updated 10/8/2012 12:17:15 PM ET 2012-10-08T16:17:15

THE LAST WORD WITH LAWRENCE O`DONNELL
October 5, 2012

Guests: Alice Rivlin, Sam Stein, Neil Irwin, Jonathan Capehart, Maggie Haberman, Jonathan Gruber

EZRA KLEIN, GUEST HOST: We have hit the point in the election, where
people begin to lose their minds. The jobless rate fell below 8 percent in
September, which is good news for President Obama and a new conspiracy
theory for some Republicans.

(BEGIN VIDEOTAPE)

MITT ROMNEY (R), PRESIDENTIAL NOMINEE: We`ve had 43 straight months
with unemployment above 8 percent.

THOMAS ROBERTS, MSNBC ANCHOR: Another October surprise.

TAMRON HALL, MSNBC ANCHOR: Breaking news right now.

ROBERTS: A major victory for President Obama.

ANDREA MITCHELL, NBC NEWS: The White House got some welcome news.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The unemployment rate
has fallen who its lowest level since I took office.

MITCHELL: This is good news.

REP. JAN SCHAKOWSKY (D), ILLINOIS: This is excellent news.

UINIDENTIFIED MALE: It`s definitely a good day for the American
economy.

ROBERTS: The new number, 7.8 percent.

UNIDENTIFIED MALE: Seven-point-eight.

HALL: Seven-point-eight.

ALEX WAGNER, MSNBC HOST: Seven-point-eight.

UNIDENTIFIED MALE: There`s just no way that`s right.

CHRIS MATTHEWS, MSNBC HOST: There are some people out here who don`t
like this number.

UNIDENTIFIED MALE: Some sort of statistical mirage.

HALL: The harsh back and forth --

UNIDENTIFIED MALE: We had truthers, we had birthers.

HALL: -- over today`s jobs reports.

UNIDENTIFIED MALE: And now, we`ve got jobbers.

ROBERTS: Business pioneer Jack Welch --

UNIDENTIFIED MALE: Jack Welch.

CHRIS JANSING, NBC NEWS: Jack Welch.

ROBERTS: -- calls these numbers into question.

JACK WELCH, FORMER G.E. CEO: These numbers don`t smell right.

JOHN HARWOOD, CNBC: Jack Welch was a very successful businessman.

WELCH: This is about asking questions.

HARWOOD: On this subject, he has absolutely no idea what he`s talking
about.

MARTIN BASHIR, MSNBC HOST: Congressman West, take it away.

REP. ALLEN WEST (R), FLORIDA: I don`t see these numbers that people
are talking about.

SCHAKOWSKY: You can`t deny the numbers.

WEST: Don`t challenge my intelligence.

UNIDENTIFIED MALE: There`s just not a shred of evidence they`ve ever
manipulated this number.

UNIDENTIFIED MALE: People have stopped looking for work.

ROMNEY: More and more people have just stopped looking for work.

UNIDENTIFIED MALE: That is definitely not the case.

UNIDENTIFIED MALE: Completely wrong.

MITCHELL: People are not giving up. They`re coming back into the
workforce.

ROMNEY: I think I get the last word.

OBAMA: I can`t allow that to happen.

ROMNEY: But I think I get the last word.

OBAMA: I won`t allow that to happen, and that is why I`m running for
a second term of president of the United States.

(END VIDEOTAPE)

KLEIN: Good evening. I`m Ezra Klein, in for Lawrence O`Donnell.

It`s 32 days until the election, and though we are only five days into
October. As "Washington Post`s" Karen Tumulty mentions, we`ve already had
two October surprises.

First, there was President Obama`s weak debate performance. And then,
today, the jobs report, the second-to-last monthly jobs report to be
released before the election is very good news for President Obama.

Unemployment has fallen below 8 percent for the first time since the
president took office in January of 2009. The September jobs report shows
the U.S. economy added 114,000 jobs since September, with the unemployment
rate dropping from 8.1 percent to 7.8 percent.

The better news, though, was the Bureau of Labor Statistics revising
job reports for the last two months finding the economy actually added
181,000 jobs, up from an already OK number of 141,000 in August. And in
August, the economy added 142,000 jobs up from the initially lackluster
96,000 initially reported.

So there were in total 200,000 new jobs on this jobs report.
President Obama tried to put today`s good news jobs report in context,
campaigning in Virginia.

(BEGIN VIDEO CLIP)

OBAMA: After losing about 800,000 jobs a month when I took office,
our businesses have now added 5.2 million new jobs over the past 2 1/2
years.

(APPLAUSE)

This morning, we found out that the unemployment rate has fallen to
its lowest level since I took office.

(APPLAUSE)

More Americans entered the workforce, more people are getting jobs.

It`s a reminder that this country has come too far to turn back now.

(END VIDEO CLIP)

KLEIN: Mitt Romney also campaigning in Virginia. Not as impressed.

(BEGIN VIDEO CLIP)

ROMNEY: We don`t have to stay in the path we`ve been on. We can do
better. There was a report that just came out this morning on job creation
this last month. There were fewer new jobs created this month than last
month. And the unemployment rate as you know this year has come down very
slowly, but it`s come down nonetheless. The reason it`s come down this
year is primarily due to the fact that more and more people have just
stopped looking for work.

