updated 9/12/2012 11:10:32 AM ET 2012-09-12T15:10:32

THE LAST WORD WITH LAWRENCE O`DONNELL
September 11, 2012

Guests: Julian Castro, Robert Reich, Ana Marie Cox, Virgil Goode

LAWRENCE O`DONNELL, HOST: Tonight there`s only one way to describe
professional Republicans` feelings about Mitt Romney`s campaign. Only one
word, and that word is panic.

(BEGIN VIDEOTAPE)

ALEX WAGNER, MSNBC HOST: The Romney campaign is telling supporters
not to worry.

CHUCK TODD, NBC NEWSD: The Romney campaign a little defensive.

WAGNER: About the slew of discouraging polls.

LAURA INGRAHAM, RADIO HOST: Mitt Romney should be up by five, six
points.

CHRIS MATTHEWS, MSNBC HOST: Conservative radio talk show host Laura
Ingraham --

WAGNER: Laura Ingraham.

MATTHEWS: -- gives a dressing down to the Romney campaign that
practically drew blood.

INGRAHAM: You know the way to stop the doubters? Start winning.

MATTHEWS: What good to do to thrash him now?

STEVE KORNACKI, SALON.COM: Romney is behind in this race.

MATTHEWS: He`s sure is what he is, isn`t he?

KORNACKI: The goal of the Romney campaign was to be the generic
candidate.

KRYSTAL BALL, DEMOCRATIC STRATEGIST: Campaigns do matter and
candidates do matter.

TAMRON HALL, MSNBC ANCHOR: The debates, this is what we need to focus
on now.

CHRIS JANSING, NBC NEWS: October 3rd may be the most important day of
the campaign.

MICHAEL SMERCONISH, MSNBC HOST: The first debate.

JANSING: The first debate.

UNIDENTIFIED MALE: The next kind of defining moment.

DAVID CORN, MOTHER JONES: If you have a human being running against a
robot, who wins?

MITT ROMNEY (R), PRESIDENTIAL NOMINEE: America must lead the free
world.

UNIDENTIFIED FEMALE: Foreign policy speech.

ROMNEY: The free world must lead the entire world.

UNIDENTIFIED FEMALE: And again he disappointed.

UNIDENTIFIED MALE: We have a presidential candidate and a vice
president candidate.

UNIDENTIFIED FEMALE: What is your foreign policy experience?

REP. PAUL RYAN (R-WI), VICE PRESIDENTIAL CANDIDATE: I voted to send
men and woman to war.

UNIDENTIFIED MALE: Neither of them have any sort of national foreign
policy experience.

RYAN: I voted to send men and women to war.

MARTIN BASHIR, MSNBC HOST: Paul Ryan`s credit rating may soon hit
junk bond status.

TODD: Congress returns today to face a looming fiscal cliff.

BASHIR: A second ratings agency threatened to down grade America`s
debt.

TODD: Congressional Republicans are getting no love.

DAVID GREGORY, NBC NEWS: Republican leaders agree to that deal to
extend --

ROMNEY: I think it was a big mistake. I thought it was mistake.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: Listen, the House has
done its job.

ROMNEY: I think it was a mistake for Republicans to go along with it.

BASHIR: A big mistake?

BOEHNER: Where`s the leadership?

TODD: With the election less than two months away, negotiators seem
poised to do as little as possible.

BOEHNER: I`m not confident at all. I`m not confident at all. I`m
not confident at all.

(END VIDEOTAPE)

O`DONNELL: How do you like these reviews? Incoherent, poorly
managed. Amateur. No hope. Going to have to make some changes.

Those are all words Republicans used today to describe Mitt Romney`s
campaign. Moments ago, Sara Palin and Bill O`Reilly offered Mitt Romney
this advice.

(BEGIN VIDEO CLIP)

SARAH PALIN (R), FOX NEWS CONTRIBUTOR: We`re in a world of hurt if we
can`t get the explanation to the public, to the voters regarding what the
choices are.

He should be very aggressive and he should be adamant in his attacks.
He needs to be severely aggressive in his articulation.

BILL O`REILLY, FOX NEWS: OK. But you`ve got to use those buzz words.
You`ve got to say socialist. You`ve got to do that to get people`s
attention.

(END VIDEO CLIP)

O`DONNELL: And here is Rush Limbaugh`s advice.

(BEGIN VIDEO CLIP)

LIMBAUGH: The Romney campaign is going to have to make some changes.
They`re going to have to go ideological. They cannot continue on this
Obama Mr. Nice guy. They just can`t do it. It isn`t going to work.

I`m not saying go out and say Obama is a bad guy. But he`s got to be
tied to this economy -- his policies, his ideas, his ideology. Liberalism
is still a dirty word in this country. Use it.

(END VIDEO CLIP)

O`DONNELL: How worried do they look, huh?

