updated 11/21/2012 10:36:38 AM ET 2012-11-21T15:36:38

THE LAST WORD WITH LAWRENCE O`DONNELL
November 20, 2012

Guests: Robert Reich, Neera Tanden, Nick Hanauer


EZRA KLEIN, GUEST HOST: And thank you for sticking around for the next
hour.

We have very, very big news tonight in Washington. You might remember a
period of time when the Republican Party, one of America`s two great
parties, were all afraid of a guy named Grover. It`s not that time
anymore.

(BEGIN VIDEOTAPE)

CHRIS JANSING, MSNBC ANCHOR: The GOP post-election fallout continues on a
couple fronts.

UNIDENTIFIED MALE: The time to negotiate on fiscal cliff.

ANDREA MITCHELL, MSNBC ANCHOR: The fiscal cliff.

ALEX WAGNER, MSNBC HOST: The fiscal cliff.

UNIDENTIFIED MALE: Is getting shorter and shorter.

UNIDENTIFIED MALE: Time is running short.

WAGNER: The public trusts President Obama.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Voters agreed with me on
this issue.

WAGNER: More than congressional Republicans.

REP. ERIC CANTOR (R), VIRGINIA: We don`t understand.

WAGNER: To negotiate in good faith.

UNIDENTIFIED FEMALE: Americans didn`t vote for dysfunction.

OBAMA: The voters agreed with me on this issue.

UNIDENTIFIED FEMALE: They voted for government that works.

OBAMA: So we got a clear majority.

CHUCK TODD, NBC NEWS: He did win this debate, did he not?

CANTOR: We don`t understand why raising tax rates is the solution.

UNIDENTIFIED MALE: Can party leaders get a deal?

UNIDENTIFIED MALE: Impossible.

GROVER NORQUIST, AMERICANS FOR TAX REFORM: All this talk about taxing the
rich is nonsense.

JANSING: Grover Norquist.

MARTIN BASHIR, MSNBC HOST: You speak of Grover Norquist.

JANSING: And his tax pledge.

UNIDENTIFIED MALE: He`s an entertaining, happy warrior.

JANSING: Are Republicans starting to defect?

UNIDENTIFIED MALE: Pledge mentality is really on the run right now.

MITCHELL: Speaker Boehner clearly wants a deal.

MICHAEL STEELE, FORMER RNC CHAIRMAN: He cannot have one arm tied behind
his back because of some pledge.

NORQUIST: Taxing the rich is nonsense.

SEN. BERNIE SANDERS (I), VERMONT: You have the top 1 percent owning 42
percent of the wealth.

NORQUIST: Nonsense.

WAGNER: Forty-eight-point-five million people lived below the poverty
level.

NORQUIST: Nonsense.

SANDERS: We should ask the wealthy to start paying their fair share.

NORQUIST: The American sense of fairness, no one should pay more than 25
percent.

UNIDENTIFIED FEMALE: Today`s Republican Party has imploded.

UNIDENTIFIED MALE: They are in denial.

CHRIS MATTHEWS, MSNBC HOST: They are looking for someone to blame.

UNIDENTIFIED MALE: Grover is really no longer speaking for the party.

UNIDENTIFIED MALE: Republicans may not be willing to just die on this hill
anymore.

(END VIDEOTAPE)

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

And the craziest thing is happening in Washington right now. You`ve
probably heard of the fiscal cliff or as Lawrence likes to call it, the
fiscal curve, or as I call it, the austerity crisis, or as my friend Brian
Beutler from "TPM" calls it the austerity bomb.

Whatever you would like to call it, it does not look like it`s going to
happen. It doesn`t just look like we`re going to avoid a crisis. At this
moment today, and this can change, it`s Washington, it looks like we`re
going to avoid an almost-crisis too. It looks Congress might actually wrap
this thing up by December 21st and go home for Christmas.

Almost everyone I have talked to in the last 24 hours has been weirdly
confident and upbeat about where this is going.

Now, this shouldn`t be an amazing thing for me to tell you. I should not
be coming to you on national television saying, "Hey, guys, look, Congress
might not blow up the economy for no good reason." Or if I do have to say
it, I shouldn`t sound excited about it. Congress shouldn`t get a round of
applause, any lollipop for not destroying the American economy, that should
kind of be a given.

But in recent years, it has not been a given. And the reason it hasn`t
been is in some ways traceable to this guy. You know that guy. That is
Grover Norquist. If you go by his name or his picture, he may not seem
terribly imposing.

But in the Republican Party, he`s a guy who breaks your knees if you vote
for higher taxes. He`s got this pledge to never raise taxes no matter what
happens, under any circumstance, cling on invasion or whatever. All
Republicans pretty much sign it and they are very, very, very loathed to
break it.

And that`s made it impossible to reach a deficit reduction deal, until now.
"The New York Times" today has an article in which Republican after
Republican after Republican goes on the record by name dismissing Norquist
pledge and his power.

Congressman Peter King from New York said, quote, "A pledge is good at the
time you sign it. In 1941, I would have voted to declare war on Japan.
But each Congress is a new Congress, and I don`t think you can have a rule
that you`re never going to raise or that you`re never going to lower taxes.
I don`t want to rule anything out."

