updated 8/20/2012 5:15:15 PM ET 2012-08-20T21:15:15

Guests: Richard Belzer, Heather McGhee, Michelle Goldberg, Josh Barro, David Cay Johnston, Neil Barofsky

CHRIS HAYES, MSNBC ANCHOR: Good morning from New York. I`m Chris Hayes. A
group of South African miners are vowing to fight to the death after police
officers shot and killed 34 striking miners armed with sticks and machetes.
And Republican vice presidential candidate Paul Ryan is taking his mother
on the trail with him in Florida today to campaign on Medicare. We`ll
talking about Medicare in just a bit.

But first, the story of the week, Congressman Ryan. Since Ryan was
announced as the vice president -- Republican vice-presidential candidate,
many progressives and even mainstream media outlets have noticed that there
is a fundamental tension between Ryan`s belief system and his biography.
Ryan is beloved by the conservative base, because he`s, by all accounts, a
true believer, deeply influenced by the hyper individualistic philosophy of
romance novelist Ayn Rand. His speeches and talk influence and the lengthy
preamble to one of his first big budget documents paints a picture of a
world divided into makers and takers, those who produce and those who
mooch.

To Rand, the ultimate good is freedom, self-autonomy, and all attempts
to weave together a social safety net to alleviate misery caused by
misfortune are incursions on that freedom and are suspect, even
contemptible. And for Ryan, there is a biographical dimension to this
philosophy. Ryan suffered through a horrible tragedy in his teenage years
when he discovered his father dead of a heart attack in his house. The
death shook Ryan. And he says, changed his outlook. It changed the
finances in the household. His mother went back to school and they took in
with his grandmother. Ryan says, he concluded that, quote, "I`ve got to
either sink or swim in life."

There`s a deep existential sense in which that`s true for everyone.
As conscious human agents, we`re all ultimately responsible for our own
conduct and the choices we make. But that does not mean we sink or swim
alone. In fact, it`s almost never the case that we do. And this is where
we start to see the deep tension between Ryan`s philosophy and Ryan`s
biography.

In Ryan`s case, while there`s no question the experience of his
father`s death must have been wrenching and devastating, Ryan`s family were
not left to sink or swim on their own. They availed themselves, as they
should have, of various flotation devices, which helped them not only to
survive but to thrive, preserving their freedoms rather than diminishing
them.

First there`s the Social Security survivors` check the government
started sending the family upon his father`s death, which would help pay
for his college. There`s also the family made well off in part by
government spending that Ryan was lucky enough to be born into. One of the
most prominent in his hometown of Janesville, owners of a large successful
construction company, which got its start in 1884 in railroad construction,
which is heavily subsidized by the federal government. The company
continued to prosper as it moved into business of building roads, public
roads. It`s the same family company that would later hire Paul Ryan as a
marketing consultant, giving his political resume a little private sector
experience furnish.

Then there`s the government paycheck that Ryan himself has drawn for
much of his adult life. In the Randian division between makers and takes,
those whose living is provided by a government paycheck are squarely on the
taker side of the ledger. This dependence on the state while
simultaneously castigating and condemning it isn`t limited to Ryan. In
fact, Rand herself, who famously inveighed against parasites and warned of
the deep corrosive moral threat of sucking at the teat of the state, pulled
off the same trick. Accepting government intervention, she wrote, in a
virtue of selfishness, is delivering oneself into gradual enslavement. But
never one to lack for hubris, Rand also authored a hilarious justification
of people like herself taking advantage of the fruits of that enslavement.
On the question of whether her devotees can morally justify taking
government scholarships for school, Rand offered comforting advice. Quote,
"The recipient of a public scholarship is morally justified only so long as
he regards it as restitution and opposes all forms of welfare statism.
Those who advocate public scholarships have no right to them. Those who
oppose them have."

Rand was true to her own words. In her later years, she collected
both Social Security and Medicare under her married name of Ann O`Connor.

My favorite example of this particular kind of contradiction is when
right-wing billionaire Charles Koch attempted to convince economists
Friedrich Hayek to move to the U.S. in 1975. In a letter promising that
quote, "You are entitled to Social Security payments, automatically
entitled to hospital coverage." For your further information, Charles Koch
writes, "I`m enclosing a pamphlet on Social Security."

Liberals like myself, of course, delight in pointing out these
inconsistencies and leveling the charge of hypocrisy. Do as I say, not as
I do. But I`m not sure hypocrisy is really the right word here. It`s a
little like when right-wingers point out that folks at Occupy Wall Street
were using iPhones, which are, hey, a product of the same global capitalism
they distrust. The response for both Occupiers and Rand devotees is that
we`re all embedded in the world as it is. A capitalist economy with a
system of social insurance, inadequate as it may be, and few of us can
individually withdraw fully from either.

So it`s not hypocrisy that bothers me so much as the ridiculous self-
serving selective vision of those who have benefited from personal
privilege, social connections, family name, and, yes, the welfare state,
constantly hectoring others to sink or swim on their own and taking
determined, effective steps to destroy policies that give other folks some
of the same cushion they had.

That`s a problem much bigger than Paul Ryan. One of the most
insidious aspects of the culture of success in the U.S. is the way in which
it invites those who are successful to write for themselves a story of
their own personal overcoming of the odds. Their own sink or swim moments,
the ways in which their success was produced by some very special personal
individual achievement, conveniently erasing the role that privilege, luck,
connections and society played in all of it. That`s exactly what Mitt
Romney did at a debate earlier this year.

(BEGIN VIDEOTAPE)

MITT ROMNEY, REPUBLICAN PRESIDENTIAL CANDIDATE: My dad, as you know,
born in Mexico, poor, didn`t get a college degree, became the head of a car
company. I could have stayed in Detroit like him and gotten pulled up in
the car company. I went off on my own. I didn`t inherit money from my
parents. What I have, I earned. I worked hard in the American way.

(END VIDEO CLIP)

HAYES: This is all part of the grand American ethos of meritocracy, a
land where people rise and fall on their own pluck, drive and intelligence,
a land where we neatly divide a quality of opportunity from the quality of
outcomes, and then we are saying we provide the quality of opportunity, the
mythical level playing field, and whoever comes out the winner in the
actual competition, well, then they`re the deserving ones. In fact, Paul
Ryan himself made precisely that point during his first speech as V.P.
candidate on Saturday.

(BEGIN VIDEO CLIP)

PAUL RYAN, REPUBLICAN VICE PRESIDENTIAL CANDIDATE: We promise equal
opportunity, not equal outcomes ...

(CHEERING AND APPLAUSE)

RYAN: And this idea was founded on the principles of liberty ...

(CHEERING)

RYAN: ... freedom, free enterprise, self-determination, and
government by consent of the governed.

(END VIDEO CLIP)

HAYES: Of course, even if you accept this as the mandate of American
fairness, equality of opportunity, not of outcome, how exactly does cutting
food stamps for poor kids preserve the quality of opportunity or cutting
Medicaid by a third, leaving thousands of poor sick people without care?
Ryan tells the story of a quality of opportunity as the necessary
precondition to evaluate individual performance as wholly produced by those
individuals. Their drive or laziness, their brains or stupidity, but Ryan
and those who share his world view don`t prioritize that equality of
opportunity in any meaningful way. They don`t show any signs of a serious
commitment to it. What they are committed to is maximizing the freedom,
especially the economic freedom of those who most benefit from society`s
outcomes at the expense of the freedom and opportunity of those who don`t.
Our panel joins us for what this week told us about Ryan`s past and about
the Romney campaign itself right after this.

(COMMERCIAL BREAK)

HAYES: All right, joining me today at the table are Josh Barro,
columnist of Bloomberg View, Michelle Goldberg, senior contributing writer
for "Newsweek" and "The Daily Beast" Heather McGhee, vice president of the
progressive Demos, and it`s a great pleasure to welcome actor and comedian
Richard Belzer.

RICHARD BELZER, ACTOR: Author.

HAYES: Author as well.

(LAUGHTER)

HAYES: So, I just -- I just have this little monologue about the
trajectory of Paul Ryan as a kind of ideological figure. And I think that
this -- to me the most interesting story that happened in the weeks since
we were last on the air, we were here Saturday morning covering the Paul
Ryan announcement live, is that when we were sitting at this table a week
ago we were saying, well, Romney`s really doubling down. He`s going for it
ideologically, right? Embracing the Ryan`s budget, not running from it,
I`m going to be the -- I`m going to be the person that gives America the
tough medicine it requires, right? I`m going to cut, we`re going to go
after Medicare, because we`ve got to tighten it all.

BELZER: That`s tough medicine, that`s true.

HAYES: That`s right, exactly. And we`re going to go -- and we`re
going to do this. And Paul Ryan is the tribune of this kind of ideological
purity. But that`s not how the week has played out at all. In fact, it`s
been a total mess of contradictions, to the point where now at the end of
the week, it appears to me that Paul Ryan has been selected to be the
person to attack Barack Obama for cutting Medicare, and then yesterday for
not baling out more of the auto industry.

(LAUGHTER)

HAYES: And I just find this a really remarkable spectacle.

BELZER: Yeah. You know, what`s interesting to me in this, if I may
just quickly quote "The New York Times."

HAYES: Please.

BELZER: That Ryan ...

HAYES: It`s a trusted source of information.

BELZER: Yeah. Occasionally they get it right. "Ryan is a powerful
influence on the intellectuals, economists, writers and policy makers who
are at the heart of Washington`s conservative establishment." That to me
is -- I don`t know what planet these people are from, but Jeffersonian
democracy, Jefferson was in France, saw the French Revolution, came back
and was appalled at the Continental Congress, because there was nothing
about personal rights or protecting your papers, protecting your home. And
so he had a -- Jefferson had a big fight with Hamilton and Madison, because
Hamilton and Madison were kind of Hobbesian, they felt maybe the king
shouldn`t have everything, the people should have something, but the people
have to be controlled, right?

Whereas Jefferson -- I take very seriously the pursuit of happiness in
the Constitution, and the government`s not supposed to get in the way of
it. And that`s what these conservatives are doing. They say like when
Bill Clinton became a Republican and ended welfare as we know it, the
ramifications of that are still reverberating, that`s kind of a lost story.

HAYES: But Ryan says ...

BELZER: Let me just finish my thought, if I may, I`m sorry, Chris.
But what I`m trying to say is, if you want people to pull themselves by
their bootstraps, but you cut their bootstraps.

HAYES: Right.

BELZER: You want them to get off welfare and go on work, but you
don`t have daycare ...

HAYES: Yes, exactly.

BELZER: You don`t have a good work program -- Excuse me for
interrupting you, but I get worked up.

HAYES: No, no, that`s -- that`s exactly the point, right? I mean the
point is they -- there is this sort of ideology -- this ideology of
individual achievement, it stands at one place. Then there is the welfare
state, which exists, and the question is how is that vision that they say
they adhere to of individual achievement and individual liberty applied to
the edifice of the welfare state? And the answer has been in a total messy
contradictory way that ponderous to our democratic (inaudible).

MICHELLE GOLDBERG, THEDAILYBEAST.COM: But I think it`s only messy and
contradictory if you kind of assume that the political arm and the
intellectual arm in the conservative movement are going to be speaking with
the same voice. You know, I mean, part of the reason that Ryan is so
useful, I think, is that he can go out and demagogue against cuts to
Medicare without actually freaking out the base who knows that he actually
wants to gut Medicare.

