updated 12/6/2012 1:20:36 PM ET 2012-12-06T18:20:36

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

Guests: Howard Dean, E.J. Dionne, Richard Wolffe, Ari Melber

LAWRENCE O`DONNELL, HOST: We don`t know what John Boehner said to the
president on the phone today, but we do know that Boehner is finally
admitting defeat on one thing. The rich will have to pay more.

(BEGIN VIDEOTAPE)

UNIDENTIFIED MALE: The next 72 hours are critical.

UNIDENTIFIED MALE: Will Republicans cry uncle?

UNIDENTIFIED MALE: Both sides are still locked in a stalemate.

TAMRON HALL, MSNBC ANCHOR: There`s plenty of hot rhetoric to go
around.

ALEX WAGNER, MSNBC ANCHOR: Both sides are coming out swinging.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: Raising tax rates
will hurt the economy.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: I will not play that
game.

CHRIS JANSING, MSNBC ANCHOR: President Obama standing his ground.

OBAMA: I will not play that game.

UNIDENTIFIED MALE: He`s not willing to play that game.

WAGNER: Playing the smackdown.

UNIDENTIFIED MALE: I think the president has boxed the Republicans
in.

SEN. TOM COBURN (R), OKLAHOMA: I know we have it to raise revenue.

JANSING: Is he the only Republican?

COBURN: I don`t really care which way we do this.

BOEHNER: Raising tax rates hurt the economy.

JON STEWART, COMEDIAN: Let`s just go over the (EXPLETIVE DELETED)
cliff.

SEN. CLAIRE MCCASKILL (D), MISSOURI: If they do not make this deal on
tax rates for the top 2 percent --

UNIDENTIFIED MALE: They just have to wait Republicans out on this.

MCCASKILL: -- then they`re going away.

UNIDENTIFIED FEMALE: I just hope this doesn`t become a game of
chicken.

OBAMA: I will not play that game.

UNIDENTIFIED FEMALE: It goes into February and March.

UNIDENTIFIED MALE: Public opinion is on their side.

UNIDENTIFIED FEMALE: When we have to raise the debt ceiling.

ANDREA MITCHELL, MSNBC ANCHOR: The debt ceiling game.

OBAMA: I will not play that game.

UNIDENTIFIED MALE: This is all about gaining maximum leverage.

HALL: We`ve gone through this before.

JANSING: Some Republicans think that could give them more leverage.

UNIDENTIFIED FEMALE: Is the U.S. going to default?

UNIDENTIFIED MALE: He`s not willing to play that game.

OBAMA: I will not play that game.

UNIDENTIFIED FEMALE: It`s government at the brink all the time.

UNIDENTIFIED MALE: These guys are not serious about negotiating.

UNIDENTIFIED MALE: The next 72 hours are critical.

SEN. LINDSEY GRAHAM (R), SOUTH CAROLINA: I think we`re going over the
cliff.

STEWART: Let`s just go over the (EXPLETIVE DELETED) cliff.

UNIDENTIFIED FEMALE: Let`s go over the cliff.

STEWART: At least for a few seconds, it will feel like we`re flying.

(END VIDEOTAPE)

O`DONNELL: With 26 days to go until America goes off the fiscal curb,
the House of Representatives chose to end their congressional business for
the week today to enjoy a long weekend at home. But John Boehner stayed
behind and spoke by phone this afternoon to President Obama. It was their
first conversation in a week.

Also, this afternoon, Treasury Secretary Tim Geithner said this on
CNBC.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: When it comes to raising taxes on the wealthy,
those making more than $250,000 -- if Republicans do not agree to that, is
the administration prepared to go over the fiscal cliff?

TIMOTHY GEITHNER, TREASURY SECRETARY: Absolutely. Again, there`s no
prospect to an agreement that doesn`t involve those rates going up on the
top 2 percent of the wealthy.

(END VIDEO CLIP)

O`DONNELL: "The New York Times" reports today that senior Republican
leadership aides are contemplating a fall-back position on a fiscal deal.
They could foresee taking up and passing legislation this month to extend
the tax cuts for the middle class and then resume the bitter fight over
spending and taxes as the nation approaches the next hard deadline. It`s
statutory borrowing limit which could be reached in late January or
February.

Speaking to a Business Roundtable, President Obama responded to that
idea this way.

(BEGIN VIDEO CLIP)

OBAMA: If Congress in any way suggests that they`re going to tie
negotiations to debt ceiling votes and take us to the brink of default once
again, as part of a budget negotiation, which, by the way, we have never
done in our history until we did this it last year -- I will not play that
game.

(END VIDEO CLIP)

O`DONNELL: John Boehner and House Republican leadership met with
small business owners today to talk about the fiscal cliff, raising tax
rates on the richest Americans, for them is still off the table.

