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'The Last Word with Lawrence O'Donnell' for Wednesday, December 12th, 2012

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THE LAST WORD WITH LAWRENCE O`DONNELL
December 12, 2012

Guests: Jonathan Capehart, Steve Schmidt, Alan Cumming

LAWRENCE O`DONNELL, HOST: This momentous day of 12-12-12 will go down
in political history as the day Rush Limbaugh gave up and found himself
agreeing with me.

(BEGIN VIDEOTAPE)

ALEX WAGNER, MSNBC ANCHOR: The clock is rapidly ticking down to
Christmas.

TAMRON HALL, MSNBC ANCHOR: Republican leaders warning their
colleagues.

REP. ERIC CANTOR (R-VA), MAJORITY LEADER: We are committed to staying
here.

HALL: Not to make any holiday plans.

CANTOR: We are going to stay here right up until Christmas Eve.

THOMAS ROBERTS, MSNBC ANCHOR: Fiscal tensions mount as the clock
clicks down Christmas, less than two weeks way, the moment the nation is
due to go off the cliff.

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Taxes are going to go
up one way or the other.

UNIDENTIFIED MALE: We are getting a little close.

CHUCK TODD, MSNBC ANCHOR: Neither side seems to have budged.

UNIDENTIFIED FEMALE: The White House has moved a little bit.

OBAMA: I remain optimistic.

UNIDENTIFIED FEMALE: Nothing yet from the House Republicans.

EZRA KLEIN, WASHINGTON POST: The two sides really do disagree.

TODD: Sunday is basically the deadline.

HALL: They could be working through the holidays.

CHRIS JANSING, MSNBC ANCHOR: The president and John Boehner talked on
the phone last night.

WAGNER: Boehner and the president spoke on the phone yesterday,
described as tense.

REP. JOHN BOEHNER (R-OH), SPEAKER OF THE HOUSE: I remain the most
optimistic person in this town.

OBAMA: I remain optimistic.

JANSING: What do they want?

ANDREA MITCHELL, MSNBC ANCHOR: Most Americans say they want
compromise.

UNIDENTIFIED MALE: They would blame Republicans if we go off the
cliff.

ROBERTS: Voters overwhelmingly disapprove of John Boehner.

BOEHNER: We don`t have an agreement today.

REP. NANCY PELOSI (D), CALIFORNIA: Figure it out. We did. Figure it
out.

MITCHELL: We are 20 days away from that so-called fiscal cliff.

JANSING: We`re all going to go off the cliff.

ANN COULTER, CONSERVATIVE COMMENTATOR: Republicans are totally over
the barrel.

CANTOR: We are committed to staying here.

BOEHNER: We don`t have an agreement today.

CANTOR: We are going to stay here right up until Christmas Eve.

COULTER: They`ll be pushing all that, and we`ll go to the Senate and
we`ll lose.

(END VIDEOTAPE)

O`DONNELL: With just 20 shopping days until the fiscal curve,
President Obama stood firm on raising the top income tax rates today and
John Boehner took one more baby step toward the president.

Tonight, "Politico" reveals that House Speaker John Boehner privately
told President Barack Obama that he is prepared to consider more than the
$800 billion in -- that the GOP has already proposed in new tax revenues --
but only if the White House will back much deeper cuts to entitlement
programs, according to several sources familiar with the talks. Getting
beyond $800 billion in revenue without raising tax rates on upper income
families would be difficult.

Today, Speaker Boehner told House Republicans not to make any plans
for the holidays and then told reporters this.

(BEGIN VIDEO CLIP)

BOEHNER: The president and I had a deliberate call yesterday. And we
spoke honestly and openly about the differences that we face. But the
president`s call for $1.4 trillion worth of revenue, that cannot pass the
House or the Senate. I was born with the glass half-full. I remain the
most optimistic person in this town, but we`ve got some serious
differences.

(END VIDEO CLIP)

O`DONNELL: President Obama seems to remain comfortable with, if
necessary, taking that step off the fiscal curve.

(BEGIN VIDEO CLIP)

OBAMA: I`m pretty confident that Republicans would not hold middle
class taxes hostage to try to protect tax cuts for high income individuals.

BARBARA WALTERS, ABC NEWS: Prediction: are you going to be able to
raise taxes, yes or no?

OBAMA: Oh, taxes are going to go up one way or the other.

(END VIDEO CLIP)

O`DONNELL: In a just-released NBC News poll, 76 percent of Americans
say it`s acceptable to raise income tax rates on people who earn more than
$250,000 per year to avoid the fiscal cliff and reduce the deficit.

Today, Rush Limbaugh, after searching for and failing to find a way
out for Republicans on the fiscal cliff dilemma found himself making the
point that I made five months ago on this program at this desk. For some
reason, Rush failed to give me credit for what he told his audience today.

(BEGIN VIDEO CLIP)

RUSH LIMBAUGH, RADIO HOST: So we go over the cliff. Everybody`s
rates go up. Here comes Obama in the white hat on the white horse to save
the day. He is going to propose, guess what? Tax cuts for the middle
class and, thereby, take the issue away from the Republicans.