The editor in chief of the conservative Newsmax Web site writes, the
Romney campaign has been poorly managed. They haven`t staged their
candidate well and their messaging has been incoherent, to put it nicely.

It`s looking more and more that Obama is no amateur, while the Romney
campaign has more than its fair share of them.

"The Wall Street Journal" editorial board writes, "Mr. Romney`s
preexisting political calculation seems to be he can win the election
without having to explain the economic moment or even his own policies."

With 56 days until the presidential election, today in Florida, Bill
Clinton made this case for a second Obama term.

(BEGIN VIDEO CLIP)

BILL CLINTON, FORMER U.S. PRESIDENT: The test is not whether you
think everything`s honky dory. If that were the test, the president would
vote against himself. He says that everything is not honky dory. He knows
how bad some people are hurting. He knows what the worries are. He knows
what the problems are.

The test is whether he`s taking this in the right direction and the
answer to that is yes. Yes.

(END VIDEO CLIP)

O`DONNELL: Today, the Gallup tracking poll shows President Obama has
reached 50 percent support among registered voters for the first time since
April. President Obama leads Mitt Romney by six points, 50 percent to 44
percent.

Today, Laura Ingraham offered Mitt Romney this prescription to make
criticisms of his campaign disappear.

(BEGIN VIDSEO CLIP)

INGRAHAM: Mitt Romney should be up five, six points. You know the
way to stop the doubters, start winning in these polls.

For the Romney campaign, you know, stick their heads in the sand and
say business as usual, keep going along the same path, I think that is very
dangerous.

(END VIDEO CLIP)

O`DONNELL: Tonight, Nate Silver`s "New York Times" FiveThirtyEight
blog forecasts, as of tonight, that on November 6th, President Obama will
314 electoral college votes. And as of tonight, it looks Mitt Romney will
win 224.

And President Obama has an 80 chance of winning the election as of
now. Mitt Romney has a 20 percent chance .

Krystal Ball, Laura Ingraham thinks the best thing for Romney to do is
win the polls.

(CROSSTALK)

O`DONNELL: There`s one of the most helpful, most helpful strategist
I`ve heard in a campaign.

BALL: Well, the interesting is --

O`DONNELL: Would that mean rig the polls, just get in there and play
with the numbers?

BALL: You`re asking me to get inside of Laura Ingraham`s head which I
don`t think I`m capable of doing.

But I think just --

O`DONNELL: I didn`t ask you to get in Bill O`Reilly.

BALL: I feel better about that actually.

But, no, it`s interesting, because the advice has been all across the
board to the extent there has been advice given. And a lot of people like
Limbaugh, like you showed, and O`Reilly, are saying you`ve got to be more
ideological. You`ve got to move harder to the right.

And you`re seeing already the fissures developing of what the
conversations will be if they do lose in November and where the Republican
Party is going to want to go. You can hear them positioning themselves to
say real conservatism wasn`t on the ballot.

So, that`s one piece that`s interesting to me. But the other piece
that`s interesting is a lot of these folks during the primary were very
skeptical of Romney. They`ve been skeptical of Romney. There was a very
brief respite after he choice Paul Ryan, where there was some grace period
given by the sort of conservative intelligentsia.

And now that they`re seeing that Ryan is -- I`m having a mic problem.

O`DONNELL: We`ll get electronic switch up here, I guess it`s your
mic. Little trick going on.

ARI MELBER, THE NATION: I can take up the baton.

(CROSSTALK)

O`DONNELL: Here`s the thing on Bill O`Reilly -- he says that Romney
has to call President Obama a socialist. That`s all he`s going to do.

The advice that these people give is so dumb. It`s incredible. And
O`Reilly knows it`s a lie. O`Reilly knows that he likes Medicare almost as
much as President Obama does. He`s saying just lie about him, just say
it`s a socialist.

MELBER: Yes, it`s amazing and it shows something that we are learning
about Bill O`Reilly`s mental state, which is things that didn`t work before
might work when you try them again. They have lied about this president.
They have called him a socialist and other things. It is not working and
they know it.

So we`re seeing the conservative crack-up. I do have the experience
here, Lawrence, because I`ve worked on a losing presidential campaign. So
I know something about what happens as people start to worry about you.

Krystal spoke to one piece.

O`DONNELL: This nervousness sounds familiar to you.

MELBER: I know it. I know it. I could feel it on my gut.

And Krystal`s right, there`s one part which is people trying to get
ready for their narrative if he loses, which shows how much little, you
know, how much faith there is.

The other part, though, is there is this desire to give advise, it`s
big in politics. Politics is like sports. Everyone thinks they can do it
better than you. And that`s also what you`re seeing.

Laura Ingraham, Rush Limbaugh, Bill O`Reilly -- they all think Mitt
Romney should be more right wing, more loud, more rude. What we saw what
rudeness to the president looked like with Clint Eastwood on a national
stage, with 20 million watching, I don`t think that`s what they need.