HAYES: Right. That`s interesting. That`s interesting.

JOSH BARRO, COLUMNIST, BLOOMBERG VIEW: I think it shows Romney`s firm
belief in Etch-a-Sketch campaigning. You know, he believes that the public
can be so fooled by any ideological change that Paul Ryan doesn`t have to
be an ideological conservative who wants to cut the budget. Paul Ryan is
going to be defender of Medicare demanding ten percent more Medicare
spending over the next decade than the president wants. Then he thinks
that they can sell that to the public. And I think he may well be right
about that. I don`t think it`s clear from this week that they are not
going to be able to sell that -- that Medicare line.

BELZER: Sell what?

BARRO: Sell the line that ...

BELZER: Obama cut waste, fraud, and abuse, as we say, and these guys
want to pay for it as we know--

(CROSSTALK)

GOLDBERG: Right. But that was already almost too many sentences or
too many words for a sound bite.

HAYES: Well, that`s the remarkable thing is, the remarkable thing is
that what`s been keyed up is ...

BELZER: I had quotes around it.

HAYES: ... the remarkable thing that what`s been keyed up is now
we`re having a debate about the mechanisms by who is cutting Medicare in
what way. And it just seems bizarre terrain.

BELZER: It is bizarre

HAYES: It`s a bizarre terrain to kind of run the campaign on. First
of all, there`s eight percent unemployment. It`s like what -- 16 million
people out of work. Like this isn`t the thing we`re going to talk about,
our fiscal projections for 2020.

MCGHEE: Right, but this is what worked for them in 2010.

(CROSSTALK)

BELZER: 2010, you made a very astute observation -- I`m sorry, did I
interrupt you?

HEATHER MCGHEE, DEMOS.ORG: No, it`s OK, I just was going to say ...

BELZER: Go ahead.

MCGHEE: Actually, there is a real ideological purity, because what
Romney is saying that Ryan is now echoing is that the problem is Obama cut
your Medicare ...

HAYES: That`s right.

MCGHEE: That you`ve paid for all your life ...

HAYES: Right.

MCGHEE: Right?

HAYES: Yes.

MCGHEE: Which is not even a government program, right, because you`ve
paid for it all your life, and gives it to this new thing for these new
people, called it Obamacare.

HAYES: That may or may not look like you.

MCGHEE: Right. So, and that`s like as pure, you know, sort of
conservative ideologies you can get, which is, you know, makers, takers,
lots of racism underneath. I mean ...

BELZER: Yes.

MCGHEE: That`s what this is really about.

BELZER: Exactly.

BARRO: I don`t think it`s conservative ideology. I think it`s just
interest group politics.

BELZER: Right, that`s exactly ...

BARRO: I think that they are -- they are trying to get the votes of
old people.

HAYES: Old people. Who are their demographic base.

BARRO: Right, and I think you know ...

BELZER: Not anymore.

BARRO: Cutting Medicare, cutting ten percent out of Medicare over the
next decade as the president does, is not a waste, fraud and abuse thing
principally.

HAYES: Right.

BARRO: It`s like, for example, he gets rid of ...

BELZER: But he is hitting providers, not the -- that`s the key.
That`s the key.

BARRO: But that`s a bit of a distinction without a difference.

BELZER: Well, please ...

BARRO: You cut reimbursement rate ...

BELZER: Please, there is a difference between a patient and a
provider.

BARRO: I understand that there`s a difference between them, but when
you cut Medicare reimbursement rates, that`s not only of concern to the
physician.

HAYES: There will be some -- there will some cascade effects, right?

MCGHEE: But also, it`s being done because they`re actually going to
have more paying customers, because of the ...

HAYES: Sure.

MCGHEE: And it`s also cutting the 117 percent sort of, you know,
giveaway that we`ve been doing through Medicare Advantage.

HAYES: But that`s in large part a giveaway--

GOLDBERG: A lot of these cuts were agreed to by hospitals, precisely
because they were going to get more patients under the ACA.

HAYES: Right.

GOLDBERG: The only way these cuts ...

BARRO: This was the bargain.

GOLDBERG: The only way these cuts really reverberate and really hurt
patients is if you do away with the Affordable Care Act, because then the
hospitals don`t have the cushion to make up for these other ...

(CCROSSTALK)

HAYES: Can I -- can I for one second, let me just play Ryan talking
about this. Because I mean one of the things that`s happened is Ryan --
they say, the president`s going to cut Medicare, we`re also going to repeal
the Affordable Care Act, but we`re keeping the savings from the Affordable
Care Act that were in the Affordable Care Act to Medicare in our budget.
And here`s how -- this is how Paul Ryan responded to that.

(BEGIN VIDEO CLIP)

RYAN: First of all those are in the baseline, he put those cuts in.
Second of all we voted to repeal Obamacare repeatedly, including those
cuts. I voted that way before the budget. I voted that way after the
budget. So when you repeal all of Obamacare what you end up doing is that
repeals that as well. In our budget we`ve restored a lot of that. It gets
a little wonky, but it was already in the baseline. We would never have
done it in the first place. We voted to repeal the whole bill. I just
don`t think the president`s going to be able to get out of the fact that he
took $716 billion from Medicare to pay for Obamacare.

(END VIDEO CLIP)

HAYES: That`s word salad. I mean, it doesn`t -- I mean, I`m not even
like -- that doesn`t make any sense.

BARRO: It means nothing, and very often if you get conservative wonks
deep into this, they start babbling about the Medicare trust fund, which is
a complete distraction here. There`s this theory put out by Charles
Blahous, he is one of the Medicare trustees, the basically, you know, the
Medicare trust fund is going to run out money in a few years. Now, I
should put that in scare quotes, the trust fund, like the Social Security
trust fund, is accounting fiction.

HAYES: Right.

BARRO: But so under -- what the law says is when the trust fund runs
out of money, Medicare can`t spend any more than it`s collecting in
Medicare taxes. So you need like an immediate 40 some percent cut in
Medicare spending, which is never going to happen. But if you assume that
it would happen, then what you can say is by cut -- by following President
Obama`s Medicare cuts now, we push out the insolvency of the trust fund by
five years, so it actually allows us to save Medicare later. The trust
fund doesn`t run out of money until 2021.

GOLDBERG: It used to be really clear, I mean I know that like
Medicare trust fund -- probably people like oh, my God--

(CROSSTALK)

GOLDBERG: But the one ...

BELZER: Go ahead.

GOLDBERG: The one thing I think is really - whenever we start talking
about the Medicare trust fund, whether or not it`s accounting fiction is
that the ACA, the Affordable Care Act, extends the Medicare trust fund by
12 years.

HAYES: Right.

GOLDBERG: So, it does the opposite of draining the Medicare trust
fund.

HAYES: And the other thing is, I thought that the whole point -- I
just don`t understand -- well, I do understand. I`m concern-trolling. I`m
concern-trolling, But it`s like why -- if the vision is -- why would you
want to fight this battle just if you`re a Republican strategist? It`s
like -- it`s like if the Democrats said the terrain we want to have this
debate on, is who`s going to deliver tax cuts to the rich? And we`re going
to -- we`re going to be the ones. We`re the ones to trust with tax cuts
for rich, not the Republicans. Well, that`s preposterous. Look at the
record, right? Who ideologically actually favors it, what coalition has
those interests in mind. And if you`re a rich person who wants your taxes
cut, you have an easy choice. If you are looking for the two parties, just
based on what their interests are, as a coalition ...

BELZER: Right.

HAYES: Why are you going to go with the Republicans as the ones who
are going to be preserving Medicare?

MCGHEE: It`s true.

HAYES: Heather, I want you to respond to that after the break.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BOB SCHIEFFER, CBS ANCHOR: There`s no question your campaign has been
trying to make this election a referendum on Barack Obama. Now some people
are saying you`re making it a referendum on Paul Ryan`s budget plan.

MITT ROMNEY, REPUBLICAN PRESIDENTIAL CANDIDATE: Well, I have my
budget plan, as you know, that I`ve put out. And that`s the budget plan
that we`re going to run on.

(END VIDEO CLIP)

HAYES: That`s the first interview that the two running mates gave to
"60 Minutes" on Sunday.

BELZER: Very general Haguean (ph), I`m in charge here.

HAYES: Yes, exactly, that`s right.

(CROSSTALK)

HAYES: Let`s remember who`s calling the shots here.

BELZER: Yeah.

HAYES: But ...

BELZER: I liked it when he introduced Ryan, he said the next
president of the United States.

HAYES: We were sitting here and squirming awkwardly, particularly
when he had to come back and correct it.

Heather, I cut you off as were having this kind of the politics of
Medicare discussion. There was something you want to say?

MCGHEE: Yeah, you were just asking basically how is it that Ryan is
now the one defending Medicare and how can that even sort of pass the smell
test. And I think it`s because frankly the American people right now are
so distrustful of politicians in general, and they are very confused,
rightly, by the 75 year-time horizons that we`re throwing around on these
big fiscal policy debates. That it has to go with gut, and when you talk
about gut, it does end up with demographics ...

HAYES: Right.

MCGHEE: There`s an inability for a lot of older white seniors to
trust Barack Obama on Medicare, and it doesn`t have anything to do with the
policies that he has put out.

BELZER: Or logic.

MCGHEE: It actually has to do with demographics. And it has to do
with that sort of ...

HAYES: I like how you`re using the world "demographics." You mean
race.

MCGHEE: Oh, yeah -- I`m sorry -- I by no means am I afraid to use the
word "race."

HAYES: Yes.

MCGHEE: It has to do with race, and it has to do with familiarity and
it has to do with the fact that in 2010, the Republican Tea Party ran on
cuts to Medicare that were in base, yeah.

HAYES: Yeah, and let me also say I also think it has to do with
demographics in the generational sense. I mean, the big kind of hustle --
right -- you`ve written about this, so I want you -- the big hustle of the
Ryan plan, is look, seniors of America, we`re not coming for you. If
you`re over 55, you`re fine. We don`t touch anything, right. And to me I
was saying this to you in the greenroom, right? It`s similar to be -- to me
to the Scott Walker policy where he said, police and firefighters, don`t
worry. You guys are pretty reliable Republican constituencies. We`re not
going to mess with your collective bargaining. You guys -- you other
public sector unions ....

BELZER: Right.

HAYES: ... and there wasn`t really a good policy rationale for that
distinction, but there was a political one. I think it`s the same thing
with this Medicare polices, is this, current seniors, don`t worry, we`re
not coming for you. It`s those other people we`re going after.

BELZER: But one other thing that they are doing -- no, go ahead, you
probably know more about ...

BARRO: You know ...

BELZER: I`m just saying, if you`re under 55, F.U. is what they are
saying, essentially. Once you are retired, you get, what, eight grand, and
if you have a disease that`s beyond that, die.

BARRO: Someone described it as a going out of business sale for the
boomer generation.

(CROSSTALK)

MCGHEE: That`s the last (ph) period (ph), right? I mean it`s like we
gave you this trickle-down economy, we gave you all the student debt, we
gave you these low-wage jobs, now go and have fun on your own.

BARRO: But I think, you know, I think the effect that Heather is
talking about is there, but I think there`s also a substantive thing, which
is the Republicans have gotten to the president`s left on Medicare for
people who are 55 and over. The president -- the Affordable Care Act cut
about ten percent of Medicare spending over the next decade. Some of which
reverberates back on beneficiaries. Even the Medicare Advantage cuts ...