Tax cuts for the rich, they will own. Somebody needs to explain to me
what is the benefit to Obama in letting the Republicans out of the trap of
going over the cliff?

I think going over the cliff is the most attractive option Obama has.

(END VIDEO CLIP)

O`DONNELL: Krystal, you can learn it from Rush Limbaugh on 12-12-12
or you could have learned it from me this summer.

KRYSTAL BALL, "THE CYCLE" CO-HOST: I learned it from you this summer.

O`DONNELL: There you go. They`re finally catching on. He finally
gets it.

BALL: Well, it pains me a little bit to say this but rush is right.
If Republicans were smart --

O`DONNELL: This is the Rush is right night.

BALL: That`s the theme of the night?

O`DONNELL: We`re not going to show any more Rush. He actually has
three hours of radio today. There`s a lot of insane stuff to it.

BALL: Right.

O`DONNELL: That thing that we just showed is the Rush is right
moment.

BALL: If they were smart, they would go ahead and do that. Take it
off the table and live to fight another day.

I mean, I do think they are a little bit delusional about the amount
of leverage that they will have around the debt ceiling as well. Holding
the debt ceiling hostage is extremely unpopular, as is taking away people`s
Medicare.

So, you are going to do two things. You`re going to hold the debt
ceiling hostage in order to take people`s Medicare away. It is going to be
massively politically unpopular if they try to do it. I don`t think they
will have the stomach for that political fight either.

O`DONNELL: Conservative columnist John Podhoretz made an important
point. He`s "New York Post" columnist. He said, "Is that 4.6 percentage
point overall gain the tipping point to what Mitt Romney called a
government-centered society? The case would be easier to make if it were
an unprecedented hike but it`s not. It`s a return to a rate from the mid-
1990s."

Ari, that`s the problem. The big scary thing President Obama is
talking about is having the big scary top tax rate be the same as it was
under President Clinton when people in the top tax bracket had a great
time.

ARI MELBER, THE NATION: Exactly. And everyone remembers that.
Everyone understands that.

There isn`t a big principle here left for the Republicans. That`s why
the fallback position I think shows a great weakness. It also shows a type
of economic nihilism that they don`t care about the credit rating of the
United States of America. But we already knew that.

The other difference here, Lawrence, that`s going to hurt them, we are
seeing it in the Bloomberg News poll and the views of the public, including
Republicans, that this should be a compromise time and Obama should get the
tax hike on at least the upper, you know, 2 percent.

But more importantly, people talk about a teachable moment. This is a
teachable month. This is taking a long time. And it hurts Republicans
because people are seeing the intransigence and they`re seeing who is
exactly standing in the way of recovery.

O`DONNELL: Well, there is a new theory about the pace of things and
why things are moving the way they are. Chris Van Hollen thinks it has
something to do with Speaker Boehner`s future. Let`s listen to that.

(BEGIN VIDEO CLIP)

REP. CHRIS VAN HOLLEN (D), MARYLAND: I am getting increasingly
concerned that one of the reasons the speaker is deciding to, I think,
string out these discussions is that he wants to wait until January 3rd,
when the election for speaker takes place.

(END VIDEO CLIP)

O`DONNELL: Krystal, that`s the kind of thing I wish I thought of.
I`ve been seeing this thing as being a January 3rd or 4th reality point for
negotiations. But I wish I would have caught that point. That`s a good
point.

BALL: Here is something that you did think of when you were so kind
as to grace us with you being on our show.

O`DONNELL: "THE CYCLE" at 3:00 p.m.

BALL: "THE CYCLE" at 3:00 p.m. -- thank you.

O`DONNELL: Sometime last week.

You were talking about how John Boehner got some control of his caucus
by doing what no speaker in the past has done, by letting the crazies
rolled the roost. I mean, it wasn`t his choice but it was what he had to
do, to send the message that this strategy isn`t going to work.

I think the other reason why they`re going to have to go over the
cliff is because I think that lesson hasn`t totally sunk in yet. I don`t
think they have completely resigned themselves to the fact that they are
going to have to give on tax rates and going back to what you were just
citing, I mean, a lot of them do see taxes as the core principle. Raising
them at all is anathema to the Republican ideology because they have seeded
every other idea that they`ve ever had.

I mean, they made this all that they stand for, and basically spent
their time yelling about socialism and death panels rather than actually
offering ideas that make sense to the American people.

O`DONNELL: And, Ari, the thing ha happens when you are off the cliff
is, as of that day, anything you would then vote on is a tax cut?

MELBER: Right.

O`DONNELL: The tenses all become correct. Right now, it is not
considered a tax cut, because it`s a future dealing with the rates. If the
rates are up here on January 2nd and on January 5th, you get to vote for
them to be down here, you just voted for a tax cut.

MELBER: Exactly. You saw that in the clip you played of the
president talking to Barbara Walters. You know, a lot of times in
politics, we talk about framing and messaging and what`s the message?