O`DONNELL: Krystal, I think we have about five microphones on you
now.

(CROSSTALK)

O`DONNELL: This thing, one of the things about campaign -- you`ve
been in campaigns --is the campaign that is in trouble knows it`s in
trouble before the leading campaign knows that the other campaign is in
trouble. That`s what you`re seeing is that the worry is breaking out on
the Republican side before the Democratic side has any real right to start
feeling confident. They are giving the Democratic side confidence.

BALL: And hopefully the Democratic side will not get overconfident
because things still can change. But if you look at the race, not just
now, but if you look at the trajectory over the past couple of months, you
will see the president has been sort of settling slightly in the lead. And
obviously Mitt Romney had a chance to change that during the conventions
and failed to shift that dynamic.

So I think what you`re seeing from conservative is not only a response
to the polls but a response to the realization that this opportunity to
reframe the race, to reframe Mitt Romney to could close that empathy gap
has passed and they`re not going to have another great opportunity to do
that because debates are a tough time to sort of introduce a candidate and
make you feel farm and fuzzy about them.

O`DONNELL: Rupert Murdoch is tweeting. I saw this on Twitter. I
think I follow, you know, I`m not even sure if I follow him, it`s just that
so many people retweet Rupert Murdoch that you actually don`t have to
follow him.

Murdoch says, to win Romney -- to win, Romney must open big tent to
sympathetic families. Stop fearing far right which has nowhere else to go.
Otherwise, no hope.

Ari, that sounds like a move to the middle piece of advice. Don`t
worry about the far right.

MELBER: It`s move to the middle but it`s a little bit like Darth
Vader you need to be warmer (INAUDIBLE). I mean, this is a stretch, Rupert
Murdoch is telling us to be sympathetic, to have a big tent, to avoid the
politics of fear, Rupert Murdoch owns FOX News.

Putting that all aside, yes, even the people committed to those
strategies as a prophet and political project, are coming around saying
that Mitt Romney has to find a new way to speak to independent voters. And
that really goes to what conventions are. You know, it`s fashionable to
say conventions are pointless nowadays, they`re not. They`re the one time
that people hear directly from the candidates.

And that`s what happened. I think Mitt Romney and Paul Ryan spoke
directly to the public and said, here`s our thing, it`s really vague, it`s
really negative and we don`t like Obama and the public said is that all you
got?

BALL: If I can speak to that, to a certain extent all politicians try
to avoid going into the details because the details are messy and
particularly if you`re talking about cuts nobody wants to hear that a
popular program they like is going to be cut. But if you have built up a
level of trust with the American people, then you`re in a better position
to say trust me on the details.

The problem in particular for Romney and Ryan is that there is no
trust there, so there`s no way that the American people are going to take
this. Trust me, we`ve got a plan, and once you elect us we`ll tell you
what it is. That`s not going to fly.

O`DONNELL: The guy who`s hiding his tax returns, is hiding what he
will do to your tax returns. Will he eliminate your mortgage deduction?
What will he do to charitable donation deduction and all these things --
he`s just hiding all that after we`ve seen him hide his own returns.
There`s an echo in there.

BALL: Exactly. And the more that we are parsing through what he has
said, it`s becoming increasingly apparent that the numbers just don`t work.
They can`t fill in the details, because if they did it would become
blatantly obvious that the numbers don`t add up.

O`DONNELL: Krystal Ball and Ari Melber, thank you both for joining
us.

BALL: Thanks, Lawrence.

O`DONNELL: Coming up. Democrats have the momentum after the
conversation. We`ll show you Bill Clinton speaking in Florida tonight.

And joining me next is San Antonio Mayor Julian Castro.

And later on the third party candidate who could tip the election even
though he`s only on the ballot in one state. That candidate will join me.

And in the "Rewrite" tonight, Mitt Romney promises to answer
questions, and then, big surprise, doesn`t answer questions.

(COMMERCIAL BREAK)

O`DONNELL: President Obama`s former budget director is now in favor
of going off the cliff -- off the fiscal cliff on January 1st. And today,
John Boehner said he`s worried that that`s exactly what will happen.
Robert Reich and Ana Marie Cox will join me to look over the fiscal cliff.

And I will show thank you a new viewer design of our fiscal cliff
button. This is the one that I designed with the team but we`re going to
show you a new one later tonight. And President Obama said that Texas
could soon become a swing state, instead of a reliable Republican state.
The new star of Texas politics, San Antonio mayor and Democratic convention
keynote speaker, Julian Castro joins me next.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

CLINTON: If you`re looking for the future, I think the president`s
budget is better, meets the arithmetic test.

I think the health care plan is better. I know the higher education
plan is better. I know the energy plan is better. And I know the economic
plan is better.

And I know it will not amount to a hill of beans if you don`t register
and vote and get your friends to. So do it. Thank you. And God bless you
all.