HAYES: Let me just say -- the amount of (inaudible) beneficiaries is
an open empirical question, how that will play out. They`re targeted at
providers. There will be cascading effects on beneficiaries--

(CROSSTALK)

BARRO: No, I mean the Medicare Advantage cuts, for example, like what
the Medicare Advantage subsidy means is that very often Medicare Advantage
plans are more generous than traditional Medicare. They pick up a larger
share of cost. That won`t be true any more when you get rid of that
subsidy. Now, I think it`s true that that is a bad way to spend the
government`s money, and that a higher priority would be, for example,
expanding Medicaid, but it is true that there is a constituency of seniors
who are benefiting from that.

HAYES: Medicare Advantage. Absolutely.

BARRO: Who will lose that benefit. So I think Republicans have
defended that. They voted against the Affordable Care Act, they voted
repeatedly to restore those Medicare cuts, so they really have taken this
very clear position that they will spend more on Medicare for people who
are already old than the president.

So I think that`s why they can sell that position. It is their
position.

BELZER: If it takes them -- you just did it eloquently, but if they
have to explain it the way you did, you know, eyes will glaze over, and are
seniors as well versed in this as you?

BARRO: No, the bumper sticker --

HAYES: That`s the amazing thing. The Ayn Rand disciple, the guy who
talks about makers and takers, right, is going to be one of the main
message vessels for the Republican message, which is what you`re saying is,
we`ll spend more. Seniors of America, we will spend more on you than the
Democrats. That is the message.

BARRO: Yes, that`s the position they`ve taken.

MCGHEE: I could quibble with a couple of things in there. First of
all, we know the Democrats are as not if not more committed to not cutting
Medicare beneficiaries` benefits.

BARRO: No. But they did.

MCGHEE: No. They cut providers.

(CROSSTALK)

MCGHEE: The idea is -- first of all, they have already said that it`s
going to be-- the way they`re going to calibrate the new Medicare Advantage
program is like patient satisfaction and all these things that are actually
really about basically if seniors start to scream, we will fix it. And you
know that the Democrats will. We`re talking about the Democrats here. And
there`s the doughnut hole, there`s lots of other things that I think we
can`t actually just say it`s a given that the Democrats have actually sort
of sold out today`s seniors.

HAYES: No, no. I`m not -- I want to make sure I`m on the record
saying I don`t think that. I -- the cuts in Affordable Care Act, I mean,
the reason -- let`s just briefly walk back to the genesis of all this is,
which is when you look at the long-range fiscal health of the country, it`s
medical costs that are the problem. It`s medical costs rising irate (ph).
And the place that hits the hardest is in Medicare. And so, this was --
this is the grand irony of this whole thing was, OK, fiscal hawks, OK,
let`s talk about the long term fiscal projections of the country. We`re
going to do something about that. And now what has happened in 2010, the
Republicans are trying to take that, take the actual -- let`s remember,
these are actual votes that they actually had to take, these are actual
pieces of legislation, and turn around and demagogue them on those cuts.

GOLDBERG: Also, you have a book about crisis of authority and crisis
of expertise. There is a lot of perverse incentives built into Medicare in
terms of kind of higher rates or higher reimbursement rates for sub-
specialists. But there`s a lot of things that have kind of nothing to do
with health care, in some cases are actually counter-productive.

So one of the ways they want to achieve some of these cuts is by
figuring out what works, by saying these procedures are more effective than
these procedures. They want to eliminate funding for some operations that
have been shown not to work, you know. And so -- we don`t even have enough
of a kind of common trust--

(CROSSTALK)

GOLDBERG: You can`t do that without people screaming death panels.

MCGHEE: I would have loved frankly a not deficit-neutral Affordable
Care Act. This was all just to make -- all of these hoops were just to
make the biggest expansion in health coverage to millions of Americans that
was going to have incredible benefits for the economy, for
entrepreneurship, all of this, for security, for economic freedom, for
working people. We had to make that deficit neutral because of this fiscal
constraint.

BELZER: And let`s talk about for one second how Ryan is running from
his girlfriend, Ayn Rand. Have you noticed that?

HAYES: Yes, and this is part of --

BELZER: We have him saying that he gave it to his staff, it`s his
Bible, it shaped his thoughts, and now he`s running from her.

HAYES: That to me is part and parcel of everything we`ve seen this
week. Which is the record of what his actual votes were, which are
massively expansionary of the deficit, the bizarre messaging where Paul
Ryan is now the person to go tell seniors we are going to spend more money
on Medicare, and also Ayn Rand. I sort of knew her maybe. The name rings
a bell.

(CROSSTALK)

HAYES: Paul Ryan releases his taxes last night. So I want to just
talk about what those reveal about Paul Ryan and about our tax system and
Mitt Romney, with David Cay Johnston after this.

(COMMERCIAL BREAK)

HAYES: A very smart viewer just emailed us this to summarize the
Republican policy on health care and did it better than I did, so I am just
going to read it. The policy is, "not one dollar less for those who
currently have health insurance, including Medicare, and not one more
dollar more, period, for those who don`t." And that`s basically it.
Right? I mean, it`s like if you`ve got it, you keep it. If you don`t, too
bad.

I want to right now bring in David Cay Johnston, Pulitzer Prize-
winning journalist for his reporting on the U.S. tax code. He was with New
York Times, he`s now with Reuters. A lecturer on tax law at Syracuse
University`s College of Law. Good morning, David, how are you.

DAVID CAY JOHNSTON, REUTERS: Good morning, Chris, glad to be here.

HAYES: This is quickly turning into the David Cay Johnston election.

JOHNSTON: Yes.

HAYES: We`ve got some more tax returns from Paul Ryan last night.
The headline is that he paid an effective rate of 16 percent in 2010 and 20
percent in 2011, and he reported a combined income of over $538,000 over
those two years. An and effective rate of about 18 percent.

So to me the interesting thing is here`s someone who`s definitely in
the upper part of the income distribution in America. He`s affluent. He`s
paying more in taxes than Mitt Romney, who`s making magnitudes more money
than he is.

JOHNSTON: Romney makes more in a week than Ryan does in a year.

HAYES: And that to me is -- that -- what I love about the tax
discussion we`re having and the things about the tax returns has to do with
not necessarily what their individual details are, but the way we just keep
getting this window on what actual -- the tax window looks like and what
the income distribution in the country looks like.

Because this is a perfect example of the kind of fractal nature of
inequality, right? Ryan is a rich guy, but in -- if you look at him in
some ways, but he`s not even in the same universe as Mitt Romney. And the
other thing about the Ryan tax returns, the other thing about the Ryan tax
returns I thought was so interesting is that it reminded you, last night we
found out that Ryan`s tax returns were out, we were like, we`re going to
start the show with Ryan`s tax returns. And then we looked at them, it`s
like, oh, right, most people`s taxes are boring.

(LAUGHTER)

HAYES: Mitt Romney`s taxes are super interesting.

BELZER: It`s like a Russian novel.

HAYES: That`s exactly right. Mitt Romney`s returns are super
interesting because he`s worth $250 million, and he makes a ton of money,
and people who make that much money have really interesting taxes. Paul
Ryan, who`s doing OK, doing well actually compared to most Americans, has
pretty boring taxes.

MCGHEE: I was going to say, his taxes aren`t interesting because he
makes a lot of money. His taxes are interesting because his money is flung
all over the world in a dogged attempt to avoid paying taxes to the country
he wants to run.

BELZER: Totally un-American.

HAYES: Is it un-American? I feel like--

BELZER: To hide your money in other countries?

(CROSSTALK)

GOLDBERG: I think that`s extremely American.

BELZER: Ironically, yes. Only in irony.

GOLDBERG: It`s kind of unpatriotic.

MCGHEE: I think he`s doing everything he can, including picking a
vice presidential nominee whose tax plan would actually have him paying a
0.82 percent tax rate to avoid contributing to the country he wants to run.
I think it`s actually like--

BELZER: That`s a good point, and do you think that Ryan was imposed
on Romney? It seems like, you know, no one really predicted that he would,
and then there was like a groundswell in the last few weeks of Ryan, Ryan,
Ryan. It`s kind of like the Sarah Palin thing, where McCain didn`t really
want her. He wanted Lebovitz (sic)--

HAYES: Lieberman.

(LAUGHTER)

HAYES: Good thing you`re Jewish, because otherwise that is--

(CROSSTALK)

(LAUGHTER)

BELZER: No, it`s, I think that McCain reluctant accepted her to play
this so-called base thing, and now Ryan is doing the same. And the base,
the word is disgusting. They are base and the family values--

HAYES: They`re fellow (ph) human beings.

BELZER: Well, they`re human beings but--

HAYES: They`re our fellow citizens. You just got to understand them.

BELZER: Yeah, I know, but I mean, what are the family values?
Misogyny, racism, homophobia, war mongering? That`s not hyperbole, Chris,
but go ahead.

HAYES: Well, look, I don`t want to get into an argument about the
base.

BELZER: I`m not arguing.

HAYES: But I think I try to give people the charity of--

BELZER: Oh, those people are basically decent, but there is this core
of racist elements within that party that is rearing its ugly head, and
unashamedly race bating. It`s disgusting.

HAYES: I will say this. It is undeniably the case that racist
Americans are almost entirely in one political coalition and not the other.
And that`s the nature of American politics.

David Cay Johnston, was there anything that jumped out at you in the
tax returns we saw from Paul Ryan?

JOHNSTON: Yes, I think there`s two very revealing things here. Paul
Ryan is right on the cusp of the top 1 percent. Mitt Romney is in the very
deeply in the top 1 percent of the 1 percent, and not only is there a
higher tax rate being paid by Paul Ryan, but I think much more
significantly, it tells us about what we`ve done with policy in this
country. The already rich get these huge tax breaks, and the striver
class, the 6-figure income class, they`re the ones who are the most heavily
taxed. That`s the thing we should be paying attention to.

By the way, Paul Ryan`s marginal tax rate is only 28 percent, because
he`s in the alternative minimum tax, which he wants to get rid of. If we
got rid of it, his marginal rate will go up, presumably.

HAYES: David Cay Johnston, Josh Barro has something he wants to say
about that, and I think there`s a really important point about where the
heaviest burden of taxation falls, and we`ll talk about that right after
this break.

(COMMERCIAL BREAK)

HAYES: We`re talking about Paul Ryan`s taxes, which have been
released. I should note, Paul Ryan just coincidentally I think, completely
randomly, released just two years of tax returns, which happens to be the
same number of tax returns that Mitt Romney has released. But I think it`s
been confirmed that he gave more than that to the Romney campaign, because
if you`re hiring someone for a super important job, like the Romney
campaign, understandably they like to see a longer record of the person`s
finances and tax returns, so they ask for more than two years, which -- do
with that what you will.

David Cay Johnston was talking about the policy ramifications of a
world in which -- and I think people don`t quite grasp this, and this is
why I like -- I look at the upper middle class as the vanguard of the
revolution, because they`re the ones who are -- in terms of the tax burden
in the country and in terms of the way the kind of inequality has played
itself out, it is people in the sort of top 10 percent adjacent to the
super rich who don`t have access to the same Byzantine world of tax
shelters, who are actually paying more than the folks one class up from
them, who are making a lot more money. And, Josh, what were you going to
say?

BARRO: Well, two things to say about that. One is that it`s a little
bit misleading to make this direct comparison, because most of Ryan`s
income consists of wages and then of things like royalties.