This isn`t about framing. The facts are, as you just stated, that the
taxes will shift back and then we can start anew. So, it`s not a frame.
It`s not a gimmick. It`s not like how do we rebrand right to work. Those
are the facts.

And again, going back to the Clinton era, going back to something that
we know was fine that didn`t hurt job creators is perfectly palatable.

So, that`s why Republicans increasingly look extreme, you know,
holding on to this last par. I will say that, you know, stock futures went
up today. So, we don`t have Nate Silver anymore. I know you used to bring
him on THE LAST WORD every night.

But we have a lot of people in the markets who actually do think this
deal is going to work out and probably work out on Obama`s terms.

O`DONNELL: I think they think what Republican Senator Bob Corker said
today. Let`s listen to this.

(BEGIN VIDEO CLIP)

SEN. BOB CORKER (R), TENNESSEE: At the end of this year, in some form
or fashion, whether we embarrass ourselves and wait and go over the cliff
and next year or before this year ends, we are going to offer revenues,
right? I mean, I don`t know how anybody can believe that revenues aren`t
coming. And so, what I would say to everyone here, let`s move to
entitlement reform. That`s the only thing candidly that hasn`t been talked
about in this debate.

(END VIDEO CLIP)

O`DONNELL: Krystal, it is really striking how Republicans feel
perfectly free to go out there and go, look, it`s going to happen.
Starting with Congressman Cole in the House and no one in the leadership is
saying to them, don`t do that.

BALL: Right.

O`DONNELL: Mitch McConnell could easily have said to Corker -- look,
Bob, not today. We`ve got to hang tight against Obama in our negotiations,
none of that. They are allowing these Republicans to go up there and
soften the wall against these taxes.

BALL: Right. Right. I loved when Tom Cole first came out and said,
this is what we should do. We should just go along with the president.

And Boehner did come out and make a cursory, he shouldn`t have said
that.

But then Cole went on five more shows that day --

O`DONNELL: He went to HARDBALL that day, yes.

BALL: -- to reiterate the exact same point.

So, I mean, this helps Boehner to be able to soften up his caucus.
The fact that you are seeing people like Rush Limbaugh and Ann Coulter say
that this is where we have to go, I think it does provide measure of
comfort for further to the right Republicans who are worried not about a
general election but are worried about their primaries back home.

O`DONNELL: The guys way over on the right don`t have to vote for
this. They can vote no. You are going to get enough Democrats and other
Republicans to pass it. I mean, those guys can be given a pass.

MELBER: Exactly. That`s one thing that ex-Speaker Pelosi was saying.
When she was speaker, she did bring certain things to the floor that she
didn`t like, because she had a notion of responsibility.

O`DONNELL: Funding the Iraq war.

MELBER: Exactly, and you don`t have that responsibility here yet.

O`DONNELL: Krystal Ball and Ari Melber -- thank you both for joining
me tonight.

MELBER: Thanks.

BALL: Thanks, Lawrence.

O`DONNELL: Coming up, the very curious case of the silent Tea Party
in the fiscal cliff negotiations. Where in the world is Michele Bachmann?

And in the "Rewrite", what Republican House members tell themselves
about their history with taxation and what they don`t know about the
Republican Party`s history with taxation.

And later, Tony-winning award actor and activist, Alan Cumming, star
of "The Good Wife", will be here.

In fact, I think he`s here already. He`s around here somewhere. So,
keep an eye for Alan Cumming. He could be popping up at any moment. You
know that.

(COMMERCIAL BREAK)

ALAN CUMMING, ACTOR & ACTIVIST: Coming up, who isn`t talking about
the fiscal cliff? Well, the Tea Party.

And later in the "Rewrite", why Abraham Lincoln spoils the never
raised taxes argument for Republicans. That`s coming up.

And what Hillary Clinton said tonight about running for president.

And later, we will have a very special update about the KIND Fund.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

MITCHELL: There aren`t any taxes in his bill. So, what`s wrong with
his bill? Why won`t you vote for it? He`s asking for your support as a
matter of loyalty. His speakership could be on the line.

REP. PAUL BROUN (R), GEORGIA: I introduced a bill to lower the debt
ceiling, not raise it. And I just think raising the debt ceiling is not
the way to go. We need to lower it.

(END VIDEO CLIP)

O`DONNELL: That was the most absurdist comment uttered during the
last showdown between President Obama and the Republican House of
Representatives. The debt ceiling debacle in the summer of 2011 made by
Republican Tea Party Congressman Paul Broun.

In 2011, the Paul Brouns in the Republican House had enough power to
threaten John Boehner`s speakership and the full faith and credit of the
United States.

In 2011, every day was marked with a new headline like this one in
"Politico", Boehner tries to tame GOP on debt ceiling plan. That article
was published on July 27th, 2011.

The very next day, the House member who was then the Republican front-
runner for president went to the National Press Club and actually said
this.