(END VIDEO CLIP)

O`DONNELL: That`s former President Bill Clinton trying to keep the
Democratic momentum going in Miami tonight, after last week`s successful
Democratic convention. In a new Gallup poll, 43 percent of Americans say
what they saw at the Democratic convention makes them more likely to vote
for President Obama.

The man they saw give the keynote address at the convention made
history by being the first Latino keynote speaker in the history of the
convention.

(BEGIN VIDEO CLIP)

MAYOR JULIAN CASTRO (D), SAN ANTONIO, TX: In the end, the American
dream -- the American dream is not even a sprint or even a marathon, but a
relay. Our parents don`t always cross the finish line in the span of one
generation, but each generation passes on to the next the fruits of their
labor.

My grandmother never owned a house. She cleaned other people`s houses
so she could afford to rent her own. But she saw her daughter become the
first in her family to graduate from college. And my mother fought hard
for civil rights so that instead of a mop, I could hold this microphone.

(END VIDEO CLIP)

O`DONNELL: And that man joins me now, San Antonio Mayor Julian
Castro.

Mr. Mayor, you`ve been greeted with an awful lot of speculation after
giving that speech about your political future. Were you surprised that by
stepping on to that stage in that role there`s already talk of your
presidential campaign in 2016?

CASTRO: Well, first of all, good to be with you, Lawrence.

Well, it`s very flattering, but you know, I`m trying to take it all in
stride, trying not to let my head get too big. I certainly expected that
being on that stage that it would generate a lot of media, but I`m
flattered by the talk. But that`s never going to happen.

O`DONNELL: And what do you think is the essence of what has given the
Democrats and President Obama this measurable bounce coming out of that
convention?

CASTRO: Well, several folks at the convention did a very good job of
putting the clear choice that we have in this election into focus.

President Clinton I think made it very clear what we have is a
president under whose leadership we`re making significant progress in this
country. As he said today in Florida, we`re not where we want to be, but
we have seen now 30 straight months of private sector job growth, 4.6
million new jobs created.

We`re going in the right direction. It looks like consumer confidence
may be, you know, getting stronger.

Michelle Obama, the first lady, did a wonderful job of sharing the
values that she and the president have and the values that they share in
common with all Americans and how they see the country. And President
Obama himself did a stellar job of laying out the challenges that we`ve had
over the last 3 1/2 years and how he sees the future.

So it`s not a surprise that when voters saw that convention and they
also saw the Republican convention, that he`s seen a bounce in the polls.
And I believe if they can keep explaining to the American people this clear
choice that we have, then that`s going to carry out all the way through
election night.

O`DONNELL: What roll do you think you can play in this campaign that
will helpful to the president and the Democrats? It seems unlikely that
you could turn Texas at this time into a Democratic state. Are there other
areas in the country where you think you should be able to go and help the
president?

CASTRO: I`m going to go where ever I`m asked to. I was in North
Carolina and Virginia right after the convention. I`m going to go out west
to Nevada and Colorado and probably to Florida by the end of the campaign.
So, you know, I have a boarding pass, I`ll travel wherever I need to go
and, of course, still be mayor of San Antonio and take care of my duties
here.

But it`s a very important election to me. I want to make sure I do
everything I can to re-elect the president.

You`re right about Texas. This year I have no doubt that it`s not
going to go Democratic. But many folks think that in the years to come,
with the demographic changes, with the number of folks who are moving into
Texas because of the economic boom from other states, more moderate states,
and importantly, because the Republican Party in Texas, has all 29
statewide offices, the super majority in the Texas House and almost a super
majority in the Texas Senate and they`ve become far to the right.

I think they`re leaving the business community here in Texas behind.
They`re leaving a whole bunch of folks behind and that`s going to create
the opportunity for Democrats to capture not just the left but the middle
in the future.

O`DONNELL: You seem to be having fun with this speculation about your
political future, and I just wanted to show the audience this video that
you released recently having some fun with that.

(BEGIN VIDEO CLIP)

CASTRO: Should I run for higher office?

AUTOMATED VOICE: Of course you should. You were just in the national
spotlight. Your mama will slap with her chanclas for asking such a
question. Must we make all of your decisions?

CASTRO: Thank you, Siri. It`s been a delightful conversation.

AUTOMATED VOICE: You`re welcome, Mr. Presidente.

(END VIDEO CLIP)

O`DONNELL: I hope your voters get the joke, Mr. Mayor.

CASTRO: hope they do, too. That was for the local gridiron, the
journalists raising money, scholarship money for folks to go into
journalism. And it happened to coincide right before the convention
speech.

So, you know, what I said yesterday was the minute that we can`t laugh
at ourselves, we have bigger problems.

O`DONNELL: Mayor Castro, one of the stars of the Democratic
convention and a future start of the Democratic Party -- thank you very
much for joining us tonight.

CASTRO: Thank you.