Senator Saxby Chambliss of Georgia said, "I`m frankly not concerned about
the Norquist pledge."

Senator John McCain said, "Fewer and fewer people are signing this, quote,
`pledge`." It`s actually a pledge, but any way.

Senator Coburn of Oklahoma called it, quote, "a tortured vision of tax
purity."

And it doesn`t end there in that article. Bill Kristol, the influential
editor of the conservative magazine, "The Weekly Standard", said this.

(BEGIN VIDEO CLIP)

BILL KRISTOL, THE WEEKLY STANDARD: Let`s have a serious debate. Don`t
scream and yell when one person says, you know what? It won`t kill the
country if we raise taxes a little bit on millionaires. It really won`t I
don`t think. I don`t really understand why Republicans don`t take Obama`s
offer.

(END VIDEO CLIP)

KLEIN: Mona Charen, a columnist at "The national Review", wrote, "As a
matter of political strategy not to say survival, Republicans will have to
agree to raise taxes on those defined as rich. It is more than just the
exit poll on support for tax increases, Republicans must also contend with
the Pew poll that asked who would be more to blame if a fiscal cliff deal
were not reached.

Before a single meeting has been held or talking point fed to the press, 29
percent said they blamed President Obama while 53 percent said they would
blame Republicans in Congress.

Former Mississippi Governor Haley Barbour was a very, very influential
Republican, was asked whether Republicans should be open to upping top tax
rates if they got spending cuts in return. He said, quote, "If there`s
enough savings, if there`s enough entitlement reform, if there`s enough
certainty about tax reform in the next few years, I would."

I could keep going, but I`ll leave it there.

Grover Norquist says in the article, not to worry. Quote, "It`s been 22
years since a Republican voted for a tax increase in this town. This is
not my first rodeo." And maybe it isn`t. But as many and injured cowboy
can tell you, the fact that you didn`t fall off the bull at your first
rodeo or your second or your third doesn`t mean you won`t fall off at your
60th.

But what isn`t good news for Grover may be good news for the country and it
certainly good news for getting a deal. Democrats are now and they have
been for some time open to spending cuts. In fact, they already passed a
trillion dollars of them into law in 2011.

If Republicans are willing to let the Bush tax cuts for the rich expire as
part of a larger framework that includes tax reform and other deficit
reduction measures, it`s going to be not just a quiet Christmas in
Washington, but a smooth one for the economy.

I should say, by the way, that we invited Mr. Norquist on the show tonight
to explain why his pledge will hold, but he declined.

So joining me now are two folks who have long experienced watching the
pledge distort American politics and scotch many a budget deal. Former
labor secretary and current Berkeley professor, Robert Reich, and, Neera
Tanden, a former director of policy for senator and presidential candidate,
Hillary Clinton, and now the president of the Center for American Progress
-- thank you both for joining me tonight.

NEERA TANDEN, CENTER FOR AMERICAN PROGRESS: Great to be with you.

ROBERT REICH, FORMER SECRETARY OF LABOR: Thank you, Ezra.

KLEIN: Robert, I want to begin with you. Does this feel different to you?
When you came in to Washington in 1993 with the Clinton administration,
pretty much the first thing you guys did was propose a budget to reduce the
deficit and it included a lot of tax increases and you didn`t get one
Republican vote because of them.

So, do you think Republicans are actually cracking now? Do you feel
something different in the air?

REICH: Look, undoubtedly something different is in the air. It`s called
an election victory for the Democrats.

But I will believe when I see it that Republicans actually beginning to
agree to a tax increase. Undoubtedly, Grover Norquist`s kind of pledge,
the idea that somehow these Republicans owe more of an allegiance to Grover
Norquist than they owe to the Constitution or the American people, that is
becoming difficult for a lot of Republicans to sustain.

The other point, Ezra, is that a lot of the power of that pledge came in
the idea in every Republican`s head that every other Republican was going
to abide to that same pledge.

Well, if Republicans are starting to say openly they are not going to abide
and they are not going to continue to pledge to Grover Norquist, well, then
there is a possibility that Norquist may disappear. I mean, like the
wicked witch of the west in the "Wizard of Oz", that just melts away. That
wicked, you wicked little girl. That could be Grover Norquist.

KLEIN: If you throw water on the pledge, it just kind of melts.

REICH: It may be melting before our eyes, but I`m just not sure yet.

KLEIN: Neera, when I talk to people in these negotiations now what they
say is actually in a way taxes are -- there`s more agreement there than
people thought. But now what it`s becoming about what will be the spending
side, what will Republicans get to assure them they are going to get a deal
in the end, too, that they like. What Republicans seem to really want is
what they would call reform or spending cuts on the Medicare side, and you
guys, your think tank released a report on how to do that while protecting
seniors.

So, if the Center for American Progress is saying you can cut Medicare and
Republicans say they want to do it, is there kind of common ground you
think that can be reached here?

TANDEN: Well, I hope so. You know in the distant past, it was Republicans
who were talking about ways to strengthen Medicare by ensuring we are
lowering health care costs. And really, what got proposed last week was
$385 billion in additional savings in Medicare. But importantly, our
proposals protect middle income and low income beneficiaries.