(CROSSTALK)

BARRO: But these are things that are not taxed at a corporate level.
They`re taxed only once. Like when the royalty is paid to Paul Ryan,
whatever entity is generating royalties pays no tax. Much of Mitt Romney`s
income consists of distributions of corporate income, which are taxed at
the corporate level, at an effective rate typically somewhere in the teens.
And then taxed again at the individual level.

So you need to apply some of that corporate tax burden to Romney. And
if you do that, he`s probably paying more tax than Paul Ryan, although not
a lot more.

(CROSSTALK)

BELZER: Is there a difference between -- do you notice, they always,
the Romneys say we pays a lot of taxes. They don`t say personal income
tax. Isn`t there a distinction? And isn`t that what that this is all
about? The aspiring class has to pay more, and those above them pay less.
It just seems illogical.

GOLDBERG: I`m sure Romney pays more sales taxes.

(CROSSTALK)

BELZER: But he takes a break on (inaudible).

HAYES: I want David Cay to respond on this double taxation. Because
this gets at the heart of it. We tax capital income, you know, capital
gains and dividends and things like that at a much lower rate, and the
argument is that they are already taxed at the corporate level, it`s double
taxation, we tax wages much higher. If you happen to be someone who is
making a fair amount of money primarily through wages, you`re going to pay
a higher rate. David.

JOHNSTON: Let me go right to the argument made by the pro-business
American Enterprise Institute. There is no double taxation of corporate
profits, because as some economists have shown going back many years, in a
global economy -- it`s not true in just the national economy, but in the
global economy, the burden of the corporate income tax actually falls on
workers who get lower wages. And what have we seen? Stagnant to lower
wages for most Americans.

So there is not that double taxation of corporate profits. And
Romney`s organizations were largely set up as pass-through entities that
did not pay the corporate income tax.

So, Josh, I`m sorry, the facts don`t support the textbook theory that
you were laying out. And fundamentally we need to keep in mind this notion
that the greater your gain, the higher your burden, that`s 2,500 years old.
It`s the most conservative principle in public finance and it is what gave
birth to democracy, and we`re violating that principle. Paul Ryan
shouldn`t be paying a higher effective tax rate than Mitt Romney, who makes
in a week what Paul Ryan makes in a year.

HAYES: Josh, response.

BARRO: That`s just wrong on both counts. As for the incidence of the
corporate income tax, the incidence is split between capital and labor.
Economists have done various studies that find different splits if you talk
with experts like Michael Linden at the Center for American Progress. A
lot of people take the view that it falls principally on capital, so there
is a fraction that falls on labor, but there`s double taxation here,
because a portion of that tax burden is borne by the investor, by Mitt
Romney`s side. As for the--

JOHNSTON: There`s a second part, Josh, you`re missing. The second
part you`re missing. And that is the tax code in the U.S. allows companies
to earn profits in the U.S. and siphon them out of the country to tax
havens. That`s why corporations are sitting on over $5 trillion of cash in
2009. Trillion. Trillion. You can earn profits in the U.S. if you`re a
multinational, treat them as expenses that you pay from your American
pocket to your tax haven pocket, and hold that money tax-free. I mean, the
system is vastly more complicated than it appears on the textbook level.

HAYES: Quickly.

(LAUGHTER)

HAYES: Resolve this dispute in (inaudible) seconds.

BARRO: The burden of the corporate tax, to the extent it`s borne by
capital, is borne uniformly by capital. Some corporations have an ability
to do that, some don`t, for example, because they don`t have foreign
operations. If you look at like Wal-Mart, they`re paying about 35 percent
of their income in tax. So it`s difficult to measure exactly how much of
this burden is borne by investors like Mitt Romney, but zero is an
incorrect answer.

(CROSSTALK)

HAYES: David Cay Johnston from the Syracuse University`s College of
Law, thank you for joining us this morning. We`ll continue to talk about
taxes and get way into the weeds of the corporate tax side with you next
time you`re on the show. Thanks a lot. We`ll be right back.

(COMMERCIAL BREAK)

HAYES: Mitt Romney spent the week casting his new running mate, Paul
Ryan, as a visionary reformer who will bring fiscal balance to Washington.
There`s much in Ryan`s record that undercuts his image as a deficit cutter,
including his vocal support for the 2008 Wall Street bailout, known as the
Troubled Asset Relief Program, or TARP. The bailout added $224 billion to
federal deficit during the Bush years, according to the Center on Budget
and Policy Priorities. On Wednesday House Speaker John Boehner was forced
to defend, somewhat unartfully, Ryan`s support for the bailout in an
interview on Fox News.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER, R-OHIO, HOUSE SPEAKER: He`s a practical
conservative. He`s got a very conservative voting record, but he`s not a
knuckle dragger, right? He understood that TARP, while none of us wanted to
do it, if we were going to save our economy and save the world economy, it
had to happen.

(END VIDEO CLIP)

HAYES: I just want to say I`m personally offended on behalf of
people, the members of John Boehner`s own caucus who voted against TARP two
times, and the many people who make up the constituents of the Republican
Party who opposed TARP, who I do not view as knuckle draggers. I want to
put that on the record.

That is essentially, though, the argument that John Boehner was
making, the argument advanced by both sides to defend the Wall Street
bailout package. It was better than Armageddon, so shut up and move on.

But now there is a damning new insider`s account of the bailout that
suggests TARP may not have saved the American economy broadly, so much as
it saved the big banks specifically, at the expense of American home
owners. The book is called "Bailout: An Inside Account of how Washington
Abandoned Main Street while rescuing Wall Street," and it portrays in
stunning detail the Bush and Obama administration`s unwillingness at every
turn to deal with a spiraling housing crisis that destroyed at much as $7
trillion in household wealth and forced millions of families from their
homes, all while nursing Wall Street back to health. The book`s author is
Neil Barofsky, who was the special inspector general in charge of
overseeing TARP, known as sig TARP (ph) in the Beltway. He joins us now.

I should also note, we also asked the Treasury Department if they
would provide someone to defend the bailout, but they declined.

Since they are not here, I am going to use tape of Tim Geithner
responding to your book. Because I got to say, you`re really hard on
Treasury in this book. There is just no question. They come off as
terrible people. They come off as bad people with bad priorities, who are
basically trying to screw over the American people, whether intentionally
or not. And so this is Charlie Rose asking Tim Geithner about your book in
July.

(BEGIN VIDEO CLIP)

CHARLIE ROSE, HOST: He raises this question, was Tim Geithner too
friendly to the banks. Because he knew them from his years at the New York
Fed.

TIMOTHY GEITHNER, SECRETARY OF THE TREASURY: I`m deeply offended by
that. I find that deeply offensive. If you think that what we did was
ineffective or there are better alternatives, I don`t know, look at the
history of financial -- look at what Europe is going through now. And ask
yourself can you find an example of something as effective and powerful as
the strategy we designed over that period of time? I don`t believe you can
find an example of that. Now, would other things have been available?
You`re asking this question, which is housing is an example.

ROSE: What would you have done?

GEITHNER: What would you have done, with what authority, with whose
money, and how would you have implemented it?

(END VIDEO CLIP)

HAYES: All right. So I will channel Tim Geithner as is often my want
here on UP. Neil Barofsky, special inspector general for TARP, formerly of
the Southern District of New York, U.S. attorneys office, what would you
have done? Pony up.

NEIL BAROFSKY, AUTHOR: First of all, I just want to make clear. I
don`t think they`re bad people. I think that they reflect the captured
ideology that has taken over Washington that resulted in the big banks
essentially dictating the terms of their own bailout.

But as to that, it`s kind of comical, the famed (ph) defense. One of
the things I talk about in the book is that it was almost a running joke
about how deeply offended Treasury officials often were at the slightest
degree of criticism.

But the answer to that, it`s sort of funny. I made dozens of
recommendations while I was at sig TARP addressing these issues, including
having real principal reduction within the mortgage modification program,
and really, almost countless recommendations to improve and make that
program better that Geithner ignored, discarded, as well as recommendations
on transparency and a number of other things. So for him to suggest that I
haven`t suggested alternatives really suggests that maybe he should have
paid a little bit more attention back in 2009 and 2010.

HAYES: I want to make a distinction between two ways of thinking
about criticism of TARP, and I think this has gotten a little bit lost.
There`s one, TARP never should have happened. That`s one way of thinking
about it, right? If you were standing in the well of the House on that
second vote, right, it went down the first time, they whipped votes, Barack
Obama called up members of the Democratic caucus to say, look, we`re going
to get help for homeowners in there, make sure this helps Main Street as
well as Wall Street. It passed the second time around. So there`s one
view that TARP never should have happened, and then there is a view of TARP
where yes, it should have happened, it should have been voted through, but
its implementation was bad. And could have been much better. My sense
from the book is that you are in the second camp. Right? I mean, you
don`t think they should have voted it down and sort of walked away from the
rubble.

BAROFSKY: I think that given the panic and what was happening in
2008, something had to be done. We really were on the brink of financial
Armageddon. Banks really are too big to fail, and they are still too big
to fail, and that`s sort of a tautology. So you can`t let them fail, and
we saw what happened with Lehman. And if AIG was next, and the cascading
thing, and Goldman Sachs would be gone, Morgan Stanley would have been
gone, Citibank would have been gone, Bank of America would have been gone,
and some people say, well, hey, that would be great for the system, but
there really might not have been a system. People might not have been able
to get cash out of their ATM.

But as you said, a condition for this bailout getting passed, because
it wasn`t passing beforehand, was not just to pour a bunch of money into
the banks to fill the giant hole they had because of their irresponsible
bets leading up to the crisis. The conditions that Congress demanded and
Treasury promised was that it was going to help struggling home owners. It
was going to deal with the foreclosure crisis. It was going to put money
back in the economy, and those failures are very much the result of
choices.

HAYES: Those failures. I want to make clear. Neil Barofsky right
now travels back in time, is a member of the House of Representatives, has
seen what will happen with TARP implementation, but is now back sitting in
the well of the House casting a vote. You still vote for it?

BAROFSKY: I still vote for it, but I don`t trust Treasury the way
they trusted Treasury to just do the right thing.

HAYES: The stuff on housing to me is the undercovered story of the
Obama administration, of the recovery. It is the key to understanding why
we are where we are. You spell it out very well in this book. We`ve got
some real jaw-dropping stats on that, and we will get to those and talk
about it right after this break.

(COMMERCIAL BREAK)

CHRIS HAYES, MSNBC HOST: Good morning from a freezing studio in New
York. I`m Chris Hayes. Here with me are Josh Barro from "Bloomberg View",
Michelle Goldberg of "Newsweek" and "The Daily Beast", Heather McGhee from
the Demos think tank and Neil Barofsky, author of "Bailout: An Inside
Account of How Washington Abandoned Main Street While Rescuing Wall
Street."

Right before we get to the break, I want to talk to you about housing
policy. And housing policy is one of those things where if someone says, I
want to talk to you about housing policy, you`re like, ugh. But housing
policy is super important because, of course, it was housing policy and the
housing market that got us into the crisis.

And what I want to kind of lay out for people -- and then I want to
get your thoughts on what could have been done -- is that, you know, we`re
in what economists call a balance sheet recession. All right? And a
balance sheet recession is where you just have too much debt hanging
around.