(END VIDEO CLIP)

KLEIN: What Mitt Romney is getting at that -- getting at there, when
you look at a report like this where the unemployment rate is dropping but
there aren`t that many new jobs, you worry immediately that you`re seeing a
kind of trick. In particular, you worry that the unemployment rate dropped
because discouraged workers gave up and they stopped looking.

That did not happen this month. The number of people participating in
the labor force went up, which means the rate didn`t drop because there are
fewer people looking for work. Average hourly earnings also increased.

And here`s the bad news, though, about the jobs report. We`re at this
point in the campaign, 32 days out from the election, where people begin to
go a little crazy. All they can think about is politics. So, to them,
everything looks political.

A new conspiracy theory was born at 8:35 a.m. today with this tweet
from former G.E. CEO Jack Welch. He wrote, "Unbelievable jobs numbers.
These Chicago guys will do anything. Can`t debate so change numbers."

I wish I could say that the assertion that the Obama campaign in
Chicago convinced the labor department to cook the books was universally
decried. It was not. We will have much more on the birth of the jobbers,
a new American conspiracy theory, coming up later in the show.

But, for now, the presidential campaign has been reshaped in a number
of ways. First, Obama`s record on jobs, even including the first horrible
months of the recession, is now firmly positive. That`s an important
milestone.

And the way Obama achieved, it`s very non-socialist, actually. Under
Obama, the economy has created about 967,000 private sector jobs and lost
642,000 government jobs. So if Obama is in fact a socialist, he`s not very
good at it.

Second, in Romney`s standard stump speech, one of his big applause
lines is we`ve now had, quote, "43 straight months with unemployment over 8
percent." We are now under 8 percent.

And third, this is probably the most important for the campaign. The
debate was only two days ago. Today is Friday. The debate was Wednesday.
But this is a big enough jobs report, striking enough, that it has turned
the whole national conversation.

Romney could have used a few more days of momentum. Now instead of
having a weekend where anyone can talk about his debate, the jobs report is
dominating the headlines.

Joining me now to talk -- I`m sorry -- joining me to talk about it is
Alice Rivlin, the founding director of the Congressional Budget Office.
She is a senior fellow and director of the Brookings Institution, and was a
member of the President Obama`s debt commission. She knows more about
budgets than probably I think anyone in the world. And Sam Stein,
"Huffington Post" political editor and White House correspondent.

Thank you, both, for being here.

SAM STEIN, HUFFINGTON POST: Thank you.

HAYES: Alice, 7.8 is a lot better than 8.1. But it`s obviously not
as low as we`d like. The progress has been somewhat slow. So when you
look at the numbers, you look at the trajectory of the economy over the
year, how do you think a voter should understand the economy when they`re
judging President Obama and Mitt Romney?

ALICE RIVLIN, BROOKINGS INSTITUTION: The economy is getting better,
more jobs are being created. We aren`t where we would like to be -- 7.8 is
still quite a high unemployment rate. We would like it to be 5 or 4.

There was a couple of months in the 1990s when it got under 4. That
would be terrific. But we`re not there. We dug ourselves a huge hole
after the financial crash of 2008.

(CROSSTALK)

RIVLIN: (INAUDIBLE) happened, but it did happen, and it was a huge
crash. And we had this great recession which took the economy down fast
and at the time that Obama took over, the economy was in freefall. And
since then, it`s gotten better.

At first, it got worse at a slower rate. That`s not a great slogan.
But for the last 2 1/2 years, it has gotten steadily better in the sense
that jobs have grown every year, every month.

KLEIN: And, Sam, when you talk to the Obama campaign, the particular
way they see the voters who are going to side with them, or at least a lot
of them -- practically swing voters -- is what they believe, as Alice said,
we have a very deep hole to dig out of. We`re not there, we`re not done,
but we`re doing about as good as we can expect to be doing.

And there`s been there important psychological barrier of 8 percent.
Does getting underneath that barrier, does getting down to 7.8 percent
really do much for President Obama`s talking point, that we have come a
long way and now voters should let him finish the job, or do these kind of
changes in numbers matter in Washington but they`re not what voters see
around them, so they`re kind of a story here but not actually in the
campaign.

STEIN: Well, first of all, I`m glad you asked Alice the economic
question and left me with the political stuff. She`s much more better
equipped to do that.

I think it`s a psychological motivator for a lot of people, especially
for the campaign itself. You know, we did a video mash up of all the times
Mitt Romney talked about how the president failed to get the unemployment
rate below 8 percent in 43 straight months. So, obviously, that`s
eliminated as a talking point.

To the extent that this actually affects voters, that sinks in to
their consciousness, I don`t know. Obviously, the debate was watched by
about 70 million people, according to Nielsen ratings. That`s a lot of
people and a lot of people took away positive impressions of Mitt Romney
from that debate. I don`t know if this competes with that.