(BEGIN VIDEO CLIP)

BOEHNER: The revenues we`re putting on the table are going to come
from, guess who? The rich. There are ways to limit deductions, close
loopholes, and have the same people pay more of their money to the federal
government without raising tax rates, which we believe will harm our
economy.

If the president doesn`t agree with our proposal and our outline, I
think he`s got an obligation to send one to the Congress, a plan that can
pass both chambers of Congress.

(END VIDEO CLIP)

O`DONNELL: Joining me now is former Vermont governor and DNC
chairman, Howard Dean, and MSNBC`s Krystal Ball.

Governor Dean, our treasury secretary is a very careful speaker. When
asked if they`re prepared to go off the cliff, his first word was
absolutely.

HOWARD DEAN, FORMER DNC CHAIRMAN: Yes.

O`DONNELL: There was nothing, nothing could be more clear that this
administration means what they say about getting what they want at this
point.

DEAN: Yes. The only problem is -- this is a little initially going
to team like heresy from the progressive is, the truth is everybody needs
to pay more taxes, not just the rich. That`s a good start. But we`re not
going to get out of this deficit problem, we must raise taxes across the
board, to go back to what Bill Clinton had in his taxes.

If we don`t do that, the problem is pressure is on spending even more.
I think we need to make the defense cuts. We want to minimize human
services cuts. The best way to do that is go back to Clinton era taxes.

So, you know, I actually have mixed feelings about striking a deal
where the rich folks pay more taxes. I think the rich folks, of course,
should pay more taxes. But I actually think going off cliff is a better
solution to what the nation`s ails than it is just charging people who make
a lot of money, what they were paying when Bill Clinton was president.

O`DONNELL: Krystal, the Clinton tax rates worked well, and when you
look at where we really are today, although the Democrats are playing
really tough on these top tax rates, they have conceded about 75 percent of
the tax debate to Republicans by agreeing with them on all of the other
rates.

KRYSTAL BALL, "THE CYCLE" CO-HOST: That is true, although there is a
matter of timing. You know, I think part of what you have to look at here
is it`s really Republicans who force this conversation about having deficit
reduction right now. We shouldn`t have deficit reduction right now. We
should be focused on jobs and employment and continued stimulus for the
economy, which I was really happy about the president at least had some of
that in his plan.

So, then you ask yourself, OK, what could you do in terms of reducing
the deficit that would be the least damaging, and what economists say and
what makes common sense is that people who are at the top end of the income
scale, who can afford to pay a little more, that`s the place where we can
raise the rates now and not have a major economic impact.

So I take the governor`s point, and I agree with it. You know, we
probably are going to -- if we`re going to continue to make the promises
and keep the promises that I think are so important and that most
progressives do, we probably will have to raise taxes on a lot of people.
But it`s a question of timing of when to make those choices.

O`DONNELL: Rush Limbaugh showed us today how difficult it is for John
Boehner and Eric Cantor to be making the moves they`ve already made. Let`s
listen to what Rush said.

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST: What we got today was a seminar
on how to surrender.

Obama is going to get what he wants. We`re using his language. We`re
now calling new taxes revenues. We have accepted the premise that new
revenues will result in greater tax receipts going forward.

They must feel so squished, so defeated, so universally disliked.

(END VIDEO CLIP)

O`DONNELL: Governor Dean, they`re still far apart, Democrats and
Republicans, but it`s worth pointing out with that kind of tape just how
far the Democrats have moved since the election to where we are today.
They`ve left that Rush Limbaugh thinking far behind.

DEAN: Well, it`s a good thing, because Rush Limbaugh is nowhere near
the mainstream of the American people.

But I`m also worried about the defense cuts. I think we really need
to make the cuts. We haven`t cut the defense budget much in the last 30
years. They just ordered new uniforms for their chauffeurs for the top
brass.

You know, this is going to be a lost opportunity if there`s too much
compromising going on here. So, I`m going to stick to my position we`d be
off as a country going over the cliff, the whole -- the curb really. It`s
a slope and not a cliff.

And doing this -- I take Krystal`s point as a good point, that you`ve
got to pick your time. The Europeans have gone too much with austerity and
they did it too soon. Bernanke has done a really good job in my view
supplying liquidity to the economy with this quantitative easing.

I think we can afford to do this, and we ought to make the down
payment. The cliff doesn`t fix the deficit, but it really does make a
downpayment and gets defense cuts for the first time. You know damn well
the defense is never going to get cut if they make a deal on this because
they`ll find a way to avoid that forever.

O`DONNELL: In "The New York Post" today, John Podhoretz, a
conservative columnist, wrote, "The truth is every way you look at it, the
GOP is trapped. Republican politicians will cave and give the president
most of what he wants. The only real question is when. The answer is
probably at the worst possible time when they`ve done even more damage to
the party`s brand."

It seems to me that from the Podhoretz perspective, he doesn`t
specify, the worst possible time will be after they drive the thing off the
cliff. If they`re going to do this, they should do it before Christmas and
go home.

