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'The Last Word with Lawrence O'Donnell' for Monday, July 16, 2012

Read the transcript to the Monday show

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Guests: David Cay Johnston, Callum Borchers

LAWRENCE O`DONNELL, HOST: Tonight, everyone who follows American
politics anywhere in the world is wondering, will Mitt Romney ever sing
again?

(BEGIN VIDEOTAPE)

GOV. CHRIS CHRISTIE (R), NEW JERSEY: I`ve released all of my tax
returns. And I think that`s the right way to go and that`s what I would
tell Governor Romney to do.

GOV. RICK PERRY (R), TEXAS: Mitt, we need for you to release your
income tax.

BILL KRISTOL, WEEKLY STANDARD: He should release the tax returns
tomorrow. It`s crazy.

GEORGE WILL, CONSERVATIVE COLUMNIST: If something`s going to come
out, get it out in a hurry.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: You know, I don`t know how
many years I`ll release.

UNIDENTIFIED MALE: He did five interviews with every outlet.

ROMNEY: I`ll take a look at the -- what our documents are.

UNIDENTIFIED MALE: He didn`t really address the questions about his
tax returns.

RICK TYLER, GINGRICH CAMPAIGN: There`s clearly a problem with the tax
returns.

THOMAS ROBERTS, MSNBC ANCHOR: Mitt Romney may be hiding something.

UNIDENTIFIED MALE: He and the campaign are worried about something.

CHRIS MATTHEWS, MSNBC HOST: What is this guy hiding?

UNIDENTIFIED MALE: It makes it seem like there`s something unseemly.

MATTHEWS: This guy Romney`s on the ropes.

MICHAEL ERIC DYSON, MSNBC POLITICAL ANALYST: Romney`s on the rope.

MATTHEWS: And he ain`t doing rope-a-dope.

(MUSIC)

CHRIS JANSING, NBC NEWS: The battle over Bain just won`t go away.

UNIDENTIFIED MALE: Candidate Obama is running at Bain. Candidate
Romney is running from Bain.

UNIDENTIFIED MALE: The beating, the rhetorical beating the Obama
campaign is going to continue on this issue.

UNIDENTIFIED MALE: This is just not a good story line, not a good
narrative for Mitt Romney.

UNIDENTIFIED FEMALE: This increasingly negative tone of this
campaign.

ROMNEY: I think it stinks to high heaven.

UNIDENTIFIED FEMALE: Romney calling for an apology from the Obama
campaign.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: No, we won`t be
apologizing.

ROMNEY: I think it stinks to high heaven.

MAYOR RAHM EMANUEL (D), CHICAGO: Stop whining.

UNIDENTIFIED MALE: He`s afraid.

REP. DEBBIE WASSERMAN SCHULTZ (D-FL), DNC CHAIR: He and his campaign
leadership need to put their big girl and big boy pants on.

ROMNEY: The Obama people keep on wanting more and more and more.

ANN COULTER, POLITICAL COMMENTATOR: If you don`t run Chris Christie,
Romney will be the nominee and we`ll lose.

(END VIDEOTAPE)

O`DONNELL: We still don`t know if Mitt Romney committed a felony by
filing false documents with the Securities and Exchange Commission, but we
do know that he committed a musical felony when he matched his singing
voice to Katharine Lee Bates` eloquent and ever so slightly socialistic
poem, "America the Beautiful."

If you like Mitt Romney`s singing voice, you better enjoy it now,
because after this, Mitt Romney will never sing again.

(BEGIN VIDEO CLIP)

OBAMA: I`m Barack Obama and I approve this message.

(MITT ROMNEY SINGING)

(END VIDEO CLIP)

O`DONNELL: Yes, they went there. The Obama re-election campaign
started running that ad in nine battleground states this weekend, while the
weekend political shows were dominated by Mitt Romney`s tax returns.

(BEGIN VIDEO CLIP)

EMANUEL: He has released only one year. To the McCain campaign, he
released 23 years. And he`s telling the American people, I`m not going to
give you what I`ve given John McCain`s people in 2008. And when he gave
them 23 years, John McCain`s people looked at it and said, let`s go with
Sarah Palin. So whatever`s in there is far worse than just the first year.

(END VIDEO CLIP)

O`DONNELL: The obliviously rich Mr. Romney made his case this morning
to his oblivious friends at "Fox & Friends".

(BEGIN VIDEO CLIP)

ROMNEY: You know, John McCain ran for president and released two
years of tax returns. John Kerry ran for president, you know, his wife,
who has hundreds of millions of dollars, she never released her tax
returns. Somehow this wasn`t an issue. The Obama people keep on wanting
more and more and more -- more things to pick through, more things for
their opposition research to try to make a mountain out of and to distort
and to be dishonest about.