(BEGIN VIDEO CLIP)

REP. MICHELE BACHMANN (R), MINNESOTA: It did not include the
defunding, nor the repeal of Obamacare and it also increased the debt
ceiling. I couldn`t go down that road. And so, I couldn`t give John
Boehner that vote.

John Boehner now has a second alternative that you have heard of. I
will not be casting my vote for that bill. I cannot. I am committed to
not raising the debt ceiling.

(END VIDEO CLIP)

O`DONNELL: Yes, she was the front-runner in the polls back when she
said that.

In 2011, Boehner lost 66 members of his party on the bill to raise the
debt ceiling but that was then and this is now.

One Republican who voted no in 2011 told "The Washington Post" today,
quote, "Speaker Boehner has a very hard job. I could not do his job. And
I would not do his job. It`s easy for me as the lowest level of the House
to criticize what others are trying to do, but I`m not going to do it."

So, now, Republican Tea Partiers, like Republican Congressman Paul
Broun, the guy who wanted to lower the debt ceiling, have been reduced to
utter relevance speaking at a press conference attended by only five
members of Congress sponsored by an organization no one has heard of,
teaparty.net.

(BEGIN VIDEO CLIPS)

BROUN: We can stop this insanity in Washington without raising
revenue. We need to raise taxpayers not taxes on anyone. I will not back
down from that.

REP. LOUIE GOHMERT (R), TEXAS: People want to say, you guys are just
trying to help your rich friends. I don`t have a lot of rich friends.

You know, that is not what we`re about. We`re about trying to protect
the principles in which this country was founded.

REP. JOHN FLEMING (R), LOUISIANA: I agree with the Tea Party. We`ve
been taxed enough already.

(END VIDEO CLIPS)

O`DONNELL: Joining me now are Sam Stein, "Huffington Post" White
House correspondent and political editor. Sam is also an MSNBC
contributor.

And Joy Reid, managing editor for "The Grio", and an MSNBC
contributor.

Joy, they had exactly one senator at this stand your ground press
conference today, Rand Paul. And he said he vote against any raising of.

Now, for a senator, we don`t care how you are going to vote. We want
to know if you are going to filibuster any deal. And, of course, he would
not dare say that. That`s how toothless this group is now.

JOY REID, THEGRIO.COM: Yes, it`s funny because the Tea Party that was
supposed to be vaunted as they were going to take over the Republican
Party. For a minute, they really did have doctrinaire, sort of old-
fashioned Republicans spooked. They were scared of them.

And John Boehner essentially operated as the weakest speaker of the
House in modern history for fear of them. But, now, John Boehner and the
House side has figured out, the way you deal with the Tea Party is by
showing them who is boss. And by revealing them for duty for bucking his
leadership on votes, he`s finally shown that he is willing to use the power
of the leadership to actually lead his caucus.

Now, if he could just put a bill on the floor, he`d really have
something going. And in the Senate, clearly, this is going to pass the
Senate. This is all about the House.

O`DONNELL: Sam Stein, Blake Farenthold, who`s a Texas congressman, he
was on this program, as a freshman. He was one of the hard liners in the
past. He said in "The Washington Post" today, "You can`t have every member
of the conference trying to negotiate. We elected Speaker Boehner to be
our leader. We need to let him lead."

That`s what the Tea Party is saying now.

(LAUGHTER)

SAM STEIN, HUFFINGTON POST: Well, you may be very nostalgic by
showing those pals.

That was like a much more exciting legislative standoff than this one,
I feel like. And, obviously, the context has changed dramatically. Back
then, we were in the midst of the Republican primary. And Michele
Bachmann, as you noted, was leading the polls.

The Tea Party had been voted in about eight months earlier, a wave
election. They had just taken over the House again. They felt very much
ascendant. Boehner was their leader ostensibly.

But they also had sort of a proxy there in Eric Cantor. And what you
see right now is that Eric Cantor has been very good soldier to Boehner.
He is not undermining Boehner in any way, noticeably and publicly (ph).

But we also have a different context politically. We`re off of the
2012 elections. The House Republicans maintained the majority but they
lost seats. And I think they realize they can`t go through these types of
standoffs and continue to hold on to power much longer.

And they also have cover, importantly, I think, from conservative
commentators who are saying, maybe, this isn`t the best time to start
demanding no rate hikes. I think, you know, when the Ann Coulters of the
world step out there and give you that type of cover, I think that actually
does give a lot of leeway and it does quiet some of the louder Tea Party
members of the caucus.

O`DONNELL: As I said, they had exactly one senator with them today.
Let`s listen to how tough Rand Paul wants to play this thing. Let`s listen
to this.

(BEGIN VIDEO CLIP)

SEN. RAND PAUL (R), KENTUCKY: My suggestion to them has been, and
I`ve talked to several members, and you can ask them too, I think we should
put forward what we are for. If it gets beyond that and something is going
to happen, I think we should encourage those in the House to vote present.
Let the Democrats own this tax increase and it could become a Democrat
plan.