And that debt is a burden that kind of hangs around the neck of the
economy and no one can quite get standing up upright because it is dragging
them down. It`s like walking around in one of those suits that weigh a lot
of money -- weigh a lot of money.

(LAUGHTER)

I guess that`s sort of --

(CROSSTALK)

HAYES: -- that`s an apt metaphor.

And I want to get some statistics on where we are in terms of housing.
Right? We all agree, housing bubble, people took on too much debt. So take
a look at what total home mortgage debt was in 2008. It was $11 trillion.
OK? Total mortgage debt, it is now essentially $10.2 trillion. It`s not
reduced by that much.

In fact, it`s remained at incredibly elevated levels historically, and
one of the parts of TARP was to go after this homeowner debt, this
excessive homeowner debt and lift that burden from the American homeowner
so that they could be functioning parts of the American economy. That
essentially was the logic.

And that has just failed to happen. This is less than 10 percent of
TARP funding for housing support programs has been spent, less than 10
percent. So there`s $45.6 billion allocated for housing support programs -
- allocated. No one had to go back to Congress to get a vote. There was
no 60th vote in the filibuster. Right? It was there to be spent.

Only $4.5 billion spent, less than a third of projected beneficiaries
of Home Affordable Mortgage Program -- that`s HAMP, which was one of the
main programs out of TARP to do this -- have received assistance. So in
2009 the administration says we imagine 3 to 4 million homeowners are going
to receive mortgage relief. It`s less than a million as of May 2012. Why
did this happen? How did this happen?

NEIL BAROFSKY, AUTHOR, "BAILOUT": There was a series of conscious
choices that were made. It`s just that simple. They decided that this
program, which was supposed to help struggling homeowners -- as you said,
up to 4 million, was really going to be about assisting the banks. And
this was -- this, you know, we talk about this in the book.

In late `09 we had a meeting, oversight meeting, Elizabeth Warren, who
was at the time the chair of the Congressional Oversight Panel and
confronting Geithner on the very clear failures of this program, how it was
not coming close to meeting its obligations.

Because of conflicts of interest that Treasury put into the program,
it gave the banks incentives not to modify people`s mortgages to keep them
in their homes, but to string them out, rack up fees and then throw them on
the foreclosure scrap heap.

And when he was confronted, Geithner defended the program by saying
that`s it was going to quote-unquote, "foam the runway for the banks." And
he explained what -- by that, the banks could handle a certain number of
foreclosures over a certain period of time. But any more than that, it may
tip them back over.

And that`s what this program was about. It wasn`t about keeping
homeowners in their homes. It was about protecting the giant banks so they
wouldn`t need more TARP money.

HAYES: That -- the other phrase I`ve used to describe the policies is
extend and pretend, right, that if all the foreclosures could get processed
at the same time, the banks suddenly become insolvent again. But if you
could span it out over a certain amount of time, then they can kind of
coast along.

HEATHER MCGHEE, DEMOS.ORG: It was never about the homeowners. It was
always about the balance sheet of the banks. And I want to make sure that
we don`t make the same mistake when we talk about the financial crisis. It
was about not so much about the housing bubble but, yes, the housing
market, but the housing market as in my home being used as a casino chip.

BAROFSKY: Right.

MCGHEE: I think we need to be very clear that what caused the banks
to do a run on the banks was their derivative trading of these things that
were tethered at some point to mortgages, but actually it wasn`t about
people being put into homes that they couldn`t afford. That was not what
has caused the global financial --

(CROSSTALK)

HAYES: Right, but I think what is an obstacle to the recovery is the
-- is household --

MCGHEE: Absolutely.

HAYES: So the problem now is the household balance sheet. I mean,
the bank -- the bank balance sheets are fine. That`s not the thing that`s
the obstacle to recovery right now.

JOSH BARRO, COLUMNIST, "BLOOMBERG VIEW": The banks` balance sheets
are fine if you believe their claims about what (inaudible).

HAYES: (Inaudible) problem.

BAROFSKY: -- allows you overstate the -- and so I think it`s, you
know, it is a real concern that if you force the banks the recognize the
decline in value of their loan portfolios, they can become insolvent again,
and that requires more government support.

But the point at which I think is that -- a mortgage modification
program, however you structure it, costs money and someone has to pay for
that and I think that`s why there`s resistance to it.

MICHELLE GOLDBERG, THEDAILYBEAST.COM: And with whose money.

BAROFSKY: But that -- but the point is that that`s what TARP was
supposed to do. Congress doesn`t pass TARP without the promise for
foreclosure relief. And not only did they have the $50 billion that they
didn`t spend, they had another $200 billion on top of that that was again
authorized, could have been obligated, not a single vote of Congress, all
of which could have gone to this.

HAYES: But then you have what I will call the Rick Santelli problem,
right, which is, you know, Rick Santelli of CNBC. The kind of iconic
moment in which the Tea Party started was him ranting on the floor of the
Chicago Mercantile Exchange about a piece of policy -- I think it was the
HAMP program, actually, it was a press conference about HAMP.

That was going to help homeowners and basically saying your tax
dollars are bailing out the losers -- his word -- the losers who bought a
house with three bathrooms they couldn`t afford. And so my question is,
OK, let`s say, on the policy merits, you`re right.

They should have used that money to write down principal reductions --
and we can talk about what that means -- of homeowners, but the politics of
it were so impossibly toxic that they would have blown up if they did it.

BAROFSKY: I`m sorry, but the cowardice in front of political
opposition by Rick Santelli should not be what the president is elected to
do and what a Treasury secretary is supposed to do when they take their
oath of office. I mean, they had an obligation to the American people and
they had an obligation to Congress when they took this money to bail out
the banks.

And part of that was a meaningful homeowner policy. And, frankly, the
fact that they were going to be scared by Rick Santelli and that`s the
reason why they spent only $3 billion to $4 billion out of $50 billion or
$200 billion available, on the fact that we still have an anemic recovery,
in part because of (inaudible) problems, I mean, that`s cowardice, not
leadership.

HAYES: Well, I don`t want a straw man -- it`s not Rick Santelli,
right. It`s that he represents some general revulsion --

MCGHEE: Moral hazard --

HAYES: -- (inaudible) moral hazard and general political revulsion on
the part of people if they`re being told -- remember, Barack Obama is
already cutting your Medicare to give it to some other folks through his
Affordable Care Act. Now he`s taking your tax dollars to bail out these
homeowners --

(CROSSTALK)

GOLDBERG: I mean, maybe the question isn`t just about the politics of
it. It`s kind of how should somebody like Geithner have addressed the
moral hazard argument?

BAROFSKY: Well, exactly as he did with the big banks. And, you know,
where`s the revulsion of -- the moral hazard of putting hundreds of
billions out (ph)?

Again, there was no governor on the accelerating panel when it came to
shoveling money into the banks to save them. And the explanation was given
that --

(CROSSTALK)

HAYES: -- elected as governor because the thing that modulates what -
-

BAROFSKY: There was no reluctance and no concern about the incredible
moral hazard, moral hazard that had destroyed the economy and triggered the
financial crisis and will trigger the next one because we haven`t dealt
with it.

No concern at all. And they went out and they explained it. And they
said they called it collateral benefit. Those exact same principles should
have been in play when dealing with the housing crisis because it`s just as
much a macroeconomic problem as the financial crisis for the banks was.

HAYES: So let`s talk about principal reductions. You`ve got a
mortgage. It`s more than you can afford, let`s say. There`s two ways of
going about dealing with that. More than your house is worth, you`re
underwater. You can refinance, right, which is, you know, bring your
interest payment from, you know, let`s say you got it at 7 percent because
you had an adjustable rate mortgage, teaser rate went up.

Bring it down to say 4 percent. You know, master financing, but that
doesn`t get rid of the principal problem, right, which is that you owe more
than the home is worth. I`m in favor of principal reductions. Heather, I
think you`re in favor of principal reductions. I think, Josh, you`re
probably in favor of principal reductions.

Michelle, I don`t know where you stand on principal reductions. But
this is something that even, you know, Glenn Hubbard has written about.
He`s a conservative economist who`s advising Mitt Romney. Principal
reduction --

MCGHEE: Marty Feldstein.

HAYES: Yes, Marty Feldstein. I mean, principal reductions have not
happened. Here is Treasury Secretary Tim Geithner testifying against
principal reductions in December of 2009.

(BEGIN VIDEO CLIP)

TIMOTHY GEITHNER, SECRETARY OF THE TREASURY: This program was not
designed -- and this was a conscious choice we made -- not to start with
deep principal reduction. And we made that choice because we thought it
would be dramatically more expensive for the American taxpayer, harder to
justify, create much greater risk of unfairness.

(END VIDEO CLIP)

HAYES: That`s giving his case against principal reductions. Now
here`s a letter from one and the same Timmy Geithner, dated this year, July
31st. He`s writing to the person who`s overseeing the essentially now
government -- fully government owned entities of Fannie and Freddie, right,
the government sponsored enterprises which went bust, had to be bailed out
with taxpayer money, are now overseen by a guy named Edward DeMarco, who is
running them as a sort of guarantor would in a bankruptcy proceeding,
saying you own a ton of these mortgages that are problematic.

You should do principal reductions. You own them. And this is him
making the argument.

"In view of the clear benefits, the use of principal reduction by
Fannie and Freddie would have for homeowners, the housing market and
taxpayers, I urge you to reconsider this decision. Five years into the
housing crisis, millions of homeowners are still struggling to stay in
their homes and the legacy of the crisis continues to weigh on the market."

Very true.

"You have the power to help more struggling homeowners and heal the
remaining damage from the housing crisis."

What changed? Did he just read your book and even though he`s mad,
bro, at you, he decided to change his mind?

BAROFSKY: Yes, those words that he said are the exact same words that
I advanced to Treasury over and over again, not just in 2009 but in 2010
and 2011. And, no, he hasn`t.

This is -- I mean, this is hypocrisy at its worst, because at the same
time that he`s telling Ed DeMarco that Fannie and Freddie have to have
mandatory principal reduction in certain circumstances using these TARP
funds, they`re still refusing to do it themselves in their own program, a
recommendation I made back in 2010, one of those recommendations that Tim
Geithner apparently had forgotten about when he was on Charlie Rose. I
said do this for your own program and he still refuses to do this.

This is just political posturing at its worst. They know DeMarco is
going to say no. He`s been saying no for six or seven months right now.

HAYES: Which is a problem, I mean, we should --

BAROFSKY: No, no -- and I agree with Geithner on this. And I think
that DeMarco should be doing this. But they could have gotten rid of
DeMarco six or seven months ago. They could have recessed the point in him
(ph) at the same time that they did court, right.

They liked having him so they can make -- give this image that now
suddenly they`re pro-homeowner in the hope that everyone will forget the
history of the last couple of years.

HAYES: I wanted to ask you what you learned in your time in
Washington, because the book is really interesting from that perspective
and hear your sort of thoughts on the culture of the place, right after we
take this break.

(COMMERCIAL BREAK)

HAYES: Josh Barro thinks Mitt Romney has a secret plan and
(inaudible) --

BARRO: I do. I absolutely do.

HAYES: I want to ask you -- so, you know, you -- the book is a really
enjoyable read. I would recommend people read it. But I want to ask you a
little bit about its tone, right, because part of the problem in the book,
what`s entertaining about it is that you`re the protagonist who`s beamed in
from this other world.