O`DONNELL: Coming up, Mitt Romney is in the "Rewrite" again tonight.
I will ask him the questions that he refuses to answer. And no, there will
be no empty chair involved.

And next, where one day closer to going off the cliff. We`ll see how
worried Ana Marie Cox and Robert Reich are about going off the cliff and if
they like our new off the cliff button design. That`s coming up.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIPS)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Eleven years ago,
memorial services were held for Americans of different races, and creeds,
backgrounds and beliefs. And yet, instead of turning each other against
each other, tragedy has brought us together.

JOE BIDEN, VICE PRESIDENT OF THE UNITED STATES: Today is just as
momentous day for all of you, just as momentous today in your life each
with your families, as every September 11th has been.

LEON PANETTA, DEFENSE SECRETARY: We remember them and we think of
their families. Who have suffered through grieve and through heartbreak.

BOEHNER: The patriots who banded together in the sky over Shanksville
to save this Capitol and these steps.

REP. NANCY PELOSI (D), CALIFORNIA: On this anniversary, the thoughts
of our nation remain with the innocent Americans we lost.

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: We remember with heavy
hearts the tragic loss of life and we express thankfulness for the men and
woman who responded to that tragedy. We honor them and we honor those who
secure our safety even to this day.

OBAMA: And somewhere, a son is growing up with his father`s eyes and
a daughter has her mother`s laugh, living reminders that those who died are
with us still.

God bless the memories of those with lost. And God bless these United
States of America.

(END VIDEO CLIPS)

(COMMERCIAL BREAK)

(MUSIC)

O`DONNELL: In the Spotlight tonight, Congress is back from recess and
now everyone is talking about going off the cliff. Tonight, I`m wearing
one of the Off the Cliff Button designs sent in by you, our viewers.
Tonight`s button was designed by Lance Marr of Fayetville, Arkansas, a real
nice tough here with the little cliff. An actual cliff in there. It`s
better than our design.

This morning, House Speaker John Boehner was asked how confident is he
that we can avoid going over the fiscal cliff on New Year`s Eve.

(BEGIN VIDEO CLIP)

REP. JOHN BOEHNER (R), HOUSE SPEAKER: I`m not confident at all.

(END VIDEO CLIP)

O`DONNELL: John Boehner, not confident at all. So day by day, we
keep moving closer to going off the cliff, which is the only way to defeat
Grover Norquist and his pledge signers at their own game. At midnight on
New Year`s Eve, all of the Bush tax rates will expire for the top two
percent and the other 98 percent to President Obama -- and President Obama,
if he is re-elected, will be able to present Congressional Republicans then
with a tax cut proposal, his tax cut proposal.

And because of the pledge they signed to Grover Norquist, the
Republicans must vote for it, because it is a tax cut. On cNBC, former
Budget Director Peter Orszag walked us off the cliff on the eve of the
second Obama term.

(BEGIN VIDEO CLIP)

PETER ORSZAG, FMR. WHITE HOUSE BUDGET DIRECTOR: The most likely
scenario is still that we actually go over the cliff and then there`s a
deal that`s cut in early January in which you combine a more progressive
tax cut than what would have just expired with some entitlement reform and
simultaneously raise the debt limit.

UNIDENTIFIED FEMALE: Do you think he gives in to Republicans when it
comes to taxes on the wealthy think or not?

ORSZAG: No, I don`t think so. That`s why I don`t think you have a
deal before the end of this year. I think you go over the fiscal cliff.
Everything expires. And then you come back. The administration comes back
with some sort of universal tax cut that is universal -- again, it applies
to everyone. So it`s not picking. You know, no class warfare charge
there. But it`s a lot more progressive and kind of even across the income
distribution than the 2001 and 2003 tax cuts.

(END VIDEO CLIP)

O`DONNELL: As for the fears that going off the cliff on New Year`s
Eve would result in economic disaster, the former budget director
explained, as we have on this program, that there is a big difference
between going off the cliff and staying off the cliff.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Is that going to be enough to avoid a recession
in 2013? Even the Congressional Budget Office is saying that we will see a
recession in 2013 because this stuff is not being addressed.

ORSZAG: Well, what they`re saying actually is that if you go over
the cliff and you stay there, that is such a fiscal constraint that that
will cause a recession. I think under this kind of scenario that we`re
just discussing you`ll have some mild fiscal constraint.

(END VIDEO CLIP)

O`DONNELL: Joining me now, Robert Reich, former labor secretary
under President Clinton and professor of public policy at the University of
California at Berkeley and the author of the book "Beyond Outrage," and Ana
Marie Cox, political correspondent for "Guardian U.S."

Bob Reich, it`s just thrilling for me to hear conservative, meaning
fiscally careful people like a budget director, saying, yeah, we`re just
going to have to go off the cliff.