And in the past, the Grover Norquist pledge has required that Republicans
really go after beneficiaries, both for Medicare and Social Security. And
so, we`re saying, you can -- you can have a good deficit reduction plan
that has savings in Medicare, but it`s important that we protect those who
are vulnerable in the middle class, seniors, those on Medicaid and we can
do that.

And one thing I would say about the pledge, you know there`s a lot of talk
about the politics and Republicans moving, et cetera. You know the issue
here is not politics when we`re together. Americans support this idea of
basic fairness. So when Republicans break from the pledge, what they are
doing is really just standing up with those people in their districts that
support these ideas.

And Grover Norquist makes a lot of noise about how for 20 years,
Republicans have stood with that pledge. But I would just remind him and
others who support this pledge that Republicans have not received,
Republican presidential candidates have not received a majority of the
American public in five of the last six elections.

So I think if the Republican Party wants to break out of the ideological
stranglehold, look like it`s standing up for America, they`ll come to the
table with the president and that`s what`s happening.

KLEIN: All right. And one thing that I do think -- I don`t know if
Norquist deserves credit or Republicans, but I`m actually kind of struck,
Robert, when I step back and look at where the tax debate is today. Both
Democrats and Republicans agree that we should keep 80 percent of the Bush
tax rates or Bush tax cuts, I`m sorry. It`s just the top percent at the
top 4 percent that should change.

In that way, even Democrats today are in some ways closer to the Bush
consensus on taxes than they are to the Clinton consensus on taxes.

So do you think this conversation has moved to the right? Or were those
rates too high for this moment when the middle class is struggling?

REICH: You know Ezra, I wouldn`t say that a consensus to reduce taxes on
the middle class and increase taxes on the rich is a move to the right. I
think it`s actually a move to the left.

What people are becoming more sensitive to is inequality of income and
wealth and opportunity and power in this country is wider than it has been
in about 85 to 100 years. And therefore, it`s appropriate and necessary to
raise taxes on the rich and reduce the tax burden on the middle class and
the poor. Social Security taxes are above what they were 20 years ago in
terms of the proportion of their income that people pay on them. Sales
taxes are up. Most Americans, middle class Americans, are paying more in
taxes than ever before. At the same time wealthy Americans are paying less
than ever before.

So, this is an appropriate move.

KLEIN: We are going to be talking more about Social Security taxes and
also Goldman Sachs later on the program. You want to -- you`ll enjoy that,
Robert.

But Neera, you know the Hill better than I. You know it better than most
people do. Do you think they get this done by the end of the year? I
mean, are you feeling optimistic, or do you think there are sticking points
or trip wires here that we`re not seeing?

TANDEN: You know I -- this is the most optimistic I have ever been. And
you know that`s not saying a lot sometimes because this whole debate around
the budget has been like losing the football for awhile. But I actually
think that you`re seeing Republicans moving in a way that they obviously
didn`t do during the last debt deal, and you`re seeing I think and
understanding -- what I think is really important is there are a lot of
people like Bill Kristol coming forward, Bobby Jindal, governors are trying
to make a play here, I think. Also, they represent whole states as well.

So I think you`re seeing a kind of break in this impasse or breaking the
fever that we haven`t seen in the past. And, you know as you said, there`s
reasonable common ground to make in entitlements and Medicare, ways we can
protect seniors. And we have done over a trillion dollars in domestic
discretionary spending.

So, if they come together on taxes, really, it`s very doable. And I think
that`s a very important point for the American people.

REICH: I don`t want to rain on this lovely parade that we have here, but
let me say one thing that worries me. Democrats have an almost inherent
love of compromise. Republicans have shown themselves absolutely adverse
to something called compromise.

So even if Grover Norquist is not quite as powerful as he was before, even
if the winds of change seem to be drifting in our direction, let`s not
assume that Democrats are automatically going to have the backbone they
need.

KLEIN: Right. As I said, it`s always Washington. It can always change.

TANDEN: Yes, and --

KLEIN: But we`re have to leave it there for tonight.

Robert Reich and Neera Tanden, thank you both so much for joining me and
we`ll be back to talk more about it soon.

REICH: Thanks.

KLEIN: Coming up, what the Twinkie and Papa John`s Pizza have to do with
the Affordable Care Act.

How Chris Christie is outsmarting much of the Republican Party.

And what the CEO of Goldman Sachs thinks American workers ought to be doing
and why he`s a bit wrong.

(COMMERCIAL BREAK)

KLEIN: It is time to bid farewell to one of the most very, very, very
crazy of a very crazy House Republican majority. THE LAST WORD tonight
will belong to Allen West. That`s coming up.

And as the businesses claimed, the Affordable Care Act is unaffordable for
them. They have no idea just how good they have it. That is next.

(COMMERCIAL BREAK)

KLEIN: America is in mourning tonight. People have taken to Tumblr, to
blog and to reblog memories and stories and photos of the Twinkie.

No disrespect to Ho-Hos or Ding Dongs and especially not Hos, because I
love them. But the Twinkie is the prize product in the Hostess cornucopia.
The Twinkie with its complicated mix of vanilla and cake and weird shelf
life, which is just about a month, not 25 years. That is an insidious
myth.

Twinkies which retail at 10 for $5 which have had their star turns on
television.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: What do we have? Hostess Twinkies. Yes, sir, I know
the folks will surely love these.