BALL: Yes, I think you`re right. I mean, we`ve seen Tom Cole, we`ve
seen others starting to say, you know what, guys? Maybe we should go ahead
and go along with the Obama plan to extend the rates for the middle class
and deal with the rest after the New Year.

That probably is their best play at this point, because that`s such a
damaging political point. People understand that Republicans are holding
the middle class tax cuts hostage in order to fight for tax cuts for this
very small percent of the population, and that`s just politically
devastating.

But if you look at the position Boehner`s in, I mean, it is remarkable
in a way that he`s already admitted that we have to raise revenues on the
wealthiest individuals, and that hasn`t come without a price. You already
see on the right between that and his movements of some committee members
assignments that there is a mini rebellion starting on the right. The
#fireBoehner is taking off.

O`DONNELL: Yes.

BALL: This is something he has to watch, because the compromise is
not going to be his initial starting position, which is already
unacceptable to people like Jim DeMint and others.

O`DONNELL: Governor Dean, if you looked at this from the Republican
perspective and you go with Podhoretz presumption that they`re going to
cave on rates at some point. They`re going to go along with it. Would you
advise them politically the sooner the better? Get this off your doorstep?

DEAN: Yes, I think they really need to do that. They really hurt
themselves in the election. Had they not taken such extreme positions,
Mitt Romney might have done a lot better.

And so, you know, I think the president is in command here. They`re
not going to beat him on this one. All they`re going to do is make
themselves look bad.

So, I think they do -- and if I were them I would cave on -- I would
do exactly what Boehner is talking about. Here`s the other problem,
though, that nobody has talked about yet.

If Boehner is not going to get the 60 or 70 Tea Party people, so that
means he`s going to have to get some Democrats. I don`t think he can get
Democrats if they do something like try to raise the age of Medicare or
something like that, eligibility for Medicare. That is a no-go zone for
any reasonable, respectable Democrat.

So, this is not over. Even if Boehner caves, he can`t bring his
caucus with him. He`s going to have to deal with Nancy Pelosi one way or
another.

O`DONNELL: Howard Dean and Krystal Ball, thank you both for joining
me tonight.

BALL: Thanks, Lawrence.

DEAN: Thanks a lot.

O`DONNELL: Coming up, there is a sleeping giant in the tax policy
issues facing the president and Congress, and no one is talking about it
yet.

And another Republican is taking shots at Mitt Romney, and this time
of all people, it`s Paul Ryan.

And also coming up, marijuana, marriage, Hillary Clinton, seceding
from the union, and "Gangnam Style" are all in the "Rewrite".

(COMMERCIAL BREAK)

O`DONNELL: Republicans used to think that it was wrong for Americans
making a lot of money to pay no income tax. In fact, Republicans supported
a version of the Buffett Rule long before anyone heard of Warren Buffett.
That`s coming up.

And Washington is turning to "Gangnam Style" politics, and that`s in
the "Rewrite."

How did I do with that?

CLARE KIM, MSNBC DIGITAL PRODUCER: It was good. It was good.

O`DONNELL: Clare Kim, our -- what is your new fancy title here at the
show?

KIM: Digital producer.

O`DONNELL: Digital producer.

And the people are Americanizing this pronunciation, and it`s wrong.
What`s the wrong pronunciation?

KIM: Gangnam. You didn`t say it that way, which is good.

O`DONNELL: I said it the right way?

KIM: You said it the right way.

O`DONNELL: I have to say it a few more times. Stand by. We`ll have
to do more of this in the show.

KIM: OK.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: The fascination with taxes I
paid I find to be very small-minded compared to the broad issues that we
face, but I did go back and look at my taxes. Over the past 10 years, I
never paid less than 13 percent. I think the most recent year is 13.6
percent or something like that.

(END VIDEO CLIP)

O`DONNELL: Thirteen percent. You know who would hate that? You know
who would hate that Mitt Romney paid only 13 percent in income taxes?

The guy who beat Mitt Romney`s father in the campaign for president in
1968, right wing reactionary Richard Nixon.

That`s right. Republican Richard Nixon who was as conservative as
Republicans got in those days hated the idea that rich people got away with
paying little or no income taxes. So, he introduced a bill that would
create a minimum tax that rich people would have to pay even if they had
the giant package of deductions and loopholes like Romney that got their
tax liability down to zero. They had to pay something.

The Nixon idea was there`s a basic minimum to pay no matter what their
deductions say. The idea was called the Alternative Minimum Tax, and
Richard Nixon signed it into law in 1969 saying, "A large number of high-
income persons who paid little or no federal income taxes will now bear a
fairer share of the tax burden through enactment of a minimum income tax
comparable to the proposal I submitted to the Congress which closes the
loopholes that permitted much of this tax avoidance."