ROBERT REICH, FORMER LABOR SECRETARY: Yes, we are going to have to
go off the cliff. And I think that the key here is that we are going to
get a budget deal out of this that is much more progressive, that really
doesn`t give all of the tax breaks to the wealthy, that`s much more
equitable. It doesn`t mean all of those cuts in the programs that the
poor, middle class and also working class depend on.

And the Republicans will have to sign on because there will be a tax
cut there. And so Grover Norquist and the irony of Grover Norquist`s
admonition is going to be very present in January.

The other very important point here is that they will be retroactive
to January 1st. Everything that Congress decides, maybe it`s January 20th
or maybe it`s February 1st, will be retroactive to January 1st. So there
won`t really be any long-term fiscal damage.

O`DONNELL: Ana Marie Cox, one of the tricky things for the Democrats
and the Treasury secretary, the president to manage under this situation is
reassuring the public that don`t worry, we`re going to fix this. And you
won`t be damaged tax-wise. But at the same time, allowing the sensation
that they will be damaged to be the political motivation for the political
class in Washington to fix this thing.

There`s a little bit of a magic trick that they have to pull off here.

ANA MARIE COX, "GUARDIAN U.S.": Well, it is unfortunate, because,
you know, when Standard and Poor`s downgraded us -- and now it looks like
Moody`s might downgrade our credit rating as well -- what they cite is not
our actual -- the budget projection. They cite that too. But what they
often cite is our inability to make a budget deal and also the political,
as I think -- I`m quoting here, the political brinkmanship that`s involved.

When we start talking about a budget and we use the credit rating and
we use the debt ceiling and we use this fiscal cliff as a bargaining chip
and not as a data point, I think it really -- it is not the way we`re
supposed to be talking about things. And it really does have a big impact
on our ability to actually move forward with things.

O`DONNELL: But Robert Reich, that`s why I think Peter Orszag`s
comments are so important. There will be more like them as we move closer
and closer. To get all the credit raters and all these people who are
watching this from outside of government to understand exactly how this
will work, that yes, on New Year`s Eve, we will go off the cliff. And then
the next day, the Congress will go into emergency session to fix this. And
actually be able to -- if we talk about it enough over time, be able to
show those observers that this is actually the way to end up with the best
policy in January of next year.

REICH: Yes. And what Moody`s today expressed some concern about,
and a lot of other credit rating agencies and other observers are concerned
about, is not that we will not have a budget deal. What they`re concerned
about is that the current budget deal that forces us over the budget cliff
January 2nd, actually, that that is going to cause a recession and that`s
going to cause all sorts of economic calamity in the United States.

In other words, the credit rating agencies are actually on the other
side of the fence from the fence that they were on a year ago when they
said what we`re really concerned about is you`re not cutting the budget
enough. Right now, Moody`s is saying oh, my gosh, you`re going to be
cutting the budget too much. You`re going to be raising the taxes too
much. Suddenly it`s going to bring the economy to a halt.

What everybody has got to realize is take a very deep breath and
understand that what we want at the end is a budget deal that is
progressive, that is more equitable, that is not a Republican deal that
basically gives all the tax breaks to the wealthy and at same time cuts all
the programs that most Americans really depend on, and simultaneously
acknowledges that right now, although the budget deficit is a problem in
the future, it`s not a problem right now.

We`ve got an unemployment problem. We`ve got a jobs problem. We`ve
got a growth problem in this country. It`s not a budget deficit problem.
We can borrow from international markets right now at the cheapest rates
we`ve ever been able to borrow. That`s not a budget deficit problem.

O`DONNELL: The tax component of going off the cliff is the one
that`s the most difficult to solve and probably the only one -- the one
that could be solved only by going off the cliff. The spending cuts
wouldn`t be that hard to solve if they got together on that. But Ana
Marie, the "Washington Post"/ABC News poll shows that 50 percent now say
they trust President Obama on handling taxes; 43 percent say they trust
Mitt Romney on handling taxes.

The president seems to be winning this tax argument.

COX: I wonder if that has to do with someone`s missing tax returns.
There`s some trust issues involved in Mitt Romney`s own personal finances,
I think. But there is kind of a wonderful -- the fiscal cliff is a very
scary sounding thing, but sometimes when I`m thinking about it, I picture
the Republicans just grasping on to the no tax cuts for the rich as they
fall off the cliff.

They really are taking it for the team, I guess, or taking it for the
rich, for Mitt Romney, in this particular scenario. They have been so
intransigent about tax cuts to the wealthy that that`s their legacy here.
I don`t see how they can avoid it. And the fact that Mitt Romney won`t
release his own tax returns and the fact that he`s basically been unable to
escape the brand of being an out of touch rich guy, well, it looks bad for
the fall for him.

O`DONNELL: Ana Marie Cox and Robert Reich, thank you very much for
joining me tonight.

REICH: Thanks, Lawrence.