(END VIDEO CLIP)

KLEIN: Twinkies, which are made by Hostess Brands Inc., which tonight
announced that mediation talks with the bakers` union have failed and it is
filing for bankruptcy.

You and I might look at that news and think, oh no, no more Twinkies, but
Paul Krugman, because he is smarter than we are, sees the end of a broader
economic era. An era he calls the Twinkie era -- a time when corporations
did well and so did the people who worked for them.

That was the time the post-war baby boom years when median family income
doubled, which gave mom and dad more money to buy Twinkies, yes, but also
televisions and new cars and all the other goods of consumer economy.
Taxes were higher in that period both on the rich and corporations, and
labor unions were like the bakers` union, were much, much stronger.

And yet in the Twinkie era, corporations still managed to be profitable.
The U.S. economy expanded more than at any other time in history. But
something happened because corporations are still doing really, really,
really well. But the people that work for them, not so much.

Corporate profits measured as a percentage of the U.S. economy have
recently hit record highs. But compensation for workers has hit record
lows.

Take a look at this chart comparing corporate profits and compensation over
the last decade. Corporate profits as a percentage of the economy has
surged to literally record levels. Meanwhile, compensation, which is to
say what workers actually get, has declined.

And these are partially the same trend. Corporations unchecked by unions
were able to threaten to go overseas. They cut costs by giving less and
less to their workers and they keep more and more of their revenue as
profit.

In fact, economist Jared Bernstein who created that chart got it looked
like a dragon, what he calls the dragon of inequality.

So how do fix that? How do you slay the dragon of inequality and also low
worker compensation? The Twinkie era is not coming back. And neither are
the Twinkie era unions or the Twinkie era tax rates.

But here`s what is coming: the Affordable Care Act. Explaining what the
Affordable Care Act has to do requires moving from Twinkies, all the way to
pizza. And yes, I recognize there`s some irony in anchoring a segment
about health care reform entirely talking in junk food, but we`re going to
do it any way.

You might have heard that Papa John`s, makers of very cheap, not that good
pizza, have been complaining that the Affordable Care Act might add 11 to
14 cents to the cost of their pies. That is because the Affordable Care
Act asks something of big employers like Papa John`s if they don`t pay
their employees good wages or give them good benefits. If their workers end
up needing to use public subsidies, taxpayer money, to afford health care,
then Papa John`s needs to pitch in too or to the tune of about $2,000 per
employee over the number of 30 or an eighth of the cost of the health care
plan.

That is not such a bad deal for Papa John`s, historically speaking.
Richard Nixon`s health care plan which he proposed back during that Twinkie
era would have forced him to pay 75 percent of the cost. Bill Clinton`s
plan would have asked them to pay as much 80 percent. But it still gives
CEO of Papa John`s every reason to hate the Affordable Care Act. No
corporation likes being told by the government to increase its labor cost.

But you know who it helps? Businesses that have taken another approach to
profit, the ones that have sought success by giving them reasonable
benefits and delivering a higher-quality product. Under the Affordable
Care Act, the business that`s trying to juice profits by skipping on worker
pay and benefits will now have to pitch in a bit more. That means they
take less in profits or they have to raise prices.

Either way, that means their competitors, the ones paying more for benefits
and get a bit more of an advantage in the marketplace. The high road
strategy suddenly becomes more profitable. And as for those workers --
well, they are not going to be able to get health insurance either from
their employer or from the government. That doesn`t bring us back to the
Twinkie era or even anything close, but it does, perhaps, mark the end of
the Papa John`s era.

Joining me now is venture capitalist Nick Hanauer of the Second Avenue
Partners. He`s also the author of "Gardens of Democracy."

Nick, it`s good to see you.

NICK HANAUER, VENTURE CAPITALIST: How are you, Ezra?

KLEIN: I`m good. I want to put up that dragon chart again. That one that
shows corporate profits versus compensation as a chair of GDP.

Nick, as a venture capitalist, somebody who has been involved in growing
companies and making them profitable, when you look at that, how do you
understand the trends on that chart?

HANAUER: You know my view is that the Papa John`s complaint, the chart,
the way in which our economy is structured to, you know increase inequality
in this crazy way represents a death spiral of falling demand, when all of
the money in a society is accumulated in the hands of a tiny minority of
people, what happens is that most people can no longer afford to buy the
products of the people at the tippy top who generally own the companies
making the stuff.

And the reason why our economy is in such tough shape, the reason the
recovery has been so slow is that we have created this crazy spiral of
increasing inequality. And that`s what`s reflected in that chart.

And, you know the Papa John`s complaint is the classic trickle down
complaint and the trickle down idea takes two forms. It is -- if the rich
gets richer, the economy will be better off and also -- it`s never stated
like this, but it`s equally true -- that if the poor get richer, the
economy will be worse off. And, of course, nothing could be farther from
the truth.

You know trickle down guys have been making this claim for generations. It
was the claim they made when child labor laws were put into effect, when
basic worker safety rules were put into effect, when women started being
paid fairly. All of -- you know frankly, slavery, you know the idea if we
pay workers fairly, the whole world would come crashing down would prove
not to be true. In fact, not only do we make people`s lives better when we
help them in this way, but we animate a virtuous cycle of increasing
returns for everyone in a capitalist economy, because in the capitalist
economy, to job creators, the source of prosperity is the purchasing power
of the middle class.