But certainly we saw in the past couple of months that people were
beginning to feel a lot more confident about the economic situation both
personally and for the country. You saw it in the polls. We were
wondering why was this data turning around, what exactly was the instigator
for it.

And the convenient explanation is, well, Bill Clinton gave a great
speech at the convention and everyone loved what Clinton said. Henceforth,
people start feeling great about the economy. It now turns out there was
some underlying economic trends that was feeding that that we didn`t really
know about, but that makes sense now.

And I think if that`s the case heading into the critical month of
October and obviously in November, where we`re going to have one more jobs
report, I think that really does benefit the president, because that`s been
the underlying issue of this entire campaign. It`s been the issue that
Mitt Romney`s campaigned on from the get-go.

KLEIN: Alice, Sam mentions Bill Clinton, and at the convention I
think he framed Obama the case for Obama and particularly the case for
Obama on the economy more clearly than anyone else has on the campaign.
And I want to go back to it for a moment.

RIVLIN: He`s very good at that.

(BEGIN VIDEO CLIP)

BILL CLINTON, FORMER U.S. PRESIDENT: No president, no president, not
me, not any of my predecessors, no one could have fully repaired all the
damage that he found in just four years. When President Barack Obama took
office, the economy was in free fall, it had just shrunk 9 full percent of
GDP. We were losing 750,000 jobs a month. Are we doing better today? The
answer is yes.

(END VIDEO CLIP)

KLEIN: And we should say, we are actually back now to where we were
when Obama got in office. But do you think Bill Clinton is right there?
Did Obama do all that could have been done?

RIVLIN: Well, I think he did all that could have been done that the
Congress would let him do. With hindsight, the stimulus package should
have been bigger, but at the time it was put together, there were two
things that were constraining it. One was we didn`t know how bad the
economy was at that moment.

KLEIN: Right.

RIVLIN: It was still getting worse. But nobody knew how much worse
it was getting. And the other was sort of sticker shock. It was a big
number and the Congress wasn`t prepared to vote more than that, and didn`t
want to come back to it.

KLEIN: And, of course, subsequently Republicans in congress refused
to vote for the American Jobs Act, which we should have done more and more
recently.

Alice Rivlin and Sam Stein -- thank you both very much for joining me
tonight. And thank you for giving us your wisdom on this.

Coming up, debunking the conspiracy theorists, I call them the
jobbers, about the jobs numbers.

And Mitt Romney wants you to think he can leave the numbers up to the
states like he did in Massachusetts. Mitt Romney as president is going to
make that impossible. I`m going to show you the math and then talk with
the guy who did that math for Governor Romney. That`s coming up.

(COMMERCIAL BREAK)

KLEIN: What candidate would want an endorsement from the actor who
starred in a film called "The Jerk"? Steve Martin`s political ad is coming
up.

And Jack Welch is not backing away from asking if the Obama
administration manipulated employment data. The same Jack Welch call the
numbers, quote, "reality" during the presidency of George W. Bush. The
newest Republican conspiracy is next.

(COMMERCIAL BREAK)

KLEIN: We have hit that moment in the election when people begin to
lose their minds. Case in point, within minutes of the jobs report today,
Twitter filled with Republicans saying the numbers must be cooked. They
were job truthers, or as I like to call them, jobbers.

The first jobber was Jack Welch the former head of G.E. and a big
Romney supporter. He tweeted, and, yes, I said Jack Welch tweeted, quote,
"Unbelievable jobs numbers. These Chicago guys will do anything. Can`t
debate so change numbers."

But Welch wasn`t alone on his island of lunacy. Keith Urbahn, former
chief of staff to Donald Rumsfeld, tweeted, "No, there`s nothing at all
curious about the last jobs report diving to 7.8 percent unemployment
before the election."

Just for the record, technically, this is not the last jobs report
before the election. The last one will come out on Friday, November 2nd, a
couple of days before the election.

Conn Carroll, a writer at the conservative "Washington Examiner",
tried to put a slightly more sophisticated spin on this argument, he wrote,
"I don`t think BLS cooked the numbers. I think a bunch of Dems lied about
getting jobs. That would have the same effect."

And then of course there was FOX News, which headlined its report,
"Jobless rate dips under 8 percent, but is the number real?" Is it? Yes,
it is.

The jobbers need to take a deep breath and remember what we`re talking
about here. This is a good jobs report in a still weak economy. The
114,000 jobs we added in September is not very impressive. We add about
100,000 new people to the workforce every month. We`re just getting a bit
above treading water here.

The revisions to the last two months which added $86,000 jobs to the
total, that was a much better. That was a big deal. Still, these are at
best good, if not great numbers. If the White House was somehow
manipulating the data, don`t you think they would have made the payroll
number look better at 114,000? No one would have batted an eye at say,
170,000.

The controversy, if it`s worth using that word, is over the
unemployment rate, which dropped from 8.1 percent to 7.8 percent. Let`s
just be clear: that is 0.3 of 1 percent. That`s what all the fuss is about
-- 0.3 of 1 percentage point.

Let`s make another thing personally clear. No one played with the
data. The people who say otherwise, they don`t just know how this actually
works. These numbers are one of the most closely guarded secrets in
Washington.