(END VIDEO CLIP)

O`DONNELL: OK. You see the way the nut wing wants to play really,
really tough is to let the Democrats have what they want.

REID: Let it pass, indeed.

I think it`s funny because you are seeing the Tea Party sort of devoid
of friends now, right? They used to be the darlings of the party, but now,
even the sort of secret real backers of the Tea Party movement, which is
the very rich themselves, big business, have gone on to the president`s
side on this.

There`s no one on their side. Even big corporations, the Lloyd
Blankfeins of the world. The CEOs are saying, go ahead, we`ll take the
rate hikes. They really don`t have any allies left.

So, now, they are just down to say, we`ll just talk about what we are
for. What are you for? You want to cut the Department of Education,
school lunches. You want to cut Medicare. You want to cut Medicaid. You
want to cut programs for kids. That`s what they are for.

So, they`re down to only being able to argue and the rest of the
Republicans don`t want to touch it.

O`DONNELL: Sam, they had a terrible decision to make strategically
with this press conference, which is the tradition in Washington for these
kinds of press conferences. It`s all about the bodies. How many people
can you throw up there behind the microphone, because that shows you how
much strength you have?

STEIN: Yes.

O`DONNELL: And, frequently, there is too big of a crowd to take the
picture of. What they did, they showed us how much strength they had,
which was nothing. Then, on the other hand, if they didn`t have the press
conference, I would be sitting here saying, they have nothing. So there
was no way for them to reveal anything other than they had nothing.

STEIN: Well, they did what they should have done, which is they got a
smaller room and it made it look bigger.

(LAUGHTER)

STEIN: You know, clearly, there is not the strength in numbers there
anymore. And, you know, part of it is because the business community has
more or less abandoned them on this issue. And they certainly will on the
debt ceiling issue.

But, also, because President Obama is much more comfortable living
with the consequences of a standoff than they are at this juncture, and I
think that`s just underling everything here, which is that he can go over
the cliff and build a tax cut plan that he can then subsequently pass.

Republicans don`t really have that option and I think they know that.
They can hold all the press conferences in the world, but when it comes
down to the actual vote, the only option they have is to either vote
present, basically. I think that`s what they were signifying there.

O`DONNELL: Sam Stein and Joy Reid, thanks for joining me.

Joy, you are sitting in for Alex tomorrow.

REID: I am, indeed.

STEIN: Whoa!

REID: On "NOW". "NOW" with Alex Wagner.

O`DONNELL: At 12:00 noon.

REID: At 12:00 noon.

O`DONNELL: Sam, you`re not going to miss that, right?

STEIN: I`m surprised Alex didn`t pick me, but I`m very happy for Joy.
I will watch and record it.

O`DONNELL: All right. Thank you very much, both of you.

REID: Thank you.

O`DONNELL: Coming up, a Republican today offered a little bit of
trivia about Republicans and taxes and his trivia needs a little bit of a
"Rewrite". That`s coming up.

And Newt Gingrich says Republicans can`t beat Hillary Clinton, and
Hillary Clinton has just said something to Barbara Walters about running
for president.

And Tony Award-winning actor Alan Cumming is here. He will join me
later. And he may join me sooner than later. With Alan, I don`t know --
you never know.

(COMMERCIAL BREAK)

CUMMING: Coming up: when taxes are raised as part of the fiscal cliff
deal, it means President Obama and President Lincoln will have one more
thing coming. That`s in the "Rewrite".

And how hard will it be to beat Hillary Clinton in 2016? Only one
politician has a higher approval rating. We`ll tell you who, coming up.
Clue: it`s not the president.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BARBARA WALTERS, "THE VIEW": What most people are asking now about
you is, will you consider running for president in 2016? Would you just
like to make your declaration now and we could conclude this interview.

HILLARY CLINTON, SECRETARY OF STATE: That would be fascinating to me
as well as everyone else. I`ve said I really don`t believe that that`s
something I will do. Again, I am so grateful I had the experience of doing
it before.

But, you know, I think there are lots of ways to serve. So I will
continue to serve.

WALTERS: What would it take to convince you to run in 2016?

CLINTON: That`s all hypothetical. Because right now, I have no
intention of running.

(END VIDEO CLIP)

O`DONNELL: That, of course, was Hillary speak for, yes, I am running
for president unless some unforeseen circumstance prevents me. Hillary was
not the only presidential possibility in Barbara Walters` special tonight.
Barbara also interviewed New Jersey Governor Chris Christie.

(BEGIN VIDEO CLIP)

WALTERS: There are people who say that you couldn`t be president
because you are so heavy. What do you say to them?

GOV. CHRIS CHRISTIE (R), NEW JERSEY: Well, that`s ridiculous. I
mean, that`s ridiculous. I don`t know what the basis of that is.

WALTERS: I think they have worried about your health.

CHRISTIE: I have done this job pretty well. I think people have
watched me for the last number of weeks in Hurricane Sandy doing 18 hours
days and getting right back up the next day and still being just as
effective in the job. So I don`t really think that would be a problem.