We`re going to put out two years of tax returns. We`ve put out one
already.

(END VIDEO CLIP)

O`DONNELL: Joining me now, Krystal Ball, co-host of MSNBC`s "THE
CYCLE"; David Cay Johnston, Pulitzer Prize-winning reporter, and tax
columnist for "Reuters" and a professor at Syracuse law school; and Steve
Schmidt, an MSNBC analyst and former senior adviser to the McCain `08
presidential campaign and a senior strategist in the Bush/Cheney `04
presidential campaign.

So, Steve, we have to go straight to you -- 23 years of tax returns
handed over in the vetting of a possible vice presidential candidacy for
Mitt Romney. Did you see those tax returns or who at the campaign did see
those tax returns?

STEVE SCHMIDT, MSNBC POLITICAL ANALYST: No, I never saw the tax
returns, Lawrence. They would have been seen by Abby Coldihaus (ph) and
Rick Davis who ran the vetting operation for Senator McCain in that
campaign.

But certainly, there was nothing, as we talked about Mitt Romney,
seriously, as a vice presidential candidate, as a team. We never talked
about -- there was no indication that there were any problems with the
taxes. But I don`t know the specifics of them.

O`DONNELL: But when you guys assembled an opposition file on Romney
in the primary, you did have a lot of Bain stuff in there, which we`ll be
talking about in the next segment. We don`t have to get into it now.

It seems to me your political view in running against Romney at that
time was anything at Bain is relevant, even the dates after he gave up day-
to-day control, because Bain was his baby, and whatever Bain did, you could
lay politically at his doorstep.

SCHMIDT: Look, I think Bain has been central to attacks on Mitt
Romney since 1994, when he ran for the U.S. Senate against Ted Kennedy.
Democrats have made the attacks. There were attacks made by Republicans in
2008 and of course by Republicans in 2012, and now we`re going around that
again.

O`DONNELL: Steve, should he release the 23 years of tax returns that
he handed over to the McCain campaign?

SCHMIDT: Look, I think one of the things that he`s clearly thinking
through, Lawrence, is that when you are in a disclosure fight and you are
forced to change your position and to disclose something you didn`t want to
disclose, there`s nobody standing there cheering for you saying, great job,
attaboy, you know, that was the right, good thing to do. You know, what
there is, is there`s more outrage, there`s more calls for disclosure, and I
think they`ve made the political calculus, their going to dig in here and
they`re going to try to pivot off of this and get back on to the
president`s economic record.

But, you know, pretty clearly, the campaign has been steadfast that
the public is not going to see more than two years` of tax returns. It
will be very interesting to see this play out between today and the
beginning of the Olympics. And then I think the race really freezes in
place until the conventions, and I think your average American, certainly
the voters that will determine the outcome of the race, they tune out and
they reengage in September.

O`DONNELL: The Republicans are not very impressed with how Romney`s
handled it. Let`s listen to George Will.

(BEGIN VIDEO CLIP)

WILL: Mitt Romney`s losing at this point, in a big way. If
something`s going to come out, get it out in a hurry. I do not know why,
given that Mr. Romney knew the day that McCain lost in 2008, that he was
going to run for president again, that he didn`t get all of this out and
tidy up some of his offshore accounts and all the rest. He`s done nothing
illegal, nothing unseemly, nothing improper, but lots that`s impolitic.

(END VIDEO CLIP)

O`DONNELL: Krystal, there`s George Will, blithely ignoring Mitt
Romney`s story about how she had to talk Mitt into running this time.
George is presuming that on election night in 2008, when McCain lost, that
the Romney campaign was starting again. And of course, he should have had
this figured out then.

KRYSTAL BALL, CO-HOST, "THE CYCLE": Yes, absolutely. I mean, he
should have gotten this out, whatever it is, years ago, if there`s
something that`s really bad. If not, put them out when the Olympics come
up. There`s not going to be a lot going on in the news. People are going
to be talking about the Olympics and who`s going to win the gold.

But I think the fundamental problem here is that it`s not just a
disclosure issue. The problem is that his low tax rates and the tax
loopholes that he exploits really undercut the whole Republican narrative
and argument that people like him and other, quote-unquote, "job creators"
need a tax cut and need special treatment.

And it also goes to this entire narrative that that`s a different set
of rules for rich and for poor, and that people like Mitt Romney live by
one set and the rest of us live by the normal rules of the game.

O`DONNELL: David Cay Johnston, if you`re allowed that one hour with
the returns, that sometimes -- you know, when Schwarzenegger was running,
he released his tax return for an hour, and reporters could stare at it.
They couldn`t make copies. They had to -- what would you -- and you knew
you couldn`t look at every page.

What would you race for and look for in there?

