laws and other measures.

You should know House Democrats have introduced the Voter Empowerment
Act which would create national standards for elections that would preserve
and in some cases expand voter access.

You should know that access to the franchise is the most crucial and
central in the democracy. And you should know that the Republican Party is
committed at almost every level of limiting and curtailing that exercise to
that right.

You should know as you hear congressional Republicans and right wing
billionaires and Mitt Romney continue to wine and rant about burden of
regulation, but regulation can actually save businesses money. A decade-
long study of California work sites found that those were places subjected
to random safety inspections reduced injuries by almost 9 percent, compared
to non-inspected work sites, and saved 26 percent in workers` compensation
costs in the four years following the inspection.

You should know the study also found no negative impact on profit and
sales. You should know that not only can smart and well-enforced
regulations be good for workers and consumers. I can also be good for

All right. I want to find out what my guests know. I`ll begin with
you, Professor Bill Black.

BLACK: Spain. We`ve been talking about Greece. Everyone agrees
Greece is a special case, but Spain coming into the crisis had budget
surpluses and was praised. It has a bubble in residential real estate that
was roughly twice as large as the U.S. bubble and has been pretending that
everything is hunky-dory.

So it`s been hiding massive bank losses and unemployment there is
over 26 percent. In southern Spain, it`s over 30 percent. Youth
unemployment is over 50 percent.

HAYES: In any event, everyone`s going to focus on Spain.

BLACK: It`s a massively bigger economy than Greece and will cause a
systemic crisis.

HAYES: Betsey, what should folks know?

STEVENSON: So, as we were talking about fiscal cliff going forward,
what people should know is we`ve already had a lot of government cutbacks
at the state, local, and federal level that put our unemployment rate quite
high. Estimates suggest we would have an unemployment rate of 7.2 percent
or even below if we put all those government jobs back.

And as you`re talking about it, there`s been a lot of jobs on these
jobs or jobs that women hold. We should note that the BLS issued a
correction and actually they forgot a lot of the women government workers.
A coding error led them to undercount people government workers.

HAYES: This is important because Mitt Romney used a statistic that
sounded to everyone I think implausible. It turns out it was implausible
because it was wrong -- Karl.

SMITH: Yes, one of the things to know is as bad as things are
financially and internationally, least part of the U.S. is doing really
well in the manufacturing sector. U.S. is doing well and even better than
we thought. The Census Bureau just did a re-benchmarking that shows it`s
much larger than we thought.

HAYES: Good to know and Ezra?

KLEIN: I`m just going to reiterate that we are not Greece. We`re
not even Europe. What those two are facing is a political crisis, the
crisis of the market not knowing that understands fundamentally how they
work and the only way we could become that is if Congress a global --

HAYES: Political dysfunction.

KLEIN: -- by defaulting on the debt when it doesn`t have to, saying
that investors did not understand how the government worked.

HAYES: I want to thank my guests today, Bill Black, the author of
"The Best Way to Rob a Bank is to Own One"; Betsey Stevenson, formerly with
the Obama Labor Department; Karl Smith, blogger at; and
MSNBC policy analyst Ezra Klein -- thank you all and thank you for joining

We`ll be back next weekend, Saturday and Sunday 8:00 Eastern Time.
You can stay up to date on info about next week`s show by checking on Up
with Chris on Facebook. You can also get my list of appearances, while
I`ll be talking about my upcoming book, by going to "Twilight of the
Elites` on Facebook.

And coming up next is the one and only Melissa Harris-Perry.

Melissa, what have you got for us this morning?

MELISSA HARRIS-PERRY, MSNBC ANCHOR: Hey, Chris, I`ve actually have
got Bill Bradley this morning.


HARRIS-PERRY: I`m pretty excited about it. He`s got a prescription
for sort of making America better. I`m skeptical. So, we`re going to see.

Also, we`re going to talk to a group of teenaged girls. I have a
panel of young women who are going to talk about what this current vitamin
looks like to them, for young women thinking about voting for the first

And I`m really excited about the NAACP historic decision yesterday.
I get to say something about it, I`m so very excited.

HAYES: I`m very much looking forward to hearing your thoughts. I
was , too, very excited.

That`s Melissa Harris-Perry coming up next.

And we`ll see you here next week here on UP.


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