(END VIDEO CLIP)

O`DONNELL: Nate Silver, the man who correctly predicted the outcome
of this year`s presidential election, said this about Hillary Clinton.
"She seems like Democrats` best bet perhaps, by some margin, to extend
their winning streak to three or more terms in the White House."

Joining me now is Steve Schmidt, former senior adviser to the McCain
2008 presidential campaign and a MSNBC political analyst, and Jonathan
Capehart, MSNBC political analyst and opinion writer for the "Washington
Post."

Steve, I want to you go to Chris Christie first. That question
Barbara Walters asked him seems to me to be a hurdle he would have to get
over in any national campaign. I think Barbara is asking what is in the
very first set of questions that voters would have on their minds.

STEVE SCHMIDT, MSNBC POLITICAL ANALYST: There is no question that its
an issue. And there is no question it is a legitimate issue. The health
of presidential candidates is always a part of a presidential race. It is
as physically grueling an experience as you can possibly have. He has done
a tremendous job during this crisis in New Jersey.

But it is not analogous to running for president nationally over the
course of four years. I think if he is going to be a serious presidential
candidate, this is an issue that he is going to have to deal with. I say
that as someone who admires him very, very much and hopes very badly that
he will run for president as a Republican I think who could help remake the
party.

O`DONNELL: Steve, I do think he handled that reasonably well in
response to Barbara`s question.

SCHMIDT: Look, there is no question that he handled it well. But his
answer that, look, it`s not going to be an issue, I think it`s a ridiculous
issue -- I just think politically, I think he is wrong on that. I do think
if he wants to be president, every presidential candidate goes into a race
with assets and liabilities. And one of the things you want to do in this
time where the race is four years out, if you think you`re going to run, is
to start to remove some of those liabilities from your sheet.

And that`s one of the liabilities I think that he would have to work
on.

O`DONNELL: Jonathan Capehart, no one is talking about Hillary Clinton
liabilities at this point. Whatever liabilities she had in the past as a
presidential candidate have disappeared. We have Newt Gingrich saying she
is, as far as he can tell at this stage, unbeatable. I did not hear
anything close to a denial in what she said to Barbara Walters tonight
about her presidential future.

JONATHAN CAPEHART, "THE WASHINGTON POST": Lawrence, I must -- I heard
a person who is desperately waiting for her successor to be nominated by
the president, for that person to take over from her and for her to
disappear for however many months she needs to rest up from 20 years under
the intense microscope that is being the First Lady, then the senator, and
then a presidential candidate, then the secretary of state.

What I heard in there was, I`m not thinking about running for
president. Maybe later, talk to me about it. Maybe I`ll do it. You know
what, quite frankly, Lawrence, I don`t think -- I wouldn`t be surprised if
she didn`t run. I know you are convinced she is running. I am not
convinced.

O`DONNELL: I will be shocked if she doesn`t run. Steve Schmidt, have
we had any parallel like this? Have we had anyone in either party who,
four years away from it, is such an obvious and formidable front-runner,
non-incumbent front-runner like this?

SCHMIDT: Not that I thick of. One of the remarkable things is, when
you look at her polling numbers, is the degree to which she has transcended
her controversies over her career. She has become an ecumenical figure in
politics. She is admired by an awful lot of Republicans and particularly
an awful lot of Republican women.

So she has all the time in the world to make her decision. She
freezes the Democratic primary process in place. Everybody will have to
wait to see what she wants to do. So she is not going to be compelled to
have to get in this early and have a three-year campaign or a two-year
campaign. She has all the time that she needs to rest and recover from the
job she has had and to think this over.

O`DONNELL: Jonathan Capehart, all of those microscopes and spotlights
she has been under for 20 years and beyond, certainly in Arkansas for many
years before that, were all of her choosing. Every one of these pressure
jobs and positions she has been in has been of her choosing. This is not
someone who is weighed down by the weight of the spotlight. She knows how
to bear it. And she knows what she has to do to win a presidential
campaign. And there is no reward for starting too late.

CAPEHART: That`s true. She knows what the pressures are. She has
been through a presidential campaign before. If she runs again, she knows
what the pitfalls are. She knows what mistakes she made in `08 and could
learn from them in 2016. There is no doubt about it, that she is the
front-runner if she chooses to be, if she chooses to jump into the race.

But I always caution people that the sky-high approval numbers that
she has now are the result of the fact that she -- while she has been
secretary of state, she has been removed from the day to day national
politics of other people who might have to get into the race. Anyone who
jumps into the race, whether their approval rating is at 70 percent, 65
percent or 50 percent, the moment they jump into the race, those numbers
come down, because t5hen they have to get into the ring.

They have to get in the arena. and invariably, no matter who the
candidate is, he or she is going to say something to piss somebody off and
lose support.

O`DONNELL: Jonathan Capehart and Steve Schmidt, thanks to both of you
for joining me tonight.

CAPEHART: Thanks, Lawrence.

SCHMIDT: Thank you.