KLEIN: Nick, one thing on that cycle that you`re talking about, because I
think you see this in the economy and the kind of strategies we`re talking
about. When you howl out the middle class, when they lose their purchasing
power, when I have trouble buying cars and going out to eat and other
things like that, you then get these retailers. Some of then are dining,
some of them are consumer goods, but they need to offer goods that are
cheap enough for these consumers who are now more strapped to buy, so they
begin squeezing costs on their supply chain, they begin squeezing their
producers, they begin paying their workers less and less.

And then you go to them and you try to lift the middle a little bit and
they say you`re destroying the business model here. I mean, I`m quite
sympathetic to what Papa John`s is saying, it just seems to me that at the
same time, and this goes to the point of your book as well, that at some
point, you need to break the cycle, because an endless cycle in which you
have retailers like Walmart or diners like Papa John`s who are squeezing
their employees in order to make goods cheap enough for those folks to buy
down the road, in a long run, that doesn`t get you prosperity. It doesn`t
build an economy more people can benefit from.

HANAUER: No. Look, not to get all wonky on you, but, you know --

KLEIN: I wouldn`t mind if you take --

HANAUER: -- human social systems like -- human social systems like
economies are complex, adoptive and ecosystemic. And these systems are
characterized by positive feedback loops that take two forms and only two
forms. You either have virtuous cycles where things get better or death
spirals where things get worse, races to the bottom.

And this ridiculous idea that if we just keep squeezing workers at the
bottom, that somehow we`ll get more prosperous is obviously categorically
untrue.

If there was a shred of truth of any of these arguments, given how rich the
rich have gotten, for instance, given how profitable corporations have
become over the last 10 years, we would be drowning in jobs and prosperity.
It`s the opposite of true.

The way you animate prosperity in a capitalist economy is by raising the
bottom, and using the surpluses.

KLEIN: Yes. Nick Hanauer, we`ll have to leave it there. Thank you very
much for joining me tonight. And enjoy and hopefully we`ll be able to
raise that bottom.

HANAUER: Yes.

KLEIN: Coming up, New Jersey Governor Chris Christie isn`t getting any
love from his own party.

And later, one person we shouldn`t be listening to when it comes to when
workers should be able to retire, the CEO of Goldman Sachs. I will explain
why.

(COMMERCIAL BREAK)

KLEIN: Today is a big day. We finally know who will represent Florida`s
18th congressional district -- and it will not be Allen West. What made
him finally concede and what it means for the Tea Party in the house is
coming up.

And Republicans, you might remember this. They used to love Chris Christie
but now they are really, really mad at him and somehow Rupert Murdoch has
got himself involved. Joy Reid joins me on that topic next.

(COMMERCIAL BREAK)

KLEIN: In the spotlight tonight, Governor Chris Christie is outsmarting
the Republican Party. "The New York Times" reveals today that Republicans
of all types are mad at Governor Christie for embracing President Obama
during the Hurricane Sandy relief effort.

FOX News chief Rupert Murdoch spoke to Christie on the phone three days
before the election. According to the people briefed on the discussion,
Mr. Murdoch was blunt. Mr. Christie risked, quote, "looking like a spoiler
unless he publicly affirmed his support for Mitt Romney."

Republicans who attended the Republican Governors Association annual
meeting last week, they were mad at Christie too. "I will not apologize
for doing my job," Christie emphatically told one of them in a hotel
hallway at the ornate Wynn Resort.

And Republican donors, you guessed it, also mad at Christie. A top Romney
aid described the contributors as, quote, "furious" with Mr. Christie. But
Chris Christie knows exactly what he is doing.

Does the name George Allen ring a bell? Once upon a time and not all that
long ago, he was going to be president. Virginia`s George Allen. He was
the son of a Hall of Fame NFL coach and, after serving as class president
at the University of Virginia, Allen served in the Virginia House of
Delegates as a United States Congressman, as Virginia governor and as
United States Senator.

In December of 2005, the Senator Allen prepared for his `06 re-election
race. "The National Journal Insiders" poll asked 100 Republican
politicians and consultants, who had the best chance of winning the party`s
nomination in 2008?" The insiders, these high informed people, picked
Allen as number one. Number one.

At the time, the conservative "National Review" online said of the former
football player, quote, "Allen knows the perils of looking upfield before
catching the ball and a lackluster win in the Senate race rather than an
impressive one will raise eyebrows."

George Allen did not have an impressive win or a lackluster win. George
Allen did not win at all. He lost. He lost because he said some kind of
dumb, kind of racist things. You might remember "Macaca". But he also
lost because Virginia became increasingly Democratic. In `04, Bush won the
state by eight points. In `08, Obama won the state by six.

George Allen went on to lose his 2012 Senate race even worse than his `06
race. And now no one talks about George Allen for president, because it
turns out that`s what`s really bad for your presidential prospects is
losing your own re-election campaign.

And that brings us back to Governor Christie. The Republican Party loved
Governor Christie. After watching him slash spending and batter (ph)
unions and humiliate public sector employees on YouTube, they begged him to
enter the race.