DAVID CAY JOHNSTON, REUTERS: What the tax was he paid every year as a
percentage? Because it is possible in some years he paid no income tax?
Was he paying well above the income tax?

He put out the average of 15 percent. Well, we have a 28 percent
capital gains rate a few years ago. What was he paying during those years?
That`s the number one thing that I would want to look at.

And then I would look at whether, secondarily, to tell us at any point
that he was heavily involved in gray market tax shelters. They weren`t
declared illegal, but they certainly would have been if there would have
been enough resources at the IRS.

O`DONNELL: And you`ll also see in tax records whether anything --
whether he`d done anything that the IRS had, in fact, ruled improper and
overruled at a certain point.

JOHNSTON: Yes. And also to figure out if he`d done things where the
IRS looked askance at these things, but they have to make choices, given
their small staff to pursue these things. And I think that would be one of
the key things to look for.

Because he`s created a position now where he can`t have had any
illegal shelters if he puts this out, but there are gray market shelters.

O`DONNELL: And, Krystal, the fact that we know this same person
handed over 23 years` of tax returns, seems to -- that seems to make it the
magic number. Why won`t you hand over now what you handed over then for a
vice presidential consideration?

BALL: Right. And not to mention, of course, his father was sort of
the model of transparency, and he`s not even putting forward enough returns
to pass a Senate confirmation hearing.

So it seems utterly ridiculous. And, obviously, when he was willing
to hand 23 returns forward, he had all the information, it`s not like it
would be a problem to get it all together. He just is clearly
uncomfortable with providing more ammunition and undercutting the narrative
about what he wants to do with the economy by lowering tax rates that are
already so low for people like himself.

O`DONNELL: David Cay Johnston, my understanding of this standard
tithing in the Mormon Church is 10 percent. Is it possible that you would
find in some years Mitt Romney actually contributed more to the Mormon
Church than he did to the federal government?

JOHNSTON: Oh, I would expect that, absolutely, we would see that.
George Romney, his father, paid, I think, around 19 percent of his income
over a number of years to the church.

O`DONNELL: Nineteen?

JOHNSTON: About 19.

O`DONNELL: Because he was a higher earner?

JOHNSTON: Well, because wealthy people, the church leans upon for
extra money, for this project and that project, like all organizations do.

O`DONNELL: Sure.

JOHNSTON: But George Romney, 19 percent. That`s a huge slug of your
income. He paid much higher taxes, and yet he gave, from the one year we
have, a larger share of his income to the church than his son did, with a
much lower tax rate.

O`DONNELL: And released a lot more tax returns.

Krystal Ball, David Cay Johnston, Steve Schmidt -- thank you all very
much for joining me tonight.

BALL: Thanks, Lawrence.

O`DONNELL: Coming up, more on Romney and Bain Capital with David Corn
and "The Boston Globe`s" Cal Borchers.

And Mitt Romney was publicly advised to attack President Obama today
on his admitted use, the president`s admitted use of recreational drugs
back when he was in high school. The adviser who wants Mitt Romney to do
that is drug addict Rush Limbaugh.

And Grover Norquist is going crazy. I mean, really, really, crazy.
He`s calling a Republican senator a liar. Republican-on-Republican verbal
violence is in the "Rewrite" tonight.

(COMMERCIAL BREAK)

O`DONNELL: Oh, sorry. Just reading this little thing.

This is 200 pages of opposition research on Mitt Romney, done during
the Republican presidential primary four years ago. There`s an awful lot
about Bain in here. And we`ll show you some of it, next.

And the Romney campaign got some public advice today about how to
campaign against President Obama. The adviser thinks Romney should attack
the president for being a lazy student who didn`t work hard in college or
law school. That advice came from college dropout Rush Limbaugh.

And Karen Finney will be here later to discuss why China-basher Mitt
Romney is suddenly afraid to say anything about the Team USA Olympic
uniforms being made in China.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: Governor Romney`s plan would encourage companies to shift more
of their operations to foreign tax havens, creating 800,000 jobs in those
other countries. Now, this shouldn`t be a surprise, because Governor
Romney`s experience has been investing in what were called pioneers of the
business of outsourcing. Now he wants to get more tax breaks to companies
that are shipping jobs overseas.

(END VIDEO CLIP)

O`DONNELL: That was President Obama today in Cincinnati, Ohio,
forcing the Romney campaign to play defense on the Romney years at Bain
Capital, and exactly when those years came to an end. Romney says all of
the offshoring began after he left, even though reporting by David Corn of
"Mother Jones" shows offshoring may have begun as early as 1998.

During the Republican presidential primary in 2008, the McCain
campaign did not limit its research to when Romney was in day-to-day
control of all Bain activities. For example, the McCain campaign found
that after Romney became governor, "Bain capital teamed up with Chinese
appliance maker Haier Group in 2005 in an effort to purchase Maytag
corporation and send jobs overseas."