O`DONNELL: Coming up, the Republican party`s history on taxes and
what Republicans need to learn from Abraham Lincoln about taxes. That`s in
the Rewrite.

As you`ve probably noticed, Tony Award-Winning Actor, Alan Cumming,
star of "The Good Life," is here tonight to talk about whatever he wants.

(COMMERCIAL BREAK)

O`DONNELL: One of the congressmen who attended that hopeless
Republican stand your ground press conference today on taxes said this.

(BEGIN VIDEO CLIP)

REP. JOHN FLEMING (R), LOUISIANA: I want to share with you today a
little bit of trivia that`s not trivial. That is that our federal tax
system began as a result of the 16th Amendment that was ratified in 1913.
Do you realize that in this entire time, and even before that, going back
to the founding of this nation, not once has a Republican controlled House
of Representatives ever lifted the tax rates on the American citizens.

So that means that if we do it here now, this will be unprecedented,
raising the federal tax rates on our citizens for the first time in a
Republican-led House of Representatives.

(END VIDEO CLIP)

O`DONNELL: Congressman Fleming is right. That is trivial. It is not
trivia. There are two reasons that a Republican-controlled House of
Representatives has never raised income tax rates. One, because
Republicans generally don`t like to do that. Number two, which is by far
the most important reason, Americans have generally had the good sense to
keep control of the House of Representatives out of the hands of
Republicans.

In the last 100 years of income taxation, American voters have
entrusted the House of Representatives to Republicans for only 30 of those
years. American voters who actually wanted to win World War I were not
about to let Republicans control the House of Representatives, which is to
say control the power to tax, since all tax bills must, according to the
Constitution, originate in the House of Representatives.

And yes, the Democratically controlled Congress did the responsible
thing and raised taxes to pay for World War I. American voters made the
mistake of electing a Republican House of Representatives in the roaring
`20s. And as soon as they could, after the stock market crash of 1929 and
the onset of the Depression, the voters threw the bums out and elected a
Democratic House of Representatives to get them out of the Depression,
which they did under the guidance of President Franklin Delano Roosevelt.

Those same voters kept the Democrats in the House of Representatives
and President Roosevelt in the White House because they were intent on
winning World War II, and they knew taxes would have to be raised to pay
for World War II.

American voters new they couldn`t trust a Republican House of
Representatives to get them through anything big, anything historic like
world wars. Congressman Fleming wrote an op-ed today in the conservative
"Washington Times" in which he made hits point about this little bit of
trivial that is not trivia. "A Republican led House of Representatives
never, ever, ever raising income tax rates."

In that piece, he quoted Abraham Lincoln, "adhere to your purpose and
you will soon feel as well as you ever did. On the contrary, if you falter
and give up, you will lose the power of keeping any resolution and will
regret it all your life."

Of course, Congressman Fleming forgot to mention something about
Lincoln and the Republican controlled House of Representatives during
Lincoln`s presidency. That Republican controlled House actually passed our
first income tax, which President Lincoln signed into law to pay for the
Civil War.

It was a progressive income tax, three percent on annual incomes over
600 dollars and five percent on annual incomes over 10,000 dollars. The
Supreme Court ruled those taxes Constitutional. But decades later in 1895,
the Supreme Court suddenly reversed itself and the earlier decision and
declared federal income taxes unconstitutional, which is why in 1913, it
took a Constitutional amendment to reestablish federal income taxation.

Now, I wouldn`t have brought up this thing about Abraham Lincoln if
Congressman Fleming had kept his historical analysis focused exclusively on
the period beginning with the 1913 Constitutional amendment, allowing for
income taxation. But he had to go and mention Abraham Lincoln, as
Republicans love to do. Republicans love to mention Abraham Lincoln,
because Abraham Lincoln was a Republican and because 21st first century
Republicans know that Abraham Lincoln is the only Republican that many
Americans admire.

Abraham Lincoln is also the only Republican president, indeed the only
president who has ever gotten a Republican House of Representatives to
raise income taxes. Republicans didn`t just establish the very first
income tax as I just described under President Lincoln. Two years later,
they raised the rates. They doubled the top tax rate from five percent to
10 percent.

That`s back when Republicans were responsible, 150 years ago. The
last time a Republican House of Representatives won a war was the Civil
War. They couldn`t have done it without raising income taxes.

Oh, and that 1913 Constitutional amendment that finally and forever
cemented Congress` right to raise income taxes, that Constitutional
amendment was approved by a Republican House of Representatives.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Eli, you are so counting your chickens.

CUMMING: Whatever do you mean? I am just sitting here chatting with
my favorite reporter.

UNIDENTIFIED FEMALE: So, what do you think of the DCC suit?

CUMMING: The DCC suit? I don`t know. What should I think?

UNIDENTIFIED FEMALE: Did you ever anything to do with it? I am the
first one to call you, aren`t I?

CUMMING: No. What are we talking about here?

UNIDENTIFIED FEMALE: The Democratic committee has brought suit
against Wendy Scott Carr, charging her with a lack of residency status.