O`DONNELL: Coming up, even Republicans are angry at Mitt Romney`s
refusal to answer questions about his tax policy. I will ask Mitt Romney
those questions next in the Rewrite.

And later, the third party candidate who really could cost Mitt Romney
a decisive swing state will get tonight`s LAST WORD.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ROMNEY: If you want to know my position on issues, ask me and I`ll
tell you.

(END VIDEO CLIP)

O`DONNELL: OK, Mitt. In tonight`s Rewrite, then, I will play the
part of people who have asked you your position on issues, and you have
refused to tell them your position on issues. I will use their questions
word for word, and your responses word for word. Your responses, of
course, are not actually spans. They are just Romney words that don`t mean
anything or add anything to our understanding of your position on issues.

I think you`ll be able to guess whose questions these are, especially
when we show you the picture of the person who actually asked the question.

First question: you say your tax cut plan will eliminate loopholes and
deductions. Can you give me an example of a loophole that you will close.

(BEGIN VIDEO CLIP)

ROMNEY: Well, I can tell you the people at the high end, high income
taxpayers, are going to have fewer deductions and exemptions.

(END VIDEO CLIP)

O`DONNELL: When are you going to tell us where you`re going to get
the revenue? Which of the deductions are you going to be willing to
eliminate?

(BEGIN VIDEO CLIP)

ROMNEY: Well, we`ll go through that process with Congress as to
which of all the different deductions --

(END VIDEO CLIP)

O`DONNELL: But do you have any ideas now, like the home mortgage
interest deduction?

(BEGIN VIDEO CLIP)

ROMNEY: Well, Simpson Bowles went through a process of saying how
they would be able to reach a setting where they had actually under their
proposal even more revenue for the government with lower rates. So
mathematically it`s been proved to be possible. We can have lower rates,
as propose, that creates more growth. And we can limit deductions and
exemptions.

(END VIDEO CLIP)

O`DONNELL: Actually, Mitt, Simpson/Bowles proposed cutting tax rates
by eliminating all tax deductions. They were specific about it, including
the home mortgage deduction, the charitable deduction, all of them. So
yeah, we can do the math on Simpson/Bowles. But we can`t do the math on
your proposal because you don`t actually propose getting rid of any tax
deductions and loopholes and tax shelters, like your Cayman Islands tax
shelters.

So don`t you dare go comparing yourself to Simpson/Bowles, which your
buddy Paul Ryan actually voted against, because you`ve made none -- none of
the tough choices Simpson/Bowles has made. Paul Ryan hasn`t made those
choices either. But I digress.

Next question. And this is a real easy yes or no question. The
president has said the government will no longer seek to deport 800,000 of
these young illegal immigrants who were brought into this country by their
parents. Would you repeal this order if you became president?

(BEGIN VIDEO CLIP)

ROMNEY: Well, it would be overtaken by events, if you will, by
virtue of my putting in place a long-term solution, with legislation which
creates law that relates to these individuals such that they know what
their setting is going to be, Not just for the term of the president but on
a permanent basis.

(END VIDEO CLIP)

O`DONNELL: I won`t keep on about this, but just to make sure I
understand, would you leave this in place while you were worked out a long-
term solution or would you just repeal it?

(BEGIN VIDEO CLIP)

ROMNEY: We`ll look at that setting as we reach that, but my
anticipation is I would come into office and say we need to get this done
on a long-term bases, not this kind of a stopgap measure.

(END VIDEO CLIP)

O`DONNELL: OK. So there`s no way you`re going to answer whether
you`ll repeal the president`s order, so let`s just move on. You said a few
years back, quote, "I don`t line up with the NRA." Is that still true?

(BEGIN VIDEO CLIP)

ROMNEY: Well, on every single issue, there are differences between
myself and the NRA. On many issues, we share a common commitment to the
Second Amendment and the right of people to bear arms. But I`m sure from
time to time there will be issues where they and I might part. I don`t
have one for you right now, but their agenda is not entirely identical with
my own. I don`t know that I line up a hundred percent with almost anybody.

(END VIDEO CLIP)

O`DONNELL: What is it that is preventing you from releasing the rest
of your returns?

(BEGIN VIDEO CLIP)

ROMNEY: Well, one, I`ve released all the information about my
financial holdings that`s required by law. And then in addition, beyond
the law, have released -- or will finally release, when the last year is
complete, two years of full returns. And what we`ve noted is our Democrat
friends take what`s there, twist it, distort it, dishonestly use it in
attack ads. I don`t want to give them more material than is required.

(END VIDEO CLIP)

O`DONNELL: Have you sought or obtained amnesty from the IRS for
potential tax felonies involving your foreign accounts? Huh? Have you?
No answer. Well, yes, I guess we don`t have any video of his answer to
that question, because no one has actually asked him that question. If I
was allowed one question to Mitt Romney tonight, that would be my one
question.