The trouble with the AMT, which is now 43 years old, is that unlike
regular income tax brackets, it has never been indexed for inflation. So,
as it holds its position in the tax code, it starts to affect more and more
taxpayers as incomes rise with inflation over time.

Congress has historically fixed this will little problem one year at a
time. Not surprisingly, this Congress has not yet gotten around to fixing
the AMT for tax year 2012 and the AMT fix is now the sleeping giant in the
fiscal cliff budget negotiations that as of this hour are still focused
entirely on income tax rates.

But there is much more that congress has to solve than income tax
rates including the AMT, Medicare spending, Medicaid, and possibly Social
Security.

Joining to talk about the things that Congress is not yet talking
about but will soon be talking about, Joy Reid and Chris Hayes.

Chris, the AMT has a deadline to it that is sharper than anything else
in here, because these 2012 tax returns going to have to be calculated with
either this new version of the AMT or the fixed version, and that is the
difference between it affecting -- it adds tens of millions of people
getting bitten by this thing. And I know that the insiders are more
worried about that actually getting fixed than the cliff at this point.

CHRIS HAYES, MSNBC HOST, "UP WITH CHRIS HAYES": Yes. When I started
covering Capitol Hill in Washington, there were two things that people
talked about, which was the AMT patch and the doc fix. Everyone is like,
where are we on the AMT patch and doc fix?

(CROSSTALK)

O`DONNELL: Each one of them has gone every year, yes.

HAYES: Every year, they do the same thing, which is they adjust the
payments that Medicare makes to doctors, and they do this thing with the
AMT.

We were asking early on, is there a way? This seems like a strange
way to legislate both these things. And, actually, when you look at the
difference between the baseline, which is current law and policy, a lot of
it is the wedge between those two things, right?

O`DONNELL: Yes.

HAYES: There`s this assumption every year that it`s going to get
fixed. And I think the big question, everything after the debt ceiling is,
is the assumption that things are going to get fixed because they always
have in the past, is that now a tenable or plausible assumption going
forward because we do seem to have entered new territory in the post-debt
ceiling era.

O`DONNELL: It will affect 28 million people if they don`t fix it.
The reason they don`t fix them long-term is that it budgetarily costs -- a
massive amount of money to do it.

HAYES: It`s ridiculous --

O`DONNELL: And so, what they do is they say, well, we only -- it`s
just like the reason Bush`s tax cuts had this 10-year sunset on it, because
in the budget windows, if you set it goes on forever, they`d never be able
to afford it. So, they do this year to year.

But this is going to be -- everything else you can fix retroactively.
Trying to unwind this AMT problem if you don`t have it fixed by New Year`s
Eve or in the first couple of days of January, it becomes a nightmare.

JOY REID, THEGRIO.COM: Yes, and for people who do their own taxes,
can you imagine the software makers have to sort of reconfigure how to do
it.

O`DONNELL: You can`t do anything.

REID: Right, it`s insane. I mean, the irony of the whole thing is,
and, by the way, when Nixon signed this, it was based on a report that like
155 people didn`t pay taxes.

O`DONNELL: Yes.

HAYES: Right.

REID: A small number of people created these things. And --

O`DONNELL: And these are people who`s making $200,000 or more which
was astronomical money back then.

REID: Exactly. And irony is, is that as a matter of philosophy,
Republicans and conservatives, they don`t believe in the AMT.

O`DONNELL: No, they`d like to abolish it.

REID: They`d like to abolish it, but they like to keep it around.
And when they had control of Congress during the Bush era, they could have
gotten rid of it legislatively. They could have got rid of it. They keep
it around because it happens to be a tax that falls more heavily on blue
states.

HAYES: Exactly, yes.

REID: Because the AMT basically doesn`t allow you to deduct for
things like your state income taxes and it hits states with high property
taxes and high income taxes hard. So you`re talking California,
Connecticut, New York. So, Republicans --

HAYES: It`s like the Obama donor closet.

(LAUGHTER)

HAYES: No, seriously. The Obama donor closet.

O`DONNELL: And Orrin Hatch made that point this year, a Republican
senator, saying, you know, the AMT hurts them more than it hurts our
people.

REID: It hurts blue states. It doesn`t hurt their folks, so they
don`t have to worry about it. So, they think that`s their leverage.

O`DONNELL: I want to think about other things discussed once we get
past the tax rates, and I want to hear -- listen to President Obama today
talking about some of the other things, the spending cuts that are involved
and what they`re dealing with here.

(BEGIN VIDEO CLIP)

OBAMA: I think there`s a recognition that maybe they can accept some
rate increases as long as it`s combined with serious entitlement reform and
additional spending cuts. And if we can get the leadership on the
Republican side to take that framework, to acknowledge that reality, then
the numbers actually aren`t that far apart. Another way of putting this
is, we can probably solve this in about a week. It`s not that tough.