And at least two Bain Capital companies, Stream International, and
Modus Media focused on outsourced technical support services, expanding
facilities abroad while contracting operations in the United States."

Joining me now is David Corn, MSNBC political analyst and Washington
bureau chief for "Mother Jones" magazine and Callum Borchers, political
correspondent for the "Boston Globe."

David, Bain is Romney`s baby. And politically, the McCain campaign,
in assembling their opposition research on him when they ran against him in
the primary believed that they could make him answer for anything that
happened at Bain, even after he left, since he created Bain.

DAVID CORN, MOTHER JONES: And he owned Bain for many of those years -
-

O`DONNELL: Yes.

CORN: -- as Cal`s reporting has shown as well.

I mean, it took him a few years to figure out how to get out of his
ownership of Bain. But the Romney camp and his few friends who are
supporting him in this regard on the right are trying to draw this line,
when he had daily, day-to-day control and when he didn`t.

But all you have to do is say, Romney`s company, Romney`s companies,
Romney`s funds, engaged in outsourcing, and you`re there. I mean, you
can`t deny that.

So in some ways, this has become a bit of an absurd argument, with him
trying to determine or create this bright line, which doesn`t really exist,
in Cal`s reporting, my reporting on the piece out today even, keeps
chipping away at that story. And as you mentioned earlier, back in `98,
before any of this was an issue, he was already investing in a Chinese
company -- I told this story last week -- that was, you know, that was
basically profiting on U.S. companies sending manufacturing and jobs to
China.

So, if you take a step back and look at the whole big picture here,
he`s really up the creek. I mean, there`s no other way to put it. And
he`s trying to escape. And that`s why he`s having a hard time. And that`s
why we`re probably not going to get the tax records or anything else that
may give us any insight into Romney world, when it comes to all those
secret finances.

O`DONNELL: Let`s listen to President Obama making his case against
Mitt Romney on this, on local television in Virginia.

(BEGIN VIDEO CLIP)

OBAMA: As the head of a private equity firm, his job was to maximize
profits and help wealthy investors. There`s nothing wrong with that. On
the other hand, that company also was investing in companies that "The
Washington Post" called pioneers of outsourcing. And he`s now claiming,
well, I wasn`t there at the time, except he files an SEC listing that says
he was the CEO, chairman, and president of the company.

(END VIDEO CLIP)

O`DONNELL: Cal Borchers, there`s the president using all of the work
that you and David corn have done, summarizing it as tightly as you could
for local media in Virginia. And it seems to me that the president is
showing absolutely no indication of letting up on this.

CALLUM BORCHERS, THE BOSTON GLOBE: No, he`s not. And we heard from
him and also from Stephanie Cutter, his deputy campaign manager, that there
will be no apologies coming, despite what Mitt Romney was hoping for.

But it`s certainly opinion an effective argument for them. As David
pointed out, there`s sort of an absurdist argument going on here. What the
Romney campaign and some of his supporters seem to be trying to miscast
this argument, as if his opponents are attempting to prove that Mitt Romney
was still in charge of day-to-day operations at Bain Capital.

We heard Karl Rove, for instance, say that yesterday.

And that`s really not the argument that anybody has put forth, as far
as I`ve seen. There`s no serious debate about that.

The question is: is it believable whether Mitt Romney had absolutely
nothing to do with Bain after February 1999? That was he has said, and
that`s a much higher standard.

(CROSSTALK)

O`DONNELL: Go ahead, David.

CORN: Lawrence, I mean, that is the key point here. They`re trying
to obfuscate and change the channel a little bit. And one reason they have
to do that because of financial disclosure forms that Mitt Romney filed
federally, including one a few weeks ago, he has said that he was not
involved with Bain in any way, other than owning, or with its operations or
deals in any way after February of `99.

I mean, we know that he signed SEC filings after that point. That
seems to me to be involvement in any way.

O`DONNELL: David Corn and Cal Borchers, thank you both for joining
me.

CORN: Sure thing, Lawrence.

BORCHERS: Pleasure.

O`DONNELL: Rush Limbaugh gave some campaign advice to Mitt Romney
today. He basically told Romney to use every racist stereotype he could
think of against President Obama.

And later, bad day for Grover Norquist. He got himself in a bad fight
with a Republican senator today. Grover`s losing it. I mean, really
losing it. Grover`s back in the "Rewrite" tonight.

(COMMERCIAL BREAK)

O`DONNELL: Drug addict and college dropout Rush Limbaugh -- and you
know, I`m not sure which one of those comes first, sequentially, drug
addict and college dropout. Did he drop out of college because he was a
drug addict or did he just -- did the drug addict thing come because he was
a radio talk show host? Well, I don`t know.