You`re prosecuting mortgage fraudsters in the Southern District of New
York, prosecuting the FARC in South America. And you come into Washington,
don`t know Washington`s ways. In the beginning, it`s -- you`re just kind
of this -- a little bit of it`s na‹ve, right, and you`re walking through
Washington. And I, you know, I spent some time in Washington and wrote
about Washington, often had that same issue.

But the book ends up to me having a little bit of what I call a
roommate problem, which is this.

If you have a friend who always has a roommate who`s terrible and they
go through 12 roommates who are terrible, at the end of that you`re like,
well, maybe it`s not the roommates, like maybe there`s something going on
in this dynamic where you`re being -- and so it does seem to me a little
bit in this book, like everyone you encounter is corrupt, is dumb, is
dismissive.

And the only people with any integrity whatsoever are basically
Elizabeth Warren and folks from the Southern District of New York. And it
just -- I think over the course of the book, it took away a little bit of
the credibility. So I want you to respond to it, because I think that`s
one of the things I`ve seen in some negative reviews.

BAROFSKY: Sure. No, I think -- I think there`s only been one
negative review, just to be clear. We had about 25 positive and one
negative.

HAYES: The one negative review.

BAROFSKY: The one negative review. You know, but first of all, I
don`t think that`s entirely fair. I think I actually give compliments to
those who never receive compliments, which is members of Congress, who were
very supportive --

HAYES: Sure.

BAROFSKY: -- of our efforts and, we, frankly, wouldn`t have been
successful, including some names in Congress that you don`t typically
associate --

HAYES: -- Chuck Grassley`s staff.

BAROFSKY: -- Chuck Grassley`s staff, Darrell Issa, you know, and
Democrats and Republicans. But I think the roommate problem is, as you
said, it gets to the very core issue that`s at the very heart of the book.
And that is Republicans or Democrats, they`ve all been so captured by the
interests of Wall Street.

And I don`t think these people are dumb by any stretch of the
imagination, nor do I think they`re bad or evil.

I think they just represent and are so captured by where they -- so
many of them come from, this Wall Street attitude that what`s good for the
big five banks and the investment banks is good for the country, that
there`s going to be a natural clash between someone whose job I was -- my -
- I was paid to look out for the interests of the taxpayer and to protect
these programs from waste, fraud and abuse.

And I did. I was squinty-eyed. I was suspicious and worried about
the banks plundering the program. From their perspective, what I heard
over and over again was this inherent trust in the banks. So my concerns
were not valid because the banks would never risk their reputations. They
would never embarrass themselves. And that`s --

(CROSSTALK)

BAROFSKY: Each of my roommates said that exact same line over and
over again. (Inaudible).

But look. I want to be very clear. The people I dealt with in
Washington, who I disagree with, patriotic Americans.

They sacrificed to serve their country. It is not personal about them
but that problem of captured ideology which rewards that attitude with big
pots of gold at the end of the Wall Street rainbow when they leave and the
ideology they bring in, that`s part of a very broken part of our system
that needs to change.

HAYES: Yes, I think you -- I think what comes out of it is there`s,
you know, it`s a question of do you go into this in the wake of the
financial crisis, in the wake of what we know about what was happening in
the housing market, viewing the banks as essentially guilty until proven
innocent, or innocent until proven guilty?

And I think you -- I think the rational thing is you dispose to
distrust the banks after their performance and that`s not the way that
Washington has conducted itself at all across party lines. It is they`re
not going to damage their reputation, even though, you know, day after day
-- LIBOR, the huge London trade that`s losing billions of dollars.

I mean, every day you`re get new evidence, I mean, MF Global, which
we`ll probably talk about soon. You know, every day you get more evidence
and yet that trust still stays there.

BAROFSKY: Right, and again, you don`t have to be -- necessarily
distrust them but you have to be realistic about what their motives are.

HAYES: (Inaudible).

BAROFSKY: And their motives are profit and not to serve the interests
of the American people and that`s why you needed to have those types of
conditions and that`s why we`re still in the problem that we are today.

HAYES: All right. I want to thank Neil Barofsky, author of "Bailout"
-- a great roommate, I should note -- "Bailout: An Inside Account of How
Washington Abandoned Main Street While Rescuing Wall Street."

Thanks for coming this morning.

BAROFSKY: Thank you (inaudible).

HAYES: The standoff at the Ecuadorian embassy in London over Julian
Assange when we come back.

(COMMERCIAL BREAK)

HAYES: High stakes standoff between Britain and Ecuador over
WikiLeaks founder Julian Assange continues this morning with British police
still surrounding Ecuador`s embassy in London and Ecuador still refusing to
turn over Assange.

The standoff, which also involves the U.S. and Sweden, has huge
possible ramifications not just for international relations but the future
of government transparency.

The problems for Assange started back in 2010, when he was accused of
sexually assaulting two women in Sweden. A month later, he left Sweden in
the U.K., where he surrendered to police in December of that year. He
remained under house arrest in the U.K. while challenging his extradition
back to Sweden to answer questions about the two alleged sexual assaults.

This June, after exhausting his appeals, he fled to the Ecuadorian
embassy in London, seeking asylum.

On Thursday Ecuador accused the U.K. of threatening to forcibly enter
the embassy if they did not hand over Assange, a breach that would go
against half a century of diplomatic laws and norms.

In a fiery press conference, announcing Ecuador would grant Assange
diplomatic asylum, Foreign Minister Ricardo Patino said, "There is strong
evidence of retaliation by the country or countries that produced the
information disclosed by Mr. Assange, retaliation that may endanger his
safety, integrity, and even his life."

Patino is referring to speculation that Assange would be extradited
from Sweden to the United States -- I hope you`re still following this --
where he could face possible prosecution, though there has been no
indictment and a Justice Department spokesperson gave us a "no comment"
when we asked about that possibility.

For its part, Sweden issued a statement that the actions of Ecuador
are unacceptable and the U.K. has made it clear they do not accept the
principle of diplomatic asylum and will not allow Assange safe passage out
of the U.K. Obviously, he`s got to get from the embassy to the airport if
he`s going to be going to Ecuador.

Joining me now is Michael Hastings, he`s a "BuzzFeed" correspondent
and "Rolling Stone" contributing editor, and author of "The Operators: The
Wild and Terrifying Inside Story of America`s War in Afghanistan." He
spent time with Assange in the U.K. while interviewing him last December
for "Rolling Stone."

Richard Belzer also back at the table.

Michael, the Assange interview, is great. I would (inaudible) on the
left side. I recommend people check it out.

MICHAEL HASTINGS, "BUZZFEED" CORRESPONDENT, "ROLLING STONE"
CONTRIBUTING EDITOR, AND AUTHOR: He`s a fascinating guy.

HAYES: He is. And I have to say, you know, it`s hard for me to kind
of figure out where I am on all of this, because there seems to be a lot of
conflicting facts. The facts are complicated about what the nature of the
sexual assault is.

Assange himself, as a figure seems a complicated (inaudible), also
admirable in certain ways. The key here, I think, is when you look at what
has happened, one question is, how did we get here? I mean, he isn`t --
hasn`t even been charged with a crime, right?

HASTINGS: Right.

HAYES: Right? He is wanted for questioning in connection to serious
assaults, I mean serious allegations, right? I mean --

HASTINGS: And questioning that -- he has said he would go to the
Swedish embassy and answer these questions. He just doesn`t want to go
back to Sweden.

HAYES: But then why -- OK.

HASTINGS: Yes.

HAYES: Here`s the thing. I feel like with the WikiLeaks thing, we`re
always in this -- it`s like some -- it`s like some movie, where it`s like
who can you trust, right? Because there`s -- why -- if that`s the case,
you know, Assange says, well, I offered the Swedes that I`d go talk to
them. It`s like am I supposed to believe the Swedes have some nefarious
plan to get Assange -- ?

(CROSSTALK)

HASTINGS: I think we should step back -- sort of step back and look
at like WikiLeaks as it is, as an institution, right? WikiLeaks, in my
view, is the most significant journalistic enterprise that we`ve seen in
the last 30 years.

What Assange did with Cablegate, with the Iraq logs, with the
Afghanistan logs, has been the --

(CROSSTALK)

HASTINGS: -- yes, there`s been over 300,000 stories around the world,
based off the reporting, based off the documents that WikiLeaks has
released. Every major news story since WikiLeaks has been -- almost every
major news story you go to and check out, there`s a WikiLeaks connection to
it.

So what he`s done is very significant and he`s also angered the most
powerful governments in the world. That is why Assange is in this
situation.

GOLDBERG: Wait. Can I ask you a question?

HASTINGS: Sure.

GOLDBERG: Why -- I mean, given the fact that Britain is signaling its
willingness to, like you said, kind of destroy this historic protocol of
diplomatic immunity, why would it be easier for him to be extradited from
Sweden than from Britain?

I mean, the idea that this whole -- that these rape charges are all a
ruse --

(CROSSTALK)

GOLDBERG: -- extradited to here, why do they have to go through that
ruse? Why not (inaudible)?

HASTINGS: He`s also afraid that he`ll eventually get extradited from
the U.K. as well.

But let`s take the fear that Assange has of getting extradited and see
if it`s actually a valid fear, right?

We know that when Bradley Manning, who is the alleged source of the
WikiLeaks leak, was put on trial in this prehearing, Assange`s name was
brought up multiple times in these grand jury hearings, right? The
government is trying to flip Bradley Manning, to turn him against Assange,
to say that Assange is part of this conspiracy to commit espionage. So --

HAYES: But let me just say, that is -- it is plausible to me that
that is the case, but we have nothing to confirm that they are actively
trying to flip. But --

(CROSSTALK)

HASTINGS: But we know -- we know from testimony, we know from people
who are within the Bradley Manning trials. We know that you guys called
the Justice Department and they`re saying no comment, right. They
certainly want to leave this possibility out there, that they can extradite
Assange. And I don`t think --

GOLDBERG: But how does Sweden help them in this process? That`s my
question.

HASTINGS: The minute Assange goes to Sweden, then he has to face
questioning on these rape charges --

GOLDBERG: But how does that --

HASTINGS: So Sweden doesn`t release him. So once Sweden gets him,
they send him over to the United States.

GOLDBERG: But why isn`t it --

HASTINGS: It doesn`t necessarily make it easier, because England is
not going to extradite him right now and they`re going to go through this
political process and eventually extradite him.

HAYES: Yes, so my understanding of the theory of the case from the
WikiLeaks folks is this, that Britain won`t directly extradite Assange
while there are these pending questions in Sweden, because that`ll be
politically untenable. They`ll send him --

UNIDENTIFIED MALE: They`re in line.

HAYES: -- and then once Sweden has resolved whatever they`ve
resolved, that`s when it`ll be politically tenable --

GOLDBERG: But my point is that --

HASTINGS: We`re getting lost --

GOLDBERG: I don`t --

HASTINGS: We`re getting totally lost in the weeds. I mean, the
reason Assange is under this threat is because he had angered the most
powerful --

HAYES: Michael, no, no, no. That`s asserted. That is what is -- no,
no, no.

HASTINGS: It`s true, it`s true.

HAYES: No, but Michael --

HASTINGS: OK. No one -- no one would -- Assange would not be being
the way he had, the way he`s being treated if he had not released these
very sensitive documents that the U.S. government and other governments did
not want out.

(CROSSTALK)

HAYES: The Swedish government is acting either out of their own
desire to punish Assange for the WikiLeaks cables or is a proxy for more
powerful negations that want to punish -- again, I`m not saying --

UNIDENTIFIED MALE: Or both. Or both.