(END VIDEO CLIP)

O`DONNELL: Chris, there`s the president saying he`s ready to do
serious entitlement reform and additional spending cuts, and no one seems
to be noticing that.

HAYES: Yes. You know, I just talked about that --

O`DONNELL: Entitlement reform is Medicare, Medicaid and Social
Security.

HAYES: That -- first of all, that phrase, you would agree, right, the
word "entitlement" has all sorts of bizarre kinds of semantic resonance to
it about, oh, like you`re whining and you`re entitled, social insurance --

O`DONNELL: Its original intent was an honorable entitlement --

(CROSSTALK)

O`DONNELL: But also meaning I paid into Social Security for 30 years.
I am entitled to my contributions coming back to me as, you know?

HAYES: It has a real resonance to take it away without due process,
right?

O`DONNELL: Right.

HAYES: So, I totally understand the origin of it.

But that phrase morphed into something --

O`DONNELL: It becomes a slur.

HAYES: And then entitlement reform. I think the big question I
think, you know, when he talks about the numbers, right -- you can take two
different plans to cut $400 billion from Medicare over 10 years that have
massively different implications for the structure of the program.

O`DONNELL: Absolutely.

HAYES: You can find ways to say bulk negotiations for drug prices or
you can raise the retirement age. And they may cash out in accounting
sense at the same dollar figure. But what they mean for the social
contract is radically different.

O`DONNELL: And on Medicaid, there isn`t the room now. I mean,
Medicaid has been hacked and hacked and hacked over time, and the states
will say, look, there isn`t something you can cut from Medicaid.

REID: Right.

O`DONNELL: And then you`ve got Social Security sitting over here,
which is a massive pot that people get tempted to play with.

HAYES: Right.

O`DONNELL: There`s this since of it doesn`t belong in these
negotiations. I don`t hear the president specifying this is not ever going
to be allowed here. The only thing I hear him sounding veto-like on are
the income tax rates.

REID: The rates. Yes, that`s true, that that is the most important
thing to him. You hear Democrats saying that. Democrats made it clear --

HAYES: And Joe Biden.

REID: And Joe Biden, right. That you will not pass cuts to the
benefits in Medicare through the Senate, it will not get through the
Senate. So, I think there`s an understanding that`s not going to be done.

But it`s interesting that Republicans always go there. They always go
after sort of these middle class entitlements, right? Or they go after
things like the AMT that hit what you might call the sort of modest rich,
people who make up $500,000. They just won`t touch the top 2 percent for
anything.

O`DONNELL: We have to go. "UP WITH CHRIS HAYES" airs Saturday and
Sunday mornings, 8:00 to 10:00 a.m. Eastern on MSNBC.

Chris Hayes and Joy Reid, thank you both for joining me tonight.

REID: Thank you.

O`DONNELL: Coming up, Paul Ryan is trying to save his career by, of
course, attacking Mitt Romney. What took him so long?

And what holds higher among Republicans? Hillary Clinton running for
president or their states seceding from the Union? It`s a serious
question, and I think you can guess the answer. That`s coming up.

(COMMERCIAL BREAK)

O`DONNELL: The permanent cause of this show is the KIND Fund -- Kids
In Need of Desks, the fund I created in partnership with UNICEF two years
ago to provide desks in African classrooms where they`ve never seen desks.
The KIND fund operates year-round, but we put a special emphasis on the
season of giving.

And since I reminded for our continued need for help with the KIND
Fund, the other night, you generously gotten our season of giving started
this year, with almost $80,000 in contributions, which enables us to
deliver another 1,200 desks to schools in Malawi.

The desks will be made in Malawi by workers who will be able to feed
their families thanks to the valuable jobs they have making these desks.
Those 1,200 desks will be used by two or three students at a time. The
desks are designed to seat two students, but they usually have three
students squeezed onto this little bench.

So at least 3,000 students will get to sit at desks for the first time
in their lives simply because of the money you have donated in the past
couple of days. And these desks -- these desks will last for years, maybe
five, maybe 10 years. So the benefits of the money you have contributed in
the last couple of days will be felt by as many as 20,000 kids over the
years, the useful years of these desks.

Since the time I first told you about the KIND Fund two years ago, you
have donated a total of 4.6 million dollars to lift hundreds of thousands
of kids in Malawi off the floor and give them a better chance of learning
in their classrooms. Because of the increasing costs of the steel and the
wood we use for these desks and the skyrocketing costs of fuel in Malawi
this year, our cost per desk has gone up to 65 dollars.

But you can give just 10 dollars towards the cost of a desk. Six
other people will give 10 dollars and we`ll get a desk built and delivered
thanks to you. You can contribute at our website, LastWordDesks.MSNBC.com,
which links to UNICEF`s contribution form. And remember, whatever you
contribute is tax-deductible. It`s a charitable gift.