As Eli Saslow, my colleague at the "Washington Post" has reported, the
Labor Department designed the process after they got security advice from
the organization that safeguards the country`s stockpile of weapons. That
is how seriously they take it. The economists who report the data and put
it together are put on an eight-day security lockdown. They have to signed
new binding confidentiality agreements every single morning. The computers
they use are encrypted, the data gets put into a safe when they go to the
bathroom.

Three days before the release when it`s done, three copies of the
report and the CD-Rom are placed in a safe and taken to downtown Washington
from a secure location where they were prepared, 12 hours before the report
is released, long after you could change anything. A few White House
officials get to see it, but they can`t tell anyone about it. There`s no
chance to change any of it.

But the fact is that there`s not even much that needs to be explained
here. We`ve seen jobs like this and even drops bigger than this before and
recently. Between July and August, the unemployment rate dropped from 8.3
percent to 8.1 percent. It`s 0.2 of 1 percent.

November and December of 2011 also saw a 0.2 drop. November to
December of 2010 saw a 0.4 percent drop, which is even bigger than what we
just saw.

So, this isn`t some incredibly weird number that needs to be
explained, the fact that the unemployment rate broke under the
psychologically important 8 percent line is making it feel big to people.
But it`s not that big.

Now, one thing you do need to know. The number could of course be
wrong. The household survey is -- well, a survey of household, which means
it is open to error.

But the internals of the poll back it up -- or the survey back it up.
The drop in unemployment came because 800,000 people said they now had
jobs. That now seems high. But it`s counting 582,000 who say they got
part-time jobs.

And that seems to happen around this time of year. As "Reuters`"
Daniel Indiviglio notes, part-time jobs increase by 579,000 in September
2010 and by 483,000 in 2011. It might be seasonal hiring, kids going back
to school, and getting part time jobs then. You don`t need to resort to
ridiculous theories like Democrats across the country all deciding to lie
to survey takers in order to help Obama.

The bottom line on this report, it`s an encouraging report. What it
tells us is that the labor market has been better than we thought and that
the recovery hasn`t slowed in quite the ways we feared.

What the response to it tells us is that the election is driving
people a little bit crazy.

Joining me now, a man never driven crazy by elections or anything
else, "Washington Post" economics reporter Neil Irwin.

Neil, it is good to see you.

NEIL IRWIN, WASHINGTON POST: You, too.

KLEIN: I`m going to play for you actually what Jack Welch when he got
up Twitter had to say on FOX News today. Listen to this.

(BEGIN VIDEO CLIP)

WELCH: These numbers don`t smell right when you think about where the
economy is right now. It`s just ironic that these assumptions all came
this way the month before the election. You draw your own conclusions.

(END VIDEO CLIP)

KLEIN: First, it`s not actually ironic. But, I think this is what
it`s been really about, right? It doesn`t sort of if fit Jack Welch`s
sense of economy smell. It feels a little off to people.

You deal with these numbers every single month. You know them very
well.

So how do they feel to you? Does this feel like such a surprising
report to you? Or is this going to overblown?

NEIL IRWIN, THE WASHINGTON POST: Look, it was surprising. It was
better than most people were expecting. It`s better than I was expecting.
It was better than any of the forecasters on Wall Street were predicting.

But that happens sometimes. There`s a reason we do these studies.
There`s a reason they do -- they survey 60,000 people every month to figure
out what`s going on.

If we already knew what was going to happen, there wouldn`t be a point
to doing it. And sometimes there`s going to be surprises.

The truth is -- you alluded to this -- a lot of the numbers are more
consistent with what we`re seeing in the economy. The payrolls number,
114,000 new jobs. That seems to match what we`ve been seeing the last few
months, a kind of slow, gradual, halting recovery.

Look, the ups and downs happen. Sometimes the survey shows a better
result than is reality, sometimes a little worse. This one may be a little
better than reality. It`s not because somebody is cooking the books, it`s
because it`s hard to figure out what`s going on in a country of 300 million
people.

KLEIN: Right. So, one of things that this has created is, we`re
having a lot of conversation this election over where the economy is right
now. Is the unemployment rate 7.8? Is it 7.9, 7.7, 8.1?

We`re not actually talking all that much about what the candidates
will do about unemployment. You just did a great piece on Romney`s
economic advisers and who would staff him if he won the White House.

So, when you were talking -- I mean, you were reporting that, what is
their theory on how you create jobs? What would they do to make this
unemployment number dive down in a way that Jack Welch would find more
pleasantly smell (ph)?

IRWIN: So, what you hear a lot is a sense -- a belief of the evidence
to strengthen on the economy over the next couple of years, whether it`s
fiscal policy, fiscal stimulus, the action to fight the Federal Reserve to
cut interest rates and pump money into the economy, those are sugar highs,
those are kind of short term things that might help a little in the short
run but don`t really help anything in the longer run. They really have a
theory that you try and fix things in the economy, get a more efficient tax
code, get the deficit down over time -- that that will help you.