Rush Limbaugh said today that the Romney campaign should attack
President Obama for smoking pot in high school and not working hard enough
in college and law school, that from the drug addict and college dropout.
Steve Kornacki and Joy Reid will join me on the latest Limbaugh madness
next.

And also later, Mitt Romney, who says he will crackdown on China in
the ways that no other president has ever had the courage to do. That same
Mitt Romney is afraid to say what he thinks about Team USA`s Olympic
uniforms being made in China. That`s coming up.

(COMMERCIAL BREAK)

O`DONNELL: In the spotlight tonight, Republican campaign strategist,
Rush Limbaugh. Rush thinks Mitt is doing a terrible job of fighting back
against the team Obama attack on Mitt as a pioneer of outsourcing. But
Rush thinks he knows why Mitt isn`t hitting back hard enough.

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST: Romney knows how to do this. He
did it to Newt and he did it to Santorum. He knows full well how he has to
do this. But I know what they think they`re up against. They got the
first black president, independence. It`s easy to go after Newt or Romney,
because they`re conservatives and everybody hates conservatives anyway.
But we can`t go after poor old Barack that way, because he`s a minority.

(END VIDEO CLIP)

O`DONNELL: And so, Rush decided to teach Mitt how to go after a
minority. Rush this is Mitt should be hitting Barack Obama as a lazy,
drug-taking beneficiary of affirmative action. Rush didn`t use the word
"shiftless," but Rush threw in every racist stereotype he could in his
advice to Mitt.

(BEGIN VIDEO CLIP)

LIMBAUGH: OK, Mr. Limbaugh, since you have the answer to everything,
what would you suggest that Romney do, if he do -- OK, fine! Look, pal,
which I was out creating jobs and investing in businesses and growing this
economy, you were at Columbia smoking weed and snorting coke. You wrote
about it in your book, you talked about how you got into Columbia, the
Harvard law and you didn`t have to do any. That`s what was great about
you. You love getting into Columbia because all you had to do was go to
class, get your grades and smoke a little weed while I was out building the
country while you were doing that.

(END VIDEO CLIP)

O`DONNELL: So Mitt was building the country? I didn`t know that.
Why hasn`t Mitt done more photo ops in front of the things that he built.
Like the interstate I was driving on when I heard Rush say these things.

So, Mitt was building the country while the president was at Columbia
smoking weed and snorting coke. Rush told his audience that the president
wrote that in his book, so it must be true, that he was smoking weed and
snorting coke at Columbia.

In his book, President Obama writes of a difficult period in high
school when he lost all contact with his father, who he had met only once
when he was 10 years old. He wrote, "I had stopped writing to my father,
and he`d stopped writing back. I had grown tired of trying to untangle a
mess that wasn`t of my making. I had learned not to care. Pot had helped,
and booze, maybe a little blow, when you could afford it."

That`s it. That`s what the president wrote in his memoir of his drug
use. But the ditto-heads listening to Rush believe that he wrote in his
book that he was smoking weed and snorting coke at Columbia, which he got
into, obviously, due to affirmative action, which is why he got into
Harvard law school, and that`s why he became president of the Harvard law
review, elected president, because of affirmative action.

Now, Rush could be bitter about Barack Obama`s academic achievement
because Rush was not elected president of the Harvard law review. In fact,
Rush wasn`t even a member of the Harvard law review, because Rush didn`t go
to Harvard law school, or any law school. And he didn`t go to law school
because, well, they couldn`t graduate from college. College was just too
tough for Rush. And we`re not talking about Columbia, one of the most
academically rigorous institutions of higher learning in the world. We`re
talking about southeast Missouri state university, the local college in
Rush`s hometown of Cape Girardeau, Missouri.

Rush had to drop out of southeast Missouri State University because it
was academically overwhelming for him, this is according to Rush`s mother,
OK? Quote, "he flunked everything." That is a quote from Rush`s mother.
He flunked everything.

How lazy or drug addicted did Rush Limbaugh have to be as a college
student to flunk everything? Everything. And how much weed did Rush smoke
as a college student? How much coke did he snort? This is a drug addict
we`re talking about.

Rush Limbaugh is a drug addict. He grew up to be a radio talk show
host drug addict who committed crimes to get his drugs and was convicted of
those crimes while Mitt Romney was building the country, and suspended his
appearances on his radio show to deal with his drug addiction.

Rush Limbaugh hates Barack Obama. Hates him. But he knows he can`t
say exactly those words, so this is the way Rush found today to say, I,
Rush Limbaugh, hate Barack Obama.