And you can give a desk as a Christmas or Hanukkah present to someone
in their name. You can donate it and UNICEF will send a gift e-mail to
whoever you want. I can never thank you enough for your generosity. It
means a lot to me. The teachers in Malawi, who themselves went to schools
without any desks, thank you.

They were the people who first told me how badly they needed desks in
Malawi. But no one can thank you better than the kids themselves.

(BEGIN VIDEO CLIP)

(FOREIGN LANGUAGE)

(END VIDEO CLIP)

(COMMERCIAL BREAK)

O`DONNELL: In the Spotlight tonight, Paul Ryan versus Mitt Romney.
Congressman Paul Ryan spoke at the Jack Kemp Award Dinner lath night where
he said this.

(BEGIN VIDEO CLIP)

REP. PAUL RYAN (R), WISCONSIN: Jack hated the idea that any part of
America could be written off. Both parties tend to divide Americans into
our voters and their voters. Let`s be really clear. Republicans must
steer far clear of that trap.

(END VIDEO CLIP)

O`DONNELL: There`s Paul Ryan realizing that his political future
depends on him getting far away from Mitt Romney`s insult to 47 percent of
the American people. Here is Senator Marco Rubio last night at the same
event.

(BEGIN VIDEO CLIP)

SEN. MARCO RUBIO (R), FLORIDA: Now, I`ve heard it suggested that the
problem is that the American people have changed, that too many people want
things from government. But I`m still convinced that the overwhelming
majority of our people, they just want what my parents had: a chance.

There are millions of Mario Rubios all across America today. They are
not looking for a handout. All they want is a job that provides for their
families.

(END VIDEO CLIP)

O`DONNELL: One man is standing by Mitt Romney. After listening to
Ryan and Rubio`s remarks, today Rush Limbaugh said this.

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, RADIO TALK SHOW HOST: One thing I will tell you is
that what animated both these guys was Romney`s 47 percent comment. The
Republican party is running away from that. If the people of this country
are not -- if a majority are not taught, educated, inspired, motivated to
solve their own problems at least in part, nothing is going to change.

The Democratic party is always going to win. We are never going to
commandeer the notion that we are the party of government.

(END VIDEO CLIP)

O`DONNELL: Joining me now, MSNBC political analysts E.J. Dionne and
Richard Wolffe.

E.J., I`m so struck seeing Paul Ryan at the Jack Kemp Dinner. I don`t
know how you can idolize Ayn Rand and Jack Kemp. Jack Kemp saying, of
course we don`t forget about anyone or leave anyone behind, and Ayn Rand
saying of course you leave behind anyone who can`t fend for themselves.

E.J. DIONNE, "THE WASHINGTON POST": I think it`s Paul Ryan who has
been trying now for at least a year to leave Ayn Rand behind. And he has
said -- he`s sort of tried to back away from all that. But I think when
you listen to both Ryan and Rubio today, this isn`t like St. Paul getting
blinded by a new truth.

I mean, these guys are practical politicians who saw the damage the 47
percent did and are changing their rhetoric. And most of those speeches
were pretty standard conservatism. But I think the fact that they are
changing their rhetoric is a really big deal.

Since Ronald Reagan, it`s been liberals who adjusted to conservative
ideas. The apotheosis of that was Bill Clinton saying "the era of big
government is over." I think this is the first time in three decades where
conservatives have been pushed or forced by the reality of politics and an
election result to adjust their ideas to the other side`s ideas.

They`re running away from the idea that all -- the only people who
matter are those rich job creators. And they`re running away from the idea
that they can always just trash government. Both of them spoke of the
essential role of government. I think this is more important than it
looks, if you only write it off as rhetoric.

O`DONNELL: I absolutely agree. I think that point that it`s always
been working the other way, Democrats bending to Republican rhetoric over
the last few decades, is absolutely true. I just want to take a look at
how quickly this conversion is occurring in Republican world. Let`s listen
to Paul Ryan before the Mitt Romney backlash on the whole 47 percent.

(BEGIN VIDEO CLIP)

RYAN: We can become a society where the net majority of Americans are
takers, not makers. The good news is survey after survey, poll after poll
still shows that we are a center-right, 70/30 country; 70 percent of
Americans want the American dream. They believe in the American idea.
Only 30 percent want the welfare state.

We risk hitting a tipping point in our society where we have more
takers than makers in the society, where we will have turned our safety net
into a hammock that lulls able-body people to lies and complacency, which
drains them of their will and incentive to make the most of their lives.

(END VIDEO CLIP)

O`DONNELL: More takers than makers, and Richard, that`s in August of
2012.

RICHARD WOLFFE, MSNBC.COM EXECUTIVE EDITOR: Yeah. I`m sorry to put a
dampener on this, but I`m not as optimistic as you guys are about this
change in rhetoric. You know, if you looked at any number of focus groups
and polls throughout the campaign, if you actually took the majority of
Mitt Romney`s language, he always talked about the middle class. They were
looking at the same data.