Now, I think when you give them truth serum, you`re talk and you off
the record, and it`s honest, you know, it might cause some disruption,
might be tough for the first few months. But they would argue that the
longer term benefits for confidence, for business hiring, since we`re on
the right track would be worth it. That`s the fundamental dispute. Now,
that`s not an argument you see in the debates. That`s not the way the
argument gets framed. But that`s the core ideological dispute in the
election.

KLEIN: On the other side that`s been surprising is President Obama
and the Obama campaign, they don`t talk about their big idea on the jobs.
They don`t really talk about the American Jobs Act. It wasn`t on their
convention speech. They didn`t bring it that much in the debates.

Why do you think that is? Because that is a big responsive, sort of
big idea on jobs here.

IRWIN: There`s just a great new book by Michael Greenwald, called
"The New New Deal," about the stimulus, the AARA that came out in 2009 and
was almost $800 billion, saying, look, it was a great success. It did a
lot of things to help this recession from being worse, to have some longer
term benefits. It`s something that the president`s political advisers,
they do the polling. They do the focus groups. It does not resonate with
swing voters.

People look around and say, look, we`re still at 7.8 unemployment.
You did all the stuff. You spent all this money, and yet we`re still in
this crummy situation.

The politics are terrible. Even though most economists, most
forecasters who look at this stuff every month, they think it helped.

HAYES: Right. And they would say they knew (ph) when to give
millionaires sort of jobs.

Neil Irwin, thank you as always for being here tonight.

IRWIN: Thanks, Ezra.

KLEIN: Coming up, the latest etch-a-sketch version of Mitt Romney.
And now, we`re seeing the allegedly moderate Mitt. Jonathan Capehart and
Maggie Haberman will join me.

And later, Steve Martin gets political and makes an ad and kind of a
mess, but it`s a really funny mess. Can you guess who he would make a
political ad for?

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

OBAMA: Now my opponent, he is doing a lot of -- a little tap dance.
At the debate the other night, trying to wiggle out of stuff he`s been
saying for a year. Doing like -- it was like "Dancing With the Stars." Or
maybe it was "Extreme Makeover," debate edition.

(END VIDEO CLIP)

KLEIN: In the spotlight tonight, so-called Moderate Mitt. That was
President Obama today in Ohio, reflecting on how the Mitt Romney from
Wednesday sounded a little different from this Mitt Romney from February.

(BEGIN VIDEO CLIP)

ROMNEY: We conservatives believe in freedom. As conservatives we`re
united by a set of core convictions. Conservative constants have shaped my
life. Conservative. Conservative. Conservative.

I was a severely conservative Republican governor.

(APPLAUSE)

(END VIDEO CLIP)

KLEIN: I think he`s a conservative. Six months after Mitt Romney
stymied the Santorum surge by hailing his severely conservative
credentials, Romney chose the even more severely conservative Paul Ryan as
his running mate.

Fast forward to Wednesday. We heard from a very different Mitt. Here
is some of what Mitt Romney said that would have earned him jeers from
Republican primary audiences.

(BEGIN VIDEO CLIP)

ROMNEY: I`m not looking for a five trillion dollar tax cut.

Regulation is essential. You can`t have a free market work if you
don`t have regulation.

What we did in Massachusetts is a model for the nation, state by
state.

(END VIDEO CLIP)

KLEIN: So which Mitt Romney will voters be choosing if they give him
the vote? The severely conservative, Paul Ryan budget endorsing guy or the
regulation is essential, barely mentioned Paul Ryan Mitt Romney?

I actually think the answer lies in something else Mitt Romney said on
Wednesday.

(BEGIN VIDEO CLIP)

ROMNEY: Something this big, this important has to be done on a
bipartisan basis. And we have to have a president who can reach across the
aisle and fashion important legislation with the input from both parties.
I`m going to work together with Congress to say OK, what are the various
ways we could bring down deductions.

We have to work on a collaborative basis, not because we`re going to
compromise our principle, but because there`s common ground.

(END VIDEO CLIP)

KLEIN: It does not sound so severely conservative. Joining me now to
help peel apart these Mitt Romneys is "Washington Post" opinion writer
Jonathan Capehart and "Politico" reporter Maggie Haberman. Thank you both
for being here.

Jon, I think the basic principle that governs Romney`s approach to
governance is that he will, somewhat pragmatically, negotiate with the
Congress he gets. So when he`s in Massachusetts, which is where he really
sort of derived his persona from at the debate, and he`s dealing with a
legislature that is filled with Democrats, he reaches across the aisle. He
cuts deals. He does universal health care.

But the thing is, if he`s elected and he has a Republican House -- and
quite likely if he wins the election, a Republican Senate, it`s hard to
imagine Mitt Romney standing up to the Republicans in Congress and
demanding to do everything in a bipartisan way.

JONATHAN CAPEHART, "THE WASHINGTON POST": Right.

KLEIN: So is that it? It`s really just about who he`s dealing with
and what kind of deals are open there to be struck?

CAPEHART: Right, look, I wouldn`t -- I mean, the Mitt Romney we saw
on Wednesday is not the Mitt Romney we`ve been seeing on this campaign
trail at all. And you know, the idea that he is going to go to Washington
and reach across the aisle, there`s a Congress there that doesn`t want to
reach across the aisle. They want him, if he gets elected, to do what they
say.