Mitt Romney chose him to deliver the keynote address at the Republican
National Convention. The only problem for Governor Christie`s rise to the
presidential nomination is that he is the governor of a very blue state,
much more so than Virginia, and his re-election in 2014 is not by any means
a sure thing.

As of October, his approval rating was a healthy 56 percent, but in a
potential head to head matchup for the governorship, Christie polls at 46
percent and the popular Democratic mayor of Newark, Cory Booker, polls at
42 percent. If Governor Christie wants to be President of the United
States, he can`t pull a George Allen and lose his race for re-election.
He`s got to win a state that just voted for President Obama by a 17-point
margin.

And so here is what Chris Christie knows. Before he gets Republicans to
love him, he needs a lot of voters in New Jersey to love him even more.
And if his recent embrace of Obama didn`t win him any friends on the right,
it is winning him quite a few friends in the northeast. According to
Quinnipiac University poll released on Tuesday, New York City voters gave
Christie higher marks than they give Mayor Bloomberg or very, very popular
Governor Cuomo for handling the storm. A full 89 percent approved of his
performance.

If Christie can get re-elected with big numbers and he can be popular
enough to possibly even put blue states like New Jersey in play, then the
Republican Party, which is increasingly terrified by its inability to speak
to voters beyond its own conservative base, they will be begging Christie
to run. Begging. If he wins, and he wins big, they are not going to be
mad of him for long.

Joining me now is MSNBC`s Joy Reid. How are you, Joy?

JOY-ANN REID, MSNBC POLITICAL ANALYST: I`m doing well, Ezra. How are you?

KLEIN: I`m good. So, much as I think they will one day come to forgive
Chris Christie, watch how Governor Christie`s recent visit to "Saturday
Night Live" played with Eric Bolling of Fox News`s of "The Five."

(BEGIN VIDEO CLIP)

ERIC BOLLING, FOX NEWS ANCHOR, "THE FIVE": Let`s look at the Republican
acting like a Democrat, Governor Chris Christie, slobbering a wet kiss on
Obama`s cheek with just days until the election. Had a shaking your
collective head, then this curious appearance on "Saturday Night Live"
while Jersey still suffers from power outages, destroyed homes and massive
job losses.

(END VIDEO CLIP)

KLEIN: "Slobbering wet kiss." Joy, do you think I`m underestimating this?
Will this riff take longer to heal?

REID: I think it will take longer to heal. I mean, I think your theory is
sound so far as it goes as in terms of getting re-elected in New Jersey. I
think Chris Christie did the right thing when it comes to remaining
Governor of New Jersey.

But I think that the idea that he can be forgiven enough by the base to run
for president in 2016 presumes that Republicans are going to basically do a
punch-the-base strategy. Because, look, the part of the party that`s about
winning elections, the sort of wing that`s the political wing, the hack
wing if you want to be cruel about it, definitely is going to look to Chris
Christie as a good solid candidate because he`s a guy in a blue state.

However, they still got to contend with the Joe the Plumber part of the
base who right now despises Chris Christie, despises the fact that he
eventually pulled a Charlie Crist. Remember why Charlie Crist got kicked
out essentially of the Republican Party in Florida - was for hugging Barack
Obama.

So that presumes that the hack wing of the party can compel the Joe the
Plumber wing of the party to accept yet another northeastern blue state
governor as their nominee.

KLEIN: But here`s the thing. I think one of my rules in Republican
presidential politics, and it doesn`t hold for their Senate primary
campaigns, their congressional primary campaigns, is that the hack wing
always wins.

In 2000, George W. Bush got in. He was popular to some degree among the
base, but he was really coming out of -- he was the son of a quite
unpopular among the base former president. He was saying he would be a
more compassionate conservative. In 2008, they gave it to John McCain, the
guy who had basically spit in their face for at least four years after the
2000 election. And then in 2012, they give it to Mitt Romney, the guy who
did Obama - who did Romneycare, the predecessor to Obamacare.

And so what I have been thinking about Christie is that he is kind of just
a bit ahead of the curve in trying to step past Mitt Romney to make inroads
with the less conservative electorate. The other guy trying this punch-
the-base strategy is Bobby Jindal.

REID: Right.

KLEIN: And he`s just been hammering Romney. And I have to point out
Christie`s reaction to Jindal`s comments on "Morning Joe." Take a listen
to this.

(BEGIN VIDEO CLIP)

JOE SCARBOROUGH, MSNBC HOST, "MORNING JOE": You`re seen as a leader. Do
you agree with Bobby Jindal? It was a terrible thing to say and said
terribly?

GOV. CHRIS CHRISTIE (R), NEW JERSEY: Yes, sure. You can`t expect to be
the leader of all the people and be divisive. You have to talk about
themes, policies that unite people.

(END VIDEO CLIP)

KLEIN: So, I thought we`re seeing two camps emerge here. We are seeing
the folks kind of like Mario Rubio who is trying to say that we just need a
better candidate and appeal to base still. You`re seeing sort of the
Jindal/Christie theory of 2016 in which they actually try to move beyond
the base a bit or at least seem like they are moving beyond the base in
order to talk to new voters. Do you think that`s about right?