HAYES: -- it is clearly the case that there are many people in
America -- let`s just talk about the U.S. government -- that do want to
punish Assange and want to prosecute him.

I want to show you just a little mashup of some of the things that
elected officials in the U.S. have said about Assange, because I want to
establish that that is absolutely the case. It is on the record there are
many people in the U.S. that want to punish Assange and there`s a grand
jury impaneled.

And there was confirmation in June of a WikiLeaks investigation.
Here`s just some of the voices calling for Assange to be tried.

(BEGIN VIDEO CLIP)

REP. PETER KING (R), N.Y.: The fact is that this type of hacking --
this type of cyber-theft are really the terrorist weapons of the 21st
century. And that`s why we have to adapt. That`s why we have to use
traditional legislation, such as the Espionage Act. But also I`ve called
to have WikiLeaks declared a terrorist organization.

SEN. JOE LIEBERMAN (I), CT: It sure looks to me on the facts that Mr.
Assange and WikiLeaks have violated America`s Espionage Act with great
negative consequences for us.

SEN. MITCH MCCONNELL (R), N.Y.: I think the man is a high-tech
terrorist. I think he needs to be prosecuted to the fullest extent of the
law. And if that becomes a problem, we need to change the law.

(END VIDEO CLIP)

HAYES: OK. So that`s on the table. Right? There are forces in the
U.S. government that clearly want him to be prosecuted. There`s a -- the
Justice Department confirmed in June, I think, that there was an open
WikiLeaks investigation. We know there`s a grand jury.

So this is -- it`s not ridiculous or paranoid to suggest he may be
prosecuted, he may be indicted under the Espionage Act -- and we can get
into the Espionage Act.

HASTINGS: Sure.

HAYES: That said, I still have to be convinced that Sweden is
essentially using their justice system and allegations of sexual
molestation as essentially a proxy to play a role in getting Assange. And
I want you to explain why I should believe that, right after we take this
break.

(COMMERCIAL BREAK)

HAYES: All right. We were talking about the extremely complicated
situation involving Julian Assange, who`s the mastermind, founder and
figurehead for the WikiLeaks operation. He`s holed up currently in the
Ecuadorian embassy in London. He`s been granted asylum by Ecuador, but
Britain is saying they won`t let him leave the embassy.

HASTINGS: He`s been under house arrest for over 600 days.

HAYES: And the big question I think is there`s -- It`s clear that
WikiLeaks has done things that have infuriated the most powerful
governments in the world. It`s clear that there is a constituency in the
U.S. that want to see him prosecuted under the Espionage Act, which I think
would be grossly inappropriate, an outrage and imperiled journalism of all
kinds. So I just want to make that very clear.

If that comes to pass, that`s absolutely unacceptable. He`s also been
accused of -- he`s wanted for questioning by the Swedish government in
connection to accusations by two women of what -- a crime that is in Sweden
called sexual molestation and that is the origin of the extradition battle
that has happened right now.

The question I asked you before the break is why should I think -- why
should I basically not trust the Swedish government is basically just
trying to get Assange to account for his actions when two other citizens
have accused him of something serious?

HASTINGS: Well, I think they are. I think part of this is the anger
of the Swedish government and sort of telling Assange like, look, you
cannot just not answer these questions. You have to come back and face the
music.

UNIDENTIFIED FEMALE: But that`s --

HASTINGS: And that`s what they`re saying. Yes, I`m not saying it`s
not, but it`s also legitimate for Assange to say, look, actually you`re
using this as a pretext to then ship me off to the United States where I`m
not going to be free for the next 20 years of my life. So I think that`s
also a very legitimate concern. Now could Assange have handled it
differently?

When I interviewed him, he did say yes, I wish I would have handled it
differently. But at the time the reason he left Sweden was because he was
working on the Cablegate disclosure.

GOLDBERG: Can I just -- I mean, listen, to me the complicated thing
about talking about this is that it sounds like either you think the
charges are legit or you think that Assange is in danger and that there are
probably conspiratorial --

(CROSSTALK)

HASTINGS: No, we don`t know that -- we don`t know the answer about
the charges --

GOLDBERG: I think it`s very possible that both of these things are
true. I have no doubt that the United States is underhanded, that the
United -- that there are people in the United States who want to kind of
completely work outside of any diplomatic channels --

HASTINGS: But they`re working very much through officials --

GOLDBERG: Again, I think that assume that these charges are a ruse --

HASTINGS: I don`t think (inaudible) assuming that. I don`t know
who`s assuming those charges are a ruse.

GOLDBERG: (Inaudible) is basically behaving as an agent of the United
States in this affair --

HASTINGS: Which they did with CIA rendition, which they`ve done in
the past.

(CROSSTALK)

HASTINGS: (Inaudible) behaving as an agent in the United States.

GOLDBERG: My question is so is the U.K. -- it just doesn`t make
sense, this --

HASTINGS: What doesn`t make --

GOLDBERG: What doesn`t make sense to me is that if they wanted to
extradite him from the U.K., they could have --

HASTINGS: And they might --

(CROSSTALK)

HASTINGS: They might actually eventually extradite him.

UNIDENTIFIED MALE: Well, they can`t now because he`s in the embassy.
Let`s hope they don`t invade the embassy.

HASTINGS: I mean, the U.K. does also extradite third-party nationals
all the time. So that could happen.

HAYES: Richard, you`re raising your hand and I would like you to ask
a question (inaudible).

RICHARD BELZER, COMEDIAN, ACTOR, TALK SHOW HOST AND AUTHOR: Yes,
please. Exactly what he released, how much of it was like top secret?
Isn`t it just embarrassing cables of gossip about other world leader the
way people really talk? I thought they were boring, mostly.

UNIDENTIFIED MALE: Well, really --

BELZER: And to some --

UNIDENTIFIED FEMALE: (Inaudible) cable --

BELZER: Some of it was somewhat astute and, you know, and they`re
talking in a language the way people talk when they don`t think they`re
being recorded. And was there any grave crime? I mean, we`ve rendered
(inaudible). He was probably naked in his cell and waterboarded.
(Inaudible) render -- well, I`m just being (inaudible).

HAYES: (Inaudible) be clear.

BELZER: Yes, no, of course. I`m a satirist. And Assange --

UNIDENTIFIED MALE: I`m a literalist.

BELZER: -- I`m surprised he has -- that`s why we`re having fun. But
Assange could be rendered under our laws and disappears.

HASTINGS: So of all the WikiLeaks disclosures, they`ve all been
classified not top secret.

(CROSSTALK)

HAYES: None of them are top secret.

(CROSSTALK)

HAYES: Well, that`s a key point. None of them were top secret
(inaudible).

HASTINGS: And there`s been no evidence that anyone has come from harm
except for career damage but the real reason why the United States
government and our western allies got so upset about these cable
disclosures because it was the cables that really annoyed everyone because
it got essentially -- it gives this sort of intimate blueprint of what the
American empire looks like, what the day-to-day business that our diplomats
and military officials are going on about around the world and often it`s
embarrassing --

BELZER: Was anyone surprised? Was anyone surprised?

HAYES: Josh.

BARRO: This drives me completely nuts. Most of what was released in
these cables, making this public, did nobody any good.

(CROSSTALK)

HASTINGS: Except for the 300,000 news stories that have been based
off it, the change -- we know that we`re being lied to in Yemen about drone
strikes. We know that there was a spying operation at the U.N. I mean,
you go down the list. We know that there was a corrupt boxer in Azerbaijan
with the Olympic committee that we found out last week.

I mean, every major -- we know that the --

UNIDENTIFIED MALE: That was really -- that was the most important
one.

UNIDENTIFIED MALE: The corrupt boxer.

(CROSSTALK)

UNIDENTIFIED MALE: Make your point. Make your point. Make your
point.

BARRO: The government should be able to keep some secrets. It
doesn`t do anybody any good that it`s known that we think the foreign
minister of Germany sucks and we like the one previously. That`s --

(CROSSTALK)

HASTINGS: -- as a journalist to try to explain what`s going in the
world.

BARRO: There`s lots of private information that would be fun for
journalists to know. But part of the way diplomacy works is to be able to
be discreet and have tact.

And so when we -- when the relationship between the U.S. and Mexico is
undermined because these diplomatic cables that are sent -- for good reason
from the embassy in Mexico to the U.S., saying that we don`t have faith in
certain elements of the Mexican government? That`s a good thing for
diplomats?

(CROSSTALK)

BELZER: Is that surprising?

BARRO: It`s a bad thing when it`s disclosed publicly. And the reason
the United States --

HASTINGS: -- is because they`re in league with the drug cartels but
the fact that we now have cables that explain what our relationship
actually is with the Mexican government, I think is a public service that`s
quite important.

BARRO: No. Not all. Everything --

HASTINGS: Is our relationship with the Mexican government totaled
because of these cables?

BARRO: No, but it wasn`t helped.

HASTINGS: We just -- we understand it more.

BARRO: The principle I`m talking about --

HASTINGS: -- to help the U.S. government. My job is not to help the
U.S. government. This showed necessarily some of your guests it`s not to
help the U.S. government fulfill their diplomatic objectives that may not
be good for me as a citizen when you have this sort of national security
state that`s out there, you know, doing God`s work.

BARRO: There`s value in the diplomatic core in the United States
being able to do some of its work in private without having the things they
say to others disclosed. And so this is bad, not just for the U.S.
government, but for people who are citizens of the United States and for
people who want

UNIDENTIFIED MALE: What`s bad about it?

BARRO: -- a stable diplomatic --

UNIDENTIFIED MALE: What happened? What happens if there`s a --

(CROSSTALK)

HAYES: Hold that thought. Hold that thought, because actually
there`s sort of an empirical question here, or a question about the actual
effects, right, then there`s the question about the principle of secrecy,
right? Those are two distinct things. And I want to get into both of
those a little more right after we take a break.

(COMMERCIAL BREAK)

(MUSIC PLAYING)

HAYES: Those are the sounds of a Russian feminist punk collective,
sentenced to two years in prison for hooliganism yesterday in Russia. They
have a name that is provocative, you`ve probably seen it. And Richard
Belzer, during a break you treated us to a little historical reenactment
that President Reagan had (inaudible) --

BELZER: Yes, I miss President Reagan because he was such a -- he was
the embassy of the country. And I could just picture him saying, "Mommy,
did you hear about the Pussy Riot?"

(LAUGHTER)

BELZER: (Inaudible) putting the Pussy Riot (inaudible).

HAYES: All right. (Inaudible) before we get in trouble with
standards.

UNIDENTIFIED MALE: I`ve already sent you an angry letter, Chris.
(Inaudible) --

HAYES: But that case, I think we`re going to continue to follow and
then talk about it more next week, because I think it`s really captured a
lot of national tension. There`s protests happening right now.

A little irony here, of course, is that Julian Assange has a show on
Russia today which is a network that`s funded by the same Russian
government has now put these people --

UNIDENTIFIED MALE: Oh, the irony.

HAYES: -- in prison. Oh, the irony.

But let`s just sort of try to resolve these deep, profound questions
in the next few minutes about secrecy and about the effects. The effects:
what do we know about the effects?

My sense from my reading and from talking to people and I talked to
some people in the State Department, there was a lot of concern about the
exposure of actual names that were unredacted, one of the (inaudible),
particularly of people in Afghanistan who collaborated with the American
embassy.