And on top of that, he didn`t mention his name, but Paul Ryan would be
his vice president. Paul Ryan is the one -- I mean, Mitt Romney says he
has a 59 point plan, but Paul Ryan actually has a budget. And it`s a
budget that goes far and away and is very specific in ways that Mitt Romney
has not been.

And if he`s really this pragmatic guy, then he`s going to be forced to
do things that naturally, if he really is this pragmatic guy, wouldn`t want
to do.

KLEIN: I have read that budget. It is way more than 59 points.
Maggie, in Wednesday`s debate, one thing that I think has been a little bit
conflated here, did you see Mitt Romney actually shifting positions or
emphasizing different elements of his positions? Because when I watched
and what I saw was a different kind of approach to governance on display
and a very different set of policies he was underscoring, but not actually
going off any of the policies he had espoused up until that night.

MAGGIE HABERMAN, "POLITICO": No, I think you`re exactly right. I
think what`s been different about the Mitt Romney we saw at the debate was
tone more than substance, I think style more than substance. I also think
it`s not a surprise that that`s what he did at a debate that is not
strictly for the Republican audience. I think that he`s appealing to a
broader group of voters. Candidly, I think most of us expected he would
have done this already. In a general election, you usually pivot.

One of the things that Romney has been very self-conscious about this
entire general election is being called a flip-flopper. Also he was
concerned about this in the primaries. But he has stuck with this. He has
stuck with this on the issue of immigration until recently. He has
actually had some positions that have modulated. He took a stand on
Obama`s executive action about some temporary deportations -- temporary
visas being issued. And this was the first time he had commented on it I
think in about 100 days. And it was the day before the debate.

He gave a little bit more meat on the bones the day before the debate
about tax policy. But you`re not seeing him change his stance. And I
think what you`re going to continue to see is this sort of dual campaign,
where you hear one thing in sort of rallies and then you hear another thing
in interviews.

KLEIN: One of the things that is fascinating about that, because, as
Maggie says, he did not shake the Etch a Sketch after the primary in a way
that surprised a lot of people. If anything, the Moderate Mitt we saw a
couple of nights ago, it`s surprising that we haven`t seen that Moderate
Mitt much earlier.

Do you think that what`s happened here is that conservatives become
afraid enough that Romney was actually going to lose that he decided he
finally actually had room to run? You saw with the 47 percent tape,
initially he stood by it, then he came out and said of course that was a
bad idea. What was I possibly talking about?

Do you think he just feels now that they are on board enough at this
point, because they are so worried about taking back the White House, that
he can be this moderate that he kind of wants to be, at least in the end of
the campaign.

CAPEHART: You know, I understand where you`re coming from, but I just
don`t trust that that`s what`s happening here. What we`re seeing -- the
Mitt Romney who showed up on Wednesday did not surprise me, because it`s
the same Mitt Romney, in terms of style and performance, who showed up when
Rick Perry came to his first debate, the same Mitt Romney who showed up
when he needed to snuff out the candidacy of Newt Gingrich in Florida
during those debates.

Mitt Romney, when his back is up against the wall, when his candidacy
is in danger, he will do what it takes to put himself back on top. And
that`s exactly what he did on Wednesday. So whether he feels he has the
wiggle room to push aside the far right wing and push aside conservatives,
I don`t know. I think in the moment, Mitt Romney thought this is my one
and only shot, the biggest audience I`ll ever have since the convention to
show the American people that I`m the guy to go up against President Obama.

KLEIN: Maggie, before you go, do you think we`re going to see a
different strategy from the Obama campaign going forward? Do you think
there will be a sort of counter-attack in that campaign, or a different
approach to this new Mitt Romney?

HABERMAN: I think you`re already seeing it. I mean, I think what
you`re seeing from the Obama campaign -- number one, I don`t think you will
see that Barack Obama on the next debate stage at Hofstra on October 16th.
But you will see, I think, a more aggressive contender. But I think it`s
very clear that the campaign and the president regret having not pushed
back on the debate stage on certain things Mitt Romney said.

The president was very aggressive on the stump the next morning,
saying he wasn`t telling the truth. I was surprised to see this version of
Mitt Romney show up. You`re going to hear a lot of that. It`s a little
harder to do when you`re not before 58 million viewers in prime time or
whatever the number ended up being.

But I think that`s what they`re going to be doing going into the next
debate. And I think that is going to be what you will see the president do
on stage in New York on October 16th.

KLEIN: Jonathan Capehart and Maggie Haberman, thank you very much for
being here tonight.

Coming up, Mitt Romney says he wants to make it possible for every
state to do what Massachusetts did with health care. But if he`s elected,
he`ll make it impossible for any of them to do it. I`ll explain it with
one of the architects of Romneycare.

And later, the crafty political ad Steve Martin has done for a Senate
candidate. That is coming up.

(COMMERCIAL BREAK)

KLEIN: So, I don`t often disagree with the great Paul Krugman, but I
think he got something wrong in his column on Wednesday`s debate. He said
that Romney`s big lie about health care is when he said this.