REID: And I think you can add Jeb Bush to that camp as well. I think
there is sort of the grown up wing of the party. I`m sorry, my head is
spinning a little bit from Chris Christie, Mr. Punch-A-Teacher, saying we
have to be less divisive. Sorry, my head was just a little spinning from
that.

But beside the fact that he`s very divisive when it comes to union issues,
yes, I think that that wing of the party and you can call the
Jindal/Christie/Jeb Bush wing -- they understand they are going to do to
have base expansion. But in order for them to get the nomination, they`re
still going to do what both John McCain and Mitt Romney had to do, which
was during the primary, they are going to have to go hard right. Because,
look, the evangelicals are still there and the Tea Party wing is still
going to be there and they`re mad, and they`re mad at Chris Christie.

KLEIN: Joy Reid, thank you for joining me tonight, very much.

REID: Thank you.

KLEIN: Coming up, Goldman Sachs CEO Llyod Blankfein says the answer to our
economic woes is you just need to work longer. That is ahead.

And, what the end of Elmo`s career in the house means for the rest of the
Tea Party? That`s also coming up.

(COMMERCIAL BREAK)

KLEIN: Is the CEO of Goldman Sachs really the guy you want to listen to
about raising the retirement age? My take on the solution that everyone
needs to work longer, that`s coming up.

And later we bid farewell to Florida`s Tea Party favorite Allen West. He
finally, finally conceded and cable news will never be the same.

(COMMERCIAL BREAK)

KLEIN: Look, if you`re the CEO of Goldman Sachs, if you have a fun job
that you love, a job that makes you so much money you can literally build a
Scrooge McDuck room where you swim through a pile of gold wearing only a
top coat, a job that makes you so much money that only the tiniest fraction
of it is taxed to keep Social Security solvent, then you really shouldn`t
be saying this.

(BEGIN VIDEO CLIP)

LLYOD BLANKFEIN, CEO, GOLDMAN SACHS: Look at the history of these things.
And Social Security wasn`t devised to be a system that supported you for a
30-year retirement after a 25-year career. So there will be certain things
that, you know, the retirement age has to be changed. Maybe some of the
benefits have to be affecting maybe some of the inflation adjustments have
to be revised. But in general entitlements have to be slowed down and
contained.

(END VIDEO CLIP)

KLEIN: That is Llyod Blankfein, the CEO of Goldman Sachs, talking to CBS
and he`s not saying anything that people, particularly richer people with
desk jobs, don`t say all the time in Washington and in New York. But it`s
got to stop.

If you want to talk about cutting Social Security, just talk about cutting
it. It`s a reasonable point of view. You`re allowed to say it aloud, be
straightforward. What makes me disgusted, though, is the cavalierness with
which people who get paid a lot of money and who love their jobs, people
you`ll have to take out of the office on a stretcher when they`re 90, the
cavalierness with which they talk about raising the retirement age.

What Blankfein was saying there isn`t Social Security wasn`t designed for
all these old people who live a long time. And to some degree, who cares?
The country`s economy has grown 15-fold since Social Security was passed
into law. And one of the things we can buy with that money is a decent
retirement for people who don`t have jobs they love and who don`t want to
work forever. That`s a gift of a rich society.

Moreover, this idea that we`ve all gained so many years, it`s not true. Or
at least is not nearly as true for poor folks who heavily rely on Social
Security as for rich folks, you don`t need it that much.

As you can see on this graph, since 1977, the life expectancy of male
workers retiring at age 65 has risen a full six years if they are in the
top half of the income distribution. If they are not, if they`re in the
bottom half, it`s only risen 1.3 years.

So yes, if you`re wealthy, you have many, many years to enjoy Social
Security. But if you`re not, you don`t. And so making it so people who
aren`t wealthy have to wait longer to use Social Security is a particularly
cruel way to cut the program. And it`s not just a cut that is particularly
tough on people who die young, it is a cut that this particularly on people
spend their lives in jobs that don`t enjoy.

You know what age most people actually begin taking Social Security? Sixty
five is what most people think, but they are wrong. If you wait until age
70, you get bigger benefits, but almost no one does that. So it is not the
right answer either.

Most people begin taking Social Security at age 62. That is as early as
the law allows you to take your benefits. And when you do that, you get
smaller benefits over your lifetime. We penalize you for taking your
benefits early. But most people do it any way and they do it because they
don`t want to spend their whole lives at that job.

Unlike many folks in finance or in the U.S. Senate, write for the nation`s
op-ed pages or who blog and do television shows sometimes, they don`t want
to work until they drop. And that`s what galls me about this easy
argument. The people who make it, the pundits and the Senators and CEOs,
they will never feel it. They don`t want to retire at age 65 or age 67 or
even usually 70. But you know what they would feel and what they don`t
tend to advocate for quite is allowedly, Social Security taxes don`t apply
to income over $110,000 a year.

In 2011, Lloyd Blankfein`s total compensation, not all that was income to
compensation, was $16.1 million. That means he paid Social Security taxes
on less than one percent of his compensation. If we lifted that cap, if we
made all income all the way up to $16 million subject to payroll taxes and
the congressional budget office estimates that it would do three times as
much to sell Social Security shortfall as raising retirement age to 70. In
fact, that one move lifting the payroll tax cut, would all at once assure
the program`s solvency for the next 75 years.