If the debate moderators do their jobs correctly, we will have Mitt
Romney`s video response to that question next month. But of course, it
won`t be an actual answer. It will just be Romney words.

(BEGIN VIDEO CLIP)

ROMNEY: If you want to know my position on issues, ask me, and I`ll
tell you.

If you want to me my position on issues, ask me and I`ll tell you.

If you want to know my position on issues, ask me and I`ll tell you.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

O`DONNELL: If the path to victory in the electoral college goes
through Virginia, this presidential election could be tipped by third party
candidate Virgil Goode. Last week, Virginia election officials announced
that former Virginia Congressman Virgil Goode will be on the presidential
ballot in that battle ground state where President Obama and Mitt Romney
are now less that one percentage point apart in the Real Clear Politics
polling average.

As the "Washington Post" reports, if Virgil Goode secures between
three and four percent in his old congressional district alone, he could
get more than one percent of the vote statewide. That`s enough to make the
difference in this election. So who will Virgil Goode pull votes from?

Well, former Congressman Goode is a former Democrat turned independent
turned Republican, and is now the presidential candidate of the
Conservative Constitution Party. With 13 electoral votes at stake, the
Virginia Republican party is trying to knock Virgil Goode off the ballot.

And joining me now for an exclusive interview is the presidential
candidate from the Constitution Party, Virgil Goode. You`ve got Donald
Trump really, really, really angry. Get ready now. This is going to scare
you, because you`re an out of towner here in New York. You`re in Trump
country. He is after you.

He Tweeted and said "the Republicans must get Virgil Goode out of the
race in Virginia. He will take votes away from Mitt Romney." I was
watching you when I read that to see how scared you are.

VIRGIL GOODE, CANDIDATE FOR PRESIDENT: Not too scared, because not
analyzing it correctly. We will get some votes from Romney voters, but
we`ll get a lot of votes from Obama voters. There are a lot of straight
arrow, yellow dog Democrats who would never vote for a Republican, but they
would vote for me. Some of them voted for me when I was a Democrat in the
state legislature, and some as a Democrat in Congress.

But I know some friends of mine that were Democrats when I ran as a
Republican. They wouldn`t put my sign up. But they put my sign up this
year.

O`DONNELL: Now you`re running for president. You`re on the ballot
in exactly one state.

GOODE: No. I`m on the ballot in 25 to 30 states. And on the write-
in ballot.

O`DONNELL: This is the state where we can actually see where you
could make a difference.

GOODE: I think we`re going to make a difference in Ohio. I was in
Ohio this past weekend. We had three rallies in Nevada, did very well.
Nevada`s a swing state.

O`DONNELL: They know who are you in Virginia.

GOODE: I have name better identity than in other states.

O`DONNELL: It`s going to be much harder for you to get a message out
about you being more conservative than Romney, which is your basic pitch.

GOODE: I`m more- - No. I`m better on the issues than Romney. Some
things I`m not. Romney and Obama, for example, are basically the -- guided
by the super PACs. I`m not taking any PAC money. We need a grassroots
candidate for president. I`m that grassroots candidate, no PAC money,
individual donations limited to 200 dollars.

Time for grassroots citizens to have a president that`s focused on
them rather than the super PACs.

O`DONNELL: Now you`ve seen what happened to Ralph Nader in 2000 when
he was perceived to have robbed the election from Al Gore in Florida by
getting more votes -- taking more votes than Al Gore needed to win in that
state. You saw the Ross Perot factor. Bill Clinton won the presidency
with 43 percent of the vote because Ross Perot was in that election as a
third party candidate.

When the third party candidate affects the outcome of the election,
people kind of hate the third party candidate.

GOODE: That may be true but our message is the message that America
needs to get back on track: balancing the budget now, on jobs focusing
first on jobs for U.S. citizens by totally ending illegal immigration --

O`DONNELL: Are you ready for the heat that`s going to --

GOODE: I`ve already got a lot of heat, because some of the team
Romney operatives -- they`re following -- they`re listening to Donald Trump
instead of the people on the street. The people on the street are saying
they`re not card carrying Republicans. They`re just average citizens
saying we don`t like Obama, we don`t like Romney; we`re glad to sign your
petition and we`re going to vote for you in the general election.

O`DONNELL: Virginia polling shows that President Obama is leading
Mitt Romney 50 to 45. But when we put your name into the poll, the
president`s numbers hold at 50 and Romney goes down a few points. You take
a few of those points directly from Romney.

GOODE: Well, that`s that poll. I`m talking about my poll from
talking with people on the street. And we are going to get some voters
from Obama. But really, we`re going to bring in a lot of conservative
voters that weren`t going to go vote. I`ve had people tell me it`s time we
had someone like you. I would vote for you but I won`t go vote for either
Obama or Romney.

O`DONNELL: We`re out of time, but I got to tell you, if Donald
Trump`s against you, I`m with you. Virgil Goode, thank you.

END

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