(BEGIN VIDEO CLIP)

ROMNEY: Number one, preexisting conditions are covered under my plan.

(END VIDEO CLIP)

KLEIN: That is a lie, as Romney`s campaign admitted later that same
night. Romney`s plan does not cover preexisting conditions. If you`ve
been uninsured at any point in the last couple of years, you`re not
protected under Romney`s plan. The Commonwealth Fund says that means 89
million Americans would be left out in the cold. As Paul Krugman notes,
that`s more than a third of the non-elderly population.

But there`s something else that Romney said about health care at the
debate that is also not true, but that matters much more and is getting
much less attention.

(BEGIN VIDEO CLIP)

ROMNEY: The best course for health care is to do what we did in my
state, craft a plan at the state level that fits the needs of the state,
and then let`s focus on getting the cost down for people rather than
raising it with a 2,500 dollar additional premium.

(END VIDEO CLIP)

KLEIN: So what does that sound like to you? It sounds like he wants
to make it possible for every state to follow Massachusetts`s example,
right? But if you read Romney`s policies -- and I have -- that`s not what
he wants to do. He`s going to make it impossible for any other state to
follow the Massachusetts model.

What you need to know here is that Romney paid for his health care
plan in three ways. Two of those ways were taking federal government money
and one of them was a state tax. The first way was this 385 million annual
payment that then-Senator Ted Kennedy had to negotiated for the safety net
hospitals.

President George W. Bush wanted to end that special payment, which set
off a huge panic in Massachusetts, and led to Romney and Kennedy going to
the Bush administration and cutting a deal with them. Massachusetts could
keep the money if they put it toward a universal health care plan.

So that`s how the whole thing got started. Romney and Kennedy were
trying to keep this federal money. They wanted that government money.
Then the state did two other things. They first covered absolutely
everyone they could cover in their Medicaid problem, so they could get the
most generous possible match from the federal government, because remember,
the federal government pays for part of Medicaid.

Right now, federal Medicaid dollars are helping Massachusetts cover
both kids and adults up to 300 percent of the poverty line. That is an
incredible deal for people in Massachusetts. They`re getting subsidized by
the rest of the country.

And then the third way Romney paid for it is Massachusetts had, long
before Romney was governor, imposed a tax in order to reimburse hospitals
for the care they provided to the uninsured. Romney took that tax and put
it towards his law. So that`s two pots of federal money and a tax.

So how much of Romney`s proposal relied on these funds? I asked
Jonathan Gruber, the MIT who helped Romney design the law. He told me,
quote, 100 percent. That was my whole job, saying whether we could fit
what he wanted to do within those three funding sources.

The legislature ended up adding a bit of other money to the law after
Romney proposed it. But the fact remains the Massachusetts law Romney put
forward relies on federal dollars and on state taxes.

But Romney`s health care proposal doesn`t make it easier for other
states to do what he did. It makes it almost impossible. He`s not
offering states access to federal funds for universal coverage. Here`s
what he`s doing.

(BEGIN VIDEO CLIP)

ROMNEY: I would like to take the Medicaid dollars that go to states,
and say to a state, you`re going to get what you got last year, plus
inflation, plus one percent, and then you`re going to manage your care for
your poor in the way you think best.

(END VIDEO CLIP)

KLEIN: That sounds nice. It`s a cut to Medicaid of more than 600
billion dollars. That`s before we even get into Romney`s repeal of the
Affordable Care Act, which pushes Medicaid cuts well above a trillion
dollars. That means Medicaid will not be able to offer other states the
generous deal Massachusetts got.

So then let`s go through these three pots of money. Romney isn`t
giving states a pot of money like the one Massachusetts got to do universal
coverage. He`s cutting Medicaid funding, so unlike Massachusetts, states
can`t rely on that either.

And he opposes any new taxes. So on health care, he`s kind of pulling
up the ladder after him and his state. He`s saying that he opposes
universal health care at the federal level, but he will not give states
money they need to get it done at the state level. So under his plan,
there`s really no way to get universal health care done at all.

But he doesn`t really want you to know that.

Joining me now is Jonathan Gruber, professor of economics at MIT and
one of the folks who helped Mitt Romney design his universal health care
law in Massachusetts. Jonathan, it`s great to see you.

JONATHAN GRUBER, MIT PROFESSOR: Good to be here, Ezra.

KLEIN: So, first, you know these numbers for this plan much better
than I do, or really than anyone does, so anything you want to fact check,
correct or complicate here?

GRUBER: No, you described it very well. I think what candidate
Romney is not owning up to is the fact that the federal government made our
plan possible. They gave us the seed money, if you will, more than seed,
more than half the money we needed to make it possible. And the rest came
from a tax that was already imposed on the state that Mitt Romney
essentially rededicated to his efforts.

KLEIN: Can even Massachusetts` plan survive in the long run under
Romney`s Medicaid cuts? Because if they begin squeezing Medicaid, at some
point, presumably, that will squeeze a funding source that goes to your
plan.