Yes, you want everyone to believe in the American dream and everyone`s
going to get on. And oh, the Democrats, they just want people to get a
handout. That`s obviously a caricature. But when you look at what the
policies actually are, when you look at how you create opportunity in the
Republican conservative mind, that actually is espoused by Rubio and Paul
Ryan, what you`re actually looking at is a reduction of government
investment, a reduction of education funding.

What they mean by more opportunity is more tax cuts for everyone.
Don`t slice off the two percent; everyone deserves a tax cut. So I`m a
little less optimistic that these rhetorical changes are anything more than
saying, hey, we heard those focus groups. Maybe we just didn`t stick to
the language of the focus groups all the time. Maybe it was just 47
percent of the time.

O`DONNELL: E.J.?

DIONNE: In fact, I agree with the idea that they have yet to adjust
their policies to this new rhetoric. Although you are kind of seeing it
happen, as you alluded to earlier in the show, Lawrence, on the tax issue.
When you have John Boehner go out there and say, look, we want to raise
more money from the rich, too; we just want to do it differently, maybe
you`re starting to see that their reading the focus groups goes not just to
the rhetoric but to the need to start changing policies.

As I was saying earlier, I think there`s a cascading effect. When
Democrats in the `80s started -- when the Democrats talked about the
market, before too long they were voting to cut the capital gains tax. I
think this takes time. And they`re not there yet. I agree with Richard on
that. But I think that there`s a logic -- Rush Limbaugh, in an odd way,
I`m in agreement with.

If they start down this road, they`re going to have to go farther.
This may begin to change conservatism.

O`DONNELL: Richard Wolffe and E.J. Dionne, thank you for joining me
tonight.

Coming up, John Kerry, Susan Rice or a Republican? The latest about
the president`s choice for his next secretary of state.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

(MUSIC)

(END VIDEO CLIP)

O`DONNELL: It`s going to make perfect sense, OK? Just wait.
Americans continue to Rewrite their attitudes on marriage equality and
legalizing marijuana. And they are becoming more liberal every day.
According to a new Quinnipiac poll released today, 48 percent of Americans
now support marriage equality, with 46 percent opposed.

In our last presidential campaign year 2008, 55 percent of voters
opposed same-sex marriage, with only 36 percent supporting it. Support for
legalizing marijuana has now spread to a majority of American voters; 51
percent now favor the legalization of marijuana, 44 remain opposed.

And Public Policy Polling, which was the most accurate polling
organization of the 2012 presidential campaign, has released a post-
election poll that shows Republicans continue to Rewrite reality; 49
percent of Republican voters say that they think Acorn stole the election
for President Obama.

The good news is that is a drop of three percentage points since 2008,
when 52 percent of Republicans thought that Acorn stole the election for
President Obama. The bad news is that Acorn no longer exists, and so the
49 percent of Republicans who still believe that Acorn stole this election
for President Obama are even more delusional than they were four years ago,
when the group they thought stole the election at least existed.

Some Republicans are so bummed by the re-election of President Obama
that they don`t want to live in America anymore. But they also don`t want
to move. So 25 percent say they would like their state to secede from the
union. Only 56 percent of Republicans want to remain Americans. And 19
percent of Republicans are still so dazed and confused they haven`t been
able to decide if they want to secede from the union.

Other Republicans are making the saner choice of seceding from the
party. In Public Policy Polling`s final poll before the election, they
found that 37 percent of voters identified themselves as Republicans.
Their new post-election poll shows a sharp decrease, with now only 32
percent identifying themselves as Republicans, which is to say identifying
themselves as losers.

Voters identifying themselves as Democrats increased by exactly the
same amount as voters identifying themselves as Republicans decreased.
America hates losers. And apparently no one hates losers more than losers.

The Simpson-Bowles proposal is not so much losing with the electorate
as it is being ignored by them; 60 percent don`t have an opinion one way or
another about Simpson-Bowles, while 23 percent support it and 16 percent
oppose it.

With polling results like this, former Republican Senator Alan Simpson
knows he has his work cut out for him trying to convince Congress to take
government benefits away from people his age, because Alan Simpson says
that people his age like their government benefits. And of course, there`s
the problem that Alan Simpson calls them old coots.

So he has lost all hope of getting them to voluntarily give up their
Medicare and Social Security benefits. So he`s now trying to convince
young voters to take those benefits away from their grandparents.

(BEGIN VIDEO CLIP)

ALAN SIMPSON, FORMER SENATOR: Stop Instagraming your breakfast and
Tweeting your first world problems and getting on Youtube so you can see
Gangnam Style --

(MUSIC)

SIMPSON: -- and start using those precious social media skills to go
out and sign people up on this baby, three people a week. Let it grow.
And don`t forget, take part or get taken part. Boy, these old coots will
clean out the Treasury before you get there.