(BEGIN VIDEO CLIP)

LIMBAUGH: I`ll tell you what. I think it -- I think it can now be
said, without equivocation, He is trying, Barack Obama is trying to
dismantle, brick by brick, the American dream. There`s no other way to put
this! There`s no other way to explain this! He was indoctrinated as a
child. His father was a communist, mother was a leftist, sent to prep Ivy
League schools where his contempt for the country was reinforced.

(END VIDEO CLIP)

O`DONNELL: Ah! So Ivy League schools reinforce contempt for America.
Did Mitt Romney`s ivy league schools reinforce contempt for America? Did
George W. Bush`s ivy league schools reinforce his contempt for America?
And, hey, did the ivy league schools, that all of these guys went to
reinforce their contempt for America?

And Barack Obama was indoctrinated by his father, who he met once?
Was Rush Limbaugh indoctrinated by his father, who was a lifelong
Republican and a delegate to the Republican national convention in 1936?

Here is what President Obama said that led Rush to say, without
equivocation, that the president hates America.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Look, if you`ve been
successful, you didn`t get there on your own. You didn`t get there on your
own. I`m always struck by people who think, wow, it must be just because
I`m so smart. There are a lot of smart people out there. It must be
because I worked harder than everybody else.

Let me tell you something, there are a whole bunch of hard-working
people out there. If you are successful, somebody along the line gave you
some help. There was a great teacher somewhere in your life. Somebody
helped to create this unbelievable American system that we have that
allowed you to thrive. Somebody invested in roads and bridges. If you`ve
got a business -- you didn`t build that, somebody else made that happen.
The Internet didn`t get invented on its own. Government research created
the Internet, so that all the companies could make money off the internet.

(END VIDEO CLIP)

O`DONNELL: Joining me now are, Joy Reid of thegrio.com, managing
editor, and MSNBC contributor, and Steve Kornacki, co-host of MSNBC`s "the
Cycle."

Joy, all of those racist stereotypes that Rush was using are things
that Mitt Romney can`t say, Rush says very, very effectively. There`s no
mystery to what he`s talking about there. Is it your sense that the
Republican campaign is kind of, in a sense, relies on Rush for this?

JOY REID, MANAGING EDITOR, THEGRIO.COM: You know, it`s funny. That
was so enjoyable, just listening to that entire monologue was so funny
because you got to --

(LAUGHTER)

O`DONNELL: Imagine me trying to drive while Rush is saying these
things.

REID: I know! And the thing is, is that Rush Limbaugh is speaking to
an average age 67, even older than FOX News, right. These people out in
the hinterlands where his syndicator owns all the stations and force places
this radio show which allows him to seem successful. It seems like he is
talking to 20 million people, of course, even technology and the people has
showed, he really actually isn`t, right.

So he`s got a declining sort of product. He`s got an angry, miserable
base that feels they`re the true victims of American history, right? The
blacks got everything. The women got everything. They`re so lucky. We`ve
got nothing.

Rush Limbaugh had a privileged existence. He was born to an upper
middle class family. He had every advantage, and he just couldn`t get it
done. This guy is president of the United States. Are you kidding? He
thinks he`s better than you. That is what Rush Limbaugh`s message is.

Problem, Mitt Romney`s already got those people. Those people are
already going to vote for Mitt Romney. The problem is if he listens to the
likes of Rush Limbaugh, how does he get the others? The people who are not
crazed with hatred for Barack Obama and with envy for what Barack Obama has
achieved.

O`DONNELL: Steve, I want to replay a piece of what the president said
that drove Rush so crazy today. It`s this small section where he`s talking
about, you know, infrastructure and starting businesses. Let`s listen to
that.

(BEGIN VIDEO CLIP)

OBAMA: Somebody helped to create this unbelievable American system
that we have that allowed you to thrive. Somebody invested in roads and
bridges. If you`ve got a business, you didn`t build that.

(END VIDEO CLIP)

O`DONNELL: Now, Rush is saying if you`ve got a business -- he`s
saying if you`ve got a business, you didn`t do it. No, what he`s saying is
if you`ve got a business, you didn`t build the roads and bridges. The
thing he`s talking about very clearly in the previous sentence. Yes, you
built your business. You didn`t build the road going into your business.

STEVE KORNACKI, MSNBC HOST, THE CYCLE: Right, or more broadly, you
didn`t build the American system that he`s talking about.

O`DONNELL: Yes.

KORNACKI: What Obama is doing there, the context he`s talking about,
it`s sort of a riff on Elizabeth Warren, who last fall had that viral
video, you probably remember, where she clearly explained very, very
clearly the social contract. The idea that nobody gets ahead in this
country, clearly and purely by themselves. Obama was trying to do that. I
think he was a little in artful there in how he described it so we open
himself up to somebody taking that out of context and doing what Limbaugh
is doing.