I don`t need to pick on Blankfein here. He`s one of the CEOs who is pretty
straight forward about the fact that his taxes are going to need go up.
But he, and all these folks who let the talk about raising the Social
Security retirement age as if it`s a completely no brainer, they need to
think harder about why they have settled on the single cut to Social
Security that will concentrate its pain on people who are poor, who haven`t
fully shared in remarkable increase in life expectancy and who really don`t
like going to their jobs every day.

Why are they, the people, who should sacrifice the most on Social Security?

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

REP. ALLEN WEST, (R) FLORIDA: It that means I`m the number one target for
the democrat party, all I got to say is one thing. Bring it on, baby.

(END VIDEO CLIP)

KLEIN: It`s been roughen. Today, Republican Congressman Allen West
conceded defeat.

(BEGIN VIDEO CLIP)

WEST: I went back and tried to do an analysis of some of the recount data
that we did get and we did not think that we would be able to get that 0.08
percent. And so, therefore, we`re not going to continue on to challenge
this or contest it.

(END VIDEO CLIP)

KLEIN: Thus ends, at least for now, the storied political career of Mr.
West. But before he goes, a salute to a man who that has done more for
cable news and perhaps any other living politician except maybe Sarah
Palin. Here, on THE LAST WORD, we will never be able to pay Mr. West back
fully, but hopefully this salute to some of his greatest hits will clear
the size of our debt.

(BEGIN VIDEO CLIP)

WEST: You must be well informed and well armed because this government
that we have right now is a radical government.

I believe there is about 78 to 81 members of the Democrat Party that are
members of the communist party.

I cannot change my color. People can change their sexual behavior. And I
have seen people do that. I like, you know chocolate chip ice cream. And
I will continue to like chocolate chip ice cream. There`s no word about me
changing to vanilla.

Give me that damn gavel.

Radical Islamic terrorism and they are here in our country. There are 36
training camps. There`s one in Northern Florida. There`s two in my home
state of Georgia. There is even tow eight outside Washington D.C. and for
those of you that take your summer vacations in New York, upstate of New
York there`s a place there.

Take your message of equality of achievement, take your message of economic
dependency, take your message of enslaving the entrepreneurial will and
spirit o the American people somewhere else. You can take it to Europe,
you can take it to the bottom of the sea, you can take it to the North
Pole, but the hell out of the United States of America.

(END VIDEO CLIP)

KLEIN: Joining me now on this very sad day is MSNBC contributor Dave
Weigel at Slate.com.

David, it is good to see you.

DAVID WEIGEL, MSNBC CONTRIBUTOR: Good to see you.

KLEIN: This is kind of -- it was kind of an amazing race. Because I
thought West ended up - he was a part of a particular kind of conservative
politics in which you raise a lot of money by being very extreme. And he
spent more money than any losing House candidate in history, outspent
Congressman Murphy now by about $14 million. So what went wrong? Why
didn`t it work?

WEIGEL: Seventeen million -- this is more than Bachmann, who ran for
president, and had that (INAUDIBLE). What people will tell you is that he
didn`t spend it that wisely. I mean, it seems obvious, but West was
combative. I think we could probably spool out more video to prove that
point.

He has an inspiring story to a certain type of voter. He grew up pretty
poor. His family served military. He went - he was first left in
military, was very contrite about why he did so. But he ran this scorch-
earth campaign against Patrick Murphy, this young Democrat who beat him.
He said he basically was a stand in. He had no real opponent. No one
could challenge him in intellectually. And they tried to demean him the
way he kind of demeaned everyone else who was his opponent in politics.
And it didn`t play. I mean, to his surprise, I think, to a lot of
Republicans surprise, that level of disrespect for your opponents at every
level just wasn`t in vogue this year.

KLEIN: What a funny thing. You know -- but you bring up Bachmann. So
Democrats speak several of the really vocal members of this kind of
politics. Michele Bachmann, who a couple of years ago, as a reasonable
presidential candidate, almost lost. Joe Walsh actually did lose. Is this
the kind of new incentive in Republican Party? I mean, do you think some
folks who thought this might be a good way to go are going to rethink that
or will they consider it just sort of a function of the unique
circumstances of 2012?

WEIGEL: It`s almost new. I was talking to some Ohio Republicans because
Josh Mandel, who was another rising star, Marine veteran, lost to Senate
race to Sherrod Brown, that two years ago they wouldn`t have thought he was
going to lose. And same complaint there. He raised a lot of money, $40
million in outside spending. Everything added up, $3 million to get
Sherrod Brown by attacking him constantly. And it failed there.

I mean, Steven LoToureete, the Republican who is retiring, who won the sort
of areas that Mendel lost, said, "Who was advising him?" There was just a
sort of fog of advice around all Republicans, the more intense you could
be, the more extreme you could be, more Palin-like you could be, you could
win.

KLEIN: Dave Weigel, thank you very much. You get tonight`s LAST WORD.

WEIGEL: Thank you.

KLEIN: I`m Ezra Klein in for Lawrence O`Donnell. You can read my work
online at "The Washington Post of wonkblog.com.

"THE ED SHOW" is up next.

END

END

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