I have a bum knee. I`ll do the lasso again and then the horseback.
The ways the cowboys ride it, the cowboys ride it.

(END VIDEO CLIP)

O`DONNELL: But the good news for the old dancing cowboy is Simpson-
Bowles does poll better than Panetta-Burns, a completely fictional budget
proposal that the PPP included in their poll because PPP knows how to have
fun. Panetta-Burns, the budget proposal that does not exist, is supported
by eight percent of voters and it is opposed by 17 percent of voters.

Unfortunately, we have no idea what these supporters of Panetta-Burns
like about the budget proposal that does not exist or what the opponents
hate about the budget proposal that does not exist. If Panetta-Burns is
going to have any chance of catching up to Simpson-Bowles, someone has it
to teach Panetta or Burns how to dance Gangnam Style.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Do you think you could show us how to do it?

UNIDENTIFIED MALE: All right.

UNIDENTIFIED FEMALE: All right. We`ve got some takers.

UNIDENTIFIED MALE: You have to look up at the sky right side and then
left leg kick your right leg. So it will be like this.

Turn on the music. One, two, three, four.

One more time.

(APPLAUSE)

UNIDENTIFIED FEMALE: We`ll see you in a few minutes. We`re back in
five right after this.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

ANDREA MITCHELL, MSNBC ANCHOR: By the way, before I let you go,
anything you want to share with us about your future or any other jobs out
there?

SEN. JOHN KERRY (D), MASSACHUSETTS: I have a bunch of meetings this
afternoon, and I look forward to a terrific day.

(END VIDEO CLIP)

O`DONNELL: That was Senator John Kerry earlier today with Andrea
Mitchell. Not quite willing to discuss his future at this point. The
Obama administration could announce appointments to his national security
team some time in the next two weeks, according to administration
officials. And John Kerry`s name obviously is being floated for two
positions, secretary of defense and secretary of state.

Joining John Kerry on the short list to replace Leon Panetta at the
Pentagon is former Republican Senator Chuck Hagel, who met with President
Obama at the White House this week. As for Hillary Clinton`s position at
the State Department, the "National Journal" reports that President Obama
is, quote, "genuinely conflicted over whether to pick Kerry or United
Nations Ambassador Susan Rice."

President Obama said yesterday that Republican attacks against Susan
Rice will not influence his decision. Joining me now, MSNBC`s Ari Melber.

Ari, what do you make of the Chuck Hagel situation with his name
floating into the mix now?

ARI MELBER, "THE NATION": I think it`s probably a good faith efforts
to take in a wide range of views. We know that President Obama, in his
first term, obviously, went with Secretary Gates despite his ties to
Republican foreign policy. Hagel is more of a progressive voice, having
broken with Republicans early on the Iraq war.

But I`m not sure that a second-term Obama presidency ultimately
reaches back to another Republican defense figure.

O`DONNELL: And as to the John Kerry/Susan Rice dilemma that the
president faces, he says that the attacks on Susan Rice won`t affect his
decision one way or another. It won`t force his hand to nominate her. And
it won`t affect his decision to go with Senator Kerry, if that`s what he
chooses to do.

Is he going to be able to credibly present his choice as his real
first choice under these circumstances?

MELBER: Well, that`s the problem with this town, right? When you
have these kind of vicious attacks, you end up damned if you do, damned if
you don`t. And for cynical operators, which I think there are some,
obviously, in the attacks on Rice among the Republican caucus here, they
get a sort of partial short-term victory there, because there is a lot of
noise.

But I think at the end of the day -- I think, at the end of the day,
this president gets his first choice secretary of state nominee through
regardless of which one it is. I`ve heard recently that they do lean
towards Rice. We`ve talked about that before.

I think ultimately it goes to the desperation of the Republicans. You
know, they`re not focusing on anything legitimate regarding the actual
foreign policy. They have taken what happened in Libya and turned into a
tragedy in search of a scandal, when it is just simply a tragedy.

O`DONNELL: Ari, another name that came up is Anna Wintour as the
possible ambassador to France or the United Kingdom. She, of course, the
editor of "Vogue." She was the inspiration for the character in "The Devil
Wears Prada." Jay Carney asked today in the White House press briefing,
has the president seen "The Devil Wears Prada"?

How does he handle that one.

MELBER: Well, she`s an inspiration to so many of us, Lawrence. I
think people do know that the ambassadorships, particularly to western
European countries, for both parties, have been symbolic and often donor
(ph) candidates. So she could be in the running, even though it`s a bit of
a weird one.

O`DONNELL: Yeah, the thing about those posts is that the real
negotiations happen at the very highest level, between prime minister and
the president. The ambassadorship is not all that important. The closer,
Ari Melber, does it for us again. Thanks for wrapping it up for us, Ari.

MELBER: Thank you, Lawrence.

O`DONNELL: "THE ED SHOW" is up next.

END

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