But you know, the other thing that strikes me about Limbaugh, and Joy
is right, you think about his listeners, sure, you know, they`re obviously
not going to be voting for Obama, they`re obviously going to be Romney
voters. But I think there has been a question about Romney this entire
time about the enthusiasm of the Republican base. They don`t really
believe he`s socially conservative.

Limbaugh himself has said this about Romney. And what really drives
them, what`s going to get them to the polls and out in droves, is not that
they like Romney and they want Romney to be president, this is the message
they need to keep them motivated. All the resentment, all the resistance
to Obama and Limbaugh delivers that in the way that Romney --

O`DONNELL: Yes. And Rush is delivering personal hatred to the
president.

Steve Kornacki and Joy Reid, thank you both for joining me.

KORNACKI: Sure.

O`DONNELL: Coming up, Grover Norquist is losing it. He`s losing his
grip on Republican senators and he may be losing his grip on his sanity.
Wait until you hear what he said today.

And later, anti-China tough guy Mitt Romney is afraid to say what he
thinks about team USA`s Olympic uniforms being made in China. That`s
coming up.

(COMMERCIAL BREAK)

O`DONNELL: And tonight`s "Rewrite," the man I introduced to fifteen
months ago, is going crazy.

(BEGIN VIDEO CLIP)

O`DONNELL: Meet Grover Norquist. The president of Americans for tax
reform whose mission statement is quote, "the government`s power to control
one`s life derives from its power to tax. We believed that the power, at
that power should be minimized."

(END VIDEO CLIP)

O`DONNELL: That`s right. The most powerful man in America who does
not sleep in the White House is losing at his being driven crazy by
Republican senator Tom Coburn who decided to do these two things in this
order. Number one, not run for re-election and number two, go to war with
Grover Norquist.

I have praised Senator Coburn`s choice to take on Grover in this space
a couple of times before. And today in "The New York Times," Coburn wrote
an op-ed piece attacking Grover once again. Then Grover made the mistake
of responding in an interview with the hill, in which he inadvertently
revealed just how bad crap crazy he is now.

Here is how he explained his fight with Coburn to the hill, word for
word. I defy you to make any sense of this at all.

"It is like a couple that is having a fight, and one of them tries to
drag a third party in, like the preacher, who gave a speech last week
against adultery. Hey, this is your fault. No, no, no! You promised her
you would behave, you didn`t promise me. You explain to her why you get to
make decisions on adultery."

So, Grover now sees himself in like a same-sex marriage with Tom
Coburn? Or Grover`s the preacher or Coburn`s the preacher and taxation is
adultery? OK, Grover then went at Coburn viciously, saying Coburn lied in
his op-ed piece. He used the word "lie," saying that piece is full of
lies. This is, according to Grover, the biggest lie in Coburn`s article
today.

"I recently proposed amendments to end tax earmarks for movie
producers and the ethanol industry. Mr. Norquist charged that those
measures would be tax hikes unless paired with dollar-for-dollar rate
reductions, and yet all by six of the 41 Senate Republicans who had signed
his pledge voted for my amendments."

What Coburn has written there is absolutely true. So Grover, calling
it a lie, is outright crazy. First of all, lobbyists, which is what Grover
is, don`t call senators liars ever! Even when they`re lying, because that
just makes every other senator wonder when you`re going to call him or her
a liar. Once a lobbyist has called a senator a liar, that lobbyist can
never do business with that senator again. Never persuade that senator to
do anything.

And second, Grover is calling Coburn a liar over something every
senator and every member of the house knows is true. Republican senators
chose to violate their oath to Grover in a vote to kill a couple of tax
loopholes.

And remember what Grover did the day that happened?

June 16th of last year, I reported that night that Grover, the
protector of tax loopholes, created a loophole in his pledge after the fact
of that Senate vote, in order to pretend that his pledge had not been
violated. Grover said that day, as long as the senators who voted with
Coburn, quote, "also vote for the DeMint amendment, they will be in keeping
with the pledge," end quote.

The DeMint amendment is a repeal of the estate tax, and therefore that
would counterbalance the increase in taxation in the Coburn vote. But this
was a change in the pledge for Grover, because prior to that day, the
pledge required any vote for any form of tax revenue increase to include in
the same bill or amendment a vote for a tax cut of the same or greater
amount, right there in the same bill.

That`s the way Grover`s pledge always worked, until 13 months ago,
when Grover said it was OK to vote for a tax increase, as long as you
promised to, quote, "also vote for senator DeMint`s forthcoming amendment."

Now, it was still a loophole in the Grover pledge, even if senator
DeMint`s amendment was guaranteed a vote in the next hour. But it wasn`t
guaranteed a vote in the next hour. Not even that day. Nor was it
guaranteed a vote the next day. It was never guaranteed a vote.