GRUBER: The only way our plan works is we`ve gotten a very generation
waiver, first from the Bush administration and then from the Obama
administration, for billions of dollars to make our plan possible. If this
had to be funded by all state money and that federal contribution was
capped, the plan would eventually with whither away. I don`t think the
state would support the plan with 100 percent state dollars.

So I think that basically you described it best, Ezra. This is really
pulling up the ladder behind him. This is saying the feds made it possible
in Massachusetts. I`m going to shut off that spigot, so it`s not possible
for anyone else.

KLEIN: Just to be -- I want to make sure I have this clear, it`s
possible even that as Romney touts what he did in Massachusetts, the
policies he`s going to put forward on health care could make it impossible
even in Massachusetts. He`s not just pulling up the ladder behind him,
it`s pulling it up in Massachusetts as well, potentially.

GRUBER: It puts it at risk potentially. It`s a question of whether
the taxpayers in Massachusetts are willing to bear 100 percent of the cost
ultimately of this plan. They may or may not be. But it certainly puts it
really at risk.

KLEIN: We talk a lot in this election about what Romney`s plan will
do to Medicare beneficiaries. But what happens to Medicaid beneficiaries
under these plans? I mean, we repeal the Affordable Care Act. You cut
Medicaid by another 600 or 700 billion. What happens to the people who
rely on Medicaid, mostly poor or children or the elderly disabled across
the country?

GRUBER: Ezra, I just put together some numbers on this in a report.
And I find that in the year 2022, while the Affordable Care Act will lead
to 33 million more Americans having health insurance coverage, Romney`s
plan would leave to roughly 12 to 18 million fewer Americans having health
insurance coverage. That is a net swing of roughly 50 million Americans
who would gain coverage under the Affordable Care Act, versus losing it
under the Romney plan.

So this is a huge hit to the possibilities for insurance coverage in
America.

KLEIN: Fifty million Americans. Jonathan Gruber, thank you very much
as always for being here.

GRUBER: You bet. Happy to be here.

KLEIN: Up next, the amazing Steve Martin gets political.

(COMMERCIAL BREAK)

KLEIN: Bob Kerrey, both a former governor and U.S. senator for the
great state of Nebraska is again running for the U.S. Senate seat in his
home state. After announcing his candidacy back in March, Kerrey sounded
optimistic about his chances when talking to Lawrence in a LAST WORD
exclusive interview.

(BEGIN VIDEO CLIP)

BOB KERREY (D), FORMER GOVERNOR AND SENATOR: I have no idea if I`m
going to win the election. I think there`s a good chance that I will. If
I do, it`s because I love the people of the state. I love the place. And
I love the values.

(END VIDEO CLIP)

KLEIN: But now the latest polls in Nebraska aren`t loving Kerrey
back. They show Kerrey trailing his opponent, Deb Fisher. One reason, no
doubt, Fisher has had the benefit of a lot of super PAC money from Karl
Rove and the Koch Brothers and others. She also has the endorsement of
Sarah Palin, which could be a pro or con depending who you ask.

So with just 32 days before election day, Bob Kerrey is turning to his
own big name endorsement, legendary comedian, Grammy award winning blue
grass artist and self-described home crafts expert Steve Martin.

(BEGIN VIDEO CLIP)

STEVE MARTIN, COMEDIAN: Hi, I`m Steve Martin. You probably know me
as the actor and comedian. But did you know I`m also a home crafts expert?
Today I`m going to show you how to make a wad of paper.

A wad of paper can be a lot of fun just to play with around the house
or maybe toss expertly into a trash can. But who wants to go down to a
fancy office building and root around in their dumpster to find a really
good one. So I`m going to show you how to make one at home with things you
have lying around the house.

You`re going to need a blank piece of paper, some paper clips, a few
grads (ph), a stapler, a stick of gum, some scissors, and a hammer. So
let`s get started.

Take one of your paper clips and just clip it like so. Like this.
Make another fold and take a grab, make a puncture, bend the brads back
like this.

Now take another fold, take your stapler, give it a punch or two like
this, maybe one more fold, use your staple well. A good stapler is always
very handy.

Then you`re going to take your stick of gum and your hammer, and
soften up that gum so it will make it easier to chew. Put it in your
mouth. And while you`re doing that, you use grab, punch it through. In
this case, we`re going to fold the grab over the top.

Take your scissors, cut off an end like this. Take out the gum and
put this on there like this. Now you`re almost done. Use your last little
paper clip like this. And voila, you have a beautiful wad of paper to play
with around the house.

And there you go. And I`ll just toss it in there. Thank you.

(END VIDEO CLIP)

KLEIN: A little dada, no? Kerrey`s campaign says it raised 1.6
million dollars in the last fundraising quarter, which ended on Sunday,
telling the Hill they expect, quote, this will be a barn burner at the end.

I`m Ezra Klein, in for Lawrence O`Donnell tonight. You can follow me
at Twitter at Twitter.com/EzraKlein, or see me work at "the Washington
Post," at WashingtonPost.com/WonkBlog. Lawrence will be back with THE LAST
WORD on Monday.

"THE ED SHOW" is up next.

END

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