As of now, there have been reports about whether any of those people
have come to harm. And my understanding is that none of them have, so far
as we know. Of course, that`s not definitive.

So the effects, it seemed to me -- and in some ways, the way you can,
I think, flip this around, "Foreign Policy" wrote an article, which I
didn`t find persuasive, but it`s provocative insofar as it goes, basically
saying it`s not that they were too damaging.

It`s that actually the effects of WikiLeaks turned out to be kind of a
shrug, that we thought WikiLeaks was going to be the future of journalism
and actually it`s kind of come to this soap opera about Julian Assange and
actually --

HASTINGS: And I completely disagree with that "Foreign Policy"
article. I think it`s the same kind of drumbeat we`ve been hearing out
(inaudible), trying to diminish WikiLeaks` accomplishments.

BELZER: What the government is afraid of is that 1984 goes both ways
now. They didn`t count on that. I mean, they`re looking at us, well, we
can look at them now, obviously.

HAYES: Yes, and Assange has basically said that, right? I mean, his
whole point is that you`re essentially leveling the playing field of
information.

HASTINGS: Right. And I think -- like WikiLeaks is Assange. I mean,
I think that`s also one of the misunderstandings. Like WikiLeaks doesn`t
happen unless you have a visionary, kind of the nut job, cool guy, I like
the guy. I love Julian. Free Assange. But it does not happen without
Assange.

So this idea that Assange somehow failed in this mission, when in fact
even when he`s under house arrest he`s put out files about Syria and he`s
put out files from a private intelligence firm. But I think I can sort of
-- what`s going to happen -- the question is what happens next. Right?
That`s a question, too, and I can --

HAYES: And let me -- I just want to go back to you, because I think
that the thing you articulated about there`s a place for secrecy and
diplomacy, to me the issue is this.

It`s a very long distance from the principle that there should be some
secrecy, that, you know, government should be able to keep some secrets,
and the massive, massive explosion of secrecy that we have seen in this
country since 9/11 and essentially since the National Security Act passed
under Truman during the Cold War.

Those are two -- there`s a long way from the principle in the abstract
to the actual functioning. Let`s remember. Literally, if I`m not
mistaken, millions of people had access to what was leaked, right?

(CROSSTALK)

BELZER: That`s a great point.

GOLDBERG: The interests of journalists and the interest of
governments are not supposed to be the same. So you kind of can`t say,
well, here`s the -- you know, the kind of sacred median in which we can all
agree. You know, you`re supposed to --

HAYES: It`s adversarial --

(CROSSTALK)

GOLDBERG: -- in the same way prosecutors and defendants are
adversarial. And Julian Assange is clearly on the side of the journalists.
It`s not for them, I think, to say that the security (inaudible) should do
a better job of keeping its secrets.

HAYES: Josh, you get some last words.

BARRO: Yes, I think the basic question is do you think what the State
Department does every day is broadly good for the world? And I think the
answer to that is yes. And particularly effective diplomacy helps prevent
wars. So I think that the fact that the State Department --

BELZER: Which wars have been prevented?

GOLDBERG: You can think that and think it`s a journalist`s job to try
to bring it.

BARRO: It`s not clear to me that Assange violated any U.S. laws.
What he does still irritates me. And I think it`s pretty clear that
Bradley --

(CROSSTALK)

BARRO: -- violated laws of the United States and even at --

UNIDENTIFIED MALE: The government (inaudible) innocent until proven
guilty. I mean, that remains to be established.

UNIDENTIFIED MALE: We don`t know where he is right now.

BARRO: But even if the government keep too many secrets, there are
worse standards than the status quo, one of which is Bradley Manning gets
to decide what secrets the government can keep.

HAYES: Yes. I don`t think I agree with that.

Michael Hastings from "BuzzFeed" and "Rolling Stone." Thanks for
joining us. Thanks for your impassioned defense of WikiLeaks as -- it`s
really good conversation.

What do we know now we didn`t know last week? My answers after this.

(COMMERCIAL BREAK)

HAYES: In just a moment what we now know that we didn`t know last
week, but first a quick personal update. My book "Twilight of the Elites"
is on sale now at online retailers and your local bookstore. Check out
"Twilight of the Elites`" Facebook page or our website at up.msnbc.com for
details.

And tonight on the off chance you`re not sick of my opining, C-SPAN2`s
Book TV will air a talk I gave about the book, 11 pm Eastern. So you can
tune in for that.

So what do we know now we didn`t know last week? We now know that on
Thursday police officers in South Africa killed 34 striking platinum miners
in what has been called the bloodiest security operation since the end of
white rule there.

We know that crowds of women arrived at the site of the mine
yesterday, looking for news of family members. We know the police chief
claims the police were, quote, "forced to utilize maximum force" to defend
themselves from the striking miners, who were carrying machetes, spears and
clubs.

But we also know that South African President Jacob Zuma has announced
the government will open an inquiry of the incident.

We now know the Russian punk protest band has been convicted of quote,
"hooliganism," and sentenced to two years in prison for their raucous bit
of performance theater in a Moscow orthodox cathedral.

We know the band captured the imagination and admiration of many
observers around the world, who see in them a challenge to the ever-
creeping authoritarianism of the Russian regime and a reminder of the
threat to power that the most fearless kind of dissident art can pose.

Though it has largely gone unnoticed in the mainstream press, we know
that in the past few weeks there have been more than eight cases of
vandalism and attacks on houses of worship in the U.S. The most horrifying
and well covered was the murderous shooting rampage of white supremacist
Wade Page in a Sikh gurdwara in Wisconsin on August 5th that left six
worshippers dead.

We know that after 9/11 the FBI reported 500 bias crimes against
Muslims in 2001, a number that fell to 107 in 2009 and then rose again by
50 percent to 116 in 2010, the year the controversy erupted over the so-
called Ground Zero mosque.

We also know the name of the suspect in the shooting at the
conservative Family Research Council that wounded a security guard there.
Twenty-eight-year-old Floyd Lee Corkins has reportedly said, "I don`t like
your politics," before pulling out a 9 mm pistol from his backpack and
shooting.

We know that political violence of this kind from any side of the
political spectrum is contemptible. We also know that in America you are
far, far more likely to be targeted for violence because you are gay than
if you hold anti-gay views.

And, finally, we know now that Paul Ryan`s favorite band thinks of
him. We know Paul Ryan has expressed his love for "Rage against the
Machine," the left-wing punk rock hardcore band that took the country by
storm in the 1990s.

The band`s guitarist, Tom Morello, wrote a scathing op-ed for "Rolling
Stone" on Thursday, saying that, quote, "Paul Ryan`s love of the Rage
against the Machine is amusing because he`s the embodiment of the machine
that our music has been raging against for two decades."

Morello continued, "I clearly see that Ryan has a whole lot of rage in
him, a rage against women, a rage against immigrants, a rage against
workers, a rage against gays, a rage against the poor, a rage against the
environment.

"Basically the only thing he`s not raging against is the privileged
elite he`s groveling in front of for campaign contributions. This
unbridled rage against those who have least is a cornerstone of the Romney-
Ryan ticket."

Ouch. We don`t know how Ryan took his shot from one of his favorite -
- his musical favorites, but I know that if Jeff Mangum (ph) ever writes a
takedown of "UP," I`ll be devastated.

I want to find out what my guests know now they didn`t know when the
week began.

We`ll begin with you, Josh Barro.

BARRO: Well, so this is just over a week old, but Romney has put Paul
Ryan on the ticket and a lot of people have taken this as a sign that he`s
running hard to the right, but I actually think it is a stronger sign than
ever that Mitt Romney intends to pursue a centrist path in the presidency.

And the reason I say this is if Romney is going to try to get policies
through a Republican-controlled House that they are not ideologically
predisposed to do, who would you want more than anybody else to sell those
policies to Republicans in Congress? Obviously the answer is Paul Ryan.
We`ve seen his audition for that this week, arguing strongly in favor,
again, of an expanded and more expensive Medicare program.

I think we`re going to see a lot like that from Paul Ryan over the
next four years if the Romney-Ryan ticket wins.

HAYES: I don`t believe that`s true, but I do believe this. I do
believe that if you get sworn in as Mitt Romney on January 21st or whatever
it is in 2013, you look at the economy and you`re going to be like, man, we
need some stimulus.

Paul Ryan, bro, do you mind going up to the House and selling them on
some stimulus? That I do believe we`ll see. It will be all tax cuts.

Michelle Goldberg?

GOLDBERG: Well, I think we have known this for a while, but it is
especially significant now that Ryan is on the ticket, we have been talking
about the money that he -- the Medicare debate, the Medicaid debate is, in
a lot of ways, more significant.

The Romney-Ryan plan would decimate Medicaid. It would throw the
poorest Americans, women and children off the rolls all over the country.
It would just -- I mean, it would be a human catastrophe.

HAYES: Yes, and we`re going to talk about that tomorrow. We`re going
to focus tomorrow on the Medicaid portion of it and poverty and poverty`s
role in this campaign.

Heather McGhee?

MCGHEE: We know when money is speech, millionaires and billionaires
get megaphones and the middle class gets muted. And we know that because
we crunched some numbers at Demos from the SEC data that came out.

And the Adelsons have given a combined $36.3 million to super PACs.
Of course, that`s like a rounding error for them, at 0.15 percent of their
net worth. And it would take 321,000 middle class families giving an
equivalent amount of their net worth to equal the same political voice that
these two people have.

HAYES: Wow, 321,000, that`s a really jaw-dropping statistic.

Richard Belzer?

BELZER: Yes, I learned two things. One is that my book, "Dead
Wrong," is the number one Amazon Kindle book under the history section.
I`m very proud of that, because my previous books have been novels and put
in entertainment sections. This is a history book.

And number two, I learned that they are misusing PTSD to describe the
murders in the Sikh temple. PTSD, we can`t demonize our veterans that come
home from Iraq and Afghanistan who have post-traumatic stress disorder. It
is not a violent thing. I don`t want them to be categorized as crazy and
gun-toting. Most of these people come home, they become heroes going
through the paperwork at the hospital.

HAYES: You know, we had some folks on who had -- a bunch of veterans
in a roundtable, talking about this exact issue, the balance between
talking about the PTSD and the real challenges in that space without
creating this media stereotype of the broken vet, right, of the person --

BELZER: Exactly.

HAYES: -- who`s psychologically destroyed. And I think that`s a
really important thing to remember.

My thanks to Josh Barro from "Bloomberg View," Michelle Goldberg from
"Newsweek" and "The Daily Beast," Heather McGhee from the Demos think tank
and actor Richard Belzer, author Richard Belzer.

Thanks for getting UP to join -- thank you for joining us today for
UP. Join us tomorrow morning Sunday morning at 8:00. We`ll have Michael
Grunwald, author of an incredible revealing, must-read new book, "The New
New Deal: The Hidden Story of Change in the Obama Era."

Until then, you can stay up to date with us on Facebook at
UpWithChris.

Coming up next is Melissa Harris-Perry. On today`s MHP, the
Republican choice for vice president is going there. Paul Ryan, the man
who wants to remake Medicare is speaking about it, where? In Florida at
the world`s largest retirement community.

Melissa will have that speech live, and much more, including a look at
whether the election is rigged. That`s Melissa Harris-Perry coming up
next. We`ll see you right here tomorrow morning at 8:00. Thanks for
getting UP.

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

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