And I asked here on that night that Grover created the loophole in his
pledge, what if the DeMint amendment never even comes to a vote? That`s
what Republican senators were asking when they were making fun of Grover
that day, when his pledge got broken by Republicans on the Senate floor.

Senator Chuck Grassley said, "there is a certain inconsistency because
there are two separate votes."

Senator John Thune said, "I think that`s going to make it incredibly
difficult for the pledge to have credibility going forward."

Senator Mike Gohan said, "what Grover Norquist has just done is blown
his pledge wide open it makes no sense to me whatsoever, once it`s out
there, no member will ever be caught in a bind as long as you follow the
Norquist exception."

How big is the Norquist exception? Thirteen months later, the DeMint
amendment still has never come to a vote. So now, according to the
Norquist exception, you can vote for any tax revenue increase you want, as
long as you promise Grover that someday you`ll vote for a tax cut in some
other bill and that someday never has to come.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

SEN. HARRY REID (D), MAJORITY LEADER: I am so upset that I think the
Olympic committee should be ashamed of themselves. I think they should be
embarrassed. I think they should take all the uniforms, put them in a big
pile, and burn them.

(END VIDEO CLIP)

O`DONNELL: That was Harry Reid last week, reacting to the news that
the team USA`s uniforms were made in China. Ralph Lauren, who designed the
uniforms, has since promised to make the 2014 Olympic uniforms on American
soil. So if Harry Reid is that upset about it, what does China-basher Mitt
Romney have to say about it?

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: You know, I`m not going to
weigh in on that. The Olympic games are about the athletes. And we`re
going to watch the athletes perform and these other matters are extraneous,
I think.

(END VIDEO CLIP)

O`DONNELL: While Romney was running the Olympics, the Olympic
torchbearer uniforms were made in Burma, and the united we stand pins were
made in China.

Joining me now, Karen Finney, former DNC communications director and
MSNBC political analyst.

Karen, I wanted us to listen to what Mitt Romney had to say about
being tough on China, just last week.

KAREN FINNEY, MSNBC POLITICAL ANALYST: OK.

(BEGIN VIDEO CLIP)

ROMNEY: I`ll clamp down on cheaters like China and make sure they
finally play by the rules, and don`t steal our jobs.

(END VIDEO CLIP)

O`DONNELL: Karen, don`t steal our jobs! What about our jobs making
the Olympic uniforms?

FINNEY: That`s right. Who thought that Bain Capital and, you know,
the Olympic uniforms were connected by Mitt Romney and outsourcing? But
there`s another thing that I want to say.

This is exactly the incompetence that we`ve seen from this campaign.
It was predictable. Once the China story came out about the uniforms that
maybe somebody would go back and check and see about the uniforms under
Mitt`s tenure.

So, again, the fact that the campaign was not prepared with an answer.
That`s malpractice, and I almost feel bad for Mitt Romney on that one. So
then we go to today, the story comes out. They have no answer.

Here`s the other problem, though, Lawrence. This is exactly like the
tax returns. We think that the reason he doesn`t want to talk about it is
there must be something in there that`s politically inconvenient. They
keep saying, no, that`s not true.

He didn`t want to talk about the Olympic uniforms on Friday, which
seemed silly, because it seemed like the perfect tee-up. Then we find out,
guess what, it`s politically inconvenient. Not good PR management by the
team.

O`DONNELL: Well, he does have, you know, some strikes against him in
this category when he was running the Olympics. Susan Bonfield, who was a
torchbearer the year that Romney ran the Olympics, in an interview with
"the guardian," she said, "when I look at the label for the uniform, I went
nuts. When you are sending work representing the U.S. to a military
dictatorship, I have an issue with that."

So, if Romney was going to say they shouldn`t have had their uniforms
done there, then why did he have the work done in Burma when he was running
the Olympics?

FINNEY: Well, that`s exactly right. But, again, in this instance,
this is something they should have been prepared for. It was a very
obvious, predictable thing that once the story came out about the uniforms,
this time being made in China, someone would take a look and would find
that quote. I mean, I found it on Google. I mean, it`s not that hard to
find.

And the fact that they were not prepared, again, I find it stunning.
And again, because it also, as you point out, goes to this outsourcing
question. So there are a number of levels where, again, team Romney just
really fell apart on this one.

O`DONNELL: Karen, I know a patriot who can afford to solve this whole
problem for the U.S. Olympic team -- Mitt Romney! He can afford to buy
them all new uniforms, made in Massachusetts or any home state he wants.

FINNEY: How about that? L. Bean could probably do them, right?

O`DONNELL: Karen Finney, thank you very much for joining me tonight.

FINNEY: Thanks, Lawrence.

O`DONNELL: "The Ed Show" is up next.

END

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