CUMMING: Get the DCC now!

(END VIDEO CLIP)

O`DONNELL: Alan Cumming, that is your day job on "The Good Wife."
You`re the star of "The Good Wife."

CUMMING: I am "the good wife".

O`DONNELL: You`re the wife, right?

CUMMING: Juliana Margolis (ph) is in it

O`DONNELL: I`ve heard of her. Yes, she has something to do with it.
Let`s take a look at your new film, "any Day Now." It`s about a gay
couple`s right to adopt. Let`s take a look at a scene from that.

(BEGIN VIDEO CLIP)

CUMMING: Your honor, we are requested that Marco be released into our
custody.

UNIDENTIFIED FEMALE: Your request is denied. And after lying to this
court about the true nature of your relationship, you are lucky that I
don`t charge you both with perjury.

(CROSS TALK)

UNIDENTIFIED MALE: He belongs with us. Is this your idea of justice?

We are talking about a human life here. A human life that you people
don`t give a damn about.

UNIDENTIFIED FEMALE: Mr. Donatello, if I so much as hear one more
word out of your moth this morning, I will find you in contempt of court
and have you tossed back into jail.

Now, I have already ruled on your request. There is nothing that you
can say or do, no matter how impassioned or dramatic, that will make me
change my ruling. So unless you have some other business before the court,
I suggest you two of you find another venue in which to display your
histrionics.

(END VIDEO CLIP)

O`DONNELL: This seems like a perfect appropriate venue for you to
display your histrionics, don`t you think?

CUMMING: Yes.

O`DONNELL: So the film -- there are now 18 states that allow same-sex
couples to adopt. There is a long way to go with this, isn`t there?

CUMMING: Yes, there is. And also a lot of those states, it is not as
-- it is not illegal, but it`s still a very, very complicated. You know,
if you meet the wrong judge or social worker on the line, you know, you
don`t have any recourse. There is a long way to go.

That`s the thing about doing this movie, actually, was that we think
1979, when it`s set, to now, there`s been a massive sea change in the way
gay people are regarded and treated, but not really as well at the same
time.

O`DONNELL: There seems to be more progress, clear progress, being
made on marriage equality.

CUMMING: Yeah. It is so exciting next week -- is it next week, when
the Supreme Court does it.

O`DONNELL: It will be some months from now.

They just announced they were going to.

CUMMING: Well, it`s a step in the right direction. It is great that
the president has been so vocal about it. I think the whole thing about
the biggest problem is prejudice and changing people`s minds. People`s
minds don`t get changed until laws get changed which actually make it
illegal for them to really voice those opinions.

And then once they have that, it`s kind of behind them. The world
changes. So I don`t know. I`m in this funny state right now, doing this
movie and thinking a lot about it. I think, yes, it is so great. There
are nine states where you can legally marry and have that. But we are
still treated as, at best, second class citizens, federally. We are not --
there is no equality.

O`DONNELL: Could you help me out with something that we have to do
here?

CUMMING: Sure.

O`DONNELL: You have been such a great co-anchor tonight and co-host.
I`ve got this thing in the prompter, but it`s in your camera over here.
can you read that for me?

CUMMING: As you?

O`DONNELL: Yes. Well, yes.

CUMMING: So far this week with your help and contributions --

O`DONNELL: Oh wait, that`s me you`re doing. OK, great, you`re doing
me.

CUMMING: We have raised a total of 102,984 dollars for the KIND
fund, Kids In Need of Desks.

O`DONNELL: This is serious. It`s kids in Africa. They need these
desks.

CUMMING: That includes a new fund for girl tuition scholarships in
Malawi. If you would like to -- I`m going to -- if you would like to
donate to the KIND Fund, which is a very serious and good thing, go to our
website, LastWordDesks.MSNBC.com, which links to the UNICEF contribution
form.

Only seven percent of girls in Malawi complete their high school
education. Families in Malawi who find a way to pay for tuition are more
likely to send their sons to school.

That`s not a good thing. But with the donation of just 177 dollars,
you can pay for a full year`s tuition for a girl in Malawi. That covers
everything, tuition, transportation, books, uniform and any other learning
material she may need.

Since we announced the tuition program on Monday, we have raised more
than 42,000 dollars for scholarships for girls. That does not include the
25,000 dollars that I contributed to the -- that`s nice -- to the tuition
fund here on the show on Monday night. Nice one, Lawrence. You put your
money where your mouth is.

O`DONNELL: I didn`t know you were contributing. How much do you have
on you?

CUMMING: I have nothing but my American Express card.

O`DONNELL: Whatever you can do. Just go to the website. Whatever
you can do.

Can you hang around and we will do something that we`ll put online, a
little bit more?

CUMMING: Sure.

O`DONNELL: We have now officially run out of time. Tony award-
winning actor and activist Alan Cumming gets tonight`s LAST WORE. His new
movie "Any Day Now" comes out this Friday in select cities. I hope you`re
in one of those select cities. "THE ED SHOW" is up next.

END

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